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, 2019 ------------------- 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, 2019 -------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2019 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).......................... 34 First Trust Capital Strength ETF (FTCS).................................. 35 First Trust Value Line(R) Dividend Index Fund (FVD)...................... 37 First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)................. 41 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, 2019 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, 2019, including a market overview and a performance analysis. A significant event for the markets in the past year was the decision by the Federal Reserve (the "Fed") to reverse course with respect to monetary policy. For those who may not follow the Fed closely, after holding its federal funds target rate (upper bound) at an artificially low 0.25% for seven years (December 2008-December 2015) to help stimulate U.S. economic activity, the Fed spent the better part of the next four years (December 2015-July 2019) increasing its benchmark lending rate in an effort to normalize it. Over that period, the Fed increased the rate from 0.25% to 2.50%. To lend some perspective, the average federal funds target rate (upper bound) was 2.95% for the 30-year period ended December 31, 2019, so the Fed came close to achieving its goal of normalizing it, according to data from Bloomberg. From the end of July 2019 through the end of December, however, the Fed initiated three rate cuts that dropped it from 2.50% to 1.75%. So why did the Fed reverse course on monetary policy? We believe, as well as others in the financial media, that the Fed's reversal on monetary policy has to do with the trade tariffs. The Trump Administration first began implementing new trade tariffs on imported goods back in March 2018. While the original tariffs targeted just imported steel and aluminum, the use of tariffs quickly escalated to other goods and services. The lion's share of the tariff conflict today is between the U.S. and China, the two-largest economies in the world. In our opinion, it is believed that President Donald J. Trump is utilizing tariffs as leverage to try and negotiate more favorable trade agreements between the U.S. and its major trading partners. One of the by-products of the escalation in the use of tariffs by all parties involved has been a slowdown in global economic growth, particularly in the U.S. The annualized U.S. real gross domestic product growth rate in the second quarter of 2018 (when new tariffs were introduced) was 3.5%. As of the second and third quarters of 2019, that annualized growth rate was down to 2.0% and 2.1%, respectively, according to data from the Bureau of Economic Analysis. For many months, President Trump has publicly challenged the Fed to lower rates aggressively to help offset the tempering of economic growth. Trump has noted that the Fed has room to lower rates due to the extremely low-to-negative rate levels found in many countries abroad as well as the lack of any significant inflationary pressure in the current climate. While the Fed has delivered some rate cuts in recent months, we believe that President Trump will continue to bang the drum for even more rate cuts. It has been said in the financial media that this is the "most hated" bull market in history, yet it has been one of the most prosperous for investors. The bull market turns 11 years old on March 9, 2020. A Bloomberg survey of 21 equity strategists found that their average 2020 year-end price target for the S&P 500(R) Index was 3,318 as of December 17, 2019, according to its own release. The highest estimate was 3,500. The lowest estimate was 3,000. With a target of 3,650, Brian Wesbury, Chief Economist at First Trust Advisors L.P., is more bullish than all the strategists surveyed by Bloomberg. We encourage investors to stay the course. Thank you for giving First Trust the opportunity to play a role in your financial future. 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, 2019 (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 27 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 The consensus among economists projects a 1.8% growth rate estimate for the U.S. economy in 2020 (on a fourth quarter to fourth quarter basis), according to a survey conducted by Bloomberg. However, Brian Wesbury, Chief Economist at First Trust Advisors L.P. believes the economy may grow at a 2.5% to 3.0% pace, in part due to home building and business investment that are poised to contribute more to economic growth in 2020 than what the broader consensus believes, in his opinion. The combination of low interest rates, low inflation, strong job growth, regulatory reform and a more favorable U.S. corporate tax structure following the passage of the Tax Cuts and Jobs Act of 2017 makes the current climate an attractive one for investors, in our opinion. Minus tax reform, which took effect in 2018, and regulatory reform, which has been driven by the Trump Administration since it took office in 2017, investors have been prospering in a low rate/low inflation/strong job growth climate for the better part of the last decade. Very little has changed in that regard. One thing that has created some uncertainty in the markets is the extent of the potential fallout from the implementation and escalation of trade tariffs by the Trump Administration. That effort is now 21 months old and counting. The mid-December announcement that the U.S. and China had struck a "Phase One" deal is encouraging, in our opinion. Investors are flocking to exchange-traded funds ("ETFs") and related exchange-traded products ("ETPs"). The global ETF industry turns 30 years old on March 9, 2020. ETFGI, an independent research and consultancy firm, reported that total assets invested in ETFs/ETPs listed globally stood at an all-time high of $6.350 trillion at the close of 2019, up 31.9% from the $4.815 trillion at the end of 2018, according to its own release. In 2019, net inflows to ETFs/ETPs listed globally totaled $571.03 billion, the second highest on record behind the $653.26 billion registered in 2017. U.S. STOCKS AND BONDS In 2019, three of the major U.S. stock indices posted substantial double-digit gains. The S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R) Index posted total returns of 31.49%, 26.20%, and 22.78%, respectively, according to Bloomberg. All 11 major S&P 500(R) Index sectors posted positive total returns. The top-performing sectors were Information Technology, Communication Services and Financials, up 50.29%, 32.69% and 32.13%, respectively, while the only sector with a total return below 20% for the year was Energy, up 11.81%. The outlook for corporate earnings is encouraging, in our opinion. Bloomberg's 2020 and 2021 consensus earnings growth estimates for the S&P 500(R) Index were 9.02% and 10.72%, respectively, as of December 31, 2019. The yield on the benchmark 10-year Treasury Note ("T-Note") closed trading on December 31, 2019, at 1.92%, down 77 basis points ("bps") from its 2.69% close a year earlier, according to Bloomberg. The yield stood 48 bps below its 2.40% average for the 10-year period ended December 31, 2019. For those investors still concerned about the prospects for an inverted yield curve, the spread between the 2-year T-Note and the 10-year T-Note closed 2019 at 35 bps (1.57% vs. 1.92%), according to data from Bloomberg. For comparative purposes, the average spread was 117 bps (3.33% vs. 4.50%) for the 30-year period ended December 31, 2019. The yield curve, while not inverted, remains relatively flat. We will monitor this scenario moving forward. In the U.S. bond market, all the major bond groups posted positive returns in 2019. The top-performing major debt group we track was high yield corporate bonds. The Bloomberg Barclays U.S. Corporate High Yield Index posted a total return of 14.32%. The worst-performing debt group that we track was government bonds. The Bloomberg Barclays U.S. Treasury: Intermediate Index posted a total return of 5.22%. FOREIGN STOCKS AND BONDS The U.S. dollar rose by 0.23% against a basket of major currencies in 2019, as measured by the U.S. Dollar Index (DXY). With respect to U.S. investors, a flat U.S. dollar would have little to no impact on the returns of foreign securities, in our opinion. Aside from the currency aspect, foreign stocks and bonds performed quite well in 2019. The Bloomberg Barclays EM Hard Currency Aggregate Index of emerging markets debt posted a total return of 12.13% (USD), while the Bloomberg Barclays Global Aggregate Index of higher quality debt rose 6.84% (USD). With respect to equities, the MSCI Emerging Markets Index of stocks posted a total return of 18.44% (USD), while the MSCI World ex USA Index was up 22.49% (USD) on a total return basis, according to Bloomberg. 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 the 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 designed to measure the performance of micro-cap stocks issued by U.S. companies that are comparatively liquid and have strong fundamentals relative to the micro-cap segment as a whole. The Index is rebalanced quarterly and reconstituted annually and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 27.25% 10.41% 12.43% 7.83% 64.11% 222.58% 193.13% Market Value 27.42% 10.41% 12.44% 7.83% 64.05% 223.03% 193.05% INDEX PERFORMANCE Dow Jones Select MicroCap Index(SM) 28.03% 11.05% 13.09% 8.53% 68.90% 242.26% 221.49% Russell 2000(R) Index 25.52% 8.23% 11.83% 8.20% 48.49% 205.82% 207.58% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a net asset value ("NAV") return of 27.25% during the 12-month period covered by this report. During the same period, the Russell 2000(R) Index ("Benchmark") generated a return of 25.52%. The Financials sector received the greatest allocation of any sector in the Fund during the same period. With an average weight of 36.2%, investments in Financials returned 22.1% and contributed 7.9% to Fund performance. Communication Services is the only sector which had a negative contribution to return in the Fund. Investments in this sector returned -8.2% but received an allocation of only 1.2% and had a drag on Fund performance of only -0.1%. On a relative basis, the Fund outperformed the Benchmark. The greatest source of outperformance were investments in the Health Care sector, which caused 2.2% of outperformance versus the Benchmark. Meanwhile, investments in the Industrials sector caused -1.5% of underperformance for the Fund. ----------------------------- 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 31.81% Industrials 17.08 Consumer Discretionary 15.75 Energy 9.68 Information Technology 8.33 Health Care 7.61 Consumer Staples 3.96 Materials 3.77 Real Estate 0.88 Communication Services 0.71 Utilities 0.42 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Kodiak Sciences, Inc. 2.47% Photronics, Inc. 1.51 NexTier Oilfield Solutions, Inc. 1.51 Renewable Energy Group, Inc. 1.50 Cohu, Inc. 1.35 Malibu Boats, Inc., Class A 1.20 Axcelis Technologies, Inc. 1.11 Kimball International, Inc., Class B 1.08 Zumiez, Inc. 1.00 Denbury Resources, Inc. 0.99 ------- Total 13.72% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust Dow Jones Select MicroCap Dow Jones Select Russell 2000(R) Index Fund MicroCap Index(SM) Index 12/09 $10,000 $10,000 $10,000 06/10 9,721 9,744 9,805 12/10 12,576 12,643 12,686 06/11 12,999 13,115 13,474 12/11 11,485 11,612 12,158 06/12 12,225 12,400 13,195 12/12 13,308 13,549 14,145 06/13 15,469 15,797 16,388 12/13 19,072 19,544 19,636 06/14 18,944 19,474 20,262 12/14 19,658 20,261 20,596 06/15 20,680 21,375 21,574 12/15 19,768 20,505 19,686 06/16 20,262 21,075 20,123 12/16 26,776 27,924 23,882 06/17 26,942 28,161 25,074 12/17 29,038 30,448 27,381 06/18 31,399 33,018 29,478 12/18 25,349 26,734 24,363 06/19 28,307 29,958 28,500 12/19 32,258 34,226 30,582
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 107 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 145 0 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 the common stocks that comprise the Index. The Index is designed to measure the performance of the 100 highest-yielding stocks that have a consistent record of dividend payment and have the ability to sustain their dividend payments. The securities comprising the Morningstar(R) US Market Index(SM) serve as the Fund's selection universe. The Index is rebalanced quarterly and reconstituted annually and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 24.36% 10.20% 12.56% 7.60% 62.49% 226.47% 174.90% Market Value 24.37% 10.19% 12.56% 7.59% 62.44% 226.34% 174.72% INDEX PERFORMANCE Morningstar(R) Dividend Leaders Index(SM) 25.12% 10.75% 13.14% 8.13% 66.60% 243.71% 194.45% S&P 500(R) Index 31.49% 11.70% 13.56% 9.25% 73.86% 256.66% 239.26% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of 24.36% during the 12-month period covered by this report. During the same period, the S&P 500(R) Index ("Benchmark") generated a return of 31.49%. The greatest weight in the Fund was invested in Energy securities, which had an allocation of 18.8%, returned 10.7%, and contributed 1.8% to Fund performance. However, Communication Services had a more significant contribution to the Fund. With a slightly smaller allocation of 17.2%, investments in this sector returned 31.2% and contributed 5.3% to Fund return. No sector had a negative contribution to Fund returns. The most poorly performing sector in the Fund were the investments in Energy securities. On a relative basis, the Fund underperformed the Benchmark. Underperformance of -2.8% versus the Benchmark was a result of the greater weight that the Fund gave to Energy securities while -2.4% of the underperformance was a result of the lesser weight given to Information Technology securities. A small amount of outperformance existed in the Fund from investments in the Industrials and Financials sectors, which produced 0.2% and 0.1% of outperformance, respectively. ----------------------------- 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 ----------------------------------------------------------- Energy 22.33% Communication Services 17.61 Financials 12.18 Consumer Staples 11.39 Information Technology 8.25 Utilities 8.13 Consumer Discretionary 7.65 Health Care 6.90 Industrials 3.12 Materials 2.44 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- AT&T, Inc. 10.03% Exxon Mobil Corp. 9.81 Verizon Communications, Inc. 7.26 Chevron Corp. 6.65 Wells Fargo & Co. 5.88 Philip Morris International, Inc. 5.19 AbbVie, Inc. 4.59 Altria Group, Inc. 4.42 International Business Machines Corp. 4.09 Broadcom, Inc. 2.96 ------- Total 60.88% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust Morningstar Morningstar(R) Dividend Leaders Dividend S&P 500(R) Index Fund Leaders Index(SM) Index 12/09 $10,000 $10,000 $10,000 06/10 9,547 9,568 9,335 12/10 11,604 11,666 11,507 06/11 12,511 12,612 12,199 12/11 13,279 13,419 11,749 06/12 14,377 14,578 12,864 12/12 14,492 14,728 13,629 06/13 16,515 16,830 15,513 12/13 17,785 18,170 18,043 06/14 19,615 20,098 19,331 12/14 20,090 20,633 20,514 06/15 19,481 20,051 20,766 12/15 20,638 21,288 20,797 06/16 23,676 24,494 21,596 12/16 24,914 25,829 23,288 06/17 25,641 26,656 25,466 12/17 27,887 29,063 28,377 06/18 26,961 28,171 29,132 12/18 26,248 27,471 27,131 06/19 29,996 31,490 32,161 12/19 32,647 34,371 35,666
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 195 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% 01/01/15 - 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 01/01/19 - 12/31/19 56 0 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 the common stocks that comprise the Index. The Index seeks to measure the performance of the equity securities of the 100 largest and typically most liquid initial public offerings ("IPOs") (including spin-offs and equity carve-outs) of U.S. companies. The Index is rebalanced and reconstituted quarterly and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 30.45% 10.63% 15.84% 11.58% 65.75% 335.20% 349.96% Market Value 30.47% 10.63% 15.85% 11.58% 65.73% 335.35% 349.92% INDEX PERFORMANCE IPOX(R)-100 U.S. Index 30.96% 11.18% 16.49% 12.23% 69.88% 360.25% 386.73% S&P 500(R) Index 31.49% 11.70% 13.56% 9.20% 73.86% 256.66% 234.62% Russell 3000(R) Index 31.02% 11.24% 13.42% 9.08% 70.35% 252.15% 229.61% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of 30.45% during the 12-month period covered by this report. During the same period, the Russell 3000(R) Index ("Benchmark") generated a return of 31.02%. The Information Technology sector was given the largest allocation in the Fund with a 28.9% weighting. This sector had a positive return of 35.4% resulting in a 10.3% contribution to the Fund's return. This was also the largest contribution to the Fund's return for the same period. The Energy sector was the worst performing sector with a -3.2% return to the Fund but the contribution to the Fund was a positive 0.1% for the period. On a relative basis, the Fund underperformed the Benchmark. The largest source of underperformance can be attributed to the Information Technology sector allocation within the Fund, specifically the security selection. The Fund overweighted but underperformed the Benchmark by 7.9% and -13.6%, respectively, resulting in -1.1% of relative underperformance. The Fund's security selection within the Health Care sector resulted in a 0.5% relative outperformance when compared to the Benchmark. ----------------------------- 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 21.34% Health Care 20.82 Communication Services 15.24 Industrials 10.87 Consumer Staples 10.44 Consumer Discretionary 8.35 Utilities 4.56 Financials 3.97 Materials 2.97 Real Estate 1.44 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- PayPal Holdings, Inc. 4.30% Thermo Fisher Scientific, Inc. 4.04 Verizon Communications, Inc. 3.58 Sempra Energy 3.52 Bristol-Myers Squibb Co. 3.39 Takeda Pharmaceutical Co., Ltd. 2.98 Fidelity National Information Services, Inc. 2.89 Uber Technologies, Inc. 2.86 Tesla, Inc. 2.76 Zoetis, Inc. 2.67 ------- Total 32.99% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust US Equity IPOX(R)-100 S&P 500(R) Russell 3000(R) Opportunities ETF U.S. Index Index Index 12/09 $10,000 $10,000 $10,000 $10,000 06/10 9,407 9,437 9,335 9,395 12/10 11,827 11,909 11,507 11,693 06/11 12,998 13,133 12,200 12,436 12/11 12,193 12,359 11,750 11,813 06/12 13,844 14,074 12,865 12,914 12/12 15,853 16,161 13,630 13,752 06/13 18,515 18,921 15,514 15,686 12/13 23,460 24,060 18,044 18,367 06/14 25,011 25,732 19,332 19,642 12/14 26,254 27,091 20,515 20,673 06/15 28,522 29,518 20,767 21,074 12/15 26,828 27,847 20,798 20,773 06/16 26,654 27,730 21,597 21,525 12/16 28,626 29,862 23,286 23,417 06/17 31,686 33,135 25,461 25,508 12/17 36,344 38,105 28,369 28,365 06/18 38,245 40,182 29,121 29,278 12/18 33,357 35,139 27,126 26,877 06/19 41,966 44,326 32,155 31,913 12/19 43,520 46,025 35,666 35,215
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 177 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 75 0 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 the common stocks and depositary receipts that comprise the Index. The Index is an equal-dollar weighted index designed to measure the performance of a cross section of small, mid and large capitalization 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 and reconstituted quarterly and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 19.78% 7.88% 17.98% 16.10% 46.09% 422.33% 654.28% Market Value 19.77% 7.87% 17.97% 16.10% 46.05% 422.11% 654.23% INDEX PERFORMANCE NYSE Arca Biotechnology Index(SM) 20.43% 8.41% 18.57% 16.72% 49.75% 449.31% 710.67% S&P Composite 1500(R) Health Care Index 20.87% 10.69% 15.17% 11.89% 66.18% 310.75% 357.25% NASDAQ(R) Biotechnology Index 25.11% 4.04% 16.61% 13.38% 21.92% 364.74% 447.43% S&P 500(R) Index 31.49% 11.70% 13.56% 9.61% 73.86% 256.66% 246.36% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of 19.78% during the 12-month period covered by this report. During the same period, the S&P Composite 1500(R) Health Care Index ("Benchmark") returned 20.87%. The Fund's allocation to the Biotechnology industry was its largest with a 78.9% weight and 19.8% return, resulting in a 15.8% contribution to the Fund's return, which was also the largest contributor to the Fund's return. The Fund's Pharmaceutical industry allocation returned -34.3% but the small weight within the Fund of 3.0% limited the negative contribution to the Fund to -0.9%. On a relative basis, the Fund underperformed the Benchmark. The Fund did not have an allocation to the Health Care Equipment and Supplies industry, compared to the Benchmark's 25.2% allocation to this industry, resulting in a relative underperformance of -1.4% for the Fund. The Fund overallocated and outperformed the Benchmark within the Biotechnology industry by 64.8% and 7.6%, respectively, creating 0.4% 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 80.79% Life Sciences Tools & Services 15.69 Pharmaceuticals 3.52 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Intercept Pharmaceuticals, Inc. 5.36% Sarepta Therapeutics, Inc. 4.24 Agios Pharmaceuticals, Inc. 4.07 Alnylam Pharmaceuticals, Inc. 3.82 Biogen, Inc. 3.80 Seattle Genetics, Inc. 3.68 Regeneron Pharmaceuticals, Inc. 3.52 Nektar Therapeutics 3.52 Vertex Pharmaceuticals, Inc. 3.46 BioMarin Pharmaceutical, Inc. 3.44 ------- Total 38.91% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 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 12/09 $10,000 $10,000 $10,000 $10,000 $10,000 06/10 10,823 10,859 9,492 9,335 9,274 12/10 13,689 13,774 11,526 11,507 10,520 06/11 15,360 15,504 13,179 12,200 12,013 12/11 11,449 11,585 12,918 11,750 11,770 06/12 15,362 15,595 16,124 12,865 13,122 12/12 16,133 16,422 17,089 13,630 13,930 06/13 20,365 20,775 21,682 15,514 16,801 12/13 24,216 24,764 28,362 18,044 19,807 06/14 28,841 29,526 32,194 19,332 21,827 12/14 35,751 36,630 38,120 20,515 24,717 06/15 43,502 44,645 46,427 20,767 27,238 12/15 39,669 40,801 42,605 20,798 26,549 06/16 31,410 32,404 32,486 21,597 26,703 12/16 31,894 32,987 33,509 23,286 26,003 06/17 39,989 41,461 39,319 25,461 30,286 12/17 43,692 45,421 40,758 28,369 31,846 06/18 49,145 51,194 42,038 29,121 32,891 12/18 43,607 45,542 37,140 27,127 33,982 06/19 49,421 51,745 41,945 32,157 36,835 12/19 52,233 54,931 46,474 35,666 41,075
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 97 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% 01/01/15 - 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 01/01/19 - 12/31/19 154 0 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 measure the performance of the largest and most actively traded securities issued by U.S. companies in the Internet industry. The Index is rebalanced and reconstituted quarterly and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 19.26% 17.81% 18.69% 15.45% 126.99% 455.03% 598.61% Market Value 19.18% 17.80% 18.68% 15.44% 126.81% 454.57% 598.30% INDEX PERFORMANCE Dow Jones Internet Composite Index(SM) 20.08% 18.46% 19.35% 16.08% 133.29% 486.39% 652.05% S&P 500(R) Index 31.49% 11.70% 13.56% 9.61% 73.86% 256.66% 246.36% S&P Composite 1500(R) Information Technology Index 49.75% 19.85% 17.31% 14.25% 147.33% 393.77% 506.65% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of 19.26% during the 12-month period covered by this report. During the same period, the S&P Composite 1500(R) Information Technology Index ("Benchmark") returned 49.75%. The Information Technology sector was the Fund's largest allocated sector with a 42.2% weight. This sector had a 14.8% return contributing 6.7% to the Fund's return. The Communication Services sector had the largest contribution to the Fund's return with 10.0%, due to the 31.1% allocation and 34.9% return for this sector. The smallest contribution to the Fund's return was from the Financials sector. The Fund allocated 4.8% of its portfolio to this sector which had a 1.5% return, resulting in a 0.2% contribution to the Fund's return. On a relative basis, the Fund underperformed the Benchmark. The primary cause of the underperformance was the Fund's underweight and underperformance in the Information Technology sector by -56.9% and -35.0%, respectively, resulting in a -13.0% drag on relative performance. ----------------------------- 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 47.86% Communication Services 27.89 Consumer Discretionary 17.79 Financials 4.01 Health Care 2.45 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Amazon.com, Inc. 8.91% Facebook, Inc., Class A 7.30 Cisco Systems, Inc. 5.67 Netflix, Inc. 4.89 salesforce.com, Inc. 4.82 PayPal Holdings, Inc. 4.52 Alphabet, Inc., Class A 4.39 Alphabet, Inc., Class C 4.37 eBay, Inc. 2.98 Twitter, Inc. 2.87 ------- Total 50.72% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 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 12/09 $10,000 $10,000 $10,000 $10,000 06/10 9,518 9,530 9,335 8,998 12/10 13,663 13,726 11,507 11,212 06/11 14,449 14,551 12,200 11,488 12/11 12,878 13,024 11,750 11,338 06/12 14,095 14,298 12,865 12,780 12/12 15,564 15,841 13,630 13,010 06/13 18,098 18,471 15,514 13,886 12/13 23,875 24,452 18,044 16,783 06/14 23,760 24,377 19,332 18,201 12/14 24,454 25,135 20,515 19,963 06/15 26,799 27,621 20,767 20,223 12/15 29,776 30,765 20,798 21,080 06/16 28,770 29,799 21,597 21,093 12/16 31,834 33,056 23,286 24,198 06/17 37,793 39,350 25,461 28,220 12/17 43,810 45,733 28,369 33,221 06/18 54,916 57,468 29,121 36,722 12/18 46,532 48,843 27,127 32,986 06/19 57,314 60,421 32,157 41,905 12/19 55,503 58,639 35,666 49,377
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 113 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 139 0 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 the common stocks and real estate investment trusts that comprise the Index. The Index seeks to provide exposure to well-capitalized companies with strong market positions that have the potential to provide their stockholders with a greater degree of stability and performance over time. The Index is rebalanced and reconstituted quarterly and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 26.72% 11.15% 13.22% 10.18% 69.64% 246.04% 269.79% Market Value 26.62% 11.11% 13.21% 10.18% 69.36% 245.91% 269.67% INDEX PERFORMANCE The Capital Strength Index(SM)* 27.60% 11.87% N/A N/A 75.22% N/A N/A S&P 500(R) Index 31.49% 11.70% 13.56% 9.42% 73.86% 256.66% 236.79% ------------------------------------------------------------------------------------------------------------------------------------
* 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 new 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 26.72% during the 12-month period covered by this report. During the same period, the S&P 500(R) Index ("Benchmark") generated a return of 31.49%. Industrials received the greatest allocation of the sectors in the Fund during the period. Carrying an average weight of 19.3%, investments in Industrials returned 19.6% and contributed 4.7% to overall Fund return. No invested sector experienced a negative return during the period, but the least-positive return came from investments in the Energy sector. Energy returned 16.8%. This sector received a very low weight of 1.5% in the Fund and contributed 0.4% to total Fund return. On a relative basis, the Fund underperformed the Benchmark. The bulk of the underperformance came from investments in Information Technology. This sector caused -3.4% underperformance versus the Benchmark during the period. The sector with the largest contribution to Fund outperformance was the Health Care sector. Investments in Health Care caused 1.1% outperformance versus the Benchmark. ----------------------------- 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 ----------------------------------------------------------- Health Care 20.78% Industrials 19.83 Information Technology 15.98 Financials 14.28 Consumer Discretionary 11.60 Consumer Staples 7.51 Materials 4.09 Communication Services 2.08 Energy 1.96 Real Estate 1.89 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Eli Lilly & Co. 2.28% UnitedHealth Group, Inc. 2.26 Amgen, Inc. 2.24 Boston Scientific Corp. 2.22 Microsoft Corp. 2.16 Johnson & Johnson 2.15 Illinois Tool Works, Inc. 2.14 Accenture PLC, Class A 2.12 Marsh & McLennan Cos., Inc. 2.12 Northern Trust Corp. 2.12 ------- Total 21.81% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust Capital S&P 500(R) Strength ETF Index 12/09 $10,000 $10,000 06/10 9,246 9,335 12/10 11,403 11,507 06/11 12,300 12,200 12/11 11,068 11,750 06/12 11,669 12,865 12/12 12,999 13,630 06/13 15,163 15,514 12/13 17,665 18,044 06/14 18,651 19,332 12/14 20,397 20,515 06/15 20,362 20,767 12/15 20,733 20,798 06/16 21,840 21,597 12/16 22,510 23,286 06/17 25,299 25,461 12/17 28,471 28,369 06/18 28,707 29,121 12/18 27,303 27,126 06/19 32,100 32,155 12/19 34,604 35,666
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 222 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 30 0 0 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 the common stocks and depositary receipts that comprise the Index. The Index seeks to measure the performance of the securities ranked #1 or #2 according to Value Line Publishing, LLC's proprietary Value Line(R) Safety(SM) Ranking System that are also still expected to provide above-average dividend yield. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 26.60% 10.80% 13.18% 10.16% 66.99% 244.83% 387.31% Market Value 26.56% 10.79% 13.17% 10.16% 66.94% 244.46% 387.17% INDEX PERFORMANCE Value Line(R) Dividend Index* 27.63% 11.67% 14.08% N/A 73.66% 273.29% N/A S&P 500(R) Index 31.49% 11.70% 13.56% 9.64% 73.86% 256.66% 350.90% Dow Jones U.S. Select Dividend Index(SM)* 23.11% 9.91% 13.41% N/A 60.37% 252.00% 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, 2019) were 201.19% and 202.63% at NAV and Market Value, respectively. That compares to an Index return of 233.65% for the same period. The average annual total returns for the period from the reorganization date (December 15, 2006) through period end (December 31, 2019) were 8.82% and 8.86% at NAV and Market Value, respectively. That compares to an Index return of 9.68% 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 American) closing market price of the Predecessor FVD Fund. * Performance data is not available for all the periods shown in the table because performance data does not exist for the periods shown. (See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of 26.60% during the 12-month period covered by this report. During the same period, the Benchmark S&P 500(R) Index ("Benchmark") generated a return of 31.49%. The Fund allocated 21.2% to the Utilities sector, the largest allocation within the Fund. This sector returned 23.2%, contributing 4.9% to the Fund's return. The Financials sector was the largest contribution to the Fund's return at 5.7% due to the Fund's 20.0% allocation and 28.4% return for this sector. The smallest contribution to the Fund's return was in the Energy sector with a 0.6% contribution, attributable to the Fund's 2.7% allocation to the sector. On a relative basis, the Fund underperformed the Benchmark. The largest source of relative underperformance came from the Information Technology sector where the Fund underweighted and underperformed the Benchmark by -15.5% and -16.2%, respectively, resulting in a -3.1% drag on performance. This underperformance was partially reduced by the Fund's allocation to the Health Care sector which delivered 1.3% in relative outperformance. ----------------------------- 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 22.02% Financials 20.41 Industrials 13.84 Consumer Staples 10.93 Health Care 6.94 Information Technology 5.93 Real Estate 5.04 Communication Services 4.49 Consumer Discretionary 4.44 Materials 3.48 Energy 2.48 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- International Flavors & Fragrances, Inc. 0.52% Simon Property Group, Inc. 0.51 WP Carey, Inc. 0.51 Assurant, Inc. 0.51 Realty Income Corp. 0.51 Mid-America Apartment Communities, Inc. 0.51 Cincinnati Financial Corp. 0.51 South Jersey Industries, Inc. 0.51 Evergy, Inc. 0.51 Comcast Corp., Class A 0.51 ------- Total 5.11% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 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) 12/09 $10,000 $10,000 $10,000 $10,000 06/10 9,712 9,746 9,335 9,871 12/10 11,608 11,699 11,507 11,832 06/11 12,552 12,702 12,200 12,824 12/11 12,657 12,856 11,750 13,301 06/12 13,458 13,737 12,865 14,171 12/12 14,071 14,410 13,630 14,743 06/13 16,026 16,484 15,514 16,785 12/13 17,810 18,386 18,044 19,027 06/14 19,328 20,044 19,332 20,904 12/14 20,650 21,497 20,515 21,949 06/15 20,220 21,132 20,767 21,165 12/15 20,907 21,948 20,798 21,590 06/16 23,851 25,148 21,597 24,947 12/16 25,077 26,541 23,286 26,337 06/17 26,441 28,094 25,461 27,941 12/17 28,207 30,077 28,369 30,403 06/18 27,987 29,960 29,121 30,713 12/18 27,231 29,253 27,128 28,587 06/19 31,882 34,400 32,157 32,486 12/19 34,483 37,329 35,666 35,200
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 241 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 11 0 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 the common stocks and depositary receipts that comprise the Index. The Index seeks to measure the performance of the 100 highest ranked securities according to Value Line Publishing, LLC's proprietary Value Line Timeliness Ranking System. The Index is rebalanced and reconstituted quarterly and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 22.38% 2.94% 8.79% 5.37% 15.57% 132.21% 137.73% Market Value 22.45% 2.94% 8.78% 5.37% 15.58% 132.11% 137.62% INDEX PERFORMANCE Value Line(R) 100 Index* 23.42% 3.89% 9.80% N/A 21.01% 154.70% N/A Russell 3000(R) Index 31.02% 11.24% 13.42% 9.74% 70.35% 252.15% 365.51% ------------------------------------------------------------------------------------------------------------------------------------
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, 2019) were 44.30% and 44.24% at NAV and Market Value, respectively. That compares to an Index return of 61.14% for that same period. The average annual total returns for the period from the reorganization date (June 15, 2007) through period end (December 31, 2019) were 2.97% and 2.96% at NAV and Market Value, respectively. That compares to an Index return of 3.88% 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 American) closing market price of the Predecessor FVL Fund. * Performance data is not available for all the periods shown in the table because performance data does not exist for the periods shown. (See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of 22.38% during the 12-month period covered by this report. During the same period, the Benchmark Russell 3000(R) Index ("Benchmark") generated a return of 31.02%. The most heavily weighted sector in the Fund was Information Technology. Investments in this sector received an allocation of 20.7%, returned 39.4%, and contributed 6.9% to total Fund return. The best-performing sector in the Fund during the same period were investments in Financials. This sector returned 43.2%, carried an average weight in the fund of 7.5%, and contributed 2.4% to total Fund return. No sector experienced a negative return in the Fund over the period. The least well-performing sector was the Energy sector, with a return of 6.0%. This sector received an allocation of 9.6% and contributed 0.4% to total Fund return. On a relative basis, the Fund underperformed the Benchmark. Underperformance of -2.0% came from investments in the Information Technology sector. The Fund and the Benchmark allocated similar weight to Information Technology, but the Fund underperformed, due to the selection effect. Meanwhile, 0.6% outperformance was earned from investments in the Real Estate sector. ----------------------------- 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 16.59% Financials 12.32 Industrials 11.50 Materials 10.72 Health Care 10.65 Utilities 10.08 Consumer Staples 7.28 Energy 6.64 Consumer Discretionary 5.96 Real Estate 5.22 Communication Services 3.04 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- AudioCodes Ltd. 1.51% Tyler Technologies, Inc. 1.24 Procter & Gamble (The) Co. 1.24 Motorola Solutions, Inc. 1.23 Zoetis, Inc. 1.21 Copart, Inc. 1.19 West Pharmaceutical Services, Inc. 1.18 Teledyne Technologies, Inc. 1.17 Crown Castle International Corp. 1.17 Arconic, Inc. 1.16 ------- Total 12.30% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust Value Line(R) 100 Value Line(R) Russell 3000(R) Exchange-Traded Fund 100 Index Index 12/09 $10,000 $10,000 $10,000 06/10 9,914 9,965 9,395 12/10 12,951 13,074 11,693 06/11 13,685 13,916 12,436 12/11 11,925 12,153 11,813 06/12 12,258 12,542 12,913 12/12 12,942 13,293 13,752 06/13 14,870 15,353 15,685 12/13 18,046 18,734 18,366 06/14 19,999 20,857 19,641 12/14 20,093 21,047 20,672 06/15 20,625 21,704 21,073 12/15 19,464 20,560 20,771 06/16 20,134 21,360 21,523 12/16 21,437 22,879 23,415 06/17 21,235 22,815 25,506 12/17 23,388 25,217 28,363 06/18 23,014 24,914 29,276 12/18 18,972 20,634 26,877 06/19 22,560 24,643 31,907 12/19 23,221 25,470 35,215
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 109 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 143 0 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, 2019 (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, 2019. 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, 2019 DECEMBER 31, 2019 PERIOD (a) PERIOD (b) -------------------------------------------------------------------------------------------------------------------------- FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) Actual $1,000.00 $1,139.40 0.60% $3.24 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 $1,088.20 0.45% $2.37 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 $1,036.80 0.58% $2.98 Hypothetical (5% return before expenses) $1,000.00 $1,022.28 0.58% $2.96 FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT) Actual $1,000.00 $1,057.00 0.55% $2.85 Hypothetical (5% return before expenses) $1,000.00 $1,022.43 0.55% $2.80 FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) Actual $1,000.00 $ 968.20 0.52% $2.58 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 $1,077.80 0.59% $3.09 Hypothetical (5% return before expenses) $1,000.00 $1,022.23 0.59% $3.01
Page 21 FIRST TRUST EXCHANGE-TRADED FUND UNDERSTANDING YOUR FUND EXPENSES (CONTINUED) DECEMBER 31, 2019 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2019 DECEMBER 31, 2019 PERIOD (a) PERIOD (b) -------------------------------------------------------------------------------------------------------------------------- FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) Actual $1,000.00 $1,081.30 0.70% $3.67 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 $1,029.10 0.70% $3.58 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, 2019 through December 31, 2019), 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, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% AEROSPACE & DEFENSE -- 2.7% 23,669 Ducommun, Inc. (a) $ 1,195,995 11,209 National Presto Industries, Inc. 990,763 43,369 Park Aerospace Corp. 705,614 25,607 Vectrus, Inc. (a) 1,312,615 -------------- 4,204,987 -------------- AIR FREIGHT & LOGISTICS -- 0.8% 60,730 Echo Global Logistics, Inc. (a) 1,257,111 -------------- AUTO COMPONENTS -- 0.1% 33,348 Shiloh Industries, Inc. (a) 118,719 -------------- BANKS -- 22.2% 18,141 1st Constitution Bancorp 401,460 8,280 Bank7 Corp. 156,989 34,603 Bar Harbor Bankshares 878,570 27,345 Baycom Corp. (a) 621,825 26,589 Business First Bancshares, Inc. 662,864 10,790 Cambridge Bancorp 864,819 18,743 Capital Bancorp, Inc. (a) 279,083 11,121 CB Financial Services, Inc. 335,187 32,718 Civista Bancshares, Inc. 785,232 31,786 CNB Financial Corp. 1,038,767 17,230 Coastal Financial Corp. (a) 283,778 31,268 Equity Bancshares, Inc., Class A (a) 965,243 35,595 Financial Institutions, Inc. 1,142,600 37,325 First Bank 412,441 30,160 First Community Bankshares, Inc. 935,563 15,523 First Community Corp. 335,452 30,511 First Financial Corp. 1,394,963 15,796 First Financial Northwest, Inc. 235,992 86,438 First Foundation, Inc. 1,504,021 18,858 First Internet Bancorp 447,123 29,292 First Mid Bancshares, Inc. 1,032,543 14,234 First United Corp. 342,897 62,648 Flushing Financial Corp. 1,353,510 29,798 Franklin Financial Network, Inc. 1,022,965 50,019 Independent Bank Corp./MI 1,132,930 9,960 Level One Bancorp, Inc. 250,594 36,347 Mercantile Bank Corp. 1,325,575 15,920 Metropolitan Bank Holding Corp. (a) 767,822 45,900 Midland States Bancorp, Inc. 1,329,264 24,092 MidWestOne Financial Group, Inc. 872,853 19,945 Nicolet Bankshares, Inc. (a) 1,472,938 14,551 Northrim BanCorp, Inc. 557,303 59,880 Old Second Bancorp, Inc. 806,584 19,891 Parke Bancorp, Inc. 505,033 35,594 Peapack Gladstone Financial Corp. 1,099,855 41,891 Peoples Bancorp, Inc. 1,451,942 33,035 QCR Holdings, Inc. 1,448,915 16,317 SB One Bancorp 406,620 31,304 Sierra Bancorp 911,572 28,269 SmartFinancial, Inc. 668,562 15,596 Southern First Bancshares, Inc. (a) 662,674 40,891 Southern National Bancorp of Virginia, Inc. 668,568 SHARES DESCRIPTION VALUE ------------------------------------------------------------- BANKS (CONTINUED) 35,325 Spirit of Texas Bancshares, Inc. (a) $ 812,475 -------------- 34,585,966 -------------- BEVERAGES -- 0.3% 25,552 Craft Brew Alliance, Inc. (a) 421,608 -------------- BIOTECHNOLOGY -- 4.4% 34,837 Cyclerion Therapeutics, Inc. (a) 94,757 41,427 Gritstone Oncology, Inc. (a) (b) 371,600 13,450 Hookipa Pharma, Inc. (a) 164,493 1,801 Immunic, Inc. (a) 17,470 53,588 Kodiak Sciences, Inc. (a) 3,855,657 14,281 LogicBio Therapeutics, Inc. (a) (b) 102,823 484,286 Palatin Technologies, Inc. (a) (b) 378,809 33,282 PhaseBio Pharmaceuticals, Inc. (a) (b) 203,353 18,707 Synthorx, Inc. (a) 1,307,432 31,015 TCR2 Therapeutics, Inc. (a) (b) 442,894 -------------- 6,939,288 -------------- BUILDING PRODUCTS -- 1.4% 40,712 Insteel Industries, Inc. 874,901 73,784 Quanex Building Products Corp. 1,260,231 -------------- 2,135,132 -------------- CAPITAL MARKETS -- 1.8% 6,927 Diamond Hill Investment Group, Inc. 972,966 20,909 Oppenheimer Holdings, Inc., Class A 574,579 33,417 Victory Capital Holdings, Inc., Class A (b) 700,755 17,553 Westwood Holdings Group, Inc. 519,920 -------------- 2,768,220 -------------- CHEMICALS -- 1.5% 59,105 American Vanguard Corp. 1,150,774 57,423 FutureFuel Corp. 711,471 111,107 Rayonier Advanced Materials, Inc. 426,651 -------------- 2,288,896 -------------- COMMERCIAL SERVICES & SUPPLIES -- 3.1% 58,078 Ennis, Inc. 1,257,389 26,826 Heritage-Crystal Clean, Inc. (a) 841,531 81,707 Kimball International, Inc., Class B 1,688,884 70,719 Quad/Graphics, Inc. 330,258 19,282 VSE Corp. 733,487 -------------- 4,851,549 -------------- COMMUNICATIONS EQUIPMENT -- 0.5% 75,916 CalAmp Corp. (a) 727,275 -------------- CONSTRUCTION & ENGINEERING -- 3.3% 41,092 Ameresco, Inc., Class A (a) 719,110 29,218 Argan, Inc. 1,172,811 72,529 Construction Partners, Inc., Class A (a) 1,223,564 37,041 MYR Group, Inc. (a) 1,207,166 See Notes to Financial Statements Page 23 FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) CONSTRUCTION & ENGINEERING (CONTINUED) 57,973 Sterling Construction Co., Inc. (a) $ 816,260 -------------- 5,138,911 -------------- CONSUMER FINANCE -- 1.1% 30,461 Curo Group Holdings Corp. (a) 371,015 116,955 EZCORP, Inc., Class A (a) 797,633 20,693 Regional Management Corp. (a) 621,411 -------------- 1,790,059 -------------- CONTAINERS & PACKAGING -- 0.8% 79,031 Myers Industries, Inc. 1,318,237 -------------- DISTRIBUTORS -- 0.2% 13,420 Weyco Group, Inc. 354,959 -------------- DIVERSIFIED CONSUMER SERVICES -- 1.3% 34,260 American Public Education, Inc. (a) 938,381 36,093 Carriage Services, Inc. 923,981 67,345 Zovio, Inc. (a) 138,731 -------------- 2,001,093 -------------- ELECTRICAL EQUIPMENT -- 0.2% 5,906 Preformed Line Products Co. 356,427 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.2% 54,113 Kimball Electronics, Inc. (a) 949,683 27,808 Vishay Precision Group, Inc. (a) 945,472 -------------- 1,895,155 -------------- ENERGY EQUIPMENT & SERVICES -- 2.6% 73,275 Covia Holdings Corp. (a) 149,481 72,778 FTS International, Inc. (a) 75,689 46,743 KLX Energy Services Holdings, Inc. (a) 301,025 29,049 Mammoth Energy Services, Inc. 63,908 350,809 NexTier Oilfield Solutions, Inc. (a) 2,350,420 70,416 Solaris Oilfield Infrastructure, Inc., Class A 985,824 37,652 US Well Services, Inc. (a) 71,162 -------------- 3,997,509 -------------- ENTERTAINMENT -- 0.4% 50,551 Sciplay Corp., Class A (a) 621,272 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 0.6% 66,585 Braemar Hotels & Resorts, Inc. 594,604 22,348 BRT Apartments Corp. 379,246 -------------- 973,850 -------------- FOOD & STAPLES RETAILING -- 2.3% 73,093 HF Foods Group, Inc. (a) (b) 1,425,313 31,543 Ingles Markets, Inc., Class A 1,498,608 17,493 Natural Grocers by Vitamin Cottage, Inc. 172,656 18,633 Village Super Market, Inc., Class A 432,286 -------------- 3,528,863 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- FOOD PRODUCTS -- 0.9% 64,862 Landec Corp. (a) $ 733,589 34,008 Limoneira Co. 653,974 -------------- 1,387,563 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.9% 14,344 FONAR Corp. (a) 282,434 95,099 Meridian Bioscience, Inc. 929,117 13,186 Soliton, Inc. (a) (b) 144,782 -------------- 1,356,333 -------------- HOTELS, RESTAURANTS & LEISURE -- 2.5% 136,937 BBX Capital Corp. 653,189 36,968 Chuy's Holdings, Inc. (a) 958,210 71,730 Del Taco Restaurants, Inc. (a) 567,026 18,402 RCI Hospitality Holdings, Inc. 377,241 60,388 Ruth's Hospitality Group, Inc. 1,314,345 -------------- 3,870,011 -------------- HOUSEHOLD DURABLES -- 2.3% 54,427 Ethan Allen Interiors, Inc. 1,037,379 52,797 Green Brick Partners, Inc. (a) 606,109 11,600 Hamilton Beach Brands Holding Co., Class A 221,560 26,339 Hooker Furniture Corp. 676,649 13,202 Legacy Housing Corp. (a) 219,681 29,070 Turtle Beach Corp. (a) 274,711 64,715 ZAGG, Inc. (a) (b) 524,839 -------------- 3,560,928 -------------- HOUSEHOLD PRODUCTS -- 0.4% 21,821 Central Garden & Pet Co. (a) 677,978 -------------- INSURANCE -- 1.9% 21,827 FedNat Holding Co. 362,983 24,624 Health Insurance Innovations, Inc., Class A (a) (b) 474,997 3,152 Investors Title Co. 501,799 28,198 Palomar Holdings, Inc. (a) 1,423,717 7,626 Watford Holdings Ltd. (a) 191,870 -------------- 2,955,366 -------------- INTERACTIVE MEDIA & SERVICES -- 0.2% 106,730 DHI Group, Inc. (a) 321,257 -------------- INTERNET & DIRECT MARKETING RETAIL -- 0.6% 26,137 Duluth Holdings, Inc., Class B (a) (b) 275,223 36,014 Lands' End, Inc. (a) 605,035 -------------- 880,258 -------------- IT SERVICES -- 1.5% 59,868 Hackett Group (The), Inc. 966,270 115,226 Unisys Corp. (a) 1,366,580 -------------- 2,332,850 -------------- LEISURE PRODUCTS -- 2.3% 13,175 Johnson Outdoors, Inc., Class A 1,010,523 45,534 Malibu Boats, Inc., Class A (a) 1,864,617 Page 24 See Notes to Financial Statements FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) LEISURE PRODUCTS (CONTINUED) 41,949 MasterCraft Boat Holdings, Inc. (a) $ 660,697 -------------- 3,535,837 -------------- MACHINERY -- 2.6% 33,578 Blue Bird Corp. (a) 769,608 14,153 Hurco Cos., Inc. 542,909 38,988 Lydall, Inc. (a) 800,034 19,180 Park-Ohio Holdings Corp. 645,407 68,769 Spartan Motors, Inc. 1,243,343 -------------- 4,001,301 -------------- MEDIA -- 0.1% 117,075 Lee Enterprises, Inc. (a) 166,246 -------------- METALS & MINING -- 1.4% 20,307 Olympic Steel, Inc. 363,901 35,309 Ryerson Holding Corp. (a) 417,706 193,027 SunCoke Energy, Inc. 1,202,558 19,553 Universal Stainless & Alloy Products, Inc. (a) 291,340 -------------- 2,275,505 -------------- MORTGAGE REAL ESTATE INVESTMENT TRUSTS -- 1.0% 34,964 Cherry Hill Mortgage Investment Corp. 510,125 51,054 Dynex Capital, Inc. 864,855 18,003 Ellington Residential Mortgage REIT 195,332 -------------- 1,570,312 -------------- OIL, GAS & CONSUMABLE FUELS -- 7.1% 59,357 Brigham Minerals, Inc., Class A 1,272,614 57,629 CONSOL Energy, Inc. (a) 836,197 1,096,261 Denbury Resources, Inc. (a) 1,545,728 75,199 Green Plains, Inc. 1,160,321 323,365 Gulfport Energy Corp. (a) 983,030 48,458 Hallador Energy Co. 143,920 133,427 Overseas Shipholding Group, Inc., Class A (a) 306,882 86,693 Renewable Energy Group, Inc. (a) 2,336,376 12,462 REX American Resources Corp. (a) 1,021,385 123,557 Unit Corp. (a) 85,946 114,322 VAALCO Energy, Inc. (a) 253,795 206,600 W&T Offshore, Inc. (a) 1,148,696 -------------- 11,094,890 -------------- PHARMACEUTICALS -- 2.3% 244,654 Amneal Pharmaceuticals, Inc. (a) 1,179,232 24,168 Eton Pharmaceuticals, Inc. (a) (b) 174,010 12,040 Kaleido Biosciences, Inc. (a) (b) 60,441 187,104 Mallinckrodt PLC (a) (b) 652,993 17,330 Osmotica Pharmaceuticals PLC (a) (b) 121,137 45,140 Phibro Animal Health Corp., Class A 1,120,826 16,899 Urovant Sciences Ltd. (a) (b) 262,103 -------------- 3,570,742 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- PROFESSIONAL SERVICES -- 2.4% 16,674 Barrett Business Services, Inc. $ 1,508,330 20,509 BG Staffing, Inc. 448,942 66,983 Resources Connection, Inc. 1,093,832 22,156 Willdan Group, Inc. (a) 704,118 -------------- 3,755,222 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.2% 20,246 Altisource Portfolio Solutions S.A. (a) (b) 391,355 -------------- ROAD & RAIL -- 0.6% 27,603 Covenant Transportation Group, Inc., Class A (a) 356,769 4,225 PAM Transportation Services, Inc. (a) 243,824 17,603 Universal Logistics Holdings, Inc. 333,753 -------------- 934,346 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 4.2% 72,135 Axcelis Technologies, Inc. (a) 1,738,093 79,644 AXT, Inc. (a) 346,451 91,815 Cohu, Inc. 2,097,973 149,511 Photronics, Inc. (a) 2,356,293 -------------- 6,538,810 -------------- SOFTWARE -- 0.6% 65,737 American Software, Inc., Class A 978,167 -------------- SPECIALTY RETAIL -- 6.3% 13,733 America's Car-Mart, Inc. (a) 1,505,961 263,925 Chico's FAS, Inc. 1,005,554 23,054 Citi Trends, Inc. 533,008 37,244 Container Store Group, (The), Inc. (a) 157,170 149,667 Express, Inc. (a) 728,878 40,252 Haverty Furniture Cos., Inc. 811,480 39,226 Hibbett Sports, Inc. (a) 1,099,897 119,799 Party City Holdco, Inc. (a) (b) 280,330 53,738 RTW RetailWinds, Inc. (a) 43,044 19,895 Shoe Carnival, Inc. (b) 741,686 89,452 Sportsman's Warehouse Holdings, Inc. (a) 718,300 49,063 Tilly's, Inc., Class A 601,022 45,358 Zumiez, Inc. (a) 1,566,665 -------------- 9,792,995 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.3% 70,745 Immersion Corp. (a) 525,635 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.3% 15,260 Rocky Brands, Inc. 449,102 -------------- THRIFTS & MORTGAGE FINANCE -- 3.8% 43,894 First Defiance Financial Corp. 1,382,222 9,214 FS Bancorp, Inc. 587,761 15,066 Home Bancorp, Inc. 590,437 33,662 Luther Burbank Corp. 388,123 See Notes to Financial Statements Page 25 FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) THRIFTS & MORTGAGE FINANCE (CONTINUED) 26,903 OP Bancorp $ 278,984 9,660 Rhinebeck Bancorp, Inc. (a) 109,255 33,510 Sterling Bancorp, Inc. 271,431 107,047 United Community Financial Corp. 1,248,168 57,383 Waterstone Financial, Inc. 1,091,998 -------------- 5,948,379 -------------- TOBACCO -- 0.1% 18,557 Pyxus International, Inc. (a) (b) 165,900 -------------- WATER UTILITIES -- 0.4% 17,577 Artesian Resources Corp., Class A 654,040 -------------- TOTAL COMMON STOCKS -- 100.0% 155,966,414 (Cost $146,981,708) -------------- MONEY MARKET FUNDS -- 0.4% 670,249 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 1.59% (c) (d) 670,249 (Cost $670,249) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 2.6% $ 4,068,591 BNP Paribas S.A., 1.56% (c), dated 12/31/19, due 01/02/20, with a maturity value of $4,068,943. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/26. The value of the collateral including accrued interest is $4,165,169. (d) 4,068,591 (Cost $4,068,591) -------------- TOTAL INVESTMENTS -- 103.0% 160,705,254 (Cost $151,720,548) (e) NET OTHER ASSETS AND LIABILITIES -- (3.0)% (4,637,788) -------------- NET ASSETS -- 100.0% $ 156,067,466 ============== (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 $4,632,511 and the total value of the collateral held by the Fund is $4,738,840. (c) Rate shown reflects yield as of December 31, 2019. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $153,905,663. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $19,678,584 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $12,878,993. The net unrealized appreciation was $6,799,591. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 155,966,414 $ -- $ -- Money Market Funds 670,249 -- -- Repurchase Agreements -- 4,068,591 -- ------------------------------------------------- Total Investments $ 156,636,663 $ 4,068,591 $ -- ================================================= * See Portfolio of Investments for industry breakout. Page 26 See Notes to Financial Statements FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 --------------------------------- 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) $ 4,632,511 Non-cash Collateral(2) (4,632,511) -------------- 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, 2019, 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) $ 4,068,591 Non-cash Collateral(4) (4,068,591) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2019, 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, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.8% AIR FREIGHT & LOGISTICS -- 1.9% 299,497 United Parcel Service, Inc., Class B $ 35,059,119 -------------- AUTO COMPONENTS -- 0.2% 30,518 Autoliv, Inc. 2,576,024 120,864 Goodyear Tire & Rubber (The) Co. 1,880,040 -------------- 4,456,064 -------------- AUTOMOBILES -- 3.3% 3,366,740 Ford Motor Co. 31,310,682 706,866 General Motors Co. 25,871,296 81,624 Harley-Davidson, Inc. 3,035,596 -------------- 60,217,574 -------------- BANKS -- 8.9% 74,804 Comerica, Inc. 5,367,187 167,688 F.N.B. Corp. 2,129,638 47,911 First Financial Bancorp. 1,218,856 140,893 First Horizon National Corp. 2,333,188 62,022 Hope Bancorp, Inc. 921,647 534,015 Huntington Bancshares, Inc. 8,052,946 108,379 Investors Bancorp, Inc. 1,291,336 492,816 KeyCorp 9,974,596 99,126 PacWest Bancorp 3,793,552 7,388 Park National Corp. 756,383 249,084 People's United Financial, Inc. 4,209,520 479,163 Regions Financial Corp. 8,222,437 59,656 Synovus Financial Corp. 2,338,515 144,210 Umpqua Holdings Corp. 2,552,517 47,620 United Bankshares, Inc. 1,840,989 165,874 Valley National Bancorp 1,899,257 2,006,605 Wells Fargo & Co. 107,955,349 -------------- 164,857,913 -------------- BIOTECHNOLOGY -- 4.6% 952,017 AbbVie, Inc. 84,291,585 -------------- CAPITAL MARKETS -- 0.5% 59,514 Artisan Partners Asset Management, Inc., Class A 1,923,493 364,587 Invesco Ltd. 6,555,274 -------------- 8,478,767 -------------- CHEMICALS -- 1.1% 57,530 Eastman Chemical Co. 4,559,828 15,041 Kronos Worldwide, Inc. 201,549 155,099 LyondellBasell Industries N.V., Class A 14,653,754 98,877 Olin Corp. 1,705,628 -------------- 21,120,759 -------------- CONTAINERS & PACKAGING -- 1.0% 13,583 Greif, Inc., Class A 600,369 227,466 International Paper Co. 10,474,809 154,502 WestRock Co. 6,629,681 -------------- 17,704,859 -------------- DIVERSIFIED CONSUMER SERVICES -- 0.1% 118,281 H&R Block, Inc. 2,777,238 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 17.2% 4,713,366 AT&T, Inc. $ 184,198,343 2,172,794 Verizon Communications, Inc. 133,409,552 -------------- 317,607,895 -------------- ELECTRIC UTILITIES -- 5.5% 403,641 Duke Energy Corp. 36,816,095 159,980 Edison International 12,064,092 460,439 PPL Corp. 16,520,551 557,121 Southern (The) Co. 35,488,608 -------------- 100,889,346 -------------- ELECTRICAL EQUIPMENT -- 0.9% 166,600 Eaton Corp. PLC 15,780,352 -------------- FOOD PRODUCTS -- 1.7% 66,804 Bunge Ltd. 3,844,570 64,185 Campbell Soup Co. 3,172,023 299,120 General Mills, Inc. 16,020,867 111,793 Kellogg Co. 7,731,604 -------------- 30,769,064 -------------- HEALTH CARE PROVIDERS & SERVICES -- 2.3% 137,870 Cardinal Health, Inc. 6,973,465 462,533 CVS Health Corp. 34,361,576 51,457 Patterson Cos., Inc. 1,053,839 -------------- 42,388,880 -------------- HOTELS, RESTAURANTS & LEISURE -- 1.7% 18,103 Brinker International, Inc. 760,326 228,119 Carnival Corp. 11,595,289 157,232 Extended Stay America, Inc. 2,336,467 207,938 Las Vegas Sands Corp. 14,356,040 43,770 Wyndham Destinations, Inc. 2,262,471 -------------- 31,310,593 -------------- HOUSEHOLD DURABLES -- 0.7% 53,226 Leggett & Platt, Inc. 2,705,478 19,165 M.D.C. Holdings, Inc. 731,336 240,166 Newell Brands, Inc. 4,615,991 27,206 Whirlpool Corp. 4,013,701 -------------- 12,066,506 -------------- INSURANCE -- 2.6% 18,300 Mercury General Corp. 891,759 372,243 MetLife, Inc. 18,973,226 139,020 Principal Financial Group, Inc. 7,646,100 226,945 Prudential Financial, Inc. 21,273,824 -------------- 48,784,909 -------------- IT SERVICES -- 4.3% 559,790 International Business Machines Corp. 75,034,252 166,353 Western Union (The) Co. 4,454,933 -------------- 79,489,185 -------------- MEDIA -- 0.3% 209,247 Interpublic Group of Cos. (The), Inc. 4,833,606 Page 28 See Notes to Financial Statements FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) MEDIA (CONTINUED) 33,063 Meredith Corp. $ 1,073,555 -------------- 5,907,161 -------------- METALS & MINING -- 0.2% 43,754 Southern Copper Corp. 1,858,670 79,160 Steel Dynamics, Inc. 2,694,606 -------------- 4,553,276 -------------- MULTILINE RETAIL -- 0.8% 116,618 Kohl's Corp. 5,941,687 387,542 Macy's, Inc. 6,588,214 53,142 Nordstrom, Inc. 2,175,102 -------------- 14,705,003 -------------- MULTI-UTILITIES -- 2.6% 300,013 CenterPoint Energy, Inc. 8,181,355 486,349 Dominion Energy, Inc. 40,279,424 -------------- 48,460,779 -------------- OIL, GAS & CONSUMABLE FUELS -- 22.3% 230,447 Apache Corp. 5,897,139 1,014,107 Chevron Corp. 122,210,035 2,582,565 Exxon Mobil Corp. 180,211,386 318,759 Marathon Petroleum Corp. 19,205,230 982,123 Occidental Petroleum Corp. 40,473,289 53,657 PBF Energy, Inc., Class A 1,683,220 187,706 Phillips 66 20,912,325 209,490 Valero Energy Corp. 19,618,738 -------------- 410,211,362 -------------- PAPER & FOREST PRODUCTS -- 0.1% 35,492 Domtar Corp. 1,357,214 -------------- PERSONAL PRODUCTS -- 0.1% 165,800 Coty, Inc., Class A 1,865,250 -------------- PROFESSIONAL SERVICES -- 0.1% 56,722 Nielsen Holdings PLC 1,151,457 -------------- ROAD & RAIL -- 0.1% 30,323 Ryder System, Inc. 1,646,842 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.0% 172,150 Broadcom, Inc. 54,402,843 -------------- SPECIALTY RETAIL -- 0.4% 39,575 Abercrombie & Fitch Co., Class A 684,252 48,628 Designer Brands, Inc., Class A 765,405 56,999 Foot Locker, Inc. 2,222,391 167,605 Gap (The), Inc. 2,963,256 12,760 Guess?, Inc. 285,569 -------------- 6,920,873 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.0% 134,313 Seagate Technology PLC 7,991,624 151,203 Western Digital Corp. 9,596,854 -------------- 17,588,478 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.4% 188,888 Hanesbrands, Inc. $ 2,804,987 195,630 Tapestry, Inc. 5,276,141 -------------- 8,081,128 -------------- THRIFTS & MORTGAGE FINANCE -- 0.1% 57,194 Northwest Bancshares, Inc. 951,136 29,575 Provident Financial Services, Inc. 729,024 -------------- 1,680,160 -------------- TOBACCO -- 9.6% 1,627,696 Altria Group, Inc. 81,238,307 1,119,468 Philip Morris International, Inc. 95,255,532 -------------- 176,493,839 -------------- TRADING COMPANIES & DISTRIBUTORS -- 0.2% 26,906 Aircastle Ltd. 861,261 15,175 Watsco, Inc. 2,733,776 -------------- 3,595,037 -------------- TOTAL INVESTMENTS -- 99.8% 1,836,671,310 (Cost $1,727,759,394) (a) NET OTHER ASSETS AND LIABILITIES -- 0.2% 4,328,487 -------------- NET ASSETS -- 100.0% $1,840,999,797 ============== (a) Aggregate cost for federal income tax purposes is $1,771,410,599. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $135,660,164 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $70,399,453. The net unrealized appreciation was $65,260,711. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 1,836,671,310 $ -- $ -- ================================================= * 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, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% AEROSPACE & DEFENSE -- 2.1% 325,083 Arconic, Inc. $ 10,002,804 44,365 Boeing (The) Co. 14,452,342 93,166 Parsons Corp. (a) 3,845,893 -------------- 28,301,039 -------------- AUTOMOBILES -- 2.8% 87,972 Tesla, Inc. (a) 36,801,327 -------------- BANKS -- 0.3% 122,934 First Hawaiian, Inc. 3,546,646 -------------- BEVERAGES -- 1.4% 633,791 Keurig Dr Pepper, Inc. 18,348,249 -------------- BIOTECHNOLOGY -- 2.4% 69,559 Apellis Pharmaceuticals, Inc. (a) 2,129,897 101,617 Biogen, Inc. (a) 30,152,812 -------------- 32,282,709 -------------- CAPITAL MARKETS -- 2.2% 328,821 Apollo Global Management, Inc. 15,688,050 81,544 Assetmark Financial Holdings, Inc. (a) 2,366,407 54,808 Hamilton Lane, Inc., Class A 3,266,556 166,894 Tradeweb Markets, Inc., Class A 7,735,537 -------------- 29,056,550 -------------- CHEMICALS -- 3.0% 562,265 Corteva, Inc. 16,620,553 362,737 Dow, Inc. 19,852,596 141,461 Valvoline, Inc. 3,028,680 -------------- 39,501,829 -------------- COMMERCIAL SERVICES & SUPPLIES -- 0.7% 558,276 ADT, Inc. (b) 4,427,129 100,251 IAA, Inc. (a) 4,717,812 -------------- 9,144,941 -------------- CONSTRUCTION & ENGINEERING -- 0.2% 72,670 Arcosa, Inc. 3,237,448 -------------- DIVERSIFIED CONSUMER SERVICES -- 0.2% 63,571 frontdoor, Inc. (a) 3,014,537 -------------- DIVERSIFIED FINANCIAL SERVICES -- 1.0% 559,045 AXA Equitable Holdings, Inc. 13,853,135 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.6% 776,347 Verizon Communications, Inc. 47,667,706 -------------- ELECTRIC UTILITIES -- 1.1% 213,908 Evergy, Inc. 13,923,272 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 2.9% 124,069 CDW Corp. 17,722,016 197,104 Keysight Technologies, Inc. (a) 20,228,783 -------------- 37,950,799 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- ENTERTAINMENT -- 3.0% 173,613 Liberty Media Corp.-Liberty Formula One, Class C (a) $ 7,980,122 88,668 Roku, Inc. (a) 11,872,645 137,951 Spotify Technology S.A. (a) 20,630,572 -------------- 40,483,339 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 1.0% 107,991 Americold Realty Trust 3,786,164 346,158 VICI Properties, Inc. 8,844,337 -------------- 12,630,501 -------------- FOOD & STAPLES RETAILING -- 2.9% 601,915 Kroger (The) Co. 17,449,516 175,899 Performance Food Group Co. (a) 9,055,281 288,326 US Foods Holding Corp. (a) 12,077,976 -------------- 38,582,773 -------------- FOOD PRODUCTS -- 5.9% 365,415 Conagra Brands, Inc. 12,511,810 156,873 Hershey (The) Co. 23,057,193 109,674 Lamb Weston Holdings, Inc. 9,435,254 370,189 Tyson Foods, Inc., Class A 33,702,007 -------------- 78,706,264 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.4% 275,213 Alcon, Inc. (a) 15,568,799 140,551 Stryker Corp. 29,507,277 -------------- 45,076,076 -------------- HEALTH CARE PROVIDERS & SERVICES -- 0.1% 63,108 Progyny, Inc. (a) (b) 1,732,315 -------------- HOTELS, RESTAURANTS & LEISURE -- 1.1% 80,221 Hilton Grand Vacations, Inc. (a) 2,758,800 55,244 Marriott Vacations Worldwide Corp. 7,113,217 71,459 Wyndham Hotels & Resorts, Inc. 4,488,340 -------------- 14,360,357 -------------- INSURANCE -- 0.5% 162,103 Brighthouse Financial, Inc. (a) 6,359,301 -------------- INTERACTIVE MEDIA & SERVICES -- 3.8% 84,060 Cargurus, Inc. (a) 2,957,231 210,222 Match Group, Inc. (a) (b) 17,261,328 1,313,999 Snap, Inc., Class A (a) 21,457,604 291,473 Twitter, Inc. (a) 9,341,710 -------------- 51,017,873 -------------- INTERNET & DIRECT MARKETING RETAIL -- 0.9% 299,298 Chewy, Inc., Class A (a) 8,679,642 133,672 Stitch Fix, Inc., Class A (a) (b) 3,430,024 -------------- 12,109,666 -------------- IT SERVICES -- 11.5% 140,377 Black Knight, Inc. (a) 9,051,509 Page 30 See Notes to Financial Statements FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) IT SERVICES (CONTINUED) 276,892 Fidelity National Information Services, Inc. $ 38,512,908 255,257 Fiserv, Inc. (a) 29,515,367 84,405 Okta, Inc. (a) 9,737,805 529,001 PayPal Holdings, Inc. (a) 57,222,038 206,502 Perspecta, Inc. 5,459,913 227,032 Switch, Inc., Class A 3,364,614 -------------- 152,864,154 -------------- LEISURE PRODUCTS -- 0.4% 98,769 Acushnet Holdings Corp. 3,209,992 64,443 YETI Holdings, Inc. (a) (b) 2,241,328 -------------- 5,451,320 -------------- LIFE SCIENCES TOOLS & SERVICES -- 4.8% 429,300 Avantor, Inc. (a) 7,791,795 33,818 Medpace Holdings, Inc. (a) 2,842,741 165,601 Thermo Fisher Scientific, Inc. 53,798,797 -------------- 64,433,333 -------------- MACHINERY -- 0.4% 153,653 Gardner Denver Holdings, Inc. (a) 5,635,992 -------------- MEDIA -- 4.8% 478,177 Altice USA, Inc., Class A (a) 13,073,359 6,432 Cable One, Inc. 9,573,839 466,055 Fox Corp., Class A 17,276,659 3,321,649 Sirius XM Holdings, Inc. 23,749,790 -------------- 63,673,647 -------------- MULTI-UTILITIES -- 3.5% 309,074 Sempra Energy 46,818,530 -------------- PERSONAL PRODUCTS -- 0.3% 154,195 BellRing Brands, Inc., Class A (a) 3,282,812 -------------- PHARMACEUTICALS -- 10.0% 703,117 Bristol-Myers Squibb Co. 45,133,080 43,387 MyoKardia, Inc. (a) 3,162,261 49,606 Reata Pharmaceuticals, Inc., Class A (a) 10,140,955 2,012,193 Takeda Pharmaceutical Co., Ltd., ADR 39,700,568 268,230 Zoetis, Inc. 35,500,241 -------------- 133,637,105 -------------- PROFESSIONAL SERVICES -- 2.8% 301,091 IHS Markit Ltd. (a) 22,687,207 176,737 TransUnion 15,130,454 -------------- 37,817,661 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.5% 205,711 Cushman & Wakefield PLC (a) 4,204,733 178,737 Newmark Group, Inc., Class A 2,404,906 -------------- 6,609,639 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- ROAD & RAIL -- 3.8% 236,608 Lyft, Inc., Class A (a) $ 10,178,876 132,993 Schneider National, Inc., Class B 2,901,907 1,280,850 Uber Technologies, Inc. (a) 38,092,479 -------------- 51,173,262 -------------- SOFTWARE -- 5.9% 100,325 Anaplan, Inc. (a) 5,257,030 34,528 Appfolio, Inc., Class A (a) 3,796,354 50,423 Appian Corp. (a) (b) 1,926,663 72,216 Avalara, Inc. (a) 5,289,822 62,667 Blackline, Inc. (a) 3,231,110 135,136 Ceridian HCM Holding, Inc. (a) 9,173,032 47,905 Coupa Software, Inc. (a) 7,006,106 84,885 Crowdstrike Holdings, Inc., Class A (a) 4,233,215 154,960 DocuSign, Inc. (a) 11,484,086 210,626 Dynatrace, Inc. (a) 5,328,838 88,210 Smartsheet, Inc., Class A (a) 3,962,393 233,657 SolarWinds Corp. (a) 4,334,337 101,082 SVMK, Inc. (a) 1,806,335 42,363 Trade Desk (The), Inc., Class A (a) 11,005,060 -------------- 77,834,381 -------------- SPECIALTY RETAIL -- 2.5% 49,745 Burlington Stores, Inc. (a) 11,343,352 170,708 Carvana Co. (a) 15,713,672 132,793 Floor & Decor Holdings, Inc., Class A (a) 6,747,212 -------------- 33,804,236 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.2% 970,823 Hewlett Packard Enterprise Co. 15,397,253 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.4% 294,880 Levi Strauss & Co., Class A 5,688,235 -------------- TRADING COMPANIES & DISTRIBUTORS -- 0.7% 56,432 United Rentals, Inc. (a) 9,411,165 -------------- TOTAL COMMON STOCKS -- 100.0% 1,331,221,377 (Cost $1,144,007,792) -------------- MONEY MARKET FUNDS -- 0.3% 3,933,925 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 1.59% (c) (d) 3,933,925 (Cost $3,933,925) -------------- See Notes to Financial Statements Page 31 FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 1.8% $ 23,879,955 BNP Paribas S.A., 1.56% (c), dated 12/31/19, due 01/02/20, with a maturity value of $23,882,024. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/26. The value of the collateral including accrued interest is $24,446,808. (d) $ 23,879,955 (Cost $23,879,955) -------------- TOTAL INVESTMENTS -- 102.1% 1,359,035,257 (Cost $1,171,821,672) (e) NET OTHER ASSETS AND LIABILITIES -- (2.1)% (28,200,168) -------------- NET ASSETS -- 100.0% $1,330,835,089 ============== (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 $27,074,980 and the total value of the collateral held by the Fund is $27,813,880. (c) Rate shown reflects yield as of December 31, 2019. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $1,182,977,911. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $192,301,284 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $16,243,938. The net unrealized appreciation was $176,057,346. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 1,331,221,377 $ -- $ -- Money Market Funds 3,933,925 -- -- Repurchase Agreements -- 23,879,955 -- ------------------------------------------------- Total Investments $ 1,335,155,302 $ 23,879,955 $ -- ================================================= * 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) $ 27,074,980 Non-cash Collateral(2) (27,074,980) -------------- 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, 2019, 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) $ 23,879,955 Non-cash Collateral(4) (23,879,955) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2019, 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, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% BIOTECHNOLOGY -- 80.8% 1,269,924 ACADIA Pharmaceuticals, Inc. (a) $ 54,327,349 1,533,749 Agios Pharmaceuticals, Inc. (a) 73,236,515 515,226 Alexion Pharmaceuticals, Inc. (a) 55,721,692 2,794,737 Alkermes PLC (a) 57,012,635 598,197 Alnylam Pharmaceuticals, Inc. (a) 68,894,348 250,405 Amgen, Inc. 60,365,133 230,530 Biogen, Inc. (a) 68,405,167 733,841 BioMarin Pharmaceutical, Inc. (a) 62,046,257 566,401 Bluebird Bio, Inc. (a) 49,701,688 525,661 Exact Sciences Corp. (a) 48,613,129 3,089,365 Exelixis, Inc. (a) 54,434,611 1,307,187 FibroGen, Inc. (a) 56,065,250 781,539 Gilead Sciences, Inc. 50,784,404 2,438,997 Grifols S.A., ADR 56,804,240 652,349 Incyte Corp. (a) 56,963,115 779,549 Intercept Pharmaceuticals, Inc. (a) 96,601,712 909,223 Ionis Pharmaceuticals, Inc. (a) 54,926,161 529,628 Neurocrine Biosciences, Inc. (a) 56,929,714 168,927 Regeneron Pharmaceuticals, Inc. (a) 63,428,710 591,244 Sarepta Therapeutics, Inc. (a) 76,294,126 580,311 Seattle Genetics, Inc. (a) 66,306,335 1,187,948 Ultragenyx Pharmaceutical, Inc. (a) 50,737,259 617,574 United Therapeutics Corp. (a) 54,395,918 284,683 Vertex Pharmaceuticals, Inc. (a) 62,331,343 -------------- 1,455,326,811 -------------- LIFE SCIENCES TOOLS & SERVICES -- 15.7% 253,390 Bio-Techne Corp. 55,621,639 377,605 Charles River Laboratories International, Inc. (a) 57,682,940 163,955 Illumina, Inc. (a) 54,390,431 353,749 IQVIA Holdings, Inc. (a) 54,657,758 1,780,685 QIAGEN N.V. (a) 60,187,153 -------------- 282,539,921 -------------- PHARMACEUTICALS -- 3.5% 2,937,328 Nektar Therapeutics (a) 63,402,225 -------------- TOTAL INVESTMENTS -- 100.0% 1,801,268,957 (Cost $1,937,181,208) (b) NET OTHER ASSETS AND LIABILITIES -- (0.0)% (341,859) -------------- NET ASSETS -- 100.0% $1,800,927,098 ============== (a) Non-income producing security. (b) Aggregate cost for federal income tax purposes is $1,997,287,583. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $144,271,370 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $340,289,996. The net unrealized depreciation was $196,018,626. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 1,801,268,957 $ -- $ -- ================================================= * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 33 FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.8% CAPITAL MARKETS -- 4.0% 3,321,264 E*TRADE Financial Corp. $ 150,685,748 3,287,463 TD Ameritrade Holding Corp. 163,386,911 -------------- 314,072,659 -------------- COMMUNICATIONS EQUIPMENT -- 12.4% 787,818 Arista Networks, Inc. (a) 160,242,181 3,255,344 Ciena Corp. (a) 138,970,635 9,270,603 Cisco Systems, Inc. 444,618,120 6,328,388 CommScope Holding Co., Inc. (a) 89,799,826 5,623,711 Juniper Networks, Inc. 138,512,002 -------------- 972,142,764 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.9% 9,588,191 Vonage Holdings Corp. (a) 71,048,495 -------------- ENTERTAINMENT -- 4.9% 1,184,451 Netflix, Inc. (a) 383,252,810 -------------- HEALTH CARE TECHNOLOGY -- 2.4% 1,363,896 Veeva Systems, Inc., Class A (a) 191,845,611 -------------- INTERACTIVE MEDIA & SERVICES -- 22.0% 256,746 Alphabet, Inc., Class A (a) 343,883,025 256,112 Alphabet, Inc., Class C (a) 342,426,866 2,786,771 Facebook, Inc., Class A (a) 571,984,748 3,742,101 Pinterest, Inc., Class A (a) 69,752,762 10,935,233 Snap, Inc., Class A (a) 178,572,355 7,019,618 Twitter, Inc. (a) 224,978,757 -------------- 1,731,598,513 -------------- INTERNET & DIRECT MARKETING RETAIL -- 17.8% 377,762 Amazon.com, Inc. (a) 698,043,734 6,460,836 eBay, Inc. 233,300,788 2,669,613 Etsy, Inc. (a) 118,263,856 1,607,122 Expedia Group, Inc. 173,794,173 22,322,240 Groupon, Inc. (a) 53,350,154 2,415,338 GrubHub, Inc. (a) 117,482,040 -------------- 1,394,234,745 -------------- IT SERVICES -- 13.5% 2,018,001 Akamai Technologies, Inc. (a) 174,314,926 2,400,394 GoDaddy, Inc., Class A (a) 163,034,760 1,466,496 Okta, Inc. (a) 169,189,644 3,275,104 PayPal Holdings, Inc. (a) 354,268,000 1,042,888 VeriSign, Inc. (a) 200,943,660 -------------- 1,061,750,990 -------------- SOFTWARE -- 21.9% 2,952,902 2U, Inc. (a) 70,840,119 4,124,310 8x8, Inc. (a) 75,474,873 4,876,120 Box, Inc., Class A (a) 81,821,294 1,538,280 Citrix Systems, Inc. 170,595,252 1,570,556 Cornerstone OnDemand, Inc. (a) 91,956,054 1,961,029 DocuSign, Inc. (a) 145,331,859 5,663,130 Dropbox, Inc., Class A (a) 101,426,658 804,481 HubSpot, Inc. (a) 127,510,239 SHARES DESCRIPTION VALUE ------------------------------------------------------------- SOFTWARE (CONTINUED) 1,106,913 j2 Global, Inc. $ 103,728,817 1,247,894 LogMeIn, Inc. 106,994,432 1,403,386 New Relic, Inc. (a) 92,216,494 3,964,962 Pluralsight, Inc., Class A (a) 68,236,996 2,321,099 salesforce.com, Inc. (a) 377,503,541 2,311,373 Smartsheet, Inc., Class A (a) 103,826,875 -------------- 1,717,463,503 -------------- TOTAL COMMON STOCKS -- 99.8% 7,837,410,090 (Cost $6,973,901,404) -------------- MONEY MARKET FUNDS -- 0.3% 21,299,238 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 1.50% (b) 21,299,238 (Cost $21,299,238) -------------- TOTAL INVESTMENTS -- 100.1% 7,858,709,328 (Cost $6,995,200,642) (c) NET OTHER ASSETS AND LIABILITIES -- (0.1)% (5,342,341) -------------- NET ASSETS -- 100.0% $7,853,366,987 ============== (a) Non-income producing security. (b) Rate shown reflects yield as of December 31, 2019. (c) Aggregate cost for federal income tax purposes is $7,126,572,548. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $1,203,663,775 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $471,526,995. The net unrealized appreciation was $732,136,780. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 7,837,410,090 $ -- $ -- Money Market Funds 21,299,238 -- -- ------------------------------------------------- Total Investments $ 7,858,709,328 $ -- $ -- ================================================= * See Portfolio of Investments for industry breakout. Page 34 See Notes to Financial Statements FIRST TRUST CAPITAL STRENGTH ETF (FTCS) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% AEROSPACE & DEFENSE -- 3.8% 171,528 Lockheed Martin Corp. $ 66,789,572 182,744 Northrop Grumman Corp. 62,858,454 -------------- 129,648,026 -------------- AIR FREIGHT & LOGISTICS -- 2.0% 864,063 Expeditors International of Washington, Inc. 67,414,195 -------------- AIRLINES -- 1.9% 1,194,627 Southwest Airlines Co. 64,485,965 -------------- BEVERAGES -- 3.8% 1,166,280 Coca-Cola (The) Co. 64,553,598 468,903 PepsiCo, Inc. 64,084,973 -------------- 128,638,571 -------------- BIOTECHNOLOGY -- 2.2% 315,150 Amgen, Inc. 75,973,211 -------------- CAPITAL MARKETS -- 8.3% 294,017 Moody's Corp. 69,802,576 674,778 Northern Trust Corp. 71,688,415 255,065 S&P Global, Inc. 69,645,498 583,944 T. Rowe Price Group, Inc. 71,147,737 -------------- 282,284,226 -------------- CHEMICALS -- 4.1% 297,329 Air Products and Chemicals, Inc. 69,869,342 514,283 PPG Industries, Inc. 68,651,637 -------------- 138,520,979 -------------- COMMERCIAL SERVICES & SUPPLIES -- 1.8% 545,829 Waste Management, Inc. 62,202,673 -------------- ELECTRICAL EQUIPMENT -- 2.1% 930,641 Emerson Electric Co. 70,970,683 -------------- ENTERTAINMENT -- 2.1% 488,104 Walt Disney (The) Co. 70,594,482 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 1.9% 278,878 American Tower Corp. 64,091,742 -------------- FOOD & STAPLES RETAILING -- 3.7% 210,956 Costco Wholesale Corp. 62,004,187 536,246 Walmart, Inc. 63,727,475 -------------- 125,731,662 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 5.8% 726,088 Baxter International, Inc. 60,715,479 1,660,743 Boston Scientific Corp. (a) 75,098,798 296,714 Stryker Corp. 62,292,137 -------------- 198,106,414 -------------- HEALTH CARE PROVIDERS & SERVICES -- 2.3% 260,413 UnitedHealth Group, Inc. 76,556,214 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- HOUSEHOLD DURABLES -- 2.1% 730,490 Garmin Ltd. $ 71,266,604 -------------- INDUSTRIAL CONGLOMERATES -- 4.1% 391,706 3M Co. 69,104,773 385,865 Honeywell International, Inc. 68,298,105 -------------- 137,402,878 -------------- INSURANCE -- 5.9% 1,405,693 Fidelity National Financial, Inc. 63,748,178 645,015 Marsh & McLennan Cos., Inc. 71,861,121 910,097 Progressive (The) Corp. 65,881,922 -------------- 201,491,221 -------------- INTERNET & DIRECT MARKETING RETAIL -- 3.7% 31,726 Booking Holdings, Inc. (a) 65,156,638 1,645,759 eBay, Inc. 59,428,357 -------------- 124,584,995 -------------- IT SERVICES -- 10.1% 341,506 Accenture PLC, Class A 71,910,918 390,667 Automatic Data Processing, Inc. 66,608,724 1,053,565 Cognizant Technology Solutions Corp., Class A 65,342,101 604,605 Fiserv, Inc. (a) 69,910,476 363,594 Visa, Inc., Class A 68,319,313 -------------- 342,091,532 -------------- MACHINERY -- 4.1% 375,200 Cummins, Inc. 67,145,792 403,565 Illinois Tool Works, Inc. 72,492,381 -------------- 139,638,173 -------------- OIL, GAS & CONSUMABLE FUELS -- 2.0% 595,971 Phillips 66 66,397,129 -------------- PHARMACEUTICALS -- 10.4% 588,072 Eli Lilly & Co. 77,290,303 500,299 Johnson & Johnson 72,978,615 754,465 Merck & Co., Inc. 68,618,592 1,752,290 Pfizer, Inc. 68,654,722 498,667 Zoetis, Inc. 65,998,577 -------------- 353,540,809 -------------- SOFTWARE -- 5.9% 243,420 Intuit, Inc. 63,759,001 464,953 Microsoft Corp. 73,323,088 1,171,192 Oracle Corp. 62,049,752 -------------- 199,131,841 -------------- SPECIALTY RETAIL -- 3.8% 559,787 Ross Stores, Inc. 65,170,402 1,058,462 TJX (The) Cos., Inc. 64,629,690 -------------- 129,800,092 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 2.0% 664,805 NIKE, Inc., Class B 67,351,395 -------------- See Notes to Financial Statements Page 35 FIRST TRUST CAPITAL STRENGTH ETF (FTCS) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 DESCRIPTION VALUE ------------------------------------------------------------- TOTAL INVESTMENTS -- 99.9% $3,387,915,712 (Cost $3,016,556,261) (b) NET OTHER ASSETS AND LIABILITIES -- 0.1% 4,707,093 -------------- NET ASSETS -- 100.0% $3,392,622,805 ============== (a) Non-income producing security. (b) Aggregate cost for federal income tax purposes is $3,023,569,622. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $375,081,632 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $10,735,542. The net unrealized appreciation was $364,346,090. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 3,387,915,712 $ -- $ -- ================================================= * See Portfolio of Investments for industry breakout. Page 36 See Notes to Financial Statements FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.8% AEROSPACE & DEFENSE -- 1.9% 141,694 Boeing (The) Co. $ 46,158,238 266,158 General Dynamics Corp. 46,936,963 122,074 Lockheed Martin Corp. 47,533,174 319,313 United Technologies Corp. 47,820,315 -------------- 188,448,690 -------------- AIR FREIGHT & LOGISTICS -- 1.5% 622,778 C.H. Robinson Worldwide, Inc. 48,701,240 315,364 FedEx Corp. 47,686,190 402,185 United Parcel Service, Inc., Class B 47,079,776 -------------- 143,467,206 -------------- AUTOMOBILES -- 0.5% 336,976 Toyota Motor Corp., ADR 47,358,607 -------------- BANKS -- 6.9% 503,175 Bank of Hawaii Corp. 47,882,133 621,252 Bank of Montreal 48,147,030 857,890 Bank of Nova Scotia (The) 48,462,206 570,476 Canadian Imperial Bank of Commerce 47,463,603 348,660 JPMorgan Chase & Co. 48,603,204 283,561 M&T Bank Corp. 48,134,480 461,204 Park National Corp. 47,218,066 2,843,978 People's United Financial, Inc. 48,063,228 299,861 PNC Financial Services Group (The), Inc. 47,866,812 607,735 Royal Bank of Canada 48,132,612 855,409 Toronto-Dominion (The) Bank 48,014,107 851,187 Truist Financial Corp. 47,938,852 802,901 U.S. Bancorp 47,604,000 888,988 Wells Fargo & Co. 47,827,554 -------------- 671,357,887 -------------- BEVERAGES -- 2.0% 584,362 Anheuser-Busch InBev S.A./N.V., ADR 47,941,058 871,148 Coca-Cola (The) Co. 48,218,042 287,256 Diageo PLC, ADR 48,379,656 349,063 PepsiCo, Inc. 47,706,440 -------------- 192,245,196 -------------- BIOTECHNOLOGY -- 0.5% 196,846 Amgen, Inc. 47,453,665 -------------- CAPITAL MARKETS -- 2.5% 949,686 Bank of New York Mellon (The) Corp. 47,797,696 95,745 BlackRock, Inc. 48,131,011 1,826,467 Franklin Resources, Inc. 47,451,613 208,813 Goldman Sachs Group (The), Inc. 48,012,373 393,308 T. Rowe Price Group, Inc. 47,920,647 -------------- 239,313,340 -------------- CHEMICALS -- 2.5% 203,439 Air Products and Chemicals, Inc. 47,806,131 870,836 Dow, Inc. 47,660,854 748,345 DuPont de Nemours, Inc. 48,043,749 SHARES DESCRIPTION VALUE ------------------------------------------------------------- CHEMICALS (CONTINUED) 385,933 International Flavors & Fragrances, Inc. $ 49,793,076 727,558 Sensient Technologies Corp. 48,084,308 -------------- 241,388,118 -------------- COMMERCIAL SERVICES & SUPPLIES -- 1.0% 535,031 Republic Services, Inc. 47,954,829 423,662 Waste Management, Inc. 48,280,521 -------------- 96,235,350 -------------- COMMUNICATIONS EQUIPMENT -- 0.5% 994,488 Cisco Systems, Inc. 47,695,645 -------------- CONSUMER FINANCE -- 0.5% 560,510 Discover Financial Services 47,542,458 -------------- CONTAINERS & PACKAGING -- 1.0% 360,012 Avery Dennison Corp. 47,096,770 766,727 Sonoco Products Co. 47,322,390 -------------- 94,419,160 -------------- DISTRIBUTORS -- 0.5% 449,050 Genuine Parts Co. 47,702,582 -------------- DIVERSIFIED FINANCIAL SERVICES -- 0.5% 1,933,523 AXA Equitable Holdings, Inc. 47,912,700 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.0% 1,224,351 AT&T, Inc. 47,847,637 1,033,191 BCE, Inc. 47,888,403 1,245,070 TELUS Corp. 48,221,561 779,073 Verizon Communications, Inc. 47,835,082 -------------- 191,792,683 -------------- ELECTRIC UTILITIES -- 11.5% 594,247 ALLETE, Inc. 48,235,029 880,946 Alliant Energy Corp. 48,205,365 510,243 American Electric Power Co., Inc. 48,223,066 931,040 Avangrid, Inc. 47,632,006 530,631 Duke Energy Corp. 48,398,854 706,393 El Paso Electric Co. 47,957,021 403,428 Entergy Corp. 48,330,674 749,789 Evergy, Inc. 48,803,766 571,287 Eversource Energy 48,599,385 1,058,301 Exelon Corp. 48,247,943 988,534 FirstEnergy Corp. 48,042,752 1,162,487 Fortis, Inc. 48,266,460 1,024,324 Hawaiian Electric Industries, Inc. 47,999,823 450,979 IDACORP, Inc. 48,164,557 614,280 MGE Energy, Inc. 48,417,550 200,320 NextEra Energy, Inc. 48,509,491 1,091,371 OGE Energy Corp. 48,533,268 933,382 Otter Tail Corp. 47,873,163 537,593 Pinnacle West Capital Corp. 48,345,739 854,502 Portland General Electric Co. 47,672,667 1,341,440 PPL Corp. 48,130,867 756,180 Southern (The) Co. 48,168,666 See Notes to Financial Statements Page 37 FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) ELECTRIC UTILITIES (CONTINUED) 759,035 Xcel Energy, Inc. $ 48,191,132 -------------- 1,108,949,244 -------------- ELECTRICAL EQUIPMENT -- 2.4% 1,996,476 ABB Ltd., ADR 48,095,107 502,858 Eaton Corp. PLC 47,630,710 622,936 Emerson Electric Co. 47,505,099 321,525 Hubbell, Inc. 47,527,825 234,162 Rockwell Automation, Inc. 47,457,613 -------------- 238,216,354 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.5% 503,122 TE Connectivity Ltd. 48,219,213 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 5.0% 230,986 AvalonBay Communities, Inc. 48,437,764 600,130 Equity Residential 48,562,520 376,533 Federal Realty Investment Trust 48,471,093 370,698 Mid-America Apartment Communities, Inc. 48,880,238 546,081 Prologis, Inc. 48,677,660 227,521 Public Storage 48,452,872 664,849 Realty Income Corp. 48,952,832 329,946 Simon Property Group, Inc. 49,148,756 1,646,675 Washington Real Estate Investment Trust 48,049,977 613,656 WP Carey, Inc. 49,117,026 -------------- 486,750,738 -------------- FOOD & STAPLES RETAILING -- 1.5% 560,817 Sysco Corp. 47,972,286 816,716 Walgreens Boots Alliance, Inc. 48,153,575 401,883 Walmart, Inc. 47,759,776 -------------- 143,885,637 -------------- FOOD PRODUCTS -- 4.0% 1,039,468 Archer-Daniels-Midland Co. 48,179,342 974,076 Campbell Soup Co. 48,138,836 907,351 General Mills, Inc. 48,597,720 326,952 Hershey (The) Co. 48,055,405 1,053,632 Hormel Foods Corp. 47,529,339 462,749 J.M. Smucker (The) Co. 48,186,053 695,506 Kellogg Co. 48,101,195 874,036 Mondelez International, Inc., Class A 48,141,903 -------------- 384,929,793 -------------- GAS UTILITIES -- 3.5% 430,514 Atmos Energy Corp. 48,157,296 1,076,189 New Jersey Resources Corp. 47,965,744 661,250 Northwest Natural Holding Co. 48,753,962 516,514 ONE Gas, Inc. 48,330,215 1,480,979 South Jersey Industries, Inc. 48,842,687 574,531 Spire, Inc. 47,864,178 1,070,129 UGI Corp. 48,327,026 -------------- 338,241,108 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.5% 420,006 Medtronic PLC $ 47,649,681 -------------- HEALTH CARE PROVIDERS & SERVICES -- 1.5% 643,132 CVS Health Corp. 47,778,276 1,317,808 Fresenius Medical Care AG & Co. KGaA, ADR 48,534,869 445,974 Quest Diagnostics, Inc. 47,625,563 -------------- 143,938,708 -------------- HOTELS, RESTAURANTS & LEISURE -- 1.9% 1,206,458 Cheesecake Factory (The), Inc. 46,882,958 307,217 Cracker Barrel Old Country Store, Inc. 47,231,542 243,788 McDonald's Corp. 48,174,947 542,171 Starbucks Corp. 47,667,674 -------------- 189,957,121 -------------- HOUSEHOLD DURABLES -- 0.5% 485,176 Garmin Ltd. 47,333,771 -------------- HOUSEHOLD PRODUCTS -- 2.0% 314,030 Clorox (The) Co. 48,216,166 696,110 Colgate-Palmolive Co. 47,920,212 349,240 Kimberly-Clark Corp. 48,037,962 382,972 Procter & Gamble (The) Co. 47,833,203 -------------- 192,007,543 -------------- INDUSTRIAL CONGLOMERATES -- 1.0% 268,034 3M Co. 47,286,558 271,153 Honeywell International, Inc. 47,994,081 -------------- 95,280,639 -------------- INSURANCE -- 8.5% 910,479 Aflac, Inc. 48,164,339 431,402 Allstate (The) Corp. 48,511,155 740,830 Argo Group International Holdings Ltd. 48,709,573 507,508 Arthur J. Gallagher & Co. 48,329,987 373,908 Assurant, Inc. 49,011,861 800,454 Axis Capital Holdings Ltd. 47,578,986 310,225 Chubb Ltd. 48,289,624 464,515 Cincinnati Financial Corp. 48,843,752 1,085,680 CNA Financial Corp. 48,649,321 288,508 Erie Indemnity Co., Class A 47,892,328 174,922 Everest Re Group Ltd. 48,425,406 1,060,907 Fidelity National Financial, Inc. 48,112,132 820,794 First American Financial Corp. 47,868,706 348,482 Hanover Insurance Group (The), Inc. 47,627,035 795,920 Hartford Financial Services Group (The), Inc. 48,368,058 1,054,093 Sun Life Financial, Inc. 48,035,018 351,116 Travelers (The) Cos., Inc. 48,085,336 -------------- 820,502,617 -------------- IT SERVICES -- 2.0% 281,335 Automatic Data Processing, Inc. 47,967,618 4,648,738 Infosys Ltd., ADR 47,974,976 Page 38 See Notes to Financial Statements FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) IT SERVICES (CONTINUED) 352,911 International Business Machines Corp. $ 47,304,190 563,370 Paychex, Inc. 47,920,252 -------------- 191,167,036 -------------- MACHINERY -- 1.9% 322,125 Caterpillar, Inc. 47,571,420 263,667 Cummins, Inc. 47,185,846 264,171 Illinois Tool Works, Inc. 47,453,037 281,661 Snap-on, Inc. 47,713,373 -------------- 189,923,676 -------------- MEDIA -- 2.0% 1,084,701 Comcast Corp., Class A 48,779,004 592,663 Omnicom Group, Inc. 48,017,556 2,373,959 Shaw Communications, Inc., Class B 48,167,628 691,868 WPP PLC, ADR 48,631,402 -------------- 193,595,590 -------------- MULTI-UTILITIES -- 6.5% 632,417 Ameren Corp. 48,569,626 1,002,223 Avista Corp. 48,196,904 618,814 Black Hills Corp. 48,601,651 767,946 CMS Energy Corp. 48,257,727 532,795 Consolidated Edison, Inc. 48,201,964 587,424 Dominion Energy, Inc. 48,650,456 371,500 DTE Energy Co. 48,246,705 1,627,054 MDU Resources Group, Inc. 48,339,774 1,742,660 NiSource, Inc. 48,515,654 670,161 NorthWestern Corp. 48,030,439 816,303 Public Service Enterprise Group, Inc. 48,202,692 317,711 Sempra Energy 48,126,862 522,886 WEC Energy Group, Inc. 48,225,776 -------------- 628,166,230 -------------- OIL, GAS & CONSUMABLE FUELS -- 2.5% 397,535 Chevron Corp. 47,906,943 680,554 Exxon Mobil Corp. 47,489,058 424,559 Phillips 66 47,300,118 802,901 Royal Dutch Shell PLC, Class B, ADR 48,149,973 869,108 TOTAL S.A., ADR 48,061,673 -------------- 238,907,765 -------------- PERSONAL PRODUCTS -- 0.5% 841,446 Unilever PLC, ADR 48,105,468 -------------- PHARMACEUTICALS -- 4.4% 756,770 Bristol-Myers Squibb Co. 48,577,066 364,744 Eli Lilly & Co. 47,938,304 1,021,028 GlaxoSmithKline PLC, ADR 47,978,106 326,664 Johnson & Johnson 47,650,478 521,418 Merck & Co., Inc. 47,422,967 504,226 Novartis AG, ADR 47,745,160 829,638 Novo Nordisk A/S, ADR 48,019,447 1,216,588 Pfizer, Inc. 47,665,918 SHARES DESCRIPTION VALUE ------------------------------------------------------------- PHARMACEUTICALS (CONTINUED) 950,809 Sanofi, ADR $ 47,730,612 -------------- 430,728,058 -------------- PROFESSIONAL SERVICES -- 1.0% 769,783 Robert Half International, Inc. 48,611,797 669,417 Thomson Reuters Corp. 47,930,257 -------------- 96,542,054 -------------- ROAD & RAIL -- 1.5% 528,942 Canadian National Railway Co. 47,842,804 246,211 Norfolk Southern Corp. 47,796,942 266,628 Union Pacific Corp. 48,203,676 -------------- 143,843,422 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.0% 401,417 Analog Devices, Inc. 47,704,396 807,652 Intel Corp. 48,337,972 821,629 Taiwan Semiconductor Manufacturing Co., Ltd., ADR 47,736,645 372,099 Texas Instruments, Inc. 47,736,581 -------------- 191,515,594 -------------- SOFTWARE -- 0.5% 890,629 Oracle Corp. 47,185,524 -------------- SPECIALTY RETAIL -- 1.0% 218,237 Home Depot (The), Inc. 47,658,596 400,021 Lowe's Cos., Inc. 47,906,515 -------------- 95,565,111 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.5% 1,702,326 Canon, Inc., ADR 46,558,616 -------------- THRIFTS & MORTGAGE FINANCE -- 1.5% 3,446,363 Capitol Federal Financial, Inc. 47,318,564 2,878,180 Northwest Bancshares, Inc. 47,864,133 1,283,140 Washington Federal, Inc. 47,027,081 -------------- 142,209,778 -------------- TOBACCO -- 0.9% 927,950 Altria Group, Inc. 46,313,984 556,119 Philip Morris International, Inc. 47,320,166 -------------- 93,634,150 -------------- TRADING COMPANIES & DISTRIBUTORS -- 1.5% 1,295,290 Fastenal Co. 47,860,965 607,581 MSC Industrial Direct Co., Inc., Class A 47,676,881 263,192 Watsco, Inc. 47,414,039 -------------- 142,951,885 -------------- WATER UTILITIES -- 0.5% 1,035,183 Aqua America, Inc. 48,591,490 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.5% 968,117 Rogers Communications, Inc., Class B 48,086,371 -------------- See Notes to Financial Statements Page 39 FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 DESCRIPTION VALUE ------------------------------------------------------------- TOTAL INVESTMENTS -- 99.8% $9,647,473,272 (Cost $8,615,183,328) (a) NET OTHER ASSETS AND LIABILITIES -- 0.2% 17,745,472 -------------- NET ASSETS -- 100.0% $9,665,218,744 ============== (a) Aggregate cost for federal income tax purposes is $8,793,134,957. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $944,611,532 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $90,273,217. The net unrealized appreciation was $854,338,315. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 9,647,473,272 $ -- $ -- ================================================= * See Portfolio of Investments for industry breakout. Page 40 See Notes to Financial Statements FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% AEROSPACE & DEFENSE -- 3.4% 14,604 Arconic, Inc. $ 449,365 1,036 Lockheed Martin Corp. 403,398 1,308 Teledyne Technologies, Inc. (a) 453,274 -------------- 1,306,037 -------------- AUTO COMPONENTS -- 1.1% 14,042 Gentex Corp. 406,937 -------------- AUTOMOBILES -- 1.0% 2,645 Toyota Motor Corp., ADR 371,728 -------------- BUILDING PRODUCTS -- 1.0% 7,968 Gibraltar Industries, Inc. (a) 401,906 -------------- CAPITAL MARKETS -- 3.1% 6,553 Brookfield Asset Management, Inc., Class A 378,763 4,512 Intercontinental Exchange, Inc. 417,586 1,422 S&P Global, Inc. 388,277 -------------- 1,184,626 -------------- CHEMICALS -- 4.3% 2,178 Ecolab, Inc. 420,332 3,938 Innospec, Inc. 407,347 4,961 RPM International, Inc. 380,806 765 Sherwin-Williams (The) Co. 446,408 -------------- 1,654,893 -------------- COMMERCIAL SERVICES & SUPPLIES -- 3.0% 5,036 Copart, Inc. (a) 457,974 7,798 Herman Miller, Inc. 324,786 8,886 Ritchie Bros Auctioneers, Inc. 381,654 -------------- 1,164,414 -------------- COMMUNICATIONS EQUIPMENT -- 3.8% 22,645 AudioCodes Ltd. 581,750 51,713 Harmonic, Inc. (a) 403,361 2,957 Motorola Solutions, Inc. 476,491 -------------- 1,461,602 -------------- CONSTRUCTION MATERIALS -- 1.1% 1,497 Martin Marietta Materials, Inc. 418,621 -------------- DISTRIBUTORS -- 1.0% 11,342 LKQ Corp. (a) 404,909 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.0% 7,894 BCE, Inc. 365,887 6,612 Verizon Communications, Inc. 405,977 -------------- 771,864 -------------- ELECTRIC UTILITIES -- 2.1% 4,303 Duke Energy Corp. 392,477 7,251 Portland General Electric Co. 404,533 -------------- 797,010 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.0% 2,731 CDW Corp. $ 390,096 -------------- ENERGY EQUIPMENT & SERVICES -- 1.1% 8,969 Dril-Quip, Inc. (a) 420,736 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 5.2% 1,850 American Tower Corp. 425,167 3,164 Crown Castle International Corp. 449,763 4,460 Equity Residential 360,903 2,810 Mid-America Apartment Communities, Inc. 370,527 1,687 SBA Communications Corp. 406,550 -------------- 2,012,910 -------------- FOOD & STAPLES RETAILING -- 4.2% 1,314 Costco Wholesale Corp. 386,211 8,000 Performance Food Group Co. (a) 411,840 4,723 Sysco Corp. 404,006 3,410 Walmart, Inc. 405,244 -------------- 1,607,301 -------------- FOOD PRODUCTS -- 1.9% 2,748 Hershey (The) Co. 403,901 1,740 J&J Snack Foods Corp. 320,630 -------------- 724,531 -------------- GAS UTILITIES -- 1.0% 8,241 National Fuel Gas Co. 383,536 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 5.4% 3,688 CONMED Corp. 412,429 1,853 Edwards Lifesciences Corp. (a) 432,287 3,422 Medtronic PLC 388,226 3,028 West Pharmaceutical Services, Inc. 455,199 2,684 Zimmer Biomet Holdings, Inc. 401,741 -------------- 2,089,882 -------------- HEALTH CARE PROVIDERS & SERVICES -- 3.0% 782 Chemed Corp. 343,501 5,458 CVS Health Corp. 405,475 3,785 Quest Diagnostics, Inc. 404,200 -------------- 1,153,176 -------------- HOUSEHOLD DURABLES -- 1.0% 6,553 Meritage Homes Corp. (a) 400,454 -------------- HOUSEHOLD PRODUCTS -- 1.2% 3,826 Procter & Gamble (The) Co. 477,867 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.9% 4,895 Ormat Technologies, Inc. 364,775 -------------- INDUSTRIAL CONGLOMERATES -- 1.0% 2,375 Carlisle Cos., Inc. 384,370 -------------- See Notes to Financial Statements Page 41 FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) INSURANCE -- 9.3% 10,202 Arch Capital Group Ltd. (a) $ 437,564 10,247 Brown & Brown, Inc. 404,552 3,938 Cincinnati Financial Corp. 414,081 7,898 Fidelity National Financial, Inc. 358,174 3,838 Globe Life, Inc. 403,949 7,046 Hartford Financial Services Group (The), Inc. 428,185 2,025 RenaissanceRe Holdings Ltd. 396,941 8,945 Sun Life Financial, Inc. 407,624 4,631 W.R. Berkley Corp. 320,002 -------------- 3,571,072 -------------- IT SERVICES -- 4.2% 5,726 Amdocs Ltd. 413,360 7,996 CSG Systems International, Inc. 414,033 3,439 Fiserv, Inc. (a) 397,652 27,336 Switch, Inc., Class A 405,119 -------------- 1,630,164 -------------- MACHINERY -- 1.0% 7,321 Douglas Dynamics, Inc. 402,655 -------------- MEDIA -- 1.0% 270 Cable One, Inc. 401,887 -------------- METALS & MINING -- 5.3% 6,796 Agnico Eagle Mines Ltd. 418,701 19,013 Barrick Gold Corp. 353,452 4,276 Franco-Nevada Corp. 441,711 18,098 Pan American Silver Corp. 428,742 3,442 Royal Gold, Inc. 420,784 -------------- 2,063,390 -------------- MULTILINE RETAIL -- 1.9% 2,110 Dollar General Corp. 329,118 3,011 Target Corp. 386,040 -------------- 715,158 -------------- MULTI-UTILITIES -- 2.0% 4,985 Dominion Energy, Inc. 412,858 11,925 MDU Resources Group, Inc. 354,292 -------------- 767,150 -------------- OIL, GAS & CONSUMABLE FUELS -- 5.6% 14,370 EQM Midstream Partners, L.P. (b) 429,807 16,851 Holly Energy Partners L.P. (b) 373,250 6,038 Marathon Petroleum Corp. 363,789 10,534 MPLX, L.P. (b) 268,196 15,029 Par Pacific Holdings, Inc. (a) 349,274 5,791 Phillips 66 Partners, L.P. (b) 356,957 -------------- 2,141,273 -------------- PHARMACEUTICALS -- 2.2% 8,475 GlaxoSmithKline PLC, ADR 398,240 3,527 Zoetis, Inc. 466,799 -------------- 865,039 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- PROFESSIONAL SERVICES -- 2.0% 3,108 FTI Consulting, Inc. (a) $ 343,931 5,760 IHS Markit Ltd. (a) 434,016 -------------- 777,947 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.2% 2,839 Cabot Microelectronics Corp. 409,724 6,973 Taiwan Semiconductor Manufacturing Co., Ltd., ADR 405,131 5,877 Teradyne, Inc. 400,753 -------------- 1,215,608 -------------- SOFTWARE -- 4.4% 1,511 ANSYS, Inc. (a) 388,947 3,685 Citrix Systems, Inc. 408,666 2,701 Microsoft Corp. 425,948 1,599 Tyler Technologies, Inc. (a) 479,732 -------------- 1,703,293 -------------- WATER UTILITIES -- 4.1% 4,101 American States Water Co. 355,311 2,992 American Water Works Co., Inc. 367,567 8,785 Aqua America, Inc. 412,368 9,572 York Water (The) Co. 441,365 -------------- 1,576,611 -------------- TOTAL INVESTMENTS -- 100.0% 38,585,428 (Cost $36,648,135) (c) NET OTHER ASSETS AND LIABILITIES -- (0.0)% (2,931) -------------- NET ASSETS -- 100.0% $ 38,582,497 ============== (a) Non-income producing security. (b) Security is a Master Limited Partnership ("MLP"). (c) Aggregate cost for federal income tax purposes is $36,708,090. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $2,245,731 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $368,393. The net unrealized appreciation was $1,877,338. ADR - American Depositary Receipt Page 42 See Notes to Financial Statements FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 38,585,428 $ -- $ -- ================================================= * 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, 2019
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............................................... $ 160,705,254 $ 1,836,671,310 $1,359,035,257 Cash................................................................ 79,337 1,207,176 -- Receivables: Investment securities sold.................................... 463,366 -- -- Capital shares sold........................................... -- 1,629,183 4,005,651 Dividends..................................................... 128,257 4,414,195 731,394 Securities lending income..................................... 24,028 -- 74,009 Reclaims...................................................... -- -- -- Prepaid expenses.................................................... 4,034 13,860 10,269 -------------- --------------- -------------- Total Assets.................................................. 161,404,276 1,843,935,724 1,363,856,580 -------------- --------------- -------------- LIABILITIES: Due to custodian.................................................... -- -- 65,026 Payables: Collateral for securities on loan............................. 4,738,840 -- 27,813,880 Investment securities purchased............................... 463,282 1,624,885 4,005,871 Capital shares redeemed....................................... -- -- -- Licensing fees................................................ -- 401,680 323,562 Investment advisory fees...................................... 54,897 456,442 453,562 Audit and tax fees............................................ 22,924 22,924 22,924 Shareholder reporting fees.................................... 8,687 53,661 43,248 Trustees' fees................................................ 46 142 50 Other liabilities................................................... 48,134 376,193 293,368 -------------- --------------- -------------- Total Liabilities............................................. 5,336,810 2,935,927 33,021,491 -------------- --------------- -------------- NET ASSETS.......................................................... $ 156,067,466 $ 1,840,999,797 $1,330,835,089 ============== =============== ============== NET ASSETS CONSIST OF: Paid-in capital..................................................... $ 174,233,887 $ 1,862,306,764 $1,278,165,801 Par value........................................................... 30,550 565,000 165,500 Accumulated distributable earnings (loss)........................... (18,196,971) (21,871,967) 52,503,788 -------------- --------------- -------------- NET ASSETS.......................................................... $ 156,067,466 $ 1,840,999,797 $1,330,835,089 ============== =============== ============== NET ASSET VALUE, per share.......................................... $ 51.09 $ 32.58 $ 80.41 ============== =============== ============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)........................... 3,055,000 56,500,002 16,550,002 ============== =============== ============== Investments, at cost................................................ $ 151,720,548 $ 1,727,759,394 $1,171,821,672 ============== =============== ============== Securities on loan, at value........................................ $ 4,632,511 $ -- $ 27,074,980 ============== =============== ==============
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) ---------------- ---------------- ---------------- ---------------- ---------------- $1,801,268,957 $7,858,709,328 $3,387,915,712 $9,647,473,272 $ 38,585,428 1,035,565 -- 2,900,544 19,027,170 24,436 -- 20,826,858 -- -- -- -- -- 12,073,202 59,440,953 -- -- 25,620 4,158,111 16,025,145 36,243 158 426 -- -- -- 55,723 -- -- 733,619 3,678 13,557 66,546 23,642 64,960 329 -------------- -------------- -------------- -------------- -------------- 1,802,373,960 7,879,628,778 3,407,071,211 9,742,765,119 38,650,114 -------------- -------------- -------------- -------------- -------------- -- -- -- -- -- -- -- -- -- -- -- -- 12,057,905 68,569,749 -- -- 20,867,819 -- -- -- 345,149 1,168,328 152,434 3,342,334 15,519 619,612 2,643,719 1,407,778 3,743,452 14,334 22,924 22,924 22,924 22,924 22,924 99,967 331,705 83,868 199,903 3,479 583 1,225 -- -- 32 358,627 1,226,071 723,497 1,668,013 11,329 -------------- -------------- -------------- -------------- -------------- 1,446,862 26,261,791 14,448,406 77,546,375 67,617 -------------- -------------- -------------- -------------- -------------- $1,800,927,098 $7,853,366,987 $3,392,622,805 $9,665,218,744 $ 38,582,497 ============== ============== ============== ============== ============== $2,264,164,143 $7,431,578,089 $3,118,018,628 $8,873,760,119 $ 47,221,525 121,000 564,500 562,000 2,682,880 16,900 (463,358,045) 421,224,398 274,042,177 788,775,745 (8,655,928) -------------- -------------- -------------- -------------- -------------- $1,800,927,098 $7,853,366,987 $3,392,622,805 $9,665,218,744 $ 38,582,497 ============== ============== ============== ============== ============== $ 148.84 $ 139.12 $ 60.37 $ 36.03 $ 22.83 ============== ============== ============== ============== ============== 12,100,002 56,450,002 56,200,002 268,287,986 1,689,982 ============== ============== ============== ============== ============== $1,937,181,208 $6,995,200,642 $3,016,556,261 $8,615,183,328 $ 36,648,135 ============== ============== ============== ============== ============== $ -- $ -- $ -- $ -- $ -- ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 45 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2019
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........................................................... $ 2,763,487 $ 73,971,099 $ 15,202,138 Securities lending income (net of fees)............................. 194,454 -- 1,056,547 Foreign withholding tax............................................. -- -- (191,882) -------------- --------------- -------------- Total investment income....................................... 2,957,941 73,971,099 16,066,803 -------------- --------------- -------------- EXPENSES: Investment advisory fees............................................ 732,185 4,919,551 4,713,266 Licensing fees...................................................... 88,331 1,482,035 1,178,317 Accounting and administration fees.................................. 77,163 757,479 572,867 Custodian fees...................................................... 55,454 77,934 91,887 Audit and tax fees.................................................. 23,628 23,628 23,628 Shareholder reporting fees.......................................... 22,743 113,679 90,884 Listing fees........................................................ 7,556 12,557 7,556 Trustees' fees and expenses......................................... 7,393 9,270 8,579 Transfer agent fees................................................. 7,322 65,995 54,392 Legal fees.......................................................... 4,005 44,694 32,510 Registration and filing fees........................................ (144) 31,084 9,553 Other expenses...................................................... 2,154 19,676 20,342 -------------- --------------- -------------- Total expenses................................................. 1,027,790 7,557,582 6,803,781 Less fees waived and expenses reimbursed by the investment advisor.................................................... (149,166) (178,254) -- -------------- --------------- -------------- Net expenses.................................................. 878,624 7,379,328 6,803,781 -------------- --------------- -------------- NET INVESTMENT INCOME (LOSS)........................................ 2,079,317 66,591,771 9,263,022 -------------- --------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments................................................... (9,747,770) (31,389,230) (29,453,086) In-kind redemptions........................................... 8,568,356 139,790,199 157,610,202 Foreign currency transactions................................. -- -- -- -------------- --------------- -------------- Net realized gain (loss)............................................ (1,179,414) 108,400,969 128,157,116 -------------- --------------- -------------- Net change in unrealized appreciation (depreciation) on: Investments................................................... 34,653,114 175,674,288 143,968,501 Foreign currency translation.................................. -- -- -- -------------- --------------- -------------- Net change in unrealized appreciation (depreciation)................ 34,653,114 175,674,288 143,968,501 -------------- --------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS)............................. 33,473,700 284,075,257 272,125,617 -------------- --------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $ 35,553,017 $ 350,667,028 $ 281,388,639 ============== =============== ==============
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) ---------------- ---------------- ---------------- ---------------- ---------------- $ 7,696,551 $ 34,544,898 $ 50,094,659 $ 209,018,743 $ 617,124 101,640 90,622 -- -- -- (250,525) -- -- (3,632,234) (10,396) -------------- -------------- -------------- -------------- -------------- 7,547,666 34,635,520 50,094,659 205,386,509 606,728 -------------- -------------- -------------- -------------- -------------- 9,991,752 33,111,621 12,257,839 33,526,797 200,300 1,998,351 4,962,098 246,148 10,134,278 62,354 1,078,841 2,588,893 1,062,048 2,232,955 21,686 175,057 763,306 185,292 360,426 12,452 23,628 23,628 23,628 23,628 23,628 239,046 735,252 192,166 432,664 12,483 7,556 12,557 1,079 28,746 (3,838) 10,941 17,686 10,006 14,720 7,251 87,447 231,943 86,303 192,632 2,003 83,841 227,160 72,209 184,892 1,031 (36,438) (17,183) 174,721 413,492 -- 40,843 134,363 24,722 75,717 1,240 -------------- -------------- -------------- -------------- -------------- 13,700,865 42,791,324 14,336,161 47,620,947 340,590 -- -- -- (683,425) (60,169) -------------- -------------- -------------- -------------- -------------- 13,700,865 42,791,324 14,336,161 46,937,522 280,421 -------------- -------------- -------------- -------------- -------------- (6,153,199) (8,155,804) 35,758,498 158,448,987 326,307 -------------- -------------- -------------- -------------- -------------- (154,356,990) (155,350,025) (55,726,030) (91,588,001) 2,824,158 111,584,293 901,811,893 117,443,347 255,326,270 1,568,043 -- -- -- (3,455) (35) -------------- -------------- -------------- -------------- -------------- (42,772,697) 746,461,868 61,717,317 163,734,814 4,392,166 -------------- -------------- -------------- -------------- -------------- 349,806,878 565,699,634 431,591,119 1,138,084,748 3,314,782 -- -- -- 767 81 -------------- -------------- -------------- -------------- -------------- 349,806,878 565,699,634 431,591,119 1,138,085,515 3,314,863 -------------- -------------- -------------- -------------- -------------- 307,034,181 1,312,161,502 493,308,436 1,301,820,329 7,707,029 -------------- -------------- -------------- -------------- -------------- $ 300,880,982 $1,304,005,698 $ 529,066,934 $1,460,269,316 $ 8,033,336 ============== ============== ============== ============== ==============
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 12/31/2019 12/31/2018 12/31/2019 12/31/2018 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 2,079,317 $ 1,594,378 $ 66,591,771 $ 55,726,737 Net realized gain (loss).................................... (1,179,414) 13,232,312 108,400,969 64,064,556 Net change in unrealized appreciation (depreciation)........ 34,653,114 (35,961,521) 175,674,288 (213,401,301) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... 35,553,017 (21,134,831) 350,667,028 (93,610,008) -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (2,210,947) (1,417,591) (66,393,993) (55,170,342) -------------- -------------- -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 15,130,878 140,816,685 829,094,807 387,762,741 Cost of shares redeemed..................................... (31,182,294) (76,499,080) (658,851,143) (571,798,626) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ (16,051,416) 64,317,605 170,243,664 (184,035,885) -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... 17,290,654 41,765,183 454,516,699 (332,816,235) NET ASSETS: Beginning of period......................................... 138,776,812 97,011,629 1,386,483,098 1,719,299,333 -------------- -------------- -------------- -------------- End of period............................................... $ 156,067,466 $ 138,776,812 $1,840,999,797 $1,386,483,098 ============== ============== ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 3,405,000 2,055,000 50,900,002 57,200,002 Shares sold................................................. 350,000 2,850,000 27,200,000 13,450,000 Shares redeemed............................................. (700,000) (1,500,000) (21,600,000) (19,750,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 3,055,000 3,405,000 56,500,002 50,900,002 ============== ============== ============== ==============
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 12/31/2019 12/31/2018 12/31/2019 12/31/2018 12/31/2019 12/31/2018 -------------- -------------- -------------- -------------- -------------- -------------- $ 9,263,022 $ 8,164,263 $ (6,153,199) $ (4,195,069) $ (8,155,804) $ (21,307,396) 128,157,116 43,343,388 (42,772,697) 216,117,246 746,461,868 934,554,669 143,968,501 (144,486,852) 349,806,878 (565,874,934) 565,699,634 (796,446,658) -------------- -------------- -------------- -------------- -------------- -------------- 281,388,639 (92,979,201) 300,880,982 (353,952,757) 1,304,005,698 116,800,615 -------------- -------------- -------------- -------------- -------------- -------------- (8,578,921) (8,618,366) -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- 653,706,904 314,592,694 632,970,959 2,320,112,972 1,828,355,646 4,019,193,398 (508,160,193) (282,248,146) (1,475,137,653) (831,758,091) (2,295,801,572) (2,610,007,206) -------------- -------------- -------------- -------------- -------------- -------------- 145,546,711 32,344,548 (842,166,694) 1,488,354,881 (467,445,926) 1,409,186,192 -------------- -------------- -------------- -------------- -------------- -------------- 418,356,429 (69,253,019) (541,285,712) 1,134,402,124 836,559,772 1,525,986,807 912,478,660 981,731,679 2,342,212,810 1,207,810,686 7,016,807,215 5,490,820,408 -------------- -------------- -------------- -------------- -------------- -------------- $1,330,835,089 $ 912,478,660 $1,800,927,098 $2,342,212,810 $7,853,366,987 $7,016,807,215 ============== ============== ============== ============== ============== ============== 14,700,002 14,400,002 18,850,002 9,700,002 60,150,002 50,000,002 8,350,000 4,400,000 4,500,000 15,450,000 13,050,000 30,750,000 (6,500,000) (4,100,000) (11,250,000) (6,300,000) (16,750,000) (20,600,000) -------------- -------------- -------------- -------------- -------------- -------------- 16,550,002 14,700,002 12,100,002 18,850,002 56,450,002 60,150,002 ============== ============== ============== ============== ============== ==============
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 12/31/2019 12/31/2018 12/31/2019 12/31/2018 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 35,758,498 $ 12,868,717 $ 158,448,987 $ 102,024,585 Net realized gain (loss).................................... 61,717,317 44,264,086 163,734,814 195,923,909 Net change in unrealized appreciation (depreciation)........ 431,591,119 (141,037,098) 1,138,085,515 (464,993,579) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... 529,066,934 (83,904,295) 1,460,269,316 (167,045,085) -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (35,558,152) (13,023,451) (157,857,442) (102,072,326) -------------- -------------- -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 2,682,671,848 1,360,944,668 5,710,878,170 2,031,003,840 Cost of shares redeemed..................................... (1,159,688,922) (511,985,305) (1,722,554,194) (1,582,233,890) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting............. from shareholder transactions............................... 1,522,982,926 848,959,363 3,988,323,976 448,769,950 -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... 2,016,491,708 752,031,617 5,290,735,850 179,652,539 NET ASSETS: Beginning of period......................................... 1,376,131,097 624,099,480 4,374,482,894 4,194,830,355 -------------- -------------- -------------- -------------- End of period............................................... $3,392,622,805 $1,376,131,097 $9,665,218,744 $4,374,482,894 ============== ============== ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 28,500,002 12,250,002 150,487,986 136,037,986 Shares sold................................................. 48,400,000 26,050,000 169,450,000 66,050,000 Shares redeemed............................................. (20,700,000) (9,800,000) (51,650,000) (51,600,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 56,200,002 28,500,002 268,287,986 150,487,986 ============== ============== ============== ==============
Page 50 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) ------------------------------- Year Ended Year Ended 12/31/2019 12/31/2018 -------------- -------------- $ 326,307 $ 285,088 4,392,166 (7,657,763) 3,314,863 (2,046,735) -------------- -------------- 8,033,336 (9,419,410) -------------- -------------- (358,670) (292,079) -------------- -------------- 9,028,116 39,520,882 (14,626,492) (49,060,514) -------------- -------------- (5,598,376) (9,539,632) -------------- -------------- 2,076,290 (19,251,121) 36,506,207 55,757,328 -------------- -------------- $ 38,582,497 $ 36,506,207 ============== ============== 1,939,982 2,389,982 400,000 1,650,000 (650,000) (2,100,000) -------------- -------------- 1,689,982 1,939,982 ============== ==============
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, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 40.76 $ 47.21 $ 43.98 $ 32.92 $ 33.21 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.66 0.56 0.42 0.49 0.49 Net realized and unrealized gain (loss) 10.37 (6.50) 3.27 11.07 (0.30) ------------ ------------ ------------ ------------ ------------ Total from investment operations 11.03 (5.94) 3.69 11.56 0.19 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.70) (0.51) (0.46) (0.50) (0.48) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 51.09 $ 40.76 $ 47.21 $ 43.98 $ 32.92 ============ ============ ============ ============ ============ TOTAL RETURN (a) 27.25% (12.68)% 8.44% 35.45% 0.55% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 156,067 $ 138,777 $ 97,012 $ 116,776 $ 49,551 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.70% 0.73% 0.71% 0.75% 0.73% 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 1.42% 1.29% 0.89% 1.52% 1.46% Portfolio turnover rate (b) 64% 75% 55% 48% 63% FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 27.24 $ 30.06 $ 27.75 $ 23.69 $ 23.94 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 1.22 1.09 0.93 0.82 0.86 Net realized and unrealized gain (loss) 5.34 (2.83) 2.34 4.05 (0.25) ------------ ------------ ------------ ------------ ------------ Total from investment operations 6.56 (1.74) 3.27 4.87 0.61 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (1.22) (1.08) (0.96) (0.81) (0.86) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 32.58 $ 27.24 $ 30.06 $ 27.75 $ 23.69 ============ ============ ============ ============ ============ TOTAL RETURN (a) 24.36% (5.87)% 11.93% 20.72% 2.73% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,841,000 $ 1,386,483 $ 1,719,299 $ 1,778,464 $ 875,294 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.46% 0.47% 0.47% 0.48% 0.48% 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 4.06% 3.70% 3.18% 3.27% 3.59% Portfolio turnover rate (b) 39% 39% 43% 50% 61%
(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, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 62.07 $ 68.18 $ 54.10 $ 51.11 $ 50.32 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.58 0.52 0.43 0.31 0.31 Net realized and unrealized gain (loss) 18.30 (6.08) 14.12 3.10 0.80 ------------ ------------ ------------ ------------ ------------ Total from investment operations 18.88 (5.56) 14.55 3.41 1.11 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.54) (0.55) (0.47) (0.42) (0.32) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 80.41 $ 62.07 $ 68.18 $ 54.10 $ 51.11 ============ ============ ============ ============ ============ TOTAL RETURN (a) 30.45% (8.22)% 26.96% 6.70% 2.19% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,330,835 $ 912,479 $ 981,732 $ 614,024 $ 789,693 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.58% 0.59% 0.59% 0.60% 0.60% Ratio of net expenses to average net assets 0.58% 0.59% 0.59% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 0.79% 0.74% 0.71% 0.58% 0.61% Portfolio turnover rate (b) 81% 57% 31% 41% 41% FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 124.26 $ 124.52 $ 90.89 $ 113.06 $ 101.99 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (0.51) (0.22) (0.08) (0.32) 0.09 Net realized and unrealized gain (loss) 25.09 (0.04) 33.71 (21.85) 11.11 ------------ ------------ ------------ ------------ ------------ Total from investment operations 24.58 (0.26) 33.63 (22.17) 11.20 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income -- -- -- -- (0.13) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 148.84 $ 124.26 $ 124.52 $ 90.89 $ 113.06 ============ ============ ============ ============ ============ TOTAL RETURN (a) 19.78% (0.21)% 36.99% (19.60)% 10.97% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,800,927 $ 2,342,213 $ 1,207,811 $ 804,385 $ 3,437,024 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.55% 0.57% 0.56% 0.56% 0.55% Ratio of net expenses to average net assets 0.55% 0.57% 0.56% 0.56% 0.55% Ratio of net investment income (loss) to average net assets (0.25)% (0.21)% (0.08)% (0.27)% 0.08% Portfolio turnover rate (b) 31% 37% 36% 42% 30%
(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, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 116.66 $ 109.82 $ 79.79 $ 74.64 $ 61.30 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (0.14) (0.35) (0.28) (0.27) (0.14) Net realized and unrealized gain (loss) 22.60 7.19 30.31 5.42 13.48 ------------ ------------ ------------ ------------ ------------ Total from investment operations 22.46 6.84 30.03 5.15 13.34 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 139.12 $ 116.66 $ 109.82 $ 79.79 $ 74.64 ============ ============ ============ ============ ============ TOTAL RETURN (a) 19.26% 6.23% 37.62% 6.91% 21.77% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 7,853,367 $ 7,016,807 $ 5,490,820 $ 3,486,734 $ 4,914,821 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.52% 0.52% 0.53% 0.54% 0.54% Ratio of net expenses to average net assets 0.52% 0.52% 0.53% 0.54% 0.54% Ratio of net investment income (loss) to average net assets (0.10)% (0.27)% (0.32)% (0.35)% (0.29)% Portfolio turnover rate (b) 28% 21% 22% 21% 28% FIRST TRUST CAPITAL STRENGTH ETF (FTCS) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 48.29 $ 50.95 $ 40.79 $ 38.12 $ 38.08 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.76 0.60 0.59 0.58 0.57 Net realized and unrealized gain (loss) 12.08 (2.65) 10.16 2.67 0.04 ------------ ------------ ------------ ------------ ------------ Total from investment operations 12.84 (2.05) 10.75 3.25 0.61 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.76) (0.61) (0.59) (0.58) (0.57) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 60.37 $ 48.29 $ 50.95 $ 40.79 $ 38.12 ============ ============ ============ ============ ============ TOTAL RETURN (a) 26.72% (4.09)% 26.49% 8.57% 1.64% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 3,392,623 $ 1,376,131 $ 624,099 $ 320,190 $ 165,815 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.58% 0.60% 0.61% 0.64% 0.65% Ratio of net expenses to average net assets 0.58% 0.60% 0.61% 0.64% 0.65% Ratio of net investment income (loss) to average net assets 1.46% 1.30% 1.33% 1.55% 1.59% Portfolio turnover rate (b) 125% 117% 85% 85% 96%
(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. 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, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 29.07 $ 30.84 $ 28.02 $ 23.86 $ 24.13 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.73 0.73 0.63 0.56 0.55 Net realized and unrealized gain (loss) 6.96 (1.77) 2.84 4.17 (0.26) ------------ ------------ ------------ ------------ ------------ Total from investment operations 7.69 (1.04) 3.47 4.73 0.29 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.73) (0.73) (0.65) (0.57) (0.56) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 36.03 $ 29.07 $ 30.84 $ 28.02 $ 23.86 ============ ============ ============ ============ ============ TOTAL RETURN (a) 26.60% (3.44)% 12.48% 19.94% 1.26% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 9,665,219 $ 4,374,483 $ 4,194,830 $ 2,892,982 $ 1,188,031 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.71% 0.72% 0.72% 0.73% 0.74% 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 2.36% 2.40% 2.19% 2.31% 2.40% Portfolio turnover rate (b) 53% 58% 50% 60% 82% FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 18.82 $ 23.33 $ 21.58 $ 19.71 $ 20.41 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.18 0.13 0.16 0.12 0.07 Net realized and unrealized gain (loss) 4.02 (4.51) 1.78 1.87 (0.71) (c) ------------ ------------ ------------ ------------ ------------ Total from investment operations 4.20 (4.38) 1.94 1.99 (0.64) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.19) (0.13) (0.19) (0.12) (0.06) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 22.83 $ 18.82 $ 23.33 $ 21.58 $ 19.71 ============ ============ ============ ============ ============ TOTAL RETURN (a) 22.38% (18.83)% 9.05% 10.14% (3.13)% (c) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 38,582 $ 36,506 $ 55,757 $ 52,643 $ 53,013 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.85% 0.89% 0.85% 0.87% 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 0.81% 0.56% 0.73% 0.59% 0.32% Portfolio turnover rate (b) 310% 424% 466% 491% 404%
(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, 2019 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(R) 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 Accounting Standards Codification 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, 2019 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, 2019 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, 2019, 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 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, 2019, only FDM and FPX had securities in the securities lending program. During the fiscal year ended December 31, 2019, FDM, FPX, FBT, and FDN participated in the securities lending program. Page 58 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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, 2019, 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, 2019 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 $ 2,210,947 $ -- $ -- First Trust Morningstar Dividend Leaders Index Fund 66,393,993 -- -- First Trust US Equity Opportunities ETF 8,578,921 -- -- First Trust NYSE Arca Biotechnology Index Fund -- -- -- First Trust Dow Jones Internet Index Fund -- -- -- First Trust Capital Strength ETF 35,558,152 -- -- First Trust Value Line(R) Dividend Index Fund 157,857,442 -- -- First Trust Value Line(R) 100 Exchange-Traded Fund 358,670 -- --
Page 59 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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 -- --
As of December 31, 2019, 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 $ 68,756 $(25,065,318) $ 6,799,591 First Trust Morningstar Dividend Leaders Index Fund 749,068 (87,881,746) 65,260,711 First Trust US Equity Opportunities ETF 775,011 (124,328,569) 176,057,346 First Trust NYSE Arca Biotechnology Index Fund -- (267,339,419) (196,018,626) First Trust Dow Jones Internet Index Fund -- (310,912,382) 732,136,780 First Trust Capital Strength ETF 200,346 (90,504,259) 364,346,090 First Trust Value Line(R) Dividend Index Fund 588,090 (66,151,074) 854,338,729 First Trust Value Line(R) 100 Exchange-Traded Fund -- (10,533,266) 1,877,338
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 2016, 2017, 2018, and 2019 remain open to federal and state audit. As of December 31, 2019, 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, 2019, 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, 2019
Post-Enactment - No Expiration --------------------- First Trust Dow Jones Select MicroCap Index Fund $ 25,065,318 First Trust Morningstar Dividend Leaders Index Fund 87,881,746 First Trust US Equity Opportunities ETF 124,328,569 First Trust NYSE Arca Biotechnology Index Fund 267,339,419 First Trust Dow Jones Internet Index Fund 310,912,382 First Trust Capital Strength ETF 90,504,259 First Trust Value Line(R) Dividend Index Fund 66,151,074 First Trust Value Line(R) 100 Exchange-Traded Fund 10,533,266
During the taxable year ended December 31, 2019, the following Funds utilized capital loss carryforwards in the following amounts:
Capital Loss Carryforward Utilized --------------------- First Trust Value Line(R) Dividend Index Fund $ 3,392,103 First Trust Value Line(R) 100 Exchange-Traded Fund 2,884,184
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended December 31, 2019, the Funds had no net late year ordinary or capital losses. 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, 2019, 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 $ -- $ (8,078,679) $ 8,078,679 First Trust Morningstar Dividend Leaders Index Fund 90,995 (132,900,079) 132,809,084 First Trust US Equity Opportunities ETF 90,910 (151,999,956) 151,909,046 First Trust NYSE Arca Biotechnology Index Fund 6,153,199 (69,287,664) 63,134,465 First Trust Dow Jones Internet Index Fund 8,155,804 (833,136,816) 824,981,012 First Trust Capital Strength ETF -- (110,590,406) 110,590,406 First Trust Value Line(R) Dividend Index Fund (3,455) (229,863,473) 229,866,928 First Trust Value Line(R) 100 Exchange-Traded Fund 32,363 (1,573,355) 1,540,992
Page 61 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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. 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, 2021.
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%
Page 62 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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 or expense was incurred, but no reimbursement payment will be made by a Fund if it results in the Fund exceeding (i) the applicable expense limitation in place for the most recent fiscal year for which such expense limitation was in place, (ii) the applicable expense limitation in place at the time the fees were waived, or (iii) the current expense limitation. 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, 2019 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 12/31/2017 12/31/2018 12/31/2019 Total --------- ------------- ---------- ---------- ---------- ---------- First Trust Dow Jones Select MicroCap Index Fund $ 149,166 $ -- $ 97,709 $ 162,786 $ 149,166 $ 409,661 First Trust Morningstar Dividend Leaders Index Fund 178,254 -- 289,110 256,355 178,254 723,719 First Trust Value Line(R) Dividend Index Fund 683,425 -- 816,754 768,292 683,425 2,268,471 First Trust Value Line(R) 100 Exchange - Traded Fund 60,169 -- 82,527 94,969 60,169 237,665
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, a defined - outcome 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 year ended December 31, 2019, 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 $ 94,249,303 $ 92,933,488 First Trust Morningstar Dividend Leaders Index Fund 628,541,965 628,664,271 First Trust US Equity Opportunities ETF 947,107,865 944,873,561 First Trust NYSE Arca Biotechnology Index Fund 765,575,301 770,230,625 First Trust Dow Jones Internet Index Fund 2,285,281,890 2,303,515,090 First Trust Capital Strength ETF 3,047,793,200 3,045,830,435 First Trust Value Line(R) Dividend Index Fund 3,587,084,711 3,578,224,043 First Trust Value Line(R) 100 Exchange-Traded Fund 123,581,675 123,320,204
Page 63 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 For the fiscal year ended December 31, 2019, 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 $ 15,101,812 $ 31,296,094 First Trust Morningstar Dividend Leaders Index Fund 826,680,731 656,965,833 First Trust US Equity Opportunities ETF 650,682,465 506,170,916 First Trust NYSE Arca Biotechnology Index Fund 632,469,902 1,475,076,675 First Trust Dow Jones Internet Index Fund 1,824,815,116 2,289,919,357 First Trust Capital Strength ETF 2,678,219,688 1,160,716,704 First Trust Value Line(R) Dividend Index Fund 5,691,232,877 1,723,139,806 First Trust Value Line(R) 100 Exchange-Traded Fund 9,020,768 14,623,485
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'). In order to purchase Creation Units of each Fund, an Authorized Participant must deposit (i) a designated portfolio of equity securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Creation Transaction Fee may increase or decrease with changes in each Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When a Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities. Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a standard redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Redemption Transaction Fee may increase or decrease with changes in each Fund's portfolio. Each Fund reserves the right to effect redemptions in cash. An Authorized Participant 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, 2021. 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. Page 64 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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 was the following subsequent event: The Board of Trustees of the Trust has approved a transaction to combine the First Trust Value Line(R) 100 Exchange-Traded Fund ("FVL"), an exchange-traded index fund that seeks investment results that correspond generally to the price and yield (before fees and expenses) of an equity index called the Value Line(R) 100 Index, with First Trust Value Line(R) Dividend Index Fund ("FVD"), an exchange-traded index fund that seeks investment results that correspond generally to the price and yield (before fees and expenses) of an equity index called the Value Line(R) Dividend Index. Pursuant to this transaction, FVL shareholders will become shareholders of FVD. In order for the transaction to occur, the shareholders of FVL must approve the transaction. If approved, shares of FVL would be exchanged, on a tax-free basis for federal income tax purposes, for shares of FVD with an equal aggregate net asset value, and FVL shareholders will become shareholders of FVD. A special meeting of shareholders of FVL for the purpose of voting on the transaction will be held. If the required approval is obtained, it is anticipated that the transaction will be consummated shortly after the special shareholder meeting. The Funds will continue sales and redemptions of shares as described in the Funds' prospectuses. Holders of shares of FVL purchased after the record date set for the special meeting of shareholders will not be entitled to vote those shares at the special meeting. 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 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, and First Trust Value Line(R) 100 Exchange-Traded Fund (the "Funds"), each a series of First Trust Exchange-Traded Fund, including the portfolios of investments, as of December 31, 2019, 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 as of December 31, 2019, 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, 2019, 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 24, 2020 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, 2019 (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 each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION For the taxable year ended December 31, 2019, 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 99.32% First Trust Morningstar Dividend Leaders Index Fund 100.00% First Trust US Equity Opportunities ETF 99.22% 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 98.55% First Trust Value Line(R)100 Exchange-Traded Fund 100.00%
For the taxable year ended December 31, 2019, 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%
A portion of each of the Funds' 2019 ordinary dividends (including short-term capital gains) paid to its shareholders during the fiscal year ended December 31, 2019, may be eligible for the Qualified Business Income Deduction (QBI) under Code Section 199A for the aggregate dividends each Fund received from the underlying Real Estate Investment Trusts (REITs) these Funds invest in. 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. Page 67 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (UNAUDITED) 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. 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. Page 68 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (UNAUDITED) 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 69 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (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, 2019, the amount of remuneration paid (or to be paid) by First Trust Advisors L.P. in respect of the Funds is $8,897,976. This figure is comprised of $552,448 paid (or to be paid) in fixed compensation and $8,345,528 paid (or to be paid) in variable compensation. There were a total of 15 beneficiaries of the remuneration described above. Those amounts include $5,196,228 paid (or to be paid) to senior management of First Trust Advisors L.P. and $3,701,748 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 70 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (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; 169 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. 169 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 169 Director of Trust (1956) and Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 169 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Products and Services); 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 169 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, 2019 (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, 2019 (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). March 2019 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, 2019 -------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2019 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)....... 31 First Trust S&P REIT Index Fund (FRI).................................... 33 First Trust Water ETF (FIW).............................................. 36 First Trust Natural Gas ETF (FCG)........................................ 38 First Trust Chindia ETF (FNI)............................................ 40 First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)............... 43 Statements of Assets and Liabilities........................................ 46 Statements of Operations.................................................... 48 Statements of Changes in Net Assets......................................... 50 Financial Highlights........................................................ 54 Notes to Financial Statements............................................... 59 Report of Independent Registered Public Accounting Firm..................... 69 Additional Information...................................................... 70 Board of Trustees and Officers.............................................. 74 Privacy Policy.............................................................. 76 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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, 2019 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, 2019, including a market overview and a performance analysis. A significant event for the markets in the past year was the decision by the Federal Reserve (the "Fed") to reverse course with respect to monetary policy. For those who may not follow the Fed closely, after holding its federal funds target rate (upper bound) at an artificially low 0.25% for seven years (December 2008-December 2015) to help stimulate U.S. economic activity, the Fed spent the better part of the next four years (December 2015-July 2019) increasing its benchmark lending rate in an effort to normalize it. Over that period, the Fed increased the rate from 0.25% to 2.50%. To lend some perspective, the average federal funds target rate (upper bound) was 2.95% for the 30-year period ended December 31, 2019, so the Fed came close to achieving its goal of normalizing it, according to data from Bloomberg. From the end of July 2019 through the end of December, however, the Fed initiated three rate cuts that dropped it from 2.50% to 1.75%. So why did the Fed reverse course on monetary policy? We believe, as well as others in the financial media, that the Fed's reversal on monetary policy has to do with the trade tariffs. The Trump Administration first began implementing new trade tariffs on imported goods back in March 2018. While the original tariffs targeted just imported steel and aluminum, the use of tariffs quickly escalated to other goods and services. The lion's share of the tariff conflict today is between the U.S. and China, the two-largest economies in the world. In our opinion, it is believed that President Donald J. Trump is utilizing tariffs as leverage to try and negotiate more favorable trade agreements between the U.S. and its major trading partners. One of the by-products of the escalation in the use of tariffs by all parties involved has been a slowdown in global economic growth, particularly in the U.S. The annualized U.S. real gross domestic product growth rate in the second quarter of 2018 (when new tariffs were introduced) was 3.5%. As of the second and third quarters of 2019, that annualized growth rate was down to 2.0% and 2.1%, respectively, according to data from the Bureau of Economic Analysis. For many months, President Trump has publicly challenged the Fed to lower rates aggressively to help offset the tempering of economic growth. Trump has noted that the Fed has room to lower rates due to the extremely low-to-negative rate levels found in many countries abroad as well as the lack of any significant inflationary pressure in the current climate. While the Fed has delivered some rate cuts in recent months, we believe that President Trump will continue to bang the drum for even more rate cuts. It has been said in the financial media that this is the "most hated" bull market in history, yet it has been one of the most prosperous for investors. The bull market turns 11 years old on March 9, 2020. A Bloomberg survey of 21 equity strategists found that their average 2020 year-end price target for the S&P 500(R) Index was 3,318 as of December 17, 2019, according to its own release. The highest estimate was 3,500. The lowest estimate was 3,000. With a target of 3,650, Brian Wesbury, Chief Economist at First Trust Advisors L.P., is more bullish than all the strategists surveyed by Bloomberg. We encourage investors to stay the course. Thank you for giving First Trust the opportunity to play a role in your financial future. 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, 2019 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 27 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 The consensus among economists projects a 1.8% growth rate estimate for the U.S. economy in 2020 (on a fourth quarter to fourth quarter basis), according to a survey conducted by Bloomberg. However, Brian Wesbury, Chief Economist at First Trust Advisors L.P. believes the economy may grow at a 2.5% to 3.0% pace, in part due to home building and business investment that are poised to contribute more to economic growth in 2020 than what the broader consensus believes, in his opinion. The combination of low interest rates, low inflation, strong job growth, regulatory reform and a more favorable U.S. corporate tax structure following the passage of the Tax Cuts and Jobs Act of 2017 makes the current climate an attractive one for investors, in our opinion. Minus tax reform, which took effect in 2018, and regulatory reform, which has been driven by the Trump Administration since it took office in 2017, investors have been prospering in a low rate/low inflation/strong job growth climate for the better part of the last decade. Very little has changed in that regard. One thing that has created some uncertainty in the markets is the extent of the potential fallout from the implementation and escalation of trade tariffs by the Trump Administration. That effort is now 21 months old and counting. The mid-December announcement that the U.S. and China had struck a "Phase One" deal is encouraging, in our opinion. Investors are flocking to exchange-traded funds ("ETFs") and related exchange-traded products ("ETPs"). The global ETF industry turns 30 years old on March 9, 2020. ETFGI, an independent research and consultancy firm, reported that total assets invested in ETFs/ETPs listed globally stood at an all-time high of $6.350 trillion at the close of 2019, up 31.9% from the $4.815 trillion at the end of 2018, according to its own release. In 2019, net inflows to ETFs/ETPs listed globally totaled $571.03 billion, the second highest on record behind the $653.26 billion registered in 2017. U.S. STOCKS AND BONDS In 2019, three of the major U.S. stock indices posted substantial double-digit gains. The S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R) Index posted total returns of 31.49%, 26.20%, and 22.78%, respectively, according to Bloomberg. All 11 major S&P 500(R) Index sectors posted positive total returns. The top-performing sectors were Information Technology, Communication Services and Financials, up 50.29%, 32.69% and 32.13%, respectively, while the only sector with a total return below 20% for the year was Energy, up 11.81%. The outlook for corporate earnings is encouraging, in our opinion. Bloomberg's 2020 and 2021 consensus earnings growth estimates for the S&P 500(R) Index were 9.02% and 10.72%, respectively, as of December 31, 2019. The yield on the benchmark 10-year Treasury Note ("T-Note") closed trading on December 31, 2019, at 1.92%, down 77 basis points ("bps") from its 2.69% close a year earlier, according to Bloomberg. The yield stood 48 bps below its 2.40% average for the 10-year period ended December 31, 2019. For those investors still concerned about the prospects for an inverted yield curve, the spread between the 2-year T-Note and the 10-year T-Note closed 2019 at 35 bps (1.57% vs. 1.92%), according to data from Bloomberg. For comparative purposes, the average spread was 117 bps (3.33% vs. 4.50%) for the 30-year period ended December 31, 2019. The yield curve, while not inverted, remains relatively flat. We will monitor this scenario moving forward. In the U.S. bond market, all the major bond groups posted positive returns in 2019. The top-performing major debt group we track was high yield corporate bonds. The Bloomberg Barclays U.S. Corporate High Yield Index posted a total return of 14.32%. The worst-performing debt group that we track was government bonds. The Bloomberg Barclays U.S. Treasury: Intermediate Index posted a total return of 5.22%. FOREIGN STOCKS AND BONDS The U.S. dollar rose by 0.23% against a basket of major currencies in 2019, as measured by the U.S. Dollar Index (DXY). With respect to U.S. investors, a flat U.S. dollar would have little to no impact on the returns of foreign securities, in our opinion. Aside from the currency aspect, foreign stocks and bonds performed quite well in 2019. The Bloomberg Barclays EM Hard Currency Aggregate Index of emerging markets debt posted a total return of 12.13% (USD), while the Bloomberg Barclays Global Aggregate Index of higher quality debt rose 6.84% (USD). With respect to equities, the MSCI Emerging Markets Index of stocks posted a total return of 18.44% (USD), while the MSCI World ex USA Index was up 22.49% (USD) on a total return basis, according to Bloomberg. 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 and depositary receipts that comprise the Index. The Index is the equal-weighted version of the NASDAQ-100 Index(R), which includes 100 of the largest U.S. and international non-financial companies listed on The Nasdaq Stock Market LLC ("Nasdaq") based on market capitalization. The Index is rebalanced quarterly and reconstituted annually and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 35.78% 12.16% 14.89% 10.56% 77.52% 300.72% 295.56% Market Value 35.81% 12.14% 14.88% 10.56% 77.35% 300.31% 295.56% INDEX PERFORMANCE NASDAQ-100 Equal Weighted Index(SM) 36.65% 12.85% 15.61% 11.25% 83.03% 326.39% 330.64% S&P 500(R) Index 31.49% 11.70% 13.56% 9.08% 73.86% 256.66% 229.02% NASDAQ-100 Index(R) 39.46% 16.91% 18.07% 13.64% 118.44% 426.36% 476.47% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a net asset value ("NAV") return of 35.78% during the 12-month period covered by this report. During the same period, the NASDAQ-100 Index(R) ("Benchmark") generated a return of 39.46%. The Information Technology sector received the greatest allocation in the Fund over the period with an average weight of 37.6%. This sector returned 51.0%, contributing 18.1% to the Fund's total return. All invested sectors experienced positive returns during the period, but the worst-performing sector was Consumer Staples. Investments in Consumer Staples returned 18.2% and, with a 5.9% allocation, contributed 1.2% to the Fund's total return. On a relative basis, the Fund underperformed the Benchmark. Investments in the Information Technology sector were the greatest drivers of this underperformance. The Fund slightly underweighted this sector in comparison to the Benchmark and the investments in the Fund slightly underperformed those in the Benchmark. Thus, due to both allocation effect and selection effect, investments in the Information Technology sector caused -2.6% of underperformance versus the Benchmark. The sector that caused the most outperformance was investments in the Consumer Discretionary sector. This sector performed well and caused 1.9% of outperformance for the Fund versus the Benchmark. ----------------------------- 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 39.07% Consumer Discretionary 15.05 Communication Services 14.02 Health Care 13.93 Industrials 8.95 Consumer Staples 6.00 Utilities 2.00 Financials 0.98 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Apple, Inc. 1.05% Advanced Micro Devices, Inc. 1.04 Western Digital Corp. 1.04 Amazon.com, Inc. 1.04 Tesla, Inc. 1.03 Align Technology, Inc. 1.03 Comcast Corp., Class A 1.02 Charter Communications, Inc., Class A 1.02 Skyworks Solutions, Inc. 1.02 Intel Corp. 1.02 ------- Total 10.31% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust NASDAQ-100 Equal NASDAQ-100 Equal S&P 500(R) NASDAQ-100 Weighted Index Fund Weighted Index(SM) Index Index(R) 12/09 $10,000 $10,000 $10,000 $10,000 06/10 9,436 9,466 9,335 9,383 12/10 12,124 12,199 11,507 12,015 06/11 13,035 13,157 12,199 12,643 12/11 11,788 11,944 11,749 12,455 06/12 12,870 13,073 12,864 14,377 12/12 13,539 13,789 13,629 14,738 06/13 15,651 16,012 15,513 16,225 12/13 18,947 19,442 18,043 20,182 06/14 20,459 21,058 19,331 21,770 12/14 22,572 23,299 20,514 24,099 06/15 23,107 23,921 20,766 25,164 12/15 23,075 23,971 20,797 26,450 06/16 22,410 23,341 21,596 25,612 12/16 24,694 25,806 23,285 28,376 06/17 28,603 29,979 25,460 33,137 12/17 31,117 32,719 28,368 37,736 06/18 32,586 34,358 29,120 41,755 12/18 29,513 31,211 27,125 37,751 06/19 36,112 38,315 32,154 46,000 12/19 40,072 42,639 35,666 52,636
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 125 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% 01/01/15 - 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 01/01/19 - 12/31/19 126 0 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 and depositary receipts that comprise the Index. The Index is an equal-weighted index composed of the securities comprising 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 U.S. and international non-financial companies listed on the Nasdaq based on market capitalization. The Index is rebalanced quarterly and reconstituted annually and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 48.36% 19.22% 17.82% 13.18% 140.82% 415.38% 445.62% Market Value 48.30% 19.19% 17.79% 13.18% 140.52% 414.34% 445.55% INDEX PERFORMANCE NASDAQ-100 Technology Sector Index(SM) 49.31% 19.96% 18.56% 13.90% 148.47% 448.73% 494.69% S&P 500(R) Index 31.49% 11.70% 13.56% 9.08% 73.86% 256.66% 229.02% S&P 500 Information Technology Index 50.29% 20.20% 17.50% 13.28% 150.89% 401.51% 452.22% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of 48.36% 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 50.29%. Semiconductors & Semiconductor Equipment received an allocation of 45.5%, a greater allocation than any other industry. Investments in this industry returned 68.2%, contributing 29.3% to the Fund's total return. The only industry with a negative return in the Fund during the period was Electronic Equipment, Instruments & Components. Investments in this industry returned -0.8%, but the allocation to this industry was only 0.1%, and, therefore had no impact to the Fund's total return. On a relative basis, the Fund underperformed the Benchmark. The industry that caused the most underperformance was Technology Hardware, Storage & Peripherals, which caused -4.4% of underperformance versus the Benchmark. The heavily weighted Semiconductors & Semiconductor Equipment sector caused 8.5% outperformance versus 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 87.53% Communication Services 9.96 Health Care 2.51 ------- 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 ----------------------------------------------------------- Apple, Inc. 2.63% Advanced Micro Devices, Inc. 2.60 Western Digital Corp. 2.60 Skyworks Solutions, Inc. 2.54 Intel Corp. 2.54 Cisco Systems, Inc. 2.53 ASML Holding N.V. 2.52 Adobe, Inc. 2.52 NetEase, Inc. 2.51 KLA Corp. 2.51 ------- Total 25.50% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 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 12/09 $10,000 $10,000 $10,000 $10,000 06/10 9,240 9,265 8,943 9,335 12/10 12,192 12,266 11,020 11,507 06/11 12,286 12,397 11,247 12,199 12/11 11,491 11,632 11,286 11,749 06/12 12,015 12,201 12,792 12,864 12/12 12,413 12,644 12,960 13,629 06/13 13,868 14,171 13,783 15,513 12/13 17,145 17,576 16,644 18,043 06/14 19,394 19,945 18,132 19,331 12/14 21,401 22,081 19,992 20,514 06/15 20,872 21,595 20,144 20,766 12/15 21,106 21,906 21,177 20,797 06/16 21,724 22,629 21,109 21,596 12/16 26,440 27,639 24,109 23,287 06/17 31,477 32,998 28,263 25,462 12/17 36,453 38,321 33,470 28,377 06/18 39,129 41,253 37,108 29,129 12/18 34,739 36,732 33,375 27,134 06/19 43,861 46,521 42,430 32,165 12/19 51,538 54,873 50,151 35,666
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 138 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 113 0 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 and depositary receipts that comprise the Index. The Index is an equal-weighted index composed of the securities comprising the NASDAQ-100 Index(R) that are not classified as "technology" according to the Industry Classification Benchmark classification system. The NASDAQ-100 Index(R) includes 100 of the largest U.S. and international non-financial companies listed on the Nasdaq based on market capitalization. The Index is rebalanced quarterly and reconstituted annually and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 28.35% 8.39% 13.34% 9.16% 49.59% 249.94% 209.61% Market Value 28.33% 8.36% 13.35% 9.16% 49.42% 250.08% 209.57% INDEX PERFORMANCE NASDAQ-100 Ex-Tech Sector Index(SM) 29.17% 9.03% 14.04% 9.84% 54.07% 271.94% 235.23% Russell 1000(R) Index 31.43% 11.48% 13.54% 8.71% 72.20% 256.09% 193.46% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of 28.35% during the 12-month period covered by this report. During the same period, the Russell 1000(R) Index ("Benchmark") generated a return of 31.43%. The Consumer Discretionary sector received the most weight in the Fund during the period. With an allocation of 27.7% and a return of 38.7%, this sector contributed 10.4% to the Fund's total return, more than investments in any other sector. No invested sector experienced a negative return in the Fund. The sector with the lowest return was Consumer Staples, which returned 18.2%. This sector carried an allocation of 9.5% and contributed 1.8% to the Fund's total return. On a relative basis, the Fund underperformed the Benchmark. Most of the underperformance came from investments in Information Technology, which caused -3.2% of underperformance versus the Benchmark. Investments in the Consumer Discretionary sector caused some outperformance versus the Benchmark. This sector received more weight in the Fund than in the Benchmark and caused 2.4% of outperformance for the Fund during 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 25.10% Health Care 21.62 Communication Services 16.71 Industrials 14.99 Consumer Staples 9.99 Information Technology 6.64 Utilities 3.31 Financials 1.64 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Tesla, Inc. 1.72% Amazon.com, Inc. 1.72 Comcast Corp., Class A 1.71 Charter Communications, Inc., Class A 1.70 Align Technology, Inc. 1.70 Ulta Beauty, Inc. 1.70 Booking Holdings, Inc. 1.69 T-Mobile US, Inc. 1.69 Ross Stores, Inc. 1.69 Lululemon Athletica, Inc. 1.69 ------- Total 17.01% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust NASDAQ-100 NASDAQ-100 Ex-Technology Sector Ex-Tech Sector Russell 1000(R) Index Fund Index(SM) Index 12/09 $10,000 $10,000 $10,000 06/10 9,555 9,583 9,360 12/10 12,064 12,139 11,609 06/11 13,519 13,648 12,348 12/11 11,933 12,093 11,782 06/12 13,457 13,672 12,887 12/12 14,357 14,621 13,717 06/13 17,053 17,450 15,625 12/13 20,278 20,806 18,259 06/14 21,207 21,832 19,586 12/14 23,391 24,142 20,677 06/15 24,661 25,537 21,031 12/15 24,501 25,460 20,867 06/16 23,019 23,968 21,647 12/16 23,979 25,037 23,381 06/17 27,403 28,702 25,548 12/17 28,872 30,327 28,450 06/18 29,781 31,367 29,261 12/18 27,262 28,792 27,090 06/19 32,695 34,648 32,194 12/19 34,994 37,194 35,609
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 119 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% 01/01/15 - 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 01/01/19 - 12/31/19 132 0 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 and depositary receipts that comprise the Index. The Index is designed to track the performance of small, mid and large capitalization clean-energy companies that are publicly traded in the United States. The Index is rebalanced quarterly and reconstituted semi-annually and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 42.69% 8.61% 5.19% 2.27% 51.11% 65.93% 33.49% Market Value 43.01% 8.61% 5.20% 2.27% 51.11% 65.95% 33.51% INDEX PERFORMANCE NASDAQ(R) Clean Edge(R) Green Energy Index(SM) 42.67% 8.58% 5.20% 2.43% 50.90% 66.03% 36.35% Russell 2000(R) Index 25.52% 8.23% 11.83% 7.17% 48.49% 205.82% 144.34% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of 42.69% during the 12-month period covered by this report. During the same period, the Russell 2000(R) Index ("Benchmark") generated a return of 25.52%. The Information Technology sector was given the largest allocation in the Fund with a weight of 43.2%, returning 64.3% and providing the largest contribution to the Fund's return at 25.7%. The Materials sector provided -1.6% of contribution to the Fund's return, the most negative contribution during the period. On a relative basis, the Fund outperformed the Benchmark. The Fund overweighted and outperformed among Information Technology securities by 29.3% and 23.1%, respectively, resulting in 12.5% of relative outperformance. The Fund overweighted and underperformed among Materials securities by 4.1% and -32.8%, respectively, creating a -3.4% drag on relative performance. ----------------------------- 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 43.91% Utilities 19.00 Industrials 15.85 Consumer Discretionary 11.65 Materials 7.21 Real Estate 1.59 Energy 0.79 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Tesla, Inc. 9.35% ON Semiconductor Corp. 7.25 Universal Display Corp. 7.03 Brookfield Renewable Partners, L.P. 6.04 Albemarle Corp. 5.61 Acuity Brands, Inc. 3.89 First Solar, Inc. 3.74 Cree, Inc. 3.73 Littelfuse, Inc. 3.50 SolarEdge Technologies, Inc. 3.47 ------- Total 53.61% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust NASDAQ(R) NASDAQ(R) Clean Edge(R) Green Clean Edge(R) Russell 2000(R) Energy Index Fund Green Energy Index(SM) Index 12/09 $10,000 $10,000 $10,000 06/10 8,285 8,309 9,805 12/10 10,205 10,270 12,686 06/11 9,497 9,594 13,474 12/11 5,997 6,079 12,158 06/12 5,804 5,872 13,195 12/12 5,967 5,999 14,145 06/13 8,920 8,944 16,388 12/13 11,324 11,358 19,636 06/14 13,024 13,066 20,262 12/14 10,979 11,003 20,596 06/15 11,783 11,811 21,574 12/15 10,272 10,302 19,686 06/16 9,265 9,269 20,123 12/16 10,053 10,029 23,882 06/17 11,753 11,739 25,074 12/17 13,243 13,243 27,381 06/18 12,750 12,762 29,478 12/18 11,626 11,637 24,363 06/19 14,007 14,024 28,500 12/19 16,593 16,603 30,582
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 158 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 93 0 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 the real estate investment trusts ("REITs") that comprise the Index. The Index seeks to measure the performance of publicly traded REITs domiciled in the U.S. that meet certain eligibility requirements. The Index is rebalanced quarterly and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 23.67% 6.24% 11.19% 4.89% 35.33% 188.94% 82.98% Market Value 23.62% 6.22% 11.19% 4.89% 35.22% 188.83% 82.92% INDEX PERFORMANCE S&P United States REIT Index* 24.45% 6.80% 11.79% N/A 38.96% 204.78% N/A FTSE EPRA/NAREIT North America Index 24.51% 6.63% 11.39% 5.18% 37.83% 194.11% 89.46% Russell 3000(R) Index 31.02% 11.24% 13.42% 8.41% 70.35% 252.15% 177.80% ------------------------------------------------------------------------------------------------------------------------------------
* 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 23.67% during the 12-month period covered by this report. During the same period, the Russell 3000(R) Index ("Benchmark") generated a return of 31.02%. The Fund invests in Real Estate Investment Trusts ("REITs"), while the Benchmark has only 3% invested in REITs. The Fund allocated 18.6% to Residential REITs, which returned 31.0% and contributed 5.4% to Fund return. No class of REITs experienced a negative return for the Fund. The least-performing class of REITs were investments in Retail REITs. These investments were allocated 18.0% of the Fund and returned 10.7%, contributing 2.3% to Fund return. On a relative basis, the Fund underperformed the Benchmark. The allocation to Retail REITs was the greatest source of underperformance, which caused -3.2% of underperformance for the Fund versus the Benchmark. Meanwhile, the allocation to Industrial REITs in the Fund caused 1.3% of outperformance versus the Benchmark. ----------------------------- 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 ----------------------------------------------------------- Specialized 19.33% Residential 18.83 Retail 15.66 Health Care 12.48 Office 12.04 Industrial 10.72 Diversified 5.91 Hotel & Resort 5.03 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Prologis, Inc. 5.71% Equinix, Inc. 5.05 Simon Property Group, Inc. 4.64 Welltower, Inc. 3.37 Public Storage 3.25 AvalonBay Communities, Inc. 2.97 Equity Residential 2.87 Digital Realty Trust, Inc. 2.54 Realty Income Corp. 2.43 Ventas, Inc. 2.18 ------- Total 35.01% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust S&P United States FTSE EPRA/NAREIT Russell 3000(R) S&P REIT Index Fund REIT Index North America Index Index 12/09 $10,000 $10,000 $10,000 $10,000 06/10 10,546 10,571 10,513 9,395 12/10 12,773 12,848 12,865 11,693 06/11 14,050 14,169 14,225 12,436 12/11 13,782 13,937 13,918 11,813 06/12 15,800 16,018 15,953 12,914 12/12 16,179 16,444 16,444 13,752 06/13 17,164 17,501 17,217 15,686 12/13 16,474 16,838 16,654 18,367 06/14 19,334 19,808 19,499 19,642 12/14 21,352 21,935 21,344 20,673 06/15 20,000 20,597 20,051 21,074 12/15 21,772 22,492 21,731 20,773 06/16 24,594 25,481 24,582 21,525 12/16 23,497 24,403 23,508 23,417 06/17 23,915 24,908 23,933 25,508 12/17 24,386 25,461 24,582 28,365 06/18 24,657 25,810 24,978 29,278 12/18 23,361 24,495 23,623 26,882 06/19 27,185 28,595 27,596 31,912 12/19 28,894 30,478 29,411 35,215
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 178 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 74 0 0 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 and depositary receipts that comprise the Index. The Index is designed to track the performance of small, mid and large capitalization companies that derive a substantial portion of their revenues from the potable water and wastewater industries. The Fund's shares are listed for trading on the NYSE Arca. The Index is rebalanced and reconstituted semi-annually and the Fund will make corresponding changes to its portfolio shortly after the changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 37.11% 13.10% 13.27% 9.93% 85.07% 247.79% 231.16% Market Value 37.19% 13.11% 13.28% 9.93% 85.16% 248.01% 231.20% INDEX PERFORMANCE ISE Clean Edge Water Index 37.94% 13.67% 13.96% 10.60% 89.75% 269.40% 257.61% Russell 3000(R) Index 31.02% 11.24% 13.42% 8.41% 70.35% 252.15% 177.80% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of 37.11% during the 12-month period covered by this report. During the same period, the Russell 3000(R) Index ("Benchmark") generated a return of 31.02%. Industrials was the sector with the greatest allocation in the Fund and the greatest contribution to the Fund's returns. This sector received an average weight of 55.6%, returned 38.2%, and contributed 21.0% to the Fund's total return. The best-performing sector was Information Technology. This sector returned 55.8%, but carried only a 4.5% allocation, resulting in a 2.4% contribution to Fund return. The only sector with a negative return in the Fund was the Consumer Staples sector. This sector received an allocation over the period of 0.9% and contributed -0.4% to Fund return. On a relative basis, the Fund outperformed the Benchmark. Much of this outperformance came from the Industrials sector, which the Fund overweighted versus the Benchmark. Investments in this sector resulted in 3.7% of outperformance for the Fund. Meanwhile, investments in the Information Technology sector caused -2.1% of underperformance for the Fund versus the Benchmark. ----------------------------- "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 56.26% Utilities 22.06 Health Care 11.61 Information Technology 5.61 Materials 3.41 Consumer Staples 1.05 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Agilent Technologies, Inc. 4.38% Pentair PLC 4.08 Danaher Corp. 3.94 AECOM 3.88 Aqua America, Inc. 3.87 IDEX Corp. 3.81 Xylem, Inc. 3.75 A.O. Smith Corp. 3.74 Flowserve Corp. 3.72 Roper Technologies, Inc. 3.53 ------- Total 38.70% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust ISE Clean Edge Russell 3000(R) Water ETF Water Index Index 12/09 $10,000 $10,000 $10,000 06/10 9,440 9,470 9,395 12/10 11,949 12,037 11,693 06/11 12,508 12,646 12,436 12/11 11,277 11,441 11,813 06/12 12,396 12,627 12,914 12/12 14,304 14,618 13,752 06/13 15,318 15,720 15,686 12/13 18,726 19,281 18,367 06/14 19,260 19,884 19,642 12/14 18,794 19,466 20,673 06/15 17,550 18,232 21,074 12/15 16,950 17,665 20,773 06/16 19,898 20,809 21,525 12/16 22,409 23,498 23,417 06/17 24,466 25,667 25,508 12/17 27,842 29,294 28,365 06/18 27,619 29,083 29,278 12/18 25,365 26,777 26,877 06/19 31,709 33,578 31,906 12/19 34,778 36,940 35,215
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 216 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 35 0 1 0 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 the common stocks, depositary receipts and master limited partnership ("MLP") units that comprise the Index. The Index is designed to track the performance of mid and large capitalization companies that derive a substantial portion of their revenue from mid-stream activities and/or the exploration and production of natural gas. The Fund's shares are listed for trading on the NYSE Arca. The Index is rebalanced and reconstituted quarterly and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV -15.87% -25.00% -16.97% -14.46% -76.27% -84.43% -86.14% Market Value -15.86% -25.00% -16.98% -14.46% -76.27% -84.44% -86.14% INDEX PERFORMANCE ISE-Revere Natural Gas(TM) Index -15.23% -24.90% -16.66% -14.12% -76.12% -83.83% -85.42% S&P Composite 1500(R) Energy Index 10.05% -2.90% 2.61% 1.29% -13.70% 29.36% 17.62% Russell 3000(R) Index 31.02% 11.24% 13.42% 8.41% 70.35% 252.15% 177.80% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -15.87% 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 10.05%. The Fund consists almost exclusively of investments in the Oil, Gas, & Consumable Fuels industry. Over the period, the Fund invested 97.6% of its assets in this industry. The investments in this industry returned -15.6%, contributing -15.3% to the Fund's total return. The only other industry represented in the Fund was the Gas Utilities industry. This industry returned 7.4% during the period, which resulted in a contribution to Fund return of 0.2%. On a relative basis, the Fund significantly underperformed the Benchmark. The Benchmark allocated 87.2% to the Oil, Gas & Consumable Fuels industry, but, due to selection, investments in this industry caused -22.0% of underperformance for the Fund versus the Benchmark. There was no industry that garnered outperformance for the Fund versus the Benchmark during the same period. ----------------------------- "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 85.77% Oil & Gas Storage & Transportation 14.23 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Concho Resources, Inc. 4.50% Noble Energy, Inc. 4.47 Encana Corp. 4.44 Devon Energy Corp. 4.43 Chesapeake Energy Corp. 4.40 EQT Corp. 4.37 Murphy Oil Corp. 4.33 Apache Corp. 4.29 Cimarex Energy Co. 4.26 Continental Resources, Inc. 4.15 ------- Total 43.64% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust ISE-Revere Natural Russell 3000(R) S&P Composite 1500(R) Natural Gas ETF Gas(TM) Index Index Energy Index 12/09 $10,000 $10,000 $10,000 $10,000 06/10 8,707 8,751 9,395 8,816 12/10 11,222 11,372 11,693 12,137 06/11 12,368 12,579 12,436 13,532 12/11 10,455 10,670 11,813 12,613 06/12 9,464 9,688 12,914 12,242 12/12 9,043 9,289 13,752 13,160 06/13 9,312 9,582 15,686 14,439 12/13 11,317 11,679 18,367 16,502 06/14 13,715 14,185 19,642 18,641 12/14 6,563 6,771 20,673 14,989 06/15 5,595 5,722 21,074 14,286 12/15 2,684 2,730 20,773 11,680 06/16 2,977 3,020 21,525 13,499 12/16 3,207 3,269 23,417 14,869 06/17 2,555 2,613 25,508 12,814 12/17 2,837 2,913 28,365 14,564 06/18 2,928 3,016 29,278 15,646 12/18 1,851 1,907 26,877 11,752 06/19 1,847 1,910 31,906 13,196 12/19 1,557 1,616 35,215 12,932
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 158 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% 01/01/15 - 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 01/01/19 - 12/31/19 93 0 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 common stocks and depositary receipts that comprise the Index. The Index is a modified market capitalization weighted index designed to track the performance of U.S. listed securities issued by small, mid and large capitalization companies domiciled in China or India. The Fund's shares are listed for trading on the NYSE Arca. The Index is rebalanced and reconstituted semi-annually and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 28.96% 8.01% 7.69% 6.71% 47.02% 109.77% 127.32% Market Value 29.09% 8.00% 7.66% 6.70% 46.93% 109.23% 127.25% INDEX PERFORMANCE ISE ChIndia(TM) Index 29.56% 8.56% 8.20% 7.26% 50.77% 119.99% 142.63% Russell 3000(R) Index 31.02% 11.24% 13.42% 8.41% 70.35% 252.15% 177.80% MSCI Emerging Markets Index 18.44% 5.61% 3.68% 3.37% 31.39% 43.50% 52.03% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of 28.96% during the 12-month period covered by this report. During the same period, the MSCI Emerging Markets Index ("Benchmark") generated a return of 18.44%. During the period, the Fund allocated 59.2% to Chinese securities and 37.6% to Indian securities. The allocation to Chinese securities resulted in a 23.0% contribution to the Fund's return and 10.5% of outperformance versus the Benchmark. The allocation to Indian securities contributed only 6.0% to Fund return and -0.3% of underperformance versus the Benchmark. The most underperformance versus the Benchmark came as a result of investments in Taiwanese securities. The Fund did not allocate any weight to Taiwan while the Benchmark allocated 11.3% during the period. The difference resulted in -2.1% of underperformance for the Fund versus the Benchmark. Meanwhile, the Fund benefitted from not including South Korean investments, which caused 1.1% outperformance for the Fund versus the Benchmark. ----------------------------- "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 38.82% Communication Services 18.81 Financials 16.62 Information Technology 13.58 Materials 4.06 Health Care 3.75 Industrials 2.20 Energy 2.16 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- JD.com, Inc., ADR 7.15% ICICI Bank Ltd., ADR 7.10 Baidu, Inc., ADR 7.07 Alibaba Group Holding Ltd., ADR 7.03 Infosys Ltd., ADR 6.96 HDFC Bank Ltd., ADR 6.80 Tata Motors Ltd., ADR 4.37 Vedanta Ltd., ADR 4.06 Pinduoduo, Inc., ADR 3.99 Wipro Ltd., ADR 3.91 ------- Total 58.44% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust ISE ChIndia(TM) Russell 3000(R) MSCI Emerging Chindia ETF Index Index Markets Index 12/09 $10,000 $10,000 $10,000 $10,000 06/10 9,727 9,761 9,395 9,383 12/10 11,846 11,944 11,693 11,887 06/11 12,040 12,208 12,436 11,992 12/11 8,764 8,858 11,813 9,698 06/12 9,292 9,405 12,914 10,079 12/12 10,263 10,409 13,752 11,465 06/13 10,389 10,568 15,686 10,368 12/13 13,937 14,199 18,367 11,166 06/14 14,808 15,119 19,642 11,852 12/14 14,268 14,590 20,673 10,923 06/15 15,282 15,657 21,074 11,245 12/15 14,221 14,613 20,773 9,293 06/16 13,703 14,119 21,525 9,889 12/16 13,915 14,390 23,417 10,333 06/17 17,863 18,518 25,508 12,237 12/17 20,505 21,296 28,365 14,185 06/18 20,109 20,932 29,278 13,240 12/18 16,264 16,980 26,877 12,116 06/19 18,899 19,780 31,906 13,400 12/19 20,974 21,999 35,215 14,350
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 83 0 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- QUARTER ENDED 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/15 - 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 01/01/19 - 12/31/19 169 0 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 the common stocks that comprise the Index. The Index is designed to track the performance of small, mid and large capitalization companies that comprise the community banking industry. The Fund's shares are listed for trading on the Nasdaq. The Index is rebalanced quarterly and reconstituted semi-annually and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. The first day of secondary market trading in shares of the Fund was July 1, 2009.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (6/29/09) Ended Ended (6/29/09) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 22.80% 8.97% 10.44% 11.18% 53.67% 170.05% 204.61% Market Value 22.79% 8.94% 10.42% 11.18% 53.41% 169.44% 204.46% INDEX PERFORMANCE NASDAQ OMX(R) ABA Community Bank Index(SM) 23.59% 9.65% 11.14% 11.89% 58.47% 187.60% 225.50% S&P Composite 1500(R) Financials Index 31.22% 11.23% 12.37% 13.80% 70.24% 221.02% 288.80% Russell 3000(R) Index 31.02% 11.24% 13.42% 14.90% 70.35% 252.15% 330.48% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of 22.80% 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 31.22%. The Fund invests effectively all of its assets in securities within the Banks industry group of the Financials sector. The company that received the greatest allocation in the Fund was Commerce Bancshares, Inc., which carried an average weight in the Fund of 2.7%. This security returned 28.7%, contributing 0.8% to the Fund's total return. The investment in the Fund with the worst return was Republic First Bancorp, Inc. This security returned -30.0%. However, since it received only 0.1% allocation, the drag on return was less than 10 basis points. On a relative basis, the Fund underperformed the Benchmark. The two primary differentiators of performance between the Fund and the Benchmark were: first, that the Fund invested almost entirely in Bank stocks, while the Benchmark invested across the Financials sector; and second, that the bank stocks in the Fund generated less return than the bank stocks in the Benchmark. Thus, the Fund differed greatly in allocation, but the selection effect was actually a more significant driver of the 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 88.62% Thrifts & Mortgage Finance 11.05 IT Services 0.33 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Commerce Bancshares, Inc. 2.99% TCF Financial Corp. 2.80 BOK Financial Corp. 2.42 Popular, Inc. 2.22 TFS Financial Corp. 2.15 First Citizens BancShares, Inc., Class A 2.02 Pinnacle Financial Partners, Inc. 1.91 First Financial Bankshares, Inc. 1.86 PacWest Bancorp 1.79 Glacier Bancorp., Inc. 1.66 ------- Total 21.82% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 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 12/09 $10,000 $10,000 $10,000 $10,000 06/10 10,140 10,165 9,696 9,395 12/10 11,278 11,350 11,329 11,693 06/11 11,100 11,210 11,080 12,436 12/11 10,548 10,686 9,629 11,813 06/12 11,596 11,789 10,921 12,914 12/12 11,974 12,208 12,225 13,752 06/13 14,189 14,514 14,518 15,686 12/13 17,111 17,559 16,413 18,367 06/14 17,106 17,608 17,262 19,642 12/14 17,576 18,145 18,857 20,673 06/15 19,181 19,865 18,900 21,074 12/15 18,962 19,692 18,722 20,773 06/16 18,640 19,416 18,419 21,525 12/16 26,087 27,270 23,269 23,417 06/17 25,179 26,403 24,719 25,508 12/17 26,223 27,601 28,127 28,372 06/18 27,562 29,096 27,176 29,285 12/18 21,989 23,271 24,461 26,884 06/19 24,676 26,201 28,663 31,914 12/19 27,005 28,760 32,102 35,215
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 34 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 218 0 0 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, 2019 (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, 2019. 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, 2019 DECEMBER 31, 2019 PERIOD (a) PERIOD (b) -------------------------------------------------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) Actual $1,000.00 $1,109.70 0.59% $3.14 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 $1,175.10 0.57% $3.12 Hypothetical (5% return before expenses) $1,000.00 $1,022.33 0.57% $2.91 FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) Actual $1,000.00 $1,070.20 0.60% $3.13 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 $1,184.30 0.60% $3.30 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 $1,062.70 0.50% $2.60 Hypothetical (5% return before expenses) $1,000.00 $1,022.68 0.50% $2.55 FIRST TRUST WATER ETF (FIW) Actual $1,000.00 $1,096.80 0.55% $2.91 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, 2019 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2019 DECEMBER 31, 2019 PERIOD (a) PERIOD (b) -------------------------------------------------------------------------------------------------------------------------- FIRST TRUST NATURAL GAS ETF (FCG) Actual $1,000.00 $ 843.00 0.60% $2.79 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 FIRST TRUST CHINDIA ETF (FNI) Actual $1,000.00 $1,109.80 0.60% $3.19 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) Actual $1,000.00 $1,094.30 0.60% $3.17 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, 2019 through December 31, 2019), 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, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% AIRLINES -- 2.0% 313,332 American Airlines Group, Inc. $ 8,986,362 101,915 United Airlines Holdings, Inc. (a) 8,977,692 -------------- 17,964,054 -------------- AUTOMOBILES -- 1.0% 22,433 Tesla, Inc. (a) 9,384,397 -------------- BEVERAGES -- 2.0% 142,353 Monster Beverage Corp. (a) 9,046,533 65,973 PepsiCo, Inc. 9,016,530 -------------- 18,063,063 -------------- BIOTECHNOLOGY -- 8.9% 82,908 Alexion Pharmaceuticals, Inc. (a) 8,966,500 37,435 Amgen, Inc. 9,024,456 30,225 Biogen, Inc. (a) 8,968,664 107,362 BioMarin Pharmaceutical, Inc. (a) 9,077,457 136,111 Gilead Sciences, Inc. 8,844,493 100,991 Incyte Corp. (a) 8,818,534 24,222 Regeneron Pharmaceuticals, Inc. (a) 9,094,877 77,577 Seattle Genetics, Inc. (a) 8,863,948 41,232 Vertex Pharmaceuticals, Inc. (a) 9,027,746 -------------- 80,686,675 -------------- COMMERCIAL SERVICES & SUPPLIES -- 2.0% 33,513 Cintas Corp. 9,017,678 100,300 Copart, Inc. (a) 9,121,282 -------------- 18,138,960 -------------- COMMUNICATIONS EQUIPMENT -- 1.0% 191,764 Cisco Systems, Inc. 9,197,001 -------------- ELECTRIC UTILITIES -- 2.0% 200,201 Exelon Corp. 9,127,164 141,843 Xcel Energy, Inc. 9,005,612 -------------- 18,132,776 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.0% 63,223 CDW Corp. 9,030,773 -------------- ENTERTAINMENT -- 5.0% 153,651 Activision Blizzard, Inc. 9,129,942 84,292 Electronic Arts, Inc. (a) 9,062,233 29,815 NetEase, Inc., ADR 9,142,472 27,009 Netflix, Inc. (a) 8,739,302 73,611 Take-Two Interactive Software, Inc. (a) 9,012,195 -------------- 45,086,144 -------------- FOOD & STAPLES RETAILING -- 2.0% 30,860 Costco Wholesale Corp. 9,070,371 155,832 Walgreens Boots Alliance, Inc. 9,187,855 -------------- 18,258,226 -------------- FOOD PRODUCTS -- 2.0% 282,406 Kraft Heinz (The) Co. 9,073,705 SHARES DESCRIPTION VALUE ------------------------------------------------------------- FOOD PRODUCTS (CONTINUED) 164,245 Mondelez International, Inc., Class A $ 9,046,614 -------------- 18,120,319 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.0% 33,345 Align Technology, Inc. (a) 9,304,589 34,788 IDEXX Laboratories, Inc. (a) 9,084,190 15,390 Intuitive Surgical, Inc. (a) 9,097,799 -------------- 27,486,578 -------------- HEALTH CARE TECHNOLOGY -- 1.0% 124,203 Cerner Corp. 9,115,258 -------------- HOTELS, RESTAURANTS & LEISURE -- 2.0% 60,338 Marriott International, Inc., Class A 9,136,983 102,861 Starbucks Corp. 9,043,539 -------------- 18,180,522 -------------- INSURANCE -- 1.0% 44,248 Willis Towers Watson PLC 8,935,441 -------------- INTERACTIVE MEDIA & SERVICES -- 3.0% 3,368 Alphabet, Inc., Class A (a) 4,511,066 3,372 Alphabet, Inc., Class C (a) 4,508,432 71,371 Baidu, Inc., ADR (a) 9,021,294 44,105 Facebook, Inc., Class A (a) 9,052,551 -------------- 27,093,343 -------------- INTERNET & DIRECT MARKETING RETAIL -- 7.0% 5,094 Amazon.com, Inc. (a) 9,412,897 4,496 Booking Holdings, Inc. (a) 9,233,570 251,426 eBay, Inc. 9,078,993 82,659 Expedia Group, Inc. 8,938,744 257,694 JD.com, Inc., ADR (a) 9,078,559 15,354 MercadoLibre, Inc. (a) 8,781,567 263,209 Trip.com Group Ltd., ADR (a) 8,828,030 -------------- 63,352,360 -------------- IT SERVICES -- 6.0% 53,182 Automatic Data Processing, Inc. 9,067,531 143,928 Cognizant Technology Solutions Corp., Class A 8,926,415 77,990 Fiserv, Inc. (a) 9,017,984 106,383 Paychex, Inc. 9,048,938 83,670 PayPal Holdings, Inc. (a) 9,050,584 47,280 VeriSign, Inc. (a) 9,109,910 -------------- 54,221,362 -------------- LIFE SCIENCES TOOLS & SERVICES -- 1.0% 27,561 Illumina, Inc. (a) 9,143,086 -------------- MACHINERY -- 1.0% 113,496 PACCAR, Inc. 8,977,534 -------------- MEDIA -- 5.0% 19,108 Charter Communications, Inc., Class A (a) 9,268,909 See Notes to Financial Statements Page 25 FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) MEDIA (CONTINUED) 206,376 Comcast Corp., Class A $ 9,280,729 122,400 Fox Corp., Class A 4,537,368 125,611 Fox Corp., Class B 4,572,240 201,040 Liberty Global PLC, Class A (a) 4,571,649 210,045 Liberty Global PLC, Class C (a) 4,577,931 1,267,288 Sirius XM Holdings, Inc. (b) 9,061,109 -------------- 45,869,935 -------------- MULTILINE RETAIL -- 1.0% 96,736 Dollar Tree, Inc. (a) 9,098,021 -------------- PROFESSIONAL SERVICES -- 2.0% 15,055 CoStar Group, Inc. (a) 9,007,406 60,790 Verisk Analytics, Inc. 9,078,379 -------------- 18,085,785 -------------- ROAD & RAIL -- 1.0% 124,337 CSX Corp. 8,997,025 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 17.0% 206,096 Advanced Micro Devices, Inc. (a) 9,451,563 75,941 Analog Devices, Inc. 9,024,828 147,209 Applied Materials, Inc. 8,985,637 30,993 ASML Holding N.V. 9,172,068 28,524 Broadcom, Inc. 9,014,154 154,351 Intel Corp. 9,237,907 51,270 KLA Corp. 9,134,776 30,593 Lam Research Corp. 8,945,393 147,448 Maxim Integrated Products, Inc. 9,069,526 86,930 Microchip Technology, Inc. 9,103,310 165,259 Micron Technology, Inc. (a) 8,887,629 38,015 NVIDIA Corp. 8,944,930 71,261 NXP Semiconductors N.V. 9,068,675 102,409 QUALCOMM, Inc. 9,035,546 76,527 Skyworks Solutions, Inc. 9,250,584 70,564 Texas Instruments, Inc. 9,052,656 93,093 Xilinx, Inc. 9,101,703 -------------- 154,480,885 -------------- SOFTWARE -- 11.0% 27,775 Adobe, Inc. (a) 9,160,473 35,147 ANSYS, Inc. (a) 9,047,189 49,764 Autodesk, Inc. (a) 9,129,703 129,822 Cadence Design Systems, Inc. (a) 9,004,454 81,474 Check Point Software Technologies Ltd. (a) 9,040,355 81,930 Citrix Systems, Inc. 9,086,037 34,064 Intuit, Inc. 8,922,384 57,805 Microsoft Corp. 9,115,848 60,275 Splunk, Inc. (a) 9,027,387 65,048 Synopsys, Inc. (a) 9,054,682 54,432 Workday, Inc., Class A (a) 8,951,342 -------------- 99,539,854 -------------- SPECIALTY RETAIL -- 3.0% 20,626 O'Reilly Automotive, Inc. (a) 9,039,551 78,965 Ross Stores, Inc. 9,193,105 SHARES DESCRIPTION VALUE ------------------------------------------------------------- SPECIALTY RETAIL (CONTINUED) 36,325 Ulta Beauty, Inc. (a) $ 9,195,311 -------------- 27,427,967 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 3.1% 32,561 Apple, Inc. 9,561,538 146,595 NetApp, Inc. 9,125,539 148,896 Western Digital Corp. 9,450,429 -------------- 28,137,506 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.0% 39,513 Lululemon Athletica, Inc. (a) 9,153,977 -------------- TRADING COMPANIES & DISTRIBUTORS -- 1.0% 245,125 Fastenal Co. 9,057,369 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 1.0% 117,560 T-Mobile US, Inc. (a) 9,219,055 -------------- TOTAL COMMON STOCKS -- 100.0% 907,635,251 (Cost $760,998,598) -------------- MONEY MARKET FUNDS -- 0.0% 100,389 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 1.59% (c) (d) 100,389 (Cost $100,389) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 0.1% $ 609,386 BNP Paribas S.A., 1.56% (c), dated 12/31/19, due 01/02/20, with a maturity value of $609,439. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/26. The value of the collateral including accrued interest is $623,852. (d) 609,386 (Cost $609,386) -------------- TOTAL INVESTMENTS -- 100.1% $ 908,345,026 (Cost $761,708,373) (e) NET OTHER ASSETS AND LIABILITIES -- (0.1)% (907,277) -------------- NET ASSETS -- 100.0% $ 907,437,749 ============== (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 $699,985 and the total value of the collateral held by the Fund is $709,775. (c) Rate shown reflects yield as of December 31, 2019. (d) This security serves as collateral for securities on loan. Page 26 See Notes to Financial Statements FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 (e) Aggregate cost for federal income tax purposes is $770,074,525. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $160,503,917 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $22,233,416. The net unrealized appreciation was $138,270,501. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 907,635,251 $ -- $ -- Money Market Funds 100,389 -- -- Repurchase Agreements -- 609,386 -- ------------------------------------------------- Total Investments $ 907,735,640 $ 609,386 $ -- ================================================= * 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) $ 699,985 Non-cash Collateral(2) (699,985) -------------- 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, 2019, 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) $ 609,386 Non-cash Collateral(4) (609,386) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2019, 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, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.1% COMMUNICATIONS EQUIPMENT -- 2.5% 1,536,074 Cisco Systems, Inc. $ 73,670,109 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 2.5% 506,438 CDW Corp. 72,339,604 -------------- ENTERTAINMENT -- 2.5% 238,831 NetEase, Inc., ADR 73,235,138 -------------- HEALTH CARE TECHNOLOGY -- 2.5% 994,904 Cerner Corp. 73,016,005 -------------- INTERACTIVE MEDIA & SERVICES -- 7.5% 26,971 Alphabet, Inc., Class A (a) 36,124,688 27,003 Alphabet, Inc., Class C (a) 36,103,551 571,705 Baidu, Inc., ADR (a) 72,263,512 353,304 Facebook, Inc., Class A (a) 72,515,646 -------------- 217,007,397 -------------- IT SERVICES -- 5.0% 1,152,906 Cognizant Technology Solutions Corp., Class A 71,503,230 378,730 VeriSign, Inc. (a) 72,973,696 -------------- 144,476,926 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 42.5% 1,650,888 Advanced Micro Devices, Inc. (a) 75,709,724 608,301 Analog Devices, Inc. 72,290,491 1,179,205 Applied Materials, Inc. 71,978,673 248,261 ASML Holding N.V. 73,470,360 228,486 Broadcom, Inc. 72,206,146 1,236,415 Intel Corp. 73,999,438 410,699 KLA Corp. 73,174,241 245,071 Lam Research Corp. 71,658,760 1,181,116 Maxim Integrated Products, Inc. 72,650,445 696,347 Microchip Technology, Inc. 72,921,458 1,323,769 Micron Technology, Inc. (a) 71,192,297 304,493 NVIDIA Corp. 71,647,203 570,810 NXP Semiconductors N.V. 72,641,281 820,334 QUALCOMM, Inc. 72,378,069 613,008 Skyworks Solutions, Inc. 74,100,407 565,232 Texas Instruments, Inc. 72,513,613 745,720 Xilinx, Inc. 72,909,044 -------------- 1,237,441,650 -------------- SOFTWARE -- 27.4% 222,480 Adobe, Inc. (a) 73,376,129 281,535 ANSYS, Inc. (a) 72,469,924 398,636 Autodesk, Inc. (a) 73,133,760 1,039,902 Cadence Design Systems, Inc. (a) 72,127,603 652,638 Check Point Software Technologies Ltd. (a) 72,416,712 656,282 Citrix Systems, Inc. 72,781,674 272,882 Intuit, Inc. 71,475,982 463,038 Microsoft Corp. 73,021,093 482,822 Splunk, Inc. (a) 72,312,251 SHARES DESCRIPTION VALUE ------------------------------------------------------------- SOFTWARE (CONTINUED) 521,065 Synopsys, Inc. (a) $ 72,532,248 436,029 Workday, Inc., Class A (a) 71,704,969 -------------- 797,352,345 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 7.7% 260,831 Apple, Inc. 76,593,023 1,174,266 NetApp, Inc. 73,098,058 1,192,712 Western Digital Corp. 75,701,431 -------------- 225,392,512 -------------- TOTAL INVESTMENTS -- 100.1% 2,913,931,686 (Cost $2,258,485,865) (b) NET OTHER ASSETS AND LIABILITIES -- (0.1)% (1,543,780) -------------- NET ASSETS -- 100.0% $2,912,387,906 ============== (a) Non-income producing security. (b) Aggregate cost for federal income tax purposes is $2,304,102,552. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $634,725,353 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $24,896,219. The net unrealized appreciation was $609,829,134. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 2,913,931,686 $ -- $ -- ================================================= * 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, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (A) -- 100.0% AIRLINES -- 3.3% 59,383 American Airlines Group, Inc. $ 1,703,104 19,155 United Airlines Holdings, Inc. (b) 1,687,364 -------------- 3,390,468 -------------- AUTOMOBILES -- 1.7% 4,213 Tesla, Inc. (b) 1,762,424 -------------- BEVERAGES -- 3.3% 26,753 Monster Beverage Corp. (b) 1,700,153 12,379 PepsiCo, Inc. 1,691,838 -------------- 3,391,991 -------------- BIOTECHNOLOGY -- 14.9% 15,766 Alexion Pharmaceuticals, Inc. (b) 1,705,093 7,033 Amgen, Inc. 1,695,445 5,664 Biogen, Inc. (b) 1,680,679 20,292 BioMarin Pharmaceutical, Inc. (b) 1,715,688 25,818 Gilead Sciences, Inc. 1,677,654 18,951 Incyte Corp. (b) 1,654,801 4,554 Regeneron Pharmaceuticals, Inc. (b) 1,709,936 14,723 Seattle Genetics, Inc. (b) 1,682,250 7,786 Vertex Pharmaceuticals, Inc. (b) 1,704,745 -------------- 15,226,291 -------------- COMMERCIAL SERVICES & SUPPLIES -- 3.4% 6,319 Cintas Corp. 1,700,316 18,938 Copart, Inc. (b) 1,722,222 -------------- 3,422,538 -------------- ELECTRIC UTILITIES -- 3.3% 37,379 Exelon Corp. 1,704,109 26,505 Xcel Energy, Inc. 1,682,802 -------------- 3,386,911 -------------- ENTERTAINMENT -- 6.6% 28,679 Activision Blizzard, Inc. 1,704,106 15,768 Electronic Arts, Inc. (b) 1,695,218 5,060 Netflix, Inc. (b) 1,637,264 13,848 Take-Two Interactive Software, Inc. (b) 1,695,411 -------------- 6,731,999 -------------- FOOD & STAPLES RETAILING -- 3.3% 5,788 Costco Wholesale Corp. 1,701,209 29,139 Walgreens Boots Alliance, Inc. 1,718,035 -------------- 3,419,244 -------------- FOOD PRODUCTS -- 3.3% 53,108 Kraft Heinz (The) Co. 1,706,360 30,823 Mondelez International, Inc., Class A 1,697,731 -------------- 3,404,091 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 5.0% 6,239 Align Technology, Inc. (b) 1,740,930 6,544 IDEXX Laboratories, Inc. (b) 1,708,835 SHARES DESCRIPTION VALUE ------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (CONTINUED) 2,880 Intuitive Surgical, Inc. (b) $ 1,702,512 -------------- 5,152,277 -------------- HOTELS, RESTAURANTS & LEISURE -- 3.4% 11,347 Marriott International, Inc., Class A 1,718,276 19,370 Starbucks Corp. 1,703,011 -------------- 3,421,287 -------------- INSURANCE -- 1.6% 8,318 Willis Towers Watson PLC 1,679,737 -------------- INTERNET & DIRECT MARKETING RETAIL -- 11.6% 950 Amazon.com, Inc. (b) 1,755,448 843 Booking Holdings, Inc. (b) 1,731,294 47,014 eBay, Inc. 1,697,676 15,431 Expedia Group, Inc. 1,668,708 48,476 JD.com, Inc., ADR (b) 1,707,810 2,901 MercadoLibre, Inc. (b) 1,659,198 49,260 Trip.com Group Ltd., ADR (b) 1,652,180 -------------- 11,872,314 -------------- IT SERVICES -- 6.6% 9,990 Automatic Data Processing, Inc. 1,703,295 14,662 Fiserv, Inc. (b) 1,695,367 19,930 Paychex, Inc. 1,695,246 15,688 PayPal Holdings, Inc. (b) 1,696,971 -------------- 6,790,879 -------------- LIFE SCIENCES TOOLS & SERVICES -- 1.7% 5,182 Illumina, Inc. (b) 1,719,077 -------------- MACHINERY -- 1.7% 21,340 PACCAR, Inc. 1,687,994 -------------- MEDIA -- 8.4% 3,589 Charter Communications, Inc., Class A (b) 1,740,952 38,772 Comcast Corp., Class A 1,743,577 22,951 Fox Corp., Class A 850,793 23,497 Fox Corp., Class B 855,291 37,752 Liberty Global PLC, Class A (b) 858,480 39,499 Liberty Global PLC, Class C (b) 860,881 238,653 Sirius XM Holdings, Inc. 1,706,369 -------------- 8,616,343 -------------- MULTILINE RETAIL -- 1.7% 18,273 Dollar Tree, Inc. (b) 1,718,576 -------------- PROFESSIONAL SERVICES -- 3.4% 2,868 CoStar Group, Inc. (b) 1,715,924 11,452 Verisk Analytics, Inc. 1,710,242 -------------- 3,426,166 -------------- ROAD & RAIL -- 1.7% 23,468 CSX Corp. 1,698,145 -------------- SPECIALTY RETAIL -- 5.0% 3,869 O'Reilly Automotive, Inc. (b) 1,695,628 14,837 Ross Stores, Inc. 1,727,324 See Notes to Financial Statements Page 29 FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (a) (CONTINUED) SPECIALTY RETAIL (CONTINUED) 6,852 Ulta Beauty, Inc. (b) $ 1,734,515 -------------- 5,157,467 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.7% 7,437 Lululemon Athletica, Inc. (b) 1,722,930 -------------- TRADING COMPANIES & DISTRIBUTORS -- 1.7% 45,957 Fastenal Co. 1,698,111 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 1.7% 22,038 T-Mobile US, Inc. (b) 1,728,220 -------------- TOTAL INVESTMENTS -- 100.0% 102,225,480 (Cost $80,696,185) (c) NET OTHER ASSETS AND LIABILITIES -- (0.0)% (42,486) -------------- NET ASSETS -- 100.0% $ 102,182,994 ============== (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) Aggregate cost for federal income tax purposes is $81,432,381. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $25,458,695 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $4,665,596. The net unrealized appreciation was $20,793,099. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 102,225,480 $ -- $ -- ================================================= * See Portfolio of Investments for industry breakout. Page 30 See Notes to Financial Statements FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.7% AEROSPACE & DEFENSE -- 3.4% 66,714 Hexcel Corp. $ 4,890,803 -------------- AUTOMOBILES -- 11.6% 823,664 NIO, Inc., ADR (a) (b) 3,311,129 32,203 Tesla, Inc. (b) 13,471,481 -------------- 16,782,610 -------------- CHEMICALS -- 7.2% 110,559 Albemarle Corp. 8,075,229 157,815 Livent Corp. (b) 1,349,318 35,998 Sociedad Quimica y Minera de Chile S.A., ADR 960,787 -------------- 10,385,334 -------------- CONSTRUCTION & ENGINEERING -- 0.4% 31,387 Ameresco, Inc., Class A (b) 549,273 -------------- ELECTRICAL EQUIPMENT -- 12.0% 40,621 Acuity Brands, Inc. 5,605,698 23,530 American Superconductor Corp. (b) 184,710 252,472 Ballard Power Systems, Inc. (a) (b) 1,812,749 81,723 Bloom Energy Corp., Class A (b) 610,471 45,714 EnerSys 3,420,779 282,236 Plug Power, Inc. (a) (b) 891,866 127,628 Sunrun, Inc. (b) 1,762,543 38,033 TPI Composites, Inc. (b) 703,991 30,968 Vicor Corp. (b) 1,446,825 131,986 Vivint Solar, Inc. (a) (b) 958,218 -------------- 17,397,850 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 8.6% 182,811 AVX Corp. 3,742,141 42,776 Itron, Inc. (b) 3,591,045 26,333 Littelfuse, Inc. 5,037,503 -------------- 12,370,689 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 1.6% 71,014 Hannon Armstrong Sustainable Infrastructure Capital, Inc. 2,285,231 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 18.9% 109,839 Atlantica Yield PLC 2,898,651 186,583 Brookfield Renewable Partners, L.P. (c) 8,700,365 79,282 Clearway Energy, Inc., Class C 1,581,676 65,755 NextEra Energy Partners, L.P. (c) (d) 3,462,001 55,128 Ormat Technologies, Inc. 4,108,139 106,205 Pattern Energy Group, Inc., Class A 2,841,515 245,450 TerraForm Power, Inc., Class A 3,777,475 -------------- 27,369,822 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 0.8% 42,123 Renewable Energy Group, Inc. (b) $ 1,135,215 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 35.2% 41,439 Advanced Energy Industries, Inc. (b) 2,950,457 64,256 Canadian Solar, Inc. (b) 1,420,058 116,442 Cree, Inc. (b) 5,373,798 10,890 Daqo New Energy Corp., ADR (b) 557,568 132,308 Enphase Energy, Inc. (a) (b) 3,457,208 96,170 First Solar, Inc. (b) 5,381,673 37,084 JinkoSolar Holding Co., Ltd., ADR (a) (b) 834,019 428,254 ON Semiconductor Corp. (b) 10,440,832 31,807 Power Integrations, Inc. 3,146,030 52,551 SolarEdge Technologies, Inc. (b) 4,997,075 181,631 SunPower Corp. (b) 1,416,722 49,121 Universal Display Corp. 10,122,364 52,868 Veeco Instruments, Inc. (b) 776,367 -------------- 50,874,171 -------------- TOTAL COMMON STOCKS -- 99.7% 144,040,998 (Cost $105,819,218) -------------- MONEY MARKET FUNDS -- 1.0% 1,363,007 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 1.59% (e) (f) 1,363,007 (Cost $1,363,007) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 5.7% $ 8,273,805 BNP Paribas S.A., 1.56% (e), dated 12/31/19, due 01/02/20, with a maturity value of $8,274,522. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/26. The value of the collateral including accrued interest is $8,470,206. (f) 8,273,805 (Cost $8,273,805) -------------- TOTAL INVESTMENTS -- 106.4% 153,677,810 (Cost $115,456,030) (g) NET OTHER ASSETS AND LIABILITIES -- (6.4)% (9,210,713) -------------- NET ASSETS -- 100.0% $ 144,467,097 ============== (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 $9,754,955 and the total value of the collateral held by the Fund is $9,636,812. (b) Non-income producing security. (c) Security is a Master Limited Partnership ("MLP"). See Notes to Financial Statements Page 31 FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 (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, 2019. (f) This security serves as collateral for securities on loan. (g) Aggregate cost for federal income tax purposes is $118,632,051. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $41,309,001 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $6,263,242. The net unrealized appreciation was $35,045,759. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 144,040,998 $ -- $ -- Money Market Funds 1,363,007 -- -- Repurchase Agreements -- 8,273,805 -- ------------------------------------------------- Total Investments $ 145,404,005 $ 8,273,805 $ -- ================================================= * 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) $ 9,754,955 Non-cash Collateral(2) (9,636,812) -------------- Net Amount $ 118,143 ============== (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) The collateral requirements are determined at the beginning of each business day based on the market value of the loaned securities from the end of the prior day. On December 31, 2019, the last business day of the period, there was sufficient collateral based on the end of day market value from the prior business day; however, as a result of market movement from December 30 to December 31, 2019, the value of the related securities loaned was above the collateral value received. See Note 2D -- Securities Lending in the Notes to Financial Statements. 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) $ 8,273,805 Non-cash Collateral(4) (8,273,805) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2019, 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 S&P REIT INDEX FUND (FRI) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.4% DIVERSIFIED REITS -- 5.9% 9,613 American Assets Trust, Inc. $ 441,237 97,599 Colony Capital, Inc. 463,595 29,926 Empire State Realty Trust, Inc., Class A 417,767 16,239 Essential Properties Realty Trust, Inc. 402,890 6,259 Gladstone Commercial Corp. 136,822 17,928 Global Net Lease, Inc. 363,580 31,618 Liberty Property Trust 1,898,661 3,071 One Liberty Properties, Inc. 83,500 4,014 PS Business Parks, Inc. 661,788 42,820 STORE Capital Corp. 1,594,617 213,967 VEREIT, Inc. 1,977,055 16,152 Washington Real Estate Investment Trust 471,315 34,525 WP Carey, Inc. 2,763,381 -------------- 11,676,208 -------------- HEALTH CARE REITS -- 12.4% 19,150 CareTrust REIT, Inc. 395,064 3,801 Community Healthcare Trust, Inc. 162,911 6,487 Global Medical REIT, Inc. 85,823 26,801 Healthcare Realty Trust, Inc. 894,349 41,521 Healthcare Trust of America, Inc., Class A 1,257,256 99,189 Healthpeak Properties, Inc. 3,419,045 7,967 LTC Properties, Inc. 356,683 103,696 Medical Properties Trust, Inc. 2,189,022 8,810 National Health Investors, Inc. 717,839 16,627 New Senior Investment Group, Inc. 127,196 43,788 Omega Healthcare Investors, Inc. 1,854,422 37,138 Physicians Realty Trust 703,394 38,818 Sabra Health Care REIT, Inc. 828,376 47,675 Senior Housing Properties Trust (a) 402,377 2,536 Universal Health Realty Income Trust 297,625 74,697 Ventas, Inc. 4,313,005 81,315 Welltower, Inc. 6,649,941 -------------- 24,654,328 -------------- HOTEL & RESORT REITS -- 5.0% 42,172 Apple Hospitality REIT, Inc. 685,295 16,984 Ashford Hospitality Trust, Inc. 47,385 5,998 Braemar Hotels & Resorts, Inc. 53,562 9,404 Chatham Lodging Trust 172,469 7,812 CorePoint Lodging, Inc. 83,432 40,120 DiamondRock Hospitality Co. 444,530 7,196 Hersha Hospitality Trust 104,702 143,723 Host Hotels & Resorts, Inc. 2,666,062 47,973 Park Hotels & Resorts, Inc. 1,241,061 26,180 Pebblebrook Hotel Trust 701,886 34,169 RLJ Lodging Trust 605,475 10,911 Ryman Hospitality Properties, Inc. 945,547 32,979 Service Properties Trust 802,379 21,075 Summit Hotel Properties, Inc. 260,065 45,063 Sunstone Hotel Investors, Inc. 627,277 SHARES DESCRIPTION VALUE ------------------------------------------------------------- HOTEL & RESORT REITS (CONTINUED) 22,573 Xenia Hotels & Resorts, Inc. $ 487,803 -------------- 9,928,930 -------------- INDUSTRIAL REITS -- 10.6% 38,429 Americold Realty Trust 1,347,321 73,662 Duke Realty Corp. 2,553,862 7,697 EastGroup Properties, Inc. 1,021,161 25,442 First Industrial Realty Trust, Inc. 1,056,097 13,062 Industrial Logistics Properties Trust 292,850 2,375 Innovative Industrial Properties, Inc. 180,191 49,674 Lexington Realty Trust 527,538 19,434 Monmouth Real Estate Investment Corp. 281,404 2,686 Plymouth Industrial REIT, Inc. 49,396 126,603 Prologis, Inc. 11,285,391 22,228 Rexford Industrial Realty, Inc. 1,015,153 26,645 STAG Industrial, Inc. 841,183 13,429 Terreno Realty Corp. 727,046 -------------- 21,178,593 -------------- OFFICE REITS -- 12.0% 23,076 Alexandria Real Estate Equities, Inc. 3,728,620 28,817 Boston Properties, Inc. 3,972,712 35,310 Brandywine Realty Trust 556,132 10,931 City Office REIT, Inc. 147,787 23,429 Columbia Property Trust, Inc. 489,900 22,457 Corporate Office Properties Trust 659,787 29,412 Cousins Properties, Inc. 1,211,774 33,032 Douglas Emmett, Inc. 1,450,105 14,861 Easterly Government Properties, Inc. 352,652 24,433 Equity Commonwealth 802,135 21,490 Franklin Street Properties Corp. 183,954 20,790 Highwoods Properties, Inc. 1,016,839 31,055 Hudson Pacific Properties, Inc. 1,169,221 23,653 JBG SMITH Properties 943,518 19,545 Kilroy Realty Corp. 1,639,826 18,148 Mack-Cali Realty Corp. 419,763 9,660 Office Properties Income Trust 310,472 40,349 Paramount Group, Inc. 561,658 25,207 Piedmont Office Realty Trust, Inc., Class A 560,604 16,336 SL Green Realty Corp. 1,500,952 31,745 Vornado Realty Trust 2,111,043 -------------- 23,789,454 -------------- RESIDENTIAL REITS -- 18.7% 27,536 American Campus Communities, Inc. 1,295,018 51,075 American Homes 4 Rent, Class A 1,338,676 29,837 Apartment Investment & Management Co., Class A 1,541,081 27,989 AvalonBay Communities, Inc. 5,869,293 4,220 Bluerock Residential Growth REIT, Inc. 50,851 See Notes to Financial Statements Page 33 FIRST TRUST S&P REIT INDEX FUND (FRI) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) RESIDENTIAL REITS (CONTINUED) 2,013 BRT Apartments Corp. $ 34,161 19,405 Camden Property Trust 2,058,871 2,642 Clipper Realty, Inc. 28,005 36,487 Equity LifeStyle Properties, Inc. 2,568,320 69,955 Equity Residential 5,660,759 13,243 Essex Property Trust, Inc. 3,984,289 9,826 Front Yard Residential Corp. 121,253 18,215 Independence Realty Trust, Inc. 256,467 2,330 Investors Real Estate Trust 168,925 107,888 Invitation Homes, Inc. 3,233,403 22,859 Mid-America Apartment Communities, Inc. 3,014,188 4,515 NexPoint Residential Trust, Inc. 203,175 9,181 Preferred Apartment Communities, Inc., Class A 122,291 18,574 Sun Communities, Inc. 2,787,957 58,729 UDR, Inc. 2,742,644 7,286 UMH Properties, Inc. 114,609 -------------- 37,194,236 -------------- RETAIL REITS -- 15.6% 17,424 Acadia Realty Trust 451,804 8,500 Agree Realty Corp. 596,445 419 Alexander's, Inc. 138,417 21,395 American Finance Trust, Inc. 283,698 59,689 Brixmor Property Group, Inc. 1,289,879 34,770 CBL & Associates Properties, Inc. 36,509 17,223 Cedar Realty Trust, Inc. 50,808 14,075 Federal Realty Investment Trust 1,811,875 6,853 Getty Realty Corp. 225,258 84,616 Kimco Realty Corp. 1,752,397 16,829 Kite Realty Group Trust 328,670 22,082 Macerich (The) Co. 594,448 34,397 National Retail Properties, Inc. 1,844,367 11,973 Pennsylvania Real Estate Investment Trust 63,816 65,314 Realty Income Corp. 4,809,070 33,580 Regency Centers Corp. 2,118,562 23,246 Retail Opportunity Investments Corp. 410,524 42,817 Retail Properties of America, Inc., Class A 573,748 2,978 Retail Value, Inc. 109,590 16,107 RPT Realty 242,249 2,360 Saul Centers, Inc. 124,561 6,717 Seritage Growth Properties, Class A 269,217 61,495 Simon Property Group, Inc. 9,160,295 29,906 SITE Centers Corp. 419,282 19,987 Spirit Realty Capital, Inc. 982,961 18,616 Tanger Factory Outlet Centers, Inc. 274,214 12,268 Taubman Centers, Inc. 381,412 23,078 Urban Edge Properties 442,636 5,991 Urstadt Biddle Properties, Inc., Class A 148,816 37,395 Washington Prime Group, Inc. 136,118 SHARES DESCRIPTION VALUE ------------------------------------------------------------- RETAIL REITS (CONTINUED) 24,240 Weingarten Realty Investors $ 757,258 8,143 Whitestone REIT 110,908 -------------- 30,939,812 -------------- SPECIALIZED REITS -- 19.2% 23,867 CoreCivic, Inc. 414,808 7,552 CoreSite Realty Corp. 846,730 38,789 CubeSmart 1,221,078 22,686 CyrusOne, Inc. 1,484,345 41,828 Digital Realty Trust, Inc. 5,008,485 15,724 EPR Properties 1,110,743 17,091 Equinix, Inc. 9,976,017 25,954 Extra Space Storage, Inc. 2,741,262 5,485 Farmland Partners, Inc. 37,188 13,811 Four Corners Property Trust, Inc. 389,332 40,872 Gaming and Leisure Properties, Inc. 1,759,540 24,304 GEO Group (The), Inc. 403,689 3,693 Gladstone Land Corp. 47,898 57,544 Iron Mountain, Inc. 1,833,927 9,348 Life Storage, Inc. 1,012,201 11,890 National Storage Affiliates Trust 399,742 30,105 Public Storage 6,411,161 11,644 QTS Realty Trust, Inc., Class A 631,920 2,490 Safehold, Inc. 100,347 92,387 VICI Properties, Inc. 2,360,488 -------------- 38,190,901 -------------- TOTAL COMMON STOCKS -- 99.4% 197,552,462 (Cost $198,827,535) -------------- MONEY MARKET FUNDS -- 0.2% 335,637 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 1.50% (b) 335,637 (Cost $335,637) -------------- TOTAL INVESTMENTS -- 99.6% 197,888,099 (Cost $199,163,172) (c) NET OTHER ASSETS AND LIABILITIES -- 0.4% 753,968 -------------- NET ASSETS -- 100.0% $ 198,642,067 ============== (a) Non-income producing security. (b) Rate shown reflects yield as of December 31, 2019. (c) Aggregate cost for federal income tax purposes is $201,835,731. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $11,468,396 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $15,416,028. The net unrealized depreciation was $3,947,632. Page 34 See Notes to Financial Statements FIRST TRUST S&P REIT INDEX FUND (FRI) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 197,552,462 $ -- $ -- Money Market Funds 335,637 -- -- ------------------------------------------------- Total Investments $ 197,888,099 $ -- $ -- ================================================= * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 35 FIRST TRUST WATER ETF (FIW) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% BEVERAGES -- 1.0% 499,820 Primo Water Corp. (a) $ 5,610,479 -------------- BUILDING PRODUCTS -- 6.0% 420,487 A.O. Smith Corp. 20,032,001 311,586 Advanced Drainage Systems, Inc. 12,102,000 -------------- 32,134,001 -------------- CHEMICALS -- 3.4% 94,818 Ecolab, Inc. 18,298,926 -------------- COMMERCIAL SERVICES & SUPPLIES -- 3.4% 210,999 Tetra Tech, Inc. 18,179,674 -------------- CONSTRUCTION & ENGINEERING -- 8.2% 482,411 AECOM (a) 20,806,387 309,668 Aegion Corp. (a) 6,927,273 108,273 Valmont Industries, Inc. 16,217,130 -------------- 43,950,790 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 5.6% 189,615 Badger Meter, Inc. 12,311,702 211,242 Itron, Inc. (a) 17,733,766 -------------- 30,045,468 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 7.2% 137,666 Danaher Corp. 21,128,978 67,511 IDEXX Laboratories, Inc. (a) 17,629,147 -------------- 38,758,125 -------------- INDUSTRIAL CONGLOMERATES -- 3.5% 53,335 Roper Technologies, Inc. 18,892,857 -------------- LIFE SCIENCES TOOLS & SERVICES -- 4.4% 275,085 Agilent Technologies, Inc. 23,467,501 -------------- MACHINERY -- 35.1% 632,151 Energy Recovery, Inc. (a) (b) 6,188,758 632,633 Evoqua Water Technologies Corp. (a) 11,988,395 401,026 Flowserve Corp. 19,959,064 213,320 Franklin Electric Co., Inc. 12,227,502 204,645 Gorman-Rupp (The) Co. 7,674,188 118,755 IDEX Corp. 20,425,860 110,814 Lindsay Corp. 10,637,036 371,040 Mueller Industries, Inc. 11,780,520 935,047 Mueller Water Products, Inc., Class A 11,201,863 476,502 Pentair PLC 21,857,147 560,388 Rexnord Corp. (a) 18,279,857 160,104 Watts Water Technologies, Inc., Class A 15,971,975 255,328 Xylem, Inc. 20,117,293 -------------- 188,309,458 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- WATER UTILITIES -- 22.1% 184,973 American States Water Co. $ 16,026,061 153,634 American Water Works Co., Inc. 18,873,937 441,655 Aqua America, Inc. 20,731,286 345,754 AquaVenture Holdings Ltd. (a) 9,376,848 259,935 California Water Service Group 13,402,249 790,034 Cia de Saneamento Basico do Estado de Sao Paulo, ADR 11,890,012 160,230 Middlesex Water Co. 10,185,821 143,141 SJW Group 10,171,599 163,713 York Water (The) Co. 7,548,806 -------------- 118,206,619 -------------- TOTAL COMMON STOCKS -- 99.9% 535,853,898 (Cost $424,394,164) -------------- MONEY MARKET FUNDS -- 0.1% 13,930 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 1.59% (c) (d) 13,930 454,027 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 1.50% (c) 454,027 -------------- TOTAL MONEY MARKET FUNDS -- 0.1% 467,957 (Cost $467,957) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 0.0% $ 84,560 BNP Paribas S.A., 1.56% (c), dated 12/31/19, due 01/02/20, with a maturity value of $84,567. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/26. The value of the collateral including accrued interest is $86,567. (d) 84,560 (Cost $84,560) -------------- TOTAL INVESTMENTS -- 100.0% 536,406,415 (Cost $424,946,681) (e) NET OTHER ASSETS AND LIABILITIES -- (0.0)% (238,720) -------------- NET ASSETS -- 100.0% $ 536,167,695 ============== (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 $95,942 and the total value of the collateral held by the Fund is $98,490. (c) Rate shown reflects yield as of December 31, 2019. (d) This security serves as collateral for securities on loan. Page 36 See Notes to Financial Statements FIRST TRUST WATER ETF (FIW) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 (e) Aggregate cost for federal income tax purposes is $428,503,931. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $111,980,703 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $4,078,219. The net unrealized appreciation was $107,902,484. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 535,853,898 $ -- $ -- Money Market Funds 467,957 -- -- Repurchase Agreements -- 84,560 -- ------------------------------------------------- Total Investments $ 536,321,855 $ 84,560 $ -- ================================================= * 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) $ 95,942 Non-cash Collateral(2) (95,942) -------------- 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, 2019, 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) $ 84,560 Non-cash Collateral(4) (84,560) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2019, the value of the collateral received from each seller exceeded the value of the repurchase agreements. See Notes to Financial Statements Page 37 FIRST TRUST NATURAL GAS ETF (FCG) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.1% OIL, GAS & CONSUMABLE FUELS -- 100.1% 832,163 Antero Resources Corp. (a) $ 2,371,665 159,614 Apache Corp. 4,084,522 223,099 Cabot Oil & Gas Corp. 3,884,154 5,083,755 Chesapeake Energy Corp. (a) 4,197,148 77,360 Cimarex Energy Co. 4,060,626 80,328 CNX Midstream Partners, L.P. (b) 1,322,199 333,280 CNX Resources Corp. (a) 2,949,528 49,010 Concho Resources, Inc. 4,291,806 59,330 ConocoPhillips 3,858,230 115,162 Continental Resources, Inc. 3,950,057 62,975 DCP Midstream, L.P. (b) 1,542,258 162,457 Devon Energy Corp. 4,219,008 162,570 Enable Midstream Partners, L.P. (b) 1,630,577 902,592 Encana Corp. 4,233,156 288,570 Enerplus Corp. 2,057,504 92,904 EQM Midstream Partners, L.P. (b) 2,778,759 382,174 EQT Corp. 4,165,697 404,854 Gulfport Energy Corp. (a) 1,230,756 36,054 Hess Midstream L.P., Class A (b) 817,705 444,214 Laredo Petroleum, Inc. (a) 1,274,894 207,600 Matador Resources Co. (a) 3,730,572 153,980 Murphy Oil Corp. 4,126,664 171,300 Noble Energy, Inc. 4,255,092 110,411 PDC Energy, Inc. (a) 2,889,456 483,046 QEP Resources, Inc. 2,173,707 689,485 Range Resources Corp. (c) 3,344,002 252,259 SM Energy Co. 2,835,391 1,378,926 Southwestern Energy Co. (a) 3,337,001 111,617 Summit Midstream Partners, L.P. (b) 369,452 50,986 TC PipeLines, L.P. (b) 2,156,708 181,206 Vermilion Energy, Inc. (c) 2,964,530 224,182 W&T Offshore, Inc. (a) 1,246,452 149,267 Western Midstream Partners, L.P. (b) 2,939,067 -------------- TOTAL COMMON STOCKS -- 100.1% 95,288,343 (Cost $111,800,461) -------------- MONEY MARKET FUNDS -- 0.5% 500,709 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 1.59% (d) (e) 500,709 (Cost $500,709) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 3.2% $ 3,039,437 BNP Paribas S.A., 1.56% (d), dated 12/31/19, due 01/02/20, with a maturity value of $3,039,700. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/26. The value of the collateral including accrued interest is $3,111,586. (e) $ 3,039,437 (Cost $3,039,437) -------------- TOTAL INVESTMENTS -- 103.8% 98,828,489 (Cost $115,340,607) (f) NET OTHER ASSETS AND LIABILITIES -- (3.8)% (3,619,597) -------------- NET ASSETS -- 100.0% $ 95,208,892 ============== (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 $3,533,371 and the total value of the collateral held by the Fund is $3,540,146. (d) Rate shown reflects yield as of December 31, 2019. (e) This security serves as collateral for securities on loan. (f) Aggregate cost for federal income tax purposes is $134,526,691. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $1,495,294 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $37,193,496. The net unrealized depreciation was $35,698,202. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 95,288,343 $ -- $ -- Money Market Funds 500,709 -- -- Repurchase Agreements -- 3,039,437 -- ------------------------------------------------- Total Investments $ 95,789,052 $ 3,039,437 $ -- ================================================= * See Portfolio of Investments for industry breakout. Page 38 See Notes to Financial Statements FIRST TRUST NATURAL GAS ETF (FCG) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 --------------------------------- 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) $ 3,533,371 Non-cash Collateral(2) (3,533,371) -------------- 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, 2019, 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) $ 3,039,437 Non-cash Collateral(4) (3,039,437) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2019, the value of the collateral received from each seller exceeded the value of the repurchase agreements. See Notes to Financial Statements Page 39 FIRST TRUST CHINDIA ETF (FNI) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% AIR FREIGHT & LOGISTICS -- 0.7% 34,061 ZTO Express Cayman, Inc., ADR $ 795,324 -------------- AUTOMOBILES -- 5.5% 319,306 NIO, Inc., ADR (a) (b) 1,283,610 375,861 Tata Motors Ltd., ADR (b) 4,859,883 -------------- 6,143,493 -------------- BANKS -- 13.9% 119,515 HDFC Bank Ltd., ADR 7,573,666 523,778 ICICI Bank Ltd., ADR 7,903,810 -------------- 15,477,476 -------------- BIOTECHNOLOGY -- 1.9% 3,565 BeiGene Ltd., ADR (b) 590,934 6,216 China Biologic Products Holdings, Inc. (b) 723,418 18,212 Zai Lab Ltd., ADR (b) 757,437 -------------- 2,071,789 -------------- CONSUMER FINANCE -- 1.4% 60,858 LexinFintech Holdings Ltd., ADR (b) 845,318 146,134 Qudian, Inc., ADR (b) 688,291 -------------- 1,533,609 -------------- DIVERSIFIED CONSUMER SERVICES -- 3.9% 17,415 New Oriental Education & Technology Group, Inc., ADR (b) 2,111,569 47,641 TAL Education Group, ADR (b) 2,296,296 -------------- 4,407,865 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.7% 85,173 China Unicom (Hong Kong) Ltd., ADR 797,219 -------------- ENTERTAINMENT -- 6.3% 41,946 Bilibili, Inc., ADR (b) 781,035 34,352 HUYA, Inc., ADR (b) 616,618 37,850 iQIYI, Inc., ADR (a) (b) 799,014 13,374 NetEase, Inc., ADR 4,101,003 58,312 Tencent Music Entertainment Group, ADR (b) 684,583 -------------- 6,982,253 -------------- HOTELS, RESTAURANTS & LEISURE -- 4.4% 21,188 Huazhu Group Ltd., ADR 849,003 24,041 Luckin Coffee, Inc., ADR (a) (b) 946,254 34,061 Melco Resorts & Entertainment Ltd., ADR 823,254 47,363 Yum China Holdings, Inc. 2,273,898 -------------- 4,892,409 -------------- INSURANCE -- 1.3% 57,526 China Life Insurance Co., Ltd., ADR 795,585 26,648 Fanhua, Inc., ADR 692,048 -------------- 1,487,633 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- INTERACTIVE MEDIA & SERVICES -- 11.1% 11,782 58.com, Inc., ADR (b) $ 762,649 10,651 Autohome, Inc., ADR (b) 852,186 62,263 Baidu, Inc., ADR (b) 7,870,043 11,363 JOYY, Inc., ADR (b) 599,853 19,365 Momo, Inc., ADR 648,727 20,775 SINA Corp. (b) 829,546 16,931 Weibo Corp., ADR (b) 784,752 -------------- 12,347,756 -------------- INTERNET & DIRECT MARKETING RETAIL -- 24.9% 36,900 Alibaba Group Holding Ltd., ADR (b) 7,826,490 19,089 Baozun, Inc., ADR (a) (b) 632,227 226,034 JD.com, Inc., ADR (b) 7,963,178 81,006 MakeMyTrip Ltd. (b) 1,855,037 117,306 Pinduoduo, Inc., ADR (b) 4,436,513 126,870 Trip.com Group Ltd., ADR (b) 4,255,220 56,716 Vipshop Holdings Ltd., ADR (b) 803,666 -------------- 27,772,331 -------------- IT SERVICES -- 13.6% 15,481 GDS Holdings Ltd., ADR (b) 798,510 750,766 Infosys Ltd., ADR 7,747,905 1,161,752 Wipro Ltd., ADR 4,356,570 33,406 WNS (Holdings) Ltd., ADR (b) 2,209,807 -------------- 15,112,792 -------------- MARINE -- 0.8% 61,687 Seaspan Corp. (a) 876,572 -------------- METALS & MINING -- 4.1% 523,871 Vedanta Ltd., ADR 4,521,007 -------------- OIL, GAS & CONSUMABLE FUELS -- 2.2% 12,978 China Petroleum & Chemical Corp., ADR 780,627 4,991 CNOOC Ltd., ADR 831,850 15,822 PetroChina Co., Ltd., ADR 796,321 -------------- 2,408,798 -------------- PHARMACEUTICALS -- 1.9% 51,782 Dr. Reddy's Laboratories Ltd., ADR 2,101,314 -------------- PROFESSIONAL SERVICES -- 0.7% 9,219 51job, Inc., ADR (b) 782,693 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.7% 19,211 China Mobile Ltd., ADR 812,049 -------------- TOTAL COMMON STOCKS -- 100.0% 111,324,382 (Cost $117,022,945) -------------- Page 40 See Notes to Financial Statements FIRST TRUST CHINDIA ETF (FNI) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- MONEY MARKET FUNDS -- 0.5% 559,287 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 1.59% (c) (d) $ 559,287 (Cost $559,287) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 3.1% $ 3,395,016 BNP Paribas S.A., 1.56% (c), dated 12/31/19, due 01/02/20, . with a maturity value of $3,395,311. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/26. The value of the collateral including accrued interest is $3,475,606. (d) 3,395,016 (Cost $3,395,016) -------------- TOTAL INVESTMENTS -- 103.6% 115,278,685 (Cost $120,977,248) (e) NET OTHER ASSETS AND LIABILITIES -- (3.6)% (3,988,082) -------------- NET ASSETS -- 100.0% $ 111,290,603 ============== (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 $3,972,876 and the total value of the collateral held by the Fund is $3,954,303. (b) Non-income producing security. (c) Rate shown reflects yield as of December 31, 2019. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $121,835,901. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $13,689,834 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $20,247,050. The net unrealized depreciation was $6,557,216. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 111,324,382 $ -- $ -- Money Market Funds 559,287 -- -- Repurchase Agreements -- 3,395,016 -- ------------------------------------------------- Total Investments $ 111,883,669 $ 3,395,016 $ -- ================================================= * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 41 FIRST TRUST CHINDIA ETF (FNI) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 --------------------------------- 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) $ 3,972,876 Non-cash Collateral(2) (3,954,303) -------------- Net Amount $ 18,573 ============== (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) The collateral requirements are determined at the beginning of each business day based on the market value of the loaned securities from the end of the prior day. On December 31, 2019, the last business day of the period, there was sufficient collateral based on the end of day market value from the prior business day; however, as a result of market movement from December 30 to December 31, 2019, the value of the related securities loaned was above the collateral value received. See Note 2D -- Securities Lending in the Notes to Financial Statements. 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) $ 3,395,016 Non-cash Collateral(4) (3,395,016) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2019, the value of the collateral received from each seller exceeded the value of the repurchase agreements. Page 42 See Notes to Financial Statements FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% BANKS -- 88.6% 14,206 1st Source Corp. $ 737,007 11,589 Allegiance Bancshares, Inc. (a) 435,746 17,550 Amalgamated Bank, Class A 341,347 16,143 Amerant Bancorp, Inc. (a) (b) 351,756 6,188 American National Bankshares, Inc. 244,859 38,793 Ameris Bancorp 1,650,254 8,340 Arrow Financial Corp. 315,252 12,189 Atlantic Capital Bancshares, Inc. (a) 223,668 44,912 Atlantic Union Bankshares Corp. 1,686,446 18,191 BancFirst Corp. 1,135,846 31,693 Bancorp (The), Inc. (a) 411,058 3,945 Bank First Corp. (b) 276,189 7,567 Bank of Marin Bancorp 340,893 71,814 Bank OZK 2,190,686 19,008 Banner Corp. 1,075,663 7,205 Baycom Corp. (a) 163,842 39,460 BOK Financial Corp. 3,448,804 46,356 Boston Private Financial Holdings, Inc. 557,663 11,046 Bridge Bancorp, Inc. 370,372 44,421 Brookline Bancorp, Inc. 731,170 11,207 Bryn Mawr Bank Corp. 462,177 8,460 Camden National Corp. 389,668 9,327 Capital City Bank Group, Inc. 284,473 10,223 Capstar Financial Holdings, Inc. 170,213 14,665 Carter Bank & Trust (a) 347,854 44,387 Cathay General Bancorp 1,688,925 14,489 CBTX, Inc. 450,898 69,664 CenterState Bank Corp. 1,740,207 2,033 Century Bancorp, Inc., Class A 182,889 2,699 Chemung Financial Corp. 114,708 9,078 City Holding Co. 743,942 8,620 Civista Bancshares, Inc. 206,880 8,463 CNB Financial Corp. 276,571 40,172 Columbia Banking System, Inc. 1,634,398 62,750 Commerce Bancshares, Inc. 4,263,235 9,903 Community Trust Bancorp, Inc. 461,876 19,700 ConnectOne Bancorp, Inc. 506,684 78,023 CVB Financial Corp. 1,683,736 19,968 Dime Community Bancshares, Inc. 417,132 18,702 Eagle Bancorp, Inc. 909,478 14,768 Enterprise Financial Services Corp. 711,965 8,600 Equity Bancshares, Inc., Class A (a) 265,482 15,408 Farmers National Banc Corp. 251,459 8,909 Financial Institutions, Inc. 285,979 16,486 First Bancorp 657,956 10,475 First Bancshares (The), Inc. 372,072 30,656 First Busey Corp. 843,040 5,420 First Citizens BancShares, Inc., Class A 2,884,578 8,676 First Community Bankshares, Inc. 269,130 55,345 First Financial Bancorp. 1,407,977 75,650 First Financial Bankshares, Inc. 2,655,315 SHARES DESCRIPTION VALUE ------------------------------------------------------------- BANKS (CONTINUED) 7,637 First Financial Corp. $ 349,164 24,867 First Foundation, Inc. 432,686 72,939 First Hawaiian, Inc. 2,104,290 5,425 First Internet Bancorp 128,627 23,965 First Interstate BancSystem, Inc., Class A 1,004,613 31,016 First Merchants Corp. 1,289,955 9,280 First Mid Bancshares, Inc. 327,120 61,242 First Midwest Bancorp, Inc. 1,412,241 13,473 First of Long Island (The) Corp. 337,903 15,680 Flushing Financial Corp. 338,766 91,397 Fulton Financial Corp. 1,593,050 14,847 German American Bancorp, Inc. 528,850 51,338 Glacier Bancorp., Inc. 2,361,035 7,929 Great Southern Bancorp, Inc. 502,064 6,422 Guaranty Bancshares, Inc. 211,155 48,568 Hancock Whitney Corp. 2,131,164 17,327 Hanmi Financial Corp. 346,453 32,568 HarborOne Bancorp, Inc. (a) 357,922 20,436 Heartland Financial USA, Inc. 1,016,487 32,968 Heritage Commerce Corp. 422,979 20,392 Heritage Financial Corp. 577,094 92,909 Home BancShares, Inc. 1,826,591 9,881 HomeTrust Bancshares, Inc. 265,107 70,557 Hope Bancorp, Inc. 1,048,477 25,043 Horizon Bancorp, Inc. 475,817 19,142 Independent Bank Corp. 1,593,572 12,519 Independent Bank Corp./MI 283,555 23,919 Independent Bank Group, Inc. 1,326,069 36,306 International Bancshares Corp. 1,563,699 153,006 Investors Bancorp, Inc. 1,823,066 28,122 Lakeland Bancorp, Inc. 488,760 14,269 Lakeland Financial Corp. 698,182 20,311 Live Oak Bancshares, Inc. 386,112 9,098 Mercantile Bank Corp. 331,804 13,515 Midland States Bancorp, Inc. 391,394 8,999 MidWestOne Financial Group, Inc. 326,034 6,585 MVB Financial Corp. 164,098 24,387 NBT Bancorp, Inc. 989,137 5,875 Nicolet Bankshares, Inc. (a) 433,869 3,642 Northrim BanCorp, Inc. 139,489 94,687 Old National Bancorp 1,731,825 16,652 Old Second Bancorp, Inc. 224,302 20,217 Opus Bank 523,014 13,076 Origin Bancorp, Inc. 494,796 33,059 Pacific Premier Bancorp, Inc. 1,077,889 66,730 PacWest Bancorp 2,553,757 8,738 PCB Bancorp 150,993 10,606 Peapack Gladstone Financial Corp. 327,725 10,500 People's Utah Bancorp 316,260 11,523 Peoples Bancorp, Inc. 399,387 42,638 Pinnacle Financial Partners, Inc. 2,728,832 53,873 Popular, Inc. 3,165,039 8,327 Preferred Bank 500,369 8,796 QCR Holdings, Inc. 385,793 11,155 RBB Bancorp 236,151 31,881 Renasant Corp. 1,129,225 See Notes to Financial Statements Page 43 FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) BANKS (CONTINUED) 10,437 Republic Bancorp, Inc., Class A $ 488,452 32,768 Republic First Bancorp, Inc. (a) 136,970 19,070 S&T Bancorp, Inc. 768,330 19,842 Sandy Spring Bancorp, Inc. 751,615 28,670 Seacoast Banking Corp. of Florida (a) 876,442 29,844 ServisFirst Bancshares, Inc. 1,124,522 8,516 Sierra Bancorp 247,986 63,470 Simmons First National Corp., Class A 1,700,361 7,775 SmartFinancial, Inc. 183,879 18,790 South State Corp. 1,630,033 4,243 Southern First Bancshares, Inc. (a) 180,285 13,466 Southern National Bancorp of Virginia, Inc. 220,169 18,805 Southside Bancshares, Inc. 698,418 8,989 Spirit of Texas Bancshares, Inc. (a) 206,747 12,584 Stock Yards Bancorp, Inc. 516,699 85,430 TCF Financial Corp. 3,998,124 40,448 TowneBank 1,125,263 16,997 TriCo Bancshares 693,648 16,319 TriState Capital Holdings, Inc. (a) 426,252 14,121 Triumph Bancorp, Inc. (a) 536,880 35,785 Trustmark Corp. 1,234,940 27,339 UMB Financial Corp. 1,876,549 122,635 Umpqua Holdings Corp. 2,170,640 56,550 United Bankshares, Inc. 2,186,223 43,984 United Community Banks, Inc. 1,358,226 16,332 Univest Financial Corp. 437,371 184,774 Valley National Bancorp 2,115,662 28,904 Veritex Holdings, Inc. 841,974 9,662 Washington Trust Bancorp, Inc. 519,719 30,456 WesBanco, Inc. 1,150,932 9,121 West Bancorporation, Inc. 233,771 15,066 Westamerica Bancorporation 1,021,023 31,783 Wintrust Financial Corp. 2,253,415 -------------- 126,414,745 -------------- IT SERVICES -- 0.3% 8,073 Cass Information Systems, Inc. 466,135 -------------- THRIFTS & MORTGAGE FINANCE -- 11.0% 16,028 Bridgewater Bancshares, Inc. (a) 220,866 78,801 Capitol Federal Financial, Inc. 1,081,938 63,576 Columbia Financial, Inc. (a) 1,076,977 10,987 First Defiance Financial Corp. 345,981 2,480 FS Bancorp, Inc. 158,199 1,188 Hingham Institution for Savings 249,718 5,165 Home Bancorp, Inc. 202,416 13,594 HomeStreet, Inc. (a) 462,196 47,952 Kearny Financial Corp. 663,176 15,986 Merchants Bancorp 315,084 29,725 Meridian Bancorp, Inc. 597,175 20,930 Meta Financial Group, Inc. 764,154 27,385 Northfield Bancorp, Inc. 464,450 59,404 Northwest Bancshares, Inc. 987,888 SHARES DESCRIPTION VALUE ------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (CONTINUED) 28,045 OceanFirst Financial Corp. $ 716,269 9,866 PCSB Financial Corp. 199,786 10,851 Provident Bancorp, Inc. (a) 135,095 5,124 Southern Missouri Bancorp, Inc. 196,557 27,958 Sterling Bancorp, Inc. 226,460 155,944 TFS Financial Corp. 3,068,978 53,972 TrustCo Bank Corp. NY 467,937 43,687 Washington Federal, Inc. 1,601,129 15,118 Waterstone Financial, Inc. 287,696 29,041 WSFS Financial Corp. 1,277,514 -------------- 15,767,639 -------------- TOTAL COMMON STOCKS -- 99.9% 142,648,519 (Cost $148,969,855) -------------- MONEY MARKET FUNDS -- 0.0% 17,072 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 1.59% (c) (d) 17,072 (Cost $17,072) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 0.1% $ 103,628 BNP Paribas S.A., 1.56% (c), dated 12/31/19, due 01/02/20, with a maturity value of $103,637. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/26. The value of the collateral including accrued interest is $106,088. (d) 103,628 (Cost $103,628) -------------- TOTAL INVESTMENTS -- 100.0% 142,769,219 (Cost $149,090,555) (e) NET OTHER ASSETS AND LIABILITIES -- (0.0)% (16,744) -------------- NET ASSETS -- 100.0% $ 142,752,475 ============== (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 $117,948 and the total value of the collateral held by the Fund is $120,700. (c) Rate shown reflects yield as of December 31, 2019. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $149,987,364. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $5,591,387 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $12,809,532. The net unrealized depreciation was $7,218,145. Page 44 See Notes to Financial Statements FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks* $ 142,648,519 $ -- $ -- Money Market Funds 17,072 -- -- Repurchase Agreements -- 103,628 -- ------------------------------------------------- Total Investments $ 142,665,591 $ 103,628 $ -- ================================================= * 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) $ 117,948 Non-cash Collateral(2) (117,948) -------------- 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, 2019, 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) $ 103,628 Non-cash Collateral(4) (103,628) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2019, the value of the collateral received from each seller exceeded the value of the repurchase agreements. See Notes to Financial Statements Page 45 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2019
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) ---------------- ----------------- ---------------- ASSETS: Investments, at value............................................... $ 908,345,026 $ 2,913,931,686 $ 102,225,480 Cash................................................................ -- -- -- Receivables: Capital shares sold........................................... 3,679,599 5,004,025 -- Dividends..................................................... 583,943 761,084 94,671 Securities lending income..................................... 216 -- -- Prepaid expenses.................................................... 5,561 20,492 772 -------------- --------------- -------------- Total Assets.................................................. 912,614,345 2,919,717,287 102,320,923 -------------- --------------- -------------- LIABILITIES: Due to custodian.................................................... 42,117 56,356 21,136 Payables: Investment securities purchased............................... 3,680,340 5,005,782 -- Collateral for securities on loan............................. 709,775 -- -- Investment advisory fees...................................... 295,238 959,655 36,044 Licensing fees................................................ 196,291 655,692 24,525 Shareholder reporting fees.................................... 33,575 103,277 7,456 Audit and tax fees............................................ 22,924 22,924 22,924 Trustees' fees................................................ 70 165 35 Other liabilities................................................... 196,266 525,530 25,809 -------------- --------------- -------------- Total Liabilities............................................. 5,176,596 7,329,381 137,929 -------------- --------------- -------------- NET ASSETS.......................................................... $ 907,437,749 $ 2,912,387,906 $ 102,182,994 ============== =============== ============== NET ASSETS CONSIST OF: Paid-in capital..................................................... $ 799,494,118 $ 2,348,749,742 $ 94,030,099 Par value........................................................... 123,000 291,000 17,500 Accumulated distributable earnings (loss)........................... 107,820,631 563,347,164 8,135,395 -------------- --------------- -------------- NET ASSETS.......................................................... $ 907,437,749 $ 2,912,387,906 $ 102,182,994 ============== =============== ============== NET ASSET VALUE, per share.......................................... $ 73.78 $ 100.08 $ 58.39 ============== =============== ============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)........................... 12,300,002 29,100,002 1,750,002 ============== =============== ============== Investments, at cost................................................ $ 761,708,373 $ 2,258,485,865 $ 80,696,185 ============== =============== ============== Securities on loan, at value........................................ $ 699,985 $ -- $ -- ============== =============== ==============
Page 46 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) ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- $ 153,677,810 $ 197,888,099 $ 536,406,415 $ 98,828,489 $ 115,278,685 $ 142,769,219 369,306 -- -- -- 52,450 53,760 -- -- 2,995,306 1,205,406 -- -- 96,572 991,929 263,477 29,740 -- 222,450 100,396 -- 533 6,316 30,906 25 936 1,527 3,869 623 765 1,202 -------------- -------------- -------------- -------------- -------------- -------------- 154,245,020 198,881,555 539,669,600 100,070,574 115,362,806 143,046,656 -------------- -------------- -------------- -------------- -------------- -------------- -- -- -- 9,421 -- -- -- -- 2,993,448 1,206,442 -- -- 9,636,812 -- 98,490 3,540,146 3,954,303 120,700 45,203 51,519 177,188 34,928 40,355 64,418 31,089 96,902 62,285 19,614 20,693 32,754 11,018 12,395 24,317 9,077 9,455 13,385 22,924 22,924 22,924 22,924 22,924 22,924 28 26 4 44 48 68 30,849 55,722 123,249 19,086 24,425 39,932 -------------- -------------- -------------- -------------- -------------- -------------- 9,777,923 239,488 3,501,905 4,861,682 4,072,203 294,181 -------------- -------------- -------------- -------------- -------------- -------------- $ 144,467,097 $ 198,642,067 $ 536,167,695 $ 95,208,892 $ 111,290,603 $ 142,752,475 ============== ============== ============== ============== ============== ============== $ 141,992,264 $ 202,155,871 $ 434,817,595 $ 620,577,418 $ 185,640,345 $ 159,221,891 58,000 76,000 89,500 78,984 28,000 27,500 2,416,833 (3,589,804) 101,260,600 (525,447,510) (74,377,742) (16,496,916) -------------- -------------- -------------- -------------- -------------- -------------- $ 144,467,097 $ 198,642,067 $ 536,167,695 $ 95,208,892 $ 111,290,603 $ 142,752,475 ============== ============== ============== ============== ============== ============== $ 24.91 $ 26.14 $ 59.91 $ 12.05 $ 39.75 $ 51.91 ============== ============== ============== ============== ============== ============== 5,800,002 7,600,002 8,950,002 7,898,365 2,800,002 2,750,002 ============== ============== ============== ============== ============== ============== $ 115,456,030 $ 199,163,172 $ 424,946,681 $ 115,340,607 $ 120,977,248 $ 149,090,555 ============== ============== ============== ============== ============== ============== $ 9,754,955 $ -- $ 95,942 $ 3,533,371 $ 3,972,876 $ 117,948 ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 47 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2019
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........................................................... $ 8,240,248 $ 34,249,017 $ 894,417 Securities lending income (net of fees)............................. 54,565 1,896 12,583 Foreign withholding tax............................................. (33,008) (285,756) -- -------------- --------------- -------------- Total investment income....................................... 8,261,805 33,965,157 907,000 -------------- --------------- -------------- EXPENSES: Investment advisory fees............................................ 2,876,108 9,757,654 368,786 Licensing fees...................................................... 716,913 2,430,498 91,816 Accounting and administration fees.................................. 360,987 1,072,381 47,457 Shareholder reporting fees.......................................... 74,482 214,547 19,590 Custodian fees...................................................... 61,248 160,749 13,300 Transfer agent fees................................................. 35,952 85,983 4,610 Registration and filing fees........................................ 28,866 6,739 1,176 Audit and tax fees.................................................. 23,628 23,628 23,629 Legal fees.......................................................... 20,675 65,995 2,476 Trustees' fees and expenses......................................... 8,088 10,138 7,316 Listing fees........................................................ 6,209 6,575 6,002 Other expenses...................................................... 8,914 39,820 1,546 -------------- --------------- -------------- Total expenses................................................ 4,222,070 13,874,707 587,704 Less fees waived and expenses reimbursed by the investment advisor.................................................... -- -- (34,524) -------------- --------------- -------------- Net expenses.................................................. 4,222,070 13,874,707 553,180 -------------- --------------- -------------- NET INVESTMENT INCOME (LOSS)........................................ 4,039,735 20,090,450 353,820 -------------- --------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments................................................... (45,738) (30,054,444) 2,054,309 In-kind redemptions........................................... 68,983,855 289,883,214 911,089 Foreign currency transactions................................. -- -- -- -------------- --------------- -------------- Net realized gain (loss)............................................ 68,938,117 259,828,770 2,965,398 -------------- --------------- -------------- Net change in unrealized appreciation (depreciation) on: Investments................................................... 122,382,566 632,641,177 19,058,774 Foreign currency translation.................................. -- -- -- -------------- --------------- -------------- Net change in unrealized appreciation (depreciation)................ 122,382,566 632,641,177 19,058,774 -------------- --------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS)............................. 191,320,683 892,469,947 22,024,172 -------------- --------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $ 195,360,418 $ 912,560,397 $ 22,377,992 ============== =============== ==============
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) ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- $ 521,980 $ 4,572,278 $ 4,583,294 $ 1,065,808 $ 863,373 $ 4,652,444 784,408 -- 8,900 76,609 235,875 5,077 (37,916) -- -- (66,066) (21,654) (8,402) -------------- -------------- -------------- -------------- -------------- -------------- 1,268,472 4,572,278 4,592,194 1,076,351 1,077,594 4,649,119 -------------- -------------- -------------- -------------- -------------- -------------- 429,944 472,533 1,592,212 344,996 458,352 721,595 107,099 126,008 198,313 85,743 90,632 161,552 55,248 80,989 200,482 44,583 59,039 93,200 26,895 30,837 55,488 24,130 16,335 27,418 9,787 41,913 46,623 12,496 6,408 28,791 5,375 7,876 19,903 4,312 5,728 9,019 2,059 6,301 14,731 -- -- (6,575) 23,628 23,628 23,628 23,628 23,628 23,628 2,906 4,320 10,777 2,087 1,201 3,760 7,328 7,383 7,634 7,316 7,307 7,439 6,143 7,471 7,952 8,036 8,036 6,152 2,300 658 5,649 1,434 5,428 4,188 -------------- -------------- -------------- -------------- -------------- -------------- 678,712 809,917 2,183,392 558,761 682,094 1,080,167 (33,796) (22,365) -- (41,266) -- -- -------------- -------------- -------------- -------------- -------------- -------------- 644,916 787,552 2,183,392 517,495 682,094 1,080,167 -------------- -------------- -------------- -------------- -------------- -------------- 623,556 3,784,726 2,408,802 558,856 395,500 3,568,952 -------------- -------------- -------------- -------------- -------------- -------------- 490,227 (1,611,882) (777,833) (43,307,500) (2,607,882) (4,677,883) 578,129 4,172,945 4,090,065 3,131,138 7,549,827 (6,679,728) -- -- -- 450 -- -- -------------- -------------- -------------- -------------- -------------- -------------- 1,068,356 2,561,063 3,312,232 (40,175,912) 4,941,945 (11,357,611) -------------- -------------- -------------- -------------- -------------- -------------- 36,620,613 20,571,144 112,270,384 29,070,325 26,166,968 46,428,802 -- -- -- 145 -- -- -------------- -------------- -------------- -------------- -------------- -------------- 36,620,613 20,571,144 112,270,384 29,070,470 26,166,968 46,428,802 -------------- -------------- -------------- -------------- -------------- -------------- 37,688,969 23,132,207 115,582,616 (11,105,442) 31,108,913 35,071,191 -------------- -------------- -------------- -------------- -------------- -------------- $ 38,312,525 $ 26,916,933 $ 117,991,418 $ (10,546,586) $ 31,504,413 $ 38,640,143 ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 49 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 12/31/2019 12/31/2018 12/31/2019 12/31/2018 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 4,039,735 $ 2,814,614 $ 20,090,450 $ 20,449,136 Net realized gain (loss).................................... 68,938,117 36,660,258 259,828,770 258,441,729 Net increase from payment by the advisor.................... -- 22,098 -- -- Net change in unrealized appreciation (depreciation)........ 122,382,566 (64,499,253) 632,641,177 (404,848,814) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... 195,360,418 (25,002,283) 912,560,397 (125,957,949) -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (3,935,821) (2,716,080) (19,495,801) (19,564,271) Return of capital........................................... -- -- -- -- -------------- -------------- -------------- -------------- Total distributions to shareholders......................... (3,935,821) (2,716,080) (19,495,801) (19,564,271) -------------- -------------- -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 460,061,921 79,723,310 950,824,332 936,219,196 Cost of shares redeemed..................................... (205,513,260) (120,172,606) (882,169,809) (1,040,739,511) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ 254,548,661 (40,449,296) 68,654,523 (104,520,315) -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... 445,973,258 (68,167,659) 961,719,119 (250,042,535) NET ASSETS: Beginning of period......................................... 461,464,491 529,632,150 1,950,668,787 2,200,711,322 -------------- -------------- -------------- -------------- End of period............................................... $ 907,437,749 $ 461,464,491 $2,912,387,906 $1,950,668,787 ============== ============== ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 8,450,002 9,150,002 28,700,002 30,600,002 Shares sold................................................. 7,000,000 1,300,000 10,550,000 11,950,000 Shares redeemed............................................. (3,150,000) (2,000,000) (10,150,000) (13,850,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 12,300,002 8,450,002 29,100,002 28,700,002 ============== ============== ============== ==============
Page 50 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 12/31/2019 12/31/2018 12/31/2019 12/31/2018 12/31/2019 12/31/2018 12/31/2019 12/31/2018 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- $ 353,820 $ 317,901 $ 623,556 $ 550,270 $ 3,784,726 $ 3,481,597 $ 2,408,802 $ 2,289,394 2,965,398 6,319,501 1,068,356 (1,384,642) 2,561,063 (8,816,597) 3,312,232 25,993,912 -- -- -- -- -- -- -- -- 19,058,774 (11,325,769) 36,620,613 (11,072,153) 20,571,144 (5,846,287) 112,270,384 (57,825,167) ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- 22,377,992 (4,688,367) 38,312,525 (11,906,525) 26,916,933 (11,181,287) 117,991,418 (29,541,861) ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- (347,860) (308,595) (1,099,140) (510,967) (3,933,661) (3,585,667) (2,453,686) (2,110,505) -- -- -- (350,683) -- -- -- -- ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- (347,860) (308,595) (1,099,140) (861,650) (3,933,661) (3,585,667) (2,453,686) (2,110,505) ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- 5,311,126 10,002,377 25,415,355 11,063,662 106,488,924 60,347,868 143,444,740 110,251,184 (2,776,468) (29,301,259) (1,893,033) (5,826,072) (46,525,981) (91,675,775) (12,922,220) (87,266,237) ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- 2,534,658 (19,298,882) 23,522,322 5,237,590 59,962,943 (31,327,907) 130,522,520 22,984,947 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- 24,564,790 (24,295,844) 60,735,707 (7,530,585) 82,946,215 (46,094,861) 246,060,252 (8,667,419) 77,618,204 101,914,048 83,731,390 91,261,975 115,695,852 161,790,713 290,107,443 298,774,862 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- $ 102,182,994 $ 77,618,204 $ 144,467,097 $ 83,731,390 $ 198,642,067 $ 115,695,852 $ 536,167,695 $ 290,107,443 ============= ============= ============== ============== ============== ============== ============== ============== 1,700,002 2,100,002 4,750,002 4,500,002 5,350,002 6,950,002 6,600,002 6,150,002 100,000 200,000 1,150,000 550,000 4,150,000 2,550,000 2,600,000 2,250,000 (50,000) (600,000) (100,000) (300,000) (1,900,000) (4,150,000) (250,000) (1,800,000) ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- 1,750,002 1,700,002 5,800,002 4,750,002 7,600,002 5,350,002 8,950,002 6,600,002 ============= ============= ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 51 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 12/31/2019 12/31/2018 12/31/2019 12/31/2018 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 558,856 $ 107,831 $ 395,500 $ 3,676,414 Net realized gain (loss).................................... (40,175,912) (16,202,838) 4,941,945 22,238,027 Net increase from payment by the advisor.................... -- -- -- -- Net change in unrealized appreciation (depreciation)........ 29,070,470 (34,785,338) 26,166,968 (102,311,847) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... (10,546,586) (50,880,345) 31,504,413 (76,397,406) -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (702,738) -- (356,420) (4,434,111) Return of capital........................................... (1,498,301) (1,420,088) -- -- -------------- -------------- -------------- -------------- Total distributions to shareholders......................... (2,201,039) (1,420,088) (356,420) (4,434,111) -------------- -------------- -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 56,754,471 31,493,285 14,960,610 123,727,641 Cost of shares redeemed..................................... (37,671,942) (74,580,615) (67,824,717) (285,804,842) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ 19,082,529 (43,087,330) (52,864,107) (162,077,201) -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... 6,334,904 (95,387,763) (21,716,114) (242,908,718) NET ASSETS: Beginning of period......................................... 88,873,988 184,261,751 133,006,717 375,915,435 -------------- -------------- -------------- -------------- End of period............................................... $ 95,208,892 $ 88,873,988 $ 111,290,603 $ 133,006,717 ============== ============== ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 6,048,365 8,098,365 4,300,002 9,500,002 Shares sold................................................. 4,200,000 1,450,000 400,000 3,200,000 Shares redeemed............................................. (2,350,000) (3,500,000) (1,900,000) (8,400,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 7,898,365 6,048,365 2,800,002 4,300,002 ============== ============== ============== ==============
Page 52 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) ----------------------------- Year Ended Year Ended 12/31/2019 12/31/2018 ----------------------------- $ 3,568,952 $ 5,190,750 (11,357,611) 3,065,123 -- -- 46,428,802 (67,237,070) ------------- ------------- 38,640,143 (58,981,197) ------------- ------------- (3,498,602) (5,212,126) -- -- ------------- ------------- (3,498,602) (5,212,126) ------------- ------------- -- 115,204,523 (121,151,073) (136,281,236) ------------- ------------- (121,151,073) (21,076,713) ------------- ------------- (86,009,532) (85,270,036) 228,762,007 314,032,043 ------------- ------------- $ 142,752,475 $ 228,762,007 ============= ============= 5,300,002 6,000,002 -- 2,050,000 (2,550,000) (2,750,000) ------------- ------------- 2,750,002 5,300,002 ============= =============
See Notes to Financial Statements Page 53 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, --------------------------------------------------------------------------- 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 54.61 $ 57.88 $ 46.18 $ 43.48 $ 42.80 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.36 0.32 0.24 0.31 0.22 Net realized and unrealized gain (loss) 19.16 (3.29) (a) 11.74 2.73 0.73 ------------ ------------ ------------ ------------ ------------ Total from investment operations 19.52 (2.97) 11.98 3.04 0.95 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.35) (0.30) (0.28) (0.34) (0.27) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 73.78 $ 54.61 $ 57.88 $ 46.18 $ 43.48 ============ ============ ============ ============ ============ TOTAL RETURN (b) 35.78% (5.16)% (a) 26.00% 7.02% 2.22% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 907,438 $ 461,464 $ 529,632 $ 404,044 $ 532,679 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.59% 0.60% 0.60% 0.61% 0.60% 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 0.56% 0.52% 0.45% 0.72% 0.51% Portfolio turnover rate (c) 29% 27% 26% 29% 31% FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 67.97 $ 71.92 $ 52.62 $ 42.64 $ 43.67 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.70 0.65 0.48 0.67 0.37 Net realized and unrealized gain (loss) 32.09 (3.98) 19.39 9.99 (0.98) ------------ ------------ ------------ ------------ ------------ Total from investment operations 32.79 (3.33) 19.87 10.66 (0.61) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.68) (0.62) (0.57) (0.68) (0.42) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 100.08 $ 67.97 $ 71.92 $ 52.62 $ 42.64 ============ ============ ============ ============ ============ TOTAL RETURN (b) 48.36% (4.70)% 37.86% 25.27% (1.37)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 2,912,388 $ 1,950,669 $ 2,200,711 $ 1,570,855 $ 302,735 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.57% 0.57% 0.58% 0.60% 0.60% Ratio of net expenses to average net assets 0.57% 0.57% 0.58% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 0.82% 0.84% 0.76% 1.40% 0.83% Portfolio turnover rate (c) 23% 21% 21% 27% 23%
(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 54 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, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 45.66 $ 48.53 $ 40.44 $ 41.45 $ 39.73 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.20 0.18 0.12 0.09 0.13 Net realized and unrealized gain (loss) 12.73 (2.88) 8.13 (0.98) 1.75 ------------ ------------ ------------ ------------ ------------ Total from investment operations 12.93 (2.70) 8.25 (0.89) 1.88 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.20) (0.17) (0.16) (0.12) (0.16) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 58.39 $ 45.66 $ 48.53 $ 40.44 $ 41.45 ============ ============ ============ ============ ============ TOTAL RETURN (a) 28.35% (5.58)% 20.41% (2.13)% 4.75% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 102,183 $ 77,618 $ 101,914 $ 103,118 $ 184,447 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.64% 0.64% 0.63% 0.64% 0.63% 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 0.38% 0.34% 0.25% 0.23% 0.33% Portfolio turnover rate (b) 31% 26% 25% 30% 39% FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 17.63 $ 20.28 $ 15.47 $ 16.01 $ 17.23 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.13 0.12 0.05 0.17 0.11 Net realized and unrealized gain (loss) 7.36 (2.59) 4.85 (0.52) (1.21) ------------ ------------ ------------ ------------ ------------ Total from investment operations 7.49 (2.47) 4.90 (0.35) (1.10) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.21) (0.11) (0.09) (0.19) (0.12) Return of capital -- (0.07) -- -- -- ------------ ------------ ------------ ------------ ------------ Total distributions (0.21) (0.18) (0.09) (0.19) (0.12) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 24.91 $ 17.63 $ 20.28 $ 15.47 $ 16.01 ============ ============ ============ ============ ============ TOTAL RETURN (a) 42.69% (12.22)% 31.73% (2.12)% (6.43)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 144,467 $ 83,731 $ 91,262 $ 51,837 $ 69,655 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.63% 0.65% 0.66% 0.68% 0.65% 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 0.58% 0.59% 0.23% 1.18% 0.65% Portfolio turnover rate (b) 26% 45% 32% 49% 35%
(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 55 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, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 21.63 $ 23.28 $ 23.07 $ 22.07 $ 22.24 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.56 0.69 0.71 0.62 0.55 Net realized and unrealized gain (loss) 4.55 (1.65) 0.16 1.13 (0.13) ------------ ------------ ------------ ------------ ------------ Total from investment operations 5.11 (0.96) 0.87 1.75 0.42 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.60) (0.69) (0.66) (0.75) (0.59) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 26.14 $ 21.63 $ 23.28 $ 23.07 $ 22.07 ============ ============ ============ ============ ============ TOTAL RETURN (a) 23.67% (4.19)% 3.79% 7.92% 1.97% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 198,642 $ 115,696 $ 161,791 $ 236,426 $ 226,250 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.51% 0.52% 0.48% 0.49% 0.48% Ratio of net expenses to average net assets 0.50% 0.50% 0.48% 0.49% 0.48% Ratio of net investment income (loss) to average net assets 2.40% 3.05% 2.77% 2.52% 2.30% Portfolio turnover rate (b) 10% 10% 7% 6% 8% FIRST TRUST WATER ETF (FIW) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 43.96 $ 48.58 $ 39.61 $ 30.13 $ 33.65 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.32 0.35 0.54 0.20 0.23 Net realized and unrealized gain (loss) 15.96 (4.65) 8.98 9.48 (3.52) ------------ ------------ ------------ ------------ ------------ Total from investment operations 16.28 (4.30) 9.52 9.68 (3.29) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.33) (0.32) (0.55) (0.20) (0.23) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 59.91 $ 43.96 $ 48.58 $ 39.61 $ 30.13 ============ ============ ============ ============ ============ TOTAL RETURN (a) 37.11% (8.89)% 24.25% 32.21% (9.81)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 536,168 $ 290,107 $ 298,775 $ 221,791 $ 102,432 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.55% 0.55% 0.56% 0.57% 0.57% Ratio of net expenses to average net assets 0.55% 0.55% 0.56% 0.57% 0.57% Ratio of net investment income (loss) to average net assets 0.61% 0.72% 1.26% 0.58% 0.70% Portfolio turnover rate (b) 12% 11% 24% 42% 17%
(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 56 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, ---------------------------------------------------------------------------- 2019 2018 2017 2016 2015 (a) ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 14.69 $ 22.75 $ 26.15 $ 22.30 $ 56.10 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.10 0.02 (0.02) 0.13 1.00 Net realized and unrealized gain (loss) (2.39) (7.86) (3.02) 4.16 (33.75) ------------ ------------ ------------ ------------ ------------ Total from investment operations (2.29) (7.84) (3.04) 4.29 (32.75) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.11) -- (0.23) (0.44) (1.05) Return of capital (0.24) (0.22) (0.13) -- -- ------------ ------------ ------------ ------------ ------------ Total distributions (0.35) (0.22) (0.36) (0.44) (1.05) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 12.05 $ 14.69 $ 22.75 $ 26.15 $ 22.30 ============ ============ ============ ============ ============ TOTAL RETURN (b) (15.87)% (34.77)% (11.53)% 19.48% (59.10)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 95,209 $ 88,874 $ 184,262 $ 251,024 $ 153,042 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.65% 0.63% 0.64% (c) 0.64% (c) 0.62% Ratio of net expenses to average net assets 0.60% 0.60% 0.63% (c) 0.61% (c) 0.60% Ratio of net investment income (loss) to average net assets 0.65% 0.07% (0.11)% 0.54% 2.44% Portfolio turnover rate (d) 61% 47% 53% 103% 67% FIRST TRUST CHINDIA ETF (FNI) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 30.93 $ 39.57 $ 27.39 $ 28.36 $ 28.63 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.14 0.04 0.34 0.25 0.15 Net realized and unrealized gain (loss) 8.81 (8.16) 12.61 (0.85) (0.24) ------------ ------------ ------------ ------------ ------------ Total from investment operations 8.95 (8.12) 12.95 (0.60) (0.09) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.13) (0.52) (0.77) (0.37) (0.18) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 39.75 $ 30.93 $ 39.57 $ 27.39 $ 28.36 ============ ============ ============ ============ ============ TOTAL RETURN (b) 28.96% (20.68)% 47.36% (2.15)% (0.32)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 111,291 $ 133,007 $ 375,915 $ 131,466 $ 221,188 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.60% 0.59% 0.60% 0.60% 0.62% Ratio of net expenses to average net assets 0.60% 0.59% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 0.35% 1.06% 0.91% 0.91% 0.64% Portfolio turnover rate (d) 26% 22% 35% 47% 68%
(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 value reported on December 31, 2015 prior to the reverse share split restatement was $4.46. (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 57 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, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 43.16 $ 52.34 $ 52.81 $ 38.94 $ 36.61 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 1.04 0.81 0.74 0.58 0.56 Net realized and unrealized gain (loss) 8.72 (9.17) (0.46) 13.89 2.31 ------------ ------------ ------------ ------------ ------------ Total from investment operations 9.76 (8.36) 0.28 14.47 2.87 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (1.01) (0.82) (0.75) (0.60) (0.54) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 51.91 $ 43.16 $ 52.34 $ 52.81 $ 38.94 ============ ============ ============ ============ ============ TOTAL RETURN (a) 22.80% (16.14)% 0.55% 37.57% 7.88% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 142,752 $ 228,762 $ 314,032 $ 404,023 $ 223,902 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.60% 0.60% 0.60% 0.61% 0.62% 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 1.98% 1.50% 1.37% 1.54% 1.52% Portfolio turnover rate (b) 15% 11% 14% 16% 19%
(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 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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 ChIndiaTM 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 Accounting Standards Codification 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 59 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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 60 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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, 2019, 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, 2019, QQEW, QCLN, FIW, FCG, FNI, and QABA had securities in the securities lending program. During the fiscal year ended December 31, 2019, QQEW, QTEC, QQXT, QCLN, FIW, FCG, FNI, and QABA participated in the securities lending program. Page 61 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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, 2019 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, 2019 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 $ 3,935,821 $ -- $ -- First Trust NASDAQ-100-Technology Sector Index Fund 19,495,801 -- -- First Trust NASDAQ-100 Ex-Technology Sector Index Fund 347,860 -- -- First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 1,099,140 -- -- First Trust S&P REIT Index Fund 3,933,661 -- -- First Trust Water ETF 2,453,686 -- -- First Trust Natural Gas ETF 702,738 -- 1,498,301 First Trust Chindia ETF 356,420 -- -- First Trust NASDAQ(R)ABA Community Bank Index Fund 3,498,602 -- --
Page 62 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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 -- --
As of December 31, 2019, 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 $ 146,848 $ (30,596,718) $ 138,270,501 First Trust NASDAQ-100-Technology Sector Index Fund 796,698 (47,278,668) 609,829,134 First Trust NASDAQ-100 Ex-Technology Sector Index Fund 15,266 (12,672,970) 20,793,099 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund -- (32,628,926) 35,045,759 First Trust S&P REIT Index Fund 357,828 -- (3,947,632) First Trust Water ETF 134,005 (6,775,889) 107,902,484 First Trust Natural Gas ETF -- (489,749,462) (35,698,048) First Trust Chindia ETF 39,080 (67,859,606) (6,557,216) First Trust NASDAQ(R) ABA Community Bank Index Fund 70,350 (9,349,121) (7,218,145)
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 2016, 2017, 2018, and 2019 remain open to federal and state audit. As of December 31, 2019, 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, 2019, 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 63 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019
Post- Enactment - No Expiration ------------------ First Trust NASDAQ-100 Equal Weighted Index Fund $ 30,596,718 First Trust NASDAQ-100-Technology Sector Index Fund 47,278,668 First Trust NASDAQ-100 Ex-Technology Sector Index Fund 12,672,970 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 32,628,926 First Trust S&P REIT Index Fund -- First Trust Water ETF 6,775,889 First Trust Natural Gas ETF 489,749,462 First Trust Chindia ETF 67,859,606 First Trust NASDAQ(R) ABA Community Bank Index Fund 9,349,121
During the taxable year ended December 31, 2019, the following Funds utilized post-enactment capital loss carryforwards in the following amounts:
Capital Loss Carryforward Utilized ------------------ First Trust NASDAQ-100 Equal Weighted Index Fund $ 6,433,561 First Trust NASDAQ-100 Ex-Technology Sector Index Fund 2,293,009 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 2,277,299 First Trust S&P REIT Index Fund 234,697 First Trust Water ETF 119,417
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended December 31, 2019, the Funds had no net late year ordinary or capital losses. 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, 2019, 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 $ -- $ (66,763,016) $ 66,763,016 First Trust NASDAQ-100-Technology Sector Index Fund -- (284,944,091) 284,944,091 First Trust NASDAQ-100 Ex-Technology Sector Index Fund -- (757,086) 757,086 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 475,584 (264,918) (210,666) First Trust S&P REIT Index Fund 216,271 (3,423,979) 3,207,708 First Trust Water ETF -- (4,032,674) 4,032,674 First Trust Natural Gas ETF 143,882 (916,320) 772,438 First Trust Chindia ETF 35,388 (7,141,076) 7,105,688 First Trust NASDAQ(R)ABA Community Bank Index Fund -- 8,390,661 (8,390,661)
Page 64 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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. 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, 2021. Page 65 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019
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 or expense was incurred, but no reimbursement payment will be made by a Fund if it results in the Fund exceeding (i) the applicable expense limitation in place for the most recent fiscal year for which such expense limitation was in place, (ii) the applicable expense limitation in place at the time the fees were waived, or (iii) the current expense limitation. 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, 2019 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 12/31/2017 12/31/2018 12/31/2019 Total --------- ------------- ---------- ---------- ---------- --------- First Trust NASDAQ-100 Ex-Technology Sector Index Fund $ 34,524 $ -- $ 26,900 $ 35,900 $ 34,524 $ 97,324 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 33,796 -- 39,255 43,615 33,796 116,666 First Trust S&P REIT Index Fund 22,365 -- -- 25,848 22,365 48,213 First Trust Natural Gas ETF 41,266 -- 25,164 39,782 41,266 106,212
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, a defined - outcome 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 66 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 4. PURCHASES AND SALES OF SECURITIES For the fiscal year ended December 31, 2019, 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 $ 206,281,302 $ 205,035,794 First Trust NASDAQ-100-Technology Sector Index Fund 552,124,214 547,969,239 First Trust NASDAQ-100 Ex-Technology Sector Index Fund 28,418,667 28,153,350 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 27,937,625 27,591,094 First Trust S&P REIT Index Fund 17,585,443 15,801,717 First Trust Water ETF 49,755,947 49,851,954 First Trust Natural Gas ETF 52,154,912 52,138,187 First Trust Chindia ETF 30,314,304 30,424,537 First Trust NASDAQ(R)ABA Community Bank Index Fund 26,554,155 26,505,799
For the fiscal year ended December 31, 2019, 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 $ 459,564,029 $ 205,145,056 First Trust NASDAQ-100-Technology Sector Index Fund 950,312,914 879,696,400 First Trust NASDAQ-100 Ex-Technology Sector Index Fund 5,308,325 2,776,255 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 25,367,051 1,888,771 First Trust S&P REIT Index Fund 106,064,013 46,406,264 First Trust Water ETF 143,261,877 12,913,878 First Trust Natural Gas ETF 56,619,977 37,581,984 First Trust Chindia ETF 14,958,741 67,796,221 First Trust NASDAQ(R)ABA Community Bank Index Fund -- 121,004,629
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"). In order to purchase Creation Units of each Fund, an Authorized Participant must deposit (i) a designated portfolio of equity securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Creation Transaction Fee may increase or decrease with changes in each Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When a Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities. Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a standard redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Redemption Transaction Fee may increase or decrease with changes in each Fund's portfolio. Each Fund reserves the right to effect redemptions in cash. An Authorized Participant may request cash redemption in lieu of securities; however, a Fund may, in its discretion, reject any such request. Page 67 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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, 2021. 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 68 -------------------------------------------------------------------------------- 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 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, and First Trust NASDAQ(R) ABA Community Bank Index Fund (the "Funds"), each a series of First Trust Exchange-Traded Fund, including the portfolios of investments, as of December 31, 2019, 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 as of December 31, 2019, 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, 2019, 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 24, 2020 We have served as the auditor of one or more First Trust investment companies since 2001. Page 69 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (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 each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION For the taxable year ended December 31, 2019, 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 29.48% First Trust S&P REIT Index Fund -- First Trust Water ETF 100.00% First Trust Natural Gas ETF 55.74% First Trust Chindia ETF 6.92% First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00%
For the taxable year ended December 31, 2019, 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 35.51% First Trust S&P REIT Index Fund -- First Trust Water ETF 100.00% First Trust Natural Gas ETF 100.00% First Trust Chindia ETF 100.00% First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00%
A portion of each of the Funds' 2019 ordinary dividends (including short-term capital gains) paid to its shareholders during the fiscal year ended December 31, 2019, may be eligible for the Qualified Business Income Deduction (QBI) under Code Section 199A for the aggregate dividends each Fund received from the underlying Real Estate Investment Trusts (REITs) these Funds invest in. For the tax year ended December 31, 2019, the First Trust S&P REIT Index Fund designated $323,764, or amounts necessary, as long-term capital gain. During the tax year, Fund shareholders redeemed amounts in excess of long-term capital gain and of these proceeds, $323,764, or amounts necessary, represents long-term capital gain from the Fund. Page 70 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (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 71 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (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 72 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (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 the United Kingdom 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 31,2019, the amount of remuneration paid (or to be paid) by First Trust Advisors L.P. in respect of the Funds is $1,666,102. This figure is comprised of $103,443 paid (or to be paid) in fixed compensation and $1,562,659 paid (or to be paid) in variable compensation. There were a total of 15 beneficiaries of the remuneration described above. Those amounts include $972,968 paid (or to be paid) to senior management of First Trust Advisors L.P. and $693,134 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 73 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (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; 169 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. 169 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 169 Director of Trust (1956) and Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 169 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Products and Services); 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 169 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 74 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (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 75 -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (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). March 2019 Page 76 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, 2019 -------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2019 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.............................................. 59 Privacy Policy.............................................................. 61 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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, 2019 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, 2019, including a market overview and a performance analysis. A significant event for the markets in the past year was the decision by the Federal Reserve (the "Fed") to reverse course with respect to monetary policy. For those who may not follow the Fed closely, after holding its federal funds target rate (upper bound) at an artificially low 0.25% for seven years (December 2008-December 2015) to help stimulate U.S. economic activity, the Fed spent the better part of the next four years (December 2015-July 2019) increasing its benchmark lending rate in an effort to normalize it. Over that period, the Fed increased the rate from 0.25% to 2.50%. To lend some perspective, the average federal funds target rate (upper bound) was 2.95% for the 30-year period ended December 31, 2019, so the Fed came close to achieving its goal of normalizing it, according to data from Bloomberg. From the end of July 2019 through the end of December, however, the Fed initiated three rate cuts that dropped it from 2.50% to 1.75%. So why did the Fed reverse course on monetary policy? We believe, as well as others in the financial media, that the Fed's reversal on monetary policy has to do with the trade tariffs. The Trump Administration first began implementing new trade tariffs on imported goods back in March 2018. While the original tariffs targeted just imported steel and aluminum, the use of tariffs quickly escalated to other goods and services. The lion's share of the tariff conflict today is between the U.S. and China, the two-largest economies in the world. In our opinion, it is believed that President Donald J. Trump is utilizing tariffs as leverage to try and negotiate more favorable trade agreements between the U.S. and its major trading partners. One of the by-products of the escalation in the use of tariffs by all parties involved has been a slowdown in global economic growth, particularly in the U.S. The annualized U.S. real gross domestic product growth rate in the second quarter of 2018 (when new tariffs were introduced) was 3.5%. As of the second and third quarters of 2019, that annualized growth rate was down to 2.0% and 2.1%, respectively, according to data from the Bureau of Economic Analysis. For many months, President Trump has publicly challenged the Fed to lower rates aggressively to help offset the tempering of economic growth. Trump has noted that the Fed has room to lower rates due to the extremely low-to-negative rate levels found in many countries abroad as well as the lack of any significant inflationary pressure in the current climate. While the Fed has delivered some rate cuts in recent months, we believe that President Trump will continue to bang the drum for even more rate cuts. It has been said in the financial media that this is the "most hated" bull market in history, yet it has been one of the most prosperous for investors. The bull market turns 11 years old on March 9, 2020. A Bloomberg survey of 21 equity strategists found that their average 2020 year-end price target for the S&P 500(R) Index was 3,318 as of December 17, 2019, according to its own release. The highest estimate was 3,500. The lowest estimate was 3,000. With a target of 3,650, Brian Wesbury, Chief Economist at First Trust Advisors L.P., is more bullish than all the strategists surveyed by Bloomberg. We encourage investors to stay the course. Thank you for giving First Trust the opportunity to play a role in your financial future. 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, 2019 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 27 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 The consensus among economists projects a 1.8% growth rate estimate for the U.S. economy in 2020 (on a fourth quarter to fourth quarter basis), according to a survey conducted by Bloomberg. However, Brian Wesbury, Chief Economist at First Trust Advisors L.P. believes the economy may grow at a 2.5% to 3.0% pace, in part due to home building and business investment that are poised to contribute more to economic growth in 2020 than what the broader consensus believes, in his opinion. The combination of low interest rates, low inflation, strong job growth, regulatory reform and a more favorable U.S. corporate tax structure following the passage of the Tax Cuts and Jobs Act of 2017 makes the current climate an attractive one for investors, in our opinion. Minus tax reform, which took effect in 2018, and regulatory reform, which has been driven by the Trump Administration since it took office in 2017, investors have been prospering in a low rate/low inflation/strong job growth climate for the better part of the last decade. Very little has changed in that regard. One thing that has created some uncertainty in the markets is the extent of the potential fallout from the implementation and escalation of trade tariffs by the Trump Administration. That effort is now 21 months old and counting. The mid-December announcement that the U.S. and China had struck a "Phase One" deal is encouraging, in our opinion. Investors are flocking to exchange-traded funds ("ETFs") and related exchange-traded products ("ETPs"). The global ETF industry turns 30 years old on March 9, 2020. ETFGI, an independent research and consultancy firm, reported that total assets invested in ETFs/ETPs listed globally stood at an all-time high of $6.350 trillion at the close of 2019, up 31.9% from the $4.815 trillion at the end of 2018, according to its own release. In 2019, net inflows to ETFs/ETPs listed globally totaled $571.03 billion, the second highest on record behind the $653.26 billion registered in 2017. U.S. STOCKS AND BONDS In 2019, three of the major U.S. stock indices posted substantial double-digit gains. The S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R) Index posted total returns of 31.49%, 26.20%, and 22.78%, respectively, according to Bloomberg. All 11 major S&P 500(R) Index sectors posted positive total returns. The top-performing sectors were Information Technology, Communication Services and Financials, up 50.29%, 32.69% and 32.13%, respectively, while the only sector with a total return below 20% for the year was Energy, up 11.81%. The outlook for corporate earnings is encouraging, in our opinion. Bloomberg's 2020 and 2021 consensus earnings growth estimates for the S&P 500(R) Index were 9.02% and 10.72%, respectively, as of December 31, 2019. The yield on the benchmark 10-year Treasury Note ("T-Note") closed trading on December 31, 2019, at 1.92%, down 77 basis points ("bps") from its 2.69% close a year earlier, according to Bloomberg. The yield stood 48 bps below its 2.40% average for the 10-year period ended December 31, 2019. For those investors still concerned about the prospects for an inverted yield curve, the spread between the 2-year T-Note and the 10-year T-Note closed 2019 at 35 bps (1.57% vs. 1.92%), according to data from Bloomberg. For comparative purposes, the average spread was 117 bps (3.33% vs. 4.50%) for the 30-year period ended December 31, 2019. The yield curve, while not inverted, remains relatively flat. We will monitor this scenario moving forward. In the U.S. bond market, all the major bond groups posted positive returns in 2019. The top-performing major debt group we track was high yield corporate bonds. The Bloomberg Barclays U.S. Corporate High Yield Index posted a total return of 14.32%. The worst-performing debt group that we track was government bonds. The Bloomberg Barclays U.S. Treasury: Intermediate Index posted a total return of 5.22%. FOREIGN STOCKS AND BONDS The U.S. dollar rose by 0.23% against a basket of major currencies in 2019, as measured by the U.S. Dollar Index (DXY). With respect to U.S. investors, a flat U.S. dollar would have little to no impact on the returns of foreign securities, in our opinion. Aside from the currency aspect, foreign stocks and bonds performed quite well in 2019. The Bloomberg Barclays EM Hard Currency Aggregate Index of emerging markets debt posted a total return of 12.13% (USD), while the Bloomberg Barclays Global Aggregate Index of higher quality debt rose 6.84% (USD). With respect to equities, the MSCI Emerging Markets Index of stocks posted a total return of 18.44% (USD), while the MSCI World ex USA Index was up 22.49% (USD) on a total return basis, according to Bloomberg. 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 net assets (including investment borrowings) in common stocks that comprise the Index. The Index is a modified market capitalization index designed to quantitatively identify and select U.S. exchange-listed securities issued by small, mid and large cap U.S. companies that exhibit growth and value factors and appear to have the greatest potential for capital appreciation. The Index is reconstituted and rebalanced on a quarterly basis and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 12/31/19 to 12/31/19 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 25.36% 7.88% 9.03% 5.94% 46.09% 137.32% 112.69% Market Value 25.27% 7.85% 9.01% 5.94% 45.93% 137.05% 112.49% INDEX PERFORMANCE NASDAQ AlphaDEX(R) Total US Market Index* 26.34% 8.73% N/A N/A 51.95% N/A N/A Russell 3000(R) Index 31.02% 11.24% 13.42% 8.72% 70.35% 252.15% 198.15% ------------------------------------------------------------------------------------------------------------------------------------
* 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 25.36% during the 12-month period covered by this report. During the same period, the Russell 3000(R) Index ("Benchmark") generated a return of 31.02%. The sector with the highest allocation in the Fund was Information Technology, which received a 15.4% weighting. Investments in this sector returned 46.2% and contributed 5.7% to total Fund performance, which was more than the contribution to return of any other sector. No sector experienced negative returns in the Fund, but the least-performing sector securities were the investments in Energy securities, which returned 3.2%. These investments received an allocation of 6.5% and contributed 0.3% to total Fund return. On a relative basis, the Fund underperformed the Benchmark. The greatest area of underperformance was in the investments in the Information Technology sector. Investments in this sector created -1.4% of underperformance, largely because the Fund underweighted this sector in comparison to the Benchmark. Investments in the Health Care sector caused 0.8% of outperformance for the Fund. The Fund did not overweight this sector, but the Health Care investments in the Fund outperformed those in the Benchmark. ----------------------------- NASDAQ and the NASDAQ AlphaDEX(R) Total US Market Index (the "Index") are trademarks of The Nasdaq OMX Group and its affiliates (the "Corporations") and has been licensed for use with the Fund by First Trust. First Trust Portfolios L.P. ("FTP") has licensed to The NASDAQ OMX Group, Inc. ("NASDAQ OMX"), free of charge, the right to use certain intellectual property owned by FTP, including the AlphaDEX trademark and the AlphaDEX stock selection method, in connection with NASDAQ OMX's calculation of the NASDAQ AlphaDEX Total US Market Index. The Fund is not sponsored, endorsed, sold or promoted by the Corporations. The Corporations have not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the Fund. The Fund is not sponsored, endorsed, sold or promoted by NASDAQ OMX and NASDAQ OMX makes no representation or warranty regarding the advisability of investing in the Fund or as to the result to be obtained by any person from use of the Index in connection with the trading of the Fund. Page 4 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Financials 17.43% Industrials 15.48 Information Technology 13.87 Consumer Discretionary 12.51 Health Care 8.04 Energy 6.69 Materials 6.55 Communication Services 5.99 Real Estate 5.99 Consumer Staples 3.85 Utilities 3.60 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Skyworks Solutions, Inc. 0.59% Halliburton Co. 0.50 Biogen, Inc. 0.49 DXC Technology Co. 0.49 Micron Technology, Inc. 0.49 Discovery, Inc., Class A 0.48 Fox Corp., Class A 0.46 Carnival Corp. 0.45 Centene Corp. 0.45 PACCAR, Inc. 0.45 ------- Total 4.85% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2009 - DECEMBER 31, 2019 First Trust Russell 3000(R) Total US Market Index AlphaDEX(R) ETF 12/09 $10,000 $10,000 06/10 9,854 9,395 12/10 11,985 11,693 06/11 12,247 12,436 12/11 10,839 11,813 06/12 11,028 12,914 12/12 11,787 13,752 06/13 13,488 15,686 12/13 15,871 18,367 06/14 16,671 19,642 12/14 16,246 20,673 06/15 16,438 21,074 12/15 15,274 20,773 06/16 15,772 21,525 12/16 17,638 23,417 06/17 18,970 25,508 12/17 21,066 28,365 06/18 21,999 29,278 12/18 18,932 26,877 06/19 22,164 31,906 12/19 23,732 35,215
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 86 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 165 0 0 1 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 a modified market capitalization weighted index designed to tactically allocate exposure to one of three indices: (i) the Nasdaq US 500 Large Cap Index; (ii) the Nasdaq US 500 Large Cap Equal Weight Index; or (iii) 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-adjusted market capitalization comprising the Nasdaq US Benchmark Index. 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-denomination cash position through the us 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 Index is rebalanced and reconstituted periodically and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 12/31/19 to 12/31/19 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 30.24% 6.59% 8.83% 37.60% 86.09% Market Value 30.09% 6.62% 8.83% 37.81% 86.08% INDEX PERFORMANCE Nasdaq Dorsey Wright People's Portfolio Index* 31.16% N/A N/A N/A N/A S&P 500(R) Index 31.49% 11.70% 14.30% 73.86% 166.73% Nasdaq US 500 Large Cap Index 32.04% 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 30.24% during the 12-month period covered by this report. During the same period, the S&P 500(R) Index ("Benchmark") generated a return of 31.49%. The Information Technology sector was given the largest allocation in the Fund with a 15.6% weight and a return of 39.6%. This resulted in the largest contribution to the Fund's return at 5.9%. The Energy sector contributed 0.8% to the Fund's return which was the smallest contribution to the portfolio. On a relative basis, the Fund underperformed the Benchmark. The Fund under allocated and underperformed in the Information Technology sector by -5.9% and -10.8%, respectively, resulting in a -2.1% relative underperformance compared to the Benchmark. The Fund's relative outperformance of 1.1% in the Health Care sector partially reduced the Fund's overall underperformance compared to the Benchmark. ----------------------------- 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 16.57% Financials 14.50 Health Care 13.21 Industrials 12.96 Consumer Discretionary 9.59 Real Estate 6.66 Consumer Staples 6.58 Utilities 5.61 Communication Services 5.21 Energy 4.67 Materials 4.44 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Noble Energy, Inc. 0.21% Newmont Goldcorp Corp. 0.21 Occidental Petroleum Corp. 0.21 Corteva, Inc. 0.21 Diamondback Energy, Inc. 0.21 International Flavors & Fragrances, Inc. 0.21 Snap, Inc., Class A 0.21 ABIOMED, Inc. 0.21 Advanced Micro Devices, Inc. 0.21 Apple, Inc. 0.21 ------- Total 2.10% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT AUGUST 29, 2012 - DECEMBER 31, 2019 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 06/19 17,139 24,045 12/19 18,609 26,673
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, 2019 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, 2015 through December 31, 2019. 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% 01/01/15 - 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 01/01/19 - 12/31/19 175 0 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% 01/01/15 - 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 01/01/19 - 12/31/19 77 0 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 is an equal weight version of the Dow Jones Industrial AverageTM (the "DJIA"). The 30 securities comprising the DJIA are issued by blue-chip U.S. companies covering all industries, with the exception of transportation and utilities. DJIA is not governed by quantitative rules but rather is based on the following criteria: (i) the company is not a utility or in the transportation business; (ii) the company has a premier reputation in its field; (iii) the company has a history of successful growth; and (iv) there is wide interest in the company among individual and institutional investors. Whenever one component is changed, the others are reviewed. For the sake of historical continuity, composition changes are rarely made. In the event that there is a change in the components of the DJIA, the component removed from the DJIA will simultaneously be removed from the Index, and the component that replaces the removed component will be added to the Index at the same weight as the component that was removed. The Fund's shares are listed for trading on the NYSE Arca, Inc. The Index is rebalanced and reconstituted periodically and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. 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) 12/31/19 to 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 24.27% 13.95% 36.76% Market Value 24.34% 13.93% 36.71% INDEX PERFORMANCE Dow Jones Industrial Average Equal Weight Index 25.00% 14.55% 38.49% Dow Jones Industrial Average(TM) 25.34% 13.94% 36.74% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 12.) PERFORMANCE REVIEW The Fund generated a NAV return of 24.27% during the 12-month period covered by this report. During the same period, the Dow Jones Industrial Average(TM) ("Benchmark") generated a return of 25.34%. The Information Technology sector was given the largest allocation of the Fund with a 20.4% weight and a return of 42.9% which had the largest contribution to the Fund's return at 8.0%. The Materials sector had the smallest contribution to the Fund's return at 0.4%. On a relative basis, the Fund underperformed the Benchmark. The Fund over allocated but underperformed the Benchmark in the Information Technology sector by 1.3% and -8.3%, respectively, resulting in a -0.9% drag on relative performance. This drag was slightly reduced by the Fund's relative underweight and outperformance within the Industrials sector by -7.7% and 5.1%, respectively, creating 1.6% of outperformance relative to the Benchmark. ----------------------------- 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 20.32% Health Care 13.45 Financials 13.27 Consumer Staples 13.18 Industrials 13.18 Consumer Discretionary 10.03 Energy 6.65 Communication Services 6.55 Materials 3.37 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Apple, Inc. 3.50% Cisco Systems, Inc. 3.47 3M Co. 3.43 NIKE, Inc., Class B 3.40 Intel Corp. 3.40 Johnson & Johnson 3.38 UnitedHealth Group, Inc. 3.38 Dow, Inc. 3.37 Pfizer, Inc. 3.35 Goldman Sachs Group (The), Inc. 3.35 ------- Total 34.03% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT AUGUST 8, 2017 - DECEMBER 31, 2019 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 06/19 12,615 12,739 12,588 12/19 13,676 13,849 13,674
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, 2019 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, 2019. 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 01/01/19 - 12/31/19 167 0 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 01/01/19 - 12/31/19 84 0 1 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 track the performance of U.S. securities exhibiting desirable factor exposure. The Index utilizes the Index Provider's risk-adjusted relative strength methodology to allocate exposure to securities exhibiting either high or low levels of the characteristics associated with one of four primary investing factors: momentum, value, quality and volatility. The Fund's shares are listed for trading on CBOE BZX, Inc. The Index is rebalanced and reconstituted periodically and the Fund will make corresponding changes after the Index changes are made public. The first day of secondary market trading in shares of the Fund was July 26, 2018.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Inception Inception Ended (7/25/18) (7/25/18) 12/31/19 to 12/31/19 to 12/31/19 FUND PERFORMANCE NAV 30.35% 9.95% 14.59% Market Value 30.52% 10.05% 14.74% INDEX PERFORMANCE Lunt Capital Large Cap Factor Rotation Index 31.38% 10.75% 15.78% Nasdaq US 500 Large Cap Index 32.04% 11.63% 17.11% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 12.) PERFORMANCE REVIEW The Fund generated a NAV return of 30.35% during the 12-month period covered by this report. The Nasdaq US 500 Large Cap Index ("Benchmark") returned 32.04% over the same period. The Information Technology sector was given the largest allocation in the Fund with a 20.1% weight. This sector returned 34.9% for the Fund and had the largest contribution to the Fund's return at 8.5%. The Energy sector provided the worst contribution to the Fund's return at -0.3%. On a relative basis, the Fund underperformed the Benchmark. The Fund under allocated and underperformed among Information Technology securities by -2.6% and -15.0%, respectively, creating a -2.0% relative drag on performance. The Fund outperformed the Benchmark among Health Care securities by 8.4%, generating 1.2% of relative outperformance. ----------------------------- 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 20.85% Information Technology 14.88 Health Care 14.88 Consumer Staples 9.42 Energy 8.45 Real Estate 7.35 Industrials 6.41 Utilities 5.53 Consumer Discretionary 5.05 Materials 3.63 Communication Services 3.55 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- DXC Technology Co. 1.88% Sarepta Therapeutics, Inc. 1.38 Sysco Corp. 1.33 MSCI, Inc. 1.25 Capital One Financial Corp. 1.23 Mastercard, Inc., Class A 1.20 McCormick & Co., Inc. 1.18 Centene Corp. 1.15 Visa, Inc., Class A 1.14 Booking Holdings, Inc. 1.11 ------- Total 12.85% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT JULY 25, 2018 - DECEMBER 31, 2019 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 06/19 10,828 10,901 10,567 12/19 11,459 11,578 11,711
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, 2019 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, 2019. 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 01/01/19 - 12/31/19 250 0 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% 07/26/18 - 12/31/18 15 1 0 0 01/01/19 - 12/31/19 1 0 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, 2019 (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 and held through the six-month period ended December 31, 2019. 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, 2019 DECEMBER 31, 2019 PERIOD PERIOD (b) ----------------------------------------------------------------------------------------------------------------------------- FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) Actual $1,000.00 $1,070.80 0.70% (a) $3.65 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 $1,086.00 0.60% $3.15 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 $1,084.00 0.50% $2.63 Hypothetical (5% return before expenses) $1,000.00 $1,022.68 0.50% $2.55 FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) Actual $1,000.00 $1,058.30 0.65% $3.37 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, 2019 through December 31, 2019), multiplied by 184/365 (to reflect the six-month period). Page 13 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% AEROSPACE & DEFENSE -- 2.1% 148 Aerojet Rocketdyne Holdings, Inc. (a) $ 6,758 323 Arconic, Inc. 9,939 318 Astronics Corp. (a) 8,888 220 BWX Technologies, Inc. 13,658 97 Curtiss-Wright Corp. 13,666 224 HEICO Corp. 25,570 205 Hexcel Corp. 15,029 59 Huntington Ingalls Industries, Inc. 14,802 268 L3Harris Technologies, Inc. 53,029 144 Lockheed Martin Corp. 56,071 259 Mercury Systems, Inc. (a) 17,899 42 National Presto Industries, Inc. 3,712 153 Spirit AeroSystems Holdings, Inc., Class A 11,151 65 Teledyne Technologies, Inc. (a) 22,525 429 Textron, Inc. 19,133 134 TransDigm Group, Inc. 75,040 245 Triumph Group, Inc. 6,191 -------------- 373,061 -------------- AIR FREIGHT & LOGISTICS -- 0.3% 89 Air Transport Services Group, Inc. (a) 2,088 370 Atlas Air Worldwide Holdings, Inc. (a) 10,201 99 C.H. Robinson Worldwide, Inc. 7,742 165 Echo Global Logistics, Inc. (a) 3,415 188 Expeditors International of Washington, Inc. 14,668 29 Forward Air Corp. 2,028 161 Hub Group, Inc., Class A (a) 8,258 176 XPO Logistics, Inc. (a) 14,027 -------------- 62,427 -------------- AIRLINES -- 1.4% 259 Alaska Air Group, Inc. 17,547 37 Allegiant Travel Co. 6,439 972 Delta Air Lines, Inc. 56,842 355 Hawaiian Holdings, Inc. 10,398 1,255 JetBlue Airways Corp. (a) 23,494 163 SkyWest, Inc. 10,535 1,037 Southwest Airlines Co. 55,977 257 Spirit Airlines, Inc. (a) 10,360 633 United Airlines Holdings, Inc. (a) 55,761 -------------- 247,353 -------------- AUTO COMPONENTS -- 0.8% 909 American Axle & Manufacturing Holdings, Inc. (a) 9,781 572 BorgWarner, Inc. 24,813 286 Cooper Tire & Rubber Co. 8,223 228 Cooper-Standard Holdings, Inc. (a) 7,560 647 Dana, Inc. 11,775 611 Gentex Corp. 17,707 648 Goodyear Tire & Rubber (The) Co. 10,080 61 LCI Industries 6,535 SHARES DESCRIPTION VALUE ------------------------------------------------------------- AUTO COMPONENTS (CONTINUED) 178 Lear Corp. $ 24,422 38 Standard Motor Products, Inc. 2,022 181 Stoneridge, Inc. (a) 5,307 597 Tenneco, Inc., Class A 7,821 -------------- 136,046 -------------- AUTOMOBILES -- 0.7% 1,867 General Motors Co. 68,332 350 Harley-Davidson, Inc. 13,017 58 Tesla, Inc. (a) 24,263 99 Thor Industries, Inc. 7,355 243 Winnebago Industries, Inc. 12,874 -------------- 125,841 -------------- BANKS -- 6.4% 82 1st Source Corp. 4,254 116 Allegiance Bancshares, Inc. (a) 4,362 139 Ameris Bancorp 5,913 277 Associated Banc-Corp. 6,105 150 Atlantic Union Bankshares Corp. 5,632 132 Banc of California, Inc. 2,268 34 BancFirst Corp. 2,123 63 BancorpSouth Bank 1,979 960 Bank of America Corp. 33,811 43 Bank of Hawaii Corp. 4,092 616 Bank OZK 18,791 111 BankUnited, Inc. 4,058 33 Banner Corp. 1,867 64 Berkshire Hills Bancorp, Inc. 2,104 159 BOK Financial Corp. 13,897 321 Boston Private Financial Holdings, Inc. 3,862 127 Brookline Bancorp, Inc. 2,090 313 Byline Bancorp, Inc. 6,125 43 Camden National Corp. 1,981 105 Carolina Financial Corp. 4,539 107 Cathay General Bancorp 4,071 67 CBTX, Inc. 2,085 66 Central Pacific Financial Corp. 1,952 371 CIT Group, Inc. 16,929 608 Citigroup, Inc. 48,573 1,583 Citizens Financial Group, Inc. 64,286 24 City Holding Co. 1,967 51 Columbia Banking System, Inc. 2,075 255 Comerica, Inc. 18,296 72 Commerce Bancshares, Inc. 4,892 88 Community Trust Bancorp, Inc. 4,104 168 ConnectOne Bancorp, Inc. 4,321 95 Cullen/Frost Bankers, Inc. 9,289 270 Customers Bancorp, Inc. (a) 6,429 379 East West Bancorp, Inc. 18,457 1,458 F.N.B. Corp. 18,517 1,534 Fifth Third Bancorp 47,155 52 First Bancorp 2,075 74 First Busey Corp. 2,035 27 First Citizens BancShares, Inc., Class A 14,370 Page 14 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) BANKS (CONTINUED) 141 First Commonwealth Financial Corp. $ 2,046 153 First Financial Bancorp. 3,892 378 First Financial Bankshares, Inc. 13,268 611 First Foundation, Inc. 10,631 70 First Hawaiian, Inc. 2,019 1,038 First Horizon National Corp. 17,189 46 First Interstate BancSystem, Inc., Class A 1,928 50 First Merchants Corp. 2,079 288 First Midwest Bancorp, Inc. 6,641 231 Fulton Financial Corp. 4,026 46 Glacier Bancorp., Inc. 2,116 66 Great Southern Bancorp, Inc. 4,179 113 Great Western Bancorp, Inc. 3,926 146 Hancock Whitney Corp. 6,406 125 Heartland Financial USA, Inc. 6,218 69 Heritage Financial Corp. 1,953 78 Hilltop Holdings, Inc. 1,945 298 Home BancShares, Inc. 5,859 391 Hope Bancorp, Inc. 5,810 108 Horizon Bancorp, Inc. 2,052 2,943 Huntington Bancshares, Inc. 44,380 222 IBERIABANK Corp. 16,612 97 International Bancshares Corp. 4,178 238 JPMorgan Chase & Co. 33,177 1,570 KeyCorp 31,777 242 Lakeland Bancorp, Inc. 4,206 177 M&T Bank Corp. 30,046 215 Midland States Bancorp, Inc. 6,226 55 National Bank Holdings Corp., Class A 1,937 51 NBT Bancorp, Inc. 2,069 112 Nicolet Bankshares, Inc. (a) 8,271 217 Old National Bancorp 3,969 111 Origin Bancorp, Inc. 4,200 120 Pacific Premier Bancorp, Inc. 3,913 462 PacWest Bancorp 17,681 806 People's United Financial, Inc. 13,621 117 Peoples Bancorp, Inc. 4,055 222 Pinnacle Financial Partners, Inc. 14,208 200 PNC Financial Services Group (The), Inc. 31,926 311 Popular, Inc. 18,271 36 Preferred Bank 2,163 119 Prosperity Bancshares, Inc. 8,555 2,655 Regions Financial Corp. 45,560 107 Renasant Corp. 3,790 51 S&T Bancorp, Inc. 2,055 166 Sandy Spring Bancorp, Inc. 6,288 106 Signature Bank 14,481 225 Simmons First National Corp., Class A 6,028 50 South State Corp. 4,338 419 Sterling Bancorp 8,833 102 Stock Yards Bancorp, Inc. 4,188 SHARES DESCRIPTION VALUE ------------------------------------------------------------- BANKS (CONTINUED) 60 SVB Financial Group (a) $ 15,062 352 Synovus Financial Corp. 13,798 102 Texas Capital Bancshares, Inc. (a) 5,791 23 Tompkins Financial Corp. 2,105 67 TowneBank 1,864 103 TriCo Bancshares 4,203 89 TriState Capital Holdings, Inc. (a) 2,325 59 Triumph Bancorp, Inc. (a) 2,243 262 Truist Financial Corp. 14,756 55 Trustmark Corp. 1,898 29 UMB Financial Corp. 1,991 1,021 Umpqua Holdings Corp. 18,072 222 United Bankshares, Inc. 8,583 198 United Community Banks, Inc. 6,114 146 Univest Financial Corp. 3,910 1,160 Valley National Bancorp 13,282 269 Webster Financial Corp. 14,354 833 Wells Fargo & Co. 44,815 100 WesBanco, Inc. 3,779 273 Western Alliance Bancorp 15,561 260 Wintrust Financial Corp. 18,434 377 Zions Bancorp N.A. 19,574 -------------- 1,159,430 -------------- BEVERAGES -- 0.4% 15 Boston Beer (The) Co., Inc., Class A (a) 5,668 223 Brown-Forman Corp., Class B 15,075 25 Coca-Cola Consolidated, Inc. 7,101 365 Molson Coors Brewing Co., Class B 19,674 42 National Beverage Corp. (a) (b) 2,143 102 PepsiCo, Inc. 13,940 -------------- 63,601 -------------- BIOTECHNOLOGY -- 1.5% 259 ACADIA Pharmaceuticals, Inc. (a) 11,080 41 Arena Pharmaceuticals, Inc. (a) 1,862 331 Arrowhead Pharmaceuticals, Inc. (a) 20,995 301 Biogen, Inc. (a) 89,316 657 Cytokinetics, Inc. (a) 6,971 33 Eagle Pharmaceuticals, Inc. (a) 1,983 663 Gilead Sciences, Inc. 43,082 70 Ionis Pharmaceuticals, Inc. (a) 4,229 94 Ligand Pharmaceuticals, Inc. (a) 9,803 75 Medicines (The) Co. (a) 6,370 171 Natera, Inc. (a) 5,761 47 Neurocrine Biosciences, Inc. (a) 5,052 363 Radius Health, Inc. (a) 7,318 492 Seattle Genetics, Inc. (a) 56,216 -------------- 270,038 -------------- BUILDING PRODUCTS -- 1.2% 176 A.O. Smith Corp. 8,385 174 Advanced Drainage Systems, Inc. 6,758 81 Allegion PLC 10,088 63 American Woodmark Corp. (a) 6,584 48 Apogee Enterprises, Inc. 1,560 See Notes to Financial Statements Page 15 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) BUILDING PRODUCTS (CONTINUED) 130 Armstrong World Industries, Inc. $ 12,216 272 Builders FirstSource, Inc. (a) 6,911 68 Continental Building Products, Inc. (a) 2,477 1,235 Cornerstone Building Brands, Inc. (a) 10,510 108 CSW Industrials, Inc. 8,316 154 Fortune Brands Home & Security, Inc. 10,062 194 JELD-WEN Holding, Inc. (a) 4,542 957 Johnson Controls International PLC 38,959 403 Masco Corp. 19,340 332 Owens Corning 21,620 218 Patrick Industries, Inc. 11,430 216 PGT Innovations, Inc. (a) 3,221 651 Resideo Technologies, Inc. (a) 7,766 81 Simpson Manufacturing Co., Inc. 6,499 185 Trex Co., Inc. (a) 16,628 140 Universal Forest Products, Inc. 6,678 -------------- 220,550 -------------- CAPITAL MARKETS -- 3.5% 70 Ares Management Corp., Class A 2,498 395 B. Riley Financial, Inc. 9,946 929 Bank of New York Mellon (The) Corp. 46,757 679 BGC Partners, Inc., Class A 4,033 110 Cboe Global Markets, Inc. 13,200 199 CME Group, Inc. 39,943 102 Cohen & Steers, Inc. 6,402 288 E*TRADE Financial Corp. 13,067 280 Eaton Vance Corp. 13,073 230 Federated Investors, Inc., Class B 7,496 2,425 Franklin Resources, Inc. 63,002 203 Goldman Sachs Group (The), Inc. 46,676 83 Houlihan Lokey, Inc. 4,056 303 Intercontinental Exchange, Inc. 28,043 45 INTL. FCStone, Inc. (a) 2,197 992 Invesco Ltd. 17,836 360 Lazard Ltd., Class A 14,386 256 LPL Financial Holdings, Inc. 23,616 85 MarketAxess Holdings, Inc. 32,224 984 Morgan Stanley 50,302 57 Morningstar, Inc. 8,625 1,803 Oaktree Specialty Lending Corp. 9,844 49 Piper Sandler Cos. 3,917 153 Raymond James Financial, Inc. 13,687 142 SEI Investments Co. 9,298 710 State Street Corp. 56,161 293 Stifel Financial Corp. 17,770 490 T. Rowe Price Group, Inc. 59,702 259 TCG BDC, Inc. 3,465 51 Virtus Investment Partners, Inc. 6,208 544 Waddell & Reed Financial, Inc., Class A 9,096 -------------- 636,526 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- CHEMICALS -- 2.8% 290 AdvanSix, Inc. (a) $ 5,788 302 Albemarle Corp. 22,058 109 Ashland Global Holdings, Inc. 8,342 279 Axalta Coating Systems Ltd. (a) 8,482 165 Cabot Corp. 7,841 458 Celanese Corp. 56,389 171 CF Industries Holdings, Inc. 8,164 500 Chemours (The) Co. 9,045 393 DuPont de Nemours, Inc. 25,231 284 Eastman Chemical Co. 22,510 157 Ferro Corp. (a) 2,328 192 FMC Corp. 19,165 194 GCP Applied Technologies, Inc. (a) 4,406 120 H.B. Fuller Co. 6,188 723 Huntsman Corp. 17,468 173 Innophos Holdings, Inc. 5,533 21 Innospec, Inc. 2,172 289 Kraton Corp. (a) 7,317 604 Kronos Worldwide, Inc. 8,094 1,396 Livent Corp. (a) 11,936 782 LyondellBasell Industries N.V., Class A 73,883 141 Minerals Technologies, Inc. 8,126 1,025 Mosaic (The) Co. 22,181 18 NewMarket Corp. 8,757 499 Olin Corp. 8,608 57 PolyOne Corp. 2,097 117 PQ Group Holdings, Inc. (a) 2,010 206 Scotts Miracle-Gro (The) Co. 21,873 102 Sherwin-Williams (The) Co. 59,521 38 Stepan Co. 3,893 191 Tredegar Corp. 4,269 130 Trinseo S.A. 4,837 191 Valvoline, Inc. 4,089 320 Westlake Chemical Corp. 22,448 -------------- 505,049 -------------- COMMERCIAL SERVICES & SUPPLIES -- 1.7% 51 ABM Industries, Inc. 1,923 946 ACCO Brands Corp. 8,855 2,900 ADT, Inc. (b) 22,997 106 Brady Corp., Class A 6,070 203 Brink's (The) Co. 18,408 130 Casella Waste Systems, Inc., Class A (a) 5,984 71 Cimpress PLC (a) 8,930 261 Cintas Corp. 70,230 54 Clean Harbors, Inc. (a) 4,630 697 Copart, Inc. (a) 63,385 108 Covanta Holding Corp. 1,603 76 Deluxe Corp. 3,794 41 Herman Miller, Inc. 1,708 105 HNI Corp. 3,933 259 Interface, Inc. 4,297 228 KAR Auction Services, Inc. 4,968 194 Kimball International, Inc., Class B 4,010 Page 16 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) COMMERCIAL SERVICES & SUPPLIES (CONTINUED) 147 Knoll, Inc. $ 3,713 158 Matthews International Corp., Class A 6,031 107 McGrath RentCorp 8,190 38 MSA Safety, Inc. 4,802 409 Pitney Bowes, Inc. 1,648 50 SP Plus Corp. (a) 2,121 305 Steelcase, Inc., Class A 6,240 242 Tetra Tech, Inc. 20,851 19 UniFirst Corp. 3,838 88 US Ecology, Inc. 5,096 111 Viad Corp. 7,492 -------------- 305,747 -------------- COMMUNICATIONS EQUIPMENT -- 0.6% 321 Ciena Corp. (a) 13,703 57 Comtech Telecommunications Corp. 2,023 141 EchoStar Corp., Class A (a) 6,107 770 Extreme Networks, Inc. (a) 5,675 60 F5 Networks, Inc. (a) 8,379 679 Juniper Networks, Inc. 16,724 246 Motorola Solutions, Inc. 39,640 640 Ribbon Communications, Inc. (a) 1,984 167 ViaSat, Inc. (a) 12,224 667 Viavi Solutions, Inc. (a) 10,005 -------------- 116,464 -------------- CONSTRUCTION & ENGINEERING -- 0.8% 447 AECOM (a) 19,279 349 Ameresco, Inc., Class A (a) 6,108 273 Arcosa, Inc. 12,162 599 Construction Partners, Inc., Class A (a) 10,105 110 Dycom Industries, Inc. (a) 5,187 195 EMCOR Group, Inc. 16,829 894 Great Lakes Dredge & Dock Corp. (a) 10,129 323 MasTec, Inc. (a) 20,724 381 Primoris Services Corp. 8,473 444 Quanta Services, Inc. 18,075 40 Valmont Industries, Inc. 5,991 480 WillScot Corp. (a) 8,875 -------------- 141,937 -------------- CONSTRUCTION MATERIALS -- 0.8% 255 Martin Marietta Materials, Inc. 71,308 169 US Concrete, Inc. (a) 7,041 463 Vulcan Materials Co. 66,667 -------------- 145,016 -------------- CONSUMER FINANCE -- 1.7% 1,689 Ally Financial, Inc. 51,616 615 Capital One Financial Corp. 63,290 SHARES DESCRIPTION VALUE ------------------------------------------------------------- CONSUMER FINANCE (CONTINUED) 9 Credit Acceptance Corp. (a) $ 3,981 345 Discover Financial Services 29,263 280 Encore Capital Group, Inc. (a) 9,901 360 Enova International, Inc. (a) 8,662 46 FirstCash, Inc. 3,709 296 Green Dot Corp., Class A (a) 6,897 584 Navient Corp. 7,989 147 Nelnet, Inc., Class A 8,561 572 OneMain Holdings, Inc. 24,110 659 Santander Consumer USA Holdings, Inc. 15,401 1,905 SLM Corp. 16,973 1,643 Synchrony Financial 59,164 -------------- 309,517 -------------- CONTAINERS & PACKAGING -- 1.4% 35 AptarGroup, Inc. 4,047 37 Avery Dennison Corp. 4,840 769 Ball Corp. 49,731 318 Crown Holdings, Inc. (a) 23,068 1,140 Graphic Packaging Holding Co. 18,981 148 Greif, Inc., Class A 6,542 1,339 International Paper Co. 61,661 727 O-I Glass, Inc. 8,673 198 Packaging Corp. of America 22,174 101 Sealed Air Corp. 4,023 124 Silgan Holdings, Inc. 3,854 216 Sonoco Products Co. 13,331 576 WestRock Co. 24,716 -------------- 245,641 -------------- DISTRIBUTORS -- 0.2% 267 LKQ Corp. (a) 9,532 83 Pool Corp. 17,627 -------------- 27,159 -------------- DIVERSIFIED CONSUMER SERVICES -- 0.3% 147 Adtalem Global Education, Inc. (a) 5,141 83 Bright Horizons Family Solutions, Inc. (a) 12,474 14 Graham Holdings Co., Class B 8,946 534 H&R Block, Inc. 12,538 701 Houghton Mifflin Harcourt Co. (a) 4,381 71 K12, Inc. (a) 1,445 225 Laureate Education, Inc., Class A (a) 3,962 176 Service Corp. International 8,101 99 WW International, Inc. (a) 3,783 -------------- 60,771 -------------- DIVERSIFIED FINANCIAL SERVICES -- 0.5% 759 AXA Equitable Holdings, Inc. 18,808 135 Berkshire Hathaway, Inc., Class B (a) 30,578 136 Cannae Holdings, Inc. (a) 5,058 468 FGL Holdings 4,984 See Notes to Financial Statements Page 17 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) DIVERSIFIED FINANCIAL SERVICES (CONTINUED) 914 Jefferies Financial Group, Inc. $ 19,532 231 Voya Financial, Inc. 14,086 -------------- 93,046 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.6% 1,480 AT&T, Inc. 57,838 64 ATN International, Inc. 3,545 203 GCI Liberty, Inc., Class A (a) 14,382 464 Verizon Communications, Inc. 28,490 165 Vonage Holdings Corp. (a) 1,223 -------------- 105,478 -------------- ELECTRIC UTILITIES -- 1.9% 144 ALLETE, Inc. 11,689 234 Alliant Energy Corp. 12,804 149 American Electric Power Co., Inc. 14,082 292 Duke Energy Corp. 26,633 119 Entergy Corp. 14,256 210 Evergy, Inc. 13,669 869 Exelon Corp. 39,618 184 Hawaiian Electric Industries, Inc. 8,622 75 IDACORP, Inc. 8,010 70 MGE Energy, Inc. 5,517 120 NextEra Energy, Inc. 29,059 185 OGE Energy Corp. 8,227 69 Otter Tail Corp. 3,539 130 Pinnacle West Capital Corp. 11,691 242 PNM Resources, Inc. 12,272 224 Portland General Electric Co. 12,497 1,778 PPL Corp. 63,795 680 Southern (The) Co. 43,316 -------------- 339,296 -------------- ELECTRICAL EQUIPMENT -- 1.0% 125 Acuity Brands, Inc. 17,250 307 Atkore International Group, Inc. (a) 12,421 129 AZZ, Inc. 5,928 505 Eaton Corp. PLC 47,834 209 Emerson Electric Co. 15,938 133 Encore Wire Corp. 7,634 57 EnerSys 4,265 268 Generac Holdings, Inc. (a) 26,958 292 GrafTech International Ltd. 3,393 64 Hubbell, Inc. 9,461 3,551 Plug Power, Inc. (a) (b) 11,221 128 Regal Beloit Corp. 10,958 447 Sunrun, Inc. (a) 6,173 571 Vivint Solar, Inc. (a) (b) 4,146 -------------- 183,580 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 2.7% 108 Anixter International, Inc. (a) 9,947 614 AVX Corp. 12,568 140 Belden, Inc. 7,700 257 Benchmark Electronics, Inc. 8,830 SHARES DESCRIPTION VALUE ------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (CONTINUED) 568 CDW Corp. $ 81,133 173 CTS Corp. 5,192 130 Dolby Laboratories, Inc., Class A 8,944 49 ePlus, Inc. (a) 4,130 143 Fabrinet (a) 9,272 160 FLIR Systems, Inc. 8,331 101 Insight Enterprises, Inc. (a) 7,099 126 Itron, Inc. (a) 10,578 352 Jabil, Inc. 14,548 514 KEMET Corp. 13,904 576 Keysight Technologies, Inc. (a) 59,115 92 Knowles Corp. (a) 1,946 47 Littelfuse, Inc. 8,991 222 Methode Electronics, Inc. 8,736 34 MTS Systems Corp. 1,633 100 National Instruments Corp. 4,234 55 OSI Systems, Inc. (a) 5,541 144 PC Connection, Inc. 7,151 90 Plexus Corp. (a) 6,924 174 Sanmina Corp. (a) 5,958 305 ScanSource, Inc. (a) 11,270 186 SYNNEX Corp. 23,957 751 TE Connectivity Ltd. 71,976 201 Tech Data Corp. (a) 28,864 766 TTM Technologies, Inc. (a) 11,528 552 Vishay Intertechnology, Inc. 11,752 41 Zebra Technologies Corp., Class A (a) 10,473 -------------- 482,225 -------------- ENERGY EQUIPMENT & SERVICES -- 1.3% 207 Apergy Corp. (a) 6,992 42 DMC Global, Inc. 1,888 3,713 Halliburton Co. 90,857 927 Helix Energy Solutions Group, Inc. (a) 8,927 314 Helmerich & Payne, Inc. 14,265 2,997 Nabors Industries Ltd. 8,631 735 Newpark Resources, Inc. (a) 4,608 281 Oil States International, Inc. (a) 4,583 655 Patterson-UTI Energy, Inc. 6,878 1,665 RPC, Inc. (b) 8,725 1,639 Schlumberger Ltd. 65,888 119 SEACOR Holdings, Inc. (a) 5,135 -------------- 227,377 -------------- ENTERTAINMENT -- 1.3% 265 Activision Blizzard, Inc. 15,746 698 AMC Entertainment Holdings, Inc., Class A (b) 5,054 326 Cinemark Holdings, Inc. 11,035 572 Electronic Arts, Inc. (a) 61,496 673 Liberty Media Corp.-Liberty Formula One, Class C (a) 30,935 211 Live Nation Entertainment, Inc. (a) 15,080 101 Marcus (The) Corp. 3,209 Page 18 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) ENTERTAINMENT (CONTINUED) 206 Roku, Inc. (a) $ 27,583 447 Take-Two Interactive Software, Inc. (a) 54,726 1,444 Zynga, Inc., Class A (a) 8,837 -------------- 233,701 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 5.6% 26 Agree Realty Corp. 1,824 175 American Campus Communities, Inc. 8,230 487 American Homes 4 Rent, Class A 12,764 127 American Tower Corp. 29,187 340 Americold Realty Trust 11,920 81 Apartment Investment & Management Co., Class A 4,184 451 Apple Hospitality REIT, Inc. 7,329 829 Brixmor Property Group, Inc. 17,915 183 Brookfield Property REIT, Inc., Class A 3,375 76 Camden Property Trust 8,064 309 Chatham Lodging Trust 5,667 931 Colony Capital, Inc. 4,422 168 Community Healthcare Trust, Inc. 7,201 432 CoreCivic, Inc. 7,508 79 CorEnergy Infrastructure Trust, Inc. 3,532 69 CoreSite Realty Corp. 7,736 101 Crown Castle International Corp. 14,357 241 CubeSmart 7,587 212 CyrusOne, Inc. 13,871 547 DiamondRock Hospitality Co. 6,061 108 Digital Realty Trust, Inc. 12,932 196 Douglas Emmett, Inc. 8,604 371 Duke Realty Corp. 12,863 351 Easterly Government Properties, Inc. 8,329 101 EastGroup Properties, Inc. 13,400 55 EPR Properties 3,885 73 Equinix, Inc. 42,610 613 Equity Commonwealth 20,125 188 Equity LifeStyle Properties, Inc. 13,233 162 Equity Residential 13,109 326 Essential Properties Realty Trust, Inc. 8,088 240 Extra Space Storage, Inc. 25,349 318 First Industrial Realty Trust, Inc. 13,200 442 Franklin Street Properties Corp. 3,784 110 Gaming and Leisure Properties, Inc. 4,736 323 GEO Group (The), Inc. 5,365 159 Gladstone Commercial Corp. 3,476 64 Hannon Armstrong Sustainable Infrastructure Capital, Inc. 2,060 125 Healthcare Realty Trust, Inc. 4,171 143 Healthcare Trust of America, Inc., Class A 4,330 SHARES DESCRIPTION VALUE ------------------------------------------------------------- EQUITY REAL ESTATE INVESTMENT TRUSTS (CONTINUED) 4,048 Host Hotels & Resorts, Inc. $ 75,090 653 Independence Realty Trust, Inc. 9,194 40 Innovative Industrial Properties, Inc. (b) 3,035 2,364 Invitation Homes, Inc. 70,849 130 Iron Mountain, Inc. 4,143 716 iStar, Inc. 10,389 54 Kilroy Realty Corp. 4,531 604 Kimco Realty Corp. 12,509 116 Kite Realty Group Trust 2,266 51 Lamar Advertising Co., Class A 4,552 182 Lexington Realty Trust 1,933 82 Liberty Property Trust 4,924 80 Life Storage, Inc. 8,662 36 LTC Properties, Inc. 1,612 266 Macerich (The) Co. 7,161 215 Medical Properties Trust, Inc. 4,539 74 National Retail Properties, Inc. 3,968 112 National Storage Affiliates Trust 3,765 120 NexPoint Residential Trust, Inc. 5,400 201 Omega Healthcare Investors, Inc. 8,512 756 Outfront Media, Inc. 20,276 673 Park Hotels & Resorts, Inc. 17,411 151 Pebblebrook Hotel Trust 4,048 45 PotlatchDeltic Corp. 1,947 517 Preferred Apartment Communities, Inc., Class A 6,886 69 PS Business Parks, Inc. 11,376 36 QTS Realty Trust, Inc., Class A 1,954 60 Regency Centers Corp. 3,785 382 Rexford Industrial Realty, Inc. 17,446 440 RLJ Lodging Trust 7,797 138 RPT Realty 2,076 51 Ryman Hospitality Properties, Inc. 4,420 366 Sabra Health Care REIT, Inc. 7,810 184 Safehold, Inc. 7,415 174 SBA Communications Corp. 41,932 404 Senior Housing Properties Trust (a) 3,410 815 Service Properties Trust 19,829 124 SITE Centers Corp. 1,739 103 SL Green Realty Corp. 9,464 175 Spirit Realty Capital, Inc. 8,607 449 STORE Capital Corp. 16,721 805 Summit Hotel Properties, Inc. 9,934 113 Sun Communities, Inc. 16,961 680 Sunstone Hotel Investors, Inc. 9,466 121 Tanger Factory Outlet Centers, Inc. (b) 1,782 73 Terreno Realty Corp. 3,952 54 Universal Health Realty Income Trust 6,337 79 Urstadt Biddle Properties, Inc., Class A 1,962 1,289 VEREIT, Inc. 11,910 186 VICI Properties, Inc. 4,752 330 Vornado Realty Trust 21,945 See Notes to Financial Statements Page 19 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) EQUITY REAL ESTATE INVESTMENT TRUSTS (CONTINUED) 1,805 Washington Prime Group, Inc. (b) $ 6,570 463 Welltower, Inc. 37,864 354 Xenia Hotels & Resorts, Inc. 7,650 -------------- 1,010,851 -------------- FOOD & STAPLES RETAILING -- 1.1% 416 Andersons (The), Inc. 10,517 72 BJ's Wholesale Club Holdings, Inc. (a) 1,637 52 Casey's General Stores, Inc. 8,267 231 Chefs' Warehouse (The), Inc. (a) 8,803 240 Ingles Markets, Inc., Class A 11,402 2,172 Kroger (The) Co. 62,966 91 Performance Food Group Co. (a) 4,685 193 Sprouts Farmers Market, Inc. (a) 3,735 307 US Foods Holding Corp. (a) 12,860 1,012 Walgreens Boots Alliance, Inc. 59,668 245 Weis Markets, Inc. 9,920 -------------- 194,460 -------------- FOOD PRODUCTS -- 1.7% 1,023 Archer-Daniels-Midland Co. 47,416 494 B&G Foods, Inc. (b) 8,857 297 Bunge Ltd. 17,092 457 Conagra Brands, Inc. 15,648 293 Darling Ingredients, Inc. (a) 8,227 363 Flowers Foods, Inc. 7,892 55 Fresh Del Monte Produce, Inc. 1,924 150 Freshpet, Inc. (a) 8,863 361 Hershey (The) Co. 53,060 267 Hostess Brands, Inc. (a) 3,882 257 Ingredion, Inc. 23,888 39 J&J Snack Foods Corp. 7,187 127 J.M. Smucker (The) Co. 13,225 173 Lamb Weston Holdings, Inc. 14,883 30 Lancaster Colony Corp. 4,803 131 Pilgrim's Pride Corp. (a) 4,286 40 Post Holdings, Inc. (a) 4,364 258 Simply Good Foods (The) Co. (a) 7,363 34 TreeHouse Foods, Inc. (a) 1,649 650 Tyson Foods, Inc., Class A 59,176 -------------- 313,685 -------------- GAS UTILITIES -- 0.3% 39 Chesapeake Utilities Corp. 3,737 448 National Fuel Gas Co. 20,850 93 New Jersey Resources Corp. 4,145 26 Northwest Natural Holding Co. 1,917 87 ONE Gas, Inc. 8,141 138 Southwest Gas Holdings, Inc. 10,484 96 Spire, Inc. 7,998 84 UGI Corp. 3,793 -------------- 61,065 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 1.4% 507 AngioDynamics, Inc. (a) $ 8,117 118 Cardiovascular Systems, Inc. (a) 5,734 78 CONMED Corp. 8,723 94 DexCom, Inc. (a) 20,562 191 Edwards Lifesciences Corp. (a) 44,558 73 Globus Medical, Inc., Class A (a) 4,298 100 Haemonetics Corp. (a) 11,490 40 Hill-Rom Holdings, Inc. 4,541 127 Insulet Corp. (a) 21,742 140 Integra LifeSciences Holdings Corp. (a) 8,159 75 Lantheus Holdings, Inc. (a) 1,538 55 LeMaitre Vascular, Inc. 1,977 28 Masimo Corp. (a) 4,426 87 Nevro Corp. (a) 10,226 281 Novocure Ltd. (a) 23,680 59 NuVasive, Inc. (a) 4,563 311 ResMed, Inc. 48,196 71 Tandem Diabetes Care, Inc. (a) 4,232 118 West Pharmaceutical Services, Inc. 17,739 -------------- 254,501 -------------- HEALTH CARE PROVIDERS & SERVICES -- 3.4% 94 Addus HomeCare Corp. (a) 9,139 128 Amedisys, Inc. (a) 21,366 130 AMN Healthcare Services, Inc. (a) 8,100 117 Anthem, Inc. 35,338 493 Brookdale Senior Living, Inc. (a) 3,584 297 Cardinal Health, Inc. 15,022 1,294 Centene Corp. (a) 81,354 50 Chemed Corp. 21,963 277 Cigna Corp. 56,644 49 CorVel Corp. (a) 4,281 785 Covetrus, Inc. (a) 10,362 666 CVS Health Corp. 49,477 74 DaVita, Inc. (a) 5,552 133 Encompass Health Corp. 9,213 39 Ensign Group (The), Inc. 1,769 275 Hanger, Inc. (a) 7,593 132 Henry Schein, Inc. (a) 8,807 164 Humana, Inc. 60,109 250 Laboratory Corp. of America Holdings (a) 42,292 111 LHC Group, Inc. (a) 15,291 30 Magellan Health, Inc. (a) 2,348 153 Molina Healthcare, Inc. (a) 20,761 68 National HealthCare Corp. 5,877 65 National Research Corp. 4,286 1,751 Option Care Health, Inc. (a) 6,531 419 Patterson Cos., Inc. 8,581 131 Quest Diagnostics, Inc. 13,989 209 R1 RCM, Inc. (a) 2,713 520 RadNet, Inc. (a) 10,556 113 Select Medical Holdings Corp. (a) 2,637 449 Tivity Health, Inc. (a) 9,135 Page 20 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) HEALTH CARE PROVIDERS & SERVICES (CONTINUED) 64 UnitedHealth Group, Inc. $ 18,815 282 Universal Health Services, Inc., Class B 40,456 43 US Physical Therapy, Inc. 4,917 -------------- 618,858 -------------- HEALTH CARE TECHNOLOGY -- 0.3% 108 HMS Holdings Corp. (a) 3,197 570 Inovalon Holdings, Inc., Class A (a) 10,728 92 Inspire Medical Systems, Inc. (a) 6,827 34 Tabula Rasa HealthCare, Inc. (a) (b) 1,655 124 Teladoc Health, Inc. (a) 10,381 92 Veeva Systems, Inc., Class A (a) 12,941 -------------- 45,729 -------------- HOTELS, RESTAURANTS & LEISURE -- 2.8% 193 Aramark 8,376 144 BJ's Restaurants, Inc. 5,466 99 Bloomin' Brands, Inc. 2,185 87 Brinker International, Inc. 3,654 1,601 Carnival Corp. 81,379 90 Cheesecake Factory (The), Inc. 3,497 83 Chipotle Mexican Grill, Inc. (a) 69,480 94 Choice Hotels International, Inc. 9,722 170 Churchill Downs, Inc. 23,324 77 Cracker Barrel Old Country Store, Inc. 11,838 118 Darden Restaurants, Inc. 12,863 410 Denny's Corp. (a) 8,151 106 Dunkin' Brands Group, Inc. 8,007 175 Hilton Grand Vacations, Inc. (a) 6,018 25 Hyatt Hotels Corp., Class A 2,243 41 Jack in the Box, Inc. 3,199 223 Lindblad Expeditions Holdings, Inc. (a) 3,646 505 MGM Resorts International 16,801 406 Norwegian Cruise Line Holdings Ltd. (a) 23,715 716 Playa Hotels & Resorts N.V. (a) 6,014 517 Royal Caribbean Cruises Ltd. 69,025 92 Scientific Games Corp. (a) 2,464 95 Shake Shack, Inc., Class A (a) 5,659 792 Starbucks Corp. 69,633 160 Texas Roadhouse, Inc. 9,011 327 Twin River Worldwide Holdings, Inc. 8,388 18 Vail Resorts, Inc. 4,317 841 Wendy's (The) Co. 18,679 43 Wingstop, Inc. 3,708 91 Wyndham Destinations, Inc. 4,704 162 Wyndham Hotels & Resorts, Inc. 10,175 -------------- 515,341 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- HOUSEHOLD DURABLES -- 2.1% 244 Century Communities, Inc. (a) $ 6,673 1,062 D.R. Horton, Inc. 56,021 133 Helen of Troy Ltd. (a) 23,912 163 Installed Building Products, Inc. (a) 11,226 220 KB Home 7,539 56 La-Z-Boy, Inc. 1,763 205 Leggett & Platt, Inc. 10,420 1,253 Lennar Corp., Class A 69,905 112 LGI Homes, Inc. (a) 7,913 217 M.D.C. Holdings, Inc. 8,281 248 M/I Homes, Inc. (a) 9,759 80 Meritage Homes Corp. (a) 4,889 169 Mohawk Industries, Inc. (a) 23,048 6 NVR, Inc. (a) 22,850 575 PulteGroup, Inc. 22,310 186 Skyline Champion Corp. (a) 5,896 288 Taylor Morrison Home Corp. (a) 6,296 272 Tempur Sealy International, Inc. (a) 23,680 512 Toll Brothers, Inc. 20,229 97 TopBuild Corp. (a) 9,999 621 TRI Pointe Group, Inc. (a) 9,675 235 Tupperware Brands Corp. 2,016 106 Whirlpool Corp. 15,638 367 William Lyon Homes, Class A (a) 7,333 -------------- 387,271 -------------- HOUSEHOLD PRODUCTS -- 0.2% 202 Central Garden & Pet Co., Class A (a) 5,931 43 Energizer Holdings, Inc. 2,159 197 Kimberly-Clark Corp. 27,097 20 WD-40 Co. 3,883 -------------- 39,070 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.3% 257 AES Corp. 5,114 212 NRG Energy, Inc. 8,427 101 Ormat Technologies, Inc. 7,526 347 Pattern Energy Group, Inc., Class A 9,284 512 TerraForm Power, Inc., Class A 7,880 629 Vistra Energy Corp. 14,461 -------------- 52,692 -------------- INDUSTRIAL CONGLOMERATES -- 0.1% 87 Carlisle Cos., Inc. 14,080 -------------- INSURANCE -- 4.1% 268 Aflac, Inc. 14,177 258 Allstate (The) Corp. 29,012 154 American Equity Investment Life Holding Co. 4,609 78 American Financial Group, Inc. 8,553 503 American International Group, Inc. 25,819 60 American National Insurance Co. 7,061 1,667 Arch Capital Group Ltd. (a) 71,498 156 Arthur J. Gallagher & Co. 14,856 33 Assurant, Inc. 4,326 472 Assured Guaranty Ltd. 23,137 See Notes to Financial Statements Page 21 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) INSURANCE (CONTINUED) 499 Athene Holding Ltd., Class A (a) $ 23,468 63 Axis Capital Holdings Ltd. 3,745 415 Brighthouse Financial, Inc. (a) 16,280 466 Brown & Brown, Inc. 18,398 120 Cincinnati Financial Corp. 12,618 56 eHealth, Inc. (a) 5,380 171 Employers Holdings, Inc. 7,139 49 Enstar Group Ltd. (a) 10,136 45 Erie Indemnity Co., Class A 7,470 16 Everest Re Group Ltd. 4,429 31 FBL Financial Group, Inc., Class A 1,827 378 Fidelity National Financial, Inc. 17,142 285 First American Financial Corp. 16,621 88 Globe Life, Inc. 9,262 151 Goosehead Insurance, Inc., Class A 6,402 31 Hanover Insurance Group (The), Inc. 4,237 462 Hartford Financial Services Group (The), Inc. 28,076 109 James River Group Holdings Ltd. 4,492 216 Kemper Corp. 16,740 90 Kinsale Capital Group, Inc. 9,149 696 Lincoln National Corp. 41,071 100 Mercury General Corp. 4,873 891 MetLife, Inc. 45,414 325 National General Holdings Corp. 7,183 28 National Western Life Group, Inc., Class A 8,145 713 Old Republic International Corp. 15,950 99 Primerica, Inc. 12,925 490 Principal Financial Group, Inc. 26,950 362 Progressive (The) Corp. 26,205 311 Prudential Financial, Inc. 29,153 79 Reinsurance Group of America, Inc. 12,882 109 RenaissanceRe Holdings Ltd. 21,366 55 Safety Insurance Group, Inc. 5,089 56 Selective Insurance Group, Inc. 3,651 188 Travelers (The) Cos., Inc. 25,747 249 Universal Insurance Holdings, Inc. 6,970 565 Unum Group 16,475 7 White Mountains Insurance Group Ltd. 7,809 -------------- 743,917 -------------- INTERACTIVE MEDIA & SERVICES -- 0.9% 11 Alphabet, Inc., Class A (a) 14,733 235 Match Group, Inc. (a) (b) 19,296 4,430 Snap, Inc., Class A (a) 72,342 109 TripAdvisor, Inc. 3,311 1,699 Twitter, Inc. (a) 54,453 54 Yelp, Inc. (a) 1,881 -------------- 166,016 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- INTERNET & DIRECT MARKETING RETAIL -- 0.2% 126 1-800-Flowers.com, Inc., Class A (a) $ 1,827 359 eBay, Inc. 12,964 74 Etsy, Inc. (a) 3,278 2,037 Qurate Retail, Inc., Series A (a) 17,172 100 Stamps.com, Inc. (a) 8,352 -------------- 43,593 -------------- IT SERVICES -- 2.7% 613 Akamai Technologies, Inc. (a) 52,951 98 Alliance Data Systems Corp. 10,996 138 Black Knight, Inc. (a) 8,898 296 Booz Allen Hamilton Holding Corp. 21,054 36 CACI International, Inc., Class A (a) 9,000 104 Cass Information Systems, Inc. 6,005 929 Cognizant Technology Solutions Corp., Class A 57,616 181 CSG Systems International, Inc. 9,372 2,373 DXC Technology Co. 89,201 92 EPAM Systems, Inc. (a) 19,519 29 Euronet Worldwide, Inc. (a) 4,569 120 EVERTEC, Inc. 4,085 84 ExlService Holdings, Inc. (a) 5,835 270 Fiserv, Inc. (a) 31,220 434 Genpact Ltd. 18,302 29 Jack Henry & Associates, Inc. 4,224 514 KBR, Inc. 15,677 245 Leidos Holdings, Inc. 23,983 217 LiveRamp Holdings, Inc. (a) 10,431 52 Mastercard, Inc., Class A 15,527 109 MAXIMUS, Inc. 8,108 35 MongoDB, Inc. (a) 4,606 271 NIC, Inc. 6,057 242 Perficient, Inc. (a) 11,149 322 Perspecta, Inc. 8,514 188 Sabre Corp. 4,219 183 Sykes Enterprises, Inc. (a) 6,769 156 TTEC Holdings, Inc. 6,181 544 Western Union (The) Co. 14,568 21 WEX, Inc. (a) 4,399 -------------- 493,035 -------------- LEISURE PRODUCTS -- 0.2% 71 Acushnet Holdings Corp. 2,307 161 Brunswick Corp. 9,657 385 Callaway Golf Co. 8,162 143 Polaris, Inc. 14,543 134 Sturm Ruger & Co., Inc. 6,302 -------------- 40,971 -------------- LIFE SCIENCES TOOLS & SERVICES -- 0.3% 13 Bio-Rad Laboratories, Inc., Class A (a) 4,811 191 Bruker Corp. 9,735 Page 22 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) LIFE SCIENCES TOOLS & SERVICES (CONTINUED) 32 Charles River Laboratories International, Inc. (a) $ 4,888 111 Medpace Holdings, Inc. (a) 9,331 42 PRA Health Sciences, Inc. (a) 4,668 164 Repligen Corp. (a) 15,170 -------------- 48,603 -------------- MACHINERY -- 3.5% 222 AGCO Corp. 17,149 32 Alamo Group, Inc. 4,018 83 Albany International Corp., Class A 6,301 179 Allison Transmission Holdings, Inc. 8,649 270 Altra Industrial Motion Corp. 9,777 72 Barnes Group, Inc. 4,461 208 Crane Co. 17,967 430 Cummins, Inc. 76,953 166 Deere & Co. 28,761 81 Donaldson Co., Inc. 4,667 27 EnPro Industries, Inc. 1,806 70 ESCO Technologies, Inc. 6,475 439 Evoqua Water Technologies Corp. (a) 8,319 285 Federal Signal Corp. 9,191 90 Flowserve Corp. 4,479 1,021 Fortive Corp. 77,994 39 Franklin Electric Co., Inc. 2,235 54 Gorman-Rupp (The) Co. 2,025 310 Greenbrier (The) Cos., Inc. 10,053 181 Hillenbrand, Inc. 6,029 34 Hyster-Yale Materials Handling, Inc. 2,005 227 Ingersoll-Rand PLC 30,173 206 ITT, Inc. 15,225 42 John Bean Technologies Corp. 4,732 304 Kennametal, Inc. 11,215 97 Lincoln Electric Holdings, Inc. 9,383 101 Meritor, Inc. (a) 2,645 65 Mueller Industries, Inc. 2,064 665 Mueller Water Products, Inc., Class A 7,967 29 Nordson Corp. 4,722 277 Oshkosh Corp. 26,218 1,028 PACCAR, Inc. 81,315 155 Parker-Hannifin Corp. 31,902 25 RBC Bearings, Inc. (a) 3,959 134 Snap-on, Inc. 22,700 47 SPX FLOW, Inc. (a) 2,297 51 Standex International Corp. 4,047 43 Timken (The) Co. 2,421 229 Toro (The) Co. 18,244 122 TriMas Corp. (a) 3,832 285 Trinity Industries, Inc. 6,313 515 Wabash National Corp. 7,565 SHARES DESCRIPTION VALUE ------------------------------------------------------------- MACHINERY (CONTINUED) 60 Watts Water Technologies, Inc., Class A $ 5,986 156 Woodward, Inc. 18,477 -------------- 632,716 -------------- MARINE -- 0.1% 102 Kirby Corp. (a) 9,132 149 Matson, Inc. 6,079 -------------- 15,211 -------------- MEDIA -- 2.9% 733 Altice USA, Inc., Class A (a) 20,040 114 AMC Networks, Inc., Class A (a) 4,503 13 Cable One, Inc. 19,350 278 Cardlytics, Inc. (a) 17,475 1,662 Central European Media Enterprises Ltd., Class A (a) 7,529 136 Charter Communications, Inc., Class A (a) 65,971 932 Comcast Corp., Class A 41,912 2,628 Discovery, Inc., Class A (a) 86,041 493 DISH Network Corp., Class A (a) 17,487 2,220 Fox Corp., Class A 82,295 229 Gray Television, Inc. (a) 4,910 585 Interpublic Group of Cos. (The), Inc. 13,513 127 John Wiley & Sons, Inc., Class A 6,162 219 Liberty Latin America Ltd., Class C (a) 4,262 302 News Corp., Class A 4,270 82 Nexstar Media Group, Inc., Class A 9,614 49 Scholastic Corp. 1,884 175 Sinclair Broadcast Group, Inc., Class A 5,835 4,479 Sirius XM Holdings, Inc. 32,025 249 TechTarget, Inc. (a) 6,499 481 TEGNA, Inc. 8,028 1,734 ViacomCBS, Inc., Class B 72,776 -------------- 532,381 -------------- METALS & MINING -- 1.5% 823 AK Steel Holding Corp. (a) 2,708 369 Allegheny Technologies, Inc. (a) 7,624 108 Carpenter Technology Corp. 5,376 1,035 Cleveland-Cliffs, Inc. (b) 8,694 537 Commercial Metals Co. 11,959 4,388 Freeport-McMoRan, Inc. 57,571 38 Kaiser Aluminum Corp. 4,214 1,375 Nucor Corp. 77,385 211 Reliance Steel & Aluminum Co. 25,269 170 Royal Gold, Inc. 20,782 705 Steel Dynamics, Inc. 23,998 809 United States Steel Corp. (b) 9,231 478 Warrior Met Coal, Inc. 10,100 52 Worthington Industries, Inc. 2,193 -------------- 267,104 -------------- See Notes to Financial Statements Page 23 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) MORTGAGE REAL ESTATE INVESTMENT TRUSTS -- 0.2% 195 Apollo Commercial Real Estate Finance, Inc. $ 3,567 142 Arbor Realty Trust, Inc. 2,038 117 Blackstone Mortgage Trust, Inc., Class A 4,355 100 Granite Point Mortgage Trust, Inc. 1,838 96 KKR Real Estate Finance Trust, Inc. 1,960 1,015 MFA Financial, Inc. 7,765 336 PennyMac Mortgage Investment Trust 7,489 117 Ready Capital Corp. 1,804 341 Redwood Trust, Inc. 5,640 174 Starwood Property Trust, Inc. 4,326 94 TPG RE Finance Trust, Inc. 1,905 -------------- 42,687 -------------- MULTILINE RETAIL -- 1.0% 381 Big Lots, Inc. 10,942 141 Dillard's, Inc., Class A (b) 10,361 440 Dollar General Corp. 68,631 423 Kohl's Corp. 21,552 1,352 Macy's, Inc. 22,984 374 Nordstrom, Inc. 15,308 262 Target Corp. 33,591 -------------- 183,369 -------------- MULTI-UTILITIES -- 0.9% 116 Avista Corp. 5,578 55 Black Hills Corp. 4,320 464 CenterPoint Energy, Inc. 12,653 148 Consolidated Edison, Inc. 13,390 105 DTE Energy Co. 13,636 447 MDU Resources Group, Inc. 13,280 140 NiSource, Inc. 3,898 50 NorthWestern Corp. 3,584 226 Public Service Enterprise Group, Inc. 13,345 95 Sempra Energy 14,391 118 Unitil Corp. 7,295 589 WEC Energy Group, Inc. 54,323 -------------- 159,693 -------------- OIL, GAS & CONSUMABLE FUELS -- 5.4% 3,092 Antero Resources Corp. (a) 8,812 492 Apache Corp. 12,590 126 Arch Coal, Inc., Class A 9,039 998 Berry Petroleum Corp. 9,411 2,152 Callon Petroleum Co. (a) 10,394 6,624 Chesapeake Energy Corp. (a) 5,469 590 Chevron Corp. 71,101 438 Cimarex Energy Co. 22,991 1,286 CNX Resources Corp. (a) 11,381 719 Comstock Resources, Inc. (a) (b) 5,917 1,228 ConocoPhillips 79,857 SHARES DESCRIPTION VALUE ------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (CONTINUED) 2,273 Continental Resources, Inc. $ 77,964 95 CVR Energy, Inc. 3,841 103 Delek US Holdings, Inc. 3,454 873 Devon Energy Corp. 22,672 943 EOG Resources, Inc. 78,986 1,580 EQT Corp. 17,222 793 Exxon Mobil Corp. 55,336 391 HollyFrontier Corp. 19,828 299 Kosmos Energy Ltd. 1,704 1,713 Marathon Oil Corp. 23,263 922 Marathon Petroleum Corp. 55,551 950 Murphy Oil Corp. 25,460 374 Noble Energy, Inc. 9,290 4,765 Northern Oil and Gas, Inc. (a) 11,150 2,699 Oasis Petroleum, Inc. (a) 8,799 1,574 Occidental Petroleum Corp. 64,865 327 Par Pacific Holdings, Inc. (a) 7,599 206 PBF Energy, Inc., Class A 6,462 337 PDC Energy, Inc. (a) 8,819 634 Peabody Energy Corp. 5,782 684 Phillips 66 76,204 2,019 QEP Resources, Inc. 9,086 964 SM Energy Co. 10,835 4,839 Southwestern Energy Co. (a) 11,710 459 Talos Energy, Inc. (a) 13,839 105 Targa Resources Corp. 4,287 657 Valero Energy Corp. 61,528 1,163 Whiting Petroleum Corp. (a) (b) 8,536 93 World Fuel Services Corp. 4,038 1,984 WPX Energy, Inc. (a) 27,260 -------------- 982,332 -------------- PAPER & FOREST PRODUCTS -- 0.1% 261 Domtar Corp. 9,981 29 Neenah, Inc. 2,042 199 Schweitzer-Mauduit International, Inc. 8,356 -------------- 20,379 -------------- PERSONAL PRODUCTS -- 0.2% 320 elf Beauty, Inc. (a) 5,162 70 Estee Lauder (The) Cos., Inc., Class A 14,458 111 Herbalife Nutrition Ltd. (a) 5,291 27 Inter Parfums, Inc. 1,963 88 Nu Skin Enterprises, Inc., Class A 3,606 55 USANA Health Sciences, Inc. (a) 4,320 -------------- 34,800 -------------- PHARMACEUTICALS -- 1.2% 188 Amphastar Pharmaceuticals, Inc. (a) 3,627 26 ANI Pharmaceuticals, Inc. (a) 1,603 346 Arvinas, Inc. (a) 14,217 828 Bristol-Myers Squibb Co. 53,149 529 Corcept Therapeutics, Inc. (a) 6,401 463 Horizon Therapeutics PLC (a) 16,761 Page 24 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) PHARMACEUTICALS (CONTINUED) 164 Jazz Pharmaceuticals PLC (a) $ 24,482 850 Mylan N.V. (a) 17,085 75 Perrigo Co., PLC 3,875 779 Pfizer, Inc. 30,521 337 Zoetis, Inc. 44,602 -------------- 216,323 -------------- PROFESSIONAL SERVICES -- 1.3% 30 ASGN, Inc. (a) 2,129 84 Barrett Business Services, Inc. 7,599 79 CBIZ, Inc. (a) 2,130 94 CoStar Group, Inc. (a) 56,240 80 Exponent, Inc. 5,521 198 FTI Consulting, Inc. (a) 21,911 22 ICF International, Inc. 2,016 386 Kelly Services, Inc., Class A 8,716 49 Kforce, Inc. 1,945 193 Korn Ferry 8,183 249 ManpowerGroup, Inc. 24,178 226 Robert Half International, Inc. 14,272 518 TransUnion 44,346 135 TriNet Group, Inc. (a) 7,642 443 TrueBlue, Inc. (a) 10,658 177 Verisk Analytics, Inc. 26,433 -------------- 243,919 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.4% 528 CBRE Group, Inc., Class A (a) 32,361 121 Jones Lang LaSalle, Inc. 21,065 53 Marcus & Millichap, Inc. (a) 1,974 412 Newmark Group, Inc., Class A 5,544 1,118 Realogy Holdings Corp. 10,822 -------------- 71,766 -------------- ROAD & RAIL -- 0.9% 43 AMERCO 16,160 307 ArcBest Corp. 8,473 261 Heartland Express, Inc. 5,494 270 Hertz Global Holdings, Inc. (a) 4,253 76 J.B. Hunt Transport Services, Inc. 8,875 105 Kansas City Southern 16,082 578 Knight-Swift Transportation Holdings, Inc. 20,716 75 Landstar System, Inc. 8,540 360 Marten Transport Ltd. 7,736 165 Old Dominion Freight Line, Inc. 31,314 180 Ryder System, Inc. 9,776 40 Saia, Inc. (a) 3,725 344 Schneider National, Inc., Class B 7,506 321 Universal Logistics Holdings, Inc. 6,086 211 Werner Enterprises, Inc. 7,678 -------------- 162,414 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 4.7% 89 Ambarella, Inc. (a) 5,390 821 Amkor Technology, Inc. (a) 10,673 SHARES DESCRIPTION VALUE ------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONTINUED) 842 Applied Materials, Inc. $ 51,396 66 Cabot Microelectronics Corp. 9,525 232 Diodes, Inc. (a) 13,078 420 Enphase Energy, Inc. (a) (b) 10,975 446 Entegris, Inc. 22,340 401 FormFactor, Inc. (a) 10,414 303 Impinj, Inc. (a) 7,836 122 Inphi Corp. (a) 9,030 1,358 Intel Corp. 81,276 439 KLA Corp. 78,217 242 Lam Research Corp. 70,761 306 Lattice Semiconductor Corp. (a) 5,857 261 MACOM Technology Solutions Holdings, Inc. (a) 6,943 2,244 Marvell Technology Group Ltd. 59,601 603 Microchip Technology, Inc. 63,146 1,633 Micron Technology, Inc. (a) 87,823 91 MKS Instruments, Inc. 10,011 108 Monolithic Power Systems, Inc. 19,226 219 ON Semiconductor Corp. (a) 5,339 858 Photronics, Inc. (a) 13,522 41 Power Integrations, Inc. 4,055 170 Qorvo, Inc. (a) 19,759 113 Silicon Laboratories, Inc. (a) 13,106 883 Skyworks Solutions, Inc. 106,737 681 SunPower Corp. (a) 5,312 363 Teradyne, Inc. 24,753 108 Texas Instruments, Inc. 13,855 50 Universal Display Corp. 10,303 271 Xperi Corp. 5,013 -------------- 855,272 -------------- SOFTWARE -- 2.0% 134 ACI Worldwide, Inc. (a) 5,077 156 Alteryx, Inc., Class A (a) (b) 15,611 190 ANSYS, Inc. (a) 48,908 59 Appfolio, Inc., Class A (a) 6,487 157 Appian Corp. (a) (b) 5,999 68 Aspen Technology, Inc. (a) 8,223 187 Avalara, Inc. (a) 13,698 183 Avaya Holdings Corp. (a) 2,470 46 Blackbaud, Inc. 3,662 130 Coupa Software, Inc. (a) 19,013 271 DocuSign, Inc. (a) 20,084 89 Ebix, Inc. 2,973 42 Fair Isaac Corp. (a) 15,737 104 Five9, Inc. (a) 6,820 49 ForeScout Technologies, Inc. (a) 1,607 40 Guidewire Software, Inc. (a) 4,391 92 j2 Global, Inc. 8,621 209 LivePerson, Inc. (a) 7,733 208 Manhattan Associates, Inc. (a) 16,588 856 MobileIron, Inc. (a) 4,160 202 Model N, Inc. (a) 7,084 129 Paylocity Holding Corp. (a) 15,586 98 Proofpoint, Inc. (a) 11,248 31 PROS Holdings, Inc. (a) 1,858 See Notes to Financial Statements Page 25 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) SOFTWARE (CONTINUED) 160 Q2 Holdings, Inc. (a) $ 12,973 134 RealPage, Inc. (a) 7,203 134 RingCentral, Inc., Class A (a) 22,602 81 SS&C Technologies Holdings, Inc. 4,973 306 Synopsys, Inc. (a) 42,595 22 Trade Desk (The), Inc., Class A (a) 5,715 64 Tyler Technologies, Inc. (a) 19,201 -------------- 368,900 -------------- SPECIALTY RETAIL -- 3.1% 261 Aaron's, Inc. 14,906 599 Abercrombie & Fitch Co., Class A 10,357 25 Advance Auto Parts, Inc. 4,004 576 American Eagle Outfitters, Inc. 8,467 36 Asbury Automotive Group, Inc. (a) 4,024 414 AutoNation, Inc. (a) 20,133 26 AutoZone, Inc. (a) 30,974 609 Best Buy Co., Inc. 53,470 214 Boot Barn Holdings, Inc. (a) 9,529 363 Buckle (The), Inc. (b) 9,816 105 Burlington Stores, Inc. (a) 23,943 113 Carvana Co. (a) 10,402 48 Children's Place (The), Inc. 3,001 376 Conn's, Inc. (a) 4,659 218 Designer Brands, Inc., Class A 3,431 183 Dick's Sporting Goods, Inc. 9,057 67 Five Below, Inc. (a) 8,567 411 Floor & Decor Holdings, Inc., Class A (a) 20,883 487 Foot Locker, Inc. 18,988 1,210 Gap (The), Inc. 21,393 61 Group 1 Automotive, Inc. 6,100 241 Home Depot (The), Inc. 52,630 429 L Brands, Inc. 7,773 71 Lithia Motors, Inc., Class A 10,437 382 Michaels (The) Cos., Inc. (a) 3,090 44 Murphy USA, Inc. (a) 5,148 35 O'Reilly Automotive, Inc. (a) 15,339 4,257 Office Depot, Inc. 11,664 444 Penske Automotive Group, Inc. 22,298 290 Rent-A-Center, Inc. 8,364 55 RH (a) 11,742 382 Ross Stores, Inc. 44,472 251 Sally Beauty Holdings, Inc. (a) 4,581 111 Signet Jewelers Ltd. 2,413 181 Sleep Number Corp. (a) 8,912 178 Sonic Automotive, Inc., Class A 5,518 136 Tiffany & Co. 18,176 332 Urban Outfitters, Inc. (a) 9,220 247 Williams-Sonoma, Inc. 18,140 236 Zumiez, Inc. (a) 8,151 -------------- 564,172 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.1% 324 Dell Technologies, Inc., Class C (a) 16,650 834 Diebold Nixdorf, Inc. (a) 8,807 SHARES DESCRIPTION VALUE ------------------------------------------------------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS (CONTINUED) 1,847 Hewlett Packard Enterprise Co. $ 29,293 740 HP, Inc. 15,207 399 NCR Corp. (a) 14,029 248 Pure Storage, Inc., Class A (a) 4,243 1,301 Seagate Technology PLC 77,410 702 Xerox Holdings Corp. 25,883 -------------- 191,522 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.0% 184 Carter's, Inc. 20,119 43 Columbia Sportswear Co. 4,308 269 Crocs, Inc. (a) 11,268 57 Deckers Outdoor Corp. (a) 9,625 597 Fossil Group, Inc. (a) 4,704 362 G-III Apparel Group Ltd. (a) 12,127 823 Hanesbrands, Inc. 12,221 106 Kontoor Brands, Inc. 4,451 78 Oxford Industries, Inc. 5,883 238 PVH Corp. 25,026 176 Ralph Lauren Corp. 20,631 450 Skechers U.S.A., Inc., Class A (a) 19,435 807 Tapestry, Inc. 21,765 132 Wolverine World Wide, Inc. 4,454 -------------- 176,017 -------------- THRIFTS & MORTGAGE FINANCE -- 0.9% 135 Axos Financial, Inc. (a) 4,088 237 Columbia Financial, Inc. (a) 4,015 264 Essent Group Ltd. 13,725 114 Federal Agricultural Mortgage Corp., Class C 9,519 50 Flagstar Bancorp, Inc. 1,913 205 HomeStreet, Inc. (a) 6,970 14 LendingTree, Inc. (a) 4,248 398 Meridian Bancorp, Inc. 7,996 286 Meta Financial Group, Inc. 10,442 1,670 MGIC Investment Corp. 23,664 879 Mr. Cooper Group, Inc. (a) 10,996 670 New York Community Bancorp, Inc. 8,053 142 NMI Holdings, Inc., Class A (a) 4,712 349 Northfield Bancorp, Inc. 5,919 123 PennyMac Financial Services, Inc. 4,187 152 Provident Financial Services, Inc. 3,747 920 Radian Group, Inc. 23,147 229 TrustCo Bank Corp. NY 1,985 133 Walker & Dunlop, Inc. 8,603 202 Washington Federal, Inc. 7,403 -------------- 165,332 -------------- TOBACCO -- 0.3% 685 Altria Group, Inc. 34,188 136 Universal Corp. 7,760 627 Vector Group Ltd. 8,396 -------------- 50,344 -------------- Page 26 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) TRADING COMPANIES & DISTRIBUTORS -- 1.1% 502 Air Lease Corp. $ 23,855 416 Aircastle Ltd. 13,316 111 Beacon Roofing Supply, Inc. (a) 3,550 285 BMC Stock Holdings, Inc. (a) 8,177 362 Foundation Building Materials, Inc. (a) 7,005 96 GATX Corp. 7,953 195 GMS, Inc. (a) 5,281 129 H&E Equipment Services, Inc. 4,312 322 HD Supply Holdings, Inc. (a) 12,951 120 Herc Holdings, Inc. (a) 5,873 616 MRC Global, Inc. (a) 8,402 77 MSC Industrial Direct Co., Inc., Class A 6,042 651 NOW, Inc. (a) 7,317 242 Rush Enterprises, Inc., Class A 11,253 101 SiteOne Landscape Supply, Inc. (a) 9,156 276 Triton International Ltd. 11,095 168 United Rentals, Inc. (a) 28,017 25 Watsco, Inc. 4,504 195 WESCO International, Inc. (a) 11,581 -------------- 189,640 -------------- TRANSPORTATION INFRASTRUCTURE -- 0.0% 142 Macquarie Infrastructure Corp. 6,083 -------------- WATER UTILITIES -- 0.2% 83 American States Water Co. 7,191 113 American Water Works Co., Inc. 13,882 187 Aqua America, Inc. 8,778 35 California Water Service Group 1,805 57 Middlesex Water Co. 3,623 27 SJW Group 1,919 -------------- 37,198 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.3% 362 Telephone & Data Systems, Inc. 9,206 355 T-Mobile US, Inc. (a) 27,839 248 United States Cellular Corp. (a) 8,985 -------------- 46,030 -------------- TOTAL COMMON STOCKS -- 99.9% 18,076,219 (Cost $15,989,273) -------------- MONEY MARKET FUNDS -- 0.3% 17,205 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 1.59% (c) (d) 17,205 45,894 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 1.50% (c) 45,894 -------------- TOTAL MONEY MARKET FUNDS -- 0.3% 63,099 (Cost $63,099) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 0.6% $ 104,437 BNP Paribas S.A., 1.56% (c), dated 12/31/19, due 01/02/20, with a maturity value of $104,446. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/26. The value of the collateral including accrued interest is $106,916. (d) $ 104,437 (Cost $104,437) -------------- TOTAL INVESTMENTS -- 100.8% 18,243,755 (Cost $16,156,809) (e) NET OTHER ASSETS AND LIABILITIES -- (0.8)% (144,163) -------------- NET ASSETS -- 100.0% $ 18,099,592 ============== (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 $120,507 and the total value of the collateral held by the Fund is $121,642. (c) Rate shown reflects yield as of December 31, 2019. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $16,328,965. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $2,416,267 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $501,477. The net unrealized appreciation was $1,914,790. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ----------------------------------------------------- Common Stocks* $ 18,076,219 $ -- $ -- Money Market Funds 63,099 -- -- Repurchase Agreements -- 104,437 -- ----------------------------------------------------- Total Investments $ 18,139,318 $ 104,437 $ -- ===================================================== * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 27 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 --------------------------------- 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) $ 120,507 Non-cash Collateral(2) (120,507) -------------- 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, 2019, 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) $ 104,437 Non-cash Collateral(4) (104,437) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2019, 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, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% AEROSPACE & DEFENSE -- 2.2% 4,062 Arconic, Inc. $ 124,988 384 Boeing (The) Co. 125,092 708 General Dynamics Corp. 124,856 1,084 HEICO Corp. 123,738 640 L3Harris Technologies, Inc. 126,637 328 Lockheed Martin Corp. 127,717 369 Northrop Grumman Corp. 126,925 374 Teledyne Technologies, Inc. (a) 129,606 2,802 Textron, Inc. 124,969 216 TransDigm Group, Inc. 120,960 849 United Technologies Corp. 127,146 -------------- 1,382,634 -------------- AIR FREIGHT & LOGISTICS -- 0.8% 1,648 C.H. Robinson Worldwide, Inc. 128,874 1,653 Expeditors International of Washington, Inc. 128,967 857 FedEx Corp. 129,587 1,072 United Parcel Service, Inc., Class B 125,488 -------------- 512,916 -------------- AIRLINES -- 0.8% 4,394 American Airlines Group, Inc. 126,020 2,140 Delta Air Lines, Inc. 125,147 2,339 Southwest Airlines Co. 126,259 1,411 United Airlines Holdings, Inc. (a) 124,295 -------------- 501,721 -------------- AUTO COMPONENTS -- 0.2% 1,312 Aptiv PLC 124,601 -------------- AUTOMOBILES -- 0.6% 13,356 Ford Motor Co. 124,211 3,401 General Motors Co. 124,476 312 Tesla, Inc. (a) 130,519 -------------- 379,206 -------------- BANKS -- 3.2% 3,615 Bank of America Corp. 127,320 1,610 Citigroup, Inc. 128,623 3,111 Citizens Financial Group, Inc. 126,338 1,767 Comerica, Inc. 126,782 4,050 Fifth Third Bancorp 124,497 1,081 First Republic Bank 126,963 8,295 Huntington Bancshares, Inc. 125,089 918 JPMorgan Chase & Co. 127,969 6,192 KeyCorp 125,326 745 M&T Bank Corp. 126,464 790 PNC Financial Services Group (The), Inc. 126,108 7,314 Regions Financial Corp. 125,508 502 SVB Financial Group (a) 126,022 2,251 Truist Financial Corp. 126,776 2,108 U.S. Bancorp 124,983 2,367 Wells Fargo & Co. 127,345 -------------- 2,022,113 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- BEVERAGES -- 1.2% 1,904 Brown-Forman Corp., Class B $ 128,710 2,300 Coca-Cola (The) Co. 127,305 672 Constellation Brands, Inc., Class A 127,512 2,316 Molson Coors Brewing Co., Class B 124,832 1,990 Monster Beverage Corp. (a) 126,465 919 PepsiCo, Inc. 125,600 -------------- 760,424 -------------- BIOTECHNOLOGY -- 2.4% 1,394 AbbVie, Inc. 123,425 1,163 Alexion Pharmaceuticals, Inc. (a) 125,778 525 Amgen, Inc. 126,562 421 Biogen, Inc. (a) 124,923 1,505 BioMarin Pharmaceutical, Inc. (a) 127,248 1,311 Exact Sciences Corp. (a) 121,241 1,920 Gilead Sciences, Inc. 124,762 1,413 Incyte Corp. (a) 123,383 339 Regeneron Pharmaceuticals, Inc. (a) 127,288 1,005 Sarepta Therapeutics, Inc. (a) 129,685 1,100 Seattle Genetics, Inc. (a) 125,686 579 Vertex Pharmaceuticals, Inc. (a) 126,772 -------------- 1,506,753 -------------- BUILDING PRODUCTS -- 0.8% 1,018 Allegion PLC 126,782 3,094 Johnson Controls International PLC 125,957 521 Lennox International, Inc. 127,108 2,666 Masco Corp. 127,941 -------------- 507,788 -------------- CAPITAL MARKETS -- 4.8% 753 Ameriprise Financial, Inc. 125,435 2,499 Bank of New York Mellon (The) Corp. 125,775 253 BlackRock, Inc. 127,183 2,293 Blackstone Group (The), Inc., Class A 128,270 1,070 Cboe Global Markets, Inc. 128,400 2,629 Charles Schwab (The) Corp. 125,035 619 CME Group, Inc. 124,246 2,767 E*TRADE Financial Corp. 125,539 475 FactSet Research Systems, Inc. 127,442 4,868 Franklin Resources, Inc. 126,471 551 Goldman Sachs Group (The), Inc. 126,691 1,360 Intercontinental Exchange, Inc. 125,868 4,278 KKR & Co., Inc., Class A 124,789 335 MarketAxess Holdings, Inc. 127,002 531 Moody's Corp. 126,065 2,483 Morgan Stanley 126,931 491 MSCI, Inc. 126,766 1,177 Nasdaq, Inc. 126,057 1,186 Northern Trust Corp. 126,001 1,391 Raymond James Financial, Inc. 124,439 467 S&P Global, Inc. 127,514 1,595 State Street Corp. 126,165 1,035 T. Rowe Price Group, Inc. 126,104 See Notes to Financial Statements Page 29 FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) CAPITAL MARKETS (CONTINUED) 2,523 TD Ameritrade Holding Corp. $ 125,393 -------------- 3,029,581 -------------- CHEMICALS -- 2.8% 540 Air Products and Chemicals, Inc. 126,895 1,029 Celanese Corp. 126,690 2,661 CF Industries Holdings, Inc. 127,036 4,525 Corteva, Inc. 133,759 2,314 Dow, Inc. 126,645 1,980 DuPont de Nemours, Inc. 127,116 1,595 Eastman Chemical Co. 126,420 666 Ecolab, Inc. 128,531 1,276 FMC Corp. 127,370 1,031 International Flavors & Fragrances, Inc. 133,020 1,347 LyondellBasell Industries N.V., Class A 127,265 5,993 Mosaic (The) Co. 129,689 955 PPG Industries, Inc. 127,483 219 Sherwin-Williams (The) Co. 127,795 -------------- 1,795,714 -------------- COMMERCIAL SERVICES & SUPPLIES -- 1.0% 469 Cintas Corp. 126,198 1,405 Copart, Inc. (a) 127,771 1,421 Republic Services, Inc. 127,364 3,811 Rollins, Inc. 126,373 1,124 Waste Management, Inc. 128,091 -------------- 635,797 -------------- COMMUNICATIONS EQUIPMENT -- 0.6% 613 Arista Networks, Inc. (a) 124,684 2,653 Cisco Systems, Inc. 127,238 784 Motorola Solutions, Inc. 126,334 -------------- 378,256 -------------- CONSTRUCTION & ENGINEERING -- 0.2% 1,407 Jacobs Engineering Group, Inc. 126,391 -------------- CONSTRUCTION MATERIALS -- 0.4% 464 Martin Marietta Materials, Inc. 129,753 894 Vulcan Materials Co. 128,727 -------------- 258,480 -------------- CONSUMER FINANCE -- 1.0% 4,088 Ally Financial, Inc. 124,929 1,008 American Express Co. 125,486 1,215 Capital One Financial Corp. 125,036 1,457 Discover Financial Services 123,583 3,449 Synchrony Financial 124,198 -------------- 623,232 -------------- CONTAINERS & PACKAGING -- 0.6% 963 Avery Dennison Corp. 125,980 1,953 Ball Corp. 126,300 2,740 International Paper Co. 126,177 -------------- 378,457 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- DISTRIBUTORS -- 0.2% 1,195 Genuine Parts Co. $ 126,945 -------------- DIVERSIFIED FINANCIAL SERVICES -- 0.4% 5,093 AXA Equitable Holdings, Inc. 126,205 558 Berkshire Hathaway, Inc., Class B (a) 126,387 -------------- 252,592 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.6% 3,238 AT&T, Inc. 126,541 9,501 CenturyLink, Inc. 125,508 2,049 Verizon Communications, Inc. 125,809 -------------- 377,858 -------------- ELECTRIC UTILITIES -- 2.8% 2,318 Alliant Energy Corp. 126,841 1,343 American Electric Power Co., Inc. 126,927 1,404 Duke Energy Corp. 128,059 1,709 Edison International 128,876 1,062 Entergy Corp. 127,228 1,988 Evergy, Inc. 129,399 1,499 Eversource Energy 127,520 2,795 Exelon Corp. 127,424 2,602 FirstEnergy Corp. 126,457 525 NextEra Energy, Inc. 127,134 1,413 Pinnacle West Capital Corp. 127,071 3,524 PPL Corp. 126,441 1,999 Southern (The) Co. 127,336 1,980 Xcel Energy, Inc. 125,710 -------------- 1,782,423 -------------- ELECTRICAL EQUIPMENT -- 0.8% 1,270 AMETEK, Inc. 126,670 1,346 Eaton Corp. PLC 127,493 1,664 Emerson Electric Co. 126,896 625 Rockwell Automation, Inc. 126,669 -------------- 507,728 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.4% 1,184 Amphenol Corp., Class A 128,144 891 CDW Corp. 127,270 4,333 Corning, Inc. 126,134 1,227 Keysight Technologies, Inc. (a) 125,927 1,325 TE Connectivity Ltd. 126,988 3,042 Trimble, Inc. (a) 126,821 506 Zebra Technologies Corp., Class A (a) 129,253 -------------- 890,537 -------------- ENERGY EQUIPMENT & SERVICES -- 0.6% 5,061 Baker Hughes Co. 129,713 5,146 Halliburton Co. 125,923 3,206 Schlumberger Ltd. 128,881 -------------- 384,517 -------------- Page 30 See Notes to Financial Statements FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) ENTERTAINMENT -- 1.4% 2,126 Activision Blizzard, Inc. $ 126,327 1,173 Electronic Arts, Inc. (a) 126,109 2,750 Liberty Media Corp.-Liberty Formula One, Class C (a) 126,404 1,795 Live Nation Entertainment, Inc. (a) 128,288 377 Netflix, Inc. (a) 121,986 1,030 Take-Two Interactive Software, Inc. (a) 126,103 862 Walt Disney (The) Co. 124,671 -------------- 879,888 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 6.4% 792 Alexandria Real Estate Equities, Inc. 127,971 559 American Tower Corp. 128,469 608 AvalonBay Communities, Inc. 127,498 929 Boston Properties, Inc. 128,072 1,195 Camden Property Trust 126,789 897 Crown Castle International Corp. 127,509 1,074 Digital Realty Trust, Inc. 128,601 3,686 Duke Realty Corp. 127,794 220 Equinix, Inc. 128,414 1,836 Equity LifeStyle Properties, Inc. 129,236 1,574 Equity Residential 127,368 425 Essex Property Trust, Inc. 127,866 1,214 Extra Space Storage, Inc. 128,223 989 Federal Realty Investment Trust 127,314 3,776 Healthpeak Properties, Inc. 130,159 6,820 Host Hotels & Resorts, Inc. 126,511 4,330 Invitation Homes, Inc. 129,770 976 Mid-America Apartment Communities, Inc. 128,695 1,435 Prologis, Inc. 127,916 600 Public Storage 127,776 1,742 Realty Income Corp. 128,263 2,025 Regency Centers Corp. 127,757 526 SBA Communications Corp. 126,761 865 Simon Property Group, Inc. 128,850 850 Sun Communities, Inc. 127,585 2,736 UDR, Inc. 127,771 2,208 Ventas, Inc. 127,490 4,997 VICI Properties, Inc. 127,673 1,882 Vornado Realty Trust 125,153 1,573 Welltower, Inc. 128,640 4,224 Weyerhaeuser Co. 127,565 1,613 WP Carey, Inc. 129,105 -------------- 4,094,564 -------------- FOOD & STAPLES RETAILING -- 1.0% 431 Costco Wholesale Corp. 126,680 4,374 Kroger (The) Co. 126,802 1,493 Sysco Corp. 127,711 2,158 Walgreens Boots Alliance, Inc. 127,236 1,051 Walmart, Inc. 124,901 -------------- 633,330 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- FOOD PRODUCTS -- 2.8% 2,736 Archer-Daniels-Midland Co. $ 126,814 1,667 Beyond Meat, Inc. (a) 126,025 2,594 Campbell Soup Co. 128,195 3,674 Conagra Brands, Inc. 125,798 2,376 General Mills, Inc. 127,259 862 Hershey (The) Co. 126,697 2,815 Hormel Foods Corp. 126,985 1,219 J.M. Smucker (The) Co. 126,934 1,853 Kellogg Co. 128,153 3,948 Kraft Heinz (The) Co. 126,849 1,479 Lamb Weston Holdings, Inc. 127,238 749 McCormick & Co., Inc. 127,128 2,289 Mondelez International, Inc., Class A 126,078 1,393 Tyson Foods, Inc., Class A 126,819 -------------- 1,776,972 -------------- GAS UTILITIES -- 0.2% 1,135 Atmos Energy Corp. 126,961 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 4.2% 1,459 Abbott Laboratories 126,729 777 ABIOMED, Inc. (a) 132,548 463 Align Technology, Inc. (a) 129,195 1,537 Baxter International, Inc. 128,524 468 Becton, Dickinson and Co. 127,282 2,804 Boston Scientific Corp. (a) 126,797 397 Cooper (The) Cos., Inc. 127,552 835 Danaher Corp. 128,156 2,223 DENTSPLY SIRONA, Inc. 125,800 598 DexCom, Inc. (a) 130,806 539 Edwards Lifesciences Corp. (a) 125,743 2,428 Hologic, Inc. (a) 126,766 486 IDEXX Laboratories, Inc. (a) 126,909 215 Intuitive Surgical, Inc. (a) 127,097 1,115 Medtronic PLC 126,497 811 ResMed, Inc. 125,681 606 Stryker Corp. 127,224 343 Teleflex, Inc. 129,119 890 Varian Medical Systems, Inc. (a) 126,389 849 West Pharmaceutical Services, Inc. 127,630 851 Zimmer Biomet Holdings, Inc. 127,378 -------------- 2,679,822 -------------- HEALTH CARE PROVIDERS & SERVICES -- 3.0% 1,490 AmerisourceBergen Corp. 126,680 423 Anthem, Inc. 127,759 2,464 Cardinal Health, Inc. 124,629 2,046 Centene Corp. (a) 128,632 621 Cigna Corp. 126,988 1,694 CVS Health Corp. 125,847 1,734 DaVita, Inc. (a) 130,102 859 HCA Healthcare, Inc. 126,969 1,894 Henry Schein, Inc. (a) 126,368 345 Humana, Inc. 126,450 749 Laboratory Corp. of America Holdings (a) 126,708 See Notes to Financial Statements Page 31 FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) HEALTH CARE PROVIDERS & SERVICES (CONTINUED) 925 McKesson Corp. $ 127,946 1,176 Quest Diagnostics, Inc. 125,585 431 UnitedHealth Group, Inc. 126,705 876 Universal Health Services, Inc., Class B 125,671 -------------- 1,903,039 -------------- HEALTH CARE TECHNOLOGY -- 0.4% 1,751 Cerner Corp. 128,506 897 Veeva Systems, Inc., Class A (a) 126,172 -------------- 254,678 -------------- HOTELS, RESTAURANTS & LEISURE -- 3.2% 2,526 Carnival Corp. 128,397 152 Chipotle Mexican Grill, Inc. (a) 127,241 1,146 Darden Restaurants, Inc. 124,926 435 Domino's Pizza, Inc. 127,794 1,145 Hilton Worldwide Holdings, Inc. 126,992 1,834 Las Vegas Sands Corp. 126,619 842 Marriott International, Inc., Class A 127,504 643 McDonald's Corp. 127,063 3,783 MGM Resorts International 125,860 2,201 Norwegian Cruise Line Holdings Ltd. (a) 128,560 959 Royal Caribbean Cruises Ltd. 128,036 1,439 Starbucks Corp. 126,517 515 Vail Resorts, Inc. 123,513 908 Wynn Resorts Ltd. 126,094 2,610 Yum China Holdings, Inc. 125,306 1,256 Yum! Brands, Inc. 126,517 -------------- 2,026,939 -------------- HOUSEHOLD DURABLES -- 0.8% 2,397 D.R. Horton, Inc. 126,442 1,295 Garmin Ltd. 126,340 2,268 Lennar Corp., Class A 126,532 34 NVR, Inc. (a) 129,486 -------------- 508,800 -------------- HOUSEHOLD PRODUCTS -- 1.0% 1,800 Church & Dwight Co., Inc. 126,612 827 Clorox (The) Co. 126,978 1,836 Colgate-Palmolive Co. 126,390 919 Kimberly-Clark Corp. 126,408 1,003 Procter & Gamble (The) Co. 125,275 -------------- 631,663 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.4% 6,387 AES Corp. 127,101 5,227 Vistra Energy Corp. 120,169 -------------- 247,270 -------------- INDUSTRIAL CONGLOMERATES -- 0.8% 729 3M Co. 128,610 11,481 General Electric Co. 128,128 SHARES DESCRIPTION VALUE ------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (CONTINUED) 716 Honeywell International, Inc. $ 126,732 361 Roper Technologies, Inc. 127,877 -------------- 511,347 -------------- INSURANCE -- 4.9% 2,380 Aflac, Inc. 125,902 157 Alleghany Corp. (a) 125,532 1,133 Allstate (The) Corp. 127,406 2,453 American International Group, Inc. 125,912 2,964 Arch Capital Group Ltd. (a) 127,126 1,325 Arthur J. Gallagher & Co. 126,180 3,171 Brown & Brown, Inc. 125,191 816 Chubb Ltd. 127,019 1,213 Cincinnati Financial Corp. 127,547 743 Erie Indemnity Co., Class A 123,338 455 Everest Re Group Ltd. 125,962 2,779 Fidelity National Financial, Inc. 126,028 1,186 Globe Life, Inc. 124,826 2,075 Hartford Financial Services Group (The), Inc. 126,098 2,100 Lincoln National Corp. 123,921 2,448 Loews Corp. 128,495 111 Markel Corp. (a) 126,892 1,126 Marsh & McLennan Cos., Inc. 125,448 2,472 MetLife, Inc. 125,998 2,294 Principal Financial Group, Inc. 126,170 1,753 Progressive (The) Corp. 126,900 1,330 Prudential Financial, Inc. 124,674 766 Reinsurance Group of America, Inc. 124,904 927 Travelers (The) Cos., Inc. 126,953 1,832 W.R. Berkley Corp. 126,591 -------------- 3,151,013 -------------- INTERACTIVE MEDIA & SERVICES -- 1.2% 94 Alphabet, Inc., Class A (a) 125,903 613 Facebook, Inc., Class A (a) 125,818 522 IAC/InterActiveCorp (a) 130,035 8,138 Snap, Inc., Class A (a) 132,893 3,953 Twitter, Inc. (a) 126,694 2,868 Zillow Group, Inc., Class C (a) 131,756 -------------- 773,099 -------------- INTERNET & DIRECT MARKETING RETAIL -- 0.8% 71 Amazon.com, Inc. (a) 131,197 63 Booking Holdings, Inc. (a) 129,385 3,503 eBay, Inc. 126,493 1,147 Expedia Group, Inc. 124,037 -------------- 511,112 -------------- IT SERVICES -- 5.0% 598 Accenture PLC, Class A 125,921 1,471 Akamai Technologies, Inc. (a) 127,065 744 Automatic Data Processing, Inc. 126,852 1,785 Booz Allen Hamilton Holding Corp. 126,967 Page 32 See Notes to Financial Statements FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) IT SERVICES (CONTINUED) 1,029 Broadridge Financial Solutions, Inc. $ 127,123 2,006 Cognizant Technology Solutions Corp., Class A 124,412 3,373 DXC Technology Co. 126,791 598 EPAM Systems, Inc. (a) 126,872 912 Fidelity National Information Services, Inc. 126,850 1,087 Fiserv, Inc. (a) 125,690 436 FleetCor Technologies, Inc. (a) 125,446 827 Gartner, Inc. (a) 127,441 693 Global Payments, Inc. 126,514 1,827 GoDaddy, Inc., Class A (a) 124,090 931 International Business Machines Corp. 124,791 864 Jack Henry & Associates, Inc. 125,859 1,305 Leidos Holdings, Inc. 127,746 425 Mastercard, Inc., Class A 126,901 1,088 Okta, Inc. (a) 125,522 1,477 Paychex, Inc. 125,634 1,165 PayPal Holdings, Inc. (a) 126,018 1,971 Square, Inc., Class A (a) 123,306 1,262 Twilio, Inc., Class A (a) 124,029 661 VeriSign, Inc. (a) 127,361 676 Visa, Inc., Class A 127,020 -------------- 3,152,221 -------------- LEISURE PRODUCTS -- 0.2% 1,206 Hasbro, Inc. 127,366 -------------- LIFE SCIENCES TOOLS & SERVICES -- 1.6% 1,495 Agilent Technologies, Inc. 127,539 7,040 Avantor, Inc. (a) 127,776 387 Illumina, Inc. (a) 128,383 824 IQVIA Holdings, Inc. (a) 127,316 161 Mettler-Toledo International, Inc. (a) 127,718 1,315 PerkinElmer, Inc. 127,687 389 Thermo Fisher Scientific, Inc. 126,374 546 Waters Corp. (a) 127,573 -------------- 1,020,366 -------------- MACHINERY -- 2.6% 861 Caterpillar, Inc. 127,152 701 Cummins, Inc. 125,451 728 Deere & Co. 126,133 1,109 Dover Corp. 127,823 1,663 Fortive Corp. 127,037 745 IDEX Corp. 128,140 705 Illinois Tool Works, Inc. 126,639 940 Ingersoll-Rand PLC 124,945 1,587 PACCAR, Inc. 125,532 612 Parker-Hannifin Corp. 125,962 765 Stanley Black & Decker, Inc. 126,791 1,664 Westinghouse Air Brake Technologies Corp. 129,459 SHARES DESCRIPTION VALUE ------------------------------------------------------------- MACHINERY (CONTINUED) 1,619 Xylem, Inc. $ 127,561 -------------- 1,648,625 -------------- MEDIA -- 1.8% 4,681 Altice USA, Inc., Class A (a) 127,979 266 Charter Communications, Inc., Class A (a) 129,031 2,889 Comcast Corp., Class A 129,918 3,832 Discovery, Inc., Class A (a) 125,460 3,407 Fox Corp., Class A 126,297 1,033 Liberty Broadband Corp., Class C (a) 129,900 1,559 Omnicom Group, Inc. 126,310 17,665 Sirius XM Holdings, Inc. 126,305 2,973 ViacomCBS, Inc., Class B 124,777 -------------- 1,145,977 -------------- METALS & MINING -- 0.6% 9,810 Freeport-McMoRan, Inc. 128,707 3,084 Newmont Goldcorp Corp. 134,000 2,222 Nucor Corp. 125,054 -------------- 387,761 -------------- MORTGAGE REAL ESTATE INVESTMENT TRUSTS -- 0.2% 13,245 Annaly Capital Management, Inc. 124,768 -------------- MULTILINE RETAIL -- 0.6% 808 Dollar General Corp. 126,032 1,353 Dollar Tree, Inc. (a) 127,250 979 Target Corp. 125,517 -------------- 378,799 -------------- MULTI-UTILITIES -- 2.0% 1,661 Ameren Corp. 127,565 4,726 CenterPoint Energy, Inc. 128,878 2,020 CMS Energy Corp. 126,937 1,406 Consolidated Edison, Inc. 127,201 1,552 Dominion Energy, Inc. 128,537 976 DTE Energy Co. 126,753 4,585 NiSource, Inc. 127,646 2,167 Public Service Enterprise Group, Inc. 127,961 837 Sempra Energy 126,789 1,375 WEC Energy Group, Inc. 126,816 -------------- 1,275,083 -------------- OIL, GAS & CONSUMABLE FUELS -- 4.0% 2,054 Cheniere Energy, Inc. (a) 125,438 1,061 Chevron Corp. 127,861 1,507 Concho Resources, Inc. 131,968 1,985 ConocoPhillips 129,084 3,759 Continental Resources, Inc. 128,934 5,009 Devon Energy Corp. 130,084 1,434 Diamondback Energy, Inc. 133,161 1,545 EOG Resources, Inc. 129,409 1,806 Exxon Mobil Corp. 126,022 1,954 Hess Corp. 130,547 6,040 Kinder Morgan, Inc. 127,867 See Notes to Financial Statements Page 33 FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) OIL, GAS & CONSUMABLE FUELS (CONTINUED) 9,595 Marathon Oil Corp. $ 130,300 2,051 Marathon Petroleum Corp. 123,573 5,414 Noble Energy, Inc. 134,484 3,247 Occidental Petroleum Corp. 133,809 1,693 ONEOK, Inc. 128,109 1,117 Phillips 66 124,445 860 Pioneer Natural Resources Co. 130,178 1,325 Valero Energy Corp. 124,086 5,326 Williams (The) Cos., Inc. 126,333 -------------- 2,575,692 -------------- PERSONAL PRODUCTS -- 0.2% 613 Estee Lauder (The) Cos., Inc., Class A 126,609 -------------- PHARMACEUTICALS -- 1.6% 2,009 Bristol-Myers Squibb Co. 128,958 4,401 Elanco Animal Health, Inc. (a) 129,609 960 Eli Lilly & Co. 126,173 867 Johnson & Johnson 126,469 1,389 Merck & Co., Inc. 126,330 6,395 Mylan N.V. (a) 128,540 3,207 Pfizer, Inc. 125,650 961 Zoetis, Inc. 127,188 -------------- 1,018,917 -------------- PROFESSIONAL SERVICES -- 0.8% 213 CoStar Group, Inc. (a) 127,438 919 Equifax, Inc. 128,770 1,485 TransUnion 127,131 850 Verisk Analytics, Inc. 126,939 -------------- 510,278 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.2% 2,096 CBRE Group, Inc., Class A (a) 128,464 -------------- ROAD & RAIL -- 1.6% 1,744 CSX Corp. 126,196 1,090 J.B. Hunt Transport Services, Inc. 127,290 822 Kansas City Southern 125,897 2,653 Lyft, Inc., Class A (a) 114,132 654 Norfolk Southern Corp. 126,961 674 Old Dominion Freight Line, Inc. 127,912 4,166 Uber Technologies, Inc. (a) 123,897 707 Union Pacific Corp. 127,819 -------------- 1,000,104 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.6% 2,889 Advanced Micro Devices, Inc. (a) 132,490 1,058 Analog Devices, Inc. 125,733 2,054 Applied Materials, Inc. 125,376 398 Broadcom, Inc. 125,776 2,161 Intel Corp. 129,336 717 KLA Corp. 127,748 426 Lam Research Corp. 124,562 4,904 Marvell Technology Group Ltd. 130,250 SHARES DESCRIPTION VALUE ------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONTINUED) 2,050 Maxim Integrated Products, Inc. $ 126,095 1,211 Microchip Technology, Inc. 126,816 2,295 Micron Technology, Inc. (a) 123,425 531 NVIDIA Corp. 124,944 1,431 QUALCOMM, Inc. 126,257 1,068 Skyworks Solutions, Inc. 129,100 1,836 Teradyne, Inc. 125,197 987 Texas Instruments, Inc. 126,622 632 Universal Display Corp. 130,236 1,289 Xilinx, Inc. 126,026 -------------- 2,285,989 -------------- SOFTWARE -- 4.6% 387 Adobe, Inc. (a) 127,636 494 ANSYS, Inc. (a) 127,161 691 Autodesk, Inc. (a) 126,771 1,796 Cadence Design Systems, Inc. (a) 124,571 1,137 Citrix Systems, Inc. 126,093 342 Fair Isaac Corp. (a) 128,141 1,181 Fortinet, Inc. (a) 126,084 476 Intuit, Inc. 124,679 807 Microsoft Corp. 127,264 4,888 NortonLifeLock, Inc. 124,742 2,366 Oracle Corp. 125,351 549 Palo Alto Networks, Inc. (a) 126,956 484 Paycom Software, Inc. (a) 128,144 750 RingCentral, Inc., Class A (a) 126,502 770 salesforce.com, Inc. (a) 125,233 451 ServiceNow, Inc. (a) 127,326 843 Splunk, Inc. (a) 126,256 2,078 SS&C Technologies Holdings, Inc. 127,589 905 Synopsys, Inc. (a) 125,976 484 Trade Desk (The), Inc., Class A (a) 125,733 843 VMware, Inc., Class A (a) 127,959 764 Workday, Inc., Class A (a) 125,640 2,619 Zscaler, Inc. (a) 121,783 -------------- 2,903,590 -------------- SPECIALTY RETAIL -- 2.6% 803 Advance Auto Parts, Inc. 128,608 104 AutoZone, Inc. (a) 123,896 1,437 Best Buy Co., Inc. 126,169 562 Burlington Stores, Inc. (a) 128,153 1,359 CarMax, Inc. (a) 119,144 574 Home Depot (The), Inc. 125,350 1,060 Lowe's Cos., Inc. 126,946 288 O'Reilly Automotive, Inc. (a) 126,219 1,102 Ross Stores, Inc. 128,295 950 Tiffany & Co. 126,967 2,101 TJX (The) Cos., Inc. 128,287 1,369 Tractor Supply Co. 127,919 510 Ulta Beauty, Inc. (a) 129,101 -------------- 1,645,054 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.4% 451 Apple, Inc. 132,436 Page 34 See Notes to Financial Statements FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS (CONTINUED) 2,554 Dell Technologies, Inc., Class C (a) $ 131,250 8,073 Hewlett Packard Enterprise Co. 128,038 6,175 HP, Inc. 126,896 2,030 NetApp, Inc. 126,368 2,135 Seagate Technology PLC 127,033 2,084 Western Digital Corp. 132,271 -------------- 904,292 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.4% 1,275 NIKE, Inc., Class B 129,170 1,301 VF Corp. 129,658 -------------- 258,828 -------------- TOBACCO -- 0.4% 2,462 Altria Group, Inc. 122,878 1,467 Philip Morris International, Inc. 124,827 -------------- 247,705 -------------- TRADING COMPANIES & DISTRIBUTORS -- 0.6% 3,419 Fastenal Co. 126,332 759 United Rentals, Inc. (a) 126,579 377 W.W. Grainger, Inc. 127,622 -------------- 380,533 -------------- WATER UTILITIES -- 0.2% 1,039 American Water Works Co., Inc. 127,641 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.2% 1,636 T-Mobile US, Inc. (a) 128,295 -------------- TOTAL INVESTMENTS -- 99.9% 63,460,118 (Cost $54,024,196) (b) NET OTHER ASSETS AND LIABILITIES -- 0.1% 47,182 -------------- NET ASSETS -- 100.0% $ 63,507,300 ============== (a) Non-income producing security. (b) Aggregate cost for federal income tax purposes is $54,516,339. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $9,973,395 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $1,029,616. The net unrealized appreciation was $8,943,779. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ----------------------------------------------------- Common Stocks* $ 63,460,118 $ -- $ -- ===================================================== * 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, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% AEROSPACE & DEFENSE -- 6.4% 4,134 Boeing (The) Co. $ 1,346,692 9,474 United Technologies Corp. 1,418,826 -------------- 2,765,518 -------------- BANKS -- 3.3% 10,323 JPMorgan Chase & Co. 1,439,026 -------------- BEVERAGES -- 3.3% 25,952 Coca-Cola (The) Co. 1,436,443 -------------- CAPITAL MARKETS -- 3.4% 6,277 Goldman Sachs Group (The), Inc. 1,443,271 -------------- CHEMICALS -- 3.4% 26,508 Dow, Inc. 1,450,783 -------------- COMMUNICATIONS EQUIPMENT -- 3.5% 31,177 Cisco Systems, Inc. 1,495,249 -------------- CONSUMER FINANCE -- 3.3% 11,324 American Express Co. 1,409,725 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.3% 23,225 Verizon Communications, Inc. 1,426,015 -------------- ENTERTAINMENT -- 3.2% 9,648 Walt Disney (The) Co. 1,395,390 -------------- FOOD & STAPLES RETAILING -- 6.6% 24,401 Walgreens Boots Alliance, Inc. 1,438,683 11,741 Walmart, Inc. 1,395,300 -------------- 2,833,983 -------------- HEALTH CARE PROVIDERS & SERVICES -- 3.4% 4,947 UnitedHealth Group, Inc. 1,454,319 -------------- HOTELS, RESTAURANTS & LEISURE -- 3.3% 7,165 McDonald's Corp. 1,415,876 -------------- HOUSEHOLD PRODUCTS -- 3.3% 11,256 Procter & Gamble (The) Co. 1,405,874 -------------- INDUSTRIAL CONGLOMERATES -- 3.4% 8,367 3M Co. 1,476,106 -------------- INSURANCE -- 3.3% 10,411 Travelers (The) Cos., Inc. 1,425,787 -------------- IT SERVICES -- 6.6% 10,523 International Business Machines Corp. 1,410,503 7,628 Visa, Inc., Class A 1,433,301 -------------- 2,843,804 -------------- MACHINERY -- 3.3% 9,705 Caterpillar, Inc. 1,433,234 -------------- OIL, GAS & CONSUMABLE FUELS -- 6.7% 11,973 Chevron Corp. 1,442,866 20,401 Exxon Mobil Corp. 1,423,582 -------------- 2,866,448 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- PHARMACEUTICALS -- 10.1% 9,990 Johnson & Johnson $ 1,457,241 15,835 Merck & Co., Inc. 1,440,193 36,847 Pfizer, Inc. 1,443,666 -------------- 4,341,100 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.4% 24,439 Intel Corp. 1,462,674 -------------- SOFTWARE -- 3.3% 9,140 Microsoft Corp. 1,441,378 -------------- SPECIALTY RETAIL -- 3.3% 6,597 Home Depot (The), Inc. 1,440,653 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 3.5% 5,133 Apple, Inc. 1,507,306 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 3.4% 14,445 NIKE, Inc., Class B 1,463,423 -------------- TOTAL INVESTMENTS -- 100.0% 43,073,385 (Cost $41,629,364) (a) NET OTHER ASSETS AND LIABILITIES -- 0.0% 3,639 -------------- NET ASSETS -- 100.0% $ 43,077,024 ============== (a) Aggregate cost for federal income tax purposes is $41,766,273. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $2,396,131 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $1,089,019. The net unrealized appreciation was $1,307,112. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ----------------------------------------------------- Common Stocks* $ 43,073,385 $ -- $ -- ===================================================== * 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, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.8% AEROSPACE & DEFENSE -- 1.6% 1,693 General Dynamics Corp. $ 298,560 1,366 Lockheed Martin Corp. 531,893 3,893 Textron, Inc. 173,628 -------------- 1,004,081 -------------- AIR FREIGHT & LOGISTICS -- 0.5% 1,937 FedEx Corp. 292,894 -------------- AIRLINES -- 0.7% 8,446 American Airlines Group, Inc. 242,231 2,470 United Airlines Holdings, Inc. (a) 217,583 -------------- 459,814 -------------- AUTOMOBILES -- 0.9% 28,433 Ford Motor Co. 264,427 8,956 General Motors Co. 327,789 -------------- 592,216 -------------- BANKS -- 3.3% 2,780 Citigroup, Inc. 222,094 6,943 Citizens Financial Group, Inc. 281,955 4,134 Comerica, Inc. 296,615 3,400 JPMorgan Chase & Co. 473,960 2,205 M&T Bank Corp. 374,299 926 SVB Financial Group (a) 232,463 3,011 U.S. Bancorp 178,522 -------------- 2,059,908 -------------- BEVERAGES -- 2.0% 6,666 Coca-Cola (The) Co. 368,963 4,512 Molson Coors Brewing Co., Class B 243,197 4,816 PepsiCo, Inc. 658,203 -------------- 1,270,363 -------------- BIOTECHNOLOGY -- 3.1% 1,828 AbbVie, Inc. 161,851 1,737 Alexion Pharmaceuticals, Inc. (a) 187,857 500 Biogen, Inc. (a) 148,365 3,068 BioMarin Pharmaceutical, Inc. (a) 259,400 861 Regeneron Pharmaceuticals, Inc. (a) 323,288 6,705 Sarepta Therapeutics, Inc. (a) 865,213 -------------- 1,945,974 -------------- BUILDING PRODUCTS -- 1.1% 3,189 Allegion PLC 397,158 7,490 Johnson Controls International PLC 304,918 -------------- 702,076 -------------- CAPITAL MARKETS -- 3.4% 4,644 Bank of New York Mellon (The) Corp. 233,732 1,907 Moody's Corp. 452,741 3,030 MSCI, Inc. 782,285 3,570 Northern Trust Corp. 379,277 3,638 State Street Corp. 287,766 -------------- 2,135,801 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- CHEMICALS -- 2.7% 1,481 Celanese Corp. $ 182,341 4,286 Dow, Inc. 234,573 4,319 DuPont de Nemours, Inc. 277,280 1,118 Eastman Chemical Co. 88,612 715 International Flavors & Fragrances, Inc. 92,249 2,137 LyondellBasell Industries N.V., Class A 201,904 27,395 Mosaic (The) Co. 592,828 -------------- 1,669,787 -------------- CONSUMER FINANCE -- 2.5% 5,838 Ally Financial, Inc. 178,409 3,098 American Express Co. 385,670 7,473 Capital One Financial Corp. 769,046 6,150 Synchrony Financial 221,462 -------------- 1,554,587 -------------- CONTAINERS & PACKAGING -- 0.1% 1,947 International Paper Co. 89,659 -------------- DISTRIBUTORS -- 0.6% 3,246 Genuine Parts Co. 344,823 -------------- DIVERSIFIED FINANCIAL SERVICES -- 1.2% 14,475 AXA Equitable Holdings, Inc. 358,690 1,763 Berkshire Hathaway, Inc., Class B (a) 399,320 -------------- 758,010 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.6% 6,120 Verizon Communications, Inc. 375,768 -------------- ELECTRIC UTILITIES -- 4.2% 5,129 Duke Energy Corp. 467,816 3,652 Entergy Corp. 437,509 6,895 Evergy, Inc. 448,795 5,696 Eversource Energy 484,559 8,378 FirstEnergy Corp. 407,171 4,177 Pinnacle West Capital Corp. 375,638 -------------- 2,621,488 -------------- ELECTRICAL EQUIPMENT -- 0.6% 1,830 AMETEK, Inc. 182,524 856 Rockwell Automation, Inc. 173,486 -------------- 356,010 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.4% 6,149 Amphenol Corp., Class A 665,506 7,311 Corning, Inc. 212,823 -------------- 878,329 -------------- ENERGY EQUIPMENT & SERVICES -- 1.7% 11,451 Baker Hughes Co. 293,489 25,007 Halliburton Co. 611,921 3,648 Schlumberger Ltd. 146,650 -------------- 1,052,060 -------------- See Notes to Financial Statements Page 37 FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) ENTERTAINMENT -- 0.6% 1,067 Netflix, Inc. (a) $ 345,249 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 7.3% 2,332 Alexandria Real Estate Equities, Inc. 376,805 1,846 AvalonBay Communities, Inc. 387,106 2,955 Boston Properties, Inc. 407,376 3,574 Camden Property Trust 379,201 4,795 Equity Residential 388,011 1,137 Essex Property Trust, Inc. 342,078 3,385 Extra Space Storage, Inc. 357,524 2,762 Federal Realty Investment Trust 355,552 3,008 Mid-America Apartment Communities, Inc. 396,635 654 Public Storage 139,276 713 Simon Property Group, Inc. 106,209 7,973 UDR, Inc. 372,339 8,860 Vornado Realty Trust 589,190 -------------- 4,597,302 -------------- FOOD & STAPLES RETAILING -- 3.2% 11,548 Kroger (The) Co. 334,777 9,731 Sysco Corp. 832,390 8,239 Walgreens Boots Alliance, Inc. 485,771 3,225 Walmart, Inc. 383,259 -------------- 2,036,197 -------------- FOOD PRODUCTS -- 3.0% 7,587 Archer-Daniels-Midland Co. 351,658 3,028 Hershey (The) Co. 445,055 11,082 Kraft Heinz (The) Co. 356,065 4,343 McCormick & Co., Inc. 737,137 -------------- 1,889,915 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.8% 2,916 ABIOMED, Inc. (a) 497,440 2,334 Align Technology, Inc. (a) 651,279 3,563 Medtronic PLC 404,222 1,451 ResMed, Inc. 224,862 2,989 Stryker Corp. 627,511 -------------- 2,405,314 -------------- HEALTH CARE PROVIDERS & SERVICES -- 4.3% 2,650 AmerisourceBergen Corp. 225,303 7,502 Cardinal Health, Inc. 379,451 11,465 Centene Corp. (a) 720,805 2,133 Cigna Corp. 436,177 4,056 CVS Health Corp. 301,320 1,609 McKesson Corp. 222,557 1,373 UnitedHealth Group, Inc. 403,635 -------------- 2,689,248 -------------- HEALTH CARE TECHNOLOGY -- 0.3% 1,180 Veeva Systems, Inc., Class A (a) 165,979 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 0.2% 833 Wynn Resorts Ltd. $ 115,679 -------------- HOUSEHOLD DURABLES -- 0.5% 5,059 Lennar Corp., Class A 282,242 -------------- INDUSTRIAL CONGLOMERATES -- 0.5% 1,745 3M Co. 307,853 -------------- INSURANCE -- 10.4% 6,864 Aflac, Inc. 363,106 5,012 Allstate (The) Corp. 563,600 3,733 American International Group, Inc. 191,615 8,273 Arch Capital Group Ltd. (a) 354,829 2,455 Chubb Ltd. 382,145 2,882 Cincinnati Financial Corp. 303,042 744 Everest Re Group Ltd. 205,969 8,004 Fidelity National Financial, Inc. 362,981 9,527 Hartford Financial Services Group (The), Inc. 578,956 7,037 Lincoln National Corp. 415,253 11,019 Loews Corp. 578,387 318 Markel Corp. (a) 363,528 4,545 Principal Financial Group, Inc. 249,975 1,997 Progressive (The) Corp. 144,563 4,806 Prudential Financial, Inc. 450,515 3,972 Reinsurance Group of America, Inc. 647,674 5,541 W.R. Berkley Corp. 382,883 -------------- 6,539,021 -------------- INTERACTIVE MEDIA & SERVICES -- 0.8% 10,342 Zillow Group, Inc., Class C (a) 475,111 -------------- INTERNET & DIRECT MARKETING RETAIL -- 1.5% 338 Booking Holdings, Inc. (a) 694,161 2,482 Expedia Group, Inc. 268,403 -------------- 962,564 -------------- IT SERVICES -- 7.5% 2,052 Accenture PLC, Class A 432,090 2,205 Automatic Data Processing, Inc. 375,952 4,476 Cognizant Technology Solutions Corp., Class A 277,602 31,350 DXC Technology Co. 1,178,446 2,519 Mastercard, Inc., Class A 752,148 7,412 Paychex, Inc. 630,465 5,443 Square, Inc., Class A (a) 340,514 3,798 Visa, Inc., Class A 713,644 -------------- 4,700,861 -------------- LIFE SCIENCES TOOLS & SERVICES -- 0.8% 483 Mettler-Toledo International, Inc. (a) 383,154 593 Waters Corp. (a) 138,555 -------------- 521,709 -------------- Page 38 See Notes to Financial Statements FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) MACHINERY -- 1.1% 2,731 Fortive Corp. $ 208,621 983 IDEX Corp. 169,076 1,026 Illinois Tool Works, Inc. 184,300 1,886 Xylem, Inc. 148,598 -------------- 710,595 -------------- MEDIA -- 1.6% 739 Charter Communications, Inc., Class A (a) 358,474 3,393 Discovery, Inc., Class A (a) 111,087 2,935 Liberty Broadband Corp., Class C (a) 369,076 4,486 ViacomCBS, Inc., Class B 188,278 -------------- 1,026,915 -------------- METALS & MINING -- 0.8% 14,315 Freeport-McMoRan, Inc. 187,813 5,793 Nucor Corp. 326,030 -------------- 513,843 -------------- MULTI-UTILITIES -- 1.3% 4,820 Consolidated Edison, Inc. 436,065 6,801 Public Service Enterprise Group, Inc. 401,599 -------------- 837,664 -------------- OIL, GAS & CONSUMABLE FUELS -- 6.8% 2,648 Chevron Corp. 319,110 6,431 Concho Resources, Inc. 563,163 8,666 Continental Resources, Inc. 297,244 21,799 Devon Energy Corp. 566,120 4,596 Exxon Mobil Corp. 320,709 15,534 Kinder Morgan, Inc. 328,855 35,424 Marathon Oil Corp. 481,058 6,413 Marathon Petroleum Corp. 386,383 7,519 Occidental Petroleum Corp. 309,858 2,820 Phillips 66 314,176 3,728 Valero Energy Corp. 349,127 -------------- 4,235,803 -------------- PERSONAL PRODUCTS -- 0.3% 912 Estee Lauder (The) Cos., Inc., Class A 188,364 -------------- PHARMACEUTICALS -- 2.5% 3,018 Bristol-Myers Squibb Co. 193,726 5,945 Elanco Animal Health, Inc. (a) 175,080 3,818 Johnson & Johnson 556,932 11,845 Mylan N.V. (a) 238,085 5,591 Pfizer, Inc. 219,055 1,484 Zoetis, Inc. 196,407 -------------- 1,579,285 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.3% 497 Broadcom, Inc. 157,062 1,206 KLA Corp. 214,873 5,822 Micron Technology, Inc. (a) 313,107 SHARES DESCRIPTION VALUE ------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONTINUED) 1,146 Xilinx, Inc. $ 112,045 -------------- 797,087 -------------- SOFTWARE -- 3.6% 1,914 ANSYS, Inc. (a) 492,683 4,228 Citrix Systems, Inc. 468,885 2,301 Intuit, Inc. 602,701 2,898 Microsoft Corp. 457,015 1,894 SS&C Technologies Holdings, Inc. 116,292 2,601 Zscaler, Inc. (a) 120,946 -------------- 2,258,522 -------------- SPECIALTY RETAIL -- 1.4% 1,797 Home Depot (The), Inc. 392,429 1,624 Ross Stores, Inc. 189,066 1,100 Ulta Beauty, Inc. (a) 278,454 -------------- 859,949 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.1% 15,951 Hewlett Packard Enterprise Co. 252,983 9,004 HP, Inc. 185,032 3,791 NetApp, Inc. 235,990 -------------- 674,005 -------------- TOBACCO -- 0.8% 7,743 Altria Group, Inc. 386,453 1,425 Philip Morris International, Inc. 121,253 -------------- 507,706 -------------- TRADING COMPANIES & DISTRIBUTORS -- 0.3% 4,711 Fastenal Co. 174,071 -------------- TOTAL COMMON STOCKS -- 99.8% 62,561,701 (Cost $58,731,203) -------------- MONEY MARKET FUNDS -- 0.1% 62,351 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 1.50% (b) 62,351 (Cost $62,351) -------------- TOTAL INVESTMENTS -- 99.9% 62,624,052 (Cost $58,793,554) (c) NET OTHER ASSETS AND LIABILITIES -- 0.1% 71,703 -------------- NET ASSETS -- 100.0% $ 62,695,755 ============== (a) Non-income producing security. (b) Rate shown reflects yield as of December 31, 2019. (c) Aggregate cost for federal income tax purposes is $59,537,613. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $3,773,225 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $686,786. The net unrealized appreciation was $3,086,439. See Notes to Financial Statements Page 39 FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ----------------------------------------------------- Common Stocks* $ 62,561,701 $ -- $ -- Money Market Funds 62,351 -- -- ----------------------------------------------------- Total Investments $ 62,624,052 $ -- $ -- ===================================================== * 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, 2019
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 PORTFOLIO ETF ETF ETF (TUSA) (DWPP) (EDOW) (FCTR) ---------------- ---------------- ---------------- ---------------- ASSETS: Investments, at value............................... $ 18,243,755 $ 63,460,118 $ 43,073,385 $ 62,624,052 Cash................................................ 120 -- -- -- Receivables: Dividends..................................... 32,165 91,197 28,978 105,847 Securities lending income..................... 422 -- -- -- Prepaid expenses.................................... 7,639 -- -- -- -------------- -------------- -------------- -------------- Total Assets.................................. 18,284,101 63,551,315 43,102,363 62,729,899 -------------- -------------- -------------- -------------- LIABILITIES: Due to custodian.................................... -- 12,417 7,026 -- Payables: Collateral for securities on loan............. 121,642 -- -- -- Audit and tax fees............................ 22,924 -- -- -- Investment advisory fees...................... 10,177 31,598 18,313 34,144 Shareholder reporting fees.................... 4,834 -- -- -- Licensing fees................................ 652 -- -- -- Trustees' fees................................ 30 -- -- -- Other liabilities................................... 24,250 -- -- -- -------------- -------------- -------------- -------------- Total Liabilities............................. 184,509 44,015 25,339 34,144 -------------- -------------- -------------- -------------- NET ASSETS.......................................... $ 18,099,592 $ 63,507,300 $ 43,077,024 $ 62,695,755 ============== ============== ============== ============== NET ASSETS CONSIST OF: Paid-in capital..................................... $ 17,706,056 $ 56,147,770 $ 41,893,020 $ 63,896,970 Par value........................................... 5,000 19,000 16,500 27,500 Accumulated distributable earnings (loss)........... 388,536 7,340,530 1,167,504 (1,228,715) -------------- -------------- -------------- -------------- NET ASSETS.......................................... $ 18,099,592 $ 63,507,300 $ 43,077,024 $ 62,695,755 ============== ============== ============== ============== NET ASSET VALUE, per share.......................... $ 36.20 $ 33.42 $ 26.11 $ 22.80 ============== ============== ============== ============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share).... 500,002 1,900,002 1,650,002 2,750,002 ============== ============== ============== ============== Investments, at cost................................ $ 16,156,809 $ 54,024,196 $ 41,629,364 $ 58,793,554 ============== ============== ============== ============== Securities on loan, at value...................... $ 120,507 $ -- $ -- $ -- ============== ============== ============== ==============
See Notes to Financial Statements Page 41 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2019
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 PORTFOLIO ETF ETF ETF (TUSA) (DWPP) (EDOW) (FCTR) ---------------- ---------------- ---------------- ---------------- INVESTMENT INCOME: Dividends........................................... $ 315,884 $ 924,977 $ 807,018 $ 809,196 Securities lending income (net of fees)............. 3,216 -- -- -- Foreign withholding tax............................. (41) -- -- 464 -------------- -------------- -------------- -------------- Total investment income....................... 319,059 924,977 807,018 809,660 -------------- -------------- -------------- -------------- EXPENSES: Investment advisory fees............................ 83,904 295,952 (a) 162,087 (a) 289,291 (a) Custodian fees...................................... 62,130 -- -- -- Audit and tax fees.................................. 23,629 -- -- -- Listing fees........................................ (45,851) -- -- -- Accounting and administration fees.................. 15,974 -- -- -- Shareholder reporting fees.......................... 13,650 -- -- -- Licensing fees...................................... 10,018 -- -- -- Trustees' fees and expenses......................... 7,223 -- -- -- Transfer agent fees................................. 839 -- -- -- Legal fees.......................................... 551 -- -- -- Registration and filing fees........................ 420 -- -- -- Excise tax.......................................... -- -- 232 -- Other expenses...................................... (569) -- -- -- -------------- -------------- -------------- -------------- Total expenses................................ 171,918 295,952 162,319 289,291 Less fees waived and expenses reimbursed by the investment advisor..................... (54,452) -- -- -- -------------- -------------- -------------- -------------- Net expenses.................................. 117,466 295,952 162,319 289,291 -------------- -------------- -------------- -------------- NET INVESTMENT INCOME (LOSS)........................ 201,593 629,025 644,699 520,369 -------------- -------------- -------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments................................... (905,578) (868,207) (211,503) (3,811,835) In-kind redemptions........................... 716,508 863,948 2,401,797 7,104,900 -------------- -------------- -------------- -------------- Net realized gain (loss)............................ (189,070) (4,259) 2,190,294 3,293,065 Net change in unrealized appreciation (depreciation) on investments................................... 3,626,404 11,761,532 2,903,317 6,786,716 -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS)...................................... 3,437,334 11,757,273 5,093,611 10,079,781 -------------- -------------- -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 3,638,927 $ 12,386,298 $ 5,738,310 $ 10,600,150 ============== ============== ============== ==============
(a) 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 12/31/2019 12/31/2018 12/31/2019 12/31/2018 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 201,593 $ 159,894 $ 629,025 $ 405,034 Net realized gain (loss).................................... (189,070) 1,721,216 (4,259) 779,150 Net change in unrealized appreciation (depreciation)........ 3,626,404 (3,291,223) 11,761,532 (4,614,714) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... 3,638,927 (1,410,113) 12,386,298 (3,430,530) -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (203,851) (155,286) (621,756) (417,641) -------------- -------------- -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 4,935,782 8,707,553 19,800,857 14,676,039 Cost of shares redeemed..................................... (3,422,556) (8,774,262) (3,099,948) (5,857,923) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ 1,513,226 (66,709) 16,700,909 8,818,116 -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... 4,948,302 (1,632,108) 28,465,451 4,969,945 NET ASSETS: Beginning of period......................................... 13,151,290 14,783,398 35,041,849 30,071,904 -------------- -------------- -------------- -------------- End of period............................................... $ 18,099,592 $ 13,151,290 $ 63,507,300 $ 35,041,849 ============== ============== ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 450,002 450,002 1,350,002 1,050,002 Shares sold................................................. 150,000 250,000 650,000 500,000 Shares redeemed............................................. (100,000) (250,000) (100,000) (200,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 500,002 450,002 1,900,002 1,350,002 ============== ============== ============== ==============
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 Year Ended Year Ended Year Ended 12/31/2019 12/31/2018 12/31/2019 12/31/2018 (a) -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 644,699 $ 246,112 $ 520,369 $ 184,637 Net realized gain (loss).................................... 2,190,294 (941,113) 3,293,065 (746,942) Net change in unrealized appreciation (depreciation)........ 2,903,317 (1,522,609) 6,786,716 (2,956,218) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... 5,738,310 (2,217,610) 10,600,150 (3,518,523) -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (654,101) (235,451) (508,246) (184,170) -------------- -------------- -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 85,774,714 69,038,254 87,781,697 51,620,840 Cost of shares redeemed..................................... (60,640,742) (55,926,566) (63,446,349) (19,649,644) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ 25,133,972 13,111,688 24,335,348 31,971,196 -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... 30,218,181 10,658,627 34,427,252 28,268,503 NET ASSETS: Beginning of period......................................... 12,858,843 2,200,216 28,268,503 -- -------------- -------------- -------------- -------------- End of period............................................... $ 43,077,024 $ 12,858,843 $ 62,695,755 $ 28,268,503 ============== ============== ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 600,002 100,002 1,600,002 -- Shares sold................................................. 3,550,000 3,050,000 4,100,000 2,550,002 Shares redeemed............................................. (2,500,000) (2,550,000) (2,950,000) (950,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 1,650,002 600,002 2,750,002 1,600,002 ============== ============== ============== ==============
(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. 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, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 29.22 $ 32.85 $ 27.74 $ 24.34 $ 26.13 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.40 0.34 0.25 0.32 0.22 Net realized and unrealized gain (loss) 6.99 (3.64) 5.12 3.43 (1.78) ------------ ------------ ------------ ------------ ------------ Total from investment operations 7.39 (3.30) 5.37 3.75 (1.56) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.41) (0.33) (0.26) (0.35) (0.23) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 36.20 $ 29.22 $ 32.85 $ 27.74 $ 24.34 ============ ============ ============ ============ ============ TOTAL RETURN (a) 25.36% (10.13)% 19.44% 15.48% (5.99)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 18,100 $ 13,151 $ 14,783 $ 8,321 $ 8,518 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 1.02% 1.57% 1.69% 1.96% 1.97% 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 1.20% 1.03% 0.88% 1.17% 0.96% Portfolio turnover rate (b) 119% 110% 112% 113% 170% FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 25.96 $ 28.64 $ 23.80 $ 24.07 $ 25.97 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.37 0.33 0.30 0.38 0.37 Net realized and unrealized gain (loss) 7.45 (2.67) 4.84 (0.25) (1.89) ------------ ------------ ------------ ------------ ------------ Total from investment operations 7.82 (2.34) 5.14 0.13 (1.52) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.36) (0.34) (0.30) (0.40) (0.38) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 33.42 $ 25.96 $ 28.64 $ 23.80 $ 24.07 ============ ============ ============ ============ ============ TOTAL RETURN (a) 30.24% (8.26)% 21.71% 0.54% (5.88)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 63,507 $ 35,042 $ 30,072 $ 3,569 $ 3,610 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 1.28% 1.19% 1.29% 1.59% 1.46% Portfolio turnover rate (b) 30% 32% 30% (c) 4% 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 DECEMBER 31, --------------------------- PERIOD ENDED 2019 2018 12/31/2017 (a) ------------ ------------ ------------ Net asset value, beginning of period $ 21.43 $ 22.00 $ 19.97 ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.47 0.40 0.17 Net realized and unrealized gain (loss) 4.70 (0.58) 2.03 ------------ ------------ ------------ Total from investment operations 5.17 (0.18) 2.20 ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.49) (0.39) (0.17) ------------ ------------ ------------ Net asset value, end of period $ 26.11 $ 21.43 $ 22.00 ============ ============ ============ TOTAL RETURN (b) 24.27% (0.88)% 11.02% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 43,077 $ 12,859 $ 2,200 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.50% 0.50% 0.50% (c) Ratio of net expenses to average net assets 0.50% 0.50% 0.50% (c) Ratio of net investment income (loss) to average net assets 1.99% 2.33% 1.99% (c) Portfolio turnover rate (d) 13% 16% 20% FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) YEAR ENDED PERIOD ENDED 12/31/2019 12/31/2018 (a) ------------ ------------ Net asset value, beginning of period $ 17.67 $ 20.23 ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.23 0.12 Net realized and unrealized gain (loss) 5.12 (2.56) ------------ ------------ Total from investment operations 5.35 (2.44) ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.22) (0.12) ------------ ------------ Net asset value, end of period $ 22.80 $ 17.67 ============ ============ TOTAL RETURN (b) 30.35% (12.09)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 62,696 $ 28,269 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.65% 0.65% (c) Ratio of net expenses to average net assets 0.65% 0.65% (c) Ratio of net investment income (loss) to average net assets 1.17% 1.48% (c) Portfolio turnover rate (d) 246% 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, 2019 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") 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 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 Accounting Standards Codification 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, 2019 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, 2019, 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, 2019 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, 2019, 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, 2019 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, 2019 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, 2019 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 $ 203,851 $ -- $ -- First Trust Dorsey Wright People's Portfolio ETF 621,756 -- -- First Trust Dow 30 Equal Weight ETF 654,101 -- -- First Trust Lunt U.S. Factor Rotation ETF 508,246 -- --
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 -- --
As of December 31, 2019, 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 $ 7,586 $ (1,533,840) $ 1,914,790 First Trust Dorsey Wright People's Portfolio ETF 13,609 (1,616,858) 8,943,779 First Trust Dow 30 Equal Weight ETF 1,597 (141,205) 1,307,112 First Trust Lunt U.S. Factor Rotation ETF 12,428 (4,327,582) 3,086,439
Page 50 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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 2016, 2017, 2018, and 2019 remain open to federal and state audit. For EDOW, the taxable years ending 2017, 2018, and 2019 remain open for federal and state audit. For FCTR, the taxable years ending 2018 and 2019 remain open for federal and state audit. As of December 31, 2019, 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, 2019, 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 $ 1,533,840 First Trust Dorsey Wright People's Portfolio ETF 1,616,858 First Trust Dow 30 Equal Weight ETF 141,205 First Trust Lunt U.S. Factor Rotation ETF 4,327,582
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended December 31, 2019, the Funds had no net late year ordinary or capital losses. 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, 2019, 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 $ 157 $ (692,978) $ 692,821 First Trust Dorsey Wright People's Portfolio ETF 6,340 (851,266) 844,926 First Trust Dow 30 Equal Weight ETF 232 (2,340,872) 2,340,640 First Trust Lunt U.S. Factor Rotation ETF (162) (6,522,628) 6,522,790
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. Page 51 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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. 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, 2021. 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 or expense was incurred, but no reimbursement payment will be made by a Fund if it results in the Fund exceeding (i) the applicable expense limitation in place for the most recent fiscal year for which such expense limitation was in place, (ii) the applicable expense limitation in place at the time the fees were waived, or (iii) the current expense limitation. 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, 2019 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 12/31/2017 12/31/2018 12/31/2019 Total --------- ------------- ---------- ---------- ---------- --------- First Trust Total US Market AlphaDEX(R) ETF $ 54,452 $ -- $ 110,596 $ 135,446 $ 54,452 $ 300,494
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. Page 52 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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, a defined - outcome 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 year ended December 31, 2019, 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 $ 19,908,582 $ 19,814,817 First Trust Dorsey Wright People's Portfolio ETF 14,877,519 14,764,010 First Trust Dow 30 Equal Weight ETF 4,288,284 4,179,211 First Trust Lunt U.S. Factor Rotation ETF 110,287,545 109,810,942
For the fiscal year ended December 31, 2019, 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 $ 4,915,825 $ 3,433,984 First Trust Dorsey Wright People's Portfolio ETF 19,768,211 3,095,723 First Trust Dow 30 Equal Weight ETF 85,528,025 60,502,798 First Trust Lunt U.S. Factor Rotation ETF 87,169,199 63,326,219
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'). In order to purchase Creation Units of each Fund, an Authorized Participant must deposit (i) a designated portfolio of equity securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Creation Transaction Fee may increase or decrease with changes in each Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When a Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities. Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a standard redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Redemption Transaction Fee may increase or decrease with changes in each Fund's portfolio. Each Fund reserves the right to effect redemptions in cash. An Authorized Participant may request cash redemption in lieu of securities; however, a Fund may, in its discretion, reject any such request. Page 53 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 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, 2021 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 was the following subsequent event: The Board of Trustees of the Trust has approved a transaction to combine the First Trust Mega Cap AlphaDEX(R) Fund ("FMK"), an exchange-traded index fund that seeks investment results that correspond generally to the price and yield (before fees and expenses) of an equity index called the Nasdaq AlphaDEX(R) Mega Cap Index, with EDOW. Pursuant to this transaction, FMK shareholders will become shareholders of EDOW. In order for the transaction to occur, the shareholders of EDOW and shareholders of FMK must approve the transaction. If approved, shares of FMK would be exchanged, on a tax-free basis for federal income tax purposes, for shares of EDOW with an equal aggregate net asset value, and FMK shareholders will become shareholders of EDOW. A special meeting of shareholders of EDOW for the purpose of voting on the transaction will be held. If the required approval is obtained, it is anticipated that the transaction will be consummated shortly after the special shareholder meeting. 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 of 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, including the portfolios of investments, as of December 31, 2019, the related statements of operations for the year then ended, 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 as of December 31, 2019, and the results of their operations for the year then ended, and the changes in their net assets and the financial highlights for the periods listed in the table below in conformity with accounting principles generally accepted in the United States of America.
-------------------------------------------------------------------------------------------------------- INDIVIDUAL FUNDS STATEMENTS OF FINANCIAL INCLUDED IN THE TRUST CHANGES TO NET ASSETS HIGHLIGHTS -------------------------------------------------------------------------------------------------------- First Trust Total US Market For the years ended For the years ended December 31, 2019, AlphaDEX(R) ETF December 31, 2019 and 2018 2018, 2017, 2016, and 2015 First Trust Dorsey Wright People's Portfolio ETF -------------------------------------------------------------------------------------------------------- First Trust Dow 30 For the years ended For the years ended December 31, 2019, Equal Weight ETF December 31, 2019 and 2018 2018, and the period from August 8, 2017 (commencement of operations) through December 31, 2017 -------------------------------------------------------------------------------------------------------- First Trust Lunt U.S. Factor For the year ended December 31, 2019, and the period from July 25, 2018 Rotation ETF (commencement of operations) through December 31, 2018 --------------------------------------------------------------------------------------------------------
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, 2019, 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 24, 2020 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, 2019 (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 each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION For the taxable year ended December 31, 2019, 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 100.00% First Trust Lunt U.S. Factor Rotation ETF 100.00%
For the taxable year ended December 31, 2019, 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 100.00% First Trust Lunt U.S. Factor Rotation ETF 100.00%
A portion of each of the Funds' 2019 ordinary dividends (including short-term capital gains) paid to its shareholders during the fiscal year ended December 31, 2019, may be eligible for the Qualified Business Income Deduction (QBI) under Code Section 199A for the aggregate dividends each Fund received from the underlying Real Estate Investment Trusts (REITs) these Funds invest in. 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. Page 56 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (UNAUDITED) 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. 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. Page 57 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (UNAUDITED) 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 58 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (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; 169 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. 169 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 169 Director of Trust (1956) and Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 169 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Products and Services); 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 169 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 59 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (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 60 -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2019 (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). March 2019 Page 61 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] 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: [Insert Report] 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 $415,000 for 2018 and $417,500 for 2019. (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 2018 and $0 for 2019. 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 $0 for 2018 and $0 for 2019. (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 $58,500 for 2018 and $63,136 for 2019. 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 2018 and $0 for 2019. (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 2018 and $0 for 2019. 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 2018 and $0 for 2019. (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 2018 were $58,500 for the registrant, $48,190 for the registrant's investment adviser and $80,310 for the registrant's distributor and for 2019 were $63,136 for the registrant, $75,670 for the registrant's investment adviser and $104,730 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 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 5, 2020 --------------- 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 5, 2020 --------------- By (Signature and Title)* /s/ Donald P. Swade ---------------------------------------- Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) Date: March 5, 2020 --------------- * Print the name and title of each signing officer under his or her signature.