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
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First Trust Exchange-Traded Fund
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(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
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(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
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 765-8000
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2015
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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, 450 Fifth Street, NW,
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 IPO Index Fund (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 Total US Market AlphaDEX(R) ETF (TUSA)
(formerly known as First Trust Value Line(R) Equity Allocation Index Fund)
First Trust Value Line(R) Dividend Index Fund (FVD)
First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)
Annual Report
December 31, 2015
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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 IPO Index Fund (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 Total US Market AlphaDEX(R) ETF (TUSA)....................... 16
First Trust Value Line(R) Dividend Index Fund (FVD)...................... 18
First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)................. 20
Notes to Fund Performance Overview.......................................... 22
Understanding Your Fund Expenses............................................ 23
Portfolio of Investments
First Trust Dow Jones Select MicroCap Index Fund (FDM)................... 25
First Trust Morningstar Dividend Leaders Index Fund (FDL)................ 30
First Trust US IPO Index Fund (FPX)...................................... 32
First Trust NYSE Arca Biotechnology Index Fund (FBT)..................... 36
First Trust Dow Jones Internet Index Fund (FDN).......................... 38
First Trust Capital Strength ETF (FTCS).................................. 40
First Trust Total US Market AlphaDEX(R) ETF (TUSA)....................... 42
First Trust Value Line(R) Dividend Index Fund (FVD)...................... 56
First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)................. 60
Statements of Assets and Liabilities........................................ 64
Statements of Operations.................................................... 66
Statements of Changes in Net Assets......................................... 68
Financial Highlights........................................................ 72
Notes to Financial Statements............................................... 77
Report of Independent Registered Public Accounting Firm..................... 87
Additional Information...................................................... 88
Board of Trustees and Officers.............................................. 92
Privacy Policy.............................................................. 94
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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
http://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 http://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's portfolio 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,
this report and other Fund regulatory filings.
Page 1
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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2015
Dear Shareholders:
Thank you for your investment in First Trust Exchange-Traded Fund (the "Trust").
First Trust Advisors L.P. ("First Trust") is pleased to provide you with this
annual report which contains detailed information about your investment for the
12 months ended December 31, 2015, including a performance analysis and a market
outlook. Additionally, First Trust has compiled the Trust's financial statements
for you to review. We encourage you to read this report and discuss it with your
financial advisor.
While markets were up and down during 2015, we believe there are three important
things to remember: first, the U.S. economy grew, in spite of the massive
decline in oil prices; and second, the tapering that began in 2014 by the
Federal Reserve (the "Fed") did not stop growth in the U.S. economy either.
Finally, the long-anticipated rate hike by the Fed in December had little effect
on the money supply, and the stock market was not shocked by the hike. We remain
positive on U.S. markets, although we know that markets will always move up and
down.
First Trust believes that having a long-term investment horizon and being
invested in quality products can help you reach your goals, despite how the
market behaves. We have always maintained perspective about the markets and
believe investors should as well. We will continue to strive to provide quality
investments each and every day, which has been one of the hallmarks of our firm
since its inception nearly 25 years ago.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value our relationship with you and will continue to focus on helping
investors like you reach your financial goals.
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
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MARKET OVERVIEW
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FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2015
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 25 years of experience as an Equity
and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst
("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE ECONOMY/INVESTING
The International Monetary Fund (IMF) updates its forecasts for U.S. and global
economic growth throughout the year. In its most recent report, the IMF set its
global growth rate estimates for 2016 and 2017 at 3.4% and 3.6%, respectively,
both up from 3.0% in 2015, according to its own release. Its 2016 and 2017
estimates for U.S. real GDP growth rates were 2.7% and 2.5%, respectively, both
up from 2.1% in 2015. While economic growth rate targets remain modest overall,
the key takeaway is that current indicators do not suggest that a recession is
looming. With the exception of the U.S., many central banks around the world are
still applying stimulus measures to their respective economies.
Dealogic reported that the total value of global mergers and acquisition ("M&A")
activity (announced) topped $5.0 trillion in 2015, surpassing the previous high
set in 2007 by around 9%, according to PRNewswire. There were 10 transactions
valued at $50 billion or more in 2015 and seven of them involved U.S. companies.
These 10 transactions combined were worth $798.9 billion. The U.S. accounted for
half of all global M&A activity, or about $2.5 trillion. The two most active
sectors were Health Care ($723.7 billion) and Technology ($713.1 billion). A
robust M&A climate indicates that companies are comfortable taking risks with
their capital, in our opinion.
ETFGI LLP, an industry research group, reported that total assets invested in
exchange-traded funds (ETFs) and other exchange-traded products reached $2.99
trillion globally in December 2015, up from $2.78 billion a year ago, according
to its own release. The industry took in a record $372.0 billion in net new
assets in 2015, topping the previous record of $338.3 billion in 2014.
U.S. STOCKS AND BONDS
In 2015, the major U.S. stock indices posted mixed results. The S&P 500(R)
Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R) Index posted total
returns of 1.38%, -2.18%, and -1.97%, respectively, according to Bloomberg. Five
of the 10 major S&P 500(R) Index sectors posted positive total returns. The
top-performing sectors were Consumer Discretionary, Health Care and Consumer
Staples, up 10.11%, 6.89% and 6.60%, respectively. The worst-performing sector
indices were Energy, Materials and Utilities, down 21.12%, 8.38% and 4.84%,
respectively.
The S&P 500(R) Index outperformed the S&P 500(R) Bond Index in eight of the last
10 calendar years (thru 2015), according to S&P Dow Jones Indices and Bloomberg.
The two years that bonds topped stocks were 2008 and 2011. In 2015, the S&P
500(R) Bond Index posted a total return of -0.06%, compared to 1.38% for the S&P
500(R) Index. As of December 31, 2015, the 10-year average annual total returns
for the S&P 500(R) Index and S&P 500(R) Bond Index were 7.30% and 5.43%,
respectively, according to Bloomberg.
In the U.S. bond market, the top-performing major debt group in 2015 was
municipal bonds. The Barclays Municipal Bond: Long Bond (22+) Index posted a
total return of 4.52%. The worst-performing major debt group was high-yield
corporate bonds. The Barclays U.S. Corporate High Yield Index posted a total
return of -4.47%. The yield on the benchmark 10-Year Treasury Note (T-Note) rose
just 10 basis points, from 2.17% (12/31/14) to 2.27% (12/31/15). Over the past
decade, the average yield on the 10-Year T-Note was 3.11%. On December 16, 2015,
the Federal Reserve (the "Fed") initiated its first increase in the federal fund
target rate since June 2006. The Fed has stated that there is the potential for
3-4 additional hikes in 2016 should the data warrant them.
FOREIGN STOCKS AND BONDS
The U.S. dollar rose 9.26% against a basket of major currencies in 2015, as
measured by the U.S. Dollar Index ("DXY"). The index has appreciated 23.63%
since June 30, 2014. The DXY peaked in 2015 at a reading of 100.33 on March 13,
2015, and then traded from 93 to 100 the remainder of 2015. With respect to U.S.
investors, a stronger U.S. dollar can negatively impact returns on foreign
securities.
Foreign bond indices struggled in 2015. The Barclays EM Hard Currency Aggregate
Index of emerging markets debt posted a total return of -0.18% (USD), while the
Barclays Global Aggregate Index of higher quality debt declined by 3.15% (USD).
Foreign equities finished 2015 in negative territory as well. The MSCI Emerging
Markets Index of stocks posted a total return of -2.41% (USD), while the MSCI
World Index (excluding the U.S.) posted a total return of -14.80% (USD).
Page 3
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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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 90% of
its assets in common stocks that comprise the Index. The Index measures the
performance of selected U.S. micro-capitalization companies chosen from all
common stocks traded on the New York Stock Exchange ("NYSE"), NYSE Amex and The
Nasdaq Stock Market, Inc. ("Nasdaq(R)") that are comparatively liquid and have
strong fundamentals relative to the micro-capitalization segment as a whole. The
Fund's shares are listed for trading on the NYSE Arca, Inc. ("NYSE Arca"). The
first day of secondary market trading in shares of the Fund was September 30,
2005.
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PERFORMANCE
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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)
12/31/15 12/31/15 12/31/15 to 12/31/15 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV 0.55% 9.46% 5.64% 5.87% 57.16% 73.13% 79.61%
Market Value 0.40% 9.43% 5.64% 5.86% 56.93% 73.14% 79.36%
INDEX PERFORMANCE
Dow Jones Select MicroCap Index(SM) 1.20% 10.16% 6.36% 6.60% 62.20% 85.28% 92.63%
Russell 2000(R) Index -4.41% 9.19% 6.80% 6.88% 55.18% 93.14% 97.99%
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(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of 0.55% during the 12-month
period covered by this report. During the same period, the Russell 2000(R) Index
("benchmark") generated a return of -4.41%. The Health Care sector was the
top-performing and top-contributing sector. Over the period, the Fund's holdings
in the sector comprised an average weighting of 6.8%, returned 33.5%, and
contributed 2.2% to the Fund's overall performance. The Health Care Providers &
Services industry, in particular, contributed 1.0%. The worst-contributing
sector was the Industrials sector with a -2.4% contribution. The Energy sector
was the worst-performing sector with a -44.0% return. With an average weighting
of 3.1%, the Energy sector's contribution was limited to -1.5%. On a relative
basis, the Fund outperformed the benchmark by 4.96%. The Financials sector was
the largest contributor. With an average 31.3% weighting and 5.7% return, the
sector contributed 2.2% to the outperformance. Within the sector, the Banks
industry was the leading contributor, outperforming the benchmark by 4.6% and
allocating a weighting of almost 10% more, which together caused 1.9% of
outperformance. The Industrials sector created -0.5% drag due to the Fund being
overweight the poor-performing (-12.9% return) sector by 5.3%.
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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
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) (CONTINUED)
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% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
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Financials 37.14%
Industrials 16.76
Consumer Discretionary 16.06
Information Technology 11.57
Materials 4.49
Consumer Staples 4.40
Health Care 4.29
Telecommunication Services 2.13
Utilities 1.59
Energy 1.57
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Total 100.00%
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% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
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Chimera Investment Corp. 2.93%
Hersha Hospitality Trust 1.14
Photronics, Inc. 0.94
Gibraltar Industries, Inc. 0.85
CalAmp Corp. 0.83
CenterState Banks, Inc. 0.81
Cavco Industries, Inc. 0.78
U.S. Physical Therapy, Inc. 0.76
Strayer Education, Inc. 0.75
RE/MAX Holdings, Inc., Class A 0.71
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Total 10.50%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2005 - DECEMBER 31, 2015
First Trust Dow Jones Dow Jones
Select MicroCap Select MicroCap Russell 2000(R)
Index Fund Index(SM) Index
12/05 $10,000 $10,000 $10,000
06/06 10,573 10,612 10,821
12/06 11,568 11,652 11,836
06/07 12,286 12,416 12,599
12/07 10,871 11,036 11,650
06/08 9,539 9,714 10,558
12/08 7,249 7,413 7,714
06/09 7,096 7,280 7,918
12/09 8,759 9,036 9,810
06/10 8,515 8,805 9,619
12/10 11,016 11,424 12,445
06/11 11,386 11,850 13,218
12/11 10,060 10,492 11,927
06/12 10,708 11,204 12,944
12/12 11,657 12,243 13,876
06/13 13,550 14,274 16,077
12/13 16,706 17,660 19,263
06/14 16,594 17,596 19,877
12/14 17,220 18,307 20,205
06/15 18,115 19,314 21,165
12/15 17,316 18,528 19,313
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, 2015
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, 2011 through
December 31, 2015. 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.
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NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
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FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 87 2 0 0
01/01/12 - 12/31/12 70 0 0 0
01/01/13 - 12/31/13 151 1 0 0
01/01/14 - 12/31/14 93 1 0 0
01/01/15 - 12/31/15 112 0 0 0
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NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
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FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 161 2 0 0
01/01/12 - 12/31/12 179 1 0 0
01/01/13 - 12/31/13 98 2 0 0
01/01/14 - 12/31/14 158 0 0 0
01/01/15 - 12/31/15 140 0 0 0
Page 5
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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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 assets in common stocks that comprise the Index. The Index offers investors
a benchmark for dividend portfolios as well as a means to invest in a portfolio
of stocks that have a consistent record of growing dividends as well as the
ability to sustain them. The Index consists of the top 100 stocks, based on
dividend yield, of the securities listed on one of the three major exchanges
(NYSE, NYSE Amex or Nasdaq(R)) that have been selected through the application
of Morningstar, Inc.'s proprietary multi-step screening process. The Index is
rebalanced four times annually in March, June, September and December. 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.
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PERFORMANCE
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (3/9/06) Ended (3/9/06)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV 2.73% 12.21% 5.79% 77.85% 73.79%
Market Value 2.69% 12.15% 5.79% 77.44% 73.67%
INDEX PERFORMANCE
Morningstar(R) Dividend Leaders Index(SM) 3.18% 12.78% 6.31% 82.46% 82.36%
S&P 500(R) Index 1.38% 12.57% 7.20% 80.75% 97.83%
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(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 2.73% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index ("benchmark")
generated a return of 1.38%. The Consumer Staples sector was the
top-contributing and top-performing sector, with a 2.9% contribution and a 16.5%
return. The Tobacco industry within this sector made up 2.2% of the
contribution, having an average weighting of 11.8% and a 21.9% return over the
period. The Energy sector contributed -2.8%, had an average weighting of 13.3%
over the period and returned -19.3%. On a relative basis, the Fund outperformed
the benchmark by 1.35%. The Consumer Staples sector was the most significant
cause of the Fund's outperformance. The Fund had an 8.8% higher weighting and a
9.9% better return which led to 2.4% of outperformance. The Energy and
Information Technology sectors together caused -2.8% of drag, -1.3% and -1.5%,
respectively. The Fund was overweight the poor-performing Energy sector by 5.6%
and underweight the Information Technology sector by 16.3% and underperformed by
-8.9%.
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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
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) (CONTINUED)
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% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Staples 21.94%
Utilities 20.59
Telecommunication Services 16.86
Energy 11.40
Industrials 10.84
Health Care 5.55
Consumer Discretionary 4.97
Financials 4.28
Materials 1.93
Information Technology 1.64
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Total 100.00%
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% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Exxon Mobil Corp. 9.92%
AT&T, Inc. 9.40
Verizon Communications, Inc. 7.46
General Electric Co. 7.08
Procter & Gamble (The) Co. 5.91
Pfizer, Inc. 5.55
Philip Morris International, Inc. 4.92
Coca-Cola (The) Co. 4.22
Altria Group, Inc. 3.67
McDonald's Corp. 2.75
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Total 60.88%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MARCH 9, 2006 - DECEMBER 31, 2015
First Trust Morningstar Morningstar(R)
Dividend Leaders Dividend Leaders S&P 500(R)
Index Fund Index(SM) Index
03/06 $10,000 $10,000 $10,000
12/06 12,077 12,110 11,317
06/07 12,392 12,462 12,104
12/07 10,793 10,870 11,939
06/08 7,995 8,069 10,516
12/08 7,371 7,462 7,522
06/09 6,961 7,067 7,760
12/09 8,420 8,567 9,512
06/10 8,039 8,197 8,879
12/10 9,771 9,995 10,945
06/11 10,535 10,806 11,604
12/11 11,182 11,498 11,176
06/12 12,107 12,491 12,236
12/12 12,204 12,620 12,964
06/13 13,908 14,421 14,756
12/13 14,978 15,569 17,163
06/14 16,519 17,221 18,388
12/14 16,919 17,679 19,513
06/15 16,406 17,180 19,753
12/15 17,381 18,240 19,783
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 219 0 0 0
01/01/12 - 12/31/12 171 0 0 0
01/01/13 - 12/31/13 171 0 0 0
01/01/14 - 12/31/14 190 0 0 0
01/01/15 - 12/31/15 151 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%
01/01/11 - 12/31/11 33 0 0 0
01/01/12 - 12/31/12 79 0 0 0
01/01/13 - 12/31/13 81 0 0 0
01/01/14 - 12/31/14 62 0 0 0
01/01/15 - 12/31/15 101 0 0 0
Page 7
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST US IPO INDEX FUND (FPX)
The First Trust US IPO 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 IPOX(R)-100 U.S. Index (the "Index").
The Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index is a modified value-weighted price index measuring
the performance of the top 100 U.S. companies ranked quarterly by market
capitalization in the IPOX Global Composite Index. The Index utilizes a 10%
capping on all constituents and includes the 100 largest, typically best
performing and most liquid initial public offerings ("IPOs") of the U.S.
companies in the IPOX Global Composite Index. The IPOX Global Composite Index is
reconstituted regularly with IPOs being added to the IPOX Global Composite Index
at their seventh trading day upon "going public" and automatically exiting after
1,000 trading days or approximately four years thereafter. The Index is
reconstituted quarterly to reflect changes in the stock market values of the
IPOX Global Composite Index constituents and IPO activity during the past
quarter, with potential new companies entering the Index while other companies
reaching 1,000 days in the Index automatically drop out. 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 CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (4/12/06) Ended (4/12/06)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV 2.19% 17.80% 11.07% 126.85% 177.42%
Market Value 2.17% 17.78% 11.07% 126.61% 177.37%
INDEX PERFORMANCE
IPOX(R)-100 U.S. Index 2.79% 18.52% 11.75% 133.88% 194.52%
S&P 500(R) Index 1.38% 12.57% 7.12% 80.75% 95.13%
Russell 3000(R) Index 0.48% 12.18% 7.08% 77.64% 94.42%
----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 2.19% during the 12-month period covered by
this report. During the same period, the benchmark Russell 3000(R) Index
("benchmark") generated a return of 0.48%. The Information Technology sector,
which was the highest allocated sector with an average weighting of 24.1%, by
far, had the highest contribution of 4.2%. The Internet Software & Services
industry within this sector contributed 2.3% of the contribution. Facebook,
Inc., in particular, had a significant impact on contribution of 2.9% by having
a 10.5% weighting and returning 34.1% over the period. The Fund allocated 19.7%
of its average weight to the Health Care sector, which returned -5.3% and
contributed to -1.8% of the Fund's overall return. On a relative basis, the Fund
outperformed the benchmark by 1.71%. The Information Technology sector again was
the leading cause of the Fund's relative outperformance. The Fund had a 4.8%
higher allocation to the sector and had a 15.3% higher return, which together
led to 2.9% of outperformance. A drag of -2.6% was created within the Health
Care sector by the Fund being overweight 5.1% and underperforming by -12.5%.
Abbvie, Inc, which had a return of -6.4%, was a significant source of this drag
by the Fund having an allocation of 9.1% versus the benchmark's 0.5%.
-----------------------------
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 IPO INDEX FUND (FPX) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 30.96%
Consumer Discretionary 21.52
Health Care 18.28
Consumer Staples 7.80
Financials 7.28
Energy 6.26
Industrials 5.91
Materials 1.16
Telecommunication Services 0.59
Utilities 0.24
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Facebook, Inc., Class A 9.78%
AbbVie, Inc. 8.84
Kraft Heinz (The) Co. 5.32
General Motors Co. 4.83
Phillips 66 3.98
PayPal Holdings, Inc. 2.81
Hewlett Packard Enterprise Co. 2.50
Baxalta, Inc. 2.42
Synchrony Financial 2.32
Delphi Automotive PLC 2.19
-------
Total 44.99%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 12, 2006 - DECEMBER 31, 2015
First Trust US IPOX(R)-100 S&P 500(R) Russell 3000(R)
IPO Index Fund U.S. Index Index Index
04/06 $10,000 $10,000 $10,000 $10,000
12/06 11,100 11,154 11,162 11,064
06/07 12,385 12,481 11,939 11,851
12/07 12,712 12,844 11,776 11,633
06/08 11,784 11,941 10,373 10,348
12/08 7,134 7,245 7,419 7,293
06/09 8,087 8,248 7,654 7,599
12/09 10,339 10,575 9,382 9,360
06/10 9,726 9,980 8,758 8,794
12/10 12,228 12,594 10,796 10,945
06/11 13,439 13,889 11,446 11,640
12/11 12,607 13,071 11,023 11,057
06/12 14,314 14,885 12,069 12,088
12/12 16,391 17,092 12,788 12,873
06/13 19,143 20,011 14,555 14,683
12/13 24,256 25,446 16,929 17,192
06/14 25,859 27,214 18,137 18,385
12/14 27,144 28,651 19,247 19,350
06/15 29,489 31,218 19,484 19,725
12/15 27,737 29,451 19,513 19,443
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 135 0 0 0
01/01/12 - 12/31/12 149 2 0 0
01/01/13 - 12/31/13 220 0 0 0
01/01/14 - 12/31/14 158 0 0 0
01/01/15 - 12/31/15 172 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%
01/01/11 - 12/31/11 116 1 0 0
01/01/12 - 12/31/12 97 2 0 0
01/01/13 - 12/31/13 32 0 0 0
01/01/14 - 12/31/14 94 0 0 0
01/01/15 - 12/31/15 80 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 assets in
common stocks that comprise the Index. The Index is an equal dollar-weighted
index designed to measure the performance of a cross section of companies in the
biotechnology industry that are primarily involved in the use of biological
processes to develop products or provide services. Such processes include, but
are not limited to, recombinant DNA technology, molecular biology, genetic
engineering, monoclonal antibody-based technology, lipid/liposome technology and
genomics. This Index is rebalanced quarterly based on closing prices on the
third Friday in January, April, July and October to ensure that each component
stock continues to represent approximately equal weight in the Index. The Fund's
shares are listed for trading on the NYSE Arca. The first day of secondary
market trading in shares of the Fund was June 23, 2006.
----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (6/19/06) Ended (6/19/06)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV 10.97% 23.72% 20.09% 189.83% 472.95%
Market Value 10.91% 23.68% 20.09% 189.43% 472.74%
INDEX PERFORMANCE
NYSE Arca Biotechnology Index(SM) 11.39% 24.30% 20.74% 196.67% 503.03%
S&P Composite 1500 Health Care Index 7.41% 20.34% 12.04% 152.38% 195.56%
NASDAQ(R) Biotechnology Index 11.77% 29.89% 18.44% 269.67% 401.86%
S&P 500(R) Index 1.38% 12.57% 7.65% 80.75% 101.97%
----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 10.97% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500 Health Care Index
("benchmark") generated a return of 7.41%. Pharmacyclics, Inc. was, by far, the
best-performing security held in the Fund with a 110.6% return and a 3.0%
contribution to the Fund's return. This security was acquired on May 27, 2015 by
Abbvie, Inc. Exact Sciences Corp., which was held at an average weighting of
2.4% over the period, was the worst performer, returning -70.8% and contributing
-2.9% to the Fund's return. From 2013 to 2014 Exact Sciences Corp. returned
134.7% on news that its Colorguard DNA test will be covered by Medicare Part B
for certain beneficiaries. During the reporting period, Exact Sciences Corp.
plunged on news that the test would be considered an alternative test rather
than a recommended test. On a relative basis, the Fund outperformed the
benchmark by 3.56%. The outperformance can be attributed to the Fund's heavier
weighting among well-performing pure Biotechnology companies.
-----------------------------
The NYSE Arca Biotechnology Index(SM) is a trademark of NYSE Euronext or its
affiliates ("NYSE Euronext") and is licensed for use by First Trust on behalf of
the Fund. The Fund is not sponsored or endorsed by NYSE Euronext. NYSE Euronext
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 78.74%
Life Sciences Tools & Services 16.58
Pharmaceuticals 4.68
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Nektar Therapeutics 4.68%
Ionis Pharmaceuticals, Inc. 4.19
Dyax Corp. 4.06
Alkermes PLC 3.91
Illumina, Inc. 3.86
United Therapeutics Corp. 3.68
Charles River Laboratories
International, Inc. 3.68
Alexion Pharmaceuticals, Inc. 3.58
Seattle Genetics, Inc. 3.42
Biogen, Inc. 3.40
-------
Total 38.46%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 19, 2006 - DECEMBER 31, 2015
First Trust NYSE NYSE Arca NASDAQ(R) S&P Composite
Arca Biotechnology Biotechnology Biotechnology S&P 500(R) 1500 Health
Index Fund Index(SM) Index Index Care Index
06/06 $10,000 $10,000 $10,000 $10,000 $10,000
12/06 11,775 11,815 11,114 11,554 11,194
06/07 12,105 12,179 11,177 12,358 11,919
12/07 12,205 12,320 11,630 12,189 12,092
06/08 11,410 11,557 11,086 10,736 10,593
12/08 9,968 10,138 10,200 7,679 9,218
06/09 10,722 10,921 10,491 7,922 9,305
12/09 14,441 14,758 11,828 9,711 11,132
06/10 15,629 16,026 11,227 9,065 10,324
12/10 19,768 20,327 13,726 11,174 11,712
06/11 22,182 22,880 15,694 11,847 13,374
12/11 16,534 17,096 15,385 11,410 13,104
06/12 22,185 23,013 19,204 12,493 14,610
12/12 23,299 24,233 20,352 13,236 15,510
06/13 29,413 30,705 25,829 15,066 18,703
12/13 34,975 36,600 33,787 17,523 22,049
06/14 41,655 43,638 38,352 18,774 24,298
12/14 51,636 54,137 45,413 19,923 27,515
06/15 62,831 65,982 54,688 20,167 30,322
12/15 57,296 60,301 50,186 20,198 29,555
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 151 1 0 0
01/01/12 - 12/31/12 121 0 0 0
01/01/13 - 12/31/13 204 0 0 0
01/01/14 - 12/31/14 183 0 0 0
01/01/15 - 12/31/15 159 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%
01/01/11 - 12/31/11 100 0 0 0
01/01/12 - 12/31/12 128 1 0 0
01/01/13 - 12/31/13 48 0 0 0
01/01/14 - 12/31/14 69 0 0 0
01/01/15 - 12/31/15 93 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
assets in common stocks that comprise the Index. The Index represents companies
that generate the majority of their revenues via the Internet. The Index was
designed and is maintained according to a set of rules that were devised with
the goal of providing clear and accurate views of the growing Internet market
segment. The Index aims to consistently represent 80% of the float-adjusted
Internet equity universe. The Index contains two sub-indices, the Dow Jones
Internet Commerce Index and the Dow Jones Internet Services Index. For its stock
to be eligible for the "universe," a company must generate at least 50% of
annual sales/revenues from the Internet, and be currently included in the Dow
Jones U.S. Index. The Fund's shares are listed for trading on the NYSE Arca. The
first day of secondary market trading in shares of the Fund was June 23, 2006.
----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (6/19/06) Ended (6/19/06)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV 21.77% 16.86% 14.86% 117.91% 274.76%
Market Value 21.71% 16.83% 14.86% 117.63% 274.71%
INDEX PERFORMANCE
Dow Jones Internet Composite Index(SM) 22.40% 17.52% 15.48% 124.15% 294.57%
S&P 500(R) Index 1.38% 12.57% 7.65% 80.75% 101.97%
S&P Composite 1500 Information
Technology Index 5.60% 13.46% 10.50% 88.02% 159.02%
----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 21.77% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500 Information
Technology Index ("benchmark") generated a return of 5.60%. The Internet &
Catalog Retail industry was the highest-contributing industry with a 13.5%
contribution. Amazon.com, Inc. within this industry, accounted for 8.2% of the
industry's contribution. Amazon.com, Inc. was held at an average weighting of
9.7% over the period and returned 117.8%. The IT Services industry, which was
held at an average weighting of 1.9%, was the worst-performing industry with a
-10.9% return and -0.3% contribution. PayPal Holdings, Inc., in particular,
returned -10.5% and contributed -0.3% to the Fund's return. On a relative basis,
the Fund outperformed the benchmark by 16.17%. The Fund's holdings within the
Internet & Catalog Retail industry contributed 12.3% of the outperformance. This
industry is categorized as being part of the Consumer Discretionary sector by
the Global Industry Classification Standard ("GICS"). The benchmark held no
weighting within this well-performing industry, causing 12.4% of relative
outperformance.
-----------------------------
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 on behalf
of the Fund. 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 69.87%
Consumer Discretionary 22.16
Financials 4.52
Health Care 2.62
Telecommunication Services 0.83
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Amazon.com, Inc. 10.18%
Facebook, Inc., Class A 10.02
Alphabet, Inc., Class A 5.10
Alphabet, Inc., Class C 5.07
salesforce.com, Inc. 4.90
Netflix, Inc. 4.73
PayPal Holdings, Inc. 4.60
eBay, Inc. 3.91
Yahoo!, Inc. 3.81
LinkedIn Corp., Class A 3.64
-------
Total 55.96%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 19, 2006 - DECEMBER 31, 2015
First Trust Dow Jones S&P Composite 1500
Dow Jones Internet Internet Composite S&P 500(R) Information Technology
Index Fund Index(SM) Index Index
06/06 $10,000 $10,000 $10,000 $10,000
12/06 11,285 11,315 11,554 11,574
06/07 12,975 13,044 12,358 12,716
12/07 12,545 12,651 12,189 13,360
06/08 11,203 11,327 10,736 11,638
12/08 7,023 7,114 7,679 7,629
06/09 9,374 9,524 7,922 9,506
12/09 12,587 12,825 9,711 12,286
06/10 11,980 12,222 9,065 11,055
12/10 17,197 17,603 11,174 13,776
06/11 18,186 18,661 11,847 14,115
12/11 16,209 16,702 11,410 13,930
06/12 17,741 18,335 12,493 15,702
12/12 19,590 20,315 13,236 15,985
06/13 22,779 23,687 15,065 17,061
12/13 30,050 31,357 17,523 20,620
06/14 29,906 31,260 18,773 22,362
12/14 30,779 32,232 19,922 24,527
06/15 33,731 35,420 20,167 24,846
12/15 37,479 39,457 20,197 25,899
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 151 0 0 0
01/01/12 - 12/31/12 122 0 0 0
01/01/13 - 12/31/13 200 0 0 0
01/01/14 - 12/31/14 148 0 0 0
01/01/15 - 12/31/15 201 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%
01/01/11 - 12/31/11 101 0 0 0
01/01/12 - 12/31/12 128 0 0 0
01/01/13 - 12/31/13 52 0 0 0
01/01/14 - 12/31/14 104 0 0 0
01/01/15 - 12/31/15 51 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(TM) (the
"Index"). The Index is initially equally-weighted and is made up of the top 50
stocks out of the universe of the largest 500 U.S. companies included in the
Nasdaq US Benchmark Index, ranked by one- and three-year daily volatility.
Companies with less than $1 billion in cash and short term investments,
companies with long-term debt divided by market capitalization greater than 30%,
and companies with return on equity less than 15% are excluded from the Index.
The Index is reconstituted and rebalanced on a quarterly basis. 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 CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (7/6/06) Ended (7/6/06)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV 1.64% 12.70% 8.75% 81.81% 121.56%
Market Value 1.51% 12.69% 8.75% 81.73% 121.57%
INDEX PERFORMANCE
The Capital Strength Index(TM)* 2.31% N/A N/A N/A N/A
S&P 500 Value Index -3.13% 10.96% 5.37% 68.23% 64.27%
S&P 500(R) Index 1.38% 12.57% 7.37% 80.75% 96.39%
----------------------------------------------------------------------------------------------------------------------------------
* 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(TM). 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). Therefore, the Fund's performance and total
returns shown for the period prior to June 4, 2013, are not necessarily
indicative of the performance of the Fund based on its current index,
would have generated. 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 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 1.64% during the 12-month period covered by
this report. During the same period, the S&P 500 Value Index ("benchmark")
generated a return of -3.13%. The Consumer Discretionary sector was the
top-performing and top-contributing sector with a 12.5% return and 2.1%
contribution. Within the Consumer Discretionary sector, Starbucks Corp. and
McDonald's Corp., both within the Hotels Restaurants & Leisure industry,
contributed 0.7% and 0.6%, respectively, to the Fund's return. The Energy sector
was the worst-performing sector with a -8.5% return. The Energy sector was held
at an average weighting of only 1.5%, so its contribution to return was limited
to -0.14%. Exxon Mobil was the only Energy sector security held over the period.
On a relative basis, the Fund outperformed the benchmark by 4.77%. Half of the
outperformance (2.2%) was caused by the Consumer Discretionary sector, where the
Fund was overweight by 7.3% and outperformed by 15.8%. The Health Care sector
was the only sector to detract from relative performance. The Fund was
overweight the Health Care sector by 3.3% and underperformed by -4.8%, leading
to -0.3% of drag.
-----------------------------
"Credit Suisse," "HOLT" and "Credit Suisse U.S. Value Index, Powered by
HOLT(TM)," are trademarks of Credit Suisse Group AG, Credit Suisse Securities
(USA) LLC or one of their affiliates.
The Capital Strength Index(TM) is the trademark (the "Mark") of the Nasdaq OMX
Group (" Nasdaq OMX"). The Mark is licensed for use by First Trust Portfolios
L.P. The Fund has not been passed on by Nasdaq OMX as to its legality or
suitability. The Fund is not issued, endorsed, sold or promoted by Nasdaq OMX.
The Fund should not be construed in any way as investment advice by Nasdaq OMX.
NASDAQ OMX MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE FUND
OR THE CAPITAL STRENGTH INDEX(TM).
Page 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CAPITAL STRENGTH ETF (FTCS) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 25.90%
Consumer Staples 20.24
Consumer Discretionary 16.06
Health Care 14.42
Information Technology 13.15
Financials 5.79
Materials 4.44
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
E.I. du Pont de Nemours and Co. 2.29%
McDonald's Corp. 2.22
Raytheon Co. 2.21
Kroger (The) Co. 2.21
Cardinal Health, Inc. 2.19
Waters Corp. 2.19
Illinois Tool Works, Inc. 2.16
Monsanto Co. 2.15
Northrop Grumman Corp. 2.13
Home Depot (The), Inc. 2.12
-------
Total 21.87%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 6, 2006 - DECEMBER 31, 2015
First Trust Capital S&P 500 Value S&P 500(R)
Strength ETF Index Index
07/06 $10,000 $10,000 $10,000
12/06 11,074 11,294 11,235
06/07 12,444 12,126 12,016
12/07 12,210 11,519 11,852
06/08 11,253 9,671 10,440
12/08 7,665 7,002 7,467
06/09 8,640 6,903 7,703
12/09 10,686 8,484 9,443
06/10 9,880 8,034 8,815
12/10 12,185 9,765 10,866
06/11 13,144 10,276 11,520
12/11 11,827 9,718 11,095
06/12 12,469 10,585 12,148
12/12 13,890 11,436 12,871
06/13 16,203 13,235 14,650
12/13 18,876 15,093 17,039
06/14 19,929 16,143 18,256
12/14 21,794 16,957 19,373
06/15 21,757 16,881 19,611
12/15 22,153 16,425 19,640
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 129 0 0 0
01/01/12 - 12/31/12 147 0 0 0
01/01/13 - 12/31/13 134 0 0 0
01/01/14 - 12/31/14 108 9 0 0
01/01/15 - 12/31/15 190 2 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 123 0 0 0
01/01/12 - 12/31/12 103 0 0 0
01/01/13 - 12/31/13 117 1 0 0
01/01/14 - 12/31/14 131 4 0 0
01/01/15 - 12/31/15 57 3 0 0
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
The First Trust Total US Market AlphaDEX(R) ETF (formerly the First Trust Value
Line(R) Equity Allocation 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 AlphaDEX(R) Total US Market Index
(the "Index"). The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Index is designed to quantitatively
identify and select stocks across market capitalizations (including large-cap,
mid-cap and small-cap companies) that exhibit growth and value factors and
appear to have the greatest potential for capital appreciation. The Index is a
modified equal-dollar weighted index. The Index is reconstituted and balanced on
a quarterly basis. The Fund's shares are listed for trading on the Nasdaq(R).
The first day of secondary market trading in shares of the Fund was December 7,
2006.
----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (12/5/06) Ended (12/5/06)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV -5.99% 4.97% 3.52% 27.42% 36.87%
Market Value -6.07% 4.92% 3.51% 27.13% 36.78%
INDEX PERFORMANCE
NASDAQ AlphaDEX(R) Total US Market Index* -5.10% N/A N/A N/A N/A
Russell 3000(R) Index 0.48% 12.18% 6.42% 77.64% 75.86%
Value Line(R) Equity Allocation Index* N/A N/A N/A N/A N/A
----------------------------------------------------------------------------------------------------------------------------------
* 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
period 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 new underlying index had an inception date of September
8, 2014, it was not in existence for all of the periods disclosed. The
Value Line(R) Equity Allocation Index is not shown above as the index
terminated on January 9, 2015 and information on this index is no longer
available.
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -5.99% during the 12-month period covered by
this report. During the same period, the Russell 3000(R) Index ("benchmark")
generated a return of 0.48%. The top-contributing and second best-performing
sector was the Consumer Staples sector with a 7.0% return and 0.3% contribution.
Followed closely by the Health Care sector with a 7.5% return and 0.2%
contribution. The Beverages industry, which was held at an average weighting of
0.8% and returned 35.4%, was the leading industry among the Consumer Staples
sector. The Energy sector was the worst-performing sector with a -26.6% return.
Among the Energy sector, the Oil Gas & Consumable Fuels industry was weighted at
an average 6.5% over the period and contributed -1.6% from its -24.1% return. On
a relative basis, the Fund underperformed the benchmark by -6.47%. With an
average weighting of 17.9%, 4.7% higher than the benchmark, the Consumer
Discretionary sector created -1.7% of drag over the period from being overweight
and underperforming by -9.9%. Amazon.com, Inc., in particular, was the cause of
-0.5% of relative underperformance. Amazon.com, Inc. was not added to the Fund
until October 2015 so it did not participate as fully as the benchmark did in
Amazon.com, Inc.'s upward momentum.
-----------------------------
The NASDAQ AlphaDEX(R) Total US Market Index (the "Index") is a trademark of The
Nasdaq OMX Group and has been licensed for use by First Trust Portfolios L.P.
AlphaDEX(R) is a trademark owned by First Trust Portfolios L.P. and has been
licensed to The Nasdaq OMX Group for use in the name of the Index. The First
Trust Total US Market AlphaDEX(R) ETF is not sponsored, endorsed, sold or
promoted by The Nasdaq OMX Group and The Nasdaq OMX Group makes no
representation or warranty regarding the advisability of investing in the First
Trust Total US Market AlphaDEX(R) ETF or as to the result to be obtained by any
person from use of the Index in connection with the trading of the First Trust
Total US Market AlphaDEX(R) ETF.
Page 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 19.82%
Information Technology 16.73
Financials 16.55
Industrials 13.44
Health Care 8.08
Energy 7.06
Consumer Staples 5.88
Utilities 5.66
Materials 5.38
Telecommunication Services 1.40
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Amazon.com, Inc. 0.53%
Valero Energy Corp. 0.48
Baxter International, Inc. 0.47
Yahoo!, Inc. 0.47
Intel Corp. 0.47
Chevron Corp. 0.46
Ulta Salon, Cosmetics & Fragrance, Inc. 0.46
eBay, Inc. 0.46
SanDisk Corp. 0.46
Marathon Petroleum Corp. 0.46
-------
Total 4.72%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 5, 2006 - DECEMBER 31, 2015
First Trust
Total US Market Russell 3000(R)
AlphaDEX(R) ETF Index
12/5/06 $10,000 $10,000
12/06 9,890 10,008
06/07 10,610 10,720
12/07 10,350 10,522
06/08 9,470 9,360
12/08 6,681 6,597
06/09 7,037 6,874
12/09 8,962 8,466
06/10 8,831 7,954
12/10 10,741 9,900
06/11 10,976 10,529
12/11 9,714 10,001
06/12 9,883 10,933
12/12 10,563 11,643
06/13 12,087 13,280
12/13 14,223 15,550
06/14 14,940 16,629
12/14 14,559 17,502
06/15 14,731 17,842
12/15 13,687 17,587
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 146 1 0 0
01/01/12 - 12/31/12 124 1 0 0
01/01/13 - 12/31/13 140 0 0 0
01/01/14 - 12/31/14 178 0 0 0
01/01/15 - 12/31/15 115 15 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%
01/01/11 - 12/31/11 105 0 0 0
01/01/12 - 12/31/12 122 3 0 0
01/01/13 - 12/31/13 104 8 0 0
01/01/14 - 12/31/14 68 6 0 0
01/01/15 - 12/31/15 110 12 0 0
Page 17
--------------------------------------------------------------------------------
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(TM)
(the "Index"). The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Index is designed to objectively
identify and select those stocks from the universe of stocks which Value Line,
Inc.(R) gives a Safety(TM) Ranking of #1 or #2 in the Value Line(R) Safety(TM)
Ranking System and have the potential to pay above-average dividends and achieve
capital appreciation. The Index is rebalanced on a monthly basis. The Fund's
shares are listed for trading on the NYSE Arca.
-----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (8/19/03) Ended Ended (8/19/03)
12/31/15 12/31/15 12/31/15 to 12/31/15 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV 1.26% 12.49% 8.20% 9.16% 80.12% 119.93% 195.49%
Market Value 1.26% 12.47% 9.68% 9.16% 80.00% 151.89% 195.49%
INDEX PERFORMANCE
Value Line(R) Dividend Index(TM)* 2.09% 13.41% N/A N/A 87.58% N/A N/A
S&P 500(R) Index 1.38% 12.57% 7.31% 8.13% 80.75% 102.42% 162.93%
Dow Jones U.S. Select Dividend
Index(SM)* -1.64% 12.78% 6.50% N/A 82.47% 87.76% 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 (12/15/06) through period end (12/31/15) were 82.68%
and 83.56% at NAV and Market Value, respectively. That compares to an
Index return of 96.14% for the same period. The average annual total
returns for the period from the reorganization date (12/15/06) through
period end (12/31/15) were 6.89% and 6.95% at NAV and Market Value,
respectively. That compares to an Index return of 7.74% for the same
period.
NAV and Market Value returns assume that all distributions have been
reinvested in the Fund at NAV and Market Value, respectively. Prior to
December 15, 2006, NAV and Market Value returns assumed that all
distributions were reinvested at prices obtained by the Dividend
Reinvestment Plan of the Predecessor FVD Fund and the price used to
calculate Market Value return was the AMEX (now known as the NYSE MKT)
closing market price of the Predecessor FVD Fund.
* Performance data is not available for all the periods shown in the table
because performance data does not exist for the periods shown.
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 1.26% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index ("benchmark")
generated a return of 1.38%. The Consumer Staples sector was the Fund's
best-performing sector with an 11.5% return and 1.5% contribution. Kraft Heinz
Co. performed particularly well within the Consumer Staples sector with a 44.3%
return and 0.2% contribution. The Energy sector was the Fund's worst-performing
sector with a -19.8% return and -1.1% contribution. TransCanada Corp. performed
particularly poorly within the Energy sector with a -30.7% return and -0.2%
contribution. On a relative basis, the Fund underperformed the benchmark by
-0.12%. The Fund was underweight the Consumer Discretionary sector by 6.0% and
underperformed by -10.2% which created -1.2% of drag. The Financials sector,
where the Fund outperformed the benchmark by 6.3%, created 1.1% of
outperformance.
-----------------------------
Value Line is a registered trademark of Value Line, Inc. that is licensed to
First Trust on behalf of the Fund. 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) DIVIDEND INDEX FUND (FVD) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Utilities 23.77%
Financials 17.78
Industrials 14.29
Consumer Staples 12.11
Information Technology 8.86
Consumer Discretionary 6.84
Health Care 6.83
Energy 4.79
Materials 3.17
Telecommunication Services 1.56
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Weis Markets, Inc. 0.56%
Hubbell, Inc. 0.55
Enbridge, Inc. 0.55
MDU Resources Group, Inc. 0.55
New Jersey Resources Corp. 0.55
Black Hills Corp. 0.55
AbbVie, Inc. 0.55
Royal Dutch Shell PLC, Class B 0.55
Fastenal Co. 0.54
Willis Towers Watson PLC 0.54
-------
Total 5.49%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2005 - DECEMBER 31, 2015
First Trust Value Line(R) S&P 500(R) Dow Jones U.S. Select
Dividend Index Fund Index Dividend Index(SM)
12/05 $10,000 $10,000 $10,000
06/06 10,575 10,271 10,501
12/06 12,010 11,580 11,954
06/07 12,333 12,386 12,454
12/07 11,600 12,216 11,337
06/08 10,470 10,761 8,910
12/08 8,796 7,697 7,825
06/09 8,690 7,940 6,844
12/09 10,518 9,733 8,696
06/10 10,215 9,086 8,584
12/10 12,209 11,200 10,289
06/11 13,202 11,874 11,152
12/11 13,312 11,436 11,567
06/12 14,155 12,521 12,323
12/12 14,800 13,266 12,820
06/13 16,856 15,099 14,596
12/13 18,732 17,562 16,546
06/14 20,329 18,816 18,178
12/14 21,720 19,968 19,087
06/15 21,268 20,214 18,406
12/15 21,991 20,244 18,776
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 218 1 0 0
01/01/12 - 12/31/12 205 0 0 0
01/01/13 - 12/31/13 238 0 0 0
01/01/14 - 12/31/14 223 0 0 0
01/01/15 - 12/31/15 179 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%
01/01/11 - 12/31/11 33 0 0 0
01/01/12 - 12/31/12 44 1 0 0
01/01/13 - 12/31/13 14 0 0 0
01/01/14 - 12/31/14 29 0 0 0
01/01/15 - 12/31/15 73 0 0 0
Page 19
--------------------------------------------------------------------------------
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 assets in
common stocks that comprise the Index. The Index is an equal-dollar weighted
index that is designed to objectively identify and select 100 stocks from the
universe of stocks to which Value Line(R) assigns a #1 ranking in the Value
Line(R) Timeliness(TM) Ranking System (the "Ranking System"). At any one time
only 100 stocks are assigned a #1 ranking in the Ranking System. The Index is
rebalanced quarterly. 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)
12/31/15 12/31/15 12/31/15 to 12/31/15 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV -3.13% 8.49% 3.59% 5.64% 50.29% 42.30% 99.26%
Market Value -3.13% 8.48% 4.56% 5.64% 50.22% 56.25% 99.16%
INDEX PERFORMANCE
Value Line(R) 100 Index -2.31% 9.48% N/A N/A 57.28% N/A N/A
Russell 3000(R)- Index 0.48% 12.18% 7.35% 8.38% 77.64% 103.33% 174.58%
-----------------------------------------------------------------------------------------------------------------------------------
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 (06/15/07) through
period end (12/31/15) were 20.95% and 20.89% at NAV and Market Value,
respectively. That compares to an Index return of 30.09% for that same
period. The average annual total returns for the period from the
reorganization date (6/15/07) through period end (12/31/15) were 2.25% and
2.25% at NAV and Market Value, respectively. That compares to an Index
return of 3.13% for the same period.
NAV and Market Value returns assume that all distributions have been
reinvested in the Fund at NAV and Market Value, respectively. Prior to
June 15, 2007, NAV and Market Value returns assumed that all distributions
were reinvested at prices obtained by the Dividend Reinvestment Plan of
the Predecessor FVL Fund and the price used to calculate Market Value
return was the AMEX (now known as the NYSE MKT) closing market price of
the Predecessor FVL Fund.
* Performance data is not available for all the periods shown in the table
for the index because performance data does not exist for each of the
entire periods.
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -3.13% during the 12-month period covered by
this report. During the same period, the Russell 3000(R) Index ("benchmark")
generated a return of 0.48%. The Consumer Staples sector was the top-performing
and top-contributing sector to the Fund's return over the period. On average,
the Consumer Staples sector was held at an 8.6% weighting, returned 15.3%, and
contributed 1.4% to the Fund's return. National Beverage Corp. was the
best-performing security within the Consumer Staples sector with a 58.6% return
and 0.5% contribution to the Fund's return. The Industrial sector was the
worst-performing sector with a -10.1% return and -2.2% contribution to the
Fund's return. Greenbrier Cos., Inc. was the worst-performing security within
the Industrials sector with a -37.8% return and -0.4% contribution to the Fund's
return. On a relative basis, the Fund underperformed the benchmark by -3.61%.
The Industrials sector led to -2.2% of the underperformance due to the Fund
being 14.9% overweight the sector and returning -6.3% less than the benchmark.
The Fund recaptured 1.5% of relative performance within the Energy sector, where
the Fund allocated 2.1% versus the benchmark at 6.9% and returned -5.5% versus
the benchmark at -23.2%.
-----------------------------
Value Line is a registered trademark of Value Line, Inc. that is licensed to
First Trust on behalf of the Fund. The Fund is not sponsored, recommended, sold,
or promoted by Value Line Publishing LLC, Value Line, Inc. or any of their
affiliates.
Page 20
--------------------------------------------------------------------------------
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 24.85%
Industrials 20.30
Consumer Discretionary 20.23
Health Care 11.37
Consumer Staples 10.71
Financials 10.38
Materials 2.16
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
National Beverage Corp. 1.56%
Hormel Foods Corp. 1.31
Ulta Salon, Cosmetics & Fragrance, Inc. 1.22
Pool Corp. 1.20
Intercontinental Exchange, Inc. 1.18
Acuity Brands, Inc. 1.17
Natus Medical, Inc. 1.17
AutoZone, Inc. 1.16
Starbucks Corp. 1.15
Cantel Medical Corp. 1.14
-------
Total 12.26%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2005 - DECEMBER 31, 2015
First Trust Value Line(R) 100 Russell 3000(R)
Exchange-Traded Fund Index
12/05 $10,000 $10,000
06/06 10,216 10,323
12/06 10,460 11,571
06/07 11,682 12,394
12/07 12,543 12,166
06/08 11,472 10,822
12/08 6,486 7,627
06/09 6,234 7,946
12/09 7,312 9,787
06/10 7,249 9,195
12/10 9,469 11,444
06/11 10,006 12,171
12/11 8,719 11,561
06/12 8,962 12,638
12/12 9,462 13,458
06/13 10,872 15,350
12/13 13,194 17,973
06/14 14,622 19,220
12/14 14,691 20,229
06/15 15,080 20,621
12/15 14,231 20,333
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 137 2 0 0
01/01/12 - 12/31/12 73 0 0 0
01/01/13 - 12/31/13 100 0 0 0
01/01/14 - 12/31/14 165 0 0 0
01/01/15 - 12/31/15 130 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%
01/01/11 - 12/31/11 111 2 0 0
01/01/12 - 12/31/12 177 0 0 0
01/01/13 - 12/31/13 152 0 0 0
01/01/14 - 12/31/14 87 0 0 0
01/01/15 - 12/31/15 122 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 the 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 the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike a 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, 2015 (UNAUDITED)
As a shareholder of First Trust Dow Jones Select MicroCap Index Fund, First
Trust Morningstar Dividend Leaders Index Fund, First Trust US IPO Index Fund,
First Trust NYSE Arca Biotechnology Index Fund, First Trust Dow Jones Internet
Index Fund, First Trust Capital Strength ETF, First Trust Total US Market
AlphaDEX(R) ETF, First Trust Value Line(R) Dividend Index Fund and 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, 2015.
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, 2015 DECEMBER 31, 2015 PERIOD (a) PERIOD (b)
-----------------------------------------------------------------------------------------------------------------------
FIRST TRUST DOW JONES SELECT MICROCAP INDEX
FUND (FDM)
Actual $1,000.00 $ 955.90 0.60% $2.96
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 $1,059.40 0.45% $2.34
Hypothetical (5% return before expenses) $1,000.00 $1,022.94 0.45% $2.29
FIRST TRUST US IPO INDEX FUND (FPX)
Actual $1,000.00 $ 940.60 0.60% $2.93
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX
FUND (FBT)
Actual $1,000.00 $ 911.90 0.56% $2.70
Hypothetical (5% return before expenses) $1,000.00 $1,022.38 0.56% $2.85
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
Actual $1,000.00 $1,111.10 0.54% $2.87
Hypothetical (5% return before expenses) $1,000.00 $1,022.48 0.54% $2.75
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
Actual $1,000.00 $1,018.20 0.65% $3.31
Hypothetical (5% return before expenses) $1,000.00 $1,021.93 0.65% $3.31
Page 23
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
DECEMBER 31, 2015 (UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2015 DECEMBER 31, 2015 PERIOD (a) PERIOD (b)
-----------------------------------------------------------------------------------------------------------------------
FIRST TRUST TOTAL US MARKET ALPHADEX(R)
ETF (TUSA)
Actual $1,000.00 $ 929.20 0.70% $3.40
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX
FUND (FVD)
Actual $1,000.00 $1,034.00 0.70% $3.59
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 $ 943.70 0.70% $3.43
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57
(a) These expense ratios reflect 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,
2015 through December 31, 2015), multiplied by 184/365 (to reflect the
one-half year period).
Page 24
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.8%
AEROSPACE & DEFENSE -- 0.9%
2,727 National Presto Industries, Inc. $ 225,959
4,888 Sparton Corp. (a) 97,711
5,954 Vectrus, Inc. (a) 124,379
--------------
448,049
--------------
AIR FREIGHT & LOGISTICS -- 0.4%
4,976 Park-Ohio Holdings Corp. 183,017
--------------
AUTO COMPONENTS -- 2.7%
9,971 Fox Factory Holding Corp. (a) 164,821
24,622 Modine Manufacturing Co. (a) 222,829
4,748 Shiloh Industries, Inc. (a) 24,879
14,584 Stoneridge, Inc. (a) 215,843
2,043 Strattec Security Corp. 115,409
12,999 Superior Industries International,
Inc. 239,442
11,859 Tower International, Inc. 338,812
--------------
1,322,035
--------------
AUTOMOBILES -- 0.6%
15,159 Winnebago Industries, Inc. 301,664
--------------
BANKS -- 20.9%
3,732 Access National Corp. 76,357
7,252 Arrow Financial Corp. 197,037
16,781 Banc of California, Inc. 245,338
3,065 Bank of Marin Bancorp 163,671
3,369 Bar Harbor Bankshares 115,961
5,567 Bridge Bancorp, Inc. 169,404
8,874 Bryn Mawr Bank Corp. 254,861
4,070 Camden National Corp. 179,446
17,175 Cascade Bancorp (a) 104,252
25,545 CenterState Banks, Inc. 399,779
20,536 CoBiz Financial, Inc. 275,593
9,252 Community Trust Bancorp, Inc. 323,450
11,249 Enterprise Financial Services
Corp. 318,909
4,002 Farmers Capital Bank Corp. (a) 108,494
10,108 Fidelity Southern Corp. 225,510
7,574 Financial Institutions, Inc. 212,072
10,449 First Bancorp 195,814
13,380 First Busey Corp. 276,029
4,446 First Business Financial Services,
Inc. 111,195
8,788 First Community Bancshares, Inc. 163,720
7,939 First Connecticut Bancorp, Inc. 138,218
6,495 First Financial Corp. 220,635
15,225 Flushing Financial Corp. 329,469
1,478 Franklin Financial Network,
Inc. (a) 46,380
6,937 German American Bancorp, Inc. 231,141
5,455 Great Southern Bancorp, Inc. 246,893
5,984 Green Bancorp, Inc. (a) 62,712
8,545 Guaranty Bancorp 141,334
16,836 Heritage Financial Corp. 317,190
9,328 HomeTrust Bancshares, Inc. (a) 188,892
4,894 Horizon Bancorp 136,836
12,527 Independent Bank Corp. 190,786
19,805 Lakeland Bancorp, Inc. 233,501
14,651 Macatawa Bank Corp. 88,639
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BANKS (CONTINUED)
11,517 MainSource Financial Group, Inc. $ 263,509
9,138 Mercantile Bank Corp. 224,247
7,320 Metro Bancorp, Inc. 229,702
5,362 MidSouth Bancorp, Inc. 48,687
20,986 NewBridge Bancorp 255,610
3,624 Northrim BanCorp, Inc. 96,398
4,202 Old Line Bancshares, Inc. 73,829
16,564 Old Second Bancorp, Inc. (a) 129,862
10,457 Pacific Continental Corp. 155,600
12,085 Pacific Premier Bancorp, Inc. (a) 256,806
24,683 Park Sterling Corp. 180,680
7,727 Peapack-Gladstone Financial Corp. 159,331
10,341 Peoples Bancorp, Inc. 194,824
5,937 QCR Holdings, Inc. 144,210
4,913 Republic Bancorp, Inc., Class A 129,752
14,086 Seacoast Banking Corp. of
Florida (a) 211,008
6,029 Sierra Bancorp 106,412
11,127 TriCo Bancshares 305,325
12,125 TriState Capital Holdings,
Inc. (a) 169,629
8,615 Triumph Bancorp, Inc. (a) 142,148
8,337 Univest Corp. of Pennsylvania 173,910
--------------
10,340,997
--------------
BEVERAGES -- 0.4%
7,547 MGP Ingredients, Inc. 195,845
--------------
BUILDING PRODUCTS -- 1.3%
16,567 Gibraltar Industries, Inc. (a) 421,465
9,649 Insteel Industries, Inc. 201,857
--------------
623,322
--------------
CAPITAL MARKETS -- 1.6%
8,656 INTL FCStone, Inc. (a) 289,630
8,301 Manning & Napier, Inc. 70,475
5,660 Oppenheimer Holdings, Inc.,
Class A 98,371
8,532 Piper Jaffray Cos. (a) 344,693
--------------
803,169
--------------
CHEMICALS -- 2.5%
4,029 Core Molding Technologies,
Inc. (a) 51,692
12,770 FutureFuel Corp. 172,395
5,333 Hawkins, Inc. 190,761
4,203 KMG Chemicals, Inc. 96,753
25,742 OMNOVA Solutions, Inc. (a) 157,798
24,087 Rayonier Advanced Materials, Inc. 235,812
10,856 Trecora Resources (a) 134,506
13,954 Tredegar Corp. 190,054
--------------
1,229,771
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.0%
14,501 Ennis, Inc. 279,144
21,806 InnerWorkings, Inc. (a) 163,545
17,868 Kimball International,
Inc., Class B 174,570
10,117 SP Plus Corp. (a) 241,796
15,766 TRC Cos., Inc. (a) 145,836
--------------
1,004,891
--------------
See Notes to Financial Statements Page 25
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMMUNICATIONS EQUIPMENT
-- 1.5%
4,966 Bel Fuse, Inc., Class B $ 85,862
20,537 CalAmp Corp. (a) 409,302
9,072 Comtech Telecommunications
Corp. 182,257
3,393 TESSCO Technologies, Inc. 66,062
--------------
743,483
--------------
CONSTRUCTION & ENGINEERING
-- 1.4%
7,064 Argan, Inc. 228,873
21,354 Furmanite Corp. (a) 142,218
11,583 MYR Group, Inc. (a) 238,726
15,327 Orion Marine Group, Inc. (a) 63,913
--------------
673,730
--------------
CONSUMER FINANCE -- 0.6%
10,491 Consumer Portfolio Services,
Inc. (a) 54,448
15,017 Enova International, Inc. (a) 99,263
6,565 Nicholas Financial, Inc. (a) 76,482
5,949 Regional Management Corp. (a) 92,031
--------------
322,224
--------------
CONTAINERS & PACKAGING -- 0.9%
2,236 AEP Industries, Inc. (a) 172,507
12,530 Myers Industries, Inc. 166,900
3,489 UFP Technologies, Inc. (a) 83,108
--------------
422,515
--------------
DIVERSIFIED CONSUMER SERVICES
-- 1.9%
9,517 Bridgepoint Education, Inc. (a) 72,424
9,303 Carriage Services, Inc. 224,202
3,942 Collectors Universe, Inc. 61,101
17,939 K12, Inc. (a) 157,863
6,195 Strayer Education, Inc. (a) 372,444
11,845 Universal Technical Institute,
Inc. 55,198
--------------
943,232
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.4%
13,492 GAIN Capital Holdings, Inc. 109,420
5,094 Marlin Business Services Corp. 81,810
--------------
191,230
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.5%
6,442 Hawaiian Telcom Holdco, Inc. (a) 160,148
9,532 IDT Corp., Class B 111,143
18,964 Inteliquent, Inc. 336,991
12,905 Lumos Networks Corp. (a) 144,536
--------------
752,818
--------------
ELECTRIC UTILITIES -- 0.5%
7,384 Unitil Corp. 264,938
--------------
ELECTRICAL EQUIPMENT -- 0.2%
3,446 Allied Motion Technologies, Inc. 90,216
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 4.2%
18,336 CTS Corp. $ 323,447
21,732 Daktronics, Inc. 189,503
9,895 Electro Rent Corp. 91,034
3,279 ePlus, Inc. (a) 305,800
17,581 GSI Group, Inc. (a) 239,453
12,368 Kimball Electronics, Inc. (a) 135,924
21,673 Newport Corp. (a) 343,951
11,378 Park Electrochemical Corp. 171,353
10,102 PC Connection, Inc. 228,709
6,823 Vishay Precision Group, Inc. (a) 77,236
--------------
2,106,410
--------------
ENERGY EQUIPMENT & SERVICES
-- 1.6%
17,925 Hornbeck Offshore Services,
Inc. (a) 178,175
7,161 Natural Gas Services Group,
Inc. (a) 159,690
47,277 Newpark Resources, Inc. (a) 249,623
69,204 Parker Drilling Co. (a) 125,951
3,703 PHI, Inc. (a) 60,766
--------------
774,205
--------------
FOOD & STAPLES RETAILING -- 0.6%
10,487 Chefs' Warehouse (The), Inc. (a) 174,923
3,923 Village Super Market, Inc.,
Class A 103,371
--------------
278,294
--------------
FOOD PRODUCTS -- 1.9%
1,535 Alico, Inc. 59,389
3,185 Farmer Bros. Co. (a) 102,780
11,017 Inventure Foods, Inc. (a) 78,221
4,802 John B. Sanfilippo & Son, Inc. 259,452
15,177 Landec Corp. (a) 179,544
12,498 Omega Protein Corp. (a) 277,455
--------------
956,841
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 0.2%
5,774 Exactech, Inc. (a) 104,798
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.0%
3,718 Addus HomeCare Corp. (a) 86,555
4,636 Almost Family, Inc. (a) 177,234
5,752 CorVel Corp. (a) 252,628
25,070 Five Star Quality Care, Inc. (a) 79,723
5,382 Landauer, Inc. 177,175
13,287 Triple-S Management Corp.,
Class B (a) 317,692
6,978 U.S. Physical Therapy, Inc. 374,579
--------------
1,465,586
--------------
HEALTH CARE TECHNOLOGY -- 0.6%
5,906 Computer Programs and Systems,
Inc. 293,824
--------------
Page 26 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOTELS, RESTAURANTS & LEISURE
-- 1.9%
7,775 Bravo Brio Restaurant Group,
Inc. (a) $ 69,975
13,094 Del Frisco's Restaurant Group,
Inc. (a) 209,766
10,619 Marcus (The) Corp. 201,442
6,010 Monarch Casino & Resort, Inc. (a) 136,547
19,668 Ruth's Hospitality Group, Inc. 313,115
--------------
930,845
--------------
HOUSEHOLD DURABLES -- 2.9%
5,713 Bassett Furniture Industries, Inc. 143,282
4,652 Cavco Industries, Inc. (a) 387,558
7,966 Century Communities, Inc. (a) 141,078
3,439 Flexsteel Industries, Inc. 151,935
6,074 Hooker Furniture Corp. 153,308
8,094 LGI Homes, Inc. (a) 196,927
7,310 New Home Co., (The), Inc. (a) 94,738
16,565 ZAGG, Inc. (a) 181,221
--------------
1,450,047
--------------
HOUSEHOLD PRODUCTS -- 0.8%
18,355 Central Garden & Pet Co.,
Class A (a) 249,628
5,077 Orchids Paper Products Co. 156,981
--------------
406,609
--------------
INSURANCE -- 1.1%
7,276 Federated National Holding Co. 215,079
5,079 HCI Group, Inc. 177,003
17,746 State National Cos., Inc. 174,088
--------------
566,170
--------------
INTERNET & CATALOG RETAIL -- 0.4%
11,318 PetMed Express, Inc. 193,991
--------------
INTERNET SOFTWARE & SERVICES
-- 0.8%
23,669 DHI Group, Inc. (a) 217,045
13,731 Liquidity Services, Inc. (a) 89,251
8,325 United Online, Inc. (a) 98,152
--------------
404,448
--------------
IT SERVICES -- 1.7%
14,032 Hackett Group (The), Inc. 225,494
16,503 Information Services Group, Inc. 59,741
32,619 Lionbridge Technologies, Inc. (a) 160,160
19,844 Perficient, Inc. (a) 339,729
24,121 Planet Payment, Inc. (a) 73,569
--------------
858,693
--------------
LEISURE PRODUCTS -- 0.5%
8,799 JAKKS Pacific, Inc. (a) 70,040
10,046 Malibu Boats, Inc., Class A (a) 164,453
--------------
234,493
--------------
MACHINERY -- 4.7%
5,263 Alamo Group, Inc. 274,202
11,294 Columbus McKinnon Corp. 213,457
14,830 Commercial Vehicle Group, Inc. (a) 40,931
12,578 Douglas Dynamics, Inc. 265,018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MACHINERY (CONTINUED)
12,083 Global Brass & Copper Holdings,
Inc. $ 257,368
5,590 Graham Corp. 94,024
3,681 Hurco Cos., Inc. 97,767
6,056 Kadant, Inc. 245,934
9,574 Lydall, Inc. (a) 339,686
6,372 Miller Industries, Inc. 138,782
15,078 NN, Inc. 240,343
5,421 Twin Disc, Inc. 57,029
6,190 Xerium Technologies, Inc. (a) 73,352
--------------
2,337,893
--------------
MEDIA -- 0.6%
13,518 Entercom Communications Corp.,
Class A (a) 151,807
28,503 Lee Enterprises, Inc. (a) 47,885
8,997 Reading International, Inc.,
Class A (a) 117,951
--------------
317,643
--------------
METALS & MINING -- 1.2%
6,992 Haynes International, Inc. 256,536
11,237 Materion Corp. 314,636
--------------
571,172
--------------
PERSONAL PRODUCTS -- 0.7%
5,219 Medifast, Inc. 158,553
3,988 Natural Health Trends Corp. 133,718
9,639 Synutra International, Inc. (a) 45,400
--------------
337,671
--------------
PHARMACEUTICALS -- 0.5%
28,232 SciClone Pharmaceuticals, Inc. (a) 259,734
--------------
PROFESSIONAL SERVICES -- 3.3%
27,614 CBIZ, Inc. (a) 272,274
5,096 CRA International, Inc. (a) 95,040
8,291 Franklin Covey Co. (a) 138,791
9,567 GP Strategies Corp. (a) 240,227
9,709 Heidrick & Struggles International,
Inc. 264,279
16,690 Kelly Services, Inc., Class A 269,544
20,867 Resources Connection, Inc. 340,967
--------------
1,621,122
--------------
REAL ESTATE INVESTMENT TRUSTS
-- 7.0%
15,963 AG Mortgage Investment Trust, Inc. 204,965
17,833 Apollo Residential Mortgage, Inc. 213,104
23,192 Arbor Realty Trust, Inc. 165,823
16,073 Ares Commercial Real Estate Corp. 183,875
16,643 Armada Hoffler Properties, Inc. 174,419
106,191 Chimera Investment Corp. 1,448,445
3,695 Ellington Residential Mortgage
REIT 45,633
25,866 Hersha Hospitality Trust 562,844
18,847 Resource Capital Corp. 240,488
23,551 Western Asset Mortgage Capital
Corp. 240,691
--------------
3,480,287
--------------
See Notes to Financial Statements Page 27
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.7%
9,461 RE/MAX Holdings, Inc., Class A $ 352,895
--------------
ROAD & RAIL -- 1.3%
15,648 Celadon Group, Inc. 154,759
6,795 Covenant Transportation Group,
Inc., Class A (a) 128,357
13,412 Marten Transport Ltd. 237,392
1,639 P.A.M. Transportation Services,
Inc. (a) 45,220
4,464 Universal Truckload Services, Inc. 62,675
--------------
628,403
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.7%
7,476 Cascade Microtech, Inc. (a) 121,485
13,945 Cohu, Inc. 168,316
13,963 IXYS Corp. 176,353
42,257 Mattson Technology, Inc. (a) 149,167
37,512 Photronics, Inc. (a) 467,024
18,121 Ultra Clean Holdings, Inc. (a) 92,780
30,253 Xcerra Corp. (a) 183,031
--------------
1,358,156
--------------
SOFTWARE -- 0.5%
14,633 American Software, Inc., Class A 148,964
5,068 QAD, Inc., Class A 103,995
--------------
252,959
--------------
SPECIALTY RETAIL -- 2.8%
10,368 Big 5 Sporting Goods Corp. 103,576
8,469 Build-A-Bear Workshop, Inc. (a) 103,661
8,737 Citi Trends, Inc. 185,661
11,292 Haverty Furniture Cos., Inc. 242,100
8,841 Kirkland's, Inc. 128,195
8,282 Shoe Carnival, Inc. 192,142
12,979 Sportsman's Warehouse Holdings,
Inc. (a) 167,429
17,989 Stage Stores, Inc. 163,880
16,423 Stein Mart, Inc. 110,527
--------------
1,397,171
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.7%
5,268 Culp, Inc. 134,176
9,205 Movado Group, Inc. 236,661
6,646 Perry Ellis International,
Inc. (a) 122,419
3,911 Rocky Brands, Inc. 45,211
4,593 Superior Uniform Group, Inc. 77,989
8,404 Unifi, Inc. (a) 236,573
--------------
853,029
--------------
THRIFTS & MORTGAGE FINANCE
-- 4.7%
23,766 Bank Mutual Corp. 185,375
17,184 Dime Community Bancshares, Inc. 300,548
5,251 Federal Agricultural Mortgage
Corp., Class C 165,774
5,154 First Defiance Financial Corp. 194,718
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE
(CONTINUED)
11,659 HomeStreet, Inc. (a) $ 253,117
4,176 Impac Mortgage Holdings, Inc. (a) 75,168
3,727 Meta Financial Group, Inc. 171,181
7,669 OceanFirst Financial Corp. 153,610
4,514 Territorial Bancorp, Inc. 125,218
53,428 TrustCo Bank Corp. NY 328,048
26,756 United Community Financial Corp. 157,861
14,508 Waterstone Financial, Inc. 204,563
--------------
2,315,181
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.4%
9,548 BMC Stock Holdings, Inc. (a) 159,929
7,119 DXP Enterprises, Inc. (a) 162,313
17,716 H&E Equipment Services, Inc. 309,676
9,418 Houston Wire & Cable Co. 49,727
--------------
681,645
--------------
WATER UTILITIES -- 1.0%
9,108 Middlesex Water Co. 241,726
9,390 SJW Corp. 278,414
--------------
520,140
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.6%
9,347 NTELOS Holdings Corp. (a) 85,431
11,799 Spok Holdings, Inc. 216,158
--------------
301,589
--------------
TOTAL INVESTMENTS -- 99.8% 49,469,090
(Cost $48,549,924) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 82,292
--------------
NET ASSETS -- 100.0% $ 49,551,382
==============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $49,518,297. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$3,960,967 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$4,010,174.
Page 28 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 49,469,090 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
See Notes to Financial Statements Page 29
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.7%
AEROSPACE & DEFENSE -- 1.5%
61,363 Lockheed Martin Corp. $ 13,324,976
--------------
BANKS -- 2.5%
28,055 Community Bank System, Inc. 1,120,517
133,772 F.N.B. Corp. 1,784,518
121,601 FirstMerit Corp. 2,267,859
62,641 Hancock Holding Co. 1,576,674
108,658 National Penn Bancshares, Inc. 1,339,753
84,757 Old National Bancorp 1,149,305
68,194 PacWest Bancorp 2,939,161
10,963 Park National Corp. 991,932
180,883 People's United Financial, Inc. 2,921,260
56,113 Trustmark Corp. 1,292,844
149,773 Umpqua Holdings Corp. 2,381,391
45,875 United Bankshares, Inc. 1,696,916
--------------
21,462,130
--------------
BEVERAGES -- 4.2%
857,192 Coca-Cola (The) Co. 36,824,968
--------------
CAPITAL MARKETS -- 0.2%
75,322 Waddell & Reed Financial, Inc.,
Class A 2,158,729
--------------
CHEMICALS -- 1.5%
251,588 Dow Chemical (The) Co. 12,951,750
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.3%
198,343 R.R. Donnelley & Sons Co. 2,919,609
--------------
CONTAINERS & PACKAGING -- 0.3%
45,056 Packaging Corp. of America 2,840,781
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 16.8%
2,382,517 AT&T, Inc. 81,982,410
1,408,766 Verizon Communications, Inc. 65,113,165
--------------
147,095,575
--------------
ELECTRIC UTILITIES -- 9.9%
39,391 ALLETE, Inc. 2,002,244
159,561 American Electric Power Co., Inc. 9,297,619
246,715 Duke Energy Corp. 17,612,984
82,767 Entergy Corp. 5,657,952
100,517 Eversource Energy 5,133,403
99,184 Great Plains Energy, Inc. 2,708,715
84,963 Hawaiian Electric Industries, Inc. 2,459,679
128,269 Pepco Holdings, Inc. 3,336,277
53,812 Pinnacle West Capital Corp. 3,469,798
61,435 Portland General Electric Co. 2,234,391
251,228 PPL Corp. 8,574,412
330,035 Southern (The) Co. 15,442,338
70,582 Westar Energy, Inc. 2,993,383
167,898 Xcel Energy, Inc. 6,029,217
--------------
86,952,412
--------------
ENERGY EQUIPMENT & SERVICES
-- 1.5%
68,191 Helmerich & Payne, Inc. 3,651,628
183,364 National Oilwell Varco, Inc. 6,140,860
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES
(CONTINUED)
211,989 Noble Corp. PLC $ 2,236,484
134,955 Tidewater, Inc. 939,287
--------------
12,968,259
--------------
FOOD & STAPLES RETAILING -- 0.7%
140,786 Sysco Corp. 5,772,226
--------------
FOOD PRODUCTS -- 0.2%
49,212 B&G Foods, Inc. 1,723,404
--------------
GAS UTILITIES -- 1.7%
50,634 AGL Resources, Inc. 3,230,956
29,606 Laclede Group (The), Inc. 1,758,892
22,164 Northwest Natural Gas Co. 1,121,720
38,838 Piedmont Natural Gas Co., Inc. 2,214,543
134,455 Questar Corp. 2,619,183
66,415 South Jersey Industries, Inc. 1,562,081
32,341 WGL Holdings, Inc. 2,037,160
--------------
14,544,535
--------------
HOTELS, RESTAURANTS & LEISURE
-- 3.2%
55,737 Darden Restaurants, Inc. 3,547,103
203,235 McDonald's Corp. 24,010,183
--------------
27,557,286
--------------
HOUSEHOLD DURABLES -- 0.7%
84,289 Garmin Ltd. 3,133,022
33,491 M.D.C. Holdings, Inc. 855,025
43,976 Tupperware Brands Corp. 2,447,265
--------------
6,435,312
--------------
HOUSEHOLD PRODUCTS -- 7.1%
84,678 Kimberly-Clark Corp. 10,779,510
649,381 Procter & Gamble (The) Co. 51,567,345
--------------
62,346,855
--------------
INDUSTRIAL CONGLOMERATES -- 7.1%
1,983,020 General Electric Co. 61,771,073
--------------
INSURANCE -- 0.9%
55,751 Cincinnati Financial Corp. 3,298,787
14,132 Erie Indemnity Co., Class A 1,351,584
147,483 Old Republic International Corp. 2,747,608
31,712 OneBeacon Insurance Group Ltd.,
Class A 393,546
--------------
7,791,525
--------------
MACHINERY -- 1.6%
207,592 Caterpillar, Inc. 14,107,952
--------------
MEDIA -- 0.3%
31,702 Meredith Corp. 1,371,112
68,113 Regal Entertainment Group,
Class A 1,285,292
--------------
2,656,404
--------------
MULTI-UTILITIES -- 8.9%
53,224 Alliant Energy Corp. 3,323,839
99,018 Ameren Corp. 4,280,548
51,054 Avista Corp. 1,805,780
41,358 Black Hills Corp. 1,920,252
Page 30 See Notes to Financial Statements
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTI-UTILITIES (CONTINUED)
268,512 CenterPoint Energy, Inc. $ 4,929,880
104,854 CMS Energy Corp. 3,783,132
106,127 Consolidated Edison, Inc. 6,820,782
180,952 Dominion Resources, Inc. 12,239,593
63,235 DTE Energy Co. 5,070,815
147,131 MDU Resources Group, Inc. 2,695,440
36,179 NorthWestern Corp. 1,962,711
144,043 PG&E Corp. 7,661,647
179,878 Public Service Enterprise Group,
Inc. 6,959,480
61,834 SCANA Corp. 3,740,339
110,591 TECO Energy, Inc. 2,947,250
58,162 Vectren Corp. 2,467,232
108,845 WEC Energy Group, Inc. 5,584,837
--------------
78,193,557
--------------
OIL, GAS & CONSUMABLE FUELS
-- 9.9%
1,110,456 Exxon Mobil Corp. 86,560,045
--------------
PAPER & FOREST PRODUCTS -- 0.1%
24,856 Schweitzer-Mauduit International,
Inc. 1,043,703
--------------
PHARMACEUTICALS -- 5.5%
1,499,565 Pfizer, Inc. 48,405,958
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.0%
100,032 Intersil Corp., Class A 1,276,408
55,003 KLA-Tencor Corp. 3,814,458
103,216 Maxim Integrated Products, Inc. 3,922,208
--------------
9,013,074
--------------
SOFTWARE -- 0.4%
131,659 CA, Inc. 3,760,181
--------------
SPECIALTY RETAIL -- 0.3%
43,271 Abercrombie & Fitch Co., Class A 1,168,317
62,963 Guess?, Inc. 1,188,741
--------------
2,357,058
--------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 0.2%
49,961 Diebold, Inc. 1,503,327
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.5%
133,014 Coach, Inc. 4,353,548
--------------
THRIFTS & MORTGAGE FINANCE
-- 0.7%
292,896 New York Community Bancorp,
Inc. 4,780,063
90,294 Northwest Bancshares, Inc. 1,209,036
--------------
5,989,099
--------------
TOBACCO -- 9.7%
550,813 Altria Group, Inc. 32,062,825
488,592 Philip Morris International, Inc. 42,952,123
211,669 Reynolds American, Inc. 9,768,524
--------------
84,783,472
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
TRADING COMPANIES &
DISTRIBUTORS -- 0.3%
63,575 Aircastle Ltd. $ 1,328,082
71,941 TAL International Group, Inc. 1,143,862
--------------
2,471,944
--------------
TOTAL INVESTMENTS -- 99.7% 872,640,727
(Cost $833,512,317) (a)
NET OTHER ASSETS AND
LIABILITIES -- 0.3% 2,652,868
--------------
NET ASSETS -- 100.0% $ 875,293,595
==============
(a) Aggregate cost for federal income tax purposes is $838,033,775. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$58,563,387 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$23,956,435.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 872,640,727 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
See Notes to Financial Statements Page 31
FIRST TRUST US IPO INDEX FUND (FPX)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AUTO COMPONENTS -- 2.2%
201,928 Delphi Automotive PLC $ 17,311,287
--------------
AUTOMOBILES -- 7.0%
1,224,089 Fiat Chrysler Automobiles
N.V. (a) (b) 17,125,005
1,121,916 General Motors Co. 38,156,363
--------------
55,281,368
--------------
BANKS -- 2.1%
380,396 Citizens Financial Group, Inc. 9,962,571
104,695 First Republic Bank 6,916,152
--------------
16,878,723
--------------
BIOTECHNOLOGY -- 12.2%
1,178,561 AbbVie, Inc. 69,817,954
489,151 Baxalta, Inc. 19,091,563
16,077 Intercept Pharmaceuticals,
Inc. (b) 2,401,100
25,203 Ophthotech Corp. (b) 1,979,192
27,997 Ultragenyx Pharmaceutical,
Inc. (b) 3,140,703
--------------
96,430,512
--------------
BUILDING PRODUCTS -- 1.4%
69,147 Allegion PLC 4,558,170
115,131 Fortune Brands Home & Security,
Inc. 6,389,771
--------------
10,947,941
--------------
CAPITAL MARKETS -- 0.3%
99,813 Virtu Financial, Inc., Class A 2,259,766
--------------
CHEMICALS -- 0.6%
171,472 Axalta Coating Systems Ltd. (b) 4,569,729
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.0%
118,910 ADT (The) Corp. (a) 3,921,652
99,155 KAR Auction Services, Inc. 3,671,709
--------------
7,593,361
--------------
COMMUNICATIONS EQUIPMENT
-- 2.3%
48,849 Arista Networks, Inc. (a) (b) 3,802,406
137,459 CommScope Holding Co., Inc. (b) 3,558,814
61,936 Palo Alto Networks, Inc. (b) 10,909,407
--------------
18,270,627
--------------
CONSTRUCTION MATERIALS -- 0.2%
72,151 Summit Materials, Inc.,
Class A (c) 1,445,906
--------------
CONSUMER FINANCE -- 3.6%
347,316 Ally Financial, Inc. (b) 6,473,970
96,955 OneMain Holdings, Inc. (b) 4,027,511
601,142 Synchrony Financial (b) 18,280,728
--------------
28,782,209
--------------
CONTAINERS & PACKAGING -- 0.4%
86,513 Berry Plastics Group, Inc. (b) 3,130,040
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES
-- 1.1%
43,284 Bright Horizons Family Solutions,
Inc. (b) $ 2,891,371
96,823 Houghton Mifflin Harcourt
Co. (b) 2,108,805
97,622 ServiceMaster Global Holdings,
Inc. (b) 3,830,687
--------------
8,830,863
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.7%
155,239 Voya Financial, Inc. 5,729,871
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.6%
176,536 Zayo Group Holdings, Inc. (b) 4,694,092
--------------
ELECTRICAL EQUIPMENT -- 0.4%
63,147 SolarCity Corp. (a) (b) 3,221,760
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.6%
122,037 CDW Corp. 5,130,435
--------------
FOOD & STAPLES RETAILING -- 0.2%
73,957 Performance Food Group Co. (b) 1,711,365
--------------
FOOD PRODUCTS -- 6.8%
577,093 Kraft Heinz (The) Co. 41,989,287
84,067 Pinnacle Foods, Inc. 3,569,485
48,273 Post Holdings, Inc. (b) 2,978,444
127,032 WhiteWave Foods (The) Co. (b) 4,942,815
--------------
53,480,031
--------------
GAS UTILITIES -- 0.2%
37,600 ONE Gas, Inc. 1,886,392
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 0.7%
46,396 Diplomat Pharmacy, Inc. (a) (b) 1,587,671
103,637 Premier, Inc., Class A (b) 3,655,277
--------------
5,242,948
--------------
HEALTH CARE TECHNOLOGY -- 0.8%
236,896 IMS Health Holdings, Inc. (b) 6,033,741
--------------
HOTELS, RESTAURANTS & LEISURE
-- 5.3%
173,403 Aramark 5,592,247
36,047 Dave & Buster's Entertainment,
Inc. (b) 1,504,602
567,709 Hilton Worldwide Holdings, Inc. 12,148,973
165,434 Norwegian Cruise Line Holdings
Ltd. (b) 9,694,432
337,086 Restaurant Brands International,
Inc. (a) 12,593,533
--------------
41,533,787
--------------
INTERNET & CATALOG RETAIL -- 2.1%
102,284 Liberty Ventures, Series A (b) 4,614,031
103,951 TripAdvisor, Inc. (b) 8,861,823
60,651 Wayfair, Inc., Class A (b) 2,888,201
--------------
16,364,055
--------------
Page 32 See Notes to Financial Statements
FIRST TRUST US IPO INDEX FUND (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INTERNET SOFTWARE & SERVICES
-- 11.5%
737,994 Facebook, Inc., Class A (b) $ 77,238,452
112,400 GoDaddy, Inc., Class A (a) (b) 3,603,544
175,371 Match Group, Inc. (a) (b) 2,376,277
324,425 Twitter, Inc. (b) 7,507,195
--------------
90,725,468
--------------
IT SERVICES -- 6.9%
110,168 Black Knight Financial Services,
Inc., Class A (b) 3,642,154
39,394 Blackhawk Network Holdings,
Inc. (b) 1,741,609
36,026 EPAM Systems, Inc. (b) 2,832,364
648,275 First Data Corp., Class A (b) 10,385,365
23,713 Luxoft Holding, Inc. (b) 1,828,984
612,802 PayPal Holdings, Inc. (b) 22,183,432
200,097 Sabre Corp. 5,596,713
137,871 Vantiv, Inc., Class A (b) 6,537,843
--------------
54,748,464
--------------
LEISURE PRODUCTS -- 0.2%
44,920 Vista Outdoor, Inc. (b) 1,999,389
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.7%
40,857 INC Research Holdings, Inc.,
Class A (b) 1,981,973
54,071 PRA Health Sciences, Inc. (b) 2,447,794
88,743 Quintiles Transnational Holdings,
Inc. (b) 6,093,095
94,703 VWR Corp. (b) 2,681,042
--------------
13,203,904
--------------
MACHINERY -- 0.6%
129,313 Xylem, Inc. 4,719,925
--------------
MEDIA -- 2.4%
52,188 AMC Networks, Inc., Class A (b) 3,897,400
97,658 Gannett Co., Inc. 1,590,849
74,409 Liberty Broadband Corp.,
Class A (b) 3,843,225
240,949 Liberty Media Corp., Class A (b) 9,457,248
--------------
18,788,722
--------------
MULTILINE RETAIL -- 0.3%
54,757 Burlington Stores, Inc. (b) 2,349,075
--------------
OIL, GAS & CONSUMABLE FUELS
-- 6.3%
199,737 Antero Resources Corp. (a) (b) 4,354,267
280,519 Columbia Pipeline Group, Inc. 5,610,380
48,089 Diamondback Energy, Inc. (b) 3,217,154
112,364 Parsley Energy, Inc., Class A (b) 2,073,116
74,103 PBF Energy, Inc., Class A 2,727,731
384,580 Phillips 66 31,458,644
--------------
49,441,292
--------------
PERSONAL PRODUCTS -- 0.8%
250,213 Coty, Inc., Class A (a) 6,412,959
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
PHARMACEUTICALS -- 3.0%
83,591 Mallinckrodt PLC (b) $ 6,238,397
358,972 Zoetis, Inc. 17,201,938
--------------
23,440,335
--------------
PROFESSIONAL SERVICES -- 2.0%
262,466 Nielsen Holdings PLC 12,230,916
131,402 TransUnion (b) 3,622,753
--------------
15,853,669
--------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.5%
105,640 Realogy Holdings Corp. (b) 3,873,819
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.0%
38,263 M/A-COM Technology Solutions
Holdings, Inc. (b) 1,564,574
166,423 NXP Semiconductors N.V. (d) 14,021,138
--------------
15,585,712
--------------
SOFTWARE -- 4.8%
150,443 Atlassian Corp. PLC,
Class A (a) (b) 4,525,325
114,938 CDK Global, Inc. 5,456,107
51,541 Guidewire Software, Inc. (b) 3,100,707
42,610 Paycom Software, Inc. (b) 1,603,414
36,649 Paylocity Holding Corp. (b) 1,486,117
114,630 ServiceNow, Inc. (b) 9,922,373
92,623 Splunk, Inc. (b) 5,447,159
52,219 Tableau Software, Inc.,
Class A (b) 4,920,074
63,946 Zendesk, Inc. (b) 1,690,732
--------------
38,152,008
--------------
SPECIALTY RETAIL -- 0.9%
150,650 Michaels Cos., (The), Inc. (b) 3,330,871
30,047 Murphy USA, Inc. (b) 1,825,055
29,184 Restoration Hardware Holdings,
Inc. (b) 2,318,669
--------------
7,474,595
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 2.8%
1,301,304 Hewlett Packard Enterprise Co. 19,779,821
137,080 Pure Storage, Inc.,
Class A (a) (b) 2,134,335
--------------
21,914,156
--------------
TRADING COMPANIES &
DISTRIBUTORS -- 0.5%
144,287 HD Supply Holdings, Inc. (b) 4,332,939
--------------
TOTAL COMMON STOCKS -- 100.0% 789,777,240
(Cost $725,391,171) --------------
MONEY MARKET FUNDS -- 2.8%
21,840,658 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.12% (e) (f) 21,840,658
(Cost $21,840,658) --------------
See Notes to Financial Statements Page 33
FIRST TRUST US IPO INDEX FUND (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.7%
$ 1,554,056 JPMorgan Chase & Co., 0.23% (e),
dated 12/31/15, due 01/04/16,
with a maturity value of
$1,554,096. Collateralized by
U.S. Treasury Notes, interest
rates of 1.250% to 1.625%, due
04/30/19 to 02/29/20. The value
of the collateral including
accrued interest is
$1,589,923. (f) $ 1,554,056
19,614,229 RBC Capital Markets LLC,
0.26% (e), dated 12/31/15, due
01/04/16, with a maturity value
of $19,614,796. Collateralized
by U.S. Treasury Notes, interest
rates of 1.625% to 1.750%, due
06/30/20 to 10/31/20. The value
of the collateral including
accrued interest is
$20,027,393. (f) 19,614,229
--------------
TOTAL REPURCHASE AGREEMENTS
-- 2.7% 21,168,285
(Cost $21,168,285) --------------
TOTAL INVESTMENTS -- 105.5% 832,786,183
(Cost $768,400,114) (g)
NET OTHER ASSETS AND
LIABILITIES -- (5.5)% (43,093,334)
--------------
NET ASSETS -- 100.0% $ 789,692,849
==============
(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 $41,811,660 and the total value of the collateral held by
the Fund is $43,008,943.
(b) Non-income producing security.
(c) Non-income producing security which makes payment-in-kind ("PIK")
distributions. For the year ended December 31, 2015, the Fund received
1,086 PIK shares of Summit Materials, Inc., Class A.
(d) Non-income producing security which makes PIK distributions. For the year
ended December 31, 2015, the Fund received 1 PIK share of NXP
Semiconductors N.V.
(e) Interest rate shown reflects yield as of December 31, 2015.
(f) This security serves as collateral for securities on loan.
(g) Aggregate cost for federal income tax purposes is $772,353,832. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$81,728,278 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$21,295,927.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 789,777,240 $ -- $ --
Money Market Funds 21,840,658 -- --
Repurchase Agreements -- 21,168,285 --
-----------------------------------------------
Total Investments $ 811,617,898 $ 21,168,285 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
Page 34 See Notes to Financial Statements
FIRST TRUST US IPO INDEX FUND (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
-----------------------------
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) $ 41,811,660
Non-cash Collateral(2) (41,811,660)
--------------
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, 2015, 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) $ 21,168,285
Non-cash Collateral(4) (21,168,285)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2015, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 35
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
BIOTECHNOLOGY -- 78.7%
1,463,946 Agios Pharmaceuticals,
Inc. (a) (b) $ 95,039,374
645,748 Alexion Pharmaceuticals,
Inc. (b) 123,176,431
1,693,076 Alkermes PLC (b) 134,396,373
1,223,535 Alnylam Pharmaceuticals,
Inc. (b) 115,183,585
680,999 Amgen, Inc. 110,546,568
381,403 Biogen, Inc. (b) 116,842,809
954,140 BioMarin Pharmaceutical,
Inc. (b) 99,955,706
881,135 Celgene Corp. (b) 105,524,727
7,424,420 Celldex Therapeutics, Inc. (a) (b) 116,414,906
3,085,311 Cepheid (b) 112,706,411
3,704,752 Dyax Corp. (b) 139,372,770
1,009,536 Gilead Sciences, Inc. 102,154,948
3,114,218 Grifols S.A., ADR 100,900,663
964,220 Incyte Corp. (b) 104,569,659
572,751 Intercept Pharmaceuticals,
Inc. (a) (b) 85,540,362
2,327,482 Ionis Pharmaceuticals, Inc. (b) 144,140,960
2,068,290 Juno Therapeutics, Inc. (a) (b) 90,942,711
2,358,977 Medivation, Inc. (b) 114,032,948
2,642,138 Myriad Genetics, Inc. (a) (b) 114,034,676
13,525,640 Novavax, Inc. (a) (b) 113,480,120
201,395 Regeneron Pharmaceuticals,
Inc. (b) 109,331,304
2,614,485 Seattle Genetics, Inc. (b) 117,338,087
808,136 United Therapeutics Corp. (b) 126,562,179
908,840 Vertex Pharmaceuticals, Inc. (b) 114,359,337
--------------
2,706,547,614
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 16.6%
1,093,871 Bio-Techne Corp. 98,448,390
1,573,473 Charles River Laboratories
International, Inc. (b) 126,491,494
691,079 Illumina, Inc. (b) 132,649,159
4,068,344 QIAGEN N.V. (b) 112,489,712
1,451,373 Quintiles Transnational
Holdings, Inc. (b) 99,651,270
--------------
569,730,025
--------------
PHARMACEUTICALS -- 4.7%
9,546,577 Nektar Therapeutics (b) 160,859,823
--------------
TOTAL COMMON STOCKS
-- 100.0% 3,437,137,462
(Cost $3,169,905,351) --------------
MONEY MARKET FUNDS -- 4.6%
158,753,150 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.12% (c) (d) 158,753,150
(Cost $158,753,150) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 4.5%
$ 11,295,963 JPMorgan Chase & Co.,
0.23% (c), dated 12/31/15, due
01/04/16, with a maturity value
of $11,296,252. Collateralized
by U.S. Treasury Notes, interest
rates of 1.250% to 1.625%, due
04/30/19 to 02/29/20. The value
of the collateral including
accrued interest is
$11,556,672. (d) $ 11,295,963
142,569,912 RBC Capital Markets LLC,
0.26% (c), dated 12/31/15, due
01/04/16, with a maturity value
of $142,574,030. Collateralized
by U.S. Treasury Notes, interest
rates of 1.625% to 1.750%, due
06/30/20 to 10/31/20. The value
of the collateral including
accrued interest is
$145,573,079. (d) 142,569,912
--------------
TOTAL REPURCHASE AGREEMENTS
-- 4.5% 153,865,875
(Cost $153,865,875) --------------
TOTAL INVESTMENTS -- 109.1% 3,749,756,487
(Cost $3,482,524,376) (e)
NET OTHER ASSETS AND
LIABILITIES -- (9.1)% (312,732,072)
--------------
NET ASSETS -- 100.0% $3,437,024,415
==============
(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 $302,586,474 and the total value of the collateral held by
the Fund is $312,619,025.
(b) Non-income producing security.
(c) Interest rate shown reflects yield as of December 31, 2015.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $3,511,456,430. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$426,877,337 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$188,577,280.
ADR - American Depositary Receipt
Page 36 See Notes to Financial Statements
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $3,437,137,462 $ -- $ --
Money Market Funds 158,753,150 -- --
Repurchase Agreements -- 153,865,875 --
------------------------------------------------
Total Investments $3,595,890,612 $153,865,875 $ --
================================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
-----------------------------
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) $ 302,586,474
Non-cash Collateral(2) (302,586,474)
--------------
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, 2015, 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) $ 153,865,875
Non-cash Collateral(4) (153,865,875)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2015, 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 DOW JONES INTERNET INDEX FUND (FDN)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
CAPITAL MARKETS -- 4.5%
3,702,987 E*TRADE Financial Corp. (a) $ 109,756,535
3,234,705 TD Ameritrade Holding Corp. 112,276,610
--------------
222,033,145
--------------
COMMUNICATIONS EQUIPMENT
-- 5.1%
866,314 Arista Networks, Inc. (a) (b) 67,433,882
4,089,506 Juniper Networks, Inc. 112,870,366
1,067,095 NETGEAR, Inc. (a) 44,721,951
3,658,175 Sonus Networks, Inc. (a) 26,082,788
--------------
251,108,987
--------------
DIVERSIFIED CONSUMER SERVICES
-- 0.8%
1,443,140 2U, Inc. (a) (b) 40,379,057
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.8%
7,100,545 Vonage Holdings Corp. (a) 40,757,128
--------------
HEALTH CARE TECHNOLOGY -- 2.6%
4,427,408 Allscripts Healthcare Solutions,
Inc. (a) 68,093,535
2,104,586 Veeva Systems, Inc., Class A (a) 60,717,306
--------------
128,810,841
--------------
INTERNET & CATALOG RETAIL
-- 21.4%
740,273 Amazon.com, Inc. (a) 500,343,118
1,217,213 Expedia, Inc. 151,299,576
15,330,341 Groupon, Inc. (a) (b) 47,064,147
2,031,736 Netflix, Inc. (a) 232,389,964
1,374,950 TripAdvisor, Inc. (a) 117,214,487
--------------
1,048,311,292
--------------
INTERNET SOFTWARE & SERVICES
-- 50.5%
2,144,544 Akamai Technologies, Inc. (a) 112,867,351
321,824 Alphabet, Inc., Class A (a) 250,382,290
328,240 Alphabet, Inc., Class C (c) 249,094,771
5,135,604 Bazaarvoice, Inc. (a) 22,493,946
2,718,779 Blucora, Inc. (a) 26,644,034
1,464,368 Cornerstone OnDemand, Inc. (a) 50,564,627
1,024,255 Demandware, Inc. (a) 55,279,042
4,711,271 EarthLink Holdings Corp. 35,004,744
6,983,801 eBay, Inc. (a) 191,914,852
2,771,963 Endurance International Group
Holdings, Inc. (a) (b) 30,297,556
4,704,844 Facebook, Inc., Class A (a) 492,408,973
1,376,663 IAC/InterActiveCorp 82,668,613
932,684 j2 Global, Inc. 76,778,547
795,331 LinkedIn Corp., Class A (a) 179,013,101
4,847,608 Pandora Media, Inc. (a) 65,006,423
2,510,503 Rackspace Hosting, Inc. (a) 63,565,936
3,654,874 TrueCar, Inc. (a) 34,867,498
5,704,080 Twitter, Inc. (a) 131,992,411
1,219,361 VeriSign, Inc. (a) (b) 106,523,377
1,885,477 Web.com Group, Inc. (a) 37,728,395
5,632,185 Yahoo!, Inc. (a) 187,326,473
--------------
2,482,422,960
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
IT SERVICES -- 4.6%
6,243,207 PayPal Holdings, Inc. (a) $ 226,004,093
--------------
SOFTWARE -- 9.7%
1,648,971 Citrix Systems, Inc. (a) 124,744,656
1,142,805 Ebix, Inc. (b) 37,472,576
831,929 NetSuite, Inc. (a) (b) 70,397,832
3,072,779 salesforce.com, Inc. (a) 240,905,874
--------------
473,520,938
--------------
TOTAL COMMON STOCKS
-- 100.0% 4,913,348,441
(Cost $4,444,423,745) --------------
MONEY MARKET FUNDS -- 2.1%
98,086,949 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.12% (d) (e) 98,086,949
3,680,508 Morgan Stanley Institutional
Liquidity Fund - Treasury
Portfolio - Institutional
Class - 0.17% (d) 3,680,508
--------------
TOTAL MONEY MARKET FUNDS
-- 2.1% 101,767,457
(Cost $101,767,457) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.9%
$ 6,979,304 JPMorgan Chase & Co.,
0.23% (d), dated 12/31/15, due
01/04/16, with a maturity value
of $6,979,483. Collateralized by
U.S. Treasury Notes, interest
rates of 1.250% to 1.625%, due
04/30/19 to 02/29/20. The value
of the collateral including
accrued interest is
$7,140,385. (e) 6,979,304
88,088,001 RBC Capital Markets LLC,
0.26% (d), dated 12/31/15, due
01/04/16, with a maturity value
of $88,090,546. Collateralized
by U.S. Treasury Notes, interest
rates of 1.625% to 1.750%, due
06/30/20 to 10/31/20. The value
of the collateral including
accrued interest is
$89,943,533. (e) 88,088,001
--------------
TOTAL REPURCHASE AGREEMENTS
-- 1.9% 95,067,305
(Cost $95,067,305) --------------
TOTAL INVESTMENTS -- 104.0% 5,110,183,203
(Cost $4,641,258,507) (f)
NET OTHER ASSETS AND
LIABILITIES -- (4.0)% (195,361,808)
--------------
NET ASSETS -- 100.0% $4,914,821,395
==============
Page 38 See Notes to Financial Statements
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
(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 $186,639,392 and the total value of the collateral held by
the Fund is $193,154,254, which includes Virnetx Holding Corp. in the
amount of $1,681,638. This security was sold on December 18, 2015.
(c) Non-income producing security which makes payment-in-kind ("PIK")
distributions. For the year ended December 31, 2015, the Fund received 659
PIK shares of Alphabet, Inc., Class C.
(d) Interest rate shown reflects yield as of December 31, 2015.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $4,705,036,975. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$684,544,809 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$279,398,581.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $4,913,348,441 $ -- $ --
Money Market Funds 101,767,457 -- --
Repurchase Agreements -- 95,067,305 --
------------------------------------------------
Total Investments $5,015,115,898 $ 95,067,305 $ --
================================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
-----------------------------
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) $ 186,639,392
Non-cash Collateral(2) (186,639,392)
--------------
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, 2015, 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) $ 95,067,305
Non-cash Collateral(4) (95,067,305)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2015, 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 CAPITAL STRENGTH ETF (FTCS)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 14.5%
23,727 Boeing (The) Co. $ 3,430,687
22,987 General Dynamics Corp. 3,157,494
33,655 Honeywell International, Inc. 3,485,648
15,539 Lockheed Martin Corp. 3,374,294
18,685 Northrop Grumman Corp. 3,527,915
29,404 Raytheon Co. 3,661,680
35,044 United Technologies Corp. 3,366,677
--------------
24,004,395
--------------
AIR FREIGHT & LOGISTICS -- 3.6%
65,309 Expeditors International of
Washington, Inc. 2,945,436
31,430 United Parcel Service,
Inc., Class B 3,024,509
--------------
5,969,945
--------------
BEVERAGES -- 4.0%
77,353 Coca-Cola (The) Co. 3,323,085
32,625 PepsiCo, Inc. 3,259,890
--------------
6,582,975
--------------
CAPITAL MARKETS -- 3.9%
84,663 Franklin Resources, Inc. 3,117,291
46,083 T. Rowe Price Group, Inc. 3,294,474
--------------
6,411,765
--------------
CHEMICALS -- 4.4%
57,041 E.I. du Pont de Nemours and Co. 3,798,931
36,118 Monsanto Co. 3,558,345
--------------
7,357,276
--------------
COMMUNICATIONS EQUIPMENT
-- 3.5%
115,793 Cisco Systems, Inc. 3,144,359
54,637 QUALCOMM, Inc. 2,731,030
--------------
5,875,389
--------------
ELECTRICAL EQUIPMENT -- 2.1%
71,951 Emerson Electric Co. 3,441,416
--------------
FOOD & STAPLES RETAILING -- 6.3%
21,428 Costco Wholesale Corp. 3,460,622
87,525 Kroger (The) Co. 3,661,171
55,446 Wal-Mart Stores, Inc. 3,398,840
--------------
10,520,633
--------------
FOOD PRODUCTS -- 2.1%
43,555 Mead Johnson Nutrition Co. 3,438,667
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 4.0%
16,700 C. R. Bard, Inc. 3,163,648
42,437 Varian Medical Systems, Inc. (a) 3,428,910
--------------
6,592,558
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 4.2%
40,737 Cardinal Health, Inc. 3,636,592
16,729 McKesson Corp. 3,299,461
--------------
6,936,053
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE
-- 4.2%
31,173 McDonald's Corp. $ 3,682,778
54,380 Starbucks Corp. 3,264,432
--------------
6,947,210
--------------
HOUSEHOLD PRODUCTS -- 1.9%
48,638 Colgate-Palmolive Co. 3,240,264
--------------
INDUSTRIAL CONGLOMERATES -- 2.0%
22,008 3M Co. 3,315,285
--------------
INSURANCE -- 1.9%
100,334 Progressive (The) Corp. 3,190,621
--------------
IT SERVICES -- 7.7%
31,647 Accenture PLC, Class A 3,307,111
37,691 Automatic Data Processing, Inc. 3,193,182
21,697 International Business Machines
Corp. 2,985,941
33,470 MasterCard, Inc., Class A 3,258,639
--------------
12,744,873
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 2.2%
26,950 Waters Corp. (a) 3,626,931
--------------
MACHINERY -- 3.7%
29,898 Cummins, Inc. 2,631,323
38,636 Illinois Tool Works, Inc. 3,580,784
--------------
6,212,107
--------------
MEDIA -- 2.1%
45,057 Omnicom Group, Inc. 3,409,013
--------------
MULTILINE RETAIL -- 1.9%
43,353 Target Corp. 3,147,861
--------------
PERSONAL PRODUCTS -- 2.0%
38,400 Estee Lauder (The) Cos., Inc.,
Class A 3,381,504
--------------
PHARMACEUTICALS -- 4.1%
33,218 Johnson & Johnson 3,412,153
63,351 Merck & Co., Inc. 3,346,200
--------------
6,758,353
--------------
SOFTWARE -- 1.9%
87,285 Oracle Corp. 3,188,521
--------------
SPECIALTY RETAIL -- 7.9%
122,744 Gap (The), Inc. 3,031,777
26,533 Home Depot (The), Inc. 3,508,989
44,685 Lowe's Cos., Inc. 3,397,848
45,096 TJX (The) Cos., Inc. 3,197,757
--------------
13,136,371
--------------
TOBACCO -- 3.9%
55,405 Altria Group, Inc. 3,225,125
68,871 Reynolds American, Inc. 3,178,397
--------------
6,403,522
--------------
TOTAL INVESTMENTS -- 100.0% 165,833,508
(Cost $162,395,182) (b)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (18,845)
--------------
NET ASSETS -- 100.0% $ 165,814,663
==============
Page 40 See Notes to Financial Statements
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $163,144,469. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$9,232,507 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$6,543,468.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 165,833,508 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
See Notes to Financial Statements Page 41
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.8%
AEROSPACE & DEFENSE -- 1.0%
146 AAR Corp. $ 3,838
53 Boeing (The) Co. 7,663
22 Cubic Corp. 1,040
67 Curtiss-Wright Corp. 4,590
46 Hexcel Corp. 2,137
58 Huntington Ingalls Industries,
Inc. 7,357
52 KLX, Inc. (a) 1,601
80 L-3 Communications Holdings, Inc. 9,561
52 Moog, Inc., Class A (a) 3,151
33 National Presto Industries, Inc. 2,734
29 Orbital ATK, Inc. 2,591
86 Spirit AeroSystems Holdings, Inc.,
Class A (a) 4,306
92 Teledyne Technologies, Inc. (a) 8,160
184 Textron, Inc. 7,730
109 Triumph Group, Inc. 4,333
156 United Technologies Corp. 14,987
--------------
85,779
--------------
AIR FREIGHT & LOGISTICS -- 0.1%
432 Air Transport Services Group,
Inc. (a) 4,355
134 Atlas Air Worldwide Holdings,
Inc. (a) 5,540
44 Expeditors International of
Washington, Inc. 1,984
--------------
11,879
--------------
AIRLINES -- 1.4%
436 Alaska Air Group, Inc. 35,102
48 Allegiant Travel Co. 8,056
357 American Airlines Group, Inc. 15,119
187 Hawaiian Holdings, Inc. (a) 6,607
403 JetBlue Airways Corp. (a) 9,128
277 SkyWest, Inc. 5,268
364 Southwest Airlines Co. 15,674
176 Spirit Airlines, Inc. (a) 7,014
261 United Continental Holdings,
Inc. (a) 14,955
54 Virgin America, Inc. (a) 1,945
--------------
118,868
--------------
AUTO COMPONENTS -- 1.1%
93 American Axle & Manufacturing
Holdings, Inc. (a) 1,762
500 BorgWarner, Inc. 21,615
94 Cooper Tire & Rubber Co. 3,558
48 Cooper-Standard Holding, Inc. (a) 3,724
654 Dana Holding Corp. 9,025
54 Dorman Products, Inc. (a) 2,563
51 Drew Industries, Inc. 3,105
270 Federal-Mogul Holdings Corp. (a) 1,850
219 Fox Factory Holding Corp. (a) 3,620
536 Gentex Corp. 8,581
354 Goodyear Tire & Rubber (The) Co. 11,565
76 Lear Corp. 9,335
53 Standard Motor Products, Inc. 2,017
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
AUTO COMPONENTS (CONTINUED)
93 Tenneco, Inc. (a) $ 4,270
102 Visteon Corp. (a) 11,679
--------------
98,269
--------------
AUTOMOBILES -- 0.6%
1,020 Ford Motor Co. 14,372
922 General Motors Co. 31,357
36 Thor Industries, Inc. 2,021
--------------
47,750
--------------
BANKS -- 3.5%
30 1st Source Corp. 926
129 Ameris Bancorp 4,385
347 Associated Banc-Corp. 6,506
15 Bank of Hawaii Corp. 944
190 Bank of the Ozarks, Inc. 9,397
174 BankUnited, Inc. 6,274
39 Banner Corp. 1,789
61 BBCN Bancorp, Inc. 1,050
166 BNC Bancorp 4,213
64 BOK Financial Corp. 3,827
61 Capital Bank Financial Corp.,
Class A 1,951
160 Cardinal Financial Corp. 3,640
314 CenterState Banks, Inc. 4,914
44 Central Pacific Financial Corp. 969
259 CIT Group, Inc. 10,282
139 Citigroup, Inc. 7,193
18 City Holding Co. 822
30 Columbia Banking System, Inc. 975
151 Comerica, Inc. 6,316
26 Community Trust Bancorp, Inc. 909
66 Cullen/Frost Bankers, Inc. 3,960
144 Customers Bancorp, Inc. (a) 3,920
55 CVB Financial Corp. 931
61 Eagle Bancorp, Inc. (a) 3,079
109 East West Bancorp, Inc. 4,530
143 F.N.B. Corp. 1,908
113 FCB Financial Holdings, Inc.,
Class A (a) 4,044
366 Fifth Third Bancorp 7,357
1,297 First BanCorp (a) 4,215
8 First Citizens BancShares, Inc.,
Class A 2,065
29 First Financial Bankshares, Inc. 875
33 First Interstate BancSystem, Inc.,
Class A 959
141 First Merchants Corp. 3,584
26 First NBC Bank Holding Co. (a) 972
132 First Republic Bank 8,720
353 FirstMerit Corp. 6,583
46 Flushing Financial Corp. 995
152 Fulton Financial Corp. 1,978
21 Great Southern Bancorp, Inc. 950
73 Great Western Bancorp, Inc. 2,118
68 Hancock Holding Co. 1,712
102 Heartland Financial USA, Inc. 3,199
94 Hilltop Holdings, Inc. (a) 1,807
Page 42 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
91 Home BancShares, Inc. $ 3,687
588 Huntington Bancshares, Inc. 6,503
20 Independent Bank Corp. 930
74 International Bancshares Corp. 1,902
673 Investors Bancorp, Inc. 8,372
114 JPMorgan Chase & Co. 7,527
121 LegacyTexas Financial Group, Inc. 3,027
85 MB Financial, Inc. 2,751
67 Old National Bancorp 909
73 Opus Bank 2,699
97 PacWest Bancorp 4,181
132 People's United Financial, Inc. 2,132
38 Pinnacle Financial Partners, Inc. 1,952
78 PNC Financial Services Group
(The), Inc. 7,434
344 Popular, Inc. 9,749
163 PrivateBancorp, Inc. 6,686
127 Prosperity Bancshares, Inc. 6,078
1,537 Regions Financial Corp. 14,755
56 Renasant Corp. 1,927
46 Signature Bank (a) 7,055
19 Simmons First National Corp.,
Class A 976
24 South State Corp. 1,727
62 Sterling Bancorp 1,006
25 Stock Yards Bancorp, Inc. 945
362 SunTrust Banks, Inc. 15,508
70 Synovus Financial Corp. 2,267
221 Talmer Bancorp, Inc., Class A 4,002
122 TCF Financial Corp. 1,723
18 Tompkins Financial Corp. 1,011
80 Trustmark Corp. 1,843
255 Umpqua Holdings Corp. 4,055
39 Union Bankshares Corp. 984
49 United Bankshares, Inc. 1,813
46 United Community Banks, Inc. 897
24 Washington Trust Bancorp, Inc. 949
59 Webster Financial Corp. 2,194
67 Western Alliance Bancorp (a) 2,403
88 Wilshire Bancorp, Inc. 1,016
151 Zions Bancorporation 4,122
--------------
297,440
--------------
BEVERAGES -- 0.7%
24 Coca-Cola Bottling Co.
Consolidated 4,380
166 Constellation Brands, Inc.,
Class A 23,645
263 Dr Pepper Snapple Group, Inc. 24,512
120 National Beverage Corp. (a) 5,453
--------------
57,990
--------------
BIOTECHNOLOGY -- 1.3%
56 Alder Biopharmaceuticals, Inc. (a) 1,850
66 Amicus Therapeutics, Inc. (a) 640
88 Anacor Pharmaceuticals, Inc. (a) 9,941
81 BioCryst Pharmaceuticals, Inc. (a) 836
48 Chimerix, Inc. (a) 430
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BIOTECHNOLOGY (CONTINUED)
46 Clovis Oncology, Inc. (a) $ 1,610
326 Dyax Corp. (a) 12,264
38 Dynavax Technologies Corp. (a) 918
50 Eagle Pharmaceuticals, Inc. (a) 4,433
97 Emergent BioSolutions, Inc. (a) 3,881
25 Enanta Pharmaceuticals, Inc. (a) 826
823 Exelixis, Inc. (a) 4,642
155 Halozyme Therapeutics, Inc. (a) 2,686
251 Incyte Corp. (a) 27,221
146 Insys Therapeutics, Inc. (a) 4,180
344 Lexicon Pharmaceuticals, Inc. (a) 4,579
32 Ligand Pharmaceuticals, Inc. (a) 3,469
95 MiMedx Group, Inc. (a) 890
56 Momenta Pharmaceuticals, Inc. (a) 831
25 Myriad Genetics, Inc. (a) 1,079
157 Neurocrine Biosciences, Inc. (a) 8,881
151 Osiris Therapeutics, Inc. 1,567
918 PDL BioPharma, Inc. 3,250
15 Regeneron Pharmaceuticals, Inc. (a) 8,143
29 Sarepta Therapeutics, Inc. (a) 1,119
54 Seattle Genetics, Inc. (a) 2,424
--------------
112,590
--------------
BUILDING PRODUCTS -- 1.0%
128 A.O. Smith Corp. 9,806
72 Allegion PLC 4,746
71 American Woodmark Corp. (a) 5,679
62 Apogee Enterprises, Inc. 2,698
364 Builders FirstSource, Inc. (a) 4,033
176 Griffon Corp. 3,133
92 Lennox International, Inc. 11,491
412 Masco Corp. 11,660
149 Owens Corning 7,007
117 Patrick Industries, Inc. (a) 5,089
301 PGT, Inc. (a) 3,428
316 Ply Gem Holdings, Inc. (a) 3,963
51 Quanex Building Products Corp. 1,063
28 Simpson Manufacturing Co., Inc. 956
48 Universal Forest Products, Inc. 3,282
156 USG Corp. (a) 3,789
--------------
81,823
--------------
CAPITAL MARKETS -- 1.2%
225 BGC Partners, Inc., Class A 2,207
20 Diamond Hill Investment Group,
Inc. 3,780
124 Eaton Vance Corp. 4,021
55 Evercore Partners, Inc., Class A 2,974
72 Federated Investors, Inc., Class B 2,063
929 Franklin Resources, Inc. 34,206
32 Greenhill & Co., Inc. 916
221 Invesco Ltd. 7,399
421 KCG Holdings, Inc., Class A (a) 5,182
150 Legg Mason, Inc. 5,884
102 Piper Jaffray Cos. (a) 4,121
84 Raymond James Financial, Inc. 4,869
172 SEI Investments Co. 9,013
49 Stifel Financial Corp. (a) 2,076
See Notes to Financial Statements Page 43
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CAPITAL MARKETS (CONTINUED)
56 TPG Specialty Lending, Inc. $ 908
46 Virtus Investment Partners, Inc. 5,403
298 Waddell & Reed Financial, Inc.,
Class A 8,541
--------------
103,563
--------------
CHEMICALS -- 2.7%
70 Airgas, Inc. 9,682
47 Albemarle Corp. 2,633
62 Ashland, Inc. 6,367
235 Axiall Corp. 3,619
60 Balchem Corp. 3,648
178 Calgon Carbon Corp. 3,071
117 Celanese Corp., Series A 7,878
571 Chemours (The) Co. 3,061
161 Chemtura Corp. (a) 4,390
653 Dow Chemical (The) Co. 33,616
144 E.I. du Pont de Nemours and Co. 9,590
214 Eastman Chemical Co. 14,447
169 Ferro Corp. (a) 1,879
306 FMC Corp. 11,974
27 H.B. Fuller Co. 985
858 Huntsman Corp. 9,755
93 Innophos Holdings, Inc. 2,695
80 Innospec, Inc. 4,345
20 International Flavors &
Fragrances, Inc. 2,393
333 LyondellBasell Industries N.V.,
Class A 28,938
1,113 Mosaic (The) Co. 30,708
6 NewMarket Corp. 2,284
275 Olin Corp. 4,747
71 PolyOne Corp. 2,255
12 Quaker Chemical Corp. 927
34 Sensient Technologies Corp. 2,136
88 Stepan Co. 4,373
146 Trinseo S.A. (a) 4,117
58 Valspar (The) Corp. 4,811
200 Westlake Chemical Corp. 10,864
--------------
232,188
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.4%
34 ABM Industries, Inc. 968
653 ACCO Brands Corp. (a) 4,656
278 ADT (The) Corp. 9,168
97 Cintas Corp. 8,832
149 Deluxe Corp. 8,126
86 Essendant, Inc. 2,796
28 G&K Services, Inc., Class A 1,761
109 Healthcare Services Group, Inc. 3,801
32 Herman Miller, Inc. 918
22 HNI Corp. 793
123 Interface, Inc. 2,354
176 KAR Auction Services, Inc. 6,517
126 Knoll, Inc. 2,369
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES
(CONTINUED)
138 McGrath RentCorp $ 3,476
23 MSA Safety, Inc. 1,000
60 Multi-Color Corp. 3,589
209 Pitney Bowes, Inc. 4,316
305 Quad/Graphics, Inc. 2,837
143 R.R. Donnelley & Sons Co. 2,105
168 Republic Services, Inc. 7,390
232 Rollins, Inc. 6,009
80 SP Plus Corp. (a) 1,912
149 Stericycle, Inc. (a) 17,969
87 Team, Inc. (a) 2,781
114 Tetra Tech, Inc. 2,966
26 UniFirst Corp. 2,709
42 US Ecology, Inc. 1,531
159 Viad Corp. 4,489
86 Waste Connections, Inc. 4,844
--------------
122,982
--------------
COMMUNICATIONS EQUIPMENT
-- 1.5%
80 ARRIS International PLC (a) 2,446
1,000 Brocade Communications Systems,
Inc. 9,180
200 Ciena Corp. (a) 4,138
791 Cisco Systems, Inc. 21,480
207 CommScope Holding Co., Inc. (a) 5,359
86 EchoStar Corp., Class A (a) 3,363
36 F5 Networks, Inc. (a) 3,491
83 Finisar Corp. (a) 1,207
424 Infinera Corp. (a) 7,683
319 Ixia (a) 3,965
161 Palo Alto Networks, Inc. (a) 28,358
36 Plantronics, Inc. 1,707
353 Polycom, Inc. (a) 4,444
515 QUALCOMM, Inc. 25,742
27 Ubiquiti Networks, Inc. (a) 856
97 ViaSat, Inc. (a) 5,918
--------------
129,337
--------------
CONSTRUCTION & ENGINEERING
-- 0.9%
151 AECOM (a) 4,535
262 Chicago Bridge & Iron Co. N.V. 10,215
170 Comfort Systems USA, Inc. 4,831
64 Dycom Industries, Inc. (a) 4,478
141 EMCOR Group, Inc. 6,774
245 Fluor Corp. 11,569
32 Granite Construction, Inc. 1,373
277 Jacobs Engineering Group, Inc. (a) 11,620
234 MasTec, Inc. (a) 4,067
141 MYR Group, Inc. (a) 2,906
103 Primoris Services Corp. 2,269
343 Quanta Services, Inc. (a) 6,946
280 Tutor Perini Corp. (a) 4,687
--------------
76,270
--------------
Page 44 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CONSTRUCTION MATERIALS -- 0.6%
246 Headwaters, Inc. (a) $ 4,150
91 Martin Marietta Materials, Inc. 12,429
96 US Concrete, Inc. (a) 5,055
311 Vulcan Materials Co. 29,536
--------------
51,170
--------------
CONSUMER FINANCE -- 1.0%
1,359 Ally Financial, Inc. (a) 25,332
286 Capital One Financial Corp. 20,643
165 Cash America International, Inc. 4,942
21 Credit Acceptance Corp. (a) 4,494
46 First Cash Financial Services,
Inc. (a) 1,722
210 Green Dot Corp., Class A (a) 3,448
739 Navient Corp. 8,462
107 Nelnet, Inc., Class A 3,592
47 OneMain Holdings, Inc. (a) 1,952
79 PRA Group, Inc. (a) 2,741
305 Santander Consumer USA
Holdings, Inc. (a) 4,834
281 SLM Corp. (a) 1,832
--------------
83,994
--------------
CONTAINERS & PACKAGING -- 0.6%
63 AptarGroup, Inc. 4,577
74 Avery Dennison Corp. 4,637
158 Bemis Co., Inc. 7,061
138 Berry Plastics Group, Inc. (a) 4,993
325 Graphic Packaging Holding Co. 4,170
58 Greif, Inc., Class A 1,787
101 Owens-Illinois, Inc. (a) 1,759
69 Packaging Corp. of America 4,350
148 Sealed Air Corp. 6,601
80 Silgan Holdings, Inc. 4,298
221 Sonoco Products Co. 9,032
--------------
53,265
--------------
DISTRIBUTORS -- 0.5%
977 LKQ Corp. (a) 28,949
144 Pool Corp. 11,632
--------------
40,581
--------------
DIVERSIFIED CONSUMER SERVICES
-- 0.5%
52 2U, Inc. (a) 1,455
417 Apollo Education Group, Inc. (a) 3,198
162 Bright Horizons Family Solutions,
Inc. (a) 10,822
56 Capella Education Co. 2,588
170 DeVry Education Group, Inc. 4,303
11 Graham Holdings Co., Class B 5,335
58 H&R Block, Inc. 1,932
306 Service Corp. International 7,962
123 ServiceMaster Global Holdings,
Inc. (a) 4,826
33 Strayer Education, Inc. (a) 1,984
--------------
44,405
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
-- 1.0%
124 CBOE Holdings, Inc. $ 8,047
39 FactSet Research Systems, Inc. 6,340
88 Intercontinental Exchange, Inc. 22,551
102 Leucadia National Corp. 1,774
89 MarketAxess Holdings, Inc. 9,931
78 Morningstar, Inc. 6,272
70 MSCI, Inc. 5,049
39 Nasdaq, Inc. 2,269
714 Voya Financial, Inc. 26,354
--------------
88,587
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.6%
12 Atlantic Tele-Network, Inc. 939
1,103 CenturyLink, Inc. 27,752
1,749 Frontier Communications Corp. 8,168
268 General Communication, Inc.,
Class A (a) 5,301
165 Inteliquent, Inc. 2,932
751 Iridium Communications, Inc. (a) 6,316
301 Windstream Holdings, Inc. 1,938
--------------
53,346
--------------
ELECTRIC UTILITIES -- 2.8%
55 ALLETE, Inc. 2,796
365 American Electric Power Co., Inc. 21,269
193 Duke Energy Corp. 13,778
329 Edison International 19,480
75 El Paso Electric Co. 2,888
168 Empire District Electric (The) Co. 4,716
425 Entergy Corp. 29,053
137 Eversource Energy 6,997
933 Exelon Corp. 25,909
442 FirstEnergy Corp. 14,025
307 Great Plains Energy, Inc. 8,384
129 IDACORP, Inc. 8,772
23 MGE Energy, Inc. 1,067
142 NextEra Energy, Inc. 14,752
304 OGE Energy Corp. 7,992
71 Otter Tail Corp. 1,891
97 Pinnacle West Capital Corp. 6,255
99 PNM Resources, Inc. 3,026
225 Portland General Electric Co. 8,183
632 PPL Corp. 21,570
50 Unitil Corp. 1,794
216 Westar Energy, Inc. 9,161
195 Xcel Energy, Inc. 7,002
--------------
240,760
--------------
ELECTRICAL EQUIPMENT -- 0.9%
47 Acuity Brands, Inc. 10,989
38 AZZ, Inc. 2,112
675 Eaton Corp. PLC 35,127
470 Emerson Electric Co. 22,480
85 Encore Wire Corp. 3,153
52 EnerSys 2,908
34 Franklin Electric Co., Inc. 919
See Notes to Financial Statements Page 45
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRICAL EQUIPMENT (CONTINUED)
37 Regal-Beloit Corp. $ 2,165
--------------
79,853
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 2.5%
64 Anixter International, Inc. (a) 3,865
188 Arrow Electronics, Inc. (a) 10,186
243 Avnet, Inc. 10,410
353 AVX Corp. 4,285
16 Badger Meter, Inc. 937
212 Benchmark Electronics, Inc. (a) 4,382
34 Coherent, Inc. (a) 2,214
2,022 Corning, Inc. 36,962
150 CTS Corp. 2,646
57 Dolby Laboratories, Inc., Class A 1,918
35 ePlus, Inc. (a) 3,264
151 Fabrinet (a) 3,597
26 FARO Technologies, Inc. (a) 767
29 FEI Co. 2,314
222 FLIR Systems, Inc. 6,232
229 II-VI, Inc. (a) 4,250
228 Ingram Micro, Inc., Class A 6,927
143 Insight Enterprises, Inc. (a) 3,592
27 IPG Photonics Corp. (a) 2,407
371 Jabil Circuit, Inc. 8,641
135 Keysight Technologies, Inc. (a) 3,825
11 Littelfuse, Inc. 1,177
16 MTS Systems Corp. 1,015
74 National Instruments Corp. 2,123
269 Newport Corp. (a) 4,269
12 OSI Systems, Inc. (a) 1,064
179 PC Connection, Inc. 4,053
95 Plexus Corp. (a) 3,317
107 Rofin-Sinar Technologies, Inc. (a) 2,865
53 Rogers Corp. (a) 2,733
216 Sanmina Corp. (a) 4,445
78 ScanSource, Inc. (a) 2,513
74 SYNNEX Corp. 6,655
462 TE Connectivity Ltd. 29,850
54 Tech Data Corp. (a) 3,585
253 Trimble Navigation Ltd. (a) 5,427
445 TTM Technologies, Inc. (a) 2,897
476 Vishay Intertechnology, Inc. 5,736
54 Zebra Technologies Corp.,
Class A (a) 3,761
--------------
211,106
--------------
ENERGY EQUIPMENT & SERVICES
-- 1.9%
424 Archrock, Inc. 3,188
312 Atwood Oceanics, Inc. 3,192
141 Bristow Group, Inc. 3,652
787 C&J Energy Services Ltd. (a) 3,746
480 Diamond Offshore Drilling, Inc. 10,128
63 Dril-Quip, Inc. (a) 3,732
268 FMC Technologies, Inc. (a) 7,775
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES
(CONTINUED)
378 Forum Energy Technologies,
Inc. (a) $ 4,710
180 Frank's International N.V. 3,004
587 Halliburton Co. 19,981
963 Helix Energy Solutions Group,
Inc. (a) 5,065
220 Helmerich & Payne, Inc. 11,781
430 McDermott International, Inc. (a) 1,441
660 Nabors Industries Ltd. 5,617
920 National Oilwell Varco, Inc. 30,811
264 Oceaneering International, Inc. 9,905
177 Oil States International, Inc. (a) 4,823
281 Patterson-UTI Energy, Inc. 4,237
417 RPC, Inc. 4,983
200 Schlumberger Ltd. 13,950
62 SEACOR Holdings, Inc. (a) 3,259
70 Tidewater, Inc. 487
--------------
159,467
--------------
FOOD & STAPLES RETAILING -- 2.0%
109 Andersons (The), Inc. 3,448
40 Casey's General Stores, Inc. 4,818
215 CVS Health Corp. 21,020
123 Fresh Market (The), Inc. (a) 2,881
96 Ingles Markets, Inc., Class A 4,232
767 Kroger (The) Co. 32,083
122 Natural Grocers By Vitamin
Cottage, Inc. (a) 2,485
1,369 Rite Aid Corp. (a) 10,733
143 SpartanNash Co. 3,094
129 SUPERVALU, Inc. (a) 875
38 United Natural Foods, Inc. (a) 1,496
417 Walgreens Boots Alliance, Inc. 35,510
320 Wal-Mart Stores, Inc. 19,616
88 Weis Markets, Inc. 3,898
656 Whole Foods Market, Inc. 21,976
--------------
168,165
--------------
FOOD PRODUCTS -- 2.3%
835 Archer-Daniels-Midland Co. 30,628
102 B&G Foods, Inc. 3,572
95 Bunge Ltd. 6,487
85 Cal-Maine Foods, Inc. 3,939
171 ConAgra Foods, Inc. 7,209
328 Darling Ingredients, Inc. (a) 3,450
60 Diamond Foods, Inc. (a) 2,313
94 Fresh Del Monte Produce, Inc. 3,655
40 Hain Celestial Group (The),
Inc. (a) 1,616
438 Hormel Foods Corp. 34,637
72 Ingredion, Inc. 6,900
25 J&J Snack Foods Corp. 2,917
90 John B. Sanfilippo & Son, Inc. 4,863
76 McCormick & Co., Inc. 6,502
500 Pilgrim's Pride Corp. 11,045
149 Pinnacle Foods, Inc. 6,326
78 Post Holdings, Inc. (a) 4,813
67 Sanderson Farms, Inc. 5,194
Page 46 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
FOOD PRODUCTS (CONTINUED)
4 Seaboard Corp. (a) $ 11,579
82 Snyder's-Lance, Inc. 2,813
27 TreeHouse Foods, Inc. (a) 2,118
482 Tyson Foods, Inc., Class A 25,705
103 WhiteWave Foods (The) Co. (a) 4,008
--------------
192,289
--------------
GAS UTILITIES -- 0.5%
107 Atmos Energy Corp. 6,745
35 Chesapeake Utilities Corp. 1,986
51 Laclede Group (The), Inc. 3,030
31 New Jersey Resources Corp. 1,022
40 Northwest Natural Gas Co. 2,024
61 ONE Gas, Inc. 3,060
103 Piedmont Natural Gas Co., Inc. 5,873
428 Questar Corp. 8,338
74 South Jersey Industries, Inc. 1,741
47 Southwest Gas Corp. 2,593
119 UGI Corp. 4,017
16 WGL Holdings, Inc. 1,008
--------------
41,437
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.3%
112 ABIOMED, Inc. (a) 10,111
74 Align Technology, Inc. (a) 4,873
126 AtriCure, Inc. (a) 2,827
7 Atrion Corp. 2,668
1,054 Baxter International, Inc. 40,210
111 C. R. Bard, Inc. 21,028
81 Cantel Medical Corp. 5,033
61 Cynosure, Inc., Class A (a) 2,725
121 DexCom, Inc. (a) 9,910
194 Edwards Lifesciences Corp. (a) 15,322
32 Greatbatch, Inc. (a) 1,680
32 Halyard Health, Inc. (a) 1,069
531 Hologic, Inc. (a) 20,544
25 ICU Medical, Inc. (a) 2,820
112 IDEXX Laboratories, Inc. (a) 8,167
95 Inogen, Inc. (a) 3,809
46 Integra LifeSciences Holdings
Corp. (a) 3,118
120 Masimo Corp. (a) 4,981
193 Merit Medical Systems, Inc. (a) 3,588
24 Natus Medical, Inc. (a) 1,153
20 Neogen Corp. (a) 1,130
58 NuVasive, Inc. (a) 3,138
117 NxStage Medical, Inc. (a) 2,563
74 Stryker Corp. 6,878
56 Varian Medical Systems, Inc. (a) 4,525
86 Vascular Solutions, Inc. (a) 2,958
39 West Pharmaceutical Services, Inc. 2,349
116 Zeltiq Aesthetics, Inc. (a) 3,310
--------------
192,487
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.4%
94 Acadia Healthcare Co., Inc. (a) $ 5,871
168 Aceto Corp. 4,533
253 Aetna, Inc. 27,354
81 Air Methods Corp. (a) 3,396
97 Amedisys, Inc. (a) 3,814
154 AMN Healthcare Services, Inc. (a) 4,782
134 AmSurg Corp. (a) 10,184
149 Anthem, Inc. 20,776
181 Brookdale Senior Living, Inc. (a) 3,341
115 Centene Corp. (a) 7,568
28 Chemed Corp. 4,194
201 Civitas Solutions, Inc. (a) 5,787
194 Community Health Systems,
Inc. (a) 5,147
44 Ensign Group (The), Inc. 996
170 Envision Healthcare Holdings,
Inc. (a) 4,415
256 Express Scripts Holding Co. (a) 22,377
179 HCA Holdings, Inc. (a) 12,106
54 HealthSouth Corp. 1,880
104 Henry Schein, Inc. (a) 16,452
103 LHC Group, Inc. (a) 4,665
117 LifePoint Health, Inc. (a) 8,588
50 Magellan Health, Inc. (a) 3,083
136 MEDNAX, Inc. (a) 9,746
151 Molina Healthcare, Inc. (a) 9,080
46 National Healthcare Corp. 2,838
48 Patterson Cos., Inc. 2,170
32 PharMerica Corp. (a) 1,120
113 Quest Diagnostics, Inc. 8,039
256 Select Medical Holdings Corp. 3,049
57 Surgical Care Affiliates, Inc. (a) 2,269
77 Team Health Holdings, Inc. (a) 3,379
20 U.S. Physical Therapy, Inc. 1,074
298 UnitedHealth Group, Inc. 35,057
166 Universal Health Services, Inc.,
Class B 19,835
158 VCA, Inc. (a) 8,690
--------------
287,655
--------------
HEALTH CARE TECHNOLOGY -- 0.1%
62 athenahealth, Inc. (a) 9,980
105 HMS Holdings Corp. (a) 1,296
74 Quality Systems, Inc. 1,193
--------------
12,469
--------------
HOTELS, RESTAURANTS & LEISURE
-- 2.7%
12 Biglari Holdings, Inc. (a) 3,910
43 BJ's Restaurants, Inc. (a) 1,869
227 Boyd Gaming Corp. (a) 4,511
79 Brinker International, Inc. 3,788
53 Buffalo Wild Wings, Inc. (a) 8,462
784 Caesars Entertainment Corp. (a) 6,186
68 Cheesecake Factory (The), Inc. 3,136
39 Chipotle Mexican Grill, Inc. (a) 18,714
34 Churchill Downs, Inc. 4,811
See Notes to Financial Statements Page 47
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOTELS, RESTAURANTS & LEISURE
(CONTINUED)
129 ClubCorp Holdings, Inc. $ 2,357
56 Cracker Barrel Old Country Store,
Inc. 7,103
251 Denny's Corp. (a) 2,467
77 Domino's Pizza, Inc. 8,566
85 Dunkin' Brands Group, Inc. 3,620
88 International Speedway Corp.,
Class A 2,967
264 Isle of Capri Casinos, Inc. (a) 3,678
27 Jack in the Box, Inc. 2,071
483 Norwegian Cruise Line Holdings
Ltd. (a) 28,304
53 Panera Bread Co., Class A (a) 10,323
151 Papa John's International, Inc. 8,436
220 Penn National Gaming, Inc. (a) 3,524
82 Pinnacle Entertainment, Inc. (a) 2,552
32 Popeyes Louisiana Kitchen, Inc. (a) 1,872
37 Red Robin Gourmet Burgers,
Inc. (a) 2,284
233 Royal Caribbean Cruises Ltd. 23,582
171 Ruth's Hospitality Group, Inc. 2,722
177 Scientific Games Corp., Class A (a) 1,588
137 Six Flags Entertainment Corp. 7,527
609 Starbucks Corp. 36,558
99 Texas Roadhouse, Inc. 3,541
60 Vail Resorts, Inc. 7,679
94 Zoe's Kitchen, Inc. (a) 2,630
--------------
231,338
--------------
HOUSEHOLD DURABLES -- 1.7%
231 CalAtlantic Group, Inc. 8,759
35 Ethan Allen Interiors, Inc. 974
58 Garmin Ltd. 2,156
65 Harman International Industries,
Inc. 6,124
41 Helen of Troy Ltd. (a) 3,864
109 Installed Building Products,
Inc. (a) 2,706
32 iRobot Corp. (a) 1,133
284 Jarden Corp. (a) 16,222
340 KB Home 4,192
35 La-Z-Boy, Inc. 855
101 Leggett & Platt, Inc. 4,244
576 Lennar Corp., Class A 28,172
170 LGI Homes, Inc. (a) 4,136
35 M.D.C. Holdings, Inc. 894
157 M/I Homes, Inc. (a) 3,441
39 Mohawk Industries, Inc. (a) 7,386
174 Newell Rubbermaid, Inc. 7,670
7 NVR, Inc. (a) 11,501
440 PulteGroup, Inc. 7,841
145 Tempur Sealy International,
Inc. (a) 10,217
122 Toll Brothers, Inc. (a) 4,063
71 TRI Pointe Group, Inc. (a) 900
18 Tupperware Brands Corp. 1,002
44 Universal Electronics, Inc. (a) 2,259
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HOUSEHOLD DURABLES (CONTINUED)
41 WCI Communities, Inc. (a) $ 913
89 William Lyon Homes, Class A (a) 1,468
--------------
143,092
--------------
HOUSEHOLD PRODUCTS -- 0.3%
57 Central Garden & Pet Co.,
Class A (a) 775
82 Church & Dwight Co., Inc. 6,960
120 Clorox (The) Co. 15,220
158 HRG Group, Inc. (a) 2,142
23 Spectrum Brands Holdings, Inc. 2,341
21 WD-40 Co. 2,072
--------------
29,510
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.4%
849 AES (The) Corp. 8,125
711 Calpine Corp. (a) 10,288
402 Dynegy, Inc. (a) 5,387
559 NRG Energy, Inc. 6,579
--------------
30,379
--------------
INDUSTRIAL CONGLOMERATES -- 0.1%
47 Carlisle Cos., Inc. 4,169
54 Raven Industries, Inc. 842
--------------
5,011
--------------
INSURANCE -- 5.1%
67 ACE Ltd. 7,829
13 Alleghany Corp. (a) 6,213
164 Allied World Assurance Co.
Holdings AG 6,099
238 Allstate (The) Corp. 14,777
319 Ambac Financial Group, Inc. (a) 4,495
80 American Equity Investment Life
Holding Co. 1,922
60 American Financial Group, Inc. 4,325
366 American International Group, Inc. 22,681
38 American National Insurance Co. 3,886
74 AMERISAFE, Inc. 3,767
165 AmTrust Financial Services, Inc. 10,161
85 Arch Capital Group Ltd. (a) 5,929
81 Argo Group International Holdings
Ltd. 4,847
101 Arthur J. Gallagher & Co. 4,135
80 Aspen Insurance Holdings Ltd. 3,864
416 Assured Guaranty Ltd. 10,995
116 Axis Capital Holdings Ltd. 6,522
134 Brown & Brown, Inc. 4,301
116 Cincinnati Financial Corp. 6,864
442 CNO Financial Group, Inc. 8,438
165 Employers Holdings, Inc. 4,504
137 Endurance Specialty Holdings Ltd. 8,767
25 Enstar Group Ltd. (a) 3,751
60 Everest Re Group, Ltd. 10,985
45 FBL Financial Group, Inc., Class A 2,864
159 First American Financial Corp. 5,708
976 FNF Group 33,838
Page 48 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
81 Hanover Insurance Group (The),
Inc. $ 6,589
605 Hartford Financial Services Group
(The), Inc. 26,293
140 Heritage Insurance Holdings, Inc. 3,055
28 Horace Mann Educators Corp. 929
34 Infinity Property & Casualty Corp. 2,796
34 James River Group Holdings Ltd. 1,140
53 Kemper Corp. 1,974
146 Lincoln National Corp. 7,338
266 Maiden Holdings Ltd. 3,966
26 Markel Corp. (a) 22,967
760 MBIA, Inc. (a) 4,925
294 MetLife, Inc. 14,174
192 National General Holdings Corp. 4,197
17 National Western Life Group, Inc.,
Class A 4,283
36 Navigators Group (The), Inc. (a) 3,088
398 Old Republic International Corp. 7,415
38 ProAssurance Corp. 1,844
69 Reinsurance Group of America,
Inc. 5,903
98 RenaissanceRe Holdings Ltd. 11,093
52 RLI Corp. 3,211
149 Selective Insurance Group, Inc. 5,003
162 State Auto Financial Corp. 3,336
23 Stewart Information Services Corp. 859
137 Third Point Reinsurance Ltd. (a) 1,837
74 Torchmark Corp. 4,230
278 Travelers (The) Cos., Inc. 31,375
79 United Fire Group, Inc. 3,026
157 Universal Insurance Holdings, Inc. 3,639
65 Unum Group 2,164
230 Validus Holdings Ltd. 10,647
115 W. R. Berkley Corp. 6,296
3 White Mountains Insurance Group
Ltd. 2,180
382 XL Group PLC 14,967
--------------
439,206
--------------
INTERNET & CATALOG RETAIL -- 1.7%
305 1-800-Flowers.com, Inc.,
Class A (a) 2,220
67 Amazon.com, Inc. (a) 45,285
294 Expedia, Inc. 36,544
62 FTD Cos., Inc. (a) 1,623
68 Lands' End, Inc. (a) 1,594
335 Netflix, Inc. (a) 38,317
174 Nutrisystem, Inc. 3,765
11 Priceline Group (The), Inc. (a) 14,025
--------------
143,373
--------------
INTERNET SOFTWARE & SERVICES
-- 2.3%
101 Akamai Technologies, Inc. (a) 5,316
22 Alphabet, Inc., Class A (a) 17,116
37 Cimpress N.V. (a) 3,002
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INTERNET SOFTWARE & SERVICES
(CONTINUED)
56 Cornerstone OnDemand, Inc. (a) $ 1,934
12 CoStar Group, Inc. (a) 2,480
137 Cvent, Inc. (a) 4,783
593 EarthLink Holdings Corp. 4,406
1,417 eBay, Inc. (a) 38,939
154 Facebook, Inc., Class A (a) 16,118
199 GTT Communications, Inc. (a) 3,395
32 IAC/InterActiveCorp 1,922
147 j2 Global, Inc. 12,101
67 LogMeIn, Inc. (a) 4,496
65 Marketo, Inc. (a) 1,866
53 NIC, Inc. 1,043
389 Pandora Media, Inc. (a) 5,216
112 Q2 Holdings, Inc. (a) 2,953
337 Rackspace Hosting, Inc. (a) 8,533
41 SPS Commerce, Inc. (a) 2,879
50 Stamps.com, Inc. (a) 5,481
36 Textura Corp. (a) 777
118 VeriSign, Inc. (a) 10,308
44 Web.com Group, Inc. (a) 880
1,197 Yahoo!, Inc. (a) 39,812
--------------
195,756
--------------
IT SERVICES -- 3.6%
141 Accenture PLC, Class A 14,734
109 Blackhawk Network Holdings,
Inc. (a) 4,819
151 Broadridge Financial Solutions,
Inc. 8,113
50 CACI International, Inc.,
Class A (a) 4,639
442 Cognizant Technology Solutions
Corp., Class A (a) 26,529
81 Computer Sciences Corp. 2,647
160 Convergys Corp. 3,982
279 CoreLogic, Inc. (a) 9,447
30 CSG Systems International, Inc. 1,079
60 DST Systems, Inc. 6,844
139 EPAM Systems, Inc. (a) 10,928
140 Euronet Worldwide, Inc. (a) 10,140
100 ExlService Holdings, Inc. (a) 4,493
207 Fidelity National Information
Services, Inc. 12,544
319 Fiserv, Inc. (a) 29,176
74 Gartner, Inc. (a) 6,712
88 Genpact Ltd. (a) 2,198
180 Global Payments, Inc. 11,612
74 Heartland Payment Systems, Inc. 7,017
89 Jack Henry & Associates, Inc. 6,947
50 Leidos Holdings, Inc. 2,813
144 ManTech International Corp.,
Class A 4,355
77 MasterCard, Inc., Class A 7,497
139 MAXIMUS, Inc. 7,819
136 NeuStar, Inc., Class A (a) 3,260
305 Sabre Corp. 8,531
See Notes to Financial Statements Page 49
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
IT SERVICES (CONTINUED)
23 Science Applications International
Corp. $ 1,053
144 Sykes Enterprises, Inc. (a) 4,432
69 TeleTech Holdings, Inc. 1,926
228 Total System Services, Inc. 11,354
231 Vantiv, Inc., Class A (a) 10,954
90 Virtusa Corp. (a) 3,721
298 Visa, Inc., Class A 23,110
2,846 Xerox Corp. 30,253
--------------
305,678
--------------
LEISURE PRODUCTS -- 0.4%
44 Brunswick Corp. 2,222
288 Hasbro, Inc. 19,400
296 Mattel, Inc. 8,042
219 Smith & Wesson Holding Corp. (a) 4,814
32 Sturm Ruger & Co., Inc. 1,908
--------------
36,386
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.3%
16 Bio-Rad Laboratories, Inc.,
Class A (a) 2,219
45 Bio-Techne Corp. 4,050
70 Cambrex Corp. (a) 3,296
32 Charles River Laboratories
International, Inc. (a) 2,572
33 PAREXEL International Corp. (a) 2,248
119 Quintiles Transnational Holdings,
Inc. (a) 8,171
242 VWR Corp. (a) 6,851
--------------
29,407
--------------
MACHINERY -- 3.6%
223 AGCO Corp. 10,122
79 Alamo Group, Inc. 4,116
65 Albany International Corp.,
Class A 2,376
156 Allison Transmission Holdings,
Inc. 4,039
80 Altra Industrial Motion Corp. 2,006
128 American Railcar Industries, Inc. 5,924
82 Astec Industries, Inc. 3,337
77 Barnes Group, Inc. 2,725
144 Briggs & Stratton Corp. 2,491
318 Caterpillar, Inc. 21,611
241 Chart Industries, Inc. (a) 4,328
69 CIRCOR International, Inc. 2,908
174 CLARCOR, Inc. 8,644
319 Cummins, Inc. 28,075
148 Donaldson Co., Inc. 4,242
363 Dover Corp. 22,256
25 ESCO Technologies, Inc. 904
202 Federal Signal Corp. 3,202
151 Flowserve Corp. 6,354
31 Graco, Inc. 2,234
144 Greenbrier (The) Cos., Inc. 4,697
71 Hillenbrand, Inc. 2,104
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MACHINERY (CONTINUED)
64 Hyster-Yale Materials Handling,
Inc. $ 3,357
29 IDEX Corp. 2,222
311 ITT Corp. 11,296
96 John Bean Technologies Corp. 4,784
309 Joy Global, Inc. 3,896
119 Lincoln Electric Holdings, Inc. 6,175
14 Lindsay Corp. 1,014
61 Manitowoc (The) Co., Inc. 936
60 Middleby (The) Corp. (a) 6,472
62 Mueller Industries, Inc. 1,680
66 Nordson Corp. 4,234
102 Oshkosh Corp. 3,982
531 PACCAR, Inc. 25,169
143 Parker-Hannifin Corp. 13,868
14 Proto Labs, Inc. (a) 892
54 Rexnord Corp. (a) 978
92 Snap-on, Inc. 15,772
12 Standex International Corp. 998
118 Toro (The) Co. 8,622
226 TriMas Corp. (a) 4,215
459 Trinity Industries, Inc. 11,025
19 Valmont Industries, Inc. 2,014
436 Wabash National Corp. (a) 5,158
204 Woodward, Inc. 10,131
190 Xylem, Inc. 6,935
--------------
304,520
--------------
MARINE -- 0.1%
168 Kirby Corp. (a) 8,840
48 Matson, Inc. 2,046
--------------
10,886
--------------
MEDIA -- 1.5%
74 AMC Entertainment Holdings,
Inc., Class A 1,776
114 AMC Networks, Inc., Class A (a) 8,514
128 Cinemark Holdings, Inc. 4,279
122 Comcast Corp., Class A 6,884
1,330 Discovery Communications, Inc.,
Class A (a) 35,484
278 Entravision Communications
Corp., Class A 2,143
217 Gray Television, Inc. (a) 3,537
109 Interpublic Group of Cos. (The),
Inc. 2,538
37 John Wiley & Sons, Inc., Class A 1,666
119 New Media Investment Group, Inc. 2,316
19 Nexstar Broadcasting Group, Inc.,
Class A 1,115
118 Scholastic Corp. 4,550
211 Scripps Networks Interactive,
Inc., Class A 11,649
37 Sinclair Broadcast Group, Inc.,
Class A 1,204
1,852 Sirius XM Holdings, Inc. (a) 7,538
111 Starz, Class A (a) 3,719
464 TEGNA, Inc. 11,841
Page 50 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDIA (CONTINUED)
242 Time, Inc. $ 3,792
291 Tribune Media Co., Class A 9,839
--------------
124,384
--------------
METALS & MINING -- 1.2%
2,150 Alcoa, Inc. 21,220
195 Allegheny Technologies, Inc. 2,194
93 Carpenter Technology Corp. 2,815
340 Commercial Metals Co. 4,655
35 Compass Minerals International,
Inc. 2,634
1,406 Hecla Mining Co. 2,657
154 Materion Corp. 4,312
647 Newmont Mining Corp. 11,639
553 Nucor Corp. 22,286
193 Reliance Steel & Aluminum Co. 11,177
259 Southern Copper Corp. 6,765
362 Steel Dynamics, Inc. 6,469
89 Stillwater Mining Co. (a) 763
266 United States Steel Corp. 2,123
35 Worthington Industries, Inc. 1,055
--------------
102,764
--------------
MULTILINE RETAIL -- 1.0%
39 Big Lots, Inc. 1,503
163 Burlington Stores, Inc. (a) 6,993
119 Dillard's, Inc., Class A 7,819
287 Dollar General Corp. 20,627
747 Kohl's Corp. 35,580
270 Macy's, Inc. 9,444
--------------
81,966
--------------
MULTI-UTILITIES -- 1.8%
107 Alliant Energy Corp. 6,682
492 Ameren Corp. 21,269
83 Avista Corp. 2,936
45 Black Hills Corp. 2,089
460 CenterPoint Energy, Inc. 8,445
117 CMS Energy Corp. 4,221
103 Consolidated Edison, Inc. 6,620
172 DTE Energy Co. 13,793
560 NiSource, Inc. 10,926
52 NorthWestern Corp. 2,821
263 PG&E Corp. 13,989
821 Public Service Enterprise Group,
Inc. 31,764
185 SCANA Corp. 11,191
72 Sempra Energy 6,769
198 Vectren Corp. 8,399
--------------
151,914
--------------
OIL, GAS & CONSUMABLE FUELS
-- 5.2%
205 Alon USA Energy, Inc. 3,042
354 Apache Corp. 15,742
439 Chevron Corp. 39,492
114 Columbia Pipeline Group, Inc. 2,280
70 Concho Resources, Inc. (a) 6,500
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS
(CONTINUED)
578 ConocoPhillips $ 26,987
212 CONSOL Energy, Inc. 1,675
51 CVR Energy, Inc. 2,007
133 Delek US Holdings, Inc. 3,272
125 Energen Corp. 5,124
466 Exxon Mobil Corp. 36,325
237 Green Plains, Inc. 5,427
350 Gulfport Energy Corp. (a) 8,600
415 Hess Corp. 20,119
170 HollyFrontier Corp. 6,781
98 Laredo Petroleum, Inc. (a) 783
1,348 Marathon Oil Corp. 16,971
747 Marathon Petroleum Corp. 38,725
429 Murphy Oil Corp. 9,631
918 Noble Energy, Inc. 30,230
532 Oasis Petroleum, Inc. (a) 3,921
133 Par Pacific Holdings, Inc. (a) 3,131
66 PBF Energy, Inc., Class A 2,429
451 Phillips 66 36,892
368 QEP Resources, Inc. 4,931
144 SM Energy Co. 2,831
655 Southwestern Energy Co. (a) 4,657
121 Targa Resources Corp. 3,274
356 Tesoro Corp. 37,512
576 Valero Energy Corp. 40,729
235 Western Refining, Inc. 8,371
544 Whiting Petroleum Corp. (a) 5,135
77 World Fuel Services Corp. 2,961
697 WPX Energy, Inc. (a) 4,001
--------------
440,488
--------------
PAPER & FOREST PRODUCTS -- 0.2%
109 Boise Cascade Co. (a) 2,783
224 KapStone Paper and Packaging
Corp. 5,060
32 Neenah Paper, Inc. 1,998
268 P.H. Glatfelter Co. 4,942
81 Schweitzer-Mauduit International,
Inc. 3,401
--------------
18,184
--------------
PERSONAL PRODUCTS -- 0.2%
34 Coty, Inc., Class A 871
152 Herbalife Ltd. (a) 8,150
67 Nu Skin Enterprises, Inc., Class A 2,539
34 USANA Health Sciences, Inc. (a) 4,344
--------------
15,904
--------------
PHARMACEUTICALS -- 0.6%
105 Horizon Pharma PLC (a) 2,275
59 Impax Laboratories, Inc. (a) 2,523
39 Intersect ENT, Inc. (a) 878
46 Intra-Cellular Therapies, Inc. (a) 2,474
73 Medicines (The) Co. (a) 2,726
561 Merck & Co., Inc. 29,632
See Notes to Financial Statements Page 51
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS (CONTINUED)
29 Phibro Animal Health Corp.,
Class A $ 874
81 Prestige Brands Holdings, Inc. (a) 4,170
232 Sucampo Pharmaceuticals, Inc.,
Class A (a) 4,011
198 Supernus Pharmaceuticals, Inc. (a) 2,661
--------------
52,224
--------------
PROFESSIONAL SERVICES -- 1.0%
282 CBIZ, Inc. (a) 2,781
214 Equifax, Inc. 23,833
41 Exponent, Inc. 2,048
22 FTI Consulting, Inc. (a) 763
122 ICF International, Inc. (a) 4,338
18 IHS, Inc., Class A (a) 2,132
63 Insperity, Inc. 3,033
196 Kelly Services, Inc., Class A 3,165
84 Korn/Ferry International 2,787
76 ManpowerGroup, Inc. 6,406
291 Navigant Consulting, Inc. (a) 4,674
100 On Assignment, Inc. (a) 4,495
61 Resources Connection, Inc. 997
81 Robert Half International, Inc. 3,818
336 RPX Corp. (a) 3,696
165 TrueBlue, Inc. (a) 4,250
94 Verisk Analytics, Inc. (a) 7,227
41 WageWorks, Inc. (a) 1,860
--------------
82,303
--------------
REAL ESTATE INVESTMENT TRUSTS
-- 3.8%
49 Alexandria Real Estate Equities,
Inc. 4,428
258 American Homes 4 Rent, Class A 4,298
53 American Residential Properties,
Inc. 1,002
56 Apartment Investment &
Management Co., Class A 2,242
59 Apollo Commercial Real Estate
Finance, Inc. 1,017
335 Apple Hospitality REIT, Inc. 6,690
757 Ashford Hospitality Trust Inc. 4,777
80 AvalonBay Communities, Inc. 14,730
104 BioMed Realty Trust, Inc. 2,464
150 Brandywine Realty Trust 2,049
28 Camden Property Trust 2,149
280 Capstead Mortgage Corp. 2,447
201 CBL & Associates Properties, Inc. 2,486
346 Chimera Investment Corp. 4,719
179 Columbia Property Trust, Inc. 4,203
36 CoreSite Realty Corp. 2,042
281 Corrections Corp. of America 7,444
305 CubeSmart 9,339
28 CyrusOne, Inc. 1,049
255 CYS Investments, Inc. 1,818
123 DCT Industrial Trust, Inc. 4,597
32 Digital Realty Trust, Inc. 2,420
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS
(CONTINUED)
73 Douglas Emmett, Inc. $ 2,276
28 Education Realty Trust, Inc. 1,061
54 Empire State Realty Trust, Inc.,
Class A 976
161 EPR Properties 9,410
25 Equinix, Inc. 7,560
76 Equity Commonwealth (a) 2,108
142 Equity LifeStyle Properties, Inc. 9,467
62 Essex Property Trust, Inc. 14,843
135 Extra Space Storage, Inc. 11,908
31 Federal Realty Investment Trust 4,529
88 First Industrial Realty Trust, Inc. 1,947
84 First Potomac Realty Trust 958
62 GEO Group (The), Inc. 1,792
85 Healthcare Trust of America, Inc.,
Class A 2,292
325 Hospitality Properties Trust 8,499
2,189 Host Hotels & Resorts, Inc. 33,579
32 Hudson Pacific Properties, Inc. 900
132 Liberty Property Trust 4,099
22 LTC Properties, Inc. 949
98 Mack-Cali Realty Corp. 2,288
543 MFA Financial, Inc. 3,584
102 Mid-America Apartment
Communities, Inc. 9,263
57 National Retail Properties, Inc. 2,283
184 New York REIT, Inc. 2,116
500 Outfront Media, Inc. 10,915
61 Physicians Realty Trust 1,028
52 Piedmont Office Realty Trust, Inc.,
Class A 982
53 Plum Creek Timber Co., Inc. 2,529
71 Post Properties, Inc. 4,200
98 Public Storage 24,275
42 QTS Realty Trust, Inc., Class A 1,895
200 Redwood Trust, Inc. 2,640
67 Regency Centers Corp. 4,564
112 Retail Opportunity Investments
Corp. 2,005
147 Retail Properties of America, Inc.,
Class A 2,171
194 Select Income REIT 3,845
385 Senior Housing Properties Trust 5,713
116 Silver Bay Realty Trust Corp. 1,817
67 Sovran Self Storage, Inc. 7,190
79 Summit Hotel Properties, Inc. 944
61 Sun Communities, Inc. 4,180
63 Tanger Factory Outlet Centers, Inc. 2,060
1,178 Two Harbors Investment Corp. 9,542
105 United Development Funding IV 1,155
36 W.P. Carey, Inc. 2,124
158 WP Glimcher, Inc. 1,676
--------------
324,547
--------------
Page 52 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.1%
29 Jones Lang LaSalle, Inc. $ 4,636
101 Marcus & Millichap, Inc. (a) 2,943
--------------
7,579
--------------
ROAD & RAIL -- 1.3%
26 AMERCO 10,127
179 ArcBest Corp. 3,829
47 Avis Budget Group, Inc. (a) 1,706
772 CSX Corp. 20,033
176 Genesee & Wyoming, Inc.,
Class A (a) 9,449
139 Heartland Express, Inc. 2,366
124 Hertz Global Holdings, Inc. (a) 1,764
32 Landstar System, Inc. 1,877
285 Marten Transport Ltd. 5,044
362 Norfolk Southern Corp. 30,622
102 Old Dominion Freight Line,
Inc. (a) 6,025
200 Roadrunner Transportation
Systems, Inc. (a) 1,886
84 Ryder System, Inc. 4,774
119 Saia, Inc. (a) 2,648
78 Union Pacific Corp. 6,100
147 Werner Enterprises, Inc. 3,438
--------------
111,688
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.0%
70 Advanced Energy Industries,
Inc. (a) 1,976
1,028 Amkor Technology, Inc. (a) 6,250
1,885 Applied Materials, Inc. 35,193
47 Cabot Microelectronics Corp. (a) 2,058
34 Cavium, Inc. (a) 2,234
117 Cirrus Logic, Inc. (a) 3,455
216 Diodes, Inc. (a) 4,964
243 First Solar, Inc. (a) 16,036
192 Inphi Corp. (a) 5,188
137 Integrated Device Technology,
Inc. (a) 3,610
1,149 Intel Corp. 39,583
459 Marvell Technology Group Ltd. 4,048
149 MaxLinear, Inc., Class A (a) 2,195
190 Microsemi Corp. (a) 6,192
110 MKS Instruments, Inc. 3,960
36 Monolithic Power Systems, Inc. 2,293
442 ON Semiconductor Corp. (a) 4,332
509 Photronics, Inc. (a) 6,337
415 SunPower Corp. (a) 12,454
45 Synaptics, Inc. (a) 3,615
231 Teradyne, Inc. 4,775
--------------
170,748
--------------
SOFTWARE -- 3.1%
897 Activision Blizzard, Inc. 34,723
84 Adobe Systems, Inc. (a) 7,891
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SOFTWARE (CONTINUED)
47 ANSYS, Inc. (a) $ 4,347
55 Aspen Technology, Inc. (a) 2,077
66 Blackbaud, Inc. 4,347
760 CA, Inc. 21,706
402 Cadence Design Systems, Inc. (a) 8,366
217 Callidus Software, Inc. (a) 4,030
409 Electronic Arts, Inc. (a) 28,106
55 Ellie Mae, Inc. (a) 3,313
32 Fair Isaac Corp. 3,014
75 Fleetmatics Group PLC (a) 3,809
244 Fortinet, Inc. (a) 7,605
46 Gigamon, Inc. (a) 1,222
151 Globant S.A. (a) 5,664
79 Guidewire Software, Inc. (a) 4,753
42 Imperva, Inc. (a) 2,659
167 Manhattan Associates, Inc. (a) 11,050
253 Mentor Graphics Corp. 4,660
14 MicroStrategy, Inc., Class A (a) 2,510
25 NetSuite, Inc. (a) 2,116
192 Oracle Corp. 7,014
103 Paycom Software, Inc. (a) 3,876
61 Paylocity Holding Corp. (a) 2,474
150 Pegasystems, Inc. 4,125
46 Proofpoint, Inc. (a) 2,990
228 Qlik Technologies, Inc. (a) 7,218
203 RingCentral, Inc., Class A (a) 4,787
88 Rovi Corp. (a) 1,466
127 Rubicon Project (The), Inc. (a) 2,089
200 salesforce.com, Inc. (a) 15,680
89 SS&C Technologies Holdings, Inc. 6,076
355 Symantec Corp. 7,455
45 Synopsys, Inc. (a) 2,052
69 Tyler Technologies, Inc. (a) 12,028
46 Ultimate Software Group (The),
Inc. (a) 8,993
165 Xura, Inc. (a) 4,056
--------------
260,347
--------------
SPECIALTY RETAIL -- 6.5%
128 Aaron's, Inc. 2,866
88 Abercrombie & Fitch Co., Class A 2,376
183 Advance Auto Parts, Inc. 27,543
399 American Eagle Outfitters, Inc. 6,184
57 Asbury Automotive Group, Inc. (a) 3,844
72 AutoNation, Inc. (a) 4,296
48 AutoZone, Inc. (a) 35,612
305 Barnes & Noble, Inc. 2,657
486 Bed Bath & Beyond, Inc. (a) 23,450
373 Best Buy Co., Inc. 11,358
50 Buckle (The), Inc. 1,539
137 Cabela's, Inc. (a) 6,402
60 Caleres, Inc. 1,609
234 CarMax, Inc. (a) 12,629
81 Cato (The) Corp., Class A 2,982
32 Children's Place (The), Inc. 1,766
55 CST Brands, Inc. 2,153
167 Dick's Sporting Goods, Inc. 5,903
See Notes to Financial Statements Page 53
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SPECIALTY RETAIL (CONTINUED)
146 DSW, Inc., Class A $ 3,484
155 Express, Inc. (a) 2,678
239 Finish Line (The), Inc., Class A 4,321
481 Foot Locker, Inc. 31,308
151 Francesca's Holdings Corp. (a) 2,629
252 GameStop Corp., Class A 7,066
971 Gap (The), Inc. 23,984
65 Genesco, Inc. (a) 3,694
52 GNC Holdings, Inc., Class A 1,613
11 Group 1 Automotive, Inc. 833
130 Guess?, Inc. 2,454
79 Hibbett Sports, Inc. (a) 2,389
240 Home Depot (The), Inc. 31,740
154 L Brands, Inc. 14,756
43 Lithia Motors, Inc., Class A 4,587
402 Lowe's Cos., Inc. 30,568
90 Michaels Cos.,(The), Inc. (a) 1,990
54 Monro Muffler Brake, Inc. 3,576
51 Murphy USA, Inc. (a) 3,098
138 O'Reilly Automotive, Inc. (a) 34,972
86 Penske Automotive Group, Inc. 3,641
76 Pep Boys-Manny, Moe & Jack
(The) (a) 1,399
536 Pier 1 Imports, Inc. 2,728
191 Rent-A-Center, Inc. 2,859
89 Restoration Hardware Holdings,
Inc. (a) 7,071
429 Ross Stores, Inc. 23,084
255 Signet Jewelers Ltd. 31,541
136 Sonic Automotive, Inc., Class A 3,095
375 Sportsman's Warehouse Holdings,
Inc. (a) 4,838
154 Tile Shop Holdings, Inc. (a) 2,526
388 TJX (The) Cos., Inc. 27,513
247 Tractor Supply Co. 21,119
212 Ulta Salon, Cosmetics &
Fragrance, Inc. (a) 39,220
283 Urban Outfitters, Inc. (a) 6,438
85 Vitamin Shoppe, Inc. (a) 2,780
81 Williams-Sonoma, Inc. 4,731
--------------
551,492
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 1.7%
233 Cray, Inc. (a) 7,561
286 EMC Corp. 7,344
2,382 HP, Inc. 28,203
64 Lexmark International, Inc.,
Class A 2,077
140 NetApp, Inc. 3,714
451 QLogic Corp. (a) 5,502
510 SanDisk Corp. 38,755
773 Seagate Technology PLC 28,338
67 Super Micro Computer, Inc. (a) 1,642
436 Western Digital Corp. 26,182
--------------
149,318
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.7%
69 Carter's, Inc. $ 6,143
215 Coach, Inc. 7,037
177 Columbia Sportswear Co. 8,631
64 Deckers Outdoor Corp. (a) 3,021
186 Fossil Group, Inc. (a) 6,800
168 G-III Apparel Group Ltd. (a) 7,436
341 Iconix Brand Group, Inc. (a) 2,329
179 Movado Group, Inc. 4,602
564 NIKE, Inc., Class B 35,250
12 Oxford Industries, Inc. 766
68 PVH Corp. 5,008
88 Ralph Lauren Corp. 9,810
192 Sequential Brands Group, Inc. (a) 1,519
233 Skechers U.S.A., Inc., Class A (a) 7,039
25 Steven Madden Ltd. (a) 755
358 Under Armour, Inc., Class A (a) 28,858
124 Unifi, Inc. (a) 3,491
192 Wolverine World Wide, Inc. 3,208
--------------
141,703
--------------
THRIFTS & MORTGAGE FINANCE
-- 0.7%
144 BofI Holding, Inc. (a) 3,031
91 Brookline Bancorp, Inc. 1,047
54 Dime Community Bancshares, Inc. 944
74 Essent Group Ltd. (a) 1,620
95 EverBank Financial Corp. 1,518
45 Flagstar Bancorp, Inc. (a) 1,040
50 LendingTree, Inc. (a) 4,464
135 Meridian Bancorp, Inc. 1,904
1,122 MGIC Investment Corp. (a) 9,907
115 New York Community Bancorp,
Inc. 1,877
122 Northfield Bancorp, Inc. 1,942
118 Oritani Financial Corp. 1,947
47 Provident Financial Services, Inc. 947
653 Radian Group, Inc. 8,744
361 TFS Financial Corp. 6,798
213 United Financial Bancorp, Inc. 2,743
177 Walker & Dunlop, Inc. (a) 5,099
57 Walter Investment Management
Corp. (a) 811
81 Washington Federal, Inc. 1,930
128 WSFS Financial Corp. 4,142
--------------
62,455
--------------
TOBACCO -- 0.4%
255 Altria Group, Inc. 14,844
157 Reynolds American, Inc. 7,246
93 Universal Corp. 5,215
368 Vector Group Ltd. 8,681
--------------
35,986
--------------
TRADING COMPANIES &
DISTRIBUTORS -- 0.6%
67 Air Lease Corp. 2,243
224 Aircastle Ltd. 4,679
Page 54 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TRADING COMPANIES & DISTRIBUTORS
(CONTINUED)
73 Applied Industrial Technologies,
Inc. $ 2,956
84 GATX Corp. 3,574
110 H&E Equipment Services, Inc. 1,923
73 HD Supply Holdings, Inc. (a) 2,192
77 Kaman Corp. 3,142
414 MRC Global, Inc. (a) 5,341
102 MSC Industrial Direct Co., Inc.,
Class A 5,740
191 Rush Enterprises, Inc.,
Class A (a) 4,181
70 Watsco, Inc. 8,199
100 WESCO International, Inc. (a) 4,368
--------------
48,538
--------------
TRANSPORTATION INFRASTRUCTURE
-- 0.0%
227 Wesco Aircraft Holdings, Inc. (a) 2,717
--------------
WATER UTILITIES -- 0.2%
67 American States Water Co. 2,811
75 American Water Works Co., Inc. 4,481
157 Aqua America, Inc. 4,679
83 California Water Service Group 1,931
90 SJW Corp. 2,668
--------------
16,570
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.8%
108 Shenandoah Telecommunications
Co. 4,650
3,606 Sprint Corp. (a) 13,054
333 Telephone & Data Systems, Inc. 8,621
870 T-Mobile US, Inc. (a) 34,034
130 United States Cellular Corp. (a) 5,305
--------------
65,664
--------------
TOTAL COMMON STOCKS -- 99.8% 8,501,789
(Cost $8,806,389)
MONEY MARKET FUNDS -- 0.3%
23,279 Morgan Stanley Institutional
Liquidity Fund - Treasury
Portfolio - Institutional
Class - 0.17% (b) 23,279
(Cost $23,279) --------------
TOTAL INVESTMENTS -- 100.1% 8,525,068
(Cost $8,829,668) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (7,399)
--------------
NET ASSETS -- 100.0% $ 8,517,669
==============
(a) Non-income producing security.
(b) Interest rate shown reflects yield as of December 31, 2015.
(c) Aggregate cost for federal income tax purposes is $8,888,215. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$392,830 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$755,977.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 8,501,789 $ -- $ --
Money Market Funds 23,279 -- --
-----------------------------------------------
Total Investments $ 8,525,068 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
See Notes to Financial Statements Page 55
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 2.6%
43,675 Boeing (The) Co. $ 6,314,968
59,978 Honeywell International, Inc. 6,211,922
52,481 L-3 Communications Holdings,
Inc. 6,272,004
28,561 Lockheed Martin Corp. 6,202,021
65,739 United Technologies Corp. 6,315,546
--------------
31,316,461
--------------
AIR FREIGHT & LOGISTICS -- 1.0%
98,462 C.H. Robinson Worldwide, Inc. 6,106,613
63,514 United Parcel Service, Inc.,
Class B 6,111,952
--------------
12,218,565
--------------
BANKS -- 7.3%
97,432 Bank of Hawaii Corp. 6,128,473
109,131 Bank of Montreal 6,157,171
152,699 Bank of Nova Scotia (The) 6,175,147
165,071 BB&T Corp. 6,241,334
104,092 BOK Financial Corp. 6,223,661
92,971 Canadian Imperial Bank of
Commerce 6,124,000
102,105 Cullen/Frost Bankers, Inc. 6,126,300
51,009 M&T Bank Corp. 6,181,271
69,747 Park National Corp. 6,310,708
384,134 People's United Financial, Inc. 6,203,764
115,370 Royal Bank of Canada 6,181,525
156,866 Toronto-Dominion (The) Bank 6,144,441
144,489 U.S. Bancorp 6,165,346
113,916 Wells Fargo & Co. 6,192,474
--------------
86,555,615
--------------
BEVERAGES -- 2.1%
49,704 Anheuser-Busch InBev N.V., ADR 6,213,000
143,846 Coca-Cola (The) Co. 6,179,624
57,243 Diageo PLC, ADR 6,243,494
62,401 PepsiCo, Inc. 6,235,108
--------------
24,871,226
--------------
BIOTECHNOLOGY -- 1.1%
109,499 AbbVie, Inc. 6,486,721
38,636 Amgen, Inc. 6,271,782
--------------
12,758,503
--------------
CAPITAL MARKETS -- 0.5%
87,425 T. Rowe Price Group, Inc. 6,250,013
--------------
CHEMICALS -- 2.1%
47,357 Air Products and Chemicals, Inc. 6,161,619
96,425 E.I. du Pont de Nemours and Co. 6,421,905
64,486 Monsanto Co. 6,353,161
60,262 Praxair, Inc. 6,170,829
--------------
25,107,514
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.6%
140,338 Republic Services, Inc. 6,173,469
197,364 Tyco International PLC 6,293,938
116,527 Waste Management, Inc. 6,219,046
--------------
18,686,453
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMUNICATIONS EQUIPMENT
-- 2.1%
231,043 Cisco Systems, Inc. $ 6,273,973
72,955 Harris Corp. 6,339,789
90,458 Motorola Solutions, Inc. 6,191,850
126,207 QUALCOMM, Inc. 6,308,457
--------------
25,114,069
--------------
CONTAINERS & PACKAGING -- 1.1%
139,196 Bemis Co., Inc. 6,220,669
153,962 Sonoco Products Co. 6,292,427
--------------
12,513,096
--------------
DISTRIBUTORS -- 0.5%
73,278 Genuine Parts Co. 6,293,847
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.6%
180,516 AT&T, Inc. 6,211,555
223,449 TELUS Corp. 6,178,365
134,072 Verizon Communications, Inc. 6,196,808
--------------
18,586,728
--------------
ELECTRIC UTILITIES -- 10.0%
122,879 ALLETE, Inc. 6,245,940
108,820 American Electric Power Co., Inc. 6,340,941
117,039 Cleco Corp. 6,110,606
88,153 Duke Energy Corp. 6,293,243
104,427 Edison International 6,183,123
164,408 El Paso Electric Co. 6,329,708
221,680 Empire District Electric (The) Co. 6,222,558
122,903 Eversource Energy 6,276,656
216,914 Hawaiian Electric Industries, Inc. 6,279,660
91,196 IDACORP, Inc. 6,201,328
137,669 MGE Energy, Inc. 6,387,842
60,154 NextEra Energy, Inc. 6,249,399
237,050 OGE Energy Corp. 6,232,044
97,742 Pinnacle West Capital Corp. 6,302,404
174,280 Portland General Electric Co. 6,338,564
184,356 PPL Corp. 6,292,070
133,114 Southern (The) Co. 6,228,404
148,968 Westar Energy, Inc. 6,317,733
173,789 Xcel Energy, Inc. 6,240,763
--------------
119,072,986
--------------
ELECTRICAL EQUIPMENT -- 1.6%
121,354 Eaton Corp. PLC 6,315,262
134,130 Emerson Electric Co. 6,415,438
65,259 Hubbell, Inc. 6,593,769
--------------
19,324,469
--------------
ENERGY EQUIPMENT & SERVICES
-- 0.5%
90,564 Schlumberger Ltd. 6,316,839
--------------
FOOD & STAPLES RETAILING -- 1.6%
150,606 Sysco Corp. 6,174,846
103,339 Wal-Mart Stores, Inc. 6,334,681
148,857 Weis Markets, Inc. 6,594,365
--------------
19,103,892
--------------
Page 56 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
FOOD PRODUCTS -- 3.7%
174,280 Archer-Daniels-Midland Co. $ 6,392,590
116,859 Campbell Soup Co. 6,140,940
150,130 ConAgra Foods, Inc. 6,329,481
107,191 General Mills, Inc. 6,180,633
69,003 Hershey (The) Co. 6,159,898
86,612 Kellogg Co. 6,259,449
86,214 Kraft Heinz (The) Co. 6,272,931
--------------
43,735,922
--------------
GAS UTILITIES -- 5.3%
97,834 AGL Resources, Inc. 6,242,788
99,128 Atmos Energy Corp. 6,249,029
106,193 Laclede Group (The), Inc. 6,308,926
198,127 New Jersey Resources Corp. 6,530,266
124,621 Northwest Natural Gas Co. 6,307,069
107,847 Piedmont Natural Gas Co., Inc. 6,149,436
323,034 Questar Corp. 6,292,702
262,648 South Jersey Industries, Inc. 6,177,481
189,115 UGI Corp. 6,384,522
98,101 WGL Holdings, Inc. 6,179,382
--------------
62,821,601
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 0.5%
139,732 Abbott Laboratories 6,275,364
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 0.5%
172,039 Owens & Minor, Inc. 6,189,963
--------------
HOTELS, RESTAURANTS & LEISURE
-- 1.1%
48,487 Cracker Barrel Old Country Store,
Inc. 6,149,606
52,290 McDonald's Corp. 6,177,541
--------------
12,327,147
--------------
HOUSEHOLD DURABLES -- 1.1%
173,104 Garmin Ltd. 6,434,276
145,343 Leggett & Platt, Inc. 6,107,313
--------------
12,541,589
--------------
HOUSEHOLD PRODUCTS -- 2.1%
48,207 Clorox (The) Co. 6,114,094
93,269 Colgate-Palmolive Co. 6,213,581
49,261 Kimberly-Clark Corp. 6,270,925
77,945 Procter & Gamble (The) Co. 6,189,612
--------------
24,788,212
--------------
INDUSTRIAL CONGLOMERATES -- 0.5%
41,727 3M Co. 6,285,755
--------------
INSURANCE -- 6.8%
53,401 ACE Ltd. 6,239,907
152,661 Arthur J. Gallagher & Co. 6,249,941
76,961 Assurant, Inc. 6,198,439
109,654 Axis Capital Holdings Ltd. 6,164,748
105,500 Cincinnati Financial Corp. 6,242,435
97,556 Endurance Specialty Holdings Ltd. 6,242,608
64,452 Erie Indemnity Co., Class A 6,164,189
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INSURANCE (CONTINUED)
33,733 Everest Re Group, Ltd. $ 6,176,175
77,494 Hanover Insurance Group (The),
Inc. 6,303,362
112,748 Marsh & McLennan Cos., Inc. 6,251,877
133,201 Mercury General Corp. 6,203,171
197,746 Progressive (The) Corp. 6,288,323
132,853 Willis Towers Watson PLC 6,452,670
--------------
81,177,845
--------------
IT SERVICES -- 2.1%
73,137 Automatic Data Processing, Inc. 6,196,167
371,607 Infosys Ltd., ADR 6,224,417
45,416 International Business Machines
Corp. 6,250,150
116,992 Paychex, Inc. 6,187,707
--------------
24,858,441
--------------
LEISURE PRODUCTS -- 0.5%
233,275 Mattel, Inc. 6,338,082
--------------
MACHINERY -- 3.2%
94,327 Caterpillar, Inc. 6,410,463
81,283 Deere & Co. 6,199,455
218,997 Donaldson Co., Inc. 6,276,454
104,001 Dover Corp. 6,376,301
67,005 Illinois Tool Works, Inc. 6,210,023
65,343 Parker-Hannifin Corp. 6,336,964
--------------
37,809,660
--------------
MEDIA -- 2.1%
82,724 Omnicom Group, Inc. 6,258,898
361,991 Shaw Communications, Inc.,
Class B 6,222,625
164,672 Thomson Reuters Corp. 6,232,835
54,335 WPP PLC, ADR 6,234,398
--------------
24,948,756
--------------
MULTILINE RETAIL -- 1.1%
134,627 Kohl's Corp. 6,412,284
85,815 Target Corp. 6,231,027
--------------
12,643,311
--------------
MULTI-UTILITIES -- 7.9%
99,368 Alliant Energy Corp. 6,205,532
143,579 Ameren Corp. 6,206,920
176,025 Avista Corp. 6,226,004
139,988 Black Hills Corp. 6,499,643
172,910 CMS Energy Corp. 6,238,593
97,047 Consolidated Edison, Inc. 6,237,211
92,455 Dominion Resources, Inc. 6,253,656
78,234 DTE Energy Co. 6,273,584
356,536 MDU Resources Group, Inc. 6,531,740
163,102 Public Service Enterprise Group,
Inc. 6,310,416
102,190 SCANA Corp. 6,181,473
65,349 Sempra Energy 6,143,459
233,187 TECO Energy, Inc. 6,214,434
146,905 Vectren Corp. 6,231,710
122,125 WEC Energy Group, Inc. 6,266,234
--------------
94,020,609
--------------
See Notes to Financial Statements Page 57
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
OIL, GAS & CONSUMABLE FUELS
-- 4.3%
68,957 Chevron Corp. $ 6,203,372
136,448 ConocoPhillips 6,370,757
197,364 Enbridge, Inc. 6,550,511
79,650 Exxon Mobil Corp. 6,208,718
93,041 Occidental Petroleum Corp. 6,290,502
140,851 Royal Dutch Shell PLC, Class B,
ADR 6,484,780
138,195 TOTAL S.A., ADR 6,211,865
192,007 TransCanada Corp. 6,257,508
--------------
50,578,013
--------------
PERSONAL PRODUCTS -- 0.5%
145,755 Unilever PLC, ADR 6,284,956
--------------
PHARMACEUTICALS -- 4.7%
186,821 AstraZeneca PLC, ADR 6,342,573
90,445 Bristol-Myers Squibb Co. 6,221,711
71,524 Eli Lilly and Co. 6,026,612
154,540 GlaxoSmithKline PLC, ADR 6,235,689
60,582 Johnson & Johnson 6,222,983
118,639 Merck & Co., Inc. 6,266,512
72,672 Novartis AG, ADR 6,252,699
189,581 Pfizer, Inc. 6,119,675
144,761 Sanofi, ADR 6,174,057
--------------
55,862,511
--------------
PROFESSIONAL SERVICES -- 0.5%
133,258 Nielsen Holdings PLC 6,209,823
--------------
REAL ESTATE INVESTMENT TRUSTS
-- 2.6%
34,197 AvalonBay Communities, Inc. 6,296,693
41,620 Federal Realty Investment Trust 6,080,682
24,554 Public Storage 6,082,026
120,474 Realty Income Corp. 6,220,073
32,077 Simon Property Group, Inc. 6,237,052
--------------
30,916,526
--------------
ROAD & RAIL -- 1.1%
73,192 Norfolk Southern Corp. 6,191,311
81,519 Union Pacific Corp. 6,374,786
--------------
12,566,097
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.1%
110,225 Analog Devices, Inc. 6,097,647
179,724 Intel Corp. 6,191,492
143,080 Linear Technology Corp. 6,076,608
131,352 Microchip Technology, Inc. 6,113,122
268,139 Taiwan Semiconductor
Manufacturing Co., Ltd., ADR 6,100,162
110,245 Texas Instruments, Inc. 6,042,528
--------------
36,621,559
--------------
SOFTWARE -- 1.1%
219,036 CA, Inc. 6,255,668
112,236 Microsoft Corp. 6,226,853
--------------
12,482,521
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 0.5%
201,499 Canon, Inc., ADR $ 6,071,165
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.5%
98,698 VF Corp. 6,143,951
--------------
THRIFTS & MORTGAGE FINANCE
-- 0.5%
493,094 Capitol Federal Financial, Inc. 6,193,261
--------------
TOBACCO -- 2.1%
107,136 Altria Group, Inc. 6,236,386
56,417 British American Tobacco PLC,
ADR 6,231,258
71,043 Philip Morris International, Inc. 6,245,390
135,904 Reynolds American, Inc. 6,271,970
--------------
24,985,004
--------------
TRADING COMPANIES &
DISTRIBUTORS -- 2.1%
158,440 Fastenal Co. 6,467,521
110,819 MSC Industrial Direct Co., Inc.,
Class A 6,235,785
31,336 W.W. Grainger, Inc. 6,348,360
52,710 Watsco, Inc. 6,173,923
--------------
25,225,589
--------------
WATER UTILITIES -- 0.5%
210,749 Aqua America, Inc. 6,280,320
--------------
TOTAL INVESTMENTS -- 99.9% 1,187,273,829
(Cost $1,136,771,835) (a)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 757,237
--------------
NET ASSETS -- 100.0% $1,188,031,066
==============
(a) Aggregate cost for federal income tax purposes is $1,171,753,842. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$79,890,021 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$64,370,034.
ADR - American Depositary Receipt
Page 58 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $1,187,273,829 $ -- $ --
================================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
See Notes to Financial Statements Page 59
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.1%
AEROSPACE & DEFENSE -- 1.0%
2,836 Northrop Grumman Corp. $ 535,465
--------------
AIRLINES -- 1.9%
14,302 Hawaiian Holdings, Inc. (a) 505,289
22,995 JetBlue Airways Corp. (a) 520,837
--------------
1,026,126
--------------
AUTO COMPONENTS -- 1.0%
4,304 Autoliv, Inc. 537,010
--------------
BANKS -- 1.1%
45,427 Investors Bancorp, Inc. 565,112
--------------
BEVERAGES -- 4.4%
2,471 Coca-Cola Bottling Co.
Consolidated 450,982
3,542 Constellation Brands, Inc.,
Class A 504,523
5,734 Dr Pepper Snapple Group, Inc. 534,409
18,167 National Beverage Corp. (a) 825,508
--------------
2,315,422
--------------
BIOTECHNOLOGY -- 1.0%
974 Regeneron Pharmaceuticals,
Inc. (a) 528,755
--------------
BUILDING PRODUCTS -- 5.1%
6,985 A.O. Smith Corp. 535,121
8,277 Allegion PLC 545,620
6,617 American Woodmark Corp. (a) 529,227
9,904 Fortune Brands Home & Security,
Inc. 549,672
4,192 Lennox International, Inc. 523,581
--------------
2,683,221
--------------
CHEMICALS -- 2.2%
9,879 Balchem Corp. 600,643
20,106 Chemtura Corp. (a) 548,291
--------------
1,148,934
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.1%
5,909 Cintas Corp. 538,014
16,872 Healthcare Services Group, Inc. 588,327
--------------
1,126,341
--------------
COMMUNICATIONS EQUIPMENT
-- 1.0%
2,944 Palo Alto Networks, Inc. (a) 518,556
--------------
CONSTRUCTION & ENGINEERING
-- 1.8%
5,849 Dycom Industries, Inc. (a) 409,196
11,417 EMCOR Group, Inc. 548,473
--------------
957,669
--------------
DISTRIBUTORS -- 1.2%
7,879 Pool Corp. 636,466
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 2.2%
2,450 Intercontinental Exchange, Inc. 627,837
8,824 Nasdaq, Inc. 513,292
--------------
1,141,129
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.2%
2,666 Acuity Brands, Inc. $ 623,311
--------------
FOOD & STAPLES RETAILING -- 1.0%
4,346 Casey's General Stores, Inc. 523,476
--------------
FOOD PRODUCTS -- 3.3%
10,894 Cal-Maine Foods, Inc. 504,828
8,783 Hormel Foods Corp. 694,560
4,801 Lancaster Colony Corp. 554,323
--------------
1,753,711
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 5.5%
9,776 Cantel Medical Corp. 607,481
7,599 Edwards Lifesciences Corp. (a) 600,169
4,902 ICU Medical, Inc. (a) 552,847
12,878 Natus Medical, Inc. (a) 618,788
6,773 STERIS PLC 510,278
--------------
2,889,563
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.0%
17,656 AMN Healthcare Services, Inc. (a) 548,219
3,582 Chemed Corp. 536,583
3,235 Henry Schein, Inc. (a) 511,745
--------------
1,596,547
--------------
HEALTH CARE TECHNOLOGY -- 1.0%
3,416 athenahealth, Inc. (a) 549,874
--------------
HOTELS, RESTAURANTS & LEISURE
-- 3.1%
8,630 Norwegian Cruise Line Holdings
Ltd. (a) 505,718
5,300 Royal Caribbean Cruises Ltd. 536,413
10,184 Starbucks Corp. 611,346
--------------
1,653,477
--------------
HOUSEHOLD DURABLES -- 3.0%
5,415 Helen of Troy Ltd. (a) 510,364
329 NVR, Inc. (a) 540,547
7,569 Tempur Sealy International,
Inc. (a) 533,312
--------------
1,584,223
--------------
HOUSEHOLD PRODUCTS -- 1.0%
4,200 Clorox (The) Co. 532,686
--------------
INDUSTRIAL CONGLOMERATES -- 1.0%
5,971 Danaher Corp. 554,586
--------------
INSURANCE -- 4.1%
9,190 Cincinnati Financial Corp. 543,772
6,751 Hanover Insurance Group (The),
Inc. 549,127
611 Markel Corp. (a) 539,727
9,613 Torchmark Corp. 549,479
--------------
2,182,105
--------------
INTERNET & CATALOG RETAIL -- 3.0%
846 Amazon.com, Inc. (a) 571,803
11,007 Ctrip.com International Ltd.,
ADR (a) 509,954
398 Priceline Group (The), Inc. (a) 507,430
--------------
1,589,187
--------------
Page 60 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INTERNET SOFTWARE & SERVICES
-- 5.0%
666 Alphabet, Inc., Class C (a) $ 505,414
4,704 Facebook, Inc., Class A (a) 492,321
6,800 j2 Global, Inc. 559,776
2,359 LinkedIn Corp., Class A (a) 530,964
6,404 VeriSign, Inc. (a) 559,453
--------------
2,647,928
--------------
IT SERVICES -- 9.0%
5,205 Accenture PLC, Class A 543,922
6,371 Automatic Data Processing, Inc. 539,751
9,552 Cognizant Technology Solutions
Corp., Class A (a) 573,311
15,474 CSG Systems International, Inc. 556,755
6,573 Fiserv, Inc. (a) 601,167
6,924 Global Payments, Inc. 446,667
6,381 Jack Henry & Associates, Inc. 498,101
10,443 Total System Services, Inc. 520,061
6,592 Visa, Inc., Class A 511,210
--------------
4,790,945
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.9%
9,945 Cambrex Corp. (a) 468,310
--------------
MACHINERY -- 2.1%
3,515 Snap-on, Inc. 602,576
7,168 Toro (The) Co. 523,766
--------------
1,126,342
--------------
MARINE -- 1.0%
12,527 Matson, Inc. 534,026
--------------
MEDIA -- 0.9%
21,548 Interpublic Group of Cos. (The),
Inc. 501,637
--------------
PROFESSIONAL SERVICES -- 3.0%
5,258 Equifax, Inc. 585,583
10,667 On Assignment, Inc. (a) 479,482
7,056 Verisk Analytics, Inc. (a) 542,465
--------------
1,607,530
--------------
REAL ESTATE INVESTMENT TRUSTS
-- 3.1%
2,244 Essex Property Trust, Inc. 537,236
3,625 Federal Realty Investment Trust 529,612
2,235 Public Storage 553,610
--------------
1,620,458
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.0%
19,912 Integrated Device Technology,
Inc. (a) 524,681
16,295 NVIDIA Corp. 537,083
--------------
1,061,764
--------------
SOFTWARE -- 6.9%
5,850 Adobe Systems, Inc. (a) 549,549
7,801 Electronic Arts, Inc. (a) 536,085
5,461 Fair Isaac Corp. 514,317
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SOFTWARE (CONTINUED)
7,031 Manhattan Associates, Inc. (a) $ 465,241
6,080 Red Hat, Inc. (a) 503,485
6,935 salesforce.com, Inc. (a) 543,704
6,160 ServiceNow, Inc. (a) 533,209
--------------
3,645,590
--------------
SPECIALTY RETAIL -- 6.3%
830 AutoZone, Inc. (a) 615,785
4,425 Home Depot (The), Inc. 585,206
7,585 Monro Muffler Brake, Inc. 502,279
2,113 O'Reilly Automotive, Inc. (a) 535,477
3,577 Signet Jewelers Ltd. 442,439
3,488 Ulta Salon, Cosmetics &
Fragrance, Inc. (a) 645,280
--------------
3,326,466
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 1.0%
11,204 Electronics For Imaging, Inc. (a) 523,675
--------------
TEXTILES, APPAREL & LUXURY
GOODS -- 1.7%
7,457 NIKE, Inc., Class B 466,063
5,479 Under Armour, Inc., Class A (a) 441,662
--------------
907,725
--------------
TOBACCO -- 1.0%
12,058 Reynolds American, Inc. 556,477
--------------
TOTAL INVESTMENTS -- 100.1% 53,071,825
(Cost $52,052,570) (b)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (58,865)
--------------
NET ASSETS -- 100.0% $ 53,012,960
==============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $52,109,220. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$1,859,025 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$896,420.
ADR - American Depositary Receipt
See Notes to Financial Statements Page 61
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 53,071,825 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
Page 62 See Notes to Financial Statements
This page intentionally left blank.
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2015
FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR FIRST TRUST
MICROCAP DIVIDEND LEADERS US IPO
INDEX FUND INDEX FUND INDEX FUND
(FDM) (FDL) (FPX)
---------------- ------------------ ----------------
ASSETS:
Investments, at value............................................... $ 49,469,090 $ 872,640,727 $ 832,786,183
Cash................................................................ -- -- 194,779
Receivables:
Capital shares sold........................................... -- 4,737,543 --
Investment securities sold.................................... 70,510 1,392,662 --
Dividends..................................................... 154,733 2,180,886 442,379
Interest...................................................... -- -- --
Securities lending income..................................... -- -- 39,961
From investment advisor....................................... -- -- --
Reclaims...................................................... -- -- 4,262
Due from authorized participants.............................. -- -- 189
Prepaid expenses.................................................... 19,375 7,763 7,475
-------------- -------------- --------------
TOTAL ASSETS.................................................. 49,713,708 880,959,581 833,475,228
-------------- -------------- --------------
LIABILITIES:
Due to custodian.................................................... 3,894 238,961 --
Payables:
Capital shares redeemed....................................... -- -- --
Investment securities purchased............................... 93,703 4,731,894 --
Audit and tax fees............................................ 24,925 24,925 24,925
Investment advisory fees...................................... 15,769 195,931 254,690
Printing fees................................................. 4,095 39,892 35,878
Due to authorized participants................................ 718 -- --
Trustees' fees................................................ 3 61 173
Collateral for securities on loan............................. -- -- 43,008,943
Licensing fees................................................ -- 189,015 188,493
Other liabilities................................................... 19,219 245,307 269,277
-------------- -------------- --------------
TOTAL LIABILITIES............................................. 162,326 5,665,986 43,782,379
-------------- -------------- --------------
NET ASSETS.......................................................... $ 49,551,382 $ 875,293,595 $ 789,692,849
============== ============== ==============
NET ASSETS CONSIST OF:
Paid-in capital..................................................... $ 71,432,740 $ 896,321,372 $ 770,752,136
Par value........................................................... 15,050 369,500 154,500
Accumulated net investment income (loss)............................ -- (62,027) --
Accumulated net realized gain (loss) on investments and
foreign currency transactions.................................... (22,815,574) (60,463,660) (45,599,856)
Net unrealized appreciation (depreciation) on investments and
foreign currency translations.................................... 919,166 39,128,410 64,386,069
-------------- -------------- --------------
NET ASSETS.......................................................... $ 49,551,382 $ 875,293,595 $ 789,692,849
============== ============== ==============
NET ASSET VALUE, per share.......................................... $ 32.92 $ 23.69 $ 51.11
============== ============== ==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)....................................... 1,505,000 36,950,002 15,450,002
-------------- -------------- --------------
Investments, at cost................................................ $ 48,549,924 $ 833,512,317 $ 768,400,114
============== ============== ==============
Securities on loan, at value........................................ $ -- $ -- $ 41,811,660
============== ============== ==============
Page 64 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NYSE ARCA DOW JONES CAPITAL TOTAL US MARKET VALUE LINE(R) VALUE LINE(R) 100
BIOTECHNOLOGY INTERNET STRENGTH ALPHADEX(R) DIVIDEND EXCHANGE-TRADED
INDEX FUND INDEX FUND ETF ETF INDEX FUND FUND
(FBT) (FDN) (FTCS) (TUSA) (FVD) (FVL)
--------------- --------------- --------------- -------------------- --------------- -----------------
$ 3,749,756,487 $ 5,110,183,203 $ 165,833,508 $ 8,525,068 $ 1,187,273,829 $ 53,071,825
2,287,072 -- -- 7,645 -- 13,828
-- 71,569,222 1,935,706 -- 3,579,063 --
5,733,390 1,478,767 -- 8,413 -- --
-- 188,105 247,468 10,874 2,472,848 45,854
-- 140 -- 3 -- --
266,963 117,776 -- -- -- --
-- -- -- 1,845 -- --
125,332 -- -- -- 107,624 --
319 3,703 -- -- -- 382
29,522 33,238 1,243 7,571 10,959 523
--------------- --------------- --------------- ---------------- --------------- ---------------
3,758,199,085 5,183,574,154 168,017,925 8,561,419 1,193,444,323 53,132,412
--------------- --------------- --------------- ---------------- --------------- ---------------
-- -- 116,198 -- 519,634 --
5,733,639 -- -- -- -- --
-- 71,537,922 1,936,107 -- 3,579,029 7,788
24,925 24,925 24,925 24,925 24,925 24,925
1,138,864 1,645,236 68,662 -- 442,405 16,021
118,428 100,220 6,183 1,438 46,426 4,007
-- -- -- 7,558 -- --
900 -- -- -- 75 14
312,619,025 193,154,254 -- -- -- --
645,997 1,181,038 3,775 225 447,956 21,758
892,892 1,109,164 47,412 9,604 352,807 44,939
--------------- --------------- --------------- ---------------- --------------- ---------------
321,174,670 268,752,759 2,203,262 43,750 5,413,257 119,452
--------------- --------------- --------------- ---------------- --------------- ---------------
$ 3,437,024,415 $ 4,914,821,395 $ 165,814,663 $ 8,517,669 $ 1,188,031,066 $ 53,012,960
=============== =============== =============== ================ =============== ===============
$ 3,340,317,009 $ 4,558,397,340 $ 187,215,905 $ 12,513,419 $ 1,208,828,137 $ 135,991,179
304,000 658,500 43,500 3,500 497,880 26,900
-- -- -- (392) -- --
(170,828,705) (113,159,141) (24,883,068) (3,694,258) (71,796,945) (84,024,374)
267,232,111 468,924,696 3,438,326 (304,600) 50,501,994 1,019,255
--------------- --------------- --------------- ---------------- --------------- ---------------
$ 3,437,024,415 $ 4,914,821,395 $ 165,814,663 $ 8,517,669 $ 1,188,031,066 $ 53,012,960
=============== =============== =============== ================ =============== ===============
$ 113.06 $ 74.64 $ 38.12 $ 24.34 $ 23.86 $ 19.71
=============== =============== =============== ================ =============== ===============
30,400,002 65,850,002 4,350,002 350,002 49,787,986 2,689,982
--------------- --------------- --------------- ---------------- --------------- ---------------
$ 3,482,524,376 $ 4,641,258,507 $ 162,395,182 $ 8,829,668 $ 1,136,771,835 $ 52,052,570
=============== =============== =============== ================ =============== ===============
$ 302,586,474 $ 186,639,392 $ -- $ -- $ -- $ --
=============== =============== =============== ================ =============== ===============
See Notes to Financial Statements Page 65
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2015
FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR FIRST TRUST
MICROCAP DIVIDEND LEADERS US IPO
INDEX FUND INDEX FUND INDEX FUND
(FDM) (FDL) (FPX)
---------------- ------------------ ----------------
INVESTMENT INCOME:
Dividends........................................................... $ 1,074,305 $ 35,935,066 $ 8,432,519
Foreign tax withholding............................................. (499) -- (38,117)
Securities lending income (net of fees)............................. -- -- 345,596
Interest............................................................ -- -- --
-------------- -------------- --------------
Total investment income....................................... 1,073,806 35,935,066 8,739,998
-------------- -------------- --------------
EXPENSES:
Investment advisory fees............................................ 262,243 2,670,733 2,883,306
Accounting and administration fees.................................. 32,875 448,567 364,178
Licensing fees...................................................... 31,222 806,641 720,826
Audit and tax fees.................................................. 25,179 25,179 25,179
Listing fees........................................................ 7,381 9,881 8,413
Custodian fees...................................................... 6,868 115,773 108,270
Printing fees....................................................... 6,086 78,977 71,359
Trustees' fees and expenses......................................... 4,602 13,921 12,776
Transfer agent fees................................................. 2,622 44,447 36,041
Legal fees.......................................................... 2,589 43,151 36,801
Registration and filing fees........................................ 285 (7,734) 19,472
Expenses previously waived or reimbursed............................ -- -- 22,244
Other expenses...................................................... 1,931 17,529 16,094
-------------- -------------- --------------
Total expenses................................................ 383,883 4,267,065 4,324,959
Less fees waived and expenses reimbursed by the investment
advisor.................................................... (69,191) (260,965) --
-------------- -------------- --------------
Net expenses.................................................. 314,692 4,006,100 4,324,959
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)........................................ 759,114 31,928,966 4,415,039
-------------- -------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................... (4,848,400) (17,949,760) (31,381,854)
In-kind redemptions........................................... 8,542,741 29,698,877 27,797,754
Foreign currency transactions................................. -- -- (53)
-------------- -------------- --------------
Net realized gain (loss)............................................ 3,694,341 11,749,117 (3,584,153)
-------------- -------------- --------------
Net increase from payment by the advisor............................ -- -- --
-------------- -------------- --------------
Net change in unrealized appreciation (depreciation) on:
Investments................................................... (4,419,000) (26,130,013) (7,795,870)
Foreign currency transactions................................. -- -- 54
-------------- -------------- --------------
Net change in unrealized appreciation (depreciation)................ (4,419,000) (26,130,013) (7,795,816)
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................. (724,659) (14,380,896) (11,379,969)
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................................. $ 34,455 $ 17,548,070 $ (6,964,930)
============== ============== ==============
Page 66 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NYSE ARCA DOW JONES CAPITAL TOTAL US MARKET VALUE LINE(R) VALUE LINE(R) 100
BIOTECHNOLOGY INTERNET STRENGTH ALPHADEX(R) DIVIDEND EXCHANGE-TRADED
INDEX FUND INDEX FUND ETF ETF INDEX FUND FUND
(FBT) (FDN) (FTCS) (TUSA) (FVD) (FVL)
--------------- --------------- --------------- -------------------- --------------- -----------------
$ 14,476,639 $ 6,209,288 $ 2,624,324 $ 107,796 $ 36,781,495 $ 604,768
(350,470) -- -- (292) (603,492) (4,654)
6,390,081 1,797,411 -- -- -- --
-- 2,216 -- 7 -- --
--------------- --------------- --------------- ---------------- --------------- ---------------
20,516,250 8,008,915 2,624,324 107,511 36,178,003 600,114
--------------- --------------- --------------- ---------------- --------------- ---------------
12,922,500 12,774,391 585,023 32,325 5,841,451 294,094
1,319,595 1,304,134 60,940 7,914 573,379 33,028
2,584,501 1,985,248 19,200 15,805 1,774,847 93,307
25,179 25,179 25,179 28,679 25,179 25,179
7,381 9,881 2,074 22,000 25,913 22,000
360,082 387,206 14,626 808 149,160 7,711
248,437 193,587 11,672 11,840 93,376 7,021
42,716 39,557 5,315 4,073 17,282 4,692
105,765 104,839 5,850 323 54,172 2,941
164,809 151,379 5,270 572 57,172 2,909
96,903 168,372 5,017 393 5,896 (992)
-- -- 17,437 -- -- --
49,449 59,523 2,928 2,397 24,259 3,314
--------------- --------------- --------------- ---------------- --------------- ---------------
17,927,317 17,203,296 760,531 127,129 8,642,086 495,204
-- -- -- (81,875) (464,054) (83,472)
--------------- --------------- --------------- ---------------- --------------- ---------------
17,927,317 17,203,296 760,531 45,254 8,178,032 411,732
--------------- --------------- --------------- ---------------- --------------- ---------------
2,588,933 (9,194,381) 1,863,793 62,257 27,999,971 188,382
--------------- --------------- --------------- ---------------- --------------- ---------------
(145,312,031) (68,291,374) (563,097) (29,326) (26,099,735) (1,988,232)
471,929,842 257,342,033 8,255,750 98,494 96,282,113 1,523,992
-- -- -- -- 488 --
--------------- --------------- --------------- ---------------- --------------- ---------------
326,617,811 189,050,659 7,692,653 69,168 70,182,866 (464,240)
--------------- --------------- --------------- ---------------- --------------- ---------------
-- -- -- -- -- 95,996
--------------- --------------- --------------- ---------------- --------------- ---------------
(147,075,543) 375,900,470 (7,484,967) (496,144) (85,527,963) (1,386,028)
-- -- -- -- -- --
--------------- --------------- --------------- ---------------- --------------- ---------------
(147,075,543) 375,900,470 (7,484,967) (496,144) (85,527,963) (1,386,028)
--------------- --------------- --------------- ---------------- --------------- ---------------
179,542,268 564,951,129 207,686 (426,976) (15,345,097) (1,754,272)
--------------- --------------- --------------- ---------------- --------------- ---------------
$ 182,131,201 $ 555,756,748 $ 2,071,479 $ (364,719) $ 12,654,874 $ (1,565,890)
=============== =============== =============== ================ =============== ===============
See Notes to Financial Statements Page 67
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)
----------------------------- -----------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
12/31/2015 12/31/2014 12/31/2015 12/31/2014
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss)........................... $ 759,114 $ 488,136 $ 31,928,966 $ 27,280,010
Net realized gain (loss)............................... 3,694,341 9,774,685 11,749,117 55,102,030
Net increase from payment by the advisor............... -- -- -- --
Net change in unrealized appreciation (depreciation)... (4,419,000) (10,331,091) (26,130,013) 6,605,707
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations..................................... 34,455 (68,270) 17,548,070 88,987,747
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (743,446) (512,148) (32,145,837) (27,604,717)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................. 31,352,476 -- 141,457,821 494,651,004
Cost of shares redeemed................................ (32,739,987) (38,851,754) (236,717,928) (258,319,285)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................... (1,387,511) (38,851,754) (95,260,107) 236,331,719
------------- ------------- ------------- -------------
Total increase (decrease) in net assets................ (2,096,502) (39,432,172) (109,857,874) 297,714,749
NET ASSETS:
Beginning of period.................................... 51,647,884 91,080,056 985,151,469 687,436,720
------------- ------------- ------------- -------------
End of period.......................................... $ 49,551,382 $ 51,647,884 $ 875,293,595 $ 985,151,469
============= ============= ============= =============
Accumulated net investment income (loss)
at end of period.................................... $ -- $ 2,224 $ (62,027) $ --
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................ 1,555,000 2,805,000 41,150,002 31,350,002
Shares sold............................................ 950,000 -- 6,000,000 20,700,000
Shares redeemed........................................ (1,000,000) (1,250,000) (10,200,000) (10,900,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period...................... 1,505,000 1,555,000 36,950,002 41,150,002
============= ============= ============= =============
Page 68 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
FIRST TRUST NYSE ARCA DOW JONES
US IPO BIOTECHNOLOGY INTERNET
INDEX FUND INDEX FUND INDEX FUND
(FPX) (FBT) (FDN)
----------------------------- ------------------------------- -------------------------------
For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
12/31/2015 12/31/2014 12/31/2015 12/31/2014 12/31/2015 12/31/2014
------------- ------------- -------------- -------------- -------------- --------------
$ 4,415,039 $ 4,297,904 $ 2,588,933 $ 898,341 $ (9,194,381) $ (2,429,166)
(3,584,153) 22,007,386 326,617,811 307,600,748 189,050,659 341,700,768
-- -- -- -- -- --
(7,795,816) 22,326,941 (147,075,543) 218,034,539 375,900,470 (345,960,771)
------------- ------------- -------------- -------------- -------------- --------------
(6,964,930) 48,632,231 182,131,201 526,533,628 555,756,748 (6,689,169)
------------- ------------- -------------- -------------- -------------- --------------
(4,530,346) (4,268,031) (3,747,095) (1,076,820) -- --
------------- ------------- -------------- -------------- -------------- --------------
372,941,483 267,156,832 2,367,869,339 1,228,321,602 3,428,956,816 1,280,119,495
(107,696,610) (126,953,339) (1,235,810,318) (581,107,220) (1,046,685,047) (1,226,489,727)
------------- ------------- -------------- -------------- -------------- --------------
265,244,873 140,203,493 1,132,059,021 647,214,382 2,382,271,769 53,629,768
------------- ------------- -------------- -------------- -------------- --------------
253,749,597 184,567,693 1,310,443,127 1,172,671,190 2,938,028,517 46,940,599
535,943,252 351,375,559 2,126,581,288 953,910,098 1,976,792,878 1,929,852,279
------------- ------------- -------------- -------------- -------------- --------------
$ 789,692,849 $ 535,943,252 $3,437,024,415 $2,126,581,288 $4,914,821,395 $1,976,792,878
============= ============= ============== ============== ============== ==============
$ -- $ 32,444 $ -- $ -- $ -- $ --
============= ============= ============== ============== ============== ==============
10,650,002 7,750,002 20,850,002 13,800,002 32,250,002 32,250,002
6,900,000 5,650,000 20,350,000 14,150,000 49,100,000 21,250,000
(2,100,000) (2,750,000) (10,800,000) (7,100,000) (15,500,000) (21,250,000)
------------- ------------- -------------- -------------- -------------- --------------
15,450,002 10,650,002 30,400,002 20,850,002 65,850,002 32,250,002
============= ============= ============== ============== ============== ==============
See Notes to Financial Statements Page 69
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
FIRST TRUST TOTAL US MARKET
CAPITAL STRENGTH ALPHADEX(R)
ETF ETF
(FTCS) (TUSA)
----------------------------- -----------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
12/31/2015 12/31/2014 12/31/2015 12/31/2014
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss)........................... $ 1,863,793 $ 1,577,772 $ 62,257 $ 54,733
Net realized gain (loss)............................... 7,692,653 5,391,406 69,168 672,438
Net increase from payment by the advisor............... -- -- -- --
Net change in unrealized appreciation (depreciation)... (7,484,967) 4,781,081 (496,144) (596,858)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations..................................... 2,071,479 11,750,259 (364,719) 130,313
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (1,868,316) (1,680,216) (65,921) (55,881)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................. 146,883,652 53,160,607 4,949,444 1,262,594
Cost of shares redeemed................................ (66,958,092) (43,250,832) (1,226,230) (1,271,557)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................... 79,925,560 9,909,775 3,723,214 (8,963)
------------- ------------- ------------- -------------
Total increase (decrease) in net assets................ 80,128,723 19,979,818 3,292,574 65,469
NET ASSETS:
Beginning of period.................................... 85,685,940 65,706,122 5,225,095 5,159,626
------------- ------------- ------------- -------------
End of period.......................................... $ 165,814,663 $ 85,685,940 $ 8,517,669 $ 5,225,095
============= ============= ============= =============
Accumulated net investment income (loss)
at end of period.................................... $ -- $ -- $ (392) $ --
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................ 2,250,002 1,950,002 200,002 200,002
Shares sold............................................ 3,850,000 1,550,000 200,000 50,000
Shares redeemed........................................ (1,750,000) (1,250,000) (50,000) (50,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period...................... 4,350,002 2,250,002 350,002 200,002
============= ============= ============= =============
Page 70 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
VALUE LINE(R) DIVIDEND VALUE LINE(R) 100
INDEX FUND EXCHANGE-TRADED FUND
(FVD) (FVL)
------------------------------- -------------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
12/31/2015 12/31/2014 12/31/2015 12/31/2014
-------------- -------------- -------------- --------------
$ 27,999,971 $ 23,422,506 $ 188,382 $ 337,501
70,182,866 92,584,613 (464,240) 6,759,546
-- -- 95,996 --
(85,527,963) 20,655,635 (1,386,028) (1,112,537)
-------------- -------------- -------------- --------------
12,654,874 136,662,754 (1,565,890) 5,984,510
-------------- -------------- -------------- --------------
(28,470,161) (24,031,395) (184,307) (352,430)
-------------- -------------- -------------- --------------
703,563,120 722,167,468 5,252,525 8,785,008
(589,015,540) (541,861,484) (10,497,440) (10,466,963)
-------------- ------------- -------------- --------------
114,547,580 180,305,984 (5,244,915) (1,681,955)
-------------- -------------- -------------- --------------
98,732,293 292,937,343 (6,995,112) 3,950,125
1,089,298,773 796,361,430 60,008,072 56,057,947
-------------- -------------- -------------- --------------
$1,188,031,066 $1,089,298,773 $ 53,012,960 $ 60,008,072
============== ============== ============== ==============
$ -- $ -- $ -- $ --
============== ============== ============== ==============
45,137,986 37,287,986 2,939,982 3,039,982
29,150,000 31,750,000 250,000 450,000
(24,500,000) (23,900,000) (500,000) (550,000)
-------------- -------------- -------------- --------------
49,787,986 45,137,986 2,689,982 2,939,982
============== ============== ============== ==============
See Notes to Financial Statements Page 71
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,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 33.21 $ 32.47 $ 22.87 $ 20.09 $ 22.17
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.49 0.23 0.25 0.35 0.10
Net realized and unrealized gain (loss) (0.30) 0.76 9.62 2.83 (2.02)
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.19 0.99 9.87 3.18 (1.92)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.48) (0.25) (0.27) (0.40) (0.16)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 32.92 $ 33.21 $ 32.47 $ 22.87 $ 20.09
========== ========== ========== ========== ==========
TOTAL RETURN (a) 0.55% 3.08% 43.32% 15.86% (8.69)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 49,551 $ 51,648 $ 91,080 $ 41,281 $ 52,328
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.73% 0.70% 0.72% 0.76% 0.71%
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 1.46% 0.71% 0.93% 1.38% 0.40%
Portfolio turnover rate (b) 63% 49% 70% 71% 59%
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 23.94 $ 21.93 $ 18.46 $ 17.57 $ 15.92
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.86 0.80 0.69 0.71 0.61
Net realized and unrealized gain (loss) (0.25) 2.01 3.47 0.89 1.65
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.61 2.81 4.16 1.60 2.26
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.86) (0.80) (0.69) (0.71) (0.61)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 23.69 $ 23.94 $ 21.93 $ 18.46 $ 17.57
========== ========== ========== ========== ==========
TOTAL RETURN (a) 2.73% 12.96% 22.71% 9.14% 14.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 875,294 $ 985,151 $ 687,437 $ 545,517 $ 447,030
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.48% 0.49% 0.49% 0.51% 0.56%
Ratio of net expenses to average net assets 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of net investment income (loss) to
average net assets 3.59% 3.55% 3.61% 3.88% 3.98%
Portfolio turnover rate (b) 61% 40% 35% 31% 27%
<FN>
(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.
</FN>
Page 72 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST US IPO INDEX FUND (FPX)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 50.32 $ 45.34 $ 30.82 $ 23.99 $ 23.51
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.31 0.41 0.22 0.31 0.18
Net realized and unrealized gain (loss) 0.80 4.97 14.53 6.87 0.55
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.11 5.38 14.75 7.18 0.73
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.32) (0.40) (0.23) (0.35) (0.25)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 51.11 $ 50.32 $ 45.34 $ 30.82 $ 23.99
========== ========== ========== ========== ==========
TOTAL RETURN (a) 2.19% 11.91% 47.98% 30.01% 3.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 789,693 $ 535,943 $ 351,376 $ 24,659 $ 15,594
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.60% 0.60% 0.66% 1.01% 1.01%
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 0.61% 0.89% 0.69% 1.27% 0.70%
Portfolio turnover rate (b) 41% 46% 30% 48% 44%
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 101.99 $ 69.12 $ 46.05 $ 32.68 $ 39.07
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.09 0.04 (0.10) (0.22) (0.30)
Net realized and unrealized gain (loss) 11.11 32.88 23.17 13.59 (6.09)
---------- ---------- ---------- ---------- ----------
Total from investment operations 11.20 32.92 23.07 13.37 (6.39)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.13) (0.05) -- -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 113.06 $ 101.99 $ 69.12 $ 46.05 $ 32.68
========== ========== ========== ========== ==========
TOTAL RETURN (a) 10.97% 47.63% 50.10% 40.91% (16.36)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $3,437,024 $2,126,581 $ 953,910 $ 239,445 $ 183,030
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.55% 0.58% 0.60% 0.61% 0.61%
Ratio of net expenses to average net assets 0.55% 0.58% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.08% 0.06% (0.26)% (0.48)% (0.54)%
Portfolio turnover rate (b) 30% 58% 48% 39% 44%
<FN>
(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.
</FN>
See Notes to Financial Statements Page 73
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,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 61.30 $ 59.84 $ 39.01 $ 32.28 $ 34.27
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.14) (0.08) (0.11) (0.08) (0.10)
Net realized and unrealized gain (loss) 13.48 1.54 20.94 6.81 (1.87)
---------- ---------- ---------- ---------- ----------
Total from investment operations 13.34 1.46 20.83 6.73 (1.97)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- -- -- -- (0.02)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 74.64 $ 61.30 $ 59.84 $ 39.01 $ 32.28
========== ========== ========== ========== ==========
TOTAL RETURN (a) 21.77% 2.42% 53.40% 20.85% (5.74)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $4,914,821 $1,976,793 $1,929,852 $ 557,882 $ 519,683
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.54% 0.54% 0.57% 0.60% 0.60%
Ratio of net expenses to average net assets 0.54% 0.54% 0.57% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets (0.29)% (0.13)% (0.28)% (0.23)% (0.25)%
Portfolio turnover rate (b) 28% 27% 17% 33% 18%
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 38.08 $ 33.70 $ 25.16 $ 21.82 $ 22.90
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.57 0.72 0.45 0.45 0.35
Net realized and unrealized gain (loss) 0.04 4.43 8.54 3.34 (1.01)
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.61 5.15 8.99 3.79 (0.66)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.57) (0.77) (0.45) (0.45) (0.42)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 38.12 $ 38.08 $ 33.70 $ 25.16 $ 21.82
========== ========== ========== ========== ==========
TOTAL RETURN (a) 1.64% 15.46% 35.90% 17.45% (2.94)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 165,815 $ 85,686 $ 65,706 $ 32,707 $ 31,643
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.65% 0.66% 0.76% 0.83% 0.82%
Ratio of net expenses to average net assets 0.65% 0.65% 0.65% 0.65% 0.65%
Ratio of net investment income (loss) to
average net assets 1.59% 2.07% 1.59% 1.84% 1.51%
Portfolio turnover rate (b) 96% 89% 156% 84% 114%
<FN>
(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.
</FN>
Page 74 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 26.13 $ 25.80 $ 19.34 $ 18.16 $ 20.30
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.22 0.27 0.21 0.34 0.21
Net realized and unrealized gain (loss) (1.78) 0.34 6.47 1.24 (2.14)
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.56) 0.61 6.68 1.58 (1.93)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.23) (0.28) (0.22) (0.40) (0.21)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 24.34 $ 26.13 $ 25.80 $ 19.34 $ 18.16
========== ========== ========== ========== ==========
TOTAL RETURN (a) (5.99)% 2.36% 34.65% 8.74% (9.56)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 8,518 $ 5,225 $ 5,160 $ 3,868 $ 6,357
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 1.97% 3.17% 2.01% 1.85% 1.39%
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 0.96% 1.05% 0.91% 1.64% 1.05%
Portfolio turnover rate (b) 170% 183% 186% 203% 184%
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 24.13 $ 21.36 $ 17.29 $ 16.01 $ 15.08
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.55 0.58 0.50 0.50 0.42
Net realized and unrealized gain (loss) (0.26) 2.78 4.06 1.28 0.93
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.29 3.36 4.56 1.78 1.35
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.56) (0.59) (0.49) (0.50) (0.42)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 23.86 $ 24.13 $ 21.36 $ 17.29 $ 16.01
========== ========== ========== ========== ==========
TOTAL RETURN (a) 1.26% 15.94% 26.57% 11.17% 9.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,188,031 $1,089,299 $ 796,361 $ 508,103 $ 366,399
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.74% 0.75% 0.76% 0.78% 0.79%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 2.40% 2.63% 2.57% 3.03% 2.84%
Portfolio turnover rate (b) 82% 63% 71% 54% 53%
<FN>
(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.
</FN>
See Notes to Financial Statements Page 75
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 20.41 $ 18.44 $ 13.27 $ 12.37 $ 13.52
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.07 0.11 0.06 0.15 0.08
Net realized and unrealized gain (loss) (0.71) (a) 1.98 5.17 0.90 (1.15)
---------- ---------- ---------- ---------- ----------
Total from investment operations (0.64) 2.09 5.23 1.05 (1.07)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.06) (0.12) (0.06) (0.15) (0.08)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 19.71 $ 20.41 $ 18.44 $ 13.27 $ 12.37
========== ========== ========== ========== ==========
TOTAL RETURN (b) (3.13)% (a) 11.33% 39.44% 8.53% (7.92)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 53,013 $ 60,008 $ 56,058 $ 45,635 $ 55,543
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.84% 0.84% 0.87% 0.87% 0.82%
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 0.32% 0.57% 0.35% 1.03% 0.47%
Portfolio turnover rate (c) 404% 325% 350% 304% 202%
<FN>
(a) The Fund received a payment from the advisor in the amount of $95,996 in
connection with a trade error. The payment from the advisor represents
$0.03 per share and had 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.
</FN>
Page 76 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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").
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 IPO Index Fund - (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(R) Stock Market LLC ("Nasdaq")
ticker "FTCS")
First Trust Total US Market AlphaDEX(R) ETF - (Nasdaq ticker "TUSA")(1)
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")
(1) Effective January 9, 2015, First Trust Value Line(R) Equity Allocation
Index Fund changed its name and ticker symbol to First Trust Total US
Market AlphaDEX(R) ETF (Nasdaq ticker "TUSA")
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 issued and redeemed principally in-kind
for securities included in a Fund's relevant index. 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 IPO Index Fund 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(TM)
First Trust Total US Market AlphaDEX(R) ETF NASDAQ AlphaDEX(R) Total US Market Index(2)
First Trust Value Line(R) Dividend Index Fund Value Line(R) Dividend Index(TM)
First Trust Value Line(R) 100 Exchange-Traded Fund Value Line(R) 100 Index
(2) Effective January 9, 2015, the Fund's underlying index was changed from
Value Line(R) Equity Allocation Index.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds, each of which is an investment company within the scope of Financial
Accounting Standards Board ("FASB") Accounting Standards Update 2013-08, follow
accounting and reporting guidance under FASB 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'
Page 77
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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
(the "Board"), 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 will be
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.
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 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 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 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 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.
Page 78
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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, 2015, 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.
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 dividend and interest earned on the securities loaned is accounted for in
the same manner as other dividend and interest income. At December 31, 2015,
FPX, FBT and FDN have securities in the securities lending program. During the
fiscal year ended December 31, 2015, FPX, FBT and FDN participated 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
Page 79
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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 Notes. The U.S. Treasury Notes 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 Notes 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, 2015, 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 may determine from time to time. Distributions of net
realized gains earned by each Fund, if any, are distributed at least annually.
Distributions from income and capital gains are determined in accordance with
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
significantly modified 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, 2015 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ---------------- ----------------
First Trust Dow Jones Select MicroCap Index Fund $ 743,446 $ -- $ --
First Trust Morningstar Dividend Leaders Index Fund 32,145,837 -- --
First Trust US IPO Index Fund 4,530,346 -- --
First Trust NYSE Arca Biotechnology Index Fund 3,747,095 -- --
First Trust Dow Jones Internet Index Fund -- -- --
First Trust Capital Strength ETF 1,868,316 -- --
First Trust Total US Market AlphaDEX(R) ETF 65,921 -- --
First Trust Value Line(R) Dividend Index Fund 28,470,161 -- --
First Trust Value Line(R) 100 Exchange-Traded Fund 184,307 -- --
Page 80
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2014 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ---------------- ----------------
First Trust Dow Jones Select MicroCap Index Fund $ 512,148 $ -- $ --
First Trust Morningstar Dividend Leaders Index Fund 27,604,717 -- --
First Trust US IPO Index Fund 4,268,031 -- --
First Trust NYSE Arca Biotechnology Index Fund 1,076,820 -- --
First Trust Dow Jones Internet Index Fund -- -- --
First Trust Capital Strength ETF 1,680,216 -- --
First Trust Total US Market AlphaDEX(R) ETF 55,881 -- --
First Trust Value Line(R) Dividend Index Fund 24,031,395 -- --
First Trust Value Line(R) 100 Exchange-Traded Fund 352,430 -- --
As of December 31, 2015, 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 $ -- $(21,847,201) $ (49,207)
First Trust Morningstar Dividend Leaders Index Fund (58,812) (55,945,417) 34,606,952
First Trust US IPO Index Fund -- (41,646,138) 60,432,351
First Trust NYSE Arca Biotechnology Index Fund -- (141,896,651) 238,300,057
First Trust Dow Jones Internet Index Fund -- (49,380,673) 405,146,228
First Trust Capital Strength ETF -- (24,133,781) 2,689,039
First Trust Total US Market AlphaDEX(R) ETF (341) (3,635,762) (363,147)
First Trust Value Line(R) Dividend Index Fund -- (36,814,938) 15,519,987
First Trust Value Line(R) 100 Exchange-Traded Fund -- (83,967,724) 962,605
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 the 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 2012, 2013,
2014 and 2015 remain open to federal and state audit. As of December 31, 2015,
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 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, 2015, the Funds had pre-enactment and
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 81
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
Capital Capital Capital
Loss Loss Loss Post- Total
Available Available Available Enactment - Capital
Through Through Through No Loss
2016 2017 2018 Expiration Available
---------- ----------- ----------- ----------- -----------
First Trust Dow Jones Select MicroCap Index Fund $ 902,807 $ 3,227,616 $ 5,096,533 $12,620,245 $21,847,201
First Trust Morningstar Dividend Leaders Index Fund 14,962,284 16,831,977 473,435 23,677,721 55,945,417
First Trust US IPO Index Fund 2,682,788 1,127,563 65,058 37,770,729 41,646,138
First Trust NYSE Arca Biotechnology Index Fund 2,061,136 5,787,577 1,039,054 133,008,884 141,896,651
First Trust Dow Jones Internet Index Fund 6,295,170 1,163,966 -- 41,921,537 49,380,673
First Trust Capital Strength ETF 11,401,861 11,336,270 1,367,556 28,094 24,133,781
First Trust Total US Market AlphaDEX(R) ETF 1,168,041 2,421,122 -- 46,599 3,635,762
First Trust Value Line(R) Dividend Index Fund 16,730,748 19,646,203 437,987 -- 36,814,938
First Trust Value Line(R) 100 Exchange-Traded Fund 47,805,834 29,477,928 -- 6,683,962 83,967,724
During the taxable year ended December 31, 2015, the following Funds utilized
capital loss carryforwards in the following amounts:
Pre-Enactment Post-Enactment
Capital Loss Capital Loss
Carryforward Utilized Carryforward Utilized
--------------------- ---------------------
First Trust Capital Strength ETF $ -- $ 140,681
First Trust Total US Market AlphaDEX(R) ETF -- 35,145
First Trust Value Line(R) Dividend Index Fund 2,184,539 --
At the taxable year ended December 31, 2015, the following Funds' capital loss
carryforwards expired in the following amounts:
Capital Loss
Carryforward
Expired
---------------------
First Trust Dow Jones Select MicroCap Index Fund $ 910,503
First Trust Morningstar Dividend Leaders Index Fund 198,670
First Trust US IPO Index Fund 740,683
First Trust Capital Strength ETF 180,261
First Trust Total US Market AlphaDEX(R) ETF 1,392,919
First Trust Value Line(R) 100 Exchange-Traded Fund 1,905,072
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, 2015, the following
Funds incurred and elected to defer net ordinary losses as follows:
Qualified Late Year Losses
---------------------------------
Ordinary Losses Capital Losses
--------------- --------------
First Trust Morningstar Dividend Leaders Index Fund $ 58,812 $ --
First Trust Total US Market AlphaDEX(R) ETF 341 --
In order to present paid-in capital, accumulated net investment income (loss)
and accumulated net realized gain (loss) 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
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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, 2015, 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 Dow Jones Select MicroCap Index Fund $ (17,892) $ (7,388,207) $ 7,406,099
First Trust Morningstar Dividend Leaders Index Fund 154,844 (27,598,155) 27,443,311
First Trust US IPO Index Fund 82,863 (26,342,975) 26,260,112
First Trust NYSE Arca Biotechnology Index Fund 1,158,162 (465,780,313) 464,622,151
First Trust Dow Jones Internet Index Fund 9,194,381 (241,237,915) 232,043,534
First Trust Capital Strength ETF 4,523 (7,902,005) 7,897,482
First Trust Total US Market AlphaDEX(R) ETF 3,272 1,306,302 (1,309,574)
First Trust Value Line(R) Dividend Index Fund 470,190 (89,686,315) 89,216,125
First Trust Value Line(R) 100 Exchange-Traded Fund (4,075) 491,092 (487,017)
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 Dow Jones & Company, Inc.
First Trust Morningstar Dividend Leaders Index Fund Morningstar, Inc.
First Trust US IPO Index Fund IPOX(R) Schuster LLC
First Trust NYSE Arca Biotechnology Index Fund NYSE Euronext
First Trust Dow Jones Internet Index Fund Dow Jones & Company, Inc.
First Trust Capital Strength ETF Nasdaq, Inc.
First Trust Total US Market AlphaDEX(R) ETF Nasdaq, Inc.
First Trust Value Line(R) Dividend Index Fund Value Line Publishing, Inc.(R)
First Trust Value Line(R)100 Exchange-Traded Fund Value Line Publishing, Inc.(R)
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 IPO Index Fund 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 Total US Market AlphaDEX(R) ETF 0.50%
First Trust Value Line(R) Dividend Index Fund 0.50%
First Trust Value Line(R) 100 Exchange-Traded Fund 0.50%
Page 83
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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, 2017.
Expense Cap
----------------
First Trust Dow Jones Select MicroCap Index Fund 0.60%
First Trust Morningstar Dividend Leaders Index Fund 0.45%
First Trust US IPO Index Fund 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 Total US Market AlphaDEX(R) ETF 0.70%
First Trust Value Line(R) Dividend Index Fund 0.70%
First Trust Value Line(R) 100 Exchange-Traded Fund 0.70%
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee was waived or expense was incurred, but no reimbursement payment will be
made by a Fund if it results in the Fund exceeding an expense ratio equal to the
Expense Cap in place at the time the expenses were reimbursed or fees waived by
First Trust. These amounts are included in "Expenses previously waived or
reimbursed" on the Statements of Operations.
The advisory fee waivers and expense reimbursements for the fiscal year ended
December 31, 2015 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 12/31/2013 12/31/2014 12/31/2015 Total
--------- ------------- ---------- ---------- ---------- ---------
First Trust Dow Jones Select MicroCap
Index Fund $ 69,191 $ -- $ 115,749 $ 66,284 $ 69,191 $ 251,224
First Trust Morningstar Dividend Leaders
Index Fund 260,965 -- 269,543 273,147 260,965 803,655
First Trust US IPO Index Fund -- -- 70,526 23,043 -- 93,569
First Trust NYSE Arca Biotechnology
Index Fund -- -- -- -- -- --
First Trust Dow Jones Internet
Index Fund -- -- -- -- -- --
First Trust Capital Strength ETF -- -- 49,536 4,069 -- 53,605
First Trust Total US Market AlphaDEX(R)
ETF 32,325 49,550 59,346 128,690 81,875 269,911
First Trust Value Line(R) Dividend
Index Fund 464,054 -- 391,960 408,933 464,054 1,264,947
First Trust Value Line(R) 100 Exchange-
Traded Fund 83,472 -- 81,246 85,675 83,472 250,393
During the fiscal year ended December 31, 2015, First Trust recovered fees that
were previously waived from First Trust US IPO Index Fund and First Trust
Capital Strength ETF of $22,244 and $17,437, respectively.
During the fiscal year ended December 31, 2015, the First Trust Value Line(R)
100 Exchange-Traded Fund received a payment from the Advisor of $95,996 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.
Page 84
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
At a meeting held on December 7, 2015, the Board accepted Mr. Bradley's
resignation from his position as the President and Chief Executive Officer of
the Trust, effective December 31, 2015. At the same meeting, the Board elected
Mr. Dykas, formerly Chief Financial Officer and Treasurer of the Trust, to serve
as the President and Chief Executive Officer and Mr. Swade, formerly an
Assistant Treasurer of the Trust, to serve as the Treasurer, Chief Financial
Officer and Chief Accounting Officer of the Trust.
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 pro rata among each fund in the First Trust Fund
Complex based on net assets. Each Independent Trustee is also paid an annual per
fund fee that varies based on whether the fund is a closed-end or other actively
managed fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
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, 2015, 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 $ 32,722,781 $ 32,531,980
First Trust Morningstar Dividend Leaders Index Fund 536,826,720 537,876,912
First Trust US IPO Index Fund 295,819,914 289,095,501
First Trust NYSE Arca Biotechnology Index Fund 954,567,148 955,746,011
First Trust Dow Jones Internet Index Fund 877,498,323 877,144,341
First Trust Capital Strength ETF 112,464,587 112,313,070
First Trust Total US Market AlphaDEX(R) ETF 10,870,598 10,838,198
First Trust Value Line(R) Dividend Index Fund 948,518,883 945,744,279
First Trust Value Line(R) 100 Exchange-Traded Fund 235,827,905 235,694,091
For the fiscal year ended December 31, 2015, 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 $ 31,186,032 $ 32,741,701
First Trust Morningstar Dividend Leaders Index Fund 141,040,071 236,111,218
First Trust US IPO Index Fund 372,390,758 107,245,969
First Trust NYSE Arca Biotechnology Index Fund 2,367,599,170 1,235,001,696
First Trust Dow Jones Internet Index Fund 3,414,219,518 1,041,784,367
First Trust Capital Strength ETF 146,775,642 66,948,921
First Trust Total US Market AlphaDEX(R) ETF 4,910,727 1,218,672
First Trust Value Line(R) Dividend Index Fund 701,934,501 588,514,927
First Trust Value Line(R) 100 Exchange-Traded Fund 5,253,836 10,473,560
5. CREATION, REDEMPTION AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Such transactions are generally permitted on an
in-kind basis, with a balancing cash component to equate the transaction to the
daily NAV per Share of each Fund on the transaction date times the number of
Shares in a Creation Unit. Authorized Participants purchasing Creation Units
must pay to BNYM, as transfer agent, a standard creation transaction fee (the
"Creation Transaction Fee"), which is based on the number of different
securities in a Creation Unit of each Fund according to the fee schedule set
forth below:
Number of Securities Creation
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
Page 85
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
The Creation Transaction Fee is applicable to each purchase transaction
regardless of the number of Creation Units purchased in the transaction. An
additional variable fee of up to three times the Creation Transaction Fee may be
charged to approximate additional expenses incurred by a Fund with respect to
transactions effected outside of the clearing process (i.e., through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. The price for each Creation Unit will equal the daily
NAV per Share of a Fund on the transaction date times the number of Shares in a
Creation Unit plus the fees described above and, if applicable, any transfer
taxes.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a standard redemption transaction fee (the "Redemption Transaction Fee"),
which is based on the number of different securities in a Creation Unit of each
Fund according to the fee schedule set forth below:
Number of Securities Redemption
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
The Redemption Transaction Fee is applicable to each redemption transaction
regardless of the number of Creation Units redeemed in the transaction. An
additional variable fee of up to three times the Redemption Transaction Fee may
be charged to approximate additional expenses incurred by a Fund with respect to
redemptions effected outside of the clearing process or to the extent that
redemptions are for cash. Each Fund reserves the right to effect redemptions in
cash. A shareholder may request cash redemption in lieu of securities; however,
a Fund may, in its discretion, reject any such request.
6. DISTRIBUTION PLAN
The Board 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, 2016.
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:
Effective January 1, 2016, the fixed annual retainer paid to the Independent
Trustees will be allocated equally among each fund in the First Trust Fund
Complex and will no longer be allocated pro rata based on each fund's net
assets.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FIRST TRUST EXCHANGE-TRADED FUND:
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 IPO Index Fund, First Trust NYSE Arca
Biotechnology Index Fund, First Trust Dow Jones Internet Index Fund, First Trust
Capital Strength ETF, First Trust Total US Market AlphaDEX(R) ETF (formerly
known as First Trust Value Line(R) Equity Allocation Index Fund), First Trust
Value Line(R) Dividend Index Fund, and First Trust Value Line(R) 100
Exchange-Traded Fund, each a series of the First Trust Exchange-Traded Fund (the
"Funds"), including the portfolios of investments, as of December 31, 2015, and
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, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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. The Funds
are not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, 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. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2015 by correspondence with the Funds'
custodian and brokers; where replies were not received, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the funds listed above included in the First Trust Exchange-Traded Fund, as
of December 31, 2015, 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.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 23, 2016
Page 87
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Funds' website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files its complete schedule of each Fund's portfolio holdings with the
SEC for the first and third quarters of each fiscal year on Form N-Q. The
Trust's Form N-Qs are available (1) by calling (800) 988-5891; (2) on the Funds'
website located at http://www.ftportfolios.com; (3) on the SEC's website at
http://www.sec.gov; and (4) for review and copying at the SEC's Public Reference
Room ("PRR") in Washington, DC. Information regarding the operation of the PRR
may be obtained by calling (800) SEC-0330.
FEDERAL TAX INFORMATION
For the taxable year ended December 31, 2015, the following percentages of
income dividends paid by the Funds qualify for the dividends received deduction
available to corporations:
Dividends Received Deduction
----------------------------
First Trust Dow Jones Select MicroCap Index Fund 100.00%
First Trust Morningstar Dividend Leaders Index Fund 100.00%
First Trust US IPO Index Fund 100.00%
First Trust NYSE Arca Biotechnology Index Fund 100.00%
First Trust Dow Jones Internet Index Fund --
First Trust Capital Strength ETF 100.00%
First Trust Total US Market AlphaDEX(R) ETF 100.00%
First Trust Value Line(R) Dividend Index Fund 100.00%
First Trust Value Line(R) 100 Exchange-Traded Fund 100.00%
For the taxable year ended December 31, 2015, 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 IPO Index Fund 100.00%
First Trust NYSE Arca Biotechnology Index Fund 100.00%
First Trust Dow Jones Internet Index Fund --
First Trust Capital Strength ETF 100.00%
First Trust Total US Market AlphaDEX(R) ETF 100.00%
First Trust Value Line(R) Dividend Index Fund 100.00%
First Trust Value Line(R) 100 Exchange-Traded Fund 100.00%
SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
A special meeting of shareholders of First Trust Total US Market AlphaDEX(R) ETF
(the "Fund") was held on December 8, 2014. At the meeting, shareholders approved
(i) a change to the Fund's investment objective that would replace its current
underlying index, the Value Line(R) Equity Allocation Index, with a new
underlying index, the NASDAQ AlphaDEX(R) Total US Market Index and (ii) the
reclassification of the Fund's investment objective from a fundamental policy to
a non-fundamental policy. 120,055 (60.03%) of the outstanding voting securities
were voted at the meeting. The number of votes cast in favor of the proposal (i)
was 116,789, the number of votes against was 2,726, the number of abstentions
was 540 and the number of broker non-votes was 79,947. The number of votes cast
in favor of proposal (ii) was 88,238, the number of votes against was 31,277,
the number of abstentions was 540 and the number of broker non-votes was 79,947.
Page 88
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. YOU SHOULD CONSIDER EACH FUND'S INVESTMENT
OBJECTIVE, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. YOU CAN
DOWNLOAD EACH FUND'S PROSPECTUS AT HTTP://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. FOR ADDITIONAL INFORMATION ABOUT THE
RISKS ASSOCIATED WITH INVESTING IN THE FUNDS, PLEASE SEE THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION, AS WELL AS OTHER REGULATORY FILINGS. READ THESE
DOCUMENTS CAREFULLY BEFORE YOU INVEST. FIRST TRUST PORTFOLIOS L.P. IS THE
DISTRIBUTOR OF THE FIRST TRUST EXCHANGE-TRADED FUND.
The following summarizes some of the risks that should be considered for the
Funds.
Each Fund's shares will change in value, and you could lose money by investing
in a Fund. Shares are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates and perceived trends in stock prices. Overall stock values could decline
generally or could underperform other investments. Overall stock market values
could decline generally or could underperform other investments.
An investment in a Fund involves risks similar to those of investing in any fund
of equity securities traded on an exchange. Investors buying or selling Fund
shares on the secondary market may incur brokerage commissions. In addition,
investors who sell Fund shares may receive less than the Fund shares' net asset
value. Unlike shares of open-end funds, investors are generally not able to
purchase exchange-traded fund ("ETF") shares directly from a Fund and individual
ETF shares are not redeemable. However, specified large blocks of ETF shares
called creation units can be purchased from, or redeemed to, a Fund.
Each Fund is subject to index tracking risk. You should anticipate that the
value of Fund shares will decline, more or less, in correlation with any decline
in the value of the index that the Fund seeks to track.
Each Fund's return may not match the return of the index it seeks to track for a
number of reasons. While First Trust seeks to have a correlation of 0.95 or
better, before expenses, between a Fund's performance and the performance of its
corresponding index, there can be no assurance that a Fund will be able to
achieve such a correlation. Accordingly, each Fund's performance may correlate
to a lesser extent and may possibly vary substantially from the performance of
its corresponding index.
Each Fund is also exposed to additional market risk due to a policy of investing
principally in the securities included in its corresponding index. As a result
of such policies, securities held by each Fund will generally not be bought or
sold in response to market fluctuations and the securities may be issued by
companies concentrated in a particular industry. As a result, each Fund will
generally not sell a stock because the stock's issuer is in financial trouble,
unless that stock is removed or is anticipated to be removed from the index the
Fund seeks to track.
Each Fund relies on a license from an index provider that permits the Fund to
use its corresponding index and associated trade names and trademarks in
connection with the name and investment strategies of the Fund. Such licenses
may be terminated by the respective index provider and, as a result, each Fund
may lose its ability to use such intellectual property. There is also no
guarantee that the index provider has all rights to license the respective
intellectual property to First Trust, on behalf of the Fund. Accordingly, in the
event the license is terminated or the index provider does not have rights to
license the particular intellectual property, it may have a significant effect
on the operation of the related Fund.
Each Fund is subject to issuer specific changes risk. The value of an individual
security or a particular type of security can be more volatile than the market
as a whole and can perform differently from the value of the market as a whole.
Each Fund will be concentrated in the securities of companies of a given
industry if the Fund's corresponding index is concentrated in such industry. A
concentration makes a Fund more susceptible to any single occurrence affecting
the related industry and may subject a Fund to greater market risk than less
concentrated funds.
With the exception of First Trust Dow Jones Select MicroCap Index Fund, First
Trust Value Line(R) Dividend Index Fund, First Trust Total US Market AlphaDEX
ETF and First Trust Value Line(R) 100 Exchange-Traded Fund, each Fund is
considered to be non-diversified. As a result, those Funds are exposed to
additional market risk. A non-diversified fund may invest a relatively high
percentage of its assets in a limited number of issuers. As a result, changes in
the market value of a single portfolio security could cause greater fluctuations
in share price than would occur in a diversified fund. Furthermore,
non-diversified funds are more susceptible to any single political, regulatory
or economic occurrence.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
The Funds are not actively managed. The Funds may be affected by a general
decline in certain market segments relating to their corresponding index. The
Funds invest in securities included in or representative of their corresponding
index regardless of their investment merit. The Funds generally will not attempt
to take defensive positions in declining markets.
The First Trust Dow Jones Select MicroCap Index Fund invests in
micro-capitalization companies. Such companies may be more vulnerable to adverse
general market or economic developments, may be less liquid, and may experience
greater price volatility than larger, more established companies.
The First Trust Dow Jones Internet Index Fund invests in stocks of companies in
the technology sector. You should be aware that an investment in a portfolio
which invests in a particular sector involves additional risks, including
limited diversification. The companies engaged in the technology sector are
subject to fierce competition and high research and development costs, and their
products and services may be subject to rapid obsolescence.
The First Trust NYSE Arca Biotechnology Index Fund is concentrated in stocks of
companies in the biotechnology sector. You should be aware that an investment in
a portfolio which is concentrated in a particular sector involves additional
risks, including limited diversification. The companies engaged in the
biotechnology sector are subject to fierce competition, substantial research and
development costs, governmental regulations and pricing constraints, and their
products and services may be subject to rapid obsolescence.
The First Trust NYSE Arca Biotechnology Index Fund and First Trust Capital
Strength ETF invest in the securities of companies in the health care sector.
Because companies in the health care sector are involved in medical services or
health care including biotechnology research and production, drugs and
pharmaceuticals and health care facilities and services, general problems of
these companies include extensive competition, generic drug sales or the loss of
patent protection, product liability litigation and increased government
regulations.
The First Trust US IPO Index Fund invests in companies that have recently
conducted an initial public offering. The stocks of such companies are often
subject to extreme price volatility and speculative trading.
The First Trust Total US Market AlphaDEX ETF and First Trust Dow Jones Select
Micro Cap Index Fund invest in securities of companies in the financials sector.
Banks, thrifts and their holding companies are especially subject to the adverse
effects of economic recession; volatile interest rates; portfolio concentrations
in geographic markets and in commercial and residential real estate loans; and
competition from new entrants in their fields of business. Although recently
enacted legislation repealed most of the barriers which separated the banking,
insurance and securities industries, these industries are still extensively
regulated at both the federal and state level and may be adversely affected by
increased regulations. The downturn in the U.S. and world economies has
adversely affected banks, thrifts and other companies in the financials sector.
The First Trust Dow Jones Internet Index Fund invests in securities of companies
in the information technology industry. Information technology companies are
generally subject to the risks of rapidly changing technologies; short product
life cycles; fierce competition; and aggressive pricing and reduced profit
margins.
The First Trust US IPO Index Fund, First Trust Value Line(R) 100 Exchange-Traded
Fund and First Trust Dow Jones Internet Index Fund invest in the securities of
companies in the consumer discretionary sector. Because companies in the
consumer discretionary sector manufacture products and provide discretionary
services directly to the consumer, the success of these companies is tied
closely to the performance of the overall domestic and international economy,
interest rates, competition and consumer confidence. Success depends heavily on
disposable household income and consumer spending. Changes in demographics and
consumer tastes can also affect the demand for, and success of, consumer
discretionary products in the marketplace.
The First Trust Morningstar Dividend Leaders Index Fund and First Trust Value
Line(R) Dividend Index Fund invest in the securities of utilities companies.
Utilities companies are subject to the imposition of rate caps, increased
competition due to deregulation, the difficulty in obtaining an adequate return
on invested capital or in financing large construction projects, the limitations
on operations and increased costs and delays attributable to environmental
considerations, and the capital market's ability to absorb utility debt. In
addition, taxes, government regulation, international politics, price and supply
fluctuations, volatile interest rates and energy conservation may cause
difficulties for utilities. Utilities issuers have been experiencing certain of
these problems to varying degrees.
The First Trust Dow Jones Internet Index Fund invests in the securities of
Internet companies. Internet companies are subject to rapid changes in
technology, worldwide competition, rapid obsolescence of products and services,
loss of patent protections, cyclical market patterns, evolving industry
standards and frequent new product introductions. The Fund's investment in
Internet companies may also be subject to the risk of owning small
capitalization companies that have recently begun operations.
Page 90
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
With the exception of First Trust Capital Strength ETF and First Trust Dow Jones
Select MicroCap Index Fund, the Funds may invest in small capitalization and
mid-capitalization companies. Such companies' securities may be less liquid and
may experience greater price volatility than securities of larger, more
established companies.
Because a Fund's corresponding index may include American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs") and/or stocks of non-U.S.
companies, the investments of certain Funds, including but not limited to, the
First Trust Value Line(R) 100 Exchange-Traded Fund, involves risks of investing
in non-U.S. securities that are in addition to the risk associated with domestic
securities. Non-U.S. companies, in general, are not subject to the regulatory
requirements of U.S. companies and, as such, there may be less publicly
available information about these companies. Moreover, non-U.S. accounting,
auditing and financial reporting standards generally are different from those
applicable to U.S. companies. In addition, non-U.S. companies are exposed to
additional economic, political, social or diplomatic events. ADRs and ADSs also
involve substantially identical risks to those associated with investments in
non-U.S. securities. In addition, the issuers of certain depositary receipts,
particularly unsponsored or unregistered depositary receipts, are under no
obligation to distribute shareholder communications to the holders of such
receipts, or to pass through to them any voting rights with respect to the
deposited securities.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 91
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
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
THE FIRST TRUST DIRECTORSHIPS
NAME, ADDRESS, TERM OF OFFICE FUND COMPLEX HELD BY TRUSTEE
DATE OF BIRTH AND AND YEAR FIRST PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST ELECTED OR APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician; President, Wheaton Orthopedics; 120 None
c/o First Trust Advisors L.P. Limited Partner, Gundersen Real Estate
120 E. Liberty Drive, o Since Inception Limited Partnership; Member, Sportsmed LLC
Suite 400
Wheaton, IL 60187
D.O.B.: 04/51
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investor Services, Inc. 120 Director of ADM
c/o First Trust Advisors L.P. (Futures Commission Merchant) Investor Services,
120 E. Liberty Drive, o Since Inception Inc., ADM
Suite 400 Investor Services
Wheaton, IL 60187 International and
D.O.B.: 11/57 Futures Industry
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 120 Director of Trust
c/o First Trust Advisors L.P. Management Consulting) Company of
120 E. Liberty Drive, o Since Inception Illinois
Suite 400
Wheaton, IL 60187
D.O.B.: 11/56
Niel B. Nielson, Trustee o Indefinite Term Managing Director and Chief Operating 120 Director of
c/o First Trust Advisors L.P. Officer (January 2015 to Present), Pelita Covenant
120 E. Liberty Drive, o Since Inception Harapan Educational Foundation (Educational Transport Inc.
Suite 400 Products and Services); President and Chief (May 2003 to
Wheaton, IL 60187 Executive Officer (June 2012 to September May 2014)
D.O.B.: 03/54 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); President
(June 2002 to June 2012), Covenant College
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer First Trust 120 None
Chairman of the Board Advisors L.P. and First Trust Portfolios
120 E. Liberty Drive, o Since Inception L.P.; Chairman of the Board of Directors,
Suite 400 BondWave LLC (Software Development
Wheaton, IL 60187 Company/Investment Advisor) and
D.O.B.: 09/55 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 92
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME, ADDRESS OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
AND DATE 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
120 E. Liberty Drive, Executive Officer (January 2016 to Present), Controller (January 2011
Suite 400 o Since January 2016 to January 2016), Senior Vice President (April 2007
Wheaton, IL 60187 to January 2016), First Trust Advisors L.P. and First
D.O.B: 01/66 Trust Portfolios L.P.
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Vice President (April 2012 to Present),
120 E. Liberty Drive, Officer and Chief First Trust Advisors L.P. and First Trust Portfolios
Suite 400 Accounting Officer o Since January 2016 L.P., VicePresident (September 2006 to April
Wheaton, IL 60187 2012), Guggenheim Funds Investment Advisors,
D.O.B.: 08/72 LLC/Claymore Securities, Inc.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First
120 E. Liberty Drive, Legal Officer Trust Portfolios L.P.; Secretary and General Counsel,
Suite 400 o Since Inception BondWave LLC (Software Development Company/
Wheaton, IL 60187 Investment Advisor); Secretary of Stonebridge
D.O.B.: 05/60 Advisors LLC (Investment Advisor)
Daniel J. Lindquist Vice President o Indefinite Term Managing Director (July 2012 to Present),
120 E. Liberty Drive, Senior Vice President (September 2005 to July
Suite 400 o Since Inception 2012), First Trust Advisors L.P. and First Trust
Wheaton, IL 60187 Portfolios L.P.
D.O.B.: 02/70
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
120 E. Liberty Drive, and Assistant Secretary and First Trust Portfolios L.P.
Suite 400 o Chief Compliance
Wheaton, IL 60187 Officer Since
D.O.B.: 12/66 January 2011
o Assistant Secretary
Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
120 E. Liberty Drive, First Trust Portfolios L.P.
Suite 400 o Since Inception
Wheaton, IL 60187
D.O.B.: 06/66
Stan Ueland Vice President o Indefinite Term Senior Vice President (September 2012 to
120 E. Liberty Drive, Present), Vice President (August 2005 to
Suite 400 o Since Inception September 2012), First Trust Advisors L.P. and
Wheaton, IL 60187 First Trust Portfolios L.P.
D.O.B.: 11/70
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 93
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PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (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 with affiliates of the Fund.
PRIVACY ONLINE
We allow third-party companies, including AddThis, to collect certain anonymous
information when you visit our website. These companies may use non-personally
identifiable information during your visits to this and other websites in order
to provide advertisements about goods and services likely to be of greater
interest to you. These companies typically use a cookie, third party web beacon
or pixel tags, to collect this information. To learn more about this behavioral
advertising practice, you can visit www.networkadvertising.org.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, we restrict access to your
nonpublic personal information to those individuals 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).
Page 94
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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
101 Barclay 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 ISE Water Index Fund (FIW)
First Trust ISE-Revere Natural Gas Index Fund (FCG)
First Trust ISE Chindia Index Fund (FNI)
First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund (VIXH)
Annual Report
December 31, 2015
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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 ISE Water Index Fund (FIW).................................... 14
First Trust ISE-Revere Natural Gas Index Fund (FCG)....................... 16
First Trust ISE Chindia Index Fund (FNI).................................. 18
First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)................ 20
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund (VIXH).............. 22
Notes to Fund Performance Overview........................................... 24
Understanding Your Fund Expenses............................................. 25
Portfolio of Investments
First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)................... 27
First Trust NASDAQ-100-Technology Sector Index Fund (QTEC)................ 30
First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT)............. 31
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)........ 34
First Trust S&P REIT Index Fund (FRI)..................................... 37
First Trust ISE Water Index Fund (FIW).................................... 40
First Trust ISE-Revere Natural Gas Index Fund (FCG)....................... 41
First Trust ISE Chindia Index Fund (FNI).................................. 43
First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)................ 46
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund (VIXH).............. 48
Statements of Assets and Liabilities......................................... 56
Statements of Operations..................................................... 58
Statements of Changes in Net Assets.......................................... 60
Financial Highlights......................................................... 64
Notes to Financial Statements................................................ 69
Report of Independent Registered Public Accounting Firm...................... 80
Additional Information....................................................... 81
Board of Trustees and Officers............................................... 86
Privacy Policy............................................................... 88
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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
http://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 http://www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
each Fund. It includes details about each Fund's portfolio 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,
this report and other Fund regulatory filings.
Page 1
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SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2015
Dear Shareholders:
Thank you for your investment in First Trust Exchange-Traded Fund (the "Trust").
First Trust Advisors L.P. ("First Trust") is pleased to provide you with this
annual report which contains detailed information about your investment for the
12 months ended December 31, 2015, including a performance analysis and a market
outlook. Additionally, First Trust has compiled the Trust's financial statements
for you to review. We encourage you to read this report and discuss it with your
financial advisor.
While markets were up and down during 2015, we believe there are three important
things to remember: first, the U.S. economy grew, in spite of the massive
decline in oil prices; and second, the tapering that began in 2014 by the
Federal Reserve (the "Fed") did not stop growth in the U.S. economy either.
Finally, the long-anticipated rate hike by the Fed in December had little effect
on the money supply, and the stock market was not shocked by the hike. We remain
positive on U.S. markets, although we know that markets will always move up and
down.
First Trust believes that having a long-term investment horizon and being
invested in quality products can help you reach your goals, despite how the
market behaves. We have always maintained perspective about the markets and
believe investors should as well. We will continue to strive to provide quality
investments each and every day, which has been one of the hallmarks of our firm
since its inception nearly 25 years ago.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value our relationship with you and will continue to focus on helping
investors like you reach your financial goals.
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
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MARKET OVERVIEW
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2015
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 25 years of experience as an Equity
and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst
("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE ECONOMY/INVESTING
The International Monetary Fund (IMF) updates its forecasts for U.S. and global
economic growth throughout the year. In its most recent report, the IMF set its
global growth rate estimates for 2016 and 2017 at 3.4% and 3.6%, respectively,
both up from 3.0% in 2015, according to its own release. Its 2016 and 2017
estimates for U.S. real GDP growth rates were 2.7% and 2.5%, respectively, both
up from 2.1% in 2015. While economic growth rate targets remain modest overall,
the key takeaway is that current indicators do not suggest that a recession is
looming. With the exception of the U.S., many central banks around the world are
still applying stimulus measures to their respective economies.
Dealogic reported that the total value of global mergers and acquisition ("M&A")
activity (announced) topped $5.0 trillion in 2015, surpassing the previous high
set in 2007 by around 9%, according to PRNewswire. There were 10 transactions
valued at $50 billion or more in 2015 and seven of them involved U.S. companies.
These 10 transactions combined were worth $798.9 billion. The U.S. accounted for
approximately half of all global M&A activity, or about $2.5 trillion. The two
most active sectors were Health Care ($723.7 billion) and Technology ($713.1
billion). A robust M&A climate indicates that companies are comfortable taking
risks with their capital, in our opinion.
ETFGI LLP, an industry research group, reported that total assets invested in
exchange-traded funds (ETFs) and other exchange-traded products reached $2.99
trillion globally in December 2015, up from $2.78 billion a year ago, according
to its own release. The industry took in a record $372.0 billion in net new
assets in 2015, topping the previous record of $338.3 billion in 2014.
U.S. STOCKS AND BONDS
In 2015, the major U.S. stock indices posted mixed results. The S&P 500(R)
Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R) Index posted total
returns of 1.38%, -2.18%, and -1.97%, respectively, according to Bloomberg. Five
of the 10 major S&P 500(R) Index sectors posted positive total returns. The
top-performing sectors were Consumer Discretionary, Health Care and Consumer
Staples, up 10.11%, 6.89% and 6.60%, respectively. The worst-performing sector
indices were Energy, Materials and Utilities, down 21.12%, 8.38% and 4.84%,
respectively.
The S&P 500(R) Index outperformed the S&P 500(R) Bond Index in eight of the last
10 calendar years (thru 2015), according to S&P Dow Jones Indices and Bloomberg.
The two years that bonds topped stocks were 2008 and 2011. In 2015, the S&P
500(R) Bond Index posted a total return of -0.06%, compared to 1.38% for the S&P
500(R) Index. As of 12/31/15, the 10-year average annual total returns for the
S&P 500(R) Index and S&P 500(R) Bond Index were 7.30% and 5.43%, respectively,
according to Bloomberg.
In the U.S. bond market, the top-performing major debt group in 2015 was
municipal bonds. The Barclays Municipal Bond: Long Bond (22+) Index posted a
total return of 4.52%. The worst-performing major debt group was high-yield
corporate bonds. The Barclays U.S. Corporate High Yield Index posted a total
return of -4.47%. The yield on the benchmark 10-Year Treasury Note (T-Note) rose
just 10 basis points, from 2.17% (12/31/14) to 2.27% (12/31/15). Over the past
decade, the average yield on the 10-Year T-Note was 3.11%. On December 16, the
Federal Reserve (the "Fed") initiated its first increase in the federal funds
target rate since June 2006. The Fed has stated that there is the potential for
3-4 additional hikes in 2016 should the data warrant them.
FOREIGN STOCKS AND BONDS
The U.S. dollar rose 9.26% against a basket of major currencies in 2015, as
measured by the U.S. Dollar Index ("DXY"). The index has appreciated 23.63%
since 6/30/14. The DXY peaked in 2015 at a reading of 100.33 on 3/13/15, and
then traded from 93 to 100 the remainder of 2015. With respect to U.S.
investors, a stronger U.S. dollar can negatively impact returns on foreign
securities.
Foreign bond indices struggled in 2015. The Barclays EM Hard Currency Aggregate
Index of emerging markets debt posted a total return of -0.18% (USD), while the
Barclays Global Aggregate Index of higher quality debt declined by 3.15% (USD).
Foreign equities finished 2015 in negative territory as well. The MSCI Emerging
Markets Index of stocks posted a total return of -14.92% (USD), while the MSCI
World Index (excluding the U.S.) posted a total return of -3.04% (USD).
Page 3
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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 assets in common stocks that comprise the Index. The Index is the
equal-weighted version of the NASDAQ-100 Index(R), which includes 100 of the
largest non-financial securities listed on The Nasdaq(R) Stock Market ("Nasdaq")
based on market capitalization. The Index contains the same securities as the
NASDAQ-100 Index(R), but each of the securities is initially set at a weight of
1.00% of the Index which is rebalanced quarterly. The Fund's shares are listed
for trading on the Nasdaq(R). The first day of secondary market trading in
shares of the Fund was April 25, 2006.
------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (4/19/06) Ended (4/19/06)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV 2.22% 13.73% 8.86% 90.31% 127.78%
Market Value 2.10% 13.73% 8.85% 90.26% 127.73%
INDEX PERFORMANCE
NASDAQ-100 Equal Weighted Index(SM) 2.89% 14.46% 9.54% 96.49% 142.07%
S&P 500(R) Index 1.38% 12.57% 6.95% 80.75% 91.86%
NASDAQ-100 Index(R) 9.75% 17.09% 11.59% 120.12% 189.64%
------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 2.22% during the 12-month period covered by
this report. During the same period, the NASDAQ-100 Index(R) ("benchmark")
generated a return of 9.75%. The Information Technology sector comprised the
majority of the Fund with an average 41.3% weighting. The sector returned 3.9%
which caused a 1.8% contribution. The top-performing sector was the Consumer
Staples sector with an 11.6% return. Since the sector had a smaller weighting of
6.8%, its contribution was limited to 0.74%. The Industrials sector returned
-7.1% and contributed -0.6% to the Fund's performance. On a relative basis, the
Fund underperformed the benchmark by -7.53%. The Fund was overweight the
Consumer Discretionary sector by 7.5% and underperformed by -19.3% which created
-4.0% of the relative underperformance. Within the Internet & Catalog Retail
industry, Amazon.com, Inc., which returned 117.7%, caused -2.2% of drag due to
being Fund being underweight the security by 3.2%.
-----------------------------
Nasdaq(R), NASDAQ-100(R), NASDAQ-100 Index(R), and NASDAQ-100 Equal Weighted
Index(SM) are trademarks of The Nasdaq (which with its affiliates is referred to
as the Corporations) and are licensed for use by First Trust on behalf of the
Fund. 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
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 41.84%
Consumer Discretionary 27.90
Health Care 16.07
Consumer Staples 6.04
Industrials 5.10
Telecommunication Services 3.05
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Celgene Corp. 1.07%
Seagate Technology PLC 1.05
Vertex Pharmaceuticals, Inc. 1.05
QUALCOMM, Inc. 1.04
PACCAR, Inc. 1.03
Tesla Motors, Inc. 1.03
SBA Communications Corp., Class A 1.03
Viacom, Inc., Class B 1.03
Illumina, Inc. 1.03
Symantec Corp. 1.02
-------
Total 10.38%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 19, 2006 - DECEMBER 31, 2015
First Trust NASDAQ-100 NASDAQ-100 Equal S&P 500(R) NASDAQ-100
Equal Weighted Index Fund Weighted Index(SM) Index Index(R)
04/06 $10,000 $10,000 $10,000 $10,000
12/06 10,060 10,097 10,975 10,168
06/07 11,050 11,117 11,739 11,217
12/07 11,040 11,142 11,579 12,124
06/08 9,673 9,785 10,199 10,708
12/08 6,187 6,292 7,295 7,084
06/09 7,653 7,803 7,526 8,671
12/09 9,871 10,100 9,225 10,954
06/10 9,314 9,561 8,612 10,278
12/10 11,968 12,321 10,616 13,161
06/11 12,867 13,288 11,254 13,849
12/11 11,636 12,063 10,839 13,645
06/12 12,704 13,203 11,868 15,750
12/12 13,365 13,927 12,574 16,145
06/13 15,450 16,172 14,312 17,774
12/13 18,704 19,636 16,646 22,109
06/14 20,197 21,268 17,835 23,849
12/14 22,283 23,531 18,927 26,396
06/15 22,811 24,159 19,160 27,556
12/15 22,779 24,210 19,189 28,964
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 151 0 0 0
01/01/12 - 12/31/12 157 0 0 0
01/01/13 - 12/31/13 203 0 0 0
01/01/14 - 12/31/14 161 3 0 0
01/01/15 - 12/31/15 126 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%
01/01/11 - 12/31/11 101 0 0 0
01/01/12 - 12/31/12 92 1 0 0
01/01/13 - 12/31/13 49 0 0 0
01/01/14 - 12/31/14 87 1 0 0
01/01/15 - 12/31/15 122 3 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 assets in common stocks that comprise the Index. The Index is an
equal-weighted index based on the securities of the NASDAQ-100 Index(R) that are
classified as "technology" according to the Industry Classification Benchmark
classification system. The NASDAQ-100 Index(R) includes 100 of the largest
domestic and international non-financial companies listed on the Nasdaq(R) based
on market capitalization. The NASDAQ-100 Index(R) is rebalanced four times
annually in March, June, September and December. The Fund's shares are listed
for trading on the Nasdaq(R). The first day of secondary market trading in
shares of the Fund was April 25, 2006.
----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (4/19/06) Ended (4/19/06)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV -1.37% 11.60% 8.64% 73.12% 123.45%
Market Value -1.44% 11.59% 8.65% 73.00% 123.55%
INDEX PERFORMANCE
NASDAQ-100 Technology Sector Index(SM) -0.80% 12.30% 9.32% 78.61% 137.43%
S&P 500(R) Index 1.38% 12.57% 6.95% 80.75% 91.86%
S&P 500 Information Technology Index 5.92% 13.95% 9.12% 92.15% 133.14%
----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -1.37% during the 12-month period covered by
this report. During the same period, the benchmark S&P 500(R) Information
Technology Index ("benchmark") generated a return of 5.92%. The Semiconductors &
Semiconductor Equipment industry was the heaviest-weighted and top-contributing
industry within the Fund with a 36.8% weighting and 2.7% contribution. NVIDIA
Corp. was the leading security, in terms of performance, with a 67.1% return and
1.6% contribution. The Technology Hardware Storage & Peripherals industry
contributed -3.8% to the Fund's performance, as the industry had a -27.9% return
and was held at an average weighting of 12.7%. Western Digital Corp. was the
lead contributor to the industry's poor performance with a -44.3% return. This
security was held at an average weighting of 2.4% and contributed -1.4% to the
Fund's return. On a relative basis, the Fund underperformed the benchmark by
-7.29%. Almost all of the relative underperformance was created by Internet
Software & Services. The six securities making up this industry in the Fund
caused an average -0.7% of underperformance, ranging from -0.4% to -1.2%. One of
the six, Alphabet, Inc. Class A, returned 46.6%, but since the Fund allocated
only 1.4% versus the benchmark at 4.9%, -1.15% drag on performance was created.
The Semiconductors & Semiconductor Equipment industry reversed 1.1% of the drag
on performance due to Fund being overweight by 24.9% and outperforming by 7.1%.
-----------------------------
Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Technology Sector
Index(SM) are trademarks of Nasdaq (which with its affiliates is referred to as
the Corporations) and are licensed for use by First Trust on behalf of the Fund.
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 97.22%
Health Care 2.78
-------
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
-----------------------------------------------------------
Seagate Technology PLC 2.94%
QUALCOMM, Inc. 2.88
Symantec Corp. 2.85
Applied Materials, Inc. 2.84
Avago Technologies Ltd. 2.84
KLA-Tencor Corp. 2.83
Cisco Systems, Inc. 2.82
Lam Research Corp. 2.82
SanDisk Corp. 2.81
Autodesk, Inc. 2.79
-------
Total 28.42%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 19, 2006 - DECEMBER 31, 2015
First Trust NASDAQ-100
NASDAQ-100- Technology Technology Sector S&P 500 Information S&P 500(R)
Sector Index Fund Index(SM) Technology Index Index
04/06 $10,000 $10,000 $10,000 $10,000
12/06 9,985 10,020 10,296 10,975
06/07 10,925 10,989 11,256 11,739
12/07 10,750 10,847 11,975 11,579
06/08 9,755 9,872 10,409 10,199
12/08 5,885 5,983 6,809 7,295
06/09 7,890 8,048 8,502 7,526
12/09 10,587 10,838 11,011 9,224
06/10 9,782 10,041 9,847 8,611
12/10 12,907 13,293 12,133 10,615
06/11 13,006 13,435 12,383 11,253
12/11 12,165 12,606 12,426 10,839
06/12 12,720 13,222 14,084 11,868
12/12 13,141 13,702 14,269 12,574
06/13 14,681 15,357 15,175 14,312
12/13 18,150 19,047 18,325 16,646
06/14 20,531 21,615 19,963 17,835
12/14 22,656 23,930 22,011 18,927
06/15 22,096 23,404 22,178 19,160
12/15 22,343 23,741 23,316 19,189
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 161 0 0 0
01/01/12 - 12/31/12 132 0 0 0
01/01/13 - 12/31/13 170 0 0 0
01/01/14 - 12/31/14 171 4 0 0
01/01/15 - 12/31/15 164 2 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 91 0 0 0
01/01/12 - 12/31/12 117 1 0 0
01/01/13 - 12/31/13 81 1 0 0
01/01/14 - 12/31/14 76 1 0 0
01/01/15 - 12/31/15 85 1 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 assets in common stocks that comprise the Index. The Index contains
securities of the NASDAQ-100 Index(R) that are not classified as "technology"
according to the Industry Classification Benchmark classification system and, as
a result, is a subset of the NASDAQ-100 Index(R). The NASDAQ-100 Index(R)
includes 100 of the largest domestic and international non-financial companies
listed on the Nasdaq(R) based on market capitalization. The Index is
equally-weighted and is rebalanced four times annually in March, June, September
and December. The Fund's shares are listed for trading on the Nasdaq(R). The
first day of secondary market trading in shares of the Fund was February 15,
2007.
----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (2/8/07) Ended (2/8/07)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV 4.75% 15.22% 9.09% 103.10% 116.79%
Market Value 4.49% 15.18% 9.07% 102.71% 116.48%
INDEX PERFORMANCE
NASDAQ-100 Ex-Tech Sector Index(SM) 5.46% 15.97% 9.79% 109.75% 129.47%
Russell 1000(R) Index 0.92% 12.44% 6.29% 79.75% 71.98%
----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 4.75% during the 12-month period covered by
this report. During the same period, the Russell 1000(R) Index ("benchmark")
generated a return of 0.92%. The Information Technology sector was the
top-performing and top-contributing sector with a 33.4% return and 3.0%
contribution. Activision Blizzard, Inc. was the leading security in the sector
with a 94.1% return and 1.2% contribution. The Industrials sector was the
worst-performing and worst-contributing sector with a -7.1% return and -0.9%
contribution. PACCAR, Inc. was the worst-performing security with a -27.1%
return and -0.5% contribution. On a relative basis, the Fund outperformed the
benchmark by 3.83%. The Information Technology sector, where the Fund held the
sector at an average weighting of 10.12% versus the benchmark's 19.4% and
outperformed the benchmark by 27.9%, created 1.9% of the outperformance. The
Industrials sector created -0.6% of drag on performance for the Fund by
underperforming the benchmark by -4.2%.
-----------------------------
Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Ex-Tech Sector
Index(SM) are trademarks of Nasdaq (which with its affiliates is referred to as
the Corporations) and are licensed for use by First Trust on behalf of the Fund.
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 (1) LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 43.55%
Health Care 23.51
Information Technology 10.80
Consumer Staples 9.43
Industrials 7.96
Telecommunication Services 4.75
-------
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
-----------------------------------------------------------
Celgene Corp. 1.66%
Vertex Pharmaceuticals, Inc. 1.64
PACCAR, Inc. 1.62
Tesla Motors, Inc. 1.61
Viacom, Inc., Class B 1.61
SBA Communications Corp., Class A 1.60
Illumina, Inc. 1.60
Fastenal Co. 1.60
Alexion Pharmaceuticals, Inc. 1.60
Mondelez International, Inc., Class A 1.59
-------
Total 16.13%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 8, 2007 - DECEMBER 31, 2015
First Trust NASDAQ-100 Ex-Technology NASDAQ-100 Ex-Tech Russell 1000(R)
Sector Index Fund Sector Index(SM) Index
02/07 $10,000 $10,000 $10,000
12/07 10,595 10,653 10,282
06/08 9,057 9,126 9,131
12/08 6,029 6,102 6,417
06/09 7,060 7,165 6,694
12/09 8,848 9,009 8,241
06/10 8,454 8,633 7,714
12/10 10,674 10,935 9,568
06/11 11,961 12,294 10,177
12/11 10,558 10,894 9,711
06/12 11,906 12,317 10,622
12/12 12,703 13,172 11,306
06/13 15,089 15,721 12,879
12/13 17,942 18,744 15,050
06/14 18,764 19,668 16,144
12/14 20,697 21,749 17,043
06/15 21,821 23,016 17,334
12/15 21,679 22,947 17,199
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 159 0 0 0
01/01/12 - 12/31/12 127 1 0 0
01/01/13 - 12/31/13 145 13 0 0
01/01/14 - 12/31/14 151 14 0 0
01/01/15 - 12/31/15 201 6 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%
01/01/11 - 12/31/11 93 0 0 0
01/01/12 - 12/31/12 111 11 0 0
01/01/13 - 12/31/13 82 12 0 0
01/01/14 - 12/31/14 79 7 1 0
01/01/15 - 12/31/15 42 3 0 0
Page 9
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
The First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (the "Fund")
seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the NASDAQ(R)
Clean Edge(R) Green Energy Index(SM) (the "Index"). The Fund will normally
invest at least 90% of its assets in common stocks that comprise the Index. The
Index is an equity index designed to track the performance of clean energy
companies that are publicly traded in the United States and includes companies
engaged in manufacturing, development, distribution and installation of emerging
clean-energy technologies including, but not limited to, solar photovoltaics,
biofuels and advanced batteries. The Index is a modified market capitalization
weighted index in which larger companies receive a larger Index weighting. The
Index weighting methodology also includes caps to prevent high concentrations
among larger alternative energy stocks. The Index is reconstituted semi-annually
in March and September and rebalanced quarterly. The Fund's shares are listed
for trading on the Nasdaq(R). The first day of secondary market trading in
shares of the Fund was February 14, 2007.
----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (2/8/07) Ended (2/8/07)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV -6.43% 0.14% -2.12% 0.68% -17.34%
Market Value -6.43% 0.14% -2.12% 0.69% -17.33%
INDEX PERFORMANCE
NASDAQ(R) Clean Edge(R) Green Energy Index(SM) -6.38% 0.06% -1.86% 0.29% -15.40%
Russell 2000(R) Index -4.41% 9.19% 5.22% 55.18% 57.29%
----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -6.43% during the 12-month period covered by
this report. During the same period, the Russell 2000(R) Index ("benchmark")
generated a return of -4.41%. Almost all of the Fund's performance came from the
Independent Power & Renewable Electricity Producer industry, where the Fund had
a 9.6% weighting, -28.4% return, and -5.6% contribution. TerraForm Power, Inc.
Class A, within the industry, contributed -2.6% to the Fund's return due to its
-61.4% return and 1.8% weighting. Codexis, Inc., which is a part of the
Chemicals industry within the Materials sector, caused the Chemicals industry to
be the top-performing industry held in the Fund with a 10.4% return and 0.03%
contribution. On a relative basis, the Fund underperformed the benchmark by
-2.02%. TerraForm Power, Inc. Class A, as mentioned earlier, caused -2.4% of
drag on performance due to its higher weighting in the Fund and poor
performance. Tesla Motors, Inc. reversed 1.9% of the underperformance due to its
high average weighting (8.0%) of the relatively well-performing security (7.9%).
-----------------------------
Nasdaq(R) and Clean Edge(R) are the registered trademarks (the "Marks") of
Nasdaq ("Nasdaq") and Clean Edge, Inc. ("Clean Edge(R)") respectively. Nasdaq
OMX and Clean Edge(R) are, collectively with their affiliates, the
"Corporations." The Marks are licensed for use by First Trust on behalf of the
Fund. 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 58.22%
Utilities 18.39
Industrials 11.94
Consumer Discretionary 7.67
Energy 2.62
Financials 0.93
Materials 0.23
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
First Solar, Inc. 8.28%
Tesla Motors, Inc. 7.66
ITC Holdings Corp. 7.49
Linear Technology Corp. 6.83
SolarCity Corp. 6.52
ON Semiconductor Corp. 5.03
SunPower Corp. 4.61
Hexcel Corp. 3.63
Cree, Inc. 3.55
Universal Display Corp. 3.38
-------
Total 56.98%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 8, 2007 - DECEMBER 31, 2015
First Trust NASDAQ(R) NASDAQ(R) Clean
Clean Edge(R) Green Edge(R) Green Energy Russell 2000(R)
Energy Index Fund Index(SM) Index
02/07 $10,000 $10,000 $10,000
12/07 15,430 15,522 9,489
06/08 12,350 12,472 8,599
12/08 5,595 5,675 6,283
06/09 6,920 7,038 6,449
12/09 8,045 8,213 7,990
06/10 6,665 6,824 7,834
12/10 8,210 8,434 10,136
06/11 7,640 7,879 10,765
12/11 4,825 4,992 9,713
06/12 4,670 4,822 10,542
12/12 4,801 4,927 11,301
06/13 7,177 7,346 13,093
12/13 9,111 9,329 15,688
06/14 10,479 10,732 16,188
12/14 8,834 9,037 16,455
06/15 9,481 9,700 17,237
12/15 8,266 8,460 15,729
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 125 5 0 0
01/01/12 - 12/31/12 37 6 1 0
01/01/13 - 12/31/13 168 5 0 0
01/01/14 - 12/31/14 122 3 0 0
01/01/15 - 12/31/15 160 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%
01/01/11 - 12/31/11 116 6 0 0
01/01/12 - 12/31/12 153 52 1 0
01/01/13 - 12/31/13 75 4 0 0
01/01/14 - 12/31/14 124 3 0 0
01/01/15 - 12/31/15 89 2 0 0
Page 11
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST S&P REIT INDEX FUND (FRI)
The First Trust S&P REIT Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the S&P United States REIT Index (the
"Index"). The Fund will normally invest at least 90% of its assets in common
stocks that comprise the Index. The Index measures the securitized U.S. real
estate investment trust ("REIT") market and maintains a constituency that
reflects the composition of the overall REIT market. The Index contains
securities selected for market representation according to geography and
property type. All securities in the Index satisfy the Index's liquidity, price
and market capitalization requirements. The Standard & Poor's Index Committee, a
team of Standard & Poor's economists and index analysts, maintains the Index.
The S&P Index Committee makes constituent changes on an as-needed basis. Share
adjustments that exceed 5% are made at the time of the change. Share adjustments
of less than 5% are made on a quarterly basis. 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 CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (5/8/07) Ended (5/8/07)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV 1.97% 11.25% 3.78% 70.45% 37.87%
Market Value 2.02% 11.26% 3.79% 70.49% 38.01%
INDEX PERFORMANCE
S&P United States REIT Index* 2.54% 11.85% N/A 75.06% N/A
FTSE EPRA/NAREIT North America Index 1.81% 11.05% 3.96% 68.88% 39.96%
Russell 3000(R) Index 0.48% 12.18% 5.88% 77.64% 63.86%
----------------------------------------------------------------------------------------------------------------------------------
* 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 24.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 1.97% during the 12-month period covered by
this report. During the same period, the Russell 3000(R) Index ("benchmark")
generated a return of 0.48%. Returns were relatively flat over the period among
the majority of REIT industries. Retail REITs were given the highest average
weighting at 25.8%, but due to the industry's meager return of 4.4%, its
contribution was limited to 1.1%. Self-Storage REITs had the best return of
40.5% and contributed 2.4% from its 6.5% weighting in the Fund. Lodging & Resort
REITs were the worst performers over the period with a -24.4% return and -1.9%
contribution. On a relative basis, the Fund outperformed the benchmark by 1.49%.
Residential REITs contributed to 2.6% of the relative outperformance by
allocating 16.0% more to the second best-performing REIT industry (16.7%).
Lodging & Resort REITs reversed -1.8% of Fund outperformance by having a 6.7%
greater allocation than the benchmark to the worst-performing REIT industry.
-----------------------------
Standard & Poor's(R), S&P(R) and S&P United States REIT Index are registered
trademarks of Standard & Poor's Financial Services LLC ("S&P") and have been
licensed for use by First Trust on behalf of the Fund. The Fund is not
sponsored, endorsed, sold or promoted by S&P or its affiliates, and S&P and its
affiliates make no representation, warranty or condition regarding the
advisability of buying, selling or holding shares of the Fund.
Page 12
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST S&P REIT INDEX FUND (FRI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
REIT CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Retail 25.14%
Residential 17.74
Office 13.68
Specialized 13.00
Health Care 12.50
Diversified 7.49
Hotel & Resort 5.74
Industrial 4.71
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Simon Property Group, Inc. 8.37%
Public Storage 5.07
Equity Residential 4.13
AvalonBay Communities, Inc. 3.51
Welltower, Inc. 3.35
Prologis, Inc. 3.13
Boston Properties, Inc. 2.72
Ventas, Inc. 2.61
HCP, Inc. 2.47
Vornado Realty Trust 2.46
-------
Total 37.82%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - DECEMBER 31, 2015
First Trust S&P REIT FTSE EPRA/NAREIT Russell 3000(R)
Index Fund North America Index Index
05/07 $10,000 $10,000 $10,000
12/07 8,093 8,206 9,811
06/08 7,739 7,843 8,728
12/08 4,947 4,872 6,151
06/09 4,319 4,381 6,405
12/09 6,333 6,442 7,889
06/10 6,679 6,772 7,412
12/10 8,090 8,287 9,225
06/11 8,899 9,163 9,811
12/11 8,729 8,965 9,319
06/12 10,007 10,276 10,188
12/12 10,247 10,593 10,849
06/13 10,871 11,091 12,374
12/13 10,434 10,728 14,489
06/14 12,245 12,560 15,495
12/14 13,523 13,748 16,308
06/15 12,667 12,915 16,624
12/15 13,789 13,997 16,386
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 149 1 0 0
01/01/12 - 12/31/12 159 0 0 0
01/01/13 - 12/31/13 130 0 0 0
01/01/14 - 12/31/14 193 0 0 0
01/01/15 - 12/31/15 130 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%
01/01/11 - 12/31/11 102 0 0 0
01/01/12 - 12/31/12 91 0 0 0
01/01/13 - 12/31/13 122 0 0 0
01/01/14 - 12/31/14 59 0 0 0
01/01/15 - 12/31/15 122 0 0 0
Page 13
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE WATER INDEX FUND (FIW)
The First Trust ISE Water 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 ISE Water Index(TM) (the "Index"). The
Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index is a modified market capitalization weighted index
comprised of 36 stocks that derive a substantial portion of their revenues from
the potable and wastewater industries. The Index is rebalanced on a semi-annual
basis. The Fund's shares are listed for trading on the NYSE Arca. The first day
of secondary market trading in shares of the Fund was May 11, 2007.
----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (5/8/07) Ended (5/8/07)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV -9.81% 7.24% 5.69% 41.84% 61.38%
Market Value -9.84% 7.20% 5.68% 41.55% 61.27%
INDEX PERFORMANCE
ISE Water Index(TM) -9.25% 7.98% 6.40% 46.78% 71.03%
Russell 3000(R) Index 0.48% 12.18% 5.88% 77.64% 63.86%
----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -9.81% during the 12-month period covered by
this report. During the same period, the benchmark Russell 3000(R) Index
("benchmark") generated a return of 0.48%. Almost all of the Fund's performance
can be attributed to the Industrials sector, where the Fund held an average
weighting of 59.2%, returned -9.8%, and contributed -5.8% to return. Several
names within the Industrials sector contributed to the poor performance. Most
notable was Northwest Pipe Co., with a -62.8% return and -2.9% contribution. The
Health Care sector was the top-performing sector with a 1.1% return. The Health
Care sector's contribution was limited to 0.1% due to its smaller average
weighting of 4.2% in the Fund over the period. On a relative basis, the Fund
underperformed the benchmark by -10.29%. As mentioned previously, the
Industrials sector contributed the most to the Fund's relative underperformance
against the benchmark. The Fund experienced -5.8% of drag due to its 48.3%
greater allocation to the poor-performing sector. No individual sector had a
positive relative contribution, however the Materials sector had the least
negative effect with -0.4% of relative underperformance.
-----------------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE Water Index(TM)" are
trademarks of the International Securities Exchange, LLC and have been licensed
for use for certain purposes by First Trust on behalf of the Fund. The Fund,
based on the ISE Water Index(TM), 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 ISE WATER INDEX FUND (FIW) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 58.34%
Utilities 23.74
Information Technology 5.82
Health Care 5.15
Materials 4.94
Financials 2.01
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Lindsay Corp. 4.22%
American Water Works Co., Inc. 4.13
California Water Service Group 4.08
Energy Recovery, Inc. 4.05
Aqua America, Inc. 4.03
Cia de Saneamento Basico do Estado de
Sao Paulo, ADR 4.00
Xylem, Inc. 3.95
Badger Meter, Inc. 3.93
Rexnord Corp. 3.84
Watts Water Technologies, Inc.,
Class A 3.63
-------
Total 39.86%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - DECEMBER 31, 2015
First Trust ISE ISE Water Russell 3000(R)
Water Index Fund Index(TM) Index
05/07 $10,000 $10,000 $10,000
12/07 11,212 11,260 9,811
06/08 10,992 11,056 8,728
12/08 7,915 7,987 6,151
06/09 8,168 8,276 6,405
12/09 9,522 9,681 7,889
06/10 8,989 9,168 7,412
12/10 11,378 11,653 9,225
06/11 11,910 12,243 9,811
12/11 10,738 11,076 9,319
06/12 11,803 12,225 10,188
12/12 13,619 14,153 10,849
06/13 14,585 15,220 12,374
12/13 17,830 18,667 14,489
06/14 18,338 19,251 15,495
12/14 17,894 18,847 16,308
06/15 16,709 17,652 16,624
12/15 16,138 17,103 16,386
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 131 0 0 0
01/01/12 - 12/31/12 121 1 0 0
01/01/13 - 12/31/13 197 0 0 0
01/01/14 - 12/31/14 195 0 0 0
01/01/15 - 12/31/15 133 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%
01/01/11 - 12/31/11 121 0 0 0
01/01/12 - 12/31/12 127 1 0 0
01/01/13 - 12/31/13 55 0 0 0
01/01/14 - 12/31/14 56 1 0 0
01/01/15 - 12/31/15 119 0 0 0
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (FCG)
The First Trust ISE-Revere Natural Gas 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 ISE-REVERE Natural Gas Index(TM)
(the "Index"). The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Index is an equal-weighted index
comprised of exchange-listed companies that derive a substantial portion of
their revenues from the exploration and production of natural gas. The Index is
constructed by establishing the universe of stocks listed in the U.S. of
companies involved in the natural gas exploration and production industries and
then eliminates stocks whose natural gas proven reserves do not meet certain
requirements. The Index then ranks all candidate stocks using four different
methods and, often averaging the rankings, selects the top 30 stocks based on
the final rank. The Index is rebalanced on a quarterly basis. The Fund's shares
are listed for trading on the NYSE Arca. The first day of secondary market
trading in shares of the Fund was May 11, 2007.
----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (5/8/07) Ended (5/8/07)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV -59.10% -24.89% -15.26% -76.09% -76.11%
Market Value -59.01% -24.89% -15.23% -76.10% -76.06%
INDEX PERFORMANCE
ISE-REVERE Natural Gas Index(TM) -59.68% -24.83% -14.96% -75.99% -75.39%
S&P Composite 1500 Energy Index -22.07% -0.76% 0.70% -3.75% 6.21%
Russell 3000(R) Index 0.48% 12.18% 5.88% 77.64% 63.86%
----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -59.10% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500 Energy Index
("benchmark") generated a return of -22.07%. Crude Oil Futures fell roughly
-38.2% and Natural Gas Futures fell roughly -36.1% during the period covered by
this report. The sharp decline in oil and natural gas prices greatly affected
the return of the Fund. Magnum Hunter Resources Corp. was held at an average
weighting of 2.6% over the period and was the worst performer with a -99.1%
return and -4.6% contribution. Newfield Exploration Co., which was held at an
average weighting of 0.9%, was the top-performing security held in the Fund with
a 22.7% return and 0.4% contribution. On a relative basis, the Fund
underperformed the benchmark by -37.03%. The poor relative performance can be
attributed to the Fund's concentration in natural gas securities which were more
affected by the decline in oil and natural gas prices than other Energy
industries.
-----------------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE-REVERE Natural Gas
Index(TM)" are trademarks of the International Securities Exchange, LLC and have
been licensed for use for certain purposes by First Trust on behalf of the Fund.
The Fund, based on the ISE-REVERE Natural Gas Index(TM), 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 ISE-REVERE NATURAL GAS INDEX FUND (FCG) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SUB-INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Oil & Gas Exploration & Production 96.57%
Integrated Oil & Gas 3.43
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
EXCO Resources, Inc. 4.37%
Southwestern Energy Co. 4.11
Rice Energy, Inc. 4.08
Vanguard Natural Resources LLC 3.97
Gulfport Energy Corp. 3.94
Antero Resources Corp. 3.83
QEP Resources, Inc. 3.83
Cabot Oil & Gas Corp. 3.75
Range Resources Corp. 3.69
Chesapeake Energy Corp. 3.69
-------
Total 39.26%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - DECEMBER 31, 2015
First Trust ISE-Revere ISE-REVERE Natural Russell 3000(R) S&P Composite 1500
Natural Gas Index Fund Gas Index(TM) Index Energy Index
05/07 $10,000 $10,000 $10,000 $10,000
12/07 11,166 11,213 9,804 12,170
06/08 15,755 15,942 8,721 13,578
12/08 5,967 6,016 6,147 7,810
06/09 6,454 6,518 6,405 7,740
12/09 8,903 9,017 7,889 9,092
06/10 7,752 7,891 7,412 8,016
12/10 9,992 10,254 9,225 11,036
06/11 11,012 11,342 9,811 12,304
12/11 9,308 9,620 9,319 11,469
06/12 8,426 8,735 10,188 11,132
12/12 8,051 8,375 10,849 11,967
06/13 8,290 8,639 12,374 13,130
12/13 10,075 10,530 14,489 15,006
06/14 12,210 12,790 15,495 16,951
12/14 5,842 6,105 16,308 13,630
06/15 4,980 5,159 16,624 12,991
12/15 2,389 2,461 16,386 10,621
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 151 0 0 0
01/01/12 - 12/31/12 151 0 0 0
01/01/13 - 12/31/13 149 0 0 0
01/01/14 - 12/31/14 140 1 0 0
01/01/15 - 12/31/15 155 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%
01/01/11 - 12/31/11 101 0 0 0
01/01/12 - 12/31/12 99 0 0 0
01/01/13 - 12/31/13 103 0 0 0
01/01/14 - 12/31/14 111 0 0 0
01/01/15 - 12/31/15 93 3 0 0
Page 17
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE CHINDIA INDEX FUND (FNI)
The First Trust ISE Chindia 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 ISE ChIndia Index(TM) (the "Index"). The
Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index is a non-market capitalization weighted portfolio
of 50 American Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs")
and/or stocks selected from a universe of all listed ADRs, ADSs, and/or stocks
of companies from China and India currently trading on a U.S. exchange. The
Index is rebalanced on a semi-annual basis. The Fund's shares are listed for
trading on the NYSE Arca. The first day of secondary market trading in shares of
the Fund was May 11, 2007.
----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (5/8/07) Ended (5/8/07)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV -0.32% 3.73% 5.13% 20.07% 54.12%
Market Value -0.39% 3.70% 5.12% 19.93% 54.06%
INDEX PERFORMANCE
ISE ChIndia Index(TM) 0.15% 4.12% 5.67% 22.35% 61.18%
Russell 3000(R) Index 0.48% 12.18% 5.88% 77.64% 63.86%
MSCI Emerging Markets Index -14.92% -4.81% -0.18% -21.83% -1.55%
----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -0.32% during the 12-month period covered by
this report. During the same period, the MSCI Emerging Markets Index
("benchmark") generated a return of -14.92%. Chinese American Depositary
Receipts ("ADRs") contributed 3.3% to the Fund's return over the period with an
average weighting of 27.7%. The Consumer Discretionary sector was the
top-contributing sector with a 1.9% contribution. The sector returned 17.8% and
was held at an average weighting of 8.3%. Indian holdings were the largest
allocated holdings over the period comprising an average 41.1% of the Fund's
weighting. On a relative basis, the Fund outperformed the benchmark by 14.60%.
Chinese holdings generated 8.7% of the outperformance from the Fund's 27.3%
greater allocation and 49.7% better return relative to the benchmark. Among the
Information Technology sector in China, NetEase, Inc., had a return of 85.3% and
created 2.1% of outperformance due to the Fund's larger allocation to this
holding which returned -57.3% for the 12-month period covered by this report.
Among the Materials sector in India, Vedanta Ltd., created -1.1% of
underperformance due to the Fund having a 1.5% allocation relative to the
benchmark.
-----------------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE ChIndia Index(TM)"
are trademarks of the International Securities Exchange, LLC and have been
licensed for use for certain purposes by First Trust on behalf of the Fund. The
Fund, based on the ISE ChIndia Index(TM), 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 ISE CHINDIA INDEX FUND (FNI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 35.07%
Consumer Discretionary 28.09
Financials 12.01
Energy 11.49
Health Care 5.43
Materials 3.73
Telecommunication Services 2.02
Industrials 1.48
Utilities 0.68
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
HDFC Bank Ltd., ADR 7.27%
Tata Motors Ltd., ADR 7.20
JD.com, Inc., ADR 7.01
NetEase, Inc., ADR 6.97
Infosys Ltd., ADR 6.85
PetroChina Co., Ltd., ADR 6.81
Melco Crown Entertainment Ltd., ADR 4.21
ICICI Bank Ltd., ADR 4.07
Dr. Reddy's Laboratories Ltd., ADR 4.00
CNOOC Ltd., ADR 3.98
-------
Total 58.37%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - DECEMBER 31, 2015
First Trust ISE Chindia ISE ChIndia Russell 3000(R) MSCI Emerging
Index Fund Index(TM) Index Markets Index
05/07 $10,000 $10,000 $10,000 $10,000
12/07 13,873 13,952 9,804 12,715
06/08 9,985 10,059 8,721 11,220
12/08 5,968 6,031 6,147 5,934
06/09 8,329 8,451 6,405 8,071
12/09 10,836 11,031 7,889 10,593
06/10 10,540 10,767 7,412 9,939
12/10 12,836 13,175 9,225 12,592
06/11 13,047 13,466 9,811 12,703
12/11 9,497 9,771 9,319 10,273
06/12 10,069 10,375 10,188 10,677
12/12 11,121 11,483 10,849 12,145
06/13 11,258 11,659 12,374 10,983
12/13 15,103 15,665 14,489 11,829
06/14 16,047 16,680 15,495 12,555
12/14 15,461 16,096 16,308 11,571
06/15 16,560 17,273 16,624 11,912
12/15 15,411 16,121 16,386 9,844
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 65 1 0 0
01/01/12 - 12/31/12 63 1 0 0
01/01/13 - 12/31/13 66 0 0 0
01/01/14 - 12/31/14 96 0 0 0
01/01/15 - 12/31/15 147 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%
01/01/11 - 12/31/11 186 0 0 0
01/01/12 - 12/31/12 175 11 0 0
01/01/13 - 12/31/13 185 1 0 0
01/01/14 - 12/31/14 155 1 0 0
01/01/15 - 12/31/15 105 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 assets in common stocks that comprise the Index. The Index includes a
subset of banks and thrifts or their holding companies listed on Nasdaq(R). The
Index is jointly owned and was developed by Nasdaq(R) and the American Bankers
Association ("ABA"). For the purposes of the Index, a "community bank" is
considered to be all U.S. banks and thrifts or their holding companies listed on
Nasdaq(R) excluding the 50 largest U.S. banks by asset size. Also excluded are
banks that have an international specialization and those banks that have a
credit-card specialization, as screened by the ABA based on the most recent data
from the FDIC. Banks with an international specialization are those institutions
with assets greater than $10 billion and more than 25% of total assets in
foreign offices. Banks with a credit-card specialization are those institutions
with credit-card loans plus securitized receivables in excess of 50% of total
assets plus securitized receivables. Securities in the Index must have a market
capitalization of at least $200 million and a three-month average daily trading
volume of at least $500 thousand. The Index is rebalanced quarterly and
reconstituted semi-annually. The Fund's shares are listed for trading on the
Nasdaq(R). The first day of secondary market trading in shares of the Fund was
July 1, 2009.
----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (6/29/09) Ended (6/29/09)
12/31/15 12/31/15 to 12/31/15 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV 7.88% 10.95% 12.39% 68.11% 113.85%
Market Value 7.82% 10.92% 12.40% 67.88% 113.97%
INDEX PERFORMANCE
NASDAQ OMX(R) ABA Community Bank Index(SM) 8.53% 11.66% 13.11% 73.54% 122.93%
S&P Composite 1500 Financials Sector Index -0.72% 10.57% 13.41% 65.25% 126.75%
Russell 3000(R) Index 0.48% 12.18% 15.40% 77.64% 153.91%
----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 7.88% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500 Financials Index
("benchmark") generated a return of -0.72%. The Financials sector was relatively
flat compared to the other GICS sectors over the period. Regional Banks from
Arkansas were the top-contributing banks over the period with a 1.2%
contribution and 29.1% return. Alabama regional banks were the top-performing
holdings with a 44.9% return. Louisiana regional banks were the worst-performing
holdings with a -9.6% return. The top-returning banks were BNC Bancorp (48.5%),
Servisfirst Bancshares, Inc. (44.9%), and Enterprise Financial Service (44.8%).
The lowest-returning banks were Bancorp, Inc. (-43.4%), Green Bancorp, Inc.
(-29.9%), and Peoples Bancorp, Inc. (-25.9%).
-----------------------------
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 on behalf of the
Fund. 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 87.02%
Thrifts & Mortgage Finance 12.66
IT Services 0.32
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Signature Bank 4.23%
East West Bancorp, Inc. 3.24
Zions Bancorporation 3.02
TFS Financial Corp. 2.96
PacWest Bancorp 2.81
Bank of the Ozarks, Inc. 2.37
Investors Bancorp, Inc. 2.28
Commerce Bancshares, Inc. 2.25
BOK Financial Corp. 2.20
Umpqua Holdings Corp. 1.90
-------
Total 27.26%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 29, 2009 - DECEMBER 31, 2015
First Trust NASDAQ(R) ABA NASDAQ OMX(R) ABA S&P Composite 1500 Russell 3000(R)
Community Bank Index Fund Community Bank Index(SM) Financials Sector Index Index
06/09 $10,000 $10,000 $10,000 $10,000
12/09 11,280 11,318 12,112 12,224
06/10 11,438 11,505 11,744 11,484
12/10 12,721 12,846 13,722 14,293
06/11 12,520 12,688 13,420 15,201
12/11 11,898 12,095 11,662 14,439
06/12 13,081 13,343 13,227 15,785
12/12 13,507 13,817 14,806 16,809
06/13 16,006 16,427 17,584 19,172
12/13 19,302 19,873 19,879 22,448
06/14 19,296 19,929 20,907 24,006
12/14 19,827 20,537 22,839 25,266
06/15 21,637 22,484 22,892 25,761
12/15 21,385 22,293 22,677 25,388
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, 2015
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, 2011 through
December 31, 2015. 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%
01/01/11 - 12/31/11 135 2 0 0
01/01/12 - 12/31/12 100 17 1 0
01/01/13 - 12/31/13 139 24 0 0
01/01/14 - 12/31/14 115 9 0 0
01/01/15 - 12/31/15 137 5 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%
01/01/11 - 12/31/11 111 4 0 0
01/01/12 - 12/31/12 114 18 0 0
01/01/13 - 12/31/13 72 17 0 0
01/01/14 - 12/31/14 116 12 0 0
01/01/15 - 12/31/15 110 0 0 0
Page 21
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
The First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge 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 CBOE(R) VIX(R) Tail
Hedge Index (the "Index"). The Fund will normally invest at least 90% of its
assets in common stocks and call options included in the Index. The Index is
composed of each of the equity securities comprising the S&P 500(R) Index and an
out-of-the-money call option position on the Chicago Board Options Exchange
Market Volatility Index (the "VIX Index"). The VIX Index is quoted in percentage
points, is calculated and disseminated in real-time by The Chicago Board Options
Exchange ("CBOE(R)") and is a way of measuring the market's expectation of
volatility in the S&P 500(R) over the next 30-day period. The Index, and in turn
the Fund, tracks the performance of an S&P 500(R) stock portfolio (with
dividends reinvested), and call options on the VIX Index. The amount of the
Index allocated to call options on the VIX Index is reevaluated and rebalanced
each month, depending on the level of forward expected volatility in the S&P
500(R) Index, as measured by the closest to maturity VIX Index futures. The
Index is designed to help address extreme downward movements in the market by
hedging its portfolio through purchasing call options on the VIX Index, or "tail
hedging." The Index is reconstituted and rebalanced monthly. 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 August 30, 2012.
----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (8/29/12) Inception (8/29/12)
12/31/15 to 12/31/15 to 12/31/15
FUND PERFORMANCE
NAV -5.88% 7.49% 27.28%
Market Value -5.74% 7.49% 27.28%
INDEX PERFORMANCE
CBOE(R) VIX(R) Tail Hedge Index -5.53% 7.95% 29.10%
S&P 500(R) Index 1.38% 14.14% 55.54%
----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -5.88% 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 1.38%. Greater volatility, as measured by
the VIX Index, through much of the year had the Fund invested in VIX Index
options. During 10 of the 12 months of 2015, the Fund acquired a VIX Index
option at a 1.0% weighting of the Fund's NAV at the time of rebalance. The
September 16, 2015 option expired in the money and created relative
outperformance against the benchmark. During the other nine months, the options
expired out of the money.
-----------------------------
S&P(R) and S&P 500(R) are registered trademarks of Standard & Poor's Financial
Services LLC ("SPFS"); and CBOE(R), Chicago Board Options Exchange(R), CBOE
Volatility Index(R) and VIX(R) are registered trademarks of Chicago Board
Options Exchange, Incorporated ("CBOE(R)"); and these trademarks have been
licensed for use by the S&P Dow Jones Indices LLC and sublicensed for certain
purposes by First Trust.
Page 22
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 20.69%
Financials 16.48
Health Care 15.15
Consumer Discretionary 12.88
Consumer Staples 10.07
Industrials 10.06
Energy 6.50
Utilities 2.98
Materials 2.76
Telecommunication Services 2.43
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Apple, Inc. 3.28%
Microsoft Corp. 2.48
Exxon Mobil Corp. 1.81
General Electric Co. 1.64
Johnson & Johnson 1.59
Amazon.com, Inc. 1.45
Wells Fargo & Co. 1.41
Berkshire Hathaway, Inc., Class B 1.38
JPMorgan Chase & Co. 1.36
Facebook, Inc., Class A 1.33
-------
Total 17.73%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 29, 2012 - DECEMBER 31, 2015
First Trust CBOE(R) S&P 500(R) CBOE(R) VIX(R) S&P 500(R)
VIX(R) Tail Hedge Fund Tail Hdge Index Index
08/12 $10,000 $10,000 $10,000
12/12 9,863 9,880 10,193
06/13 10,686 10,719 11,602
12/13 11,738 11,799 13,494
06/14 12,251 12,345 14,457
12/14 13,525 13,666 15,342
06/15 13,175 13,320 15,531
12/15 12,730 12,910 15,554
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, 2015
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 30, 2012 (commencement
of trading) through December 31, 2015. 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%
08/30/12 - 12/31/12 57 3 0 0
01/01/13 - 12/31/13 155 5 0 0
01/01/14 - 12/31/14 152 2 0 1
01/01/15 - 12/31/15 98 1 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%
08/30/12 - 12/31/12 21 1 1 0
01/01/13 - 12/31/13 92 0 0 0
01/01/14 - 12/31/14 95 2 0 0
01/01/15 - 12/31/15 148 1 1 2
Page 23
--------------------------------------------------------------------------------
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 the 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 the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike a 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 24
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2015 (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 ISE Water Index
Fund, First Trust ISE-Revere Natural Gas Index Fund, First Trust ISE Chindia
Index Fund, First Trust NASDAQ(R)ABA Community Bank Index Fund, or First Trust
CBOE(R) S&P 500(R) VIX(R) Tail Hedge 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, 2015.
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, 2015 DECEMBER 31, 2015 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
Actual $1,000.00 $ 998.60 0.60% $3.02
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
Actual $1,000.00 $1,011.20 0.60% $3.04
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
Actual $1,000.00 $ 993.50 0.60% $3.01
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 $ 871.80 0.60% $2.83
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 $1,088.60 0.48% $2.53
Hypothetical (5% return before expenses) $1,000.00 $1,022.79 0.48% $2.45
FIRST TRUST ISE WATER INDEX FUND (FIW)
Actual $1,000.00 $ 965.80 0.59% $2.92
Hypothetical (5% return before expenses) $1,000.00 $1,022.23 0.59% $3.01
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (FCG)
Actual $1,000.00 $ 479.80 0.60% $2.24
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
Page 25
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
DECEMBER 31, 2015 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2015 DECEMBER 31, 2015 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------
FIRST TRUST ISE CHINDIA INDEX FUND (FNI)
Actual $1,000.00 $ 930.60 0.60% $2.92
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 $ 988.60 0.60% $3.01
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
Actual $1,000.00 $ 966.20 0.60% $2.97
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
(a) These expense ratios reflect 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,
2015 through December 31, 2015), multiplied by 184/365 (to reflect the
one-half year period).
Page 26
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AIRLINES -- 1.0%
127,067 American Airlines Group, Inc. $ 5,381,288
--------------
AUTOMOBILES -- 1.0%
22,901 Tesla Motors, Inc. (a) (b) 5,496,469
--------------
BEVERAGES -- 1.0%
35,669 Monster Beverage Corp. (b) 5,313,254
--------------
BIOTECHNOLOGY -- 9.1%
28,550 Alexion Pharmaceuticals, Inc. (b) 5,445,913
32,786 Amgen, Inc. 5,322,151
17,757 Biogen, Inc. (b) 5,439,857
50,436 BioMarin Pharmaceutical, Inc. (b) 5,283,675
47,346 Celgene Corp. (b) 5,670,157
51,713 Gilead Sciences, Inc. 5,232,838
46,004 Incyte Corp. (b) 4,989,134
9,572 Regeneron Pharmaceuticals,
Inc. (b) 5,196,352
44,543 Vertex Pharmaceuticals, Inc. (b) 5,604,846
--------------
48,184,923
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.0%
45,016 Stericycle, Inc. (b) 5,428,930
--------------
COMMUNICATIONS EQUIPMENT
-- 2.1%
198,750 Cisco Systems, Inc. 5,397,056
110,287 QUALCOMM, Inc. 5,512,696
--------------
10,909,752
--------------
FOOD & STAPLES RETAILING -- 3.0%
32,956 Costco Wholesale Corp. 5,322,394
63,213 Walgreens Boots Alliance, Inc. 5,382,903
158,772 Whole Foods Market, Inc. 5,318,862
--------------
16,024,159
--------------
FOOD PRODUCTS -- 2.0%
74,101 Kraft Heinz (The) Co. 5,391,589
121,372 Mondelez International, Inc.,
Class A 5,442,320
--------------
10,833,909
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 1.0%
9,730 Intuitive Surgical, Inc. (b) 5,314,137
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 2.0%
61,010 Express Scripts Holding Co. (b) 5,332,884
34,033 Henry Schein, Inc. (b) 5,383,680
--------------
10,716,564
--------------
HEALTH CARE TECHNOLOGY -- 1.0%
88,196 Cerner Corp. (b) 5,306,753
--------------
HOTELS, RESTAURANTS & LEISURE
-- 3.0%
81,039 Marriott International, Inc.,
Class A (a) 5,432,854
90,905 Norwegian Cruise Line Holdings
Ltd. (b) 5,327,033
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE
(CONTINUED)
89,427 Starbucks Corp. $ 5,368,303
--------------
16,128,190
--------------
INTERNET & CATALOG RETAIL -- 7.8%
7,864 Amazon.com, Inc. (b) 5,315,199
108,645 Ctrip.com International Ltd.,
ADR (b) 5,033,523
41,594 Expedia, Inc. 5,170,134
161,828 JD.com, Inc., ADR (b) 5,221,381
100,209 Liberty Interactive Corp.,
Class A (b) 2,737,710
60,185 Liberty Ventures, Series A (b) 2,714,945
43,959 Netflix, Inc. (b) 5,028,030
4,058 Priceline Group (The), Inc. (b) 5,173,747
62,371 TripAdvisor, Inc. (b) 5,317,128
--------------
41,711,797
--------------
INTERNET SOFTWARE & SERVICES
-- 5.9%
100,152 Akamai Technologies, Inc. (b) 5,271,000
3,455 Alphabet, Inc., Class A (b) 2,688,025
3,538 Alphabet, Inc., Class C (c) 2,684,917
27,374 Baidu, Inc., ADR (b) 5,174,781
190,290 eBay, Inc. (b) 5,229,169
50,081 Facebook, Inc., Class A (b) 5,241,477
158,988 Yahoo!, Inc. (b) 5,287,941
--------------
31,577,310
--------------
IT SERVICES -- 5.0%
62,645 Automatic Data Processing, Inc. 5,307,284
88,568 Cognizant Technology Solutions
Corp., Class A (b) 5,315,851
57,110 Fiserv, Inc. (b) 5,223,281
99,847 Paychex, Inc. 5,280,908
148,683 PayPal Holdings, Inc. (b) 5,382,325
--------------
26,509,649
--------------
LEISURE PRODUCTS -- 1.0%
199,961 Mattel, Inc. 5,432,940
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.0%
28,507 Illumina, Inc. (b) 5,471,776
--------------
MACHINERY -- 1.1%
116,216 PACCAR, Inc. 5,508,638
--------------
MEDIA -- 9.1%
29,505 Charter Communications, Inc.,
Class A (a) (b) 5,402,365
92,645 Comcast Corp., Class A 5,227,957
100,902 Discovery Communications, Inc.,
Class A (b) 2,692,065
105,354 Discovery Communications, Inc.,
Class C (b) 2,657,028
91,762 DISH Network Corp., Class A (b) 5,246,951
66,917 Liberty Global PLC, Class A (b) 2,834,604
69,410 Liberty Global PLC, Series C (b) 2,829,846
68,990 Liberty Media Corp., Class A (b) 2,707,858
71,382 Liberty Media Corp., Class C (b) 2,718,227
See Notes to Financial Statements Page 27
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDIA (CONTINUED)
1,316,531 Sirius XM Holdings, Inc. (b) $ 5,358,281
97,169 Twenty-First Century Fox, Inc.,
Class A 2,639,110
94,546 Twenty-First Century Fox, Inc.,
Class B 2,574,488
133,155 Viacom, Inc., Class B 5,480,660
--------------
48,369,440
--------------
MULTILINE RETAIL -- 1.0%
69,045 Dollar Tree, Inc. (b) 5,331,655
--------------
PHARMACEUTICALS -- 2.0%
85,959 Endo International PLC (b) 5,262,410
98,518 Mylan N.V. (b) 5,326,868
--------------
10,589,278
--------------
PROFESSIONAL SERVICES -- 1.0%
69,760 Verisk Analytics, Inc. (b) 5,363,149
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 13.9%
94,802 Analog Devices, Inc. 5,244,447
291,184 Applied Materials, Inc. 5,436,405
37,338 Avago Technologies Ltd. 5,419,611
153,888 Intel Corp. 5,301,441
78,111 KLA-Tencor Corp. 5,416,998
67,780 Lam Research Corp. 5,383,088
123,020 Linear Technology Corp. 5,224,659
140,266 Maxim Integrated Products, Inc. 5,330,108
362,398 Micron Technology, Inc. (b) 5,131,556
161,903 NVIDIA Corp. 5,336,323
62,033 NXP Semiconductors N.V. (b) 5,226,280
68,150 Skyworks Solutions, Inc. 5,235,964
95,274 Texas Instruments, Inc. 5,221,968
112,532 Xilinx, Inc. 5,285,628
--------------
74,194,476
--------------
SOFTWARE -- 10.0%
135,718 Activision Blizzard, Inc. 5,253,644
56,826 Adobe Systems, Inc. (b) 5,338,234
87,784 Autodesk, Inc. (b) 5,348,679
185,617 CA, Inc. 5,301,221
64,708 Check Point Software
Technologies Ltd. (b) 5,265,937
70,241 Citrix Systems, Inc. (b) 5,313,732
75,323 Electronic Arts, Inc. (b) 5,176,197
54,798 Intuit, Inc. 5,288,007
95,648 Microsoft Corp. 5,306,551
259,662 Symantec Corp. 5,452,902
--------------
53,045,104
--------------
SPECIALTY RETAIL -- 4.9%
104,641 Bed Bath & Beyond, Inc. (b) 5,048,928
20,800 O'Reilly Automotive, Inc. (b) 5,271,136
98,665 Ross Stores, Inc. 5,309,164
61,216 Tractor Supply Co. 5,233,968
28,389 Ulta Salon, Cosmetics &
Fragrance, Inc. (b) 5,251,965
--------------
26,115,161
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 5.0%
49,011 Apple, Inc. $ 5,158,898
191,260 NetApp, Inc. 5,074,128
70,708 SanDisk Corp. 5,373,101
153,148 Seagate Technology PLC 5,614,406
88,785 Western Digital Corp. 5,331,539
--------------
26,552,072
--------------
TRADING COMPANIES &
DISTRIBUTORS -- 1.0%
133,425 Fastenal Co. (a) 5,446,409
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 3.1%
52,190 SBA Communications Corp.,
Class A (b) 5,483,603
136,512 T-Mobile US, Inc. (b) 5,340,350
167,345 Vodafone Group PLC, ADR 5,398,550
--------------
16,222,503
--------------
TOTAL COMMON STOCKS -- 100.0% 532,479,685
(Cost $515,167,222) --------------
MONEY MARKET FUNDS -- 1.5%
7,907,841 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.12% (d) (e) 7,907,841
(Cost $7,907,841) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.4%
$ 562,677 JPMorgan Chase & Co., 0.23% (d),
dated 12/31/15, due 01/04/16,
with a maturity value of
$562,691. Collateralized by U.S.
Treasury Notes, interest rates
of 1.250% to 1.625%, due
04/30/19 to 02/29/20. The value
of the collateral including
accrued interest is
$575,663. (e) 562,677
7,101,719 RBC Capital Markets LLC,
0.26% (d), dated 12/31/15, due
01/04/16, with a maturity value
of $7,101,924. Collateralized by
U.S. Treasury Notes, interest
rates of 1.625% to 1.750%, due
06/30/20 to 10/31/20. The value
of the collateral including
accrued interest is
$7,251,313. (e) 7,101,719
--------------
TOTAL REPURCHASE AGREEMENTS
-- 1.4% 7,664,396
(Cost $7,664,396) --------------
TOTAL INVESTMENTS -- 102.9% 548,051,922
(Cost $530,739,459) (f)
NET OTHER ASSETS AND
LIABILITIES -- (2.9)% (15,373,108)
--------------
NET ASSETS -- 100.0% $ 532,678,814
==============
Page 28 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
(a) All or a portion of this security is on loan (see Note 2E - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $15,149,145 and the total value of the collateral held by
the Fund is $15,572,237.
(b) Non-income producing security.
(c) Non-income producing security which makes payment-in-kind ("PIK")
distributions. For the year ended December 31, 2015, the Fund received 16
PIK shares of Alphabet, Inc., Class C.
(d) Interest rate shown reflects yield as of December 31, 2015.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $535,781,907. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$50,956,011 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$38,685,996.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 532,479,685 $ -- $ --
Money Market Funds 7,907,841 -- --
Repurchase Agreements -- 7,664,396 --
-----------------------------------------------
Total Investments $ 540,387,526 $ 7,664,396 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
---------------------------------
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 2D - 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) $ 15,149,145
Non-cash Collateral(2) (15,149,145)
--------------
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, 2015, 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) $ 7,664,396
Non-cash Collateral(4) (7,664,396)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At December 31, 2015, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 29
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
COMMUNICATIONS EQUIPMENT
-- 5.7%
314,740 Cisco Systems, Inc. $ 8,546,765
174,633 QUALCOMM, Inc. 8,729,030
--------------
17,275,795
--------------
HEALTH CARE TECHNOLOGY -- 2.7%
139,753 Cerner Corp. (a) 8,408,938
--------------
INTERNET SOFTWARE & SERVICES
-- 13.8%
158,618 Akamai Technologies, Inc. (a) 8,348,065
5,465 Alphabet, Inc., Class A (a) 4,251,825
5,598 Alphabet, Inc., Class C (b) 4,248,210
43,350 Baidu, Inc., ADR (a) 8,194,884
79,325 Facebook, Inc., Class A (a) 8,302,155
251,878 Yahoo!, Inc. (a) 8,377,462
--------------
41,722,601
--------------
IT SERVICES -- 2.8%
140,200 Cognizant Technology Solutions
Corp., Class A (a) 8,414,804
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 38.8%
150,280 Analog Devices, Inc. 8,313,490
460,659 Applied Materials, Inc. 8,600,503
59,163 Avago Technologies Ltd. 8,587,509
243,760 Intel Corp. 8,397,532
123,747 KLA-Tencor Corp. 8,581,854
107,404 Lam Research Corp. 8,530,026
194,882 Linear Technology Corp. 8,276,639
222,032 Maxim Integrated Products, Inc. 8,437,216
573,760 Micron Technology, Inc. (a) 8,124,442
256,419 NVIDIA Corp. 8,451,570
98,351 NXP Semiconductors N.V. (a) 8,286,072
107,807 Skyworks Solutions, Inc. 8,282,812
150,852 Texas Instruments, Inc. 8,268,198
178,186 Xilinx, Inc. 8,369,396
--------------
117,507,259
--------------
SOFTWARE -- 22.3%
90,019 Adobe Systems, Inc. (a) 8,456,385
138,890 Autodesk, Inc. (a) 8,462,568
294,080 CA, Inc. 8,398,925
102,483 Check Point Software
Technologies Ltd. (a) 8,340,067
111,016 Citrix Systems, Inc. (a) 8,398,360
86,815 Intuit, Inc. 8,377,647
151,365 Microsoft Corp. 8,397,730
411,144 Symantec Corp. 8,634,024
--------------
67,465,706
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 13.9%
77,604 Apple, Inc. 8,168,597
302,996 NetApp, Inc. 8,038,484
112,032 SanDisk Corp. 8,513,312
242,410 Seagate Technology PLC 8,886,750
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS (CONTINUED)
140,533 Western Digital Corp. $ 8,439,007
--------------
42,046,150
--------------
TOTAL INVESTMENTS -- 100.0% 302,841,253
(Cost $282,536,651) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (106,126)
--------------
NET ASSETS -- 100.0% $ 302,735,127
==============
(a) Non-income producing security.
(b) Non-income producing security which makes PIK distributions. For the year
ended December 31, 2015, the Fund received 23 PIK shares of Alphabet,
Inc., Class C.
(c) Aggregate cost for federal income tax purposes is $285,909,855. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$35,554,605 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$18,623,207.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 302,841,253 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
Page 30 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.9%
AIRLINES -- 1.6%
68,681 American Airlines Group, Inc. $ 2,908,640
--------------
AUTOMOBILES -- 1.6%
12,362 Tesla Motors, Inc. (b) (c) 2,967,004
--------------
BEVERAGES -- 1.6%
19,294 Monster Beverage Corp. (c) 2,874,034
--------------
BIOTECHNOLOGY -- 14.1%
15,435 Alexion Pharmaceuticals, Inc. (c) 2,944,226
17,675 Amgen, Inc. 2,869,183
9,581 Biogen, Inc. (c) 2,935,139
27,225 BioMarin Pharmaceutical, Inc. (c) 2,852,091
25,535 Celgene Corp. (c) 3,058,071
27,898 Gilead Sciences, Inc. 2,822,999
24,869 Incyte Corp. (c) 2,697,043
5,171 Regeneron Pharmaceuticals,
Inc. (c) 2,807,181
24,059 Vertex Pharmaceuticals, Inc. (c) 3,027,344
--------------
26,013,277
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.6%
24,317 Stericycle, Inc. (c) 2,932,630
--------------
FOOD & STAPLES RETAILING -- 4.7%
17,812 Costco Wholesale Corp. 2,876,638
34,179 Walgreens Boots Alliance, Inc. 2,910,513
85,829 Whole Foods Market, Inc. 2,875,271
--------------
8,662,422
--------------
FOOD PRODUCTS -- 3.2%
40,040 Kraft Heinz (The) Co. 2,913,310
65,525 Mondelez International, Inc.,
Class A 2,938,141
--------------
5,851,451
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 1.5%
5,251 Intuitive Surgical, Inc. (c) 2,867,886
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.1%
32,945 Express Scripts Holding Co. (c) 2,879,722
18,377 Henry Schein, Inc. (c) 2,907,058
--------------
5,786,780
--------------
HOTELS, RESTAURANTS & LEISURE
-- 4.7%
43,756 Marriott International, Inc.,
Class A (b) 2,933,403
49,147 Norwegian Cruise Line Holdings
Ltd. (c) 2,880,014
48,404 Starbucks Corp. 2,905,692
--------------
8,719,109
--------------
INTERNET & CATALOG RETAIL -- 12.2%
4,248 Amazon.com, Inc. (c) 2,871,181
58,656 Ctrip.com International Ltd.,
ADR (c) 2,717,532
22,476 Expedia, Inc. 2,793,767
87,334 JD.com, Inc., ADR (c) 2,817,832
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INTERNET & CATALOG RETAIL
(CONTINUED)
54,112 Liberty Interactive Corp.,
Class A (c) $ 1,478,340
32,478 Liberty Ventures, Series A (c) 1,465,083
23,787 Netflix, Inc. (c) 2,720,757
2,192 Priceline Group (The), Inc. (c) 2,794,690
33,713 TripAdvisor, Inc. (c) 2,874,033
--------------
22,533,215
--------------
INTERNET SOFTWARE & SERVICES
-- 1.5%
102,740 eBay, Inc. (c) 2,823,295
--------------
IT SERVICES -- 6.2%
33,840 Automatic Data Processing, Inc. 2,866,925
30,868 Fiserv, Inc. (c) 2,823,187
53,947 Paychex, Inc. 2,853,257
80,523 PayPal Holdings, Inc. (c) 2,914,933
--------------
11,458,302
--------------
LEISURE PRODUCTS -- 1.6%
107,956 Mattel, Inc. 2,933,165
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.6%
15,374 Illumina, Inc. (c) 2,950,962
--------------
MACHINERY -- 1.6%
62,822 PACCAR, Inc. 2,977,763
--------------
MEDIA -- 14.2%
15,944 Charter Communications, Inc.,
Class A (b) (c) 2,919,346
50,026 Comcast Corp., Class A 2,822,967
54,485 Discovery Communications, Inc.,
Class A (c) 1,453,660
56,945 Discovery Communications, Inc.,
Class C (c) 1,436,153
49,602 DISH Network Corp., Class A (c) 2,836,242
36,150 Liberty Global PLC, Class A (c) 1,531,314
37,496 Liberty Global PLC, Series C (c) 1,528,712
37,290 Liberty Media Corp., Class A (c) 1,463,633
38,598 Liberty Media Corp., Class C (c) 1,469,812
712,481 Sirius XM Holdings, Inc. (c) 2,899,798
52,346 Twenty-First Century Fox, Inc.,
Class A 1,421,717
50,974 Twenty-First Century Fox, Inc.,
Class B 1,388,022
71,916 Viacom, Inc., Class B 2,960,063
--------------
26,131,439
--------------
MULTILINE RETAIL -- 1.6%
37,369 Dollar Tree, Inc. (c) 2,885,634
--------------
PHARMACEUTICALS -- 3.1%
46,385 Endo International PLC (c) 2,839,689
53,110 Mylan N.V. (c) 2,871,658
--------------
5,711,347
--------------
PROFESSIONAL SERVICES -- 1.6%
37,751 Verisk Analytics, Inc. (c) 2,902,297
--------------
See Notes to Financial Statements Page 31
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SOFTWARE -- 3.1%
73,318 Activision Blizzard, Inc. $ 2,838,140
40,719 Electronic Arts, Inc. (c) 2,798,210
--------------
5,636,350
--------------
SPECIALTY RETAIL -- 7.6%
56,637 Bed Bath & Beyond, Inc. (c) 2,732,735
11,231 O'Reilly Automotive, Inc. (c) 2,846,160
53,258 Ross Stores, Inc. 2,865,813
33,084 Tractor Supply Co. 2,828,682
15,341 Ulta Salon, Cosmetics &
Fragrance, Inc. (c) 2,838,085
--------------
14,111,475
--------------
TRADING COMPANIES &
DISTRIBUTORS -- 1.6%
72,246 Fastenal Co. (b) 2,949,082
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 4.7%
28,152 SBA Communications Corp.,
Class A (c) 2,957,931
73,612 T-Mobile US, Inc. (c) 2,879,701
90,480 Vodafone Group PLC, ADR 2,918,885
--------------
8,756,517
--------------
TOTAL COMMON STOCKS -- 99.9% 184,344,076
(Cost $165,103,402) --------------
MONEY MARKET FUNDS -- 2.3%
4,129,485 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.12% (d) (e) 4,129,485
95,669 Morgan Stanley Institutional
Liquidity Fund - Treasury
Portfolio - Institutional
Class - 0.17% (d) 95,669
--------------
TOTAL MONEY MARKET FUNDS
-- 2.3% 4,225,154
(Cost $4,225,154) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.2%
$ 293,830 JPMorgan Chase & Co., 0.23% (d),
dated 12/31/15, due 01/04/16,
with a maturity value of
$293,838. Collateralized by U.S.
Treasury Notes, interest rates
of 1.250% to 1.625%, due
04/30/19 to 02/29/20. The value
of the collateral including
accrued interest is
$300,612. (e) $ 293,830
3,708,526 RBC Capital Markets LLC,
0.26% (d), dated 12/31/15, due
01/04/16, with a maturity value
of $3,708,633. Collateralized by
U.S. Treasury Notes, interest
rates of 1.625% to 1.750%, due
06/30/20 to 10/31/20. The value
of the collateral including
accrued interest is
$3,786,645. (e) 3,708,526
--------------
TOTAL REPURCHASE AGREEMENTS
-- 2.2% 4,002,356
(Cost $4,002,356) --------------
TOTAL INVESTMENTS -- 104.4% 192,571,586
(Cost $173,330,912) (f)
NET OTHER ASSETS AND
LIABILITIES -- (4.4)% (8,124,106)
--------------
NET ASSETS -- 100.0% $ 184,447,480
==============
(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) All or a portion of this security is on loan (see Note 2E - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $7,914,093 and the total value of the collateral held by the
Fund is $8,131,841.
(c) Non-income producing security.
(d) Interest rate shown reflects yield as of December 31, 2015.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $174,978,539. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$24,516,127 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$6,923,080.
ADR - American Depositary Receipt
Page 32 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 184,344,076 $ -- $ --
Money Market Funds 4,225,154 -- --
Repurchase Agreements -- 4,002,356 --
-----------------------------------------------
Total Investments $ 188,569,230 $ 4,002,356 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
---------------------------------
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 2D - 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) $ 7,914,093
Non-cash Collateral(2) (7,914,093)
--------------
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, 2015, 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) $ 4,002,356
Non-cash Collateral(4) (4,002,356)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At December 31, 2015, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 33
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 3.6%
54,371 Hexcel Corp. $ 2,525,533
--------------
AUTOMOBILES -- 7.7%
22,238 Tesla Motors, Inc. (a) (b) 5,337,342
--------------
CHEMICALS -- 0.2%
37,343 Codexis, Inc. (b) 157,961
--------------
ELECTRIC UTILITIES -- 7.5%
132,838 ITC Holdings Corp. 5,213,892
--------------
ELECTRICAL EQUIPMENT -- 8.3%
142,149 Ballard Power Systems,
Inc. (a) (b) 221,752
92,722 China Ming Yang Wind Power
Group Ltd., ADR (a) (b) 215,115
42,000 Enphase Energy, Inc. (a) (b) 147,420
166,752 Plug Power, Inc. (a) (b) 351,847
20,831 PowerSecure International,
Inc. (b) 313,507
89,023 SolarCity Corp. (a) (b) 4,541,953
--------------
5,791,594
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 8.2%
155,450 AVX Corp. 1,887,163
35,111 Itron, Inc. (b) 1,270,316
29,455 Maxwell Technologies, Inc. (b) 210,309
43,277 Universal Display Corp. (b) 2,356,000
--------------
5,723,788
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 10.9%
92,849 Abengoa Yield PLC (a) 1,791,057
27,487 NextEra Energy Partners, L.P. (c) 820,487
45,430 Ormat Technologies, Inc. 1,656,832
69,182 Pattern Energy Group, Inc. 1,446,596
74,149 TerraForm Power, Inc., Class A (a) 932,795
98,704 Vivint Solar, Inc. (a) (b) 943,610
--------------
7,591,377
--------------
INTERNET SOFTWARE & SERVICES
-- 0.7%
48,008 OPOWER, Inc. (a) (b) 506,964
--------------
OIL, GAS & CONSUMABLE FUELS
-- 2.6%
178,045 Amyris, Inc. (a) (b) 288,433
35,104 Green Plains, Inc. 803,882
36,113 Pacific Ethanol, Inc. (b) 172,620
40,612 Renewable Energy Group, Inc. (b) 377,285
74,617 Solazyme, Inc. (a) (b) 185,050
--------------
1,827,270
--------------
REAL ESTATE INVESTMENT TRUSTS
-- 1.0%
34,254 Hannon Armstrong Sustainable
Infrastructure Capital, Inc. 648,086
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 48.2%
38,024 Advanced Energy Industries,
Inc. (b) 1,073,418
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (CONTINUED)
51,785 Canadian Solar, Inc. (b) $ 1,499,694
92,631 Cree, Inc. (a) (b) 2,470,469
105,057 Fairchild Semiconductor
International, Inc. (b) 2,175,730
87,382 First Solar, Inc. (b) 5,766,338
29,147 IXYS Corp. 368,127
37,324 JA Solar Holdings Co., Ltd.,
ADR (a) (b) 362,043
20,818 JinkoSolar Holding Co., Ltd.,
ADR (a) (b) 576,034
112,000 Linear Technology Corp. 4,756,640
71,100 Microsemi Corp. (b) 2,317,149
357,339 ON Semiconductor Corp. (b) 3,501,922
26,340 Power Integrations, Inc. 1,280,914
36,414 SolarEdge Technologies,
Inc. (a) (b) 1,025,782
293,434 SunEdison, Inc. (a) (b) 1,493,579
106,858 SunPower Corp. (a) (b) 3,206,809
79,407 Trina Solar Ltd., ADR (a) (b) 875,065
37,933 Veeco Instruments, Inc. (b) 779,902
--------------
33,529,615
--------------
SOFTWARE -- 1.1%
28,529 EnerNOC, Inc. (b) 109,836
46,641 Silver Spring Networks, Inc. (b) 672,097
--------------
781,933
--------------
TOTAL COMMON STOCKS -- 100.0% 69,635,355
(Cost $79,721,575) --------------
MONEY MARKET FUNDS -- 10.3%
7,191,765 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.12% (d) (e) 7,191,765
(Cost $7,191,765) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 10.0%
$ 511,725 JPMorgan Chase & Co., 0.23% (d),
dated 12/31/15, due 01/04/16,
with a maturity value of
$511,738. Collateralized by U.S.
Treasury Notes, interest rates
of 1.250% to 1.625%, due
04/30/19 to 02/29/20. The value
of the collateral including
accrued interest is $523,535. (e) 511,725
Page 34 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS (CONTINUED)
$ 6,458,639 RBC Capital Markets LLC,
0.26% (d), dated 12/31/15, due
01/04/16, with a maturity value
of $6,458,826. Collateralized by
U.S. Treasury Notes, interest
rates of 1.625% to 1.750%, due
06/30/20 to 10/31/20. The value
of the collateral including
accrued interest is
$6,594,687. (e) $ 6,458,639
--------------
TOTAL REPURCHASE AGREEMENTS
-- 10.0% 6,970,364
(Cost $6,970,364) --------------
TOTAL INVESTMENTS -- 120.3% 83,797,484
(Cost $93,883,704) (f)
NET OTHER ASSETS AND
LIABILITIES -- (20.3)% (14,142,604)
--------------
NET ASSETS -- 100.0% $ 69,654,880
==============
(a) All or a portion of this security is on loan (see Note 2E - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $13,713,270 and the total value of the collateral held by
the Fund is $14,162,129.
(b) Non-income producing security.
(c) Master Limited Partnership ("MLP").
(d) Interest rate shown reflects yield as of December 31, 2015.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $95,300,718. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$6,740,498 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$18,243,732.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 69,635,355 $ -- $ --
Money Market Funds 7,191,765 -- --
Repurchase Agreements -- 6,970,364 --
-----------------------------------------------
Total Investments $ 76,827,120 $ 6,970,364 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
See Notes to Financial Statements Page 35
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
-----------------------------
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 2D - 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) $ 13,713,270
Non-cash Collateral(2) (13,713,270)
--------------
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, 2015, 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) $ 6,970,364
Non-cash Collateral(4) (6,970,364)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At December 31, 2015, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 36 See Notes to Financial Statements
FIRST TRUST S&P REIT INDEX FUND (FRI)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.6%
DIVERSIFIED REITS -- 7.5%
12,368 American Assets Trust, Inc. $ 474,313
9,287 Armada Hoffler Properties, Inc. 97,328
63,936 Cousins Properties, Inc. 602,917
108,243 Duke Realty Corp. 2,275,268
36,820 Empire State Realty Trust, Inc.,
Class A 665,337
18,129 First Potomac Realty Trust 206,671
6,918 Gladstone Commercial Corp. 100,934
53,004 Global Net Lease, Inc. 421,382
131,775 Gramercy Property Trust 1,017,303
39,361 Investors Real Estate Trust 273,559
66,398 Lexington Realty Trust 531,184
46,328 Liberty Property Trust 1,438,484
59,242 NorthStar Realty Finance Corp. 1,008,891
4,399 One Liberty Properties, Inc. 94,403
6,098 PS Business Parks, Inc. 533,148
19,614 Select Income REIT 388,749
138,380 Spirit Realty Capital, Inc. 1,386,568
21,197 STORE Capital Corp. 491,770
283,712 VEREIT, Inc. 2,246,999
21,374 Washington Real Estate Investment
Trust 578,380
8,460 Whitestone REIT 101,605
11,420 Winthrop Realty Trust 148,117
30,440 WP Carey, Inc. 1,795,960
--------------
16,879,270
--------------
HEALTH CARE REITS -- 12.5%
26,273 Care Capital Properties, Inc. 803,166
15,095 CareTrust REIT, Inc. 165,290
145,794 HCP, Inc. 5,575,163
31,551 Healthcare Realty Trust, Inc. 893,524
39,828 Healthcare Trust of America, Inc.,
Class A 1,074,161
11,152 LTC Properties, Inc. 481,097
74,564 Medical Properties Trust, Inc. 858,232
10,717 National Health Investors, Inc. 652,344
27,129 New Senior Investment Group, Inc. 267,492
51,603 Omega Healthcare Investors, Inc. 1,805,073
27,327 Physicians Realty Trust 460,733
20,420 Sabra Health Care REIT, Inc. 413,097
74,449 Senior Housing Properties Trust 1,104,823
3,844 Universal Health Realty Income
Trust 192,238
104,393 Ventas, Inc. 5,890,897
110,944 Welltower, Inc. 7,547,520
--------------
28,184,850
--------------
HOTEL & RESORT REITS -- 5.7%
48,946 Apple Hospitality REIT, Inc. 977,452
8,033 Ashford Hospitality Prime, Inc. 116,478
25,443 Ashford Hospitality Trust, Inc. 160,545
12,010 Chatham Lodging Trust 245,965
18,703 Chesapeake Lodging Trust 470,567
62,934 DiamondRock Hospitality Co. 607,313
41,357 FelCor Lodging Trust, Inc. 301,906
14,434 Hersha Hospitality Trust 314,084
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HOTEL & RESORT REITS (CONTINUED)
47,511 Hospitality Properties Trust $ 1,242,413
235,636 Host Hotels & Resorts, Inc. 3,614,656
35,404 LaSalle Hotel Properties 890,765
22,529 Pebblebrook Hotel Trust 631,263
39,416 RLJ Lodging Trust 852,568
16,078 Ryman Hospitality Properties, Inc. 830,268
27,190 Summit Hotel Properties, Inc. 324,920
65,395 Sunstone Hotel Investors, Inc. 816,784
35,010 Xenia Hotels & Resorts, Inc. 536,703
--------------
12,934,650
--------------
INDUSTRIAL REITS -- 4.7%
27,691 DCT Industrial Trust, Inc. 1,034,813
10,082 EastGroup Properties, Inc. 560,660
34,719 First Industrial Realty Trust,
Inc. 768,331
19,099 Monmouth Real Estate Investment
Corp. 199,776
164,375 Prologis, Inc. 7,054,975
17,427 Rexford Industrial Realty, Inc. 285,106
21,343 STAG Industrial, Inc. 393,778
13,578 Terreno Realty Corp. 307,134
--------------
10,604,573
--------------
OFFICE REITS -- 13.6%
22,729 Alexandria Real Estate Equities,
Inc. 2,053,792
63,334 BioMed Realty Trust, Inc. 1,500,382
48,147 Boston Properties, Inc. 6,140,668
54,926 Brandywine Realty Trust 750,289
3,924 City Office REIT, Inc. 47,794
38,989 Columbia Property Trust, Inc. 915,462
29,637 Corporate Office Properties Trust 646,976
43,715 Douglas Emmett, Inc. 1,363,034
4,091 Easterly Government Properties,
Inc. 70,283
39,612 Equity Commonwealth (a) 1,098,441
27,954 Franklin Street Properties Corp. 289,324
22,299 Government Properties Income
Trust 353,885
29,885 Highwoods Properties, Inc. 1,302,986
23,006 Hudson Pacific Properties, Inc. 647,389
28,893 Kilroy Realty Corp. 1,828,349
28,000 Mack-Cali Realty Corp. 653,800
50,951 New York REIT, Inc. 585,937
19,751 NorthStar Realty Europe Corp. 233,259
25,547 Parkway Properties, Inc. 399,300
45,618 Piedmont Office Realty Trust,
Inc., Class A 861,268
31,258 SL Green Realty Corp. 3,531,529
55,562 Vornado Realty Trust 5,553,978
--------------
30,828,125
--------------
RESIDENTIAL REITS -- 17.7%
35,216 American Campus Communities,
Inc. 1,455,829
48,917 American Homes 4 Rent, Class A 814,957
10,098 American Residential Properties,
Inc. 190,852
See Notes to Financial Statements Page 37
FIRST TRUST S&P REIT INDEX FUND (FRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RESIDENTIAL REITS (CONTINUED)
49,040 Apartment Investment &
Management Co., Class A $ 1,963,071
42,912 AvalonBay Communities, Inc. 7,901,387
5,640 Bluerock Residential Growth
REIT, Inc. 66,834
27,232 Camden Property Trust 2,090,328
20,302 Campus Crest Communities, Inc. 138,054
11,905 Colony Starwood Homes (a) 269,529
17,370 Education Realty Trust, Inc. 657,976
25,107 Equity LifeStyle Properties, Inc. 1,673,884
114,199 Equity Residential 9,317,496
20,702 Essex Property Trust, Inc. 4,956,266
9,445 Independence Realty Trust, Inc. 70,932
23,632 Mid-America Apartment
Communities, Inc. 2,146,022
52,233 Monogram Residential Trust, Inc. 509,794
6,676 NexPoint Residential Trust, Inc. 87,389
16,969 Post Properties, Inc. 1,003,886
7,013 Preferred Apartment Communities,
Inc., Class A 91,730
11,309 Silver Bay Realty Trust Corp. 177,099
18,121 Sun Communities, Inc. 1,241,832
82,144 UDR, Inc. 3,086,150
7,706 UMH Properties, Inc. 77,985
--------------
39,989,282
--------------
RETAIL REITS -- 25.0%
21,639 Acadia Realty Trust 717,333
6,072 Agree Realty Corp. 206,387
1,185 Alexander's, Inc. 455,170
53,340 Brixmor Property Group, Inc. 1,377,239
47,572 CBL & Associates Properties, Inc. 588,466
23,464 Cedar Realty Trust, Inc. 166,125
95,363 DDR Corp. 1,605,913
23,140 Equity One, Inc. 628,251
21,765 Federal Realty Investment Trust 3,179,867
182,549 General Growth Properties, Inc. 4,967,158
8,173 Getty Realty Corp. 140,167
28,380 Inland Real Estate Corp. 301,396
129,576 Kimco Realty Corp. 3,428,581
26,123 Kite Realty Group Trust 677,369
42,191 Macerich (The) Co. 3,404,392
42,688 National Retail Properties, Inc. 1,709,654
21,692 Pennsylvania Real Estate
Investment Trust 474,404
24,818 Ramco-Gershenson Properties
Trust 412,227
78,251 Realty Income Corp. 4,040,099
29,520 Regency Centers Corp. 2,010,902
31,189 Retail Opportunity Investments
Corp. 558,283
74,385 Retail Properties of America,
Inc., Class A 1,098,667
11,824 Rouse Properties, Inc. 172,158
3,589 Saul Centers, Inc. 184,008
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
RETAIL REITS (CONTINUED)
4,455 Seritage Growth Properties,
Class A $ 179,180
97,002 Simon Property Group, Inc. 18,861,069
29,703 Tanger Factory Outlet Centers,
Inc. 971,288
18,884 Taubman Centers, Inc. 1,448,781
28,949 Urban Edge Properties 678,854
8,314 Urstadt Biddle Properties, Inc.,
Class A 159,961
35,749 Weingarten Realty Investors 1,236,200
58,094 WP GLIMCHER, Inc. 616,377
--------------
56,655,926
--------------
SPECIALIZED REITS -- 12.9%
9,607 CoreSite Realty Corp. 544,909
36,750 Corrections Corp. of America 973,508
54,088 CubeSmart 1,656,175
20,769 CyrusOne, Inc. 777,799
45,880 Digital Realty Trust, Inc. 3,469,446
20,506 DuPont Fabros Technology, Inc. 651,886
18,733 EPR Properties 1,094,944
38,705 Extra Space Storage, Inc. 3,414,168
12,068 Four Corners Property Trust,
Inc. (a) 291,563
28,888 Gaming and Leisure Properties,
Inc. 803,086
23,123 GEO Group (The), Inc. 668,486
60,240 Iron Mountain, Inc. 1,627,082
7,216 National Storage Affiliates Trust 123,610
46,143 Public Storage 11,429,621
12,086 QTS Realty Trust, Inc., Class A 545,199
11,339 Sovran Self Storage, Inc. 1,216,788
--------------
29,288,270
--------------
TOTAL INVESTMENTS -- 99.6% 225,364,946
(Cost $231,340,535) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.4% 885,011
--------------
NET ASSETS -- 100.0% $ 226,249,957
==============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $232,605,683. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$10,418,508 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$17,659,245.
Page 38 See Notes to Financial Statements
FIRST TRUST S&P REIT INDEX FUND (FRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 225,364,946 $ -- $ --
===============================================
* See Portfolio of Investments for breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
See Notes to Financial Statements Page 39
FIRST TRUST ISE WATER INDEX FUND (FIW)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
CHEMICALS -- 4.9%
28,806 Ashland, Inc. $ 2,958,376
121,696 Calgon Carbon Corp. 2,099,256
--------------
5,057,632
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.9%
76,031 Tetra Tech, Inc. 1,978,327
--------------
CONSTRUCTION & ENGINEERING
-- 8.9%
68,252 AECOM (a) 2,049,608
95,606 Aegion Corp. (a) 1,846,152
387,343 Layne Christensen Co. (a) 2,037,424
281,757 Northwest Pipe Co. (a) 3,152,861
--------------
9,086,045
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 2.0%
199,415 PICO Holdings, Inc. (a) 2,057,963
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 5.8%
68,649 Badger Meter, Inc. 4,022,145
53,602 Itron, Inc. (a) 1,939,320
--------------
5,961,465
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.1%
29,335 IDEXX Laboratories, Inc. (a) 2,139,108
--------------
INDUSTRIAL CONGLOMERATES -- 7.0%
37,776 Danaher Corp. 3,508,635
19,174 Roper Technologies, Inc. 3,639,033
--------------
7,147,668
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 3.1%
74,944 Agilent Technologies, Inc. 3,133,409
--------------
MACHINERY -- 40.6%
63,719 Crane Co. 3,048,317
586,272 Energy Recovery, Inc. (a) 4,144,943
48,690 Flowserve Corp. 2,048,875
127,688 Gorman-Rupp (The) Co. 3,413,100
46,402 IDEX Corp. 3,554,857
59,672 Lindsay Corp. 4,320,253
72,386 Mueller Industries, Inc. 1,961,661
231,335 Mueller Water Products, Inc.,
Class A 1,989,481
67,929 Pentair PLC 3,364,523
217,080 Rexnord Corp. (a) 3,933,490
18,795 Valmont Industries, Inc. 1,992,646
74,897 Watts Water Technologies, Inc.,
Class A 3,720,134
110,877 Xylem, Inc. 4,047,010
--------------
41,539,290
--------------
WATER UTILITIES -- 23.7%
50,086 American States Water Co. 2,101,108
70,804 American Water Works Co., Inc. 4,230,539
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
WATER UTILITIES (CONTINUED)
138,434 Aqua America, Inc. $ 4,125,333
179,605 California Water Service Group 4,179,408
890,458 Cia de Saneamento Basico do
Estado de Sao Paulo, ADR 4,096,107
279,663 Consolidated Water Co., Ltd. 3,423,075
72,648 SJW Corp. 2,154,013
--------------
24,309,583
--------------
TOTAL COMMON STOCKS -- 100.0% 102,410,490
(Cost $111,522,393)
MONEY MARKET FUNDS -- 0.1%
81,702 Morgan Stanley Institutional
Liquidity Fund - Treasury
Portfolio - Institutional
Class - 0.17% (b) 81,702
(Cost $81,702) --------------
TOTAL INVESTMENTS -- 100.1% 102,492,192
(Cost $111,604,095) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (60,400)
--------------
NET ASSETS -- 100.0% $ 102,431,792
==============
(a) Non-income producing security.
(b) Interest rate shown reflects yield as of December 31, 2015.
(c) Aggregate cost for federal income tax purposes is $111,995,757. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$8,836,332 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$18,339,897.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 102,410,490 $ -- $ --
Money Market Funds 81,702 -- --
-----------------------------------------------
Total Investments $ 102,492,192 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
Page 40 See Notes to Financial Statements
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (FCG)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.9%
OIL, GAS & CONSUMABLE FUELS
-- 99.9%
105,315 Anadarko Petroleum Corp. $ 5,116,203
268,578 Antero Resources Corp. (a) (b) 5,855,000
4,617,980 Bellatrix Exploration Ltd. (a) (b) 5,587,756
324,118 Cabot Oil & Gas Corp. 5,733,647
1,254,402 Chesapeake Energy Corp. (a) 5,644,809
51,477 Cimarex Energy Co. 4,601,014
2,676,058 Comstock Resources, Inc. (a) (b) 5,004,229
155,538 Devon Energy Corp. 4,977,216
863,956 Encana Corp. 4,397,536
1,441,528 Enerplus Corp. 4,930,026
103,923 EQT Corp. 5,417,506
5,383,476 EXCO Resources, Inc. (a) (b) 6,675,510
245,104 Gulfport Energy Corp. (b) 6,022,205
3,502,228 Linn Energy LLC (c) 4,517,874
245,919 Matador Resources Co. (b) 4,861,819
159,928 Noble Energy, Inc. 5,266,429
436,313 QEP Resources, Inc. 5,846,594
229,376 Range Resources Corp. (a) 5,644,943
5,336,835 Rex Energy Corp. (a) (b) 5,603,677
572,812 Rice Energy, Inc. (b) 6,243,651
22,396,199 SandRidge Energy, Inc. (b) 4,479,240
231,824 SM Energy Co. 4,557,660
884,462 Southwestern Energy Co. (a) (b) 6,288,525
375,683 Statoil ASA, ADR (a) 5,244,535
1,069,325 Stone Energy Corp. (b) 4,587,404
500,794 Synergy Resources Corp. (b) 4,266,765
1,904,494 Ultra Petroleum Corp. (a) (b) 4,761,235
2,038,444 Vanguard Natural Resources
LLC (c) 6,074,563
807,792 WPX Energy, Inc. (b) 4,636,726
--------------
TOTAL COMMON STOCKS -- 99.9% 152,844,297
(Cost $319,377,674) --------------
WARRANT -- 0.0%
OIL, GAS & CONSUMABLE FUELS
-- 0.0%
468,973 Magnum Hunter Resources Corp.,
expiring 05/15/16 (a) (b) (d) 0
(Cost $0) --------------
MONEY MARKET FUNDS -- 9.6%
14,597,942 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.12% (e) (f) 14,597,942
(Cost $14,597,942) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 9.2%
$ 1,038,706 JPMorgan Chase & Co., 0.23% (e),
dated 12/31/15, due 01/04/16,
with a maturity value of
$1,038,732. Collateralized by
U.S. Treasury Notes, interest
rates of 1.250% to 1.625%, due
04/30/19 to 02/29/20. The value
of the collateral including
accrued interest is
$1,062,679. (f) $ 1,038,706
13,109,834 RBC Capital Markets LLC,
0.26% (e), dated 12/31/15, due
01/04/16, with a maturity value
of $13,110,212. Collateralized
by U.S. Treasury Notes, interest
rates of 1.625% to 1.750%, due
06/30/20 to 10/31/20. The value
of the collateral including
accrued interest is
$13,385,986. (f) 13,109,834
--------------
TOTAL REPURCHASE AGREEMENTS
-- 9.2% 14,148,540
(Cost $14,148,540) --------------
TOTAL INVESTMENTS -- 118.7% 181,590,779
(Cost $348,124,156) (g)
NET OTHER ASSETS AND
LIABILITIES -- (18.7)% (28,548,354)
--------------
NET ASSETS -- 100.0% $ 153,042,425
==============
(a) All or a portion of this security is on loan (see Note 2E - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $29,192,536 and the total value of the collateral held by
the Fund is $28,746,482. 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, 2015, 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, the value of the
related securities loaned was above the collateral value received.
(b) Non-income producing security.
(c) Master Limited Partnership ("MLP").
(d) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At December 31, 2015, securities noted as such are valued at $0,
or 0.00% of net assets.
(e) Interest rate shown reflects yield as of December 31, 2015.
(f) This security serves as collateral for securities on loan.
(g) Aggregate cost for federal income tax purposes is $372,382,251. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $0 and
the aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $190,791,472.
ADR - American Depositary Receipt
See Notes to Financial Statements Page 41
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (FCG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 152,844,297 $ -- $ --
Money Market Funds 14,597,942 -- --
Repurchase Agreements -- 14,148,540 --
Warrants* -- -- ** --
-----------------------------------------------
Total Investments $ 167,442,239 $ 14,148,540 $ --
===============================================
* See Portfolio of Investments for industry breakout.
** Investment is valued at $0.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
-----------------------------
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 2D - 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) $ 29,192,536
Non-cash Collateral(2) (29,192,536)
--------------
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) 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, 2015, 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, market movement from December
30 to December 31 reduced the collateral value below the value of the
related securities loaned. See Note 2E - 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) $ 14,148,540
Non-cash Collateral(4) (14,148,540)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At December 31, 2015, 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 ISE CHINDIA INDEX FUND (FNI)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.6%
AIRLINES -- 0.8%
44,446 China Southern Airlines Co., Ltd.,
ADR (a) $ 1,695,615
--------------
AUTOMOBILES -- 7.2%
543,723 Tata Motors Ltd., ADR (b) 16,023,517
--------------
BANKS -- 11.4%
262,577 HDFC Bank Ltd., ADR 16,174,743
1,155,540 ICICI Bank Ltd., ADR 9,047,878
--------------
25,222,621
--------------
BIOTECHNOLOGY -- 0.8%
11,942 China Biologic Products, Inc. (b) 1,701,257
--------------
CHEMICALS -- 0.7%
41,663 Sinopec Shanghai Petrochemical
Co., Ltd., ADR (b) 1,649,438
--------------
DIVERSIFIED CONSUMER SERVICES
-- 0.6%
45,407 New Oriental Education &
Technology Group, Inc., ADR 1,424,418
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.4%
33,199 China Telecom Corp., Ltd., ADR 1,542,093
125,745 China Unicom (Hong Kong) Ltd.,
ADR (a) 1,516,485
--------------
3,058,578
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 0.7%
54,587 Mindray Medical International
Ltd., ADR 1,480,400
--------------
HOTELS, RESTAURANTS & LEISURE
-- 5.6%
76,148 500.com Ltd., Class A, ADR (a) (b) 1,530,575
557,159 Melco Crown Entertainment Ltd.,
ADR (a) 9,360,271
87,126 Tuniu Corp., ADR (a) (b) 1,392,274
--------------
12,283,120
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.7%
44,254 Huaneng Power International, Inc.,
ADR 1,517,912
--------------
INSURANCE -- 0.7%
94,021 China Life Insurance Co., Ltd.,
ADR 1,503,396
--------------
INTERNET & CATALOG RETAIL -- 12.8%
86,626 Ctrip.com International Ltd.,
ADR (b) 4,013,383
483,211 JD.com, Inc., ADR (b) 15,590,803
161,633 Jumei International Holding Ltd.,
ADR (a) (b) 1,464,395
81,541 MakeMyTrip Ltd. (b) 1,399,243
84,764 Qunar Cayman Islands Ltd.,
ADR (a) (b) 4,470,453
90,726 Vipshop Holdings Ltd., ADR (b) 1,385,386
--------------
28,323,663
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INTERNET SOFTWARE & SERVICES
-- 21.3%
71,560 21Vianet Group, Inc., ADR (b) $ 1,512,778
23,475 58.com, Inc., ADR (b) 1,548,411
105,788 Alibaba Group Holding Ltd.,
ADR (b) 8,597,391
45,927 Autohome, Inc., ADR (b) 1,603,771
7,486 Baidu, Inc., ADR (b) 1,415,153
60,333 Bitauto Holdings Ltd., ADR (b) 1,706,217
98,764 Momo, Inc., ADR (a) (b) 1,582,199
85,565 NetEase, Inc., ADR 15,507,801
20,328 Qihoo 360 Technology Co., Ltd.,
ADR (a) (b) 1,480,082
31,426 SINA Corp. (b) 1,552,444
30,281 Sohu.com, Inc. (b) 1,731,770
215,750 SouFun Holdings Ltd., ADR (a) 1,594,393
79,445 Weibo Corp., ADR (b) 1,549,178
53,741 Youku Tudou, Inc., ADR (b) 1,457,993
67,795 YY, Inc., ADR (a) (b) 4,235,154
--------------
47,074,735
--------------
IT SERVICES -- 12.6%
909,553 Infosys Ltd., ADR 15,235,013
715,476 Wipro Ltd., ADR (a) 8,256,593
142,249 WNS (Holdings) Ltd., ADR (b) 4,436,746
--------------
27,928,352
--------------
MARINE -- 0.7%
100,752 Seaspan Corp. (a) 1,592,889
--------------
MEDIA -- 2.0%
501,668 Videocon d2h Ltd., ADR (b) 4,454,812
--------------
METALS & MINING -- 3.0%
205,066 Aluminum Corp. of China Ltd.,
ADR (a) (b) 1,689,744
893,247 Vedanta Ltd., ADR (a) 4,966,453
--------------
6,656,197
--------------
OIL, GAS & CONSUMABLE FUELS
-- 11.6%
26,014 China Petroleum & Chemical
Corp., ADR (a) 1,560,320
84,926 CNOOC Ltd., ADR (a) 8,864,576
231,016 PetroChina Co., Ltd., ADR 15,152,339
--------------
25,577,235
--------------
PHARMACEUTICALS -- 4.0%
192,325 Dr. Reddy's Laboratories Ltd.,
ADR (a) 8,902,724
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.8%
151,817 Trina Solar Ltd., ADR (a) (b) 1,673,023
--------------
SOFTWARE -- 0.6%
86,041 Cheetah Mobile, Inc., ADR (a) (b) 1,378,377
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.6%
25,509 China Mobile Ltd., ADR 1,436,922
--------------
TOTAL COMMON STOCKS -- 100.6% 222,559,201
(Cost $235,973,291) --------------
See Notes to Financial Statements Page 43
FIRST TRUST ISE CHINDIA INDEX FUND (FNI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MONEY MARKET FUNDS -- 7.9%
17,453,166 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.12% (c) (d) $ 17,453,166
(Cost $17,453,166) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 7.7%
$ 1,241,867 JPMorgan Chase & Co., 0.23% (c),
dated 12/31/15, due 01/04/16,
with a maturity value of
$1,241,899. Collateralized by
U.S. Treasury Notes, interest
rates of 1.250% to 1.625%, due
04/30/19 to 02/29/20. The value
of the collateral including
accrued interest is
$1,270,529. (d) 1,241,867
15,673,997 RBC Capital Markets LLC,
0.26% (c), dated 12/31/15, due
01/04/16, with a maturity value
of $15,674,450. Collateralized
by U.S. Treasury Notes, interest
rates of 1.625% to 1.750%, due
06/30/20 to 10/31/20. The value
of the collateral including
accrued interest is
$16,004,162. (d) 15,673,997
--------------
TOTAL REPURCHASE AGREEMENTS
-- 7.7% 16,915,864
(Cost $16,915,864) --------------
TOTAL INVESTMENTS -- 116.2% 256,928,231
(Cost $270,342,321) (e)
NET OTHER ASSETS AND
LIABILITIES -- (16.2)% (35,740,642)
--------------
NET ASSETS -- 100.0% $ 221,187,589
==============
(a) All or a portion of this security is on loan (see Note 2E - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $33,487,544 and the total value of the collateral held by
the Fund is $34,369,030.
(b) Non-income producing security.
(c) Interest rate shown reflects yield as of December 31, 2015.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $272,771,118. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$9,288,765 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$25,131,652.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 222,559,201 $ -- $ --
Money Market Funds 17,453,166 -- --
Repurchase Agreements -- 16,915,864 --
-----------------------------------------------
Total Investments $ 240,012,367 $ 16,915,864 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
COUNTRY ALLOCATION AS A PERCENTAGE OF NET ASSETS**:
----------------------------------------------------
Cayman Islands 40.9%
India 37.6
United States 17.1
China 11.9
Hong Kong 5.4
Jersey 2.0
Marshall Islands 0.7
Mauritius 0.6
Net Other Assets and Liabilities (16.2)
-------
100.0%
=======
** Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index.
Page 44 See Notes to Financial Statements
FIRST TRUST ISE CHINDIA INDEX FUND (FNI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
-----------------------------
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 2D - 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) $ 33,487,544
Non-cash Collateral(2) (33,487,544)
--------------
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, 2015, 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) $ 16,915,864
Non-cash Collateral(4) (16,915,864)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At December 31, 2015, 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 NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.9%
BANKS -- 86.9%
31,647 1st Source Corp. $ 976,943
39,059 Ameris Bancorp 1,327,615
18,919 BancFirst Corp. 1,109,032
45,804 Bancorp (The), Inc. (a) 291,771
7,355 Bank of Marin Bancorp 392,757
107,086 Bank of the Ozarks, Inc. 5,296,474
39,816 Banner Corp. 1,825,962
96,513 BBCN Bancorp, Inc. 1,661,954
33,469 Blue Hills Bancorp, Inc. 512,410
49,020 BNC Bancorp 1,244,128
82,148 BOK Financial Corp. 4,911,629
101,489 Boston Private Financial Holdings,
Inc. 1,150,885
21,086 Bridge Bancorp, Inc. 641,647
85,138 Brookline Bancorp, Inc. 979,087
20,832 Bryn Mawr Bank Corp. 598,295
12,377 Camden National Corp. 545,702
33,021 Capital Bank Financial Corp.,
Class A 1,056,012
39,078 Cardinal Financial Corp. 889,024
98,275 Cathay General Bancorp 3,078,956
55,163 CenterState Banks, Inc. 863,301
46,256 Chemical Financial Corp. 1,585,193
18,558 City Holding Co. 846,987
49,823 CoBiz Financial, Inc. 668,625
70,033 Columbia Banking System, Inc. 2,276,773
118,242 Commerce Bancshares, Inc. 5,030,015
21,254 Community Trust Bancorp, Inc. 743,040
36,495 ConnectOne Bancorp, Inc. 682,092
20,665 CU Bancorp (a) 524,064
129,040 CVB Financial Corp. 2,183,357
40,606 Eagle Bancorp, Inc. (a) 2,049,385
174,583 East West Bancorp, Inc. 7,255,669
24,297 Enterprise Financial Services Corp. 688,820
27,980 Fidelity Southern Corp. 624,234
17,213 Financial Institutions, Inc. 481,964
24,002 First Bancorp. 449,797
34,809 First Busey Corp. 718,110
10,549 First Business Financial Services,
Inc. 263,830
13,354 First Citizens BancShares, Inc.,
Class A 3,447,602
22,066 First Community Bancshares, Inc. 411,090
19,259 First Connecticut Bancorp, Inc. 335,299
74,785 First Financial Bancorp 1,351,365
80,035 First Financial Bankshares, Inc. 2,414,656
15,414 First Financial Corp. 523,614
19,361 First Foundation, Inc. (a) 456,726
26,183 First Interstate BancSystem, Inc.,
Class A 761,140
45,948 First Merchants Corp. 1,167,998
94,567 First Midwest Bancorp, Inc. 1,742,870
23,137 First NBC Bank Holding Co. (a) 865,092
17,110 First of Long Island (The) Corp. 513,300
201,102 FirstMerit Corp. 3,750,552
34,981 Flushing Financial Corp. 756,989
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BANKS (CONTINUED)
211,126 Fulton Financial Corp. $ 2,746,749
16,108 German American Bancorp, Inc. 536,719
92,311 Glacier Bancorp, Inc. 2,449,011
16,832 Great Southern Bancorp, Inc. 761,816
44,557 Green Bancorp, Inc. (a) 466,957
26,363 Guaranty Bancorp 436,044
93,900 Hancock Holding Co. 2,363,463
38,788 Hanmi Financial Corp. 920,051
25,036 Heartland Financial USA, Inc. 785,129
38,911 Heritage Commerce Corp. 465,376
36,361 Heritage Financial Corp. 685,041
41,678 Heritage Oaks Bancorp 333,841
85,055 Home BancShares, Inc. 3,446,429
22,633 HomeTrust Bancshares, Inc. (a) 458,318
14,477 Horizon Bancorp 404,777
49,906 IBERIABANK Corp. 2,748,323
31,831 Independent Bank Corp./MA 1,480,778
27,056 Independent Bank Corp./MI 412,063
20,750 Independent Bank Group, Inc. 664,000
80,522 International Bancshares Corp. 2,069,415
410,693 Investors Bancorp, Inc. 5,109,021
45,990 Lakeland Bancorp, Inc. 542,222
20,179 Lakeland Financial Corp. 940,745
57,796 LegacyTexas Financial Group, Inc. 1,446,056
26,176 MainSource Financial Group, Inc. 598,907
89,397 MB Financial, Inc. 2,893,781
19,731 Mercantile Bank Corp. 484,199
52,520 NBT Bancorp, Inc. 1,464,258
138,940 Old National Bancorp 1,884,026
35,772 Old Second Bancorp, Inc. (a) 280,452
34,871 Opus Bank 1,289,181
23,768 Pacific Continental Corp. 353,668
26,098 Pacific Premier Bancorp, Inc. (a) 554,582
145,828 PacWest Bancorp 6,285,187
19,178 Peapack-Gladstone Financial Corp. 395,450
22,334 Peoples Bancorp, Inc. 420,773
49,563 Pinnacle Financial Partners, Inc. 2,545,556
125,665 Popular, Inc. 3,561,346
16,717 Preferred Bank 551,995
95,900 PrivateBancorp, Inc. 3,933,818
14,244 QCR Holdings, Inc. 345,987
48,850 Renasant Corp. 1,680,928
22,569 Republic Bancorp, Inc., Class A 596,047
42,228 S&T Bancorp, Inc. 1,301,467
29,558 Sandy Spring Bancorp, Inc. 796,884
41,665 Seacoast Banking Corp. of
Florida (a) 624,142
31,432 ServisFirst Bancshares, Inc. 1,493,963
61,757 Signature Bank (a) 9,471,671
36,324 Simmons First National Corp.,
Class A 1,865,601
29,378 South State Corp. 2,113,747
30,780 Southside Bancshares, Inc. 739,336
24,420 Southwest Bancorp, Inc. 426,862
43,449 State Bank Financial Corp. 913,732
18,041 Stock Yards Bancorp, Inc. 681,769
15,368 Stonegate Bank 504,992
Page 46 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
80,224 Talmer Bancorp, Inc., Class A $ 1,452,857
55,618 Texas Capital Bancshares, Inc. (a) 2,748,642
62,676 TowneBank 1,308,048
27,621 TriCo Bancshares 757,920
34,002 TriState Capital Holdings,
Inc. (a) 475,688
21,880 Triumph Bancorp, Inc. (a) 361,020
81,964 Trustmark Corp. 1,888,451
59,798 UMB Financial Corp. 2,783,597
267,166 Umpqua Holdings Corp. 4,247,939
54,504 Union Bankshares Corp. 1,375,681
84,401 United Bankshares, Inc. 3,121,993
90,362 United Community Banks, Inc. 1,761,155
23,690 Univest Corp. of Pennsylvania 494,173
20,632 Washington Trust Bancorp, Inc. 815,377
46,718 WesBanco, Inc. 1,402,474
30,965 Westamerica Bancorporation 1,447,614
58,675 Wintrust Financial Corp. 2,846,911
247,848 Zions Bancorporation 6,766,250
--------------
194,706,273
--------------
IT SERVICES -- 0.3%
13,756 Cass Information Systems, Inc. 707,884
--------------
THRIFTS & MORTGAGE FINANCE
-- 12.7%
11,649 Anchor BanCorp Wisconsin,
Inc. (a) 506,964
55,187 Bank Mutual Corp. 430,459
24,878 BankFinancial Corp. 314,209
100,585 Beneficial Bancorp, Inc. (a) 1,339,792
76,407 BofI Holding, Inc. (a) 1,608,367
166,364 Capitol Federal Financial, Inc. 2,089,532
31,173 Clifton Bancorp, Inc. 447,021
45,251 Dime Community Bancshares, Inc. 791,440
11,126 First Defiance Financial Corp. 420,340
26,784 HomeStreet, Inc. (a) 581,481
113,462 Kearny Financial Corp. 1,437,564
66,803 Meridian Bancorp, Inc. 941,922
9,937 Meta Financial Group, Inc. 456,406
55,281 Northfield Bancorp, Inc. 880,074
123,459 Northwest Bancshares, Inc. 1,653,116
20,969 OceanFirst Financial Corp. 420,009
53,514 Oritani Financial Corp. 882,981
11,746 Territorial Bancorp, Inc. 325,834
351,703 TFS Financial Corp. 6,622,568
115,566 TrustCo Bank Corp. NY 709,575
57,775 United Community Financial Corp. 340,873
60,103 United Financial Bancorp, Inc. 774,127
112,752 Washington Federal, Inc. 2,686,880
35,700 Waterstone Financial, Inc. 503,370
36,220 WSFS Financial Corp. 1,172,079
--------------
28,336,983
--------------
TOTAL INVESTMENTS -- 99.9% 223,751,140
(Cost $227,987,765) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 150,987
--------------
NET ASSETS -- 100.0% $ 223,902,127
==============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $229,793,646. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$3,618,227 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$9,660,733.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 223,751,140 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
See Notes to Financial Statements Page 47
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.4%
AEROSPACE & DEFENSE -- 2.7%
126 Boeing (The) Co. $ 18,218
60 General Dynamics Corp. 8,242
154 Honeywell International, Inc. 15,950
16 L-3 Communications Holdings,
Inc. 1,912
53 Lockheed Martin Corp. 11,509
37 Northrop Grumman Corp. 6,986
28 Precision Castparts Corp. 6,496
60 Raytheon Co. 7,472
26 Rockwell Collins, Inc. 2,400
55 Textron, Inc. 2,310
165 United Technologies Corp. 15,852
--------------
97,347
--------------
AIR FREIGHT & LOGISTICS -- 0.7%
29 C.H. Robinson Worldwide, Inc. 1,799
37 Expeditors International of
Washington, Inc. 1,669
53 FedEx Corp. 7,896
140 United Parcel Service, Inc.,
Class B 13,472
--------------
24,836
--------------
AIRLINES -- 0.6%
126 American Airlines Group, Inc. 5,336
158 Delta Air Lines, Inc. 8,009
130 Southwest Airlines Co. 5,597
75 United Continental Holdings,
Inc. (a) 4,298
--------------
23,240
--------------
AUTO COMPONENTS -- 0.4%
45 BorgWarner, Inc. 1,945
56 Delphi Automotive PLC 4,801
54 Goodyear Tire & Rubber (The) Co. 1,764
130 Johnson Controls, Inc. 5,134
--------------
13,644
--------------
AUTOMOBILES -- 0.6%
781 Ford Motor Co. 11,004
284 General Motors Co. 9,659
38 Harley-Davidson, Inc. 1,725
--------------
22,388
--------------
BANKS -- 6.0%
2,087 Bank of America Corp. 35,124
156 BB&T Corp. 5,898
597 Citigroup, Inc. 30,895
35 Comerica, Inc. 1,464
160 Fifth Third Bancorp 3,216
160 Huntington Bancshares, Inc. 1,770
738 JPMorgan Chase & Co. 48,730
168 KeyCorp 2,216
32 M&T Bank Corp. 3,878
62 People's United Financial, Inc. 1,001
102 PNC Financial Services Group
(The), Inc. 9,722
263 Regions Financial Corp. 2,525
102 SunTrust Banks, Inc. 4,370
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BANKS (CONTINUED)
330 U.S. Bancorp $ 14,081
932 Wells Fargo & Co. 50,663
41 Zions Bancorporation 1,119
--------------
216,672
--------------
BEVERAGES -- 2.3%
20 Brown-Forman Corp., Class B 1,985
785 Coca-Cola (The) Co. 33,724
42 Coca-Cola Enterprises, Inc. 2,068
35 Constellation Brands, Inc.,
Class A 4,985
38 Dr Pepper Snapple Group, Inc. 3,542
32 Molson Coors Brewing Co.,
Class B 3,005
30 Monster Beverage Corp. (a) 4,469
292 PepsiCo, Inc. 29,177
--------------
82,955
--------------
BIOTECHNOLOGY -- 3.7%
328 AbbVie, Inc. 19,431
45 Alexion Pharmaceuticals, Inc. (a) 8,584
151 Amgen, Inc. 24,512
109 Baxalta, Inc. 4,254
45 Biogen, Inc. (a) 13,786
157 Celgene Corp. (a) 18,802
289 Gilead Sciences, Inc. 29,244
16 Regeneron Pharmaceuticals, Inc. (a) 8,686
49 Vertex Pharmaceuticals, Inc. (a) 6,165
--------------
133,464
--------------
BUILDING PRODUCTS -- 0.1%
19 Allegion PLC 1,253
68 Masco Corp. 1,924
--------------
3,177
--------------
CAPITAL MARKETS -- 2.1%
11 Affiliated Managers Group, Inc. (a) 1,757
35 Ameriprise Financial, Inc. 3,725
219 Bank of New York Mellon (The)
Corp. 9,027
25 BlackRock, Inc. 8,513
240 Charles Schwab (The) Corp. 7,903
59 E*TRADE Financial Corp. (a) 1,749
76 Franklin Resources, Inc. 2,798
80 Goldman Sachs Group (The), Inc. 14,418
85 Invesco Ltd. 2,846
22 Legg Mason, Inc. 863
303 Morgan Stanley 9,639
44 Northern Trust Corp. 3,172
81 State Street Corp. 5,375
50 T. Rowe Price Group, Inc. 3,575
--------------
75,360
--------------
CHEMICALS -- 2.1%
39 Air Products and Chemicals, Inc. 5,074
13 Airgas, Inc. 1,798
47 CF Industries Holdings, Inc. 1,918
225 Dow Chemical (The) Co. 11,583
176 E.I. du Pont de Nemours and Co. 11,722
30 Eastman Chemical Co. 2,025
Page 48 See Notes to Financial Statements
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CHEMICALS (CONTINUED)
53 Ecolab, Inc. $ 6,062
27 FMC Corp. 1,056
16 International Flavors &
Fragrances, Inc. 1,914
72 LyondellBasell Industries N.V.,
Class A 6,257
88 Monsanto Co. 8,670
67 Mosaic (The) Co. 1,849
54 PPG Industries, Inc. 5,336
57 Praxair, Inc. 5,837
16 Sherwin-Williams (The) Co. 4,154
--------------
75,255
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.4%
33 ADT (The) Corp. 1,088
18 Cintas Corp. 1,639
40 Pitney Bowes, Inc. 826
48 Republic Services, Inc. 2,111
17 Stericycle, Inc. (a) 2,050
85 Tyco International PLC 2,711
83 Waste Management, Inc. 4,430
--------------
14,855
--------------
COMMUNICATIONS EQUIPMENT
-- 1.4%
1,018 Cisco Systems, Inc. 27,644
14 F5 Networks, Inc. (a) 1,357
25 Harris Corp. 2,173
71 Juniper Networks, Inc. 1,960
32 Motorola Solutions, Inc. 2,190
301 QUALCOMM, Inc. 15,045
--------------
50,369
--------------
CONSTRUCTION & ENGINEERING
-- 0.1%
28 Fluor Corp. 1,322
25 Jacobs Engineering Group, Inc. (a) 1,049
32 Quanta Services, Inc. (a) 648
--------------
3,019
--------------
CONSTRUCTION MATERIALS -- 0.1%
13 Martin Marietta Materials, Inc. 1,776
27 Vulcan Materials Co. 2,564
--------------
4,340
--------------
CONSUMER FINANCE -- 0.8%
168 American Express Co. 11,685
107 Capital One Financial Corp. 7,723
86 Discover Financial Services 4,611
73 Navient Corp. 836
168 Synchrony Financial (a) 5,109
--------------
29,964
--------------
CONTAINERS & PACKAGING -- 0.3%
18 Avery Dennison Corp. 1,128
27 Ball Corp. 1,964
83 International Paper Co. 3,129
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
CONTAINERS & PACKAGING (CONTINUED)
32 Owens-Illinois, Inc. (a) $ 557
40 Sealed Air Corp. 1,784
52 WestRock Co. 2,372
--------------
10,934
--------------
DISTRIBUTORS -- 0.1%
30 Genuine Parts Co. 2,577
--------------
DIVERSIFIED CONSUMER SERVICES
-- 0.0%
47 H&R Block, Inc. 1,566
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 2.0%
376 Berkshire Hathaway, Inc.,
Class B (a) 49,647
68 CME Group, Inc. 6,161
22 Intercontinental Exchange, Inc. 5,638
67 Leucadia National Corp. 1,165
54 McGraw Hill Financial, Inc. 5,323
34 Moody's Corp. 3,412
23 Nasdaq, Inc. 1,338
--------------
72,684
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.4%
1,233 AT&T, Inc. 42,428
110 CenturyLink, Inc. 2,768
235 Frontier Communications Corp. 1,097
58 Level 3 Communications, Inc. (a) 3,153
816 Verizon Communications, Inc. 37,715
--------------
87,161
--------------
ELECTRIC UTILITIES -- 1.7%
98 American Electric Power Co., Inc. 5,710
138 Duke Energy Corp. 9,852
65 Edison International 3,849
36 Entergy Corp. 2,461
64 Eversource Energy 3,268
185 Exelon Corp. 5,137
85 FirstEnergy Corp. 2,697
92 NextEra Energy, Inc. 9,558
51 Pepco Holdings, Inc. 1,326
22 Pinnacle West Capital Corp. 1,419
135 PPL Corp. 4,608
182 Southern (The) Co. 8,516
102 Xcel Energy, Inc. 3,663
--------------
62,064
--------------
ELECTRICAL EQUIPMENT -- 0.5%
48 AMETEK, Inc. 2,572
93 Eaton Corp. PLC 4,840
131 Emerson Electric Co. 6,266
26 Rockwell Automation, Inc. 2,668
--------------
16,346
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.4%
62 Amphenol Corp., Class A 3,238
238 Corning, Inc. 4,351
28 FLIR Systems, Inc. 786
See Notes to Financial Statements Page 49
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS (CONTINUED)
77 TE Connectivity Ltd. $ 4,975
--------------
13,350
--------------
ENERGY EQUIPMENT & SERVICES
-- 1.0%
87 Baker Hughes, Inc. 4,015
38 Cameron International Corp. (a) 2,402
13 Diamond Offshore Drilling, Inc. 274
47 Ensco PLC, Class A 723
46 FMC Technologies, Inc. (a) 1,334
172 Halliburton Co. 5,855
22 Helmerich & Payne, Inc. 1,178
75 National Oilwell Varco, Inc. 2,512
253 Schlumberger Ltd. 17,647
69 Transocean Ltd. 854
--------------
36,794
--------------
FOOD & STAPLES RETAILING -- 2.3%
88 Costco Wholesale Corp. 14,212
222 CVS Health Corp. 21,705
195 Kroger (The) Co. 8,157
105 Sysco Corp. 4,305
175 Walgreens Boots Alliance, Inc. 14,902
315 Wal-Mart Stores, Inc. 19,309
68 Whole Foods Market, Inc. 2,278
--------------
84,868
--------------
FOOD PRODUCTS -- 1.7%
120 Archer-Daniels-Midland Co. 4,402
36 Campbell Soup Co. 1,892
87 ConAgra Foods, Inc. 3,668
120 General Mills, Inc. 6,919
29 Hershey (The) Co. 2,589
27 Hormel Foods Corp. 2,135
24 J.M. Smucker (The) Co. 2,960
51 Kellogg Co. 3,686
23 Keurig Green Mountain, Inc. 2,070
119 Kraft Heinz (The) Co. 8,658
23 McCormick & Co., Inc. 1,968
40 Mead Johnson Nutrition Co. 3,158
319 Mondelez International, Inc.,
Class A 14,304
59 Tyson Foods, Inc., Class A 3,146
--------------
61,555
--------------
GAS UTILITIES -- 0.0%
24 AGL Resources, Inc. 1,531
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.1%
299 Abbott Laboratories 13,428
110 Baxter International, Inc. 4,197
42 Becton, Dickinson and Co. 6,472
271 Boston Scientific Corp. (a) 4,997
15 C. R. Bard, Inc. 2,842
28 DENTSPLY International, Inc. 1,704
43 Edwards Lifesciences Corp. (a) 3,396
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HEALTH CARE EQUIPMENT &
SUPPLIES (CONTINUED)
7 Intuitive Surgical, Inc. (a) $ 3,823
282 Medtronic PLC 21,691
57 St. Jude Medical, Inc. 3,521
63 Stryker Corp. 5,855
19 Varian Medical Systems, Inc. (a) 1,535
34 Zimmer Biomet Holdings, Inc. 3,488
--------------
76,949
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 2.7%
70 Aetna, Inc. 7,568
39 AmerisourceBergen Corp. 4,045
52 Anthem, Inc. 7,251
66 Cardinal Health, Inc. 5,892
52 Cigna Corp. 7,609
33 DaVita HealthCare Partners,
Inc. (a) 2,300
136 Express Scripts Holding Co. (a) 11,888
63 HCA Holdings, Inc. (a) 4,261
17 Henry Schein, Inc. (a) 2,689
30 Humana, Inc. 5,355
20 Laboratory Corp. of America
Holdings (a) 2,473
46 McKesson Corp. 9,073
17 Patterson Cos., Inc. 768
29 Quest Diagnostics, Inc. 2,063
20 Tenet Healthcare Corp. (a) 606
191 UnitedHealth Group, Inc. 22,469
18 Universal Health Services, Inc.,
Class B 2,151
--------------
98,461
--------------
HEALTH CARE TECHNOLOGY -- 0.1%
61 Cerner Corp. (a) 3,670
--------------
HOTELS, RESTAURANTS & LEISURE
-- 1.8%
92 Carnival Corp. 5,012
6 Chipotle Mexican Grill, Inc. (a) 2,879
23 Darden Restaurants, Inc. 1,464
39 Marriott International, Inc.,
Class A 2,615
184 McDonald's Corp. 21,738
34 Royal Caribbean Cruises Ltd. 3,441
298 Starbucks Corp. 17,889
34 Starwood Hotels & Resorts
Worldwide, Inc. 2,355
23 Wyndham Worldwide Corp. 1,671
16 Wynn Resorts Ltd. 1,107
86 Yum! Brands, Inc. 6,282
--------------
66,453
--------------
HOUSEHOLD DURABLES -- 0.4%
66 D.R. Horton, Inc. 2,114
24 Garmin Ltd. 892
14 Harman International Industries,
Inc. 1,319
27 Leggett & Platt, Inc. 1,135
36 Lennar Corp., Class A 1,761
13 Mohawk Industries, Inc. (a) 2,462
Page 50 See Notes to Financial Statements
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOUSEHOLD DURABLES (CONTINUED)
54 Newell Rubbermaid, Inc. $ 2,380
64 PulteGroup, Inc. 1,140
16 Whirlpool Corp. 2,350
--------------
15,553
--------------
HOUSEHOLD PRODUCTS -- 1.9%
26 Church & Dwight Co., Inc. 2,207
26 Clorox (The) Co. 3,297
180 Colgate-Palmolive Co. 11,992
73 Kimberly-Clark Corp. 9,293
545 Procter & Gamble (The) Co. 43,278
--------------
70,067
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.1%
135 AES (The) Corp. 1,292
63 NRG Energy, Inc. 742
--------------
2,034
--------------
INDUSTRIAL CONGLOMERATES -- 2.6%
123 3M Co. 18,529
120 Danaher Corp. 11,145
1,892 General Electric Co. 58,936
20 Roper Technologies, Inc. 3,796
--------------
92,406
--------------
INSURANCE -- 2.7%
65 ACE Ltd. 7,595
86 Aflac, Inc. 5,151
78 Allstate (The) Corp. 4,843
248 American International Group, Inc. 15,369
55 Aon PLC 5,072
13 Assurant, Inc. 1,047
46 Chubb (The) Corp. 6,101
30 Cincinnati Financial Corp. 1,775
82 Hartford Financial Services Group
(The), Inc. 3,564
50 Lincoln National Corp. 2,513
56 Loews Corp. 2,150
105 Marsh & McLennan Cos., Inc. 5,822
223 MetLife, Inc. 10,751
55 Principal Financial Group, Inc. 2,474
118 Progressive (The) Corp. 3,752
90 Prudential Financial, Inc. 7,327
23 Torchmark Corp. 1,315
61 Travelers (The) Cos., Inc. 6,885
49 Unum Group 1,631
60 XL Group PLC 2,351
--------------
97,488
--------------
INTERNET & CATALOG RETAIL -- 2.2%
77 Amazon.com, Inc. (a) 52,044
20 Expedia, Inc. 2,486
86 Netflix, Inc. (a) 9,837
10 Priceline Group (The), Inc. (a) 12,749
23 TripAdvisor, Inc. (a) 1,961
--------------
79,077
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INTERNET SOFTWARE & SERVICES
-- 4.3%
36 Akamai Technologies, Inc. (a) $ 1,895
58 Alphabet, Inc., Class A (a) 45,125
60 Alphabet, Inc., Class C (b) 45,533
222 eBay, Inc. (a) 6,100
455 Facebook, Inc., Class A (a) 47,620
20 VeriSign, Inc. (a) 1,747
174 Yahoo!, Inc. (a) 5,787
--------------
153,807
--------------
IT SERVICES -- 3.7%
125 Accenture PLC, Class A 13,063
12 Alliance Data Systems Corp. (a) 3,319
92 Automatic Data Processing, Inc. 7,794
122 Cognizant Technology Solutions
Corp., Class A (a) 7,322
28 CSRA, Inc. 840
56 Fidelity National Information
Services, Inc. 3,394
46 Fiserv, Inc. (a) 4,207
179 International Business Machines
Corp. 24,634
199 MasterCard, Inc., Class A 19,375
64 Paychex, Inc. 3,385
223 PayPal Holdings, Inc. (a) 8,073
27 Teradata Corp. (a) 713
34 Total System Services, Inc. 1,693
390 Visa, Inc., Class A 30,244
102 Western Union (The) Co. 1,827
192 Xerox Corp. 2,041
--------------
131,924
--------------
LEISURE PRODUCTS -- 0.1%
22 Hasbro, Inc. 1,482
68 Mattel, Inc. 1,848
--------------
3,330
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.6%
66 Agilent Technologies, Inc. 2,760
29 Illumina, Inc. (a) 5,566
22 PerkinElmer, Inc. 1,179
80 Thermo Fisher Scientific, Inc. 11,348
16 Waters Corp. (a) 2,153
--------------
23,006
--------------
MACHINERY -- 1.2%
117 Caterpillar, Inc. 7,951
33 Cummins, Inc. 2,904
62 Deere & Co. 4,729
31 Dover Corp. 1,901
26 Flowserve Corp. 1,094
66 Illinois Tool Works, Inc. 6,117
52 Ingersoll-Rand PLC 2,875
71 PACCAR, Inc. 3,365
27 Parker-Hannifin Corp. 2,619
36 Pentair PLC 1,783
12 Snap-on, Inc. 2,057
30 Stanley Black & Decker, Inc. 3,202
See Notes to Financial Statements Page 51
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MACHINERY (CONTINUED)
36 Xylem, Inc. $ 1,314
--------------
41,911
--------------
MEDIA -- 3.0%
45 Cablevision Systems Corp.,
Class A 1,436
87 CBS Corp., Class B 4,100
489 Comcast Corp., Class A 27,594
30 Discovery Communications, Inc.,
Class A (a) 800
52 Discovery Communications, Inc.,
Class C (a) 1,312
82 Interpublic Group of Cos. (The),
Inc. 1,909
77 News Corp., Class A 1,029
22 News Corp., Class B 307
49 Omnicom Group, Inc. 3,707
19 Scripps Networks Interactive, Inc.,
Class A 1,049
45 TEGNA, Inc. 1,148
57 Time Warner Cable, Inc. 10,579
160 Time Warner, Inc. 10,347
236 Twenty-First Century Fox, Inc.,
Class A 6,410
87 Twenty-First Century Fox, Inc.,
Class B 2,369
70 Viacom, Inc., Class B 2,881
305 Walt Disney (The) Co. 32,050
--------------
109,027
--------------
METALS & MINING -- 0.2%
264 Alcoa, Inc. 2,606
233 Freeport-McMoRan, Inc. 1,577
106 Newmont Mining Corp. 1,907
64 Nucor Corp. 2,579
--------------
8,669
--------------
MULTILINE RETAIL -- 0.6%
58 Dollar General Corp. 4,168
47 Dollar Tree, Inc. (a) 3,629
38 Kohl's Corp. 1,810
63 Macy's, Inc. 2,204
27 Nordstrom, Inc. 1,345
123 Target Corp. 8,931
--------------
22,087
--------------
MULTI-UTILITIES -- 1.1%
49 Ameren Corp. 2,118
87 CenterPoint Energy, Inc. 1,597
56 CMS Energy Corp. 2,020
59 Consolidated Edison, Inc. 3,792
119 Dominion Resources, Inc. 8,049
36 DTE Energy Co. 2,887
64 NiSource, Inc. 1,249
98 PG&E Corp. 5,213
101 Public Service Enterprise Group,
Inc. 3,908
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MULTI-UTILITIES (CONTINUED)
29 SCANA Corp. $ 1,754
47 Sempra Energy 4,418
47 TECO Energy, Inc. 1,253
63 WEC Energy Group, Inc. 3,233
--------------
41,491
--------------
OIL, GAS & CONSUMABLE FUELS
-- 5.4%
102 Anadarko Petroleum Corp. 4,955
76 Apache Corp. 3,380
83 Cabot Oil & Gas Corp. 1,468
104 Chesapeake Energy Corp. 468
377 Chevron Corp. 33,915
19 Cimarex Energy Co. 1,698
78 Columbia Pipeline Group, Inc. 1,560
247 ConocoPhillips 11,532
46 CONSOL Energy, Inc. 363
78 Devon Energy Corp. 2,496
110 EOG Resources, Inc. 7,787
31 EQT Corp. 1,616
835 Exxon Mobil Corp. 65,088
48 Hess Corp. 2,327
368 Kinder Morgan, Inc. 5,491
136 Marathon Oil Corp. 1,712
107 Marathon Petroleum Corp. 5,547
33 Murphy Oil Corp. 741
33 Newfield Exploration Co. (a) 1,075
85 Noble Energy, Inc. 2,799
153 Occidental Petroleum Corp. 10,344
42 ONEOK, Inc. 1,036
95 Phillips 66 7,771
30 Pioneer Natural Resources Co. 3,761
34 Range Resources Corp. 837
77 Southwestern Energy Co. (a) 548
135 Spectra Energy Corp. 3,232
24 Tesoro Corp. 2,529
97 Valero Energy Corp. 6,859
137 Williams (The) Cos., Inc. 3,521
--------------
196,456
--------------
PERSONAL PRODUCTS -- 0.1%
45 Estee Lauder (The) Cos., Inc.,
Class A 3,963
--------------
PHARMACEUTICALS -- 5.8%
79 Allergan PLC (a) 24,688
334 Bristol-Myers Squibb Co. 22,976
196 Eli Lilly and Co. 16,515
42 Endo International PLC (a) 2,571
555 Johnson & Johnson 57,010
23 Mallinckrodt PLC (a) 1,716
560 Merck & Co., Inc. 29,579
83 Mylan N.V. (a) 4,488
29 Perrigo Co. PLC 4,196
1,237 Pfizer, Inc. 39,930
92 Zoetis, Inc. 4,409
--------------
208,078
--------------
Page 52 See Notes to Financial Statements
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
PROFESSIONAL SERVICES -- 0.3%
7 Dun & Bradstreet (The) Corp. $ 727
24 Equifax, Inc. 2,673
73 Nielsen Holdings PLC 3,402
27 Robert Half International, Inc. 1,273
31 Verisk Analytics, Inc. (a) 2,383
--------------
10,458
--------------
REAL ESTATE INVESTMENT TRUSTS
-- 2.7%
85 American Tower Corp. 8,241
31 Apartment Investment &
Management Co., Class A 1,241
27 AvalonBay Communities, Inc. 4,971
31 Boston Properties, Inc. 3,954
67 Crown Castle International Corp. 5,792
12 Equinix, Inc. 3,629
73 Equity Residential 5,956
13 Essex Property Trust, Inc. 3,112
117 General Growth Properties, Inc. 3,184
93 HCP, Inc. 3,556
151 Host Hotels & Resorts, Inc. 2,316
39 Iron Mountain, Inc. 1,053
83 Kimco Realty Corp. 2,196
27 Macerich (The) Co. 2,179
35 Plum Creek Timber Co., Inc. 1,670
105 Prologis, Inc. 4,507
30 Public Storage 7,431
50 Realty Income Corp. 2,581
62 Simon Property Group, Inc. 12,055
20 SL Green Realty Corp. 2,260
67 Ventas, Inc. 3,781
36 Vornado Realty Trust 3,599
71 Welltower, Inc. 4,830
103 Weyerhaeuser Co. 3,088
--------------
97,182
--------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.1%
58 CBRE Group, Inc., Class A (a) 2,006
--------------
ROAD & RAIL -- 0.8%
196 CSX Corp. 5,086
18 J.B. Hunt Transport Services, Inc. 1,321
22 Kansas City Southern 1,643
60 Norfolk Southern Corp. 5,075
11 Ryder System, Inc. 625
171 Union Pacific Corp. 13,372
--------------
27,122
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.5%
63 Analog Devices, Inc. 3,485
231 Applied Materials, Inc. 4,313
53 Avago Technologies Ltd. 7,693
112 Broadcom Corp., Class A 6,476
15 First Solar, Inc. (a) 990
946 Intel Corp. 32,590
31 KLA-Tencor Corp. 2,150
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (CONTINUED)
32 Lam Research Corp. $ 2,541
48 Linear Technology Corp. 2,039
41 Microchip Technology, Inc. 1,908
219 Micron Technology, Inc. (a) 3,101
102 NVIDIA Corp. 3,362
28 Qorvo, Inc. (a) 1,425
38 Skyworks Solutions, Inc. 2,920
203 Texas Instruments, Inc. 11,126
52 Xilinx, Inc. 2,442
--------------
88,561
--------------
SOFTWARE -- 4.4%
101 Activision Blizzard, Inc. 3,910
100 Adobe Systems, Inc. (a) 9,394
45 Autodesk, Inc. (a) 2,742
63 CA, Inc. 1,799
31 Citrix Systems, Inc. (a) 2,345
62 Electronic Arts, Inc. (a) 4,261
53 Intuit, Inc. 5,115
1,601 Microsoft Corp. 88,823
642 Oracle Corp. 23,452
37 Red Hat, Inc. (a) 3,064
125 salesforce.com, Inc. (a) 9,800
136 Symantec Corp. 2,856
--------------
157,561
--------------
SPECIALTY RETAIL -- 2.6%
15 Advance Auto Parts, Inc. 2,258
15 AutoNation, Inc. (a) 895
6 AutoZone, Inc. (a) 4,451
33 Bed Bath & Beyond, Inc. (a) 1,592
60 Best Buy Co., Inc. 1,827
41 CarMax, Inc. (a) 2,213
21 GameStop Corp., Class A 589
46 Gap (The), Inc. 1,136
254 Home Depot (The), Inc. 33,591
51 L Brands, Inc. 4,887
183 Lowe's Cos., Inc. 13,915
20 O'Reilly Automotive, Inc. (a) 5,068
81 Ross Stores, Inc. 4,359
16 Signet Jewelers Ltd. 1,979
130 Staples, Inc. 1,231
22 Tiffany & Co. 1,678
134 TJX (The) Cos., Inc. 9,502
27 Tractor Supply Co. 2,309
17 Urban Outfitters, Inc. (a) 387
--------------
93,867
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 4.1%
1,118 Apple, Inc. 117,681
390 EMC Corp. 10,015
362 Hewlett Packard Enterprise Co. 5,502
364 HP, Inc. 4,310
59 NetApp, Inc. 1,565
40 SanDisk Corp. 3,040
60 Seagate Technology PLC 2,200
See Notes to Financial Statements Page 53
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2015
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS (CONTINUED)
46 Western Digital Corp. $ 2,762
--------------
147,075
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.9%
56 Coach, Inc. 1,833
8 Fossil Group, Inc. (a) 292
79 Hanesbrands, Inc. 2,325
37 Michael Kors Holdings Ltd. (a) 1,482
270 NIKE, Inc., Class B 16,875
17 PVH Corp. 1,252
12 Ralph Lauren Corp. 1,338
36 Under Armour, Inc., Class A (a) 2,902
68 VF Corp. 4,233
--------------
32,532
--------------
TOBACCO -- 1.6%
393 Altria Group, Inc. 22,876
311 Philip Morris International, Inc. 27,340
166 Reynolds American, Inc. 7,661
--------------
57,877
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.2%
58 Fastenal Co. 2,368
19 United Rentals, Inc. (a) 1,378
12 W.W. Grainger, Inc. 2,431
--------------
6,177
--------------
TOTAL COMMON STOCKS -- 99.4% 3,588,640
(Cost $3,045,606) --------------
CONTRACTS DESCRIPTION VALUE
-------------------------------------------------------------
OPTIONS PURCHASED -- 0.5%
CALL OPTIONS -- 0.5%
304 VIX US, expiring 01/20/2016,
Strike Price $26 (a) 19,760
(Cost $38,925) --------------
TOTAL INVESTMENTS -- 99.9% 3,608,400
(Cost $3,084,531) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 1,839
--------------
NET ASSETS -- 100.0% $ 3,610,239
==============
(a) Non-income producing security.
(b) Non-income producing security which makes PIK distributions. For the year
ended December 31, 2015, the Fund received fractional PIK shares of
Alphabet, Inc., Class C.
(c) Aggregate cost for federal income tax purposes is $3,073,671. As of
December 31, 2015, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$713,458 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$178,729.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 3,588,640 $ -- $ --
Options Purchased 19,760 -- --
-----------------------------------------------
Total Investments $ 3,608,400 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at December 31, 2015.
Page 54 See Notes to Financial Statements
This page intentionally left blank.
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2015
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............................................... $ 532,479,685 $ 302,841,253 $ 184,344,076
Money market funds, at value........................................ 7,907,841 -- 4,225,154
Repurchase agreements, at value..................................... 7,664,396 -- 4,002,356
Cash................................................................ 306,281 104,382 --
Receivables:
Capital shares sold........................................... -- -- --
Investment securities sold.................................... 2,212,535 -- --
Dividends..................................................... 424,398 103,126 193,357
Securities lending income..................................... 8,928 -- 3,517
Interest...................................................... -- -- 19
Reclaims...................................................... -- -- --
Due from authorized participants.............................. -- -- --
Prepaid expenses.................................................... 5,257 2,721 1,416
-------------- -------------- --------------
TOTAL ASSETS.................................................. 551,009,321 303,051,482 192,769,895
-------------- -------------- --------------
LIABILITIES:
Due to custodian.................................................... -- -- --
Payables:
Capital shares redeemed....................................... 2,213,195 -- --
Investment securities purchased............................... -- -- --
Collateral for securities on loan............................. 15,572,237 -- 8,131,841
Investment advisory fees...................................... 173,914 104,284 54,602
Licensing fees................................................ 139,018 75,442 42,965
Printing fees................................................. 35,649 21,805 10,924
Audit and tax fees............................................ 24,925 24,925 24,925
Trustees' fees................................................ 136 32 --
Due to authorized participants................................ -- 469 --
Other liabilities................................................... 171,433 89,398 57,158
-------------- -------------- --------------
TOTAL LIABILITIES............................................. 18,330,507 316,355 8,322,415
-------------- -------------- --------------
NET ASSETS.......................................................... $ 532,678,814 $ 302,735,127 $ 184,447,480
============== ============== ==============
NET ASSETS CONSIST OF:
Paid-in capital..................................................... $ 540,222,691 $ 304,845,002 $ 171,927,766
Par value........................................................... 122,500 71,000 44,500
Accumulated net investment income (loss)............................ -- -- --
Accumulated net realized gain (loss) on investments................. (24,978,840) (22,485,477) (6,765,460)
Net unrealized appreciation (depreciation) on investments........... 17,312,463 20,304,602 19,240,674
-------------- -------------- --------------
NET ASSETS.......................................................... $ 532,678,814 $ 302,735,127 $ 184,447,480
============== ============== ==============
NET ASSET VALUE, per share.......................................... $ 43.48 $ 42.64 $ 41.45
============== ============== ==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)....................................... 12,250,002 7,100,002 4,450,002
-------------- -------------- --------------
Investments, at cost................................................ $ 515,167,222 $ 282,536,651 $ 165,103,402
============== ============== ==============
Money market funds, at cost......................................... $ 7,907,841 $ -- $ 4,225,154
============== ============== ==============
Repurchase agreements, at cost...................................... $ 7,664,396 $ -- $ 4,002,356
============== ============== ==============
Securities on loan, at value........................................ $ 15,149,145 $ -- $ 7,914,093
============== ============== ==============
Page 56 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
NASDAQ(R) FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST NASDAQ(R) ABA CBOE(R)
CLEAN EDGE(R) S&P ISE ISE-REVERE ISE COMMUNITY S&P 500(R)
GREEN ENERGY REIT WATER NATURAL GAS CHINDIA BANK VIX(R)
INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND TAIL HEDGE FUND
(QCLN) (FRI) (FIW) (FCG) (FNI) (QABA) (VIXH)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 69,635,355 $ 225,364,946 $ 102,410,490 $ 152,844,297 $ 222,559,201 $ 223,751,140 $ 3,608,400
7,191,765 -- 81,702 14,597,942 17,453,166 -- --
6,970,364 -- -- 14,148,540 16,915,864 -- --
27,378 -- 3,645 1,362,893 749,217 51,726 1,077
-- -- -- 4,470,045 -- -- --
-- 14 -- 3,771,838 -- -- --
36,012 1,164,141 57,709 101,329 -- 315,556 4,848
51,847 -- -- 250,694 20,991 -- --
-- 50 13 19 -- -- --
-- -- -- 25,013 -- -- --
-- -- 104 -- -- -- --
639 1,984 1,038 1,604 2,133 1,077 --
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
83,913,360 226,531,135 102,554,701 191,574,214 257,700,572 224,119,499 3,614,325
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
-- 61,905 -- -- -- -- --
-- -- -- 3,790,632 -- -- --
-- -- -- 5,773,630 1,914,950 -- 2,219
14,162,129 -- -- 28,746,482 34,369,030 -- --
19,618 57,104 35,677 49,357 49,273 81,998 1,867
17,108 59,949 13,489 49,533 46,223 45,195 --
9,019 14,212 15,058 24,056 19,381 6,178 --
24,925 24,925 24,925 24,925 24,925 24,925 --
40 -- 32 -- 23 -- --
-- -- -- 589 -- -- --
25,641 63,083 33,728 72,585 89,178 59,076 --
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
14,258,480 281,178 122,909 38,531,789 36,512,983 217,372 4,086
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 69,654,880 $ 226,249,957 $ 102,431,792 $ 153,042,425 $ 221,187,589 $ 223,902,127 $ 3,610,239
=============== =============== =============== =============== =============== =============== ===============
$ 119,643,081 $ 233,388,194 $ 124,118,665 $ 716,494,477 $ 304,398,809 $ 231,075,678 $ 3,802,651
43,500 102,500 34,000 343,000 78,000 57,500 1,500
12,316 -- 7,659 -- (206,457) 112,770 --
(39,957,797) (1,265,148) (12,616,629) (397,261,675) (69,668,673) (3,107,196) (717,781)
(10,086,220) (5,975,589) (9,111,903) (166,533,377) (13,414,090) (4,236,625) 523,869
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 69,654,880 $ 226,249,957 $ 102,431,792 $ 153,042,425 $ 221,187,589 $ 223,902,127 $ 3,610,239
=============== =============== =============== =============== =============== =============== ===============
$ 16.01 $ 22.07 $ 30.13 $ 4.46 $ 28.36 $ 38.94 $ 24.07
=============== =============== =============== =============== =============== =============== ===============
4,350,002 10,250,002 3,400,002 34,300,002 7,800,002 5,750,002 150,002
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 79,721,575 $ 231,340,535 $ 111,522,393 $ 319,377,674 $ 235,973,291 $ 227,987,765 $ 3,084,531
=============== =============== =============== =============== =============== =============== ===============
$ 7,191,765 $ -- $ 81,702 $ 14,597,942 $ 17,453,166 $ -- $ --
=============== =============== =============== =============== =============== =============== ===============
$ 6,970,364 $ -- $ -- $ 14,148,540 $ 16,915,864 $ -- $ --
=============== =============== =============== =============== =============== =============== ===============
$ 13,713,270 $ -- $ -- $ 29,192,536 $ 33,487,544 $ -- $ --
=============== =============== =============== =============== =============== =============== ===============
See Notes to Financial Statements Page 57
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2015
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........................................................... $ 6,686,922 $ 4,755,562 $ 1,382,306
Securities lending income (net of fees)............................. 61,202 -- 19,248
Interest............................................................ -- -- 59
Foreign tax withholding............................................. (12,798) -- (3,014)
-------------- -------------- --------------
Total investment income....................................... 6,735,326 4,755,562 1,398,599
-------------- -------------- --------------
EXPENSES:
Investment advisory fees............................................ 2,435,344 1,326,344 600,942
Licensing fees...................................................... 608,836 331,586 150,236
Accounting and administration fees.................................. 308,250 167,977 77,939
Custodian fees...................................................... 98,643 42,095 28,484
Printing fees....................................................... 76,352 50,236 21,722
Transfer agent fees................................................. 30,442 16,579 7,512
Legal fees.......................................................... 30,199 16,121 7,344
Audit and tax fees.................................................. 25,179 25,179 25,179
Trustees' fees and expenses......................................... 11,364 7,819 5,689
Expenses previously waived or reimbursed............................ 10,910 -- --
Listing fees........................................................ 8,186 8,887 7,120
Registration and filing fees........................................ (4,721) (31) 4,556
Other expenses...................................................... 14,032 6,939 3,100
-------------- -------------- --------------
Total expenses................................................ 3,653,016 1,999,731 939,823
Less fees waived and expenses reimbursed by the investment
advisor.................................................... -- (10,215) (38,410)
-------------- -------------- --------------
Net expenses.................................................. 3,653,016 1,989,516 901,413
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)........................................ 3,082,310 2,766,046 497,186
-------------- -------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................... (12,319,963) (2,005,844) (2,223,194)
Options....................................................... -- -- --
In-kind redemptions........................................... 54,085,670 46,824,712 7,725,924
-------------- -------------- --------------
Net realized gain (loss)............................................ 41,765,707 44,818,868 5,502,730
-------------- -------------- --------------
Net change in unrealized appreciation (depreciation) on:
Investments................................................... (34,310,836) (55,092,351) (186,256)
Options....................................................... -- -- --
-------------- -------------- --------------
Net change in unrealized appreciation (depreciation)................ (34,310,836) (55,092,351) (186,256)
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................. 7,454,871 (10,273,483) 5,316,474
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................................. $ 10,537,181 $ (7,507,437) $ 5,813,660
============== ============== ==============
(a) Fund is subject to a Unitary Fee (see Note 3 in the Notes to Financial
Statements).
Page 58 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
NASDAQ(R) FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST NASDAQ(R) ABA CBOE(R)
CLEAN EDGE(R) S&P ISE ISE-REVERE ISE COMMUNITY S&P 500(R)
GREEN ENERGY REIT WATER NATURAL GAS CHINDIA BANK VIX(R)
INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND TAIL HEDGE FUND
(QCLN) (FRI) (FIW) (FCG) (FNI) (QABA) (VIXH)
--------------- --------------- --------------- --------------- --------------- --------------- ----------------
$ 556,244 $ 7,076,959 $ 1,998,850 $ 2,226,262 $ 2,432,697 $ 2,439,422 $ 78,005
447,793 -- -- 4,694,134 406,657 -- --
-- 153 50 115 -- -- --
-- -- -- (192,929) (102,212) (3,219) (5)
--------------- --------------- --------------- --------------- --------------- --------------- ------------
1,004,037 7,077,112 1,998,900 6,727,582 2,737,142 2,436,203 78,000
--------------- --------------- --------------- --------------- --------------- --------------- ------------
320,401 762,628 626,984 884,223 886,114 460,285 22,673 (a)
80,100 203,368 78,373 221,056 177,223 103,564 --
42,576 132,236 80,474 112,514 113,201 62,662 --
13,216 32,377 19,634 33,553 67,382 14,384 --
13,835 34,767 29,230 31,164 42,840 13,218 --
4,005 12,711 7,837 11,053 11,077 5,754 --
4,026 10,904 7,918 11,538 12,006 4,116 --
25,179 25,179 25,179 25,179 25,179 25,179 --
5,046 6,678 5,761 6,535 6,535 5,020 --
-- 4,444 -- -- -- -- --
7,266 9,000 11,001 11,381 11,381 7,123 --
(735) (7,098) (996) 6,878 10,770 9,100 --
4,303 1,397 4,900 8,414 3,604 2,660 --
--------------- --------------- --------------- --------------- --------------- --------------- ------------
519,218 1,228,591 896,295 1,363,488 1,367,312 713,065 22,673
(38,617) -- -- (37,153) (38,142) (22,638) --
--------------- --------------- --------------- --------------- --------------- --------------- ------------
480,601 1,228,591 896,295 1,326,335 1,329,170 690,427 22,673
--------------- --------------- --------------- --------------- --------------- --------------- ------------
523,436 5,848,521 1,102,605 5,401,247 1,407,972 1,745,776 55,327
--------------- --------------- --------------- --------------- --------------- --------------- ------------
(5,378,701) 367,189 (1,187,442) (184,104,034) (17,002,128) (2,002,442) 14,860
-- -- -- -- -- -- (259,700)
526,447 22,639,536 10,361,883 1,180,816 11,833,125 8,015,754 --
--------------- --------------- --------------- --------------- --------------- --------------- ------------
(4,852,254) 23,006,725 9,174,441 (182,923,218) (5,169,003) 6,013,312 (244,840)
--------------- --------------- --------------- --------------- --------------- --------------- ------------
(1,381,171) (22,518,489) (30,704,492) (5,578,141) (22,242,010) (10,201,193) (35,596)
-- -- -- -- -- -- (3,111)
--------------- --------------- --------------- --------------- --------------- --------------- ------------
(1,381,171) (22,518,489) (30,704,492) (5,578,141) (22,242,010) (10,201,193) (38,707)
--------------- --------------- --------------- --------------- --------------- --------------- ------------
(6,233,425) 488,236 (21,530,051) (188,501,359) (27,411,013) (4,187,881) (283,547)
--------------- --------------- --------------- --------------- --------------- --------------- ------------
$ (5,709,989) $ 6,336,757 $ (20,427,446) $ (183,100,112) $ (26,003,041) $ (2,442,105) $ (228,220)
=============== =============== =============== =============== =============== =============== ============
See Notes to Financial Statements Page 59
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)
----------------------------- -----------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
12/31/2015 12/31/2014 12/31/2015 12/31/2014
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss)........................... $ 3,082,310 $ 4,749,649 $ 2,766,046 $ 3,243,902
Net realized gain (loss)............................... 41,765,707 31,854,044 44,818,868 12,025,520
Net change in unrealized appreciation (depreciation)... (34,310,836) 31,248,859 (55,092,351) 40,032,392
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations..................................... 10,537,181 67,852,552 (7,507,437) 55,301,814
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (3,678,500) (5,254,521) (3,154,776) (3,895,191)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................. 195,067,101 477,669,678 76,107,779 181,010,141
Cost of shares redeemed................................ (247,074,977) (251,384,716) (129,579,619) (42,712,206)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................... (52,007,876) 226,284,962 (53,471,840) 138,297,935
------------- ------------- ------------- -------------
Total increase (decrease) in net assets................ (45,149,195) 288,882,993 (64,134,053) 189,704,558
NET ASSETS:
Beginning of period.................................... 577,828,009 288,945,016 366,869,180 177,164,622
------------- ------------- ------------- -------------
End of period.......................................... $ 532,678,814 $ 577,828,009 $ 302,735,127 $ 366,869,180
============= ============= ============= =============
Accumulated net investment income (loss)
at end of period.................................... $ -- $ -- $ -- $ --
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................ 13,500,002 7,950,002 8,400,002 5,000,002
Shares sold............................................ 4,450,000 12,150,000 1,750,000 4,450,000
Shares redeemed........................................ (5,700,000) (6,600,000) (3,050,000) (1,050,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period...................... 12,250,002 13,500,002 7,100,002 8,400,002
============= ============= ============= =============
Page 60 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 ISE WATER
INDEX FUND INDEX FUND INDEX FUND INDEX FUND
(QQXT) (QCLN) (FRI) (FIW)
----------------------------- ------------------------------- ------------------------------- -------------------------------
For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended Ended Ended
12/31/2015 12/31/2014 12/31/2015 12/31/2014 12/31/2015 12/31/2014 12/31/2015 12/31/2014
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 497,186 $ 867,619 $ 523,436 $ 819,485 $ 5,848,521 $ 5,353,731 $ 1,102,605 $ 1,463,333
5,502,730 11,553,919 (4,852,254) 19,991,447 23,006,725 18,847,621 9,174,441 12,824,605
(186,256) 1,380,688 (1,381,171) (30,603,684) (22,518,489) 23,109,804 (30,704,492) (14,409,829)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
5,813,660 13,802,226 (5,709,989) (9,792,752) 6,336,757 47,311,156 (20,427,446) (121,891)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(636,390) (905,596) (527,840) (857,050) (6,276,431) (6,113,911) (1,094,946) (1,479,820)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
80,613,411 45,510,861 4,544,831 99,521,515 119,979,221 370,499,249 9,558,341 41,982,569
(18,537,885) (31,608,677) (18,268,019) (96,829,501) (232,919,287) (220,777,099) (84,154,350) (39,473,865)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
62,075,526 13,902,184 (13,723,188) 2,692,014 (112,940,066) 149,722,150 (74,596,009) 2,508,704
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
67,252,796 26,798,814 (19,961,017) (7,957,788) (112,879,740) 190,919,395 (96,118,401) 906,993
117,194,684 90,395,870 89,615,897 97,573,685 339,129,697 148,210,302 198,550,193 197,643,200
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 184,447,480 $ 117,194,684 $ 69,654,880 $ 89,615,897 $ 226,249,957 $ 339,129,697 $ 102,431,792 $ 198,550,193
============= ============= ============== ============== ============== ============== ============== ==============
$ -- $ -- $ 12,316 $ 510 $ -- $ -- $ 7,659 $ --
============= ============= ============== ============== ============== ============== ============== ==============
2,950,002 2,600,002 5,200,002 5,450,002 15,250,002 8,450,002 5,900,002 5,850,002
1,950,000 1,200,000 250,000 5,050,000 5,250,000 17,850,000 300,000 1,250,000
(450,000) (850,000) (1,100,000) (5,300,000) (10,250,000) (11,050,000) (2,800,000) (1,200,000)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
4,450,002 2,950,002 4,350,002 5,200,002 10,250,002 15,250,002 3,400,002 5,900,002
============= ============= ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 61
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
ISE-REVERE FIRST TRUST
NATURAL GAS ISE CHINDIA
INDEX FUND INDEX FUND
(FCG) (FNI)
----------------------------- -----------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
12/31/2015 12/31/2014 12/31/2015 12/31/2014
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss)........................... $ 5,401,247 $ 3,376,804 $ 1,407,972 $ 407,975
Net realized gain (loss)............................... (182,923,218) (36,262,344) (5,169,003) 5,012,397
Net change in unrealized appreciation (depreciation)... (5,578,141) (163,962,545) (22,242,010) (7,267,776)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations..................................... (183,100,112) (196,848,085) (26,003,041) (1,847,404)
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (5,545,080) (3,518,320) (1,676,190) (666,211)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................. 248,375,073 391,219,526 248,313,891 62,493,569
Cost of shares redeemed................................ (153,633,016) (408,702,370) (111,110,415) (20,278,569)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................... 94,742,057 (17,482,844) 137,203,476 42,215,000
------------- ------------- ------------- -------------
Total increase (decrease) in net assets................ (93,903,135) (217,849,249) 109,524,245 39,701,385
NET ASSETS:
Beginning of period.................................... 246,945,560 464,794,809 111,663,344 71,961,959
------------- ------------- ------------- -------------
End of period.......................................... $ 153,042,425 $ 246,945,560 $ 221,187,589 $ 111,663,344
============= ============= ============= =============
Accumulated net investment income (loss)
at end of period.................................... $ -- $ 307,369 $ (206,457) $ (80,940)
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................ 22,000,002 23,800,002 3,900,002 2,550,002
Shares sold............................................ 35,400,000 19,000,000 7,950,000 2,050,000
Shares redeemed........................................ (23,100,000) (20,800,000) (4,050,000) (700,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period...................... 34,300,002 22,000,002 7,800,002 3,900,002
============= ============= ============= =============
Page 62 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
NASDAQ(R) ABA CBOE(R) S&P 500(R)
COMMUNITY BANK VIX(R) TAIL
INDEX FUND HEDGE FUND
(QABA) (VIXH)
----------------------------- -----------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
12/31/2015 12/31/2014 12/31/2015 12/31/2014
------------- ------------- ------------- -------------
$ 1,745,776 $ 1,215,821 $ 55,327 $ 74,991
6,013,312 1,885,640 (244,840) 926,768
(10,201,193) (1,523,495) (38,707) (419,455)
------------- ------------- ------------- -------------
(2,442,105) 1,577,966 (228,220) 582,304
------------- ------------- ------------- -------------
(1,652,931) (1,203,186) (56,416) (75,215)
------------- ------------- ------------- -------------
198,934,541 70,848,157 -- 1,195,628
(80,755,559) (13,767,069) -- (3,523,628)
------------- ------------- ------------- -------------
118,178,982 57,081,088 -- (2,328,000)
------------- ------------- ------------- -------------
114,083,946 57,455,868 (284,636) (1,820,911)
109,818,181 52,362,313 3,894,875 5,715,786
------------- ------------- ------------- -------------
$ 223,902,127 $ 109,818,181 $ 3,610,239 $ 3,894,875
============= ============= ============= =============
$ 112,770 $ 19,925 $ -- $ 56
============= ============= ============= =============
3,000,002 1,450,002 150,002 250,002
4,950,000 1,950,000 -- 50,000
(2,200,000) (400,000) -- (150,000)
------------- ------------- ------------- -------------
5,750,002 3,000,002 150,002 150,002
============= ============= ============= =============
See Notes to Financial Statements Page 63
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,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 42.80 $ 36.35 $ 26.10 $ 22.98 $ 23.74
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.22 0.41 0.17 0.27 0.05
Net realized and unrealized gain (loss) 0.73 6.49 10.25 3.14 (0.70)
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.95 6.90 10.42 3.41 (0.65)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.27) (0.45) (0.17) (0.29) (0.11)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 43.48 $ 42.80 $ 36.35 $ 26.10 $ 22.98
========== ========== ========== ========== ==========
TOTAL RETURN (a) 2.22% 19.13% 39.95% 14.86% (2.77)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 532,679 $ 577,828 $ 288,945 $ 84,815 $ 73,539
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.60% 0.61% 0.63% 0.68% 0.68%
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 0.51% 1.10% 0.60% 1.01% 0.23%
Portfolio turnover rate (b) 31% 27% 38% 34% 27%
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 43.67 $ 35.43 $ 25.86 $ 24.14 $ 25.69
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.37 0.45 0.24 0.19 0.00 (c) (d)
Net realized and unrealized gain (loss) (0.98) 8.32 9.59 1.74 (1.47)
---------- ---------- ---------- ---------- ----------
Total from investment operations (0.61) 8.77 9.83 1.93 (1.47)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (loss) (0.42) (0.53) (0.26) (0.21) (0.08)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 42.64 $ 43.67 $ 35.43 $ 25.86 $ 24.14
========== ========== ========== ========== ==========
TOTAL RETURN (a) (1.37)% 24.83% 38.12% 8.02% (5.75)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 302,735 $ 366,869 $ 177,165 $ 106,008 $ 149,660
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.60% 0.61% 0.62% 0.65% 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 0.83% 1.32% 0.80% 0.63% (0.02)%
Portfolio turnover rate (b) 23% 20% 33% 26% 21%
<FN>
(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) Amount represents less than $0.01 per share.
(d) Per share amounts have been calculated using the average share method.
</FN>
Page 64 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,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 39.73 $ 34.77 $ 24.70 $ 20.80 $ 21.10
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.13 0.32 0.10 0.31 0.06
Net realized and unrealized gain (loss) 1.75 4.97 10.06 3.92 (0.28)
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.88 5.29 10.16 4.23 (0.22)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.16) (0.33) (0.09) (0.33) (0.08)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 41.45 $ 39.73 $ 34.77 $ 24.70 $ 20.80
========== ========== ========== ========== ==========
TOTAL RETURN (a) 4.75% 15.35% 41.24% 20.31% (1.08)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 184,447 $ 117,195 $ 90,396 $ 41,982 $ 30,157
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.63% 0.64% 0.67% 0.76% 0.78%
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 0.33% 0.90% 0.38% 1.34% 0.31%
Portfolio turnover rate (b) 39% 23% 33% 40% 37%
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 17.23 $ 17.90 $ 9.48 $ 9.65 $ 16.42
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.11 0.13 0.07 0.13 (0.03)
Net realized and unrealized gain (loss) (1.21) (0.66) 8.42 (0.18) (6.74)
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.10) (0.53) 8.49 (0.05) (6.77)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.12) (0.14) (0.07) (0.12) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 16.01 $ 17.23 $ 17.90 $ 9.48 $ 9.65
========== ========== ========== ========== ==========
TOTAL RETURN (a) (6.43)% (3.05)% 89.79% (0.50)% (41.23)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 69,655 $ 89,616 $ 97,574 $ 13,740 $ 20,740
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.65% 0.64% 0.70% 0.98% 0.77%
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 0.65% 0.61% 0.60% 1.19% (0.18)%
Portfolio turnover rate (b) 35% 37% 49% 24% 22%
<FN>
(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.
</FN>
See Notes to Financial Statements Page 65
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,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 22.24 $ 17.54 $ 17.75 $ 15.47 $ 14.65
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.55 0.41 0.52 0.38 0.28
Net realized and unrealized gain (loss) (0.13) 4.75 (0.19) 2.30 0.88
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.42 5.16 0.33 2.68 1.16
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.59) (0.46) (0.54) (0.37) (0.34)
Net realized gain -- -- -- (0.03) --
---------- ---------- ---------- ---------- ----------
Total distributions (0.59) (0.46) (0.54) (0.40) (0.34)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 22.07 $ 22.24 $ 17.54 $ 17.75 $ 15.47
========== ========== ========== ========== ==========
TOTAL RETURN (a) 1.97% 29.61% 1.82% 17.39% 7.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 226,250 $ 339,130 $ 148,210 $ 402,888 $ 324,961
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.48% 0.50% 0.50% 0.50% 0.57%
Ratio of net expenses to average net assets 0.48% 0.50% 0.50% 0.50% 0.50%
Ratio of net investment income (loss) to
average net assets 2.30% 2.35% 2.31% 2.15% 2.03%
Portfolio turnover rate (b) 8% 11% 11% 8% 9%
FIRST TRUST ISE WATER INDEX FUND (FIW)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 33.65 $ 33.79 $ 25.99 $ 20.71 $ 22.13
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.23 0.25 0.21 0.23 0.16
Net realized and unrealized gain (loss) (3.52) (0.14) 7.80 5.30 (1.39)
---------- ---------- ---------- ---------- ----------
Total from investment operations (3.29) 0.11 8.01 5.53 (1.23)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.23) (0.25) (0.21) (0.25) (0.19)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 30.13 $ 33.65 $ 33.79 $ 25.99 $ 20.71
========== ========== ========== ========== ==========
TOTAL RETURN (a) (9.81)% 0.36% 30.91% 26.83% (5.62)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 102,432 $ 198,550 $ 197,643 $ 72,769 $ 57,986
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.57% 0.59% 0.60% 0.63% 0.64%
Ratio of net expenses to average net assets 0.57% 0.59% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.70% 0.75% 0.75% 1.02% 0.79%
Portfolio turnover rate (b) 17% 24% 45% 31% 31%
<FN>
(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.
</FN>
Page 66 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (FCG)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 11.22 $ 19.53 $ 15.67 $ 18.19 $ 19.60
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.20 0.14 0.07 0.07 0.08
Net realized and unrealized gain (loss) (6.75) (8.30) 3.86 (2.52) (1.41)
---------- ---------- ---------- ---------- ----------
Total from investment operations (6.55) (8.16) 3.93 (2.45) (1.33)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.21) (0.15) (0.07) (0.07) (0.08)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 4.46 $ 11.22 $ 19.53 $ 15.67 $ 18.19
========== ========== ========== ========== ==========
TOTAL RETURN (a) (59.10)% (42.02)% 25.13% (13.51)% (6.85)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 153,042 $ 246,946 $ 464,795 $ 387,899 $ 346,556
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.62% 0.61% 0.60% 0.63% 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 2.44% 0.74% 0.40% 0.40% 0.39%
Portfolio turnover rate (b) 67% 42% 49% 41% 43%
FIRST TRUST ISE CHINDIA INDEX FUND (FNI)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 28.63 $ 28.22 $ 20.97 $ 18.23 $ 25.01
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.15 0.20 0.20 0.35 0.27
Net realized and unrealized gain (loss) (0.24) 0.48 7.26 2.74 (6.75)
---------- ---------- ---------- ---------- ----------
Total from investment operations (0.09) 0.68 7.46 3.09 (6.48)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.18) (0.27) (0.21) (0.35) (0.30)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 28.36 $ 28.63 $ 28.22 $ 20.97 $ 18.23
========== ========== ========== ========== ==========
TOTAL RETURN (a) (0.32)% 2.37% 35.81% 17.11% (26.02)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 221,188 $ 111,663 $ 71,962 $ 66,066 $ 79,287
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.62% 0.65% 0.66% 0.73% 0.66%
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 0.64% 0.54% 0.79% 1.60% 1.00%
Portfolio turnover rate (b) 68% 40% 40% 29% 23%
<FN>
(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.
</FN>
See Notes to Financial Statements Page 67
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,
------------------------------------------------------------------------
2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 36.61 $ 36.11 $ 25.56 $ 22.97 $ 24.95
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.56 0.47 0.37 0.48 0.37
Net realized and unrealized gain (loss) 2.31 0.50 10.55 2.62 (1.98)
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.87 0.97 10.92 3.10 (1.61)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.54) (0.47) (0.37) (0.51) (0.37)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 38.94 $ 36.61 $ 36.11 $ 25.56 $ 22.97
========== ========== ========== ========== ==========
TOTAL RETURN (a) 7.88% 2.72% 42.89% 13.52% (6.48)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 223,902 $ 109,818 $ 52,362 $ 8,945 $ 12,634
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.62% 0.64% 0.76% 1.04% 0.96%
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 1.52% 1.41% 1.38% 1.90% 1.62%
Portfolio turnover rate (b) 19% 26% 29% 17% 29%
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
FOR THE PERIOD
YEAR ENDED DECEMBER 31, 8/29/2012 (c)
------------------------------------------ THROUGH
2015 2014 2013 12/31/2012
------------ ------------ ------------ --------------
Net asset value, beginning of period $ 25.97 $ 22.86 $ 19.51 $ 19.89
---------- ---------- ---------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.37 0.34 0.34 0.11
Net realized and unrealized gain (loss) (1.89) 3.11 3.34 (0.38)
---------- ---------- ---------- ------------
Total from investment operations (1.52) 3.45 3.68 (0.27)
---------- ---------- ---------- ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.38) (0.34) (0.33) (0.11)
---------- ---------- ---------- ------------
Net asset value, end of period $ 24.07 $ 25.97 $ 22.86 $ 19.51
========== ========== ========== ============
TOTAL RETURN (a) (5.88)% 15.22% 19.00% (1.37)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3,610 $ 3,895 $ 5,716 $ 2,927
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.60% 0.60% 0.60% 0.60% (d)
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% (d)
Ratio of net investment income (loss) to
average net assets 1.46% 1.42% 1.53% 1.97% (d)
Portfolio turnover rate (b) 7% 7% 4% 2%
<FN>
(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 NASDAQ(R) ABA
Community Bank Index Fund 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) Inception date is consistent with the commencement of investment
operations and is the date the initial creation units were established.
(d) Annualized.
</FN>
Page 68 See Notes to Financial Statements
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NOTES TO FINANCIAL STATEMENTS
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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 nineteen exchange-traded funds. This report
covers the ten funds listed below:
First Trust NASDAQ-100 Equal Weighted Index Fund - (The Nasdaq(R) 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 ISE Water Index Fund - (NYSE Arca ticker "FIW")
First Trust ISE-Revere Natural Gas Index Fund - (NYSE Arca ticker "FCG")
First Trust ISE Chindia Index Fund - (NYSE Arca ticker "FNI")
First Trust NASDAQ(R) ABA Community Bank Index Fund - (Nasdaq ticker
"QABA")
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund - (NYSE Arca ticker
"VIXH")
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 issued and redeemed principally in-kind
for securities included in a Fund's relevant index. 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 ISE Water Index Fund ISE Water Index(TM)
First Trust ISE-Revere Natural Gas Index Fund ISE-REVERE Natural Gas Index(TM)
First Trust ISE Chindia Index Fund ISE ChIndia Index(TM)
First Trust NASDAQ(R) ABA Community Bank Index Fund NASDAQ OMX(R) ABA Community Bank Index(SM)
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund CBOE(R) VIX(R) Tail Hedge Index
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds, each of which is an investment company within the scope of Financial
Accounting Standards Board ("FASB") Accounting Standards Update 2013-08, follow
accounting and reporting guidance under FASB 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 69
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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
(the "Board"), 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 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.
Exchange-traded options contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded options contracts are fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price. Over-the-counter options contracts are fair
valued at the mean of their most recent bid and asked price, if available,
and otherwise at 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 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 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 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 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.
Page 70
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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, 2015, is
included with each Fund's Portfolio of Investments.
B. CALL OPTIONS
The First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund ("VIXH") is subject to
equity price risk in the normal course of pursuing its investment objective and
may purchase out-of-the-money call options on the Chicago Board Options Exchange
Market Volatility Index (the "VIX Index") to hedge against changes in the value
of equities. Also, VIXH may sell call options on the VIX Index in order to close
out existing positions. The purchase of call options involves the risk of loss
of all or a part of the cash paid for the call options (the premium). The market
risk associated with purchasing options on the VIX Index is limited to the
premium paid. When VIXH purchases a call option, the premium paid represents the
cost of the call option, which is included in "Investments, at cost" on the
Statements of Assets and Liabilities. Options are marked-to-market daily and
their value will be affected by changes in the market value of the stocks
included in the stock index.
If VIXH elects to exercise a call option on the VIX Index, settlement does not
occur by the delivery of the securities comprising the VIX Index. VIXH, as
holder of the stock index option, receives an amount of cash if the closing
level of the stock index upon which the option is based is greater than, in the
case of a call, or less than in the case of a put, the exercise price of the
option. This amount of cash is equal to the difference between the closing price
of the stock index and the exercise price of the option expressed in dollars
times a specified multiple. If VIXH elects to allow a call option to expire,
then the equity price risk for purchased options is limited to the premium
initially paid. Gain or loss on options is presented separately as "Net realized
gain (loss) on Options" on the Statements of Operations.
For the fiscal year ended December 31, 2015, VIXH recorded a change in
unrealized loss of $3,111 on the options, which is included in the "Net change
in unrealized appreciation (depreciation) on Options" on the Statements of
Operations. For the fiscal year ended December 31, 2015, VIXH recorded a
realized loss on options of $259,700, which is included in "Net realized gain
(loss) on Options" on the Statements of Operations.
At December 31, 2015, VIXH held 304 options contracts with a notional value of
$7,904. This is representative of contracts held throughout the year.
C. 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.
Distributions received from a Fund's investments in master limited partnerships
("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 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.
D. 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.
Page 71
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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.
E. 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 dividend and interest earned on the securities loaned is accounted for in
the same manner as other dividend and interest income. At December 31, 2015,
QQEW, QQXT, QCLN, FCG and FNI have securities in the securities lending program.
During the fiscal year ended December 31, 2015, QQEW, QQXT, QCLN, FCG and FNI
participated 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.
F. 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 Notes. The U.S. Treasury Notes 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 Notes 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, 2015, were received
as collateral for lending securities.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly, or as the Board may determine from time to time. Distributions of net
realized gains earned by each Fund, if any, are distributed at least annually.
Distributions from income and capital gains are determined in accordance with
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
significantly modified 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, 2015 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ---------------- ----------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ 3,678,500 $ -- $ --
First Trust NASDAQ-100-Technology Sector Index Fund 3,154,776 -- --
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 636,390 -- --
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 527,840 -- --
First Trust S&P REIT Index Fund 6,276,431 -- --
First Trust ISE Water Index Fund 1,094,946 -- --
First Trust ISE-Revere Natural Gas Index Fund 5,545,080 -- --
First Trust ISE Chindia Index Fund 1,676,190 -- --
First Trust NASDAQ(R)ABA Community Bank Index Fund 1,652,931 -- --
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund 56,416 -- --
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2014 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ---------------- ----------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ 5,254,521 $ -- $ --
First Trust NASDAQ-100-Technology Sector Index Fund 3,895,191 -- --
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 905,596 -- --
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 857,050 -- --
First Trust S&P REIT Index Fund 6,113,911 -- --
First Trust ISE Water Index Fund 1,479,820 -- --
First Trust ISE-Revere Natural Gas Index Fund 3,518,320 -- --
First Trust ISE Chindia Index Fund 666,211 -- --
First Trust NASDAQ(R)ABA Community Bank Index Fund 1,203,186 -- --
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund 75,215 -- --
Page 73
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
As of December 31, 2015, 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 $ -- $ (19,936,392) $ 12,270,015
First Trust NASDAQ-100-Technology Sector Index Fund -- (19,112,273) 16,931,398
First Trust NASDAQ-100 Ex-Technology Sector Index Fund -- (5,117,833) 17,593,047
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 12,316 (38,540,783) (11,503,234)
First Trust S&P REIT Index Fund -- -- (7,240,737)
First Trust ISE Water Index Fund 7,659 (12,224,967) (9,503,565)
First Trust ISE-Revere Natural Gas Index Fund -- (373,003,580) (190,791,472)
First Trust ISE Chindia Index Fund 22,787 (67,469,120) (15,842,887)
First Trust NASDAQ(R) ABA Community Bank Index Fund 112,770 (1,301,315) (6,042,506)
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund -- (728,641) 534,729
H. 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 the 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 2012, 2013,
2014 and 2015 remain open to federal and state audit. As of December 31, 2015,
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 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, 2015, the Funds, except for First Trust S&P
REIT Index Fund, had pre-enactment and 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.
Capital Capital Capital
Loss Loss Loss Post- Total
Available Available Available Enactment - Capital
Through Through Through No Loss
2016 2017 2018 Expiration Available
---------- ----------- ----------- ----------- -----------
First Trust NASDAQ-100 Equal Weighted Index Fund $1,957,170 $ 4,681,103 $ -- $13,298,119 $19,936,392
First Trust NASDAQ-100-Technology Sector Index Fund 1,421,664 2,016,911 -- 15,673,698 19,112,273
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 143,597 1,051,894 80,899 3,841,443 5,117,833
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index
Fund 4,246,707 7,483,633 5,884,801 20,925,642 38,540,783
First Trust ISE Water Index Fund 318,246 5,768,328 2,198,674 3,939,719 12,224,967
First Trust ISE-Revere Natural Gas Index Fund 7,264,703 32,569,413 40,089,981 293,079,483 373,003,580
First Trust ISE Chindia Index Fund 11,116,593 11,686,955 7,245,147 37,420,425 67,469,120
First Trust NASDAQ(R) ABA Community Bank Index Fund -- 4,787 116,604 1,179,924 1,301,315
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund -- -- -- 728,641 728,641
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
At the taxable year ended December 31, 2015, the following Funds' capital loss
carryforwards expired in the following amounts:
Capital Loss
Carryforward
Expired
--------------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ 54,385
First Trust NASDAQ-100-Technology Sector Index Fund 311,155
First Trust NASDAQ 100 Ex-Technology Sector Index Fund 7,779
First Trust NASDAQ(R) Clean Edge(R) Green Energy
Index Fund 141,332
First Trust ISE Water Index Fund 592
First Trust ISE-Revere Natural Gas Index Fund 5,274
In order to present paid-in capital, accumulated net investment income (loss)
and accumulated net realized gain (loss) 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, 2015, 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 $ 596,190 $ (51,169,778) $ 50,573,588
First Trust NASDAQ-100-Technology Sector Index Fund 388,730 (45,389,450) 45,000,720
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 139,204 (7,582,332) 7,443,128
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 16,210 213,033 (229,243)
First Trust S&P REIT Index Fund 427,910 (23,318,214) 22,890,304
First Trust ISE Water Index Fund -- (9,540,039) 9,540,039
First Trust ISE-Revere Natural Gas Index Fund (163,536) 28,771,835 (28,608,299)
First Trust ISE Chindia Index Fund 142,701 (10,924,447) 10,781,746
First Trust NASDAQ(R)ABA Community Bank Index Fund -- (7,445,589) 7,445,589
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund 1,033 (24) (1,009)
I. EXPENSES
Expenses that are directly related to one of the Funds are charged directly to
the respective Fund, except for First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge
Fund (the "Unitary Fee Fund"), for which expenses other than excluded expenses
(discussed in Note 3) are paid by the Advisor. General expenses of the Trust are
allocated to all the Funds based upon the net assets of each Fund.
First Trust has entered into licensing agreements with each of the following
"Licensors" for the respective Funds:
FUND LICENSOR
First Trust NASDAQ-100 Equal Weighted Index Fund The Nasdaq Stock Market LLC
First Trust NASDAQ-100-Technology Sector Index Fund The Nasdaq Stock Market LLC
First Trust NASDAQ-100 Ex-Technology Sector Index Fund The Nasdaq Stock Market LLC
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund The Nasdaq Stock Market LLC /Clean Edge(R), Inc.
First Trust S&P REIT Index Fund Standard & Poor's Financial Services, LLC
First Trust ISE Water Index Fund International Securities Exchange, LLC
First Trust ISE-Revere Natural Gas Index Fund International Securities Exchange, LLC
First Trust ISE Chindia Index Fund International Securities Exchange, LLC
First Trust NASDAQ(R)ABA Community Bank Index Fund The Nasdaq Stock Market LLC
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund Standard & Poor's Financial Services, LLC
Page 75
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
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. With the exception of the
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund, 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 the First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund, First Trust is
paid an annual unitary management fee of 0.60% 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 and other services,
and excluding distribution and service fees pursuant to a Rule 12b-1 plan, if
any, brokerage expenses, taxes, interest, and extraordinary expenses.
First Trust is entitled to receive monthly fees from the remaining Funds
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 ISE Water Index Fund 0.40%
First Trust ISE-Revere Natural Gas Index Fund 0.40%
First Trust ISE Chindia Index Fund 0.40%
First Trust NASDAQ(R)ABA Community Bank Index Fund 0.40%
For such Funds, 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, 2017.
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 ISE Water Index Fund 0.60%
First Trust ISE-Revere Natural Gas Index Fund 0.60%
First Trust ISE Chindia Index Fund 0.60%
First Trust NASDAQ(R)ABA Community Bank Index Fund 0.60%
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee was waived or expense was incurred, but no reimbursement payment will be
made by a Fund if it results in the Fund exceeding an expense ratio equal to the
Expense Cap in place at the time the expenses were reimbursed or fees were
waived by First Trust. These amounts are included in "Expenses previously waived
or reimbursed" on the Statements of Operations.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
The advisory fee waivers and expense reimbursements for the fiscal year ended
December 31, 2015 and fees waived or expenses borne by First Trust subject to
recovery from the applicable Fund for the periods indicated were as follows:
Fees Waived or Expenses Borne
by First Trust Subject to Recovery
------------------------------------------------
Advisory Year Year Year
Fee Expense Ended Ended Ended
Waivers Reimbursement 12/31/2013 12/31/2014 12/31/2015 Total
--------- ------------- ---------- ---------- ---------- ---------
First Trust NASDAQ-100 Equal Weighted
Index Fund $ -- $ -- $ 56,300 $ 41,566 $ -- $ 97,866
First Trust NASDAQ-100-Technology Sector
Index Fund 10,215 -- 32,509 33,593 10,215 76,317
First Trust NASDAQ-100 Ex-Technology
Sector Index Fund 38,410 -- 44,451 40,262 38,410 123,123
First Trust NASDAQ(R) Clean Edge(R) Green
Energy Index Fund 38,617 -- 50,502 50,372 38,617 139,491
First Trust S&P REIT Index Fund -- -- -- -- -- --
First Trust ISE Water Index Fund -- -- -- -- -- --
First Trust ISE-Revere Natural Gas Index Fund 37,153 -- 11,985 42,386 37,153 91,524
First Trust ISE Chindia Index Fund 38,142 -- 35,100 33,734 38,142 106,976
First Trust NASDAQ(R) ABA Community Bank
Index Fund 22,638 -- 40,775 37,176 22,638 100,589
During the fiscal year ended December 31, 2015, First Trust recovered fees that
were previously waived from First Trust NASDAQ-100 Equal Weighted Index Fund and
First Trust S&P REIT Index Fund of $10,910 and $4,444, respectively.
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.
At a meeting held on December 7, 2015, the Board accepted Mr. Bradley's
resignation from his position as the President and Chief Executive Officer of
the Trust, effective December 31, 2015. At the same meeting, the Board elected
Mr. Dykas, formerly Chief Financial Officer and Treasurer of the Trust, to serve
as the President and Chief Executive Officer and Mr. Swade, formerly an
Assistant Treasurer of the Trust, to serve as the Treasurer, Chief Financial
Officer and Chief Accounting Officer of the Trust.
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 pro rata among each fund in the First Trust Fund
Complex based on net assets. Each Independent Trustee is also paid an annual per
fund fee that varies based on whether the fund is a closed-end or other actively
managed fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
4. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended December 31, 2015, 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 $ 186,479,335 $ 185,375,172
First Trust NASDAQ-100-Technology Sector Index Fund 76,563,315 76,474,604
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 58,706,378 58,152,777
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 28,377,989 28,157,688
First Trust S&P REIT Index Fund 23,070,957 20,598,871
First Trust ISE Water Index Fund 25,952,440 26,259,901
First Trust ISE-Revere Natural Gas Index Fund 149,665,533 147,201,275
First Trust ISE Chindia Index Fund 147,970,745 146,923,190
First Trust NASDAQ(R)ABA Community Bank Index Fund 21,892,641 21,740,629
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund 257,366 516,231
For the fiscal year ended December 31, 2015, 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 $ 194,875,946 $ 246,915,973
First Trust NASDAQ-100-Technology Sector Index Fund 75,974,934 129,399,885
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 80,540,463 18,541,899
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 4,541,723 18,252,521
First Trust S&P REIT Index Fund 119,738,466 231,917,346
First Trust ISE Water Index Fund 9,564,675 84,108,331
First Trust ISE-Revere Natural Gas Index Fund 246,625,637 153,604,927
First Trust ISE Chindia Index Fund 248,221,627 110,906,365
First Trust NASDAQ(R)ABA Community Bank Index Fund 198,739,581 80,652,903
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund -- --
5. CREATION, REDEMPTION AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Such transactions are generally permitted on an
in-kind basis, with a balancing cash component to equate the transaction to the
daily NAV per Share of each Fund on the transaction date times the number of
Shares in a Creation Unit. Authorized Participants purchasing Creation Units
must pay to BNYM, as transfer agent, a standard creation transaction fee (the
"Creation Transaction Fee"), which is based on the number of different
securities in a Creation Unit of each Fund, except First Trust CBOE(R) S&P
500(R) VIX(R) Tail Hedge Fund, according to the fee schedule set forth below:
Number of Securities Creation
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
The standard creation transaction fee for First Trust CBOE(R) S&P 500(R) VIX(R)
Tail Hedge Fund is currently $1,500.
The Creation Transaction Fee is applicable to each purchase transaction
regardless of the number of Creation Units purchased in the transaction. An
additional variable fee of up to three times the Creation Transaction Fee may be
charged to approximate additional expenses incurred by a Fund with respect to
transactions effected outside of the clearing process (i.e., through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. The price for each Creation Unit will equal the daily
NAV per Share of a Fund on the transaction date times the number of Shares in a
Creation Unit plus the fees described above and, if applicable, any transfer
taxes.
Page 78
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a standard redemption transaction fee (the "Redemption Transaction Fee"),
which is based on the number of different securities in a Creation Unit of each
Fund, except First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund, according to
the fee schedule set forth below:
Number of Securities Redemption
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
The standard redemption transaction fee for First Trust CBOE(R) S&P 500(R)
VIX(R) Tail Hedge Fund is currently $1,500.
The Redemption Transaction Fee is applicable to each redemption transaction
regardless of the number of Creation Units redeemed in the transaction. An
additional variable fee of up to three times the Redemption Transaction Fee may
be charged to approximate additional expenses incurred by a Fund with respect to
redemptions effected outside of the clearing process or to the extent that
redemptions are for cash. Each Fund reserves the right to effect redemptions in
cash. A shareholder may request cash redemption in lieu of securities; however,
a Fund may, in its discretion, reject any such request.
6. DISTRIBUTION PLAN
The Board 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, 2017.
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:
Effective January 1, 2016, the fixed annual retainer paid to the Independent
Trustees will be allocated equally among each fund in the First Trust Fund
Complex and will no longer be allocated pro rata based on each fund's net
assets.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FIRST TRUST EXCHANGE-TRADED FUND:
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 ISE Water Index Fund, First Trust ISE-Revere Natural Gas
Index Fund, First Trust ISE Chindia Index Fund, First Trust NASDAQ(R) ABA
Community Bank Index Fund, and First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge
Fund, each a series of the First Trust Exchange-Traded Fund (the "Funds"),
including the portfolios of investments, as of December 31, 2015, and 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, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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. The Funds
are not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, 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. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2015 by correspondence with the Funds'
custodian and brokers; where replies were not received, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the funds listed above included in the First Trust Exchange-Traded Fund, as
of December 31, 2015, 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 periods presented, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 23, 2016
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Funds' website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files its complete schedule of each Fund's portfolio holdings with the
SEC for the first and third quarters of each fiscal year on Form N-Q. The
Trust's Form N-Qs are available (1) by calling (800) 988-5891; (2) on the Funds'
website located at http://www.ftportfolios.com; (3) on the SEC's website at
http://www.sec.gov; and (4) for review and copying at the SEC's Public Reference
Room ("PRR") in Washington, DC. Information regarding the operation of the PRR
may be obtained by calling (800) SEC-0330.
FEDERAL TAX INFORMATION
For the taxable year ended December 31, 2015, 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 64.02%
First Trust S&P REIT Index Fund --
First Trust ISE Water Index Fund 100.00%
First Trust ISE-Revere Natural Gas Index Fund 5.22%
First Trust ISE Chindia Index Fund --
First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00%
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund 100.00%
For the taxable year ended December 31, 2015, 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 85.80%
First Trust S&P REIT Index Fund --
First Trust ISE Water Index Fund 100.00%
First Trust ISE-Revere Natural Gas Index Fund 27.71%
First Trust ISE Chindia Index Fund 100.00%
First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00%
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund 100.00%
For the tax year ended December 31, 2015, the First Trust S&P REIT Index Fund
designated $1,678,918, or amounts necessary, as long-term capital gain. During
the tax year, Fund shareholders redeemed amounts in excess of our long-term
capital gain and of these proceeds, $1,678,918, or amounts necessary, represents
long-term capital gain from the Fund.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. YOU SHOULD CONSIDER EACH FUND'S INVESTMENT
OBJECTIVE, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. YOU CAN
DOWNLOAD EACH FUND'S PROSPECTUS AT HTTP://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. FOR ADDITIONAL INFORMATION ABOUT THE
RISKS ASSOCIATED WITH INVESTING IN THE FUNDS, PLEASE SEE THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION, AS WELL AS OTHER REGULATORY FILINGS. READ THESE
DOCUMENTS CAREFULLY BEFORE YOU INVEST. FIRST TRUST PORTFOLIOS L.P. IS THE
DISTRIBUTOR OF THE FIRST TRUST EXCHANGE-TRADED FUND.
The following summarizes some of the risks that should be considered for the
Funds.
Each Fund's shares will change in value, and you could lose money by investing
in a Fund. Shares are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates and perceived trends in stock prices. Overall stock values could decline
generally or could underperform other investments. Overall stock market values
could decline generally or could underperform other investments.
An investment in a Fund involves risks similar to those of investing in any fund
of equity securities traded on an exchange. Investors buying or selling Fund
shares on the secondary market may incur brokerage commissions. In addition,
investors who sell Fund shares may receive less than the Fund shares' net asset
value. Unlike shares of open-end funds, investors are generally not able to
purchase exchange-traded fund ("ETF") shares directly from a Fund and individual
ETF shares are not redeemable. However, specified large blocks of ETF shares
called creation units can be purchased from, or redeemed to, a Fund.
Each Fund is subject to index tracking risk. You should anticipate that the
value of Fund shares will decline, more or less, in correlation with any decline
in the value of the index that the Fund seeks to track.
Each Fund's return may not match the return of the index it seeks to track for a
number of reasons. While First Trust seeks to have a correlation of 0.95 or
better, before expenses, between a Fund's performance and the performance of its
corresponding index, there can be no assurance that a Fund will be able to
achieve such a correlation. Accordingly, each Fund's performance may correlate
to a lesser extent and may possibly vary substantially from the performance of
its corresponding index.
Each Fund is also exposed to additional market risk due to a policy of investing
principally in the securities included in its corresponding index. As a result
of such policies, securities held by each Fund will generally not be bought or
sold in response to market fluctuations and the securities may be issued by
companies concentrated in a particular industry. As a result, each Fund will
generally not sell a stock because the stock's issuer is in financial trouble,
unless that stock is removed or is anticipated to be removed from the index the
Fund seeks to track.
Each Fund relies on a license from an index provider that permits the Fund to
use its corresponding index and associated trade names and trademarks in
connection with the name and investment strategies of the Fund. Such licenses
may be terminated by the respective index provider and, as a result, each Fund
may lose its ability to use such intellectual property. There is also no
guarantee that the index provider has all rights to license the respective
intellectual property to First Trust, on behalf of the Fund. Accordingly, in the
event the license is terminated or the index provider does not have rights to
license the particular intellectual property, it may have a significant effect
on the operation of the related Fund.
Each Fund is subject to issuer specific changes risk. The value of an individual
security or a particular type of security can be more volatile than the market
as a whole and can perform differently from the value of the market as a whole.
Each Fund will be concentrated in the securities of companies of a given
industry if the Fund's corresponding index is concentrated in such industry. A
concentration makes a Fund more susceptible to any single occurrence affecting
the related industry and may subject a Fund to greater market risk than less
concentrated funds.
Each Fund is considered to be non-diversified. As a result, those Funds are
exposed to additional market risk. A non-diversified fund may invest a
relatively high percentage of its assets in a limited number of issuers. As a
result, changes in the market value of a single portfolio security could cause
greater fluctuations in share price than would occur in a diversified fund.
Furthermore, non-diversified funds are more susceptible to any single political,
regulatory or economic occurrence.
The Funds are not actively managed. The Funds may be affected by a general
decline in certain market segments relating to their corresponding index. The
Funds invest in securities included in or representative of their corresponding
index regardless of their investment merit. The Funds generally will not attempt
to take defensive positions in declining markets.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
The First Trust NASDAQ-100 Equal Weighted Index Fund and the First Trust
NASDAQ-100-Technology Sector Index Fund invest in stocks of companies in the
technology sector. You should be aware that an investment in a portfolio which
invests in a particular sector involves additional risks, including limited
diversification. The companies engaged in the technology sector are subject to
fierce competition and high research and development costs, and their products
and services may be subject to rapid obsolescence.
First Trust S&P REIT Index Fund and First Trust NASDAQ(R) ABA Community Bank
Index Fund invest in securities of companies in the financials sector. Banks,
thrifts and their holding companies are especially subject to the adverse
effects of economic recession; volatile interest rates; portfolio concentrations
in geographic markets and in commercial and residential real estate loans; and
competition from new entrants in their fields of business. Although recently
enacted legislation repealed most of the barriers which separated the banking,
insurance and securities industries, these industries are still extensively
regulated at both the federal and state level and may be adversely affected by
increased regulations. The downturn in the U.S. and world economies has
adversely affected banks, thrifts and other companies in the financials sector.
The First Trust ISE Chindia Index Fund, the First Trust NASDAQ-100 Equal
Weighted Index Fund, the First Trust NASDAQ-100-Technology Sector Index Fund,
the First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund and the First Trust
NASDAQ(R) Clean Edge(R) Green Energy Index Fund invest in securities of
companies in the information technology industry. Information technology
companies are generally subject to the risks of rapidly changing technologies;
short product life cycles; fierce competition; and aggressive pricing and
reduced profit margins.
The First Trust NASDAQ-100 Ex-Technology Sector Index Fund and First Trust
NASDAQ-100 Equal Weighted Index Fund invest in the securities of companies in
the consumer discretionary sector. Because companies in the consumer
discretionary sector manufacture products and provide discretionary services
directly to the consumer, the success of these companies is tied closely to the
performance of the overall domestic and international economy, interest rates,
competition and consumer confidence. Success depends heavily on disposable
household income and consumer spending. Changes in demographics and consumer
tastes can also affect the demand for, and success of, consumer discretionary
products in the marketplace.
The First Trust ISE-Revere Natural Gas Index Fund invests in the securities of
companies in the energy sector. General problems of issuers in the energy sector
include volatile fluctuations in price and supply of energy fuels, international
politics, terrorist attacks, reduced demand as a result of increases in energy
efficiency and energy conservation, the success of exploration projects,
clean-up and litigation costs relating to oil spills and environmental damage,
and tax and other regulatory policies of various governments. In addition,
recent oil prices have been at historic highs and extremely volatile.
The First Trust ISE Water Index Fund and the First Trust NASDAQ(R) Clean Edge(R)
Green Energy Index Fund invest in the securities of companies in the industrials
sector. General risks of these companies include the general state of the
economy, intense competition, consolidation, domestic and international
politics, excess capacity and consumer demand and spending trends. In addition,
they may also be significantly affected by overall capital spending levels,
economic cycles, technical obsolescence, delays in modernization, labor
relations, government regulations and e-commerce initiatives.
The First Trust S&P REIT Index Fund invests in companies in the real estate
industry, including real estate investment trusts ("REITs") and is subject to
the risks associated with investing in real estate (any of which could cause the
value of a REIT's stock price to decline), which may include, but are not
limited to, possible declines in the value of real estate, adverse general and
local economic conditions, possible lack of availability of mortgage funds,
overbuilding in a REIT's market, changes in interest rates and environmental
problems. Furthermore, increases in interest rates typically lower the present
value of a REIT's future earnings stream, and may make financing property
purchases and improvements more costly.
The First Trust NASDAQ-100 Ex-Technology Sector Index Fund invests in the
securities of companies in the health care sector. Because companies in the
health care sector are involved in medical services or health care including
biotechnology research and production, drugs and pharmaceuticals and health care
facilities and services, general problems of these companies include extensive
competition, generic drug sales or the loss of patent protection, product
liability litigation and increased government regulations.
The First Trust ISE Water Index Fund invests in the securities of utilities
companies. Utilities companies are subject to the imposition of rate caps,
increased competition due to deregulation, the difficulty in obtaining an
adequate return on invested capital or in financing large construction projects,
the limitations on operations and increased costs and delays attributable to
environmental considerations, and the capital market's ability to absorb utility
debt. In addition, taxes, government regulation, international politics, price
and supply fluctuations, volatile interest rates and energy conservation may
cause difficulties for utilities. Utilities issuers have been experiencing
certain of these problems to varying degrees.
The Funds may invest in small capitalization and mid-capitalization companies.
Such companies' securities may be less liquid and may experience greater price
volatility than securities of larger, more established companies.
Page 83
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
Because a Fund's corresponding index may include American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs") and/or stocks of non-U.S.
companies, the investments of certain Funds, including but not limited to, the
First Trust ISE Chindia Index Fund, the First Trust ISE-Revere Natural Gas Index
Fund and the First Trust ISE Water Index Fund involve risks of investing in
non-U.S. securities that are in addition to the risk associated with domestic
securities. Non-U.S. companies, in general, are not subject to the regulatory
requirements of U.S. companies and, as such, there may be less publicly
available information about these companies. Moreover, non-U.S. accounting,
auditing and financial reporting standards generally are different from those
applicable to U.S. companies. In addition, non-U.S. companies are exposed to
additional economic, political, social or diplomatic events. ADRs and ADSs also
involve substantially identical risks to those associated with investments in
non-U.S. securities. In addition, the issuers of certain depositary receipts,
particularly unsponsored or unregistered depositary receipts, are under no
obligation to distribute shareholder communications to the holders of such
receipts, or to pass through to them any voting rights with respect to the
deposited securities.
The First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund invests in
renewable and alternative energy companies. You should be aware that share
prices of renewable and alternative energy companies have been significantly
more volatile than shares of companies operating in other more established
industries and the securities included in the First Trust NASDAQ(R) Clean
Edge(R) Green Energy Index Fund may be subject to sharp price declines. This
industry is relatively nascent and under-researched in comparison to more
established and mature sectors, and should therefore be regarded as having
greater investment risk.
The First Trust ISE Water Index Fund invests in companies in the potable water
and wastewater industries. You should be aware that adverse developments in
these industries may significantly affect the value of the shares of the First
Trust ISE Water Index Fund. Companies involved in the potable water and
wastewater industries are subject to environmental considerations, taxes,
government regulation, price and supply fluctuations, competition and
conservation.
The First Trust ISE-Revere Natural Gas Index Fund invests in companies in the
natural gas industry. You should be aware that one of the natural gas industry's
primary risks is the competitive risk associated with the prices of alternative
fuels, such as coal and oil. Additionally, the natural gas industry is sensitive
to increased interest rates because of the industry's capital intensive nature.
Furthermore, there are additional risks and hazards that are inherent in the
natural gas industry that may cause the price of natural gas to widely
fluctuate.
The First Trust ISE Chindia Index Fund invests in the securities of Chinese and
Indian companies. You should be aware that investments in such companies are
subject to additional risks, which are associated with possible adverse
economic, political and social developments in those countries.
The First Trust NASDAQ(R) ABA Community Bank Index Fund is concentrated in the
securities of NASDAQ(R) listed community banks as defined by its corresponding
index which involves additional risks, including limited diversification. These
companies are subject to certain risks, including the adverse effects of
volatile interest rates, economic recession, increased competition from new
entrants in the field, and potential increased regulation. The financial
performance of these companies may also be highly dependent upon the business
environment in certain geographic regions of the United States and may be
adversely impacted by any downturn or unfavorable economic or employment
developments in their local markets and the United States as a whole. These
companies may also be subject to interest rate risks and changes in monetary
policy as their earnings are largely dependent upon their net interest income
and lending risks that could further increase because of increases in interest
rates and/or continuing economic weakness.
Page 84
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
The First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund's use of options and
other derivatives can lead to 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 derivatives. These risks are heightened when the First
Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge 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. The option positions employed, as dictated by the
attempt to replicate the Index, may present additional risk. The value of an
option may be adversely affected if the market for the option becomes less
liquid or smaller, and will be affected by changes in the value and dividend
rates of the stock subject to the option, an increase in interest rates, a
change in the actual and perceived volatility of the stock market and the common
stock and the remaining time to expiration. Additionally, the value of an option
does not increase or decrease at the same rate as the underlying stock (although
they generally move in the same direction).
Unlike most exchange-traded funds, the First Trust CBOE(R) S&P 500(R) VIX(R)
Tail Hedge Fund may effect a portion of creations and redemptions for cash,
rather than in-kind securities. Particularly, the call option portion of the
Fund's portfolio, if applicable, may be redeemed for cash. As a result, an
investment in the Fund may be less tax-efficient than an investment in a more
conventional exchange-traded fund. Because the Fund may effect a portion of
redemptions for cash, rather than in-kind distributions, it may be required to
sell portfolio securities in order to obtain the cash needed to distribute
redemption proceeds. A sale of shares may result in capital gains or losses, and
may also result in higher brokerage costs.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 85
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
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
THE FIRST TRUST DIRECTORSHIPS
NAME, ADDRESS, TERM OF OFFICE FUND COMPLEX HELD BY TRUSTEE
DATE OF BIRTH AND AND YEAR FIRST PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST ELECTED OR APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician; President, Wheaton Orthopedics; 120 None
c/o First Trust Advisors L.P. Limited Partner, Gundersen Real Estate
120 E. Liberty Drive, o Since Inception Limited Partnership; Member, Sportsmed LLC
Suite 400
Wheaton, IL 60187
D.O.B.: 04/51
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investor Services, Inc. 120 Director of ADM
c/o First Trust Advisors L.P. (Futures Commission Merchant) Investor Services,
120 E. Liberty Drive, o Since Inception Inc., ADM
Suite 400 Investor Services
Wheaton, IL 60187 International and
D.O.B.: 11/57 Futures Industry
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 120 Director of Trust
c/o First Trust Advisors L.P. Management Consulting) Company of
120 E. Liberty Drive, o Since Inception Illinois
Suite 400
Wheaton, IL 60187
D.O.B.: 11/56
Niel B. Nielson, Trustee o Indefinite Term Managing Director and Chief Operating 120 Director of
c/o First Trust Advisors L.P. Officer (January 2015 to Present), Pelita Covenant
120 E. Liberty Drive, o Since Inception Harapan Educational Foundation (Educational Transport Inc.
Suite 400 Products and Services); President and Chief (May 2003 to
Wheaton, IL 60187 Executive Officer (June 2012 to September May 2014)
D.O.B.: 03/54 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); President
(June 2002 to June 2012), Covenant College
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 120 None
Chairman of the Board Advisors L.P. and First Trust Portfolios
120 E. Liberty Drive, o Since Inception L.P.; Chairman of the Board of Directors,
Suite 400 BondWave LLC (Software Development
Wheaton, IL 60187 Company/Investment Advisor) and
D.O.B.: 09/55 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 86
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BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME, ADDRESS OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
AND DATE 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
120 E. Liberty Drive, Executive Officer (January 2016 to Present), Controller (January 2011
Suite 400 o Since January 2016 to January 2016), Senior Vice President (April 2007
Wheaton, IL 60187 to January 2016), First Trust Advisors L.P. and First
D.O.B: 01/66 Trust Portfolios L.P.
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Vice President (April 2012 to Present),
120 E. Liberty Drive, Officer and Chief First Trust Advisors L.P. and First Trust Portfolios
Suite 400 Accounting Officer o Since January 2016 L.P., Vice President (September 2006 to April
Wheaton, IL 60187 2012), Guggenheim Funds Investment Advisors,
D.O.B.: 08/72 LLC/Claymore Securities, Inc.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First
120 E. Liberty Drive, Legal Officer Trust Portfolios L.P.; Secretary and General Counsel,
Suite 400 o Since Inception BondWave LLC (Software Development Company/
Wheaton, IL 60187 Investment Advisor); Secretary of Stonebridge
D.O.B.: 05/60 Advisors LLC (Investment Advisor)
Daniel J. Lindquist Vice President o Indefinite Term Managing Director (July 2012 to Present),
120 E. Liberty Drive, Senior Vice President (September 2005 to July
Suite 400 o Since Inception 2012), First Trust Advisors L.P. and First Trust
Wheaton, IL 60187 Portfolios L.P.
D.O.B.: 02/70
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
120 E. Liberty Drive, and Assistant Secretary and First Trust Portfolios L.P.
Suite 400 o Chief Compliance
Wheaton, IL 60187 Officer Since
D.O.B.: 12/66 January 2011
o Assistant Secretary
Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
120 E. Liberty Drive, First Trust Portfolios L.P.
Suite 400 o Since Inception
Wheaton, IL 60187
D.O.B.: 06/66
Stan Ueland Vice President o Indefinite Term Senior Vice President (September 2012 to
120 E. Liberty Drive, Present), Vice President (August 2005 to
Suite 400 o Since Inception September 2012), First Trust Advisors L.P. and
Wheaton, IL 60187 First Trust Portfolios L.P.
D.O.B.: 11/70
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 87
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PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2015 (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 with affiliates of the Fund.
PRIVACY ONLINE
We allow third-party companies, including AddThis, to collect certain anonymous
information when you visit our website. These companies may use non-personally
identifiable information during your visits to this and other websites in order
to provide advertisements about goods and services likely to be of greater
interest to you. These companies typically use a cookie, third party web beacon
or pixel tags, to collect this information. To learn more about this behavioral
advertising practice, you can visit www.networkadvertising.org.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, we restrict access to your
nonpublic personal information to those individuals 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).
Page 88
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
101 Barclay Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless
of whether these individuals are employed by the registrant or a third
party.
(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, and that relates to any element of the code of ethics
description.
(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, that relates to one or more of the items set forth in
paragraph (b) of this item's instructions.
(e) Not applicable.
(f) The code of ethics is filed as an exhibit to the Registrant's annual
report on this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified
to serve as audit committee financial experts serving on its audit committee and
that each of them is "independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees -- The aggregate fees billed for each of the last two
fiscal years for professional services rendered by the principal accountant for
the audit of the registrant's annual financial statements or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements were $380,000 for 2014 and $380,000 for 2015.
(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 2014 and $0 for 2015.
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 2014 and $0 for 2015.
(c) Tax Fees (Registrant) -- The aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal accountant
for tax compliance, tax advice, and tax planning to the registrant were $55,575
for 2014 and $55,575 for 2015. 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 2014 and $0 for 2015.
(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 2014 and $0 for 2015.
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 2014 and $0 for 2015.
(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 2014 were $55,575
for the registrant, $8,500 for the registrant's investment adviser and $43,500
for the registrant's distributor and for 2015 were $55,575 for the registrant,
$12,500 for the registrant's investment adviser and $29,000 for the registrant's
distributor .
(h) The registrant's audit committee of its Board of Trustees has
determined that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal accountant's
independence.
ITEMS 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The Registrant has a separately designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934
consisting of all the independent directors of the Registrant. The audit
committee of the registrant is comprised of: Richard E. Erickson, Thomas R.
Kadlec, Robert F. Keith and Niel B. Nielson.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407 (c) (2) (iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22 (b) (15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3 (c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this
paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as
amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal quarter of
the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. 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
(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
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By (Signature and Title)* /s/ James M. Dykas
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James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: February 22, 2016
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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: February 22, 2016
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By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: February 22, 2016
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* Print the name and title of each signing officer under his or her signature.