UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-21774
-----------
First Trust Exchange-Traded Fund
-------------------------------------------------------------
(Exact name of registrant as specified in charter)
Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
-------------------------------------------------------------
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
-------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 765-8000
----------------
Date of fiscal year end: December 31
-------------
Date of reporting period: December 31, 2018
-------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
FIRST TRUST
First Trust Exchange-Traded Fund
Book 1
First Trust Dow Jones Select MicroCap Index Fund (FDM)
First Trust Morningstar Dividend Leaders Index Fund (FDL)
First Trust US Equity Opportunities ETF (FPX)
First Trust NYSE Arca Biotechnology Index Fund (FBT)
First Trust Dow Jones Internet Index Fund (FDN)
First Trust Capital Strength ETF (FTCS)
First Trust Value Line(R) Dividend Index Fund (FVD)
First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)
Annual Report
December 31, 2018
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2018
Shareholder Letter.......................................................... 2
Market Overview............................................................. 3
Fund Performance Overview
First Trust Dow Jones Select MicroCap Index Fund (FDM)................... 4
First Trust Morningstar Dividend Leaders Index Fund (FDL)................ 6
First Trust US Equity Opportunities ETF (FPX)............................ 8
First Trust NYSE Arca Biotechnology Index Fund (FBT)..................... 10
First Trust Dow Jones Internet Index Fund (FDN).......................... 12
First Trust Capital Strength ETF (FTCS).................................. 14
First Trust Value Line(R) Dividend Index Fund (FVD)...................... 16
First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)................. 18
Notes to Fund Performance Overview.......................................... 20
Understanding Your Fund Expenses............................................ 21
Portfolio of Investments
First Trust Dow Jones Select MicroCap Index Fund (FDM)................... 23
First Trust Morningstar Dividend Leaders Index Fund (FDL)................ 28
First Trust US Equity Opportunities ETF (FPX)............................ 30
First Trust NYSE Arca Biotechnology Index Fund (FBT)..................... 33
First Trust Dow Jones Internet Index Fund (FDN).......................... 35
First Trust Capital Strength ETF (FTCS).................................. 37
First Trust Value Line(R) Dividend Index Fund (FVD)...................... 39
First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)................. 42
Statements of Assets and Liabilities........................................ 44
Statements of Operations.................................................... 46
Statements of Changes in Net Assets......................................... 48
Financial Highlights........................................................ 52
Notes to Financial Statements............................................... 56
Report of Independent Registered Public Accounting Firm..................... 66
Additional Information...................................................... 67
Board of Trustees and Officers.............................................. 71
Privacy Policy.............................................................. 73
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (each such series is referred to as a "Fund" and collectively, as the
"Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund shares may therefore be less than what you paid
for them. Accordingly, you can lose money by investing in a Fund. See "Risk
Considerations" in the Additional Information Section of this report for a
discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund and presents data and analysis that provide
insight into each Fund's performance and investment approach.
By reading the market overview by Robert F. Carey, Chief Market Strategist of
the Advisor, you may obtain an understanding of how the market environment
affected the performance of each Fund. The statistical information that follows
may help you understand each Fund's performance compared to that of relevant
market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in each
Fund are spelled out in its prospectus, statement of additional information, and
other Fund regulatory filings.
Page 1
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2018
Dear Shareholders:
First Trust is pleased to provide you with the annual report for certain funds
in the First Trust Exchange-Traded Fund (the "Funds"), which contains detailed
information about the Funds for the twelve months ended December 31, 2018,
including a market overview and performance analyses. We encourage you to read
this report carefully and discuss it with your financial advisor.
As I wrote in my June 2018 letter, investors were hoping for another strong year
in the markets for 2018. For the entire year, however, increased market
volatility was the norm for U.S. and global markets. Despite the volatility,
August was a strong month for stocks, and the Dow Jones Industrial Average
("DJIA") finished the month just under its previous high in January 2018. At the
close of the third quarter in September, the markets had moved higher into
positive territory. In fact, all three major U.S. indices (the Nasdaq Composite
Index, the DJIA and the S&P 500(R) Index) hit record levels during the third
quarter. Yet, in October, markets were again very volatile, surprising analysts
and investors alike. Both global markets and U.S. markets fell on fears of
slowing growth, trade wars and higher interest rates. The DJIA was down 5% for
October and the MSCI EAFE Index, an index of stocks in 21 developed markets
(excluding the U.S. and Canada), was down 9% for the month. However, investors
cheered as November ended, and the DJIA climbed 617 points (2.5%) to its biggest
one-day gain in eight months. The MSCI EAFE Index ended November down slightly.
December held its own shocks as it became the worst December for stocks since
the Great Depression. The DJIA and the MSCI EAFE Index ended December with
year-to-date returns of -3.48% and -13.79%, respectively.
Based on continued strong job growth and the economic outlook in the U.S., the
Federal Reserve (the "Fed") raised interest rates in March, June and September.
At their September meeting, the Fed indicated the possibility of one additional
rate hike in 2018 and three more in 2019. At their November meeting, the Fed did
not raise interest rates. However, at their December 19th meeting, the Fed did
raise interest rates by 25 basis points. Analysts and investors will be watching
to see what the Fed does with rates in 2019.
While trade tensions have had an impact on markets around the world and could
continue to do so in the future, our First Trust economists believe that the
long-term impact of U.S. tariffs will be to encourage countries to come back to
the table and talk about more equal trade. Despite market volatility, we
continue to believe that the combination of low interest rates, low inflation
and strong corporate earnings still point to a positive economic environment and
further growth, though we understand that past performance can never guarantee
future performance.
We continue to believe that you should invest for the long term and be prepared
for market movements, which can happen at any time. You can do this by keeping
current on your portfolio and by speaking regularly with your investment
professional. Markets go up and they also go down, but savvy investors are
prepared for either through careful attention to investment goals.
Thank you for giving First Trust the opportunity to be a part of your financial
plan. We value our relationship with you and will report on the Funds again in
six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
--------------------------------------------------------------------------------
MARKET OVERVIEW
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2018 (UNAUDITED)
ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of research and analysis of
the First Trust product line. Mr. Carey has over 25 years of experience as an
Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial
Analyst ("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE ECONOMY/INVESTING
In its latest forecast, the International Monetary Fund ("IMF") is calling for
the world real gross domestic product ("GDP") growth rate to dip from an
estimated 3.7% in 2018 to an estimated 3.5% in 2019, according to its own
release. The IMF cited the ongoing trade dispute between the U.S. and China as
being partly responsible for the small downward revision in growth. The U.S.
real GDP growth rate is expected to decrease from an estimated 2.9% in 2018 to
an estimated 2.5% in 2019. The growth rate for Emerging Market and Developing
Economies is expected to dip from an estimated 4.6% in 2018 to an estimated 4.5%
in 2019. As indicated by the growth forecasts, we believe there is no imminent
threat of a global economic recession.
We believe that concerns over the extent to which interest rates could trend
higher in 2019 and the potential for trade tariffs escalating to an all-out
trade war were largely behind the spikes in volatility in the stock market in
2018. For those investors who fear that higher interest rates could dampen the
prospects for stocks in 2019, Federal Reserve (the "Fed") Chairman Jerome Powell
announced on January 4, 2019 that the Fed will be adopting a "patient" approach
to tightening monetary policy. With respect to trade, the Trump Administration
sent trade representatives to China on January 7, 2019 to set up future trade
policy talks. The two countries also agreed to a 90-day truce freezing tariffs
until March 1, 2019. We believe stock prices would move higher on a U.S.-China
trade deal.
ETFGI, an independent research and consultancy firm, reported that total assets
invested in exchange-traded funds ("ETFs") and other exchange-traded products
("ETPs") listed globally stood at $4.79 trillion at the close of 2018, down from
$4.84 trillion the previous year, according to its own release. The dip in
assets under management was due to performance rather than capital flows.
December 2018 marked the 59th consecutive month of net inflows into ETFs/ETPs
listed globally. The U.S.'s share of the global market was approximately 70% at
year-end.
U.S. STOCKS AND BONDS
The three major Standard & Poor's stock indices finished 2018 in the red. The
S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R) Index posted
total returns of -4.38%, -11.08%, and -8.48%, respectively, according to
Bloomberg. Only three of the 11 major S&P 500(R) Index sectors posted positive
total returns. The top-performing sectors were Health Care, Utilities and
Consumer Discretionary, up 6.47%, 4.11% and 0.82%, respectively, on a total
return basis. The sectors that posted the biggest losses were Energy, Materials
and Industrials, down 18.10%, 14.70% and 13.32%, respectively. We believe that
some of the downside in stock prices late in the year could be attributed to
profit taking and tax selling. Keep in mind, the S&P 500(R) Index posted a total
return of 21.83% in 2017, more than double its 9.98% average annual total return
from 1926-2018, according to Ibbotson Associates/Morningstar.
Dividend growth has historically been a barometer of strength for Corporate
America. The S&P Dow Jones Indices announced that total dividend distributions
for U.S. common stocks increased by a net (increases less decreases) $7.4
billion in the third quarter of 2018, up from $4.5 billion from the third
quarter of 2017, according to its own release. Net dividend increases totaled a
record $58.4 billion in 2018, up from $37.1 billion in 2017. Currently, 82.2% of
the companies in the S&P 500(R) Index pay a dividend, compared to 69.8% of the
companies in the S&P MidCap 400(R) Index and 51.9% of the companies in the S&P
SmallCap 600(R) Index. Total global dividend payouts are expected to rise 6.0%
year-over-year to a record $1.81 trillion in 2019, according to business
information provider IHS Markit, a London-based global information provider.
Dividend-paying companies in the U.S. are expected to increase distributions by
8.1%, according to IHS Markit.
In the U.S. bond market, the top-performing major debt group we track was
intermediate-term Treasuries. The Bloomberg Barclays U.S. Treasury: Intermediate
Index posted a total return of 1.41% in 2018. The worst-performing debt group
that we track was high yield corporates. The Bloomberg Barclays U.S. Corporate
High Yield Index posted a total return of -2.08%. The yield on the benchmark
10-Year Treasury note (T-note) rose by 28 basis points to 2.69% in 2018,
according to Bloomberg. For comparative purposes, the average yield on the
10-year T-note was 2.51% for the 10-year period ended December 31, 2018.
FOREIGN STOCKS AND BONDS
The U.S. dollar registered a gain of 4.40% against a basket of major currencies
in 2018, as measured by the U.S. Dollar Index (DXY). With respect to U.S.
investors, a stronger U.S. dollar can negatively impact returns on unhedged
foreign securities. We believe the dollar strengthened due to the escalating
trade/tariff battle between the U.S. and its major trading partners,
particularly China.
Both foreign stocks and bonds succumbed to selling pressure in 2018. The
Bloomberg Barclays Global Aggregate Index of higher quality debt posted a total
return of -1.20% (USD), while the Bloomberg Barclays EM Hard Currency Aggregate
Index of emerging markets debt fell 3.02%, according to Bloomberg Barclays. With
respect to equities, the MSCI Daily Total Return Net World Index (excluding the
U.S.) posted a total return of -14.09% (USD), compared to -14.58% (USD) for the
MSCI Daily Total Return Net Emerging Markets Index.
Page 3
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
The First Trust Dow Jones Select MicroCap Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Dow Jones Select
MicroCap Index(SM) (the "Index"). The Fund will normally invest at least 80% of
its net assets (including investment borrowings) in common stocks of U.S.
micro-capitalization companies which are publicly traded in the United States.
The Fund will normally invest at least 90% of its net assets (including
investment borrowings) in common stocks that comprise the Index. The Index is
comprised of selected U.S. micro-capitalization companies chosen from all common
stocks traded on the New York Stock Exchange ("NYSE"), the NYSE American and The
Nasdaq Stock Market LLC ("Nasdaq"), excluding limited partnerships that are
comparatively liquid and have strong fundamentals relative to the
micro-capitalization segment as a whole. The Fund's shares are listed for
trading on the NYSE Arca, Inc. ("NYSE Arca"). The first day of secondary market
trading in shares of the Fund was September 30, 2005.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (9/27/05) Ended Ended (9/27/05)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -12.68% 5.86% 11.85% 6.50% 32.94% 206.36% 130.37%
Market Value -13.05% 5.93% 11.87% 6.48% 33.37% 206.90% 130.00%
INDEX PERFORMANCE
Dow Jones Select MicroCap Index(SM) -12.21% 6.46% 12.54% 7.19% 36.77% 225.84% 151.12%
Russell 2000(R) Index -11.01% 4.41% 11.97% 6.99% 24.09% 209.83% 145.03%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of -12.68% during the
12-month period covered by this report. During the same period, the Russell
2000(R) Index ("benchmark") generated a return of -11.01%. The Fund's largest
allocated sector over the period was the Financials sector with a 39.6%
allocation. This sector contributed -4.1% to the Fund's return due to its -11.1%
return. The top contributing sector in the Fund was the Consumer Staples sector
with a 0.9% contributing, stemming from its 2.8% allocation and 56.1% return.
The least contributing sector in the Fund was the Consumer Discretionary sector
with a -4.5% contribution, stemming from its 15.5% allocation and -26.5% return.
On a relative basis, the Fund underperformed the benchmark. The primary cause of
the underperformance is due to the Fund underperforming the benchmark among
Consumer Discretionary securities by -16.2%, which created -2.7% of relative
underperformance. The Fund outperformed the benchmark by 67.1% among the
Consumer Staples sector, which created 1.3% of relative outperformance.
-----------------------------
Dow Jones and Dow Jones Select MicroCap Index(SM) are products of S&P Dow Jones
Indices LLC ("SPDJI"), and have been licensed for use by First Trust on behalf
of the Fund. The Fund, based on the Dow Jones Select MicroCap Index(SM), is not
sponsored, endorsed, sold or promoted by SPDJI, Dow Jones Trademark Holdings LLC
("Dow Jones") or their respective affiliates, and SPDJI, Dow Jones and their
respective affiliates make no representation regarding the advisability of
trading in the Fund.
Page 4
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Financials 40.45%
Consumer Discretionary 16.33
Industrials 14.14
Information Technology 6.64
Real Estate 5.87
Energy 5.43
Materials 3.46
Consumer Staples 3.11
Health Care 2.67
Communication Services 1.39
Utilities 0.51
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
PennyMac Financial Services, Inc. 1.68%
CVR Energy, Inc. 1.32
Renewable Energy Group, Inc. 1.25
K12, Inc. 1.21
TPG RE Finance Trust, Inc. 1.00
NexPoint Residential Trust, Inc. 0.97
Marcus & Millichap, Inc. 0.96
Arbor Realty Trust, Inc. 0.93
World Acceptance Corp. 0.90
Addus HomeCare Corp. 0.90
-------
Total 11.12%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust Dow Jones
Select MicroCap Dow Jones Select Russell 2000(R)
Index Fund MicroCap Index(SM) Index
12/08 $10,000 $10,000 $10,000
06/09 9,790 9,820 10,264
12/09 12,084 12,189 12,717
06/10 11,747 11,877 12,469
12/10 15,197 15,410 16,132
06/11 15,708 15,985 17,134
12/11 13,878 14,153 15,460
06/12 14,772 15,114 16,779
12/12 16,081 16,515 17,987
06/13 18,693 19,255 20,840
12/13 23,047 23,822 24,970
06/14 22,893 23,736 25,767
12/14 23,756 24,695 26,192
06/15 24,991 26,053 27,436
12/15 23,889 24,993 25,035
06/16 24,486 25,688 25,591
12/16 32,358 34,037 30,371
06/17 32,559 34,326 31,887
12/17 35,092 37,113 34,821
06/18 37,945 40,245 37,488
12/18 30,636 32,584 30,983
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 93 1 0 0
01/01/15 - 12/31/15 112 0 0 0
01/01/16 - 12/31/16 133 0 0 0
01/01/17 - 12/31/17 180 0 0 0
01/01/18 - 12/31/18 164 4 0 1
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 158 0 0 0
01/01/15 - 12/31/15 140 0 0 0
01/01/16 - 12/31/16 119 0 0 0
01/01/17 - 12/31/17 71 0 0 0
01/01/18 - 12/31/18 81 1 0 0
Page 5
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
The First Trust Morningstar Dividend Leaders Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Morningstar(R) Dividend
Leaders Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its net assets (including investment borrowings) in common stocks that comprise
the Index. The objective of the Index is to offer investors a benchmark for
dividend portfolios as well as a means to invest in a portfolio of stocks that
have a consistent record of growing dividends as well as the ability to sustain
them. The Index consists of the top 100 stocks, based on dividend yield, in the
Morningstar(R) US Market Index that have been selected through the application
of Morningstar, Inc.'s proprietary multi-step screening process. The Index is
rebalanced annually in June. The Fund's shares are listed for trading on the
NYSE Arca. The first day of secondary market trading in shares of the Fund was
March 15, 2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (3/9/06) Ended Ended (3/9/06)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -5.87% 8.10% 11.61% 6.39% 47.60% 199.91% 121.05%
Market Value -6.00% 8.09% 11.57% 6.38% 47.54% 198.88% 120.89%
INDEX PERFORMANCE
Morningstar(R) Dividend Leaders Index(SM) -5.47% 8.62% 12.17% 6.91% 51.19% 215.38% 135.33%
S&P 500(R) Index -4.38% 8.49% 13.12% 7.68% 50.33% 243.04% 158.02%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -5.87% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index ("benchmark")
generated a return of -4.38%. The Fund's largest allocation was among the
Consumer Staples sector with a 20.4% allocation. These securities had a return
of -12.0% and contributed -2.1% to the Fund's return, the lowest among all
sectors represented in the Fund. The Health Care sector was the top performing
sector in the Fund with a 15.9% return, a 9.6% allocation, and a 1.6%
contribution. On a relative basis, the Fund underperformed the benchmark. The
primary cause of the underperformance is attributable to the Fund
underperforming the benchmark amongst Consumer Discretionary securities by
-20.1%, which created -1.3% of relative underperformance. The Fund's holdings
among the Health Care sector reversed 1.2% of underperformance as the Fund
outperformed the benchmark by 9.9%.
-----------------------------
Morningstar(R) is a service mark of Morningstar, Inc. and has been licensed for
use by First Trust on behalf of the Fund. The Fund is not sponsored, endorsed,
issued, sold or promoted by Morningstar, Inc., nor does this company make any
representation regarding the advisability of investing in the Fund.
Page 6
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Staples 22.26%
Communication Services 16.83
Energy 15.58
Utilities 13.20
Health Care 13.17
Information Technology 6.93
Consumer Discretionary 5.39
Financials 3.92
Materials 1.47
Industrials 1.19
Real Estate 0.06
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
AT&T, Inc. 9.44%
Exxon Mobil Corp. 8.54
Verizon Communications, Inc. 6.70
Chevron Corp. 5.52
Pfizer, Inc. 5.33
Procter & Gamble (The) Co. 4.79
AbbVie, Inc. 4.12
Coca-Cola (The) Co. 3.94
Philip Morris International, Inc. 3.87
Altria Group, Inc. 3.82
-------
Total 56.07%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust Morningstar Morningstar(R)
Dividend Leaders Dividend S&P 500(R)
Index Fund Leaders Index(SM) Index
12/08 $10,000 $10,000 $10,000
06/09 9,444 9,470 10,316
12/09 11,423 11,480 12,645
06/10 10,906 10,984 11,804
12/10 13,256 13,393 14,551
06/11 14,293 14,479 15,426
12/11 15,171 15,406 14,857
06/12 16,426 16,737 16,267
12/12 16,557 16,909 17,235
06/13 18,868 19,322 19,617
12/13 20,319 20,860 22,817
06/14 22,410 23,073 24,446
12/14 22,952 23,687 25,942
06/15 22,257 23,019 26,261
12/15 23,579 24,439 26,300
06/16 27,050 28,120 27,310
12/16 28,465 29,653 29,449
06/17 29,296 30,602 32,203
12/17 31,862 33,365 35,884
06/18 30,804 32,341 36,838
12/18 29,991 31,538 34,304
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 190 0 0 0
01/01/15 - 12/31/15 151 0 0 0
01/01/16 - 12/31/16 161 0 0 0
01/01/17 - 12/31/17 131 0 0 0
01/01/18 - 12/31/18 140 1 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 62 0 0 0
01/01/15 - 12/31/15 101 0 0 0
01/01/16 - 12/31/16 91 0 0 0
01/01/17 - 12/31/17 120 0 0 0
01/01/18 - 12/31/18 108 2 0 0
Page 7
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
The First Trust US Equity Opportunities ETF (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the IPOX(R)-100 U.S. Index (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in common stocks that comprise the Index. The
Index is an applied market-cap weighted price index measuring the performance of
the top U.S. companies ranked quarterly by market capitalization in the IPOX(R)
U.S. Composite Index, a sub-index of the IPOX(R) Global Composite Index. The
Index utilizes a 10% capping on all constituents and includes the 100 largest
public offerings ("IPOs") in the IPOX(R) U.S. Composite Index, adjusted for
liquidity. In general, eligible constituents are added on the sixth day of
trading and remain eligible to be included in the Index for approximately four
years. The Index includes the securities of small, mid and large companies. The
Fund's shares are listed for trading on the NYSE Arca. The first day of
secondary market trading in shares of the Fund was April 13, 2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (4/12/06) Ended Ended (4/12/06)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -8.22% 7.29% 17.07% 10.22% 42.20% 383.51% 244.94%
Market Value -8.33% 7.28% 17.07% 10.22% 42.09% 383.70% 244.84%
INDEX PERFORMANCE
IPOX(R)-100 U.S. Index -7.78% 7.87% 17.76% 10.87% 46.07% 413.01% 271.68%
S&P 500(R) Index -4.38% 8.49% 13.12% 7.62% 50.33% 243.04% 154.49%
Russell 3000(R) Index -5.24% 7.91% 13.18% 7.52% 46.34% 244.95% 151.58%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -8.22% during the 12-month period covered by
this report. During the same period, the Russell 3000(R) Index ("benchmark")
generated a return of -5.24%. The largest allocated sector in the Fund over the
period was the Information Technology sector with a 29% allocation. The sector
with the highest contribution was Health Care with a contribution of 1.3%. The
top performing sector in the Fund was the Information Technology sector with a
6.0% return. The Consumer Staples sector was the least contributing sector. With
a return of -30.3% and weight of 10.6%, this sector contributed -3.6% to the
Fund's overall return. On a relative basis, the Fund underperformed the
benchmark. The greatest source of underperformance was the Consumer Staples
sector, which created -2.7% underperformance against the benchmark. The Fund
over allocated and outperformed the benchmark among the Health Care sector,
creating 2.8% of relative outperformance.
-----------------------------
The Fund is not sponsored, endorsed, sold or promoted by IPOX(R). IPOX(R) makes
no representation or warranty, express or implied, to the owners of the Fund or
any member of the public regarding the advisability of trading in the Fund.
Page 8
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 33.69%
Health Care 20.57
Communication Services 14.47
Consumer Staples 11.66
Consumer Discretionary 6.60
Industrials 5.99
Real Estate 1.87
Energy 1.84
Utilities 1.64
Financials 1.02
Materials 0.65
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
PayPal Holdings, Inc. 8.98%
Verizon Communications, Inc. 5.27
Shire PLC, ADR 4.82
Thermo Fisher Scientific, Inc. 4.08
Kraft Heinz (The) Co. 3.90
Eli Lilly & Co. 2.91
salesforce.com, Inc. 2.85
Stryker Corp. 2.66
Fiat Chrysler Automobiles N.V. 2.57
Square, Inc., Class A 2.10
-------
Total 40.14%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust
US Equity IPOX(R)-100 S&P 500(R) Russell 3000(R)
Opportunities ETF U.S. Index Index Index
12/08 $10,000 $10,000 $10,000 $10,000
06/09 11,336 11,385 10,316 10,420
12/09 14,493 14,597 12,645 12,834
06/10 13,634 13,775 11,803 12,058
12/10 17,142 17,383 14,550 15,007
06/11 18,839 19,170 15,426 15,960
12/11 17,673 18,041 14,857 15,160
06/12 20,066 20,545 16,267 16,573
12/12 22,978 23,592 17,235 17,649
06/13 26,836 27,622 19,617 20,130
12/13 34,004 35,124 22,817 23,570
06/14 36,252 37,565 24,446 25,206
12/14 38,054 39,548 25,942 26,529
06/15 41,342 43,092 26,261 27,044
12/15 38,886 40,653 26,300 26,657
06/16 38,633 40,482 27,309 27,622
12/16 41,492 43,595 29,451 30,056
06/17 45,927 48,373 32,202 32,740
12/17 52,678 55,629 35,879 36,407
06/18 55,433 58,661 36,830 37,579
12/18 48,349 51,299 34,304 34,495
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 158 0 0 0
01/01/15 - 12/31/15 172 0 0 0
01/01/16 - 12/31/16 118 0 0 0
01/01/17 - 12/31/17 179 0 0 0
01/01/18 - 12/31/18 157 3 1 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 94 0 0 0
01/01/15 - 12/31/15 80 0 0 0
01/01/16 - 12/31/16 134 0 0 0
01/01/17 - 12/31/17 72 0 0 0
01/01/18 - 12/31/18 87 3 0 0
Page 9
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT)
The First Trust NYSE Arca Biotechnology Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the NYSE Arca Biotechnology Index(SM)
(the "Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in common stocks that comprise the Index. The
Index is an equal-dollar weighted index designed to measure the performance of a
cross section of companies in the biotechnology industry that are primarily
involved in the use of biological processes to develop products or provide
services. Such processes include, but are not limited to, recombinant DNA
technology, molecular biology, genetic engineering, monoclonal antibody-based
technology, lipid/liposome technology and genomics. This Index is rebalanced
quarterly based on closing prices on the third Friday in January, April, July
and October to ensure that each component stock continues to represent
approximately equal weight in the Index. The Fund's shares are listed for
trading on the NYSE Arca. The first day of secondary market trading in shares of
the Fund was June 23, 2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (6/19/06) Ended Ended (6/19/06)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -0.21% 12.48% 20.24% 15.81% 80.05% 531.74% 529.71%
Market Value -0.20% 12.48% 20.29% 15.81% 80.07% 534.37% 529.76%
INDEX PERFORMANCE
NYSE Arca Biotechnology Index(SM) 0.27% 12.96% 20.84% 16.43% 83.92% 564.00% 573.13%
S&P Composite 1500(R) Health Care Index 6.71% 11.40% 15.16% 11.20% 71.57% 310.38% 278.31%
NASDAQ(R) Biotechnology Index -8.86% 5.54% 15.71% 12.50% 30.97% 330.29% 337.55%
S&P 500(R) Index -4.38% 8.49% 13.12% 8.03% 50.33% 243.04% 163.42%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -0.21% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500(R) Health Care Index
("benchmark") generated a return of 6.71%. The Fund was fully allocated to the
Pharmaceuticals, Biotechnology & Life Sciences Tools & Services industry during
the period. The top performing and contributing security in the Fund was
Intercept Pharmaceuticals, Inc. with a 72.5% return and a 1.8% contribution,
stemming from its 3.7% allocation. The worst performing and contributing
security was Bluebird Bio, Inc. with a -54.8% return. This security was given a
2.6% allocation, leading to a contribution of -2.1% to the Fund's return. On a
relative basis, the Fund underperformed the benchmark. The benchmark did not
have any exposure to Bluebird Bio, Inc., which created -2.2% of relative drag
versus the benchmark. The benchmark also did not have any exposure to Intercept
Pharmaceuticals, Inc., which created 1.7% of relative outperformance.
-----------------------------
The NYSE Arca Biotechnology Index(SM) is a trademark of NYSE Group, Inc. or its
affiliates ("NYSE Group, Inc.") and is licensed for use by First Trust. The Fund
is not sponsored or endorsed by NYSE Group, Inc. NYSE Group, Inc. makes no
representation or warranty, express or implied, to the owners of the Fund or any
member of the public regarding the advisability of investing in the Fund or the
ability of the Fund to track the performance of the various sectors represented
in the stock market.
Page 10
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Biotechnology 79.73%
Life Sciences Tools & Services 7.64
Pharmaceuticals 2.63
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Exelixis, Inc. 4.66%
Ionis Pharmaceuticals, Inc. 4.61
Intercept Pharmaceuticals, Inc. 4.06
Amgen, Inc. 3.72
Incyte Corp. 3.71
QIAGEN N.V. 3.70
Regeneron Pharmaceuticals, Inc. 3.70
Illumina, Inc. 3.69
Alnylam Pharmaceuticals, Inc. 3.67
Grifols S.A., ADR 3.66
-------
Total 39.18%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust NYSE NYSE Arca NASDAQ(R) S&P Composite
Arca Biotechnology Biotechnology Biotechnology S&P 500(R) 1500(R) Health
Index Fund Index(SM) Index Index Care Index
12/08 $10,000 $10,000 $10,000 $10,000 $10,000
06/09 10,756 10,773 10,285 10,316 10,094
12/09 14,487 14,559 11,584 12,646 12,075
06/10 15,679 15,810 10,995 11,805 11,198
12/10 19,831 20,053 13,351 14,552 12,703
06/11 22,252 22,572 15,266 15,428 14,506
12/11 16,587 16,866 14,964 14,859 14,213
06/12 22,256 22,703 18,678 16,269 15,846
12/12 23,373 23,906 19,796 17,237 16,822
06/13 29,504 30,243 25,117 19,619 20,289
12/13 35,083 36,050 32,856 22,819 23,919
06/14 41,784 42,982 37,295 24,448 26,359
12/14 51,795 53,323 44,160 25,944 29,849
06/15 63,024 64,990 53,784 26,263 32,894
12/15 57,472 59,394 49,357 26,302 32,062
06/16 45,506 47,171 37,635 27,312 32,248
12/16 46,207 48,020 38,821 29,448 31,403
06/17 57,934 60,356 45,553 32,198 36,575
12/17 63,299 66,120 47,220 35,875 38,459
06/18 71,199 74,524 48,703 36,826 39,720
12/18 63,174 66,400 43,029 34,304 41,038
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 183 0 0 0
01/01/15 - 12/31/15 159 0 0 0
01/01/16 - 12/31/16 129 1 0 0
01/01/17 - 12/31/17 136 0 0 0
01/01/18 - 12/31/18 156 1 2 1
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 69 0 0 0
01/01/15 - 12/31/15 93 0 0 0
01/01/16 - 12/31/16 122 0 0 0
01/01/17 - 12/31/17 115 0 0 0
01/01/18 - 12/31/18 88 3 0 0
Page 11
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
The First Trust Dow Jones Internet Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Dow Jones Internet Composite
Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net
assets (including investment borrowings) in common stocks that comprise the
Index. The Index is designed to include only companies whose primary focus is
Internet-related. To be eligible for inclusion in the Index, a company must
generate at least 50% of its revenue from Internet commerce or services.
Internet commerce companies are defined as those that derive the majority of
their revenues from providing goods and services through an open network,
whereas Internet services companies are defined as those that derive the
majority of their revenues from providing access to the Internet or providing
services to people using the Internet. The Fund's shares are listed for trading
on the NYSE Arca. The first day of secondary market trading in shares of the
Fund was June 23, 2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (6/19/06) Ended Ended (6/19/06)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV 6.23% 14.28% 23.63% 15.15% 94.94% 734.11% 485.77%
Market Value 6.23% 14.28% 23.63% 15.15% 94.95% 734.32% 485.92%
INDEX PERFORMANCE
Dow Jones Internet Composite Index(SM) 6.77% 14.84% 24.30% 15.76% 99.72% 780.37% 526.31%
S&P 500(R) Index -4.38% 8.49% 13.12% 8.03% 50.33% 243.04% 163.42%
S&P Composite 1500(R) Information
Technology Index -0.75% 14.46% 18.17% 11.81% 96.47% 431.01% 305.12%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 6.23% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500(R) Information
Technology Index ("benchmark") generated a return of -0.75%. The Information
Technology sector was the heaviest weighted sector in the Fund over the period
with a 39.4% allocation. This sector was also the Fund's largest contributing
sector with a 3.4% contribution, stemming from its 8.9% return. The least
contributing sector was the Financials sector with a 0.1% contribution. On a
relative basis, the Fund outperformed the benchmark. The primary cause of the
outperformance is due to the Fund over allocating the benchmark amongst the
relatively well performing Communication Services securities by 18.7%, which
created 3.4% of relative outperformance. There was no single sector that
contributed negatively to the Fund relative to the performance against the
benchmark.
-----------------------------
Dow Jones and Dow Jones Internet Composite Index(SM) are products of S&P Dow
Jones Indices ("SPDJI") and have been licensed for use by First Trust. The Fund,
based on the Dow Jones Internet Composite Index(SM), is not sponsored, endorsed,
sold or promoted by SPDJI, Dow Jones Trademark Holdings LLC ("Dow Jones") or
their respective affiliates and SPDJI, Dow Jones and their respective affiliates
make no representation regarding the advisability of trading in the Fund.
Page 12
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 41.20%
Communication Services 32.22
Consumer Discretionary 18.38
Financials 5.84
Health Care 2.36
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Amazon.com, Inc. 9.63%
Facebook, Inc., Class A 7.43
Netflix, Inc. 5.57
salesforce.com, Inc. 5.32
PayPal Holdings, Inc. 5.17
Alphabet, Inc., Class C 5.12
Alphabet, Inc., Class A 5.02
eBay, Inc. 3.38
Twitter, Inc. 2.77
VeriSign, Inc. 2.75
-------
Total 52.16%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust Dow Jones S&P Composite 1500(R)
Dow Jones Internet Internet Composite S&P 500(R) Information Technology
Index Fund Index(SM) Index Index
12/08 $10,000 $10,000 $10,000 $10,000
06/09 13,348 13,387 10,316 12,460
12/09 17,924 18,027 12,646 16,103
06/10 17,060 17,179 11,805 14,489
12/10 24,490 24,742 14,552 18,055
06/11 25,898 26,229 15,428 18,499
12/11 23,083 23,476 14,859 18,257
06/12 25,264 25,773 16,269 20,579
12/12 27,897 28,555 17,237 20,949
06/13 32,439 33,296 19,619 22,359
12/13 42,794 44,077 22,819 27,023
06/14 42,589 43,943 24,448 29,306
12/14 43,833 45,309 25,944 32,143
06/15 48,037 49,791 26,263 32,561
12/15 53,374 55,459 26,302 33,942
06/16 51,570 53,718 27,312 33,962
12/16 57,062 59,589 29,448 38,961
06/17 67,744 70,935 32,198 45,436
12/17 78,529 82,441 35,875 53,487
06/18 98,436 103,595 36,826 59,125
12/18 83,411 88,037 34,304 53,101
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 148 0 0 0
01/01/15 - 12/31/15 201 0 0 0
01/01/16 - 12/31/16 124 0 0 0
01/01/17 - 12/31/17 129 0 0 0
01/01/18 - 12/31/18 116 4 2 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 104 0 0 0
01/01/15 - 12/31/15 51 0 0 0
01/01/16 - 12/31/16 128 0 0 0
01/01/17 - 12/31/17 122 0 0 0
01/01/18 - 12/31/18 125 4 0 0
Page 13
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
The First Trust Capital Strength ETF (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called The Capital Strength Index(SM) (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in common stocks that comprise the Index. In
constructing the Index, NASDAQ begins with the largest 500 U.S. companies
included in the NASDAQ US Benchmark Index and excludes (i) companies with less
than $1 billion in cash and short term investments; (ii) companies with
long-term debt divided by the market capitalization greater than 30%; and (iii)
companies with return on equity less than 15%. NASDAQ then ranks all remaining
stocks in the universe by one-year and three-month daily volatility (one-year
and three-month daily volatility factors are equally weighted), and selects the
top 50 companies with the lowest combined volatility score, subject to a maximum
weight of 30% from any one of the ten Industry Classification Benchmark
industries. The stocks in the Index are equally weighted initially and on each
quarterly reconstituting and rebalancing effective date. The Fund's shares are
listed for trading on the Nasdaq. The first day of secondary market trading in
shares of the Fund was July 11, 2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (7/6/06) Ended Ended (7/6/06)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -4.09% 9.10% 14.30% 8.95% 54.56% 280.74% 191.82%
Market Value -4.24% 9.08% 14.38% 8.96% 54.39% 283.20% 191.94%
INDEX PERFORMANCE
The Capital Strength Index(SM)* -3.53% 9.81% N/A N/A 59.63% N/A N/A
S&P 500(R) Index -4.38% 8.49% 13.12% 7.82% 50.33% 243.04% 156.14%
------------------------------------------------------------------------------------------------------------------------------------
* On June 4, 2013, the Fund's underlying index changed from the Credit
Suisse U.S. Value Index, Powered by HOLT(TM) to The Capital Strength
Index(SM). On June 18, 2010, the Fund's underlying index changed from the
Deutsche Bank CROCI(R) US+ Index(TM) to the Credit Suisse U.S. Value
Index, Powered by HOLT(TM). Since the Fund's current underlying index had
an inception date of March 20, 2013, it was not in existence for some of
the periods disclosed.
(See Notes to Fund Performance Overview on page 20.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -4.09% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index ("benchmark")
generated a return of -4.38%. The Industrials sector was the Fund's largest
allocated sector over the period with a 33.2% allocation. This sector had a
-12.5% return and contributed -4.2% to the Fund's return, the least amongst all
sectors. The top performing and largest contributing sector in the Fund was the
Information Technology sector with a 4.1% return, 0.5% contribution, and 15.9%
allocation. On a relative basis, the Fund outperformed the benchmark. The
primary cause of the outperformance is attributable to the Fund under allocating
the benchmark amongst the relatively poor performing Financials sector by -7.1%,
creating 1.2% of relative outperformance. The Fund over allocated the benchmark
amongst the poor performing Industrials sector by 23.4%, which created -1.9% of
relative underperformance.
-----------------------------
NASDAQ(R) and the Capital Strength Index(SM) are trademarks (the "Marks") of
Nasdaq, Inc. (collectively with its affiliates, "NASDAQ"). The Marks are
licensed for use by First Trust. The Fund has not been passed on by NASDAQ as to
its legality or suitability. The Fund is not issued, endorsed, sold or promoted
by NASDAQ. The Fund should not be construed in any way as investment advice by
NASDAQ. NASDAQ MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE
FUND.
Page 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CAPITAL STRENGTH ETF (FTCS) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 22.21%
Financials 20.66
Information Technology 19.59
Consumer Discretionary 10.39
Health Care 10.19
Consumer Staples 8.65
Real Estate 2.29
Materials 2.20
Communication Services 2.01
Energy 1.81
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Starbucks Corp. 2.39%
Procter & Gamble (The) Co. 2.31
American Tower Corp. 2.28
Estee Lauder (The) Cos., Inc., Class A 2.24
Expeditors International of Washington, Inc. 2.23
CME Group, Inc. 2.23
Aflac, Inc. 2.22
Garmin Ltd. 2.22
Intercontinental Exchange, Inc. 2.21
PPG Industries, Inc. 2.20
-------
Total 22.53%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust Capital S&P 500(R)
Strength ETF Index
12/08 $10,000 $10,000
06/09 11,272 10,316
12/09 13,941 12,646
06/10 12,890 11,805
12/10 15,897 14,552
06/11 17,148 15,428
12/11 15,430 14,859
06/12 16,268 16,269
12/12 18,123 17,237
06/13 21,140 19,619
12/13 24,628 22,819
06/14 26,002 24,448
12/14 28,436 25,944
06/15 28,388 26,263
12/15 28,905 26,302
06/16 30,449 27,312
12/16 31,384 29,448
06/17 35,272 32,198
12/17 39,695 35,875
06/18 40,024 36,826
12/18 38,074 34,304
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 108 9 0 0
01/01/15 - 12/31/15 190 2 0 0
01/01/16 - 12/31/16 194 0 0 0
01/01/17 - 12/31/17 197 0 0 0
01/01/18 - 12/31/18 161 3 0 1
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 131 4 0 0
01/01/15 - 12/31/15 57 3 0 0
01/01/16 - 12/31/16 58 0 0 0
01/01/17 - 12/31/17 54 0 0 0
01/01/18 - 12/31/18 84 1 1 0
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
The First Trust Value Line(R) Dividend Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Value Line(R) Dividend Index (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in common stocks that comprise the Index. The
Index is a modified equal-dollar weighted index comprised of U.S.
exchange-listed securities of companies that pay above-average dividends and
have potential for capital appreciation. The Index is designed to objectively
identify and select those stocks from the universe of stocks which Value Line
Publishing LLC gives a Safety(TM) Ranking of #1 or #2 in the Value Line(R)
Safety(TM) Ranking System and have the potential to pay above-average dividends
and achieve capital appreciation. The Index is rebalanced on a monthly basis.
The Fund's shares are listed for trading on the NYSE Arca.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (8/19/03) Ended Ended (8/19/03)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -3.44% 8.87% 12.53% 9.17% 52.94% 225.72% 284.93%
Market Value -3.50% 8.85% 12.62% 9.17% 52.79% 228.28% 284.92%
INDEX PERFORMANCE
Value Line(R) Dividend Index* -2.73% 9.73% 13.43% N/A 59.09% 252.49% N/A
S&P 500(R) Index -4.38% 8.49% 13.12% 8.35% 50.33% 243,04% 242.92%
Dow Jones U.S. Select Dividend Index(SM)* -5.94% 8.49% 12.26% N/A 50.28% 217.75% N/A
------------------------------------------------------------------------------------------------------------------------------------
On December 15, 2006, the Fund acquired the assets and adopted the
financial and performance history of First Trust Value Line(R) Dividend
Fund (the "Predecessor FVD Fund," a closed-end fund), which had an
inception date of August 19, 2003. The inception date total returns at net
asset value ("NAV") include the sales load of $0.675 per share on the
initial offering. The investment goals, strategies and policies of the
Fund are substantially similar to those of the Predecessor FVD Fund. The
inception date of the Index was July 3, 2006. Returns for the Index are
only disclosed for those periods in which the Index was in existence for
the entire period. The cumulative total returns for the period from the
reorganization date (December 15, 2006) through period end (December 31,
2018) were 137.98% and 139.12% at NAV and Market Value, respectively. That
compares to an Index return of 179.64% for the same period. The average
annual total returns for the period from the reorganization date (December
15, 2006) through period end (December 31, 2018) were 7.46% and 7.51% at
NAV and Market Value, respectively. That compares to an Index return of
8.85% for the same period.
NAV and Market Value returns assume that all distributions have been
reinvested in the Fund at NAV and Market Value, respectively. Prior to
December 15, 2006, NAV and Market Value returns assumed that all
distributions were reinvested at prices obtained by the Dividend
Reinvestment Plan of the Predecessor FVD Fund and the price used to
calculate Market Value return was the AMEX (now known as the NYSE MKT)
closing market price of the Predecessor FVD Fund.
* Performance data is not available for all the periods shown in the table
for the index because performance data does not exist for some of the
entire periods.
(See Notes to Fund Performance Overview on page 20.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -3.44% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index ("benchmark")
generated a return of -4.38%. The Utilities sector was the Fund's largest
allocated sector over the period with a 21.7% allocation. This sector was also
the largest contributing sector with a 0.6% contribution and a 3.4% return. The
top performing sector was the Health Care sector with a 5.6% return. This sector
contributed 0.4% to the Fund's return and had a 6.7% allocation. The Fund's
least contributing sector was the Consumer Staples sector with a -1.7%
contribution, stemming from its 13.5% allocation and -12.6% return. On a
relative basis, the Fund outperformed the benchmark. The primary cause of the
outperformance is attributable to the Fund overweighting the benchmark among the
relatively well performing Utilities securities by 18.9%, which created 1.6% of
relative outperformance. The Fund underperformed the benchmark among the
Information Technology sector, which created -1.3% of relative drag.
-----------------------------
Value Line(R) and Safety(TM) are trademarks of Value Line, Inc. that are
licensed to First Trust. The Fund is not sponsored, recommended, sold, or
promoted by Value Line Publishing LLC, Value Line, Inc. or any of their
affiliates.
Page 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Utilities 20.35%
Financials 19.87
Industrials 13.89
Consumer Staples 12.91
Information Technology 6.65
Health Care 6.07
Consumer Discretionary 5.53
Real Estate 4.83
Materials 3.34
Energy 3.31
Communication Services 3.25
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Williams-Sonoma, Inc. 0.58%
Phillips 66 0.57
Boeing (The) Co. 0.57
Amgen, Inc. 0.57
Hartford Financial Services Group
(The), Inc. 0.57
DowDuPont, Inc. 0.57
T. Rowe Price Group, Inc. 0.57
Caterpillar, Inc. 0.57
Home Depot (The), Inc. 0.57
BlackRock, Inc. 0.57
-------
Total 5.71%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust
Value Line(R) Value Line(R) S&P 500(R) Dow Jones U.S. Select
Dividend Index Fund Dividend Index Index Dividend Index(SM)
12/08 $10,000 $10,000 $10,000 $10,000
06/09 9,880 9,910 10,316 8,746
12/09 11,959 12,052 12,645 11,113
06/10 11,615 11,746 11,804 10,970
12/10 13,883 14,100 14,551 13,149
06/11 15,012 15,308 15,427 14,252
12/11 15,137 15,493 14,858 14,782
06/12 16,096 16,554 16,268 15,749
12/12 16,829 17,365 17,236 16,385
06/13 19,167 19,864 19,618 18,655
12/13 21,301 22,156 22,818 21,147
06/14 23,117 24,154 24,447 23,233
12/14 24,698 25,905 25,943 24,395
06/15 24,184 25,465 26,262 23,524
12/15 25,006 26,448 26,301 23,997
06/16 28,527 30,304 27,311 27,729
12/16 29,993 31,983 29,447 29,274
06/17 31,625 33,854 32,197 31,057
12/17 33,738 36,244 35,874 33,793
06/18 33,475 36,103 36,825 34,138
12/18 32,572 35,251 34,304 31,775
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 223 0 0 0
01/01/15 - 12/31/15 179 0 0 0
01/01/16 - 12/31/16 182 0 0 0
01/01/17 - 12/31/17 185 0 0 0
01/01/18 - 12/31/18 143 1 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 29 0 0 0
01/01/15 - 12/31/15 73 0 0 0
01/01/16 - 12/31/16 70 0 0 0
01/01/17 - 12/31/17 66 0 0 0
01/01/18 - 12/31/18 106 1 0 0
Page 17
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
The First Trust Value Line(R) 100 Exchange-Traded Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Value Line(R) 100 Index
(the "Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in common stocks that comprise the Index. The
Index is an equal-dollar weighted index that is designed to objectively identify
and select 100 stocks from the universe of stocks to which Value Line Publishing
LLC assigns a #1 ranking in the Value Line(R) Timeliness(TM) Ranking System (the
"Ranking System"). At any one time only 100 stocks are assigned a #1 ranking in
the Ranking System. The Fund's shares are listed for trading on the NYSE Arca.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (6/12/03) Ended Ended (6/12/03)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -18.83% 1.01% 7.90% 4.36% 5.14% 113.92% 94.26%
Market Value -18.95% 0.98% 7.94% 4.35% 4.97% 114.63% 94.05%
INDEX PERFORMANCE
Value Line(R) 100 Index* -18.18% 1.95% 8.92% N/A 10.16% 134.92% N/A
Russell 3000(R) Index -5.24% 7.91% 13.18% 8.49% 46.34% 244.95% 255.30%
------------------------------------------------------------------------------------------------------------------------------------
On June 15, 2007, the Fund acquired the assets and adopted the financial
and performance history of First Trust Value Line(R) 100 Fund (the
"Predecessor FVL Fund," a closed-end fund), which had an inception date of
June 12, 2003. The inception date total returns at NAV include the sales
load of $0.675 per share on the initial offering. The investment goals,
strategies and policies of the Fund are substantially similar to those of
the Predecessor FVL Fund. The inception date of the Index was January 16,
2007. Returns for the Index are only disclosed for those periods in which
the Index was in existence for the entire period. The cumulative total
returns for the period from the reorganization date (June 15, 2007)
through period end (December 31, 2018) were 17.91% and 17.79% at NAV and
Market Value, respectively. That compares to an Index return of 38.96% for
that same period. The average annual total returns for the period from the
reorganization date (June 15, 2007) through period end (December 31, 2018)
were 1.44% and 1.43% at NAV and Market Value, respectively. That compares
to an Index return of 2.87% for the same period.
NAV and Market Value returns assume that all distributions have been
reinvested in the Fund at NAV and Market Value, respectively. Prior to
June 15, 2007, NAV and Market Value returns assumed that all distributions
were reinvested at prices obtained by the Dividend Reinvestment Plan of
the Predecessor FVL Fund and the price used to calculate Market Value
return was the AMEX (now known as the NYSE MKT) closing market price of
the Predecessor FVL Fund.
* Performance data is not available for all the periods shown in the table
for the index because performance data does not exist for some of the
entire periods.
(See Notes to Fund Performance Overview on page 20.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -18.83% during the 12-month period covered by
this report. During the same period, the Russell 3000(R) Index ("benchmark")
generated a return of -5.24%. The Information Technology sector was the largest
allocation in the Fund over the period with a 22.5% allocation. This sector had
a -18.5% return and contributed -3.4% to the Fund's return. The Health Care
sector was the largest contributing sector in the Fund with a 1.0% contribution,
stemming from its 8.7% allocation and 19.2% return. The Fund's least
contributing sector was the Industrials sector with a -4.5% contribution,
stemming from its 16.2% allocation and -27.0% return. On a relative basis, the
Fund underperformed the benchmark. The leading cause of the underperformance is
attributable to the Fund underperforming the benchmark amongst the Information
Technology sector by -21.5%, creating -3.6% of relative drag. The Fund
outperformed the benchmark amongst the Health Care sector by 14.75%, creating
0.5% of relative outperformance.
-----------------------------
Value Line(R) and Timeliness(TM) are trademarks of Value Line, Inc. that are
licensed to First Trust. The Fund is not sponsored, recommended, sold, or
promoted by Value Line Publishing LLC, Value Line, Inc. or any of their
affiliates.
Page 18
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 16.08%
Health Care 13.34
Utilities 10.38
Consumer Discretionary 9.58
Consumer Staples 9.28
Materials 9.05
Energy 9.02
Communication Services 7.30
Financials 7.12
Industrials 4.78
Real Estate 4.07
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Zebra Technologies Corp., Class A 1.79%
HCA Healthcare, Inc. 1.56
Ameren Corp. 1.27
Marcus (The) Corp. 1.24
Burlington Stores, Inc. 1.22
Abbott Laboratories 1.18
Eli Lilly & Co. 1.15
WD-40 Co. 1.15
Merck & Co., Inc. 1.14
CDW Corp. 1.13
-------
Total 12.83%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust Value Line(R) 100 Value Line(R) Russell 3000(R)
Exchange-Traded Fund 100 Index Index
12/08 $10,000 $10,000 $10,000
06/09 9,611 9,654 10,419
12/09 11,274 11,382 12,833
06/10 11,177 11,342 12,057
12/10 14,601 14,881 15,006
06/11 15,429 15,839 15,959
12/11 13,445 13,832 15,160
06/12 13,820 14,275 16,572
12/12 14,591 15,130 17,648
06/13 16,765 17,475 20,129
12/13 20,346 21,323 23,570
06/14 22,547 23,739 25,206
12/14 22,653 23,955 26,530
06/15 23,253 24,702 27,045
12/15 21,944 23,400 26,657
06/16 22,699 24,310 27,622
12/16 24,168 26,038 30,050
06/17 23,941 25,965 32,733
12/17 26,369 28,699 36,399
06/18 25,947 28,355 37,571
12/18 21,392 24,492 34,495
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 165 0 0 0
01/01/15 - 12/31/15 130 0 0 0
01/01/16 - 12/31/16 140 1 0 0
01/01/17 - 12/31/17 137 1 0 0
01/01/18 - 12/31/18 182 4 0 1
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 87 0 0 0
01/01/15 - 12/31/15 122 0 0 0
01/01/16 - 12/31/16 111 0 0 0
01/01/17 - 12/31/17 113 0 0 0
01/01/18 - 12/31/18 63 1 0 0
Page 19
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated. The total returns would have been lower if certain fees had not been
waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of each Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
each Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in each Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike each Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 20
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2018 (UNAUDITED)
As a shareholder of First Trust Dow Jones Select MicroCap Index Fund, First
Trust Morningstar Dividend Leaders Index Fund, First Trust US Equity
Opportunities ETF, First Trust NYSE Arca Biotechnology Index Fund, First Trust
Dow Jones Internet Index Fund, First Trust Capital Strength ETF, First Trust
Value Line(R) Dividend Index Fund or First Trust Value Line(R) 100
Exchange-Traded Fund (each a "Fund" and collectively, the "Funds"), you incur
two types of costs: (1) transaction costs; and (2) ongoing costs, including
management fees, distribution and/or service fees, if any, and other Fund
expenses. This Example is intended to help you understand your ongoing costs of
investing in the Funds and to compare these costs with the ongoing costs of
investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended December 31, 2018.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2018 DECEMBER 31, 2018 PERIOD (a) PERIOD (b)
--------------------------------------------------------------------------------------------------------------------------
FIRST TRUST DOW JONES SELECT MICROCAP INDEX
FUND (FDM)
Actual $1,000.00 $ 807.50 0.60% $2.73
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX
FUND (FDL)
Actual $1,000.00 $ 973.60 0.45% $2.24
Hypothetical (5% return before expenses) $1,000.00 $1,022.94 0.45% $2.29
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
Actual $1,000.00 $ 872.20 0.59% $2.78
Hypothetical (5% return before expenses) $1,000.00 $1,022.23 0.59% $3.01
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX
FUND (FBT)
Actual $1,000.00 $ 887.20 0.57% $2.71
Hypothetical (5% return before expenses) $1,000.00 $1,022.33 0.57% $2.91
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
Actual $1,000.00 $ 847.40 0.52% $2.42
Hypothetical (5% return before expenses) $1,000.00 $1,022.58 0.52% $2.65
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
Actual $1,000.00 $ 951.10 0.61% $3.00
Hypothetical (5% return before expenses) $1,000.00 $1,022.13 0.61% $3.11
Page 21
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
DECEMBER 31, 2018 (UNAUDITED)
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2018 DECEMBER 31, 2018 PERIOD (a) PERIOD (b)
--------------------------------------------------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
Actual $1,000.00 $ 973.20 0.70% $3.48
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
Actual $1,000.00 $ 824.90 0.70% $3.22
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57
(a) These expense ratios reflect expense caps for certain Funds. See Note 3 in
Notes to Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (July 1,
2018 through December 31, 2018), multiplied by 184/365 (to reflect the
six-month period).
Page 22
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.2%
AEROSPACE & DEFENSE -- 2.2%
18,717 Ducommun, Inc. (a) $ 679,801
32,649 Engility Holdings, Inc. (a) 929,191
9,059 National Presto Industries, Inc. 1,059,178
20,298 Vectrus, Inc. (a) 438,031
--------------
3,106,201
--------------
AUTO COMPONENTS -- 0.3%
26,570 Shiloh Industries, Inc. (a) 154,903
41,488 Superior Industries International,
Inc. 199,557
--------------
354,460
--------------
BANKS -- 24.5%
11,212 1st Constitution Bancorp 223,455
26,033 Access National Corp. 555,284
20,851 Allegiance Bancshares, Inc. (a) 674,947
26,054 Arrow Financial Corp. 834,249
47,060 Atlantic Capital Bancshares,
Inc. (a) 770,372
27,960 Bar Harbor Bankshares 627,143
48,413 Blue Hills Bancorp, Inc. 1,033,133
28,143 Byline Bancorp, Inc. (a) 468,862
5,869 C&F Financial Corp. 312,290
6,662 Cambridge Bancorp (b) 554,612
23,368 Capital City Bank Group, Inc. 542,371
8,979 CB Financial Services, Inc. (b) 222,500
25,541 Civista Bancshares, Inc. 444,924
25,832 CNB Financial Corp. 592,844
25,903 Equity Bancshares, Inc.,
Class A (a) 913,081
39,817 Fidelity Southern Corp. 1,036,038
28,709 Financial Institutions, Inc. 737,821
22,199 First Bancshares (The), Inc. 671,520
27,770 First Bank 336,572
25,830 First Community Bankshares, Inc. 813,128
12,792 First Community Corp. 248,549
19,436 First Financial Corp. 780,355
14,955 First Financial Northwest, Inc. 231,354
17,435 First Internet Bancorp 356,371
18,972 First Mid-Illinois Bancshares,
Inc. 605,586
41,807 First of Long Island (The) Corp. 834,050
12,764 First United Corp. 203,203
21,994 Franklin Financial Network,
Inc. (a) 579,982
47,824 Green Bancorp, Inc. 819,703
70,210 Heritage Commerce Corp. 796,181
30,275 HomeTrust Bancshares, Inc. 792,600
43,451 Independent Bank Corp. 913,340
29,910 Mercantile Bank Corp. 845,257
11,389 Metropolitan Bank Holding
Corp. (a) 351,351
36,317 Midland States Bancorp, Inc. 811,322
19,606 MidWestOne Financial Group, Inc. 486,817
31,679 National Commerce Corp. (a) 1,140,444
13,395 Nicolet Bankshares, Inc. (a) 653,676
12,407 Northrim BanCorp, Inc. 407,818
6,900 Ohio Valley Banc Corp. (b) 244,191
26,641 Old Line Bancshares, Inc. 701,191
47,203 Old Second Bancorp, Inc. 613,639
39,000 Opus Bank 764,010
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BANKS (CONTINUED)
9,370 Origin Bancorp, Inc. $ 319,330
14,431 Parke Bancorp, Inc. 270,076
28,785 Peapack-Gladstone Financial Corp. 724,806
29,692 People's Utah Bancorp 895,214
24,017 QCR Holdings, Inc. 770,706
18,373 RBB Bancorp 322,814
18,087 Reliant Bancorp, Inc. 416,724
18,530 Republic Bancorp, Inc., Class A 717,482
11,480 SB One Bancorp 234,651
25,343 Sierra Bancorp 608,992
17,833 SmartFinancial, Inc. (a) 325,809
12,352 Southern First Bancshares,
Inc. (a) 396,129
35,119 Southern National Bancorp of
Virginia, Inc. 464,273
43,668 Veritex Holdings, Inc. (a) 933,622
--------------
33,946,764
--------------
BUILDING PRODUCTS -- 1.1%
60,926 Griffon Corp. 636,677
63,387 Quanex Building Products Corp. 861,429
--------------
1,498,106
--------------
CAPITAL MARKETS -- 1.6%
5,885 Diamond Hill Investment Group,
Inc. 879,513
33,794 GAIN Capital Holdings, Inc. 208,171
17,102 Oppenheimer Holdings, Inc.,
Class A 436,956
25,929 Victory Capital Holdings, Inc.,
Class A (a) 264,995
14,631 Westwood Holdings Group, Inc. 497,454
--------------
2,287,089
--------------
CHEMICALS -- 2.1%
48,093 American Vanguard Corp. 730,533
46,519 FutureFuel Corp. 737,791
39,697 Kronos Worldwide, Inc. 457,309
80,896 OMNOVA Solutions, Inc. (a) 592,968
37,120 Trecora Resources (a) 289,536
48,906 Valhi, Inc. 94,389
--------------
2,902,526
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.1%
47,446 Ennis, Inc. 913,335
66,073 Kimball International, Inc.,
Class B 937,576
54,275 Quad/Graphics, Inc. 668,668
15,488 VSE Corp. 463,246
--------------
2,982,825
--------------
COMMUNICATIONS EQUIPMENT
-- 0.5%
52,222 Casa Systems, Inc. (a) 685,675
--------------
CONSTRUCTION & ENGINEERING
-- 2.2%
33,285 Ameresco, Inc., Class A (a) 469,319
29,856 MYR Group, Inc. (a) 841,044
16,871 NV5 Global, Inc. (a) 1,021,539
52,215 Orion Group Holdings, Inc. (a) 224,002
See Notes to Financial Statements Page 23
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CONSTRUCTION & ENGINEERING
(CONTINUED)
46,353 Sterling Construction Co.,
Inc. (a) $ 504,784
--------------
3,060,688
--------------
CONSUMER FINANCE -- 2.0%
24,042 Curo Group Holdings Corp. (a) 228,159
32,701 Elevate Credit, Inc. (a) 146,501
93,036 EZCORP, Inc., Class A (a) 719,168
17,215 Regional Management Corp. (a) 414,021
12,094 World Acceptance Corp. (a) 1,236,732
--------------
2,744,581
--------------
CONTAINERS & PACKAGING -- 0.7%
63,724 Myers Industries, Inc. 962,870
--------------
DISTRIBUTORS -- 0.4%
18,725 Funko, Inc., Class A (a) 246,234
11,326 Weyco Group, Inc. 330,379
--------------
576,613
--------------
DIVERSIFIED CONSUMER SERVICES
-- 1.9%
48,921 Bridgepoint Education, Inc. (a) 342,936
26,615 Carriage Services, Inc. 412,532
14,210 Collectors Universe, Inc. 161,426
67,376 K12, Inc. (a) 1,670,251
--------------
2,587,145
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.3%
16,986 Marlin Business Services Corp. 379,297
--------------
ELECTRIC UTILITIES -- 0.1%
33,771 Genie Energy Ltd., Class B 203,639
--------------
ELECTRICAL EQUIPMENT -- 1.2%
137,992 Enphase Energy, Inc. (a) (b) 652,702
4,881 Preformed Line Products Co. 264,794
32,969 TPI Composites, Inc. (a) 810,378
--------------
1,727,874
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 2.5%
48,142 Control4 Corp. (a) 847,299
47,379 Kimball Electronics, Inc. (a) 733,901
20,760 Napco Security Technologies,
Inc. (a) 326,970
20,717 PC Connection, Inc. 615,916
15,549 PCM, Inc. (a) 273,818
22,434 Vishay Precision Group, Inc. (a) 678,180
--------------
3,476,084
--------------
ENERGY EQUIPMENT & SERVICES
-- 0.7%
59,093 FTS International, Inc. (a) 420,151
22,590 Mammoth Energy Services, Inc. 406,168
58,932 Profire Energy, Inc. (a) 85,452
--------------
911,771
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ENTERTAINMENT -- 0.3%
29,615 Reading International, Inc.,
Class A (a) $ 430,602
--------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 4.0%
16,390 BRT Apartments Corp. 187,502
71,281 City Office REIT, Inc. 730,630
21,537 CorEnergy Infrastructure Trust,
Inc. 712,444
57,431 MedEquities Realty Trust, Inc. 392,828
148,073 New Senior Investment Group, Inc. 610,061
38,124 NexPoint Residential Trust, Inc. 1,336,246
26,211 One Liberty Properties, Inc. 634,830
20,775 Saul Centers, Inc. 980,996
--------------
5,585,537
--------------
FOOD & STAPLES RETAILING -- 0.8%
25,478 Ingles Markets, Inc., Class A 693,511
14,532 Village Super Market, Inc.,
Class A 388,586
--------------
1,082,097
--------------
FOOD PRODUCTS -- 1.6%
50,024 Landec Corp. (a) 592,284
26,433 Limoneira Co. 516,765
33,417 Tootsie Roll Industries, Inc. (b) 1,116,128
--------------
2,225,177
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 0.2%
11,457 FONAR Corp. (a) 231,890
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 2.0%
21,288 AAC Holdings, Inc. (a) 29,803
18,180 Addus HomeCare Corp. (a) 1,234,058
28,078 Civitas Solutions, Inc. (a) 491,646
16,558 CorVel Corp. (a) 1,021,960
--------------
2,777,467
--------------
HOTELS, RESTAURANTS & LEISURE
-- 3.9%
116,188 BBX Capital Corp. 665,757
33,165 Bojangles', Inc. (a) 533,293
30,555 Chuy's Holdings, Inc. (a) 542,046
63,308 Del Taco Restaurants, Inc. (a) 632,447
48,721 Lindblad Expeditions Holdings,
Inc. (a) 655,785
21,290 Monarch Casino & Resort, Inc. (a) 812,000
16,291 RCI Hospitality Holdings, Inc. 363,778
23,397 Red Robin Gourmet Burgers,
Inc. (a) 625,168
20,610 Speedway Motorsports, Inc. 335,325
45,077 Town Sports International
Holdings, Inc. (a) 288,493
--------------
5,454,092
--------------
HOUSEHOLD DURABLES -- 2.3%
18,027 Bassett Furniture Industries, Inc. 361,261
44,539 Ethan Allen Interiors, Inc. 783,441
13,216 Flexsteel Industries, Inc. 291,809
43,881 Green Brick Partners, Inc. (a) 317,698
Page 24 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOUSEHOLD DURABLES (CONTINUED)
9,336 Hamilton Beach Brands Holding
Co., Class A $ 219,023
21,243 Hooker Furniture Corp. 559,541
12,831 Turtle Beach Corp. (a) (b) 183,098
50,100 ZAGG, Inc. (a) 489,978
--------------
3,205,849
--------------
INSURANCE -- 1.0%
18,189 FedNat Holding Co. 362,325
22,071 Health Insurance Innovations,
Inc., Class A (a) (b) 589,958
2,412 Investors Title Co. 426,152
--------------
1,378,435
--------------
IT SERVICES -- 1.3%
47,885 Hackett Group (The), Inc. 766,639
91,976 Unisys Corp. (a) 1,069,681
--------------
1,836,320
--------------
LEISURE PRODUCTS -- 1.3%
10,536 Johnson Outdoors, Inc., Class A 618,885
33,739 MasterCraft Boat Holdings,
Inc. (a) 630,919
53,689 Nautilus, Inc. (a) 585,210
--------------
1,835,014
--------------
MACHINERY -- 1.4%
25,038 Blue Bird Corp. (a) 455,441
11,380 Hurco Cos., Inc. 406,266
15,571 Park-Ohio Holdings Corp. 477,874
55,793 Spartan Motors, Inc. 403,384
17,928 Twin Disc, Inc. (a) 264,438
--------------
2,007,403
--------------
MEDIA -- 1.1%
44,865 Emerald Expositions Events, Inc. 553,634
93,629 Lee Enterprises, Inc. (a) 197,557
112,436 National CineMedia, Inc. 728,586
--------------
1,479,777
--------------
METALS & MINING -- 0.6%
104,041 Gold Resource Corp. 416,164
16,470 Olympic Steel, Inc. 235,027
14,869 Synalloy Corp. 246,677
--------------
897,868
--------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS -- 4.2%
126,954 Arbor Realty Trust, Inc. 1,278,427
47,593 Ares Commercial Real Estate Corp. 620,613
26,557 Cherry Hill Mortgage Investment
Corp. 465,810
107,591 Dynex Capital, Inc. 615,421
30,250 Great Ajax Corp. 364,512
31,209 Ready Capital Corp. 431,620
74,992 TPG RE Finance Trust, Inc. 1,370,854
86,733 Western Asset Mortgage Capital
Corp. 723,353
--------------
5,870,610
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS
-- 4.7%
300,318 Abraxas Petroleum Corp. (a) $ 327,347
52,553 CVR Energy, Inc. 1,812,028
115,879 Overseas Shipholding Group, Inc.,
Class A (a) 192,359
50,445 Par Pacific Holdings, Inc. (a) 715,310
67,232 Renewable Energy Group, Inc. (a) 1,727,862
10,266 REX American Resources Corp. (a) 699,217
11,170 SilverBow Resources, Inc. (a) 264,059
100,879 VAALCO Energy, Inc. (a) 148,292
165,547 W&T Offshore, Inc. (a) 682,054
--------------
6,568,528
--------------
PERSONAL PRODUCTS -- 0.4%
23,106 Lifevantage Corp. (a) 304,768
13,125 Natural Health Trends Corp. 242,681
--------------
547,449
--------------
PHARMACEUTICALS -- 0.5%
14,943 ANI Pharmaceuticals, Inc. (a) 672,734
--------------
PROFESSIONAL SERVICES -- 1.7%
15,566 BG Staffing, Inc. 321,438
14,600 CRA International, Inc. 621,230
53,447 Resources Connection, Inc. 758,947
16,952 Willdan Group, Inc. (a) 592,981
--------------
2,294,596
--------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 1.8%
9,944 Consolidated-Tomoka Land Co. 522,060
38,320 Marcus & Millichap, Inc. (a) 1,315,525
12,583 RMR Group (The), Inc., Class A 667,906
--------------
2,505,491
--------------
ROAD & RAIL -- 0.6%
22,201 Covenant Transportation Group,
Inc., Class A (a) 426,259
3,979 PAM. Transportation Services,
Inc. (a) 156,812
14,832 Universal Logistics Holdings, Inc. 268,311
--------------
851,382
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.5%
63,426 AXT, Inc. (a) 275,903
123,270 Photronics, Inc. (a) 1,193,253
22,411 SMART Global Holdings, Inc. (a) 665,607
--------------
2,134,763
--------------
SOFTWARE -- 0.4%
49,283 American Software, Inc., Class A 515,007
--------------
SPECIALTY RETAIL -- 5.5%
51,066 Boot Barn Holdings, Inc. (a) 869,654
41,180 Cato (The) Corp., Class A 587,639
21,985 Citi Trends, Inc. 448,274
27,330 Container Store Group, (The),
Inc. (a) 130,364
34,205 Haverty Furniture Cos., Inc. 642,370
33,447 Hibbett Sports, Inc. (a) 478,292
See Notes to Financial Statements Page 25
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SPECIALTY RETAIL (CONTINUED)
25,236 J. Jill, Inc. (a) $ 134,508
26,780 Kirkland's, Inc. (a) 255,213
103,349 Party City Holdco, Inc. (a) 1,031,423
53,753 RTW RetailWinds, Inc. (a) 152,121
18,086 Shoe Carnival, Inc. 606,062
42,638 Sonic Automotive, Inc., Class A 586,699
68,108 Sportsman's Warehouse Holdings,
Inc. (a) 298,313
70,372 Tile Shop Holdings, Inc. 385,639
38,819 Tilly's, Inc., Class A 421,574
34,054 Zumiez, Inc. (a) 652,815
--------------
7,680,960
--------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 0.4%
55,521 Immersion Corp. (a) 497,468
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.6%
13,461 Lakeland Industries, Inc. (a) (b) 140,533
12,174 Rocky Brands, Inc. 316,524
38,877 Vera Bradley, Inc. (a) 333,176
--------------
790,233
--------------
THRIFTS & MORTGAGE FINANCE
-- 6.6%
26,651 BankFinancial Corp. 398,432
55,839 Dime Community Bancshares, Inc. 948,146
12,422 Entegra Financial Corp. (a) 257,756
36,773 First Defiance Financial Corp. 901,306
6,835 FS Bancorp, Inc. 293,085
12,647 Home Bancorp, Inc. 447,704
28,447 Merchants Bancorp 567,802
200,349 Ocwen Financial Corp. (a) 268,468
69,705 Oritani Financial Corp. 1,028,149
108,950 PennyMac Financial Services, Inc. 2,316,277
89,636 United Community Financial Corp. 793,279
51,964 Waterstone Financial, Inc. 870,917
--------------
9,091,321
--------------
TOBACCO -- 0.3%
15,506 Turning Point Brands, Inc. 422,073
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.4%
103,525 Nexeo Solutions, Inc. (a) (b) 889,280
26,195 Systemax, Inc. 625,798
12,203 Transcat, Inc. (a) 232,101
5,595 Willis Lease Finance Corp. (a) 193,587
--------------
1,940,766
--------------
WATER UTILITIES -- 0.4%
14,173 Artesian Resources Corp., Class A 494,212
--------------
TOTAL COMMON STOCKS -- 99.2% 137,699,329
(Cost $163,367,737) --------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MONEY MARKET FUNDS -- 0.7%
919,140 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.61% (c) (d) $ 919,140
(Cost $919,140) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.3%
$ 405,554 BNP Paribas S.A., 2.95% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$405,621. Collateralized by
U.S. Treasury Note, interest
rate of 2.375%, due 04/30/20.
The value of the collateral
including accrued interest is
$415,306. (d) 405,554
1,459,602 JPMorgan Chase & Co., 2.85% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$1,459,833. Collateralized by
U.S. Treasury Bill, interest
rate of 0.000%, due 05/09/19.
The value of the collateral is
$1,488,765. (d) 1,459,602
--------------
TOTAL REPURCHASE AGREEMENTS
-- 1.3% 1,865,156
(Cost $1,865,156) --------------
TOTAL INVESTMENTS -- 101.2% 140,483,625
(Cost $166,152,033) (e)
NET OTHER ASSETS AND
LIABILITIES -- (1.2)% (1,706,813)
--------------
NET ASSETS -- 100.0% $ 138,776,812
==============
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $2,727,760 and the total value of the collateral held by the
Fund is $2,781,006.
(c) Rate shown reflects yield as of December 31, 2018.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $167,651,203. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,975,484 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$29,143,062. The net unrealized depreciation was $27,167,578.
Page 26 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 137,699,329 $ -- $ --
Money Market
Funds 919,140 -- --
Repurchase
Agreements -- 1,865,156 --
-----------------------------------------------------
Total Investments $ 138,618,469 $ 1,865,156 $ --
=====================================================
* See Portfolio of Investments for industry breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 2,727,760
Non-cash Collateral(2) (2,727,760)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At December 31, 2018, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 1,865,156
Non-cash Collateral(4) (1,865,156)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2018, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 27
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.8%
AUTOMOBILES -- 1.6%
2,573,793 Ford Motor Co. $ 19,689,516
63,466 Harley-Davidson, Inc. 2,165,460
--------------
21,854,976
--------------
BANKS -- 0.7%
133,752 F.N.B. Corp. 1,316,120
78,203 PacWest Bancorp 2,602,596
5,459 Park National Corp. 463,742
158,731 People's United Financial, Inc. 2,290,488
98,925 Umpqua Holdings Corp. 1,572,907
39,987 United Bankshares, Inc. 1,243,996
--------------
9,489,849
--------------
BEVERAGES -- 7.3%
1,151,773 Coca-Cola (The) Co. 54,536,451
424,597 PepsiCo, Inc. 46,909,477
--------------
101,445,928
--------------
BIOTECHNOLOGY -- 4.1%
618,436 AbbVie, Inc. 57,013,615
--------------
CAPITAL MARKETS -- 0.4%
7,361 Cohen & Steers, Inc. 252,630
39,090 Federated Investors, Inc.,
Class B 1,037,839
265,441 Invesco Ltd. 4,443,482
--------------
5,733,951
--------------
CHEMICALS -- 0.8%
139,715 LyondellBasell Industries N.V.,
Class A 11,618,699
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.1%
188,408 Pitney Bowes, Inc. 1,113,491
--------------
CONTAINERS & PACKAGING -- 0.5%
173,615 International Paper Co. 7,007,101
--------------
DIVERSIFIED CONSUMER SERVICES
-- 0.1%
69,531 H&R Block, Inc. 1,764,002
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 16.1%
4,578,232 AT&T, Inc. 130,662,741
1,650,025 Verizon Communications, Inc. 92,764,406
--------------
223,427,147
--------------
ELECTRIC UTILITIES -- 8.3%
65,353 Alliant Energy Corp. 2,761,164
157,648 American Electric Power Co., Inc. 11,782,612
280,007 Duke Energy Corp. 24,164,604
125,619 Edison International 7,131,391
70,349 Entergy Corp. 6,054,939
87,432 Eversource Energy 5,686,577
269,971 Exelon Corp. 12,175,692
32,948 Hawaiian Electric Industries, Inc. 1,206,556
67,060 OGE Energy Corp. 2,628,081
34,421 Pinnacle West Capital Corp. 2,932,669
365,078 PPL Corp. 10,342,660
498,283 Southern (The) Co. 21,884,589
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ELECTRIC UTILITIES (CONTINUED)
139,999 Xcel Energy, Inc. $ 6,897,751
--------------
115,649,285
--------------
ELECTRICAL EQUIPMENT -- 0.8%
152,634 Eaton Corp. PLC 10,479,851
--------------
ENTERTAINMENT -- 0.1%
32,029 Cinemark Holdings, Inc. 1,146,638
--------------
FOOD PRODUCTS -- 1.5%
38,521 B&G Foods, Inc. 1,113,642
65,842 Campbell Soup Co. 2,172,128
64,231 Flowers Foods, Inc. 1,186,346
287,488 General Mills, Inc. 11,194,783
88,244 Kellogg Co. 5,030,790
--------------
20,697,689
--------------
GAS UTILITIES -- 0.1%
29,853 South Jersey Industries, Inc. 829,913
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 0.4%
100,216 Cardinal Health, Inc. 4,469,634
35,022 Patterson Cos., Inc. 688,532
--------------
5,158,166
--------------
HOTELS, RESTAURANTS & LEISURE
-- 0.9%
11,433 Brinker International, Inc. 502,823
189,074 Las Vegas Sands Corp. 9,841,302
39,928 Wyndham Destinations, Inc. 1,431,020
--------------
11,775,145
--------------
HOUSEHOLD DURABLES -- 0.6%
36,670 Garmin Ltd. 2,321,945
50,079 Leggett & Platt, Inc. 1,794,831
159,081 Newell Brands, Inc. 2,957,316
35,042 Tupperware Brands Corp. 1,106,276
--------------
8,180,368
--------------
HOUSEHOLD PRODUCTS -- 5.7%
115,345 Kimberly-Clark Corp. 13,142,409
721,051 Procter & Gamble (The) Co. 66,279,008
--------------
79,421,417
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.2%
205,598 AES Corp. 2,972,947
--------------
INSURANCE -- 2.8%
397,444 MetLife, Inc. 16,319,051
97,225 Old Republic International Corp. 1,999,918
126,080 Principal Financial Group, Inc. 5,568,953
15,455 ProAssurance Corp. 626,855
170,234 Prudential Financial, Inc. 13,882,583
--------------
38,397,360
--------------
IT SERVICES -- 4.3%
446,841 International Business Machines
Corp. 50,792,417
99,689 Paychex, Inc. 6,494,738
172,189 Western Union (The) Co. 2,937,544
--------------
60,224,699
--------------
Page 28 See Notes to Financial Statements
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDIA -- 0.6%
128,037 Interpublic Group of Cos. (The),
Inc. $ 2,641,403
14,760 Meredith Corp. 766,635
65,758 Omnicom Group, Inc. 4,816,116
--------------
8,224,154
--------------
METALS & MINING -- 0.1%
19,693 Compass Minerals International,
Inc. 821,001
--------------
MULTILINE RETAIL -- 1.5%
59,711 Kohl's Corp. 3,961,228
136,690 Macy's, Inc. 4,070,628
186,937 Target Corp. 12,354,666
--------------
20,386,522
--------------
MULTI-UTILITIES -- 4.6%
15,389 Black Hills Corp. 966,121
182,669 CenterPoint Energy, Inc. 5,156,746
102,467 Consolidated Edison, Inc. 7,834,627
276,366 Dominion Energy, Inc. 19,749,114
51,304 DTE Energy Co. 5,658,831
16,327 NorthWestern Corp. 970,477
154,891 Public Service Enterprise Group,
Inc. 8,062,077
79,663 Sempra Energy 8,618,740
89,546 WEC Energy Group, Inc. 6,201,956
--------------
63,218,689
--------------
OIL, GAS & CONSUMABLE FUELS
-- 15.5%
702,331 Chevron Corp. 76,406,590
1,732,862 Exxon Mobil Corp. 118,163,860
341,632 Occidental Petroleum Corp. 20,969,372
--------------
215,539,822
--------------
PAPER & FOREST PRODUCTS -- 0.1%
26,074 Domtar Corp. 915,980
--------------
PHARMACEUTICALS -- 8.7%
607,120 Merck & Co., Inc. 46,390,039
1,688,731 Pfizer, Inc. 73,713,108
--------------
120,103,147
--------------
PROFESSIONAL SERVICES -- 0.3%
180,836 Nielsen Holdings PLC 4,218,904
--------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.1%
45,635 Kennedy-Wilson Holdings, Inc. 829,188
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.0%
494,053 QUALCOMM, Inc. 28,116,556
--------------
SPECIALTY RETAIL -- 0.6%
26,080 DSW, Inc., Class A 644,176
111,108 GameStop Corp., Class A 1,402,183
71,549 Gap (The), Inc. 1,843,102
165,199 L Brands, Inc. 4,240,658
21,150 Signet Jewelers Ltd. 671,936
--------------
8,802,055
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 0.5%
155,647 Seagate Technology PLC $ 6,006,418
78,130 Xerox Corp. 1,543,849
--------------
7,550,267
--------------
TEXTILES, APPAREL & LUXURY
GOODS -- 0.1%
138,914 Hanesbrands, Inc. 1,740,592
--------------
THRIFTS & MORTGAGE FINANCE
-- 0.0%
38,629 Northwest Bancshares, Inc. 654,375
--------------
TOBACCO -- 7.7%
1,069,554 Altria Group, Inc. 52,825,272
802,236 Philip Morris International, Inc. 53,557,276
--------------
106,382,548
--------------
TRADING COMPANIES &
DISTRIBUTORS -- 0.0%
35,839 Aircastle Ltd. 617,864
--------------
TOTAL INVESTMENTS -- 99.8% 1,383,523,901
(Cost $1,450,286,273) (a)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 2,959,197
--------------
NET ASSETS -- 100.0% $1,386,483,098
==============
(a) Aggregate cost for federal income tax purposes is $1,473,853,073. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$71,620,556 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$161,949,728. The net unrealized depreciation was $90,329,172.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 1,383,523,901 $ -- $ --
=====================================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 29
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AUTOMOBILES -- 2.6%
1,622,035 Fiat Chrysler Automobiles
N.V. (a) $ 23,454,626
--------------
BEVERAGES -- 1.6%
574,921 Keurig Dr Pepper, Inc. 14,740,974
--------------
BIOTECHNOLOGY -- 5.3%
34,858 Allakos, Inc. (a) 1,822,027
100,558 Allogene Therapeutics,
Inc. (a) (b) 2,708,027
252,969 Shire PLC, ADR 44,026,725
--------------
48,556,779
--------------
CAPITAL MARKETS -- 0.4%
156,643 Virtu Financial, Inc., Class A 4,035,124
--------------
CHEMICALS -- 0.6%
34,741 Ingevity Corp. (a) 2,907,474
155,753 Valvoline, Inc. 3,013,821
--------------
5,921,295
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.4%
626,270 ADT, Inc. (b) 3,763,883
--------------
COMMUNICATIONS EQUIPMENT
-- 0.3%
61,515 Lumentum Holdings, Inc. (a) 2,584,245
--------------
CONSUMER FINANCE -- 0.6%
297,454 Santander Consumer USA
Holdings, Inc. 5,232,216
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 5.3%
855,076 Verizon Communications, Inc. 48,072,373
--------------
ELECTRIC UTILITIES -- 1.6%
263,935 Evergy, Inc. 14,983,590
--------------
ELECTRICAL EQUIPMENT -- 0.1%
92,586 Sunrun, Inc. (a) 1,008,262
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 2.3%
124,151 CDW Corp. 10,062,439
177,968 Keysight Technologies, Inc. (a) 11,048,253
--------------
21,110,692
--------------
ENTERTAINMENT -- 1.7%
19,660 Madison Square Garden (The) Co.,
Class A (a) 5,262,982
86,442 Spotify Technology S.A. (a) 9,811,167
--------------
15,074,149
--------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 1.6%
100,091 JBG SMITH Properties 3,484,168
228,683 MGM Growth Properties LLC,
Class A 6,039,518
176,179 STORE Capital Corp. 4,987,627
--------------
14,511,313
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
FOOD & STAPLES RETAILING -- 1.2%
113,269 BJ's Wholesale Club Holdings,
Inc. (a) $ 2,510,041
87,047 Performance Food Group Co. (a) 2,809,007
179,877 US Foods Holding Corp. (a) 5,691,308
--------------
11,010,356
--------------
FOOD PRODUCTS -- 8.8%
173,669 Hershey (The) Co. 18,613,844
827,757 Kraft Heinz (The) Co. 35,626,661
121,229 Lamb Weston Holdings, Inc. 8,917,605
328,627 Tyson Foods, Inc., Class A 17,548,682
--------------
80,706,792
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 3.2%
29,823 Glaukos Corp. (a) 1,675,158
28,561 Penumbra, Inc. (a) 3,490,154
154,867 Stryker Corp. 24,275,402
--------------
29,440,714
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 0.6%
70,984 Guardant Health, Inc. (a) (b) 2,668,288
51,641 HealthEquity, Inc. (a) 3,080,386
--------------
5,748,674
--------------
HEALTH CARE TECHNOLOGY -- 0.3%
58,032 Teladoc Health, Inc. (a) 2,876,646
--------------
HOTELS, RESTAURANTS & LEISURE
-- 0.8%
86,913 Planet Fitness, Inc., Class A (a) 4,660,275
45,526 Wingstop, Inc. 2,922,314
--------------
7,582,589
--------------
INTERACTIVE MEDIA & SERVICES
-- 3.5%
73,980 CarGurus, Inc. (a) 2,495,345
230,188 Match Group, Inc. 9,845,141
1,071,876 Snap, Inc., Class A (a) (b) 5,906,037
467,269 Twitter, Inc. (a) 13,429,311
--------------
31,675,834
--------------
INTERNET & DIRECT MARKETING RETAIL
-- 1.4%
99,712 Etsy, Inc. (a) 4,743,300
82,394 Stitch Fix, Inc., Class A (a) (b) 1,408,113
74,783 Wayfair, Inc., Class A (a) 6,736,453
--------------
12,887,866
--------------
IT SERVICES -- 18.5%
123,665 Black Knight, Inc. (a) 5,572,345
67,161 Evo Payments, Inc., Class A (a) 1,656,862
772,899 First Data Corp., Class A (a) 13,069,722
143,628 GoDaddy, Inc., Class A (a) 9,424,869
44,370 MongoDB, Inc. (a) (b) 3,715,544
91,416 Okta, Inc. (a) 5,832,341
975,094 PayPal Holdings, Inc. (a) 81,995,654
136,139 Perspecta, Inc. 2,344,313
342,275 Square, Inc., Class A (a) 19,198,205
81,830 Twilio, Inc., Class A (a) 7,307,419
Page 30 See Notes to Financial Statements
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
IT SERVICES (CONTINUED)
249,862 Worldpay, Inc., Class A (a) $ 19,096,953
--------------
169,214,227
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 6.9%
163,933 IQVIA Holdings, Inc. (a) 19,044,097
29,473 Medpace Holdings, Inc. (a) 1,560,006
53,783 PRA Health Sciences, Inc. (a) 4,945,885
166,617 Thermo Fisher Scientific, Inc. 37,287,218
--------------
62,837,206
--------------
MACHINERY -- 2.1%
276,440 Fortive Corp. 18,703,930
--------------
MEDIA -- 4.1%
634,944 Altice USA, Inc., Class A 10,489,275
5,568 Cable One, Inc. 4,566,317
149,745 Liberty Latin America Ltd.,
Class C (a) 2,181,785
271,180 Liberty Media Corp.-Liberty
SiriusXM, Class A (a) 9,979,424
271,180 Liberty Media Corp.-Liberty
SiriusXM, Class C (a) 10,028,236
--------------
37,245,037
--------------
MULTILINE RETAIL -- 0.4%
52,051 Ollie's Bargain Outlet Holdings,
Inc. (a) 3,461,912
--------------
OIL, GAS & CONSUMABLE FUELS
-- 1.8%
212,638 Cheniere Energy, Inc. (a) 12,586,043
210,473 Equitrans Midstream Corp. (a) 4,213,670
--------------
16,799,713
--------------
PHARMACEUTICALS -- 4.2%
73,846 Akcea Therapeutics, Inc. (a) 2,225,718
302,649 Elanco Animal Health, Inc. (a) 9,542,523
229,316 Eli Lilly & Co. 26,536,448
--------------
38,304,689
--------------
PROFESSIONAL SERVICES -- 2.7%
326,271 IHS Markit Ltd. (a) 15,651,220
153,382 TransUnion 8,712,098
--------------
24,363,318
--------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.3%
178,835 Cushman & Wakefield PLC (a) 2,587,742
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.3%
90,254 Versum Materials, Inc. 2,501,841
--------------
SOFTWARE -- 10.3%
39,736 Alarm.com Holdings, Inc. (a) 2,061,106
58,215 Altair Engineering, Inc.,
Class A (a) 1,605,570
50,810 Alteryx, Inc., Class A (a) 3,021,671
103,439 Anaplan, Inc. (a) (b) 2,745,271
52,705 Appian Corp., Class A (a) (b) 1,407,751
45,232 Blackline, Inc. (a) 1,852,250
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SOFTWARE (CONTINUED)
49,207 Coupa Software, Inc. (a) $ 3,093,152
336,501 Dropbox, Inc., Class A (a) 6,874,715
32,476 HubSpot, Inc. (a) 4,083,208
47,149 New Relic, Inc. (a) 3,817,655
148,282 Nutanix, Inc., Class A (a) 6,167,048
48,518 Paycom Software, Inc. (a) 5,941,029
111,806 Pluralsight, Inc., Class A (a) 2,633,031
72,668 SailPoint Technologies Holding,
Inc. (a) 1,706,971
189,606 salesforce.com, Inc. (a) 25,970,334
39,202 SendGrid, Inc. (a) 1,692,350
85,520 Smartsheet, Inc., Class A (a) (b) 2,126,027
256,557 SolarWinds Corp. (a) 3,548,183
35,793 Trade Desk (The), Inc.,
Class A (a) 4,154,136
88,605 Zendesk, Inc. (a) 5,171,874
101,194 Zscaler, Inc. (a) 3,967,817
--------------
93,641,149
--------------
SPECIALTY RETAIL -- 1.4%
55,797 Burlington Stores, Inc. (a) 9,076,498
115,947 Carvana Co. (a) (b) 3,792,626
--------------
12,869,124
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 2.0%
1,157,763 Hewlett Packard Enterprise Co. 15,294,049
200,000 Pure Storage, Inc., Class A (a) 3,216,000
--------------
18,510,049
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.8%
67,135 United Rentals, Inc. (a) 6,883,352
--------------
TOTAL COMMON STOCKS -- 100.0% 912,902,281
(Cost $869,657,197) --------------
MONEY MARKET FUNDS -- 0.8%
6,892,077 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.61% (c) (d) 6,892,077
(Cost $6,892,077) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.5%
$ 3,041,010 BNP Paribas S.A., 2.95% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$3,041,508. Collateralized by
U.S. Treasury Note, interest
rate of 2.375%, due 04/30/20.
The value of the collateral
including accrued interest is
$3,114,127. (d) 3,041,010
See Notes to Financial Statements Page 31
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS
(CONTINUED)
$ 10,944,672 JPMorgan Chase & Co., 2.85% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$10,946,405. Collateralized by
U.S. Treasury Bill, interest
rate of 0.000%, due 05/09/19.
The value of the collateral is
$11,163,352. (d) $ 10,944,672
--------------
TOTAL REPURCHASE AGREEMENTS
-- 1.5% 13,985,682
(Cost $13,985,682) --------------
TOTAL INVESTMENTS -- 102.3% 933,780,040
(Cost $890,534,956) (e)
NET OTHER ASSETS AND
LIABILITIES -- (2.3)% (21,301,380)
--------------
NET ASSETS -- 100.0% $ 912,478,660
==============
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $20,126,810 and the total value of the collateral held by
the Fund is $20,853,085.
(c) Rate shown reflects yield as of December 31, 2018.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $897,935,868. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$115,558,291 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$79,714,119. The net unrealized appreciation was $35,844,172.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 912,902,281 $ -- $ --
Money Market
Funds 6,892,077 -- --
Repurchase
Agreements -- 13,985,682 --
-----------------------------------------------------
Total Investments $ 919,794,358 $ 13,985,682 $ --
=====================================================
* See Portfolio of Investments for industry breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 20,126,810
Non-cash Collateral(2) (20,126,810)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At December 31, 2018, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 13,985,682
Non-cash Collateral(4) (13,985,682)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2018, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 32 See Notes to Financial Statements
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
BIOTECHNOLOGY -- 79.7%
4,066,656 ACADIA Pharmaceuticals,
Inc. (a) $ 65,757,828
1,350,227 Agios Pharmaceuticals, Inc. (a) 62,258,967
717,699 Alexion Pharmaceuticals, Inc. (a) 69,875,175
2,249,241 Alkermes PLC (a) 66,375,102
1,178,044 Alnylam Pharmaceuticals, Inc. (a) 85,891,188
447,245 Amgen, Inc. 87,065,184
282,160 Biogen, Inc. (a) 84,907,587
875,069 BioMarin Pharmaceutical, Inc. (a) 74,512,125
747,922 Bluebird Bio, Inc. (a) 74,193,862
1,095,970 Celgene Corp. (a) 70,240,717
5,551,138 Exelixis, Inc. (a) 109,190,884
1,707,422 FibroGen, Inc. (a) 79,019,490
1,232,369 Gilead Sciences, Inc. 77,084,681
4,667,603 Grifols S.A., ADR 85,697,191
1,367,195 Incyte Corp. (a) 86,939,930
943,300 Intercept Pharmaceuticals,
Inc. (a) 95,075,207
6,475,656 Intrexon Corp. (a) (b) 42,350,790
1,998,959 Ionis Pharmaceuticals, Inc. (a) 108,063,724
806,073 Neurocrine Biosciences, Inc. (a) 57,561,673
231,727 Regeneron Pharmaceuticals,
Inc. (a) 86,550,035
1,257,987 Seattle Genetics, Inc. (a) 71,277,543
1,427,658 Ultragenyx Pharmaceutical,
Inc. (a) 62,074,570
734,772 United Therapeutics Corp. (a) 80,016,671
513,879 Vertex Pharmaceuticals, Inc. (a) 85,154,889
--------------
1,867,135,013
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 17.7%
509,186 Bio-Techne Corp. 73,689,398
738,678 Charles River Laboratories
International, Inc. (a) 83,603,576
288,312 Illumina, Inc. (a) 86,473,418
711,543 IQVIA Holdings, Inc. (a) 82,659,951
2,515,214 QIAGEN N.V. (a) 86,649,122
--------------
413,075,465
--------------
PHARMACEUTICALS -- 2.6%
1,874,041 Nektar Therapeutics (a) 61,599,728
--------------
TOTAL COMMON STOCKS
-- 100.0% 2,341,810,206
(Cost $2,827,529,335) --------------
MONEY MARKET FUNDS -- 0.6%
13,098,698 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.61% (c) (d) 13,098,698
(Cost $13,098,698) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.1%
$ 5,779,574 BNP Paribas S.A., 2.95% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$5,780,521. Collateralized by
U.S. Treasury Note, interest
rate of 2.375%, due 04/30/20.
The value of the collateral
including accrued interest is
$5,918,537. (d) $ 5,779,574
20,800,836 JPMorgan Chase & Co.,
2.85% (c), dated 12/31/18, due
01/02/19, with a maturity
value of $20,804,130.
Collateralized by U.S.
Treasury Bill, interest rate
of 0.000%, due 05/09/19. The
value of the collateral is
$21,216,446. (d) 20,800,836
--------------
TOTAL REPURCHASE AGREEMENTS
-- 1.1% 26,580,410
(Cost $26,580,410) --------------
TOTAL INVESTMENTS -- 101.7% 2,381,489,314
(Cost $2,867,208,443) (e)
NET OTHER ASSETS AND
LIABILITIES -- (1.7)% (39,276,504)
--------------
NET ASSETS -- 100.0% $2,342,212,810
==============
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $37,090,302 and the total value of the collateral held by
the Fund is $39,632,215.
(c) Rate shown reflects yield as of December 31, 2018.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $2,946,177,240. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$18,175,212 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$582,863,138. The net unrealized depreciation was $564,687,926.
ADR - American Depositary Receipt
See Notes to Financial Statements Page 33
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 2,341,810,206 $ -- $ --
Money Market
Funds 13,098,698 -- --
Repurchase
Agreements -- 26,580,410 --
-----------------------------------------------------
Total Investments $ 2,354,908,904 $ 26,580,410 $ --
=====================================================
* See Portfolio of Investments for industry breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 37,090,302
Non-cash Collateral(2) (37,090,302)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At December 31, 2018, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 26,580,410
Non-cash Collateral(4) (26,580,410)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2018, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 34 See Notes to Financial Statements
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.9%
CAPITAL MARKETS -- 5.8%
2,299,415 Blucora, Inc. (a) $ 61,256,416
3,797,347 E*TRADE Financial Corp. 166,627,586
3,703,066 TD Ameritrade Holding Corp. 181,302,111
--------------
409,186,113
--------------
COMMUNICATIONS EQUIPMENT
-- 5.5%
760,535 Arista Networks, Inc. (a) 160,244,725
5,647,067 Juniper Networks, Inc. 151,962,573
1,405,135 NETGEAR, Inc. (a) 73,109,174
--------------
385,316,472
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.1%
1,649,831 Cogent Communications
Holdings, Inc. 74,588,859
8,323,986 Vonage Holdings Corp. (a) 72,668,398
--------------
147,257,257
--------------
ENTERTAINMENT -- 6.7%
1,458,023 Netflix, Inc. (a) 390,254,436
9,722,066 Pandora Media, Inc. (a) 78,651,514
--------------
468,905,950
--------------
HEALTH CARE TECHNOLOGY -- 2.3%
1,853,341 Veeva Systems, Inc., Class A (a) 165,540,418
--------------
INTERACTIVE MEDIA & SERVICES
-- 23.4%
336,783 Alphabet, Inc., Class A (a) 351,924,764
346,572 Alphabet, Inc., Class C (a) 358,913,429
3,971,938 Facebook, Inc., Class A (a) 520,681,353
18,576,712 Snap, Inc., Class A (a) (b) 102,357,683
2,136,147 TripAdvisor, Inc. (a) 115,223,769
6,755,692 Twitter, Inc. (a) 194,158,588
--------------
1,643,259,586
--------------
INTERNET & DIRECT MARKETING
RETAIL -- 18.4%
449,591 Amazon.com, Inc. (a) 675,272,194
8,442,949 eBay, Inc. (a) 236,993,578
1,574,541 Expedia Group, Inc. 177,372,044
20,357,283 Groupon, Inc. (a) 65,143,306
1,748,910 GrubHub, Inc. (a) 134,333,777
--------------
1,289,114,899
--------------
IT SERVICES -- 14.7%
2,493,729 Akamai Technologies, Inc. (a) 152,316,967
5,917,155 Endurance International Group
Holdings, Inc. (a) 39,349,081
2,582,394 GoDaddy, Inc., Class A (a) 169,456,694
1,822,134 Okta, Inc. (a) 116,252,149
4,307,742 PayPal Holdings, Inc. (a) 362,238,025
1,298,331 VeriSign, Inc. (a) 192,529,504
--------------
1,032,142,420
--------------
SOFTWARE -- 21.0%
1,699,922 2U, Inc. (a) 84,520,122
3,941,570 8x8, Inc. (a) 71,105,923
4,773,802 Box, Inc., Class A (a) 80,581,778
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SOFTWARE (CONTINUED)
1,716,003 Citrix Systems, Inc. $ 175,821,667
1,734,587 Cornerstone OnDemand, Inc. (a) 87,475,222
1,411,527 DocuSign, Inc. (a) 56,574,002
3,569,453 Dropbox, Inc., Class A (a) 72,923,925
1,303,122 Ebix, Inc. 55,460,872
878,066 HubSpot, Inc. (a) 110,399,238
1,406,526 j2 Global, Inc. 97,584,774
1,299,850 LogMeIn, Inc. 106,028,765
1,239,267 New Relic, Inc. (a) 100,343,449
2,721,183 salesforce.com, Inc. (a) 372,720,436
--------------
1,471,540,173
--------------
TOTAL COMMON STOCKS -- 99.9% 7,012,263,288
(Cost $6,714,454,236) --------------
MONEY MARKET FUNDS -- 0.6%
32,783,250 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.61% (c) (d) 32,783,250
10,022,043 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 2.33% (c) 10,022,043
--------------
TOTAL MONEY MARKET FUNDS
-- 0.6% 42,805,293
(Cost $42,805,293) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.0%
$ 14,465,042 BNP Paribas S.A., 2.95% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$14,467,413. Collateralized by
U.S. Treasury Note, interest
rate of 2.375%, due 04/30/20.
The value of the collateral
including accrued interest is
$14,812,836. (d) 14,465,042
52,060,063 JPMorgan Chase & Co., 2.85% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$52,068,305. Collateralized
by U.S. Treasury Bill,
interest rate of 0.000%, due
05/09/19. The value of the
collateral is $53,100,244. (d) 52,060,063
--------------
TOTAL REPURCHASE AGREEMENTS
-- 1.0% 66,525,105
(Cost $66,525,105) --------------
TOTAL INVESTMENTS -- 101.5% 7,121,593,686
(Cost $6,823,784,634) (e)
NET OTHER ASSETS AND
LIABILITIES -- (1.5)% (104,786,471)
--------------
NET ASSETS -- 100.0% $7,016,807,215
==============
See Notes to Financial Statements Page 35
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $92,071,747 and the total value of the collateral held by
the Fund is $99,190,991.
(c) Rate shown reflects yield as of December 31, 2018.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $7,028,557,022. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$712,375,306 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$619,338,642. The net unrealized appreciation was $93,036,664.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 7,012,263,288 $ -- $ --
Money Market
Funds 42,805,293 -- --
Repurchase
Agreements -- 66,525,105 --
-----------------------------------------------------
Total Investments $ 7,055,068,581 $ 66,525,105 $ --
=====================================================
* See Portfolio of Investments for industry breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 92,071,747
Non-cash Collateral(2) (92,071,747)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At December 31, 2018, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 66,525,105
Non-cash Collateral(4) (66,525,105)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2018, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 36 See Notes to Financial Statements
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 8.8%
156,373 General Dynamics Corp. $ 24,583,399
138,443 L3 Technologies, Inc. 24,042,012
91,076 Lockheed Martin Corp. 23,847,340
156,286 Raytheon Co. 23,966,458
232,440 United Technologies Corp. 24,750,211
--------------
121,189,420
--------------
AIR FREIGHT & LOGISTICS -- 5.7%
451,095 Expeditors International of
Washington, Inc. 30,715,059
135,859 FedEx Corp. 21,918,132
257,632 United Parcel Service, Inc.,
Class B 25,126,849
--------------
77,760,040
--------------
BEVERAGES -- 2.2%
271,271 PepsiCo, Inc. 29,970,020
--------------
CAPITAL MARKETS -- 12.6%
74,124 BlackRock, Inc. 29,117,390
163,118 CME Group, Inc. 30,685,758
403,594 Intercontinental Exchange, Inc. 30,402,736
193,243 MSCI, Inc. 28,489,815
158,888 S&P Global, Inc. 27,001,427
297,324 T. Rowe Price Group, Inc. 27,448,952
--------------
173,146,078
--------------
CHEMICALS -- 2.2%
295,674 PPG Industries, Inc. 30,226,753
--------------
COMMUNICATIONS EQUIPMENT
-- 2.1%
180,002 F5 Networks, Inc. (a) 29,165,724
--------------
ELECTRICAL EQUIPMENT -- 1.8%
413,245 Emerson Electric Co. 24,691,389
--------------
ENTERTAINMENT -- 2.0%
252,520 Walt Disney (The) Co. 27,688,818
--------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 2.3%
198,586 American Tower Corp. 31,414,319
--------------
FOOD & STAPLES RETAILING -- 1.9%
129,915 Costco Wholesale Corp. 26,464,985
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 6.0%
106,659 Anthem, Inc. 28,011,853
142,376 Cigna Corp. 27,040,050
112,704 UnitedHealth Group, Inc. 28,076,821
--------------
83,128,724
--------------
HOTELS, RESTAURANTS & LEISURE
-- 2.4%
509,514 Starbucks Corp. 32,812,702
--------------
HOUSEHOLD DURABLES -- 2.2%
482,089 Garmin Ltd. 30,525,875
--------------
HOUSEHOLD PRODUCTS -- 2.3%
345,591 Procter & Gamble (The) Co. 31,766,725
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INDUSTRIAL CONGLOMERATES
-- 2.1%
149,884 3M Co. $ 28,558,897
--------------
INSURANCE -- 8.1%
670,442 Aflac, Inc. 30,545,337
306,487 Allstate (The) Corp. 25,325,021
371,533 Marsh & McLennan Cos., Inc. 29,629,757
422,886 Progressive (The) Corp. 25,512,712
--------------
111,012,827
--------------
IT SERVICES -- 11.9%
189,675 Accenture PLC, Class A 26,746,072
208,048 Automatic Data Processing, Inc. 27,279,254
146,069 FleetCor Technologies, Inc. (a) 27,127,935
230,835 International Business Machines
Corp. 26,239,014
146,274 Mastercard, Inc., Class A 27,594,590
213,070 Visa, Inc., Class A 28,112,456
--------------
163,099,321
--------------
MACHINERY -- 1.8%
374,709 Fortive Corp. 25,352,811
--------------
OIL, GAS & CONSUMABLE FUELS
-- 1.8%
289,529 Phillips 66 24,942,923
--------------
PERSONAL PRODUCTS -- 2.2%
236,610 Estee Lauder (The) Cos., Inc.,
Class A 30,782,961
--------------
PHARMACEUTICALS -- 4.1%
668,547 Pfizer, Inc. 29,182,076
325,683 Zoetis, Inc. 27,858,924
--------------
57,041,000
--------------
ROAD & RAIL -- 2.0%
201,170 Union Pacific Corp. 27,807,729
--------------
SOFTWARE -- 4.0%
140,945 Intuit, Inc. 27,745,023
274,586 Microsoft Corp. 27,889,700
--------------
55,634,723
--------------
SPECIALTY RETAIL -- 5.8%
165,785 Home Depot (The), Inc. 28,485,179
314,278 Ross Stores, Inc. 26,147,929
554,834 TJX (The) Cos., Inc. 24,823,273
--------------
79,456,381
--------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 1.6%
136,313 Apple, Inc. 21,502,013
--------------
TOTAL INVESTMENTS -- 99.9% 1,375,143,158
(Cost $1,435,374,826) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 987,939
--------------
NET ASSETS -- 100.0% $1,376,131,097
==============
See Notes to Financial Statements Page 37
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $1,440,138,474. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$27,834,429 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$92,829,745. The net unrealized depreciation was $64,995,316.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 1,375,143,158 $ -- $ --
=====================================================
* See Portfolio of Investments for industry breakout.
Page 38 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 2.2%
77,564 Boeing (The) Co. $ 25,014,390
153,932 General Dynamics Corp. 24,199,649
93,039 Lockheed Martin Corp. 24,361,332
223,537 United Technologies Corp. 23,802,220
--------------
97,377,591
--------------
AIR FREIGHT & LOGISTICS -- 1.1%
288,577 C.H. Robinson Worldwide, Inc. 24,266,440
253,803 United Parcel Service, Inc.,
Class B 24,753,407
--------------
49,019,847
--------------
AUTOMOBILES -- 0.5%
204,053 Toyota Motor Corp., ADR 23,686,472
--------------
BANKS -- 7.6%
356,933 Bank of Hawaii Corp. 24,028,730
359,223 Bank of Montreal 23,475,223
464,462 Bank of Nova Scotia (The) 23,162,720
552,821 BB&T Corp. 23,948,206
307,886 Canadian Imperial Bank of
Commerce 22,949,822
247,605 JPMorgan Chase & Co. 24,171,200
168,078 M&T Bank Corp. 24,057,004
287,816 Park National Corp. 24,449,969
1,653,234 People's United Financial, Inc. 23,856,167
207,954 PNC Financial Services Group
(The), Inc. 24,311,902
343,799 Royal Bank of Canada 23,557,107
472,257 Toronto-Dominion (The) Bank 23,480,618
521,357 U.S. Bancorp 23,826,015
523,276 Wells Fargo & Co. 24,112,558
--------------
333,387,241
--------------
BEVERAGES -- 2.1%
348,690 Anheuser-Busch InBev S.A/N.V.,
ADR 22,947,289
496,404 Coca-Cola (The) Co. 23,504,730
164,778 Diageo PLC, ADR 23,365,520
215,158 PepsiCo, Inc. 23,770,656
--------------
93,588,195
--------------
BIOTECHNOLOGY -- 0.6%
127,878 Amgen, Inc. 24,894,010
--------------
CAPITAL MARKETS -- 2.2%
512,799 Bank of New York Mellon (The)
Corp. 24,137,449
63,065 BlackRock, Inc. 24,773,193
821,854 Franklin Resources, Inc. 24,376,190
268,563 T. Rowe Price Group, Inc. 24,793,736
--------------
98,080,568
--------------
CHEMICALS -- 1.7%
152,228 Air Products and Chemicals, Inc. 24,364,091
464,746 DowDuPont, Inc. 24,854,616
432,023 Sensient Technologies Corp. 24,128,485
--------------
73,347,192
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMUNICATIONS EQUIPMENT
-- 0.6%
566,400 Cisco Systems, Inc. $ 24,542,112
--------------
CONSUMER FINANCE -- 0.6%
414,143 Discover Financial Services 24,426,154
--------------
CONTAINERS & PACKAGING -- 1.7%
272,275 Avery Dennison Corp. 24,458,463
522,798 Bemis Co., Inc. 23,996,428
452,756 Sonoco Products Co. 24,054,927
--------------
72,509,818
--------------
DISTRIBUTORS -- 0.5%
248,399 Genuine Parts Co. 23,851,272
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.6%
833,870 AT&T, Inc. 23,798,650
698,338 TELUS Corp. 23,142,921
430,064 Verizon Communications, Inc. 24,178,198
--------------
71,119,769
--------------
ELECTRIC UTILITIES -- 10.7%
309,605 ALLETE, Inc. 23,598,093
553,622 Alliant Energy Corp. 23,390,529
310,193 American Electric Power Co., Inc. 23,183,825
464,182 Avangrid, Inc. 23,250,876
271,890 Duke Energy Corp. 23,464,107
465,990 El Paso Electric Co. 23,360,079
408,067 Evergy, Inc. 23,165,964
359,973 Eversource Energy 23,412,644
636,580 FirstEnergy Corp. 23,903,579
710,735 Fortis, Inc. 23,710,120
643,036 Hawaiian Electric Industries, Inc. 23,547,978
250,322 IDACORP, Inc. 23,294,965
135,734 NextEra Energy, Inc. 23,593,284
596,924 OGE Energy Corp. 23,393,451
479,598 Otter Tail Corp. 23,807,245
269,654 Pinnacle West Capital Corp. 22,974,521
516,294 Portland General Electric Co. 23,672,080
826,923 PPL Corp. 23,426,729
530,325 Southern (The) Co. 23,291,874
469,438 Xcel Energy, Inc. 23,129,210
--------------
468,571,153
--------------
ELECTRICAL EQUIPMENT -- 2.8%
1,254,249 ABB Ltd., ADR 23,843,274
351,755 Eaton Corp. PLC 24,151,498
411,157 Emerson Electric Co. 24,566,631
245,960 Hubbell, Inc. 24,433,666
160,920 Rockwell Automation, Inc. 24,215,242
--------------
121,210,311
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.6%
322,603 TE Connectivity Ltd. 24,398,465
--------------
ENERGY EQUIPMENT & SERVICES
-- 0.5%
648,323 Schlumberger Ltd. 23,391,494
--------------
See Notes to Financial Statements Page 39
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 4.8%
135,128 AvalonBay Communities, Inc. $ 23,519,028
358,271 Equity Residential 23,649,469
197,826 Federal Realty Investment Trust 23,351,381
247,365 Mid-America Apartment
Communities, Inc. 23,672,831
116,013 Public Storage 23,482,191
378,546 Realty Income Corp. 23,863,540
142,002 Simon Property Group, Inc. 23,854,916
997,140 Washington Real Estate Investment
Trust 22,934,220
351,809 WP Carey, Inc. 22,987,200
--------------
211,314,776
--------------
FOOD & STAPLES RETAILING -- 1.7%
380,556 Sysco Corp. 23,845,639
349,594 Walgreens Boots Alliance, Inc. 23,887,758
265,838 Walmart, Inc. 24,762,810
--------------
72,496,207
--------------
FOOD PRODUCTS -- 4.8%
575,832 Archer-Daniels-Midland Co. 23,591,837
682,669 Campbell Soup Co. 22,521,250
1,088,494 Conagra Brands, Inc. 23,250,232
606,942 General Mills, Inc. 23,634,322
220,704 Hershey (The) Co. 23,655,055
244,891 J.M. Smucker (The) Co. 22,894,860
408,723 Kellogg Co. 23,301,298
536,309 Kraft Heinz (The) Co. 23,082,739
577,880 Mondelez International, Inc.,
Class A 23,132,536
--------------
209,064,129
--------------
GAS UTILITIES -- 2.2%
515,929 New Jersey Resources Corp. 23,562,478
385,577 Northwest Natural Holding Co. 23,311,985
851,931 South Jersey Industries, Inc. 23,683,682
320,664 Spire, Inc. 23,754,789
--------------
94,312,934
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.1%
362,590 CVS Health Corp. 23,756,897
286,076 Quest Diagnostics, Inc. 23,821,548
--------------
47,578,445
--------------
HOTELS, RESTAURANTS & LEISURE
-- 1.6%
143,575 Cracker Barrel Old Country Store,
Inc. 22,951,900
133,992 McDonald's Corp. 23,792,959
376,727 Starbucks Corp. 24,261,219
--------------
71,006,078
--------------
HOUSEHOLD DURABLES -- 0.6%
671,612 Leggett & Platt, Inc. 24,070,574
--------------
HOUSEHOLD PRODUCTS -- 2.2%
156,940 Clorox (The) Co. 24,190,731
393,094 Colgate-Palmolive Co. 23,396,955
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HOUSEHOLD PRODUCTS (CONTINUED)
213,522 Kimberly-Clark Corp. $ 24,328,697
261,160 Procter & Gamble (The) Co. 24,005,827
--------------
95,922,210
--------------
INDUSTRIAL CONGLOMERATES -- 1.1%
127,721 3M Co. 24,335,959
182,771 Honeywell International, Inc. 24,147,705
--------------
48,483,664
--------------
INSURANCE -- 8.3%
538,972 Aflac, Inc. 24,555,564
295,257 Allstate (The) Corp. 24,397,086
330,698 Arthur J. Gallagher & Co. 24,372,443
276,045 Assurant, Inc. 24,689,465
464,840 Axis Capital Holdings Ltd. 24,004,338
189,821 Chubb Ltd. 24,521,077
316,212 Cincinnati Financial Corp. 24,481,133
542,684 CNA Financial Corp. 23,959,498
183,049 Erie Indemnity Co., Class A 24,402,262
110,884 Everest Re Group Ltd. 24,146,100
770,765 Fidelity National Financial, Inc. 24,232,851
536,182 First American Financial Corp. 23,935,164
559,733 Hartford Financial Services Group
(The), Inc. 24,880,132
467,700 Mercury General Corp. 24,184,767
202,557 Travelers (The) Cos., Inc. 24,256,201
--------------
365,018,081
--------------
IT SERVICES -- 2.8%
187,079 Automatic Data Processing, Inc. 24,529,799
2,512,636 Infosys Ltd., ADR 23,920,295
212,084 International Business Machines
Corp. 24,107,588
451,418 Leidos Holdings, Inc. 23,798,757
370,128 Paychex, Inc. 24,113,839
--------------
120,470,278
--------------
MACHINERY -- 3.9%
195,085 Caterpillar, Inc. 24,789,451
181,799 Cummins, Inc. 24,295,618
342,925 Dover Corp. 24,330,529
191,807 Illinois Tool Works, Inc. 24,300,029
425,088 PACCAR, Inc. 24,289,528
167,600 Snap-on, Inc. 24,350,604
205,075 Stanley Black & Decker, Inc. 24,555,681
--------------
170,911,440
--------------
MEDIA -- 1.6%
330,366 Omnicom Group, Inc. 24,196,006
1,282,445 Shaw Communications, Inc.,
Class B 23,199,430
430,708 WPP PLC, ADR 23,602,798
--------------
70,998,234
--------------
MULTI-UTILITIES -- 6.9%
360,766 Ameren Corp. 23,532,766
530,325 Avista Corp. 22,528,206
377,923 Black Hills Corp. 23,726,006
472,842 CMS Energy Corp. 23,476,605
302,909 Consolidated Edison, Inc. 23,160,422
Page 40 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTI-UTILITIES (CONTINUED)
320,799 Dominion Energy, Inc. $ 22,924,297
209,414 DTE Energy Co. 23,098,364
989,794 MDU Resources Group, Inc. 23,596,689
393,229 NorthWestern Corp. 23,373,532
457,302 Public Service Enterprise Group,
Inc. 23,802,569
212,435 Sempra Energy 22,983,343
318,643 Vectren Corp. 22,935,923
337,394 WEC Energy Group, Inc. 23,367,908
--------------
302,506,630
--------------
OIL, GAS & CONSUMABLE FUELS
-- 2.8%
225,909 Chevron Corp. 24,576,640
348,267 Exxon Mobil Corp. 23,748,327
290,641 Phillips 66 25,038,722
402,380 Royal Dutch Shell PLC, Class B,
ADR 24,118,657
454,297 TOTAL S.A., ADR 23,705,218
--------------
121,187,564
--------------
PERSONAL PRODUCTS -- 0.5%
447,614 Unilever PLC, ADR 23,387,831
--------------
PHARMACEUTICALS -- 4.4%
467,891 Bristol-Myers Squibb Co. 24,320,974
213,722 Eli Lilly and Co. 24,731,910
612,649 GlaxoSmithKline PLC, ADR 23,409,318
185,731 Johnson & Johnson 23,968,586
320,664 Merck & Co., Inc. 24,501,936
276,576 Novartis AG, ADR 23,732,987
562,633 Pfizer, Inc. 24,558,930
550,021 Sanofi, ADR 23,876,412
--------------
193,101,053
--------------
PROFESSIONAL SERVICES -- 0.5%
489,802 Thomson Reuters Corp. 23,662,335
--------------
ROAD & RAIL -- 0.6%
177,947 Union Pacific Corp. 24,597,614
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.2%
283,691 Analog Devices, Inc. 24,349,199
523,394 Intel Corp. 24,562,880
646,494 Taiwan Semiconductor
Manufacturing Co., Ltd., ADR 23,862,094
259,843 Texas Instruments, Inc. 24,555,163
--------------
97,329,336
--------------
SPECIALTY RETAIL -- 1.7%
144,271 Home Depot (The), Inc. 24,788,643
307,433 Tiffany & Co. 24,751,431
500,974 Williams-Sonoma, Inc. 25,274,138
--------------
74,814,212
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 0.5%
863,866 Canon, Inc., ADR 23,842,702
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
TEXTILES, APPAREL & LUXURY
GOODS -- 0.6%
338,905 VF Corp. $ 24,177,483
--------------
THRIFTS & MORTGAGE FINANCE
-- 1.1%
1,853,350 Capitol Federal Financial, Inc. 23,667,279
1,422,370 Northwest Bancshares, Inc. 24,094,948
--------------
47,762,227
--------------
TOBACCO -- 1.6%
479,698 Altria Group, Inc. 23,692,284
724,282 British American Tobacco
PLC, ADR 23,075,625
345,836 Philip Morris International, Inc. 23,088,011
--------------
69,855,920
--------------
TRADING COMPANIES &
DISTRIBUTORS -- 1.6%
462,218 Fastenal Co. 24,169,379
309,856 MSC Industrial Direct Co., Inc.,
Class A 23,834,123
172,068 Watsco, Inc. 23,941,542
--------------
71,945,044
--------------
WATER UTILITIES -- 0.6%
704,592 Aqua America, Inc. 24,090,000
--------------
TOTAL INVESTMENTS -- 99.9% 4,371,308,665
(Cost $4,477,103,469) (a)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 3,174,229
--------------
NET ASSETS -- 100.0% $4,374,482,894
==============
(a) Aggregate cost for federal income tax purposes is $4,585,534,336. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$151,807,970 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$366,033,641. The net unrealized depreciation was $214,225,671.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 4,371,308,665 $ -- $ --
=====================================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 41
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.8%
BANKS -- 1.0%
7,552 Popular, Inc. $ 356,605
--------------
BEVERAGES -- 0.9%
7,425 Coca-Cola European Partners PLC 340,436
--------------
CAPITAL MARKETS -- 1.0%
1,914 CME Group, Inc. 360,062
--------------
CHEMICALS -- 7.0%
2,574 Air Products and Chemicals, Inc. 411,969
3,815 Balchem Corp. 298,905
9,264 CF Industries Holdings, Inc. 403,077
2,592 Ecolab, Inc. 381,931
2,706 International Flavors & Fragrances,
Inc. 363,334
12,229 Mosaic (The) Co. 357,209
2,011 Quaker Chemical Corp. 357,375
--------------
2,573,800
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.8%
6,289 Clean Harbors, Inc. (a) 310,362
4,889 Republic Services, Inc. 352,448
4,040 Waste Management, Inc. 359,520
--------------
1,022,330
--------------
COMMUNICATIONS EQUIPMENT
-- 2.2%
8,957 Cisco Systems, Inc. 388,107
3,519 Motorola Solutions, Inc. 404,825
--------------
792,932
--------------
CONTAINERS & PACKAGING -- 2.0%
7,984 Ball Corp. 367,105
6,710 Sonoco Products Co. 356,502
--------------
723,607
--------------
DIVERSIFIED CONSUMER SERVICES
-- 2.1%
3,458 Bright Horizons Family Solutions,
Inc. (a) 385,394
9,189 Service Corp. International 369,949
--------------
755,343
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.0%
10,349 TELUS Corp. 342,966
6,898 Verizon Communications, Inc. 387,805
--------------
730,771
--------------
ELECTRIC UTILITIES -- 7.0%
8,205 Alliant Energy Corp. 346,661
5,374 American Electric Power Co., Inc. 401,653
5,335 Eversource Energy 346,988
10,856 Hawaiian Electric Industries, Inc. 397,547
4,126 IDACORP, Inc. 383,966
3,996 Pinnacle West Capital Corp. 340,459
7,652 Portland General Electric Co. 350,844
--------------
2,568,118
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 2.9%
5,099 CDW Corp. $ 413,274
4,096 Zebra Technologies Corp.,
Class A (a) 652,206
--------------
1,065,480
--------------
ENTERTAINMENT -- 2.2%
11,409 Marcus (The) Corp. 450,655
3,369 Walt Disney (The) Co. 369,411
--------------
820,066
--------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 4.1%
2,202 American Tower Corp. 348,334
3,766 Crown Castle International Corp. 409,101
1,411 Essex Property Trust, Inc. 345,991
2,258 Simon Property Group, Inc. 379,322
--------------
1,482,748
--------------
FOOD & STAPLES RETAILING -- 1.0%
1,860 Costco Wholesale Corp. 378,900
--------------
FOOD PRODUCTS -- 5.0%
7,791 Archer-Daniels-Midland Co. 319,197
3,271 Hershey (The) Co. 350,586
8,930 Hormel Foods Corp. 381,132
2,199 Lancaster Colony Corp. 388,915
2,820 McCormick & Co., Inc. 392,657
--------------
1,832,487
--------------
GAS UTILITIES -- 1.0%
4,897 Southwest Gas Holdings, Inc. 374,620
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.2%
5,932 Abbott Laboratories 429,062
3,606 STERIS PLC 385,301
--------------
814,363
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 4.6%
1,382 Anthem, Inc. 362,955
5,881 Encompass Health Corp. 362,858
4,557 HCA Healthcare, Inc. 567,118
10,469 Premier, Inc., Class A (a) 391,017
--------------
1,683,948
--------------
HOTELS, RESTAURANTS & LEISURE
-- 2.0%
3,701 Darden Restaurants, Inc. 369,582
5,707 Dunkin' Brands Group, Inc. 365,933
--------------
735,515
--------------
HOUSEHOLD DURABLES -- 2.1%
5,584 Garmin Ltd. 353,579
3,088 Helen of Troy Ltd. (a) 405,084
--------------
758,663
--------------
HOUSEHOLD PRODUCTS -- 2.3%
6,218 Church & Dwight Co., Inc. 408,896
2,293 WD-40 Co. 420,215
--------------
829,111
--------------
Page 42 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INSURANCE -- 5.1%
13,081 Brown & Brown, Inc. $ 360,512
4,686 Cincinnati Financial Corp. 362,790
3,061 Erie Indemnity Co., Class A 408,062
5,236 RLI Corp. 361,232
5,209 W.R. Berkley Corp. 384,997
--------------
1,877,593
--------------
IT SERVICES -- 8.0%
2,773 Automatic Data Processing, Inc. 363,596
7,714 Booz Allen Hamilton Holding
Corp. 347,670
2,304 CACI International, Inc.,
Class A (a) 331,845
5,607 Fiserv, Inc. (a) 412,058
2,748 Gartner, Inc. (a) 351,304
2,476 Jack Henry & Associates, Inc. 313,264
5,967 Paychex, Inc. 388,750
2,657 VeriSign, Inc. (a) 394,007
--------------
2,902,494
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 2.1%
3,414 IQVIA Holdings, Inc. (a) 396,605
1,622 Thermo Fisher Scientific, Inc. 362,987
--------------
759,592
--------------
MACHINERY -- 1.0%
8,306 Donaldson Co., Inc. 360,397
--------------
MEDIA -- 1.0%
427 Cable One, Inc. 350,183
--------------
MULTI-UTILITIES -- 2.3%
7,117 Ameren Corp. 464,242
3,393 DTE Energy Co. 374,248
--------------
838,490
--------------
OIL, GAS & CONSUMABLE FUELS
-- 9.0%
19,376 Alliance Resource Partners,
L.P. (b) 335,980
8,833 BP PLC, ADR 334,947
11,392 Cheniere Energy Partners, L.P. (b) 411,251
5,888 ConocoPhillips 367,117
15,538 Enterprise Products Partners,
L.P. (b) 382,079
5,303 Exxon Mobil Corp. 361,612
13,539 Imperial Oil Ltd. 342,808
8,504 Phillips 66 Partners, L.P. (b) 358,103
7,455 TOTAL S.A., ADR 389,002
--------------
3,282,899
--------------
PHARMACEUTICALS -- 4.4%
3,632 Eli Lilly & Co. 420,295
2,752 Johnson & Johnson 355,146
5,411 Merck & Co., Inc. 413,454
9,418 Pfizer, Inc. 411,096
--------------
1,599,991
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
PROFESSIONAL SERVICES -- 1.0%
3,266 Verisk Analytics, Inc. (a) $ 356,125
--------------
SOFTWARE -- 3.0%
3,395 Check Point Software Technologies
Ltd. (a) 348,497
3,721 Citrix Systems, Inc. 381,254
3,592 Microsoft Corp. 364,839
--------------
1,094,590
--------------
SPECIALTY RETAIL -- 3.4%
2,727 Burlington Stores, Inc. (a) 443,601
1,163 O'Reilly Automotive, Inc. (a) 400,456
8,851 TJX (The) Cos., Inc. 395,994
--------------
1,240,051
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 2.1%
8,208 China Mobile Ltd., ADR 393,984
8,239 Shenandoah Telecommunications
Co. 364,576
--------------
758,560
--------------
TOTAL INVESTMENTS -- 99.8% 36,420,870
(Cost $37,798,359) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 85,337
--------------
NET ASSETS -- 100.0% $ 36,506,207
==============
(a) Non-income producing security.
(b) Security is a Master Limited Partnership ("MLP").
(c) Aggregate cost for federal income tax purposes is $37,801,658. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$431,605 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$1,812,393. The net unrealized depreciation was $1,380,788.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as
of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the
Notes to Financial Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 36,420,870 $ -- $ --
=====================================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 43
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2018
FIRST TRUST FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR US EQUITY
MICROCAP DIVIDEND LEADERS OPPORTUNITIES
INDEX FUND INDEX FUND ETF
(FDM) (FDL) (FPX)
---------------- ----------------- ----------------
ASSETS:
Investments, at value............................................... $ 140,483,625 $ 1,383,523,901 $ 933,780,040
Cash................................................................ 716,708 222,899 1,861,875
Receivables:
Investment securities sold.................................... -- 664,711 9,252,073
Capital shares sold........................................... 18,229,591 5,433,236 --
Dividends..................................................... 370,913 3,767,609 546,117
Securities lending income..................................... 8,403 -- 14,532
Reclaims...................................................... -- -- --
Prepaid expenses.................................................... 1,173 12,159 9,528
-------------- --------------- --------------
Total Assets.................................................. 159,810,413 1,393,624,515 945,464,165
-------------- --------------- --------------
LIABILITIES:
Due to custodian.................................................... -- -- --
Due to securities lending agent..................................... 3,290 -- 24,674
Payables:
Investment securities purchased............................... 18,122,589 6,094,225 1,985,719
Capital shares redeemed....................................... -- -- 9,246,721
Collateral for securities on loan............................. 2,781,006 -- 20,853,085
Investment advisory fees...................................... 32,714 350,435 333,026
Audit and tax fees............................................ 22,925 22,925 22,925
Licensing fees................................................ 12,481 328,353 253,060
Shareholder reporting fees.................................... 11,229 56,233 48,081
Trustees' fees................................................ 55 29 93
Other liabilities................................................... 47,312 289,217 218,121
-------------- --------------- --------------
Total Liabilities............................................. 21,033,601 7,141,417 32,985,505
-------------- --------------- --------------
NET ASSETS.......................................................... $ 138,776,812 $ 1,386,483,098 $ 912,478,660
============== =============== ==============
NET ASSETS CONSIST OF:
Paid-in capital..................................................... $ 182,203,124 $ 1,559,310,016 $ 980,728,544
Par value........................................................... 34,050 509,000 147,000
Accumulated distributable earnings (loss)........................... (43,460,362) (173,335,918) (68,396,884)
-------------- --------------- --------------
NET ASSETS.......................................................... $ 138,776,812 $ 1,386,483,098 $ 912,478,660
============== =============== ==============
NET ASSET VALUE, per share.......................................... $ 40.76 $ 27.24 $ 62.07
============== =============== ==============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)........................... 3,405,000 50,900,002 14,700,002
============== =============== ==============
Investments, at cost................................................ $ 166,152,033 $ 1,450,286,273 $ 890,534,956
============== =============== ==============
Securities on loan, at value........................................ $ 2,727,760 $ -- $ 20,126,810
============== =============== ==============
Page 44 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NYSE ARCA DOW JONES CAPITAL VALUE LINE(R) VALUE LINE(R) 100
BIOTECHNOLOGY INTERNET STRENGTH DIVIDEND EXCHANGE-TRADED
INDEX FUND INDEX FUND ETF INDEX FUND FUND
(FBT) (FDN) (FTCS) (FVD) (FVL)
---------------- ---------------- ---------------- ---------------- ----------------
$2,381,489,314 $7,121,593,686 $1,375,143,158 $4,371,308,665 $ 36,420,870
2,838,303 -- 573,212 -- 136,580
18,214,403 15,464,957 -- -- --
-- 5,832,675 26,424,841 34,764,240 --
-- 20,874 1,371,246 9,357,082 39,827
43,199 41,189 -- -- --
78,704 -- -- 449,455 5,481
27,446 73,787 10,199 36,747 413
-------------- -------------- -------------- -------------- --------------
2,402,691,369 7,143,027,168 1,403,522,656 4,415,916,189 36,603,171
-------------- -------------- -------------- -------------- --------------
-- -- -- 667,858 --
46,893 117,364 -- -- --
-- 8,730,811 26,407,636 36,295,048 --
18,217,714 11,573,736 -- -- --
39,632,215 99,190,991 -- -- --
864,590 2,479,066 568,544 1,793,153 9,657
22,925 22,925 22,925 22,925 22,925
988,077 2,571,640 32,078 1,697,433 17,123
65,984 287,169 41,692 148,001 7,895
-- 556 -- -- 57
640,161 1,245,695 318,684 808,877 39,307
-------------- -------------- -------------- -------------- --------------
60,478,559 126,219,953 27,391,559 41,433,295 96,964
-------------- -------------- -------------- -------------- --------------
$2,342,212,810 $7,016,807,215 $1,376,131,097 $4,374,482,894 $ 36,506,207
============== ============== ============== ============== ==============
$3,043,128,872 $7,074,006,003 $1,484,722,296 $4,656,747,215 $ 51,276,409
188,500 601,500 285,000 1,504,880 19,400
(701,104,562) (57,800,288) (108,876,199) (283,769,201) (14,789,602)
-------------- -------------- -------------- -------------- --------------
$2,342,212,810 $7,016,807,215 $1,376,131,097 $4,374,482,894 $ 36,506,207
============== ============== ============== ============== ==============
$ 124.26 $ 116.66 $ 48.29 $ 29.07 $ 18.82
============== ============== ============== ============== ==============
18,850,002 60,150,002 28,500,002 150,487,986 1,939,982
============== ============== ============== ============== ==============
$2,867,208,443 $6,823,784,634 $1,435,374,826 $4,477,103,469 $ 37,798,359
============== ============== ============== ============== ==============
$ 37,090,302 $ 92,071,747 $ -- $ -- $ --
============== ============== ============== ============== ==============
See Notes to Financial Statements Page 45
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2018
FIRST TRUST FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR US EQUITY
MICROCAP DIVIDEND LEADERS OPPORTUNITIES
INDEX FUND INDEX FUND ETF
(FDM) (FDL) (FPX)
---------------- ----------------- ----------------
INVESTMENT INCOME:
Dividends........................................................... $ 2,252,275 $ 62,498,636 $ 13,521,753
Securities lending income (net of fees)............................. 83,480 -- 1,134,116
Foreign withholding tax............................................. -- -- (14,199)
-------------- --------------- --------------
Total investment income....................................... 2,335,755 62,498,636 14,641,670
-------------- --------------- --------------
EXPENSES:
Investment advisory fees............................................ 617,813 4,514,600 4,422,222
Licensing fees...................................................... 74,706 1,360,097 1,105,555
Accounting and administration fees.................................. 68,201 703,443 543,747
Custodian fees...................................................... 67,457 151,402 145,845
Audit and tax fees.................................................. 23,131 23,131 23,131
Shareholder reporting fees.......................................... 17,749 103,292 93,888
Trustees' fees and expenses......................................... 7,110 8,790 8,369
Registration and filing fees........................................ 6,841 -- 14,311
Listing fees........................................................ 6,239 11,239 4,176
Transfer agent fees................................................. 6,179 62,622 52,556
Legal fees.......................................................... 4,308 48,931 38,710
Other expenses...................................................... 4,429 40,707 24,897
-------------- --------------- --------------
Total expenses................................................ 904,163 7,028,254 6,477,407
Less fees waived and expenses reimbursed by the investment
advisor.................................................... (162,786) (256,355) --
-------------- --------------- --------------
Net expenses.................................................. 741,377 6,771,899 6,477,407
-------------- --------------- --------------
NET INVESTMENT INCOME (LOSS)........................................ 1,594,378 55,726,737 8,164,263
-------------- --------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................... (3,519,897) (63,665,040) (30,919,280)
In-kind redemptions........................................... 16,752,209 127,729,596 74,262,668
Foreign currency transactions................................. -- -- --
-------------- --------------- --------------
Net realized gain (loss)............................................ 13,232,312 64,064,556 43,343,388
-------------- --------------- --------------
Net change in unrealized appreciation (depreciation) on:
Investments................................................... (35,961,521) (213,401,301) (144,486,852)
Foreign currency translation.................................. -- -- --
-------------- --------------- --------------
Net change in unrealized appreciation (depreciation)................ (35,961,521) (213,401,301) (144,486,852)
-------------- --------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................. (22,729,209) (149,336,745) (101,143,464)
-------------- --------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................................. $ (21,134,831) $ (93,610,008) $ (92,979,201)
============== =============== ==============
Page 46 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NYSE ARCA DOW JONES CAPITAL VALUE LINE(R) VALUE LINE(R) 100
BIOTECHNOLOGY INTERNET STRENGTH DIVIDEND EXCHANGE-TRADED
INDEX FUND INDEX FUND ETF INDEX FUND FUND
(FBT) (FDN) (FTCS) (FVD) (FVL)
---------------- ---------------- ---------------- ---------------- ----------------
$ 6,005,487 $ 18,787,369 $ 18,828,681 $ 133,982,399 $ 647,686
1,118,073 1,110,405 -- -- --
(268,387) -- -- (2,253,411) (6,363)
-------------- -------------- -------------- -------------- --------------
6,855,173 19,897,774 18,828,681 131,728,988 641,323
-------------- -------------- -------------- -------------- --------------
7,821,079 31,572,428 4,943,539 21,218,970 254,453
1,564,217 4,753,370 106,273 6,418,893 80,417
875,000 2,502,288 486,853 1,625,331 26,950
241,956 874,714 119,995 416,834 17,522
23,131 23,131 23,131 23,131 23,131
131,959 600,837 84,900 306,021 11,027
9,260 17,323 8,130 12,149 7,021
201,972 206,944 89,663 60,353 --
6,240 11,239 758 29,173 22,000
73,888 222,346 47,234 131,095 2,545
67,193 289,184 33,387 139,640 1,780
34,347 131,366 16,101 91,105 4,358
-------------- -------------- -------------- -------------- --------------
11,050,242 41,205,170 5,959,964 30,472,695 451,204
-- -- -- (768,292) (94,969)
-------------- -------------- -------------- -------------- --------------
11,050,242 41,205,170 5,959,964 29,704,403 356,235
-------------- -------------- -------------- -------------- --------------
(4,195,069) (21,307,396) 12,868,717 102,024,585 285,088
-------------- -------------- -------------- -------------- --------------
(15,734,651) (154,734,379) (33,678,343) (76,510,741) (9,694,117)
231,851,897 1,089,289,048 77,942,429 272,443,971 2,036,354
-- -- -- (9,321) --
-------------- -------------- -------------- -------------- --------------
216,117,246 934,554,669 44,264,086 195,923,909 (7,657,763)
-------------- -------------- -------------- -------------- --------------
(565,874,934) (796,446,658) (141,037,098) (464,992,294) (2,046,617)
-- -- -- (1,285) (118)
-------------- -------------- -------------- -------------- --------------
(565,874,934) (796,446,658) (141,037,098) (464,993,579) (2,046,735)
-------------- -------------- -------------- -------------- --------------
(349,757,688) 138,108,011 (96,773,012) (269,069,670) (9,704,498)
-------------- -------------- -------------- -------------- --------------
$ (353,952,757) $ 116,800,615 $ (83,904,295) $ (167,045,085) $ (9,419,410)
============== ============== ============== ============== ==============
See Notes to Financial Statements Page 47
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR
MICROCAP DIVIDEND LEADERS
INDEX FUND INDEX FUND
(FDM) (FDL)
------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/2018 12/31/2017 12/31/2018 12/31/2017
-------------- -------------- -------------- --------------
OPERATIONS:
Net investment income (loss)................................ $ 1,594,378 $ 812,905 $ 55,726,737 $ 55,003,112
Net realized gain (loss).................................... 13,232,312 9,434,698 64,064,556 159,135,760
Net change in unrealized appreciation (depreciation)........ (35,961,521) (4,670,191) (213,401,301) (19,118,314)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations.......................................... (21,134,831) 5,577,412 (93,610,008) 195,020,558
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations....................................... (1,417,591) (55,170,342)
-------------- --------------
Net investment income....................................... (908,212) (56,593,922)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................... 140,816,685 20,308,722 387,762,741 664,561,022
Cost of shares redeemed..................................... (76,499,080) (44,741,959) (571,798,626) (862,152,243)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions............................ 64,317,605 (24,433,237) (184,035,885) (197,591,221)
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets..................... 41,765,183 (19,764,037) (332,816,235) (59,164,585)
NET ASSETS:
Beginning of period......................................... 97,011,629 116,775,666 1,719,299,333 1,778,463,918
-------------- -------------- -------------- --------------
End of period............................................... $ 138,776,812 $ 97,011,629 $1,386,483,098 $1,719,299,333
============== ============== ============== ==============
Accumulated net investment income (loss)
at end of period......................................... $ -- $ (91,063)
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period..................... 2,055,000 2,655,000 57,200,002 64,100,002
Shares sold................................................. 2,850,000 450,000 13,450,000 22,900,000
Shares redeemed............................................. (1,500,000) (1,050,000) (19,750,000) (29,800,000)
-------------- -------------- -------------- --------------
Shares outstanding, end of period........................... 3,405,000 2,055,000 50,900,002 57,200,002
============== ============== ============== ==============
Page 48 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
US EQUITY NYSE ARCA DOW JONES
OPPORTUNITIES BIOTECHNOLOGY INTERNET
ETF INDEX FUND INDEX FUND
(FPX) (FBT) (FDN)
----------------------------- ------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/2018 12/31/2017 12/31/2018 12/31/2017 12/31/2018 12/31/2017
------------- ------------- -------------- -------------- -------------- --------------
$ 8,164,263 $ 5,726,923 $ (4,195,069) $ (806,724) $ (21,307,396) $ (14,212,652)
43,343,388 55,915,695 216,117,246 32,801,434 934,554,669 493,372,496
(144,486,852) 130,247,878 (565,874,934) 267,489,817 (796,446,658) 912,068,438
------------- ------------- -------------- -------------- -------------- --------------
(92,979,201) 191,890,496 (353,952,757) 299,484,527 116,800,615 1,391,228,282
------------- ------------- -------------- -------------- -------------- --------------
(8,618,366) -- --
------------- -------------- --------------
(6,231,361) -- --
------------- -------------- --------------
314,592,694 442,823,110 2,320,112,972 186,132,148 4,019,193,398 2,369,979,673
(282,248,146) (260,774,732) (831,758,091) (82,190,788) (2,610,007,206) (1,757,121,476)
------------- ------------- -------------- -------------- -------------- --------------
32,344,548 182,048,378 1,488,354,881 103,941,360 1,409,186,192 612,858,197
------------- ------------- -------------- -------------- -------------- --------------
(69,253,019) 367,707,513 1,134,402,124 403,425,887 1,525,986,807 2,004,086,479
981,731,679 614,024,166 1,207,810,686 804,384,799 5,490,820,408 3,486,733,929
------------- ------------- -------------- -------------- -------------- --------------
$ 912,478,660 $ 981,731,679 $2,342,212,810 $1,207,810,686 $7,016,807,215 $5,490,820,408
============= ============= ============== ============== ============== ==============
$ -- $ -- $ --
============= ============== ==============
14,400,002 11,350,002 9,700,002 8,850,002 50,000,002 43,700,002
4,400,000 7,250,000 15,450,000 1,600,000 30,750,000 24,150,000
(4,100,000) (4,200,000) (6,300,000) (750,000) (20,600,000) (17,850,000)
------------- ------------- -------------- -------------- -------------- --------------
14,700,002 14,400,002 18,850,002 9,700,002 60,150,002 50,000,002
============= ============= ============== ============== ============== ==============
See Notes to Financial Statements Page 49
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST FIRST TRUST
CAPITAL STRENGTH VALUE LINE(R) DIVIDEND
ETF INDEX FUND
(FTCS) (FVD)
------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/2018 12/31/2017 12/31/2018 12/31/2017
-------------- -------------- -------------- --------------
OPERATIONS:
Net investment income (loss)................................ $ 12,868,717 $ 5,948,746 $ 102,024,585 $ 79,934,330
Net realized gain (loss).................................... 44,264,086 36,081,254 195,923,909 187,060,882
Net change in unrealized appreciation (depreciation)........ (141,037,098) 63,244,829 (464,993,579) 160,582,654
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations.......................................... (83,904,295) 105,274,829 (167,045,085) 427,577,866
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations....................................... (13,023,451) (102,072,326)
-------------- --------------
Net investment income....................................... (5,933,462) (82,356,171)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................... 1,360,944,668 517,169,745 2,031,003,840 2,713,663,936
Cost of shares redeemed..................................... (511,985,305) (312,601,674) (1,582,233,890) (1,757,036,859)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions............................ 848,959,363 204,568,071 448,769,950 956,627,077
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets..................... 752,031,617 303,909,438 179,652,539 1,301,848,772
NET ASSETS:
Beginning of period......................................... 624,099,480 320,190,042 4,194,830,355 2,892,981,583
-------------- -------------- -------------- --------------
End of period............................................... $1,376,131,097 $ 624,099,480 $4,374,482,894 $4,194,830,355
============== ============== ============== ==============
Accumulated net investment income (loss)
at end of period......................................... $ 15,284 $ --
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period..................... 12,250,002 7,850,002 136,037,986 103,237,986
Shares sold................................................. 26,050,000 11,250,000 66,050,000 92,200,000
Shares redeemed............................................. (9,800,000) (6,850,000) (51,600,000) (59,400,000)
-------------- -------------- -------------- --------------
Shares outstanding, end of period........................... 28,500,002 12,250,002 150,487,986 136,037,986
============== ============== ============== ==============
Page 50 See Notes to Financial Statements
FIRST TRUST
VALUE LINE(R) 100
EXCHANGE-TRADED FUND
(FVL)
-----------------------------
Year Ended Year Ended
12/31/2018 12/31/2017
------------- -------------
$ 285,088 $ 392,778
(7,657,763) 3,981,719
(2,046,735) 364,913
------------- -------------
(9,419,410) 4,739,410
------------- -------------
(292,079)
-------------
(463,929)
-------------
39,520,882 39,249,030
(49,060,514) (40,410,393)
------------- -------------
(9,539,632) (1,161,363)
------------- -------------
(19,251,121) 3,114,118
55,757,328 52,643,210
------------- -------------
$ 36,506,207 $ 55,757,328
============= =============
$ --
=============
2,389,982 2,439,982
1,650,000 1,700,000
(2,100,000) (1,750,000)
------------- -------------
1,939,982 2,389,982
============= =============
See Notes to Financial Statements Page 51
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 47.21 $ 43.98 $ 32.92 $ 33.21 $ 32.47
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.56 0.42 0.49 0.49 0.23
Net realized and unrealized gain (loss) (6.50) 3.27 11.07 (0.30) 0.76
------------ ------------ ------------ ------------ ------------
Total from investment operations (5.94) 3.69 11.56 0.19 0.99
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.51) (0.46) (0.50) (0.48) (0.25)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 40.76 $ 47.21 $ 43.98 $ 32.92 $ 33.21
============ ============ ============ ============ ============
TOTAL RETURN (a) (12.68)% 8.44% 35.45% 0.55% 3.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 138,777 $ 97,012 $ 116,776 $ 49,551 $ 51,648
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.73% 0.71% 0.75% 0.73% 0.70%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.29% 0.89% 1.52% 1.46% 0.71%
Portfolio turnover rate (b) 75% 55% 48% 63% 49%
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 30.06 $ 27.75 $ 23.69 $ 23.94 $ 21.93
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.09 0.93 0.82 0.86 0.80
Net realized and unrealized gain (loss) (2.83) 2.34 4.05 (0.25) 2.01
------------ ------------ ------------ ------------ ------------
Total from investment operations (1.74) 3.27 4.87 0.61 2.81
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.08) (0.96) (0.81) (0.86) (0.80)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 27.24 $ 30.06 $ 27.75 $ 23.69 $ 23.94
============ ============ ============ ============ ============
TOTAL RETURN (a) (5.87)% 11.93% 20.72% 2.73% 12.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,386,483 $ 1,719,299 $ 1,778,464 $ 875,294 $ 985,151
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.47% 0.47% 0.48% 0.48% 0.49%
Ratio of net expenses to average net assets 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of net investment income (loss) to
average net assets 3.70% 3.18% 3.27% 3.59% 3.55%
Portfolio turnover rate (b) 39% 43% 50% 61% 40%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 52 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 68.18 $ 54.10 $ 51.11 $ 50.32 $ 45.34
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.52 0.43 0.31 0.31 0.41
Net realized and unrealized gain (loss) (6.08) 14.12 3.10 0.80 4.97
------------ ------------ ------------ ------------ ------------
Total from investment operations (5.56) 14.55 3.41 1.11 5.38
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.55) (0.47) (0.42) (0.32) (0.40)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 62.07 $ 68.18 $ 54.10 $ 51.11 $ 50.32
============ ============ ============ ============ ============
TOTAL RETURN (a) (8.22)% 26.96% 6.70% 2.19% 11.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 912,479 $ 981,732 $ 614,024 $ 789,693 $ 535,943
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.59% 0.59% 0.60% 0.60% 0.60%
Ratio of net expenses to average net assets 0.59% 0.59% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.74% 0.71% 0.58% 0.61% 0.89%
Portfolio turnover rate (b) 57% 31% 41% 41% 46%
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 124.52 $ 90.89 $ 113.06 $ 101.99 $ 69.12
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.22) (0.08) (0.32) 0.09 0.04
Net realized and unrealized gain (loss) (0.04) 33.71 (21.85) 11.11 32.88
------------ ------------ ------------ ------------ ------------
Total from investment operations (0.26) 33.63 (22.17) 11.20 32.92
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- -- -- (0.13) (0.05)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 124.26 $ 124.52 $ 90.89 $ 113.06 $ 101.99
============ ============ ============ ============ ============
TOTAL RETURN (a) (0.21)% 36.99% (19.60)% 10.97% 47.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2,342,213 $ 1,207,811 $ 804,385 $ 3,437,024 $ 2,126,581
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.57% 0.56% 0.56% 0.55% 0.58%
Ratio of net expenses to average net assets 0.57% 0.56% 0.56% 0.55% 0.58%
Ratio of net investment income (loss) to
average net assets (0.21)% (0.08)% (0.27)% 0.08% 0.06%
Portfolio turnover rate (b) 37% 36% 42% 30% 58%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 53
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 109.82 $ 79.79 $ 74.64 $ 61.30 $ 59.84
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.35) (0.28) (0.27) (0.14) (0.08)
Net realized and unrealized gain (loss) 7.19 30.31 5.42 13.48 1.54
------------ ------------ ------------ ------------ ------------
Total from investment operations 6.84 30.03 5.15 13.34 1.46
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 116.66 $ 109.82 $ 79.79 $ 74.64 $ 61.30
============ ============ ============ ============ ============
TOTAL RETURN (a) 6.23% 37.62% 6.91% 21.77% 2.42%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 7,016,807 $ 5,490,820 $ 3,486,734 $ 4,914,821 $ 1,976,793
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.52% 0.53% 0.54% 0.54% 0.54%
Ratio of net expenses to average net assets 0.52% 0.53% 0.54% 0.54% 0.54%
Ratio of net investment income (loss) to
average net assets (0.27)% (0.32)% (0.35)% (0.29)% (0.13)%
Portfolio turnover rate (b) 21% 22% 21% 28% 27%
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 50.95 $ 40.79 $ 38.12 $ 38.08 $ 33.70
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.60 0.59 0.58 0.57 0.72
Net realized and unrealized gain (loss) (2.65) 10.16 2.67 0.04 4.43
------------ ------------ ------------ ------------ ------------
Total from investment operations (2.05) 10.75 3.25 0.61 5.15
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.61) (0.59) (0.58) (0.57) (0.77)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 48.29 $ 50.95 $ 40.79 $ 38.12 $ 38.08
============ ============ ============ ============ ============
TOTAL RETURN (a) (4.09)% 26.49% 8.57% 1.64% 15.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,376,131 $ 624,099 $ 320,190 $ 165,815 $ 85,686
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.60% 0.61% 0.64% 0.65% 0.66%
Ratio of net expenses to average net assets 0.60% 0.61% 0.64% 0.65% 0.65%
Ratio of net investment income (loss) to
average net assets 1.30% 1.33% 1.55% 1.59% 2.07%
Portfolio turnover rate (b) 117% 85% 85% 96% 89%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 54 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 30.84 $ 28.02 $ 23.86 $ 24.13 $ 21.36
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.73 0.63 0.56 0.55 0.58
Net realized and unrealized gain (loss) (1.77) 2.84 4.17 (0.26) 2.78
------------ ------------ ------------ ------------ ------------
Total from investment operations (1.04) 3.47 4.73 0.29 3.36
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.73) (0.65) (0.57) (0.56) (0.59)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 29.07 $ 30.84 $ 28.02 $ 23.86 $ 24.13
============ ============ ============ ============ ============
TOTAL RETURN (a) (3.44)% 12.48% 19.94% 1.26% 15.94%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 4,374,483 $ 4,194,830 $ 2,892,982 $ 1,188,031 $ 1,089,299
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.72% 0.72% 0.73% 0.74% 0.75%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 2.40% 2.19% 2.31% 2.40% 2.63%
Portfolio turnover rate (b) 58% 50% 60% 82% 63%
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 23.33 $ 21.58 $ 19.71 $ 20.41 $ 18.44
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.13 0.16 0.12 0.07 0.11
Net realized and unrealized gain (loss) (4.51) 1.78 1.87 (0.71) (c) 1.98
------------ ------------ ------------ ------------ ------------
Total from investment operations (4.38) 1.94 1.99 (0.64) 2.09
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.13) (0.19) (0.12) (0.06) (0.12)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 18.82 $ 23.33 $ 21.58 $ 19.71 $ 20.41
============ ============ ============ ============ ============
TOTAL RETURN (a) (18.83)% 9.05% 10.14% (3.13)% (c) 11.33%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 36,506 $ 55,757 $ 52,643 $ 53,013 $ 60,008
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.89% 0.85% 0.87% 0.84% 0.84%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 0.56% 0.73% 0.59% 0.32% 0.57%
Portfolio turnover rate (b) 424% 466% 491% 404% 325%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(c) The Fund received a payment from the Advisor in the amount of $95,996 in
connection with a trade error, which represents $0.03 per share. Since the
Advisor reimbursed the Fund, there was no effect on the Fund's total
return.
See Notes to Financial Statements Page 55
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
1. ORGANIZATION
First Trust Exchange-Traded Fund (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on August 8,
2003, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of twenty-one exchange-traded funds. This report
covers the eight funds listed below:
First Trust Dow Jones Select MicroCap Index Fund - (NYSE Arca, Inc. ("NYSE
Arca") ticker "FDM")
First Trust Morningstar Dividend Leaders Index Fund - (NYSE Arca ticker
"FDL")
First Trust US Equity Opportunities ETF - (NYSE Arca ticker "FPX")
First Trust NYSE Arca Biotechnology Index Fund - (NYSE Arca ticker "FBT")
First Trust Dow Jones Internet Index Fund - (NYSE Arca ticker "FDN")
First Trust Capital Strength ETF - (The Nasdaq Stock Market LLC ("Nasdaq")
ticker "FTCS")
First Trust Value Line Dividend Index Fund - (NYSE Arca ticker "FVD")
First Trust Value Line(R) 100 Exchange-Traded Fund - (NYSE Arca ticker
"FVL")
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual
funds, each Fund issues and redeems shares on a continuous basis, at net asset
value ("NAV"), only in large specified blocks consisting of 50,000 shares called
a "Creation Unit." Creation Units are generally issued and redeemed in-kind for
securities in which a Fund invests and, in certain circumstances, for cash, and
only to and from broker-dealers and large institutional investors that have
entered into participation agreements. Except when aggregated in Creation Units,
each Fund's shares are not redeemable securities. The investment objective of
each Fund is to seek investment results that correspond generally to the price
and yield (before the Fund's fees and expenses) of the following indices:
FUND INDEX
First Trust Dow Jones Select MicroCap Index Fund Dow Jones Select MicroCap Index(SM)
First Trust Morningstar Dividend Leaders Index Fund Morningstar(R) Dividend Leaders Index(SM)
First Trust US Equity Opportunities ETF IPOX(R)-100 U.S. Index
First Trust NYSE Arca Biotechnology Index Fund NYSE Arca Biotechnology Index(SM)
First Trust Dow Jones Internet Index Fund Dow Jones Internet Composite Index(SM)
First Trust Capital Strength ETF The Capital Strength Index(SM)
First Trust Value Line(R) Dividend Index Fund Value Line(R) Dividend Index
First Trust Value Line(R) 100 Exchange-Traded Fund Value Line(R) 100 Index
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the Funds in the preparation of the
financial statements. The preparation of the financial statements in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP") requires management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. Each Fund's investments are valued as
follows:
Page 56
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
Common stocks and other equity securities listed on any national or
foreign exchange (excluding Nasdaq and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Overnight repurchase agreements are valued at amortized cost when it
represents the best estimate of fair value.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
In addition, differences between the prices used to calculate a Fund's NAV and
the prices used by such Fund's corresponding index could result in a difference
between a Fund's performance and the performance of its underlying index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
Page 57
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of December 31, 2018, is
included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Withholding taxes and tax reclaims on foreign dividends have been provided for
in accordance with each Fund's understanding of the applicable country's tax
rules and rates.
Distributions received from a Fund's investments in real estate investment trust
("REITs") may be comprised of return of capital, capital gains and income. The
actual character of the amounts received during the year is not known until
after the REITs' fiscal year end. A Fund records the character of distributions
received from REITs during the year based on estimates available. The
characterization of distributions received by a Fund may be subsequently revised
based on information received from the REITs after their tax reporting periods
conclude.
C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES
Offsetting Assets and Liabilities require entities to disclose both gross and
net information about instruments and transactions eligible for offset on the
Statements of Assets and Liabilities, and disclose instruments and transactions
subject to master netting or similar agreements. These disclosure requirements
are intended to help investors and other financial statement users better assess
the effect or potential effect of offsetting arrangements on a fund's financial
position. The transactions subject to offsetting disclosures are derivative
instruments, repurchase agreements and reverse repurchase agreements, and
securities borrowing and securities lending transactions.
This disclosure, if applicable, is included within each Fund's Portfolio of
Investments under the heading "Offsetting Assets and Liabilities." For financial
reporting purposes, the Funds do not offset financial assets and financial
liabilities that are subject to master netting arrangements ("MNAs") or similar
agreements on the Statements of Assets and Liabilities. MNAs provide the right,
in the event of default (including bankruptcy and insolvency), for the
non-defaulting counterparty to liquidate the collateral and calculate the net
exposure to the defaulting party or request additional collateral.
D. SECURITIES LENDING
The Funds may lend securities representing up to 33 1/3% of the value of their
total assets to broker-dealers, banks and other institutions to generate
additional income. When a Fund loans its portfolio securities, it will receive,
at the inception of each loan, collateral equal to at least 102% (for domestic
securities) or 105% (for international securities) of the market value of the
loaned securities. The collateral amount is valued at the beginning of each
business day and is compared to the market value of the loaned securities from
the prior business day to determine if additional collateral is required. If
additional collateral is required, a request is sent to the borrower. Securities
lending involves the risk that the Fund may lose money because the borrower of
the Fund's loaned securities fails to return the securities in a timely manner
or at all. The Fund could also lose money in the event of (i) a decline in the
value of the collateral provided for the loaned securities, (ii) a decline in
the value of any investments made with cash collateral or (iii) an increase in
the value of the loaned securities if the borrower does not increase the
collateral accordingly and the borrower fails to return the securities. These
events could also trigger adverse tax consequences for the Funds.
Under the Funds' Securities Lending Agency Agreement, the securities lending
agent will generally bear the risk that a borrower may default on its obligation
to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the
Funds' securities lending agent and is responsible for executing the lending of
the portfolio securities to creditworthy borrowers. The Funds, however, will be
responsible for the risks associated with the investment of cash collateral. A
Fund may lose money on its investment of cash collateral, which may affect its
ability to repay the collateral to the borrower without the use of other Fund
assets. Each Fund that engages in securities lending receives compensation (net
of any rebate and securities lending agent fees) for lending its securities.
Compensation can be in the form of fees received from the securities lending
agent or dividends or interest earned from the investment of cash collateral.
The fees earned from the securities lending agent are accrued daily. The
dividend and interest earned on the securities loaned is accounted for in the
same manner as other dividend and interest income. At December 31, 2018, only
FDM, FPX, FBT, and FDN had securities in the securities lending program.
In the event of a default by a borrower with respect to any loan, BBH will
exercise any and all remedies provided under the applicable borrower agreement
to make the Funds whole. These remedies include purchasing replacement
securities by applying the collateral held from the defaulting broker against
the purchase cost of the replacement securities. If, despite such efforts by BBH
Page 58
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
to exercise these remedies, a Fund sustains losses as a result of a borrower's
default, BBH will indemnify the Fund by purchasing replacement securities at its
own expense, or paying the Fund an amount equal to the market value of the
replacement securities, subject to certain limitations which are set forth in
detail in the Securities Lending Agency Agreement between the Trust on behalf of
the Funds and BBH.
E. REPURCHASE AGREEMENTS
Repurchase agreements involve the purchase of securities subject to the seller's
agreement to repurchase the securities at a mutually agreed upon date and price,
under the terms of a Master Repurchase Agreement ("MRA"). During the term of a
repurchase agreement, the value of the underlying securities held as collateral
on behalf of a Fund, including accrued interest, is required to exceed the value
of the repurchase agreement, including accrued interest. The underlying
securities for all repurchase agreements are held at the Funds' custodian or
designated sub-custodians under tri-party repurchase agreements.
MRAs govern transactions between a Fund and select counterparties. The MRAs
contain provisions for, among other things, initiation, income payments, events
of default, and maintenance of collateral for repurchase agreements.
Repurchase agreements received for lending securities are collateralized by U.S.
Treasury securities. The U.S. Treasury securities are held in a joint custody
account at BBH on behalf of the Funds participating in the securities lending
program. In the event the counterparty defaults on the repurchase agreement, the
U.S. Treasury securities can either be maintained as part of a Fund's portfolio
or sold for cash. A Fund could suffer a loss to the extent that the proceeds
from the sale of the underlying collateral held by the Fund is less than the
repurchase price and the Fund's costs associated with the delay and enforcement
of the MRA.
While the Funds may invest in repurchase agreements, any repurchase agreements
held by the Funds during the fiscal year ended December 31, 2018, were received
as collateral for lending securities.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on portfolio securities held by the Funds and
have no impact on net assets or NAV per share. Temporary differences, which
arise from recognizing certain items of income, expense and gain/loss in
different periods for financial statement and tax purposes, will reverse at some
time in the future.
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2018 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
------------------ ---------------- -----------------
First Trust Dow Jones Select MicroCap Index Fund $ 1,417,591 $ -- $ --
First Trust Morningstar Dividend Leaders Index Fund 55,170,342 -- --
First Trust US Equity Opportunities ETF 8,618,366 -- --
First Trust NYSE Arca Biotechnology Index Fund -- -- --
First Trust Dow Jones Internet Index Fund -- -- --
First Trust Capital Strength ETF 13,023,451 -- --
First Trust Value Line(R) Dividend Index Fund 102,072,326 -- --
First Trust Value Line(R) 100 Exchange-Traded Fund 292,079 -- --
Page 59
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2017 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
------------------ ---------------- -----------------
First Trust Dow Jones Select MicroCap Index Fund $ 908,212 $ -- $ --
First Trust Morningstar Dividend Leaders Index Fund 56,593,922 -- --
First Trust US Equity Opportunities ETF 6,231,361 -- --
First Trust NYSE Arca Biotechnology Index Fund -- -- --
First Trust Dow Jones Internet Index Fund -- -- --
First Trust Capital Strength ETF 5,933,462 -- --
First Trust Value Line(R) Dividend Index Fund 82,356,171 -- --
First Trust Value Line(R) 100 Exchange-Traded Fund 463,929 -- --
As of December 31, 2018, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ ---------------- -----------------
First Trust Dow Jones Select MicroCap Index Fund $ 200,386 $(16,493,170) $ (27,167,578)
First Trust Morningstar Dividend Leaders Index Fund 135,366 (83,142,112) (90,329,172)
First Trust US Equity Opportunities ETF -- (104,241,056) 35,844,172
First Trust NYSE Arca Biotechnology Index Fund -- (136,416,636) (564,687,926)
First Trust Dow Jones Internet Index Fund -- (150,836,952) 93,036,664
First Trust Capital Strength ETF -- (43,880,883) (64,995,316)
First Trust Value Line(R) Dividend Index Fund -- (69,543,177) (214,226,024)
First Trust Value Line(R) 100 Exchange-Traded Fund -- (13,408,733) (1,380,869)
G. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of each Fund's taxable income
exceeds the distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ending 2015, 2016,
2017, and 2018 remain open to federal and state audit. As of December 31, 2018,
management has evaluated the application of these standards to the Funds, and
has determined that no provision for income tax is required in the Funds'
financial statements for uncertain tax positions.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses arising in taxable years beginning after December 22, 2010,
may be carried forward indefinitely, and their character is retained as
short-term and/or long-term losses. Previously, net capital losses were carried
forward for up to eight years and treated as short-term losses. As a transition
rule, the Act requires that post-enactment net capital losses be used before
pre-enactment net capital losses. At December 31, 2018, the Funds had
post-enactment net capital losses for federal income tax purposes as shown in
the following table. To the extent that these loss carryforwards are used to
offset future capital gains, it is probable that the capital gains so offset
will not be distributed to Fund shareholders. The Funds are subject to certain
limitations, under U.S. tax rules, on the use of capital loss carryforwards and
net unrealized built-in losses. These limitations apply when there has been a
50% change in ownership.
Page 60
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
Post-Enactment -
No Expiration
--------------------
First Trust Dow Jones Select MicroCap Index Fund $ 16,493,170
First Trust Morningstar Dividend Leaders Index Fund 83,142,112
First Trust US Equity Opportunities ETF 104,241,056
First Trust NYSE Arca Biotechnology Index Fund 136,416,636
First Trust Dow Jones Internet Index Fund 150,836,952
First Trust Capital Strength ETF 43,880,883
First Trust Value Line(R) Dividend Index Fund 69,543,177
First Trust Value Line(R) 100 Exchange-Traded Fund 13,408,733
During the taxable year ended December 31, 2018, the following Fund utilized
capital loss carryforwards in the following amount:
Post-Enactment
Capital Loss
Carryforward
Utilized
--------------------
First Trust NYSE Arca Biotechnology Index Fund $ 66,225,459
At the taxable year ended December 31, 2018, the following Funds' capital loss
carryforwards expired in the following amounts:
Capital Loss
Carryforward Expired
--------------------
First Trust Dow Jones Select MicroCap Index Fund $ 5,096,533
First Trust Morningstar Dividend Leaders Index Fund 473,435
First Trust US Equity Opportunities ETF 65,058
First Trust NYSE Arca Biotechnology Index Fund 1,039,054
First Trust Dow Jones Internet Index Fund --
First Trust Capital Strength ETF 1,367,556
First Trust Value Line(R) Dividend Index Fund 437,987
First Trust Value Line(R) 100 Exchange-Traded Fund --
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended December 31, 2018, the adjustments for each Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss)
Income (Loss) on Investments Paid-in Capital
------------------ ---------------- -----------------
First Trust Dow Jones Select MicroCap Index Fund $ 23,599 $ (10,832,182) $ 10,808,583
First Trust Morningstar Dividend Leaders Index Fund (336,035) (119,409,496) 119,745,531
First Trust US Equity Opportunities ETF 454,103 (69,391,076) 68,936,973
First Trust NYSE Arca Biotechnology Index Fund 4,195,069 (200,912,456) 196,717,387
First Trust Dow Jones Internet Index Fund 21,307,396 (1,053,785,383) 1,032,477,987
First Trust Capital Strength ETF 139,450 (74,295,350) 74,155,900
First Trust Value Line(R) Dividend Index Fund 47,741 (250,157,844) 250,110,103
First Trust Value Line(R) 100 Exchange-Traded Fund 6,991 (1,828,580) 1,821,589
Page 61
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
H. EXPENSES
Expenses that are directly related to one of the Funds are charged directly to
the respective Fund. General expenses of the Trust are allocated to all the
Funds based upon the net assets of each Fund.
First Trust has entered into licensing agreements with each of the following
"Licensors" for the respective Funds:
FUND LICENSOR
First Trust Dow Jones Select MicroCap Index Fund S&P Dow Jones Indices LLC First
Trust Morningstar Dividend Leaders Index Fund Morningstar, Inc.
First Trust US Equity Opportunities ETF IPOX(R) Schuster LLC
First Trust NYSE Arca Biotechnology Index Fund ICE Data Indices, LLC
First Trust Dow Jones Internet Index Fund S&P Dow Jones Indices LLC
First Trust Capital Strength ETF Nasdaq, Inc.
First Trust Value Line(R) Dividend Index Fund Value Line Publishing LLC
First Trust Value Line(R) 100 Exchange-Traded Fund Value Line Publishing LLC
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The respective Funds are
required to pay licensing fees, which are shown on the Statements of Operations.
I. NEW ACCOUNTING PRONOUNCEMENT
On August 28, 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13,
"Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement," which amends the fair value measurement disclosure requirements of
ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified
disclosure requirements of ASC 820. In addition, the amendments clarify that
materiality is an appropriate consideration of entities when evaluating
disclosure requirements. The ASU is effective for fiscal years beginning after
December 15, 2019, including interim periods therein. Early adoption is
permitted for any eliminated or modified disclosures upon issuance of this ASU.
The Funds have early adopted ASU 2018-13 for these financial statements, which
did not result in a material impact.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
For these services, First Trust is entitled to receive monthly fees from each
Fund calculated at the following annual rates:
% of Average
Daily Net Assets
----------------
First Trust Dow Jones Select MicroCap Index Fund 0.50%
First Trust Morningstar Dividend Leaders Index Fund 0.30%
First Trust US Equity Opportunities ETF 0.40%
First Trust NYSE Arca Biotechnology Index Fund 0.40%
First Trust Dow Jones Internet Index Fund 0.40%
First Trust Capital Strength ETF 0.50%
First Trust Value Line(R) Dividend Index Fund 0.50%
First Trust Value Line(R) 100 Exchange-Traded Fund 0.50%
The Trust and First Trust have entered into an Expense Reimbursement, Fee Waiver
and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to
waive fees and/or reimburse Fund expenses to the extent that the operating
expenses of each Fund (excluding interest expense, brokerage commissions and
other trading expenses, acquired fund fees and expenses, taxes and extraordinary
expenses) exceed the below amount as a percentage of average daily net assets
per year (the "Expense Cap"). The Expense Cap will be in effect until at least
April 30, 2020.
Page 62
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
Expense Cap
----------------
First Trust Dow Jones Select MicroCap Index Fund 0.60%
First Trust Morningstar Dividend Leaders Index Fund 0.45%
First Trust US Equity Opportunities ETF 0.60%
First Trust NYSE Arca Biotechnology Index Fund 0.60%
First Trust Dow Jones Internet Index Fund 0.60%
First Trust Capital Strength ETF 0.65%
First Trust Value Line(R) Dividend Index Fund 0.70%
First Trust Value Line(R) 100 Exchange-Traded Fund 0.70%
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee was waived or expense was incurred, but no reimbursement payment will be
made by a Fund if it results in the Fund exceeding an expense ratio equal to the
Expense Cap in place at the time the expenses were reimbursed or fees waived by
First Trust. These amounts would be included in "Expenses previously waived or
reimbursed" on the Statements of Operations.
The advisory fee waivers and expense reimbursements for the fiscal year ended
December 31, 2018 and the fees waived or expenses borne by First Trust subject
to recovery from the applicable Fund for the periods indicated were as follows:
Fees Waived or Expenses Borne by First Trust
Subject to Recovery
------------------------------------------------
Advisory Year Year Year
Fee Expense Ended Ended Ended
Waivers Reimbursement 12/31/2016 12/31/2017 12/31/2018 Total
--------- ------------- ---------- ---------- ---------- ---------
First Trust Dow Jones Select MicroCap
Index Fund $ 162,786 $ -- $ 76,424 $ 97,709 $ 162,786 $ 336,919
First Trust Morningstar Dividend Leaders
Index Fund 256,355 -- 390,779 289,110 256,355 936,244
First Trust Value Line(R) Dividend Index
Fund 768,292 -- 679,825 816,754 768,292 2,264,871
First Trust Value Line(R) 100 Exchange-Traded
Fund 94,969 -- 85,239 82,527 94,969 262,735
First Trust US Equity Opportunities ETF, First Trust NYSE Arca Biotechnology
Index Fund, First Trust Dow Jones Internet Index Fund and First Trust Capital
Strength ETF do not have any remaining fees previously waived or expenses
reimbursed that are subject to recovery.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Trust for acting in such capacities.
Page 63
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
4. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended December 31, 2018, the cost of purchases and proceeds
from sales of investments for each Fund, excluding short-term investments and
in-kind transactions, were as follows:
Purchases Sales
--------------- ---------------
First Trust Dow Jones Select MicroCap Index Fund $ 92,561,226 $ 93,056,098
First Trust Morningstar Dividend Leaders Index Fund 580,060,631 582,191,194
First Trust US Equity Opportunities ETF 620,556,934 618,996,187
First Trust NYSE Arca Biotechnology Index Fund 716,091,647 714,162,096
First Trust Dow Jones Internet Index Fund 1,657,239,139 1,678,937,959
First Trust Capital Strength ETF 1,157,622,867 1,154,105,487
First Trust Value Line(R) Dividend Index Fund 2,459,298,445 2,448,182,884
First Trust Value Line(R) 100 Exchange-Traded Fund 213,101,175 213,209,220
For the fiscal year ended December 31, 2018, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
--------------- ---------------
First Trust Dow Jones Select MicroCap Index Fund $ 140,584,424 $ 76,430,063
First Trust Morningstar Dividend Leaders Index Fund 386,234,475 568,494,449
First Trust US Equity Opportunities ETF 312,377,376 281,186,502
First Trust NYSE Arca Biotechnology Index Fund 2,312,485,548 830,779,164
First Trust Dow Jones Internet Index Fund 4,017,170,269 2,610,905,311
First Trust Capital Strength ETF 1,357,903,955 513,110,174
First Trust Value Line(R) Dividend Index Fund 2,024,024,539 1,580,240,974
First Trust Value Line(R) 100 Exchange-Traded Fund 39,512,069 49,039,516
5. CREATION, REDEMPTION AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Such transactions are generally permitted on an
in-kind basis, with a balancing cash component to equate the transaction to the
daily NAV per Share of each Fund on the transaction date times the number of
Shares in a Creation Unit. Authorized Participants purchasing Creation Units
must pay to BNYM, as transfer agent, a standard creation transaction fee (the
"Creation Transaction Fee"), which is based on the number of different
securities in a Creation Unit of each Fund according to the fee schedule set
forth below:
Number of Securities Creation
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
The Creation Transaction Fee is applicable to each purchase transaction
regardless of the number of Creation Units purchased in the transaction. An
additional variable fee of up to three times the Creation Transaction Fee may be
charged to approximate additional expenses incurred by a Fund with respect to
transactions effected outside of the clearing process (i.e., through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. The price for each Creation Unit will equal the daily
NAV per Share of a Fund on the transaction date times the number of Shares in a
Creation Unit plus the fees described above and, if applicable, any transfer
taxes.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a standard redemption transaction fee (the "Redemption Transaction Fee"),
which is based on the number of different securities in a Creation Unit of each
Fund according to the fee schedule set forth below:
Number of Securities Redemption
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
Page 64
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
The Redemption Transaction Fee is applicable to each redemption transaction
regardless of the number of Creation Units redeemed in the transaction. An
additional variable fee of up to three times the Redemption Transaction Fee may
be charged to approximate additional expenses incurred by a Fund with respect to
redemptions effected outside of the clearing process or to the extent that
redemptions are for cash. Each Fund reserves the right to effect redemptions in
cash. A shareholder may request cash redemption in lieu of securities; however,
a Fund may, in its discretion, reject any such request.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before April 30, 2020.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
Page 65
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of First Trust Exchange-Traded Fund (the
"Trust"), comprising the First Trust Dow Jones Select MicroCap Index Fund, First
Trust Morningstar Dividend Leaders Index Fund, First Trust US Equity
Opportunities ETF, First Trust NYSE Arca Biotechnology Index Fund, First Trust
Dow Jones Internet Index Fund, First Trust Capital Strength ETF, First Trust
Value Line(R) Dividend Index Fund, and First Trust Value Line(R) 100
Exchange-Traded Fund (the "Funds"), each a series of First Trust Exchange-Traded
Fund, as of December 31, 2018, the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, the financial highlights for each of the five years in
the period then ended, and the related notes. In our opinion, the financial
statements and financial highlights present fairly, in all material respects,
the financial position of each of the funds listed above included in First Trust
Exchange-Traded Fund as of December 31, 2018, and the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Funds' internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2018, by correspondence with
the custodian and brokers; when replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 25, 2019
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 66
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Funds' website located at www.ftportfolios.com; and (3) on the Securities
and Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files its complete schedule of each Fund's portfolio holdings with the
SEC for the first and third quarters of each fiscal year on Form N-Q. The
Trust's Form N-Qs are available (1) by calling (800) 988-5891; (2) on each
Fund's website at www.ftportfolios.com; and (3) on the SEC's website at
www.sec.gov.
Beginning in April 2019, the Trust will cease to disclose each Fund's holdings
on Form N-Q and will file Form N-PORT with the SEC on a monthly basis. Part F of
Form N-PORT, which contains the complete schedule of each Fund's portfolio
holdings, will be made available in the same manner as Form N-Q discussed above.
FEDERAL TAX INFORMATION
For the taxable year ended December 31, 2018, the following percentages of
income dividends paid by the Funds qualify for the dividends received deduction
available to corporations:
Dividends Received Deduction
----------------------------
First Trust Dow Jones Select MicroCap Index Fund 100.00%
First Trust Morningstar Dividend Leaders Index Fund 100.00%
First Trust US Equity Opportunities ETF 100.00%
First Trust NYSE Arca Biotechnology Index Fund --
First Trust Dow Jones Internet Index Fund --
First Trust Capital Strength ETF 100.00%
First Trust Value Line(R) Dividend Index Fund 98.69%
First Trust Value Line(R)100 Exchange-Traded Fund 100.00%
For the taxable year ended December 31, 2018, the following percentages of
income dividends paid by the Funds are hereby designated as qualified dividend
income:
Qualified Dividend Income
----------------------------
First Trust Dow Jones Select MicroCap Index Fund 100.00%
First Trust Morningstar Dividend Leaders Index Fund 100.00%
First Trust US Equity Opportunities ETF 100.00%
First Trust NYSE Arca Biotechnology Index Fund --
First Trust Dow Jones Internet Index Fund --
First Trust Capital Strength ETF 100.00%
First Trust Value Line(R) Dividend Index Fund 100.00%
First Trust Value Line(R)100 Exchange-Traded Fund 100.00%
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
not concentrated.
Page 67
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. As a result, such a fund may be included in one or more index-tracking
exchange-traded funds or mutual funds. Being a component security of such a
vehicle could greatly affect the trading activity involving a fund, the size of
the fund and the market volatility of the fund. Inclusion in an index could
significantly increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
Page 68
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; different legal or accounting standards; and less government supervision
and regulation of exchanges in foreign countries. Investments in non-U.S.
securities may involve higher costs than investments in U.S. securities,
including higher transaction and custody costs, as well as additional taxes
imposed by non-U.S. governments. These risks may be heightened for securities of
companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
REMUNERATION
First Trust Advisors L.P. ("First Trust") is authorised and regulated by the
U.S. Securities and Exchange Commission and is entitled to market shares of
certain First Trust Exchange-Traded Fund funds it manages (the "Funds") in
certain members states in the European Economic Area in accordance with the
cooperation arrangements in Article 42 of the Alternative Investment Fund
Managers Directive (the "Directive"). First Trust is required under the
Directive to make disclosures in respect of remuneration. The following
disclosures are made in line with First Trust's interpretation of currently
available regulatory guidance on remuneration disclosures.
During the year ended December 31,2018, the amount of remuneration paid (or to
be paid) by First Trust Advisors L.P. in respect of the Funds is $8,108,839.
This figure is comprised of $355,327 paid (or to be paid) in fixed compensation
and $7,753,512 paid (or to be paid) in variable compensation. There were a total
of 14 beneficiaries of the remuneration described above. Those amounts include
$5,149,543 paid (or to be paid) to senior management of First Trust Advisors
L.P. and $2,959,296 paid (or to be paid) to other employees whose professional
activities have a material impact on the risk profiles of First Trust Advisors
L.P. or the Funds (collectively, "Code Staff").
Code Staff included in the aggregated figures disclosed above are rewarded in
line with First Trust's remuneration policy (the "Remuneration Policy") which is
determined and implemented by First Trust's senior management. The Remuneration
Policy reflects First Trust's ethos of good governance and encapsulates the
following principal objectives:
i. to provide a clear link between remuneration and performance of
First Trust and to avoid rewarding for failure;
ii. to promote sound and effective risk management consistent with the
risk profiles of the Funds managed by First Trust; and
iii. to remunerate staff in line with the business strategy, objectives,
values and interests of First Trust and the Funds managed by First
Trust in a manner that avoids conflicts of interest.
Page 69
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
First Trust assesses various risk factors which it is exposed to when
considering and implementing remuneration for Code Staff and considers whether
any potential award to such person(s) would give rise to a conflict of interest.
First Trust does not reward failure, or consider the taking of risk or failure
to take risk in its remuneration of Code Staff.
First Trust assesses performance for the purposes of determining payments in
respect of performance-related remuneration of Code Staff by reference to a
broad range of measures including (i) individual performance (using financial
and non-financial criteria), and (ii) the overall performance of First Trust.
Remuneration is not based upon the performance of the Funds.
The elements of remuneration are balanced between fixed and variable and the
senior management sets fixed salaries at a level sufficient to ensure that
variable remuneration incentivises and rewards strong individual performance but
does not encourage excessive risk taking.
No individual is involved in setting his or her own remuneration.
Page 70
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 161 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed LLC
(April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 161 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 161 Director of Trust
(1956) Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 161 Director of
(1954) Managing Director and Chief Operating Covenant
o Since Inception Officer (January 2015 to August 2018), Transport Inc.
Pelita Harapan Educational Foundation (May 2003 to
(Educational Products and Services); May 2014)
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products
and Services); President and Chief
Executive Officer (June 2012 to September
2014), Dew Learning LLC (Educational
Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 161 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 71
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer
(1966) Executive Officer (January 2016 to Present), Controller (January 2011 to
o Since January 2016 January 2016), Senior Vice President (April 2007 to
January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC (Software
Development Company) and Stonebridge Advisors
LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First
(1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel,
o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Chief Compliance
Officer Since
January 2011
o Assistant Secretary
Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 72
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
May 2017
Page 73
This page intentionally left blank.
This page intentionally left blank.
This page intentionally left blank.
FIRST TRUST
First Trust Exchange-Traded Fund
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund
Book 2
First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)
First Trust NASDAQ-100-Technology Sector Index Fund (QTEC)
First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT)
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)
First Trust S&P REIT Index Fund (FRI)
First Trust Water ETF (FIW)
First Trust Natural Gas ETF (FCG)
First Trust Chindia ETF (FNI)
First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)
Annual Report
December 31, 2018
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2018
Shareholder Letter.......................................................... 2
Market Overview............................................................. 3
Fund Performance Overview
First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW).................. 4
First Trust NASDAQ-100-Technology Sector Index Fund (QTEC)............... 6
First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT)............ 8
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)....... 10
First Trust S&P REIT Index Fund (FRI).................................... 12
First Trust Water ETF (FIW).............................................. 14
First Trust Natural Gas ETF (FCG)........................................ 16
First Trust Chindia ETF (FNI)............................................ 18
First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)............... 20
Notes to Fund Performance Overview.......................................... 22
Understanding Your Fund Expenses............................................ 23
Portfolio of Investments
First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW).................. 25
First Trust NASDAQ-100-Technology Sector Index Fund (QTEC)............... 28
First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT)............ 29
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)....... 32
First Trust S&P REIT Index Fund (FRI).................................... 34
First Trust Water ETF (FIW).............................................. 37
First Trust Natural Gas ETF (FCG)........................................ 39
First Trust Chindia ETF (FNI)............................................ 41
First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)............... 44
Statements of Assets and Liabilities........................................ 48
Statements of Operations.................................................... 50
Statements of Changes in Net Assets......................................... 52
Financial Highlights........................................................ 56
Notes to Financial Statements............................................... 61
Report of Independent Registered Public Accounting Firm..................... 71
Additional Information...................................................... 72
Board of Trustees and Officers.............................................. 76
Privacy Policy.............................................................. 78
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (each such series is referred to as a "Fund" and collectively, as the
"Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund shares may therefore be less than what you paid
for them. Accordingly, you can lose money by investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund and presents data and analysis that provide
insight into each Fund's performance and investment approach.
By reading the market overview by Robert F. Carey, Chief Market Strategist of
the Advisor, you may obtain an understanding of how the market environment
affected the performance of each Fund. The statistical information that follows
may help you understand each Fund's performance compared to that of relevant
market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in each
Fund are spelled out in its prospectus, statement of additional information, and
other Fund regulatory filings.
Page 1
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2018
Dear Shareholders:
First Trust is pleased to provide you with the annual report for certain funds
in the First Trust Exchange-Traded Fund (the "Funds"), which contains detailed
information about the Funds for the twelve months ended December 31, 2018,
including a market overview and performance analyses. We encourage you to read
this report carefully and discuss it with your financial advisor.
As I wrote in my June 2018 letter, investors were hoping for another strong year
in the markets for 2018. For the entire year, however, increased market
volatility was the norm for U.S. and global markets. Despite the volatility,
August was a strong month for stocks, and the Dow Jones Industrial Average
("DJIA") finished the month just under its previous high in January 2018. At the
close of the third quarter in September, the markets had moved higher into
positive territory. In fact, all three major U.S. indices (the Nasdaq Composite
Index, the DJIA and the S&P 500(R) Index) hit record levels during the third
quarter. Yet, in October, markets were again very volatile, surprising analysts
and investors alike. Both global markets and U.S. markets fell on fears of
slowing growth, trade wars and higher interest rates. The DJIA was down 5% for
October and the MSCI EAFE Index, an index of stocks in 21 developed markets
(excluding the U.S. and Canada), was down 9% for the month. However, investors
cheered as November ended, and the DJIA climbed 617 points (2.5%) to its biggest
one-day gain in eight months. The MSCI EAFE Index ended November down slightly.
December held its own shocks as it became the worst December for stocks since
the Great Depression. The DJIA and the MSCI EAFE Index ended December with
year-to-date returns of -3.48% and -13.79%, respectively.
Based on continued strong job growth and the economic outlook in the U.S., the
Federal Reserve (the "Fed") raised interest rates in March, June and September.
At their September meeting, the Fed indicated the possibility of one additional
rate hike in 2018 and three more in 2019. At their November meeting, the Fed did
not raise interest rates. However, at their December 19th meeting, the Fed did
raise interest rates by 25 basis points. Analysts and investors will be watching
to see what the Fed does with rates in 2019.
While trade tensions have had an impact on markets around the world and could
continue to do so in the future, our First Trust economists believe that the
long-term impact of U.S. tariffs will be to encourage countries to come back to
the table and talk about more equal trade. Despite market volatility, we
continue to believe that the combination of low interest rates, low inflation
and strong corporate earnings still point to a positive economic environment and
further growth, though we understand that past performance can never guarantee
future performance.
We continue to believe that you should invest for the long term and be prepared
for market movements, which can happen at any time. You can do this by keeping
current on your portfolio and by speaking regularly with your investment
professional. Markets go up and they also go down, but savvy investors are
prepared for either through careful attention to investment goals.
Thank you for giving First Trust the opportunity to be a part of your financial
plan. We value our relationship with you and will report on the Funds again in
six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
--------------------------------------------------------------------------------
MARKET OVERVIEW
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2018
ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of research and analysis of
the First Trust product line. Mr. Carey has over 25 years of experience as an
Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial
Analyst ("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE ECONOMY/INVESTING
In its latest forecast, the International Monetary Fund ("IMF") is calling for
the world real gross domestic product ("GDP") growth rate to dip from an
estimated 3.7% in 2018 to an estimated 3.5% in 2019, according to its own
release. The IMF cited the ongoing trade dispute between the U.S. and China as
being partly responsible for the small downward revision in growth. The U.S.
real GDP growth rate is expected to decrease from an estimated 2.9% in 2018 to
an estimated 2.5% in 2019. The growth rate for Emerging Market and Developing
Economies is expected to dip from an estimated 4.6% in 2018 to an estimated 4.5%
in 2019. As indicated by the growth forecasts, we believe there is no imminent
threat of a global economic recession.
We believe that concerns over the extent to which interest rates could trend
higher in 2019 and the potential for trade tariffs escalating to an all-out
trade war were largely behind the spikes in volatility in the stock market in
2018. For those investors who fear that higher interest rates could dampen the
prospects for stocks in 2019, Federal Reserve (the "Fed") Chairman Jerome Powell
announced on January 4, 2019 that the Fed will be adopting a "patient" approach
to tightening monetary policy. With respect to trade, the Trump Administration
sent trade representatives to China on January 7, 2019 to set up future trade
policy talks. The two countries also agreed to a 90-day truce freezing tariffs
until March 1, 2019. We believe stock prices would move higher on a U.S.-China
trade deal.
ETFGI, an independent research and consultancy firm, reported that total assets
invested in exchange-traded funds ("ETFs") and other exchange-traded products
("ETPs") listed globally stood at $4.79 trillion at the close of 2018, down from
$4.84 trillion the previous year, according to its own release. The dip in
assets under management was due to performance rather than capital flows.
December 2018 marked the 59th consecutive month of net inflows into ETFs/ETPs
listed globally. The U.S.'s share of the global market was approximately 70% at
year-end.
U.S. STOCKS AND BONDS
The three major Standard & Poor's stock indices finished 2018 in the red. The
S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R) Index posted
total returns of -4.38%, -11.08%, and -8.48%, respectively, according to
Bloomberg. Only three of the 11 major S&P 500(R) Index sectors posted positive
total returns. The top-performing sectors were Health Care, Utilities and
Consumer Discretionary, up 6.47%, 4.11% and 0.82%, respectively, on a total
return basis. The sectors that posted the biggest losses were Energy, Materials
and Industrials, down 18.10%, 14.70% and 13.32%, respectively. We believe that
some of the downside in stock prices late in the year could be attributed to
profit taking and tax selling. Keep in mind, the S&P 500(R) Index posted a total
return of 21.83% in 2017, more than double its 9.98% average annual total return
from 1926-2018, according to Ibbotson Associates/Morningstar.
Dividend growth has historically been a barometer of strength for Corporate
America. The S&P Dow Jones Indices announced that total dividend distributions
for U.S. common stocks increased by a net (increases less decreases) $7.4
billion in the third quarter of 2018, up from $4.5 billion from the third
quarter of 2017, according to its own release. Net dividend increases totaled a
record $58.4 billion in 2018, up from $37.1 billion in 2017. Currently, 82.2% of
the companies in the S&P 500(R) Index pay a dividend, compared to 69.8% of the
companies in the S&P MidCap 400(R) Index and 51.9% of the companies in the S&P
SmallCap 600(R) Index. Total global dividend payouts are expected to rise 6.0%
year-over-year to a record $1.81 trillion in 2019, according to business
information provider IHS Markit, a London-based global information provider.
Dividend-paying companies in the U.S. are expected to increase distributions by
8.1%, according to IHS Markit.
In the U.S. bond market, the top-performing major debt group we track was
intermediate-term Treasuries. The Bloomberg Barclays U.S. Treasury: Intermediate
Index posted a total return of 1.41% in 2018. The worst-performing debt group
that we track was high yield corporates. The Bloomberg Barclays U.S. Corporate
High Yield Index posted a total return of -2.08%. The yield on the benchmark
10-Year Treasury note (T-note) rose by 28 basis points to 2.69% in 2018,
according to Bloomberg. For comparative purposes, the average yield on the
10-year T-note was 2.51% for the 10-year period ended December 31, 2018.
FOREIGN STOCKS AND BONDS
The U.S. dollar registered a gain of 4.40% against a basket of major currencies
in 2018, as measured by the U.S. Dollar Index (DXY). With respect to U.S.
investors, a stronger U.S. dollar can negatively impact returns on unhedged
foreign securities. We believe the dollar strengthened due to the escalating
trade/tariff battle between the U.S. and its major trading partners,
particularly China.
Both foreign stocks and bonds succumbed to selling pressure in 2018. The
Bloomberg Barclays Global Aggregate Index of higher quality debt posted a total
return of -1.20% (USD), while the Bloomberg Barclays EM Hard Currency Aggregate
Index of emerging markets debt fell 3.02%, according to Bloomberg Barclays. With
respect to equities, the MSCI Daily Total Return Net World Index (excluding the
U.S.) posted a total return of -14.09% (USD), compared to -14.58% (USD) for the
MSCI Daily Total Return Net Emerging Markets Index.
Page 3
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
The First Trust NASDAQ-100 Equal Weighted Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Equal
Weighted Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its net assets (including investment borrowings) in common stocks that comprise
the Index. The Index is the equal-weighted version of the NASDAQ-100 Index(R),
which includes 100 of the largest non-financial companies listed on The Nasdaq
Stock Market LLC ("Nasdaq") based on market capitalization. The Index contains
the same securities as the NASDAQ-100 Index(R), but each of the securities is
initially set at a weight of 1.00% of the Index which is rebalanced quarterly.
The Fund's shares are listed for trading on the Nasdaq. The first day of
secondary market trading in shares of the Fund was April 25, 2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (4/19/06) Ended Ended (4/19/06)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -5.16% 9.27% 16.76% 8.78% 55.74% 370.82% 191.32%
Market Value -5.22% 9.26% 16.77% 8.78% 55.67% 371.12% 191.26%
INDEX PERFORMANCE
NASDAQ-100 Equal Weighted Index(SM) -4.61% 9.93% 17.48% 9.46% 60.51% 400.84% 215.14%
S&P 500(R) Index -4.38% 8.49% 13.12% 7.49% 50.33% 243.04% 150.23%
NASDAQ-100 Index(R) 0.04% 13.34% 19.29% 11.82% 87.03% 483.57% 313.37%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of -5.16% during the
12-month period covered by this report. During the same period, the NASDAQ-100
Index(R) ("benchmark") generated a return of 0.04%. The Information Technology
sector was the Fund's top weighted sector over the period with a 34.1%
allocation. This sector had a -0.7% return and -0.07% contribution to the Fund's
return. The Fund's least contributing sector was the Communication Services
sector with a -1.8% contribution, stemming from its 15.3% allocation and -12.5%
return. There was no single sector that returned positive performance for the
Fund over the period. On a relative basis, the Fund underperformed the
benchmark. The Fund's holdings among the Consumer Discretionary sector were the
primary cause of the underperformance as the Fund underperformed the benchmark
by -18.5% among these securities, which created -2.7% of relative
underperformance. The Fund under allocated the relatively poor performing
Utilities sector, which created 0.03% of relative outperformance.
-----------------------------
Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Equal Weighted
Index(SM) are trademarks of Nasdaq, Inc. (which with its affiliates is referred
to as the "Corporations") and are licensed for use by First Trust. The Fund has
not been passed on by the Corporations as to its legality or suitability. The
Fund is not issued, endorsed, sold, or promoted by the Corporations. THE
CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 4
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 37.16%
Consumer Discretionary 17.21
Health Care 16.21
Communication Services 13.79
Industrials 7.92
Consumer Staples 5.80
Financials 0.99
Utilities 0.92
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Workday, Inc., Class A 1.08%
Netflix, Inc. 1.05
Amazon.com, Inc. 1.05
Incyte Corp. 1.05
Dollar Tree, Inc. 1.04
Regeneron Pharmaceuticals, Inc. 1.04
Ross Stores, Inc. 1.03
Align Technology, Inc. 1.03
Advanced Micro Devices, Inc. 1.03
JD.com, Inc., ADR 1.03
-------
Total 10.43%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust
NASDAQ-100 Equal NASDAQ-100 Equal S&P 500(R) NASDAQ-100
Weighted Index Fund Weighted Index(SM) Index Index(R)
12/08 $10,000 $10,000 $10,000 $10,000
06/09 12,369 12,401 10,316 12,240
12/09 15,954 16,052 12,645 15,462
06/10 15,054 15,195 11,804 14,508
12/10 19,343 19,582 14,551 18,577
06/11 20,796 21,119 15,426 19,549
12/11 18,806 19,172 14,857 19,258
06/12 20,532 20,984 16,267 22,230
12/12 21,600 22,134 17,235 22,788
06/13 24,970 25,702 19,617 25,087
12/13 30,229 31,207 22,817 31,206
06/14 32,641 33,800 24,446 33,662
12/14 36,013 37,396 25,942 37,264
06/15 36,867 38,394 26,261 38,911
12/15 36,815 38,475 26,300 40,899
06/16 35,755 37,463 27,310 39,603
12/16 39,398 41,419 29,446 43,876
06/17 45,635 48,116 32,196 51,238
12/17 49,646 52,514 35,873 58,350
06/18 51,989 55,145 36,824 64,564
12/18 47,082 50,084 34,302 58,357
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 161 3 0 0
01/01/15 - 12/31/15 126 1 0 0
01/01/16 - 12/31/16 107 0 0 0
01/01/17 - 12/31/17 178 0 0 0
01/01/18 - 12/31/18 148 2 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 87 1 0 0
01/01/15 - 12/31/15 122 3 0 0
01/01/16 - 12/31/16 145 0 0 0
01/01/17 - 12/31/17 73 0 0 0
01/01/18 - 12/31/18 99 2 0 0
Page 5
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
The First Trust NASDAQ-100-Technology Sector Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Technology
Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its net assets (including investment borrowings) in common stocks that comprise
the Index. The Index is an equal-weighted index based on the securities of the
NASDAQ-100 Index(R) that are classified as "technology" according to the
Industry Classification Benchmark classification system. The NASDAQ-100 Index(R)
includes 100 of the largest domestic and international non-financial companies
listed on the Nasdaq based on market capitalization. The NASDAQ-100 Index(R) is
rebalanced quarterly. The Fund's shares are listed for trading on the Nasdaq.
The first day of secondary market trading in shares of the Fund was April 25,
2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (4/19/06) Ended Ended (4/19/06)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -4.70% 15.17% 20.11% 10.80% 102.63% 524.91% 267.76%
Market Value -4.74% 15.16% 20.25% 10.80% 102.51% 532.06% 267.86%
INDEX PERFORMANCE
NASDAQ-100 Technology Sector Index(SM) -4.14% 15.89% 20.87% 11.49% 109.07% 565.74% 298.29%
S&P 500(R) Index -4.38% 8.49% 13.12% 7.49% 50.33% 243.04% 150.23%
S&P 500 Information Technology Index -0.29% 14.93% 18.36% 10.79% 100.52% 439.66% 267.44%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -4.70% during the 12-month period covered by
this report. During the same period, the S&P 500 Information Technology Index
("benchmark") generated a return of -0.29%. The Semiconductors & Semiconductor
Equipment industry was the Fund's largest allocated industry over the period
with a 61.5% allocation. This sector was also the least contributing sector with
a -3.7% contribution, stemming from its -9.6% return. The Fund's top
contributing industry was the Software & Services industry with a 2.8%
contribution, stemming from its 31.4% allocation and 11.7% return. On a relative
basis, the Fund underperformed the benchmark. The primary cause of the
underperformance is due to the Fund over allocating the relatively poor
performing Semiconductors & Semiconductor Equipment industry securities by
24.9%, which created -2.0% of relative underperformance. There was no single
sector that contributed positively to the Fund relative to the performance
against the benchmark.
-----------------------------
Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Technology Sector
Index(SM) are trademarks of Nasdaq, Inc. (which with its affiliates is referred
to as the "Corporations") and are licensed for use by First Trust. The Fund has
not been passed on by the Corporations as to its legality or suitability. The
Fund is not issued, endorsed, sold, or promoted by the Corporations. THE
CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 6
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION (1) LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 87.02%
Communication Services 10.31
Health Care 2.67
-------
Total 100.00%
=======
(1) The above sector classification is based on Standard & Poor's Global
Industry Classification Standard ("GICS"), and is different than the
industry sector classification system used by the Index to select
securities, which is the Industry Classification Benchmark ("ICB") system,
the joint classification system of Dow Jones Indexes and FTSE Group.
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Workday, Inc., Class A 2.82%
Advanced Micro Devices, Inc. 2.71
Adobe, Inc. 2.71
Applied Materials, Inc. 2.70
Lam Research Corp. 2.69
Cadence Design Systems, Inc. 2.68
Autodesk, Inc. 2.68
Cerner Corp. 2.67
Microchip Technology, Inc. 2.67
Intuit, Inc. 2.66
-------
Total 26.99%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust
NASDAQ-100- NASDAQ-100
Technology Sector Technology Sector S&P 500 Information S&P 500(R)
Index Fund Index(SM) Technology Index Index
12/08 $10,000 $10,000 $10,000 $10,000
06/09 13,407 13,452 12,486 10,316
12/09 17,990 18,115 16,171 12,645
06/10 16,623 16,784 14,462 11,804
12/10 21,934 22,220 17,820 14,551
06/11 22,103 22,458 18,187 15,426
12/11 20,673 21,072 18,251 14,857
06/12 21,616 22,102 20,686 16,267
12/12 22,331 22,904 20,957 17,235
06/13 24,948 25,671 22,288 19,617
12/13 30,843 31,840 26,915 22,817
06/14 34,890 36,132 29,321 24,446
12/14 38,501 40,002 32,329 25,942
06/15 37,550 39,122 32,575 26,261
12/15 37,971 39,685 34,246 26,300
06/16 39,084 40,995 34,136 27,310
12/16 47,567 50,073 38,987 29,448
06/17 56,629 59,782 45,704 32,198
12/17 65,579 69,434 54,125 35,882
06/18 70,392 74,746 60,008 36,833
12/18 62,494 66,574 53,966 34,304
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 171 4 0 0
01/01/15 - 12/31/15 164 2 0 0
01/01/16 - 12/31/16 147 0 0 0
01/01/17 - 12/31/17 146 0 0 0
01/01/18 - 12/31/18 132 3 1 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 76 1 0 0
01/01/15 - 12/31/15 85 1 0 0
01/01/16 - 12/31/16 105 0 0 0
01/01/17 - 12/31/17 105 0 0 0
01/01/18 - 12/31/18 111 4 0 0
Page 7
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
The First Trust NASDAQ-100 Ex-Technology Sector Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Ex-Tech
Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its net assets (including investment borrowings) in common stocks that comprise
the Index. The Index is an equal-weighted index based on the securities of the
NASDAQ-100 Index(R) that are not classified as "technology" according to the
Industry Classification Benchmark classification system and, as a result, is a
subset of the NASDAQ-100 Index(R). The NASDAQ-100 Index(R) includes 100 of the
largest domestic and international non-financial companies listed on the Nasdaq
based on market capitalization. The Index is rebalanced quarterly. The Fund's
shares are listed for trading on the Nasdaq. The first day of secondary market
trading in shares of the Fund was February 15, 2007.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (2/8/07) Ended Ended (2/8/07)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -5.58% 6.10% 14.87% 7.69% 34.45% 300.08% 141.23%
Market Value -5.61% 6.10% 14.96% 7.69% 34.45% 303.10% 141.23%
INDEX PERFORMANCE
NASDAQ-100 Ex-Tech Sector Index(SM) -5.06% 6.72% 15.57% 8.35% 38.40% 325.12% 159.53%
Russell 1000(R) Index -4.78% 8.21% 13.28% 6.99% 48.37% 247.98% 123.29%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -5.58% during the 12-month period covered by
this report. During the same period, the Russell 1000(R) Index ("benchmark")
generated a return of -4.78%. The Fund's largest weighted sector over the period
was the Health Care sector with a 26.4% allocation. This sector had a -4.8%
return and a -1.2% contribution. The least contributing sector to the Fund's
return was the Consumer Discretionary sector with a -1.9% contribution, stemming
from its 26.3% allocation and -7.2% return. The top contributing sector to the
Fund's return was the Information Technology sector with a 0.6% contribution,
stemming from its 6.3% allocation and 10.1% return. On a relative basis, the
Fund underperformed the benchmark. The primary cause of the underperformance is
attributable to the Fund over allocating and underperforming the benchmark
amongst the Health Care sector by 12.8% and -10.3%, respectively, creating -1.3%
of relative underperformance. The Fund underweighted the Financials sector by
14.2%, which created 1.2% of relative outperformance as the Financial securities
were relatively poor performers over the period.
-----------------------------
Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Ex-Tech Sector
Index(SM) are trademarks of Nasdaq, Inc. (which with its affiliates is referred
to as the "Corporations") and are licensed for use by First Trust. The Fund has
not been passed on by the Corporations as to its legality or suitability. The
Fund is not issued, endorsed, sold, or promoted by the Corporations. THE
CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 8
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 27.78%
Health Care 24.57
Communication Services 15.92
Industrials 12.80
Consumer Staples 9.37
Information Technology 6.46
Financials 1.62
Utilities 1.48
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Netflix, Inc. 1.70%
Amazon.com, Inc. 1.69
Regeneron Pharmaceuticals, Inc. 1.69
Dollar Tree, Inc. 1.69
Incyte Corp. 1.68
Ross Stores, Inc. 1.67
JD.com, Inc., ADR 1.67
Align Technology, Inc. 1.66
Amgen, Inc. 1.66
Lululemon Athletica, Inc. 1.66
-------
Total 16.77%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust
NASDAQ-100 NASDAQ-100
Ex-Technology Sector Ex-Tech Sector Russell 1000(R)
Index Fund Index(SM) Index
12/08 $10,000 $10,000 $10,000
06/09 11,710 11,742 10,432
12/09 14,675 14,763 12,843
06/10 14,022 14,147 12,021
12/10 17,704 17,920 14,910
06/11 19,839 20,147 15,860
12/11 17,512 17,852 15,134
06/12 19,748 20,183 16,554
12/12 21,069 21,584 17,620
06/13 25,026 25,761 20,071
12/13 29,758 30,715 23,455
06/14 31,121 32,229 25,160
12/14 34,326 35,639 26,561
06/15 36,190 37,699 27,015
12/15 35,955 37,586 26,804
06/16 33,780 35,383 27,806
12/16 35,189 36,961 30,033
06/17 40,214 42,372 32,817
12/17 42,369 44,770 36,545
06/18 43,704 46,306 37,587
12/18 40,007 42,512 34,798
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 151 14 0 0
01/01/15 - 12/31/15 201 6 0 0
01/01/16 - 12/31/16 80 0 0 0
01/01/17 - 12/31/17 44 0 0 0
01/01/18 - 12/31/18 96 2 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 79 7 1 0
01/01/15 - 12/31/15 42 3 0 0
01/01/16 - 12/31/16 172 0 0 0
01/01/17 - 12/31/17 207 0 0 0
01/01/18 - 12/31/18 150 3 0 0
Page 9
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
The First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (the "Fund")
seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the NASDAQ(R)
Clean Edge(R) Green Energy Index(SM) (the "Index"). The Fund will normally
invest at least 90% of its net assets (including investment borrowings) in
common stocks that comprise the Index. The Index is a modified market
capitalization weighted index in which larger companies receive a larger Index
weighting and includes caps to prevent high concentrations among larger
alternative energy stocks. The Index is an equity index designed to track the
performance of clean-energy companies that are publicly traded in the United
States and includes companies engaged in manufacturing, development,
distribution, and installation of emerging clean-energy technologies including,
but not limited to, solar photovoltaics, biofuels, and advanced batteries. The
Index is reconstituted semi-annually in March and September and rebalanced
quarterly. The Fund's shares are listed for trading on the Nasdaq. The first day
of secondary market trading in shares of the Fund was February 14, 2007.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (2/8/07) Ended Ended (2/8/07)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -12.22% 0.53% 5.28% -0.56% 2.68% 67.21% -6.44%
Market Value -12.59% 0.48% 5.27% -0.58% 2.44% 67.15% -6.65%
INDEX PERFORMANCE
NASDAQ(R) Clean Edge(R) Green Energy
Index(SM) -12.11% 0.49% 5.35% -0.38% 2.46% 68.42% -4.42%
Russell 2000(R) Index -11.01% 4.41% 11.97% 5.76% 24.09% 209.83% 94.66%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -12.22% during the 12-month period covered by
this report. During the same period, the Russell 2000(R) Index ("benchmark")
generated a return of -11.01%. The Fund's largest allocated sector over the
period was the Information Technology sector with a 46.2% allocation. This
sector contributed -7.8% to the Fund's return, due to its -18.7% return. The
Energy sector was the Fund's top performing sector with a 119.4% return, but due
to the sector's low allocation of 1.0%, its contribution to the Fund's return
was limited to only 0.5%. On a relative basis, the Fund underperformed the
benchmark. The primary cause of the underperformance is attributable to the Fund
overweighting and underperforming the benchmark among the Information Technology
sector by 31.9% and -16.9%, respectively, creating -5.4% of relative drag. The
Energy sector reversed 2.1% of relative underperformance due to the Fund
outperforming the benchmark by 159.1%.
Nasdaq(R) and Clean Edge(R) are the registered trademarks (the "Marks") of
Nasdaq, Inc. ("Nasdaq") and Clean Edge, Inc. ("Clean Edge(R)") respectively.
Nasdaq and Clean Edge(R) are, collectively with their affiliates, the
"Corporations." The Marks are licensed for use by First Trust. The Fund has not
been passed on by the Corporations as to its legality or suitability. The Fund
is not issued, endorsed, sold, or promoted by the Corporations. The Fund should
not be construed in any way as investment advice by the Corporations. THE
CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 10
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 44.06%
Industrials 18.68
Utilities 17.97
Materials 8.70
Consumer Discretionary 8.35
Real Estate 1.16
Energy 1.08
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Tesla, Inc. 8.35%
ON Semiconductor Corp. 7.22
Albemarle Corp. 7.04
Integrated Device Technology, Inc. 6.49
Hexcel Corp. 5.13
Universal Display Corp. 4.48
Cree, Inc. 4.26
First Solar, Inc. 4.20
Brookfield Renewable Partners, L.P. 3.98
Littelfuse, Inc. 3.94
-------
Total 55.09%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust
NASDAQ(R) NASDAQ(R)
Clean Edge(R) Green Clean Edge(R) Russell 2000(R)
Energy Index Fund Green Energy Index(SM) Index
12/08 $10,000 $10,000 $10,000
06/09 12,368 12,402 10,264
12/09 14,379 14,472 12,717
06/10 11,913 12,025 12,469
12/10 14,674 14,863 16,132
06/11 13,656 13,885 17,134
12/11 8,624 8,798 15,460
06/12 8,347 8,498 16,779
12/12 8,581 8,682 17,987
06/13 12,828 12,944 20,840
12/13 16,285 16,438 24,970
06/14 18,729 18,910 25,767
12/14 15,789 15,924 26,192
06/15 16,945 17,093 27,436
12/15 14,773 14,909 25,035
06/16 13,325 13,414 25,591
12/16 14,459 14,514 30,371
06/17 16,904 16,989 31,887
12/17 19,047 19,165 34,821
06/18 18,338 18,469 37,488
12/18 16,721 16,842 30,983
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 122 3 0 0
01/01/15 - 12/31/15 160 1 0 0
01/01/16 - 12/31/16 68 0 0 0
01/01/17 - 12/31/17 164 0 0 0
01/01/18 - 12/31/18 151 2 1 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 124 3 0 0
01/01/15 - 12/31/15 89 2 0 0
01/01/16 - 12/31/16 184 0 0 0
01/01/17 - 12/31/17 87 0 0 0
01/01/18 - 12/31/18 95 2 0 0
Page 11
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST S&P REIT INDEX FUND (FRI)
The First Trust S&P REIT Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the S&P United States REIT Index (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in common stocks that comprise the Index. The
Index is a subset of the S&P Developed REIT Index, which measures the
performance of more than 200 REITs or REIT-like structures in 15 developed
markets. The S&P Developed REIT Index is a sub-index of the S&P Global REIT
Index. The S&P Developed REIT Index aims to represent an accurate measure of the
REIT developed equity market, reflecting the risk and return characteristics of
this broad universe on an on-going basis. The Index contains those constituents
of the S&P Developed REIT Index that are domiciled in the United States. The
Index includes the securities of small and mid cap companies. The Fund's shares
are listed for trading on the NYSE Arca. The first day of secondary market
trading in shares of the Fund was May 10, 2007.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (5/8/07) Ended Ended (5/8/07)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -4.19% 7.24% 11.58% 3.42% 41.84% 199.07% 47.96%
Market Value -4.18% 7.24% 11.64% 3.42% 41.84% 200.66% 47.97%
INDEX PERFORMANCE
S&P United States REIT Index* -3.79% 7.78% 12.16% N/A 45.46% 214.94% N/A
FTSE EPRA/NAREIT North America Index -3.89% 7.24% 12.06% 3.67% 41.85% 212.32% 52.16%
Russell 3000(R) Index -5.24% 7.91% 13.18% 6.66% 46.34% 244.95% 112.03%
------------------------------------------------------------------------------------------------------------------------------------
* On November 6, 2008, the Fund's underlying index changed from the S&P REIT
Composite Index to the S&P United States REIT Index. Effective December
31, 2008, the S&P REIT Composite Index was discontinued. Therefore, the
Fund's performance and historical returns shown for the periods prior to
November 6, 2008 are not necessarily indicative of the performance that
the Fund, based on its current Index, would have generated. The inception
date of the Index was June 30, 2008. Returns for the Index are only
disclosed for those periods in which the Index was in existence for the
whole period.
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -4.19% during the 12-month period covered by
this report. During the same period, the Russell 3000(R) Index ("benchmark")
generated a return of -5.24%. Retail Real Estate Investment Trusts ("REITs")
were given the highest allocation in the Fund over the period at 20.2%, but due
to these securities' poor return of -4.6%, their contribution to the Fund's
return was -1.0%. Health Care REITs were the Fund's top performing and
contributing REITs with a 7.6% return and 0.7% contribution. Office REITs were
the Fund's worst performing and contributing REITs with a -14.5% return and
-1.7% contribution. On a relative basis, the Fund outperformed the benchmark.
REITs accounted for 2.6% of the benchmark over the period and contributed -0.1%
to the benchmark's return. The Fund's allocation to Residential REITs created
1.4% of relative outperformance as the Fund over allocated the benchmark these
relatively well performing securities by 19.6%. The Fund over allocated the
benchmark by 11.4% amongst Office REITs, which created -1.1% of relative
underperformance.
-----------------------------
The S&P United States REIT Index is a product of S&P Dow Jones Indices LLC
("SPDJI"). Standard & Poor's(R) and S&P(R) are registered trademarks of Standard
& Poor's Financial Services LLC ("S&P"). The marks have been licensed for use by
SPDJI and sub-licensed by First Trust. The Fund is not sponsored, endorsed, sold
or promoted by SPDJI or its affiliates, and SPDJI and its affiliates make no
representation, warranty or condition regarding the advisability of buying,
selling or holding shares of the Fund.
Page 12
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST S&P REIT INDEX FUND (FRI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
REIT CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Retail 19.13%
Residential 18.50
Specialized 15.95
Health Care 13.11
Office 12.84
Industrial 8.62
Hotel & Resort 6.07
Diversified 5.78
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Simon Property Group, Inc. 6.88%
Prologis, Inc. 4.89
Public Storage 4.02
Welltower, Inc. 3.45
Equity Residential 3.22
AvalonBay Communities, Inc. 3.18
Digital Realty Trust, Inc. 2.91
Ventas, Inc. 2.77
Realty Income Corp. 2.46
Boston Properties, Inc. 2.30
-------
Total 36.08%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust S&P United States FTSE EPRA/NAREIT Russell 3000(R)
S&P REIT Index Fund REIT Index North America Index Index
12/08 $10,000 $10,000 $10,000 $10,000
06/09 8,731 8,757 8,993 10,420
12/09 12,801 12,859 13,222 12,834
06/10 13,500 13,593 13,900 12,058
12/10 16,351 16,521 17,009 15,007
06/11 17,986 18,219 18,807 15,960
12/11 17,642 17,920 18,401 15,160
06/12 20,225 20,595 21,091 16,573
12/12 20,710 21,143 21,741 17,649
06/13 21,971 22,502 22,763 20,130
12/13 21,088 21,649 22,019 23,570
06/14 24,749 25,468 25,780 25,206
12/14 27,333 28,203 28,219 26,529
06/15 25,603 26,483 26,509 27,044
12/15 27,871 28,919 28,730 26,657
06/16 31,483 32,762 32,499 27,622
12/16 30,079 31,376 31,079 30,050
06/17 30,614 32,025 31,642 32,733
12/17 31,214 32,736 32,496 36,397
06/18 31,560 33,184 33,016 37,567
12/18 29,907 31,494 31,232 34,495
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 193 0 0 0
01/01/15 - 12/31/15 130 0 0 0
01/01/16 - 12/31/16 156 0 0 0
01/01/17 - 12/31/17 106 0 0 0
01/01/18 - 12/31/18 86 3 1 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 59 0 0 0
01/01/15 - 12/31/15 122 0 0 0
01/01/16 - 12/31/16 96 0 0 0
01/01/17 - 12/31/17 145 0 0 0
01/01/18 - 12/31/18 160 0 1 0
Page 13
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST WATER ETF (FIW)
The First Trust Water ETF (the "Fund") seeks investment results that correspond
generally to the price and yield (before the Fund's fees and expenses) of an
equity index called the ISE Clean Edge Water Index (the "Index"). The Fund will
normally invest at least 90% of its net assets (including investment borrowings)
in common stocks that comprise the Index. The Index is a modified market
capitalization weighted index comprised of 36 stocks that derive a substantial
portion of their revenues from the potable and wastewater industries. The Fund's
shares are listed for trading on the NYSE Arca. The first day of secondary
market trading in shares of the Fund was May 11, 2007.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (5/8/07) Ended Ended (5/8/07)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -8.89% 6.26% 11.80% 7.86% 35.47% 205.14% 141.53%
Market Value -8.99% 6.23% 11.84% 7.86% 35.29% 206.15% 141.41%
INDEX PERFORMANCE
ISE Clean Edge Water Index -8.59% 6.79% 12.49% 8.52% 38.89% 224.58% 159.26%
Russell 3000(R) Index -5.24% 7.91% 13.18% 6.66% 46.34% 244.95% 112.03%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -8.89% during the 12-month period covered by
this report. During the same period, the Russell 3000(R) Index ("benchmark")
generated a return of -5.24%. The Fund's largest allocated sector was the
Industrials sector with a 56.3% allocation. This sector had a -14.3% return and
-8.1% contribution to the Fund's return. The top performing sector was the
Health Care sector with a 12.3% return and 1.3% contribution, stemming from its
12.2% allocation. The worst performing sector was the Materials sector with a
-17.7% return. This sector had a 5.8% allocation and -1.0% contribution to the
Fund's return. On a relative basis, the Fund underperformed the benchmark. The
primary cause of the underperformance is due to the Fund over allocating the
benchmark among the poor performing Industrials sector by 45.8%, creating -4.1%
of relative underperformance. The Fund over allocated the benchmark among the
relatively well performing Utilities securities by 18.1%, which created 1.2% of
relative outperformance.
-----------------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE Clean Edge Water
Index" are trademarks of the International Securities Exchange, LLC and have
been licensed for use for certain purposes by First Trust. The Fund, based on
the ISE Clean Edge Water Index, is not sponsored, endorsed, sold or promoted by
the International Securities Exchange, LLC and the International Securities
Exchange, LLC makes no representation regarding the advisability of trading in
such product.
Page 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST WATER ETF (FIW) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 53.73%
Utilities 23.94
Health Care 12.62
Materials 5.17
Information Technology 4.54
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
American Water Works Co., Inc. 4.80%
Agilent Technologies, Inc. 4.62
Danaher Corp. 4.61
Ecolab, Inc. 4.53
Roper Technologies, Inc. 4.13
Xylem, Inc. 4.07
Pentair PLC 4.02
American States Water Co. 3.85
IDEX Corp. 3.81
Aqua America, Inc. 3.72
-------
Total 42.16%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust ISE Clean Edge Russell 3000(R)
Water ETF Water Index Index
12/08 $10,000 $10,000 $10,000
06/09 10,320 10,362 10,420
12/09 12,031 12,121 12,834
06/10 11,357 11,479 12,058
12/10 14,376 14,591 15,007
06/11 15,049 15,329 15,960
12/11 13,568 13,868 15,160
06/12 14,914 15,306 16,573
12/12 17,209 17,720 17,649
06/13 18,429 19,056 20,130
12/13 22,529 23,372 23,570
06/14 23,171 24,104 25,206
12/14 22,610 23,598 26,529
06/15 21,113 22,102 27,044
12/15 20,391 21,415 26,657
06/16 23,937 25,227 27,622
12/16 26,958 28,486 30,050
06/17 29,433 31,115 32,733
12/17 33,495 35,512 36,399
06/18 33,227 35,256 37,571
12/18 30,517 32,460 34,495
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 195 0 0 0
01/01/15 - 12/31/15 133 0 0 0
01/01/16 - 12/31/16 152 0 0 0
01/01/17 - 12/31/17 184 0 0 0
01/01/18 - 12/31/18 177 5 1 1
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 56 1 0 0
01/01/15 - 12/31/15 119 0 0 0
01/01/16 - 12/31/16 100 0 0 0
01/01/17 - 12/31/17 67 0 0 0
01/01/18 - 12/31/18 65 1 0 1
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NATURAL GAS ETF (FCG)
The First Trust Natural Gas ETF (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE-Revere Natural Gas(TM) Index (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in equity securities that comprise the Index.
The Index is designed to track public companies that derive a substantial
portion of their revenue from mid-stream securities and/or the exploration and
production of natural gas. Equity securities are selected for inclusion in the
Index using a quantitative ranking and screening system that begins with the
universe of equity securities of issuers that are involved in the exploration
and production of natural gas and that satisfy market capitalization, liquidity
and weighting concentration requirements. After application of the screens, the
remaining equity securities are divided into two groups, one for equity
securities issued by master limited partnerships ("MLPs") and one for equity
securities issued by entities that are not MLPs ("non-MLPs"). The Index is
allocated 85% to equity securities issued by non-MLPs, and the remaining 15%
consists of equity securities issued by MLPs. The Index uses a linear-based
capitalization-weighted methodology for each of the MLP and non-MLP group of
constituents that initially ranks the equity securities based on market
capitalization and average daily trading volume, and then adjusts the combined
rankings of each equity security by a factor relating to its market
capitalization. The resulting linear weight distribution prevents a few large
component stocks from dominating the Index while allowing smaller companies to
adequately influence Index performance. The Fund's shares are listed for trading
on the NYSE Arca. The first day of secondary market trading in shares of the
Fund was May 11, 2007.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (5/8/07) Ended Ended (5/8/07)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -34.77% -30.38% -12.08% -14.34% -83.65% -72.39% -83.53%
Market Value -34.77% -30.37% -11.96% -14.34% -83.64% -72.04% -83.53%
INDEX PERFORMANCE
ISE-Revere Natural Gas(TM) Index -34.54% -30.40% -11.77% -14.02% -83.67% -71.41% -82.80%
S&P Composite 1500(R) Energy Index -19.31% -6.56% 3.19% 0.57% -28.77% 36.85% 6.88%
Russell 3000(R) Index -5.24% 7.91% 13.18% 6.66% 46.34% 244.95% 112.03%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -34.77% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500(R) Energy Index
("benchmark") generated a return of -19.31%. The Oil, Gas & Consumable Fuels
industry made up 92.2% of the Fund over the period. Anadarko Petroleum Corp. was
the top performing security in the Fund with a 28.7% return, while Ultra
Petroleum Corp. was the worst performing security in the Fund with a -77.6%
return. On a relative basis, the Fund underperformed the benchmark. The primary
cause of the underperformance is attributable to the Fund underperforming the
benchmark amongst the Oil, Gas & Consumable Fuels securities by -20.3%, which
created -18.8% of relative drag. The Fund outperformed the benchmark amongst the
Energy Equipment & Services securities by 6.9%, which created 3.4% of relative
outperformance.
-----------------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE-Revere Natural
Gas(TM) Index" are trademarks of the International Securities Exchange, LLC and
have been licensed for use for certain purposes by First Trust. The Fund, based
on the ISE-Revere Natural Gas(TM) Index, is not sponsored, endorsed, sold or
promoted by the International Securities Exchange, LLC and the International
Securities Exchange, LLC makes no representation regarding the advisability of
trading in such product.
Page 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NATURAL GAS ETF (FCG) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SUB-INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Oil & Gas Exploration & Production 77.87%
Oil & Gas Storage & Transportation 16.79
Gas Utilities 4.31
Oil & Gas Drilling 1.03
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
EQT Corp. 5.56%
Cabot Oil & Gas Corp. 4.89
Continental Resources, Inc. 4.84
Encana Corp. 4.74
Devon Energy Corp. 4.60
Noble Energy, Inc. 4.35
Concho Resources, Inc. 4.35
National Fuel Gas Co. 4.31
Cimarex Energy Co. 4.14
Murphy Oil Corp. 3.91
-------
Total 45.69%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust ISE-Revere Natural Russell 3000(R) S&P Composite 1500(R)
Natural Gas ETF Gas(TM) Index Index Energy Index
12/08 $10,000 $10,000 $10,000 $10,000
06/09 10,816 10,834 10,420 9,910
12/09 14,920 14,988 12,834 11,641
06/10 12,991 13,116 12,058 10,263
12/10 16,744 17,044 15,007 14,129
06/11 18,454 18,852 15,960 15,752
12/11 15,599 15,990 15,160 14,682
06/12 14,120 14,519 16,573 14,250
12/12 13,492 13,921 17,649 15,319
06/13 13,893 14,360 20,130 16,808
12/13 16,884 17,503 23,570 19,210
06/14 20,462 21,259 25,206 21,700
12/14 9,791 10,147 26,529 17,449
06/15 8,347 8,575 27,044 16,631
12/15 4,005 4,091 26,657 13,598
06/16 4,442 4,526 27,622 15,715
12/16 4,785 4,900 30,050 17,310
06/17 3,812 3,917 32,733 14,918
12/17 4,233 4,367 36,399 16,956
06/18 4,368 4,521 37,571 18,216
12/18 2,761 2,859 34,495 13,682
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 140 1 0 0
01/01/15 - 12/31/15 155 1 0 0
01/01/16 - 12/31/16 156 6 1 0
01/01/17 - 12/31/17 116 0 0 0
01/01/18 - 12/31/18 104 6 2 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 111 0 0 0
01/01/15 - 12/31/15 93 3 0 0
01/01/16 - 12/31/16 88 1 0 0
01/01/17 - 12/31/17 135 0 0 0
01/01/18 - 12/31/18 137 2 0 0
Page 17
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CHINDIA ETF (FNI)
The First Trust Chindia ETF (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE ChIndia(TM) Index (the "Index"). The
Fund will normally invest at least 90% of its net assets (including investment
borrowings) in securities that comprise the Index. The Index is a modified
market capitalization weighted portfolio of 50 American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs") and/or stocks selected from a
universe of all listed ADRs, ADSs, and/or stocks of companies from China and
India currently trading on a U.S. exchange. The Fund's shares are listed for
trading on the NYSE Arca. The first day of secondary market trading in shares of
the Fund was May 11, 2007.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (5/8/07) Ended Ended (5/8/07)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -20.68% 3.14% 11.44% 4.99% 16.71% 195.36% 76.27%
Market Value -20.84% 3.07% 11.34% 4.97% 16.31% 192.75% 76.04%
INDEX PERFORMANCE
ISE ChIndia(TM) Index -20.27% 3.64% 12.00% 5.53% 19.58% 210.56% 87.28%
Russell 3000(R) Index -5.24% 7.91% 13.18% 6.66% 46.34% 244.95% 112.03%
MSCI Emerging Markets Index -14.58% 1.65% 8.02% 2.17% 8.51% 116.29% 28.36%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -20.68% during the 12-month period covered by
this report. During the same period, the MSCI Emerging Markets Index
("benchmark") generated a return of -14.58%. Chinese securities were given the
largest allocation in the Fund over the period with a 53.8% allocation. These
securities returned -31.0% and contributed -17.2% to the Fund's return. Indian
securities comprised the remainder of the Fund and had a -6.9% return and -2.8%
contribution. On a relative basis, the Fund underperformed the benchmark. The
underperformance can be attributed to the Fund allocating 27.0% more weighting
to the poor performing Chinese securities, which created -8.7% of
underperformance. The benchmark had a 14.6% allocation to South Korean
securities versus the Fund's 0% allocation. South Korean securities returned
-21.1% in the benchmark, which created 1.6% of relative outperformance for the
Fund.
-----------------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE ChIndia(TM) Index"
are trademarks of the International Securities Exchange, LLC and have been
licensed for use for certain purposes by First Trust. The Fund, based on the ISE
ChIndia(TM) Index, is not sponsored, endorsed, sold or promoted by the
International Securities Exchange, LLC and the International Securities
Exchange, LLC makes no representation regarding the advisability of trading in
such product.
Page 18
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CHINDIA ETF (FNI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 37.20%
Communication Services 19.97
Financials 17.66
Information Technology 13.65
Materials 4.38
Health Care 3.90
Energy 1.90
Industrials 1.34
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
HDFC Bank Ltd., ADR 7.56%
ICICI Bank Ltd., ADR 7.49
JD.com, Inc., ADR 7.30
Infosys Ltd., ADR 7.14
Alibaba Group Holding Ltd., ADR 6.31
Baidu, Inc., ADR 6.23
NetEase, Inc, ADR 4.38
Vedanta Ltd., ADR 4.38
Tata Motors Ltd., ADR 4.22
Wipro Ltd., ADR 4.16
-------
Total 59.17%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust ISE ChIndia(TM) Russell 3000(R) MSCI Emerging
Chindia ETF Index Index Markets Index
12/08 $10,000 $10,000 $10,000 $10,000
06/09 13,956 14,012 10,420 13,601
12/09 18,157 18,288 12,834 17,850
06/10 17,661 17,851 12,058 16,749
12/10 21,508 21,842 15,007 21,219
06/11 21,861 22,325 15,960 21,406
12/11 15,913 16,199 15,160 17,311
06/12 16,871 17,200 16,573 17,991
12/12 18,634 19,037 17,649 20,465
06/13 18,863 19,328 20,130 18,506
12/13 25,305 25,969 23,570 19,931
06/14 26,887 27,652 25,206 21,155
12/14 25,906 26,684 26,529 19,496
06/15 27,748 28,635 27,044 20,071
12/15 25,822 26,725 26,657 16,587
06/16 24,882 25,822 27,622 17,650
12/16 25,268 26,318 30,050 18,442
06/17 32,437 33,869 32,733 21,841
12/17 37,234 38,949 36,399 25,318
06/18 36,515 38,283 37,571 23,632
12/18 29,533 31,055 34,495 21,626
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
QUARTER ENDED 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 96 0 0 0
01/01/15 - 12/31/15 147 0 0 0
01/01/16 - 12/31/16 132 0 0 0
01/01/17 - 12/31/17 189 0 0 0
01/01/18 - 12/31/18 143 1 0 1
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
QUARTER ENDED 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 155 1 0 0
01/01/15 - 12/31/15 105 0 0 0
01/01/16 - 12/31/16 120 0 0 0
01/01/17 - 12/31/17 62 0 0 0
01/01/18 - 12/31/18 105 1 0 0
Page 19
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
The First Trust NASDAQ(R) ABA Community Bank Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ OMX(R) ABA
Community Bank Index(SM) (the "Index"). The Fund will normally invest at least
90% of its net assets (including investment borrowings) in common stocks that
comprise the Index. The Index is a market capitalization weighted index that
includes all NASDAQ banks and thrifts or their holding companies excluding the
50 largest U.S. banks by asset size. Also excluded are banks that have an
international specialization and those banks that have a credit-card
specialization, as screened by the American Bankers Association ("ABA") based on
the most recent data from the Federal Deposit Insurance Corporation. Banks with
an international specialization are those institutions with assets greater than
$10 billion and more than 25% of total assets in foreign offices. Banks with a
credit-card specialization are those institutions with credit-card loans plus
securitized receivables in excess of 50% of total assets plus securitized
receivables. Securities in the Index must have a market capitalization of at
least $200 million and a three-month average daily trading volume of at least
$500 thousand. The Index is rebalanced quarterly and reconstituted
semi-annually. The Fund's shares are listed for trading on the Nasdaq. The first
day of secondary market trading in shares of the Fund was July 1, 2009.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (6/29/09) Ended (6/29/09)
12/31/18 12/31/18 to 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -16.14% 5.15% 10.03% 28.54% 148.05%
Market Value -16.39% 5.08% 10.02% 28.13% 147.95%
INDEX PERFORMANCE
NASDAQ OMX(R) ABA Community Bank Index(SM) -15.69% 5.79% 10.72% 32.51% 163.37%
S&P Composite 1500(R) Financials Index -13.03% 8.31% 12.10% 49.05% 196.30%
Russell 3000(R) Index -5.24% 7.91% 13.33% 46.34% 228.56%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -16.14% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500(R) Financials Index
("benchmark") generated a return of -13.03%. The Fund was made up of 99.1%
Financial securities over the period. More specifically, this 99.1% allocation
was invested in the Banking industry. This industry had a -16.1% return and
contributed -16.1% to the Fund's return. Popular, Inc. was the Fund's top
performing security over the period with a 35.8% return, while Bank OZK was the
Fund's worst performing security with a -52.0% return. On a relative basis, the
Fund underperformed the benchmark. The primary cause of the underperformance is
attributable to the Fund underperforming the benchmark amongst Financials
securities by -2.6%, creating -3.1% of relative underperformance.
-----------------------------
Nasdaq(R), OMX(R), Nasdaq OMX(R), and NASDAQ OMX(R) ABA Community Bank Index(SM)
are trademarks of Nasdaq, Inc. ("Nasdaq") and American Bankers Association
("ABA") (Nasdaq and ABA, collectively with their affiliates, are referred to as
the "Corporations") and are licensed for use by First Trust. The Fund has not
been passed on by the Corporations as to its legality or suitability. The Fund
is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS
MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 20
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Banks 88.14%
Thrifts & Mortgage Finance 11.50
IT Services 0.36
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
East West Bancorp, Inc. 2.91%
Commerce Bancshares, Inc. 2.90
BOK Financial Corp. 2.21
Popular, Inc. 2.18
TFS Financial Corp. 2.08
First Citizens BancShares, Inc., Class A 1.88
PacWest Bancorp 1.87
First Financial Bankshares, Inc. 1.80
Wintrust Financial Corp. 1.73
Pinnacle Financial Partners, Inc. 1.65
-------
Total 21.21%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 29, 2009 - DECEMBER 31, 2018
First Trust
NASDAQ(R) ABA NASDAQ OMX(R)
Community Bank ABA Community S&P Composite 1500(R) Russell 3000(R)
Index Fund Bank Index(SM) Financials Index Index
06/09 $10,000 $10,000 $10,000 $10,000
12/09 11,280 11,318 12,112 12,224
06/10 11,438 11,505 11,744 11,484
12/10 12,721 12,846 13,722 14,293
06/11 12,520 12,688 13,420 15,201
12/11 11,898 12,095 11,662 14,439
06/12 13,081 13,343 13,227 15,785
12/12 13,507 13,817 14,806 16,809
06/13 16,006 16,427 17,584 19,172
12/13 19,302 19,873 19,879 22,448
06/14 19,296 19,929 20,907 24,006
12/14 19,827 20,537 22,839 25,266
06/15 21,637 22,484 22,892 25,756
12/15 21,390 22,288 22,677 25,388
06/16 21,026 21,976 22,310 26,307
12/16 29,426 30,865 28,184 28,619
06/17 28,402 29,883 29,940 31,175
12/17 29,581 31,239 34,069 34,674
06/18 31,092 32,931 32,917 35,790
12/18 24,805 26,338 29,629 32,855
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 115 9 0 0
01/01/15 - 12/31/15 137 5 0 0
01/01/16 - 12/31/16 133 0 0 0
01/01/17 - 12/31/17 128 5 0 0
01/01/18 - 12/31/18 125 12 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 116 12 0 0
01/01/15 - 12/31/15 110 0 0 0
01/01/16 - 12/31/16 119 0 0 0
01/01/17 - 12/31/17 116 1 1 0
01/01/18 - 12/31/18 106 7 1 0
Page 21
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated. The total returns would have been lower if certain fees had not been
waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of each Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
each Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in each Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike each Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 22
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2018 (UNAUDITED)
As a shareholder of First Trust NASDAQ-100 Equal Weighted Index Fund, First
Trust NASDAQ-100-Technology Sector Index Fund, First Trust NASDAQ-100
Ex-Technology Sector Index Fund, First Trust NASDAQ(R) Clean Edge(R) Green
Energy Index Fund, First Trust S&P REIT Index Fund, First Trust Water ETF, First
Trust Natural Gas ETF, First Trust Chindia ETF or First Trust NASDAQ(R) ABA
Community Bank Index Fund (each a "Fund" and collectively, the "Funds"), you
incur two types of costs: (1) transaction costs; and (2) ongoing costs,
including management fees, distribution and/or service fees, if any, and other
Fund expenses. This Example is intended to help you understand your ongoing
costs of investing in the Funds and to compare these costs with the ongoing
costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended December 31, 2018.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2018 DECEMBER 31, 2018 PERIOD (a) PERIOD (b)
--------------------------------------------------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX
FUND (QQEW)
Actual $1,000.00 $ 905.70 0.59% $2.83
Hypothetical (5% return before expenses) $1,000.00 $1,022.23 0.59% $3.01
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX
FUND (QTEC)
Actual $1,000.00 $ 887.80 0.58% $2.76
Hypothetical (5% return before expenses) $1,000.00 $1,022.28 0.58% $2.96
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR
INDEX FUND (QQXT)
Actual $1,000.00 $ 915.40 0.60% $2.90
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY
INDEX FUND (QCLN)
Actual $1,000.00 $ 911.70 0.60% $2.89
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST S&P REIT INDEX FUND (FRI)
Actual $1,000.00 $ 947.70 0.50% $2.45
Hypothetical (5% return before expenses) $1,000.00 $1,022.68 0.50% $2.55
FIRST TRUST WATER ETF (FIW)
Actual $1,000.00 $ 918.40 0.55% $2.66
Hypothetical (5% return before expenses) $1,000.00 $1,022.43 0.55% $2.80
Page 23
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
DECEMBER 31, 2018 (UNAUDITED)
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2018 DECEMBER 31, 2018 PERIOD (a) PERIOD (b)
--------------------------------------------------------------------------------------------------------------------------
FIRST TRUST NATURAL GAS ETF (FCG)
Actual $1,000.00 $ 632.10 0.60% $2.47
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST CHINDIA ETF (FNI)
Actual $1,000.00 $ 808.80 0.59% $2.69
Hypothetical (5% return before expenses) $1,000.00 $1,022.23 0.59% $3.01
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK
INDEX FUND (QABA)
Actual $1,000.00 $ 797.80 0.60% $2.72
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
(a) These expense ratios reflect an expense cap for certain Funds. See Note 3
in Notes to Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (July 1,
2018 through December 31, 2018), multiplied by 184/365 (to reflect the
six-month period).
Page 24
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.8%
AIRLINES -- 2.0%
141,944 American Airlines Group, Inc. $ 4,557,822
53,461 United Continental Holdings,
Inc. (a) 4,476,289
--------------
9,034,111
--------------
AUTOMOBILES -- 1.0%
14,211 Tesla, Inc. (a) 4,729,421
--------------
BEVERAGES -- 1.9%
91,169 Monster Beverage Corp. (a) 4,487,338
40,048 PepsiCo, Inc. 4,424,503
--------------
8,911,841
--------------
BIOTECHNOLOGY -- 9.1%
45,979 Alexion Pharmaceuticals, Inc. (a) 4,476,515
24,356 Amgen, Inc. 4,741,383
15,594 Biogen, Inc. (a) 4,692,546
54,790 BioMarin Pharmaceutical, Inc. (a) 4,665,369
72,399 Celgene Corp. (a) 4,640,052
69,959 Gilead Sciences, Inc. 4,375,935
75,770 Incyte Corp. (a) 4,818,214
12,851 Regeneron Pharmaceuticals,
Inc. (a) 4,799,849
28,284 Vertex Pharmaceuticals, Inc. (a) 4,686,942
--------------
41,896,805
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.0%
27,928 Cintas Corp. 4,691,625
--------------
COMMUNICATIONS EQUIPMENT
-- 1.0%
105,065 Cisco Systems, Inc. 4,552,466
--------------
ELECTRIC UTILITIES -- 0.9%
85,910 Xcel Energy, Inc. 4,232,786
--------------
ENTERTAINMENT -- 5.9%
97,743 Activision Blizzard, Inc. 4,551,892
58,120 Electronic Arts, Inc. (a) 4,586,249
18,346 NetEase, Inc., ADR 4,318,098
18,107 Netflix, Inc. (a) 4,846,520
44,133 Take-Two Interactive Software,
Inc. (a) 4,543,051
47,016 Twenty-First Century Fox, Inc.,
Class A 2,262,410
47,294 Twenty-First Century Fox, Inc.,
Class B 2,259,707
--------------
27,367,927
--------------
FOOD & STAPLES RETAILING -- 2.0%
22,697 Costco Wholesale Corp. 4,623,606
66,414 Walgreens Boots Alliance, Inc. 4,538,069
--------------
9,161,675
--------------
FOOD PRODUCTS -- 1.9%
99,779 Kraft Heinz (The) Co. 4,294,488
109,034 Mondelez International, Inc.,
Class A 4,364,631
--------------
8,659,119
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES
-- 3.0%
22,726 Align Technology, Inc. (a) $ 4,759,506
24,245 IDEXX Laboratories, Inc. (a) 4,510,055
9,884 Intuitive Surgical, Inc. (a) 4,733,645
--------------
14,003,206
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.0%
246 Cigna Corp. 46,720
58,533 Henry Schein, Inc. (a) 4,596,011
--------------
4,642,731
--------------
HEALTH CARE TECHNOLOGY -- 1.0%
89,857 Cerner Corp. (a) 4,712,101
--------------
HOTELS, RESTAURANTS & LEISURE
-- 3.0%
43,400 Marriott International, Inc.,
Class A 4,711,504
72,314 Starbucks Corp. 4,657,021
46,626 Wynn Resorts Ltd. 4,611,778
--------------
13,980,303
--------------
INSURANCE -- 1.0%
30,141 Willis Towers Watson PLC 4,577,212
--------------
INTERACTIVE MEDIA & SERVICES
-- 3.0%
2,253 Alphabet, Inc., Class A (a) 2,354,295
2,274 Alphabet, Inc., Class C (a) 2,354,977
28,087 Baidu, Inc., ADR (a) 4,454,598
35,402 Facebook, Inc., Class A (a) 4,640,848
--------------
13,804,718
--------------
INTERNET & DIRECT MARKETING RETAIL
-- 7.0%
3,209 Amazon.com, Inc. (a) 4,819,822
2,702 Booking Holdings, Inc. (a) 4,653,979
169,177 Ctrip.com International Ltd.,
ADR (a) 4,577,930
164,661 eBay, Inc. (a) 4,622,034
39,819 Expedia Group, Inc. 4,485,610
227,040 JD.com, Inc., ADR (a) 4,751,947
14,906 MercadoLibre, Inc. (a) 4,365,222
--------------
32,276,544
--------------
IT SERVICES -- 6.0%
35,056 Automatic Data Processing, Inc. 4,596,543
72,518 Cognizant Technology Solutions
Corp., Class A 4,603,443
62,540 Fiserv, Inc. (a) 4,596,064
69,308 Paychex, Inc. 4,515,416
55,987 PayPal Holdings, Inc. (a) 4,707,947
31,149 VeriSign, Inc. (a) 4,619,085
--------------
27,638,498
--------------
LEISURE PRODUCTS -- 1.0%
57,038 Hasbro, Inc. 4,634,338
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.0%
15,817 Illumina, Inc. (a) 4,743,993
--------------
See Notes to Financial Statements Page 25
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MACHINERY -- 1.0%
80,798 PACCAR, Inc. $ 4,616,798
--------------
MEDIA -- 3.9%
15,558 Charter Communications, Inc.,
Class A (a) 4,433,563
129,740 Comcast Corp., Class A 4,417,647
104,558 Liberty Global PLC, Class A (a) 2,231,268
108,516 Liberty Global PLC, Class C (a) 2,239,770
789,598 Sirius XM Holdings, Inc. (b) 4,508,605
--------------
17,830,853
--------------
MULTILINE RETAIL -- 1.0%
53,184 Dollar Tree, Inc. (a) 4,803,579
--------------
PHARMACEUTICALS -- 1.0%
170,450 Mylan N.V. (a) 4,670,330
--------------
PROFESSIONAL SERVICES -- 1.0%
41,793 Verisk Analytics, Inc. (a) 4,557,109
--------------
ROAD & RAIL -- 1.9%
72,534 CSX Corp. 4,506,537
48,146 J.B. Hunt Transport Services, Inc. 4,479,504
--------------
8,986,041
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 17.1%
257,727 Advanced Micro Devices, Inc. (a) 4,757,640
53,799 Analog Devices, Inc. 4,617,568
144,269 Applied Materials, Inc. 4,723,367
29,814 ASML Holding N.V. 4,639,655
18,208 Broadcom, Inc. 4,629,930
98,243 Intel Corp. 4,610,544
51,598 KLA-Tencor Corp. 4,617,505
34,578 Lam Research Corp. 4,708,486
91,333 Maxim Integrated Products, Inc. 4,644,283
65,144 Microchip Technology, Inc. 4,685,157
144,797 Micron Technology, Inc. (a) 4,594,409
34,004 NVIDIA Corp. 4,539,534
63,258 NXP Semiconductors N.V. 4,635,546
80,222 QUALCOMM, Inc. 4,565,434
68,300 Skyworks Solutions, Inc. 4,577,466
48,945 Texas Instruments, Inc. 4,625,303
54,315 Xilinx, Inc. 4,626,009
--------------
78,797,836
--------------
SOFTWARE -- 10.1%
21,003 Adobe, Inc. (a) 4,751,719
36,481 Autodesk, Inc. (a) 4,691,821
108,269 Cadence Design Systems, Inc. (a) 4,707,536
44,231 Check Point Software
Technologies Ltd. (a) 4,540,312
43,946 Citrix Systems, Inc. 4,502,707
23,811 Intuit, Inc. 4,687,195
44,933 Microsoft Corp. 4,563,845
237,338 Symantec Corp. 4,484,502
54,409 Synopsys, Inc. (a) 4,583,414
31,241 Workday, Inc., Class A (a) 4,988,563
--------------
46,501,614
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SPECIALTY RETAIL -- 3.1%
13,483 O'Reilly Automotive, Inc. (a) $ 4,642,601
57,258 Ross Stores, Inc. 4,763,866
19,248 Ulta Beauty, Inc. (a) 4,712,680
--------------
14,119,147
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 3.0%
29,053 Apple, Inc. 4,582,820
77,303 NetApp, Inc. 4,612,670
121,214 Western Digital Corp. 4,481,282
--------------
13,676,772
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.0%
39,022 Lululemon Athletica, Inc. (a) 4,745,465
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.0%
87,882 Fastenal Co. 4,595,350
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 1.0%
70,716 T-Mobile US, Inc. (a) 4,498,245
--------------
TOTAL COMMON STOCKS -- 99.8% 460,650,559
(Cost $436,396,472) --------------
MONEY MARKET FUNDS -- 0.3%
1,400,245 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.61% (c) (d) 1,400,245
(Cost $1,400,245) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.6%
$ 617,834 BNP Paribas S.A., 2.95% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$617,935. Collateralized by
U.S. Treasury Note, interest
rate of 2.375%, due 04/30/20.
The value of the collateral
including accrued interest is
$632,689. (d) 617,834
2,223,599 JPMorgan Chase & Co., 2.85% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$2,223,951. Collateralized by
U.S. Treasury Bill, interest
rate of 0.000%, due 05/09/19.
The value of the collateral is
$2,268,028. (d) 2,223,599
--------------
TOTAL REPURCHASE AGREEMENTS
-- 0.6% 2,841,433
(Cost $2,841,433) --------------
TOTAL INVESTMENTS -- 100.7% 464,892,237
(Cost $440,638,150) (e)
NET OTHER ASSETS AND
LIABILITIES -- (0.7)% (3,427,746)
--------------
NET ASSETS -- 100.0% $ 461,464,491
==============
Page 26 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $4,057,743 and the total value of the collateral held by the
Fund is $4,236,665.
(c) Rate shown reflects yield as of December 31, 2018.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $444,745,842. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$62,869,451 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$42,723,056. The net unrealized appreciation was $20,146,395.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 460,650,559 $ -- $ --
Money Market
Funds 1,400,245 -- --
Repurchase
Agreements -- 2,841,433 --
-----------------------------------------------------
Total Investments $ 462,050,804 $ 2,841,433 $ --
=====================================================
* See Portfolio of Investments for industry breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 4,057,743
Non-cash Collateral(2) (4,057,743)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities which is
included in "Investments, at value", is not offset and is shown on a gross
basis
(2) At December 31, 2018, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 2,841,433
Non-cash Collateral(4) (2,841,433)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2018, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 27
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.8%
COMMUNICATIONS EQUIPMENT
-- 2.6%
1,162,867 Cisco Systems, Inc. $ 50,387,027
--------------
ENTERTAINMENT -- 2.5%
204,359 NetEase, Inc., ADR 48,099,978
--------------
HEALTH CARE TECHNOLOGY -- 2.7%
990,855 Cerner Corp. (a) 51,960,436
--------------
INTERACTIVE MEDIA & SERVICES
-- 7.8%
24,892 Alphabet, Inc., Class A (a) 26,011,144
25,136 Alphabet, Inc., Class C (a) 26,031,093
311,697 Baidu, Inc., ADR (a) 49,435,144
390,462 Facebook, Inc., Class A (a) 51,185,664
--------------
152,663,045
--------------
IT SERVICES -- 5.2%
805,167 Cognizant Technology Solutions
Corp., Class A 51,112,001
343,733 VeriSign, Inc. (a) 50,972,167
--------------
102,084,168
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 44.8%
2,855,095 Advanced Micro Devices, Inc. (a) 52,705,054
595,737 Analog Devices, Inc. 51,132,107
1,607,378 Applied Materials, Inc. 52,625,556
330,805 ASML Holding N.V. 51,479,874
201,500 Broadcom, Inc. 51,237,420
1,091,822 Intel Corp. 51,239,206
571,897 KLA-Tencor Corp. 51,179,063
383,966 Lam Research Corp. 52,284,650
1,012,609 Maxim Integrated Products, Inc. 51,491,168
722,075 Microchip Technology, Inc. 51,931,634
1,605,816 Micron Technology, Inc. (a) 50,952,542
377,497 NVIDIA Corp. 50,395,849
702,332 NXP Semiconductors N.V. 51,466,889
891,273 QUALCOMM, Inc. 50,722,346
757,249 Skyworks Solutions, Inc. 50,750,828
541,230 Texas Instruments, Inc. 51,146,235
602,647 Xilinx, Inc. 51,327,445
--------------
874,067,866
--------------
SOFTWARE -- 26.4%
232,714 Adobe, Inc. (a) 52,649,215
405,718 Autodesk, Inc. (a) 52,179,392
1,200,721 Cadence Design Systems, Inc. (a) 52,207,349
491,434 Check Point Software
Technologies Ltd. (a) 50,445,700
487,954 Citrix Systems, Inc. 49,995,767
263,450 Intuit, Inc. 51,860,133
498,578 Microsoft Corp. 50,640,567
2,637,964 Symantec Corp. 49,844,330
603,279 Synopsys, Inc. (a) 50,820,223
343,905 Workday, Inc., Class A (a) 54,914,750
--------------
515,557,426
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 7.8%
323,592 Apple, Inc. $ 51,043,402
855,267 NetApp, Inc. 51,033,782
1,346,852 Western Digital Corp. 49,793,118
--------------
151,870,302
--------------
TOTAL INVESTMENTS -- 99.8% 1,946,690,248
(Cost $1,923,885,604) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 3,978,539
--------------
NET ASSETS -- 100.0% $1,950,668,787
==============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $1,944,462,973. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$158,358,392 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$156,131,117. The net unrealized appreciation was $2,227,275.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 1,946,690,248 $ -- $ --
=====================================================
* See Portfolio of Investments for industry breakout.
Page 28 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.7%
AIRLINES -- 3.2%
38,569 American Airlines Group, Inc. $ 1,238,451
14,536 United Continental Holdings,
Inc. (b) 1,217,099
--------------
2,455,550
--------------
AUTOMOBILES -- 1.7%
3,856 Tesla, Inc. (b) 1,283,277
--------------
BEVERAGES -- 3.1%
24,727 Monster Beverage Corp. (b) 1,217,063
10,860 PepsiCo, Inc. 1,199,813
--------------
2,416,876
--------------
BIOTECHNOLOGY -- 14.6%
12,491 Alexion Pharmaceuticals, Inc. (b) 1,216,124
6,611 Amgen, Inc. 1,286,963
4,224 Biogen, Inc. (b) 1,271,086
14,887 BioMarin Pharmaceutical, Inc. (b) 1,267,628
19,599 Celgene Corp. (b) 1,256,100
18,942 Gilead Sciences, Inc. 1,184,822
20,485 Incyte Corp. (b) 1,302,641
3,495 Regeneron Pharmaceuticals,
Inc. (b) 1,305,383
7,672 Vertex Pharmaceuticals, Inc. (b) 1,271,327
--------------
11,362,074
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.6%
7,586 Cintas Corp. 1,274,372
--------------
ELECTRIC UTILITIES -- 1.5%
23,317 Xcel Energy, Inc. 1,148,829
--------------
ENTERTAINMENT -- 8.1%
26,537 Activision Blizzard, Inc. 1,235,828
15,736 Electronic Arts, Inc. (b) 1,241,728
4,905 Netflix, Inc. (b) 1,312,872
11,973 Take-Two Interactive Software,
Inc. (b) 1,232,501
12,777 Twenty-First Century Fox, Inc.,
Class A 614,829
12,853 Twenty-First Century Fox, Inc.,
Class B 614,116
--------------
6,251,874
--------------
FOOD & STAPLES RETAILING -- 3.2%
6,161 Costco Wholesale Corp. 1,255,057
18,055 Walgreens Boots Alliance, Inc. 1,233,698
--------------
2,488,755
--------------
FOOD PRODUCTS -- 3.0%
27,076 Kraft Heinz (The) Co. 1,165,351
29,604 Mondelez International, Inc.,
Class A 1,185,048
--------------
2,350,399
--------------
HEALTH CARE EQUIPMENT & SUPPLIES
-- 4.9%
6,147 Align Technology, Inc. (b) 1,287,366
6,587 IDEXX Laboratories, Inc. (b) 1,225,314
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES
(CONTINUED)
2,681 Intuitive Surgical, Inc. (b) $ 1,283,984
--------------
3,796,664
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.7%
321 Cigna Corp. 60,964
15,897 Henry Schein, Inc. (b) 1,248,233
--------------
1,309,197
--------------
HOTELS, RESTAURANTS & LEISURE
-- 4.9%
11,770 Marriott International, Inc.,
Class A 1,277,751
19,618 Starbucks Corp. 1,263,399
12,645 Wynn Resorts Ltd. 1,250,717
--------------
3,791,867
--------------
INSURANCE -- 1.6%
8,207 Willis Towers Watson PLC 1,246,315
--------------
INTERNET & DIRECT MARKETING RETAIL
-- 11.3%
870 Amazon.com, Inc. (b) 1,306,714
733 Booking Holdings, Inc. (b) 1,262,534
45,928 Ctrip.com International Ltd.,
ADR (b) 1,242,811
44,653 eBay, Inc. (b) 1,253,410
10,812 Expedia Group, Inc. 1,217,972
61,642 JD.com, Inc., ADR (b) 1,290,167
4,026 MercadoLibre, Inc. (b) 1,179,014
--------------
8,752,622
--------------
IT SERVICES -- 6.4%
9,525 Automatic Data Processing, Inc. 1,248,918
16,974 Fiserv, Inc. (b) 1,247,419
18,833 Paychex, Inc. 1,226,970
15,219 PayPal Holdings, Inc. (b) 1,279,766
--------------
5,003,073
--------------
LEISURE PRODUCTS -- 1.6%
15,491 Hasbro, Inc. 1,258,644
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.7%
4,286 Illumina, Inc. (b) 1,285,500
--------------
MACHINERY -- 1.6%
21,920 PACCAR, Inc. 1,252,509
--------------
MEDIA -- 6.2%
4,231 Charter Communications, Inc.,
Class A (b) 1,205,708
35,301 Comcast Corp., Class A 1,201,999
28,359 Liberty Global PLC, Class A (b) 605,181
29,417 Liberty Global PLC, Class C (b) 607,167
213,982 Sirius XM Holdings, Inc. (c) 1,221,837
--------------
4,841,892
--------------
MULTILINE RETAIL -- 1.7%
14,450 Dollar Tree, Inc. (b) 1,305,124
--------------
See Notes to Financial Statements Page 29
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
PHARMACEUTICALS -- 1.6%
46,155 Mylan N.V. (b) $ 1,264,647
--------------
PROFESSIONAL SERVICES -- 1.6%
11,349 Verisk Analytics, Inc. (b) 1,237,495
--------------
ROAD & RAIL -- 3.1%
19,681 CSX Corp. 1,222,781
13,074 J.B. Hunt Transport Services, Inc. 1,216,405
--------------
2,439,186
--------------
SPECIALTY RETAIL -- 4.9%
3,648 O'Reilly Automotive, Inc. (b) 1,256,116
15,533 Ross Stores, Inc. 1,292,346
5,224 Ulta Beauty, Inc. (b) 1,279,044
--------------
3,827,506
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.7%
10,581 Lululemon Athletica, Inc. (b) 1,286,755
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.6%
23,872 Fastenal Co. 1,248,267
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 1.6%
19,257 T-Mobile US, Inc. (b) 1,224,938
--------------
TOTAL COMMON STOCKS -- 99.7% 77,404,207
(Cost $74,933,686) --------------
MONEY MARKET FUNDS -- 0.9%
373,473 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.61% (d) (e) 373,473
335,076 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio -Institutional
Class - 2.33% (d) 335,076
--------------
TOTAL MONEY MARKET FUNDS
-- 0.9% 708,549
(Cost $708,549) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.0%
$ 164,788 BNP Paribas S.A., 2.95% (d),
dated 12/31/18, due 01/02/19,
with a maturity value of
$164,815. Collateralized by
U.S. Treasury Note, interest
rate of 2.375%, due 04/30/20.
The value of the collateral
including accrued interest is
$168,750. (e) $ 164,788
593,077 JPMorgan Chase & Co., 2.85% (d),
dated 12/31/18, due 01/02/19,
with a maturity value of
$593,171. Collateralized by
U.S. Treasury Bill, interest
rate of 0.000%, due 05/09/19.
The value of the collateral
is $604,927. (e) 593,077
--------------
TOTAL REPURCHASE AGREEMENTS
-- 1.0% 757,865
(Cost $757,865) --------------
TOTAL INVESTMENTS -- 101.6% 78,870,621
(Cost $76,400,100) (f)
NET OTHER ASSETS AND
LIABILITIES -- (1.6)% (1,252,417)
--------------
NET ASSETS -- 100.0% $ 77,618,204
==============
(a) The industry allocation is based on Standard & Poor's Global Industry
Classification Standard (GICS), and is different than the industry sector
classification system used by the Index to select securities, which is the
Industry Classification Benchmark (ICB) system, which is maintained by
FTSE International Limited.
(b) Non-income producing security.
(c) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $1,099,249 and the total value of the collateral held by the
Fund is $1,130,001.
(d) Rate shown reflects yield as of December 31, 2018.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $77,051,599. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$10,508,659 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$8,689,637. The net unrealized appreciation was $1,819,022.
ADR - American Depositary Receipt
Page 30 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 77,404,207 $ -- $ --
Money Market
Funds 708,549 -- --
Repurchase
Agreements -- 757,865 --
-----------------------------------------------------
Total Investments $ 78,112,756 $ 757,865 $ --
=====================================================
* See Portfolio of Investments for industry breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 1,099,249
Non-cash Collateral(2) (1,099,249)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At December 31, 2018, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 757,865
Non-cash Collateral(4) (757,865)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2018, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 31
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.8%
AEROSPACE & DEFENSE -- 5.1%
74,689 Hexcel Corp. $ 4,282,667
--------------
AUTOMOBILES -- 8.3%
20,955 Tesla, Inc. (a) 6,973,824
--------------
CHEMICALS -- 8.7%
76,249 Albemarle Corp. 5,876,511
36,184 Sociedad Quimica y Minera de
Chile S.A., ADR (b) 1,385,847
--------------
7,262,358
--------------
CONSTRUCTION & ENGINEERING
-- 0.5%
26,242 Ameresco, Inc., Class A (a) 370,012
--------------
ELECTRICAL EQUIPMENT -- 13.1%
28,243 Acuity Brands, Inc. 3,246,533
217,448 Ballard Power Systems,
Inc. (a) (b) 519,701
39,536 EnerSys 3,068,389
99,737 Enphase Energy, Inc. (a) (b) 471,756
218,919 Plug Power, Inc. (a) (b) 271,459
104,919 Sunrun, Inc. (a) 1,142,568
32,372 TPI Composites, Inc. (a) 795,704
26,647 Vicor Corp. (a) 1,006,990
111,924 Vivint Solar, Inc. (a) (b) 426,430
--------------
10,949,530
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 9.0%
158,332 AVX Corp. 2,414,563
36,973 Itron, Inc. (a) 1,748,453
19,191 Littelfuse, Inc. 3,290,873
43,025 Maxwell Technologies, Inc. (a) (b) 89,062
--------------
7,542,951
--------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 1.2%
50,693 Hannon Armstrong Sustainable
Infrastructure Capital, Inc. 965,702
--------------
INDEPENDENT POWER AND
RENEWABLE ELECTRICITY PRODUCERS
-- 17.9%
94,005 Atlantica Yield PLC 1,842,498
128,308 Brookfield Renewable Partners,
L.P. (c) 3,323,177
68,557 Clearway Energy, Inc., Class C 1,182,608
52,540 NextEra Energy Partners,
L.P. (c) (d) 2,261,847
47,531 Ormat Technologies, Inc. 2,485,872
92,015 Pattern Energy Group, Inc.,
Class A 1,713,319
196,177 TerraForm Power, Inc., Class A 2,201,106
--------------
15,010,427
--------------
OIL, GAS & CONSUMABLE FUELS
-- 1.1%
34,988 Renewable Energy Group, Inc. (a) 899,192
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 34.9%
36,103 Advanced Energy Industries,
Inc. (a) $ 1,549,902
54,950 Canadian Solar, Inc. (a) (b) 787,983
83,194 Cree, Inc. (a) 3,558,623
9,449 Daqo New Energy Corp.,
ADR (a) (b) 221,106
82,613 First Solar, Inc. (a) 3,507,335
111,927 Integrated Device Technology,
Inc. (a) 5,420,625
26,762 JinkoSolar Holding Co., Ltd.,
ADR (a) 264,676
365,164 ON Semiconductor Corp. (a) 6,028,858
27,511 Power Integrations, Inc. 1,677,621
42,916 SolarEdge Technologies, Inc. (a) 1,506,351
132,339 SunPower Corp. (a) (b) 657,725
39,984 Universal Display Corp. (b) 3,741,303
44,830 Veeco Instruments, Inc. (a) 332,190
--------------
29,254,298
--------------
TOTAL COMMON STOCKS -- 99.8% 83,510,961
(Cost $81,909,794) --------------
MONEY MARKET FUNDS -- 2.4%
2,031,713 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.61% (e) (f) 2,031,713
(Cost $2,031,713) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 4.9%
$ 896,459 BNP Paribas S.A., 2.95% (e),
dated 12/31/18, due 01/02/19,
with a maturity value of
$896,605. Collateralized by
U.S. Treasury Note, interest
rate of 2.375%, due 04/30/20.
The value of the collateral
including accrued interest is
$918,013. (f) 896,459
3,226,377 JPMorgan Chase & Co., 2.85% (e),
dated 12/31/18, due 01/02/19,
with a maturity value of
$3,226,888. Collateralized by
U.S. Treasury Bill, interest
rate of 0.000%, due 05/09/19.
The value of the collateral
is $3,290,842. (f) 3,226,377
--------------
TOTAL REPURCHASE AGREEMENTS
-- 4.9% 4,122,836
(Cost $4,122,836) --------------
TOTAL INVESTMENTS -- 107.1% 89,665,510
(Cost $88,064,343) (g)
NET OTHER ASSETS AND
LIABILITIES -- (7.1)% (5,934,120)
--------------
NET ASSETS -- 100.0% $ 83,731,390
==============
Page 32 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $5,971,190 and the total value of the collateral held by the
Fund is $6,147,276.
(c) Security is a Master Limited Partnership ("MLP").
(d) NextEra Energy Partners, L.P. is taxed as a "C" corporation for federal
income tax purposes.
(e) Rate shown reflects yield as of December 31, 2018.
(f) This security serves as collateral for securities on loan.
(g) Aggregate cost for federal income tax purposes is $89,766,503. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$10,784,646 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$10,885,639. The net unrealized depreciation was $100,993.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 83,510,961 $ -- $ --
Money Market
Funds 2,031,713 -- --
Repurchase
Agreements -- 4,122,836 --
-----------------------------------------------------
Total Investments $ 85,542,674 $ 4,122,836 $ --
=====================================================
* See Portfolio of Investments for industry breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 5,971,190
Non-cash Collateral(2) (5,971,190)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At December 31, 2018, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 4,122,836
Non-cash Collateral(4) (4,122,836)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2018, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 33
FIRST TRUST S&P REIT INDEX FUND (FRI)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.4%
DIVERSIFIED REITS -- 5.7%
5,748 American Assets Trust, Inc. $ 230,897
74,601 Colony Capital, Inc. 349,133
21,322 Empire State Realty Trust, Inc.,
Class A 303,412
5,259 Essential Properties Realty Trust,
Inc. 72,784
4,411 Gladstone Commercial Corp. 79,045
11,574 Global Net Lease, Inc. 203,934
31,995 Lexington Realty Trust 262,679
22,491 Liberty Property Trust 941,923
2,212 One Liberty Properties, Inc. 53,575
3,037 PS Business Parks, Inc. 397,847
28,821 STORE Capital Corp. 815,922
147,205 VEREIT, Inc. 1,052,516
12,149 Washington Real Estate Investment
Trust 279,427
24,506 WP Carey, Inc. 1,601,222
--------------
6,644,316
--------------
HEALTH CARE REITS -- 13.0%
12,763 CareTrust REIT, Inc. 235,605
2,679 Community Healthcare Trust, Inc. 77,236
2,949 Global Medical REIT, Inc. 26,217
72,650 HCP, Inc. 2,029,115
19,055 Healthcare Realty Trust, Inc. 541,924
31,486 Healthcare Trust of America, Inc.,
Class A 796,911
6,034 LTC Properties, Inc. 251,497
4,848 MedEquities Realty Trust, Inc. 33,160
55,526 Medical Properties Trust, Inc. 892,858
6,425 National Health Investors, Inc. 485,345
12,499 New Senior Investment Group, Inc. 51,496
30,536 Omega Healthcare Investors, Inc. 1,073,340
27,740 Physicians Realty Trust 444,672
27,126 Sabra Health Care REIT, Inc. 447,036
36,171 Senior Housing Properties Trust 423,924
1,924 Universal Health Realty Income
Trust 118,076
54,237 Ventas, Inc. 3,177,746
57,154 Welltower, Inc. 3,967,059
--------------
15,073,217
--------------
HOTEL & RESORT REITS -- 6.0%
32,720 Apple Hospitality REIT, Inc. 466,587
13,221 Ashford Hospitality Trust, Inc. 52,884
4,650 Braemar Hotels & Resorts, Inc. 41,525
7,077 Chatham Lodging Trust 125,121
9,189 Chesapeake Lodging Trust 223,752
31,635 DiamondRock Hospitality Co. 287,246
5,519 Hersha Hospitality Trust 96,803
25,020 Hospitality Properties Trust 597,478
112,905 Host Hotels & Resorts, Inc. 1,882,126
30,615 Park Hotels & Resorts, Inc. 795,378
19,478 Pebblebrook Hotel Trust 551,422
26,657 RLJ Lodging Trust 437,175
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HOTEL & RESORT REITS (CONTINUED)
7,810 Ryman Hospitality Properties,
Inc. $ 520,849
15,939 Summit Hotel Properties, Inc. 155,087
34,728 Sunstone Hotel Investors, Inc. 451,811
17,126 Xenia Hotels & Resorts, Inc. 294,567
--------------
6,979,811
--------------
INDUSTRIAL REITS -- 8.6%
8,999 Americold Realty Trust 229,834
54,518 Duke Realty Corp. 1,412,016
5,484 EastGroup Properties, Inc. 503,047
19,218 First Industrial Realty Trust,
Inc. 554,632
9,915 Industrial Logistics Properties
Trust 195,028
1,487 Innovative Industrial Properties,
Inc. 67,495
13,935 Monmouth Real Estate Investment
Corp. 172,794
95,783 Prologis, Inc. 5,624,378
14,118 Rexford Industrial Realty, Inc. 416,057
16,568 STAG Industrial, Inc. 412,212
8,998 Terreno Realty Corp. 316,460
--------------
9,903,953
--------------
OFFICE REITS -- 12.8%
16,360 Alexandria Real Estate Equities,
Inc. 1,885,326
23,498 Boston Properties, Inc. 2,644,700
27,175 Brandywine Realty Trust 349,742
6,017 City Office REIT, Inc. 61,674
17,950 Columbia Property Trust, Inc. 347,332
16,562 Corporate Office Properties Trust 348,299
63,962 Cousins Properties, Inc. 505,300
24,563 Douglas Emmett, Inc. 838,335
9,254 Easterly Government Properties,
Inc. 145,103
18,484 Equity Commonwealth 554,705
16,315 Franklin Street Properties Corp. 101,642
15,746 Highwoods Properties, Inc. 609,213
23,843 Hudson Pacific Properties, Inc. 692,878
16,558 JBG SMITH Properties 576,384
15,329 Kilroy Realty Corp. 963,887
13,742 Mack-Cali Realty Corp. 269,206
7,579 NorthStar Realty Europe Corp. 110,199
15,094 Office Properties Income Trust (a) 103,696
31,044 Paramount Group, Inc. 389,913
19,532 Piedmont Office Realty Trust,
Inc., Class A 332,825
13,625 Select Income REIT 100,280
12,974 SL Green Realty Corp. 1,025,984
8,198 Tier REIT, Inc. 169,125
26,346 Vornado Realty Trust 1,634,242
--------------
14,759,990
--------------
RESIDENTIAL REITS -- 18.4%
20,849 American Campus Communities,
Inc. 862,940
39,168 American Homes 4 Rent, Class A 777,485
Page 34 See Notes to Financial Statements
FIRST TRUST S&P REIT INDEX FUND (FRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RESIDENTIAL REITS (CONTINUED)
23,681 Apartment Investment &
Management Co., Class A $ 1,039,122
21,031 AvalonBay Communities, Inc. 3,660,446
3,607 Bluerock Residential Growth
REIT, Inc. 32,535
1,383 BRT Apartments Corp. 15,821
14,171 Camden Property Trust 1,247,757
2,304 Clipper Realty, Inc. 30,113
13,655 Equity LifeStyle Properties, Inc. 1,326,310
56,058 Equity Residential 3,700,389
10,052 Essex Property Trust, Inc. 2,464,851
7,425 Front Yard Residential Corp. 64,820
13,529 Independence Realty Trust, Inc. 124,196
1,818 Investors Real Estate Trust 89,209
45,144 Invitation Homes, Inc. 906,492
17,320 Mid-America Apartment
Communities, Inc. 1,657,524
3,218 NexPoint Residential Trust, Inc. 112,791
6,246 Preferred Apartment
Communities, Inc., Class A 87,819
13,139 Sun Communities, Inc. 1,336,368
41,924 UDR, Inc. 1,661,029
5,272 UMH Properties, Inc. 62,420
--------------
21,260,437
--------------
RETAIL REITS -- 19.0%
12,408 Acadia Realty Trust 294,814
5,246 Agree Realty Corp. 310,143
575 Alexander's, Inc. 175,225
8,152 American Finance Trust, Inc. 108,585
45,616 Brixmor Property Group, Inc. 670,099
26,272 CBL & Associates Properties, Inc. 50,442
13,424 Cedar Realty Trust, Inc. 42,151
11,238 Federal Realty Investment Trust 1,326,534
5,119 Getty Realty Corp. 150,550
64,115 Kimco Realty Corp. 939,285
12,737 Kite Realty Group Trust 179,464
16,096 Macerich (The) Co. 696,635
24,213 National Retail Properties, Inc. 1,174,573
9,756 Pennsylvania Real Estate
Investment Trust 57,951
44,902 Realty Income Corp. 2,830,622
25,781 Regency Centers Corp. 1,512,829
17,343 Retail Opportunity Investments
Corp. 275,407
32,782 Retail Properties of America, Inc.,
Class A 355,685
2,332 Retail Value, Inc. 59,676
12,195 RPT Realty 145,730
1,754 Saul Centers, Inc. 82,824
4,233 Seritage Growth Properties,
Class A 136,853
47,059 Simon Property Group, Inc. 7,905,441
22,198 SITE Centers Corp. 245,732
6,543 Spirit MTA REIT 46,652
13,041 Spirit Realty Capital, Inc. 459,695
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
RETAIL REITS (CONTINUED)
14,288 Tanger Factory Outlet Centers,
Inc. $ 288,903
9,291 Taubman Centers, Inc. 422,648
17,392 Urban Edge Properties 289,055
4,536 Urstadt Biddle Properties, Inc.,
Class A 87,182
28,311 Washington Prime Group, Inc. 137,591
18,158 Weingarten Realty Investors 450,500
6,051 Whitestone REIT 74,185
--------------
21,983,661
--------------
SPECIALIZED REITS -- 15.9%
18,057 CoreCivic, Inc. 321,956
5,584 CoreSite Realty Corp. 487,092
28,347 CubeSmart 813,276
16,103 CyrusOne, Inc. 851,527
31,386 Digital Realty Trust, Inc. 3,344,178
11,311 EPR Properties 724,243
19,249 Extra Space Storage, Inc. 1,741,650
4,512 Farmland Partners, Inc. 20,485
10,309 Four Corners Property Trust, Inc. 270,096
30,620 Gaming and Leisure Properties,
Inc. 989,332
18,531 GEO Group (The), Inc. 365,061
2,127 Gladstone Land Corp. 24,418
6,020 InfraREIT, Inc. 126,540
43,548 Iron Mountain, Inc. 1,411,391
7,090 Life Storage, Inc. 659,299
8,607 National Storage Affiliates Trust 227,741
22,815 Public Storage 4,617,984
7,761 QTS Realty Trust, Inc., Class A 287,545
1,304 Safety Income & Growth, Inc. 24,528
54,806 VICI Properties, Inc. 1,029,257
--------------
18,337,599
--------------
TOTAL COMMON STOCKS -- 99.4% 114,942,984
(Cost $136,789,201) --------------
MONEY MARKET FUNDS -- 1.5%
1,788,634 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 2.33% (b) 1,788,634
(Cost $1,788,634) --------------
TOTAL INVESTMENTS -- 100.9% 116,731,618
(Cost $138,577,835) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.9)% (1,035,766)
--------------
NET ASSETS -- 100.0% $ 115,695,852
==============
See Notes to Financial Statements Page 35
FIRST TRUST S&P REIT INDEX FUND (FRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
(a) Non-income producing security.
(b) Rate shown reflects yield as of December 31, 2018.
(c) Aggregate cost for federal income tax purposes is $139,942,420. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$502,958 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$23,713,760. The net unrealized depreciation was $23,210,802.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 114,942,984 $ -- $ --
Money Market
Funds 1,788,634 -- --
-----------------------------------------------------
Total Investments $ 116,731,618 $ -- $ --
=====================================================
* See Portfolio of Investments for industry breakout.
Page 36 See Notes to Financial Statements
FIRST TRUST WATER ETF (FIW)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
BUILDING PRODUCTS -- 5.2%
231,020 A.O. Smith Corp. $ 9,864,554
213,998 Advanced Drainage Systems, Inc. 5,189,451
--------------
15,054,005
--------------
CHEMICALS -- 4.5%
89,165 Ecolab, Inc. 13,138,463
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 3.0%
168,201 Tetra Tech, Inc. 8,707,766
--------------
CONSTRUCTION & ENGINEERING
-- 7.9%
349,003 AECOM (a) 9,248,580
268,783 Aegion Corp. (a) 4,386,538
83,621 Valmont Industries, Inc. 9,277,750
--------------
22,912,868
--------------
CONSTRUCTION MATERIALS -- 0.7%
495,630 Forterra, Inc. (a) (b) 1,863,569
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 4.6%
122,090 Badger Meter, Inc. 6,008,049
151,555 Itron, Inc. (a) 7,167,036
--------------
13,175,085
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 8.0%
129,590 Danaher Corp. 13,363,321
52,817 IDEXX Laboratories, Inc. (a) 9,825,018
--------------
23,188,339
--------------
INDUSTRIAL CONGLOMERATES -- 4.1%
44,971 Roper Technologies, Inc. 11,985,671
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 4.6%
198,663 Agilent Technologies, Inc. 13,401,806
--------------
MACHINERY -- 33.5%
432,717 Energy Recovery, Inc. (a) (b) 2,912,185
346,174 Evoqua Water Technologies
Corp. (a) 3,323,270
225,257 Flowserve Corp. 8,564,271
205,793 Franklin Electric Co., Inc. 8,824,404
193,753 Gorman-Rupp (The) Co. 6,279,535
87,576 IDEX Corp. 11,057,346
70,052 Lindsay Corp. 6,742,505
209,848 Mueller Industries, Inc. 4,902,049
579,848 Mueller Water Products, Inc.,
Class A 5,276,617
308,595 Pentair PLC 11,658,719
346,650 Rexnord Corp. (a) 7,955,617
122,054 Watts Water Technologies, Inc.,
Class A 7,876,145
176,758 Xylem, Inc. 11,793,294
--------------
97,165,957
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
WATER UTILITIES -- 23.9%
166,528 American States Water Co. $ 11,164,037
153,292 American Water Works Co., Inc. 13,914,315
315,773 Aqua America, Inc. 10,796,279
230,639 AquaVenture Holdings Ltd. (a) 4,356,771
163,034 California Water Service Group 7,770,200
697,674 Cia de Saneamento Basico do
Estado de Sao Paulo, ADR 5,630,229
91,552 Middlesex Water Co. 4,884,299
115,850 SJW Group 6,443,577
139,303 York Water (The) Co. 4,466,054
--------------
69,425,761
--------------
TOTAL COMMON STOCKS -- 100.0% 290,019,290
(Cost $290,829,940) --------------
MONEY MARKET FUNDS -- 0.7%
1,273,445 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.61% (c) (d) 1,273,445
871,913 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 2.33% (c) 871,913
--------------
TOTAL MONEY MARKET FUNDS
-- 0.7% 2,145,358
(Cost $2,145,358) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.9%
$ 561,886 BNP Paribas S.A., 2.95% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$561,978. Collateralized by
U.S. Treasury Note, interest
rate of 2.375%, due 04/30/20.
The value of the collateral
including accrued interest is
$575,396. (d) 561,886
2,022,242 JPMorgan Chase & Co., 2.85% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$2,022,562. Collateralized by
U.S. Treasury Bill, interest
rate of 0.000%, due 05/09/19.
The value of the collateral
is $2,062,647. (d) 2,022,242
--------------
TOTAL REPURCHASE AGREEMENTS
-- 0.9% 2,584,128
(Cost $2,584,128) --------------
TOTAL INVESTMENTS -- 101.6% 294,748,776
(Cost $295,559,426) (e)
NET OTHER ASSETS AND
LIABILITIES -- (1.6)% (4,641,333)
--------------
NET ASSETS -- 100.0% $ 290,107,443
==============
See Notes to Financial Statements Page 37
FIRST TRUST WATER ETF (FIW)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $3,797,847 and the total value of the collateral held by the
Fund is $3,853,014.
(c) Rate shown reflects yield as of December 31, 2018.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $298,276,817. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$25,901,903 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$29,429,944. The net unrealized depreciation was $3,528,041.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 290,019,290 $ -- $ --
Money Market
Funds 2,145,358 -- --
Repurchase
Agreements -- 2,584,128 --
-----------------------------------------------------
Total Investments $ 292,164,648 $ 2,584,128 $ --
=====================================================
* See Portfolio of Investments for industry breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 3,797,847
Non-cash Collateral(2) (3,797,847)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At December 31, 2018, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 2,584,128
Non-cash Collateral(4) (2,584,128)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2018, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 38 See Notes to Financial Statements
FIRST TRUST NATURAL GAS ETF (FCG)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.8%
ENERGY EQUIPMENT & SERVICES
-- 1.0%
63,750 Unit Corp. (a) $ 910,350
--------------
GAS UTILITIES -- 4.3%
74,725 National Fuel Gas Co. 3,824,425
--------------
OIL, GAS & CONSUMABLE FUELS
-- 94.5%
360,545 Antero Resources Corp. (a) 3,385,518
194,214 Cabot Oil & Gas Corp. 4,340,683
59,604 Cimarex Energy Co. 3,674,587
55,860 CNX Midstream Partners, L.P. (b) 909,401
259,971 CNX Resources Corp. (a) 2,968,869
136,746 Comstock Resources, Inc. (a) (c) 619,459
37,490 Concho Resources, Inc. (a) 3,853,597
106,876 Continental Resources, Inc. (a) 4,295,346
77,464 DCP Midstream, L.P. (b) 2,052,021
180,782 Devon Energy Corp. 4,074,826
96,036 Enable Midstream Partners,
L.P. (b) 1,299,367
727,154 Encana Corp. 4,202,950
285,151 Enerplus Corp. 2,212,772
62,984 EQM Midstream Partners, L.P. (b) 2,724,058
261,169 EQT Corp. 4,933,482
268,194 Gulfport Energy Corp. (a) 1,756,671
24,306 Hess Midstream Partners, L.P. (b) 412,716
145,348 Matador Resources Co. (a) 2,257,254
101,536 MPLX, L.P. (b) 3,076,541
148,400 Murphy Oil Corp. 3,471,076
205,831 Noble Energy, Inc. 3,861,390
101,825 PDC Energy, Inc. (a) 3,030,312
377,335 QEP Resources, Inc. (a) 2,124,396
335,121 Range Resources Corp. 3,207,108
176,372 SM Energy Co. 2,730,239
893,772 Southwestern Energy Co. (a) 3,047,762
352,858 SRC Energy, Inc. (a) 1,658,433
70,893 Summit Midstream Partners,
L.P. (b) 712,475
58,244 TC PipeLines, L.P. (b) 1,870,797
127,491 Vermilion Energy, Inc. (c) 2,686,235
159,965 W&T Offshore, Inc. (a) 659,056
66,112 Western Gas Equity Partners,
L.P. (b) 1,833,286
--------------
83,942,683
--------------
TOTAL COMMON STOCKS -- 99.8% 88,677,458
(Cost $134,259,901) --------------
MONEY MARKET FUNDS -- 1.2%
678,795 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.61% (d) (e) 678,795
406,127 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 2.33% (d) 406,127
--------------
TOTAL MONEY MARKET FUNDS
-- 1.2% 1,084,922
(Cost $1,084,922) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.5%
$ 299,507 BNP Paribas S.A., 2.95% (d),
dated 12/31/18, due 01/02/19,
with a maturity value of
$299,556. Collateralized by
U.S. Treasury Note, interest
rate of 2.375%, due 04/30/20.
The value of the collateral
including accrued interest is
$306,708. (e) $ 299,507
1,077,933 JPMorgan Chase & Co., 2.85 % (d),
dated 12/31/18, due 01/02/19,
with a maturity value of
$1,078,103. Collateralized by
U.S. Treasury Bill, interest
rate of 0.000%, due 05/09/19.
The value of the collateral
is $1,099,470. (e) 1,077,933
--------------
TOTAL REPURCHASE AGREEMENTS
-- 1.5% 1,377,440
(Cost $1,377,440) --------------
TOTAL INVESTMENTS -- 102.5% 91,139,820
(Cost $136,722,263) (f)
NET OTHER ASSETS AND
LIABILITIES -- (2.5)% (2,265,832)
--------------
NET ASSETS -- 100.0% $ 88,873,988
==============
(a) Non-income producing security.
(b) Security is a Master Limited Partnership ("MLP").
(c) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $2,043,121 and the total value of the collateral held by the
Fund is $2,053,805.
(d) Rate shown reflects yield as of December 31, 2018.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $143,037,781. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$393,937 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$52,291,898. The net unrealized depreciation was $51,897,961.
See Notes to Financial Statements Page 39
FIRST TRUST NATURAL GAS ETF (FCG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 88,677,458 $ -- $ --
Money Market
Funds 1,084,922 -- --
Repurchase
Agreements -- 1,377,440 --
-----------------------------------------------------
Total Investments $ 89,762,380 $ 1,377,440 $ --
=====================================================
* See Portfolio of Investments for industry breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 2,043,121
Non-cash Collateral(2) (2,043,121)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At December 31, 2018, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 1,377,440
Non-cash Collateral(4) (1,377,440)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2018, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 40 See Notes to Financial Statements
FIRST TRUST CHINDIA ETF (FNI)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.1%
AIR FREIGHT & LOGISTICS -- 0.7%
56,401 ZTO Express Cayman, Inc., ADR $ 892,828
--------------
AUTOMOBILES -- 4.8%
125,530 NIO, Inc., ADR (a) (b) 799,626
461,560 Tata Motors Ltd., ADR (b) 5,621,801
--------------
6,421,427
--------------
BANKS -- 15.1%
97,163 HDFC Bank Ltd., ADR 10,065,115
968,959 ICICI Bank Ltd., ADR 9,970,588
--------------
20,035,703
--------------
BIOTECHNOLOGY -- 1.3%
6,313 BeiGene Ltd., ADR (b) 885,462
11,797 China Biologic Products Holdings,
Inc. (a) (b) 895,510
--------------
1,780,972
--------------
CAPITAL MARKETS -- 0.6%
19,882 Noah Holdings Ltd., ADR (b) 861,288
--------------
CONSUMER FINANCE -- 0.6%
189,771 Qudian, Inc., ADR (a) (b) 814,117
--------------
DIVERSIFIED CONSUMER SERVICES
-- 6.1%
49,257 New Oriental Education &
Technology Group, Inc., ADR (b) 2,699,776
200,607 TAL Education Group, ADR (b) 5,352,195
--------------
8,051,971
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.3%
17,930 China Telecom Corp., Ltd., ADR 909,589
82,439 China Unicom (Hong Kong) Ltd.,
ADR 878,800
--------------
1,788,389
--------------
ENTERTAINMENT -- 6.9%
62,001 Bilibili, Inc., ADR (b) 904,594
106,006 Eros International PLC (a) (b) 878,790
56,041 HUYA, Inc., ADR (b) 867,515
47,653 iQIYI, Inc., ADR (a) (b) 708,600
24,799 NetEase, Inc., ADR 5,836,941
--------------
9,196,440
--------------
HOTELS, RESTAURANTS & LEISURE
-- 3.3%
30,686 Huazhu Group Ltd., ADR 878,540
53,560 Melco Resorts & Entertainment
Ltd., ADR 943,727
78,580 Yum China Holdings, Inc. 2,634,788
--------------
4,457,055
--------------
INSURANCE -- 1.4%
90,031 China Life Insurance Co., Ltd.,
ADR (a) 944,425
39,568 Fanhua, Inc., ADR 868,518
--------------
1,812,943
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INTERACTIVE MEDIA & SERVICES
-- 11.0%
16,242 58.com, Inc., ADR (b) $ 880,479
11,754 Autohome, Inc., ADR (a) 919,515
52,339 Baidu, Inc., ADR (b) 8,300,965
52,429 Bitauto Holdings Ltd., ADR (a) (b) 1,298,666
30,872 Momo, Inc., ADR (b) 733,210
14,943 SINA Corp. (b) 801,543
15,198 Weibo Corp., ADR (b) 888,019
14,218 YY, Inc., ADR (b) 851,090
--------------
14,673,487
--------------
INTERNET & DIRECT MARKETING
RETAIL -- 23.0%
61,260 Alibaba Group Holding Ltd.,
ADR (b) 8,396,908
27,441 Baozun, Inc., ADR (a) (b) 801,552
195,183 Ctrip.com International Ltd.,
ADR (b) 5,281,652
464,169 JD.com, Inc., ADR (b) 9,715,057
112,666 MakeMyTrip Ltd. (b) 2,741,164
122,627 Pinduoduo, Inc., ADR (a) (b) 2,751,750
167,736 Vipshop Holdings Ltd., ADR (b) 915,838
--------------
30,603,921
--------------
IT SERVICES -- 13.7%
32,819 GDS Holdings Ltd., ADR (b) 757,791
999,423 Infosys Ltd., ADR 9,514,507
1,078,742 Wipro Ltd., ADR 5,533,946
57,648 WNS (Holdings) Ltd., ADR (b) 2,378,557
--------------
18,184,801
--------------
METALS & MINING -- 4.4%
505,026 Vedanta Ltd., ADR 5,828,000
--------------
OIL, GAS & CONSUMABLE FUELS
-- 1.9%
11,341 China Petroleum & Chemical
Corp., ADR 800,674
5,746 CNOOC Ltd., ADR 875,978
13,926 PetroChina Co., Ltd., ADR 857,145
--------------
2,533,797
--------------
PHARMACEUTICALS -- 2.6%
73,244 Dr. Reddy's Laboratories Ltd.,
ADR 2,761,299
28,078 Hutchison China MediTech Ltd.,
ADR (b) 648,321
--------------
3,409,620
--------------
PROFESSIONAL SERVICES -- 0.7%
14,216 51job, Inc., ADR (b) 887,647
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.7%
19,458 China Mobile Ltd., ADR 933,984
--------------
TOTAL COMMON STOCKS -- 100.1% 133,168,390
(Cost $165,033,921) --------------
See Notes to Financial Statements Page 41
FIRST TRUST CHINDIA ETF (FNI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MONEY MARKET FUNDS -- 1.6%
2,082,441 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.61% (c) (d) $ 2,082,441
(Cost $2,082,441) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 3.2%
$ 918,841 BNP Paribas S.A., 2.95% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$918,992. Collateralized by
U.S. Treasury Note, interest
rate of 2.375%, due 04/30/20.
The value of the collateral
including accrued interest is
$940,934. (d) 918,841
3,306,934 JPMorgan Chase & Co., 2.85% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$3,307,457. Collateralized by
U.S. Treasury Bill, interest
rate of 0.000%, due 05/09/19.
The value of the collateral
is $3,373,008. (d) 3,306,934
--------------
TOTAL REPURCHASE AGREEMENTS
-- 3.2% 4,225,775
(Cost $4,225,775) --------------
TOTAL INVESTMENTS -- 104.9% 139,476,606
(Cost $171,342,137) (e)
NET OTHER ASSETS AND
LIABILITIES -- (4.9)% (6,469,889)
--------------
NET ASSETS -- 100.0% $ 133,006,717
==============
(a) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $6,237,963 and the total value of the collateral held by the
Fund is $6,300,761.
(b) Non-income producing security.
(c) Rate shown reflects yield as of December 31, 2018.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $172,993,855. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$3,402,566 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$36,919,815. The net unrealized depreciation was $33,517,249.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 133,168,390 $ -- $ --
Money Market
Funds 2,082,441 -- --
Repurchase
Agreements -- 4,225,775 --
-----------------------------------------------------
Total Investments $ 135,250,831 $ 4,225,775 $ --
=====================================================
* See Portfolio of Investments for industry breakout.
Page 42 See Notes to Financial Statements
FIRST TRUST CHINDIA ETF (FNI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 6,237,963
Non-cash Collateral(2) (6,237,963)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At December 31, 2018, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 4,225,775
Non-cash Collateral(4) (4,225,775)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2018, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 43
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.9%
BANKS -- 88.0%
27,340 1st Source Corp. $ 1,102,896
22,981 Allegiance Bancshares, Inc. (a) 743,895
9,172 American National Bankshares,
Inc. 268,831
50,015 Ameris Bancorp 1,583,975
27,494 Atlantic Capital Bancshares,
Inc. (a) 450,077
34,492 BancFirst Corp. 1,721,151
59,433 Bancorp (The), Inc. (a) 473,087
14,684 Bank of Marin Bancorp 605,568
135,426 Bank OZK 3,091,776
37,386 Banner Corp. 1,999,403
11,445 Baycom Corp. (a) 264,265
68,899 BOK Financial Corp. 5,052,364
88,847 Boston Private Financial Holdings,
Inc. 939,113
20,837 Bridge Bancorp, Inc. 531,135
84,752 Brookline Bancorp, Inc. 1,171,273
21,324 Bryn Mawr Bank Corp. 733,546
12,141 Business First Bancshares, Inc. 294,176
16,408 Camden National Corp. 590,196
23,767 Carolina Financial Corp. 703,265
85,373 Cathay General Bancorp 2,862,557
27,335 CBTX, Inc. 803,649
100,739 CenterState Bank Corp. 2,119,549
14,528 Central Valley Community Bancorp 274,143
75,226 Chemical Financial Corp. 2,754,024
16,203 City Holding Co. 1,095,161
16,217 Civista Bancshares, Inc. 282,500
77,135 Columbia Banking System, Inc. 2,799,229
117,446 Commerce Bancshares, Inc. 6,620,431
18,673 Community Trust Bancorp, Inc. 739,637
33,661 ConnectOne Bancorp, Inc. 621,719
147,765 CVB Financial Corp. 2,989,286
36,170 Eagle Bancorp, Inc. (a) 1,761,841
152,636 East West Bancorp, Inc. 6,644,245
24,297 Enterprise Financial Services
Corp. 914,296
16,628 Equity Bancshares, Inc.,
Class A (a) 586,137
3,962 Fidelity D&D Bancorp, Inc. (b) 254,281
28,713 Fidelity Southern Corp. 747,112
16,770 Financial Institutions, Inc. 430,989
31,307 First Bancorp 1,022,487
51,451 First Busey Corp. 1,262,608
12,377 First Choice Bancorp 279,720
11,380 First Citizens BancShares, Inc.,
Class A 4,290,829
17,146 First Community Bankshares, Inc. 539,756
103,093 First Financial Bancorp 2,445,366
71,306 First Financial Bankshares, Inc. 4,113,643
12,902 First Financial Corp. 518,015
46,797 First Foundation, Inc. (a) 601,809
142,015 First Hawaiian, Inc. 3,196,758
10,722 First Internet Bancorp 219,158
40,124 First Interstate BancSystem, Inc.,
Class A 1,466,933
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BANKS (CONTINUED)
52,291 First Merchants Corp. $ 1,792,013
17,528 First Mid-Illinois Bancshares,
Inc. 559,494
112,015 First Midwest Bancorp, Inc. 2,219,017
26,838 First of Long Island (The) Corp. 535,418
29,486 Flushing Financial Corp. 634,834
185,424 Fulton Financial Corp. 2,870,363
14,412 FVCBankcorp, Inc. (a) 253,795
26,280 German American Bancorp, Inc. 729,796
88,998 Glacier Bancorp, Inc. 3,526,101
14,905 Great Southern Bancorp, Inc. 686,077
12,520 Guaranty Bancshares, Inc. 373,346
89,677 Hancock Whitney Corp. 3,107,308
33,461 Hanmi Financial Corp. 659,182
36,303 Heartland Financial USA, Inc. 1,595,517
45,570 Heritage Commerce Corp. 516,764
38,828 Heritage Financial Corp. 1,153,968
182,089 Home BancShares, Inc. 2,975,334
19,651 HomeTrust Bancshares, Inc. 514,463
135,599 Hope Bancorp, Inc. 1,608,204
40,401 Horizon Bancorp, Inc. 637,528
20,043 Howard Bancorp, Inc. (a) 286,615
58,483 IBERIABANK Corp. 3,759,287
29,008 Independent Bank Corp. 2,039,552
25,386 Independent Bank Corp./MI 533,614
32,089 Independent Bank Group, Inc. 1,468,714
69,660 International Bancshares Corp. 2,396,304
307,005 Investors Bancorp, Inc. 3,192,852
49,998 Lakeland Bancorp, Inc. 740,470
26,645 Lakeland Financial Corp. 1,070,063
51,058 LegacyTexas Financial Group, Inc. 1,638,451
37,381 Live Oak Bancshares, Inc. 553,613
17,472 Mercantile Bank Corp. 493,759
24,964 Midland States Bancorp, Inc. 557,696
12,873 MidWestOne Financial Group, Inc. 319,637
45,978 NBT Bancorp, Inc. 1,590,379
10,027 Nicolet Bankshares, Inc. (a) 489,318
7,252 Northrim BanCorp, Inc. 238,373
17,888 Old Line Bancshares, Inc. 470,812
184,407 Old National Bancorp 2,839,868
31,331 Old Second Bancorp, Inc. 407,303
37,970 Opus Bank 743,832
24,869 Origin Bancorp, Inc. 847,535
65,778 Pacific Premier Bancorp, Inc. (a) 1,678,655
128,220 PacWest Bancorp 4,267,162
20,259 Peapack-Gladstone Financial Corp. 510,122
20,594 Peoples Bancorp, Inc. 619,879
19,710 People's Utah Bancorp 594,256
82,011 Pinnacle Financial Partners, Inc. 3,780,707
105,666 Popular, Inc. 4,989,548
16,140 Preferred Bank 699,669
16,501 QCR Holdings, Inc. 529,517
19,874 RBB Bancorp 349,186
61,826 Renasant Corp. 1,865,909
19,679 Republic Bancorp, Inc., Class A 761,971
61,902 Republic First Bancorp, Inc. (a) 369,555
36,858 S&T Bancorp, Inc. 1,394,707
37,404 Sandy Spring Bancorp, Inc. 1,172,241
Page 44 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
53,988 Seacoast Banking Corp. of
Florida (a) $ 1,404,768
56,118 ServisFirst Bancshares, Inc. 1,788,481
16,091 Sierra Bancorp 386,667
97,433 Simmons First National Corp.,
Class A 2,351,058
14,708 SmartFinancial, Inc. (a) 268,715
38,460 South State Corp. 2,305,677
25,325 Southern National Bancorp of
Virginia, Inc. 334,796
37,024 Southside Bancshares, Inc. 1,175,512
23,949 Stock Yards Bancorp, Inc. 785,527
52,843 Texas Capital Bancshares, Inc. (a) 2,699,749
76,194 TowneBank 1,824,846
32,030 TriCo Bancshares 1,082,294
30,388 TriState Capital Holdings,
Inc. (a) 591,350
27,672 Triumph Bancorp, Inc. (a) 821,858
70,646 Trustmark Corp. 2,008,466
52,522 UMB Financial Corp. 3,202,266
231,905 Umpqua Holdings Corp. 3,687,289
69,482 Union Bankshares Corp. 1,961,477
108,648 United Bankshares, Inc. 3,380,039
83,400 United Community Banks, Inc. 1,789,764
30,869 Univest Financial Corp. 665,844
349,050 Valley National Bancorp 3,099,564
25,507 Veritex Holdings, Inc. (a) 545,340
18,209 Washington Trust Bancorp, Inc. 865,474
57,493 WesBanco, Inc. 2,109,418
28,142 Westamerica Bancorporation 1,566,947
59,380 Wintrust Financial Corp. 3,948,176
--------------
201,438,875
--------------
IT SERVICES -- 0.4%
15,528 Cass Information Systems, Inc. 821,742
--------------
THRIFTS & MORTGAGE FINANCE
-- 11.5%
17,895 BankFinancial Corp. 267,530
31,653 Bridgewater Bancshares, Inc. (a) 333,939
148,718 Capitol Federal Financial, Inc. 1,899,129
122,028 Columbia Financial, Inc. (a) 1,865,808
38,376 Dime Community Bancshares, Inc. 651,625
21,479 First Defiance Financial Corp. 526,450
4,721 FS Bancorp, Inc. 202,436
28,422 HomeStreet, Inc. (a) 603,399
101,433 Kearny Financial Corp. 1,300,371
59,535 Luther Burbank Corp. 537,006
30,214 Merchants Bancorp 603,071
57,025 Meridian Bancorp, Inc. 816,598
41,498 Meta Financial Group, Inc. 804,646
52,168 Northfield Bancorp, Inc. 706,876
108,773 Northwest Bancshares, Inc. 1,842,615
50,962 OceanFirst Financial Corp. 1,147,155
47,901 Oritani Financial Corp. 706,540
55,816 Sterling Bancorp, Inc. 387,921
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE
(CONTINUED)
295,049 TFS Financial Corp. $ 4,759,140
101,779 TrustCo Bank Corp. NY 698,204
52,363 United Community Financial Corp. 463,413
53,722 United Financial Bancorp, Inc. 789,713
85,907 Washington Federal, Inc. 2,294,576
30,359 Waterstone Financial, Inc. 508,817
30,870 Western New England Bancorp,
Inc. 309,935
33,027 WSFS Financial Corp. 1,252,054
--------------
26,278,967
--------------
TOTAL COMMON STOCKS -- 99.9% 228,539,584
(Cost $281,289,722) --------------
MONEY MARKET FUNDS -- 0.0%
60,337 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.61% (c) (d) 60,337
(Cost $60,337) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.1%
$ 26,623 BNP Paribas S.A., 2.95% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$26,627. Collateralized by
U.S. Treasury Note, interest
rate of 2.375%, due 04/30/20.
The value of the collateral
including accrued interest is
$27,263. (d) 26,623
95,816 JPMorgan Chase & Co., 2.85% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$95,831. Collateralized by U.S.
Treasury Bill, interest rate
of 0.000%, due 05/09/19. The
value of the collateral is
$97,730. (d) 95,816
--------------
TOTAL REPURCHASE AGREEMENTS
-- 0.1% 122,439
(Cost $122,439) --------------
TOTAL INVESTMENTS -- 100.0% 228,722,360
(Cost $281,472,498) (e)
NET OTHER ASSETS AND
LIABILITIES 0.0% 39,647
--------------
NET ASSETS -- 100.0% $ 228,762,007
==============
See Notes to Financial Statements Page 45
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $179,704 and the total value of the collateral held by the
Fund is $182,560.
(c) Rate shown reflects yield as of December 31, 2018.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $283,779,527. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,748,906 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$56,806,073. The net unrealized depreciation was $55,057,167.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 228,539,584 $ -- $ --
Money Market
Funds 60,337 -- --
Repurchase
Agreements -- 122,439 --
-----------------------------------------------------
Total Investments $ 228,599,921 $ 122,439 $ --
=====================================================
* See Portfolio of Investments for industry breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 179,704
Non-cash Collateral(2) (179,704)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At December 31, 2018, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 122,439
Non-cash Collateral(4) (122,439)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2018, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 46 See Notes to Financial Statements
This page intentionally left blank.
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2018
FIRST TRUST FIRST TRUST
NASDAQ-100 FIRST TRUST NASDAQ-100
EQUAL NASDAQ-100- EX-TECHNOLOGY
WEIGHTED TECHNOLOGY SECTOR SECTOR
INDEX FUND INDEX FUND INDEX FUND
---------------- ----------------- ----------------
ASSETS:
Investments, at value............................................... $ 464,892,237 $ 1,946,690,248 $ 78,870,621
Cash................................................................ 646,097 4,109,651 --
Receivables:
Investment securities sold.................................... -- 6,742,689 --
Capital shares sold........................................... -- -- --
Dividends..................................................... 603,349 1,685,691 121,141
Securities lending income..................................... 11,945 4,433 3,606
Prepaid expenses.................................................... 4,518 20,618 762
-------------- --------------- --------------
Total Assets.................................................. 466,158,146 1,959,253,330 78,996,130
-------------- --------------- --------------
LIABILITIES:
Due to custodian.................................................... -- -- 146,475
Due to securities lending agent..................................... 5,013 -- 1,337
Payables:
Investment securities purchased............................... -- -- --
Capital shares redeemed....................................... -- 6,757,072 --
Collateral for securities on loan............................. 4,236,665 -- 1,130,001
Investment advisory fees...................................... 164,438 707,166 23,563
Licensing fees................................................ 129,381 569,481 21,593
Shareholder reporting fees.................................... 28,027 101,983 10,383
Audit and tax fees............................................ 22,925 22,925 22,925
Trustees' fees ............................................... 67 150 57
Other liabilities................................................... 107,139 425,766 21,592
-------------- --------------- --------------
Total Liabilities............................................. 4,693,655 8,584,543 1,377,926
-------------- --------------- --------------
NET ASSETS.......................................................... $ 461,464,491 $ 1,950,668,787 $ 77,618,204
============== =============== ==============
NET ASSETS CONSIST OF:
Paid-in capital..................................................... $ 478,220,941 $ 1,995,155,128 $ 90,738,855
Par value........................................................... 84,500 287,000 17,000
Accumulated distributable earnings (loss)........................... (16,840,950) (44,773,341) (13,137,651)
-------------- --------------- --------------
NET ASSETS.......................................................... $ 461,464,491 $ 1,950,668,787 $ 77,618,204
============== =============== ==============
NET ASSET VALUE, per share.......................................... $ 54.61 $ 67.97 $ 45.66
============== =============== ==============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)........................... 8,450,002 28,700,002 1,700,002
============== =============== ==============
Investments, at cost................................................ $ 440,638,150 $ 1,923,885,604 $ 76,400,100
============== =============== ==============
Securities on loan, at value........................................ $ 4,057,743 $ -- $ 1,099,249
============== =============== ==============
Page 48 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
NASDAQ(R) FIRST TRUST NASDAQ(R) ABA
CLEAN EDGE(R) S&P FIRST TRUST FIRST TRUST FIRST TRUST COMMUNITY
GREEN ENERGY REIT WATER NATURAL GAS CHINDIA BANK
INDEX FUND INDEX FUND ETF ETF ETF INDEX FUND
(QCLN) (FRI) (FIW) (FCG) (FNI) (QABA)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 89,665,510 $ 116,731,618 $ 294,748,776 $ 91,139,820 $ 139,476,606 $ 228,722,360
202,607 -- -- -- 70,707 110,363
-- -- -- 2,932,590 -- 10,722,533
-- -- 4,351,786 -- -- --
83,348 687,732 148,868 54,000 9,820 404,026
38,824 3,028 915 9,674 316
720 851 2,897 1,133 2,446 3,129
-------------- -------------- -------------- -------------- -------------- --------------
89,991,009 117,420,201 299,255,355 94,128,458 139,569,253 239,962,727
-------------- -------------- -------------- -------------- -------------- --------------
-- 1,613,025 689,256 131,152 -- --
7,273 -- 4,559 2,430 7,455 216
-- -- 4,350,240 -- 74,116 --
-- -- -- 2,938,728 -- 10,731,063
6,147,276 -- 3,853,014 2,053,805 6,300,761 182,560
24,264 28,021 100,484 33,361 47,464 85,940
22,279 20,894 40,146 30,137 41,677 71,344
13,122 11,689 23,324 16,085 20,160 26,661
22,925 22,925 22,925 22,925 22,925 22,925
56 58 61 59 108 76
22,424 27,737 63,903 25,788 47,870 79,935
-------------- -------------- -------------- -------------- -------------- --------------
6,259,619 1,724,349 9,147,912 5,254,470 6,562,536 11,200,720
-------------- -------------- -------------- -------------- -------------- --------------
$ 83,731,390 $ 115,695,852 $ 290,107,443 $ 88,873,988 $ 133,006,717 $ 228,762,007
============== ============== ============== ============== ============== ==============
$ 118,691,108 $ 139,007,720 $ 300,285,901 $ 602,239,252 $ 231,383,764 $ 288,738,125
47,500 53,500 66,000 60,484 43,000 53,000
(35,007,218) (23,365,368) (10,244,458) (513,425,748) (98,420,047) (60,029,118)
-------------- -------------- -------------- -------------- -------------- --------------
$ 83,731,390 $ 115,695,852 $ 290,107,443 $ 88,873,988 $ 133,006,717 $ 228,762,007
============== ============== ============== ============== ============== ==============
$ 17.63 $ 21.63 $ 43.96 $ 14.69 $ 30.93 $ 43.16
============== ============== ============== ============== ============== ==============
4,750,002 5,350,002 6,600,002 6,048,365 4,300,002 5,300,002
============== ============== ============== ============== ============== ==============
$ 88,064,343 $ 138,577,835 $ 295,559,426 $ 136,722,263 $ 171,342,137 $ 281,472,498
============== ============== ============== ============== ============== ==============
$ 5,971,190 $ -- $ 3,797,847 $ 2,043,121 $ 6,237,963 $ 179,704
============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 49
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2018
FIRST TRUST FIRST TRUST
NASDAQ-100 FIRST TRUST NASDAQ-100
EQUAL NASDAQ-100- EX-TECHNOLOGY
WEIGHTED TECHNOLOGY SECTOR SECTOR
INDEX FUND INDEX FUND INDEX FUND
(QQEW) (QTEC) (QQXT)
---------------- ----------------- ----------------
INVESTMENT INCOME:
Dividends........................................................... $ 5,923,852 $ 34,551,559 $ 839,157
Securities lending income (net of fees)............................. 149,813 13,123 41,614
Foreign withholding tax............................................ (9,187) (115,806) --
-------------- --------------- --------------
Total investment income....................................... 6,064,478 34,448,876 880,771
-------------- --------------- --------------
EXPENSES:
Investment advisory fees............................................ 2,180,073 9,748,449 375,251
Licensing fees...................................................... 545,351 2,438,217 93,920
Accounting and administration fees.................................. 273,988 1,071,797 48,281
Custodian fees...................................................... 74,895 252,083 17,135
Shareholder reporting fees.......................................... 51,650 205,427 15,704
Expenses previously waived or reimbursed............................ 27,809 -- --
Transfer agent fees................................................. 27,253 85,934 4,691
Audit and tax fees.................................................. 23,131 23,131 23,131
Legal fees.......................................................... 18,469 85,488 3,110
Trustees' fees and expenses......................................... 7,644 10,086 7,073
Listing fees........................................................ 5,424 3,804 6,038
Registration and filing fees........................................ (23) 24,792 --
Excise tax.......................................................... -- -- --
Other expenses...................................................... 14,200 50,532 4,436
-------------- --------------- --------------
Total expenses................................................ 3,249,864 13,999,740 598,770
Less fees waived and expenses reimbursed by the investment
advisor.................................................... -- -- (35,900)
-------------- --------------- --------------
Net expenses.................................................. 3,249,864 13,999,740 562,870
-------------- --------------- --------------
NET INVESTMENT INCOME (LOSS)........................................ 2,814,614 20,449,136 317,901
-------------- --------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................... (4,372,434) (49,736,717) (1,825,262)
In-kind redemptions........................................... 41,032,692 308,178,446 8,144,763
Foreign currency transactions................................. -- -- --
-------------- --------------- --------------
Net realized gain (loss)............................................ 36,660,258 258,441,729 6,319,501
-------------- --------------- --------------
Net increase from payment by the advisor............................ 22,098 -- --
-------------- --------------- --------------
Net change in unrealized appreciation (depreciation) on:
Investments................................................... (64,499,253) (404,848,814) (11,325,769)
Foreign currency translation.................................. -- -- --
-------------- --------------- --------------
Net change in unrealized appreciation (depreciation)................ (64,499,253) (404,848,814) (11,325,769)
-------------- --------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................. (27,816,897) (146,407,085) (5,006,268)
-------------- --------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................................. $ (25,002,283) $ (125,957,949) $ (4,688,367)
============== =============== ==============
Page 50 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
NASDAQ(R) FIRST TRUST NASDAQ(R) ABA
CLEAN EDGE(R) S&P FIRST TRUST FIRST TRUST FIRST TRUST COMMUNITY
GREEN ENERGY REIT WATER NATURAL GAS CHINDIA BANK
INDEX FUND INDEX FUND ETF ETF ETF INDEX FUND
(QCLN) (FRI) (FIW) (FCG) (FNI) (QABA)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 696,182 $ 4,052,356 $ 3,920,618 $ 1,012,790 $ 5,347,656 $ 7,269,684
435,424 -- 129,908 6,508 510,860 16,208
(24,621) -- -- (43,923) (119,159) (13,046)
-------------- -------------- -------------- -------------- -------------- --------------
1,106,985 4,052,356 4,050,526 975,375 5,739,357 7,272,846
-------------- -------------- -------------- -------------- -------------- --------------
371,144 342,821 1,273,325 578,363 1,392,775 1,388,067
92,852 91,419 159,207 144,816 279,045 312,349
48,003 59,235 160,619 73,691 175,985 176,410
16,217 31,957 41,978 23,266 48,685 62,570
23,739 17,077 44,604 27,934 39,875 45,117
-- -- -- -- 33,342 15,316
4,639 5,714 15,918 7,230 17,411 17,352
23,131 23,131 23,131 23,131 23,131 23,131
3,196 3,131 11,204 4,853 13,237 11,874
7,071 7,096 7,354 7,135 7,437 7,407
6,089 9,001 11,505 10,744 10,743 6,119
376 -- 4,060 -- 1,293 6,575
-- -- -- -- 10,048 --
3,873 6,025 8,227 6,163 9,936 9,809
-------------- -------------- -------------- -------------- -------------- --------------
600,330 596,607 1,761,132 907,326 2,062,943 2,082,096
(43,615) (25,848) -- (39,782) -- --
-------------- -------------- -------------- -------------- -------------- --------------
556,715 570,759 1,761,132 867,544 2,062,943 2,082,096
-------------- -------------- -------------- -------------- -------------- --------------
550,270 3,481,597 2,289,394 107,831 3,676,414 5,190,750
-------------- -------------- -------------- -------------- -------------- --------------
(3,194,184) (1,664,079) (1,464,625) (24,346,980) (17,075,684) (3,367,474)
1,809,542 (7,152,518) 27,458,537 8,144,776 39,313,711 6,432,597
-- -- -- (634) -- --
-------------- -------------- -------------- -------------- -------------- --------------
(1,384,642) (8,816,597) 25,993,912 (16,202,838) 22,238,027 3,065,123
-------------- -------------- -------------- -------------- -------------- --------------
-- -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- --------------
(11,072,153) (5,846,287) (57,825,167) (34,785,346) (102,311,847) (67,237,070)
-- -- -- 8 -- --
-------------- -------------- -------------- -------------- -------------- --------------
(11,072,153) (5,846,287) (57,825,167) (34,785,338) (102,311,847) (67,237,070)
-------------- -------------- -------------- -------------- -------------- --------------
(12,456,795) (14,662,884) (31,831,255) (50,988,176) (80,073,820) (64,171,947)
-------------- -------------- -------------- -------------- -------------- --------------
$ (11,906,525) $ (11,181,287) $ (29,541,861) $ (50,880,345) $ (76,397,406) $ (58,981,197)
============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 51
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
NASDAQ-100 NASDAQ-100-
EQUAL WEIGHTED TECHNOLOGY SECTOR
INDEX FUND INDEX FUND
(QQEW) (QTEC)
------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/2018 12/31/2017 12/31/2018 12/31/2017
-------------- -------------- -------------- --------------
OPERATIONS:
Net investment income (loss)................................ $ 2,814,614 $ 2,257,216 $ 20,449,136 $ 15,361,504
Net realized gain (loss).................................... 36,660,258 39,948,494 258,441,729 251,008,897
Net increase from payment by the advisor.................... 22,098 -- -- --
Net change in unrealized appreciation (depreciation)........ (64,499,253) 66,809,610 (404,848,814) 347,761,259
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations.......................................... (25,002,283) 109,015,320 (125,957,949) 614,131,660
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations....................................... (2,716,080) (19,564,271)
Net investment income....................................... (2,664,196) (18,099,151)
Return of capital........................................... -- -- -- --
-------------- -------------- -------------- --------------
Total distributions to shareholders......................... (2,716,080) (2,664,196) (19,564,271) (18,099,151)
-------------- -------------- -------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................... 79,723,310 186,618,945 936,219,196 900,379,473
Cost of shares redeemed..................................... (120,172,606) (167,382,228) (1,040,739,511) (866,555,377)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions............................ (40,449,296) 19,236,717 (104,520,315) 33,824,096
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets..................... (68,167,659) 125,587,841 (250,042,535) 629,856,605
NET ASSETS:
Beginning of period......................................... 529,632,150 404,044,309 2,200,711,322 1,570,854,717
-------------- -------------- -------------- --------------
End of period............................................... $ 461,464,491 $ 529,632,150 $1,950,668,787 $2,200,711,322
============== ============== ============== ==============
Accumulated net investment income (loss)
at end of period......................................... $ -- $ --
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period..................... 9,150,002 8,750,002 30,600,002 29,850,002
Shares sold................................................. 1,300,000 3,550,000 11,950,000 13,950,000
Shares redeemed............................................. (2,000,000) (3,150,000) (13,850,000) (13,200,000)
-------------- -------------- -------------- --------------
Shares outstanding, end of period........................... 8,450,002 9,150,002 28,700,002 30,600,002
============== ============== ============== ==============
Page 52 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
NASDAQ-100 NASDAQ(R) S&P FIRST TRUST
EX-TECHNOLOGY SECTOR CLEAN EDGE(R) GREEN ENERGY REIT WATER
INDEX FUND INDEX FUND INDEX FUND ETF
(QQXT) (QCLN) (FRI) (FIW)
----------------------------- ------------------------------- ------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/2018 12/31/2017 12/31/2018 12/31/2017 12/31/2018 12/31/2017 12/31/2018 12/31/2017
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 317,901 $ 245,092 $ 550,270 $ 157,651 $ 3,481,597 $ 5,789,030 $ 2,289,394 $ 3,176,313
6,319,501 5,246,103 (1,384,642) 203,014 (8,816,597) 2,507,384 25,993,912 19,374,705
-- -- -- -- -- -- -- --
(11,325,769) 13,165,675 (11,072,153) 17,631,024 (5,846,287) (285,345) (57,825,167) 32,146,174
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(4,688,367) 18,656,870 (11,906,525) 17,991,689 (11,181,287) 8,011,069 (29,541,861) 54,697,192
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(308,595) (510,967) (3,585,667) (2,110,505)
(336,720) (353,370) (5,399,046) (3,256,646)
-- -- (350,683) -- -- -- -- --
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(308,595) (336,720) (861,650) (353,370) (3,585,667) (5,399,046) (2,110,505) (3,256,646)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
10,002,377 20,432,764 11,063,662 29,586,328 60,347,868 26,735,727 110,251,184 101,855,142
(29,301,259) (39,956,628) (5,826,072) (7,799,880) (91,675,775) (103,982,757) (87,266,237) (76,311,985)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(19,298,882) (19,523,864) 5,237,590 21,786,448 (31,327,907) (77,247,030) 22,984,947 25,543,157
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(24,295,844) (1,203,714) (7,530,585) 39,424,767 (46,094,861) (74,635,007) (8,667,419) 76,983,703
101,914,048 103,117,762 91,261,975 51,837,208 161,790,713 236,425,720 298,774,862 221,791,159
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 77,618,204 $ 101,914,048 $ 83,731,390 $ 91,261,975 $ 115,695,852 $ 161,790,713 $ 290,107,443 $ 298,774,862
============= ============= ============== ============== ============== ============== ============== ==============
$ -- $ -- $ 394,562 $ --
============= ============== ============== ==============
2,100,002 2,550,002 4,500,002 3,350,002 6,950,002 10,250,002 6,150,002 5,600,002
200,000 450,000 550,000 1,550,000 2,550,000 1,150,000 2,250,000 2,350,000
(600,000) (900,000) (300,000) (400,000) (4,150,000) (4,450,000) (1,800,000) (1,800,000)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
1,700,002 2,100,002 4,750,002 4,500,002 5,350,002 6,950,002 6,600,002 6,150,002
============= ============= ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 53
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST FIRST TRUST
NATURAL GAS CHINDIA
ETF ETF
(FCG) (FNI)
------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/2018 12/31/2017 12/31/2018 12/31/2017
-------------- -------------- -------------- --------------
OPERATIONS:
Net investment income (loss)................................ $ 107,831 $ (202,989) $ 3,676,414 $ 2,422,504
Net realized gain (loss).................................... (16,202,838) (4,939,862) 22,238,027 4,746,736
Net increase from payment by the advisor.................... -- -- -- --
Net change in unrealized appreciation (depreciation)........ (34,785,338) (21,923,961) (102,311,847) 80,982,652
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations.......................................... (50,880,345) (27,066,812) (76,397,406) 88,151,892
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations....................................... -- (4,434,111)
Net investment income....................................... (1,778,865) (7,008,527)
Return of capital........................................... (1,420,088) (1,015,203) -- --
-------------- -------------- -------------- --------------
Total distributions to shareholders......................... (1,420,088) (2,794,068) (4,434,111) (7,008,527)
-------------- -------------- -------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................... 31,493,285 44,818,055 123,727,641 175,541,076
Cost of shares redeemed..................................... (74,580,615) (81,719,422) (285,804,842) (12,234,853)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions............................ (43,087,330) (36,901,367) (162,077,201) 163,306,223
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets..................... (95,387,763) (66,762,247) (242,908,718) 244,449,588
NET ASSETS:
Beginning of period......................................... 184,261,751 251,023,998 375,915,435 131,465,847
-------------- -------------- -------------- --------------
End of period............................................... $ 88,873,988 $ 184,261,751 $ 133,006,717 $ 375,915,435
============== ============== ============== ==============
Accumulated net investment income (loss)
at end of period......................................... $ -- $ (2,371,548)
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period..................... 8,098,365 9,598,365 9,500,002 4,800,002
Shares sold................................................. 1,450,000 2,000,000 3,200,000 5,050,000
Shares redeemed............................................. (3,500,000) (3,500,000) (8,400,000) (350,000)
-------------- -------------- -------------- --------------
Shares outstanding, end of period........................... 6,048,365 8,098,365 4,300,002 9,500,002
============== ============== ============== ==============
Page 54 See Notes to Financial Statements
FIRST TRUST
NASDAQ(R) ABA
COMMUNITY BANK
INDEX FUND
(QABA)
-----------------------------
Year Ended Year Ended
12/31/2018 12/31/2017
------------- -------------
$ 5,190,750 $ 5,192,986
3,065,123 34,020,200
-- --
(67,237,070) (46,391,038)
------------- -------------
(58,981,197) (7,177,852)
------------- -------------
(5,212,126)
(5,233,697)
-- --
------------- -------------
(5,212,126) (5,233,697)
------------- -------------
115,204,523 129,887,132
(136,281,236) (207,466,414)
------------- -------------
(21,076,713) (77,579,282)
------------- -------------
(85,270,036) (89,990,831)
314,032,043 404,022,874
------------- -------------
$ 228,762,007 $ 314,032,043
============= =============
$ --
=============
6,000,002 7,650,002
2,050,000 2,500,000
(2,750,000) (4,150,000)
------------- -------------
5,300,002 6,000,002
============= =============
See Notes to Financial Statements Page 55
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 57.88 $ 46.18 $ 43.48 $ 42.80 $ 36.35
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.32 0.24 0.31 0.22 0.41
Net realized and unrealized gain (loss) (3.29) (a) 11.74 2.73 0.73 6.49
------------ ------------ ------------ ------------ ------------
Total from investment operations (2.97) 11.98 3.04 0.95 6.90
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.30) (0.28) (0.34) (0.27) (0.45)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 54.61 $ 57.88 $ 46.18 $ 43.48 $ 42.80
============ ============ ============ ============ ============
TOTAL RETURN (b) (5.16)% (a) 26.00% 7.02% 2.22% 19.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 461,464 $ 529,632 $ 404,044 $ 532,679 $ 577,828
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.60% 0.60% 0.61% 0.60% 0.61%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.52% 0.45% 0.72% 0.51% 1.10%
Portfolio turnover rate (c) 27% 26% 29% 31% 27%
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 71.92 $ 52.62 $ 42.64 $ 43.67 $ 35.43
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.65 0.48 0.67 0.37 0.45
Net realized and unrealized gain (loss) (3.98) 19.39 9.99 (0.98) 8.32
------------ ------------ ------------ ------------ ------------
Total from investment operations (3.33) 19.87 10.66 (0.61) 8.77
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.62) (0.57) (0.68) (0.42) (0.53)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 67.97 $ 71.92 $ 52.62 $ 42.64 $ 43.67
============ ============ ============ ============ ============
TOTAL RETURN (b) (4.70)% 37.86% 25.27% (1.37)% 24.83%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,950,669 $ 2,200,711 $ 1,570,855 $ 302,735 $ 366,869
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.57% 0.58% 0.60% 0.60% 0.61%
Ratio of net expenses to average net assets 0.57% 0.58% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.84% 0.76% 1.40% 0.83% 1.32%
Portfolio turnover rate (c) 21% 21% 27% 23% 20%
(a) The Fund received a reimbursement from the Advisor in the amount of
$22,098 in connection with a trade error, which represents less than $0.01
per share. Since the Advisor reimbursed the Fund, there was no effect on
the Fund's total return.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(c) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 56 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 48.53 $ 40.44 $ 41.45 $ 39.73 $ 34.77
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.18 0.12 0.09 0.13 0.32
Net realized and unrealized gain (loss) (2.88) 8.13 (0.98) 1.75 4.97
------------ ------------ ------------ ------------ ------------
Total from investment operations (2.70) 8.25 (0.89) 1.88 5.29
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.17) (0.16) (0.12) (0.16) (0.33)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 45.66 $ 48.53 $ 40.44 $ 41.45 $ 39.73
============ ============ ============ ============ ============
TOTAL RETURN (a) (5.58)% 20.41% (2.13)% 4.75% 15.35%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 77,618 $ 101,914 $ 103,118 $ 184,447 $ 117,195
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.64% 0.63% 0.64% 0.63% 0.64%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.34% 0.25% 0.23% 0.33% 0.90%
Portfolio turnover rate (b) 26% 25% 30% 39% 23%
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 20.28 $ 15.47 $ 16.01 $ 17.23 $ 17.90
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.12 0.05 0.17 0.11 0.13
Net realized and unrealized gain (loss) (2.59) 4.85 (0.52) (1.21) (0.66)
------------ ------------ ------------ ------------ ------------
Total from investment operations (2.47) 4.90 (0.35) (1.10) (0.53)
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.11) (0.09) (0.19) (0.12) (0.14)
Return of capital (0.07) -- -- -- --
------------ ------------ ------------ ------------ ------------
Total distributions (0.18) (0.09) (0.19) (0.12) (0.14)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 17.63 $ 20.28 $ 15.47 $ 16.01 $ 17.23
============ ============ ============ ============ ============
TOTAL RETURN (a) (12.22)% 31.73% (2.12)% (6.43)% (3.05)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 83,731 $ 91,262 $ 51,837 $ 69,655 $ 89,616
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.65% 0.66% 0.68% 0.65% 0.64%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.59% 0.23% 1.18% 0.65% 0.61%
Portfolio turnover rate (b) 45% 32% 49% 35% 37%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 57
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST S&P REIT INDEX FUND (FRI)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 23.28 $ 23.07 $ 22.07 $ 22.24 $ 17.54
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.69 0.71 0.62 0.55 0.41
Net realized and unrealized gain (loss) (1.65) 0.16 1.13 (0.13) 4.75
------------ ------------ ------------ ------------ ------------
Total from investment operations (0.96) 0.87 1.75 0.42 5.16
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.69) (0.66) (0.75) (0.59) (0.46)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 21.63 $ 23.28 $ 23.07 $ 22.07 $ 22.24
============ ============ ============ ============ ============
TOTAL RETURN (a) (4.19)% 3.79% 7.92% 1.97% 29.61%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 115,696 $ 161,791 $ 236,426 $ 226,250 $ 339,130
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.52% 0.48% 0.49% 0.48% 0.50%
Ratio of net expenses to average net assets 0.50% 0.48% 0.49% 0.48% 0.50%
Ratio of net investment income (loss) to
average net assets 3.05% 2.77% 2.52% 2.30% 2.35%
Portfolio turnover rate (b) 10% 7% 6% 8% 11%
FIRST TRUST WATER ETF (FIW)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 48.58 $ 39.61 $ 30.13 $ 33.65 $ 33.79
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.35 0.54 0.20 0.23 0.25
Net realized and unrealized gain (loss) (4.65) 8.98 9.48 (3.52) (0.14)
------------ ------------ ------------ ------------ ------------
Total from investment operations (4.30) 9.52 9.68 (3.29) 0.11
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.32) (0.55) (0.20) (0.23) (0.25)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 43.96 $ 48.58 $ 39.61 $ 30.13 $ 33.65
============ ============ ============ ============ ============
TOTAL RETURN (a) (8.89)% 24.25% 32.21% (9.81)% 0.36%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 290,107 $ 298,775 $ 221,791 $ 102,432 $ 198,550
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.55% 0.56% 0.57% 0.57% 0.59%
Ratio of net expenses to average net assets 0.55% 0.56% 0.57% 0.57% 0.59%
Ratio of net investment income (loss) to
average net assets 0.72% 1.26% 0.58% 0.70% 0.75%
Portfolio turnover rate (b) 11% 24% 42% 17% 24%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 58 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NATURAL GAS ETF (FCG)
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
2018 2017 2016 2015 (a) 2014 (a)
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 22.75 $ 26.15 $ 22.30 $ 56.10 $ 97.65
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.02 (0.02) 0.13 1.00 0.70
Net realized and unrealized gain (loss) (7.86) (3.02) 4.16 (33.75) (41.50)
------------ ------------ ------------ ------------ ------------
Total from investment operations (7.84) (3.04) 4.29 (32.75) (40.80)
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- (0.23) (0.44) (1.05) (0.75)
Return of capital (0.22) (0.13) -- -- --
------------ ------------ ------------ ------------ ------------
Total distributions (0.22) (0.36) (0.44) (1.05) (0.75)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 14.69 $ 22.75 $ 26.15 $ 22.30 $ 56.10
============ ============ ============ ============ ============
TOTAL RETURN (b) (34.77)% (11.53)% 19.48% (59.10)% (42.02)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 88,874 $ 184,262 $ 251,024 $ 153,042 $ 246,946
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.63% 0.64% (c) 0.64% (c) 0.62% 0.61%
Ratio of net expenses to average net assets 0.60% 0.63% (c) 0.61% (c) 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.07% (0.11)% 0.54% 2.44% 0.74%
Portfolio turnover rate (d) 47% 53% 103% 67% 42%
FIRST TRUST CHINDIA ETF (FNI)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 39.57 $ 27.39 $ 28.36 $ 28.63 $ 28.22
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.04 0.34 0.25 0.15 0.20
Net realized and unrealized gain (loss) (8.16) 12.61 (0.85) (0.24) 0.48
------------ ------------ ------------ ------------ ------------
Total from investment operations (8.12) 12.95 (0.60) (0.09) 0.68
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.52) (0.77) (0.37) (0.18) (0.27)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 30.93 $ 39.57 $ 27.39 $ 28.36 $ 28.63
============ ============ ============ ============ ============
TOTAL RETURN (b) (20.68)% 47.36% (2.15)% (0.32)% 2.37%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 133,007 $ 375,915 $ 131,466 $ 221,188 $ 111,663
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.59% 0.60% 0.60% 0.62% 0.65%
Ratio of net expenses to average net assets 0.59% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.06% 0.91% 0.91% 0.64% 0.54%
Portfolio turnover rate (d) 22% 35% 47% 68% 40%
(a) All per share amounts and net asset values have been adjusted to reflect
the impact of the 1-for-5 reverse share split on May 2, 2016. The net
asset values reported on December 31, 2015 and 2014 prior to the reverse
share split restatement were $4.46 and $11.22, respectively.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(c) For the years ended December 31, 2017 and 2016, ratios reflect excise tax
of 0.03% and 0.01%, respectively, which are not included in the expense
cap.
(d) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 59
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 52.34 $ 52.81 $ 38.94 $ 36.61 $ 36.11
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.81 0.74 0.58 0.56 0.47
Net realized and unrealized gain (loss) (9.17) (0.46) 13.89 2.31 0.50
------------ ------------ ------------ ------------ ------------
Total from investment operations (8.36) 0.28 14.47 2.87 0.97
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.82) (0.75) (0.60) (0.54) (0.47)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 43.16 $ 52.34 $ 52.81 $ 38.94 $ 36.61
============ ============ ============ ============ ============
TOTAL RETURN (a) (16.14)% 0.55% 37.57% 7.88% 2.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 228,762 $ 314,032 $ 404,023 $ 223,902 $ 109,818
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.60% 0.60% 0.61% 0.62% 0.64%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.50% 1.37% 1.54% 1.52% 1.41%
Portfolio turnover rate (b) 11% 14% 16% 19% 26%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 60 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
1. ORGANIZATION
First Trust Exchange-Traded Fund (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on August 8,
2003, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of twenty-one exchange-traded funds. This report
covers the nine funds listed below:
First Trust NASDAQ-100 Equal Weighted Index Fund - (The Nasdaq Stock
Market LLC ("Nasdaq") ticker "QQEW")
First Trust NASDAQ-100-Technology Sector Index Fund - (Nasdaq ticker
"QTEC")
First Trust NASDAQ-100 Ex-Technology Sector Index Fund - (Nasdaq
ticker "QQXT")
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund - (Nasdaq
ticker "QCLN")
First Trust S&P REIT Index Fund - (NYSE Arca, Inc. ("NYSE Arca") ticker
"FRI")
First Trust Water ETF - (NYSE Arca ticker "FIW")
First Trust Natural Gas ETF - (NYSE Arca ticker "FCG")
First Trust Chindia ETF - (NYSE Arca ticker "FNI")
First Trust NASDAQ(R) ABA Community Bank Index Fund - (Nasdaq ticker
"QABA")
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual
funds, each Fund issues and redeems shares on a continuous basis, at net asset
value ("NAV"), only in large specified blocks consisting of 50,000 shares called
a "Creation Unit." Creation Units are generally issued and redeemed in-kind for
securities in which a Fund invests and, in certain circumstances, for cash, and
only to and from broker-dealer and large institutional investors that have
entered into participation agreements. Except when aggregated in Creation Units,
each Fund's shares are not redeemable securities. The investment objective of
each Fund is to seek investment results that correspond generally to the price
and yield (before the Fund's fees and expenses) of the following indices:
FUND INDEX
First Trust NASDAQ-100 Equal Weighted Index Fund NASDAQ-100 Equal Weighted Index(SM)
First Trust NASDAQ-100-Technology Sector Index Fund NASDAQ-100 Technology Sector Index(SM)
First Trust NASDAQ-100 Ex-Technology Sector Index Fund NASDAQ-100 Ex-Tech Sector Index(SM)
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund NASDAQ(R) Clean Edge(R) Green Energy Index(SM)
First Trust S&P REIT Index Fund S&P United States REIT Index
First Trust Water ETF ISE Clean Edge Water Index
First Trust Natural Gas ETF ISE-Revere Natural Gas(TM) Index
First Trust Chindia ETF ISE ChIndia(TM) Index
First Trust NASDAQ(R) ABA Community Bank Index Fund NASDAQ OMX(R) ABA Community Bank Index(SM)
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the Funds in the preparation of the
financial statements. The preparation of the financial statements in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP") requires management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using the data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
Page 61
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with the 1940 Act. Investments valued by the
Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to
the Portfolio of Investments. Each Fund's investments are valued as follows:
Common stocks, real estate investment trusts ("REITs"), master limited
partnerships ("MLPs") and other equity securities listed on any national
or foreign exchange (excluding Nasdaq and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Overnight repurchase agreements are valued at amortized cost when it
represents the best estimate of fair value.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
In addition, differences between the prices used to calculate a Fund's NAV and
the prices used by such Fund's corresponding index could result in a difference
between a Fund's performance and the performance of its underlying index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
Page 62
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of December 31, 2018, is
included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Withholding taxes and tax reclaims on foreign dividends have been provided for
in accordance with each Fund's understanding of the applicable country's tax
rules and rates.
Distributions received from a Fund's investments in MLPs generally are comprised
of return of capital and investment income. A Fund records estimated return of
capital and investment income based on historical information available from
each MLP. These estimates may subsequently be revised based on information
received from the MLPs after their tax reporting periods are concluded.
Distributions received from a Fund's investments in REITs may be comprised of
return of capital, capital gains and income. The actual character of the amounts
received during the year is not known until after the REITs' fiscal year end. A
Fund records the character of distributions received from the REITs during the
year based on estimates available. The characterization of distributions
received by a Fund may be subsequently revised based on information received
from the REITs after their tax reporting periods conclude.
C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES
Offsetting Assets and Liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset on the
Statements of Assets and Liabilities, and disclose instruments and transactions
subject to master netting or similar agreements. These disclosure requirements
are intended to help investors and other financial statement users better assess
the effect or potential effect of offsetting arrangements on a fund's financial
position. The transactions subject to offsetting disclosures are derivative
instruments, repurchase agreements and reverse repurchase agreements, and
securities borrowing and securities lending transactions.
This disclosure, if applicable, is included within each Fund's Portfolio of
Investments under the heading "Offsetting Assets and Liabilities". For financial
reporting purposes, the Funds do not offset financial assets and financial
liabilities that are subject to master netting arrangements ("MNAs") or similar
agreements on the Statements of Assets and Liabilities. MNAs provide the right,
in the event of default (including bankruptcy and insolvency), for the
non-defaulting counterparty to liquidate the collateral and calculate the net
exposure to the defaulting party or request additional collateral.
D. SECURITIES LENDING
The Funds may lend securities representing up to 33 1/3% of the value of their
total assets to broker-dealers, banks and other institutions to generate
additional income. When a Fund loans its portfolio securities, it will receive,
at the inception of each loan, collateral equal to at least 102% (for domestic
securities) or 105% (for international securities) of the market value of the
loaned securities. The collateral amount is valued at the beginning of each
business day and is compared to the market value of the loaned securities from
the prior business day to determine if additional collateral is required. If
additional collateral is required, a request is sent to the borrower. Securities
lending involves the risk that the Fund may lose money because the borrower of
the Fund's loaned securities fails to return the securities in a timely manner
or at all. The Fund could also lose money in the event of (i) a decline in the
value of the collateral provided for the loaned securities, (ii) a decline in
the value of any investments made with cash collateral or (iii) an increase in
the value of the loaned securities if the borrower does not increase the
collateral accordingly and the borrower fails to return the securities. These
events could also trigger adverse tax consequences for the Funds.
Under the Funds' Securities Lending Agency Agreement, the securities lending
agent will generally bear the risk that a borrower may default on its obligation
to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the
Funds' securities lending agent and is responsible for executing the lending of
the portfolio securities to creditworthy borrowers. The Funds, however, will be
responsible for the risks associated with the investment of cash collateral. A
Fund may lose money on its investment of cash collateral, which may affect its
ability to repay the collateral to the borrower without the use of other Fund
assets. Each Fund that engages in securities lending receives compensation (net
of any rebate and securities lending agent fees) for lending its securities.
Compensation can be in the form of fees received from the securities lending
agent or dividends or interest earned from the investment of cash collateral.
The fees received from the securities lending agent are accrued daily. The
dividend and interest earned on the securities loaned is accounted for in the
same manner as other dividend and interest income. At December 31, 2018, QQEW,
QQXT, QCLN, FIW, FCG, FNI, and QABA had securities in the securities lending
program. During the fiscal year ended December 31, 2018, QQEW, QTEC, QQXT, QCLN,
FIW, FCG, FNI, and QABA participated in the securities lending program.
Page 63
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
In the event of a default by a borrower with respect to any loan, BBH will
exercise any and all remedies provided under the applicable borrower agreement
to make the Funds whole. These remedies include purchasing replacement
securities by applying the collateral held from the defaulting broker against
the purchase cost of the replacement securities. If, despite such efforts by BBH
to exercise these remedies, a Fund sustains losses as a result of a borrower's
default, BBH will indemnify the Fund by purchasing replacement securities at its
own expense, or paying the Fund an amount equal to the market value of the
replacement securities, subject to certain limitations which are set forth in
detail in the Securities Lending Agency Agreement between the Trust on behalf of
the Funds and BBH.
E. REPURCHASE AGREEMENTS
Repurchase agreements involve the purchase of securities subject to the seller's
agreement to repurchase the securities at a mutually agreed upon date and price,
under the terms of a Master Repurchase Agreement ("MRA"). During the term of a
repurchase agreement, the value of the underlying securities held as collateral
on behalf of a Fund, including accrued interest, is required to exceed the value
of the repurchase agreement, including accrued interest. The underlying
securities for all repurchase agreements are held at the Funds' custodian or
designated sub-custodians under tri-party repurchase agreements.
MRAs govern transactions between a Fund and select counterparties. The MRAs
contain provisions for, among other things, initiation, income payments, events
of default, and maintenance of collateral for repurchase agreements.
Repurchase agreements received for lending securities are collateralized by U.S.
Treasury securities. The U.S. Treasury securities are held in a joint custody
account at BBH on behalf of the Funds participating in the securities lending
program. In the event the counterparty defaults on the repurchase agreement, the
U.S. Treasury securities can either be maintained as part of a Fund's portfolio
or sold for cash. A Fund could suffer a loss to the extent that the proceeds
from the sale of the underlying collateral held by the Fund is less than the
repurchase price and the Fund's costs associated with the delay and enforcement
of the MRA.
While the Funds may invest in repurchase agreements, any repurchase agreements
held by the Funds during the fiscal year ended December 31, 2018, were received
as collateral for lending securities.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on portfolio securities held by the Funds and
have no impact on net assets or NAV per share. Temporary differences, which
arise from recognizing certain items of income, expense and gain/loss in
different periods for financial statement and tax purposes, will reverse at some
time in the future.
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2018 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
------------------ ---------------- -----------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ 2,716,080 $ -- $ --
First Trust NASDAQ-100-Technology Sector Index Fund 19,564,271 -- --
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 308,595 -- --
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 510,967 -- 350,683
First Trust S&P REIT Index Fund 3,585,667 -- --
First Trust Water ETF 2,110,505 -- --
First Trust Natural Gas ETF -- -- 1,420,088
First Trust Chindia ETF 4,434,111 -- --
First Trust NASDAQ(R)ABA Community Bank Index Fund 5,212,126 -- --
Page 64
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2017 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
------------------ ---------------- -----------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ 2,664,196 $ -- $ --
First Trust NASDAQ-100-Technology Sector Index Fund 18,099,151 -- --
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 336,720 -- --
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 353,370 -- --
First Trust S&P REIT Index Fund 5,399,046 -- --
First Trust Water ETF 3,256,646 -- --
First Trust Natural Gas ETF 1,778,865 -- 1,015,203
First Trust Chindia ETF 7,008,527 -- --
First Trust NASDAQ(R)ABA Community Bank Index Fund 5,233,697 -- --
As of December 31, 2018, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ ---------------- -----------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ 42,934 $(37,030,279) $ 20,146,395
First Trust NASDAQ-100-Technology Sector Index Fund 202,049 (47,202,665) 2,227,275
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 9,306 (14,965,979) 1,819,022
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund -- (34,906,225) (100,993)
First Trust S&P REIT Index Fund 290,492 (445,058) (23,210,802)
First Trust Water ETF 178,889 (6,895,306) (3,528,041)
First Trust Natural Gas ETF -- (461,527,796) (51,897,952)
First Trust Chindia ETF -- (64,902,798) (33,517,249)
First Trust NASDAQ(R) ABA Community Bank Index Fund -- (4,971,951) (55,057,167)
G. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of each Fund's taxable income
exceeds the distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ending 2015, 2016,
2017, and 2018 remain open to federal and state audit. As of December 31, 2018,
management has evaluated the application of these standards to the Funds, and
has determined that no provision for income tax is required in the Funds'
financial statements for uncertain tax positions.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses arising in taxable years beginning after December 22, 2010,
may be carried forward indefinitely, and their character is retained as
short-term and/or long-term losses. Previously, net capital losses were carried
forward for up to eight years and treated as short-term losses. As a transition
rule, the Act requires that post-enactment net capital losses be used before
pre-enactment net capital losses. At December 31, 2018, the Funds had
post-enactment net capital losses for federal income tax purposes as shown in
the following table. To the extent that these loss carryforwards are used to
offset future capital gains, it is probable that the capital gains so offset
will not be distributed to Fund shareholders. The Funds are subject to certain
limitations, under U.S. tax rules, on the use of capital loss carryforwards and
net unrealized built-in losses. These limitations apply when there has been a
50% change in ownership.
Page 65
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
Post-
Enactment -
No
Expiration
------------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ 37,030,279
First Trust NASDAQ-100-Technology Sector Index Fund 47,202,665
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 14,965,979
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 34,906,225
First Trust S&P REIT Index Fund 445,058
First Trust Water ETF 6,895,306
First Trust Natural Gas ETF 461,527,796
First Trust Chindia ETF 64,902,798
First Trust NASDAQ(R) ABA Community Bank Index Fund 4,971,951
At the taxable year ended December 31, 2018, the following Funds' capital loss
carryforwards expired in the following amounts:
Capital Loss
Carryforward
Expired
------------------
First Trust NASDAQ-100 Ex-Technology Sector Index Fund $ 80,899
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 5,884,801
First Trust Water ETF 2,198,674
First Trust Natural Gas ETF 40,089,981
First Trust Chindia ETF 7,245,147
First Trust NASDAQ(R)ABA Community Bank Index Fund 116,604
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended December 31, 2018, the adjustments for each Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) Paid-in
Income (Loss) on Investments Capital
------------------ ---------------- -----------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ (55,600) $ (40,351,757) $ 40,407,357
First Trust NASDAQ-100-Technology Sector Index Fund (682,816) (300,403,738) 301,086,554
First Trust NASDAQ-100 Ex-Technology Sector Index Fund -- (7,807,005) 7,807,005
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (39,303) 4,280,044 (4,240,741)
First Trust S&P REIT Index Fund -- 8,122,992 (8,122,992)
First Trust Water ETF -- (24,837,224) 24,837,224
First Trust Natural Gas ETF (107,831) 34,361,220 (34,253,389)
First Trust Chindia ETF 3,064,562 (28,204,471) 25,139,909
First Trust NASDAQ(R)ABA Community Bank Index Fund 21,376 (4,461,474) 4,440,098
Page 66
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
H. EXPENSES
Expenses that are directly related to one of the Funds are charged directly to
the respective Fund. General expenses of the Trust are allocated to all the
Funds based upon the net assets of each Fund.
First Trust has entered into licensing agreements with each of the following
"Licensors" for the respective Funds:
FUND LICENSOR
First Trust NASDAQ-100 Equal Weighted Index Fund Nasdaq, Inc.
First Trust NASDAQ-100-Technology Sector Index Fund Nasdaq, Inc.
First Trust NASDAQ-100 Ex-Technology Sector Index Fund Nasdaq, Inc.
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund Nasdaq, Inc.
First Trust S&P REIT Index Fund S&P Dow Jones Indices LLC
First Trust Water ETF International Securities Exchange, LLC
First Trust Natural Gas ETF International Securities Exchange, LLC
First Trust Chindia ETF International Securities Exchange, LLC
First Trust NASDAQ(R)ABA Community Bank Index Fund Nasdaq, Inc. and American Bankers Association
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The respective Funds are
required to pay licensing fees, which are shown on the Statements of Operations.
I. NEW ACCOUNTING PRONOUNCEMENT
On August 28, 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13,
"Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement," which amends the fair value measurement disclosure requirements of
ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified
disclosure requirements of ASC 820. In addition, the amendments clarify that
materiality is an appropriate consideration of entities when evaluating
disclosure requirements. The ASU is effective for fiscal years beginning after
December 15, 2019, including interim periods therein. Early adoption is
permitted for any eliminated or modified disclosures upon issuance of this ASU.
The Funds have early adopted ASU 2018-13 for these financial statements, which
did not result in a material impact.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
For these services, First Trust is entitled to receive monthly fees from each
Fund calculated at the following annual rates:
% of Average
Daily Net Assets
----------------
First Trust NASDAQ-100 Equal Weighted Index Fund 0.40%
First Trust NASDAQ-100-Technology Sector Index Fund 0.40%
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 0.40%
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 0.40%
First Trust S&P REIT Index Fund 0.30%
First Trust Water ETF 0.40%
First Trust Natural Gas ETF 0.40%
First Trust Chindia ETF 0.40%
First Trust NASDAQ(R)ABA Community Bank Index Fund 0.40%
The Trust and the Advisor have entered into an Expense Reimbursement, Fee Waiver
and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to
waive fees and/or reimburse Fund expenses to the extent that the operating
expenses of each Fund (excluding interest expense, brokerage commissions and
other trading expenses, acquired fund fees and expenses, taxes and extraordinary
expenses) exceed the below amount as a percentage of average daily net assets
per year (the "Expense Cap"). The Expense Cap will be in effect until at least
April 30, 2020.
Page 67
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
Expense Cap
----------------
First Trust NASDAQ-100 Equal Weighted Index Fund 0.60%
First Trust NASDAQ-100-Technology Sector Index Fund 0.60%
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 0.60%
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 0.60%
First Trust S&P REIT Index Fund 0.50%
First Trust Water ETF 0.60%
First Trust Natural Gas ETF 0.60%
First Trust Chindia ETF 0.60%
First Trust NASDAQ(R)ABA Community Bank Index Fund 0.60%
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee was waived or expense was incurred, but no reimbursement payment will be
made by a Fund if it results in the Fund exceeding an expense ratio equal to the
Expense Cap in place at the time the expenses were reimbursed or fees were
waived by First Trust. These amounts are included in "Expenses previously waived
or reimbursed" on the Statements of Operations.
The advisory fee waivers and expense reimbursements for the fiscal year ended
December 31, 2018 and fees waived or expenses borne by First Trust subject to
recovery from the applicable Fund for the periods indicated were as follows:
Fees Waived or Expenses Borne by
First Trust Subject to Recovery
------------------------------------------------
Advisory Year Year Year
Fee Expense Ended Ended Ended
Waivers Reimbursement 12/31/2016 12/31/2017 12/31/2018 Total
--------- ------------- ---------- ---------- ---------- ---------
First Trust NASDAQ-100 Ex-Technology Sector
Index Fund $ 35,900 $ -- $ 49,128 $ 26,900 $ 35,900 $ 111,928
First Trust NASDAQ(R) Clean Edge(R) Green Energy
Index Fund 43,615 -- 44,163 39,255 43,615 127,033
First Trust S&P REIT Index Fund 25,848 -- -- -- 25,848 25,848
First Trust Natural Gas ETF 39,782 -- 54,736 25,164 39,782 119,682
First Trust NASDAQ(R) ABA Community Bank
Index Fund -- -- 21,616 -- -- 21,616
During the fiscal year ended December 31, 2018, First Trust recovered fees that
were previously waived from First Trust NASDAQ-100 Equal Weighted Index Fund,
First Trust Chindia ETF and First Trust NASDAQ(R) ABA Community Bank Index Fund
of $27,809, $33,342 and $15,316, respectively. First Trust NASDAQ-100 Equal
Weighted Index Fund, First Trust NASDAQ-100-Technology Sector Index Fund, First
Trust Water ETF and First Trust Chindia ETF do not have any remaining fees
previously waived or expenses reimbursed that are subject to recovery.
During the fiscal year ended December 31, 2018, First Trust NASDAQ-100 Equal
Weighted Index Fund received a reimbursement from the Advisor of $22,098 in
connection with a trade error.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Trust for acting in such capacities.
Page 68
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
4. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended December 31, 2018, the cost of purchases and proceeds
from sales of investments for each Fund, excluding short-term investments and
in-kind transactions, were as follows:
Purchases Sales
--------------- ---------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ 145,488,983 $ 146,262,108
First Trust NASDAQ-100-Technology Sector Index Fund 514,060,665 516,549,460
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 24,036,039 24,248,463
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 41,371,283 41,382,684
First Trust S&P REIT Index Fund 12,378,045 11,208,431
First Trust Water ETF 36,964,684 36,020,677
First Trust Natural Gas ETF 68,338,772 67,904,995
First Trust Chindia ETF 76,636,858 77,774,538
First Trust NASDAQ(R)ABA Community Bank Index Fund 38,235,776 38,199,697
For the fiscal year ended December 31, 2018, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
--------------- ---------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ 79,705,846 $ 120,160,270
First Trust NASDAQ-100-Technology Sector Index Fund 935,532,788 1,041,426,747
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 9,987,579 29,250,275
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 11,039,990 5,819,573
First Trust S&P REIT Index Fund 60,148,169 91,192,195
First Trust Water ETF 109,995,279 87,624,344
First Trust Natural Gas ETF 31,479,644 74,550,721
First Trust Chindia ETF 123,517,711 285,086,605
First Trust NASDAQ(R)ABA Community Bank Index Fund 114,903,432 136,114,054
5. CREATION, REDEMPTION AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Such transactions are generally permitted on an
in-kind basis, with a balancing cash component to equate the transaction to the
daily NAV per Share of each Fund on the transaction date times the number of
Shares in a Creation Unit. Authorized Participants purchasing Creation Units
must pay to BNYM, as transfer agent, a standard creation transaction fee (the
"Creation Transaction Fee"), which is based on the number of different
securities in a Creation Unit of each Fund according to the fee schedule set
forth below:
Number of Securities Creation
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
The Creation Transaction Fee is applicable to each purchase transaction
regardless of the number of Creation Units purchased in the transaction. An
additional variable fee of up to three times the Creation Transaction Fee may be
charged to approximate additional expenses incurred by a Fund with respect to
transactions effected outside of the clearing process (i.e., through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. The price for each Creation Unit will equal the daily
NAV per Share of a Fund on the transaction date times the number of Shares in a
Creation Unit plus the fees described above and, if applicable, any transfer
taxes.
Page 69
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a standard redemption transaction fee (the "Redemption Transaction Fee"),
which is based on the number of different securities in a Creation Unit of each
Fund according to the fee schedule set forth below:
Number of Securities Redemption
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
The Redemption Transaction Fee is applicable to each redemption transaction
regardless of the number of Creation Units redeemed in the transaction. An
additional variable fee of up to three times the Redemption Transaction Fee may
be charged to approximate additional expenses incurred by a Fund with respect to
redemptions effected outside of the clearing process or to the extent that
redemptions are for cash. Each Fund reserves the right to effect redemptions in
cash. A shareholder may request cash redemption in lieu of securities; however,
a Fund may, in its discretion, reject any such request.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before April 30, 2020.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
Page 70
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of First Trust Exchange-Traded Fund (the
"Trust"), comprising the First Trust NASDAQ-100 Equal Weighted Index Fund, First
Trust NASDAQ-100-Technology Sector Index Fund, First Trust NASDAQ-100
Ex-Technology Sector Index Fund, First Trust NASDAQ(R) Clean Edge(R) Green
Energy Index Fund, First Trust S&P REIT Index Fund, First Trust Chindia ETF,
First Trust Natural Gas ETF, First Trust Water ETF, and First Trust NASDAQ(R)
ABA Community Bank Index Fund (the "Funds"), each a series of First Trust
Exchange-Traded Fund, as of December 31, 2018, the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, the financial highlights for
each of the five years in the period then ended, and the related notes. In our
opinion, the financial statements and financial highlights present fairly, in
all material respects, the financial position of each of the funds listed above
included in First Trust Exchange-Traded Fund as of December 31, 2018, and the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Funds' internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2018, by correspondence with
the custodian and brokers; when replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 25, 2019
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 71
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Funds' website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files its complete schedule of each Fund's portfolio holdings with the
SEC for the first and third quarters of each fiscal year on Form N-Q. The
Trust's Form N-Qs are available (1) by calling (800) 988-5891; (2) on each
Fund's website at www.ftportfolios.com; and (3) on the SEC's website at
www.sec.gov.
Beginning in April 2019, the Trust will cease to disclose each Fund's holdings
on Form N-Q and will file Form N-PORT with the SEC on a monthly basis. Part F of
Form N-PORT, which contains the complete schedule of each Fund's portfolio
holdings, will be made available in the same manner as Form N-Q discussed above.
FEDERAL TAX INFORMATION
For the taxable year ended December 31, 2018, the following percentages of
income dividends paid by the Funds qualify for the dividends received deduction
available to corporations:
Dividends Received Deduction
----------------------------
First Trust NASDAQ-100 Equal Weighted Index Fund 100.00%
First Trust NASDAQ-100-Technology Sector Index Fund 100.00%
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 100.00%
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 75.24%
First Trust S&P REIT Index Fund 0.00%
First Trust Water ETF 100.00%
First Trust Natural Gas ETF 0.00%
First Trust Chindia ETF 0.00%
First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00%
For the taxable year ended December 31, 2018, the following percentages of
income dividends paid by the Funds are hereby designated as qualified dividend
income:
Qualified Dividend Income
----------------------------
First Trust NASDAQ-100 Equal Weighted Index Fund 100.00%
First Trust NASDAQ-100-Technology Sector Index Fund 100.00%
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 100.00%
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 100.00%
First Trust S&P REIT Index Fund 0.00%
First Trust Water ETF 100.00%
First Trust Natural Gas ETF 0.00%
First Trust Chindia ETF 92.84%
First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00%
A portion of First Trust S&P REIT Index Fund's 2018 ordinary dividends
(including short-term capital gains) paid to its shareholders during the taxable
year ended December 31, 2018, may be eligible for the Qualified Business Income
Deduction (QBI) under code section 199A for the aggregate dividends the Fund
received from the underlying Real Estate Investment Trusts (REITs) it invests
in.
Page 72
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
Page 73
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. As a result, such a fund may be included in one or more index-tracking
exchange-traded funds or mutual funds. Being a component security of such a
vehicle could greatly affect the trading activity involving a fund, the size of
the fund and the market volatility of the fund. Inclusion in an index could
significantly increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; different legal or accounting standards; and less government supervision
and regulation of exchanges in foreign countries. Investments in non-U.S.
securities may involve higher costs than investments in U.S. securities,
including higher transaction and custody costs, as well as additional taxes
imposed by non-U.S. governments. These risks may be heightened for securities of
companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 74
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
REMUNERATION
First Trust Advisors L.P. ("First Trust") is authorised and regulated by the
U.S. Securities and Exchange Commission and is entitled to market shares of
certain First Trust Exchange-Traded Fund funds it manages (the "Funds") in
certain member states in the European Economic Area in accordance with the
cooperation arrangements in Article 42 of the Alternative Investment Fund
Managers Directive (the "Directive"). First Trust is required under the
Directive to make disclosures in respect of remuneration. The following
disclosures are made in line with First Trust's interpretation of currently
available regulatory guidance on remuneration disclosures.
During the year ended December 31,2018, the amount of remuneration paid (or to
be paid) by First Trust Advisors L.P. in respect of the Funds is $2,015,725.
This figure is comprised of $88,328 paid (or to be paid) in fixed compensation
and $1,927,397 paid (or to be paid) in variable compensation. There were a total
of 14 beneficiaries of the remuneration described above. Those amounts include
$1,280,092 paid (or to be paid) to senior management of First Trust Advisors
L.P. and $735,633 paid (or to be paid) to other employees whose professional
activities have a material impact on the risk profiles of First Trust Advisors
L.P. or the Funds (collectively, "Code Staff").
Code Staff included in the aggregated figures disclosed above are rewarded in
line with First Trust's remuneration policy (the "Remuneration Policy") which is
determined and implemented by First Trust's senior management. The Remuneration
Policy reflects First Trust's ethos of good governance and encapsulates the
following principal objectives:
i. to provide a clear link between remuneration and performance of
First Trust and to avoid rewarding for failure;
ii. to promote sound and effective risk management consistent with the
risk profiles of the Funds managed by First Trust; and
iii. to remunerate staff in line with the business strategy, objectives,
values and interests of First Trust and the Funds managed by First
Trust in a manner that avoids conflicts of interest.
First Trust assesses various risk factors which it is exposed to when
considering and implementing remuneration for Code Staff and considers whether
any potential award to such person(s) would give rise to a conflict of interest.
First Trust does not reward failure, or consider the taking of risk or failure
to take risk in its remuneration of Code Staff.
First Trust assesses performance for the purposes of determining payments in
respect of performance-related remuneration of Code Staff by reference to a
broad range of measures including (i) individual performance (using financial
and non-financial criteria), and (ii) the overall performance of First Trust.
Remuneration is not based upon the performance of the Funds.
The elements of remuneration are balanced between fixed and variable and the
senior management sets fixed salaries at a level sufficient to ensure that
variable remuneration incentivises and rewards strong individual performance but
does not encourage excessive risk taking.
No individual is involved in setting his or her own remuneration.
Page 75
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 161 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed LLC
(April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 161 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 161 Director of Trust
(1956) Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 161 Director of
(1954) Managing Director and Chief Operating Covenant
o Since Inception Officer (January 2015 to August 2018), Transport Inc.
Pelita Harapan Educational Foundation (May 2003 to
(Educational Products and Services); May 2014)
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products
and Services); President and Chief
Executive Officer (June 2012 to September
2014), Dew Learning LLC (Educational
Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 161 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 76
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer
(1966) Executive Officer (January 2016 to Present), Controller (January 2011 to
o Since January 2016 January 2016), Senior Vice President (April 2007 to
January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer (January
2016 to Present), BondWave LLC (Software
Development Company) and Stonebridge Advisors
LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First
(1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel,
o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Chief Compliance
Officer Since
January 2011
o Assistant Secretary
Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 77
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
May 2017
Page 78
This page intentionally left blank.
This page intentionally left blank.
FIRST TRUST
First Trust Exchange-Traded Fund
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund
Book 3
First Trust Total US Market AlphaDEX(R) ETF (TUSA)
First Trust Dorsey Wright People's Portfolio ETF (DWPP)
First Trust Dow 30 Equal Weight ETF (EDOW)
First Trust Lunt U.S. Factor Rotation ETF (FCTR)
Annual Report
December 31, 2018
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2018
Shareholder Letter.......................................................... 2
Market Overview............................................................. 3
Fund Performance Overview
First Trust Total US Market AlphaDEX(R) ETF (TUSA)....................... 4
First Trust Dorsey Wright People's Portfolio ETF (DWPP).................. 6
First Trust Dow 30 Equal Weight ETF (EDOW)............................... 8
First Trust Lunt U.S. Factor Rotation ETF (FCTR)......................... 10
Notes to Fund Performance Overview.......................................... 12
Understanding Your Fund Expenses............................................ 13
Portfolio of Investments
First Trust Total US Market AlphaDEX(R) ETF (TUSA)....................... 14
First Trust Dorsey Wright People's Portfolio ETF (DWPP).................. 29
First Trust Dow 30 Equal Weight ETF (EDOW)............................... 36
First Trust Lunt U.S. Factor Rotation ETF (FCTR)......................... 37
Statements of Assets and Liabilities........................................ 41
Statements of Operations.................................................... 42
Statements of Changes in Net Assets......................................... 43
Financial Highlights........................................................ 45
Notes to Financial Statements............................................... 47
Report of Independent Registered Public Accounting Firm..................... 55
Additional Information...................................................... 56
Board of Trustees and Officers.............................................. 60
Privacy Policy.............................................................. 62
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (each such series is referred to as a "Fund" and collectively, as the
"Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund shares may therefore be less than what you paid
for them. Accordingly, you can lose money by investing in a Fund. See "Risk
Considerations" in the Additional Information Section of this report for a
discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund and presents data and analysis that provide
insight into each Fund's performance and investment approach.
By reading the market overview by Robert F. Carey, Chief Market Strategist of
the Advisor, you may obtain an understanding of how the market environment
affected the performance of each Fund. The statistical information that follows
may help you understand each Fund's performance compared to that of relevant
market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in each
Fund are spelled out in its prospectus, statement of additional information, and
other Fund regulatory filings.
Page 1
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2018
Dear Shareholders:
First Trust is pleased to provide you with the annual report for certain funds
in the First Trust Exchange-Traded Fund (the "Funds"), which contains detailed
information about the Funds for the twelve months ended December 31, 2018,
including a market overview and performance analyses. We encourage you to read
this report carefully and discuss it with your financial advisor.
As I wrote in my June 2018 letter, investors were hoping for another strong year
in the markets for 2018. For the entire year, however, increased market
volatility was the norm for U.S. and global markets. Despite the volatility,
August was a strong month for stocks, and the Dow Jones Industrial Average
("DJIA") finished the month just under its previous high in January 2018. At the
close of the third quarter in September, the markets had moved higher into
positive territory. In fact, all three major U.S. indices (the Nasdaq Composite
Index, the DJIA and the S&P 500(R) Index) hit record levels during the third
quarter. Yet, in October, markets were again very volatile, surprising analysts
and investors alike. Both global markets and U.S. markets fell on fears of
slowing growth, trade wars and higher interest rates. The DJIA was down 5% for
October and the MSCI EAFE Index, an index of stocks in 21 developed markets
(excluding the U.S. and Canada), was down 9% for the month. However, investors
cheered as November ended, and the DJIA climbed 617 points (2.5%) to its biggest
one-day gain in eight months. The MSCI EAFE Index ended November down slightly.
December held its own shocks as it became the worst December for stocks since
the Great Depression. The DJIA and the MSCI EAFE Index ended December with
year-to-date returns of -3.48% and -13.79%, respectively.
Based on continued strong job growth and the economic outlook in the U.S., the
Federal Reserve (the "Fed") raised interest rates in March, June and September.
At their September meeting, the Fed indicated the possibility of one additional
rate hike in 2018 and three more in 2019. At their November meeting, the Fed did
not raise interest rates. However, at their December 19th meeting, the Fed did
raise interest rates by 25 basis points. Analysts and investors will be watching
to see what the Fed does with rates in 2019.
While trade tensions have had an impact on markets around the world and could
continue to do so in the future, our First Trust economists believe that the
long-term impact of U.S. tariffs will be to encourage countries to come back to
the table and talk about more equal trade. Despite market volatility, we
continue to believe that the combination of low interest rates, low inflation
and strong corporate earnings still point to a positive economic environment and
further growth, though we understand that past performance can never guarantee
future performance.
We continue to believe that you should invest for the long term and be prepared
for market movements, which can happen at any time. You can do this by keeping
current on your portfolio and by speaking regularly with your investment
professional. Markets go up and they also go down, but savvy investors are
prepared for either through careful attention to investment goals.
Thank you for giving First Trust the opportunity to be a part of your financial
plan. We value our relationship with you and will report on the Funds again in
six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
--------------------------------------------------------------------------------
MARKET OVERVIEW
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2018
ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of research and analysis of
the First Trust product line. Mr. Carey has over 25 years of experience as an
Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial
Analyst ("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE ECONOMY/INVESTING
In its latest forecast, the International Monetary Fund ("IMF") is calling for
the world real gross domestic product ("GDP") growth rate to dip from an
estimated 3.7% in 2018 to an estimated 3.5% in 2019, according to its own
release. The IMF cited the ongoing trade dispute between the U.S. and China as
being partly responsible for the small downward revision in growth. The U.S.
real GDP growth rate is expected to decrease from an estimated 2.9% in 2018 to
an estimated 2.5% in 2019. The growth rate for Emerging Market and Developing
Economies is expected to dip from an estimated 4.6% in 2018 to an estimated 4.5%
in 2019. As indicated by the growth forecasts, we believe there is no imminent
threat of a global economic recession.
We believe that concerns over the extent to which interest rates could trend
higher in 2019 and the potential for trade tariffs escalating to an all-out
trade war were largely behind the spikes in volatility in the stock market in
2018. For those investors who fear that higher interest rates could dampen the
prospects for stocks in 2019, Federal Reserve (the "Fed") Chairman Jerome Powell
announced on January 4, 2019 that the Fed will be adopting a "patient" approach
to tightening monetary policy. With respect to trade, the Trump Administration
sent trade representatives to China on January 7, 2019 to set up future trade
policy talks. The two countries also agreed to a 90-day truce freezing tariffs
until March 1, 2019. We believe stock prices would move higher on a U.S.-China
trade deal.
ETFGI, an independent research and consultancy firm, reported that total assets
invested in exchange-traded funds ("ETFs") and other exchange-traded products
("ETPs") listed globally stood at $4.79 trillion at the close of 2018, down from
$4.84 trillion the previous year, according to its own release. The dip in
assets under management was due to performance rather than capital flows.
December 2018 marked the 59th consecutive month of net inflows into ETFs/ETPs
listed globally. The U.S.'s share of the global market was approximately 70% at
year-end.
U.S. STOCKS AND BONDS
The three major Standard & Poor's stock indices finished 2018 in the red. The
S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R) Index posted
total returns of -4.38%, -11.08%, and -8.48%, respectively, according to
Bloomberg. Only three of the 11 major S&P 500(R) Index sectors posted positive
total returns. The top-performing sectors were Health Care, Utilities and
Consumer Discretionary, up 6.47%, 4.11% and 0.82%, respectively, on a total
return basis. The sectors that posted the biggest losses were Energy, Materials
and Industrials, down 18.10%, 14.70% and 13.32%, respectively. We believe that
some of the downside in stock prices late in the year could be attributed to
profit taking and tax selling. Keep in mind, the S&P 500(R) Index posted a total
return of 21.83% in 2017, more than double its 9.98% average annual total return
from 1926-2018, according to Ibbotson Associates/Morningstar.
Dividend growth has historically been a barometer of strength for Corporate
America. The S&P Dow Jones Indices announced that total dividend distributions
for U.S. common stocks increased by a net (increases less decreases) $7.4
billion in the third quarter of 2018, up from $4.5 billion from the third
quarter of 2017, according to its own release. Net dividend increases totaled a
record $58.4 billion in 2018, up from $37.1 billion in 2017. Currently, 82.2% of
the companies in the S&P 500(R) Index pay a dividend, compared to 69.8% of the
companies in the S&P MidCap 400(R) Index and 51.9% of the companies in the S&P
SmallCap 600(R) Index. Total global dividend payouts are expected to rise 6.0%
year-over-year to a record $1.81 trillion in 2019, according to business
information provider IHS Markit, a London-based global information provider.
Dividend-paying companies in the U.S. are expected to increase distributions by
8.1%, according to IHS Markit.
In the U.S. bond market, the top-performing major debt group we track was
intermediate-term Treasuries. The Bloomberg Barclays U.S. Treasury: Intermediate
Index posted a total return of 1.41% in 2018. The worst-performing debt group
that we track was high yield corporates. The Bloomberg Barclays U.S. Corporate
High Yield Index posted a total return of -2.08%. The yield on the benchmark
10-Year Treasury note (T-note) rose by 28 basis points to 2.69% in 2018,
according to Bloomberg. For comparative purposes, the average yield on the
10-year T-note was 2.51% for the 10-year period ended December 31, 2018.
FOREIGN STOCKS AND BONDS
The U.S. dollar registered a gain of 4.40% against a basket of major currencies
in 2018, as measured by the U.S. Dollar Index (DXY). With respect to U.S.
investors, a stronger U.S. dollar can negatively impact returns on unhedged
foreign securities. We believe the dollar strengthened due to the escalating
trade/tariff battle between the U.S. and its major trading partners,
particularly China.
Both foreign stocks and bonds succumbed to selling pressure in 2018. The
Bloomberg Barclays Global Aggregate Index of higher quality debt posted a total
return of -1.20% (USD), while the Bloomberg Barclays EM Hard Currency Aggregate
Index of emerging markets debt fell 3.02%, according to Bloomberg Barclays. With
respect to equities, the MSCI Daily Total Return Net World Index (excluding the
U.S.) posted a total return of -14.09% (USD), compared to -14.58% (USD) for the
MSCI Daily Total Return Net Emerging Markets Index.
Page 3
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
The First Trust Total US Market AlphaDEX(R) ETF (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the NASDAQ AlphaDEX(R) Total US Market
Index (the "Index"). The Fund will normally invest at least 90% of its assets
(including investment borrowings) in common stocks that comprise the Index. The
Index is designed to quantitatively identify and select stocks across market
capitalizations (including large-cap, mid-cap and small-cap companies) that
exhibit growth and value factors and appear to have the greatest potential for
capital appreciation. The Index is a modified equal-dollar weighted index. The
Index is reconstituted and balanced on a quarterly basis. The Fund's shares are
listed for trading on The Nasdaq Stock Market LLC. The first day of secondary
market trading in shares of the Fund was December 7, 2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (12/5/06) Ended Ended (12/5/06)
12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -10.13% 3.59% 9.77% 4.48% 19.28% 153.95% 69.66%
Market Value -10.24% 3.58% 9.98% 4.47% 19.24% 158.84% 69.63%
INDEX PERFORMANCE
NASDAQ AlphaDEX(R) Total US Market Index* -9.55% N/A N/A N/A N/A N/A N/A
Russell 3000(R) Index -5.24% 7.91% 13.18% 7.05% 46.34% 244.95% 127.56%
------------------------------------------------------------------------------------------------------------------------------------
* On January 9, 2015, the Fund's underlying index changed from the Value
Line(R) Equity Allocation Index to the NASDAQ AlphaDEX(R) Total US Market
Index. Therefore, the Fund's performance and total returns shown for the
periods prior to January 9, 2015, are not necessarily indicative of the
performance the Fund, based on its current index, would have generated.
Since the Fund's current underlying index had an inception date of
September 8, 2014, it was not in existence for all of the periods
disclosed.
(See Notes to Fund Performance Overview on page 12.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of -10.13% during the
12-month period covered by this report. During the same period, the Russell
3000(R) Index ("benchmark") generated a return of -5.24%. The Consumer
Discretionary sector was the Fund's largest allocated sector over the period
with a 17.7% allocation. This sector had a -6.1% return leading to a
contribution of -1.1%. The Fund's largest contributing sector was the Health
Care sector with a 0.4% contribution, stemming from its 7.8% allocation and 9.6%
return. The Fund's least contributing sector was the Industrials sector with a
-2.2% contribution, stemming from its 15.5% allocation and -14.1% return. On a
relative basis, the Fund underperformed the benchmark. The primary cause of the
underperformance is attributable to the Fund underperforming the benchmark
amongst Information Technology securities by -7.9%, creating -1.4% of relative
drag. The Fund's holdings amongst the Utilities sector reversed 0.4% of relative
drag as the Fund's Utilities sector holdings outperformed the benchmark's by
3.3%.
-----------------------------
The NASDAQ AlphaDEX(R) Total US Market Index (the "Index") is a trademark of The
Nasdaq OMX Group and has been licensed for use by First Trust Portfolios L.P.
AlphaDEX(R) is a trademark owned by First Trust Portfolios L.P. and has been
licensed to The Nasdaq OMX Group for use in the name of the Index. The First
Trust Total US Market AlphaDEX(R) ETF is not sponsored, endorsed, sold or
promoted by The Nasdaq OMX Group and The Nasdaq OMX Group makes no
representation or warranty regarding the advisability of investing in the First
Trust Total US Market AlphaDEX(R) ETF or as to the result to be obtained by any
person from use of the Index in connection with the trading of the First Trust
Total US Market AlphaDEX(R) ETF.
Page 4
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 16.83%
Information Technology 14.25
Industrials 13.59
Health Care 11.87
Financials 11.71
Energy 6.91
Consumer Staples 5.90
Materials 5.80
Utilities 5.51
Communication Services 5.17
Real Estate 2.46
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
O'Reilly Automotive, Inc. 0.51%
Comcast Corp., Class A 0.50
Kroger (The) Co. 0.49
Newell Brands, Inc. 0.47
Molson Coors Brewing Co., Class B 0.47
J.M. Smucker (The) Co. 0.47
Tyson Foods, Inc., Class A 0.46
IQVIA Holdings, Inc. 0.46
HCA Healthcare, Inc. 0.46
Dollar Tree, Inc. 0.46
-------
Total 4.75%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2008 - DECEMBER 31, 2018
First Trust
Total US Market Russell 3000(R)
AlphaDEX(R) ETF Index
12/08 $10,000 $10,000
06/09 10,533 10,420
12/09 13,415 12,834
06/10 13,219 12,058
12/10 16,078 15,007
06/11 16,430 15,960
12/11 14,541 15,160
06/12 14,794 16,573
12/12 15,812 17,649
06/13 18,094 20,130
12/13 21,291 23,570
06/14 22,364 25,206
12/14 21,794 26,529
06/15 22,051 27,044
12/15 20,490 26,657
06/16 21,158 27,622
12/16 23,661 30,050
06/17 25,447 32,733
12/17 28,259 36,397
06/18 29,511 37,567
12/18 25,397 34,490
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore does not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 178 0 0 0
01/01/15 - 12/31/15 115 15 0 0
01/01/16 - 12/31/16 121 0 0 0
01/01/17 - 12/31/17 216 0 0 0
01/01/18 - 12/31/18 168 2 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 68 6 0 0
01/01/15 - 12/31/15 110 12 0 0
01/01/16 - 12/31/16 131 0 0 0
01/01/17 - 12/31/17 35 0 0 0
01/01/18 - 12/31/18 79 1 1 0
Page 5
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
The First Trust Dorsey Wright People's Portfolio ETF (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an index called the Nasdaq Dorsey Wright People's
Portfolio Index (the "Index"). The Fund will normally invest at least 80% of its
total assets (including investment borrowings) in common stocks or U.S. Treasury
Bills ("T-Bills") that comprise the Index. The Index is designed to provide
exposure to either the U.S. equity market or T-Bills, based upon daily relative
strength readings resulting from a wholly-quantitative process. The Index always
holds exactly one of three possible positions: all the component securities of
the Nasdaq US 500 Large Cap Index, all the component securities in the Nasdaq US
500 Large Cap Equal Weight Index or all the component securities of the Nasdaq
US T-Bill Index. Each of the Nasdaq US 500 Large Cap Index and the Nasdaq US 500
Large Cap Equal Weight Index contains the same constituent securities - the 500
securities with the highest float market capitalization comprising the NASDAQ US
Benchmark Index - but weights them differently. The Nasdaq US 500 Large Cap
Index weights the securities according to their market capitalization and the
Nasdaq US 500 Large Cap Equal Index weights them equally. The Nasdaq US T-Bill
Index is designed to act as a US dollar-denominated cash position through the
use of nine T-Bills ranging from 30 to 91 days in duration. A T-Bill is a
short-term debt obligation backed by the U.S. government with a maturity of less
than one year, sold in denominations of $1,000 up to a maximum purchase of $5
million. The Fund's shares are listed and trade on The Nasdaq Stock Market LLC
under the ticker symbol "DWPP." The first day of secondary market trading in
shares of the Fund was August 30, 2012.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (8/29/12) Ended (8/29/12)
12/31/18 12/31/18 to 12/31/18 12/31/18 to 12/31/18
FUND PERFORMANCE
NAV -8.26% 4.01% 5.79% 21.74% 42.89%
Market Value -8.29% 4.01% 5.81% 21.72% 43.05%
INDEX PERFORMANCE
Nasdaq Dorsey Wright People's Portfolio Index* -7.76% N/A N/A N/A N/A
S&P 500(R) Index -4.38% 8.49% 11.80% 50.33% 102.85%
Nasdaq US 500 Large Cap Index -4.75% N/A N/A N/A N/A
------------------------------------------------------------------------------------------------------------------------------------
* On August 18, 2017, the Fund's underlying index changed from the CBOE(R)
VIX(R) Tail Hedge Index to the Nasdaq Dorsey Wright People's Portfolio
Index (the "Index"). Therefore, the Fund's performance and total returns
shown for the periods prior to August 18, 2017, are not necessarily
indicative of the performance the Fund, based on its current index, would
have generated. Since the Index had an inception date of July 24, 2017, it
was not in existence for all of the periods disclosed.
(See Notes to Fund Performance Overview on page 12.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -8.26% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index ("benchmark")
generated a return of -4.38%. The Information Technology sector was given the
largest allocation in the Fund over the period with a 14.8% allocation. This
sector was also the largest contributing sector with a 0.1% contribution and
1.8% return. The Fund's least contributing sector was the Financials sector with
a -1.9% contribution, stemming from its 14.1% allocation and -15.3% return. On a
relative basis, the Fund underperformed the benchmark. The primary cause of the
underperformance is attributable to the Fund underperforming the benchmark
amongst Consumer Discretionary securities by -14.1%, creating -1.4% of relative
drag. The Fund over allocated the relatively well performing Utilities
securities, which created 0.2% of relative outperformance.
-----------------------------
The Fund is not sponsored, endorsed, sold or promoted by Nasdaq, Inc. or its
affiliates (Nasdaq, with its affiliates are referred to as the "Corporations").
The Corporations have not passed on the legality or suitability of, or the
accuracy or descriptions and disclosure relating to, the Fund. The Corporations
make no representation or warranty, express or implied to the owners of the Fund
or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly.
Page 6
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 15.47%
Financials 13.70
Industrials 12.85
Health Care 12.83
Consumer Discretionary 11.76
Consumer Staples 6.82
Energy 5.98
Real Estate 5.37
Utilities 5.15
Materials 5.04
Communication Services 5.03
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
ABIOMED, Inc. 0.22%
Splunk, Inc. 0.22
Snap, Inc. 0.22
GrubHub, Inc. 0.22
Workday, Inc. 0.22
Zillow Group, Inc. 0.22
Kohl's Corp. 0.22
salesforce.com, Inc. 0.22
IAC/InterActiveCorp 0.21
XPO Logistics, Inc. 0.21
-------
Total 2.18%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 29, 2012 - DECEMBER 31, 2018
First Trust
Dorsey Wright S&P 500(R)
People's Portfolio ETF Index
08/12 $10,000 $10,000
12/12 9,863 10,193
06/13 10,686 11,602
12/13 11,738 13,494
06/14 12,251 14,457
12/14 13,525 15,342
06/15 13,175 15,531
12/15 12,730 15,554
06/16 12,551 16,151
12/16 12,800 17,414
06/17 13,952 19,040
12/17 15,579 21,214
06/18 15,782 21,776
12/18 14,292 20,284
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore does not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2014 through
December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares
and receive less than NAV when they sell those shares because shares are bought
and sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 152 2 0 1
01/01/15 - 12/31/15 98 1 0 1
01/01/16 - 12/31/16 76 3 0 0
01/01/17 - 12/31/17 175 0 0 1
01/01/18 - 12/31/18 162 3 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/14 - 12/31/14 95 2 0 0
01/01/15 - 12/31/15 148 1 1 2
01/01/16 - 12/31/16 168 4 1 0
01/01/17 - 12/31/17 75 0 0 0
01/01/18 - 12/31/18 84 2 0 0
Page 7
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW)
The First Trust Dow 30 Equal Weight ETF (the "Fund") seeks investment results
that correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the Dow Jones Industrial Average Equal
Weight Index (the "Index"). The Fund will normally invest at least 90% of its
net assets (including investment borrowings) in common stocks that comprise the
Index. The Index consists of an equally weighted portfolio of the 30 securities
that comprise the Dow Jones Industrial Average(TM) (the "DJIA"). The 30
securities comprising the DJIA are domestic, blue-chip companies covering all
industries. While inclusion in the DJIA is not governed by quantitative rules, a
stock is typically only added if the company has an excellent reputation,
demonstrates sustained growth and is of interest to a large number of investors.
The Fund's shares are listed for trading on the NYSE Arca, Inc. The Index is
rebalanced quarterly. The first day of secondary market trading in shares of the
Fund was August 9, 2017.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Inception Inception
Ended (8/8/17) (8/8/17)
12/31/18 to 12/31/18 to 12/31/17
FUND PERFORMANCE
NAV -0.88% 7.09% 10.05%
Market Value -1.15% 7.02% 9.94%
INDEX PERFORMANCE
Dow Jones Industrial Average Equal Weight Index -0.40% 7.61% 10.79%
Dow Jones Industrial Average(TM) -3.48% 6.43% 9.09%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 12.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -0.88% during the 12-month period covered by
this report. During the same period, the Dow Jones Industrial Average(TM)
("benchmark") generated a return of -3.48%. The Information Technology sector
was given the largest allocation in the Fund over the period with a 19.9%
allocation. This sector had a 5.4% return and contributed 1.4% to the Fund's
return. The top contributing sector in the Fund was the Health Care sector with
a 2.2% contribution, stemming from its 13.6% allocation and 18.2% return. The
Industrials sector detracted -2.2% from the Fund's performance, stemming from
its 14.5% allocation and -13.6% return. On a relative basis, the Fund
outperformed the benchmark. The primary cause of the outperformance is
attributable to the Fund over allocating and outperforming the benchmark amongst
the Information Technology sector by 2.0% and 5.1%, respectively, creating 1.2%
of relative outperformance. The Fund underperformed the benchmark amongst
Industrial securities by -6.9%, creating -0.9% of relative underperformance.
-----------------------------
The Dow Jones Industrial Average Equal Weight Index is a product of S&P Dow
Jones Indices LLC ("SPDJI"), and has been licensed for use by First Trust. Dow
Jones(R) and Dow Jones Industrial Average Equal Weight Index are trademarks of
Dow Jones Trademark Holdings LLC ("Dow Jones") and have been licensed to SPDJI
and have been sublicensed for use for certain purposes by First Trust. The First
Trust Dow 30 Equal Weight Index ETF is not sponsored, endorsed, sold or promoted
by SPDJI, Dow Jones or their respective affiliates and none of them makes any
representation regarding the advisability of investing in such fund.
Page 8
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 19.87%
Health Care 13.47
Industrials 13.39
Financials 13.22
Consumer Staples 13.08
Consumer Discretionary 10.30
Communication Services 6.77
Energy 6.41
Materials 3.49
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
NIKE, Inc., Class B 3.52%
Walmart, Inc. 3.50
DowDuPont, Inc. 3.49
Boeing (The) Co. 3.49
Caterpillar, Inc. 3.46
Merck & Co., Inc. 3.45
Home Depot (The), Inc. 3.44
Pfizer, Inc. 3.44
Travelers (The) Cos., Inc. 3.43
Verizon Communications, Inc. 3.40
-------
Total 34.62%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 8, 2017 - DECEMBER 31, 2018
Dow Jones Industrial
First Trust Dow 30 Average Equal Dow Jones Industrial
Equal Weight ETF Weight Index Average(TM)
08/17 $10,000 $10,000 $10,000
12/17 11,102 11,124 11,302
06/18 11,024 11,069 11,219
12/18 11,004 11,079 10,908
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period August 9, 2017 (commencement
of trading) through December 31, 2018. Shareholders may pay more than NAV when
they buy Fund shares and receive less than NAV when they sell those shares
because shares are bought and sold at current market price. Data presented
represents past performance and cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
08/09/17 - 12/31/17 94 0 0 0
01/01/18 - 12/31/18 171 4 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
08/09/17 - 12/31/17 6 0 0 0
01/01/18 - 12/31/18 74 2 0 0
Page 9
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR)
The First Trust Lunt U.S. Factor Rotation ETF (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Lunt Capital Large Cap Factor
Rotation Index (the "Index"). The Fund will normally invest at least 90% of its
net assets (including investment borrowings) in common stocks that comprise the
Index. The Index is owned and was developed by Lunt Capital Management, Inc.
(the "Index Provider"). The Index is calculated and maintained by Nasdaq, Inc.
The Index is designed to provide exposure to U.S. large cap equities grouped
into four separate factors, with factors emphasized within the Index as they
come into favor in the U.S. marketplace. The Index utilizes the Index Provider's
risk-adjusted relative strength methodology to rotate among eight sub-indices,
each of which exhibits characteristics of one of the four primary factors:
momentum, value, quality and volatility. The Index Provider's risk-adjusted
relative strength score is designed to identify the sub-indices with the
greatest return potential with the least amount of risk and is calculated as the
return per unit of risk for each sub-index, measured as the standard deviation
of returns over the course of the prior 12-months for each sub-index. The Fund's
shares are listed for trading on CBOE BZX, Inc. The first day of secondary
market trading in shares of the Fund was July 26, 2018.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(7/25/18)
to 12/31/18
FUND PERFORMANCE
NAV -12.09%
Market Value -12.10%
INDEX PERFORMANCE
Lunt Capital Large Cap Factor Rotation Index -11.87%
Nasdaq US 500 Large Cap Index -11.31%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 12.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -12.09% during the time period covered by
this report, which is from inception of the Fund on July 25, 2018 to December
31, 2018. During the same period, the Nasdaq US 500 Large Cap Index
("benchmark") generated a return of -11.31%. The Fund's largest allocation over
the period was the Information Technology sector with a 19.1% allocation. This
sector had a -10.3% return and contributed -2.4% to the Fund's return. The least
contributing sector was the Health Care sector with a -2.6% contribution,
stemming from its 15.6% allocation and -16.1% return. The top contributing
sector was the Utilities sector with a 0.2% contribution, stemming from its 4.5%
allocation and 2.7% return. On a relative basis, the Fund underperformed the
benchmark. The primary cause of the underperformance is attributable to the Fund
underperforming the benchmark amongst Health Care securities by -14.1%, creating
-2.2% of relative drag. The Energy sector reversed 0.7% of underperformance as
the Fund under allocated this poor performing sector by -0.9%.
-----------------------------
Lunt Capital Management, Inc. ("Licensor") and the Lunt Capital Large Cap Factor
Rotation Index, ("Licensor Index") are trademarks of Licensor and have been
licensed for use for certain purposes by First Trust Advisors L.P. The First
Trust Lunt U.S. Factor Rotation ETF is based on the Licensor Index and is not
sponsored, endorsed, sold or promoted by Licensor, and Licensor makes no
representation regarding the advisability of trading in such fund.
Page 10
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Financials 20.00%
Information Technology 16.26
Health Care 13.54
Consumer Discretionary 13.16
Consumer Staples 9.26
Industrials 9.21
Real Estate 5.48
Materials 4.95
Communication Services 3.41
Utilities 2.40
Energy 2.33
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Fidelity National Information Services, Inc. 1.74%
Newell Brands, Inc. 1.71
Verisk Analytics, Inc. 1.65
Aflac, Inc. 1.46
American Tower Corp. 1.31
Waste Management, Inc. 1.27
Paychex, Inc. 1.20
UnitedHealth Group, Inc. 1.17
Intuit, Inc. 1.14
McDonald's Corp. 1.14
-------
Total 13.79%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 25, 2018 - DECEMBER 31, 2018
First Trust Lunt U.S. Lunt Capital Large Cap Nasdaq US 500
Factor Rotation ETF Factor Rotation Index Large Cap Index
07/18 $10,000 $10,000 $10,000
12/18 8,791 8,813 8,869
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period July 26, 2018 (commencement
of trading) through December 31, 2018. Shareholders may pay more than NAV when
they buy Fund shares and receive less than NAV when they sell those shares
because shares are bought and sold at current market price. Data presented
represents past performance and cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
07/26/18 - 12/31/18 91 2 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
07/26/18 - 12/31/18 15 1 0 0
Page 11
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated. The total returns would have been lower if certain fees had not been
waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of each Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
each Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in each Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike each Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 12
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2018 (UNAUDITED)
As a shareholder of First Trust Total US Market AlphaDEX(R) ETF, First Trust
Dorsey Wright People's Portfolio ETF, First Trust Dow 30 Equal Weight ETF or
First Trust Lunt U.S. Factor Rotation ETF (each a "Fund" and collectively, the
"Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing
costs, including management fees, distribution and/or service fees, if any, and
other Fund expenses. This Example is intended to help you understand your
ongoing costs of investing in the Funds and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period (or since inception) and held through the six-month (or shorter) period
ended December 31, 2018.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
------------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2018 DECEMBER 31, 2018 PERIOD PERIOD (b)
------------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
Actual $1,000.00 $ 860.60 0.70% (a) $3.28
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% (a) $3.57
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO
ETF (DWPP)
Actual $1,000.00 $ 905.60 0.60% $2.88
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW)
Actual $1,000.00 $ 998.20 0.50% $2.52
Hypothetical (5% return before expenses) $1,000.00 $1,022.68 0.50% $2.55
------------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE JULY 25, 2018 (c)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
JULY 25, 2018 (c) DECEMBER 31, 2018 IN THE PERIOD DECEMBER 31, 2018 (d)
------------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR)
Actual $1,000.00 $ 879.10 0.65% $2.68
Hypothetical (5% return before expenses) $1,000.00 $1,021.93 0.65% $3.31
(a) These expense ratios reflect an expense cap. See Note 3 in Notes to
Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (July 1,
2018 through December 31, 2018), multiplied by 184/365 (to reflect the
six-month period).
(c) Inception date.
(d) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period (July
25, 2018 through December 31, 2018), multiplied by 160/365. Hypothetical
expenses are assumed for the most recent six-month period.
Page 13
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.6%
AEROSPACE & DEFENSE -- 0.8%
80 Aerovironment, Inc. (a) $ 5,436
177 Axon Enterprise, Inc. (a) 7,744
109 Boeing (The) Co. 35,152
59 Curtiss-Wright Corp. 6,025
20 Esterline Technologies Corp. (a) 2,429
176 HEICO Corp. 13,636
60 Hexcel Corp. 3,440
32 Huntington Ingalls Industries, Inc. 6,090
65 Mercury Systems, Inc. (a) 3,074
28 National Presto Industries, Inc. 3,274
88 Spirit AeroSystems Holdings, Inc.,
Class A 6,344
82 Teledyne Technologies, Inc. (a) 16,980
--------------
109,624
--------------
AIR FREIGHT & LOGISTICS -- 0.6%
141 Atlas Air Worldwide Holdings,
Inc. (a) 5,949
290 Echo Global Logistics, Inc. (a) 5,895
368 Expeditors International of
Washington, Inc. 25,057
25 Forward Air Corp. 1,371
196 Hub Group, Inc., Class A (a) 7,266
472 XPO Logistics, Inc. (a) 26,923
--------------
72,461
--------------
AIRLINES -- 1.3%
236 Alaska Air Group, Inc. 14,361
57 Allegiant Travel Co. 5,713
699 Delta Air Lines, Inc. 34,880
223 Hawaiian Holdings, Inc. 5,889
1,050 JetBlue Airways Corp. (a) 16,863
152 SkyWest, Inc. 6,759
867 Southwest Airlines Co. 40,298
153 Spirit Airlines, Inc. (a) 8,862
456 United Continental Holdings,
Inc. (a) 38,181
--------------
171,806
--------------
AUTO COMPONENTS -- 1.0%
308 Adient PLC 4,639
514 American Axle & Manufacturing
Holdings, Inc. (a) 5,705
380 BorgWarner, Inc. 13,201
190 Cooper Tire & Rubber Co. 6,143
45 Cooper-Standard Holdings, Inc. (a) 2,795
288 Dana, Inc. 3,926
23 Dorman Products, Inc. (a) 2,071
128 Fox Factory Holding Corp. (a) 7,535
695 Goodyear Tire & Rubber (The) Co. 14,185
65 LCI Industries 4,342
467 Lear Corp. 57,376
361 Modine Manufacturing Co. (a) 3,902
60 Stoneridge, Inc. (a) 1,479
128 Tenneco, Inc., Class A 3,506
19 Visteon Corp. (a) 1,145
--------------
131,950
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
AUTOMOBILES -- 0.7%
5,854 Ford Motor Co. $ 44,783
805 General Motors Co. 26,927
178 Harley-Davidson, Inc. 6,074
243 Thor Industries, Inc. 12,636
216 Winnebago Industries, Inc. 5,229
--------------
95,649
--------------
BANKS -- 3.0%
34 1st Source Corp. 1,372
310 Associated Banc-Corp. 6,135
95 Banc of California, Inc. 1,264
55 BancorpSouth Bank 1,438
456 BankUnited, Inc. 13,653
277 BB&T Corp. 12,000
41 BOK Financial Corp. 3,006
43 Cathay General Bancorp 1,442
234 CIT Group, Inc. 8,955
1,048 Citizens Financial Group, Inc. 31,157
46 Columbia Banking System, Inc. 1,669
64 Commerce Bancshares, Inc. 3,608
29 Community Bank System, Inc. 1,691
39 Community Trust Bancorp, Inc. 1,545
75 ConnectOne Bancorp, Inc. 1,385
228 Customers Bancorp, Inc. (a) 4,150
35 Eagle Bancorp, Inc. (a) 1,705
134 East West Bancorp, Inc. 5,833
34 Enterprise Financial Services Corp. 1,279
951 F.N.B. Corp. 9,358
46 FB Financial Corp. 1,611
1,455 Fifth Third Bancorp 34,236
44 First Bancorp 1,437
18 First Citizens BancShares, Inc.,
Class A 6,787
111 First Commonwealth Financial
Corp. 1,341
205 First Financial Bankshares, Inc. 11,826
297 First Hawaiian, Inc. 6,685
108 Fulton Financial Corp. 1,672
94 Glacier Bancorp, Inc. 3,724
32 Great Southern Bancorp, Inc. 1,473
42 Great Western Bancorp, Inc. 1,312
170 Hancock Whitney Corp. 5,890
144 Hanmi Financial Corp. 2,837
89 Hilltop Holdings, Inc. 1,587
184 Home BancShares, Inc. 3,007
222 Hope Bancorp, Inc. 2,633
50 IBERIABANK Corp. 3,214
40 International Bancshares Corp. 1,376
329 Investors Bancorp, Inc. 3,422
99 Lakeland Bancorp, Inc. 1,466
333 OFG Bancorp 5,481
65 Opus Bank 1,273
254 PacWest Bancorp 8,453
707 People's United Financial, Inc. 10,202
199 PNC Financial Services Group
(The), Inc. 23,265
157 Popular, Inc. 7,413
Page 14 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
116 Prosperity Bancshares, Inc. $ 7,227
732 Regions Financial Corp. 9,794
43 Renasant Corp. 1,298
46 Sandy Spring Bancorp, Inc. 1,442
71 Signature Bank 7,299
406 SunTrust Banks, Inc. 20,479
131 SVB Financial Group (a) 24,879
339 TCF Financial Corp. 6,607
195 TriState Capital Holdings,
Inc. (a) 3,795
53 Trustmark Corp. 1,507
114 UMB Financial Corp. 6,951
582 Umpqua Holdings Corp. 9,254
111 United Bankshares, Inc. 3,453
68 Univest Financial Corp. 1,467
358 Valley National Bancorp 3,179
256 Wells Fargo & Co. 11,796
71 Western Alliance Bancorp (a) 2,804
95 Wintrust Financial Corp. 6,317
--------------
395,816
--------------
BEVERAGES -- 0.6%
13 Boston Beer (The) Co., Inc.,
Class A (a) 3,131
10 Coca-Cola Consolidated, Inc. 1,774
1,101 Molson Coors Brewing Co.,
Class B 61,832
72 National Beverage Corp. 5,167
--------------
71,904
--------------
BIOTECHNOLOGY -- 1.6%
31 Acceleron Pharma, Inc. (a) 1,350
187 Arrowhead Pharmaceuticals,
Inc. (a) 2,323
235 BioCryst Pharmaceuticals, Inc. (a) 1,896
77 Biogen, Inc. (a) 23,171
299 Cara Therapeutics, Inc. (a) 3,887
124 CareDx, Inc. (a) 3,117
587 Dicerna Pharmaceuticals, Inc. (a) 6,275
82 Emergent BioSolutions, Inc. (a) 4,861
257 Exact Sciences Corp. (a) 16,217
220 Fate Therapeutics, Inc. (a) 2,823
77 Genomic Health, Inc. (a) 4,960
57 Heron Therapeutics, Inc. (a) 1,479
71 Intercept Pharmaceuticals,
Inc. (a) 7,156
536 Invitae Corp. (a) 5,928
78 Ionis Pharmaceuticals, Inc. (a) 4,217
210 Karyopharm Therapeutics, Inc. (a) 1,968
74 Ligand Pharmaceuticals, Inc. (a) 10,042
68 Momenta Pharmaceuticals, Inc. (a) 751
78 Myriad Genetics, Inc. (a) 2,267
299 Natera, Inc. (a) 4,174
164 Neurocrine Biosciences, Inc. (a) 11,711
1,906 Novavax, Inc. (a) 3,507
191 PTC Therapeutics, Inc. (a) 6,555
95 REGENXBIO, Inc. (a) 3,985
97 Repligen Corp. (a) 5,116
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BIOTECHNOLOGY (CONTINUED)
126 Sarepta Therapeutics, Inc. (a) $ 13,750
211 Seattle Genetics, Inc. (a) 11,955
158 Ultragenyx Pharmaceutical,
Inc. (a) 6,870
159 United Therapeutics Corp. (a) 17,315
140 Vertex Pharmaceuticals, Inc. (a) 23,199
--------------
212,825
--------------
BUILDING PRODUCTS -- 1.0%
174 Advanced Drainage Systems, Inc. 4,219
89 Allegion PLC 7,094
46 American Woodmark Corp. (a) 2,561
173 Apogee Enterprises, Inc. 5,164
116 Armstrong World Industries, Inc. 6,752
191 Continental Building Products,
Inc. (a) 4,861
231 Fortune Brands Home & Security,
Inc. 8,776
79 Gibraltar Industries, Inc. (a) 2,812
222 Griffon Corp. 2,320
1,155 Johnson Controls International
PLC 34,246
37 Lennox International, Inc. 8,098
300 Owens Corning 13,194
61 Patrick Industries, Inc. (a) 1,806
249 PGT Innovations, Inc. (a) 3,947
99 Simpson Manufacturing Co., Inc. 5,359
264 Trex Co., Inc. (a) 15,671
203 Universal Forest Products, Inc. 5,270
--------------
132,150
--------------
CAPITAL MARKETS -- 1.2%
149 Affiliated Managers Group, Inc. 14,519
531 Bank of New York Mellon (The)
Corp. 24,994
134 Blucora, Inc. (a) 3,570
80 Evercore, Inc., Class A 5,725
54 FactSet Research Systems, Inc. 10,807
297 Federated Investors, Inc., Class B 7,885
888 Invesco Ltd. 14,865
84 Lazard Ltd., Class A 3,100
287 Legg Mason, Inc. 7,321
188 LPL Financial Holdings, Inc. 11,483
289 Morgan Stanley 11,459
65 Morningstar, Inc. 7,140
76 MSCI, Inc. 11,205
157 Stifel Financial Corp. 6,503
429 TCG BDC, Inc. (b) 5,320
47 Virtus Investment Partners, Inc. 3,733
338 Waddell & Reed Financial, Inc.,
Class A 6,111
--------------
155,740
--------------
CHEMICALS -- 2.9%
211 AdvanSix, Inc. (a) 5,136
81 Air Products and Chemicals, Inc. 12,964
40 Albemarle Corp. 3,083
96 Ashland Global Holdings, Inc. 6,812
138 Axalta Coating Systems Ltd. (a) 3,232
See Notes to Financial Statements Page 15
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CHEMICALS (CONTINUED)
32 Balchem Corp. $ 2,507
118 Celanese Corp. 10,616
222 CF Industries Holdings, Inc. 9,659
409 Chemours (The) Co. 11,542
707 Eastman Chemical Co. 51,689
86 Ecolab, Inc. 12,672
464 FMC Corp. 34,317
69 H.B. Fuller Co. 2,944
746 Huntsman Corp. 14,390
160 Ingevity Corp. (a) 13,390
23 Innospec, Inc. 1,421
38 Kraton Corp. (a) 830
551 Kronos Worldwide, Inc. 6,348
660 LyondellBasell Industries N.V.,
Class A 54,886
106 Minerals Technologies, Inc. 5,442
124 Mosaic (The) Co. 3,622
10 NewMarket Corp. 4,121
791 Olin Corp. 15,907
1,304 Platform Specialty Products
Corp. (a) 13,470
92 PolyOne Corp. 2,631
308 PQ Group Holdings, Inc. (a) 4,562
486 Rayonier Advanced Materials, Inc. 5,176
62 RPM International, Inc. 3,644
119 Sherwin-Williams (The) Co. 46,822
41 Stepan Co. 3,034
166 Tredegar Corp. 2,633
69 Trinseo S.A. 3,159
187 Valvoline, Inc. 3,618
--------------
376,279
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.1%
167 ABM Industries, Inc. 5,362
634 ACCO Brands Corp. 4,299
1,718 ADT, Inc. (b) 10,325
66 Advanced Disposal Services,
Inc. (a) 1,580
82 Brady Corp., Class A 3,564
173 Casella Waste Systems, Inc.,
Class A (a) 4,929
59 Cimpress N.V. (a) 6,102
137 Cintas Corp. 23,015
25 Clean Harbors, Inc. (a) 1,234
331 Covanta Holding Corp. 4,442
126 Deluxe Corp. 4,843
93 Herman Miller, Inc. 2,813
41 HNI Corp. 1,453
77 Interface, Inc. 1,097
203 KAR Auction Services, Inc. 9,687
153 Knoll, Inc. 2,521
107 Matthews International Corp.,
Class A 4,346
152 MSA Safety, Inc. 14,329
86 Multi-Color Corp. 3,018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES
(CONTINUED)
253 Pitney Bowes, Inc. $ 1,495
258 Quad/Graphics, Inc. 3,179
98 SP Plus Corp. (a) 2,895
97 Steelcase, Inc., Class A 1,438
206 Stericycle, Inc. (a) 7,558
105 Tetra Tech, Inc. 5,436
21 UniFirst Corp. 3,004
73 US Ecology, Inc. 4,598
30 Viad Corp. 1,503
--------------
140,065
--------------
COMMUNICATIONS EQUIPMENT
-- 0.7%
121 Casa Systems, Inc. (a) 1,589
650 Ciena Corp. (a) 22,042
262 CommScope Holding Co., Inc. (a) 4,294
148 Comtech Telecommunications
Corp. 3,602
193 EchoStar Corp., Class A (a) 7,087
61 F5 Networks, Inc. (a) 9,884
312 Motorola Solutions, Inc. 35,892
29 NETGEAR, Inc. (a) 1,509
213 NetScout Systems, Inc. (a) 5,033
--------------
90,932
--------------
CONSTRUCTION & ENGINEERING
-- 0.6%
247 AECOM (a) 6,545
159 Comfort Systems USA, Inc. 6,945
161 EMCOR Group, Inc. 9,610
69 Fluor Corp. 2,222
78 Granite Construction, Inc. 3,142
53 Jacobs Engineering Group, Inc. 3,098
424 KBR, Inc. 6,436
364 MasTec, Inc. (a) 14,764
103 NV5 Global, Inc. (a) 6,237
144 Primoris Services Corp. 2,755
487 Quanta Services, Inc. 14,659
477 Tutor Perini Corp. (a) 7,618
--------------
84,031
--------------
CONSTRUCTION MATERIALS -- 0.1%
191 Eagle Materials, Inc. 11,657
296 Summit Materials, Inc.,
Class A (a) 3,670
78 US Concrete, Inc. (a) 2,752
--------------
18,079
--------------
CONSUMER FINANCE -- 1.1%
615 Ally Financial, Inc. 13,936
285 Capital One Financial Corp. 21,543
37 Credit Acceptance Corp. (a) 14,125
100 Encore Capital Group, Inc. (a) 2,350
187 Enova International, Inc. (a) 3,639
98 FirstCash, Inc. 7,090
229 Green Dot Corp., Class A (a) 18,210
897 Navient Corp. 7,903
94 Nelnet, Inc., Class A 4,920
Page 16 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CONSUMER FINANCE (CONTINUED)
360 OneMain Holdings, Inc. (a) $ 8,745
199 PRA Group, Inc. (a) 4,850
1,014 Santander Consumer USA
Holdings, Inc. 17,836
362 SLM Corp. (a) 3,008
872 Synchrony Financial 20,457
--------------
148,612
--------------
CONTAINERS & PACKAGING -- 1.1%
37 AptarGroup, Inc. 3,480
83 Berry Global Group, Inc. (a) 3,945
1,151 Graphic Packaging Holding Co. 12,247
100 Greif, Inc., Class A 3,711
1,102 International Paper Co. 44,477
77 Myers Industries, Inc. 1,163
95 Owens-Illinois, Inc. (a) 1,638
147 Packaging Corp. of America 12,268
193 Silgan Holdings, Inc. 4,559
145 Sonoco Products Co. 7,704
1,267 WestRock Co. 47,842
--------------
143,034
--------------
DISTRIBUTORS -- 0.2%
382 LKQ Corp. (a) 9,065
97 Pool Corp. 14,419
--------------
23,484
--------------
DIVERSIFIED CONSUMER SERVICES
-- 0.7%
103 Bright Horizons Family Solutions,
Inc. (a) 11,479
16 Graham Holdings Co., Class B 10,249
36 Grand Canyon Education, Inc. (a) 3,461
470 H&R Block, Inc. 11,924
768 Houghton Mifflin Harcourt Co. (a) 6,805
405 K12, Inc. (a) 10,040
580 Laureate Education, Inc.,
Class A (a) 8,839
263 Regis Corp. (a) 4,458
274 Service Corp. International 11,031
130 ServiceMaster Global Holdings,
Inc. (a) 4,776
26 Strategic Education, Inc. 2,949
112 Weight Watchers International,
Inc. (a) 4,318
--------------
90,329
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.4%
253 Berkshire Hathaway, Inc.,
Class B (a) 51,658
184 Jefferies Financial Group, Inc. 3,194
--------------
54,852
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.3%
2,016 AT&T, Inc. 57,537
49 ATN International, Inc. 3,505
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES (CONTINUED)
2,554 CenturyLink, Inc. $ 38,693
32 Cogent Communications Holdings,
Inc. 1,447
412 Consolidated Communications
Holdings, Inc. 4,071
239 Iridium Communications, Inc. (a) 4,409
330 ORBCOMM, Inc. (a) 2,726
1,014 Verizon Communications, Inc. 57,007
253 Vonage Holdings Corp. (a) 2,209
116 Zayo Group Holdings, Inc. (a) 2,649
--------------
174,253
--------------
ELECTRIC UTILITIES -- 2.7%
163 ALLETE, Inc. 12,424
284 Alliant Energy Corp. 11,999
380 American Electric Power Co., Inc. 28,401
337 Duke Energy Corp. 29,083
199 Edison International 11,297
63 El Paso Electric Co. 3,158
166 Entergy Corp. 14,288
219 Eversource Energy 14,244
1,240 Exelon Corp. 55,924
227 Hawaiian Electric Industries, Inc. 8,313
81 IDACORP, Inc. 7,538
28 MGE Energy, Inc. 1,679
448 OGE Energy Corp. 17,557
37 Otter Tail Corp. 1,837
589 PG&E Corp. (a) 13,989
153 Pinnacle West Capital Corp. 13,035
45 PNM Resources, Inc. 1,849
354 Portland General Electric Co. 16,231
1,388 PPL Corp. 39,322
621 Southern (The) Co. 27,274
571 Xcel Energy, Inc. 28,133
--------------
357,575
--------------
ELECTRICAL EQUIPMENT -- 0.8%
78 Acuity Brands, Inc. 8,966
135 Atkore International Group,
Inc. (a) 2,678
71 AZZ, Inc. 2,866
622 Eaton Corp. PLC 42,707
143 Encore Wire Corp. 7,176
127 Generac Holdings, Inc. (a) 6,312
30 Hubbell, Inc. 2,980
196 Regal Beloit Corp. 13,730
432 Sunrun, Inc. (a) 4,704
188 TPI Composites, Inc. (a) 4,621
117 Vicor Corp. (a) 4,421
--------------
101,161
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.4%
51 Anixter International, Inc. (a) 2,770
221 Arrow Electronics, Inc. (a) 15,238
25 Belden, Inc. 1,044
609 CDW Corp. 49,359
144 Cognex Corp. 5,568
See Notes to Financial Statements Page 17
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS (CONTINUED)
24 Coherent, Inc. (a) $ 2,537
157 Control4 Corp. (a) 2,763
58 Dolby Laboratories, Inc., Class A 3,587
19 ePlus, Inc. (a) 1,352
77 Fabrinet (a) 3,951
84 FARO Technologies, Inc. (a) 3,414
197 FLIR Systems, Inc. 8,577
76 II-VI, Inc. (a) 2,467
66 Insight Enterprises, Inc. (a) 2,690
298 Jabil, Inc. 7,387
245 Keysight Technologies, Inc. (a) 15,210
216 Knowles Corp. (a) 2,875
99 Methode Electronics, Inc. 2,306
98 MTS Systems Corp. 3,933
138 PC Connection, Inc. 4,103
90 ScanSource, Inc. (a) 3,094
192 SYNNEX Corp. 15,521
75 Tech Data Corp. (a) 6,136
563 TTM Technologies, Inc. (a) 5,478
88 Vishay Intertechnology, Inc. 1,585
91 Zebra Technologies Corp.,
Class A (a) 14,490
--------------
187,435
--------------
ENERGY EQUIPMENT & SERVICES
-- 0.7%
294 Archrock, Inc. 2,202
431 C&J Energy Services, Inc. (a) 5,818
999 Covia Holdings Corp. (a) 3,417
179 Diamond Offshore Drilling,
Inc. (a) 1,690
135 Exterran Corp. (a) 2,389
693 Forum Energy Technologies,
Inc. (a) 2,862
456 FTS International, Inc. (a) 3,242
726 Helix Energy Solutions Group,
Inc. (a) 3,928
295 Helmerich & Payne, Inc. 14,142
123 Mammoth Energy Services, Inc. 2,212
389 McDermott International, Inc. (a) 2,544
582 Nabors Industries Ltd. 1,164
346 Newpark Resources, Inc. (a) 2,377
195 Oceaneering International,
Inc. (a) 2,359
1,188 Patterson-UTI Energy, Inc. 12,296
326 ProPetro Holding Corp. (a) 4,016
347 RPC, Inc. (b) 3,425
181 SEACOR Holdings, Inc. (a) 6,697
285 Solaris Oilfield Infrastructure,
Inc., Class A 3,446
368 Superior Energy Services, Inc. (a) 1,233
476 U.S. Silica Holdings, Inc. (b) 4,846
344 Unit Corp. (a) 4,912
--------------
91,217
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ENTERTAINMENT -- 1.2%
87 AMC Entertainment Holdings,
Inc., Class A $ 1,068
301 Cinemark Holdings, Inc. 10,776
1,203 Glu Mobile, Inc. (a) 9,708
373 Live Nation Entertainment,
Inc. (a) 18,370
39 Madison Square Garden (The) Co.,
Class A (a) 10,440
213 Marcus (The) Corp. 8,414
36 Netflix, Inc. (a) 9,636
2,005 Viacom, Inc., Class B 51,529
346 Walt Disney (The) Co. 37,939
74 World Wrestling Entertainment,
Inc., Class A 5,529
--------------
163,409
--------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 2.3%
395 Alexander & Baldwin, Inc. (a) 7,260
196 American Campus Communities,
Inc. 8,112
43 Camden Property Trust 3,786
257 Chatham Lodging Trust 4,544
112 Chesapeake Lodging Trust 2,727
221 CoreCivic, Inc. 3,940
36 CoreSite Realty Corp. 3,140
127 CyrusOne, Inc. 6,716
461 DiamondRock Hospitality Co. 4,186
177 EPR Properties 11,333
507 Equity Commonwealth 15,215
42 Equity LifeStyle Properties, Inc. 4,080
70 Four Corners Property Trust, Inc. 1,834
449 Franklin Street Properties Corp. 2,797
71 GEO Group (The), Inc. 1,399
151 Healthcare Trust of America, Inc.,
Class A 3,822
158 Hersha Hospitality Trust 2,771
564 Hospitality Properties Trust 13,468
1,284 Host Hotels & Resorts, Inc. 21,404
234 Industrial Logistics Properties
Trust 4,603
723 Kimco Realty Corp. 10,592
215 Kite Realty Group Trust 3,029
104 Lamar Advertising Co., Class A 7,195
289 Liberty Property Trust 12,103
253 Mack-Cali Realty Corp. 4,956
818 Medical Properties Trust, Inc. 13,153
80 Mid-America Apartment
Communities, Inc. 7,656
127 NorthStar Realty Europe Corp. 1,847
476 Office Properties Income Trust (a) 3,270
123 Omega Healthcare Investors, Inc. 4,323
90 Outfront Media, Inc. 1,631
189 Piedmont Office Realty Trust, Inc.,
Class A 3,221
88 PotlatchDeltic Corp. 2,784
408 Preferred Apartment Communities,
Inc., Class A 5,737
125 Regency Centers Corp. 7,335
Page 18 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
EQUITY REAL ESTATE INVESTMENT
TRUSTS (CONTINUED)
549 RLJ Lodging Trust $ 9,004
527 RPT Realty 6,298
94 Ryman Hospitality Properties, Inc. 6,269
174 Sabra Health Care REIT, Inc. 2,868
689 Senior Housing Properties Trust 8,075
200 Spirit Realty Capital, Inc. 7,050
40 Sun Communities, Inc. 4,068
493 Sunstone Hotel Investors, Inc. 6,414
267 Uniti Group, Inc. 4,157
168 Urstadt Biddle Properties, Inc.,
Class A 3,229
1,666 VEREIT, Inc. 11,912
982 Washington Prime Group, Inc. 4,773
125 WP Carey, Inc. 8,168
227 Xenia Hotels & Resorts, Inc. 3,904
--------------
302,158
--------------
FOOD & STAPLES RETAILING -- 1.4%
238 Andersons (The), Inc. 7,114
126 Casey's General Stores, Inc. 16,146
247 Chefs' Warehouse (The), Inc. (a) 7,899
2,325 Kroger (The) Co. 63,938
363 Performance Food Group Co. (a) 11,714
65 Sprouts Farmers Market, Inc. (a) 1,528
552 Sysco Corp. 34,588
299 United Natural Foods, Inc. (a) 3,166
527 US Foods Holding Corp. (a) 16,674
186 Walgreens Boots Alliance, Inc. 12,709
206 Weis Markets, Inc. 9,843
--------------
185,319
--------------
FOOD PRODUCTS -- 3.2%
804 Archer-Daniels-Midland Co. 32,940
59 Bunge Ltd. 3,153
111 Cal-Maine Foods, Inc. 4,695
396 Conagra Brands, Inc. 8,459
371 Darling Ingredients, Inc. (a) 7,138
432 Flowers Foods, Inc. 7,979
106 Fresh Del Monte Produce, Inc. 2,997
244 Freshpet, Inc. (a) 7,847
631 General Mills, Inc. 24,571
344 Hormel Foods Corp. 14,682
809 Hostess Brands, Inc. (a) 8,850
154 Ingredion, Inc. 14,076
12 J&J Snack Foods Corp. 1,735
660 J.M. Smucker (The) Co. 61,703
25 John B. Sanfilippo & Son, Inc. 1,392
1,228 Kraft Heinz (The) Co. 52,853
121 Lamb Weston Holdings, Inc. 8,901
54 Lancaster Colony Corp. 9,550
307 McCormick & Co., Inc. 42,747
1,123 Pilgrim's Pride Corp. (a) 17,418
165 Post Holdings, Inc. (a) 14,706
87 Sanderson Farms, Inc. 8,638
61 Tootsie Roll Industries, Inc. (b) 2,037
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
FOOD PRODUCTS (CONTINUED)
1,137 Tyson Foods, Inc., Class A $ 60,716
--------------
419,783
--------------
GAS UTILITIES -- 0.6%
129 Atmos Energy Corp. 11,961
21 Chesapeake Utilities Corp. 1,707
288 National Fuel Gas Co. 14,740
175 New Jersey Resources Corp. 7,992
98 ONE Gas, Inc. 7,801
153 Southwest Gas Holdings, Inc. 11,704
166 Spire, Inc. 12,297
293 UGI Corp. 15,632
--------------
83,834
--------------
HEALTH CARE EQUIPMENT & SUPPLIES
-- 3.8%
120 ABIOMED, Inc. (a) 39,005
138 Align Technology, Inc. (a) 28,901
82 AngioDynamics, Inc. (a) 1,651
153 AtriCure, Inc. (a) 4,682
52 Avanos Medical, Inc. (a) 2,329
704 Boston Scientific Corp. (a) 24,879
92 Cardiovascular Systems, Inc. (a) 2,621
746 Cerus Corp. (a) 3,782
45 CONMED Corp. 2,889
98 Cooper (The) Cos., Inc. 24,941
204 CryoLife, Inc. (a) 5,790
142 DexCom, Inc. (a) 17,012
155 Edwards Lifesciences Corp. (a) 23,741
110 Glaukos Corp. (a) 6,179
213 Globus Medical, Inc., Class A (a) 9,219
141 Haemonetics Corp. (a) 14,107
85 Hill-Rom Holdings, Inc. 7,527
197 Hologic, Inc. (a) 8,097
43 ICU Medical, Inc. (a) 9,874
163 IDEXX Laboratories, Inc. (a) 30,321
83 Inogen, Inc. (a) 10,306
152 Insulet Corp. (a) 12,057
86 Integer Holdings Corp. (a) 6,558
184 Integra LifeSciences Holdings
Corp. (a) 8,298
94 Intuitive Surgical, Inc. (a) 45,018
76 iRhythm Technologies, Inc. (a) 5,281
130 Masimo Corp. (a) 13,958
117 Merit Medical Systems, Inc. (a) 6,530
171 Novocure Ltd. (a) 5,725
76 NuVasive, Inc. (a) 3,767
109 Penumbra, Inc. (a) 13,320
55 Quidel Corp. (a) 2,685
235 ResMed, Inc. 26,759
1,503 Senseonics Holdings, Inc. (a) 3,893
187 STAAR Surgical Co. (a) 5,967
72 Surmodics, Inc. (a) 3,403
126 Tactile Systems Technology,
Inc. (a) 5,739
84 Tandem Diabetes Care, Inc. (a) 3,189
1,545 TransEnterix, Inc. (a) (b) 3,492
63 Varex Imaging Corp. (a) 1,492
See Notes to Financial Statements Page 19
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HEALTH CARE EQUIPMENT & SUPPLIES
(CONTINUED)
766 ViewRay, Inc. (a) $ 4,650
98 West Pharmaceutical Services,
Inc. 9,607
124 Wright Medical Group N.V. (a) 3,375
309 Zimmer Biomet Holdings, Inc. 32,049
--------------
504,665
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.1%
462 Acadia Healthcare Co., Inc. (a) 11,878
128 Addus HomeCare Corp. (a) 8,689
72 Amedisys, Inc. (a) 8,432
248 American Renal Associates
Holdings, Inc. (a) 2,857
49 Anthem, Inc. 12,869
139 BioTelemetry, Inc. (a) 8,301
374 Centene Corp. (a) 43,122
25 Chemed Corp. 7,082
209 Encompass Health Corp. 12,895
189 Ensign Group (The), Inc. 7,331
487 HCA Healthcare, Inc. 60,607
214 HealthEquity, Inc. (a) 12,765
52 LHC Group, Inc. (a) 4,882
99 Magellan Health, Inc. (a) 5,632
435 MEDNAX, Inc. (a) 14,355
137 Molina Healthcare, Inc. (a) 15,922
71 National HealthCare Corp. 5,570
293 Patterson Cos., Inc. 5,760
228 PetIQ, Inc. (a) 5,351
157 Premier, Inc., Class A (a) 5,864
27 Providence Service (The)
Corp. (a) 1,621
125 Quest Diagnostics, Inc. 10,409
882 R1 RCM, Inc. (a) 7,012
195 Select Medical Holdings Corp. (a) 2,993
434 Surgery Partners, Inc. (a) 4,249
283 Tenet Healthcare Corp. (a) 4,851
204 UnitedHealth Group, Inc. 50,820
127 Universal Health Services, Inc.,
Class B 14,803
60 US Physical Therapy, Inc. 6,141
211 WellCare Health Plans, Inc. (a) 49,815
--------------
412,878
--------------
HEALTH CARE TECHNOLOGY -- 0.5%
316 Evolent Health, Inc., Class A (a) 6,304
58 HealthStream, Inc. 1,401
218 HMS Holdings Corp. (a) 6,132
75 Omnicell, Inc. (a) 4,593
110 Tabula Rasa HealthCare, Inc. (a) 7,014
233 Teladoc Health, Inc. (a) 11,550
187 Veeva Systems, Inc., Class A (a) 16,703
147 Vocera Communications, Inc. (a) 5,784
--------------
59,481
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE
-- 2.8%
187 Aramark $ 5,417
966 BBX Capital Corp. 5,535
124 BJ's Restaurants, Inc. 6,271
238 Boyd Gaming Corp. 4,946
153 Brinker International, Inc. 6,729
1,982 Caesars Entertainment Corp. (a) 13,458
849 Carnival Corp. 41,856
33 Cheesecake Factory (The), Inc. 1,436
89 Chipotle Mexican Grill, Inc. (a) 38,429
97 Choice Hotels International, Inc. 6,943
82 Cracker Barrel Old Country Store,
Inc. (b) 13,109
135 Dave & Buster's Entertainment,
Inc. 6,016
66 Dine Brands Global, Inc. 4,444
55 Domino's Pizza, Inc. 13,639
221 Dunkin' Brands Group, Inc. 14,171
184 Eldorado Resorts, Inc. (a) 6,663
67 Fiesta Restaurant Group, Inc. (a) 1,039
108 Hilton Grand Vacations, Inc. (a) 2,850
45 Hyatt Hotels Corp., Class A 3,042
205 International Speedway Corp.,
Class A 8,991
1,940 MGM Resorts International 47,064
281 Norwegian Cruise Line Holdings
Ltd. (a) 11,912
109 Penn National Gaming, Inc. (a) 2,052
299 Planet Fitness, Inc., Class A (a) 16,032
186 Playa Hotels & Resorts N.V. (a) 1,337
313 Royal Caribbean Cruises Ltd. 30,608
170 Ruth's Hospitality Group, Inc. 3,864
228 SeaWorld Entertainment, Inc. (a) 5,037
57 Shake Shack, Inc., Class A (a) 2,589
58 Six Flags Entertainment Corp. 3,227
175 Texas Roadhouse, Inc. 10,448
15 Vail Resorts, Inc. 3,162
235 Wendy's (The) Co. 3,668
111 Wingstop, Inc. 7,125
186 Wyndham Destinations, Inc. 6,666
383 Yum China Holdings, Inc. 12,842
--------------
372,617
--------------
HOUSEHOLD DURABLES -- 2.2%
29 Cavco Industries, Inc. (a) 3,781
341 Century Communities, Inc. (a) 5,886
1,284 D.R. Horton, Inc. 44,503
192 Garmin Ltd. 12,157
82 iRobot Corp. (a) 6,867
225 KB Home 4,297
170 La-Z-Boy, Inc. 4,711
184 Leggett & Platt, Inc. 6,595
580 Lennar Corp., Class A 22,707
303 M.D.C. Holdings, Inc. 8,517
225 Meritage Homes Corp. (a) 8,262
309 Mohawk Industries, Inc. (a) 36,141
3,334 Newell Brands, Inc. 61,979
Page 20 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOUSEHOLD DURABLES (CONTINUED)
820 PulteGroup, Inc. $ 21,312
123 Roku, Inc. (a) 3,769
397 Taylor Morrison Home Corp.,
Class A (a) 6,312
615 Toll Brothers, Inc. 20,252
126 TopBuild Corp. (a) 5,670
723 TRI Pointe Group, Inc. (a) 7,902
--------------
291,620
--------------
HOUSEHOLD PRODUCTS -- 0.3%
456 Church & Dwight Co., Inc. 29,987
69 Energizer Holdings, Inc. 3,115
162 Spectrum Brands Holdings, Inc. 6,844
21 WD-40 Co. 3,849
--------------
43,795
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.2%
576 AES Corp. 8,329
435 NRG Energy, Inc. 17,226
361 Pattern Energy Group, Inc.,
Class A 6,722
--------------
32,277
--------------
INDUSTRIAL CONGLOMERATES -- 0.1%
99 Carlisle Cos., Inc. 9,951
157 Raven Industries, Inc. 5,682
--------------
15,633
--------------
INSURANCE -- 4.4%
1,150 Aflac, Inc. 52,394
6 Alleghany Corp. 3,740
410 Allstate (The) Corp. 33,878
351 Ambac Financial Group, Inc. (a) 6,051
101 American Equity Investment Life
Holding Co. 2,822
36 American Financial Group, Inc. 3,259
157 American National Insurance Co. 19,977
75 Assurant, Inc. 6,708
481 Assured Guaranty Ltd. 18,413
315 Athene Holding Ltd., Class A (a) 12,547
273 Brown & Brown, Inc. 7,524
101 Chubb Ltd. 13,047
351 Cincinnati Financial Corp. 27,174
253 CNO Financial Group, Inc. 3,765
119 Employers Holdings, Inc. 4,994
19 Enstar Group Ltd. (a) 3,184
32 Erie Indemnity Co., Class A 4,266
71 FBL Financial Group, Inc., Class A 4,661
410 Fidelity National Financial, Inc. 12,890
313 First American Financial Corp. 13,972
33 Hanover Insurance Group (The),
Inc. 3,853
145 Health Insurance Innovations, Inc.,
Class A (a) (b) 3,876
120 Horace Mann Educators Corp. 4,494
202 Kemper Corp. 13,409
84 Kinsale Capital Group, Inc. 4,667
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INSURANCE (CONTINUED)
598 Lincoln National Corp. $ 30,683
268 Loews Corp. 12,199
671 MBIA, Inc. (a) 5,985
288 MetLife, Inc. 11,825
134 National General Holdings Corp. 3,244
17 National Western Life Group, Inc.,
Class A 5,112
540 Old Republic International Corp. 11,108
169 Primerica, Inc. 16,513
462 Principal Financial Group, Inc. 20,407
953 Progressive (The) Corp. 57,495
399 Prudential Financial, Inc. 32,539
141 Reinsurance Group of America, Inc. 19,772
46 RLI Corp. 3,174
63 Selective Insurance Group, Inc. 3,839
414 Third Point Reinsurance Ltd. (a) 3,991
233 Torchmark Corp. 17,366
104 Travelers (The) Cos., Inc. 12,454
50 Trupanion, Inc. (a) (b) 1,273
185 Universal Insurance Holdings, Inc. 7,015
413 Unum Group 12,134
101 W.R. Berkley Corp. 7,465
--------------
581,158
--------------
INTERACTIVE MEDIA & SERVICES
-- 0.4%
11 Alphabet, Inc., Class A (a) 11,495
153 ANGI Homeservices, Inc.,
Class A (a) 2,459
325 Cars.com, Inc. (a) 6,987
94 IAC/InterActiveCorp (a) 17,206
131 Match Group, Inc. 5,603
79 TripAdvisor, Inc. (a) 4,261
73 Yelp, Inc. (a) 2,554
--------------
50,565
--------------
INTERNET & DIRECT MARKETING RETAIL
-- 1.1%
456 1-800-Flowers.com, Inc.,
Class A (a) 5,577
34 Amazon.com, Inc. (a) 51,067
285 Duluth Holdings, Inc., Class B (a) 7,190
395 Etsy, Inc. (a) 18,790
147 GrubHub, Inc. (a) 11,291
152 Liberty Expedia Holdings, Inc.,
Class A (a) 5,945
116 Quotient Technology, Inc. (a) 1,239
915 Qurate Retail, Inc. (a) 17,861
98 Shutterstock, Inc. 3,529
18 Stamps.com, Inc. (a) 2,801
137 Wayfair, Inc., Class A (a) 12,341
--------------
137,631
--------------
IT SERVICES -- 3.7%
180 Automatic Data Processing, Inc. 23,602
409 Booz Allen Hamilton Holding
Corp. 18,434
See Notes to Financial Statements Page 21
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
IT SERVICES (CONTINUED)
204 Broadridge Financial Solutions,
Inc. $ 19,635
88 CACI International, Inc.,
Class A (a) 12,675
101 Carbonite, Inc. (a) 2,551
716 Conduent, Inc. (a) 7,611
45 CSG Systems International, Inc. 1,430
721 DXC Technology Co. 38,336
118 EPAM Systems, Inc. (a) 13,689
149 EVERTEC, Inc. 4,276
54 ExlService Holdings, Inc. (a) 2,841
494 First Data Corp., Class A (a) 8,354
59 FleetCor Technologies, Inc. (a) 10,957
427 Gartner, Inc. (a) 54,588
263 Genpact Ltd. 7,098
97 GoDaddy, Inc., Class A (a) 6,365
76 Jack Henry & Associates, Inc. 9,616
175 Leidos Holdings, Inc. 9,226
181 LiveRamp Holdings, Inc. (a) 6,992
85 ManTech International Corp.,
Class A 4,445
182 Mastercard, Inc., Class A 34,334
186 MAXIMUS, Inc. 12,107
121 NIC, Inc. 1,510
287 Okta, Inc. (a) 18,311
153 PayPal Holdings, Inc. (a) 12,866
134 Perficient, Inc. (a) 2,983
470 Presidio, Inc. 6,133
464 Sabre Corp. 10,041
100 Science Applications International
Corp. 6,370
681 Square, Inc., Class A (a) 38,197
118 Sykes Enterprises, Inc. (a) 2,918
136 Total System Services, Inc. 11,055
234 Twilio, Inc., Class A (a) 20,896
439 Unisys Corp. (a) 5,106
133 Virtusa Corp. (a) 5,664
181 Visa, Inc., Class A 23,881
61 WEX, Inc. (a) 8,544
--------------
483,637
--------------
LEISURE PRODUCTS -- 0.2%
131 Acushnet Holdings Corp. 2,760
231 American Outdoor Brands Corp. (a) 2,971
369 Callaway Golf Co. 5,646
77 Johnson Outdoors, Inc., Class A 4,523
164 Malibu Boats, Inc., Class A (a) 5,707
40 Polaris Industries, Inc. 3,067
26 Sturm Ruger & Co., Inc. 1,384
--------------
26,058
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.9%
39 Bio-Rad Laboratories, Inc.,
Class A (a) 9,057
79 Bio-Techne Corp. 11,433
79 Cambrex Corp. (a) 2,983
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES
(CONTINUED)
121 Charles River Laboratories
International, Inc. (a) $ 13,695
418 Codexis, Inc. (a) 6,981
184 Illumina, Inc. (a) 55,187
522 IQVIA Holdings, Inc. (a) 60,641
59 Luminex Corp. 1,363
150 Medpace Holdings, Inc. (a) 7,939
233 NeoGenomics, Inc. (a) 2,938
331 Pacific Biosciences of California,
Inc. (a) 2,449
209 PerkinElmer, Inc. 16,417
183 PRA Health Sciences, Inc. (a) 16,829
166 Thermo Fisher Scientific, Inc. 37,149
--------------
245,061
--------------
MACHINERY -- 2.6%
267 AGCO Corp. 14,864
39 Alamo Group, Inc. 3,015
90 Albany International Corp.,
Class A 5,619
391 Allison Transmission Holdings, Inc. 17,169
43 Altra Industrial Motion Corp. 1,081
114 Chart Industries, Inc. (a) 7,413
123 EnPro Industries, Inc. 7,392
53 ESCO Technologies, Inc. 3,495
134 Federal Signal Corp. 2,667
142 Gardner Denver Holdings, Inc. (a) 2,904
49 Global Brass & Copper Holdings,
Inc. 1,232
49 Gorman-Rupp (The) Co. 1,588
87 Graco, Inc. 3,641
119 Greenbrier (The) Cos., Inc. 4,705
314 Harsco Corp. (a) 6,236
103 Hillenbrand, Inc. 3,907
29 Hyster-Yale Materials Handling,
Inc. 1,797
54 IDEX Corp. 6,818
66 ITT, Inc. 3,186
135 John Bean Technologies Corp. 9,694
82 Kennametal, Inc. 2,729
43 Lincoln Electric Holdings, Inc. 3,391
166 Lydall, Inc. (a) 3,371
224 Manitowoc (The) Co., Inc. (a) 3,308
278 Meritor, Inc. (a) 4,701
31 Middleby (The) Corp. (a) 3,185
62 Mueller Industries, Inc. 1,448
311 Mueller Water Products, Inc.,
Class A 2,830
209 Navistar International Corp. (a) 5,424
59 Nordson Corp. 7,042
228 Oshkosh Corp. 13,979
822 PACCAR, Inc. 46,969
45 Proto Labs, Inc. (a) 5,076
81 RBC Bearings, Inc. (a) 10,619
342 REV Group, Inc. 2,568
66 Snap-on, Inc. 9,589
54 SPX Corp. (a) 1,513
Page 22 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MACHINERY (CONTINUED)
33 Sun Hydraulics Corp. $ 1,095
324 Timken (The) Co. 12,092
67 Toro (The) Co. 3,744
59 TriMas Corp. (a) 1,610
770 Trinity Industries, Inc. 15,854
393 Wabash National Corp. 5,140
103 WABCO Holdings, Inc. (a) 11,056
194 Wabtec Corp. 13,629
22 Watts Water Technologies, Inc.,
Class A 1,420
50 Woodward, Inc. 3,715
506 Xylem, Inc. 33,760
--------------
339,280
--------------
MARINE -- 0.1%
198 Kirby Corp. (a) 13,337
181 Matson, Inc. 5,796
--------------
19,133
--------------
MEDIA -- 1.8%
896 Altice USA, Inc., Class A 14,802
54 AMC Networks, Inc., Class A (a) 2,964
18 Cable One, Inc. 14,762
1,912 Comcast Corp., Class A 65,104
568 DISH Network Corp., Class A (a) 14,183
435 Emerald Expositions Events, Inc. 5,368
1,134 Entercom Communications Corp.,
Class A 6,475
716 Gannett Co., Inc. 6,107
512 Gray Television, Inc. (a) 7,547
353 Interpublic Group of Cos. (The),
Inc. 7,282
89 John Wiley & Sons, Inc., Class A 4,180
803 Liberty Broadband Corp.,
Class C (a) 57,840
70 Meredith Corp. 3,636
139 MSG Networks, Inc., Class A (a) 3,275
338 National CineMedia, Inc. 2,190
457 New Media Investment Group, Inc. 5,288
88 Nexstar Media Group, Inc., Class A 6,920
316 Sinclair Broadcast Group, Inc.,
Class A 8,323
599 TEGNA, Inc. 6,511
--------------
242,757
--------------
METALS & MINING -- 1.5%
299 Alcoa Corp. (a) 7,947
122 Carpenter Technology Corp. 4,344
283 Cleveland-Cliffs, Inc. (a) 2,176
672 Coeur Mining, Inc. (a) 3,004
175 Commercial Metals Co. 2,804
4,863 Freeport-McMoRan, Inc. 50,138
1,285 Hecla Mining Co. 3,033
1,067 Nucor Corp. 55,281
238 Reliance Steel & Aluminum Co. 16,939
331 Schnitzer Steel Industries, Inc.,
Class A 7,133
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
METALS & MINING (CONTINUED)
268 Steel Dynamics, Inc. $ 8,051
771 SunCoke Energy, Inc. (a) 6,592
667 United States Steel Corp. 12,166
265 Warrior Met Coal, Inc. 6,389
124 Worthington Industries, Inc. 4,320
--------------
190,317
--------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS -- 0.9%
380 Apollo Commercial Real Estate
Finance, Inc. 6,331
624 Arbor Realty Trust, Inc. 6,284
319 ARMOUR Residential REIT, Inc. 6,539
120 Blackstone Mortgage Trust, Inc.,
Class A 3,823
680 Capstead Mortgage Corp. 4,536
1,121 Chimera Investment Corp. 19,976
186 Granite Point Mortgage Trust, Inc. 3,354
566 Invesco Mortgage Capital, Inc. 8,196
178 KKR Real Estate Finance Trust,
Inc. 3,409
317 Ladder Capital Corp. 4,904
975 MFA Financial, Inc. 6,513
1,140 New Residential Investment Corp. 16,199
884 New York Mortgage Trust, Inc. 5,207
354 PennyMac Mortgage Investment
Trust 6,591
441 Redwood Trust, Inc. 6,646
375 Starwood Property Trust, Inc. 7,391
480 Two Harbors Investment Corp. 6,163
--------------
122,062
--------------
MULTILINE RETAIL -- 1.9%
172 Big Lots, Inc. 4,974
117 Dillard's, Inc., Class A (b) 7,056
248 Dollar General Corp. 26,804
664 Dollar Tree, Inc. (a) 59,973
726 Kohl's Corp. 48,163
1,949 Macy's, Inc. 58,041
135 Nordstrom, Inc. 6,292
210 Ollie's Bargain Outlet Holdings,
Inc. (a) 13,967
307 Target Corp. 20,290
--------------
245,560
--------------
MULTI-UTILITIES -- 1.8%
213 Ameren Corp. 13,894
93 Black Hills Corp. 5,839
1,958 CenterPoint Energy, Inc. 55,274
531 Consolidated Edison, Inc. 40,600
193 Dominion Energy, Inc. 13,792
248 DTE Energy Co. 27,354
471 MDU Resources Group, Inc. 11,229
324 NiSource, Inc. 8,213
122 NorthWestern Corp. 7,252
766 Public Service Enterprise Group,
Inc. 39,870
70 Unitil Corp. 3,545
See Notes to Financial Statements Page 23
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTI-UTILITIES (CONTINUED)
203 WEC Energy Group, Inc. $ 14,060
--------------
240,922
--------------
OIL, GAS & CONSUMABLE FUELS
-- 6.2%
199 Anadarko Petroleum Corp. 8,724
1,147 Antero Resources Corp. (a) 10,770
848 Apache Corp. 22,260
100 Arch Coal, Inc., Class A 8,299
185 California Resources Corp. (a) 3,152
213 Carrizo Oil & Gas, Inc. (a) 2,405
738 Centennial Resource
Development, Inc., Class A (a) 8,133
779 Cheniere Energy, Inc. (a) 46,109
898 Chesapeake Energy Corp. (a) 1,886
443 Chevron Corp. 48,194
219 Cimarex Energy Co. 13,501
1,420 CNX Resources Corp. (a) 16,216
875 ConocoPhillips 54,556
595 Continental Resources, Inc. (a) 23,913
134 CVR Energy, Inc. 4,620
383 Delek US Holdings, Inc. 12,451
1,445 Denbury Resources, Inc. (a) 2,471
211 EOG Resources, Inc. 18,401
476 Exxon Mobil Corp. 32,459
521 Green Plains, Inc. 6,830
861 Gulfport Energy Corp. (a) 5,640
2,005 Halcon Resources Corp. (a) (b) 3,409
757 Hess Corp. 30,659
968 HollyFrontier Corp. 49,484
575 Kosmos Energy Ltd. (a) 2,340
1,097 Laredo Petroleum, Inc. (a) 3,971
2,908 Marathon Oil Corp. 41,701
677 Marathon Petroleum Corp. 39,950
366 Matador Resources Co. (a) 5,684
363 Murphy Oil Corp. 8,491
559 Newfield Exploration Co. (a) 8,195
1,728 Noble Energy, Inc. 32,417
1,344 Northern Oil and Gas, Inc. (a) 3,037
284 Oasis Petroleum, Inc. (a) 1,571
164 Occidental Petroleum Corp. 10,066
351 Par Pacific Holdings, Inc. (a) 4,977
138 Parsley Energy, Inc., Class A (a) 2,205
407 PBF Energy, Inc., Class A 13,297
82 PDC Energy, Inc. (a) 2,440
570 Peabody Energy Corp. 17,374
89 Penn Virginia Corp. (a) 4,811
601 Phillips 66 51,776
475 QEP Resources, Inc. (a) 2,674
957 Range Resources Corp. 9,159
311 Renewable Energy Group, Inc. (a) 7,993
142 Resolute Energy Corp. (a) 4,115
163 SemGroup Corp., Class A 2,246
284 SM Energy Co. 4,396
1,753 Southwestern Energy Co. (a) 5,978
143 Targa Resources Corp. 5,151
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS
(CONTINUED)
595 Valero Energy Corp. $ 44,607
929 W&T Offshore, Inc. (a) 3,828
380 Whiting Petroleum Corp. (a) 8,622
227 WildHorse Resource
Development Corp. (a) 3,203
494 Williams (The) Cos., Inc. 10,893
1,002 WPX Energy, Inc. (a) 11,373
--------------
813,083
--------------
PAPER & FOREST PRODUCTS -- 0.2%
195 Boise Cascade Co. 4,651
767 Louisiana-Pacific Corp. 17,043
188 P.H. Glatfelter Co. 1,835
94 Schweitzer-Mauduit International,
Inc. 2,354
266 Verso Corp., Class A (a) 5,958
--------------
31,841
--------------
PERSONAL PRODUCTS -- 0.3%
321 Coty, Inc., Class A 2,106
296 Herbalife Nutrition Ltd. (a) 17,449
111 Inter Parfums, Inc. 7,278
41 Medifast, Inc. 5,126
49 Nu Skin Enterprises, Inc., Class A 3,005
45 USANA Health Sciences, Inc. (a) 5,298
--------------
40,262
--------------
PHARMACEUTICALS -- 0.9%
182 Amneal Pharmaceuticals, Inc. (a) 2,462
377 Eli Lilly and Co. 43,626
426 Endo International PLC (a) 3,110
183 Horizon Pharma PLC (a) 3,576
24 Jazz Pharmaceuticals PLC (a) 2,975
740 Mylan N.V. (a) 20,276
27 MyoKardia, Inc. (a) 1,319
198 Nektar Therapeutics (a) 6,508
109 Pacira Pharmaceuticals, Inc. (a) 4,689
114 Perrigo Co. PLC 4,418
305 Pfizer, Inc. 13,313
236 Prestige Consumer Healthcare,
Inc. (a) 7,288
66 Reata Pharmaceuticals, Inc.,
Class A (a) 3,703
110 Theravance Biopharma, Inc. (a) 2,815
--------------
120,078
--------------
PROFESSIONAL SERVICES -- 1.0%
153 ASGN, Inc. (a) 8,339
227 CBIZ, Inc. (a) 4,472
67 Exponent, Inc. 3,398
122 FTI Consulting, Inc. (a) 8,130
71 ICF International, Inc. 4,599
171 Insperity, Inc. 15,965
298 Kelly Services, Inc., Class A 6,103
191 Kforce, Inc. 5,906
82 Korn Ferry 3,242
188 ManpowerGroup, Inc. 12,182
389 Navigant Consulting, Inc. 9,355
Page 24 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
PROFESSIONAL SERVICES (CONTINUED)
231 Robert Half International, Inc. $ 13,213
183 TransUnion 10,394
215 TriNet Group, Inc. (a) 9,019
206 TrueBlue, Inc. (a) 4,584
112 Verisk Analytics, Inc. (a) 12,213
--------------
131,114
--------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.2%
42 HFF, Inc., Class A 1,393
56 Jones Lang LaSalle, Inc. 7,089
434 Realogy Holdings Corp. (b) 6,371
97 RMR Group (The), Inc., Class A 5,149
--------------
20,002
--------------
ROAD & RAIL -- 2.1%
57 AMERCO 18,702
148 ArcBest Corp. 5,071
56 Avis Budget Group, Inc. (a) 1,259
366 CSX Corp. 22,740
222 Genesee & Wyoming, Inc.,
Class A (a) 16,432
363 Heartland Express, Inc. 6,643
439 Hertz Global Holdings, Inc. (a) 5,992
478 Kansas City Southern 45,625
589 Knight-Swift Transportation
Holdings, Inc. 14,766
33 Landstar System, Inc. 3,157
426 Marten Transport Ltd. 6,897
224 Norfolk Southern Corp. 33,497
168 Old Dominion Freight Line, Inc. 20,746
276 Ryder System, Inc. 13,289
70 Saia, Inc. (a) 3,907
359 Schneider National, Inc., Class B 6,703
248 Union Pacific Corp. 34,281
243 Universal Logistics Holdings, Inc. 4,396
253 Werner Enterprises, Inc. 7,474
--------------
271,577
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.9%
104 Advanced Energy Industries,
Inc. (a) 4,465
2,191 Advanced Micro Devices, Inc. (a) 40,446
1,212 Amkor Technology, Inc. (a) 7,951
153 Brooks Automation, Inc. 4,006
139 Cirrus Logic, Inc. (a) 4,612
71 Cohu, Inc. 1,141
54 Diodes, Inc. (a) 1,742
448 Lattice Semiconductor Corp. (a) 3,100
32 Monolithic Power Systems, Inc. 3,720
191 Nanometrics, Inc. (a) 5,220
193 NVIDIA Corp. 25,765
52 Qorvo, Inc. (a) 3,158
64 Semtech Corp. (a) 2,936
34 Universal Display Corp. 3,181
--------------
111,443
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SOFTWARE -- 6.0%
169 8x8, Inc. (a) $ 3,049
150 Adobe, Inc. (a) 33,936
125 Alarm.com Holdings, Inc. (a) 6,484
157 Alteryx, Inc., Class A (a) 9,337
73 ANSYS, Inc. (a) 10,435
91 Appfolio, Inc., Class A (a) 5,389
54 Appian Corp. (a) (b) 1,442
48 Apptio, Inc., Class A (a) 1,822
106 Aspen Technology, Inc. (a) 8,711
260 Autodesk, Inc. (a) 33,439
405 Avaya Holdings Corp. (a) 5,897
44 Benefitfocus, Inc. (a) 2,012
127 Blackline, Inc. (a) 5,201
99 Bottomline Technologies DE,
Inc. (a) 4,752
75 Box, Inc., Class A (a) 1,266
427 Cision Ltd. (a) 4,996
26 CommVault Systems, Inc. (a) 1,536
95 Cornerstone OnDemand, Inc. (a) 4,791
257 Coupa Software, Inc. (a) 16,155
23 Ebix, Inc. 979
29 Envestnet, Inc. (a) 1,426
124 Everbridge, Inc. (a) 7,038
71 Fair Isaac Corp. (a) 13,277
164 Five9, Inc. (a) 7,170
220 Fortinet, Inc. (a) 15,495
120 Guidewire Software, Inc. (a) 9,628
135 HubSpot, Inc. (a) 16,973
179 Intuit, Inc. 35,236
49 j2 Global, Inc. 3,400
207 LivePerson, Inc. (a) 3,904
33 Manhattan Associates, Inc. (a) 1,398
473 Microsoft Corp. 48,043
44 MINDBODY, Inc., Class A (a) 1,602
86 New Relic, Inc. (a) 6,963
94 Nutanix, Inc., Class A (a) 3,909
188 OneSpan, Inc. (a) 2,435
180 Palo Alto Networks, Inc. (a) 33,903
131 Paycom Software, Inc. (a) 16,041
89 Paylocity Holding Corp. (a) 5,359
64 Pegasystems, Inc. 3,061
114 PTC, Inc. (a) 9,451
59 Q2 Holdings, Inc. (a) 2,923
95 QAD, Inc., Class A 3,736
40 Qualys, Inc. (a) 2,990
194 Rapid7, Inc. (a) 6,045
245 RealPage, Inc. (a) 11,806
217 RingCentral, Inc., Class A (a) 17,889
339 salesforce.com, Inc. (a) 46,433
367 SecureWorks Corp., Class A (a) 6,199
208 ServiceNow, Inc. (a) 37,034
448 Splunk, Inc. (a) 46,973
72 SPS Commerce, Inc. (a) 5,931
2,545 Symantec Corp. 48,088
275 Synopsys, Inc. (a) 23,166
108 Tableau Software, Inc.,
Class A (a) 12,960
288 TiVo Corp. 2,710
See Notes to Financial Statements Page 25
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SOFTWARE (CONTINUED)
60 Trade Desk (The), Inc.,
Class A (a) $ 6,964
33 Tyler Technologies, Inc. (a) 6,132
50 Ultimate Software Group (The),
Inc. (a) 12,243
55 Upland Software, Inc. (a) 1,495
49 Varonis Systems, Inc. (a) 2,592
72 Verint Systems, Inc. (a) 3,046
277 Workday, Inc., Class A (a) 44,231
181 Workiva, Inc. (a) 6,496
302 Yext, Inc. (a) 4,485
284 Zendesk, Inc. (a) 16,577
--------------
786,485
--------------
SPECIALTY RETAIL -- 4.8%
132 Aaron's, Inc. 5,551
339 Abercrombie & Fitch Co., Class A 6,797
48 Advance Auto Parts, Inc. 7,558
650 American Eagle Outfitters, Inc. 12,565
78 Asbury Automotive Group, Inc. (a) 5,200
1,176 Ascena Retail Group, Inc. (a) 2,952
489 AutoNation, Inc. (a) 17,457
70 AutoZone, Inc. (a) 58,684
597 Bed Bath & Beyond, Inc. 6,758
315 Boot Barn Holdings, Inc. (a) 5,364
311 Buckle (The), Inc. (b) 6,015
99 Burlington Stores, Inc. (a) 16,104
150 Caleres, Inc. 4,175
152 Carvana Co. (a) (b) 4,972
1,033 Chico's FAS, Inc. 5,805
202 Dick's Sporting Goods, Inc. 6,302
648 Express, Inc. (a) 3,311
155 Five Below, Inc. (a) 15,860
319 Foot Locker, Inc. 16,971
117 GameStop Corp., Class A 1,477
559 Gap (The), Inc. 14,400
138 Group 1 Automotive, Inc. 7,275
65 Home Depot (The), Inc. 11,168
399 L Brands, Inc. 10,242
88 Lithia Motors, Inc., Class A 6,717
590 Lowe's Cos., Inc. 54,492
63 Murphy USA, Inc. (a) 4,828
195 O'Reilly Automotive, Inc. (a) 67,144
2,233 Office Depot, Inc. 5,761
661 Party City Holdco, Inc. (a) 6,597
429 Penske Automotive Group, Inc. 17,297
27 RH (a) 3,235
683 Ross Stores, Inc. 56,826
97 Sally Beauty Holdings, Inc. (a) 1,654
49 Sleep Number Corp. (a) 1,555
463 Sonic Automotive, Inc., Class A 6,371
71 Tailored Brands, Inc. 968
104 Tiffany & Co. 8,373
1,209 TJX (The) Cos., Inc. 54,091
89 Tractor Supply Co. 7,426
240 Ulta Beauty, Inc. (a) 58,762
296 Urban Outfitters, Inc. (a) 9,827
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SPECIALTY RETAIL (CONTINUED)
184 Williams-Sonoma, Inc. $ 9,283
--------------
634,170
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 1.6%
299 Apple, Inc. 47,164
4,150 Hewlett Packard Enterprise Co. 54,822
628 NetApp, Inc. 37,473
622 Pure Storage, Inc., Class A (a) 10,002
572 Seagate Technology PLC 22,073
694 Western Digital Corp. 25,657
448 Xerox Corp. 8,852
--------------
206,043
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.2%
123 Carter's, Inc. 10,039
130 Columbia Sportswear Co. 10,932
421 Crocs, Inc. (a) 10,938
61 Deckers Outdoor Corp. (a) 7,805
154 Fossil Group, Inc. (a) 2,422
37 G-III Apparel Group Ltd. (a) 1,032
320 NIKE, Inc., Class B 23,725
40 Oxford Industries, Inc. 2,842
281 PVH Corp. 26,119
433 Skechers U.S.A., Inc., Class A (a) 9,911
51 Steven Madden Ltd. 1,543
380 Under Armour, Inc., Class A (a) 6,715
577 VF Corp. 41,163
--------------
155,186
--------------
THRIFTS & MORTGAGE FINANCE
-- 0.6%
141 Capitol Federal Financial, Inc. 1,801
182 Essent Group Ltd. (a) 6,221
203 HomeStreet, Inc. (a) 4,310
1,527 MGIC Investment Corp. (a) 15,972
107 Mr Cooper Group, Inc. (a) 1,249
1,166 New York Community Bancorp,
Inc. 10,972
396 NMI Holdings, Inc., Class A (a) 7,069
103 Northwest Bancshares, Inc. 1,745
115 Oritani Financial Corp. 1,696
73 Provident Financial Services, Inc. 1,761
983 Radian Group, Inc. 16,082
213 United Financial Bancorp, Inc. 3,131
112 Washington Federal, Inc. 2,991
--------------
75,000
--------------
TOBACCO -- 0.1%
216 Turning Point Brands, Inc. 5,880
110 Universal Corp. 5,956
--------------
11,836
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.3%
443 Air Lease Corp. 13,383
409 Aircastle Ltd. 7,051
Page 26 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TRADING COMPANIES & DISTRIBUTORS
(CONTINUED)
23 Applied Industrial Technologies,
Inc. $ 1,241
149 Beacon Roofing Supply, Inc. (a) 4,726
384 BMC Stock Holdings, Inc. (a) 5,944
45 DXP Enterprises, Inc. (a) 1,253
467 Fastenal Co. 24,419
103 GATX Corp. 7,293
309 GMS, Inc. (a) 4,592
47 H&E Equipment Services, Inc. 960
94 HD Supply Holdings, Inc. (a) 3,527
140 Herc Holdings, Inc. (a) 3,639
95 MRC Global, Inc. (a) 1,162
183 MSC Industrial Direct Co., Inc.,
Class A 14,076
228 Rush Enterprises, Inc., Class A 7,861
54 SiteOne Landscape Supply, Inc. (a) 2,985
69 Systemax, Inc. 1,648
269 Triton International Ltd. 8,358
82 United Rentals, Inc. (a) 8,408
132 Univar, Inc. (a) 2,342
152 W.W. Grainger, Inc. 42,919
23 Watsco, Inc. 3,200
87 WESCO International, Inc. (a) 4,176
--------------
175,163
--------------
TRANSPORTATION INFRASTRUCTURE
-- 0.1%
440 Macquarie Infrastructure Corp. 16,086
--------------
WATER UTILITIES -- 0.1%
109 Aqua America, Inc. 3,727
37 Middlesex Water Co. 1,974
29 SJW Group 1,613
--------------
7,314
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.4%
205 Boingo Wireless, Inc. (a) 4,217
294 Telephone & Data Systems, Inc. 9,567
386 T-Mobile US, Inc. (a) 24,553
160 United States Cellular Corp. (a) 8,315
--------------
46,652
--------------
TOTAL COMMON STOCKS -- 99.6% 13,096,208
(Cost $14,635,666) --------------
MONEY MARKET FUNDS -- 1.1%
25,890 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.61% (c) (d) 25,890
117,659 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 2.33% (c) 117,659
--------------
TOTAL MONEY MARKET FUNDS
-- 1.1% 143,549
(Cost $143,549) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.4%
$ 11,423 BNP Paribas S.A., 2.95% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$11,425. Collateralized by
U.S. Treasury Note, interest
rate of 2.375%, due 04/30/20.
The value of the collateral
including accrued interest is
$11,698. (d) $ 11,423
41,113 JPMorgan Chase & Co., 2.85% (c),
dated 12/31/18, due 01/02/19,
with a maturity value of
$41,120. Collateralized by U.S.
Treasury Bill, interest rate
of 0.000%, due 05/09/19. The
value of the collateral is
$41,934. (d) 41,113
--------------
TOTAL REPURCHASE AGREEMENTS
-- 0.4% 52,536
(Cost $52,536) --------------
TOTAL INVESTMENTS -- 101.1% 13,292,293
(Cost $14,831,751) (e)
NET OTHER ASSETS AND
LIABILITIES -- (1.1)% (141,003)
--------------
NET ASSETS -- 100.0% $ 13,151,290
==============
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $75,985 and the total value of the collateral held by the
Fund is $78,333.
(c) Rate shown reflects yield as of December 31, 2018.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $14,984,746. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$506,059 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$2,198,512. The net unrealized depreciation was $1,692,453.
See Notes to Financial Statements Page 27
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 13,096,208 $ -- $ --
Money Market
Funds 143,549 -- --
Repurchase
Agreements -- 52,536 --
-----------------------------------------------------
Total Investments $ 13,239,757 $ 52,536 $ --
=====================================================
* See Portfolio of Investments for industry breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 75,985
Non-cash Collateral(2) (75,985)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At December 31, 2018, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 52,536
Non-cash Collateral(4) (52,536)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2018, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 28 See Notes to Financial Statements
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.8%
AEROSPACE & DEFENSE -- 2.6%
3,952 Arconic, Inc. $ 66,631
222 Boeing (The) Co. 71,595
446 General Dynamics Corp. 70,116
526 Harris Corp. 70,826
372 Huntington Ingalls Industries,
Inc. 70,795
410 L3 Technologies, Inc. 71,201
263 Lockheed Martin Corp. 68,864
287 Northrop Grumman Corp. 70,286
444 Raytheon Co. 68,087
994 Spirit AeroSystems Holdings, Inc.,
Class A 71,657
1,494 Textron, Inc. 68,709
212 TransDigm Group, Inc. (a) 72,093
631 United Technologies Corp. 67,189
--------------
908,049
--------------
AIR FREIGHT & LOGISTICS -- 1.0%
835 C.H. Robinson Worldwide, Inc. 70,215
1,045 Expeditors International of
Washington, Inc. 71,154
436 FedEx Corp. 70,340
726 United Parcel Service, Inc.,
Class B 70,807
1,315 XPO Logistics, Inc. (a) 75,007
--------------
357,523
--------------
AIRLINES -- 0.8%
2,174 American Airlines Group, Inc. 69,807
1,372 Delta Air Lines, Inc. 68,463
1,472 Southwest Airlines Co. 68,418
820 United Continental Holdings,
Inc. (a) 68,659
--------------
275,347
--------------
AUTO COMPONENTS -- 0.4%
2,024 BorgWarner, Inc. 70,314
582 Lear Corp. 71,504
--------------
141,818
--------------
AUTOMOBILES -- 0.6%
8,399 Ford Motor Co. 64,252
2,038 General Motors Co. 68,171
217 Tesla, Inc. (a) 72,218
--------------
204,641
--------------
BANKS -- 3.6%
2,877 Bank of America Corp. 70,889
1,593 BB&T Corp. 69,009
1,344 Citigroup, Inc. 69,969
2,371 Citizens Financial Group, Inc. 70,490
1,029 Comerica, Inc. 70,682
2,973 Fifth Third Bancorp 69,955
849 First Republic Bank 73,778
5,873 Huntington Bancshares, Inc. 70,006
714 JPMorgan Chase & Co. 69,701
4,761 KeyCorp 70,367
484 M&T Bank Corp. 69,275
597 PNC Financial Services Group
(The), Inc. 69,795
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BANKS (CONTINUED)
5,281 Regions Financial Corp. $ 70,660
1,400 SunTrust Banks, Inc. 70,616
367 SVB Financial Group (a) 69,701
1,517 U.S. Bancorp 69,327
1,499 Wells Fargo & Co. 69,074
1,733 Zions Bancorp N.A. 70,602
--------------
1,263,896
--------------
BEVERAGES -- 1.4%
1,492 Brown-Forman Corp., Class B 70,989
1,428 Coca-Cola (The) Co. 67,616
418 Constellation Brands, Inc.,
Class A 67,223
2,706 Keurig Dr Pepper, Inc. 69,382
1,211 Molson Coors Brewing Co.,
Class B 68,010
1,395 Monster Beverage Corp. (a) 68,662
613 PepsiCo, Inc. 67,724
--------------
479,606
--------------
BIOTECHNOLOGY -- 2.2%
795 AbbVie, Inc. 73,291
704 Alexion Pharmaceuticals, Inc. (a) 68,542
373 Amgen, Inc. 72,612
238 Biogen, Inc. (a) 71,619
835 BioMarin Pharmaceutical, Inc. (a) 71,100
1,110 Celgene Corp. (a) 71,140
1,073 Gilead Sciences, Inc. 67,116
1,156 Incyte Corp. (a) 73,510
198 Regeneron Pharmaceuticals,
Inc. (a) 73,953
1,286 Seattle Genetics, Inc. (a) 72,865
434 Vertex Pharmaceuticals, Inc. (a) 71,918
--------------
787,666
--------------
BUILDING PRODUCTS -- 0.4%
2,274 Johnson Controls International PLC 67,424
2,367 Masco Corp. 69,211
--------------
136,635
--------------
CAPITAL MARKETS -- 4.4%
671 Ameriprise Financial, Inc. 70,032
1,513 Bank of New York Mellon (The)
Corp. 71,217
184 BlackRock, Inc. 72,279
690 Cboe Global Markets, Inc. 67,503
1,741 Charles Schwab (The) Corp. 72,304
370 CME Group, Inc. 69,604
1,624 E*TRADE Financial Corp. 71,261
2,358 Franklin Resources, Inc. 69,938
421 Goldman Sachs Group (The), Inc. 70,328
936 Intercontinental Exchange, Inc. 70,509
4,174 Invesco Ltd. 69,873
3,578 KKR & Co., Inc., Class A 70,236
507 Moody's Corp. 71,000
1,786 Morgan Stanley 70,815
491 MSCI, Inc. 72,388
845 Nasdaq, Inc. 68,927
852 Northern Trust Corp. 71,219
959 Raymond James Financial, Inc. 71,359
417 S&P Global, Inc. 70,865
See Notes to Financial Statements Page 29
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CAPITAL MARKETS (CONTINUED)
1,135 State Street Corp. $ 71,584
780 T. Rowe Price Group, Inc. 72,010
1,461 TD Ameritrade Holding Corp. 71,531
--------------
1,556,782
--------------
CHEMICALS -- 2.8%
438 Air Products and Chemicals, Inc. 70,102
906 Albemarle Corp. 69,825
775 Celanese Corp. 69,727
1,675 CF Industries Holdings, Inc. 72,879
1,335 DowDuPont, Inc. 71,396
982 Eastman Chemical Co. 71,794
472 Ecolab, Inc. 69,549
957 FMC Corp. 70,780
529 International Flavors &
Fragrances, Inc. 71,029
861 LyondellBasell Industries N.V.,
Class A 71,601
2,402 Mosaic (The) Co. 70,162
701 PPG Industries, Inc. 71,663
179 Sherwin-Williams (The) Co. 70,429
1,103 Westlake Chemical Corp. 72,986
--------------
993,922
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.0%
428 Cintas Corp. 71,900
1,489 Copart, Inc. (a) 71,144
954 Republic Services, Inc. 68,774
1,963 Rollins, Inc. 70,864
777 Waste Management, Inc. 69,145
--------------
351,827
--------------
COMMUNICATIONS EQUIPMENT
-- 0.8%
351 Arista Networks, Inc. (a) 73,956
1,607 Cisco Systems, Inc. 69,631
438 F5 Networks, Inc. (a) 70,969
603 Motorola Solutions, Inc. 69,369
--------------
283,925
--------------
CONSTRUCTION & ENGINEERING
-- 0.2%
1,214 Jacobs Engineering Group, Inc. 70,970
--------------
CONSTRUCTION MATERIALS -- 0.4%
414 Martin Marietta Materials, Inc. 71,154
732 Vulcan Materials Co. 72,322
--------------
143,476
--------------
CONSUMER FINANCE -- 1.0%
3,138 Ally Financial, Inc. 71,107
733 American Express Co. 69,869
932 Capital One Financial Corp. 70,450
1,197 Discover Financial Services 70,599
3,004 Synchrony Financial 70,474
--------------
352,499
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
CONTAINERS & PACKAGING -- 1.0%
785 Avery Dennison Corp. $ 70,517
1,554 Ball Corp. 71,453
1,726 International Paper Co. 69,661
821 Packaging Corp. of America 68,521
1,827 WestRock Co. 68,987
--------------
349,139
--------------
DISTRIBUTORS -- 0.4%
731 Genuine Parts Co. 70,191
2,877 LKQ Corp. (a) 68,271
--------------
138,462
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.4%
4,388 AXA Equitable Holdings, Inc. 72,973
352 Berkshire Hathaway, Inc.,
Class B (a) 71,871
--------------
144,844
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.6%
2,409 AT&T, Inc. 68,753
4,531 CenturyLink, Inc. 68,645
1,239 Verizon Communications, Inc. 69,656
--------------
207,054
--------------
ELECTRIC UTILITIES -- 2.7%
1,549 Alliant Energy Corp. 65,445
876 American Electric Power Co., Inc. 65,472
768 Duke Energy Corp. 66,279
1,174 Edison International 66,648
782 Entergy Corp. 67,307
1,164 Evergy, Inc. 66,080
1,010 Eversource Energy 65,690
1,478 Exelon Corp. 66,658
1,818 FirstEnergy Corp. 68,266
388 NextEra Energy, Inc. 67,442
2,978 PG&E Corp. (a) 70,728
2,377 PPL Corp. 67,341
1,495 Southern (The) Co. 65,660
1,316 Xcel Energy, Inc. 64,839
--------------
933,855
--------------
ELECTRICAL EQUIPMENT -- 0.8%
1,039 AMETEK, Inc. 70,340
1,019 Eaton Corp. PLC 69,965
1,195 Emerson Electric Co. 71,401
465 Rockwell Automation, Inc. 69,973
--------------
281,679
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.0%
877 Amphenol Corp., Class A 71,054
873 CDW Corp. 70,757
2,359 Corning, Inc. 71,265
1,182 Keysight Technologies, Inc. (a) 73,379
951 TE Connectivity Ltd. 71,924
--------------
358,379
--------------
Page 30 See Notes to Financial Statements
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ENERGY EQUIPMENT & SERVICES
-- 0.8%
3,288 Baker Hughes a GE Co. $ 70,692
2,611 Halliburton Co. 69,400
2,665 National Oilwell Varco, Inc. 68,491
1,898 Schlumberger Ltd. 68,480
--------------
277,063
--------------
ENTERTAINMENT -- 1.6%
1,492 Activision Blizzard, Inc. 69,483
886 Electronic Arts, Inc. (a) 69,914
2,400 Liberty Media Corp.-Liberty
Formula One, Class C (a) 73,680
1,393 Live Nation Entertainment,
Inc. (a) 68,605
277 Netflix, Inc. (a) 74,142
675 Take-Two Interactive Software,
Inc. (a) 69,485
2,623 Viacom, Inc., Class B 67,411
645 Walt Disney (The) Co. 70,724
--------------
563,444
--------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 5.2%
583 Alexandria Real Estate Equities,
Inc. 67,185
428 American Tower Corp. 67,705
377 AvalonBay Communities, Inc. 65,617
593 Boston Properties, Inc. 66,742
634 Crown Castle International Corp. 68,871
641 Digital Realty Trust, Inc. 68,299
2,538 Duke Realty Corp. 65,734
192 Equinix, Inc. 67,692
997 Equity Residential 65,812
264 Essex Property Trust, Inc. 64,736
727 Extra Space Storage, Inc. 65,779
2,371 HCP, Inc. 66,222
4,154 Host Hotels & Resorts, Inc. 69,247
3,354 Invitation Homes, Inc. 67,348
2,109 Iron Mountain, Inc. 68,353
693 Mid-America Apartment
Communities, Inc. 66,320
1,139 Prologis, Inc. 66,882
332 Public Storage 67,200
1,061 Realty Income Corp. 66,886
1,177 Regency Centers Corp. 69,066
419 SBA Communications Corp. (a) 67,832
405 Simon Property Group, Inc. 68,036
1,655 UDR, Inc. 65,571
1,115 Ventas, Inc. 65,328
1,081 Vornado Realty Trust 67,055
957 Welltower, Inc. 66,425
3,147 Weyerhaeuser Co. 68,793
--------------
1,810,736
--------------
FOOD & STAPLES RETAILING -- 1.0%
347 Costco Wholesale Corp. 70,687
2,465 Kroger (The) Co. 67,787
1,112 Sysco Corp. 69,678
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
FOOD & STAPLES RETAILING
(CONTINUED)
1,020 Walgreens Boots Alliance, Inc. $ 69,697
777 Walmart, Inc. 72,378
--------------
350,227
--------------
FOOD PRODUCTS -- 2.7%
1,673 Archer-Daniels-Midland Co. 68,543
1,269 Bunge Ltd. 67,815
1,845 Campbell Soup Co. 60,867
3,061 Conagra Brands, Inc. 65,383
1,746 General Mills, Inc. 67,989
636 Hershey (The) Co. 68,166
1,597 Hormel Foods Corp. 68,160
702 J.M. Smucker (The) Co. 65,630
1,182 Kellogg Co. 67,386
1,529 Kraft Heinz (The) Co. 65,808
925 Lamb Weston Holdings, Inc. 68,043
487 McCormick & Co., Inc. 67,810
1,672 Mondelez International, Inc.,
Class A 66,930
1,302 Tyson Foods, Inc., Class A 69,527
--------------
938,057
--------------
GAS UTILITIES -- 0.2%
718 Atmos Energy Corp. 66,573
--------------
HEALTH CARE EQUIPMENT & SUPPLIES
-- 3.9%
1,009 Abbott Laboratories 72,981
239 ABIOMED, Inc. (a) 77,685
345 Align Technology, Inc. (a) 72,253
1,090 Baxter International, Inc. 71,744
317 Becton, Dickinson and Co. 71,426
2,085 Boston Scientific Corp. (a) 73,684
289 Cooper (The) Cos., Inc. 73,550
690 Danaher Corp. 71,153
1,930 DENTSPLY SIRONA, Inc. 71,815
471 Edwards Lifesciences Corp. (a) 72,143
1,781 Hologic, Inc. (a) 73,199
370 IDEXX Laboratories, Inc. (a) 68,827
151 Intuitive Surgical, Inc. (a) 72,317
767 Medtronic PLC 69,766
642 ResMed, Inc. 73,105
448 Stryker Corp. 70,224
287 Teleflex, Inc. 74,184
635 Varian Medical Systems, Inc. (a) 71,952
686 Zimmer Biomet Holdings, Inc. 71,152
--------------
1,373,160
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.2%
929 AmerisourceBergen Corp. 69,118
269 Anthem, Inc. 70,647
1,525 Cardinal Health, Inc. 68,015
606 Centene Corp. (a) 69,872
377 Cigna Corp. 71,600
1,063 CVS Health Corp. 69,648
1,366 DaVita, Inc. (a) 70,294
565 HCA Healthcare, Inc. 70,314
See Notes to Financial Statements Page 31
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HEALTH CARE PROVIDERS & SERVICES
(CONTINUED)
896 Henry Schein, Inc. (a) $ 70,354
245 Humana, Inc. 70,188
545 Laboratory Corp. of America
Holdings (a) 68,866
630 McKesson Corp. 69,596
831 Quest Diagnostics, Inc. 69,197
284 UnitedHealth Group, Inc. 70,750
594 Universal Health Services, Inc.,
Class B 69,237
303 WellCare Health Plans, Inc. (a) 71,535
--------------
1,119,231
--------------
HEALTH CARE TECHNOLOGY -- 0.2%
1,372 Cerner Corp. (a) 71,948
--------------
HOTELS, RESTAURANTS & LEISURE
-- 3.4%
2,373 Aramark 68,746
1,413 Carnival Corp. 69,661
171 Chipotle Mexican Grill, Inc. (a) 73,836
687 Darden Restaurants, Inc. 68,604
284 Domino's Pizza, Inc. 70,429
1,029 Hilton Worldwide Holdings, Inc. 73,882
1,399 Las Vegas Sands Corp. 72,818
664 Marriott International, Inc.,
Class A 72,084
390 McDonald's Corp. 69,252
3,047 MGM Resorts International 73,920
1,659 Norwegian Cruise Line Holdings
Ltd. (a) 70,325
724 Royal Caribbean Cruises Ltd. 70,800
1,108 Starbucks Corp. 71,355
331 Vail Resorts, Inc. 69,781
716 Wynn Resorts Ltd. 70,820
2,103 Yum China Holdings, Inc. 70,514
772 Yum! Brands, Inc. 70,962
--------------
1,207,789
--------------
HOUSEHOLD DURABLES -- 1.2%
1,976 D.R. Horton, Inc. 68,488
1,099 Garmin Ltd. 69,588
1,713 Lennar Corp., Class A 67,064
599 Mohawk Industries, Inc. (a) 70,059
3,593 Newell Brands, Inc. 66,794
28 NVR, Inc. (a) 68,236
--------------
410,229
--------------
HOUSEHOLD PRODUCTS -- 1.0%
1,051 Church & Dwight Co., Inc. 69,114
439 Clorox (The) Co. 67,667
1,130 Colgate-Palmolive Co. 67,258
590 Kimberly-Clark Corp. 67,225
743 Procter & Gamble (The) Co. 68,296
--------------
339,560
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.4%
1,812 NRG Energy, Inc. $ 71,755
3,141 Vistra Energy Corp. (a) 71,898
--------------
143,653
--------------
INDUSTRIAL CONGLOMERATES -- 0.8%
368 3M Co. 70,119
9,515 General Electric Co. 72,028
523 Honeywell International, Inc. 69,099
264 Roper Technologies, Inc. 70,361
--------------
281,607
--------------
INSURANCE -- 4.0%
1,566 Aflac, Inc. 71,347
850 Allstate (The) Corp. 70,236
766 American Financial Group, Inc. 69,346
1,797 American International Group, Inc. 70,820
2,653 Arch Capital Group Ltd. (a) 70,888
952 Arthur J. Gallagher & Co. 70,162
544 Chubb Ltd. 70,274
898 Cincinnati Financial Corp. 69,523
2,234 Fidelity National Financial, Inc. 70,237
1,609 Hartford Financial Services Group
(The), Inc. 71,520
1,370 Lincoln National Corp. 70,295
1,538 Loews Corp. 70,010
69 Markel Corp. (a) 71,625
873 Marsh & McLennan Cos., Inc. 69,622
1,749 MetLife, Inc. 71,814
1,607 Principal Financial Group, Inc. 70,981
1,140 Progressive (The) Corp. 68,776
860 Prudential Financial, Inc. 70,133
929 Torchmark Corp. 69,238
581 Travelers (The) Cos., Inc. 69,575
--------------
1,406,422
--------------
INTERACTIVE MEDIA & SERVICES
-- 1.3%
69 Alphabet, Inc., Class A (a) 72,102
539 Facebook, Inc., Class A (a) 70,658
410 IAC/InterActiveCorp (a) 75,046
14,020 Snap, Inc., Class A (a) 77,250
2,482 Twitter, Inc. (a) 71,333
2,391 Zillow Group, Inc., Class C (a) 75,508
--------------
441,897
--------------
INTERNET & DIRECT MARKETING
RETAIL -- 1.0%
49 Amazon.com, Inc. (a) 73,596
41 Booking Holdings, Inc. (a) 70,619
2,526 eBay, Inc. (a) 70,905
609 Expedia Group, Inc. 68,604
989 GrubHub, Inc. (a) 75,965
--------------
359,689
--------------
IT SERVICES -- 5.0%
489 Accenture PLC, Class A 68,954
1,137 Akamai Technologies, Inc. (a) 69,448
456 Alliance Data Systems Corp. 68,437
Page 32 See Notes to Financial Statements
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
IT SERVICES (CONTINUED)
537 Automatic Data Processing, Inc. $ 70,411
722 Broadridge Financial Solutions,
Inc. 69,493
1,107 Cognizant Technology Solutions
Corp., Class A 70,272
1,323 DXC Technology Co. 70,344
693 Fidelity National Information
Services, Inc. 71,067
4,306 First Data Corp., Class A (a) 72,814
957 Fiserv, Inc. (a) 70,330
384 FleetCor Technologies, Inc. (a) 71,317
535 Gartner, Inc. (a) 68,394
706 Global Payments, Inc. 72,810
1,138 GoDaddy, Inc., Class A (a) 74,676
609 International Business Machines
Corp. 69,225
547 Jack Henry & Associates, Inc. 69,206
1,315 Leidos Holdings, Inc. 69,327
383 Mastercard, Inc., Class A 72,253
1,060 Paychex, Inc. 69,059
860 PayPal Holdings, Inc. (a) 72,317
1,290 Square, Inc., Class A (a) 72,356
880 Total System Services, Inc. 71,535
475 VeriSign, Inc. (a) 70,438
544 Visa, Inc., Class A 71,775
934 Worldpay, Inc., Class A (a) 71,386
--------------
1,767,644
--------------
LEISURE PRODUCTS -- 0.2%
875 Hasbro, Inc. 71,094
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.2%
1,066 Agilent Technologies, Inc. 71,912
241 Illumina, Inc. (a) 72,283
629 IQVIA Holdings, Inc. (a) 73,071
125 Mettler-Toledo International,
Inc. (a) 70,698
314 Thermo Fisher Scientific, Inc. 70,270
386 Waters Corp. (a) 72,819
--------------
431,053
--------------
MACHINERY -- 2.6%
566 Caterpillar, Inc. 71,922
527 Cummins, Inc. 70,428
478 Deere & Co. 71,303
980 Dover Corp. 69,531
1,051 Fortive Corp. 71,111
548 IDEX Corp. 69,190
551 Illinois Tool Works, Inc. 69,806
761 Ingersoll-Rand PLC 69,426
1,234 PACCAR, Inc. 70,511
466 Parker-Hannifin Corp. 69,499
594 Stanley Black & Decker, Inc. 71,126
1,001 Wabtec Corp. 70,320
1,080 Xylem, Inc. 72,058
--------------
916,231
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MEDIA -- 1.4%
1,567 CBS Corp., Class B $ 68,509
240 Charter Communications, Inc.,
Class A (a) 68,393
1,989 Comcast Corp., Class A 67,725
2,689 Discovery, Inc., Class A (a) 66,526
960 Liberty Broadband Corp.,
Class C (a) 69,149
951 Omnicom Group, Inc. 69,651
12,045 Sirius XM Holdings, Inc. 68,777
--------------
478,730
--------------
METALS & MINING -- 0.8%
6,714 Freeport-McMoRan, Inc. 69,221
2,017 Newmont Mining Corp. 69,889
1,313 Nucor Corp. 68,027
2,266 Steel Dynamics, Inc. 68,071
--------------
275,208
--------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS -- 0.2%
6,897 Annaly Capital Management, Inc. 67,729
--------------
MULTILINE RETAIL -- 1.0%
677 Dollar General Corp. 73,170
819 Dollar Tree, Inc. (a) 73,972
1,138 Kohl's Corp. 75,495
2,380 Macy's, Inc. 70,877
1,111 Target Corp. 73,426
--------------
366,940
--------------
MULTI-UTILITIES -- 1.7%
1,008 Ameren Corp. 65,752
2,388 CenterPoint Energy, Inc. 67,413
1,322 CMS Energy Corp. 65,637
844 Consolidated Edison, Inc. 64,532
904 Dominion Energy, Inc. 64,600
593 DTE Energy Co. 65,408
1,286 Public Service Enterprise Group,
Inc. 66,936
598 Sempra Energy 64,698
944 WEC Energy Group, Inc. 65,382
--------------
590,358
--------------
OIL, GAS & CONSUMABLE FUELS
-- 5.2%
1,571 Anadarko Petroleum Corp. 68,873
2,584 Apache Corp. 67,830
3,010 Cabot Oil & Gas Corp. 67,273
1,190 Cheniere Energy, Inc. (a) 70,436
656 Chevron Corp. 71,366
689 Concho Resources, Inc. (a) 70,822
1,141 ConocoPhillips 71,141
1,780 Continental Resources, Inc. (a) 71,538
3,099 Devon Energy Corp. 69,851
765 Diamondback Energy, Inc. 70,916
780 EOG Resources, Inc. 68,024
3,688 EQT Corp. 69,666
999 Exxon Mobil Corp. 68,122
1,621 Hess Corp. 65,651
1,405 HollyFrontier Corp. 71,824
See Notes to Financial Statements Page 33
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
OIL, GAS & CONSUMABLE FUELS
(CONTINUED)
4,390 Kinder Morgan, Inc. $ 67,518
5,034 Marathon Oil Corp. 72,188
1,197 Marathon Petroleum Corp. 70,635
3,743 Noble Energy, Inc. 70,219
1,134 Occidental Petroleum Corp. 69,605
1,262 ONEOK, Inc. 68,085
832 Phillips 66 71,677
542 Pioneer Natural Resources Co. 71,284
1,865 Targa Resources Corp. 67,177
957 Valero Energy Corp. 71,746
3,138 Williams (The) Cos., Inc. 69,193
--------------
1,812,660
--------------
PERSONAL PRODUCTS -- 0.4%
10,868 Coty, Inc., Class A 71,294
544 Estee Lauder (The) Cos., Inc.,
Class A 70,774
--------------
142,068
--------------
PHARMACEUTICALS -- 2.0%
516 Allergan PLC 68,969
1,363 Bristol-Myers Squibb Co. 70,849
621 Eli Lilly and Co. 71,862
570 Jazz Pharmaceuticals PLC (a) 70,657
532 Johnson & Johnson 68,655
933 Merck & Co., Inc. 71,290
2,597 Mylan N.V. (a) 71,158
1,772 Perrigo Co. PLC 68,665
1,617 Pfizer, Inc. 70,582
830 Zoetis, Inc. 70,998
--------------
703,685
--------------
PROFESSIONAL SERVICES -- 0.8%
212 CoStar Group, Inc. (a) 71,516
760 Equifax, Inc. 70,779
1,280 TransUnion 72,704
640 Verisk Analytics, Inc. (a) 69,785
--------------
284,784
--------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.2%
1,714 CBRE Group, Inc., Class A (a) 68,629
--------------
ROAD & RAIL -- 1.2%
1,108 CSX Corp. 68,840
736 J.B. Hunt Transport Services, Inc. 68,478
732 Kansas City Southern 69,869
468 Norfolk Southern Corp. 69,985
568 Old Dominion Freight Line, Inc. 70,142
506 Union Pacific Corp. 69,944
--------------
417,258
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.5%
3,959 Advanced Micro Devices, Inc. (a) 73,083
824 Analog Devices, Inc. 70,724
2,217 Applied Materials, Inc. 72,585
278 Broadcom, Inc. 70,690
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (CONTINUED)
1,501 Intel Corp. $ 70,442
791 KLA-Tencor Corp. 70,787
530 Lam Research Corp. 72,170
4,572 Marvell Technology Group Ltd. 74,021
1,398 Maxim Integrated Products, Inc. 71,088
998 Microchip Technology, Inc. 71,776
2,221 Micron Technology, Inc. (a) 70,472
521 NVIDIA Corp. 69,553
1,172 Qorvo, Inc. (a) 71,175
1,227 QUALCOMM, Inc. 69,829
1,047 Skyworks Solutions, Inc. 70,170
748 Texas Instruments, Inc. 70,686
831 Xilinx, Inc. 70,776
--------------
1,210,027
--------------
SOFTWARE -- 3.9%
321 Adobe, Inc. (a) 72,623
481 ANSYS, Inc. (a) 68,754
558 Autodesk, Inc. (a) 71,764
1,654 Cadence Design Systems, Inc. (a) 71,916
671 Citrix Systems, Inc. 68,751
1,028 Fortinet, Inc. (a) 72,402
363 Intuit, Inc. 71,457
687 Microsoft Corp. 69,779
1,531 Oracle Corp. 69,125
397 Palo Alto Networks, Inc. (a) 74,775
857 PTC, Inc. (a) 71,045
391 Red Hat, Inc. (a) 68,675
549 salesforce.com, Inc. (a) 75,196
420 ServiceNow, Inc. (a) 74,781
737 Splunk, Inc. (a) 77,274
1,606 SS&C Technologies Holdings, Inc. 72,447
3,629 Symantec Corp. 68,570
830 Synopsys, Inc. (a) 69,919
473 Workday, Inc., Class A (a) 75,529
--------------
1,364,782
--------------
SPECIALTY RETAIL -- 2.7%
449 Advance Auto Parts, Inc. 70,699
83 AutoZone, Inc. (a) 69,582
1,380 Best Buy Co., Inc. 73,085
443 Burlington Stores, Inc. (a) 72,063
1,157 CarMax, Inc. (a) 72,579
2,754 Gap (The), Inc. 70,943
420 Home Depot (The), Inc. 72,164
771 Lowe's Cos., Inc. 71,210
206 O'Reilly Automotive, Inc. (a) 70,932
876 Ross Stores, Inc. 72,883
885 Tiffany & Co. 71,251
1,609 TJX (The) Cos., Inc. 71,987
295 Ulta Beauty, Inc. (a) 72,228
--------------
931,606
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 1.2%
446 Apple, Inc. 70,352
5,381 Hewlett Packard Enterprise Co. 71,083
Page 34 See Notes to Financial Statements
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS (CONTINUED)
3,424 HP, Inc. $ 70,055
1,182 NetApp, Inc. 70,530
1,868 Seagate Technology PLC 72,086
1,863 Western Digital Corp. 68,875
--------------
422,981
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.8%
950 NIKE, Inc., Class B 70,433
760 PVH Corp. 70,642
2,068 Tapestry, Inc. 69,795
973 VF Corp. 69,414
--------------
280,284
--------------
TOBACCO -- 0.4%
1,395 Altria Group, Inc. 68,899
986 Philip Morris International, Inc. 65,825
--------------
134,724
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.6%
1,346 Fastenal Co. 70,383
681 United Rentals, Inc. (a) 69,823
248 W.W. Grainger, Inc. 70,025
--------------
210,231
--------------
WATER UTILITIES -- 0.2%
732 American Water Works Co., Inc. 66,444
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.2%
1,085 T-Mobile US, Inc. (a) 69,017
--------------
TOTAL INVESTMENTS -- 99.8% 34,967,446
(Cost $37,293,056) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 74,403
--------------
NET ASSETS -- 100.0% $ 35,041,849
==============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $37,454,486. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,685,622 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$4,172,662. The net unrealized depreciation was $2,487,040.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 34,967,446 $ -- $ --
=====================================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 35
FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 6.6%
1,390 Boeing (The) Co. $ 448,275
3,728 United Technologies Corp. 396,957
--------------
845,232
--------------
BANKS -- 3.4%
4,417 JPMorgan Chase & Co. 431,188
--------------
BEVERAGES -- 3.3%
8,977 Coca-Cola (The) Co. 425,061
--------------
CAPITAL MARKETS -- 3.3%
2,564 Goldman Sachs Group (The), Inc. 428,316
--------------
CHEMICALS -- 3.5%
8,392 DowDuPont, Inc. 448,804
--------------
COMMUNICATIONS EQUIPMENT
-- 3.3%
9,667 Cisco Systems, Inc. 418,871
--------------
CONSUMER FINANCE -- 3.1%
4,191 American Express Co. 399,486
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 3.4%
7,760 Verizon Communications, Inc. 436,267
--------------
ENTERTAINMENT -- 3.4%
3,948 Walt Disney (The) Co. 432,898
--------------
FOOD & STAPLES RETAILING -- 6.5%
5,625 Walgreens Boots Alliance, Inc. 384,356
4,822 Walmart, Inc. 449,170
--------------
833,526
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.2%
1,671 UnitedHealth Group, Inc. 416,280
--------------
HOTELS, RESTAURANTS & LEISURE
-- 3.3%
2,417 McDonald's Corp. 429,187
--------------
HOUSEHOLD PRODUCTS -- 3.3%
4,583 Procter & Gamble (The) Co. 421,269
--------------
INDUSTRIAL CONGLOMERATES -- 3.3%
2,259 3M Co. 430,430
--------------
INSURANCE -- 3.4%
3,674 Travelers (The) Cos., Inc. 439,962
--------------
IT SERVICES -- 6.6%
3,694 International Business Machines
Corp. 419,897
3,279 Visa, Inc., Class A 432,631
--------------
852,528
--------------
MACHINERY -- 3.5%
3,494 Caterpillar, Inc. 443,983
--------------
OIL, GAS & CONSUMABLE FUELS
-- 6.4%
3,891 Chevron Corp. 423,302
5,861 Exxon Mobil Corp. 399,661
--------------
822,963
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
PHARMACEUTICALS -- 10.2%
3,330 Johnson & Johnson $ 429,737
5,792 Merck & Co., Inc. 442,567
10,113 Pfizer, Inc. 441,432
--------------
1,313,736
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.4%
9,255 Intel Corp. 434,337
--------------
SOFTWARE -- 3.3%
4,178 Microsoft Corp. 424,359
--------------
SPECIALTY RETAIL -- 3.4%
2,571 Home Depot (The), Inc. 441,749
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 3.3%
2,677 Apple, Inc. 422,270
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 3.5%
6,107 NIKE, Inc., Class B 452,773
--------------
TOTAL INVESTMENTS -- 99.9% 12,845,475
(Cost $14,304,771) (a)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 13,368
--------------
NET ASSETS -- 100.0% $ 12,858,843
==============
(a) Aggregate cost for federal income tax purposes is $14,357,754. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was $0 and
the aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value was $1,512,279. The net
unrealized depreciation was $1,512,279.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 12,845,475 $ -- $ --
=====================================================
* See Portfolio of Investments for industry breakout.
Page 36 See Notes to Financial Statements
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.8%
AEROSPACE & DEFENSE -- 0.6%
216 Boeing (The) Co. $ 69,660
2,358 Textron, Inc. 108,444
--------------
178,104
--------------
AIRLINES -- 0.4%
1,349 United Continental Holdings,
Inc. (a) 112,952
--------------
AUTO COMPONENTS -- 1.0%
1,543 BorgWarner, Inc. 53,604
1,813 Lear Corp. 222,745
--------------
276,349
--------------
AUTOMOBILES -- 1.5%
40,930 Ford Motor Co. 313,114
3,173 General Motors Co. 106,137
--------------
419,251
--------------
BANKS -- 1.2%
3,004 Citizens Financial Group, Inc. 89,309
3,798 Fifth Third Bancorp 89,367
3,561 U.S. Bancorp 162,738
--------------
341,414
--------------
BEVERAGES -- 1.0%
5,463 Keurig Dr Pepper, Inc. 140,071
2,601 Molson Coors Brewing Co.,
Class B 146,072
--------------
286,143
--------------
BIOTECHNOLOGY -- 1.3%
1,626 Celgene Corp. (a) 104,211
4,087 Incyte Corp. (a) 259,892
--------------
364,103
--------------
CAPITAL MARKETS -- 5.5%
2,098 Bank of New York Mellon (The)
Corp. 98,753
305 BlackRock, Inc. 119,810
437 CME Group, Inc. 82,209
4,197 Franklin Resources, Inc. 124,483
976 Intercontinental Exchange, Inc. 73,522
16,366 Invesco Ltd. 273,967
1,105 MSCI, Inc. 162,910
821 Nasdaq, Inc. 66,969
1,692 Northern Trust Corp. 141,434
1,183 S&P Global, Inc. 201,039
876 State Street Corp. 55,249
1,529 T. Rowe Price Group, Inc. 141,157
--------------
1,541,502
--------------
CHEMICALS -- 2.5%
1,095 Air Products and Chemicals, Inc. 175,255
670 Eastman Chemical Co. 48,984
1,357 Ecolab, Inc. 199,954
352 Sherwin-Williams (The) Co. 138,498
2,092 Westlake Chemical Corp. 138,427
--------------
701,118
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.7%
784 Cintas Corp. $ 131,704
3,936 Republic Services, Inc. 283,746
4,013 Waste Management, Inc. 357,117
--------------
772,567
--------------
COMMUNICATIONS EQUIPMENT
-- 0.8%
489 F5 Networks, Inc. (a) 79,233
1,349 Motorola Solutions, Inc. 155,189
--------------
234,422
--------------
CONSTRUCTION & ENGINEERING
-- 0.3%
1,545 Jacobs Engineering Group, Inc. 90,321
--------------
CONSTRUCTION MATERIALS -- 0.4%
645 Martin Marietta Materials, Inc. 110,856
--------------
CONSUMER FINANCE -- 0.7%
4,405 Ally Financial, Inc. 99,817
1,366 Capital One Financial Corp. 103,256
--------------
203,073
--------------
CONTAINERS & PACKAGING -- 0.4%
3,318 WestRock Co. 125,288
--------------
DISTRIBUTORS -- 1.0%
1,810 Genuine Parts Co. 173,796
4,010 LKQ Corp. (a) 95,157
--------------
268,953
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 1.5%
7,773 AXA Equitable Holdings, Inc. 129,265
1,377 Berkshire Hathaway, Inc.,
Class B (a) 281,156
--------------
410,421
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.8%
4,931 AT&T, Inc. 140,731
5,931 CenturyLink, Inc. 89,854
--------------
230,585
--------------
ELECTRIC UTILITIES -- 1.8%
2,780 Exelon Corp. 125,378
1,733 NextEra Energy, Inc. 301,230
1,547 Southern (The) Co. 67,944
--------------
494,552
--------------
ELECTRICAL EQUIPMENT -- 1.0%
4,287 AMETEK, Inc. 290,230
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.8%
1,893 Amphenol Corp., Class A 153,371
1,006 CDW Corp. 81,536
--------------
234,907
--------------
See Notes to Financial Statements Page 37
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ENERGY EQUIPMENT & SERVICES
-- 0.8%
3,638 Baker Hughes a GE Co. $ 78,217
3,245 Halliburton Co. 86,252
1,777 Schlumberger Ltd. 64,114
--------------
228,583
--------------
ENTERTAINMENT -- 1.1%
4,795 Viacom, Inc., Class B 123,231
1,620 Walt Disney (The) Co. 177,633
--------------
300,864
--------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 5.5%
2,334 American Tower Corp. 369,216
1,597 Crown Castle International Corp. 173,482
1,428 Digital Realty Trust, Inc. 152,153
721 Essex Property Trust, Inc. 176,797
810 Extra Space Storage, Inc. 73,289
1,849 Mid-America Apartment
Communities, Inc. 176,949
3,370 Realty Income Corp. 212,445
960 Simon Property Group, Inc. 161,270
2,328 Weyerhaeuser Co. 50,890
--------------
1,546,491
--------------
FOOD & STAPLES RETAILING -- 1.0%
6,160 Kroger (The) Co. 169,400
1,743 Walgreens Boots Alliance, Inc. 119,099
--------------
288,499
--------------
FOOD PRODUCTS -- 5.4%
7,757 Archer-Daniels-Midland Co. 317,804
2,170 Bunge Ltd. 115,965
4,119 Campbell Soup Co. 135,886
2,532 General Mills, Inc. 98,596
1,668 Hershey (The) Co. 178,776
1,138 J.M. Smucker (The) Co. 106,392
5,980 Kraft Heinz (The) Co. 257,379
5,648 Tyson Foods, Inc., Class A 301,603
--------------
1,512,401
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 3.9%
2,438 Abbott Laboratories 176,341
2,236 Baxter International, Inc. 147,174
692 Becton, Dickinson and Co. 155,921
1,636 Danaher Corp. 168,704
7,708 DENTSPLY SIRONA, Inc. 286,815
1,514 Zimmer Biomet Holdings, Inc. 157,032
--------------
1,091,987
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 4.3%
1,491 AmerisourceBergen Corp. 110,930
2,772 Cardinal Health, Inc. 123,631
1,730 CVS Health Corp. 113,350
2,028 Laboratory Corp. of America
Holdings (a) 256,258
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES
(CONTINUED)
1,456 McKesson Corp. $ 160,844
1,541 Quest Diagnostics, Inc. 128,319
1,323 UnitedHealth Group, Inc. 329,586
--------------
1,222,918
--------------
HOTELS, RESTAURANTS & LEISURE
-- 3.7%
2,601 Las Vegas Sands Corp. 135,382
1,810 McDonald's Corp. 321,402
4,558 MGM Resorts International 110,577
1,515 Wynn Resorts Ltd. 149,849
4,153 Yum China Holdings, Inc. 139,250
2,086 Yum! Brands, Inc. 191,745
--------------
1,048,205
--------------
HOUSEHOLD DURABLES -- 4.3%
2,752 D.R. Horton, Inc. 95,384
3,636 Garmin Ltd. 230,232
5,199 Lennar Corp., Class A 203,541
1,317 Mohawk Industries, Inc. (a) 154,036
25,927 Newell Brands, Inc. 481,983
25 NVR, Inc. (a) 60,925
--------------
1,226,101
--------------
HOUSEHOLD PRODUCTS -- 1.1%
532 Clorox (The) Co. 82,002
2,387 Procter & Gamble (The) Co. 219,413
--------------
301,415
--------------
INDUSTRIAL CONGLOMERATES -- 2.2%
752 3M Co. 143,286
22,796 General Electric Co. 172,565
1,140 Honeywell International, Inc. 150,617
588 Roper Technologies, Inc. 156,714
--------------
623,182
--------------
INSURANCE -- 10.1%
9,013 Aflac, Inc. 410,632
1,453 Allstate (The) Corp. 120,061
6,126 Arch Capital Group Ltd. (a) 163,687
2,707 Arthur J. Gallagher & Co. 199,506
836 Chubb Ltd. 107,994
2,354 Cincinnati Financial Corp. 182,247
2,360 Hartford Financial Services Group
(The), Inc. 104,902
3,209 Lincoln National Corp. 164,654
3,849 Loews Corp. 175,207
172 Markel Corp. (a) 178,545
4,641 MetLife, Inc. 190,559
3,227 Principal Financial Group, Inc. 142,537
3,688 Progressive (The) Corp. 222,497
2,553 Prudential Financial, Inc. 208,197
2,243 Torchmark Corp. 167,171
879 Travelers (The) Cos., Inc. 105,260
--------------
2,843,656
--------------
Page 38 See Notes to Financial Statements
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INTERACTIVE MEDIA & SERVICES
-- 1.5%
564 Facebook, Inc., Class A (a) $ 73,935
47,637 Snap, Inc., Class A (a) 262,480
2,969 Zillow Group, Inc., Class C (a) 93,761
--------------
430,176
--------------
INTERNET & DIRECT MARKETING RETAIL
-- 0.4%
3,496 eBay, Inc. (a) 98,133
--------------
IT SERVICES -- 7.9%
461 Accenture PLC, Class A 65,006
332 Alliance Data Systems Corp. 49,827
1,216 Automatic Data Processing, Inc. 159,442
4,788 Fidelity National Information
Services, Inc. 491,009
3,969 Fiserv, Inc. (a) 291,682
2,340 Jack Henry & Associates, Inc. 296,057
1,616 Mastercard, Inc., Class A 304,858
5,214 Paychex, Inc. 339,692
1,914 Total System Services, Inc. 155,589
592 Visa, Inc., Class A 78,108
--------------
2,231,270
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.2%
123 Mettler-Toledo International,
Inc. (a) 69,566
--------------
METALS & MINING -- 1.6%
16,649 Freeport-McMoRan, Inc. 171,651
5,499 Newmont Mining Corp. 190,540
1,871 Nucor Corp. 96,937
--------------
459,128
--------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS -- 1.1%
30,786 Annaly Capital Management, Inc. 302,318
--------------
MULTILINE RETAIL -- 0.8%
820 Dollar Tree, Inc. (a) 74,063
5,413 Macy's, Inc. 161,199
--------------
235,262
--------------
MULTI-UTILITIES -- 0.6%
2,633 WEC Energy Group, Inc. 182,362
--------------
OIL, GAS & CONSUMABLE FUELS
-- 1.5%
4,746 Cabot Oil & Gas Corp. 106,073
5,872 EQT Corp. 110,922
1,693 Marathon Petroleum Corp. 99,904
1,294 Phillips 66 111,478
--------------
428,377
--------------
PERSONAL PRODUCTS -- 0.4%
17,907 Coty, Inc., Class A 117,470
--------------
PHARMACEUTICALS -- 3.8%
1,614 Eli Lilly and Co. 186,772
1,258 Johnson & Johnson 162,345
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
PHARMACEUTICALS (CONTINUED)
2,381 Merck & Co., Inc. $ 181,932
1,536 Perrigo Co. PLC 59,520
4,375 Pfizer, Inc. 190,969
3,389 Zoetis, Inc. 289,895
--------------
1,071,433
--------------
PROFESSIONAL SERVICES -- 1.6%
4,263 Verisk Analytics, Inc. (a) 464,838
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.9%
6,503 Applied Materials, Inc. 212,908
1,262 Lam Research Corp. 171,847
1,131 Microchip Technology, Inc. 81,342
681 Texas Instruments, Inc. 64,354
--------------
530,451
--------------
SOFTWARE -- 3.6%
327 Adobe, Inc. (a) 73,980
1,117 CDK Global, Inc. 53,482
1,774 Citrix Systems, Inc. 181,764
1,633 Intuit, Inc. 321,456
1,104 Red Hat, Inc. (a) 193,907
9,652 Symantec Corp. 182,375
--------------
1,006,964
--------------
SPECIALTY RETAIL -- 0.5%
5,431 Gap (The), Inc. 139,903
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 1.2%
12,686 Hewlett Packard Enterprise Co. 167,582
4,928 Western Digital Corp. 182,188
--------------
349,770
--------------
TOBACCO -- 0.4%
1,601 Philip Morris International, Inc. 106,883
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.2%
1,296 Fastenal Co. 67,768
--------------
TOTAL COMMON STOCKS -- 99.8% 28,213,485
(Cost $31,169,703) --------------
MONEY MARKET FUNDS -- 0.6%
171,578 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 2.33% (b) 171,578
(Cost $171,578) --------------
TOTAL INVESTMENTS -- 100.4% 28,385,063
(Cost $31,341,281) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.4)% (116,560)
--------------
NET ASSETS -- 100.0% $ 28,268,503
==============
See Notes to Financial Statements Page 39
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2018
(a) Non-income producing security.
(b) Rate shown reflects yield as of December 31, 2018.
(c) Aggregate cost for federal income tax purposes is $31,519,501. As of
December 31, 2018, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$300,661 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$3,435,099. The net unrealized depreciation was $3,134,438.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------
Common Stocks* $ 28,213,485 $ -- $ --
Money Market
Funds 171,578 -- --
-----------------------------------------------------
Total Investments $ 28,385,063 $ -- $ --
=====================================================
* See Portfolio of Investments for industry breakout.
Page 40 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2018
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
TOTAL US MARKET DORSEY WRIGHT DOW 30 LUNT U.S.
ALPHADEX(R) PEOPLE'S EQUAL WEIGHT FACTOR ROTATION
ETF ETF PORTFOLIO ETF ETF
(TUSA) (DWPP) (EDOW) (FCTR)
---------------- ---------------- ---------------- ----------------
ASSETS:
Investments, at value............................... $ 13,292,293 $ 34,967,446 $ 12,845,475 $ 28,385,063
Cash................................................ -- 43,359 -- --
Receivables:
Investment securities sold.................... 62,579 -- -- --
Dividends..................................... 20,292 49,570 43,233 47,949
Securities lending income..................... 6,046 -- -- --
From investment advisor....................... 5,514 -- -- --
Prepaid expenses.................................... 7,630 -- -- --
-------------- -------------- -------------- --------------
Total Assets.................................. 13,394,354 35,060,375 12,888,708 28,433,012
-------------- -------------- -------------- --------------
LIABILITIES:
Due to custodian.................................... 53,055 -- 15,249 148,320
Due to securities lending agent..................... 93 -- -- --
Payables:
Investment advisory fees...................... -- 18,526 14,616 16,189
Collateral for securities on loan............. 78,333 -- -- --
Audit and tax fees............................ 22,925 -- -- --
Shareholder reporting fees.................... 9,938 -- -- --
Licensing fees................................ 732 -- -- --
Trustees' fees................................ 55 -- -- --
Other liabilities................................... 77,933 -- -- --
-------------- -------------- -------------- --------------
Total Liabilities............................. 243,064 18,526 29,865 164,509
-------------- -------------- -------------- --------------
NET ASSETS.......................................... $ 13,151,290 $ 35,041,849 $ 12,858,843 $ 28,268,503
============== ============== ============== ==============
NET ASSETS CONSIST OF:
Paid-in capital..................................... $ 15,500,509 $ 38,607,435 $ 14,428,908 $ 33,050,332
Par value........................................... 4,500 13,500 6,000 16,000
Accumulated distributable earnings (loss)........... (2,353,719) (3,579,086) (1,576,065) (4,797,829)
-------------- -------------- -------------- --------------
NET ASSETS.......................................... $ 13,151,290 $ 35,041,849 $ 12,858,843 $ 28,268,503
============== ============== ============== ==============
NET ASSET VALUE, per share.......................... $ 29.22 $ 25.96 $ 21.43 $ 17.67
============== ============== ============== ==============
Number of shares outstanding (unlimited number of
shares authorized, par value $0.01 per share).... 450,002 1,350,002 600,002 1,600,002
============== ============== ============== ==============
Investments, at cost................................ $ 14,831,751 $ 37,293,056 $ 14,304,771 $ 31,341,281
============== ============== ============== ==============
Securities on loan, at value........................ $ 75,985 $ -- $ -- $ --
============== ============== ============== ==============
See Notes to Financial Statements Page 41
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2018
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
TOTAL US MARKET DORSEY WRIGHT DOW 30 LUNT U.S.
ALPHADEX(R) PEOPLE'S EQUAL WEIGHT FACTOR ROTATION
ETF ETF PORTFOLIO ETF ETF
(TUSA) (DWPP) (EDOW) (FCTR) (a)
---------------- ---------------- ---------------- ----------------
INVESTMENT INCOME:
Dividends........................................... $ 258,875 $ 608,966 $ 298,877 $ 265,938
Securities lending income (net of fees)............. 9,320 -- -- --
Foreign withholding tax............................. (19) -- -- (464)
-------------- -------------- -------------- --------------
Total investment income....................... 268,176 608,966 298,877 265,474
-------------- -------------- -------------- --------------
EXPENSES:
Investment advisory fees............................ 77,425 203,932 (b) 52,765 (b) 80,837 (b)
Custodian fees...................................... 73,602 -- -- --
Audit and tax fees.................................. 23,131 -- -- --
Listing fees........................................ 17,512 -- -- --
Accounting and administration fees.................. 15,210 -- -- --
Shareholder reporting fees.......................... 12,436 -- -- --
Licensing fees...................................... 10,596 -- -- --
Trustees' fees and expenses......................... 6,974 -- -- --
Legal fees.......................................... 842 -- -- --
Transfer agent fees................................. 774 -- -- --
Registration and filing fees........................ (14) -- -- --
Other expenses...................................... 5,240 -- -- --
-------------- -------------- -------------- --------------
Total expenses................................ 243,728 203,932 52,765 80,837
Less fees waived and expenses reimbursed by
the investment advisor..................... (135,446) -- -- --
-------------- -------------- -------------- --------------
Net expenses.................................. 108,282 203,932 52,765 80,837
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)........................ 159,894 405,034 246,112 184,637
-------------- -------------- -------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................... (105,349) (193,846) (182,280) (1,898,570)
In-kind redemptions........................... 1,826,565 972,996 (758,833) 1,151,628
-------------- -------------- -------------- --------------
Net realized gain (loss)............................ 1,721,216 779,150 (941,113) (746,942)
Net change in unrealized appreciation (depreciation)
on investments................................... (3,291,223) (4,614,714) (1,522,609) (2,956,218)
-------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED
GAIN (LOSS)...................................... (1,570,007) (3,835,564) (2,463,722) (3,703,160)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........................ $ (1,410,113) $ (3,430,530) $ (2,217,610) $ (3,518,523)
============== ============== ============== ==============
(a) Inception date is July 25, 2018, which is consistent with the commencement
of investment operations and is the date the initial creation units were
established.
(b) Fund is subject to a Unitary Fee (see Note 3 in the Notes to Financial
Statements).
Page 42 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
TOTAL US MARKET DORSEY WRIGHT
ALPHADEX(R) PEOPLE'S
ETF PORTFOLIO ETF
(TUSA) (DWPP)
------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/2018 12/31/2017 12/31/2018 12/31/2017
-------------- -------------- -------------- --------------
OPERATIONS:
Net investment income (loss)................................ $ 159,894 $ 97,872 $ 405,034 $ 161,735
Net realized gain (loss).................................... 1,721,216 639,673 779,150 1,618,196
Net change in unrealized appreciation (depreciation).. (3,291,223) 1,270,377 (4,614,714) 1,449,469
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations.......................................... (1,410,113) 2,007,922 (3,430,530) 3,229,400
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations....................................... (155,286) (417,641)
-------------- --------------
Net investment income....................................... (103,705) (163,136)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................... 8,707,553 7,703,270 14,676,039 30,201,881
Cost of shares redeemed..................................... (8,774,262) (3,145,475) (5,857,923) (6,765,642)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions............................ (66,709) 4,557,795 8,818,116 23,436,239
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets..................... (1,632,108) 6,462,012 4,969,945 26,502,503
NET ASSETS:
Beginning of period......................................... 14,783,398 8,321,386 30,071,904 3,569,401
-------------- -------------- -------------- --------------
End of period............................................... $ 13,151,290 $ 14,783,398 $ 35,041,849 $ 30,071,904
============== ============== ============== ==============
Accumulated net investment income (loss)
at end of period......................................... $ (256) $ --
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period..................... 450,002 300,002 1,050,002 150,002
Shares sold................................................. 250,000 250,000 500,000 1,150,000
Shares redeemed............................................. (250,000) (100,000) (200,000) (250,000)
-------------- -------------- -------------- --------------
Shares outstanding, end of period........................... 450,002 450,002 1,350,002 1,050,002
============== ============== ============== ==============
See Notes to Financial Statements Page 43
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST FIRST TRUST
DOW 30 LUNT U.S.
EQUAL WEIGHT FACTOR ROTATION
ETF ETF
(EDOW) (FCTR)
------------------------------- --------------
Year Ended Period Ended Period Ended
12/31/2018 12/31/2017 (a) 12/31/2018 (a)
-------------- -------------- --------------
OPERATIONS:
Net investment income (loss)................................ $ 246,112 $ 16,796 $ 184,637
Net realized gain (loss).................................... (941,113) 150,879 (746,942)
Net change in unrealized appreciation (depreciation)........ (1,522,609) 63,313 (2,956,218)
-------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations.......................................... (2,217,610) 230,988 (3,518,523)
-------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations....................................... (235,451) (184,170)
-------------- --------------
Net investment income....................................... (16,690)
--------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................... 69,038,254 4,099,141 51,620,840
Cost of shares redeemed..................................... (55,926,566) (2,113,223) (19,649,644)
-------------- -------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions............................ 13,111,688 1,985,918 31,971,196
-------------- -------------- --------------
Total increase (decrease) in net assets..................... 10,658,627 2,200,216 28,268,503
NET ASSETS:
Beginning of period......................................... 2,200,216 -- --
-------------- -------------- --------------
End of period............................................... $ 12,858,843 $ 2,200,216 $ 28,268,503
============== ============== ==============
Accumulated net investment income (loss)
at end of period......................................... $ 106
==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period..................... 100,002 -- --
Shares sold................................................. 3,050,000 200,002 2,550,002
Shares redeemed............................................. (2,550,000) (100,000) (950,000)
-------------- -------------- --------------
Shares outstanding, end of period........................... 600,002 100,002 1,600,002
============== ============== ==============
(a) Inception dates for EDOW and FCTR are August 8, 2017 and July 25, 2018,
respectively, which are consistent with the respective Fund's commencement
of investment operations and are the dates the initial creation units were
established.
Page 44 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 32.85 $ 27.74 $ 24.34 $ 26.13 $ 25.80
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.34 0.25 0.32 0.22 0.27
Net realized and unrealized gain (loss) (3.64) 5.12 3.43 (1.78) 0.34
------------ ------------ ------------ ------------ ------------
Total from investment operations (3.30) 5.37 3.75 (1.56) 0.61
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.33) (0.26) (0.35) (0.23) (0.28)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 29.22 $ 32.85 $ 27.74 $ 24.34 $ 26.13
============ ============ ============ ============ ============
TOTAL RETURN (a) (10.13)% 19.44% 15.48% (5.99)% 2.36%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 13,151 $ 14,783 $ 8,321 $ 8,518 $ 5,225
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 1.57% 1.69% 1.96% 1.97% 3.17%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.03% 0.88% 1.17% 0.96% 1.05%
Portfolio turnover rate (b) 110% 112% 113% 170% 183%
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 28.64 $ 23.80 $ 24.07 $ 25.97 $ 22.86
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.33 0.30 0.38 0.37 0.34
Net realized and unrealized gain (loss) (2.67) 4.84 (0.25) (1.89) 3.11
------------ ------------ ------------ ------------ ------------
Total from investment operations (2.34) 5.14 0.13 (1.52) 3.45
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.34) (0.30) (0.40) (0.38) (0.34)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 25.96 $ 28.64 $ 23.80 $ 24.07 $ 25.97
============ ============ ============ ============ ============
TOTAL RETURN (a) (8.26)% 21.71% 0.54% (5.88)% 15.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 35,042 $ 30,072 $ 3,569 $ 3,610 $ 3,895
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.19% 1.29% 1.59% 1.46% 1.42%
Portfolio turnover rate (b) 32% 30% (c) 4% 7% 7%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns for First Trust Total US Market
AlphaDEX(R) ETF would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(c) The variation in the portfolio turnover rate is due to the change in the
Fund's underlying index effective August 18, 2017, which resulted in a
complete rebalance of the Fund's portfolio.
See Notes to Financial Statements Page 45
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW)
YEAR ENDED PERIOD ENDED
12/31/2018 12/31/2017 (a)
------------ ------------
Net asset value, beginning of period $ 22.00 $ 19.97
------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.40 0.17
Net realized and unrealized gain (loss) (0.58) 2.03
------------ ------------
Total from investment operations (0.18) 2.20
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.39) (0.17)
------------ ------------
Net asset value, end of period $ 21.43 $ 22.00
============ ============
TOTAL RETURN (b) (0.88)% 11.02%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 12,859 $ 2,200
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.50% 0.50% (c)
Ratio of net expenses to average net assets 0.50% 0.50% (c)
Ratio of net investment income (loss) to
average net assets 2.33% 1.99% (c)
Portfolio turnover rate (d) 16% 20%
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR)
PERIOD ENDED
12/31/2018 (a)
------------
Net asset value, beginning of period $ 20.23
------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.12
Net realized and unrealized gain (loss) (2.56)
------------
Total from investment operations (2.44)
------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.12)
------------
Net asset value, end of period $ 17.67
============
TOTAL RETURN (b) (12.09)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 28,269
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.65% (c)
Ratio of net expenses to average net assets 0.65% (c)
Ratio of net investment income (loss) to
average net assets 1.48% (c)
Portfolio turnover rate (d) 183%
(a) Inception dates for EDOW and FCTR are August 8, 2017 and July 25, 2018,
respectively, which are consistent with the respective Fund's commencement
of investment operations and are the dates the initial creation units were
established.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(c) Annualized.
(d) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 46 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
1. ORGANIZATION
First Trust Exchange-Traded Fund (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on August 8,
2003, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of twenty-one exchange-traded funds. This report
covers the four funds listed below:
First Trust Total US Market AlphaDEX(R) ETF - (The Nasdaq Stock Market LLC
("Nasdaq") ticker "TUSA")
First Trust Dorsey Wright People's Portfolio ETF - (Nasdaq ticker "DWPP")
First Trust Dow 30 Equal Weight ETF - (NYSE Arca, Inc. ("NYSE Arca")
ticker "EDOW")
First Trust Lunt U.S. Factor Rotation ETF - (Cboe BZX Exchange, Inc.
("Cboe BZX") ticker "FCTR")(1)
(1) Commenced investment operations on July 25, 2018.
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual
funds, each Fund issues and redeems shares on a continuous basis, at net asset
value ("NAV"), only in large specified blocks consisting of 50,000 shares called
a "Creation Unit." Creation Units are generally issued and redeemed in-kind for
securities in which a Fund invests and, in certain circumstances, for cash, and
only to and from broker-dealers and large institutional investors that have
entered into participation agreements. Except when aggregated in Creation Units,
each Fund's shares are not redeemable securities. The investment objective of
each Fund is to seek investment results that correspond generally to the price
and yield (before the Fund's fees and expenses) of the following indices:
FUND INDEX
First Trust Total US Market AlphaDEX(R) ETF NASDAQ AlphaDEX(R) Total US Market Index
First Trust Dorsey Wright People's Portfolio ETF Nasdaq Dorsey Wright People's Portfolio Index
First Trust Dow 30 Equal Weight ETF Dow Jones Industrial Average(R) Equal Weight Index
First Trust Lunt U.S. Factor Rotation ETF Lunt Capital Large Cap Factor Rotation Index
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the Funds in the preparation of the
financial statements. The preparation of the financial statements in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP") requires management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Each Fund's NAV is calculated by dividing the
value of all assets of each Fund (including accrued interest and dividends),
less all liabilities (including accrued expenses and dividends declared but
unpaid), by the total number of shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. Each Fund's investments are valued as
follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding Nasdaq and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Page 47
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Overnight repurchase agreements are valued at amortized cost when it
represents the best estimate of fair value.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
In addition, differences between the prices used to calculate a Fund's NAV and
the prices used by such Fund's corresponding index could result in a difference
between a Fund's performance and the performance of its underlying index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of December 31, 2018, is
included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Withholding taxes and tax reclaims on foreign dividends have been provided for
in accordance with each Fund's understanding of the applicable country's tax
rules and rates.
Page 48
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
Distributions received from a Fund's investments in real estate investment
trusts ("REITs") may be comprised of return of capital, capital gains and
income. The actual character of the amounts received during the year is not
known until after the REITs' fiscal year end. A Fund records the character of
distributions received from the REITs during the year based on estimates
available. The characterization of distributions received by a Fund may be
subsequently revised based on information received from the REITs after their
tax reporting periods conclude.
C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES
Offsetting Assets and Liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset on the
Statements of Assets and Liabilities, and disclose instruments and transactions
subject to master netting or similar agreements. These disclosure requirements
are intended to help investors and other financial statement users better assess
the effect or potential effect of offsetting arrangements on a fund's financial
position. The transactions subject to offsetting disclosures are derivative
instruments, repurchase agreements and reverse repurchase agreements, and
securities borrowing and securities lending transactions.
This disclosure, if applicable, is included within each Fund's Portfolio of
Investments under the heading "Offsetting Assets and Liabilities". For financial
reporting purposes, the Funds do not offset financial assets and financial
liabilities that are subject to master netting arrangements ("MNAs") or similar
agreements on the Statements of Assets and Liabilities. MNAs provide the right,
in the event of default (including bankruptcy and insolvency), for the
non-defaulting counterparty to liquidate the collateral and calculate the net
exposure to the defaulting party or request additional collateral.
D. SECURITIES LENDING
The Funds may lend securities representing up to 33 1/3% of the value of their
total assets to broker-dealers, banks and other institutions to generate
additional income. When a Fund loans its portfolio securities, it will receive,
at the inception of each loan, collateral equal to at least 102% (for domestic
securities) or 105% (for international securities) of the market value of the
loaned securities. The collateral amount is valued at the beginning of each
business day and is compared to the market value of the loaned securities from
the prior business day to determine if additional collateral is required. If
additional collateral is required, a request is sent to the borrower. Securities
lending involves the risk that the Fund may lose money because the borrower of
the Fund's loaned securities fails to return the securities in a timely manner
or at all. The Fund could also lose money in the event of (i) a decline in the
value of the collateral provided for the loaned securities, (ii) a decline in
the value of any investments made with cash collateral or (iii) an increase in
the value of the loaned securities if the borrower does not increase the
collateral accordingly and the borrower fails to return the securities. These
events could also trigger adverse tax consequences for the Funds.
Under the Funds' Securities Lending Agency Agreement, the securities lending
agent will generally bear the risk that a borrower may default on its obligation
to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the
Funds' securities lending agent and is responsible for executing the lending of
the portfolio securities to creditworthy borrowers. The Funds, however, will be
responsible for the risks associated with the investment of cash collateral. A
Fund may lose money on its investment of cash collateral, which may affect its
ability to repay the collateral to the borrower without the use of other Fund
assets. Each Fund that engages in securities lending receives compensation (net
of any rebate and securities lending agent fees) for lending its securities.
Compensation can be in the form of fees received from the securities lending
agent or dividends or interest earned from the investment of cash collateral.
The fees received from the securities lending agent are accrued daily. The
dividend and interest earned on the securities loaned is accounted for in the
same manner as other dividend and interest income. At December 31, 2018, only
TUSA had securities in the securities lending program.
In the event of a default by a borrower with respect to any loan, BBH will
exercise any and all remedies provided under the applicable borrower agreement
to make the Funds whole. These remedies include purchasing replacement
securities by applying the collateral held from the defaulting broker against
the purchase cost of the replacement securities. If, despite such efforts by BBH
to exercise these remedies, a Fund sustains losses as a result of a borrower's
default, BBH will indemnify the Fund by purchasing replacement securities at its
own expense, or paying the Fund an amount equal to the market value of the
replacement securities, subject to certain limitations which are set forth in
detail in the Securities Lending Agency Agreement between the Trust on behalf of
the Funds and BBH.
E. REPURCHASE AGREEMENTS
Repurchase agreements involve the purchase of securities subject to the seller's
agreement to repurchase the securities at a mutually agreed upon date and price,
under the terms of a Master Repurchase Agreement ("MRA"). During the term of a
repurchase agreement, the value of the underlying securities held as collateral
on behalf of a Fund, including accrued interest, is required to exceed the value
of the repurchase agreement, including accrued interest. The underlying
securities for all repurchase agreements are held at the Funds' custodian or
designated sub-custodians under tri-party repurchase agreements.
Page 49
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
MRAs govern transactions between a Fund and select counterparties. The MRAs
contain provisions for, among other things, initiation, income payments, events
of default, and maintenance of collateral for repurchase agreements.
Repurchase agreements received for lending securities are collateralized by U.S.
Treasury securities. The U.S. Treasury securities are held in a joint custody
account at BBH on behalf of the Funds participating in the securities lending
program. In the event the counterparty defaults on the repurchase agreement, the
U.S. Treasury securities can either be maintained as part of a Fund's portfolio
or sold for cash. A Fund could suffer a loss to the extent that the proceeds
from the sale of the underlying collateral held by the Fund is less than the
repurchase price and the Fund's costs associated with the delay and enforcement
of the MRA.
While the Funds may invest in repurchase agreements, any repurchase agreements
held by the Funds during the fiscal period ended December 31, 2018, were
received as collateral for lending securities.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on portfolio securities held by the Funds and
have no impact on net assets or NAV per share. Temporary differences, which
arise from recognizing certain items of income, expense and gain/loss in
different periods for financial statement and tax purposes, will reverse at some
time in the future.
The tax character of distributions paid by each Fund during the fiscal period
ended December 31, 2018 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ---------------- -----------------
First Trust Total US Market AlphaDEX(R) ETF $ 155,286 $ -- $ --
First Trust Dorsey Wright People's Portfolio ETF 417,641 -- --
First Trust Dow 30 Equal Weight ETF 235,451 -- --
First Trust Lunt U.S. Factor Rotation ETF 184,170 -- --
The tax character of distributions paid by each Fund during the fiscal period
ended December 31, 2017 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ---------------- -----------------
First Trust Total US Market AlphaDEX(R) ETF $ 103,705 $ -- $ --
First Trust Dorsey Wright People's Portfolio ETF 163,136 -- --
First Trust Dow 30 Equal Weight ETF 16,690 -- --
As of December 31, 2018, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ ---------------- -----------------
First Trust Total US Market AlphaDEX(R) ETF $ 5,031 $ (666,297) $ (1,692,453)
First Trust Dorsey Wright People's Portfolio ETF -- (1,092,046) (2,487,040)
First Trust Dow 30 Equal Weight ETF 10,767 (74,553) (1,512,279)
First Trust Lunt U.S. Factor Rotation ETF 467 (1,663,858) (3,134,438)
Page 50
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
G. INCOME TAXES
Each Fund intends to qualify or continue to qualify as a regulated investment
company by complying with the requirements under Subchapter M of the Internal
Revenue Code of 1986, as amended, which includes distributing substantially all
of its net investment income and net realized gains to shareholders.
Accordingly, no provision has been made for federal and state income taxes.
However, due to the timing and amount of distributions, each Fund may be subject
to an excise tax of 4% of the amount by which approximately 98% of each Fund's
taxable income exceeds the distributions from such taxable income for the
calendar year.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. For TUSA and DWPP, the taxable
years ending 2015, 2016, 2017, and 2018 remain open to federal and state audit.
For EDOW, the taxable years ending 2017 and 2018 remain open for federal and
state audit. For FCTR, the taxable year ending 2018 remains open for federal and
state audit. As of December 31, 2018, management has evaluated the application
of these standards to the Funds, and has determined that no provision for income
tax is required in the Funds' financial statements for uncertain tax positions.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses arising in taxable years beginning after December 22, 2010,
may be carried forward indefinitely, and their character is retained as
short-term and/or long-term losses. Previously, net capital losses were carried
forward for up to eight years and treated as short-term losses. As a transition
rule, the Act requires that post-enactment net capital losses be used before
pre-enactment net capital losses. At December 31, 2018, the Funds had
post-enactment net capital losses for federal income tax purposes as shown in
the following table. To the extent that these loss carryforwards are used to
offset future capital gains, it is probable that the capital gains so offset
will not be distributed to Fund shareholders. The Funds are subject to certain
limitations, under U.S. tax rules, on the use of capital loss carryforwards and
net unrealized built-in losses. These limitations apply when there has been a
50% change in ownership.
Post-Enactment -
No Expiration
------------------
First Trust Total US Market AlphaDEX(R) ETF $ 666,297
First Trust Dorsey Wright People's Portfolio ETF 1,092,046
First Trust Dow 30 Equal Weight ETF 74,553
First Trust Lunt U.S. Factor Rotation ETF 1,663,858
During the taxable year ended December 31, 2018, the following Fund utilized
capital loss carryforwards in the following amount:
Post-Enactment
Capital Loss
Carryforward
Utilized
------------------
First Trust Total US Market AlphaDEX(R) ETF $ 5,052
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
period ended December 31, 2018, the adjustments for each Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) Paid-in
Income (Loss) on Investments Capital
------------------ ---------------- -----------------
First Trust Total US Market AlphaDEX(R) ETF $ 679 $ (1,769,995) $ 1,769,316
First Trust Dorsey Wright People's Portfolio ETF 12,607 (948,782) 936,175
First Trust Dow 30 Equal Weight ETF -- 817,734 (817,734)
First Trust Lunt U.S. Factor Rotation ETF -- (1,095,136) 1,095,136
Page 51
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
H. EXPENSES
Expenses that are directly related to First Trust Total US Market AlphaDEX(R)
ETF are charged directly to the Fund. Expenses for First Trust Dorsey Wright
People's Portfolio ETF, First Trust Dow 30 Equal Weight ETF and First Trust Lunt
U.S. Factor Rotation ETF (the "Unitary Fee Funds"), other than excluded expenses
(discussed in Note 3), are paid by the Advisor. General expenses of the Trust
are allocated to all the Funds based upon the net assets of each Fund.
First Trust has entered into licensing agreements with each of the following
"Licensors" for the respective Funds:
FUND LICENSOR
First Trust Total US Market AlphaDEX(R) ETF Nasdaq, Inc.
First Trust Dorsey Wright People's Portfolio ETF Nasdaq, Inc.
First Trust Dow 30 Equal Weight ETF S&P Dow Jones Indices LLC
First Trust Lunt U.S. Factor Rotation ETF Lunt Capital Management, Inc.
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The First Trust Total US
Market AlphaDEX(R) ETF is required to pay licensing fees, which are shown on the
Statements of Operations.
I. NEW ACCOUNTING PRONOUNCEMENT
On August 28, 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13,
"Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement," which amends the fair value measurement disclosure requirements of
ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified
disclosure requirements of ASC 820. In addition, the amendments clarify that
materiality is an appropriate consideration of entities when evaluating
disclosure requirements. The ASU is effective for fiscal years beginning after
December 15, 2019, including interim periods therein. Early adoption is
permitted for any eliminated or modified disclosures upon issuance of this ASU.
The Funds have early adopted ASU 2018-13 for these financial statements, which
did not result in a material impact.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
For the First Trust Total US Market AlphaDEX(R) ETF, First Trust is paid an
annual management fee of 0.50% of the Fund's average daily net assets. For such
Fund, the Trust and the Advisor have entered into an Expense Reimbursement, Fee
Waiver and Recovery Agreement ("Recovery Agreement") in which First Trust has
agreed to waive fees and/or reimburse Fund expenses to the extent that the
operating expenses of the Fund (excluding interest expense, brokerage
commissions and other trading expenses, acquired fund fees and expenses, taxes
and extraordinary expenses) exceed 0.70% of average daily net assets per year
(the "Expense Cap"). The Expense Cap will be in effect until at least April 30,
2020.
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee was waived or expense was incurred, but no reimbursement payment will be
made by the Fund if it results in the Fund exceeding an expense ratio equal to
the Expense Cap in place at the time the expenses were reimbursed or fees were
waived by First Trust. This amount would be included in "Expenses previously
waived or reimbursed" on the Statements of Operations.
The advisory fee waivers and expense reimbursements for the fiscal year ended
December 31, 2018 and fees waived or expenses borne by First Trust subject to
recovery from the Fund for the periods indicated were as follows:
Fees Waived and Expenses Borne by
First Trust Subject to Recovery
------------------------------------------------
Advisory Year Year Year
Fee Expense Ended Ended Ended
Waivers Reimbursement 12/31/2016 12/31/2017 12/31/2018 Total
--------- ------------- ---------- ---------- ---------- ---------
First Trust Total US Market AlphaDEX(R)
ETF $ 77,425 $ 58,021 $ 112,511 $ 110,596 $ 135,446 $ 358,553
Page 52
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
For the First Trust Dorsey Wright People's Portfolio ETF, First Trust Dow 30
Equal Weight ETF, and First Trust Lunt U.S. Factor Rotation ETF, First Trust is
paid an annual unitary management fee of 0.60%, 0.50%, and 0.65%, respectively,
of such Fund's average daily net assets and is responsible for the expenses of
such Fund including the cost of transfer agency, custody, fund administration,
legal, audit, licensing and other services, but excluding fee payments under the
Investment Management Agreement, distribution and service fees pursuant to a
Rule 12b-1 plan, if any, brokerage commissions and other expenses connected with
the execution of portfolio transactions, acquired fund fees and expenses, taxes,
interest, and extraordinary expenses.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the fiscal period ended December 31, 2018, the cost of purchases and
proceeds from sales of investments for each Fund, excluding short-term
investments and in-kind transactions, were as follows:
Purchases Sales
--------------- ---------------
First Trust Total US Market AlphaDEX(R) ETF $ 16,867,610 $ 16,862,637
First Trust Dorsey Wright People's Portfolio ETF 10,640,130 10,646,299
First Trust Dow 30 Equal Weight ETF 1,756,785 1,660,463
First Trust Lunt U.S. Factor Rotation ETF 46,422,532 46,057,662
For the fiscal period ended December 31, 2018, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
--------------- ---------------
First Trust Total US Market AlphaDEX(R) ETF $ 8,667,228 $ 8,767,744
First Trust Dorsey Wright People's Portfolio ETF 14,656,231 5,853,063
First Trust Dow 30 Equal Weight ETF 68,840,001 55,818,395
First Trust Lunt U.S. Factor Rotation ETF 51,233,390 19,672,458
5. CREATION, REDEMPTION AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Such transactions are generally permitted on an
in-kind basis, with a balancing cash component to equate the transaction to the
daily NAV per Share of each Fund on the transaction date times the number of
Shares in a Creation Unit. Authorized Participants purchasing Creation Units
must pay to BNYM, as transfer agent, a standard creation transaction fee (the
"Creation Transaction Fee"), which is based on the number of different
securities in a Creation Unit of each Fund, according to the fee schedule set
forth below:
Number of Securities Creation
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
Page 53
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018
The Creation Transaction Fee is applicable to each purchase transaction
regardless of the number of Creation Units purchased in the transaction. An
additional variable fee of up to three times the Creation Transaction Fee may be
charged to approximate additional expenses incurred by a Fund with respect to
transactions effected outside of the clearing process (i.e., through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. The price for each Creation Unit will equal the daily
NAV per Share of a Fund on the transaction date times the number of Shares in a
Creation Unit plus the fees described above and, if applicable, any transfer
taxes.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a standard redemption transaction fee (the "Redemption Transaction Fee"),
which is based on the number of different securities in a Creation Unit of each
Fund, according to the fee schedule set forth below:
Number of Securities Redemption
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
The Redemption Transaction Fee is applicable to each redemption transaction
regardless of the number of Creation Units redeemed in the transaction. An
additional variable fee of up to three times the Redemption Transaction Fee may
be charged to approximate additional expenses incurred by a Fund with respect to
redemptions effected outside of the clearing process or to the extent that
redemptions are for cash. Each Fund reserves the right to effect redemptions in
cash. A shareholder may request cash redemption in lieu of securities; however,
a Fund may, in its discretion, reject any such request.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before April 30, 2020 for First
Trust Total US Market AlphaDEX(R) ETF, First Trust Dorsey Wright People's
Portfolio ETF, and First Trust Dow 30 Equal Weight ETF and July 20, 2020 for
First Trust Lunt U.S. Factor Rotation ETF.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
Page 54
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of First Trust Exchange-Traded Fund (the
"Trust"), comprising the First Trust Total US Market AlphaDEX(R) ETF, First
Trust Dorsey Wright People's Portfolio ETF, First Trust Dow 30 Equal Weight ETF,
and First Trust Lunt U.S. Factor Rotation ETF (the "Funds"), each a series of
First Trust Exchange-Traded Fund, as of December 31, 2018, the related
statements of operations, the changes in net assets and the financial highlights
for the periods indicated in the table below for the Funds; and the related
notes. In our opinion, the financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the funds
listed above included in First Trust Exchange-Traded Fund as of December 31,
2018, and the results of their operations, the changes in their net assets and
the financial highlights for the period listed in the table below, in conformity
with accounting principles generally accepted in the United States of America.
INDIVIDUAL FUNDS STATEMENTS OF STATEMENTS OF FINANCIAL
INCLUDED IN THE TRUST OPERATIONS CHANGES TO NET ASSETS HIGHLIGHTS
---------------------------------------------------------------------------------------------------------------------------
First Trust Total US Market For the year ended For the years ended December 31, For the years ended December 31,
AlphaDEX(R) ETF December 31, 2018 2018 and 2017 2018, 2017, 2016, 2015, and 2014
First Trust Dorsey Wright
People's Portfolio ETF
---------------------------------------------------------------------------------------------------------------------------
First Trust Dow 30 For the year ended For the year ended December 31, 2018 and the period from August 8, 2017
Equal Weight ETF December 31, 2018 (commencement of operations) through December 31, 2017
---------------------------------------------------------------------------------------------------------------------------
First Trust Lunt U.S. Factor For the period from July 25, 2018 (commencement of operations) through December 31, 2018
Rotation ETF
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Funds' internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2018, by correspondence with
the custodian and brokers; when replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 25, 2019
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 55
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Funds' website located at www.ftportfolios.com; and (3) on the Securities
and Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files its complete schedule of each Fund's portfolio holdings with the
SEC for the first and third quarters of each fiscal year on Form N-Q. The
Trust's Form N-Qs are available (1) by calling (800) 988-5891; (2) on each
Fund's website at www.ftportfolios.com; and (3) on the SEC's website at
www.sec.gov.
Beginning in April 2019, the Trust will cease to disclose each Fund's holdings
on Form N-Q and will file Form N-PORT with the SEC on a monthly basis. Part F of
Form N-PORT, which contains the complete schedule of each Fund's portfolio
holdings, will be made available in the same manner as Form N-Q discussed above.
FEDERAL TAX INFORMATION
For the taxable period ended December 31, 2018, the following percentages of
income dividends paid by the Funds qualify for the dividends received deduction
available to corporations:
Dividends Received Deduction
----------------------------
First Trust Total US Market AlphaDEX(R) ETF 100.00%
First Trust Dorsey Wright People's Portfolio ETF 100.00%
First Trust Dow 30 Equal Weight ETF 74.65%
First Trust Lunt U.S. Factor Rotation ETF 92.27%
For the taxable period ended December 31, 2018, the following percentages of
income dividends paid by the Funds are hereby designated as qualified dividend
income:
Qualified Dividend Income
----------------------------
First Trust Total US Market AlphaDEX(R) ETF 100.00%
First Trust Dorsey Wright People's Portfolio ETF 100.00%
First Trust Dow 30 Equal Weight ETF 74.65%
First Trust Lunt U.S. Factor Rotation ETF 100.00%
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
Page 56
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. As a result, such a fund may be included in one or more index-tracking
exchange-traded funds or mutual funds. Being a component security of such a
vehicle could greatly affect the trading activity involving a fund, the size of
the fund and the market volatility of the fund. Inclusion in an index could
significantly increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
Page 57
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; different legal or accounting standards; and less government supervision
and regulation of exchanges in foreign countries. Investments in non-U.S.
securities may involve higher costs than investments in U.S. securities,
including higher transaction and custody costs, as well as additional taxes
imposed by non-U.S. governments. These risks may be heightened for securities of
companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AGREEMENT
BOARD CONSIDERATIONS REGARDING INVESTMENT MANAGEMENT AGREEMENT
The Board of Trustees (the "Board") of First Trust Exchange-Traded Fund (the
"Trust"), including the Independent Trustees, unanimously approved the
Investment Management Agreement (the "Agreement") with First Trust Advisors L.P.
(the "Advisor"), on behalf of First Trust Lunt U.S. Factor Rotation ETF (the
"Fund"), for an initial two-year term at a meeting held on December 10-11, 2017.
The Board of Trustees determined that the Agreement is in the best interests of
the Fund in light of the extent and quality of the services expected to be
provided and such other matters as the Board considered to be relevant in the
exercise of its reasonable business judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. To assist the Board in its evaluation of the Agreement for
the Fund, the Independent Trustees received a report from the Advisor in advance
of the Board meeting responding to a request for information provided on behalf
of the Independent Trustees that, among other things, outlined the services to
be provided by the Advisor to the Fund (including the relevant personnel
responsible for these services and their experience); the proposed unitary fee
rate payable by the Fund as compared to fee rates charged to a peer group of
funds (all of which were exchange-traded funds ("ETFs")) compiled by Management
Practice, Inc. ("MPI"), an independent source (the "MPI Peer Group"), and as
compared to fee rates charged to other ETFs managed by the Advisor; the
estimated expenses of the Fund as compared to the expense ratios of the funds in
the MPI Peer Group; the nature of the expenses to be incurred in providing
services to the Fund and the potential for economies of scale, if any; financial
data on the Advisor; any fall-out benefits to the Advisor and its affiliate,
First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance
program. The Independent Trustees also met separately with their independent
legal counsel to discuss the information provided by the Advisor. The Board
applied its business judgment to determine whether the arrangement between the
Trust and the Advisor is a reasonable business arrangement from the Fund's
perspective as well as from the perspective of shareholders.
In evaluating whether to approve the Agreement for the Fund, the Board
considered the nature, extent and quality of the services to be provided by the
Advisor under the Agreement and considered that employees of the Advisor provide
management services to other ETFs and to other investment companies in the First
Trust fund complex with diligence and care. The Board considered that the
Advisor will be responsible for the overall management and administration of the
Fund and reviewed all of the services to be provided by the Advisor to the Fund.
The Board considered the background and experience of the persons who will be
responsible for the day-to-day management of the Fund. In reviewing the services
to be provided, the Board considered the compliance program that had been
developed by the Advisor and considered that it includes a robust program for
Page 58
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
monitoring the Advisor's and the Fund's compliance with the 1940 Act, as well as
the Fund's compliance with its investment objective and policies. Since the Fund
had yet to commence investment operations, the Board could not consider the
historical investment performance of the Fund, but the Board did consider the
hypothetical investment performance of the underlying index. Because the Fund is
an index ETF that is designed to track the performance of an underlying index,
the Board considered reports it receives on a quarterly basis showing the
correlation and tracking error between other ETFs for which the Advisor serves
as investment advisor and their applicable underlying indexes. In light of the
information presented and the considerations made, the Board concluded that the
nature, extent and quality of the services to be provided to the Fund by the
Advisor under the Agreement are expected to be satisfactory.
The Board considered the proposed unitary fee rate payable by the Fund under the
Agreement for the services to be provided. The Board noted that, under the
unitary fee arrangement, the Fund would pay the Advisor a unitary fee equal to
an annual rate of 0.65% of its average daily net assets. The Board noted that
the Advisor would be responsible for the Fund's expenses, including the cost of
transfer agency, custody, fund administration, legal, audit and other services
and license fees (if any), but excluding the fee payments under the Agreement,
interest, taxes, brokerage commissions and other expenses connected with the
execution of portfolio transactions, distribution and service fees pursuant to a
Rule 12b-1 plan, if any, and extraordinary expenses. The Board received and
reviewed information for the Fund showing the unitary fee rates and expense
ratios of the peer funds in the MPI Peer Group, as well as the advisory fee
rates (along with related expense caps) and unitary fee rates charged by the
Advisor to other ETFs it manages. Because the Fund's MPI Peer Group included
peer funds that pay unitary fees and because the Fund will pay a unitary fee,
the Board determined that expense ratios were the most relevant comparative data
point. Based on the information provided, the Board noted that the unitary fee
rate for the Fund was equal to the median total (net) expense ratio of the peer
funds in its MPI Peer Group. With respect to the MPI Peer Group, the Board
discussed with representatives of the Advisor how the MPI Peer Group was
assembled and how the Fund compared and differed from the peer funds. The Board
took this information into account in considering the peer data. With respect to
fee rates charged to other First Trust ETFs, the Board considered differences
between the Fund and other First Trust ETFs that limited their comparability.
The Board noted that the Fund's unitary fee rate was in line with the total
(net) expense ratios of comparable index ETFs advised by the Advisor that, like
the Fund, focus on targeted segments of the U.S. equity market, employ robust
selection and weighting methodologies and pursue objectives to add meaningful
alpha compared to broader investment category benchmarks. In light of the
information considered and the nature, extent and quality of the services
expected to be provided to the Fund under the Agreement, the Board determined
that the proposed unitary fee rate for the Fund was fair and reasonable.
The Board noted that the proposed unitary fee for the Fund was not structured to
pass the benefits of any economies of scale on to shareholders as the Fund's
assets grow. The Board noted that any reduction in fixed costs associated with
the management of the Fund would benefit the Advisor, but that the unitary fee
structure provides a level of certainty in expenses for the Fund. The Board
noted that the Advisor has continued to invest in personnel and infrastructure
for the First Trust fund complex. The Board took the types of costs to be borne
by the Advisor in connection with its services to be performed for the Fund
under the Agreement into consideration and noted that the Advisor was unable to
estimate the profitability of the Agreement for the Fund to the Advisor. The
Board considered fall-out benefits described by the Advisor that may be realized
from its and FTP's relationship with the Fund. The Board also noted that the
Advisor would not utilize soft dollars in connection with its management of the
Fund's portfolio. The Board concluded that the character and amount of potential
fall-out benefits to the Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreement are fair and reasonable and that the approval of the Agreement
is in the best interests of the Fund. No single factor was determinative in the
Board's analysis.
Page 59
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 161 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed LLC
(April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 161 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 161 Director of Trust
(1956) Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 161 Director of
(1954) Managing Director and Chief Operating Covenant
o Since Inception Officer (January 2015 to August 2018), Transport Inc.
Pelita Harapan Educational Foundation (May 2003 to
(Educational Products and Services); May 2014)
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products
and Services); President and Chief
Executive Officer (June 2012 to September
2014), Dew Learning LLC (Educational
Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 161 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 60
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer
(1966) Executive Officer (January 2016 to Present), Controller (January 2011 to
o Since January 2016 January 2016), Senior Vice President (April 2007 to
January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer (January
2016 to Present), BondWave LLC (Software
Development Company) and Stonebridge Advisors
LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First
(1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel,
o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Chief Compliance
Officer Since
January 2011
o Assistant Secretary
Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 61
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2018 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
May 2017
Page 62
This page intentionally left blank.
This page intentionally left blank.
FIRST TRUST
First Trust Exchange-Traded Fund
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless
of whether these individuals are employed by the registrant or a third
party.
(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, and that relates to any element of the code of ethics
description.
(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, that relates to one or more of the items set forth in
paragraph (b) of this item's instructions.
(e) Not applicable.
(f) The code of ethics is filed as an exhibit to the Registrant's annual
report on this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified
to serve as audit committee financial experts serving on its audit committee and
that each of them is "independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees -- The aggregate fees billed for each of the last two
fiscal years for professional services rendered by the principal accountant for
the audit of the registrant's annual financial statements or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements were $380,000 for 2017 and $415,000 for 2018.
(b) Audit-Related Fees (Registrant) -- The aggregate fees billed in each
of the last two fiscal years, for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under paragraph
(a) of this Item were $0 for 2017 and $0 for 2018.
Audit-Related Fees (Investment Adviser and Distributor) -- The aggregate
fees billed in each of the last two fiscal years for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item were $3,500 for 2017 and $0 for 2018.
(c) Tax Fees (Registrant) -- The aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal accountant
for tax compliance, tax advice, and tax planning to the registrant were $55,575
for 2017 and $58,500 for 2018. The tax fees were for review of regulated
investment company status.
Tax Fees (Investment Adviser and Distributor) -- The aggregate fees billed
in each of the last two fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and tax planning to the
registrant's adviser and distributor were $0 for 2017 and $0 for 2018.
(d) All Other Fees (Registrant) -- The aggregate fees billed in each of
the last two fiscal years for products and services provided by the principal
accountant to the registrant, other than the services reported in paragraphs (a)
through (c) of this Item were $0 for 2017 and $0 for 2018.
All Other Fees (Investment Adviser and Distributor) -- The aggregate fees
billed in each of the last two fiscal years for products and services provided
by the principal accountant to the registrant's investment adviser and
distributor, other than the services reported in paragraphs (a) through (c) of
this Item were $ 0 for 2017 and $0 for 2018.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval
Policy, the Audit Committee (the "Committee") is responsible for the
pre-approval of all audit services and permitted non-audit services (including
the fees and terms thereof) to be performed for the registrant by its
independent auditors. The Chairman of the Committee is authorized to give such
pre-approvals on behalf of the Committee up to $25,000 and report any such
pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent
auditor's engagements for non-audit services with the registrant's adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and any entity
controlling, controlled by or under common control with the investment adviser
that provides ongoing services to the registrant, if the engagement relates
directly to the operations and financial reporting of the registrant, subject to
the de minimis exceptions for non-audit services described in Rule 2-01 of
Regulation S-X. If the independent auditor has provided non-audit services to
the registrant's adviser (other than any sub-adviser whose role is primarily
portfolio management and is sub-contracted with or overseen by another
investment adviser) and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to its policies, the Committee
will consider whether the provision of such non-audit services is compatible
with the auditor's independence.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) for the registrant and the registrant's investment adviser of this
Item that were approved by the audit committee pursuant to the
pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows:
(b) 0%
(c) 0%
(d) 0%
(f) The percentage of hours expended on the principal accountant's engagement
to audit the registrant's financial statements for the most recent fiscal
year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was less than fifty
percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the
registrant for 2017 were $55,575 for the registrant, $44,000 for the
registrant's investment adviser and $63,400 for the registrant's
distributor and for 2018 were $58,500 for the registrant, $48,190 for the
registrant's investment adviser and $80,310 for the registrant's
distributor .
(h) The registrant's audit committee of its Board of Trustees has determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role
is primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by, or
under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
ITEMS 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The Registrant has a separately designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934
consisting of all the independent directors of the Registrant. The audit
committee of the registrant is comprised of: Richard E. Erickson, Thomas R.
Kadlec, Robert F. Keith and Niel B. Nielson.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407 (c) (2) (iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22 (b) (15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3 (c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this
paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as
amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal quarter of
the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
(a) Not applicable.
(b) Not applicable.
ITEM 13. EXHIBITS.
(a) (1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a) (2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a) (3) Not Applicable
(a) (4) Not Applicable
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) First Trust Exchange-Traded Fund
-------------------------------------------------
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: March 11, 2019
----------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: March 11, 2019
----------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: March 11, 2019
----------------
* Print the name and title of each signing officer under his or her signature.