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)
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, 2021
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. § 3507.
Item 1. Report to Stockholders.
(a) 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(R) Arca(R) 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)
Annual Report
December 31, 2021
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2021
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(R) Arca(R) 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
Notes to Fund Performance Overview.......................................... 18
Understanding Your Fund Expenses............................................ 19
Portfolio of Investments
First Trust Dow Jones Select MicroCap Index Fund (FDM)................... 21
First Trust Morningstar Dividend Leaders Index Fund (FDL)................ 26
First Trust US Equity Opportunities ETF (FPX)............................ 28
First Trust NYSE(R) Arca(R) Biotechnology Index Fund (FBT)............... 32
First Trust Dow Jones Internet Index Fund (FDN).......................... 33
First Trust Capital Strength ETF (FTCS).................................. 35
First Trust Value Line(R) Dividend Index Fund (FVD)...................... 37
Statements of Assets and Liabilities........................................ 42
Statements of Operations.................................................... 44
Statements of Changes in Net Assets......................................... 46
Financial Highlights........................................................ 49
Notes to Financial Statements............................................... 53
Report of Independent Registered Public Accounting Firm..................... 63
Additional Information...................................................... 64
Board of Trustees and Officers.............................................. 68
Privacy Policy.............................................................. 70
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (each such series is referred to as a "Fund" and collectively, as the
"Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund's 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 certain 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
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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2021
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, 2021.
Being that this is a year-end review, I would like to touch on the state of the
business climate and securities markets in the U.S. The two biggest stories in
2021 were clearly the ongoing fight against the coronavirus ("COVID-19")
pandemic and the surge in the rate of inflation, which I believe is a byproduct
of that fight. The COVID-19 pandemic is closing in on its second anniversary and
it continues to curb economic activity in the U.S. and abroad. It is nearly as
challenging today as it was at its peak in 2020.
The emergence of the Omicron variant in the latter half of 2021 was particularly
disappointing because we had been making some inroads into fully reopening the
U.S. economy until its arrival. Americans were dining out. Airline travel was
picking up and people were even taking cruises again. We have learned that the
Omicron variant, while seemingly not as dangerous as its predecessor, the Delta
variant, at least in terms of the number of deaths to date, is still extremely
contagious, especially for those individuals who have not been vaccinated. The
U.S. federal government has funneled trillions of dollars of stimulus and
subsidies into the financial system to mitigate the economic fallout from the
pandemic. That level of support is unprecedented and has likely fueled much of
the surge in inflation, as measured by the Consumer Price Index ("CPI"). The
standard definition for inflation is "too many dollars chasing too few goods."
The explosion of the U.S. money supply has easily overwhelmed the volume of
goods available to consumers. Global supply chain bottlenecks, including the
backlog of container ships at ports in Southern California, have also
contributed to the shortages of goods. In December 2021, the trailing 12-month
rate on the CPI was 7.0%, up from 1.4% last December, according to the U.S.
Bureau of Labor Statistics. The last time inflation was this elevated was in
1982.
Since the onset of COVID-19, companies and millions of employees have scrambled
to adapt to the new normal of working remotely, typically from home. What an
amazing thing to watch. While opinions may vary, it has become evident that the
workplace culture has probably changed forever. According to Barron's magazine,
we should look for more of a hybrid arrangement moving forward that would entail
workers being at the office for three days a week and home for two. I do not
believe that the stock and bond markets would have performed nearly as well over
the past two years had U.S. businesses not overcome the adversity brought their
way by COVID-19. Oh, and the trillions of dollars from the government. In 2021,
the S&P 500(R) Index posted a total return of 28.71%, and that came on the heels
of an 18.40% gain in 2020, according to Bloomberg. From 1926-2021 (a span of 96
years), the S&P 500(R) Index posted an average annual total return of 10.44%,
according to Morningstar/Ibbotson Associates. Investors should relish these
outsized returns. Bond investors have earned more modest total returns over the
past two years. Bond returns were higher for most bond categories in 2020 due to
the artificially depressed yield on the 10-Year Treasury Note ("T-Note"). The
10-Year T-Note yield trended higher in 2021, putting some pressure on bond
prices. Expect the Federal Reserve to tighten monetary policy by raising
short-term interest rates. It could begin as early as March 2022. While the
markets could experience some near-term pain, I believe normalizing interest
rates and bond yields will prove to be a healthy and necessary transition for
the markets long-term.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
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MARKET OVERVIEW
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FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2021 (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 more than 30 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
Inflation surged in 2021 and it looks as though it is here to stay. Federal
Reserve (the "Fed") Chairman Jerome Powell has changed his expectations on
inflation from characterizing it as transitory to it being more persistent in
nature. In the hopes of keeping inflation from becoming entrenched, the Fed
announced it will expedite the tapering of its monthly bond buying program as of
December 2021. This program has been successful at pushing down intermediate and
longer maturity bond yields and keeping them artificially low to help stimulate
economic activity. The Fed will reduce its purchases of Treasuries and
mortgage-backed securities by $30 billion per month. At that pace, it should be
done buying bonds in the open market by the end of March 2022. They also foresee
hiking short-term interest rates three times in 2022. The Federal Funds target
rate (upper bound) is currently at 0.25%. The trailing 12-month Consumer Price
Index rate stood at 7.0% in December 2021, according to the U.S. Bureau of Labor
Statistics. That is up significantly from 1.4% in December 2020 and well above
its 2.3% average rate over the past 30 years.
The global growth forecast from the International Monetary Fund ("IMF") released
in October 2021 sees real gross domestic product growth rising by 4.9% worldwide
in 2022, down from its 5.9% projection for 2021. The IMF is calling for a 5.2%
growth rate for the U.S. in 2022, down from its 6.0% estimate for 2021. As has
been the case for many years, Emerging Market and Developing Economies are
expected to grow faster than Advanced Economies. Their 2022 growth rate
estimates are 5.1% and 4.5%, respectively.
The exchange-traded funds ("ETFs") and related exchange-traded products ("ETPs")
industry grew significantly in 2021. ETFGI, an independent research and
consultancy firm, reported that total assets invested in ETFs/ETPs listed in the
U.S. stood at an all-time high of $7.21 trillion as of year-end, up 31.81% from
the $5.47 trillion at the end of 2020, according to its own release. Net inflows
to ETFs/ETPs listed in the U.S. hit a record high of $919.78 billion in 2021,
topping the prior record of $490.19 billion in 2020. U.S. ETF/ETP assets
represent approximately 72% of total global ETF/ETP assets.
U.S. STOCKS AND BONDS
In 2021, three of the major U.S. stock indices posted substantial double-digit
gains. The S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R)
Index posted total returns of 28.71%, 24.76%, and 26.82%, respectively,
according to Bloomberg. All 11 major sectors that comprise the S&P 500(R) Index
posted positive double-digit total returns. The top-performing sectors were
Energy, Real Estate, Financials and Information Technology, up 54.64%, 46.14%,
35.04% and 34.53%, respectively, while the worst-performing sector was
Utilities, up 17.67%. As we have noted often, we believe that when the major
stock indices are trading at or near their record highs in maturing bull
markets, corporate earnings need to continue to grow to drive the market higher.
Bloomberg's consensus year-over-year earnings growth rate estimates for the S&P
500(R) Index for 2022 and 2023 were 8.74% and 9.97%, respectively, as of
December 31, 2021. These projections, while positive, are more typical than
Bloomberg's 2021 growth estimate of 47.26%, which reflects a robust rebound from
the coronavirus-induced -12.44% earnings growth rate posted in 2020.
The yield on the benchmark 10-Year Treasury Note closed trading on December 31,
2021, at 1.51%, according to Bloomberg. The 1.51% yield stood 52 basis points
("bps") below its 2.03% average for the 10-year period ended December 31, 2021.
Its yield rose 59 bps in 2021. The more than half-point rise was enough of a
headwind to push the returns of taxable investment-grade bonds into negative
territory. It was risk-on for investors in 2021. The top performing fixed-income
bond category we track was high yield corporates. The Bloomberg U.S. Corporate
High Yield Index posted a total return of 5.28% for the year. Investors were
willing to accept more risk to garner a higher return. The good news is that the
default rate on speculative-grade (high yield) debt is low by historical
standards. Moody's reported that its global speculative-grade default rate stood
at 1.7% in December. Moody's puts the historical average default rate at 4.1%
(1983-2021). Its baseline scenario sees the default rate increasing to 2.4% by
December 2022 but staying well below its average.
FOREIGN STOCKS AND BONDS
The U.S. dollar appreciated by 6.37% against a basket of major currencies in
2021, as measured by the U.S. Dollar Index ("DXY"), according to Bloomberg. The
DXY closed 2021 at a reading of 95.67, above its 20-year average of 88.89. The
stronger U.S. dollar likely had a negative influence on the returns of unhedged
foreign securities held by U.S. investors.
The Bloomberg EM Hard Currency Aggregate Index of emerging markets debt posted a
total return of -2.57% (USD), while the Bloomberg Global Aggregate Index of
higher quality debt declined 4.71% (USD). With respect to equities, the MSCI
Emerging Markets Index of stocks posted a total return of -2.54% (USD), while
the MSCI World ex USA Index rose by 12.62% (USD) on a total return basis,
according to Bloomberg.
Page 3
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
The First Trust Dow Jones Select MicroCap Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Dow Jones Select
MicroCap Index(SM) (the "Index"). The Fund will normally invest at least 80% of
its net assets (including investment borrowings) in the common stocks of U.S.
micro-capitalization companies which are publicly traded in the United States.
The Fund will normally invest at least 90% of its net assets (including
investment borrowings) in the common stocks that comprise the Index. The Index
is designed to measure the performance of micro-cap stocks issued by U.S.
companies that are comparatively liquid and have strong fundamentals relative to
the micro-cap segment as a whole. The Index is rebalanced quarterly and
reconstituted annually and the Fund will make corresponding changes to its
portfolio shortly after the Index changes are made public. The Fund's shares are
listed for trading on the NYSE Arca, Inc. ("NYSE Arca"). The first day of
secondary market trading in shares of the Fund was September 30, 2005.
<TABLE>
<CAPTION>
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PERFORMANCE
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AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (9/27/05) Ended Ended (9/27/05)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 34.71% 9.22% 13.74% 8.52% 55.41% 262.28% 278.08%
Market Value 34.58% 9.19% 13.82% 8.53% 55.21% 264.95% 278.23%
INDEX PERFORMANCE
Dow Jones Select MicroCap Index(SM) 35.60% 10.03% 14.52% 9.28% 61.30% 287.95% 323.16%
Russell 2000(R) Index 14.82% 12.02% 13.23% 9.29% 76.39% 246.52% 323.65%
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</TABLE>
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of 34.71% during the
12-month period covered by this report. During the same period, the Russell
2000(R) Index (the "Benchmark") generated a return of 14.82%. The Financials
sector received the largest allocation in the Fund during the period at 32.4%
while also providing the Fund's largest contribution to the Fund's return at
13.5%. The Health Care sector provided the largest negative contribution to the
Fund's return with a contribution of -0.6%. On a relative basis, the Fund
outperformed the Benchmark. The greatest source of relative outperformance was
found in the Financials sector where the Fund earned 7.1% of outperformance
versus the Benchmark. The Fund outperformed the Benchmark in every sector during
the 12-month period covered by this report.
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The Dow Jones Select MicroCap Index(SM) ("Index") is a product of S&P Dow Jones
Indices LLC or its affiliates ("SPDJI") and has been licensed for use by First
Trust. S&P(R) is a registered trademark of Standard & Poor's Financial Services
LLC ("S&P"); Dow Jones(R) is a registered trademark of Dow Jones Trademark
Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by
SPDJI and sublicensed for certain purposes by First Trust. The Fund is not
sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their
respective affiliates and none of such parties make any representation regarding
the advisability of investing in such products nor do they have any liability
for any errors, omissions, or interruptions of the Index.
Page 4
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) (CONTINUED)
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% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
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Financials 34.1%
Industrials 14.9
Consumer Discretionary 14.5
Information Technology 9.3
Health Care 7.7
Real Estate 6.6
Materials 5.1
Consumer Staples 4.2
Energy 2.3
Communication Services 0.7
Utilities 0.6
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Total 100.0%
=======
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% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
AdvanSix, Inc. 1.1%
Alpha & Omega Semiconductor Ltd. 1.1
Ingles Markets, Inc., Class A 1.1
Andersons (The), Inc. 1.0
Photronics, Inc. 1.0
Federal Agricultural Mortgage Corp., Class C 1.0
Plymouth Industrial REIT, Inc. 1.0
Metropolitan Bank Holding Corp. 0.9
HomeStreet, Inc. 0.9
Banc of California, Inc. 0.9
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Total 10.0%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust Dow Jones
Select MicroCap Dow Jones Select Russell 2000(R)
Index Fund MicroCap Index(SM) Index
<S> <C> <C> <C>
12/11 $10,000 $10,000 $10,000
06/12 10,644 10,679 10,853
12/12 11,587 11,669 11,634
06/13 13,469 13,605 13,479
12/13 16,606 16,832 16,151
06/14 16,495 16,771 16,666
12/14 17,117 17,449 16,941
06/15 18,007 18,409 17,746
12/15 17,213 17,660 16,193
06/16 17,643 18,151 16,552
12/16 23,315 24,050 19,644
06/17 23,460 24,254 20,624
12/17 25,285 26,223 22,521
06/18 27,341 28,436 24,246
12/18 22,072 23,025 20,038
06/19 24,648 25,802 23,440
12/19 28,089 29,478 25,152
06/20 21,729 22,846 21,888
12/20 26,895 28,611 30,176
06/21 34,754 37,080 35,469
12/21 36,228 38,795 34,652
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 5
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
The First Trust Morningstar Dividend Leaders Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Morningstar(R) Dividend
Leaders Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its net assets (including investment borrowings) in the common stocks that
comprise the Index. The Index is designed to measure the performance of the 100
highest-yielding stocks that have a consistent record of dividend payment and
have the ability to sustain their dividend payments. The securities comprising
the Morningstar(R) US Market Index(SM) serve as the Fund's selection universe.
The Index is rebalanced quarterly and reconstituted annually and the Fund will
make corresponding changes to its portfolio shortly after the Index changes are
made public. The Fund's shares are listed for trading on the NYSE Arca. The
first day of secondary market trading in shares of the Fund was March 15, 2006.
<TABLE>
<CAPTION>
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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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 24.76% 9.34% 11.35% 7.80% 56.31% 193.15% 227.81%
Market Value 24.83% 9.33% 11.36% 7.80% 56.18% 193.23% 227.80%
INDEX PERFORMANCE
Morningstar(R) Dividend Leaders Index(SM) 25.55% 9.94% 11.95% 8.35% 60.61% 209.15% 255.39%
S&P 500(R) Index 28.71% 18.47% 16.55% 10.95% 133.41% 362.57% 416.98%
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</TABLE>
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 24.76% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index (the "Benchmark")
generated a return of 28.71%. The Fund's greatest allocation was to the
Communication Services sector, with an average weight of 17.8%. This sector
contributed -0.7% to the Fund's return, which was the worst contribution to
return of any sector. The greatest contribution to the Fund's return was the
6.5% from investments in the Financials sector. On a relative basis, the Fund
underperformed the Benchmark. The greatest source of underperformance for the
Fund was investments in the Communication Services sector. The Fund's
investments in this sector underperformed those in the Benchmark and caused
-5.8% of underperformance versus the Benchmark during the period. The sector
with the greatest outperformance for the Fund versus the Benchmark was the
Financials sector. Investments in the Financials sector caused 2.3% of
outperformance for the Fund versus the Benchmark during the period covered by
this report.
-----------------------------
Morningstar(R) and Morningstar(R) Dividend Leaders Index(SM) are registered
trademarks and service marks of Morningstar, Inc. ("Morningstar") and have been
licensed for use by First Trust on behalf of the Fund. The Fund is not
sponsored, endorsed, issued, sold or promoted by Morningstar and Morningstar
makes no representation regarding the advisability of investing in the Fund.
Page 6
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Health Care 20.1%
Consumer Staples 17.7
Communication Services 17.7
Utilities 13.9
Energy 9.6
Information Technology 9.2
Financials 8.5
Materials 2.7
Consumer Discretionary 0.5
Industrials 0.1
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Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
AT&T, Inc. 10.1%
Verizon Communications, Inc. 7.0
Chevron Corp. 6.6
AbbVie, Inc. 6.5
Pfizer, Inc. 6.4
Philip Morris International, Inc. 5.3
Altria Group, Inc. 4.5
Coca-Cola (The) Co. 4.5
Merck & Co., Inc. 4.4
Broadcom, Inc. 4.3
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Total 59.6%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust Morningstar
Dividend Leaders Morningstar(R) Dividend S&P 500(R)
Index Fund Leaders Index(SM) Index
<S> <C> <C> <C>
12/11 $10,000 $10,000 $10,000
06/12 10,827 10,864 10,949
12/12 10,914 10,976 11,600
06/13 12,438 12,542 13,203
12/13 13,394 13,540 15,356
06/14 14,772 14,977 16,452
12/14 15,129 15,375 17,459
06/15 14,671 14,941 17,674
12/15 15,542 15,863 17,701
06/16 17,830 18,252 18,381
12/16 18,763 19,247 19,821
06/17 19,311 19,863 21,675
12/17 21,003 21,657 24,153
06/18 20,306 20,992 24,796
12/18 19,769 20,470 23,092
06/19 22,592 23,465 27,373
12/19 24,590 25,611 30,355
06/20 19,686 20,559 29,421
12/20 23,502 24,621 35,940
06/21 26,807 28,175 41,416
12/21 29,315 30,915 46,257
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 7
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
The First Trust US Equity Opportunities ETF (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the IPOX(R)-100 U.S. Index (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in the common stocks that comprise the Index.
The Index seeks to measure the performance of the equity securities of the 100
largest and typically most liquid initial public offerings ("IPOs") (including
spin-offs and equity carve-outs) of U.S. companies. The Index is rebalanced and
reconstituted quarterly and the Fund will make corresponding changes to its
portfolio shortly after the Index changes are made public. The Fund's shares are
listed for trading on the NYSE Arca. The first day of secondary market trading
in shares of the Fund was April 13, 2006.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 3.67% 18.42% 18.51% 13.07% 132.85% 446.63% 589.27%
Market Value 3.63% 18.39% 18.52% 13.07% 132.55% 446.85% 589.28%
INDEX PERFORMANCE
IPOX(R)-100 U.S. Index 4.19% 18.97% 19.14% 13.70% 138.34% 475.98% 652.76%
S&P 500(R) Index 28.71% 18.47% 16.55% 10.92% 133.41% 362.57% 409.92%
Russell 3000(R) Index 25.66% 17.97% 16.30% 10.79% 128.45% 352.85% 400.71%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 3.67% during the 12-month period covered by
this report. During the same period, the Russell 3000(R) Index (the "Benchmark")
generated a return of 25.66%. The Information Technology sector was the largest
sector allocation for the Fund at 34.7% and provided the second largest
contribution to the Fund's return at 4.2%. The Consumer Discretionary sector
contributed -1.5% to the Fund's return, the worst of any sector. On a relative
basis, the Fund underperformed the Benchmark. The largest source of relative
underperformance came from the Information Technology sector where the Fund
underperformed the Benchmark by -5.0%. The Fund underperformed the Benchmark in
most sectors; however, the Fund's investments in the Consumer Staples sector
significantly outperformed the Benchmark allocations in this sector and earned
0.4% of outperformance for the Fund versus the Benchmark.
-----------------------------
IPOX(R) and IPOX(R)-100 U.S. Index are registered international trademarks and
service marks of IPOX(R) Schuster LLC ("IPOX") and have been licensed for use by
First Trust. The Fund is not sponsored, endorsed, sold or promoted by IPOX, and
IPOX makes no representation regarding the advisability of trading in such Fund.
IPOX(R) is an international trademark of IPOX Schuster LLC. Index of Initial
Public Offerings (IPOX) and IPOX Derivatives Patent No. 7,698,197.
Page 8
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 33.7%
Industrials 13.3
Health Care 10.6
Consumer Discretionary 10.6
Financials 7.4
Communication Services 7.0
Real Estate 4.5
Consumer Staples 4.3
Energy 3.9
Materials 3.8
Utilities 0.9
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Marvell Technology, Inc. 10.0%
Airbnb, Inc., Class A 4.1
Tradeweb Markets, Inc., Class A 2.8
Avantor, Inc. 2.8
Uber Technologies, Inc. 2.7
ROBLOX Corp., Class A 2.6
Alcon, Inc. 2.5
Keysight Technologies, Inc. 2.3
General Dynamics Corp. 2.3
Datadog, Inc., Class A 2.2
-------
Total 34.3%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust
US Equity IPOX(R)-100 S&P 500(R) Russell 3000(R)
Opportunities ETF U.S. Index Index Index
<S> <C> <C> <C> <C>
12/11 $10,000 $10,000 $10,000 $10,000
06/12 11,354 11,388 10,949 10,932
12/12 13,001 13,077 11,600 11,641
06/13 15,184 15,311 13,203 13,278
12/13 19,240 19,469 15,356 15,547
06/14 20,512 20,822 16,452 16,626
12/14 21,531 21,921 17,459 17,499
06/15 23,391 23,885 17,674 17,838
12/15 22,002 22,533 17,701 17,583
06/16 21,859 22,438 18,381 18,220
12/16 23,477 24,163 19,818 19,822
06/17 25,987 26,811 21,669 21,592
12/17 29,807 30,833 24,144 24,010
06/18 31,366 32,513 24,784 24,783
12/18 27,357 28,433 23,086 22,751
06/19 34,418 35,867 27,366 27,015
12/19 35,695 37,243 30,354 29,809
06/20 37,376 39,066 29,421 28,773
12/20 52,729 55,285 35,943 36,037
06/21 56,825 59,725 41,422 41,481
12/21 54,663 57,598 46,257 45,285
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 9
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX FUND (FBT)
The First Trust NYSE(R) Arca(R) 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(R) Arca
Biotechnology Index (the "Index"). The Fund will normally invest at least 90% of
its net assets (including investment borrowings) in the common stocks and
depositary receipts that comprise the Index. The Index is an equal-dollar
weighted index designed to measure the performance of a cross section of small,
mid and large capitalization companies in the biotechnology industry that are
primarily involved in the use of biological processes to develop products or
provide services. Such processes include, but are not limited to, recombinant
DNA technology, molecular biology, genetic engineering, monoclonal
antibody-based technology, lipid/liposome technology and genomics. This Index is
rebalanced and reconstituted quarterly and the Fund will make corresponding
changes to its portfolio shortly after the Index changes are made public. The
Fund's shares are listed for trading on the NYSE Arca. The first day of
secondary market trading in shares of the Fund was June 23, 2006.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV -3.64% 12.25% 17.38% 14.51% 78.19% 396.40% 720.83%
Market Value -3.61% 12.24% 17.38% 14.51% 78.10% 396.68% 721.02%
INDEX PERFORMANCE
NYSE(R) Arca Biotechnology Index -3.52% 12.75% 17.91% 15.10% 82.18% 419.27% 788.26%
S&P Composite 1500(R) Health Care Index 24.85% 17.70% 17.44% 12.85% 125.88% 399.07% 553.90%
NASDAQ(R) Biotechnology Index 0.02% 11.89% 16.36% 13.26% 75.37% 354.94% 592.23%
S&P 500(R) Index 28.71% 18.47% 16.55% 11.30% 133.41% 362.57% 427.80%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -3.64% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500(R) Health Care Index
(the "Benchmark") returned 24.85%. The Fund's allocation to the Biotechnology
industry was its largest at 79.9%, while also providing the worst contribution
to the Fund's return at -8.3%. The industry providing the greatest contribution
to return was the Life Sciences Tools & Services industry with a 5.2%
contribution to the Fund's return. On a relative basis, the Fund underperformed
the Benchmark. The largest source of relative underperformance was found in the
Biotechnology industry, which caused -26.7% of underperformance for the Fund
versus the Benchmark. The Fund did outperform the Benchmark in the Life Sciences
Tools & Services industry, reducing a portion of the Fund's overall relative
underperformance.
-----------------------------
Source ICE Data Indices, LLC, is used with permission. "NYSE(R)" is a
service/trade mark of ICE Data Indices, LLC or its affiliates. This trademark
has been licensed, along with the NYSE(R) Arca Biotechnology Index (the "Index")
for use by First Trust Portfolios L.P. in connection with the First Trust
NYSE(R) Arca(R) Biotechnology Index Fund (the "Product"). Neither First Trust
Portfolios L.P., First Trust Exchange-Traded Fund (the "Trust") nor the Product,
as applicable, is sponsored, endorsed, sold or promoted by ICE Data Indices,
LLC, its affiliates or its Third Party Suppliers ("ICE Data and its Suppliers").
ICE Data and its Suppliers make no representations or warranties regarding the
advisability of investing in securities generally, in the Product particularly,
the Trust or the ability of the Index to track general market performance. Past
performance of an Index is not an indicator of or a guarantee of future results.
ICE DATA AND ITS SUPPLIERS DISCLAIM ANY AND ALL WARRANTIES AND REPRESENTATIONS,
EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE, INCLUDING THE INDICES, INDEX DATA AND ANY
INFORMATION INCLUDED IN, RELATED TO, OR DERIVED THEREFROM ("INDEX DATA"). ICE
DATA AND ITS SUPPLIERS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY WITH
RESPECT TO THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDICES AND
THE INDEX DATA, WHICH ARE PROVIDED ON AN "AS IS" BASIS AND YOUR USE IS AT YOUR
OWN RISK.
Page 10
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX FUND (FBT) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Biotechnology 79.9%
Life Sciences Tools & Services 17.4
Pharmaceuticals 2.7
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
ACADIA Pharmaceuticals, Inc. 4.5%
FibroGen, Inc. 4.3
Vertex Pharmaceuticals, Inc. 4.1
BioMarin Pharmaceutical, Inc. 4.0
United Therapeutics Corp. 3.9
Regeneron Pharmaceuticals, Inc. 3.9
IQVIA Holdings, Inc. 3.9
Incyte Corp. 3.8
Amgen, Inc. 3.7
QIAGEN N.V. 3.7
-------
Total 39.8%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust NYSE(R) NYSE(R) Arca NASDAQ(R) S&P Composite
Arca(R) Biotechnology Biotechnology Biotechnology S&P 500(R) 1500(R) Health
Index Fund Index Index Index Care Index
<S> <C> <C> <C> <C> <C>
12/11 $10,000 $10,000 $10,000 $10,000 $10,000
06/12 13,418 13,461 12,482 10,949 11,149
12/12 14,092 14,174 13,229 11,600 11,836
06/13 17,788 17,932 16,785 13,203 14,275
12/13 21,152 21,375 21,957 15,356 16,829
06/14 25,192 25,485 24,923 16,452 18,546
12/14 31,228 31,617 29,510 17,459 21,001
06/15 37,998 38,535 35,941 17,674 23,143
12/15 34,650 35,217 32,982 17,701 22,557
06/16 27,436 27,969 25,149 18,381 22,688
12/16 27,859 28,472 25,941 19,818 22,094
06/17 34,930 35,786 30,439 21,669 25,733
12/17 38,165 39,204 31,553 24,144 27,058
06/18 42,928 44,187 32,544 24,784 27,946
12/18 38,086 39,309 28,756 23,086 28,874
06/19 43,165 44,663 32,480 27,366 31,299
12/19 45,625 47,338 35,978 30,354 34,898
06/20 51,407 53,482 40,968 29,419 34,682
12/20 51,520 53,760 45,487 35,938 39,978
06/21 52,933 55,394 49,376 41,419 44,699
12/21 49,640 51,927 45,494 46,257 49,907
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 11
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
The First Trust Dow Jones Internet Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Dow Jones Internet Composite
Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net
assets (including investment borrowings) in common stocks that comprise the
Index. The Index is designed to measure the performance of the largest and most
actively traded securities issued by U.S. companies in the Internet industry.
The Index is rebalanced and reconstituted quarterly and the Fund will make
corresponding changes to its portfolio shortly after the Index changes are made
public. The Fund's shares are listed for trading on the NYSE Arca. The first day
of secondary market trading in shares of the Fund was June 23, 2006.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 6.43% 23.15% 21.48% 16.93% 183.27% 600.19% 1,034.99%
Market Value 6.47% 23.14% 21.49% 16.93% 183.18% 600.31% 1,035.18%
INDEX PERFORMANCE
Dow Jones Internet Composite Index(SM) 6.97% 23.84% 22.15% 17.56% 191.28% 639.38% 1,134.95%
S&P Composite 1500(R) Information
Technology Index 33.76% 31.35% 23.63% 17.11% 290.95% 734.38% 1,062.31%
S&P 500(R) Index 28.71% 18.47% 16.55% 11.30% 133.41% 362.57% 427.80%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 6.43% during the 12-month period covering
this report. During the same period, the S&P Composite 1500(R) Information
Technology Index (the "Benchmark") returned 33.76%. The Fund allocated the
largest weight to holdings in the Interactive Media & Services industry. This
industry received a 28.9% allocation and generated a 3.8% return for the Fund,
which was the largest positive contribution to the Fund's return. The Health
Care Technology industry provided the worst contribution to the Fund's return at
1.3%. On a relative basis, the Fund underperformed the Benchmark. The largest
source of underperformance came from the Application Software industry where the
Fund underperformed the Benchmark by -6.9%. A portion of the Fund's
underperformance was reduced by investments in the Data Processing & Outsourced
Services industry which provided a 2.4% return versus the Benchmark.
-----------------------------
The Dow Jones Internet Composite Index(SM) ("Index") is a product of S&P Dow
Jones Indices LLC or its affiliates ("SPDJI") and has been licensed for use by
First Trust. S&P(R) is a registered trademark of Standard & Poor's Financial
Services LLC ("S&P"); Dow Jones(R) is a registered trademark of Dow Jones
Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed
for use by SPDJI and sublicensed for certain purposes by First Trust. The Fund
is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their
respective affiliates and none of such parties make any representation regarding
the advisability of investing in such product nor do they have any liability for
any errors, omissions, or interruptions of the Index.
Page 12
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 44.9%
Communication Services 31.8
Consumer Discretionary 18.7
Health Care 3.3
Real Estate 1.3
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Amazon.com, Inc. 9.2%
Meta Platforms, Inc., Class A 7.5
Cisco Systems, Inc. 5.2
Alphabet, Inc., Class A 5.2
Netflix, Inc. 4.8
Alphabet, Inc., Class C 4.8
salesforce.com, Inc. 4.6
PayPal Holdings, Inc. 4.4
Snowflake, Inc., Class A 2.9
Airbnb, Inc., Class A 2.5
-------
Total 51.1%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
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
<S> <C> <C> <C> <C>
12/11 $10,000 $10,000 $10,000 $10,000
06/12 10,945 10,978 10,949 11,272
12/12 12,085 12,163 11,600 11,475
06/13 14,052 14,183 13,203 12,247
12/13 18,537 18,775 15,356 14,802
06/14 18,448 18,718 16,452 16,053
12/14 18,987 19,300 17,459 17,607
06/15 20,808 21,209 17,674 17,836
12/15 23,120 23,623 17,701 18,592
06/16 22,339 22,881 18,381 18,603
12/16 24,718 25,382 19,818 21,341
06/17 29,345 30,215 21,669 24,888
12/17 34,017 35,116 24,144 29,298
06/18 42,640 44,127 24,784 32,386
12/18 36,133 37,495 23,086 29,079
06/19 44,509 46,374 27,366 36,930
12/19 43,094 45,025 30,354 43,544
06/20 52,820 55,363 29,419 49,518
12/20 65,782 69,115 35,938 62,368
06/21 75,840 79,869 41,419 70,887
12/21 70,019 73,938 46,257 83,438
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 13
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
The First Trust Capital Strength ETF (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called The Capital Strength Index(SM) (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in the common stocks and real estate
investment trusts that comprise the Index. The Index seeks to provide exposure
to well-capitalized companies with strong market positions that have the
potential to provide their stockholders with a greater degree of stability and
performance over time. The Index is rebalanced and reconstituted quarterly and
the Fund will make corresponding changes to its portfolio shortly after the
Index changes are made public. The Fund's shares are listed for trading on The
Nasdaq Stock Market LLC. The first day of secondary market trading in shares of
the Fund was July 11, 2006.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 26.61% 17.09% 16.17% 11.36% 120.05% 347.51% 429.35%
Market Value 26.68% 17.08% 16.18% 11.36% 119.97% 347.96% 429.41%
INDEX PERFORMANCE
The Capital Strength Index(SM)* 27.37% 17.82% N/A N/A 127.04% N/A N/A
S&P 500(R) Index 28.71% 18.47% 16.55% 11.14% 133.41% 362.57% 413.22%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* On June 4, 2013, the Fund's underlying index changed from the Credit
Suisse U.S. Value Index, Powered by HOLT(TM) to The Capital Strength
Index(SM). On June 18, 2010, the Fund's underlying index changed from the
Deutsche Bank CROCI(R) US+ Index(TM) to the Credit Suisse U.S. Value
Index, Powered by HOLT(TM). Since the Fund's new underlying index had an
inception date of March 20, 2013, it was not in existence for some of the
periods disclosed.
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 26.61% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index (the "Benchmark")
generated a return of 28.71%. The Industrials sector received the greatest
allocation of any of the sectors in the Fund during the period, carrying an
average weight of 20.7%. Investments in the Industrials sector returned 21.0%
and contributed 4.4% to the Fund's overall return. Stock selections from the
Real Estate sector in the Fund returned -6.9% during the period, which was the
only sector with a negative return. This sector received a very low weight of
0.6% in the Fund and contributed -0.2% to the Fund's total return. On a relative
basis, the Fund slightly underperformed the Benchmark. The bulk of the
underperformance came from investments in the Consumer Staples sector. This
sector caused -2.1% of underperformance versus the Benchmark during the period.
The sector with the largest negative contribution to the Fund's underperformance
was the Information Technology sector. Investments in the Information Technology
sector outperformed the Benchmark by 2.0%.
-----------------------------
Nasdaq(R) and The Capital Strength Index(SM) are registered trademarks and
service marks of Nasdaq, Inc. (together with its affiliates hereinafter 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 14
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CAPITAL STRENGTH ETF (FTCS) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 25.4%
Health Care 18.3
Industrials 17.2
Consumer Staples 16.5
Financials 11.3
Consumer Discretionary 5.5
Materials 3.9
Communication Services 1.9
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Broadcom, Inc. 2.4%
Costco Wholesale Corp. 2.3
Keysight Technologies, Inc. 2.3
Accenture PLC, Class A 2.2
Zoetis, Inc. 2.2
Abbott Laboratories 2.2
Home Depot (The), Inc. 2.2
UnitedHealth Group, Inc. 2.2
Intuit, Inc. 2.1
Automatic Data Processing, Inc. 2.1
-------
Total 22.2%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust Capital S&P 500(R)
Strength ETF Index
<S> <C> <C>
12/11 $10,000 $10,000
06/12 10,543 10,949
12/12 11,745 11,600
06/13 13,701 13,203
12/13 15,962 15,356
06/14 16,853 16,452
12/14 18,430 17,459
06/15 18,399 17,674
12/15 18,734 17,701
06/16 19,734 18,381
12/16 20,340 19,818
06/17 22,860 21,669
12/17 25,727 24,144
06/18 25,941 24,784
12/18 24,672 23,086
06/19 29,007 27,366
12/19 31,271 30,354
06/20 30,464 29,420
12/20 35,352 35,942
06/21 39,792 41,421
12/21 44,751 46,257
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 15
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
The First Trust Value Line(R) Dividend Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Value Line(R) Dividend Index (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in the common stocks and depositary receipts
that comprise the Index. The Index seeks to measure the performance of the
securities ranked #1 or #2 according to Value Line Publishing, LLC's proprietary
Value Line(R) Safety(SM) Ranking System that are also still expected to provide
above-average dividend yield. The Index is rebalanced and reconstituted monthly,
and the Fund will make corresponding changes to its portfolio shortly after the
Index changes are made public. The Fund's shares are listed for trading on the
NYSE Arca.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 24.86% 11.41% 13.02% 10.33% 71.63% 240.05% 508.25%
Market Value 24.86% 11.39% 13.02% 10.33% 71.48% 240.12% 508.39%
INDEX PERFORMANCE
Value Line(R) Dividend Index* 25.85% 12.32% 13.95% N/A 78.78% 269.07% N/A
S&P 500(R) Index 28.71% 18.47% 16.55% 11.06% 133.41% 362.57% 587.10%
Dow Jones U.S. Select Dividend Index(SM)* 32.24% 11.02% 12.82% N/A 68.69% 234.01% N/A
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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,
2021) were 276.05% and 277.93% at NAV and Market Value, respectively. That
compares to an Index return of 324.04% for the same period. The average
annual total returns for the period from the reorganization date (December
15, 2006) through period end (December 31, 2021) were 9.20% and 9.24% at
NAV and Market Value, respectively. That compares to an Index return of
10.08% for the same period.
NAV and Market Value returns assume that all distributions have been
reinvested in the Fund at NAV and Market Value, respectively. Prior to
December 15, 2006, NAV and Market Value returns assumed that all
distributions were reinvested at prices obtained by the Dividend
Reinvestment Plan of the Predecessor FVD Fund and the price used to
calculate Market Value return was the AMEX (now known as the NYSE
American) closing market price of the Predecessor FVD Fund.
* Performance data is not available for all the periods shown in the table
because performance data does not exist for the periods shown.
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 24.86% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index (the "Benchmark")
generated a return of 28.71%. The Utilities sector received a 19.8% allocation
within the Fund during the period, which was the Fund's largest allocation. The
Fund's investments in the Financials sector generated a 5.3% contribution to the
Fund's return, which was the largest sector return for the period. No sector in
the Fund generated a negative contribution to the Fund's return during the
period, however, investments in the Energy sector generated a 0.1% contribution,
which was the smallest for the period covered by this report. On a relative
basis, the Fund underperformed the Benchmark. The largest source of relative
underperformance came from the Utilities sector where the Fund underperformed
the Benchmark by -1.8% during the period. A portion of the Fund's overall
underperformance was partially reduced by investments in the Real Estate sector
where the Fund outperformed the Benchmark by 0.8% during the period.
-----------------------------
Value Line(R) and Value Line(R) Dividend Index are trademarks or registered
trademarks of Value Line, Inc. ("Value Line") and have been licensed for use for
certain purposes by First Trust. The Fund is not sponsored, endorsed,
recommended, sold or promoted by Value Line and Value Line makes no
representation regarding the advisability of investing in products utilizing
such strategy.
Page 16
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Utilities 19.5%
Industrials 16.9
Financials 14.8
Consumer Staples 11.2
Health Care 10.1
Information Technology 10.0
Materials 5.3
Real Estate 4.4
Consumer Discretionary 4.4
Communication Services 2.9
Energy 0.5
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Exelon Corp. 0.5%
Otter Tail Corp. 0.5
International Flavors & Fragrances, Inc. 0.5
MGE Energy, Inc. 0.5
Rollins, Inc. 0.5
Target Corp. 0.5
Campbell Soup Co. 0.5
Axis Capital Holdings Ltd. 0.5
C.H. Robinson Worldwide, Inc. 0.5
Avangrid, Inc. 0.5
-------
Total 5.0%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
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)
<S> <C> <C> <C> <C>
12/11 $10,000 $10,000 $10,000 $10,000
06/12 10,633 10,685 10,949 10,654
12/12 11,117 11,209 11,600 11,084
06/13 12,661 12,822 13,203 12,619
12/13 14,070 14,302 15,356 14,305
06/14 15,269 15,592 16,452 15,716
12/14 16,313 16,722 17,459 16,502
06/15 15,974 16,438 17,674 15,913
12/15 16,517 17,073 17,701 16,233
06/16 18,843 19,562 18,381 18,757
12/16 19,812 20,646 19,818 19,802
06/17 20,890 21,854 21,669 21,008
12/17 22,285 23,397 24,144 22,859
06/18 22,111 23,306 24,784 23,092
12/18 21,512 22,756 23,088 21,492
06/19 25,186 26,760 27,368 24,424
12/19 27,235 29,036 30,354 26,467
06/20 23,276 24,950 29,420 20,730
12/20 27,231 29,326 35,942 25,258
06/21 31,146 33,679 41,421 31,242
12/21 34,005 36,907 46,257 33,401
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 17
<PAGE>
--------------------------------------------------------------------------------
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 of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV was 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 18
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2021 (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(R) Arca(R) Biotechnology Index Fund, First
Trust Dow Jones Internet Index Fund, First Trust Capital Strength ETF or First
Trust Value Line(R) Dividend 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 (12b-1) 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, 2021.
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.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2021 DECEMBER 31, 2021 PERIOD (a) PERIOD (b)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST DOW JONES SELECT MICROCAP INDEX
FUND (FDM)
Actual $1,000.00 $1,042.60 0.60% $3.09
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX
FUND (FDL)
Actual $1,000.00 $1,093.80 0.45% $2.37
Hypothetical (5% return before expenses) $1,000.00 $1,022.94 0.45% $2.29
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
Actual $1,000.00 $ 961.90 0.57% $2.82
Hypothetical (5% return before expenses) $1,000.00 $1,022.33 0.57% $2.91
FIRST TRUST NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX
FUND (FBT)
Actual $1,000.00 $ 937.90 0.55% $2.69
Hypothetical (5% return before expenses) $1,000.00 $1,022.43 0.55% $2.80
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
Actual $1,000.00 $ 923.20 0.51% $2.47
Hypothetical (5% return before expenses) $1,000.00 $1,022.63 0.51% $2.60
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
Actual $1,000.00 $1,124.80 0.55% $2.95
Hypothetical (5% return before expenses) $1,000.00 $1,022.43 0.55% $2.80
</TABLE>
Page 19
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
DECEMBER 31, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2021 DECEMBER 31, 2021 PERIOD (a) PERIOD (b)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
Actual $1,000.00 $1,091.70 0.67% $3.53
Hypothetical (5% return before expenses) $1,000.00 $1,021.83 0.67% $3.41
</TABLE>
(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,
2021 through December 31, 2021), multiplied by 184/365 (to reflect the
six-month period).
Page 20
<PAGE>
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 1.4%
17,600 Ducommun, Inc. (a) $ 823,152
101,205 PAE, Inc. (a) 1,004,966
19,025 Vectrus, Inc. (a) 870,774
---------------
2,698,892
---------------
AIRLINES -- 0.2%
51,235 Mesa Air Group, Inc. (a) 286,916
---------------
AUTO COMPONENTS -- 1.1%
31,154 Motorcar Parts of America,
Inc. (a) 531,799
31,047 Standard Motor Products, Inc. 1,626,552
---------------
2,158,351
---------------
BANKS -- 23.8%
30,551 Allegiance Bancshares, Inc. 1,289,558
41,478 Amerant Bancorp, Inc. 1,433,065
32,938 Atlantic Capital Bancshares,
Inc. (a) 947,626
87,754 Banc of California, Inc. 1,721,733
25,976 Bank of Marin Bancorp 967,086
24,365 Blue Ridge Bankshares, Inc. 436,134
37,928 Byline Bancorp, Inc. 1,037,331
24,088 Camden National Corp. 1,160,078
30,565 Capstar Financial Holdings, Inc. 642,782
45,367 Central Pacific Financial Corp. 1,277,988
16,335 Central Valley Community
Bancorp 339,278
24,603 Community Trust Bancorp, Inc. 1,072,937
34,098 First Bancshares (The), Inc. 1,316,865
18,375 First Financial Corp. 832,204
36,012 First of Long Island (The) Corp. 777,499
10,058 Five Star Bancorp 301,740
49,762 Flushing Financial Corp. 1,209,217
16,661 Great Southern Bancorp, Inc. 987,164
49,327 Hanmi Financial Corp. 1,168,063
77,716 HarborOne Bancorp, Inc. 1,153,305
97,768 Heritage Commerce Corp. 1,167,350
57,047 Heritage Financial Corp. 1,394,229
33,173 HomeStreet, Inc. 1,724,996
62,833 Horizon Bancorp, Inc. 1,310,068
34,515 Independent Bank Corp. 823,873
14,261 Investar Holding Corp. 262,545
82,092 Lakeland Bancorp, Inc. 1,558,927
16,403 Metropolitan Bank Holding
Corp. (a) 1,747,412
20,960 Mid Penn Bancorp, Inc. 665,270
33,571 Midland States Bancorp, Inc. 832,225
17,187 MVB Financial Corp. 713,604
19,905 Nicolet Bankshares, Inc. (a) 1,706,854
12,048 Northeast Bank 430,475
35,446 Origin Bancorp, Inc. 1,521,342
19,983 PCB Bancorp 438,827
39,901 Peoples Bancorp, Inc. 1,269,251
22,240 Preferred Bank 1,596,610
23,784 QCR Holdings, Inc. 1,331,904
45,176 TriState Capital Holdings,
Inc. (a) 1,367,026
47,771 Univest Financial Corp. 1,429,308
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
BANKS (CONTINUED)
28,109 Washington Trust Bancorp, Inc. $ 1,584,504
---------------
44,948,253
---------------
BIOTECHNOLOGY -- 3.0%
155,566 Catalyst Pharmaceuticals,
Inc. (a) 1,053,182
40,122 Dyne Therapeutics, Inc. (a) (b) 477,051
18,435 Eagle Pharmaceuticals, Inc. (a) 938,710
24,566 Enochian Biosciences,
Inc. (a) (b) 179,086
33,696 KalVista Pharmaceuticals,
Inc. (a) 445,798
60,068 Magenta Therapeutics, Inc. (a) 266,101
84,852 Ovid therapeutics, Inc. (a) 272,375
173,196 Tyme Technologies, Inc. (a) (b) 104,455
90,374 Vanda Pharmaceuticals, Inc. (a) 1,417,968
112,950 Viking Therapeutics, Inc. (a) 519,570
---------------
5,674,296
---------------
BUILDING PRODUCTS -- 1.9%
31,483 Insteel Industries, Inc. 1,253,338
54,378 Quanex Building Products Corp. 1,347,487
34,028 Tecnoglass, Inc. (b) 891,193
---------------
3,492,018
---------------
CAPITAL MARKETS -- 2.0%
5,146 Diamond Hill Investment Group,
Inc. 999,507
22,500 Greenhill & Co., Inc. 403,425
14,821 Oppenheimer Holdings, Inc.,
Class A 687,250
31,505 Sculptor Capital Management, Inc. 672,632
26,503 Victory Capital Holdings, Inc.,
Class A 968,155
---------------
3,730,969
---------------
CHEMICALS -- 3.0%
45,635 AdvanSix, Inc. 2,156,254
43,657 American Vanguard Corp. 715,538
30,482 Hawkins, Inc. 1,202,515
34,562 Koppers Holdings, Inc. (a) 1,081,791
41,599 Tredegar Corp. 491,700
---------------
5,647,798
---------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.3%
155,292 ACCO Brands Corp. 1,282,712
42,373 Ennis, Inc. 827,545
95,797 Interface, Inc. 1,527,962
59,316 Kimball International, Inc.,
Class B 606,802
---------------
4,245,021
---------------
COMMUNICATIONS EQUIPMENT
-- 2.2%
15,418 Aviat Networks, Inc. (a) 494,610
57,202 Casa Systems, Inc. (a) 324,335
18,489 Clearfield, Inc. (a) 1,560,842
55,334 Digi International, Inc. (a) 1,359,556
55,047 EMCORE Corp. (a) 384,228
---------------
4,123,571
---------------
See Notes to Financial Statements Page 21
<PAGE>
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CONSTRUCTION & ENGINEERING
-- 1.9%
25,580 Argan, Inc. $ 989,690
47,472 Infrastructure and Energy
Alternatives, Inc. (a) (b) 436,743
46,710 Sterling Construction Co.,
Inc. (a) 1,228,473
67,935 Tutor Perini Corp. (a) 840,356
---------------
3,495,262
---------------
CONSUMER FINANCE -- 1.1%
8,815 Atlanticus Holdings Corp. (a) 628,686
34,122 Curo Group Holdings Corp. 546,293
14,953 Regional Management Corp. 859,199
---------------
2,034,178
---------------
CONTAINERS & PACKAGING -- 0.6%
58,786 Myers Industries, Inc. 1,176,308
---------------
DISTRIBUTORS -- 0.4%
42,171 Funko, Inc., Class A (a) 792,815
---------------
DIVERSIFIED CONSUMER SERVICES
-- 0.7%
113,724 Perdoceo Education Corp. (a) 1,337,394
---------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.4%
13,443 A-Mark Precious Metals, Inc. 821,367
---------------
ELECTRICAL EQUIPMENT -- 0.4%
89,098 Babcock & Wilcox Enterprises,
Inc. (a) 803,664
---------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.7%
57,139 Benchmark Electronics, Inc. 1,548,467
40,718 Kimball Electronics, Inc. (a) 886,024
20,444 Vishay Precision Group, Inc. (a) 758,881
---------------
3,193,372
---------------
ENTERTAINMENT -- 0.3%
39,803 Sciplay Corp., Class A (a) 548,485
---------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 5.6%
42,616 Bluerock Residential Growth
REIT, Inc. (b) 1,124,636
70,652 City Office REIT, Inc. 1,393,258
9,671 CTO Realty Growth, Inc. 593,993
46,053 Farmland Partners, Inc. 550,333
154,219 Franklin Street Properties Corp. 917,603
198,773 GEO Group (The), Inc. (b) 1,540,491
26,119 One Liberty Properties, Inc. 921,478
56,135 Plymouth Industrial REIT, Inc. 1,796,320
48,798 Urstadt Biddle Properties, Inc.,
Class A 1,039,397
74,889 Whitestone REIT 758,626
---------------
10,636,135
---------------
FOOD & STAPLES RETAILING -- 2.9%
50,216 Andersons (The), Inc. 1,943,862
23,135 Ingles Markets, Inc., Class A 1,997,476
58,307 SpartanNash Co. 1,501,988
---------------
5,443,326
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
FOOD PRODUCTS -- 0.8%
7,081 Alico, Inc. $ 262,209
14,392 John B Sanfilippo & Son, Inc. 1,297,583
---------------
1,559,792
---------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 1.2%
33,746 Bioventus, Inc., Class A (a) 488,980
44,053 Co-Diagnostics, Inc. (a) (b) 393,393
70,328 Meridian Bioscience, Inc. (a) 1,434,691
---------------
2,317,064
---------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.1%
57,334 Cross Country Healthcare,
Inc. (a) 1,591,592
29,695 InfuSystem Holdings, Inc. (a) 505,706
---------------
2,097,298
---------------
HEALTH CARE TECHNOLOGY -- 0.4%
23,762 Computer Programs and Systems,
Inc. (a) 696,227
---------------
HOTELS, RESTAURANTS & LEISURE
-- 1.6%
32,122 Chuy's Holdings, Inc. (a) 967,515
54,902 Del Taco Restaurants, Inc. 683,530
31,433 El Pollo Loco Holdings, Inc. (a) 446,034
12,945 RCI Hospitality Holdings, Inc. 1,008,156
---------------
3,105,235
---------------
HOUSEHOLD DURABLES -- 4.0%
47,718 Beazer Homes USA, Inc. (a) 1,108,012
58,843 Cricut, Inc., Class A (a) (b) 1,299,842
29,337 Dream Finders Homes, Inc.,
Class A (a) (b) 570,605
35,649 Ethan Allen Interiors, Inc. 937,212
10,207 Flexsteel Industries, Inc. 274,160
7,716 Hovnanian Enterprises, Inc.,
Class A (a) 982,170
21,828 Lovesac (The) Co. (a) 1,446,323
21,254 Universal Electronics, Inc. (a) 866,100
---------------
7,484,424
---------------
HOUSEHOLD PRODUCTS -- 0.4%
15,814 Central Garden & Pet Co. (a) 832,291
---------------
INSURANCE -- 1.2%
3,679 National Western Life Group,
Inc., Class A 788,925
34,645 Tiptree, Inc. 479,140
29,055 Trean Insurance Group, Inc. (a) 258,880
45,504 Universal Insurance Holdings,
Inc. 773,568
---------------
2,300,513
---------------
INTERNET & DIRECT MARKETING
RETAIL -- 1.1%
21,193 Duluth Holdings, Inc.,
Class B (a) 321,710
43,117 Liquidity Services, Inc. (a) 952,023
33,973 PetMed Express, Inc. (b) 858,158
---------------
2,131,891
---------------
Page 22 See Notes to Financial Statements
<PAGE>
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
IT SERVICES -- 1.1%
19,090 Cass Information Systems, Inc. $ 750,619
57,222 Information Services Group, Inc. 436,032
53,869 International Money Express,
Inc. (a) 859,749
---------------
2,046,400
---------------
LEISURE PRODUCTS -- 0.7%
22,879 American Outdoor Brands, Inc. (a) 455,979
30,734 MasterCraft Boat Holdings,
Inc. (a) 870,694
---------------
1,326,673
---------------
MACHINERY -- 2.3%
25,595 Blue Bird Corp. (a) 400,306
36,873 Gorman-Rupp (The) Co. 1,642,692
15,806 Hyster-Yale Materials Handling,
Inc. 649,627
80,260 Wabash National Corp. 1,566,675
---------------
4,259,300
---------------
MARINE -- 0.1%
39,217 Pangaea Logistics Solutions Ltd. 148,240
---------------
MEDIA -- 0.4%
100,163 Entravision Communications
Corp., Class A 679,105
---------------
METALS & MINING -- 0.2%
15,094 Olympic Steel, Inc. 354,709
---------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS -- 2.5%
76,245 Ares Commercial Real Estate
Corp. 1,108,603
88,500 Ellington Financial, Inc. 1,512,465
71,296 Franklin BSP Realty Trust, Inc. 1,065,162
87,255 Granite Point Mortgage Trust,
Inc. 1,021,756
---------------
4,707,986
---------------
MULTI-UTILITIES -- 0.6%
25,911 Unitil Corp. 1,191,647
---------------
OIL, GAS & CONSUMABLE FUELS
-- 2.3%
5,226 Altus Midstream Co., Class A (b) 320,406
51,458 CONSOL Energy, Inc. (a) 1,168,611
44,929 Dorian LPG Ltd. 570,149
42,183 NextDecade Corp. (a) 120,222
8,524 REX American Resources
Corp. (a) 818,304
420,121 Uranium Energy Corp. (a) 1,407,405
---------------
4,405,097
---------------
PAPER & FOREST PRODUCTS -- 1.3%
72,227 Glatfelter Corp. 1,242,304
77,103 Resolute Forest Products, Inc. 1,177,363
---------------
2,419,667
---------------
PHARMACEUTICALS -- 2.0%
275,837 Antares Pharma, Inc. (a) 984,738
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
PHARMACEUTICALS (CONTINUED)
160,264 BioDelivery Sciences
International, Inc. (a) $ 496,819
56,077 Collegium Pharmaceutical,
Inc. (a) 1,047,518
39,277 Harrow Health, Inc. (a) (b) 339,353
32,992 Phibro Animal Health Corp.,
Class A 673,697
12,159 Rain Therapeutics, Inc. (a) (b) 156,608
---------------
3,698,733
---------------
PROFESSIONAL SERVICES -- 2.0%
12,174 Barrett Business Services, Inc. 840,737
12,048 CRA International, Inc. 1,124,801
58,448 Kelly Services, Inc., Class A 980,173
50,605 Resources Connection, Inc. 902,793
---------------
3,848,504
---------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 1.0%
2,358 American Realty Investors,
Inc. (a) 29,829
30,644 RE/MAX Holdings, Inc., Class A 934,335
24,994 RMR Group (The), Inc., Class A 866,792
---------------
1,830,956
---------------
ROAD & RAIL -- 0.6%
96,299 Daseke, Inc. (a) 966,842
40,091 US Xpress Enterprises, Inc.,
Class A (a) 235,334
---------------
1,202,176
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.7%
34,223 Alpha & Omega Semiconductor
Ltd. (a) 2,072,545
64,525 AXT, Inc. (a) 568,465
11,933 CyberOptics Corp. (a) 554,885
99,197 Photronics, Inc. (a) 1,869,863
---------------
5,065,758
---------------
SOFTWARE -- 1.3%
48,745 ChannelAdvisor Corp. (a) 1,203,027
10,162 CoreCard Corp. (a) (b) 394,286
34,623 eGain Corp. (a) 345,537
50,684 Rimini Street, Inc. (a) 302,583
21,872 Viant Technology, Inc.,
Class A (a) 212,268
---------------
2,457,701
---------------
SPECIALTY RETAIL -- 3.6%
34,021 Big 5 Sporting Goods Corp. (b) 646,739
14,724 Citi Trends, Inc. (a) 1,395,099
31,087 Conn's, Inc. (a) 731,166
24,136 Haverty Furniture Cos., Inc. 737,837
18,465 JOANN, Inc. (b) 191,667
13,045 Lazydays Holdings, Inc. (a) 280,989
15,513 OneWater Marine, Inc., Class A 945,828
28,400 Shoe Carnival, Inc. 1,109,872
70,921 Sportsman's Warehouse Holdings,
Inc. (a) 836,868
---------------
6,876,065
---------------
See Notes to Financial Statements Page 23
<PAGE>
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 0.3%
26,029 Turtle Beach Corp. (a) $ 579,405
---------------
TEXTILES, APPAREL & LUXURY
GOODS -- 1.2%
12,663 Lakeland Industries, Inc. (a) 274,787
26,776 Movado Group, Inc. 1,120,040
11,124 Rocky Brands, Inc. 442,735
41,391 Vera Bradley, Inc. (a) 352,238
---------------
2,189,800
---------------
THRIFTS & MORTGAGE FINANCE
-- 3.1%
14,981 Federal Agricultural Mortgage
Corp., Class C 1,856,595
33,462 Finance Of America Cos., Inc.,
Class A (a) (b) 132,844
121,744 Kearny Financial Corp. 1,613,108
70,742 Northfield Bancorp, Inc. 1,143,191
31,176 TrustCo Bank Corp. 1,038,473
---------------
5,784,211
---------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.9%
15,746 BlueLinx Holdings, Inc. (a) 1,507,837
32,623 Titan Machinery, Inc. (a) 1,099,069
11,343 Transcat, Inc. (a) 1,048,433
---------------
3,655,339
---------------
TOTAL COMMON STOCKS -- 99.9% 188,540,598
(Cost $163,899,975) ---------------
MONEY MARKET FUNDS -- 2.6%
4,807,787 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (c) (d) 4,807,787
(Cost $4,807,787) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.1%
$ 2,134,740 BNP Paribas S.A., 0.03% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$2,134,746. Collateralized by
U.S. Treasury Note, interest
rate of 1.50%, due 11/30/28.
The value of the collateral
including accrued interest is
$2,176,498. (d) 2,134,740
(Cost $2,134,740) ---------------
TOTAL INVESTMENTS -- 103.6% 195,483,125
(Cost $170,842,502) (e)
NET OTHER ASSETS AND
LIABILITIES -- (3.6)% (6,746,523)
---------------
NET ASSETS -- 100.0% $ 188,736,602
===============
(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 remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $6,687,020 and the
total value of the collateral held by the Fund is $6,942,527.
(c) Rate shown reflects yield as of December 31, 2021.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $172,198,053. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$29,890,266 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$6,605,194. The net unrealized appreciation was $23,285,072.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
-------------------------------------------------------------
Common
Stocks* $ 188,540,598 $ 188,540,598 $ -- $ --
Money Market
Funds 4,807,787 4,807,787 -- --
Repurchase
Agreements 2,134,740 -- 2,134,740 --
-------------------------------------------------------------
Total
Investments $ 195,483,125 $ 193,348,385 $ 2,134,740 $ --
=============================================================
* See Portfolio of Investments for industry breakout.
Page 24 See Notes to Financial Statements
<PAGE>
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
---------------------------------
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) $ 6,687,020
Non-cash Collateral(2) (6,687,020)
---------------
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, 2021, 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) $ 2,134,740
Non-cash Collateral(4) (2,134,740)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 25
<PAGE>
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.7%
BANKS -- 3.0%
61,625 Associated Banc-Corp. $ 1,392,109
15,366 Bank of Hawaii Corp. 1,287,056
156,744 Citizens Financial Group, Inc. 7,406,154
48,343 Comerica, Inc. 4,205,841
49,826 CVB Financial Corp. 1,066,775
142,629 F.N.B. Corp. 1,730,090
41,094 First Financial Bancorp 1,001,872
220,877 First Horizon Corp. 3,606,921
63,158 Fulton Financial Corp. 1,073,686
644,905 Huntington Bancshares, Inc. 9,944,435
93,926 Investors Bancorp, Inc. 1,422,979
362,483 KeyCorp 8,384,232
198,231 People's United Financial, Inc. 3,532,476
105,253 Umpqua Holdings Corp. 2,025,068
55,888 United Bankshares, Inc. 2,027,616
142,225 Valley National Bancorp 1,955,594
28,552 WesBanco, Inc. 999,034
---------------
53,061,938
---------------
BEVERAGES -- 4.5%
1,332,022 Coca-Cola (The) Co. 78,869,023
---------------
BIOTECHNOLOGY -- 8.9%
846,380 AbbVie, Inc. 114,599,852
573,368 Gilead Sciences, Inc. 41,632,251
---------------
156,232,103
---------------
CAPITAL MARKETS -- 2.9%
66,232 Apollo Global Management, Inc. 4,797,184
42,984 Ares Management Corp., Class A 3,493,310
68,027 Artisan Partners Asset Management,
Inc., Class A 3,240,806
248,045 Blackstone, Inc. 32,094,543
32,688 Federated Hermes, Inc. 1,228,415
106,153 Franklin Resources, Inc. 3,555,064
26,628 Moelis & Co., Class A 1,664,516
34,371 Virtu Financial, Inc., Class A 990,916
---------------
51,064,754
---------------
CHEMICALS -- 0.8%
148,154 LyondellBasell Industries N.V.,
Class A 13,664,243
---------------
COMMUNICATIONS EQUIPMENT
-- 0.2%
90,034 Juniper Networks, Inc. 3,215,114
---------------
CONSUMER FINANCE -- 0.1%
58,025 Navient Corp. 1,231,291
---------------
CONTAINERS & PACKAGING -- 0.5%
174,915 International Paper Co. 8,217,507
---------------
DIVERSIFIED CONSUMER SERVICES
-- 0.1%
89,048 H&R Block, Inc. 2,097,971
---------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 17.0%
7,194,722 AT&T, Inc. 176,990,161
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES (CONTINUED)
2,356,273 Verizon Communications, Inc. $ 122,431,945
---------------
299,422,106
---------------
ELECTRIC UTILITIES -- 10.0%
23,516 ALLETE, Inc. 1,560,287
208,515 American Electric Power Co., Inc. 18,551,580
27,014 Avangrid, Inc. 1,347,458
337,377 Duke Energy Corp. 35,390,847
168,904 Edison International 11,527,698
86,371 Entergy Corp. 9,729,693
88,076 Evergy, Inc. 6,042,894
314,304 Exelon Corp. 18,154,199
241,858 FirstEnergy Corp. 10,058,874
41,243 Hawaiian Electric Industries,
Inc. 1,711,585
92,034 NRG Energy, Inc. 3,964,825
102,161 OGE Energy Corp. 3,920,939
64,573 Pinnacle West Capital Corp. 4,558,208
33,752 Portland General Electric Co. 1,786,156
491,607 PPL Corp. 14,777,706
484,582 Southern (The) Co. 33,232,634
---------------
176,315,583
---------------
FOOD & STAPLES RETAILING -- 0.9%
317,364 Walgreens Boots Alliance, Inc. 16,553,706
---------------
FOOD PRODUCTS -- 1.5%
80,639 Campbell Soup Co. 3,504,571
72,184 Flowers Foods, Inc. 1,982,894
216,211 General Mills, Inc. 14,568,297
107,349 Kellogg Co. 6,915,423
---------------
26,971,185
---------------
GAS UTILITIES -- 0.5%
29,785 National Fuel Gas Co. 1,904,453
35,750 New Jersey Resources Corp. 1,467,895
19,751 ONE Gas, Inc. 1,532,480
61,090 South Jersey Industries, Inc. 1,595,671
22,514 Southwest Gas Holdings, Inc. 1,577,105
23,709 Spire, Inc. 1,546,301
---------------
9,623,905
---------------
HEALTH CARE PROVIDERS & SERVICES
-- 0.4%
132,515 Cardinal Health, Inc. 6,823,197
33,994 Patterson Cos., Inc. 997,724
---------------
7,820,921
---------------
HOUSEHOLD DURABLES -- 0.2%
171,181 Newell Brands, Inc. 3,738,593
---------------
HOUSEHOLD PRODUCTS -- 1.0%
125,920 Kimberly-Clark Corp. 17,996,486
---------------
INSURANCE -- 2.3%
27,867 Axis Capital Holdings Ltd. 1,517,915
100,198 Fidelity National Financial, Inc. 5,228,332
14,457 Mercury General Corp. 767,088
114,218 Old Republic International Corp. 2,807,478
100,147 Principal Financial Group, Inc. 7,243,633
188,933 Prudential Financial, Inc. 20,450,108
Page 26 See Notes to Financial Statements
<PAGE>
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
114,572 Unum Group $ 2,815,034
---------------
40,829,588
---------------
IT SERVICES -- 4.3%
536,500 International Business Machines
Corp. 71,708,590
242,232 Western Union (The) Co. 4,321,419
---------------
76,030,009
---------------
MEDIA -- 0.7%
131,671 Interpublic Group of (The) Cos.,
Inc. 4,931,079
96,295 Omnicom Group, Inc. 7,055,535
---------------
11,986,614
---------------
METALS & MINING -- 1.5%
350,143 Newmont Corp. 21,715,869
63,309 Southern Copper Corp. 3,906,798
---------------
25,622,667
---------------
MULTI-UTILITIES -- 3.3%
32,664 Avista Corp. 1,387,893
25,244 Black Hills Corp. 1,781,469
150,823 Consolidated Edison, Inc. 12,868,218
62,670 DTE Energy Co. 7,491,572
150,181 NiSource, Inc. 4,146,498
25,337 NorthWestern Corp. 1,448,263
181,145 Public Service Enterprise Group,
Inc. 12,087,806
125,050 Sempra Energy 16,541,614
---------------
57,753,333
---------------
OIL, GAS & CONSUMABLE FUELS
-- 9.5%
982,302 Chevron Corp. 115,273,140
373,188 ConocoPhillips 26,936,710
69,240 Devon Energy Corp. 3,050,022
1,455,038 Kinder Morgan, Inc. 23,076,902
---------------
168,336,774
---------------
PHARMACEUTICALS -- 10.8%
1,009,109 Merck & Co., Inc. 77,338,114
1,910,058 Pfizer, Inc. 112,788,925
---------------
190,127,039
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 4.3%
112,670 Broadcom, Inc. 74,971,745
---------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 0.4%
451,619 Hewlett Packard Enterprise Co. 7,122,032
---------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.1%
133,381 Hanesbrands, Inc. 2,230,130
---------------
THRIFTS & MORTGAGE FINANCE
-- 0.2%
288,345 New York Community Bancorp,
Inc. 3,520,692
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
TOBACCO -- 9.7%
1,673,807 Altria Group, Inc. $ 79,321,714
973,095 Philip Morris International, Inc. 92,444,025
---------------
171,765,739
---------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.1%
19,082 MSC Industrial Direct Co., Inc.,
Class A 1,604,033
---------------
TOTAL INVESTMENTS -- 99.7% 1,757,996,824
(Cost $1,527,933,885) (a)
NET OTHER ASSETS AND
LIABILITIES -- 0.3% 4,912,790
---------------
NET ASSETS -- 100.0% $ 1,762,909,614
===============
(a) Aggregate cost for federal income tax purposes is $1,567,952,333. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$270,798,552 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$80,754,061. The net unrealized appreciation was $190,044,491.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
-----------------------------------------------
Common Stocks* $ 1,757,996,824 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 27
<PAGE>
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 2.3%
201,244 General Dynamics Corp. $ 41,953,337
---------------
AIR FREIGHT & LOGISTICS -- 0.4%
82,625 GXO Logistics, Inc. (a) 7,504,829
---------------
AUTOMOBILES -- 1.8%
321,166 Rivian Automotive, Inc.,
Class A (a) (b) 33,301,703
---------------
BANKS -- 1.1%
838,800 KeyCorp 19,401,444
---------------
BEVERAGES -- 2.0%
1,021,963 Keurig Dr Pepper, Inc. 37,669,556
---------------
BIOTECHNOLOGY -- 2.5%
106,118 Cerevel Therapeutics Holdings,
Inc. (a) 3,440,345
204,347 Horizon Therapeutics PLC (a) 22,020,433
53,637 Intellia Therapeutics, Inc. (a) 6,342,039
104,300 Legend Biotech Corp., ADR (a) 4,861,423
32,459 United Therapeutics Corp. (a) 7,013,741
32,653 Zentalis Pharmaceuticals,
Inc. (a) 2,744,811
---------------
46,422,792
---------------
BUILDING PRODUCTS -- 2.5%
138,019 Builders FirstSource, Inc. (a) 11,829,608
624,573 Carrier Global Corp. 33,876,840
---------------
45,706,448
---------------
CAPITAL MARKETS -- 4.8%
116,327 Coinbase Global, Inc.,
Class A (a) 29,357,445
130,943 Focus Financial Partners, Inc.,
Class A (a) 7,819,916
519,677 Tradeweb Markets, Inc., Class A 52,040,455
---------------
89,217,816
---------------
CHEMICALS -- 3.3%
763,168 Corteva, Inc. 36,082,583
399,797 Dow, Inc. 22,676,486
116,453 Livent Corp. (a) 2,839,124
---------------
61,598,193
---------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.2%
120,636 Driven Brands Holdings, Inc. (a) 4,055,782
---------------
COMMUNICATIONS EQUIPMENT
-- 0.3%
52,109 Lumentum Holdings, Inc. (a) 5,511,569
---------------
CONSTRUCTION & ENGINEERING
-- 0.5%
241,250 WillScot Mobile Mini Holdings
Corp. (a) 9,852,650
---------------
CONSUMER FINANCE -- 0.5%
59,069 Upstart Holdings, Inc. (a) 8,937,140
---------------
CONTAINERS & PACKAGING -- 0.1%
58,666 Ranpak Holdings Corp. (a) 2,204,668
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.5%
291,727 Equitable Holdings, Inc. $ 9,565,728
---------------
ELECTRIC UTILITIES -- 0.9%
245,401 Evergy, Inc. 16,836,963
---------------
ELECTRICAL EQUIPMENT -- 0.6%
41,758 Atkore, Inc. (a) 4,643,072
270,757 Vertiv Holdings Co. 6,760,802
---------------
11,403,874
---------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 2.3%
209,762 Keysight Technologies, Inc. (a) 43,317,951
---------------
ENERGY EQUIPMENT & SERVICES
-- 0.2%
218,456 ChampionX Corp. (a) 4,414,996
---------------
ENTERTAINMENT -- 4.1%
496,958 Endeavor Group Holdings, Inc.,
Class A (a) (b) 17,338,864
458,900 ROBLOX Corp., Class A (a) 47,340,124
259,587 Warner Music Group Corp.,
Class A 11,208,967
---------------
75,887,955
---------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 3.1%
157,214 Digital Realty Trust, Inc. 27,806,440
92,329 Phillips Edison & Co., Inc. 3,050,550
313,716 Welltower, Inc. 26,907,422
---------------
57,764,412
---------------
FOOD & STAPLES RETAILING -- 1.6%
336,670 Albertsons Cos., Inc., Class A 10,164,067
293,981 BJ's Wholesale Club Holdings,
Inc. (a) 19,687,908
---------------
29,851,975
---------------
FOOD PRODUCTS -- 0.4%
166,112 Simply Good Foods (The) Co. (a) 6,905,276
---------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 3.3%
522,216 Alcon, Inc. (b) 45,495,458
145,378 Envista Holdings Corp. (a) 6,550,733
170,734 Ortho Clinical Diagnostics
Holdings PLC (a) 3,652,000
25,445 Shockwave Medical, Inc. (a) 4,537,607
---------------
60,235,798
---------------
HEALTH CARE PROVIDERS & SERVICES
-- 0.2%
65,176 Progyny, Inc. (a) 3,281,612
---------------
HOTELS, RESTAURANTS & LEISURE
-- 5.6%
457,943 Airbnb, Inc., Class A (a) 76,242,930
109,212 Expedia Group, Inc. (a) 19,736,793
139,144 Life Time Group Holdings,
Inc. (a) 2,394,668
67,155 Wyndham Hotels & Resorts, Inc. 6,020,446
---------------
104,394,837
---------------
Page 28 See Notes to Financial Statements
<PAGE>
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOUSEHOLD DURABLES -- 0.2%
146,600 Sonos, Inc. (a) $ 4,368,680
---------------
INSURANCE -- 0.6%
80,876 BRP Group, Inc., Class A (a) 2,920,432
186,717 Ryan Specialty Group Holdings,
Inc., Class A (a) 7,534,031
---------------
10,454,463
---------------
INTERACTIVE MEDIA & SERVICES
-- 2.9%
754,147 Snap, Inc., Class A (a) 35,467,533
290,610 ZoomInfo Technologies, Inc. (a) 18,657,162
---------------
54,124,695
---------------
INTERNET & DIRECT MARKETING
RETAIL -- 1.4%
148,349 DoorDash, Inc., Class A (a) 22,089,166
52,542 Revolve Group, Inc. (a) 2,944,454
---------------
25,033,620
---------------
IT SERVICES -- 3.1%
231,892 Cloudflare, Inc., Class A (a) 30,493,798
157,359 DigitalOcean Holdings, Inc. (a) 12,640,649
58,787 Grid Dynamics Holdings, Inc. (a) 2,232,142
436,056 Switch, Inc., Class A 12,488,644
---------------
57,855,233
---------------
LEISURE PRODUCTS -- 0.6%
167,265 Hayward Holdings, Inc. (a) 4,387,361
85,275 YETI Holdings, Inc. (a) 7,063,328
---------------
11,450,689
---------------
LIFE SCIENCES TOOLS & SERVICES
-- 4.7%
80,510 10X Genomics, Inc., Class A (a) 11,992,770
1,229,898 Avantor, Inc. (a) 51,827,902
185,730 Maravai LifeSciences Holdings,
Inc., Class A (a) 7,782,087
71,232 Medpace Holdings, Inc. (a) 15,502,932
---------------
87,105,691
---------------
MACHINERY -- 1.7%
52,061 Hillenbrand, Inc. 2,706,651
336,758 Otis Worldwide Corp. 29,321,519
---------------
32,028,170
---------------
METALS & MINING -- 0.3%
128,107 MP Materials Corp. (a) 5,818,620
---------------
OIL, GAS & CONSUMABLE FUELS
-- 3.6%
182,769 Cheniere Energy, Inc. 18,536,432
166,555 Magnolia Oil & Gas Corp.,
Class A 3,142,893
175,953 Pioneer Natural Resources Co. 32,002,331
748,965 Range Resources Corp. (a) 13,354,046
---------------
67,035,702
---------------
PERSONAL PRODUCTS -- 0.3%
215,698 Beauty Health (The) Co. (a) 5,211,264
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
PROFESSIONAL SERVICES -- 1.9%
256,576 Jacobs Engineering Group, Inc. $ 35,723,076
---------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 1.4%
161,059 Cushman & Wakefield PLC (a) 3,581,952
81,842 Jones Lang LaSalle, Inc. (a) 22,043,324
---------------
25,625,276
---------------
ROAD & RAIL -- 3.1%
333,789 Hertz Global Holdings,
Inc. (a) (b) 8,341,387
1,188,551 Uber Technologies, Inc. (a) 49,835,943
---------------
58,177,330
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 11.7%
136,724 Allegro MicroSystems, Inc. (a) 4,946,675
2,122,270 Marvell Technology, Inc. 185,677,402
310,513 ON Semiconductor Corp. (a) 21,090,043
14,813 SiTime Corp. (a) 4,333,395
---------------
216,047,515
---------------
SOFTWARE -- 14.6%
269,293 AppLovin Corp., Class A (a) (b) 25,383,558
134,366 Asana, Inc., Class A (a) 10,016,985
73,913 Bill.com Holdings, Inc. (a) 18,415,424
190,614 Confluent, Inc., Class A (a) (b) 14,532,411
165,290 Crowdstrike Holdings, Inc.,
Class A (a) 33,843,128
224,879 Datadog, Inc., Class A (a) 40,053,199
71,308 DocuSign, Inc. (a) 10,860,922
256,822 Dynatrace, Inc. (a) 15,499,208
1,083,696 Palantir Technologies, Inc.,
Class A (a) 19,734,104
95,093 Procore Technologies, Inc. (a) 7,604,587
68,115 Sprout Social, Inc., Class A (a) 6,177,349
94,707 Verint Systems, Inc. (a) 4,973,065
171,819 Zoom Video Communications,
Inc., Class A (a) 31,599,232
100,962 Zscaler, Inc. (a) 32,442,119
---------------
271,135,291
---------------
SPECIALTY RETAIL -- 0.5%
191,428 Academy Sports & Outdoors,
Inc. (a) 8,403,689
---------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 1.7%
550,552 Dell Technologies, Inc.,
Class C (a) 30,924,506
---------------
TEXTILES, APPAREL & LUXURY
GOODS -- 0.5%
41,311 Kontoor Brands, Inc. 2,117,189
289,758 Levi Strauss & Co., Class A 7,252,642
---------------
9,369,831
---------------
TOTAL COMMON STOCKS -- 99.9% 1,853,092,645
(Cost $1,506,472,415) ---------------
See Notes to Financial Statements Page 29
<PAGE>
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.3%
$ 2,969,375 Bank of America Corp., 0.05% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$2,969,379. Collateralized by
U.S. Treasury Securities,
interest rates of 0.00% to
0.88%, due 07/15/2027 to
11/15/2045. The value of the
collateral including accrued
interest is $3,028,763. (d) $ 2,969,375
20,293,609 Citigroup, Inc., 0.05% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$20,293,637. Collateralized by
U.S. Treasury Securities,
interest rates of 0.00% to
2.38%, due 01/04/2022 to
11/15/2051. The value of the
collateral including accrued
interest is $20,699,482. (d) 20,293,609
20,293,609 JPMorgan Chase & Co., 0.05% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$20,293,637. Collateralized by
U.S. Treasury Securities,
interest rates of 0.00% to
4.38%, due 01/18/2022 to
05/15/2040. The value of the
collateral including accrued
interest is $20,699,481. (d) 20,293,609
---------------
TOTAL REPURCHASE AGREEMENTS
-- 2.3% 43,556,593
(Cost $43,556,593) ---------------
TOTAL INVESTMENTS -- 102.2% 1,896,649,238
(Cost $1,550,029,008) (e)
NET OTHER ASSETS AND
LIABILITIES -- (2.2)% (40,944,220)
---------------
NET ASSETS -- 100.0% $ 1,855,705,018
===============
(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 remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $42,850,919 and the
total value of the collateral held by the Fund is $43,556,593.
(c) Rate shown reflects yield as of December 31, 2021.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $1,553,300,522. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$389,481,914 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$46,133,198. The net unrealized appreciation was $343,348,716.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
-------------------------------------------------------------
Common
Stocks* $ 1,853,092,645 $ 1,853,092,645 $ -- $ --
Repurchase
Agreements 43,556,593 -- 43,556,593 --
-------------------------------------------------------------
Total
Investments $ 1,896,649,238 $ 1,853,092,645 $ 43,556,593 $ --
=============================================================
* See Portfolio of Investments for industry breakout.
Page 30 See Notes to Financial Statements
<PAGE>
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
---------------------------------
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) $ 42,850,919
Non-cash Collateral(2) (42,850,919)
---------------
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, 2021, 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) $ 43,556,593
Non-cash Collateral(4) (43,556,593)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 31
<PAGE>
FIRST TRUST NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX FUND (FBT)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 100.0%
BIOTECHNOLOGY -- 79.9%
3,322,115 ACADIA Pharmaceuticals,
Inc. (a) $ 77,538,164
1,256,829 Agios Pharmaceuticals, Inc. (a) 41,311,969
1,836,772 Alkermes PLC (a) 42,723,317
278,718 Alnylam Pharmaceuticals, Inc. (a) 47,264,998
280,017 Amgen, Inc. 62,995,425
206,875 Biogen, Inc. (a) 49,633,450
766,475 BioMarin Pharmaceutical, Inc. (a) 67,718,066
235,006 BioNTech SE, ADR (a) 60,584,547
5,157,063 Bluebird Bio, Inc. (a) 51,519,059
587,733 Exact Sciences Corp. (a) 45,743,259
2,666,002 Exelixis, Inc. (a) 48,734,517
5,268,816 FibroGen, Inc. (a) 74,290,306
859,958 Gilead Sciences, Inc. 62,441,550
4,090,756 Grifols S.A., ADR 45,939,190
887,225 Incyte Corp. (a) 65,122,315
1,657,163 Ionis Pharmaceuticals, Inc. (a) 50,427,470
179,609 Moderna, Inc. (a) 45,617,094
556,571 Neurocrine Biosciences, Inc. (a) 47,403,152
105,169 Regeneron Pharmaceuticals,
Inc. (a) 66,416,327
690,737 Sarepta Therapeutics, Inc. (a) 62,200,867
336,712 Seagen, Inc. (a) 52,055,675
727,091 Ultragenyx Pharmaceutical,
Inc. (a) 61,141,082
310,745 United Therapeutics Corp. (a) 67,145,780
319,833 Vertex Pharmaceuticals, Inc. (a) 70,235,327
---------------
1,366,202,906
---------------
LIFE SCIENCES TOOLS & SERVICES
-- 17.4%
116,854 Bio-Techne Corp. 60,453,248
144,120 Charles River Laboratories
International, Inc. (a) 54,301,534
141,956 Illumina, Inc. (a) 54,005,741
233,708 IQVIA Holdings, Inc. (a) 65,938,375
1,126,559 QIAGEN N.V. (a) 62,614,149
---------------
297,313,047
---------------
PHARMACEUTICALS -- 2.7%
3,360,634 Nektar Therapeutics (a) 45,402,165
---------------
TOTAL INVESTMENTS -- 100.0% 1,708,918,118
(Cost $1,749,071,411) (b)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (161,570)
---------------
NET ASSETS -- 100.0% $1,708,756,548
===============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $1,797,732,834. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$289,638,816 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$378,453,532. The net unrealized depreciation was $88,814,716.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
-----------------------------------------------
Common Stocks* $ 1,708,918,118 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
Page 32 See Notes to Financial Statements
<PAGE>
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 100.0%
COMMUNICATIONS EQUIPMENT
-- 10.6%
1,483,365 Arista Networks, Inc. (a) $ 213,233,719
1,792,320 Ciena Corp. (a) 137,954,870
8,182,333 Cisco Systems, Inc. 518,514,442
5,254,644 CommScope Holding Co., Inc. (a) 58,011,270
3,591,420 Juniper Networks, Inc. 128,249,608
---------------
1,055,963,909
---------------
ENTERTAINMENT -- 4.8%
797,035 Netflix, Inc. (a) 480,165,766
---------------
HEALTH CARE TECHNOLOGY -- 3.3%
1,405,193 Teladoc Health, Inc. (a) 129,024,821
786,794 Veeva Systems, Inc., Class A (a) 201,010,131
---------------
330,034,952
---------------
HOTELS, RESTAURANTS & LEISURE
-- 4.3%
1,489,438 Airbnb, Inc., Class A (a) 247,976,533
1,023,452 Expedia Group, Inc. (a) 184,958,245
---------------
432,934,778
---------------
INTERACTIVE MEDIA & SERVICES
-- 27.0%
178,376 Alphabet, Inc., Class A (a) 516,762,407
165,804 Alphabet, Inc., Class C (a) 479,768,796
1,594,386 Match Group, Inc. (a) 210,857,549
2,218,586 Meta Platforms, Inc., Class A (a) 746,221,401
4,152,326 Pinterest, Inc., Class A (a) 150,937,050
4,903,634 Snap, Inc., Class A (a) 230,617,907
4,617,242 Twitter, Inc. (a) 199,557,199
2,393,762 ZoomInfo Technologies, Inc. (a) 153,679,521
---------------
2,688,401,830
---------------
INTERNET & DIRECT MARKETING
RETAIL -- 14.4%
274,563 Amazon.com, Inc. (a) 915,486,393
3,363,237 eBay, Inc. 223,655,261
795,248 Etsy, Inc. (a) 174,111,597
640,657 Wayfair, Inc., Class A (a) (b) 121,705,610
---------------
1,434,958,861
---------------
IT SERVICES -- 14.8%
1,348,082 Akamai Technologies, Inc. (a) 157,779,517
1,438,537 Cloudflare, Inc., Class A (a) 189,167,615
1,836,644 Fastly, Inc., Class A (a) (b) 65,109,030
1,711,242 GoDaddy, Inc., Class A (a) 145,215,996
866,054 Okta, Inc. (a) 194,143,325
2,322,381 PayPal Holdings, Inc. (a) 437,954,609
853,630 Snowflake, Inc., Class A (a) 289,167,163
---------------
1,478,537,255
---------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 1.3%
357,934 Zillow Group, Inc., Class A (a) 22,270,654
1,655,937 Zillow Group, Inc., Class C (a) 105,731,577
---------------
128,002,231
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
SOFTWARE -- 19.5%
2,815,723 Box, Inc., Class A (a) $ 73,743,786
1,393,056 Citrix Systems, Inc. 131,769,167
739,137 Coupa Software, Inc. (a) 116,820,603
1,303,246 Datadog, Inc., Class A (a) 232,121,145
1,253,494 DocuSign, Inc. (a) 190,919,671
3,891,508 Dropbox, Inc., Class A (a) 95,497,606
2,855,998 Nutanix, Inc., Class A (a) 90,992,096
1,821,551 salesforce.com, Inc. (a) 462,910,756
4,054,539 Vonage Holdings Corp. (a) 84,293,866
901,672 Workday, Inc., Class A (a) 246,318,757
1,161,578 Zoom Video Communications,
Inc., Class A (a) 213,625,810
---------------
1,939,013,263
---------------
TOTAL COMMON STOCKS
-- 100.0% 9,968,012,845
(Cost $8,071,072,721) ---------------
MONEY MARKET FUNDS -- 0.2%
15,988,251 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (c) (d) 15,988,251
6,346,598 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (c) 6,346,598
---------------
TOTAL MONEY MARKET FUNDS
-- 0.2% 22,334,849
(Cost $22,334,849) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.1%
$ 7,099,059 BNP Paribas S.A., 0.03% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$7,099,077. Collateralized by
U.S. Treasury Note, interest
rate of 1.50%, due 11/30/28.
The value of the collateral
including accrued interest
is $7,237,923. (d) 7,099,059
(Cost $7,099,059) ---------------
TOTAL INVESTMENTS -- 100.3% 9,997,446,753
(Cost $8,100,506,629) (e)
NET OTHER ASSETS AND
LIABILITIES -- (0.3)% (29,873,498)
---------------
NET ASSETS -- 100.0% $ 9,967,573,255
===============
(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 remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $19,577,306 and the
total value of the collateral held by the Fund is $23,087,310.
See Notes to Financial Statements Page 33
<PAGE>
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
(c) Rate shown reflects yield as of December 31, 2021.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $8,218,804,824. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$2,593,782,461 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$815,140,532. The net unrealized appreciation was $1,778,641,929.
------------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
-------------------------------------------------------------
Common
Stocks* $ 9,968,012,845 $ 9,968,012,845 $ -- $ --
Money Market
Funds 22,334,849 22,334,849 -- --
Repurchase
Agreements 7,099,059 -- 7,099,059 --
-------------------------------------------------------------
Total
Investments $ 9,997,446,753 $ 9,990,347,694 $ 7,099,059 $ --
=============================================================
* 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) $ 19,577,306
Non-cash Collateral(2) (19,577,306)
---------------
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, 2021, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 7,099,059
Non-cash Collateral(4) (7,099,059)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 34 See Notes to Financial Statements
<PAGE>
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 5.4%
840,771 General Dynamics Corp. $ 175,275,530
478,450 Lockheed Martin Corp. 170,045,915
442,460 Northrop Grumman Corp. 171,262,992
---------------
516,584,437
---------------
AIR FREIGHT & LOGISTICS -- 2.1%
1,507,248 Expeditors International of
Washington, Inc. 202,408,334
---------------
BEVERAGES -- 8.1%
2,559,770 Brown-Forman Corp., Class B 186,504,842
3,210,931 Coca-Cola (The) Co. 190,119,224
2,044,066 Monster Beverage Corp. (a) 196,312,099
1,101,508 PepsiCo, Inc. 191,342,955
---------------
764,279,120
---------------
BIOTECHNOLOGY -- 2.0%
841,665 Amgen, Inc. 189,349,375
---------------
CAPITAL MARKETS -- 5.8%
471,286 Moody's Corp. 184,074,886
861,649 Nasdaq, Inc. 180,954,906
394,057 S&P Global, Inc. 185,967,320
---------------
550,997,112
---------------
CHEMICALS -- 3.9%
597,645 Air Products and Chemicals, Inc. 181,839,468
794,387 Ecolab, Inc. 186,355,246
---------------
368,194,714
---------------
COMMUNICATIONS EQUIPMENT
-- 2.1%
3,166,181 Cisco Systems, Inc. 200,640,890
---------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 6.4%
2,269,779 Amphenol Corp., Class A 198,514,871
1,036,879 Keysight Technologies, Inc. (a) 214,125,882
1,187,587 TE Connectivity Ltd. 191,605,287
---------------
604,246,040
---------------
FOOD & STAPLES RETAILING -- 2.3%
386,678 Costco Wholesale Corp. 219,517,101
---------------
FOOD PRODUCTS -- 2.0%
2,908,251 Mondelez International, Inc.,
Class A 192,846,124
---------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 4.1%
1,488,906 Abbott Laboratories 209,548,630
656,842 Stryker Corp. 175,652,688
---------------
385,201,318
---------------
HEALTH CARE PROVIDERS & SERVICES
-- 4.3%
644,080 Laboratory Corp. of America
Holdings (a) 202,376,377
408,652 UnitedHealth Group, Inc. 205,200,515
---------------
407,576,892
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
HOUSEHOLD DURABLES -- 1.6%
1,120,421 Garmin Ltd. $ 152,567,728
---------------
HOUSEHOLD PRODUCTS -- 4.1%
2,294,177 Colgate-Palmolive Co. 195,785,065
1,211,265 Procter & Gamble (The) Co. 198,138,729
---------------
393,923,794
---------------
INDUSTRIAL CONGLOMERATES -- 3.5%
961,480 3M Co. 170,787,692
792,549 Honeywell International, Inc. 165,254,392
---------------
336,042,084
---------------
INSURANCE -- 5.5%
1,380,013 Allstate (The) Corp. 162,358,529
132,578 Markel Corp. (a) 163,601,252
1,917,063 Progressive (The) Corp. 196,786,517
---------------
522,746,298
---------------
INTERACTIVE MEDIA & SERVICES
-- 1.9%
61,879 Alphabet, Inc., Class A (a) 179,265,938
---------------
IT SERVICES -- 10.3%
511,766 Accenture PLC, Class A 212,152,595
821,355 Automatic Data Processing, Inc. 202,529,716
2,219,096 Cognizant Technology Solutions
Corp., Class A 196,878,197
1,468,162 Paychex, Inc. 200,404,113
757,311 Visa, Inc., Class A 164,116,867
---------------
976,081,488
---------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.9%
1,141,327 Agilent Technologies, Inc. 182,212,856
---------------
MACHINERY -- 4.0%
2,407,533 Fortive Corp. 183,670,692
782,801 Illinois Tool Works, Inc. 193,195,287
---------------
376,865,979
---------------
MULTILINE RETAIL -- 1.7%
711,941 Target Corp. 164,771,625
---------------
PHARMACEUTICALS -- 6.0%
1,084,509 Johnson & Johnson 185,526,955
2,233,260 Merck & Co., Inc. 171,157,046
865,055 Zoetis, Inc. 211,099,372
---------------
567,783,373
---------------
ROAD & RAIL -- 2.1%
776,920 Union Pacific Corp. 195,729,456
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.4%
347,606 Broadcom, Inc. 231,300,508
---------------
SOFTWARE -- 4.2%
316,811 Intuit, Inc. 203,779,172
575,032 Microsoft Corp. 193,394,762
---------------
397,173,934
---------------
SPECIALTY RETAIL -- 2.2%
499,218 Home Depot (The), Inc. 207,180,462
---------------
See Notes to Financial Statements Page 35
<PAGE>
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
DESCRIPTION VALUE
--------------------------------------------------------------
TOTAL INVESTMENTS -- 99.9% $ 9,485,486,980
(Cost $7,936,675,780) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 6,445,218
---------------
NET ASSETS -- 100.0% $ 9,491,932,198
===============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $7,963,288,538. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,605,196,189 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$82,997,747. The net unrealized appreciation was $1,522,198,442.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
-----------------------------------------------
Common Stocks* $ 9,485,486,980 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
Page 36 See Notes to Financial Statements
<PAGE>
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 2.9%
363,069 Elbit Systems Ltd. $ 63,221,205
298,922 General Dynamics Corp. 62,316,269
294,369 L3Harris Technologies, Inc. 62,771,246
176,755 Lockheed Martin Corp. 62,820,494
161,153 Northrop Grumman Corp. 62,377,492
726,363 Raytheon Technologies Corp. 62,510,800
---------------
376,017,506
---------------
AIR FREIGHT & LOGISTICS -- 1.0%
592,595 C.H. Robinson Worldwide, Inc. 63,781,000
287,830 United Parcel Service, Inc.,
Class B 61,693,482
---------------
125,474,482
---------------
AUTO COMPONENTS -- 0.5%
1,777,121 Gentex Corp. 61,932,667
---------------
AUTOMOBILES -- 0.5%
333,050 Toyota Motor Corp., ADR 61,714,165
---------------
BANKS -- 3.8%
575,092 Bank of Montreal 61,948,910
873,146 Bank of Nova Scotia (The) 62,595,837
527,066 Canadian Imperial Bank of
Commerce 61,434,813
906,112 Commerce Bancshares, Inc. 62,286,139
391,471 JPMorgan Chase & Co. 61,989,433
586,366 Royal Bank of Canada 62,236,887
809,658 Toronto-Dominion (The) Bank 62,084,575
1,091,200 U.S. Bancorp 61,292,704
---------------
495,869,298
---------------
BEVERAGES -- 1.9%
1,055,664 Coca-Cola (The) Co. 62,505,865
250,874 Constellation Brands, Inc.,
Class A 62,961,848
281,435 Diageo PLC, ADR 61,955,101
361,082 PepsiCo, Inc. 62,723,554
---------------
250,146,368
---------------
BIOTECHNOLOGY -- 0.9%
274,976 Amgen, Inc. 61,861,351
849,661 Gilead Sciences, Inc. 61,693,885
---------------
123,555,236
---------------
BUILDING PRODUCTS -- 1.0%
730,986 A.O. Smith Corp. 62,755,148
776,462 Johnson Controls International
PLC 63,134,125
---------------
125,889,273
---------------
CAPITAL MARKETS -- 4.2%
1,058,015 Bank of New York Mellon (The)
Corp. 61,449,511
67,109 BlackRock, Inc. 61,442,316
476,999 Cboe Global Markets, Inc. 62,200,670
269,866 CME Group, Inc. 61,653,586
159,552 Goldman Sachs Group (The), Inc. 61,036,618
586,977 Houlihan Lokey, Inc. 60,763,859
616,681 Morgan Stanley 60,533,407
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
CAPITAL MARKETS (CONTINUED)
998,629 SEI Investments Co. $ 60,856,451
310,635 T. Rowe Price Group, Inc. 61,083,267
---------------
551,019,685
---------------
CHEMICALS -- 2.9%
204,867 Air Products and Chemicals, Inc. 62,332,833
426,386 International Flavors &
Fragrances, Inc. 64,235,051
180,289 Linde PLC 62,457,518
178,698 NewMarket Corp. 61,243,379
364,767 PPG Industries, Inc. 62,900,422
624,650 Sensient Technologies Corp. 62,502,479
---------------
375,671,682
---------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.5%
451,012 Republic Services, Inc. 62,893,624
1,870,533 Rollins, Inc. 63,990,934
378,017 Waste Management, Inc. 63,091,037
---------------
189,975,595
---------------
COMMUNICATIONS EQUIPMENT
-- 1.0%
976,268 Cisco Systems, Inc. 61,866,103
1,763,458 Juniper Networks, Inc. 62,973,085
---------------
124,839,188
---------------
CONTAINERS & PACKAGING -- 2.4%
516,434 AptarGroup, Inc. 63,252,836
291,360 Avery Dennison Corp. 63,099,835
465,522 Packaging Corp. of America 63,380,820
1,478,381 Silgan Holdings, Inc. 63,333,842
1,085,651 Sonoco Products Co. 62,848,337
---------------
315,915,670
---------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.9%
2,498,583 AT&T, Inc. 61,465,142
1,196,196 BCE, Inc. 62,250,040
2,638,045 TELUS Corp. 62,178,720
1,175,303 Verizon Communications, Inc. 61,068,744
---------------
246,962,646
---------------
ELECTRIC UTILITIES -- 10.8%
953,415 ALLETE, Inc. 63,259,085
1,032,082 Alliant Energy Corp. 63,442,081
711,013 American Electric Power Co., Inc. 63,258,827
1,277,648 Avangrid, Inc. 63,729,082
599,424 Duke Energy Corp. 62,879,578
558,649 Entergy Corp. 62,931,810
917,525 Evergy, Inc. 62,951,390
693,955 Eversource Energy 63,136,026
1,129,623 Exelon Corp. 65,247,024
1,301,825 Fortis, Inc. 62,839,093
1,521,629 Hawaiian Electric Industries,
Inc. 63,147,603
561,633 IDACORP, Inc. 63,638,635
780,479 MGE Energy, Inc. 64,194,398
678,005 NextEra Energy, Inc. 63,298,547
1,650,626 OGE Energy Corp. 63,351,026
899,792 Otter Tail Corp. 64,263,145
See Notes to Financial Statements Page 37
<PAGE>
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
898,747 Pinnacle West Capital Corp. $ 63,442,551
1,371,017 PNM Resources, Inc. 62,532,085
1,197,353 Portland General Electric Co. 63,363,921
2,096,679 PPL Corp. 63,026,171
924,649 Southern (The) Co. 63,412,428
926,592 Xcel Energy, Inc. 62,730,278
---------------
1,394,074,784
---------------
ELECTRICAL EQUIPMENT -- 1.9%
1,617,845 ABB Ltd., ADR 61,753,143
671,739 Emerson Electric Co. 62,451,575
297,096 Hubbell, Inc. 61,876,184
177,761 Rockwell Automation, Inc. 62,011,925
---------------
248,092,827
---------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.4%
1,499,151 Avnet, Inc. 61,809,996
1,656,807 Corning, Inc. 61,682,925
380,337 TE Connectivity Ltd. 61,363,571
---------------
184,856,492
---------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 4.4%
281,306 Alexandria Real Estate Equities,
Inc. 62,719,986
216,666 American Tower Corp. 63,374,805
350,670 Camden Property Trust 62,657,716
302,393 Crown Castle International Corp. 63,121,515
962,910 Duke Realty Corp. 63,205,412
275,634 Mid-America Apartment
Communities, Inc. 63,241,465
373,229 Prologis, Inc. 62,836,834
167,885 Public Storage 62,883,006
872,782 Realty Income Corp. 62,482,463
---------------
566,523,202
---------------
FOOD & STAPLES RETAILING -- 0.5%
439,862 Walmart, Inc. 63,643,633
---------------
FOOD PRODUCTS -- 5.8%
937,116 Archer-Daniels-Midland Co. 63,339,670
1,467,878 Campbell Soup Co. 63,793,978
937,256 General Mills, Inc. 63,152,309
326,071 Hershey (The) Co. 63,084,956
1,290,428 Hormel Foods Corp. 62,985,791
646,224 Ingredion, Inc. 62,451,087
393,459 J & J Snack Foods Corp. 62,150,784
462,570 J.M. Smucker (The) Co. 62,826,257
978,732 Kellogg Co. 63,049,915
380,733 Lancaster Colony Corp. 63,049,385
657,760 McCormick & Co., Inc. 63,546,194
944,979 Mondelez International, Inc.,
Class A 62,661,558
---------------
756,091,884
---------------
GAS UTILITIES -- 2.9%
594,994 Atmos Energy Corp. 62,337,521
433,365 Chesapeake Utilities Corp. 63,188,951
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
GAS UTILITIES (CONTINUED)
1,516,408 New Jersey Resources Corp. $ 62,263,712
811,896 ONE Gas, Inc. 62,995,011
959,622 Spire, Inc. 62,586,547
1,354,810 UGI Corp. 62,199,327
---------------
375,571,069
---------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 1.9%
437,687 Abbott Laboratories 61,600,068
714,955 Baxter International, Inc. 61,371,737
246,359 Becton, Dickinson and Co. 61,954,361
592,879 Medtronic PLC 61,333,333
---------------
246,259,499
---------------
HEALTH CARE PROVIDERS & SERVICES
-- 2.4%
469,410 AmerisourceBergen Corp. 62,379,895
604,635 CVS Health Corp. 62,374,147
1,918,055 Fresenius Medical Care AG &
Co. KGaA, ADR 62,260,065
1,516,782 Premier, Inc., Class A 62,445,915
365,608 Quest Diagnostics, Inc. 63,253,840
---------------
312,713,862
---------------
HOTELS, RESTAURANTS & LEISURE
-- 1.4%
230,817 McDonald's Corp. 61,875,113
542,068 Starbucks Corp. 63,405,694
448,619 Yum! Brands, Inc. 62,295,235
---------------
187,576,042
---------------
HOUSEHOLD DURABLES -- 0.5%
455,463 Garmin Ltd. 62,020,397
---------------
HOUSEHOLD PRODUCTS -- 2.4%
362,309 Clorox (The) Co. 63,172,197
737,868 Colgate-Palmolive Co. 62,969,655
442,887 Kimberly-Clark Corp. 63,297,410
382,260 Procter & Gamble (The) Co. 62,530,091
254,570 WD-40 Co. 62,278,005
---------------
314,247,358
---------------
INDUSTRIAL CONGLOMERATES -- 1.0%
350,392 3M Co. 62,240,131
299,934 Honeywell International, Inc. 62,539,238
---------------
124,779,369
---------------
INSURANCE -- 6.7%
1,063,836 Aflac, Inc. 62,117,384
533,385 Allstate (The) Corp. 62,752,745
403,720 Assurant, Inc. 62,923,799
1,171,072 Axis Capital Holdings Ltd. 63,788,292
320,008 Chubb Ltd. 61,860,747
1,403,329 CNA Financial Corp. 61,858,742
321,363 Erie Indemnity Co., Class A 61,913,796
228,283 Everest Re Group Ltd. 62,531,279
472,774 Hanover Insurance Group (The),
Inc. 61,961,760
899,401 Hartford Financial Services Group
(The), Inc. 62,094,645
356,058 Marsh & McLennan Cos., Inc. 61,890,002
Page 38 See Notes to Financial Statements
<PAGE>
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
1,114,380 Sun Life Financial, Inc. $ 62,059,822
396,790 Travelers (The) Cos., Inc. 62,069,860
258,994 Willis Towers Watson PLC 61,508,485
---------------
871,331,358
---------------
IT SERVICES -- 3.8%
825,200 Amdocs Ltd. 61,757,968
251,394 Automatic Data Processing, Inc. 61,988,733
335,620 Broadridge Financial Solutions,
Inc. 61,358,048
570,962 Fidelity National Information
Services, Inc. 62,320,502
2,444,334 Infosys Ltd., ADR 61,866,094
470,406 International Business Machines
Corp. 62,874,466
785,123 Maximus, Inc. 62,550,749
456,465 Paychex, Inc. 62,307,473
---------------
497,024,033
---------------
MACHINERY -- 3.4%
300,009 Caterpillar, Inc. 62,023,861
286,367 Cummins, Inc. 62,468,097
1,068,598 Donaldson Co., Inc. 63,325,117
254,029 Illinois Tool Works, Inc. 62,694,357
443,712 Lincoln Electric Holdings, Inc. 61,884,513
721,623 PACCAR, Inc. 63,690,446
289,362 Snap-on, Inc. 62,322,788
---------------
438,409,179
---------------
MEDIA -- 0.5%
1,226,767 Comcast Corp., Class A 61,743,183
---------------
MULTILINE RETAIL -- 0.5%
276,283 Target Corp. 63,942,938
---------------
MULTI-UTILITIES -- 5.4%
707,189 Ameren Corp. 62,946,893
1,498,428 Avista Corp. 63,668,206
895,373 Black Hills Corp. 63,186,473
968,786 CMS Energy Corp. 63,019,529
739,463 Consolidated Edison, Inc. 63,090,983
799,626 Dominion Energy, Inc. 62,818,619
525,368 DTE Energy Co. 62,802,491
1,109,983 NorthWestern Corp. 63,446,628
951,658 Public Service Enterprise Group,
Inc. 63,504,138
475,682 Sempra Energy 62,923,215
649,822 WEC Energy Group, Inc. 63,078,221
---------------
694,485,396
---------------
OIL, GAS & CONSUMABLE FUELS
-- 0.5%
1,610,687 Enbridge, Inc. 62,945,648
---------------
PERSONAL PRODUCTS -- 0.5%
1,162,722 Unilever PLC, ADR 62,542,816
---------------
PHARMACEUTICALS -- 4.8%
1,066,397 AstraZeneca PLC, ADR 62,117,625
993,980 Bristol-Myers Squibb Co. 61,974,653
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
PHARMACEUTICALS (CONTINUED)
222,386 Eli Lilly & Co. $ 61,427,461
1,404,283 GlaxoSmithKline PLC, ADR 61,928,880
364,917 Johnson & Johnson 62,426,351
808,603 Merck & Co., Inc. 61,971,334
706,707 Novartis AG, ADR 61,815,661
554,643 Novo Nordisk A/S, ADR 62,120,016
1,045,862 Pfizer, Inc. 61,758,151
1,226,034 Sanofi, ADR 61,424,304
---------------
618,964,436
---------------
PROFESSIONAL SERVICES -- 1.0%
555,388 Robert Half International, Inc. 61,936,870
522,577 Thomson Reuters Corp. 62,510,661
---------------
124,447,531
---------------
ROAD & RAIL -- 1.4%
506,462 Canadian National Railway Co. 62,223,921
212,377 Norfolk Southern Corp. 63,226,757
249,702 Union Pacific Corp. 62,907,425
---------------
188,358,103
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.9%
352,855 Analog Devices, Inc. 62,021,323
1,192,045 Intel Corp. 61,390,317
504,609 Taiwan Semiconductor
Manufacturing Co., Ltd., ADR 60,709,509
322,744 Texas Instruments, Inc. 60,827,562
---------------
244,948,711
---------------
SOFTWARE -- 1.4%
1,290,160 Open Text Corp. 61,256,797
691,480 Oracle Corp. 60,303,971
438,212 SAP SE, ADR 61,397,883
---------------
182,958,651
---------------
SPECIALTY RETAIL -- 1.0%
153,216 Home Depot (The), Inc. 63,586,172
244,051 Lowe's Cos., Inc. 63,082,303
---------------
126,668,475
---------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 0.5%
2,452,073 Canon, Inc., ADR 59,904,143
---------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.9%
973,815 Fastenal Co. 62,382,589
732,640 MSC Industrial Direct Co., Inc.,
Class A 61,585,718
119,955 W.W. Grainger, Inc. 62,165,479
202,527 Watsco, Inc. 63,366,648
---------------
249,500,434
---------------
WATER UTILITIES -- 0.5%
613,263 American States Water Co. 63,435,925
---------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.5%
1,322,691 Rogers Communications, Inc.,
Class B 62,999,772
---------------
See Notes to Financial Statements Page 39
<PAGE>
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
TOTAL INVESTMENTS -- 99.9% $12,936,044,611
(Cost $10,323,373,814) (a)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 18,142,110
---------------
NET ASSETS -- 100.0% $12,954,186,721
===============
(a) Aggregate cost for federal income tax purposes is $10,630,699,450. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$2,563,308,042 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$257,962,881. The net unrealized appreciation was $2,305,345,161.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
-----------------------------------------------
Common
Stocks* $12,936,044,611 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
Page 40 See Notes to Financial Statements
<PAGE>
This page intentionally left blank.
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2021
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR US EQUITY
MICROCAP DIVIDEND LEADERS OPPORTUNITIES
INDEX FUND INDEX FUND ETF
(FDM) (FDL) (FPX)
------------------ ------------------ ------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value............................................... $ 195,483,125 $ 1,757,996,824 $ 1,896,649,238
Cash................................................................ 87,944 1,300,567 3,970,511
Due from authorized participant..................................... 5,482 -- --
Receivables:
Investment securities sold.................................... 1,441,974 -- --
Dividends..................................................... 283,988 4,768,259 203,704
Securities lending income..................................... 15,445 -- 14,779
Capital shares sold........................................... -- -- --
Reclaims...................................................... -- -- 1,135
Prepaid expenses.................................................... 1,139 11,448 13,570
---------------- ---------------- ----------------
Total Assets.................................................. 197,319,097 1,764,077,098 1,900,852,937
---------------- ---------------- ----------------
LIABILITIES:
Payables:
Collateral for securities on loan............................. 6,942,527 -- 43,556,593
Investment securities purchased............................... 1,453,724 -- --
Licensing fees................................................ 40,832 340,405 486,923
Investment advisory fees...................................... 64,782 417,005 631,847
Audit and tax fees............................................ 30,319 30,318 30,318
Shareholder reporting fees.................................... 9,284 45,604 59,210
Other liabilities................................................... 41,027 334,152 383,028
---------------- ---------------- ----------------
Total Liabilities............................................. 8,582,495 1,167,484 45,147,919
---------------- ---------------- ----------------
NET ASSETS.......................................................... $ 188,736,602 $ 1,762,909,614 $ 1,855,705,018
================ ================ ================
NET ASSETS CONSIST OF:
Paid-in capital..................................................... $ 205,727,928 $ 1,889,928,526 $ 1,851,572,512
Par value........................................................... 29,550 496,000 151,500
Accumulated distributable earnings (loss)........................... (17,020,876) (127,514,912) 3,981,006
---------------- ---------------- ----------------
NET ASSETS.......................................................... $ 188,736,602 $ 1,762,909,614 $ 1,855,705,018
================ ================ ================
NET ASSET VALUE, per share.......................................... $ 63.87 $ 35.54 $ 122.49
================ ================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)........................... 2,955,000 49,600,002 15,150,002
================ ================ ================
Investments, at cost................................................ $ 170,842,502 $ 1,527,933,885 $ 1,550,029,008
================ ================ ================
Securities on loan, at value........................................ $ 6,687,020 $ -- $ 42,850,919
================ ================ ================
</TABLE>
Page 42 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NYSE(R) ARCA(R) DOW JONES CAPITAL VALUE LINE(R)
BIOTECHNOLOGY INTERNET STRENGTH DIVIDEND
INDEX FUND INDEX FUND ETF INDEX FUND
(FBT) (FDN) (FTCS) (FVD)
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
$ 1,708,918,118 $ 9,997,446,753 $ 9,485,486,980 $ 12,936,044,611
1,206,957 -- 2,935,983 20,049,830
-- -- -- --
-- -- -- --
-- 39 8,774,070 21,145,319
18 7,016 -- --
-- 11,300,783 4,226,023 15,014,377
1,830 -- -- 1,289,946
11,454 69,184 71,528 82,479
---------------- ---------------- ---------------- ----------------
1,710,138,377 10,008,823,775 9,501,494,584 12,993,626,562
---------------- ---------------- ---------------- ----------------
-- 23,087,310 -- --
-- 11,299,848 4,224,683 26,411,355
350,601 1,589,363 -- 5,726,409
572,545 3,420,830 3,844,616 5,327,065
30,318 30,318 30,318 30,319
72,238 321,147 218,021 306,580
356,127 1,501,704 1,244,748 1,638,113
---------------- ---------------- ---------------- ----------------
1,381,829 41,250,520 9,562,386 39,439,841
---------------- ---------------- ---------------- ----------------
$ 1,708,756,548 $ 9,967,573,255 $ 9,491,932,198 $ 12,954,186,721
================ ================ ================ ================
$ 2,122,679,628 $ 8,629,977,749 $ 8,292,458,704 $ 11,082,370,663
105,500 441,000 1,123,000 3,012,409
(414,028,580) 1,337,154,506 1,198,350,494 1,868,803,649
---------------- ---------------- ---------------- ----------------
$ 1,708,756,548 $ 9,967,573,255 $ 9,491,932,198 $ 12,954,186,721
================ ================ ================ ================
$ 161.97 $ 226.02 $ 84.52 $ 43.00
================ ================ ================ ================
10,550,002 44,100,002 112,300,002 301,240,884
================ ================ ================ ================
$ 1,749,071,411 $ 8,100,506,629 $ 7,936,675,780 $ 10,323,373,814
================ ================ ================ ================
$ -- $ 19,577,306 $ -- $ --
================ ================ ================ ================
</TABLE>
See Notes to Financial Statements Page 43
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2021
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR US EQUITY
MICROCAP DIVIDEND LEADERS OPPORTUNITIES
INDEX FUND INDEX FUND ETF
(FDM) (FDL) (FPX)
------------------ ------------------ ------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends........................................................... $ 2,613,675 $ 70,731,356 $ 11,578,090
Securities lending income (net of fees)............................. 139,278 -- 1,335,814
Foreign withholding tax............................................. -- -- (4,031)
---------------- ---------------- ----------------
Total investment income....................................... 2,752,953 70,731,356 12,909,873
---------------- ---------------- ----------------
EXPENSES:
Investment advisory fees............................................ 808,478 4,876,050 8,100,111
Licensing fees...................................................... 112,035 1,425,974 2,021,593
Accounting and administration fees.................................. 84,543 751,568 911,747
Audit and tax fees.................................................. 30,996 30,952 30,564
Shareholder reporting fees.......................................... 26,942 97,431 137,767
Custodian fees...................................................... 17,084 127,076 155,824
Transfer agent fees................................................. 8,085 65,634 75,626
Listing fees........................................................ 7,812 9,750 7,812
Trustees' fees and expenses......................................... 6,385 7,159 7,496
Legal fees.......................................................... 3,032 29,750 32,800
Registration and filing fees........................................ 321 2,824 (12,517)
Expenses previously waived or reimbursed............................ -- -- --
Other expenses...................................................... 3,523 21,418 28,175
---------------- ---------------- ----------------
Total expenses................................................ 1,109,236 7,445,586 11,496,998
Less fees waived and expenses reimbursed by the investment
advisor.................................................... (139,062) (131,819) --
---------------- ---------------- ----------------
Net expenses.................................................. 970,174 7,313,767 11,496,998
---------------- ---------------- ----------------
NET INVESTMENT INCOME (LOSS)........................................ 1,782,779 63,417,589 1,412,875
---------------- ---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................... 5,471,316 32,339,197 (80,836,577)
In-kind redemptions........................................... 27,687,937 159,168,671 379,628,954
Foreign currency transactions................................. -- -- --
---------------- ---------------- ----------------
Net realized gain (loss)............................................ 33,159,253 191,507,868 298,792,377
---------------- ---------------- ----------------
Net change in unrealized appreciation (depreciation) on:
Investments................................................... 8,369,281 87,772,838 (231,648,485)
Foreign currency translation.................................. -- -- --
---------------- ---------------- ----------------
Net change in unrealized appreciation (depreciation)................ 8,369,281 87,772,838 (231,648,485)
---------------- ---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................. 41,528,534 279,280,706 67,143,892
---------------- ---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................................. $ 43,311,313 $ 342,698,295 $ 68,556,767
================ ================ ================
</TABLE>
Page 44 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NYSE(R) ARCA(R) DOW JONES CAPITAL VALUE LINE(R)
BIOTECHNOLOGY INTERNET STRENGTH DIVIDEND
INDEX FUND INDEX FUND ETF INDEX FUND
(FBT) (FDN) (FTCS) (FVD)
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
$ 6,324,032 $ 21,565,140 $ 144,008,827 $ 307,151,894
2,592 156,668 -- --
(270,687) -- -- (6,833,737)
---------------- ---------------- ---------------- ----------------
6,055,937 21,721,808 144,008,827 300,318,157
---------------- ---------------- ---------------- ----------------
7,639,573 42,311,230 40,507,949 58,233,975
1,527,877 6,275,430 54,916 14,302,348
865,320 3,106,270 2,554,281 3,347,640
30,920 30,887 30,532 35,225
147,967 664,719 479,696 626,121
154,406 820,029 606,043 868,902
72,747 289,445 227,540 316,170
7,812 13,625 5,031 66,250
7,300 12,359 11,132 12,723
31,099 172,556 139,027 211,375
(7,401) (22,151) (48,989) (13,469)
-- -- -- 255,932
33,897 196,731 99,538 166,828
---------------- ---------------- ---------------- ----------------
10,511,517 53,871,130 44,666,696 78,430,020
-- -- -- --
---------------- ---------------- ---------------- ----------------
10,511,517 53,871,130 44,666,696 78,430,020
---------------- ---------------- ---------------- ----------------
(4,455,580) (32,149,322) 99,342,131 221,888,137
---------------- ---------------- ---------------- ----------------
(78,651,815) (56,762,078) (80,353,710) 238,508,839
69,859,393 2,203,064,027 1,158,492,293 602,944,856
-- -- -- (2,702)
---------------- ---------------- ---------------- ----------------
(8,792,422) 2,146,301,949 1,078,138,583 841,450,993
---------------- ---------------- ---------------- ----------------
(58,114,526) (1,439,319,817) 761,114,952 1,485,603,869
-- -- -- 101
---------------- ---------------- ---------------- ----------------
(58,114,526) (1,439,319,817) 761,114,952 1,485,603,970
---------------- ---------------- ---------------- ----------------
(66,906,948) 706,982,132 1,839,253,535 2,327,054,963
---------------- ---------------- ---------------- ----------------
$ (71,362,528) $ 674,832,810 $ 1,938,595,666 $ 2,548,943,100
================ ================ ================ ================
</TABLE>
See Notes to Financial Statements Page 45
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
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
12/31/2021 12/31/2020 12/31/2021 12/31/2020
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)............................. $ 1,782,779 $ 2,111,719 $ 63,417,589 $ 66,323,992
Net realized gain (loss)................................. 33,159,253 (29,360,877) 191,507,868 (263,732,972)
Net change in unrealized appreciation (depreciation)..... 8,369,281 7,286,636 87,772,838 33,378,185
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations....................................... 43,311,313 (19,962,522) 342,698,295 (164,030,795)
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................... (1,928,374) (2,126,197) (63,399,697) (66,635,153)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................ 86,724,692 29,127,047 644,763,236 83,773,486
Proceeds from shares acquired through reorganization..... -- -- -- --
Cost of shares redeemed.................................. (61,853,301) (40,623,522) (560,634,737) (294,624,818)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions......................... 24,871,391 (11,496,475) 84,128,499 (210,851,332)
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets.................. 66,254,330 (33,585,194) 363,427,097 (441,517,280)
NET ASSETS:
Beginning of period...................................... 122,482,272 156,067,466 1,399,482,517 1,840,999,797
--------------- --------------- --------------- ---------------
End of period............................................ $ 188,736,602 $ 122,482,272 $ 1,762,909,614 $ 1,399,482,517
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.................. 2,555,000 3,055,000 47,300,002 56,500,002
Shares sold.............................................. 1,450,000 700,000 19,250,000 2,750,000
Shares issued through reorganization..................... -- -- -- --
Shares redeemed.......................................... (1,050,000) (1,200,000) (16,950,000) (11,950,000)
--------------- --------------- --------------- ---------------
Shares outstanding, end of period........................ 2,955,000 2,555,000 49,600,002 47,300,002
=============== =============== =============== ===============
</TABLE>
Page 46 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST FIRST TRUST
US EQUITY NYSE(R) ARCA(R) 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
12/31/2021 12/31/2020 12/31/2021 12/31/2020 12/31/2021 12/31/2020
--------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 1,412,875 $ 3,650,043 $ (4,455,580) $ (5,453,767) $ (32,149,322) $ (17,892,891)
298,792,377 181,468,921 (8,792,422) 56,195,268 2,146,301,949 1,460,876,048
(231,648,485) 391,055,130 (58,114,526) 153,873,484 (1,439,319,817) 2,472,751,255
--------------- --------------- --------------- --------------- --------------- ---------------
68,556,767 576,174,094 (71,362,528) 204,614,985 674,832,810 3,915,734,412
--------------- --------------- --------------- --------------- --------------- ---------------
(2,739,625) (5,290,041) -- -- -- --
--------------- --------------- --------------- --------------- --------------- ---------------
991,605,700 978,879,034 52,174,778 403,631,644 3,348,838,868 3,121,562,471
-- -- -- -- -- --
(1,148,090,496) (934,225,504) (314,229,031) (367,000,398) (5,131,127,308) (3,815,634,985)
--------------- --------------- --------------- --------------- --------------- ---------------
(156,484,796) 44,653,530 (262,054,253) 36,631,246 (1,782,288,440) (694,072,514)
--------------- --------------- --------------- --------------- --------------- ---------------
(90,667,654) 615,537,583 (333,416,781) 241,246,231 (1,107,455,630) 3,221,661,898
1,946,372,672 1,330,835,089 2,042,173,329 1,800,927,098 11,075,028,885 7,853,366,987
--------------- --------------- --------------- --------------- --------------- ---------------
$ 1,855,705,018 $ 1,946,372,672 $ 1,708,756,548 $ 2,042,173,329 $ 9,967,573,255 $11,075,028,885
=============== =============== =============== =============== =============== ===============
16,450,002 16,550,002 12,150,002 12,100,002 52,150,002 56,450,002
8,000,000 10,100,000 300,000 2,550,000 14,450,000 18,050,000
-- -- -- -- -- --
(9,300,000) (10,200,000) (1,900,000) (2,500,000) (22,500,000) (22,350,000)
--------------- --------------- --------------- --------------- --------------- ---------------
15,150,002 16,450,002 10,550,002 12,150,002 44,100,002 52,150,002
=============== =============== =============== =============== =============== ===============
</TABLE>
See Notes to Financial Statements Page 47
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST
CAPITAL STRENGTH VALUE LINE(R) DIVIDEND
ETF INDEX FUND
(FTCS) (FVD)
--------------------------------- ---------------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/2021 12/31/2020 12/31/2021 12/31/2020
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)............................. $ 99,342,131 $ 55,537,289 $ 221,888,137 $ 225,598,348
Net realized gain (loss)................................. 1,078,138,583 471,532,595 841,450,993 (446,982,237)
Net change in unrealized appreciation (depreciation)..... 761,114,952 416,336,797 1,485,603,970 94,895,748
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations....................................... 1,938,595,666 943,406,681 2,548,943,100 (126,488,141)
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................... (96,596,007) (55,671,376) (223,826,833) (231,083,030)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................ 7,347,607,864 6,487,496,472 2,745,034,380 3,432,557,406
Proceeds from shares acquired through reorganization..... -- -- -- 36,820,323
Cost of shares redeemed.................................. (6,719,583,961) (3,745,945,946) (2,265,168,318) (2,627,820,910)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions......................... 628,023,903 2,741,550,526 479,866,062 841,556,819
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets.................. 2,470,023,562 3,629,285,831 2,804,982,329 483,985,648
NET ASSETS:
Beginning of period...................................... 7,021,908,636 3,392,622,805 10,149,204,392 9,665,218,744
--------------- --------------- --------------- ---------------
End of period............................................ $ 9,491,932,198 $ 7,021,908,636 $12,954,186,721 $10,149,204,392
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.................. 103,950,002 56,200,002 289,190,884 268,287,986
Shares sold.............................................. 98,850,000 107,300,000 68,500,000 100,550,000
Shares issued through reorganization..................... -- -- -- 1,052,898
Shares redeemed.......................................... (90,500,000) (59,550,000) (56,450,000) (80,700,000)
--------------- --------------- --------------- ---------------
Shares outstanding, end of period........................ 112,300,002 103,950,002 301,240,884 289,190,884
=============== =============== =============== ===============
</TABLE>
Page 48 See Notes to Financial Statements
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 47.94 $ 51.09 $ 40.76 $ 47.21 $ 43.98
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.64 0.80 0.66 0.56 0.42
Net realized and unrealized gain (loss) 15.98 (3.15) 10.37 (6.50) 3.27
------------ ------------ ------------ ------------ ------------
Total from investment operations 16.62 (2.35) 11.03 (5.94) 3.69
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.69) (0.80) (0.70) (0.51) (0.46)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 63.87 $ 47.94 $ 51.09 $ 40.76 $ 47.21
============ ============ ============ ============ ============
TOTAL RETURN (a) 34.71% (4.25)% 27.25% (12.68)% 8.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 188,737 $ 122,482 $ 156,067 $ 138,777 $ 97,012
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.69% 0.71% 0.70% 0.73% 0.71%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.10% 1.88% 1.42% 1.29% 0.89%
Portfolio turnover rate (b) 95% 95% 64% 75% 55%
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 29.59 $ 32.58 $ 27.24 $ 30.06 $ 27.75
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.29 1.32 1.22 1.09 0.93
Net realized and unrealized gain (loss) 5.95 (2.98) 5.34 (2.83) 2.34
------------ ------------ ------------ ------------ ------------
Total from investment operations 7.24 (1.66) 6.56 (1.74) 3.27
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.29) (1.33) (1.22) (1.08) (0.96)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 35.54 $ 29.59 $ 32.58 $ 27.24 $ 30.06
============ ============ ============ ============ ============
TOTAL RETURN (a) 24.76% (4.42)% 24.36% (5.87)% 11.93%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,762,910 $ 1,399,483 $ 1,841,000 $ 1,386,483 $ 1,719,299
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.46% 0.46% 0.46% 0.47% 0.47%
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 3.90% 4.73% 4.06% 3.70% 3.18%
Portfolio turnover rate (b) 59% 63% 39% 39% 43%
</TABLE>
(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 49
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 118.32 $ 80.41 $ 62.07 $ 68.18 $ 54.10
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.08 0.24 0.58 0.52 0.43
Net realized and unrealized gain (loss) 4.26 38.01 18.30 (6.08) 14.12
------------ ------------ ------------ ------------ ------------
Total from investment operations 4.34 38.25 18.88 (5.56) 14.55
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.17) (0.34) (0.54) (0.55) (0.47)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 122.49 $ 118.32 $ 80.41 $ 62.07 $ 68.18
============ ============ ============ ============ ============
TOTAL RETURN (a) 3.67% 47.76% 30.45% (8.22)% 26.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,855,705 $ 1,946,373 $ 1,330,835 $ 912,479 $ 981,732
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.57% 0.57% 0.58% 0.59% 0.59%
Ratio of net expenses to average net assets 0.57% 0.57% 0.58% 0.59% 0.59%
Ratio of net investment income (loss) to
average net assets 0.07% 0.26% 0.79% 0.74% 0.71%
Portfolio turnover rate (b) 85% 75% 81% 57% 31%
FIRST TRUST NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX FUND (FBT)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 168.08 $ 148.84 $ 124.26 $ 124.52 $ 90.89
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.42) (0.45) (0.51) (0.22) (0.08)
Net realized and unrealized gain (loss) (5.69) 19.69 25.09 (0.04) 33.71
------------ ------------ ------------ ------------ ------------
Total from investment operations (6.11) 19.24 24.58 (0.26) 33.63
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 161.97 $ 168.08 $ 148.84 $ 124.26 $ 124.52
============ ============ ============ ============ ============
TOTAL RETURN (a) (3.64)% 12.93% 19.78% (0.21)% 36.99%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,708,757 $ 2,042,173 $ 1,800,927 $ 2,342,213 $ 1,207,811
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.55% 0.55% 0.55% 0.57% 0.56%
Ratio of net expenses to average net assets 0.55% 0.55% 0.55% 0.57% 0.56%
Ratio of net investment income (loss) to
average net assets (0.23)% (0.28)% (0.25)% (0.21)% (0.08)%
Portfolio turnover rate (b) 39% 26% 31% 37% 36%
</TABLE>
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 50 See Notes to Financial Statements
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 212.37 $ 139.12 $ 116.66 $ 109.82 $ 79.79
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.73) (0.34) (0.14) (0.35) (0.28)
Net realized and unrealized gain (loss) 14.38 73.59 22.60 7.19 30.31
------------ ------------ ------------ ------------ ------------
Total from investment operations 13.65 73.25 22.46 6.84 30.03
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 226.02 $ 212.37 $ 139.12 $ 116.66 $ 109.82
============ ============ ============ ============ ============
TOTAL RETURN (a) 6.43% 52.65% 19.26% 6.23% 37.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 9,967,573 $ 11,075,029 $ 7,853,367 $ 7,016,807 $ 5,490,820
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.51% 0.51% 0.52% 0.52% 0.53%
Ratio of net expenses to average net assets 0.51% 0.51% 0.52% 0.52% 0.53%
Ratio of net investment income (loss) to
average net assets (0.30)% (0.20)% (0.10)% (0.27)% (0.32)%
Portfolio turnover rate (b) 19% 39% 28% 21% 22%
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 67.55 $ 60.37 $ 48.29 $ 50.95 $ 40.79
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.91 0.63 0.76 0.60 0.59
Net realized and unrealized gain (loss) 16.95 7.18 12.08 (2.65) 10.16
------------ ------------ ------------ ------------ ------------
Total from investment operations 17.86 7.81 12.84 (2.05) 10.75
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.89) (0.63) (0.76) (0.61) (0.59)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 84.52 $ 67.55 $ 60.37 $ 48.29 $ 50.95
============ ============ ============ ============ ============
TOTAL RETURN (a) 26.61% 13.07% 26.72% (4.09)% 26.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 9,491,932 $ 7,021,909 $ 3,392,623 $ 1,376,131 $ 624,099
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.55% 0.56% 0.58% 0.60% 0.61%
Ratio of net expenses to average net assets 0.55% 0.56% 0.58% 0.60% 0.61%
Ratio of net investment income (loss) to
average net assets 1.23% 1.10% 1.46% 1.30% 1.33%
Portfolio turnover rate (b) 117% 133% 125% 117% 85%
</TABLE>
(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 51
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 35.10 $ 36.03 $ 29.07 $ 30.84 $ 28.02
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.74 0.79 0.73 0.73 0.63
Net realized and unrealized gain (loss) 7.91 (0.91) 6.96 (1.77) 2.84
------------ ------------ ------------ ------------ ------------
Total from investment operations 8.65 (0.12) 7.69 (1.04) 3.47
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.75) (0.81) (0.73) (0.73) (0.65)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 43.00 $ 35.10 $ 36.03 $ 29.07 $ 30.84
============ ============ ============ ============ ============
TOTAL RETURN (a) 24.86% (0.04)% 26.60% (3.44)% 12.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 12,954,187 $ 10,149,204 $ 9,665,219 $ 4,374,483 $ 4,194,830
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.67% 0.70% 0.71% 0.72% 0.72%
Ratio of net expenses to average net assets 0.67% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.91% 2.47% 2.36% 2.40% 2.19%
Portfolio turnover rate (b) 47% 86% 53% 58% 50%
</TABLE>
(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 52
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
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-two exchange-traded funds. This report
covers the seven funds (each a "Fund" and collectively, the "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(R) Arca(R) Biotechnology Index Fund - (NYSE Arca ticker
"FBT")
First Trust Dow Jones Internet Index Fund - (NYSE Arca ticker "FDN")
First Trust Capital Strength ETF - (The Nasdaq Stock Market LLC
("Nasdaq") ticker "FTCS")
First Trust Value Line(R) Dividend Index Fund -- (NYSE Arca ticker
"FVD")
Each Fund represents a separate series of beneficial interest in the Trust.
Unlike conventional mutual funds, each Fund issues and redeems shares on a
continuous basis at net asset value ("NAV"), only in large blocks of shares
known as "Creation Units." 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:
<TABLE>
<CAPTION>
FUND INDEX
<S> <C>
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(R) Arca(R) Biotechnology Index Fund NYSE(R) Arca Biotechnology Index
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
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. Each Fund's investments are valued as
follows:
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.
Page 53
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
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.
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, 2021, 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.
Page 54
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
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
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 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 with the exception of FPX.
The Bank of New York Mellon ("BNYM") acts as FPX's 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, 2021, only FDM, FPX and FDN had securities
in the securities lending program. During the fiscal year ended December 31,
2021, FDM, FPX, FBT and FDN participated in the securities lending program.
In the event of a default by a borrower with respect to any loan, BBH or BNYM
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
and BNYM to exercise these remedies, a Fund sustains losses as a result of a
borrower's default, BBH or BNYM 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 or BNYM.
Page 55
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
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 or BNYM 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, 2021, 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, 2021 was as follows:
<TABLE>
<CAPTION>
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
------------------ ---------------- -----------------
<S> <C> <C> <C>
First Trust Dow Jones Select MicroCap Index Fund $ 1,928,374 $ -- $ --
First Trust Morningstar Dividend Leaders Index Fund 63,399,697 -- --
First Trust US Equity Opportunities ETF 2,739,625 -- --
First Trust NYSE(R) Arca(R) Biotechnology Index Fund -- -- --
First Trust Dow Jones Internet Index Fund -- -- --
First Trust Capital Strength ETF 96,596,007 -- --
First Trust Value Line(R) Dividend Index Fund 223,826,833 -- --
</TABLE>
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2020 was as follows:
<TABLE>
<CAPTION>
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
------------------ ---------------- -----------------
<S> <C> <C> <C>
First Trust Dow Jones Select MicroCap Index Fund $ 2,126,197 $ -- $ --
First Trust Morningstar Dividend Leaders Index Fund 66,635,153 -- --
First Trust US Equity Opportunities ETF 5,290,041 -- --
First Trust NYSE(R) Arca(R) Biotechnology Index Fund -- -- --
First Trust Dow Jones Internet Index Fund -- -- --
First Trust Capital Strength ETF 55,671,376 -- --
First Trust Value Line(R) Dividend Index Fund 231,083,030 -- --
</TABLE>
Page 56
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
As of December 31, 2021, the components of distributable earnings on a tax basis
for each Fund were as follows:
<TABLE>
<CAPTION>
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ ---------------- -----------------
<S> <C> <C> <C>
First Trust Dow Jones Select MicroCap Index Fund $ -- $ (40,305,948) $ 23,285,072
First Trust Morningstar Dividend Leaders Index Fund 443,847 (318,003,250) 190,044,491
First Trust US Equity Opportunities ETF -- (339,367,710) 343,348,716
First Trust NYSE(R) Arca(R) Biotechnology Index Fund -- (325,213,864) (88,814,716)
First Trust Dow Jones Internet Index Fund -- (441,487,423) 1,778,641,929
First Trust Capital Strength ETF 2,812,383 (326,660,331) 1,522,198,442
First Trust Value Line(R) Dividend Index Fund -- (436,542,343) 2,305,345,992
</TABLE>
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. The taxable years ended 2018,
2019, 2020, and 2021 remain open to federal and state audit. As of December 31,
2021, 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.
Each Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
Each Fund is 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. At December 31, 2021, for
federal income tax purposes, each applicable Fund had a capital loss
carryforward available that is shown in the table below, to the extent provided
by regulations, to offset future capital gains. 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 each applicable Fund's
shareholders.
<TABLE>
<CAPTION>
Non-Expiring Capital
Loss Carryforwards
---------------------
<S> <C>
First Trust Dow Jones Select MicroCap Index Fund $ 40,305,948
First Trust Morningstar Dividend Leaders Index Fund 318,003,250
First Trust US Equity Opportunities ETF 339,367,710
First Trust NYSE(R) Arca(R) Biotechnology Index Fund 325,213,864
First Trust Dow Jones Internet Index Fund 441,487,423
First Trust Capital Strength ETF 326,660,331
First Trust Value Line(R) Dividend Index Fund* 436,542,343
</TABLE>
* $11,007,161 of First Trust Value Line(R) Dividend Index Fund's non-expiring
net capital losses is subject to loss limitation resulting from reorganization
activity. This limitation generally reduces the utilization of these losses to a
maximum of $364,521 per year.
During the taxable year ended December 31, 2021, the following Funds utilized
non-expiring capital loss carryforwards in the following amount:
<TABLE>
<CAPTION>
Capital Loss
Carryforward Utilized
---------------------
<S> <C>
First Trust Dow Jones Select MicroCap Index Fund $ 5,893,625
First Trust Morningstar Dividend Leaders Index Fund 44,628,469
First Trust Value Line(R) Dividend Index Fund 262,677,258
</TABLE>
Page 57
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended December 31, 2021, the Funds had
no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended December 31, 2021, the adjustments for each Fund were as follows:
<TABLE>
<CAPTION>
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss)
Income (Loss) on Investments Paid-in Capital
------------------ ---------------- -----------------
<S> <C> <C> <C>
First Trust Dow Jones Select MicroCap Index Fund $ 54,904 $ (26,376,605) $ 26,321,701
First Trust Morningstar Dividend Leaders Index Fund -- (152,201,849) 152,201,849
First Trust US Equity Opportunities ETF 1,326,750 (367,904,669) 366,577,919
First Trust NYSE(R) Arca(R) Biotechnology Index Fund 4,455,580 (55,878,429) 51,422,849
First Trust Dow Jones Internet Index Fund 32,149,322 (2,114,501,671) 2,082,352,349
First Trust Capital Strength ETF -- (1,147,719,691) 1,147,719,691
First Trust Value Line(R) Dividend Index Fund 1,938,696 (550,352,866) 548,414,170
</TABLE>
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:
<TABLE>
<CAPTION>
FUND LICENSOR
<S> <C>
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(R) Arca(R) 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
</TABLE>
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The respective Funds are
required to pay licensing fees, which are shown on the Statements of Operations.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
Page 58
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
For these services, First Trust is entitled to receive monthly fees from each
Fund calculated at the following annual rates:
<TABLE>
<CAPTION>
% of Average
Daily Net Assets
----------------
<S> <C>
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(R) Arca(R) 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%
</TABLE>
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, 2023.
<TABLE>
<CAPTION>
Expense Cap
----------------
<S> <C>
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(R) Arca(R) 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%
</TABLE>
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee or expense was incurred, but no reimbursement payment will be made by a Fund
if it results in the Fund's expenses exceeding (i) the applicable expense
limitation in place for the most recent fiscal year for which such expense
limitation was in place, (ii) the applicable expense limitation in place at the
time the fees were waived or expenses were reimbursed, or (iii) the current
expense limitation. These amounts would be included in "Expenses previously
waived or reimbursed" on the Statements of Operations.
The advisory fee waivers and expense reimbursements for the fiscal year ended
December 31, 2021 and the fees waived or expenses borne by First Trust subject
to recovery from the applicable Fund for the periods indicated were as follows:
<TABLE>
<CAPTION>
Fees Waived or Expenses Borne by First Trust
Subject to Recovery
-------------------------------------------------
Advisory Year Year Year
Fee Expense Ended Ended Ended
Waivers Reimbursement 12/31/2019 12/31/2020 12/31/2021 Total
--------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
First Trust Dow Jones Select MicroCap
Index Fund $ 139,062 $ -- $ 149,166 $ 127,387 $ 139,062 $ 415,615
First Trust Morningstar Dividend Leaders
Index Fund 131,819 -- 178,254 162,827 131,819 472,900
</TABLE>
During the fiscal year ended December 31, 2021, First Trust recovered fees that
were previously waived from First Trust Value Line(R) Dividend Index Fund of
$255,932.
The Trust has multiple service agreements with BNYM. Under the service
agreements, BNYM performs custodial, fund accounting, certain administrative
services, and transfer agency services for each Fund. As custodian, BNYM is
responsible for custody of each Fund's assets. As fund accountant and
administrator, BNYM is responsible for maintaining the books and records of each
Fund's securities and cash. As transfer agent, BNYM is responsible for
maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank
of New York Mellon Corporation, a financial holding company.
Page 59
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairs 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 Chairs
rotate every three years. The officers and "Interested" Trustee receive no
compensation from the Trust for acting in such capacities.
4. REORGANIZATION
On January 30, 2020, the Board of Trustees of First Trust Value Line(R) 100
Exchange-Traded Fund ("FVL") and FVD approved a reorganization of FVD with FVL.
The reorganization was completed on December 14, 2020. FVD was the surviving
fund.
Under the terms of the reorganization, which was tax-free, the assets of FVL
were transferred to, and the liabilities of FVL were assumed by, FVD in exchange
for shares of FVD. The cost of the investments received from FVL was carried
forward to FVD for U.S. GAAP and tax purposes. The FVD shares were then
distributed to FVL shareholders and the separate existence of FVD ceased. The
reorganization was subject to certain conditions, including that the
reorganization was approved on November 16, 2020, by the shareholders of FVL.
When the reorganization occurred, the transactions were based on the relative
NAVs of FVL and FVD.
The following table summarizes the asset transfers and conversion ratios for the
reorganization.
<TABLE>
<CAPTION>
Net Assets on Unrealized Accumulated Shares Acquiring Net Assets on
Acquired Shares December 11, Appreciation Net Realized Conversion (Surviving) Shares December 11,
Fund Redeemed 2020 (Depreciation) Gain (Loss) Ratio Fund Issued* 2020**
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FVL 1,589,982 $ 36,820,323 $ (118,448) $ (8,573,998) 0.662214 FVD 1,052,908 $10,030,756,341
</TABLE>
* Amount includes 10 shares that were distributed cash in lieu.
** Amount reflects net assets of FVD prior to the reorganization.
The following table summarizes the operations of the Acquired Fund for the
period January 1, 2020 to December 11, 2020, and the operations of FVD, the
Acquiring (Surviving) Fund, for the fiscal year ended December 31, 2020, as
presented in the Statements of Operations and the combined Acquired and
Acquiring (Surviving) Funds' pro-forma results of operations for the fiscal year
ended December 31, 2020, assuming the acquisition had been completed on January
1, 2020.
Because the combined investment portfolios have been managed as a single
integrated portfolio since the reorganization was completed, it is not
practicable to separate the amounts of revenue and earnings of FVL that have
been included in FVD's Statement of Operations since December 11, 2020.
<TABLE>
<CAPTION>
Net Realized and
Change in
Unrealized Net Increase
Net Investment Gain (Loss) (Decrease) from
Income on Investments Operations
--------------- ---------------- ---------------
<S> <C> <C> <C>
Acquired Fund for the period January 1, 2020 to December 11, 2020
FVL $ 300,669 $ (36,518) $ 264,151
Acquiring Fund for the fiscal year ended December 31, 2020
FVD 229,162,401 (355,768,990) (126,606,589)
--------------- ---------------- ---------------
Combined Total $ 229,463,070 $ (355,805,508) $ (126,342,438)
=============== ================ ===============
</TABLE>
Page 60
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
5. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended December 31, 2021, the cost of purchases and proceeds
from sales of investments for each Fund, excluding short-term investments and
in-kind transactions, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------------- ----------------
<S> <C> <C>
First Trust Dow Jones Select MicroCap Index Fund $ 151,425,829 $ 150,843,816
First Trust Morningstar Dividend Leaders Index Fund 942,805,851 936,013,501
First Trust US Equity Opportunities ETF 1,698,513,575 1,699,291,760
First Trust NYSE(R) Arca(R) Biotechnology Index Fund 732,799,368 737,902,246
First Trust Dow Jones Internet Index Fund 1,988,049,155 2,025,580,717
First Trust Capital Strength ETF 9,444,928,981 9,401,204,136
First Trust Value Line(R) Dividend Index Fund 5,406,139,606 5,388,778,063
</TABLE>
For the fiscal year ended December 31, 2021, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------------- ----------------
<S> <C> <C>
First Trust Dow Jones Select MicroCap Index Fund $ 86,636,298 $ 62,269,726
First Trust Morningstar Dividend Leaders Index Fund 640,917,176 559,245,159
First Trust US Equity Opportunities ETF 990,070,036 1,145,574,219
First Trust NYSE(R) Arca(R) Biotechnology Index Fund 52,157,372 313,685,975
First Trust Dow Jones Internet Index Fund 3,348,788,042 5,123,986,490
First Trust Capital Strength ETF 7,317,538,948 6,735,390,237
First Trust Value Line(R) Dividend Index Fund 2,730,249,660 2,269,625,819
</TABLE>
6. CREATION, REDEMPTION AND TRANSACTION FEES
Each Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with a Fund or one of the Fund's
service providers to purchase and redeem Fund shares directly with the Fund in
large blocks of shares known as "Creation Units." Prior to the start of trading
on every business day, a Fund publishes through the National Securities Clearing
Corporation ("NSCC") the "basket" of securities, cash or other assets that it
will accept in exchange for a Creation Unit of the Fund's shares. An Authorized
Participant that wishes to effectuate a creation of a Fund's shares deposits
with the Fund the "basket" of securities, cash or other assets identified by the
Fund that day, and then receives the Creation Unit of the Fund's shares in
return for those assets. After purchasing a Creation Unit, the Authorized
Participant may continue to hold the Fund's shares or sell them in the secondary
market. The redemption process is the reverse of the purchase process: the
Authorized Participant redeems a Creation Unit of a Fund's shares for a basket
of securities, cash or other assets. The combination of the creation and
redemption process with secondary market trading in a Fund's shares and
underlying securities provides arbitrage opportunities that are designed to help
keep the market price of a Fund's shares at or close to the NAV per share of the
Fund.
Each Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various facts-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of a Fund times the number of shares in
a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
Each Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of a Fund times the number
of shares in a Creation Unit, minus the fees described above and, if applicable,
any operational processing and brokerage costs, transfer fees, stamp taxes and
part or all of the spread between the expected bid and offer side of the market
related to the securities comprising the redemption basket. Investors who use
the services of a broker or other such intermediary in addition to an Authorized
Participant to effect a redemption of a Creation Unit may also be assessed an
amount to cover the cost of such services. The redemption fee charged by a Fund
will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no
more than 2% of the value of the shares redeemed.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
7. 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, 2023.
8. 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.
9. 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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First
Trust Dow Jones Select MicroCap Index Fund, First Trust Morningstar Dividend
Leaders Index Fund, First Trust US Equity Opportunities ETF, First Trust NYSE(R)
Arca(R) Biotechnology Index Fund, First Trust Dow Jones Internet Index Fund,
First Trust Capital Strength ETF, and First Trust Value Line(R) Dividend Index
Fund (the "Funds"), each a series of First Trust Exchange-Traded Fund, including
the portfolios of investments, as of December 31, 2021, the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, the financial highlights for
each of the five years in the period then ended, and the related notes. In our
opinion, the financial statements and financial highlights present fairly, in
all material respects, the financial position of each of the Funds as of
December 31, 2021, 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, 2021, 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 23, 2022
We have served as the auditor of one or more First Trust investment companies
since 2001.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
each Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal
quarter within 60 days after the end of the relevant fiscal quarter on Form
N-PORT. Portfolio holdings information for the third month of each fiscal
quarter will be publicly available on the SEC's website at www.sec.gov. Each
Fund's complete schedule of portfolio holdings for the second and fourth
quarters of each fiscal year is included in the semi-annual and annual reports
to shareholders, respectively, and is filed with the SEC on Form N-CSR. The
semi-annual and annual report for each Fund is available to investors within 60
days after the period to which it relates. Each Fund's Forms N-PORT and Forms
N-CSR are available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable year ended December 31, 2021, the following percentages of
income dividends paid by the Funds qualify for the dividends received deduction
available to corporations:
<TABLE>
<CAPTION>
Dividends Received Deduction
----------------------------
<S> <C>
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(R) Arca(R) Biotechnology Index Fund 0.00%
First Trust Dow Jones Internet Index Fund 0.00%
First Trust Capital Strength ETF 100.00%
First Trust Value Line(R) Dividend Index Fund 100.00%
</TABLE>
For the taxable year ended December 31, 2021, the following percentages of
income dividends paid by the Funds are hereby designated as qualified dividend
income:
<TABLE>
<CAPTION>
Qualified Dividend Income
----------------------------
<S> <C>
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(R) Arca(R) Biotechnology Index Fund 0.00%
First Trust Dow Jones Internet Index Fund 0.00%
First Trust Capital Strength ETF 100.00%
First Trust Value Line(R) Dividend Index Fund 100.00%
</TABLE>
A portion of each of the Funds' 2021 ordinary dividends (including short-term
capital gains) paid to its shareholders during the fiscal year ended December
31, 2021, may be eligible for the Qualified Business Income Deduction (QBI)
under Internal Revenue Code Section 199A for the aggregate dividends each Fund
received from the underlying Real Estate Investment Trusts (REITs) these Funds
invest in.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
Page 64
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
CONCENTRATION RISK. To the extent that a fund is able to invest a significant
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
more broadly diversified.
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.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
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.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 2021. The unavailability or replacement of LIBOR may affect the
value, liquidity or return on certain fund investments and may result in costs
incurred in connection with closing out positions and entering into new trades.
Any potential effects of the transition away from LIBOR on the fund or on
certain instruments in which the fund invests can be difficult to ascertain, and
they may vary depending on a variety of factors, and they could result in losses
to the fund.
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. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. While the development of
vaccines has slowed the spread of the virus and allowed for the resumption of
"reasonably" normal business activity in the United States, many countries
continue to impose lockdown measures in an attempt to slow the spread.
Additionally, there is no guarantee that vaccines will be effective against
emerging variants of the disease.
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;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; 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.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
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 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, 2021, the amount of remuneration paid (or to
be paid) by First Trust Advisors L.P. in respect of the Funds is $18,874,484.
This figure is comprised of $726,302 paid (or to be paid) in fixed compensation
and $18,148,182 paid (or to be paid) in variable compensation. There were a
total of 24 beneficiaries of the remuneration described above. Those amounts
include $9,692,694 paid (or to be paid) to senior management of First Trust
Advisors L.P. and $9,181,790 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.
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (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.
<TABLE>
<CAPTION>
NUMBER OF
PORTFOLIOS IN
TERM OF OFFICE THE FIRST TRUST OTHER TRUSTEESHIPS
NAME, AND YEAR FIRST FUND COMPLEX OR DIRECTORSHIPS HELD
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY BY TRUSTEE DURING
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 216 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 216 Director of ADM Investor
(1957) (Futures Commission Merchant) Services, Inc., ADM
o Since Inception Investor Services
International, Futures
Industry Association,
and National Futures
Association
Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate Aurora 216 Director and Board Chair
(1964) Health and President, Advocate Aurora of Advocate Home Health
Services, Advocate Home
o Since 2021 Continuing Health Division (Integrated Care Products and
Healthcare System) Advocate Hospice;
Director and Board Chair
of Aurora At Home
(since 2018); Director
of Advocate
Physician Partners
Accountable Care
Organization; Director
and Board Chair of
RML Long Term
Acute Care Hospitals;
and Director of Senior
Helpers (since 2021)
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 216 Director of Trust
(1956) and Management Consulting) Company of Illinois
o Since Inception
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 216 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust
Chairman of the Board Advisors L.P. and First Trust Portfolios 216 None
(1955) L.P., Chairman of the Board of
o Since Inception Directors, BondWave LLC (Software
Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
</TABLE>
-----------------------------
(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.
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BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
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)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
o Since January 2016 to 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 First
(1970) 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. and
(1966) First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
</TABLE>
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
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PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (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
professional or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2021
Page 70
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<PAGE>
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
320 South Canal Street
Chicago, IL 60606
<PAGE>
[BLANK BACK COVER]
<PAGE>
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, 2021
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2021
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).................................... 35
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..................... 72
Additional Information...................................................... 73
Board of Trustees and Officers.............................................. 78
Privacy Policy.............................................................. 80
<PAGE>
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (each such series is referred to as a "Fund" and collectively, as the
"Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund's 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
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SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2021
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, 2021.
Being that this is a year-end review, I would like to touch on the state of the
business climate and securities markets in the U.S. The two biggest stories in
2021 were clearly the ongoing fight against the coronavirus ("COVID-19")
pandemic and the surge in the rate of inflation, which I believe is a byproduct
of that fight. The COVID-19 pandemic is closing in on its second anniversary and
it continues to curb economic activity in the U.S. and abroad. It is nearly as
challenging today as it was at its peak in 2020.
The emergence of the Omicron variant in the latter half of 2021 was particularly
disappointing because we had been making some inroads into fully reopening the
U.S. economy until its arrival. Americans were dining out. Airline travel was
picking up and people were even taking cruises again. We have learned that the
Omicron variant, while seemingly not as dangerous as its predecessor, the Delta
variant, at least in terms of the number of deaths to date, is still extremely
contagious, especially for those individuals who have not been vaccinated. The
U.S. federal government has funneled trillions of dollars of stimulus and
subsidies into the financial system to mitigate the economic fallout from the
pandemic. That level of support is unprecedented and has likely fueled much of
the surge in inflation, as measured by the Consumer Price Index ("CPI"). The
standard definition for inflation is "too many dollars chasing too few goods."
The explosion of the U.S. money supply has easily overwhelmed the volume of
goods available to consumers. Global supply chain bottlenecks, including the
backlog of container ships at ports in Southern California, have also
contributed to the shortages of goods. In December 2021, the trailing 12-month
rate on the CPI was 7.0%, up from 1.4% last December, according to the U.S.
Bureau of Labor Statistics. The last time inflation was this elevated was in
1982.
Since the onset of COVID-19, companies and millions of employees have scrambled
to adapt to the new normal of working remotely, typically from home. What an
amazing thing to watch. While opinions may vary, it has become evident that the
workplace culture has probably changed forever. According to Barron's magazine,
we should look for more of a hybrid arrangement moving forward that would entail
workers being at the office for three days a week and home for two. I do not
believe that the stock and bond markets would have performed nearly as well over
the past two years had U.S. businesses not overcome the adversity brought their
way by COVID-19. Oh, and the trillions of dollars from the government. In 2021,
the S&P 500(R) Index posted a total return of 28.71%, and that came on the heels
of an 18.40% gain in 2020, according to Bloomberg. From 1926-2021 (a span of 96
years), the S&P 500(R) Index posted an average annual total return of 10.44%,
according to Morningstar/Ibbotson Associates. Investors should relish these
outsized returns. Bond investors have earned more modest total returns over the
past two years. Bond returns were higher for most bond categories in 2020 due to
the artificially depressed yield on the 10-Year Treasury Note ("T-Note"). The
10-Year T-Note yield trended higher in 2021, putting some pressure on bond
prices. Expect the Federal Reserve to tighten monetary policy by raising
short-term interest rates. It could begin as early as March 2022. While the
markets could experience some near-term pain, I believe normalizing interest
rates and bond yields will prove to be a healthy and necessary transition for
the markets long-term.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
<PAGE>
--------------------------------------------------------------------------------
MARKET OVERVIEW
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2021
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 more than 30 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
Inflation surged in 2021 and it looks as though it is here to stay. Federal
Reserve (the "Fed") Chairman Jerome Powell has changed his expectations on
inflation from characterizing it as transitory to it being more persistent in
nature. In the hopes of keeping inflation from becoming entrenched, the Fed
announced it will expedite the tapering of its monthly bond buying program as of
December 2021. This program has been successful at pushing down intermediate and
longer maturity bond yields and keeping them artificially low to help stimulate
economic activity. The Fed will reduce its purchases of Treasuries and
mortgage-backed securities by $30 billion per month. At that pace, it should be
done buying bonds in the open market by the end of March 2022. They also foresee
hiking short-term interest rates three times in 2022. The Federal Funds target
rate (upper bound) is currently at 0.25%. The trailing 12-month Consumer Price
Index rate stood at 7.0% in December 2021, according to the U.S. Bureau of Labor
Statistics. That is up significantly from 1.4% in December 2020 and well above
its 2.3% average rate over the past 30 years.
The global growth forecast from the International Monetary Fund ("IMF") released
in October 2021 sees real gross domestic product growth rising by 4.9% worldwide
in 2022, down from its 5.9% projection for 2021. The IMF is calling for a 5.2%
growth rate for the U.S. in 2022, down from its 6.0% estimate for 2021. As has
been the case for many years, Emerging Market and Developing Economies are
expected to grow faster than Advanced Economies. Their 2022 growth rate
estimates are 5.1% and 4.5%, respectively.
The exchange-traded funds ("ETFs") and related exchange-traded products ("ETPs")
industry grew significantly in 2021. ETFGI, an independent research and
consultancy firm, reported that total assets invested in ETFs/ETPs listed in the
U.S. stood at an all-time high of $7.21 trillion as of year-end, up 31.81% from
the $5.47 trillion at the end of 2020, according to its own release. Net inflows
to ETFs/ETPs listed in the U.S. hit a record high of $919.78 billion in 2021,
topping the prior record of $490.19 billion in 2020. U.S. ETF/ETP assets
represent approximately 72% of total global ETF/ETP assets.
U.S. STOCKS AND BONDS
In 2021, three of the major U.S. stock indices posted substantial double-digit
gains. The S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R)
Index posted total returns of 28.71%, 24.76%, and 26.82%, respectively,
according to Bloomberg. All 11 major sectors that comprise the S&P 500(R) Index
posted positive double-digit total returns. The top-performing sectors were
Energy, Real Estate, Financials and Information Technology, up 54.64%, 46.14%,
35.04% and 34.53%, respectively, while the worst-performing sector was
Utilities, up 17.67%. As we have noted often, we believe that when the major
stock indices are trading at or near their record highs in maturing bull
markets, corporate earnings need to continue to grow to drive the market higher.
Bloomberg's consensus year-over-year earnings growth rate estimates for the S&P
500(R) Index for 2022 and 2023 were 8.74% and 9.97%, respectively, as of
December 31, 2021. These projections, while positive, are more typical than
Bloomberg's 2021 growth estimate of 47.26%, which reflects a robust rebound from
the coronavirus-induced -12.44% earnings growth rate posted in 2020.
The yield on the benchmark 10-Year Treasury Note closed trading on December 31,
2021, at 1.51%, according to Bloomberg. The 1.51% yield stood 52 basis points
("bps") below its 2.03% average for the 10-year period ended December 31, 2021.
Its yield rose 59 bps in 2021. The more than half-point rise was enough of a
headwind to push the returns of taxable investment-grade bonds into negative
territory. It was risk-on for investors in 2021. The top performing fixed-income
bond category we track was high yield corporates. The Bloomberg U.S. Corporate
High Yield Index posted a total return of 5.28% for the year. Investors were
willing to accept more risk to garner a higher return. The good news is that the
default rate on speculative-grade (high yield) debt is low by historical
standards. Moody's reported that its global speculative-grade default rate stood
at 1.7% in December. Moody's puts the historical average default rate at 4.1%
(1983-2021). Its baseline scenario sees the default rate increasing to 2.4% by
December 2022 but staying well below its average.
FOREIGN STOCKS AND BONDS
The U.S. dollar appreciated by 6.37% against a basket of major currencies in
2021, as measured by the U.S. Dollar Index ("DXY"), according to Bloomberg. The
DXY closed 2021 at a reading of 95.67, above its 20-year average of 88.89. The
stronger U.S. dollar likely had a negative influence on the returns of unhedged
foreign securities held by U.S. investors.
The Bloomberg EM Hard Currency Aggregate Index of emerging markets debt posted a
total return of -2.57% (USD), while the Bloomberg Global Aggregate Index of
higher quality debt declined 4.71% (USD). With respect to equities, the MSCI
Emerging Markets Index of stocks posted a total return of -2.54% (USD), while
the MSCI World ex USA Index rose by 12.62% (USD) on a total return basis,
according to Bloomberg.
Page 3
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
The First Trust NASDAQ-100 Equal Weighted Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Equal
Weighted Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its net assets (including investment borrowings) in common stocks and depositary
receipts that comprise the Index. The Index is the equal-weighted version of the
NASDAQ-100 Index(R), which includes 100 of the largest U.S. and international
non-financial companies listed on The Nasdaq Stock Market LLC ("Nasdaq") based
on market capitalization. The Index is rebalanced quarterly and reconstituted
annually and the Fund will make corresponding changes to its portfolio shortly
after the Index changes are made public. The Fund's shares are listed for
trading on the Nasdaq. The first day of secondary market trading in shares of
the Fund was April 25, 2006.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 17.67% 21.27% 18.57% 12.54% 162.27% 449.39% 539.32%
Market Value 17.75% 21.26% 18.58% 12.54% 162.22% 449.76% 539.48%
INDEX PERFORMANCE
NASDAQ-100 Equal Weighted Index(SM) 18.45% 22.02% 19.31% 13.24% 170.49% 484.43% 604.89%
S&P 500(R) Index 28.71% 18.47% 16.55% 10.81% 133.41% 362.57% 401.38%
NASDAQ-100 Index(R) 27.51% 28.63% 23.15% 16.46% 252.19% 702.29% 994.29%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of 17.67% during the
12-month period covered by this report. During the same period, the NASDAQ-100
Index(R) (the "Benchmark") generated a return of 27.51%. The Information
Technology sector received the greatest allocation in the Fund over the period
with an average weight of 41.4%. This sector returned 28.6% as the strongest
performing allocated sector, contributing 11.3% to the Fund's total return. All
invested sectors experienced positive returns during the period except for the
Consumer Discretionary investments, which contributed -0.5% to the Fund's
return. On a relative basis, the Fund underperformed the Benchmark. Investments
in the Information Technology sector were the greatest drivers of this
underperformance. The Fund slightly underweighted this sector in comparison to
the Benchmark and the investments in the Fund slightly underperformed those in
the Benchmark. Thus, due to both allocation effect and selection effect,
investments in the Information Technology sector caused -4.2% underperformance
versus the Benchmark. The only sector which contributed outperformance for the
Fund versus the Benchmark were the investments in the Health Care sector, which
contributed 0.2% of outperformance for the Fund.
-----------------------------
Nasdaq(R), NASDAQ-100(R), NASDAQ-100 Index(R), and NASDAQ-100 Equal Weighted
Index(SM) are registered trademarks and service marks of Nasdaq, Inc. (together
with its affiliates hereinafter 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
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 43.3%
Consumer Discretionary 16.0
Communication Services 12.0
Health Care 11.7
Industrials 7.0
Consumer Staples 7.0
Utilities 3.0
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
MercadoLibre, Inc. 1.1%
Tesla, Inc. 1.1
Micron Technology, Inc. 1.1
Paychex, Inc. 1.1
Marriott International, Inc., Class A 1.1
KLA Corp. 1.1
Atlassian Corp. PLC, Class A 1.1
NetEase, Inc., ADR 1.1
Booking Holdings, Inc. 1.0
Activision Blizzard, Inc. 1.0
-------
Total 10.8%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust
NASDAQ-100 Equal NASDAQ-100 Equal S&P 500(R) NASDAQ-100
Weighted Index Fund Weighted Index(SM) Index Index(R)
<S> <C> <C> <C> <C>
12/11 $10,000 $10,000 $10,000 $10,000
06/12 10,918 10,945 10,949 11,544
12/12 11,486 11,545 11,600 11,835
06/13 13,278 13,406 13,203 13,029
12/13 16,074 16,278 15,356 16,204
06/14 17,357 17,631 16,452 17,479
12/14 19,150 19,507 17,459 19,349
06/15 19,604 20,028 17,674 20,204
12/15 19,577 20,070 17,701 21,236
06/16 19,013 19,542 18,381 20,563
12/16 20,950 21,606 19,818 22,782
06/17 24,266 25,100 21,669 26,605
12/17 26,399 27,394 24,144 30,298
06/18 27,645 28,766 24,784 33,525
12/18 25,038 26,131 23,086 30,310
06/19 30,636 32,078 27,366 36,933
12/19 33,997 35,706 30,354 42,270
06/20 36,900 38,873 29,419 49,409
12/20 46,693 49,341 35,938 62,927
06/21 51,974 55,104 41,419 71,321
12/21 54,939 58,443 46,257 80,229
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 5
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
The First Trust NASDAQ-100-Technology Sector Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Technology
Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its net assets (including investment borrowings) in common stocks and depositary
receipts that comprise the Index. The Index is an equal-weighted index composed
of the securities comprising the NASDAQ-100 Index(R) that are classified as
"technology" according to the Industry Classification Benchmark classification
system. The NASDAQ-100 Index(R) includes 100 of the largest U.S. and
international non-financial companies listed on the Nasdaq based on market
capitalization. The Index is rebalanced quarterly and reconstituted annually and
the Fund will make corresponding changes to its portfolio shortly after the
Index changes are made public. The Fund's shares are listed for trading on the
Nasdaq. The first day of secondary market trading in shares of the Fund was
April 25, 2006.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 26.94% 27.99% 22.96% 15.51% 243.47% 690.33% 861.46%
Market Value 27.03% 27.98% 22.97% 15.51% 243.31% 690.87% 861.71%
INDEX PERFORMANCE
NASDAQ-100 Technology Sector Index(SM) 27.71% 28.78% 23.74% 16.23% 254.15% 741.60% 961.04%
S&P 500(R) Index 28.71% 18.47% 16.55% 10.81% 133.41% 362.57% 401.38%
S&P 500 Information Technology Index 34.53% 32.13% 24.01% 16.29% 302.73% 760.29% 968.96%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 26.94% during the 12-month period covered by
this report. During the same period, the S&P 500 Information Technology Index
(the "Benchmark") generated a return of 34.53%. Semiconductors & Semiconductor
Equipment received an allocation of 44.7%, a greater allocation than any other
industry for the Fund during this reporting period. Investments in this industry
returned 48.5% and contributed 19.7% to the Fund's total return. All industries
yielded positive returns for the Fund. On a relative basis, the Fund
underperformed the Benchmark. The industry that caused the most underperformance
for the Fund was Software, which caused -10.4% of underperformance versus the
Benchmark. The IT Services industry caused 3.4% of outperformance versus the
Benchmark, the greatest degree of outperformance by an industry in the Fund.
-----------------------------
Nasdaq(R), NASDAQ-100(R), NASDAQ-100 Index(R), and NASDAQ-100 Technology Sector
Index(SM) are registered trademarks and service marks of Nasdaq, Inc. (together
with its affiliates hereinafter 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
<PAGE>
--------------------------------------------------------------------------------
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 90.6%
Communication Services 9.4
-------
Total 100.0%
=======
(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
-----------------------------------------------------------
Micron Technology, Inc. 2.6%
KLA Corp. 2.5
Atlassian Corp. PLC, Class A 2.5
Applied Materials, Inc. 2.5
Fortinet, Inc. 2.5
Lam Research Corp. 2.5
ASML Holding N.V. 2.4
Xilinx, Inc. 2.4
Synopsys, Inc. 2.4
NVIDIA Corp. 2.4
-------
Total 24.7%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust
NASDAQ-100- NASDAQ-100
Technology Sector Technology Sector S&P 500(R) S&P 500 Information
Index Fund Index(SM) Index Technology Index
<S> <C> <C> <C> <C>
12/11 $10,000 $10,000 $10,000 $10,000
06/12 10,456 10,489 10,949 11,334
12/12 10,802 10,870 11,600 11,482
06/13 12,068 12,183 13,203 12,211
12/13 14,920 15,111 15,356 14,746
06/14 16,878 17,148 16,452 16,064
12/14 18,625 18,985 17,459 17,712
06/15 18,165 18,567 17,674 17,847
12/15 18,368 18,834 17,701 18,763
06/16 18,906 19,456 18,381 18,703
12/16 23,009 23,766 19,818 21,361
06/17 27,392 28,374 21,669 25,042
12/17 31,720 32,959 24,144 29,657
06/18 34,048 35,480 24,784 32,881
12/18 30,228 31,591 23,086 29,573
06/19 38,166 40,010 27,366 37,596
12/19 44,849 47,168 30,354 44,446
06/20 49,123 51,833 29,419 51,091
12/20 62,258 65,890 35,938 63,951
06/21 71,684 76,077 41,419 72,751
12/21 79,033 84,160 46,257 86,029
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 7
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
The First Trust NASDAQ-100 Ex-Technology Sector Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Ex-Tech
Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its net assets (including investment borrowings) in common stocks and depositary
receipts that comprise the Index. The Index is an equal-weighted index composed
of the securities comprising the NASDAQ-100 Index(R) that are not classified as
"technology" according to the Industry Classification Benchmark classification
system. The NASDAQ-100 Index(R) includes 100 of the largest U.S. and
international non-financial companies listed on the Nasdaq based on market
capitalization. The Index is rebalanced quarterly and reconstituted annually and
the Fund will make corresponding changes to its portfolio shortly after the
Index changes are made public. The Fund's shares are listed for trading on the
Nasdaq. The first day of secondary market trading in shares of the Fund was
February 15, 2007.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 11.80% 17.36% 16.16% 10.99% 122.66% 347.44% 372.43%
Market Value 11.84% 17.38% 16.17% 10.99% 122.82% 347.77% 372.55%
INDEX PERFORMANCE
NASDAQ-100 Ex-Tech Sector Index(SM) 12.53% 18.08% 16.87% 11.68% 129.58% 375.35% 418.07%
Russell 1000(R) Index 26.45% 18.43% 16.54% 10.61% 132.93% 362.24% 348.88%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 11.80% during the 12-month period covered by
this report. During the same period, the Russell 1000(R) Index (the "Benchmark")
generated a return of 26.45%. The Consumer Discretionary sector was the Fund's
largest allocation during the period at 24.9% and generated the largest negative
contribution to the Fund's return at -0.9%. The largest positive contribution to
the Fund's return came from investments in the Health Care sector, which
returned 5.9% during the period. On a relative basis, the Fund underperformed
the Benchmark. The Consumer Discretionary sector's -7.5% drag on return compared
to the Benchmark's performance for the same sector was the largest source of
relative underperformance during the period. The Health Care sector's 0.3% of
outperformance marginally reduced the Fund's relative underperformance versus
the Benchmark.
-----------------------------
Nasdaq(R), NASDAQ-100(R), NASDAQ-100 Index(R), and NASDAQ-100 Ex-Tech Sector
Index(SM) are registered trademarks and service marks of Nasdaq, Inc. (together
with its affiliates hereinafter 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
<PAGE>
--------------------------------------------------------------------------------
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 27.7%
Health Care 20.3
Communication Services 13.8
Industrials 12.1
Consumer Staples 12.1
Information Technology 8.8
Utilities 5.2
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
MercadoLibre, Inc. 1.9%
Tesla, Inc. 1.9
Paychex, Inc. 1.8
Marriott International, Inc., Class A 1.8
NetEase, Inc., ADR 1.8
Booking Holdings, Inc. 1.8
Activision Blizzard, Inc. 1.8
Exelon Corp. 1.8
Align Technology, Inc. 1.8
Starbucks Corp. 1.8
-------
Total 18.2%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust
NASDAQ-100 NASDAQ-100
Ex-Technology Sector Ex-Tech Sector Russell 1000(R)
Index Fund Index(SM) Index
<S> <C> <C> <C>
12/11 $10,000 $10,000 $10,000
06/12 11,277 11,306 10,938
12/12 12,031 12,091 11,642
06/13 14,290 14,431 13,261
12/13 16,992 17,206 15,497
06/14 17,770 18,054 16,624
12/14 19,600 19,964 17,550
06/15 20,664 21,118 17,850
12/15 20,530 21,055 17,711
06/16 19,288 19,821 18,373
12/16 20,092 20,705 19,845
06/17 22,961 23,736 21,685
12/17 24,192 25,079 24,148
06/18 24,954 25,939 24,836
12/18 22,843 23,809 22,993
06/19 27,396 28,652 27,325
12/19 29,319 30,752 30,219
06/20 31,612 33,255 29,370
12/20 40,018 42,231 36,554
06/21 43,568 46,125 42,019
12/21 44,744 47,535 46,224
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 9
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
The First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (the "Fund")
seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the NASDAQ(R)
Clean Edge(R) Green Energy Index(SM) (the "Index"). The Fund will normally
invest at least 90% of its net assets (including investment borrowings) in
common stocks and depositary receipts that comprise the Index. The Index is
designed to track the performance of small, mid and large capitalization
clean-energy companies that are publicly traded in the United States. The Index
is rebalanced quarterly and reconstituted semi-annually and the Fund will make
corresponding changes to its portfolio shortly after the Index changes are made
public. The Fund's shares are listed for trading on the Nasdaq. The first day of
secondary market trading in shares of the Fund was February 14, 2007.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV -3.14% 35.28% 22.48% 9.11% 353.12% 659.78% 266.59%
Market Value -3.18% 35.26% 22.52% 9.11% 352.76% 662.12% 266.58%
INDEX PERFORMANCE
NASDAQ(R) Clean Edge(R) Green Energy
Index(SM) -2.64% 35.64% 22.44% 9.34% 359.13% 657.36% 278.11%
Russell 2000(R) Index 14.82% 12.02% 13.23% 8.49% 76.39% 246.52% 236.55%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -3.14% during the 12-month period covered by
this report. During the same period, the Russell 2000(R) Index (the "Benchmark")
generated a return of 14.82%. The Fund's 36.7% weight in the Information
Technology sector was the largest allocation. The largest positive contribution
to the Fund of 3.9% came from investments in the Materials sector. The largest
negative contribution to the Fund during the period was the -6.2% contribution
from the Industrials sector. On a relative basis, the Fund underperformed the
Benchmark. The Fund's allocation in the Industrials sector caused -11.1% of
underperformance for the Fund versus the Benchmark, which was the largest source
of underperformance from any sector during the period. The Fund did not have an
allocation to the Health Care sector, and this resulted in 6.9% of
outperformance for the Fund versus the Benchmark during the period.
-----------------------------
Nasdaq(R), Clean Edge(R), and NASDAQ(R) Clean Edge(R) Green Energy Index(SM) are
registered trademarks and service marks of Nasdaq, Inc. and Clean Edge, Inc.,
respectively (together with its affiliates hereinafter 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 10
<PAGE>
--------------------------------------------------------------------------------
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 36.5%
Consumer Discretionary 20.2
Industrials 19.3
Materials 12.2
Utilities 9.7
Financials 1.4
Energy 0.7
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Tesla, Inc. 8.3%
ON Semiconductor Corp. 8.2
Albemarle Corp. 7.6
NIO, Inc., ADR 7.3
Enphase Energy, Inc. 6.6
XPeng, Inc., ADR 4.1
Wolfspeed, Inc. 3.9
SolarEdge Technologies, Inc. 3.9
Plug Power, Inc. 3.2
Brookfield Renewable Partners, L.P. 3.0
-------
Total 56.1%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust
NASDAQ(R) NASDAQ(R)
Clean Edge(R) Green Clean Edge(R) Russell 2000(R)
Energy Index Fund Green Energy Index(SM) Index
<S> <C> <C> <C>
12/11 $10,000 $10,000 $10,000
06/12 9,679 9,659 10,853
12/12 9,950 9,869 11,634
06/13 14,874 14,714 13,479
12/13 18,883 18,685 16,151
06/14 21,717 21,495 16,666
12/14 18,307 18,101 16,941
06/15 19,647 19,430 17,746
12/15 17,128 16,947 16,193
06/16 15,449 15,247 16,552
12/16 16,764 16,497 19,644
06/17 19,599 19,310 20,624
12/17 22,084 21,784 22,521
06/18 21,262 20,993 24,246
12/18 19,385 19,146 20,039
06/19 23,355 23,073 23,442
12/19 27,659 27,314 25,153
06/20 33,122 32,719 21,888
12/20 78,420 77,799 30,178
06/21 77,369 76,912 35,471
12/21 75,978 75,736 34,652
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 11
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST S&P REIT INDEX FUND (FRI)
The First Trust S&P REIT Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the S&P United States REIT Index (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in the real estate investment trusts ("REITs")
that comprise the Index. The Index seeks to measure the performance of publicly
traded REITs domiciled in the U.S. that meet certain eligibility requirements.
The Index is rebalanced quarterly and the Fund will make corresponding changes
to its portfolio shortly after the Index changes are made public. The Fund's
shares are listed for trading on the NYSE Arca. The first day of secondary
market trading in shares of the Fund was May 10, 2007.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 42.52% 10.00% 10.63% 6.15% 61.06% 174.58% 139.64%
Market Value 42.56% 10.00% 10.63% 6.15% 61.05% 174.67% 139.73%
INDEX PERFORMANCE
S&P United States REIT Index* 43.05% 10.57% 11.21% N/A 65.24% 189.31% N/A
FTSE EPRA/NAREIT North America Index 42.60% 10.00% 10.52% 6.27% 61.05% 171.96% 143.83%
Russell 3000(R) Index 25.66% 17.97% 16.30% 10.33% 128.45% 352.85% 322.00%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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 42.52% during the 12-month period covered by
this report. During the same period, the Benchmark Russell 3000(R) Index (the
"Benchmark") generated a return of 25.66%. Prologis, Inc. was the largest
holding in the Fund during the period at an 8.3% weight and generated the
largest contribution to the Fund's return at 5.5%. The largest drag on the
Fund's return came from Americold Realty Trust with a -0.1% contribution to the
Fund's return during the period. On a relative basis, the Fund outperformed the
Benchmark. The largest outperformance was the allocation to Prologis, Inc. which
generated 3.6% of relative outperformance during the period. The Benchmark had
an allocation to Microsoft Corp. while the Fund did not, resulting in a -1.3%
drag on the Fund's performance versus the Benchmark.
-----------------------------
S&P United States REIT Index ("Index") is a product of S&P Dow Jones Indices LLC
or its affiliates ("SPDJI") and has been licensed for use by First Trust. S&P(R)
is a registered trademark of Standard & Poor's Financial Services LLC ("S&P");
Dow Jones(R) is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow
Jones"); and these trademarks have been licensed for use by SPDJI and
sublicensed for certain purposes by First Trust. The Fund is not sponsored,
endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective
affiliates and none of such parties make any representation regarding the
advisability of investing in such product nor do they have any liability for any
errors, omissions, or interruptions of the Index.
Page 12
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST S&P REIT INDEX FUND (FRI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
REIT CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Specialized 23.8%
Residential 19.8
Industrial 16.9
Retail 14.2
Health Care 9.8
Office 8.4
Diversified 3.9
Hotel & Resort 3.2
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Prologis, Inc. 9.6%
Equinix, Inc. 5.9
Public Storage 4.4
Simon Property Group, Inc. 4.0
Digital Realty Trust, Inc. 3.9
Realty Income Corp. 3.1
Welltower, Inc. 2.9
AvalonBay Communities, Inc. 2.7
Alexandria Real Estate Equities, Inc. 2.4
Equity Residential 2.4
-------
Total 41.3%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust S&P United States FTSE EPRA/NAREIT Russell 3000(R)
S&P REIT Index Fund REIT Index North America Index Index
<S> <C> <C> <C> <C>
12/11 $10,000 $10,000 $10,000 $10,000
06/12 11,464 11,493 11,462 10,932
12/12 11,739 11,799 11,815 11,641
06/13 12,454 12,558 12,370 13,278
12/13 11,953 12,082 11,966 15,547
06/14 14,028 14,213 14,010 16,626
12/14 15,493 15,739 15,335 17,499
06/15 14,512 14,779 14,406 17,838
12/15 15,798 16,139 15,613 17,583
06/16 17,845 18,284 17,661 18,220
12/16 17,049 17,511 16,889 19,822
06/17 17,352 17,873 17,195 21,592
12/17 17,694 18,270 17,661 24,010
06/18 17,890 18,520 17,945 24,783
12/18 16,948 17,576 16,970 22,756
06/19 19,722 20,518 19,824 27,014
12/19 20,959 21,872 21,128 29,815
06/20 17,061 17,861 16,695 28,777
12/20 19,266 20,225 19,069 36,036
06/21 23,385 24,614 23,293 41,481
12/21 27,458 28,931 27,196 45,285
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 13
<PAGE>
--------------------------------------------------------------------------------
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 the common stocks and depositary receipts that comprise the Index. The Index
is designed to track the performance of small, mid and large capitalization
companies that derive a substantial portion of their revenues from the potable
water and wastewater industries. The Fund's shares are listed for trading on the
NYSE Arca. The Index is rebalanced and reconstituted semi-annually and the Fund
will make corresponding changes to its portfolio shortly after the changes are
made public. The first day of secondary market trading in shares of the Fund was
May 11, 2007.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 31.89% 19.93% 17.30% 12.05% 148.10% 392.95% 429.36%
Market Value 31.87% 19.92% 17.32% 12.05% 148.00% 394.16% 429.39%
INDEX PERFORMANCE
ISE Clean Edge Water Index 33.30% 20.68% 18.05% 12.78% 155.96% 425.78% 482.35%
Russell 3000(R) Index 25.66% 17.97% 16.30% 10.33% 128.45% 352.85% 322.00%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 31.89% during the 12-month period covered by
this report. During the same period, the Russell 3000(R) Index (the "Benchmark")
generated a return of 25.66%. The Industrials sector received the largest
allocation to the Fund during the period covered by this report with a 57.2%
weight and generated the largest contribution to the Fund's return at 23.5%.
Investments in the Information Technology sector caused a small drag on the
Fund's performance with a -0.5% contribution to the Fund's return during the
period. On a relative basis, the Fund outperformed the Benchmark. The
Industrials sector was where the Fund outperformed the Benchmark by the largest
amount, with 10.1% of relative outperformance during the period. A portion of
the Fund's outperformance compared to the Benchmark was reduced by the -2.9% of
relative underperformance in the Information Technology sector.
-----------------------------
Nasdaq(R), Clean Edge(R), and ISE Clean Edge Water Index are registered
trademarks and service marks of Nasdaq, Inc. and Clean Edge, Inc., respectively
(together with its affiliates hereinafter 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 14
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST WATER ETF (FIW) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 59.8%
Utilities 20.0
Health Care 11.0
Materials 3.9
Information Technology 3.4
Consumer Staples 1.9
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Essential Utilities, Inc. 4.1%
IDEX Corp. 4.0
Advanced Drainage Systems, Inc. 4.0
Ecolab, Inc. 3.9
American Water Works Co., Inc. 3.9
A.O. Smith Corp. 3.9
Tetra Tech, Inc. 3.9
AECOM 3.9
Roper Technologies, Inc. 3.9
Danaher Corp. 3.9
-------
Total 39.4%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust ISE Clean Edge Russell 3000(R)
Water ETF Water Index Index
<S> <C> <C> <C>
12/11 $10,000 $10,000 $10,000
06/12 10,992 11,037 10,932
12/12 12,684 12,778 11,641
06/13 13,583 13,741 13,278
12/13 16,605 16,853 15,547
06/14 17,078 17,380 16,626
12/14 16,665 17,015 17,499
06/15 15,562 15,936 17,838
12/15 15,030 15,440 17,583
06/16 17,644 18,188 18,220
12/16 19,871 20,538 19,822
06/17 21,695 22,434 21,592
12/17 24,689 25,604 24,010
06/18 24,491 25,420 24,783
12/18 22,493 23,404 22,751
06/19 28,118 29,349 27,008
12/19 30,840 32,281 29,809
06/20 28,768 30,257 28,772
12/20 37,378 39,434 36,034
06/21 43,344 45,854 41,485
12/21 49,295 52,578 45,285
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 15
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NATURAL GAS ETF (FCG)
The First Trust Natural Gas ETF (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE-Revere Natural Gas(TM) Index (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in the common stocks, depositary receipts and
master limited partnership ("MLP") units that comprise the Index. The Index is
designed to track the performance of mid and large capitalization companies that
derive a substantial portion of their revenue from mid-stream activities and/or
the exploration and production of natural gas. The Fund's shares are listed for
trading on the NYSE Arca. The Index is rebalanced and reconstituted quarterly
and the Fund will make corresponding changes to its portfolio shortly after the
Index changes are made public. The first day of secondary market trading in
shares of the Fund was May 11, 2007.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 98.69% -5.82% -13.77% -10.06% -25.92% -77.28% -78.86%
Market Value 98.57% -5.84% -13.77% -10.07% -25.99% -77.28% -78.87%
INDEX PERFORMANCE
ISE-Revere Natural Gas(TM) Index 100.25% -6.16% -13.94% -9.97% -27.24% -77.70% -78.55%
S&P Composite 1500(R) Energy Index 55.15% -2.23% 0.52% 1.30% -10.66% 5.33% 20.80%
Russell 3000(R) Index 25.66% 17.97% 16.30% 10.33% 128.45% 352.85% 322.00%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 98.69% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500(R) Energy Index (the
"Benchmark") generated a return of 55.15%. The Oil & Gas Exploration &
Production sub-industry was the largest weight for the Fund during the period at
83.9% and generated the largest contribution to the Fund's return at 88.3%. The
smallest contribution to the Fund's return came from investments in the
Integrated Oil & Gas sub-industry which was also the Fund's smallest allocation
during the period. On a relative basis, the Fund outperformed the Benchmark. The
largest source of outperformance came from the Fund's substantial weighting to
the Oil & Gas Exploration & Production sub-industry where the Fund outperformed
the Benchmark by 35.1% on a relative basis. The Fund did not have any
investments in the Coal & Consumable Fuels sub-industry which generated a
minimal drag of -0.1% on the Fund's performance compared to the Benchmark.
-----------------------------
Nasdaq(R) and ISE-Revere Natural Gas(TM) Index are registered trademarks and
service marks of Nasdaq, Inc. (together with its affiliates hereinafter 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 16
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NATURAL GAS ETF (FCG) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SUB-INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Oil & Gas Exploration & Production 82.8%
Oil & Gas Storage & Transportation 13.1
Integrated Oil & Gas 4.1
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Western Midstream Partners, L.P. 5.1%
DCP Midstream, L.P. 4.6
ConocoPhillips 4.4
Pioneer Natural Resources Co. 4.1
Occidental Petroleum Corp. 4.1
EOG Resources, Inc. 4.0
Devon Energy Corp. 4.0
Marathon Oil Corp. 3.8
Diamondback Energy, Inc. 3.8
EQT Corp. 3.6
-------
Total 41.5%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust ISE-Revere Natural Russell 3000(R) S&P Composite 1500(R)
Natural Gas ETF Gas(TM) Index Index Energy Index
<S> <C> <C> <C> <C>
12/11 $10,000 $10,000 $10,000 $10,000
06/12 9,052 9,080 10,932 9,706
12/12 8,649 8,706 11,641 10,434
06/13 8,906 8,980 13,278 11,448
12/13 110,823 10,946 15,547 13,084
06/14 113,116 13,295 16,626 14,780
12/14 6,276 6,346 17,499 11,885
06/15 5,350 5,363 17,838 11,328
12/15 2,567 2,559 17,583 9,262
06/16 2,847 2,831 18,220 10,704
12/16 3,067 3,065 19,822 11,790
06/17 2,443 2,450 21,592 10,161
12/17 2,713 2,732 24,010 11,549
06/18 2,800 2,828 24,783 12,407
12/18 1,770 1,788 22,751 9,319
06/19 1,767 1,791 27,008 10,464
12/19 1,490 1,516 29,809 10,255
06/20 945 922 28,772 6,542
12/20 1,144 1,114 36,034 6,789
06/21 2,141 2,093 41,485 9,990
12/21 2,272 2,230 45,285 10,533
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 17
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CHINDIA ETF (FNI)
The First Trust Chindia ETF (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE ChIndia(TM) Index (the "Index"). The
Fund will normally invest at least 90% of its net assets (including investment
borrowings) in common stocks and depositary receipts that comprise the Index.
The Index is a modified market capitalization weighted index designed to track
the performance of U.S. listed securities issued by small, mid and large
capitalization companies domiciled in China or India. The Fund's shares are
listed for trading on the NYSE Arca. The Index is rebalanced and reconstituted
semi-annually and the Fund will make corresponding changes to its portfolio
shortly after the Index changes are made public. The first day of secondary
market trading in shares of the Fund was May 11, 2007.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV -19.38% 12.64% 11.16% 7.11% 81.37% 188.01% 173.51%
Market Value -19.41% 12.66% 11.18% 7.10% 81.45% 188.46% 173.33%
INDEX PERFORMANCE
ISE ChIndia(TM) Index -18.94% 13.25% 11.71% 7.68% 86.26% 202.58% 195.60%
Russell 3000(R) Index 25.66% 17.97% 16.30% 10.33% 128.45% 352.85% 322.00%
MSCI Emerging Markets Index -2.54% 9.87% 5.49% 3.91% 60.14% 70.62% 75.29%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -19.38% during the 12-month period covered by
this report. During the same period, the MSCI Emerging Markets Index (the
"Benchmark") generated a return of -2.54%. The Consumer Discretionary sector had
the largest allocation in the Fund during the period at 38.6%. The Fund's
investments in the Information Technology Sector generated a 3.9% contribution
to the Fund's return, the largest for the period. Investments in the Consumer
Discretionary sector generated the largest negative contribution to the Fund's
return at -15.3%. On a relative basis, the Fund underperformed the Benchmark.
The largest source of underperformance came from investments in the Consumer
Discretionary sector where the Fund underperformed the Benchmark by -10.5% on a
relative basis. The Fund's investments in the Information Technology sector
generated a small relative outperformance of 1.9% when compared to the
Benchmark.
-----------------------------
Nasdaq(R) and ISE ChIndia Index(TM) are registered trademarks and service marks
of Nasdaq, Inc. (together with its affiliates hereinafter 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 18
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CHINDIA ETF (FNI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 37.5%
Information Technology 20.4
Financials 17.3
Communication Services 13.4
Health Care 4.0
Utilities 2.8
Industrials 2.5
Energy 0.7
Real Estate 0.7
Consumer Staples 0.7
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
COUNTRY ALLOCATION(1) LONG-TERM INVESTMENTS
-----------------------------------------------------------
China 54.6%
India 44.6
Hong Kong 0.8
-------
Total 100.0%
=======
(1) Calculated based on country of risk.
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Infosys Ltd., ADR 8.3%
ICICI Bank Ltd., ADR 7.9
HDFC Bank Ltd., ADR 7.3
Alibaba Group Holding Ltd., ADR 6.9
Pinduoduo, Inc., ADR 6.5
JD.com, Inc., ADR 6.1
Wipro Ltd., ADR 4.8
Tata Motors Ltd., ADR 4.4
WNS (Holdings) Ltd., ADR 4.4
Baidu, Inc., ADR 4.2
-------
Total 60.8%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust ISE ChIndia(TM) Russell 3000(R) MSCI Emerging
Chindia ETF Index Index Markets Index
<S> <C> <C> <C> <C>
12/11 $10,000 $10,000 $10,000 $10,000
06/12 10,602 10,618 10,932 10,393
12/12 11,710 11,752 11,641 11,822
06/13 11,854 11,932 13,278 10,691
12/13 15,902 16,032 15,547 11,514
06/14 16,896 17,071 16,626 12,221
12/14 16,279 16,474 17,499 11,263
06/15 17,436 17,678 17,838 11,595
12/15 16,226 16,499 17,583 9,582
06/16 15,635 15,941 18,220 10,196
12/16 15,877 16,247 19,822 10,654
06/17 20,381 20,908 21,592 12,618
12/17 23,395 24,044 24,010 14,627
06/18 22,943 23,633 24,783 13,653
12/18 18,556 19,171 22,751 12,494
06/19 21,562 22,332 27,008 13,818
12/19 23,930 24,838 29,809 14,798
06/20 24,511 25,521 28,772 13,351
12/20 35,715 37,332 36,034 17,509
06/21 37,826 39,620 41,485 18,813
12/21 28,801 30,258 45,285 17,062
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 19
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
The First Trust NASDAQ(R) ABA Community Bank Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ OMX(R) ABA
Community Bank Index(SM) (the "Index"). The Fund will normally invest at least
90% of its net assets (including investment borrowings) in the common stocks
that comprise the Index. The Index is designed to track the performance of
small, mid and large capitalization companies that comprise the community
banking industry. The Fund's shares are listed for trading on the Nasdaq. The
Index is rebalanced quarterly and reconstituted semi-annually and the Fund will
make corresponding changes to its portfolio shortly after the Index changes are
made public. The first day of secondary market trading in shares of the Fund was
July 1, 2009.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (6/29/09) Ended Ended (6/29/09)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 34.08% 4.32% 11.82% 10.87% 23.56% 205.56% 263.51%
Market Value 34.02% 4.29% 11.89% 10.87% 23.40% 207.65% 263.61%
INDEX PERFORMANCE
NASDAQ OMX(R) ABA Community Bank
Index(SM) 35.01% 5.00% 12.53% 11.59% 27.61% 225.68% 293.94%
S&P Composite 1500(R) Financials Index 34.55% 12.73% 15.97% 13.97% 82.09% 340.01% 413.14%
Russell 3000(R) Index 25.66% 17.97% 16.30% 16.20% 128.45% 352.85% 533.94%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 22.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 34.08% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500(R) Financials Index
(the "Benchmark") generated a return of 34.55%. The Fund allocated 90.2% to the
Banks industry group within the Financials Sector and 9.0% to the Thrifts and
Mortgage Finance industry, within the same sector. The Benchmark allocated 99.9%
to the Financials sector but spread more evenly across seven industries with
39.5% in Banks and only 0.9% in Thrifts and Mortgage Finance. The Banks
industry, by far the greatest allocation in the Fund, accounted for 32.2% of the
Fund's overall return. No industry in the Fund had a negative contribution to
the Fund's return during the period covered by this report. On a relative basis,
the Fund underperformed the Benchmark. The greatest source of underperformance
came from the Fund's lack of allocation to the Capital Markets industry. The
Benchmark allocated 24.9% to this industry, which caused -1.2% of relative
underperformance for the Fund versus the Benchmark. The allocation to Banks, to
which the Fund allocated 90.2% and the Benchmark allocated only 39.5%, earned
0.8% of relative outperformance for the Fund versus the Benchmark.
-----------------------------
Nasdaq(R), NASDAQ OMX(R), OMX(R), American Bankers Association(R), ABA(R) and
the NASDAQ OMX(R) ABA(R) Community Bank Index(SM) are registered trademarks and
service marks of Nasdaq, Inc. and American Bankers Association (together with
its affiliates hereinafter 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
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Banks 90.6%
Thrifts & Mortgage Finance 9.2
IT Services 0.2
-------
Total 100.0%
=======
(1) Calculated based on country of risk.
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Commerce Bancshares, Inc. 3.3%
Pinnacle Financial Partners, Inc. 2.9
First Financial Bankshares, Inc. 2.9
BOK Financial Corp. 2.8
Bank OZK 2.4
Valley National Bancorp 2.2
SouthState Corp. 2.2
PacWest Bancorp 2.1
Wintrust Financial Corp. 2.0
UMB Financial Corp. 2.0
-------
Total 24.8%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
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
<S> <C> <C> <C> <C>
12/11 $10,000 $10,000 $10,000 $10,000
06/12 10,994 11,032 11,342 10,932
12/12 11,352 11,424 12,696 11,641
06/13 13,452 13,582 15,078 13,278
12/13 16,222 16,432 17,046 15,547
06/14 16,217 16,478 17,927 16,626
12/14 16,663 16,981 19,583 17,499
06/15 18,184 18,591 19,628 17,838
12/15 17,977 18,429 19,443 17,583
06/16 17,671 18,171 19,128 18,220
12/16 24,731 25,521 24,164 19,822
06/17 23,870 24,709 25,669 21,592
12/17 24,868 25,826 29,214 24,010
06/18 26,139 27,226 28,227 24,783
12/18 20,854 21,775 25,407 22,751
06/19 23,402 24,516 29,772 27,008
12/19 25,609 26,911 33,339 29,809
06/20 17,762 18,730 25,398 28,772
12/20 22,786 24,123 32,703 36,039
06/21 28,355 30,122 40,931 41,484
12/21 30,556 32,568 44,001 45,285
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 21
<PAGE>
--------------------------------------------------------------------------------
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 of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV was 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
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2021 (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 (12b-1) 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, 2021.
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.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2021 DECEMBER 31, 2021 PERIOD (a) PERIOD (b)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX
FUND (QQEW)
Actual $1,000.00 $1,057.10 0.57% $2.96
Hypothetical (5% return before expenses) $1,000.00 $1,022.33 0.57% $2.91
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX
FUND (QTEC)
Actual $1,000.00 $1,102.40 0.56% $2.97
Hypothetical (5% return before expenses) $1,000.00 $1,022.38 0.56% $2.85
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR
INDEX FUND (QQXT)
Actual $1,000.00 $1,026.90 0.60% $3.07
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 $ 982.20 0.58% $2.90
Hypothetical (5% return before expenses) $1,000.00 $1,022.28 0.58% $2.96
FIRST TRUST S&P REIT INDEX FUND (FRI)
Actual $1,000.00 $1,174.20 0.50% $2.74
Hypothetical (5% return before expenses) $1,000.00 $1,022.68 0.50% $2.55
FIRST TRUST WATER ETF (FIW)
Actual $1,000.00 $1,137.30 0.53% $2.86
Hypothetical (5% return before expenses) $1,000.00 $1,022.53 0.53% $2.70
</TABLE>
Page 23
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
DECEMBER 31, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2021 DECEMBER 31, 2021 PERIOD (a) PERIOD (b)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST NATURAL GAS ETF (FCG)
Actual $1,000.00 $1,061.80 0.60% $3.12
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST CHINDIA ETF (FNI)
Actual $1,000.00 $ 761.20 0.61% $2.71
Hypothetical (5% return before expenses) $1,000.00 $1,022.13 0.61% $3.11
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK
INDEX FUND (QABA)
Actual $1,000.00 $1,077.50 0.60% $3.14
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
</TABLE>
(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,
2021 through December 31, 2021), multiplied by 184/365 (to reflect the
six-month period).
Page 24
<PAGE>
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 100.0%
AUTOMOBILES -- 2.0%
336,380 Lucid Group, Inc. (a) $ 12,799,259
14,434 Tesla, Inc. (a) 15,253,563
---------------
28,052,822
---------------
BEVERAGES -- 3.0%
377,253 Keurig Dr Pepper, Inc. 13,905,546
146,919 Monster Beverage Corp. (a) 14,110,101
79,981 PepsiCo, Inc. 13,893,499
---------------
41,909,146
---------------
BIOTECHNOLOGY -- 6.7%
60,492 Amgen, Inc. 13,608,885
56,691 Biogen, Inc. (a) 13,601,305
186,402 Gilead Sciences, Inc. 13,534,649
45,655 Moderna, Inc. (a) 11,595,457
21,735 Regeneron Pharmaceuticals,
Inc. (a) 13,726,087
89,646 Seagen, Inc. (a) 13,859,272
62,742 Vertex Pharmaceuticals, Inc. (a) 13,778,143
---------------
93,703,798
---------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.0%
30,698 Cintas Corp. 13,604,432
94,048 Copart, Inc. (a) 14,259,558
---------------
27,863,990
---------------
COMMUNICATIONS EQUIPMENT
-- 1.0%
222,621 Cisco Systems, Inc. 14,107,493
---------------
ELECTRIC UTILITIES -- 3.0%
155,540 American Electric Power Co., Inc. 13,838,394
251,505 Exelon Corp. 14,526,929
200,906 Xcel Energy, Inc. 13,601,336
---------------
41,966,659
---------------
ENTERTAINMENT -- 4.1%
219,369 Activision Blizzard, Inc. 14,594,620
105,559 Electronic Arts, Inc. 13,923,232
143,572 NetEase, Inc., ADR 14,612,758
22,942 Netflix, Inc. (a) 13,821,178
---------------
56,951,788
---------------
FOOD & STAPLES RETAILING -- 2.0%
24,580 Costco Wholesale Corp. 13,954,066
275,539 Walgreens Boots Alliance, Inc. 14,372,114
---------------
28,326,180
---------------
FOOD PRODUCTS -- 2.0%
379,068 Kraft Heinz (The) Co. 13,608,541
207,212 Mondelez International, Inc.,
Class A 13,740,228
---------------
27,348,769
---------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 4.1%
22,101 Align Technology, Inc. (a) 14,524,335
24,238 Dexcom, Inc. (a) 13,014,594
21,821 IDEXX Laboratories, Inc. (a) 14,368,256
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
HEALTH CARE EQUIPMENT &
SUPPLIES (CONTINUED)
39,895 Intuitive Surgical, Inc. (a) $ 14,334,273
---------------
56,241,458
---------------
HOTELS, RESTAURANTS & LEISURE
-- 4.2%
85,235 Airbnb, Inc., Class A (a) 14,190,775
6,089 Booking Holdings, Inc. (a) 14,608,911
89,621 Marriott International, Inc.,
Class A (a) 14,808,974
123,908 Starbucks Corp. 14,493,519
---------------
58,102,179
---------------
INDUSTRIAL CONGLOMERATES -- 1.0%
65,607 Honeywell International, Inc. 13,679,716
---------------
INTERACTIVE MEDIA & SERVICES
-- 4.0%
2,374 Alphabet, Inc., Class A (a) 6,877,573
2,356 Alphabet, Inc., Class C (a) 6,817,298
94,726 Baidu, Inc., ADR (a) 14,094,281
106,279 Match Group, Inc. (a) 14,055,398
40,326 Meta Platforms, Inc., Class A (a) 13,563,650
---------------
55,408,200
---------------
INTERNET & DIRECT MARKETING
RETAIL -- 5.0%
3,958 Amazon.com, Inc. (a) 13,197,318
210,211 eBay, Inc. 13,979,032
189,478 JD.com, Inc., ADR (a) 13,276,723
11,335 MercadoLibre, Inc. (a) 15,284,114
231,824 Pinduoduo, Inc., ADR (a) 13,515,339
---------------
69,252,526
---------------
IT SERVICES -- 7.1%
58,675 Automatic Data Processing, Inc. 14,468,082
158,696 Cognizant Technology Solutions
Corp., Class A 14,079,509
129,865 Fiserv, Inc. (a) 13,478,688
61,765 Okta, Inc. (a) 13,845,860
108,649 Paychex, Inc. 14,830,589
72,288 PayPal Holdings, Inc. (a) 13,632,071
55,594 VeriSign, Inc. (a) 14,110,869
---------------
98,445,668
---------------
LEISURE PRODUCTS -- 0.8%
317,056 Peloton Interactive, Inc.,
Class A (a) 11,337,923
---------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.0%
34,969 Illumina, Inc. (a) 13,303,606
---------------
MACHINERY -- 1.0%
161,202 PACCAR, Inc. 14,227,689
---------------
MEDIA -- 2.9%
20,707 Charter Communications, Inc.,
Class A (a) 13,500,343
276,112 Comcast Corp., Class A 13,896,717
2,109,759 Sirius XM Holdings, Inc. (b) 13,396,969
---------------
40,794,029
---------------
See Notes to Financial Statements Page 25
<PAGE>
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTILINE RETAIL -- 1.0%
98,738 Dollar Tree, Inc. (a) $ 13,874,664
---------------
PROFESSIONAL SERVICES -- 1.0%
60,597 Verisk Analytics, Inc. 13,860,352
---------------
ROAD & RAIL -- 1.0%
376,831 CSX Corp. 14,168,846
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 17.3%
97,712 Advanced Micro Devices, Inc. (a) 14,060,757
79,127 Analog Devices, Inc. 13,908,153
92,099 Applied Materials, Inc. 14,492,698
17,949 ASML Holding N.V. 14,289,917
21,198 Broadcom, Inc. 14,105,361
265,906 Intel Corp. 13,694,159
34,377 KLA Corp. 14,785,891
20,114 Lam Research Corp. 14,464,983
160,181 Marvell Technology, Inc. 14,014,236
159,562 Microchip Technology, Inc. 13,891,468
162,162 Micron Technology, Inc. 15,105,390
48,418 NVIDIA Corp. 14,240,218
61,542 NXP Semiconductors N.V. 14,018,037
76,132 QUALCOMM, Inc. 13,922,259
88,728 Skyworks Solutions, Inc. 13,765,262
72,251 Texas Instruments, Inc. 13,617,146
67,256 Xilinx, Inc. 14,260,290
---------------
240,636,225
---------------
SOFTWARE -- 16.9%
24,180 Adobe, Inc. (a) 13,711,511
33,917 ANSYS, Inc. (a) 13,604,787
38,352 Atlassian Corp. PLC, Class A (a) 14,623,234
48,477 Autodesk, Inc. (a) 13,631,248
75,135 Cadence Design Systems, Inc. (a) 14,001,407
65,620 Crowdstrike Holdings, Inc.,
Class A (a) 13,435,695
79,097 Datadog, Inc., Class A (a) 14,087,967
86,626 DocuSign, Inc. (a) 13,194,006
40,320 Fortinet, Inc. (a) 14,491,008
21,701 Intuit, Inc. 13,958,517
41,568 Microsoft Corp. 13,980,150
25,389 Palo Alto Networks, Inc. (a) 14,135,580
120,891 Splunk, Inc. (a) 13,989,506
38,675 Synopsys, Inc. (a) 14,251,737
49,145 Workday, Inc., Class A (a) 13,425,431
67,383 Zoom Video Communications,
Inc., Class A (a) 12,392,408
44,149 Zscaler, Inc. (a) 14,186,398
---------------
235,100,590
---------------
SPECIALTY RETAIL -- 2.0%
19,910 O'Reilly Automotive, Inc. (a) 14,061,039
124,554 Ross Stores, Inc. 14,234,031
---------------
28,295,070
---------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 1.0%
78,648 Apple, Inc. 13,965,525
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
TEXTILES, APPAREL & LUXURY
GOODS -- 1.0%
34,991 Lululemon Athletica, Inc. (a) $ 13,697,227
---------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.0%
216,931 Fastenal Co. 13,896,600
---------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.9%
112,347 T-Mobile US, Inc. (a) 13,030,005
---------------
TOTAL COMMON STOCKS
-- 100.0% 1,391,548,743
(Cost $1,102,188,453) ---------------
MONEY MARKET FUNDS -- 0.6%
8,451,460 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (c) (d) 8,451,460
(Cost $8,451,460) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.3%
$ 3,752,594 BNP Paribas S.A., 0.03% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$3,752,604. Collateralized by
U.S. Treasury Note, interest
rate of 1.50%, due 11/30/28.
The value of the collateral
including accrued interest
is $3,825,998. (d) 3,752,594
(Cost $3,752,594) ---------------
TOTAL INVESTMENTS -- 100.9% 1,403,752,797
(Cost $1,114,392,507) (e)
NET OTHER ASSETS AND
LIABILITIES -- (0.9)% (12,338,538)
---------------
NET ASSETS -- 100.0% $ 1,391,414,259
===============
(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 remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $11,592,002 and the
total value of the collateral held by the Fund is $12,204,054.
(c) Rate shown reflects yield as of December 31, 2021.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $1,129,004,495. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$334,073,224 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$59,324,922. The net unrealized appreciation was $274,748,302.
ADR - American Depositary Receipt
Page 26 See Notes to Financial Statements
<PAGE>
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common
Stocks* $ 1,391,548,743 $ 1,391,548,743 $ -- $ --
Money Market
Funds 8,451,460 8,451,460 -- --
Repurchase
Agreements 3,752,594 -- 3,752,594 --
--------------------------------------------------------------
Total
Investments $ 1,403,752,797 $ 1,400,000,203 $ 3,752,594 $ --
==============================================================
* 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) $ 11,592,002
Non-cash Collateral(2) (11,592,002)
---------------
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, 2021, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 3,752,594
Non-cash Collateral(4) (3,752,594)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 27
<PAGE>
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 100.0%
INTERACTIVE MEDIA & SERVICES
-- 9.4%
16,379 Alphabet, Inc., Class A (a) $ 47,450,618
16,256 Alphabet, Inc., Class C (a) 47,038,199
653,461 Baidu, Inc., ADR (a) 97,228,462
733,135 Match Group, Inc. (a) 96,957,104
278,176 Meta Platforms, Inc., Class A (a) 93,564,498
---------------
382,238,881
---------------
IT SERVICES -- 7.2%
1,094,707 Cognizant Technology Solutions
Corp., Class A 97,122,405
426,086 Okta, Inc. (a) 95,515,698
383,507 VeriSign, Inc. (a) 97,341,747
---------------
289,979,850
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 41.0%
674,056 Advanced Micro Devices, Inc. (a) 96,996,659
545,841 Analog Devices, Inc. 95,942,473
635,323 Applied Materials, Inc. 99,974,427
123,823 ASML Holding N.V. 98,580,443
146,230 Broadcom, Inc. 97,302,904
1,834,302 Intel Corp. 94,466,553
237,140 KLA Corp. 101,996,286
138,756 Lam Research Corp. 99,786,377
1,104,984 Marvell Technology, Inc. 96,675,050
1,100,683 Microchip Technology, Inc. 95,825,462
1,118,672 Micron Technology, Inc. 104,204,297
333,995 NVIDIA Corp. 98,231,270
424,541 NXP Semiconductors N.V. 96,701,949
525,179 QUALCOMM, Inc. 96,039,484
612,073 Skyworks Solutions, Inc. 94,957,005
498,407 Texas Instruments, Inc. 93,934,767
463,946 Xilinx, Inc. 98,370,470
---------------
1,659,985,876
---------------
SOFTWARE -- 40.0%
166,804 Adobe, Inc. (a) 94,587,876
233,967 ANSYS, Inc. (a) 93,848,843
264,562 Atlassian Corp. PLC, Class A (a) 100,874,845
334,416 Autodesk, Inc. (a) 94,034,435
518,295 Cadence Design Systems, Inc. (a) 96,584,273
452,692 Crowdstrike Holdings, Inc.,
Class A (a) 92,688,687
545,646 Datadog, Inc., Class A (a) 97,185,009
597,601 DocuSign, Inc. (a) 91,020,608
278,137 Fortinet, Inc. (a) 99,962,438
149,696 Intuit, Inc. 96,287,461
286,752 Microsoft Corp. 96,440,433
175,143 Palo Alto Networks, Inc. (a) 97,512,617
833,942 Splunk, Inc. (a) 96,503,768
266,787 Synopsys, Inc. (a) 98,311,009
339,020 Workday, Inc., Class A (a) 92,613,484
464,846 Zoom Video Communications,
Inc., Class A (a) 85,489,828
304,558 Zscaler, Inc. (a) 97,863,622
---------------
1,621,809,236
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 2.4%
542,546 Apple, Inc. $ 96,339,893
---------------
TOTAL INVESTMENTS -- 100.0% 4,050,353,736
(Cost $3,019,067,209) (b)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (546,674)
---------------
NET ASSETS -- 100.0% $ 4,049,807,062
===============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $3,064,214,172. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,171,671,085 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$185,531,521. The net unrealized appreciation was $986,139,564.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 4,050,353,736 $ -- $ --
=============================================
* See Portfolio of Investments for industry breakout.
Page 28 See Notes to Financial Statements
<PAGE>
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 100.0%
AUTOMOBILES -- 3.5%
57,357 Lucid Group, Inc. (b) $ 2,182,434
2,461 Tesla, Inc. (b) 2,600,735
---------------
4,783,169
---------------
BEVERAGES -- 5.2%
64,318 Keurig Dr Pepper, Inc. 2,370,761
25,047 Monster Beverage Corp. (b) 2,405,514
13,635 PepsiCo, Inc. 2,368,536
---------------
7,144,811
---------------
BIOTECHNOLOGY -- 11.6%
10,314 Amgen, Inc. 2,320,341
9,665 Biogen, Inc. (b) 2,318,827
31,780 Gilead Sciences, Inc. 2,307,546
7,784 Moderna, Inc. (b) 1,976,980
3,706 Regeneron Pharmaceuticals,
Inc. (b) 2,340,413
15,284 Seagen, Inc. (b) 2,362,906
10,697 Vertex Pharmaceuticals, Inc. (b) 2,349,061
---------------
15,976,074
---------------
COMMERCIAL SERVICES & SUPPLIES
-- 3.5%
5,233 Cintas Corp. 2,319,109
16,034 Copart, Inc. (b) 2,431,075
---------------
4,750,184
---------------
COMMUNICATIONS EQUIPMENT
-- 1.8%
37,956 Cisco Systems, Inc. 2,405,272
---------------
ELECTRIC UTILITIES -- 5.2%
26,518 American Electric Power Co., Inc. 2,359,306
42,878 Exelon Corp. 2,476,633
34,251 Xcel Energy, Inc. 2,318,793
---------------
7,154,732
---------------
ENTERTAINMENT -- 7.1%
37,400 Activision Blizzard, Inc. 2,488,222
17,996 Electronic Arts, Inc. 2,373,672
24,478 NetEase, Inc., ADR 2,491,371
3,911 Netflix, Inc. (b) 2,356,143
---------------
9,709,408
---------------
FOOD & STAPLES RETAILING -- 3.5%
4,191 Costco Wholesale Corp. 2,379,231
46,977 Walgreens Boots Alliance, Inc. 2,450,320
---------------
4,829,551
---------------
FOOD PRODUCTS -- 3.4%
64,625 Kraft Heinz (The) Co. 2,320,038
35,327 Mondelez International, Inc.,
Class A 2,342,533
---------------
4,662,571
---------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 7.0%
3,768 Align Technology, Inc. (b) 2,476,254
4,132 Dexcom, Inc. (b) 2,218,678
3,720 IDEXX Laboratories, Inc. (b) 2,449,471
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
HEALTH CARE EQUIPMENT &
SUPPLIES (CONTINUED)
6,802 Intuitive Surgical, Inc. (b) $ 2,443,959
---------------
9,588,362
---------------
HOTELS, RESTAURANTS & LEISURE
-- 7.2%
14,533 Airbnb, Inc., Class A (b) 2,419,599
1,038 Booking Holdings, Inc. (b) 2,490,401
15,280 Marriott International, Inc.,
Class A (b) 2,524,867
21,125 Starbucks Corp. 2,470,991
---------------
9,905,858
---------------
INDUSTRIAL CONGLOMERATES -- 1.7%
11,185 Honeywell International, Inc. 2,332,184
---------------
INTERNET & DIRECT MARKETING
RETAIL -- 8.6%
675 Amazon.com, Inc. (b) 2,250,679
35,840 eBay, Inc. 2,383,360
32,304 JD.com, Inc., ADR (b) 2,263,541
1,932 MercadoLibre, Inc. (b) 2,605,109
39,525 Pinduoduo, Inc., ADR (b) 2,304,308
---------------
11,806,997
---------------
IT SERVICES -- 7.0%
10,003 Automatic Data Processing, Inc. 2,466,540
22,140 Fiserv, Inc. (b) 2,297,911
18,523 Paychex, Inc. 2,528,389
12,325 PayPal Holdings, Inc. (b) 2,324,248
---------------
9,617,088
---------------
LEISURE PRODUCTS -- 1.4%
54,060 Peloton Interactive, Inc.,
Class A (b) 1,933,186
---------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.7%
5,962 Illumina, Inc. (b) 2,268,183
---------------
MACHINERY -- 1.8%
27,483 PACCAR, Inc. 2,425,650
---------------
MEDIA -- 5.1%
3,531 Charter Communications, Inc.,
Class A (b) 2,302,106
47,074 Comcast Corp., Class A 2,369,234
359,694 Sirius XM Holdings, Inc. (c) 2,284,057
---------------
6,955,397
---------------
MULTILINE RETAIL -- 1.7%
16,834 Dollar Tree, Inc. (b) 2,365,514
---------------
PROFESSIONAL SERVICES -- 1.7%
10,331 Verisk Analytics, Inc. 2,363,010
---------------
ROAD & RAIL -- 1.8%
64,246 CSX Corp. 2,415,650
---------------
SPECIALTY RETAIL -- 3.5%
3,394 O'Reilly Automotive, Inc. (b) 2,396,944
21,235 Ross Stores, Inc. 2,426,736
---------------
4,823,680
---------------
See Notes to Financial Statements Page 29
<PAGE>
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
TEXTILES, APPAREL & LUXURY GOODS
-- 1.7%
5,966 Lululemon Athletica, Inc. (b) $ 2,335,391
---------------
TRADING COMPANIES &
DISTRIBUTORS -- 1.7%
36,984 Fastenal Co. 2,369,195
---------------
WIRELESS TELECOMMUNICATION
SERVICES -- 1.6%
19,154 T-Mobile US, Inc. (b) 2,221,481
---------------
TOTAL COMMON STOCKS
-- 100.0% 137,142,598
(Cost $106,287,829) ---------------
MONEY MARKET FUNDS -- 1.1%
1,450,062 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (d) (e) 1,450,062
38,640 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (d) 38,640
---------------
TOTAL MONEY MARKET FUNDS
-- 1.1% 1,488,702
(Cost $1,488,702) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.5%
$ 643,852 BNP Paribas S.A., 0.03% (d),
dated 12/31/21, due 01/03/22,
with a maturity value of
$643,854. Collateralized by
U.S. Treasury Note, interest
rate of 1.50%, due 11/30/28.
The value of the collateral
including accrued interest
is $656,447. (e) 643,852
(Cost $643,852) ---------------
TOTAL INVESTMENTS -- 101.6% 139,275,152
(Cost $108,420,383) (f)
NET OTHER ASSETS AND
LIABILITIES -- (1.6)% (2,140,107)
---------------
NET ASSETS -- 100.0% $ 137,135,045
===============
(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 remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $2,011,782 and the
total value of the collateral held by the Fund is $2,093,914.
(d) Rate shown reflects yield as of December 31, 2021.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $109,616,772. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$35,157,146 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$5,498,766. The net unrealized appreciation was $29,658,380.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common
Stocks* $ 137,142,598 $ 137,142,598 $ -- $ --
Money Market
Funds 1,488,702 1,488,702 -- --
Repurchase
Agreements 643,852 -- 643,852 --
--------------------------------------------------------------
Total
Investments $ 139,275,152 $ 138,631,300 $ 643,852 $ --
==============================================================
* See Portfolio of Investments for industry breakout.
Page 30 See Notes to Financial Statements
<PAGE>
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
---------------------------------
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) $ 2,011,782
Non-cash Collateral(2) (2,011,782)
---------------
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, 2021, 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) $ 643,852
Non-cash Collateral(4) (643,852)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 31
<PAGE>
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 100.0%
AUTOMOBILES -- 20.2%
6,518,662 NIO, Inc., ADR (a) $ 206,511,212
426,670 Niu Technologies, ADR (a) (b) 6,873,654
222,822 Tesla, Inc. (a) 235,473,833
1,321,213 Workhorse Group, Inc. (a) (b) 5,760,488
2,318,872 XPeng, Inc., ADR (a) 116,708,828
---------------
571,328,015
---------------
CHEMICALS -- 9.8%
921,617 Albemarle Corp. 215,446,406
1,368,550 Livent Corp. (a) 33,365,249
550,117 Sociedad Quimica y Minera de
Chile S.A., ADR 27,742,400
---------------
276,554,055
---------------
CONSTRUCTION & ENGINEERING
-- 1.0%
284,252 Ameresco, Inc., Class A (a) 23,149,483
406,350 Infrastructure and Energy
Alternatives, Inc. (a) (b) 3,738,420
404,127 ReneSola Ltd., ADR (a) (b) 2,408,597
---------------
29,296,500
---------------
ELECTRICAL EQUIPMENT -- 17.7%
296,335 Acuity Brands, Inc. 62,740,046
434,131 Advent Technologies Holdings,
Inc. (a) (b) 3,043,258
240,521 American Superconductor
Corp. (a) 2,616,868
1,143,695 Array Technologies, Inc. (a) 17,944,575
2,520,854 Ballard Power Systems,
Inc. (a) (b) 31,661,926
357,440 Blink Charging Co. (a) (b) 9,475,734
1,251,286 Bloom Energy Corp., Class A (a) 27,440,702
751,341 CBAK Energy Technology,
Inc. (a) (b) 1,172,092
2,751,960 ChargePoint Holdings,
Inc. (a) (b) 52,424,838
354,822 EnerSys 28,052,227
719,832 FTC Solar, Inc. (a) 5,441,930
3,105,243 FuelCell Energy, Inc. (a) (b) 16,147,264
228,024 LSI Industries, Inc. 1,564,245
3,200,446 Plug Power, Inc. (a) 90,348,591
1,136,164 Romeo Power, Inc. (a) (b) 4,146,999
882,410 Shoals Technologies Group, Inc.,
Class A (a) 21,442,563
1,223,829 Stem, Inc. (a) 23,216,036
1,753,347 Sunrun, Inc. (a) 60,139,802
246,350 Sunworks, Inc. (a) (b) 756,295
313,989 TPI Composites, Inc. (a) 4,697,275
271,135 Vicor Corp. (a) 34,428,722
---------------
498,901,988
---------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 2.0%
319,064 Advanced Energy Industries, Inc. 29,053,968
383,469 Itron, Inc. (a) 26,275,296
---------------
55,329,264
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 9.7%
944,227 Atlantica Sustainable
Infrastructure PLC $ 33,765,558
408,228 Azure Power Global Ltd. (a) (b) 7,409,338
2,329,351 Brookfield Renewable Partners,
L.P. (c) 83,367,472
692,655 Clearway Energy, Inc., Class C 24,956,360
710,408 NextEra Energy Partners,
L.P. (c) (d) 59,958,435
474,333 Ormat Technologies, Inc. (b) 37,614,607
950,912 Sunnova Energy International,
Inc. (a) 26,549,463
---------------
273,621,233
---------------
MACHINERY -- 0.6%
188,153 GreenPower Motor Co.,
Inc. (a) (b) 1,783,691
1,604,810 Lion Electric (The) Co. (a) (b) 15,951,811
---------------
17,735,502
---------------
METALS & MINING -- 2.4%
1,505,530 MP Materials Corp. (a) (b) 68,381,173
---------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS -- 1.4%
717,369 Hannon Armstrong Sustainable
Infrastructure Capital, Inc. 38,106,641
---------------
OIL, GAS & CONSUMABLE FUELS
-- 0.6%
425,804 Renewable Energy Group, Inc. (a) 18,071,122
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 34.6%
1,606,787 Allegro MicroSystems, Inc. (a) 58,133,554
539,008 Canadian Solar, Inc. (a) 16,865,560
495,615 Daqo New Energy Corp., ADR (a) 19,983,197
1,020,295 Enphase Energy, Inc. (a) 186,652,767
900,590 First Solar, Inc. (a) 78,495,425
337,494 JinkoSolar Holding Co., Ltd.,
ADR (a) (b) 15,511,224
374,649 Maxeon Solar Technologies
Ltd. (a) (b) 5,207,621
282,688 O2Micro International Ltd.,
ADR (a) 1,280,577
3,394,386 ON Semiconductor Corp. (a) 230,546,697
511,013 Power Integrations, Inc. 47,467,998
389,123 SolarEdge Technologies,Inc. (a) 109,176,240
1,465,229 SunPower Corp. (a) (b) 30,579,329
399,165 Universal Display Corp. 65,874,200
984,360 Wolfspeed, Inc. (a) 110,021,917
---------------
975,796,306
---------------
TOTAL COMMON STOCKS
-- 100.0% 2,823,121,799
(Cost $2,623,974,610) ---------------
Page 32 See Notes to Financial Statements
<PAGE>
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
MONEY MARKET FUNDS -- 2.4%
68,705,243 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (e) (f) $ 68,705,243
(Cost $68,705,243) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.1%
$ 30,506,314 BNP Paribas S.A, 0.03% (e),
dated 12/31/21, due 01/03/22,
with a maturity value of
$30,506,390. Collateralized by
U.S. Treasury Note, interest
rate of 1.50%, due 11/30/28.
The value of the collateral
including accrued interest
is $31,103,044. (f) 30,506,314
(Cost $30,506,314) ---------------
TOTAL INVESTMENTS -- 103.5% 2,922,333,356
(Cost $2,723,186,167) (g)
NET OTHER ASSETS AND
LIABILITIES -- (3.5)% (98,671,884)
---------------
NET ASSETS -- 100.0% $2,823,661,472
===============
(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 remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $95,587,796 and the
total value of the collateral held by the Fund is $99,211,557.
(c) Security is a Master Limited Partnership ("MLP").
(d) This security is taxed as a "C" corporation for federal income tax
purposes.
(e) Rate shown reflects yield as of December 31, 2021.
(f) This security serves as collateral for securities on loan.
(g) Aggregate cost for federal income tax purposes is $2,802,336,970. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$531,885,558 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$411,889,172. The net unrealized appreciation was $119,996,386.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common
Stocks* $ 2,823,121,799 $ 2,823,121,799 $ -- $ --
Money Market
Funds 68,705,243 68,705,243 -- --
Repurchase
Agreements 30,506,314 -- 30,506,314 --
--------------------------------------------------------------
Total
Investments $ 2,922,333,356 $ 2,891,827,042 $ 30,506,314 $ --
==============================================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 33
<PAGE>
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 95,587,796
Non-cash Collateral(2) (95,587,796)
---------------
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, 2021, 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) $ 30,506,314
Non-cash Collateral(4) (30,506,314)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 34 See Notes to Financial Statements
<PAGE>
FIRST TRUST S&P REIT INDEX FUND (FRI)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.6%
DIVERSIFIED REITS -- 3.9%
13,117 Alexander & Baldwin, Inc. $ 329,106
1,881 Alpine Income Property Trust,
Inc. 37,695
9,519 American Assets Trust, Inc. 357,248
11,127 Armada Hoffler Properties, Inc. 169,353
29,169 Broadstone Net Lease, Inc. 723,975
1,076 CTO Realty Growth, Inc. 66,088
92,883 DigitalBridge Group, Inc. (a) 773,715
25,579 Empire State Realty Trust, Inc.,
Class A 227,653
21,993 Essential Properties Realty
Trust, Inc. 634,058
6,738 Gladstone Commercial Corp. 173,638
18,739 Global Net Lease, Inc. 286,332
2,912 One Liberty Properties, Inc. 102,735
3,637 PS Business Parks, Inc. 669,826
44,389 STORE Capital Corp. 1,526,982
15,312 Washington Real Estate
Investment Trust 395,815
33,693 WP Carey, Inc. 2,764,511
---------------
9,238,730
---------------
HEALTH CARE REITS -- 9.8%
17,551 CareTrust REIT, Inc. 400,689
4,246 Community Healthcare Trust, Inc. 200,708
43,229 Diversified Healthcare Trust 133,578
10,916 Global Medical REIT, Inc. 193,759
26,687 Healthcare Realty Trust, Inc. 844,377
39,943 Healthcare Trust of America,
Inc., Class A 1,333,697
97,506 Healthpeak Properties, Inc. 3,518,992
7,121 LTC Properties, Inc. 243,111
107,861 Medical Properties Trust, Inc. 2,548,755
8,292 National Health Investors, Inc. 476,541
43,226 Omega Healthcare Investors, Inc. 1,279,057
39,848 Physicians Realty Trust 750,338
41,362 Sabra Health Care REIT, Inc. 560,042
2,319 Universal Health Realty Income
Trust 137,911
72,203 Ventas, Inc. 3,691,017
78,734 Welltower, Inc. 6,753,015
---------------
23,065,587
---------------
HOTEL & RESORT REITS -- 3.2%
38,414 Apple Hospitality REIT, Inc. 620,386
5,891 Ashford Hospitality Trust,
Inc. (a) 56,554
10,269 Braemar Hotels & Resorts,
Inc. (a) 52,372
8,822 Chatham Lodging Trust (a) 121,038
7,191 CorePoint Lodging, Inc. (a) 112,899
38,099 DiamondRock Hospitality Co. (a) 366,131
5,973 Hersha Hospitality Trust (a) 54,772
129,158 Host Hotels & Resorts, Inc. (a) 2,246,058
42,775 Park Hotels & Resorts, Inc. (a) 807,592
23,766 Pebblebrook Hotel Trust 531,645
30,133 RLJ Lodging Trust 419,753
9,963 Ryman Hospitality Properties,
Inc. (a) 916,197
29,863 Service Properties Trust 262,496
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
HOTEL & RESORT REITS (CONTINUED)
19,256 Summit Hotel Properties, Inc. (a) $ 187,939
39,676 Sunstone Hotel Investors,
Inc. (a) 465,399
20,656 Xenia Hotels & Resorts, Inc. (a) 374,080
---------------
7,595,311
---------------
INDUSTRIAL REITS -- 16.8%
48,255 Americold Realty Trust 1,582,281
68,889 Duke Realty Corp. 4,521,874
7,361 EastGroup Properties, Inc. 1,677,204
23,570 First Industrial Realty Trust,
Inc. 1,560,334
1,162 Indus Realty Trust, Inc. 94,192
11,833 Industrial Logistics Properties
Trust 296,417
4,329 Innovative Industrial Properties,
Inc. 1,138,137
51,158 LXP Industrial Trust 799,088
17,790 Monmouth Real Estate
Investment Corp. 373,768
6,258 Plymouth Industrial REIT, Inc. 200,256
133,730 Prologis, Inc. 22,514,783
27,402 Rexford Industrial Realty, Inc. 2,222,576
31,656 STAG Industrial, Inc. 1,518,222
13,531 Terreno Realty Corp. 1,154,059
---------------
39,653,191
---------------
OFFICE REITS -- 8.4%
25,508 Alexandria Real Estate Equities,
Inc. 5,687,264
25,710 Boston Properties, Inc. 2,961,278
30,951 Brandywine Realty Trust 415,362
2,748 CIM Commercial Trust Corp. 20,198
7,876 City Office REIT, Inc. 155,315
20,317 Corporate Office Properties Trust 568,266
26,892 Cousins Properties, Inc. 1,083,210
31,743 Douglas Emmett, Inc. 1,063,390
15,578 Easterly Government Properties,
Inc. 357,048
21,871 Equity Commonwealth (a) 566,459
17,199 Franklin Street Properties Corp. 102,334
18,880 Highwoods Properties, Inc. 841,859
27,579 Hudson Pacific Properties, Inc. 681,477
20,647 JBG SMITH Properties 592,775
18,961 Kilroy Realty Corp. 1,260,148
8,757 Office Properties Income Trust 217,524
9,801 Orion Office REIT, Inc. (a) 182,985
29,705 Paramount Group, Inc. 247,740
22,455 Piedmont Office Realty Trust,
Inc., Class A 412,723
2,279 Postal Realty Trust, Inc.,
Class A 45,124
12,068 SL Green Realty Corp. 865,276
14,477 Veris Residential, Inc. (a) 266,087
28,758 Vornado Realty Trust 1,203,810
---------------
19,797,652
---------------
RESIDENTIAL REITS -- 19.7%
25,174 American Campus Communities,
Inc. 1,442,218
51,316 American Homes 4 Rent, Class A 2,237,891
28,397 Apartment Income REIT Corp. 1,552,464
See Notes to Financial Statements Page 35
<PAGE>
FIRST TRUST S&P REIT INDEX FUND (FRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RESIDENTIAL REITS (CONTINUED)
27,538 Apartment Investment and
Management Co., Class A (a) $ 212,593
25,275 AvalonBay Communities, Inc. 6,384,212
4,753 Bluerock Residential Growth
REIT, Inc. 125,432
2,076 BRT Apartments Corp. 49,803
18,483 Camden Property Trust 3,302,542
2,584 Centerspace 286,566
2,442 Clipper Realty, Inc. 24,273
30,922 Equity LifeStyle Properties, Inc. 2,710,623
61,731 Equity Residential 5,586,656
11,772 Essex Property Trust, Inc. 4,146,452
18,910 Independence Realty Trust, Inc. 488,445
107,943 Invitation Homes, Inc. 4,894,136
20,829 Mid-America Apartment
Communities, Inc. 4,779,006
4,109 NexPoint Residential Trust, Inc. 344,457
9,577 Preferred Apartment Communities,
Inc. 172,961
20,979 Sun Communities, Inc. 4,404,961
52,573 UDR, Inc. 3,153,854
8,246 UMH Properties, Inc. 225,363
---------------
46,524,908
---------------
RETAIL REITS -- 14.1%
15,998 Acadia Realty Trust 349,236
12,622 Agree Realty Corp. 900,706
390 Alexander's, Inc. 101,517
22,340 American Finance Trust, Inc. 203,964
53,717 Brixmor Property Group, Inc. 1,364,949
2,222 Cedar Realty Trust, Inc. 55,794
12,662 Federal Realty Investment Trust 1,726,084
7,134 Getty Realty Corp. 228,930
111,501 Kimco Realty Corp. 2,748,500
39,615 Kite Realty Group Trust 862,815
38,536 Macerich (The) Co. 665,902
31,766 National Retail Properties, Inc. 1,526,992
7,165 NETSTREIT Corp. 164,079
11,315 Pennsylvania Real Estate
Investment Trust (a) 11,541
3,543 Phillips Edison & Co., Inc. 117,061
102,339 Realty Income Corp. 7,326,449
27,871 Regency Centers Corp. 2,100,080
21,961 Retail Opportunity Investments
Corp. 430,436
3,135 Retail Value, Inc. 20,127
15,246 RPT Realty 203,991
2,356 Saul Centers, Inc. 124,915
6,549 Seritage Growth Properties,
Class A (a) 86,905
59,440 Simon Property Group, Inc. 9,496,729
32,475 SITE Centers Corp. 514,079
22,307 Spirit Realty Capital, Inc. 1,074,974
18,811 Tanger Factory Outlet Centers,
Inc. 362,676
19,915 Urban Edge Properties 378,385
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
RETAIL REITS (CONTINUED)
5,444 Urstadt Biddle Properties, Inc.,
Class A $ 115,957
8,353 Whitestone REIT 84,616
---------------
33,348,389
---------------
SPECIALIZED REITS -- 23.7%
39,210 CubeSmart 2,231,441
22,954 CyrusOne, Inc. 2,059,433
51,332 Digital Realty Trust, Inc. 9,079,091
13,529 EPR Properties 642,492
16,285 Equinix, Inc. 13,774,504
24,219 Extra Space Storage, Inc. 5,491,174
5,133 Farmland Partners, Inc. 61,339
13,989 Four Corners Property Trust, Inc. 411,417
40,955 Gaming and Leisure Properties,
Inc. 1,992,870
22,165 GEO Group (The), Inc. 171,779
5,632 Gladstone Land Corp. 190,136
52,373 Iron Mountain, Inc. 2,740,679
14,834 Life Storage, Inc. 2,272,272
14,821 National Storage Affiliates Trust 1,025,613
27,593 Public Storage 10,335,234
2,560 Safehold, Inc. 204,416
113,768 VICI Properties, Inc. 3,425,555
---------------
56,109,445
---------------
TOTAL INVESTMENTS -- 99.6% 235,333,213
(Cost $211,814,331) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.4% 975,898
---------------
NET ASSETS -- 100.0% $ 236,309,111
===============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $212,990,282. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$33,884,150 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$11,541,219. The net unrealized appreciation was $22,342,931.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 235,333,213 $ -- $ --
=============================================
* See Portfolio of Investments for subindustry breakout.
Page 36 See Notes to Financial Statements
<PAGE>
FIRST TRUST WATER ETF (FIW)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 100.0%
BEVERAGES -- 1.9%
1,714,419 Primo Water Corp. $ 30,225,207
---------------
BUILDING PRODUCTS -- 11.4%
732,729 A.O. Smith Corp. 62,904,785
466,791 Advanced Drainage Systems, Inc. 63,544,259
1,560,653 Zurn Water Solutions Corp. 56,807,769
---------------
183,256,813
---------------
CHEMICALS -- 3.9%
270,217 Ecolab, Inc. 63,390,206
---------------
COMMERCIAL SERVICES & SUPPLIES
-- 5.6%
380,602 Montrose Environmental Group,
Inc. (a) 26,836,247
370,442 Tetra Tech, Inc. 62,901,052
---------------
89,737,299
---------------
CONSTRUCTION & ENGINEERING
-- 6.8%
812,756 AECOM (a) 62,866,677
183,524 Valmont Industries, Inc. 45,972,762
---------------
108,839,439
---------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 3.4%
284,324 Badger Meter, Inc. 30,297,565
362,434 Itron, Inc. (a) 24,833,978
---------------
55,131,543
---------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 3.7%
90,384 IDEXX Laboratories, Inc. (a) 59,514,249
---------------
INDUSTRIAL CONGLOMERATES
-- 3.9%
126,007 Roper Technologies, Inc. 61,977,803
---------------
LIFE SCIENCES TOOLS & SERVICES
-- 7.3%
347,047 Agilent Technologies, Inc. 55,406,053
187,858 Danaher Corp. 61,807,161
---------------
117,213,214
---------------
MACHINERY -- 28.8%
931,478 Energy Recovery, Inc. (a) 20,017,462
782,326 Evoqua Water Technologies
Corp. (a) 36,573,740
1,174,997 Flowserve Corp. 35,954,908
358,298 Franklin Electric Co., Inc. 33,880,659
542,632 Gorman-Rupp (The) Co. 24,174,256
271,858 IDEX Corp. 64,245,482
115,510 Lindsay Corp. 17,557,520
682,538 Mueller Industries, Inc. 40,515,456
1,832,015 Mueller Water Products, Inc.,
Class A 26,381,016
789,220 Pentair PLC 57,636,737
266,200 Watts Water Technologies, Inc.,
Class A 51,688,054
446,748 Xylem, Inc. 53,574,020
---------------
462,199,310
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
MULTI-UTILITIES -- 3.1%
3,431,047 Algonquin Power & Utilities
Corp. $ 49,578,629
---------------
PROFESSIONAL SERVICES -- 3.3%
945,398 Stantec, Inc. 53,178,637
---------------
WATER UTILITIES -- 16.9%
330,203 American States Water Co. 34,156,198
334,137 American Water Works Co., Inc. 63,105,114
479,119 California Water Service Group 34,429,491
2,750,008 Cia de Saneamento Basico do
Estado de Sao Paulo, ADR 20,185,059
1,227,002 Essential Utilities, Inc. 65,877,737
173,933 Middlesex Water Co. 20,924,140
439,178 SJW Group 32,147,830
---------------
270,825,569
---------------
TOTAL COMMON STOCKS
-- 100.0% 1,605,067,918
(Cost $1,221,532,310) ---------------
MONEY MARKET FUNDS -- 0.0%
537,861 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (b) 537,861
(Cost $537,861) ---------------
TOTAL INVESTMENTS -- 100.0% 1,605,605,779
(Cost $1,222,070,171) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 185,151
---------------
NET ASSETS -- 100.0% $ 1,605,790,930
===============
(a) Non-income producing security.
(b) Rate shown reflects yield as of December 31, 2021.
(c) Aggregate cost for federal income tax purposes is $1,232,686,598. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$396,664,027 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$23,744,846. The net unrealized appreciation was $372,919,181.
ADR - American Depositary Receipt
See Notes to Financial Statements Page 37
<PAGE>
FIRST TRUST WATER ETF (FIW)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 1,605,067,918 $ -- $ --
Money Market
Funds 537,861 -- --
---------------------------------------------
Total Investments $ 1,605,605,779 $ -- $ --
=============================================
* See Portfolio of Investments for industry breakout.
Page 38 See Notes to Financial Statements
<PAGE>
FIRST TRUST NATURAL GAS ETF (FCG)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.8%
OIL, GAS & CONSUMABLE FUELS
-- 99.8%
716,520 Antero Resources Corp. (a) $ 12,539,100
540,550 APA Corp. 14,535,389
194,457 Callon Petroleum Co. (a) 9,188,093
4,531,619 Camber Energy, Inc. (a) (b) 3,851,876
937,669 Centennial Resource
Development, Inc., Class A (a) 5,607,261
196,227 Chesapeake Energy Corp. 12,660,566
79,127 Civitas Resources, Inc. 3,874,849
592,995 CNX Resources Corp. (a) 8,153,681
444,356 Comstock Resources, Inc. (a) 3,594,840
256,301 ConocoPhillips 18,499,806
738,489 Coterra Energy, Inc. 14,031,291
77,474 Crescent Energy, Inc.,
Class A (a) 982,370
710,197 DCP Midstream, L.P. (c) 19,516,214
384,616 Devon Energy Corp. 16,942,335
147,357 Diamondback Energy, Inc. 15,892,452
43,970 Earthstone Energy, Inc.,
Class A (a) 481,032
571,212 Enerplus Corp. 6,043,423
191,101 EOG Resources, Inc. 16,975,502
693,809 EQT Corp. (a) 15,131,974
43,099 Gulfport Energy Corp. (a) 3,104,421
192,966 Hess Corp. 14,285,273
517,614 Hess Midstream, L.P.,
Class A (c) (d) 14,301,675
106,806 Laredo Petroleum, Inc. (a) 6,422,245
402,694 Magnolia Oil & Gas Corp.,
Class A 7,598,836
986,325 Marathon Oil Corp. 16,195,457
274,625 Matador Resources Co. 10,139,155
338,115 Murphy Oil Corp. 8,828,183
37,476 Oasis Petroleum, Inc. 4,721,601
591,062 Occidental Petroleum Corp. 17,134,887
374,900 Ovintiv, Inc. 12,634,130
187,123 PDC Energy, Inc. 9,127,860
95,761 Pioneer Natural Resources Co. 17,417,011
620,281 Range Resources Corp. (a) 11,059,610
169,086 SandRidge Energy, Inc. (a) 1,768,640
38,132 SilverBow Resources, Inc. (a) 830,134
356,390 SM Energy Co. 10,506,377
2,507,579 Southwestern Energy Co. (a) 11,685,318
270,426 Talos Energy, Inc. (a) 2,650,175
2,205,439 Tellurian, Inc. (a) 6,792,752
495,282 Vermilion Energy, Inc. (a) 6,235,600
653,139 W&T Offshore, Inc. (a) 2,109,639
972,405 Western Midstream Partners,
L.P. (c) 21,655,459
104,201 Whiting Petroleum Corp. (a) 6,739,721
---------------
TOTAL COMMON STOCKS -- 99.8% 422,446,213
(Cost $379,433,995) ---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
MONEY MARKET FUNDS -- 0.8%
2,363,081 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (e) (f) $ 2,363,081
1,023,795 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (e) 1,023,795
---------------
TOTAL MONEY MARKET FUNDS
-- 0.8% 3,386,876
(Cost $3,386,876) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.3%
$ 1,049,249 BNP Paribas S.A., 0.03% (e),
dated 12/31/21, due 01/03/22,
with a maturity value of
$1,049,251. Collateralized by
U.S. Treasury Note, interest
rate of 1.50%, due 11/30/28.
The value of the collateral
including accrued interest
is $1,069,773. (f) 1,049,249
(Cost $1,049,249) ---------------
TOTAL INVESTMENTS -- 100.9% 426,882,338
(Cost $383,870,120) (g)
NET OTHER ASSETS AND
LIABILITIES -- (0.9)% (3,657,084)
---------------
NET ASSETS -- 100.0% $ 423,225,254
===============
(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 remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $2,944,570 and the
total value of the collateral held by the Fund is $3,412,330.
(c) Security is a Master Limited Partnership ("MLP").
(d) This security is taxed as a "C" corporation for federal income tax
purposes.
(e) Rate shown reflects yield as of December 31, 2021.
(f) This security serves as collateral for securities on loan.
(g) Aggregate cost for federal income tax purposes is $394,482,486. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$50,129,300 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$17,729,448. The net unrealized appreciation was $32,399,852.
See Notes to Financial Statements Page 39
<PAGE>
FIRST TRUST NATURAL GAS ETF (FCG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common
Stocks* $ 422,446,213 $ 422,446,213 $ -- $ --
Money Market
Funds 3,386,876 3,386,876 -- --
Repurchase
Agreements 1,049,249 -- 1,049,249 --
--------------------------------------------------------------
Total
Investments $ 426,882,338 $ 425,833,089 $ 1,049,249 $ --
==============================================================
* 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) $ 2,944,570
Non-cash Collateral(2) (2,944,570)
---------------
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, 2021, 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) $ 1,049,249
Non-cash Collateral(4) (1,049,249)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 40 See Notes to Financial Statements
<PAGE>
FIRST TRUST CHINDIA ETF (FNI)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.9%
AIR FREIGHT & LOGISTICS -- 0.7%
24,560 ZTO Express Cayman, Inc., ADR $ 693,083
---------------
AUTOMOBILES -- 10.4%
21,906 Li Auto, Inc., ADR (a) 703,183
115,434 NIO, Inc., ADR (a) 3,656,949
147,903 Tata Motors Ltd., ADR (a) (b) 4,746,207
41,063 XPeng, Inc., ADR (a) 2,066,701
---------------
11,173,040
---------------
BANKS -- 15.2%
120,737 HDFC Bank Ltd., ADR 7,856,357
428,205 ICICI Bank Ltd., ADR 8,474,177
---------------
16,330,534
---------------
BIOTECHNOLOGY -- 1.8%
2,234 BeiGene Ltd., ADR (a) 605,258
12,841 I-Mab, ADR (a) 608,535
11,211 Zai Lab Ltd., ADR (a) 704,611
---------------
1,918,404
---------------
CAPITAL MARKETS -- 0.7%
16,348 Futu Holdings Ltd., ADR (a) 707,868
---------------
CONSUMER FINANCE -- 1.4%
33,348 360 DigiTech, Inc., ADR 764,670
121,685 Lufax Holding Ltd., ADR (a) 685,086
---------------
1,449,756
---------------
DIVERSIFIED CONSUMER SERVICES
-- 1.2%
351,290 New Oriental Education &
Technology Group, Inc.,
ADR (a) 737,709
149,875 TAL Education Group, ADR (a) 589,009
---------------
1,326,718
---------------
ENTERTAINMENT -- 6.7%
34,214 Bilibili, Inc., ADR (a) 1,587,529
124,415 iQIYI, Inc., ADR (a) 567,332
41,928 NetEase, Inc., ADR 4,267,432
107,976 Tencent Music Entertainment
Group, ADR (a) 739,636
---------------
7,161,929
---------------
HOTELS, RESTAURANTS & LEISURE
-- 5.2%
19,644 Huazhu Group Ltd., ADR (a) 733,507
92,750 MakeMyTrip Ltd. (a) 2,570,102
79,544 Melco Resorts & Entertainment
Ltd., ADR (a) 809,758
28,231 Trip.com Group Ltd., ADR (a) 695,047
15,496 Yum China Holdings, Inc. 772,321
---------------
5,580,735
---------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 2.8%
37,687 Azure Power Global Ltd. (a) (b) 684,019
293,690 ReNew Energy Global PLC,
Class A (a) (b) 2,284,908
---------------
2,968,927
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
INTERACTIVE MEDIA & SERVICES
-- 6.7%
22,720 Autohome, Inc., ADR $ 669,786
30,145 Baidu, Inc., ADR (a) 4,485,274
24,276 Kanzhun Ltd., ADR (a) 846,747
19,501 Weibo Corp., ADR (a) 604,141
106,204 Zhihu, Inc., ADR (a) 588,370
---------------
7,194,318
---------------
INTERNET & DIRECT MARKETING
RETAIL -- 20.6%
61,983 Alibaba Group Holding Ltd.,
ADR (a) 7,362,961
42,963 Dada Nexus Ltd., ADR (a) 565,393
93,980 JD.com, Inc., ADR (a) 6,585,179
118,867 Pinduoduo, Inc., ADR (a) 6,929,946
79,463 Vipshop Holdings Ltd., ADR (a) 667,489
---------------
22,110,968
---------------
IT SERVICES -- 18.8%
13,854 GDS Holdings Ltd., ADR (a) 653,355
350,073 Infosys Ltd., ADR 8,860,348
44,928 Kingsoft Cloud Holdings Ltd.,
ADR (a) (b) 707,616
528,916 Wipro Ltd., ADR 5,162,220
53,728 WNS (Holdings) Ltd., ADR (a) 4,739,884
---------------
20,123,423
---------------
OIL, GAS & CONSUMABLE FUELS
-- 0.7%
17,872 PetroChina Co., Ltd., ADR 790,121
---------------
PHARMACEUTICALS -- 2.2%
36,170 Dr. Reddy's Laboratories Ltd.,
ADR 2,365,880
---------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.7%
38,798 KE Holdings, Inc., ADR (a) 780,616
---------------
ROAD & RAIL -- 1.9%
295,999 DiDi Global, Inc., ADR (a) (b) 1,474,075
62,058 Full Truck Alliance Co. Ltd.,
ADR (a) 519,426
---------------
1,993,501
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.1%
13,539 Daqo New Energy Corp., ADR (a) 545,892
14,850 JinkoSolar Holding Co., Ltd.,
ADR (a) 682,506
---------------
1,228,398
---------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 0.4%
88,322 Canaan, Inc., ADR (a) (b) 454,858
---------------
TOBACCO -- 0.7%
188,893 RLX Technology, Inc.,
ADR (a) (b) 736,683
---------------
TOTAL COMMON STOCKS -- 99.9% 107,089,760
(Cost $120,220,556) ---------------
See Notes to Financial Statements Page 41
<PAGE>
FIRST TRUST CHINDIA ETF (FNI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 5.6%
$ 205,766 Bank of America Corp., 0.05% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$205,766. Collateralized by
U.S. Treasury Securities,
interest rates of 0.00% to
0.88%, due 07/15/27 to
11/15/45. The value of the
collateral including accrued
interest is $209,881. (d) 205,766
2,923,695 Citigroup, Inc., 0.05% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$2,923,699. Collateralized by
U.S. Treasury Securities,
interest rates of 0.00% to
2.38%, due 01/04/22 to
11/15/51. The value of the
collateral including accrued
interest is $2,982,169.(d) 2,923,695
2,904,988 JPMorgan Chase & Co., 0.05% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$2,904,992. Collateralized by
U.S. Treasury Securities,
interest rates of 0.00% to
4.38%, due 01/18/22 to
05/15/40. The value of the
collateral including accrued
interest is $2,963,088.(d) 2,904,988
---------------
TOTAL REPURCHASE AGREEMENTS
-- 5.6% 6,034,449
(Cost $6,034,449) ---------------
TOTAL INVESTMENTS -- 105.5% 113,124,209
(Cost $126,255,005) (e)
NET OTHER ASSETS AND
LIABILITIES -- (5.5)% (5,977,525)
---------------
NET ASSETS -- 100.0% $ 107,146,684
===============
(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 remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $5,918,600 and the
total value of the collateral held by the Fund is $6,034,449.
(c) Rate shown reflects yield as of December 31, 2021.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $126,854,159. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$19,991,456 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$33,721,406. The net unrealized depreciation was $13,729,950.
ADR - American Depositary Receipt
------------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common
Stocks* $ 107,089,760 $ 107,089,760 $ -- $ --
Repurchase
Agreements 6,034,449 -- 6,034,449 --
--------------------------------------------------------------
Total
Investments $ 113,124,209 $ 107,089,760 $ 6,034,449 $ --
==============================================================
* See Portfolio of Investments for industry breakout.
Page 42 See Notes to Financial Statements
<PAGE>
FIRST TRUST CHINDIA ETF (FNI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
---------------------------------
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) $ 5,918,600
Non-cash Collateral(2) (5,918,600)
---------------
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, 2021, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 6,034,449
Non-cash Collateral(4) (6,034,449)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 43
<PAGE>
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.9%
BANKS -- 90.5%
11,508 1st Source Corp. $ 570,797
14,431 Amalgamated Financial Corp. 242,008
13,484 Amerant Bancorp, Inc. 465,872
5,002 American National Bankshares,
Inc. 188,475
32,315 Ameris Bancorp 1,605,409
7,436 Arrow Financial Corp. 261,970
35,108 Atlantic Union Bankshares Corp. 1,309,177
15,116 BancFirst Corp. 1,066,585
26,442 Bancorp (The), Inc. (a) 669,247
3,540 Bank First Corp. (b) 255,730
7,431 Bank of Marin Bancorp 276,656
59,730 Bank OZK 2,779,237
15,895 Banner Corp. 964,350
31,833 BOK Financial Corp. 3,358,063
36,030 Brookline Bancorp, Inc. 583,326
9,466 Business First Bancshares, Inc. 267,982
3,232 Cambridge Bancorp 302,483
6,891 Camden National Corp. 331,871
6,436 Capital Bancorp, Inc. 168,623
7,833 Capital City Bank Group, Inc. 206,791
10,287 Capstar Financial Holdings, Inc. 216,336
12,280 Carter Bankshares, Inc. (a) 188,989
35,836 Cathay General Bancorp 1,540,590
11,406 CBTX, Inc. 330,774
7,309 Citizens & Northern Corp. 190,911
7,016 City Holding Co. 573,839
6,973 Civista Bancshares, Inc. 170,141
7,839 CNB Financial Corp. 207,733
5,574 Coastal Financial Corp. (a) 282,156
36,440 Columbia Banking System, Inc. 1,192,317
56,606 Commerce Bancshares, Inc. 3,891,096
8,280 Community Trust Bancorp, Inc. 361,091
18,378 ConnectOne Bancorp, Inc. 601,144
23,629 CrossFirst Bankshares, Inc. (a) 368,849
62,890 CVB Financial Corp. 1,346,475
18,773 Dime Community Bancshares, Inc. 660,059
14,827 Eagle Bancorp, Inc. 865,007
5,581 Enterprise Bancorp, Inc. 250,699
17,807 Enterprise Financial Services
Corp. 838,532
7,820 Equity Bancshares, Inc., Class A 265,333
3,642 Esquire Financial Holdings,
Inc. (a) 115,160
15,698 Farmers National Banc Corp. 291,198
7,350 Financial Institutions, Inc. 233,730
16,518 First Bancorp 755,203
5,103 First Bancorp (The), Inc. 160,234
9,754 First Bancshares (The), Inc. 376,699
25,834 First Busey Corp. 700,618
7,897 First Community Bankshares, Inc. 263,918
43,506 First Financial Bancorp 1,060,676
66,116 First Financial Bankshares, Inc. 3,361,337
5,973 First Financial Corp. 270,517
20,916 First Foundation, Inc. 519,972
59,780 First Hawaiian, Inc. 1,633,787
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
BANKS (CONTINUED)
4,573 First Internet Bancorp $ 215,114
19,359 First Interstate BancSystem,
Inc., Class A 787,331
25,021 First Merchants Corp. 1,048,130
8,394 First Mid Bancshares, Inc. 359,179
10,960 First of Long Island (The) Corp. 236,626
7,993 Five Star Bancorp 239,790
14,236 Flushing Financial Corp. 345,935
74,855 Fulton Financial Corp. 1,272,535
12,319 German American Bancorp, Inc. 480,195
6,190 Great Southern Bancorp, Inc. 366,757
40,293 Hancock Whitney Corp. 2,015,456
14,111 Hanmi Financial Corp. 334,148
24,701 HarborOne Bancorp, Inc. 366,563
19,607 Heartland Financial USA, Inc. 992,310
27,969 Heritage Commerce Corp. 333,950
16,319 Heritage Financial Corp. 398,836
9,490 HomeStreet, Inc. 493,480
7,572 HomeTrust Bancshares, Inc. 234,581
55,780 Hope Bancorp, Inc. 820,524
20,196 Horizon Bancorp, Inc. 421,087
21,973 Independent Bank Corp. 1,791,459
9,874 Independent Bank Corp./MI 235,692
19,925 Independent Bank Group, Inc. 1,437,589
29,406 International Bancshares Corp. 1,246,520
23,484 Lakeland Bancorp, Inc. 445,961
11,740 Lakeland Financial Corp. 940,844
20,002 Live Oak Bancshares, Inc. 1,745,975
15,866 Macatawa Bank Corp. 139,938
7,272 Mercantile Bank Corp. 254,738
14,176 Meta Financial Group, Inc. 845,740
11,817 Metrocity Bankshares, Inc. 325,322
5,306 Mid Penn Bancorp, Inc. 168,412
10,217 Midland States Bancorp, Inc. 253,279
7,282 MidWestOne Financial Group,
Inc. 235,718
5,587 MVB Financial Corp. 231,972
20,117 NBT Bancorp, Inc. 774,907
5,547 Nicolet Bankshares, Inc. (a) 475,655
3,789 Northeast Bank 135,381
2,849 Northrim BanCorp, Inc. 123,818
27,576 OceanFirst Financial Corp. 612,187
76,948 Old National Bancorp 1,394,298
13,322 Old Second Bancorp, Inc. 167,724
10,904 Origin Bancorp, Inc. 468,000
43,787 Pacific Premier Bancorp, Inc. 1,752,794
54,415 PacWest Bancorp 2,457,926
6,887 PCB Bancorp 151,239
8,648 Peapack-Gladstone Financial
Corp. 306,139
13,120 Peoples Bancorp, Inc. 417,347
35,332 Pinnacle Financial Partners, Inc. 3,374,206
6,812 Preferred Bank 489,033
11,404 Primis Financial Corp. 171,516
7,238 QCR Holdings, Inc. 405,328
9,057 RBB Bancorp 237,293
25,870 Renasant Corp. 981,766
Page 44 See Notes to Financial Statements
<PAGE>
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
8,373 Republic Bancorp, Inc., Class A $ 425,683
18,261 S&T Bancorp, Inc. 575,587
21,170 Sandy Spring Bancorp, Inc. 1,017,854
27,078 Seacoast Banking Corp. of Florida 958,290
9,191 Shore Bancshares, Inc. 191,632
7,152 Sierra Bancorp 194,177
53,288 Simmons First National Corp.,
Class A 1,576,259
7,797 SmartFinancial, Inc. 213,326
8,255 South Plains Financial, Inc. 229,572
3,672 Southern First Bancshares,
Inc. (a) 229,463
14,978 Southside Bancshares, Inc. 626,380
32,401 SouthState Corp. 2,595,644
12,337 Stock Yards Bancorp, Inc. 788,088
23,485 Texas Capital Bancshares,
Inc. (a) 1,414,971
33,729 TowneBank 1,065,499
13,789 TriCo Bancshares 592,375
11,659 Triumph Bancorp, Inc. (a) 1,388,354
28,981 Trustmark Corp. 940,723
22,441 UMB Financial Corp. 2,381,215
59,958 United Bankshares, Inc. 2,175,276
41,437 United Community Banks, Inc. 1,489,246
13,666 Univest Financial Corp. 408,887
188,851 Valley National Bancorp 2,596,701
22,877 Veritex Holdings, Inc. 910,047
8,041 Washington Trust Bancorp, Inc. 453,271
29,343 WesBanco, Inc. 1,026,712
7,682 West BanCorp, Inc. 238,680
12,468 Westamerica BanCorp 719,778
26,455 Wintrust Financial Corp. 2,402,643
---------------
106,744,348
---------------
IT SERVICES -- 0.2%
6,502 Cass Information Systems, Inc. 255,659
---------------
THRIFTS & MORTGAGE FINANCE
-- 9.2%
13,025 Bridgewater Bancshares, Inc. (a) 230,412
64,433 Capitol Federal Financial, Inc. 730,026
49,321 Columbia Financial, Inc. (a) 1,028,836
3,799 FS Bancorp, Inc. 127,760
994 Hingham Institution for Savings 417,361
3,955 Home Bancorp, Inc. 164,172
34,828 Kearny Financial Corp. 461,471
13,358 Merchants Bancorp 632,234
23,026 Northfield Bancorp, Inc. 372,100
58,733 Northwest Bancshares, Inc. 831,659
17,160 Premier Financial Corp. 530,416
8,319 Provident Bancorp, Inc. 154,733
4,125 Southern Missouri Bancorp, Inc. 215,201
130,293 TFS Financial Corp. 2,328,336
8,919 TrustCo Bank Corp. 297,092
30,268 Washington Federal, Inc. 1,010,346
11,567 Waterstone Financial, Inc. 252,855
22,074 WSFS Financial Corp. 1,106,349
---------------
10,891,359
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
TOTAL COMMON STOCKS -- 99.9% $ 117,891,366
(Cost $112,671,620) ---------------
MONEY MARKET FUNDS -- 0.1%
144,458 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (c) (d) 144,458
(Cost $144,458) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.1%
$ 64,142 BNP Paribas S.A., 0.03% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$64,142. Collateralized by
U.S. Treasury Note, interest
rate of 1.50%, due 11/30/28.
The value of the collateral
including accrued interest
is $65,397. (d) 64,142
(Cost $64,142) ---------------
TOTAL INVESTMENTS -- 100.1% 118,099,966
(Cost $112,880,220) (e)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (153,342)
---------------
NET ASSETS -- 100.0% $ 117,946,624
===============
(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 remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $202,272 and the
total value of the collateral held by the Fund is $208,600.
(c) Rate shown reflects yield as of December 31, 2021.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $114,097,680. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$10,326,155 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$6,323,869. The net unrealized appreciation was $4,002,286.
See Notes to Financial Statements Page 45
<PAGE>
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
------------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common
Stocks* $ 117,891,366 $ 117,891,366 $ -- $ --
Money Market
Funds 144,458 144,458 -- --
Repurchase
Agreements 64,142 -- 64,142 --
--------------------------------------------------------------
Total
Investments $ 118,099,966 $ 118,035,824 $ 64,142 $ --
==============================================================
* 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) $ 202,272
Non-cash Collateral(2) (202,272)
---------------
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, 2021, 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) $ 64,142
Non-cash Collateral(4) (64,142)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 46 See Notes to Financial Statements
<PAGE>
This page intentionally left blank.
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2021
<TABLE>
<CAPTION>
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)
----------------- ------------------ -----------------
<S> <C> <C> <C>
ASSETS:
Investments, at value.................................................. $ 1,403,752,797 $ 4,050,353,736 $ 139,275,152
Cash................................................................... 355,213 2,048,234 --
Receivables:
Capital shares sold.............................................. -- -- --
Dividends........................................................ 660,564 559,380 104,940
Securities lending income........................................ 7,198 -- 1,549
Investment securities sold....................................... -- -- --
Reclaims......................................................... -- -- --
Prepaid expenses....................................................... 9,299 25,732 1,004
--------------- ---------------- ---------------
Total Assets..................................................... 1,404,785,071 4,052,987,082 139,382,645
--------------- ---------------- ---------------
LIABILITIES:
Due to custodian....................................................... -- -- --
Payables:
Collateral for securities on loan................................ 12,204,054 -- 2,093,914
Investment securities purchased.................................. -- -- --
Investment advisory fees......................................... 468,777 1,373,609 45,792
Licensing fees................................................... 345,154 996,403 36,961
Shareholder reporting fees....................................... 44,575 115,907 7,192
Audit and tax fees............................................... 30,318 30,318 30,318
Capital shares redeemed.......................................... -- -- --
Other liabilities...................................................... 277,934 663,783 33,423
--------------- ---------------- ---------------
Total Liabilities................................................ 13,370,812 3,180,020 2,247,600
--------------- ---------------- ---------------
NET ASSETS............................................................. $ 1,391,414,259 $ 4,049,807,062 $ 137,135,045
=============== ================ ===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 1,158,205,968 $ 3,150,469,480 $ 119,850,674
Par value.............................................................. 117,500 231,000 15,500
Accumulated distributable earnings (loss).............................. 233,090,791 899,106,582 17,268,871
--------------- ---------------- ---------------
NET ASSETS............................................................. $ 1,391,414,259 $ 4,049,807,062 $ 137,135,045
=============== ================ ===============
NET ASSET VALUE, per share............................................. $ 118.42 $ 175.32 $ 88.47
=============== ================ ===============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 11,750,002 23,100,002 1,550,002
=============== ================ ===============
Investments, at cost................................................... $ 1,114,392,507 $ 3,019,067,209 $ 108,420,383
=============== ================ ===============
Securities on loan, at value........................................... $ 11,592,002 $ -- $ 2,011,782
=============== ================ ===============
</TABLE>
Page 48 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
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)
---------------- ------------------ ----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
$2,922,333,356 $ 235,333,213 $ 1,605,605,779 $ 426,882,338 $ 113,124,209 $ 118,099,966
1,746,564 -- -- 51,226 162,646 25,296
-- 1,629,674 9,449,758 -- -- --
1,121,317 740,926 1,095,411 117,057 9,335 161,662
139,388 -- -- 312 23,722 42
3,409,924 1,291,330 -- -- -- --
-- -- 169,819 -- -- --
20,569 1,506 10,226 3,158 697 915
-------------- ---------------- --------------- --------------- ---------------- ----------------
2,928,771,118 238,996,649 1,616,330,993 427,054,091 113,320,609 118,287,881
-------------- ---------------- --------------- --------------- ---------------- ----------------
-- 878,912 -- -- -- --
99,211,557 -- -- 3,412,330 6,034,449 208,600
-- 1,622,278 9,446,414 -- -- --
993,105 55,116 519,302 143,136 37,088 31,668
742,700 30,399 183,458 119,303 24,504 27,085
163,048 8,967 50,318 17,033 11,888 10,266
30,318 35,818 30,318 32,318 32,318 30,318
3,410,374 -- -- -- -- --
558,544 56,048 310,253 104,717 33,678 33,320
-------------- ---------------- --------------- --------------- ---------------- ----------------
105,109,646 2,687,538 10,540,063 3,828,837 6,173,925 341,257
-------------- ---------------- --------------- --------------- ---------------- ----------------
$2,823,661,472 $ 236,309,111 $ 1,605,790,930 $ 423,225,254 $ 107,146,684 $ 117,946,624
============== ================ =============== =============== ================ ================
$2,805,800,777 $ 214,547,341 $ 1,239,634,228 $ 904,775,424 $ 205,589,683 $ 125,470,815
415,500 72,500 169,500 246,484 22,500 20,000
17,445,195 21,689,270 365,987,202 (481,796,654) (98,465,499) (7,544,191)
-------------- ---------------- --------------- --------------- ---------------- ----------------
$2,823,661,472 $ 236,309,111 $ 1,605,790,930 $ 423,225,254 $ 107,146,684 $ 117,946,624
============== ================ =============== =============== ================ ================
$ 67.96 $ 32.59 $ 94.74 $ 17.17 $ 47.62 $ 58.97
============== ================ =============== =============== ================ ================
41,550,002 7,250,002 16,950,002 24,648,365 2,250,002 2,000,002
============== ================ =============== =============== ================ ================
$2,723,186,167 $ 211,814,331 $ 1,222,070,171 $ 383,870,120 $ 126,255,005 $ 112,880,220
============== ================ =============== =============== ================ ================
$ 95,587,796 $ -- $ -- $ 2,944,570 $ 5,918,600 $ 202,272
============== ================ =============== =============== ================ ================
</TABLE>
See Notes to Financial Statements Page 49
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2021
<TABLE>
<CAPTION>
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)
----------------- ------------------ -----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............................................................. $ 10,659,979 $ 21,046,608 $ 1,448,154
Securities lending income (net of fees)................................ 38,481 -- 6,900
Foreign withholding tax................................................ (33,353) (230,304) --
--------------- ---------------- ---------------
Total investment income.......................................... 10,665,107 20,816,304 1,455,054
--------------- ---------------- ---------------
EXPENSES:
Investment advisory fees............................................... 5,172,645 14,476,626 584,594
Licensing fees......................................................... 1,294,119 3,621,799 146,259
Accounting and administration fees..................................... 618,680 1,436,995 74,383
Shareholder reporting fees............................................. 103,308 240,998 26,571
Custodian fees......................................................... 98,553 271,499 12,085
Transfer agent fees.................................................... 57,329 115,479 7,307
Audit and tax fees..................................................... 31,040 30,963 30,974
Legal fees............................................................. 22,779 62,214 2,581
Trustees' fees and expenses............................................ 7,056 8,372 6,383
Listing fees........................................................... 6,521 7,067 6,096
Registration and filing fees........................................... (4,833) -- (656)
Expenses previously waived or reimbursed............................... -- -- --
Excise Tax............................................................. -- -- --
Other expenses......................................................... 18,081 47,761 3,849
--------------- ---------------- ---------------
Total expenses................................................... 7,425,278 20,319,773 900,426
Less fees waived and expenses reimbursed by the investment
advisor....................................................... -- -- (23,534)
--------------- ---------------- ---------------
Net expenses..................................................... 7,425,278 20,319,773 876,892
--------------- ---------------- ---------------
NET INVESTMENT INCOME (LOSS)........................................... 3,239,829 496,531 578,162
--------------- ---------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... (8,749,701) (22,614,962) 1,662,168
In-kind redemptions.............................................. 191,453,959 817,151,358 16,205,765
--------------- ---------------- ---------------
Net realized gain (loss)............................................... 182,704,258 794,536,396 17,867,933
--------------- ---------------- ---------------
Net change in unrealized appreciation (depreciation) on investments.... 16,405,196 57,064,938 (2,765,567)
--------------- ---------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 199,109,454 851,601,334 15,102,366
--------------- ---------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 202,349,283 $ 852,097,865 $ 15,680,528
=============== ================ ===============
</TABLE>
Page 50 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
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)
---------------- ------------------ ----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
$ 7,046,120 $ 3,634,982 $ 11,285,810 $ 5,601,176 $ 989,641 $ 2,998,089
3,029,991 -- 1,456 11,347 342,290 927
(836,623) -- (343,673) (9,144) (122,248) --
-------------- ---------------- --------------- --------------- ---------------- ----------------
9,239,488 3,634,982 10,943,593 5,603,379 1,209,683 2,999,016
-------------- ---------------- --------------- --------------- ---------------- ----------------
11,048,556 428,766 4,392,266 1,108,751 873,345 496,626
2,765,565 114,341 549,180 277,379 174,972 111,759
1,177,971 73,632 533,616 140,077 110,875 65,203
409,324 25,203 112,947 42,231 36,268 29,181
209,252 18,872 82,888 22,287 17,293 15,924
94,054 7,146 50,707 13,859 10,917 6,208
31,105 36,409 30,931 32,920 33,639 30,887
50,924 1,723 21,229 5,894 3,594 6,259
8,168 6,369 6,949 6,451 6,434 6,362
7,252 9,812 12,336 12,336 12,336 6,098
40,870 3,974 20,188 7,293 (1,375) 102
78,177 -- -- -- -- --
-- -- -- 34,748 -- --
19,713 2,698 12,123 3,298 4,451 2,677
-------------- ---------------- --------------- --------------- ---------------- ----------------
15,940,931 728,945 5,825,360 1,707,524 1,282,749 777,286
-- (14,335) -- (9,649) -- (32,356)
-------------- ---------------- --------------- --------------- ---------------- ----------------
15,940,931 714,610 5,825,360 1,697,875 1,282,749 744,930
-------------- ---------------- --------------- --------------- ---------------- ----------------
(6,701,443) 2,920,372 5,118,233 3,905,504 (73,066) 2,254,086
-------------- ---------------- --------------- --------------- ---------------- ----------------
(168,529,832) 58,665 (796,918) (1,603,289) (9,027,271) 683,297
324,938,674 4,950,353 84,013,345 81,924,626 62,168,416 7,881,128
-------------- ---------------- --------------- --------------- ---------------- ----------------
156,408,842 5,009,018 83,216,427 80,321,337 53,141,145 8,564,425
-------------- ---------------- --------------- --------------- ---------------- ----------------
(450,506,660) 39,250,974 200,157,259 30,765,415 (93,625,547) 18,576,945
-------------- ---------------- --------------- --------------- ---------------- ----------------
(294,097,818) 44,259,992 283,373,686 111,086,752 (40,484,402) 27,141,370
-------------- ---------------- --------------- --------------- ---------------- ----------------
$ (300,799,261) $ 47,180,364 $ 288,491,919 $ 114,992,256 $ (40,557,468) $ 29,395,456
============== ================ =============== =============== ================ ================
</TABLE>
See Notes to Financial Statements Page 51
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
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
12/31/2021 12/31/2020 12/31/2021 12/31/2020
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).............................. $ 3,239,829 $ 3,623,684 $ 496,531 $ 13,868,845
Net realized gain (loss).................................. 182,704,258 143,193,386 794,536,396 488,919,986
Net change in unrealized appreciation (depreciation)...... 16,405,196 126,318,441 57,064,938 318,775,768
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations........................................ 202,349,283 273,135,511 852,097,865 821,564,599
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................... (3,291,356) (3,745,681) (661,890) (14,694,706)
Return of capital......................................... -- -- -- --
--------------- --------------- --------------- ---------------
Total distributions to shareholders....................... (3,291,356) (3,745,681) (661,890) (14,694,706)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................. 456,270,076 469,620,748 1,499,345,517 1,270,455,298
Cost of shares redeemed................................... (439,183,900) (471,178,171) (1,650,885,696) (1,639,801,831)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions.......................... 17,086,176 (1,557,423) (151,540,179) (369,346,533)
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets................... 216,144,103 267,832,407 699,895,796 437,523,360
NET ASSETS:
Beginning of period....................................... 1,175,270,156 907,437,749 3,349,911,266 2,912,387,906
--------------- --------------- --------------- ---------------
End of period............................................. $ 1,391,414,259 $ 1,175,270,156 $ 4,049,807,062 $ 3,349,911,266
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................... 11,650,002 12,300,002 24,250,002 29,100,002
Shares sold............................................... 4,100,000 5,550,000 9,500,000 10,800,000
Shares redeemed........................................... (4,000,000) (6,200,000) (10,650,000) (15,650,000)
--------------- --------------- --------------- ---------------
Shares outstanding, end of period......................... 11,750,002 11,650,002 23,100,002 24,250,002
=============== =============== =============== ===============
</TABLE>
Page 52 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
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
12/31/2021 12/31/2020 12/31/2021 12/31/2020 12/31/2021 12/31/2020 12/31/2021 12/31/2020
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 578,162 $ 384,225 $ (6,701,443) $ 211,101 $ 2,920,372 $ 2,036,020 $ 5,118,233 $ 3,515,620
17,867,933 26,614,296 156,408,842 65,171,162 5,009,018 (10,709,851) 83,216,427 29,359,613
(2,765,567) 12,091,041 (450,506,660) 611,432,069 39,250,974 (14,457,019) 200,157,259 71,918,615
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
15,680,528 39,089,562 (300,799,261) 676,814,332 47,180,364 (23,130,850) 288,491,919 104,793,848
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(515,676) (389,766) (275,655) (3,181,371) (2,732,665) (2,857,361) (4,964,311) (3,656,056)
-- -- -- -- -- -- -- --
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(515,676) (389,766) (275,655) (3,181,371) (2,732,665) (2,857,361) (4,964,311) (3,656,056)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
8,843,090 76,102,422 1,748,106,641 1,267,759,656 152,028,630 -- 802,243,154 153,090,861
(33,811,304) (70,046,805) (623,172,866) (86,057,101) (34,511,600) (98,309,474) (168,774,018) (101,602,162)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(24,968,214) 6,055,617 1,124,933,775 1,181,702,555 117,517,030 (98,309,474) 633,469,136 51,488,699
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(9,803,362) 44,755,413 823,858,859 1,855,335,516 161,964,729 (124,297,685) 916,996,744 152,626,491
146,938,407 102,182,994 1,999,802,613 144,467,097 74,344,382 198,642,067 688,794,186 536,167,695
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 137,135,045 $ 146,938,407 $2,823,661,472 $1,999,802,613 $ 236,309,111 $ 74,344,382 $1,605,790,930 $ 688,794,186
============= ============= ============== ============== ============== ============== ============== ==============
1,850,002 1,750,002 28,500,002 5,800,002 3,200,002 7,600,002 9,550,002 8,950,002
100,000 1,200,000 22,650,000 25,400,000 5,300,000 -- 9,450,000 2,500,000
(400,000) (1,100,000) (9,600,000) (2,700,000) (1,250,000) (4,400,000) (2,050,000) (1,900,000)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
1,550,002 1,850,002 41,550,002 28,500,002 7,250,002 3,200,002 16,950,002 9,550,002
============= ============= ============== ============== ============== ============== ============== ==============
</TABLE>
See Notes to Financial Statements Page 53
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST
NATURAL GAS CHINDIA
ETF ETF
(FCG) (FNI)
-------------------------------- --------------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/2021 12/31/2020 12/31/2021 12/31/2020
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).............................. $ 3,905,504 $ 1,210,304 $ (73,066) $ 307,787
Net realized gain (loss).................................. 80,321,337 (35,101,100) 53,141,145 (1,131,009)
Net change in unrealized appreciation (depreciation)...... 30,765,415 28,758,767 (93,625,547) 86,193,314
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations........................................ 114,992,256 (5,132,029) (40,557,468) 85,370,092
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................... (6,273,849) (6,156) -- (754,006)
Return of capital......................................... -- (3,810,423) -- --
--------------- --------------- --------------- ---------------
Total distributions to shareholders....................... (6,273,849) (3,816,579) -- (754,006)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................. 389,376,422 127,269,397 59,830,685 96,283,160
Cost of shares redeemed................................... (178,298,282) (110,100,974) (169,075,322) (35,241,060)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions.......................... 211,078,140 17,168,423 (109,244,637) 61,042,100
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets................... 319,796,547 8,219,815 (149,802,105) 145,658,186
NET ASSETS:
Beginning of period....................................... 103,428,707 95,208,892 256,948,789 111,290,603
--------------- --------------- --------------- ---------------
End of period............................................. $ 423,225,254 $ 103,428,707 $ 107,146,684 $ 256,948,789
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................... 11,748,365 7,898,365 4,350,002 2,800,002
Shares sold............................................... 24,200,000 21,850,000 900,000 2,500,000
Shares redeemed........................................... (11,300,000) (18,000,000) (3,000,000) (950,000)
--------------- --------------- --------------- ---------------
Shares outstanding, end of period......................... 24,648,365 11,748,365 2,250,002 4,350,002
=============== =============== =============== ===============
</TABLE>
Page 54 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST
NASDAQ(R) ABA
COMMUNITY BANK
INDEX FUND
(QABA)
-----------------------------
Year Ended Year Ended
12/31/2021 12/31/2020
------------- -------------
<S> <C>
$ 2,254,086 $ 2,220,401
8,564,425 (21,079,361)
18,576,945 (7,035,863)
------------- -------------
29,395,456 (25,894,823)
------------- -------------
(2,215,667) (2,302,952)
-- --
------------- -------------
(2,215,667) (2,302,952)
------------- -------------
41,856,729 20,210,038
(36,109,870) (49,744,762)
------------- -------------
5,746,859 (29,534,724)
------------- -------------
32,926,648 (57,732,499)
85,019,976 142,752,475
------------- -------------
$ 117,946,624 $ 85,019,976
============= =============
1,900,002 2,750,002
750,000 500,000
(650,000) (1,350,000)
------------- -------------
2,000,002 1,900,002
============= =============
</TABLE>
See Notes to Financial Statements Page 55
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 100.88 $ 73.78 $ 54.61 $ 57.88 $ 46.18
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.28 0.34 0.36 0.32 0.24
Net realized and unrealized gain (loss) 17.54 27.11 19.16 (3.29) (a) 11.74
------------ ------------ ------------ ------------ ------------
Total from investment operations 17.82 27.45 19.52 (2.97) 11.98
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.28) (0.35) (0.35) (0.30) (0.28)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 118.42 $ 100.88 $ 73.78 $ 54.61 $ 57.88
============ ============ ============ ============ ============
TOTAL RETURN (b) 17.67% 37.35% 35.78% (5.16)% (a) 26.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,391,414 $ 1,175,270 $ 907,438 $ 461,464 $ 529,632
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.57% 0.58% 0.59% 0.60% 0.60%
Ratio of net expenses to average net assets 0.57% 0.58% 0.59% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.25% 0.41% 0.56% 0.52% 0.45%
Portfolio turnover rate (c) 23% 28% 29% 27% 26%
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 138.14 $ 100.08 $ 67.97 $ 71.92 $ 52.62
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.02 0.58 0.70 0.65 0.48
Net realized and unrealized gain (loss) 37.19 38.09 32.09 (3.98) 19.39
------------ ------------ ------------ ------------ ------------
Total from investment operations 37.21 38.67 32.79 (3.33) 19.87
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.03) (0.61) (0.68) (0.62) (0.57)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 175.32 $ 138.14 $ 100.08 $ 67.97 $ 71.92
============ ============ ============ ============ ============
TOTAL RETURN (b) 26.94% 38.82% 48.36% (4.70)% 37.86%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 4,049,807 $ 3,349,911 $ 2,912,388 $ 1,950,669 $ 2,200,711
Ratios to average net assets:
Ratio of total expenses to average net assets 0.56% 0.57% 0.57% 0.57% 0.58%
Ratio of net expenses to average net assets 0.56% 0.57% 0.57% 0.57% 0.58%
Ratio of net investment income (loss) to
average net assets 0.01% 0.50% 0.82% 0.84% 0.76%
Portfolio turnover rate (c) 25% 31% 23% 21% 21%
</TABLE>
(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
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 79.43 $ 58.39 $ 45.66 $ 48.53 $ 40.44
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.35 0.22 0.20 0.18 0.12
Net realized and unrealized gain (loss) 9.00 21.04 12.73 (2.88) 8.13
------------ ------------ ------------ ------------ ------------
Total from investment operations 9.35 21.26 12.93 (2.70) 8.25
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.31) (0.22) (0.20) (0.17) (0.16)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 88.47 $ 79.43 $ 58.39 $ 45.66 $ 48.53
============ ============ ============ ============ ============
TOTAL RETURN (a) 11.80% 36.48% 28.35% (5.58)% 20.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 137,135 $ 146,938 $ 102,183 $ 77,618 $ 101,914
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.62% 0.62% 0.64% 0.64% 0.63%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.40% 0.34% 0.38% 0.34% 0.25%
Portfolio turnover rate (b) 25% 35% 31% 26% 25%
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 70.17 $ 24.91 $ 17.63 $ 20.28 $ 15.47
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.13) 0.11 0.13 0.12 0.05
Net realized and unrealized gain (loss) (2.07) 45.36 7.36 (2.59) 4.85
------------ ------------ ------------ ------------ ------------
Total from investment operations (2.20) 45.47 7.49 (2.47) 4.90
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.01) (0.21) (0.21) (0.11) (0.09)
Return of capital -- -- -- (0.07) --
------------ ------------ ------------ ------------ ------------
Total distributions (0.01) (0.21) (0.21) (0.18) (0.09)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 67.96 $ 70.17 $ 24.91 $ 17.63 $ 20.28
============ ============ ============ ============ ============
TOTAL RETURN (a) (3.14)% 183.52% 42.69% (12.22)% 31.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2,823,661 $ 1,999,803 $ 144,467 $ 83,731 $ 91,262
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.58% 0.60% 0.63% 0.65% 0.66%
Ratio of net expenses to average net assets 0.58% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets (0.24)% 0.04% 0.58% 0.59% 0.23%
Portfolio turnover rate (b) 28% 43% 26% 45% 32%
</TABLE>
(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
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FIRST TRUST S&P REIT INDEX FUND (FRI)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 23.23 $ 26.14 $ 21.63 $ 23.28 $ 23.07
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.50 0.52 0.56 0.69 0.71
Net realized and unrealized gain (loss) 9.33 (2.72) 4.55 (1.65) 0.16
------------ ------------ ------------ ------------ ------------
Total from investment operations 9.83 (2.20) 5.11 (0.96) 0.87
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.47) (0.71) (0.60) (0.69) (0.66)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 32.59 $ 23.23 $ 26.14 $ 21.63 $ 23.28
============ ============ ============ ============ ============
TOTAL RETURN (a) 42.52% (8.10)% 23.67% (4.19)% 3.79%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 236,309 $ 74,344 $ 198,642 $ 115,696 $ 161,791
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.51% 0.52% 0.51% 0.52% 0.48%
Ratio of net expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.48%
Ratio of net investment income (loss) to
average net assets 2.04% 2.04% 2.40% 3.05% 2.77%
Portfolio turnover rate (b) 6% 6% 10% 10% 7%
FIRST TRUST WATER ETF (FIW)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 72.13 $ 59.91 $ 43.96 $ 48.58 $ 39.61
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.36 0.38 0.32 0.35 0.54
Net realized and unrealized gain (loss) 22.60 12.24 15.96 (4.65) 8.98
------------ ------------ ------------ ------------ ------------
Total from investment operations 22.96 12.62 16.28 (4.30) 9.52
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.35) (0.40) (0.33) (0.32) (0.55)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 94.74 $ 72.13 $ 59.91 $ 43.96 $ 48.58
============ ============ ============ ============ ============
TOTAL RETURN (a) 31.89% 21.20% 37.11% (8.89)% 24.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,605,791 $ 688,794 $ 536,168 $ 290,107 $ 298,775
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.53% 0.54% 0.55% 0.55% 0.56%
Ratio of net expenses to average net assets 0.53% 0.54% 0.55% 0.55% 0.56%
Ratio of net investment income (loss) to
average net assets 0.47% 0.66% 0.61% 0.72% 1.26%
Portfolio turnover rate (b) 15% 15% 12% 11% 24%
</TABLE>
(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
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FIRST TRUST NATURAL GAS ETF (FCG)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.80 $ 12.05 $ 14.69 $ 22.75 $ 26.15
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.20 0.10 0.10 0.02 (0.02)
Net realized and unrealized gain (loss) 8.47 (3.01) (2.39) (7.86) (3.02)
------------ ------------ ------------ ------------ ------------
Total from investment operations 8.67 (2.91) (2.29) (7.84) (3.04)
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.30) -- (0.11) -- (0.23)
Return of capital -- (0.34) (0.24) (0.22) (0.13)
------------ ------------ ------------ ------------ ------------
Total distributions (0.30) (0.34) (0.35) (0.22) (0.36)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 17.17 $ 8.80 $ 12.05 $ 14.69 $ 22.75
============ ============ ============ ============ ============
TOTAL RETURN (a) 98.69% (23.22)% (15.87)% (34.77)% (11.53)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 423,225 $ 103,429 $ 95,209 $ 88,874 $ 184,262
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.62%(b) 0.67% 0.65% 0.63% 0.64% (b)
Ratio of net expenses to average net assets 0.61%(b) 0.60% 0.60% 0.60% 0.63% (b)
Ratio of net investment income (loss) to
average net assets 1.41% 1.48% 0.65% 0.07% (0.11)%
Portfolio turnover rate (c) 42% 103% 61% 47% 53%
FIRST TRUST CHINDIA ETF (FNI)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 59.07 $ 39.75 $ 30.93 $ 39.57 $ 27.39
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.12) 0.09 0.14 0.04 0.34
Net realized and unrealized gain (loss) (11.33) 19.42 8.81 (8.16) 12.61
------------ ------------ ------------ ------------ ------------
Total from investment operations (11.45) 19.51 8.95 (8.12) 12.95
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- (0.19) (0.13) (0.52) (0.77)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 47.62 $ 59.07 $ 39.75 $ 30.93 $ 39.57
============ ============ ============ ============ ============
TOTAL RETURN (a) (19.38)% 49.25% 28.96% (20.68)% 47.36%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 107,147 $ 256,949 $ 111,291 $ 133,007 $ 375,915
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.59% 0.60% 0.60% 0.59% 0.60%
Ratio of net expenses to average net assets 0.59% 0.60% 0.60% 0.59% 0.60%
Ratio of net investment income (loss) to
average net assets (0.03)% 0.20% 0.35% 1.06% 0.91%
Portfolio turnover rate (c) 43% 46% 26% 22% 35%
</TABLE>
(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) For the years ended December 31, 2021 and 2017, ratios reflect excise tax
of 0.01% and 0.03%, respectively, which are not included in the expense
cap.
(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.
See Notes to Financial Statements Page 59
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 44.75 $ 51.91 $ 43.16 $ 52.34 $ 52.81
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.01 1.11 1.04 0.81 0.74
Net realized and unrealized gain (loss) 14.20 (7.13) 8.72 (9.17) (0.46)
------------ ------------ ------------ ------------ ------------
Total from investment operations 15.21 (6.02) 9.76 (8.36) 0.28
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.99) (1.14) (1.01) (0.82) (0.75)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 58.97 $ 44.75 $ 51.91 $ 43.16 $ 52.34
============ ============ ============ ============ ============
TOTAL RETURN (a) 34.08% (11.00)% 22.80% (16.14)% 0.55%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 117,947 $ 85,020 $ 142,752 $ 228,762 $ 314,032
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.63% 0.64% 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 1.82% 2.75% 1.98% 1.50% 1.37%
Portfolio turnover rate (b) 23% 14% 15% 11% 14%
</TABLE>
(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
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
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-two exchange-traded funds. This report
covers the nine funds (each a "Fund" and collectively, the "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 beneficial interest in the Trust.
Unlike conventional mutual funds, each Fund issues and redeems shares on a
continuous basis, at net asset value ("NAV"), only in large blocks of shares
known as "Creation Units." 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:
<TABLE>
<CAPTION>
FUND INDEX
<S> <C>
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)
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using the data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
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:
Page 61
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
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.
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, 2021, is
included with each Fund's Portfolio of Investments.
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
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 with the exception of FNI.
The Bank of New York Mellon ("BNYM") acts as FNI's 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, 2021, QQEW, QQXT, QCLN, FCG, FNI, and QABA
had securities in the securities lending program. During the fiscal year ended
December 31, 2021, QQEW, QQXT, QCLN, FIW, FCG, FNI, and QABA participated in the
securities lending program.
In the event of a default by a borrower with respect to any loan, BBH or BNYM
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
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
and BNYM to exercise these remedies, a Fund sustains losses as a result of a
borrower's default, BBH or BNYM 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 or BNYM.
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 or BNYM 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, 2021 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, 2021 was as follows:
<TABLE>
<CAPTION>
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
------------------ ---------------- -----------------
<S> <C> <C> <C>
First Trust NASDAQ-100 Equal Weighted Index Fund $ 3,291,356 $ -- $ --
First Trust NASDAQ-100-Technology Sector Index Fund 661,890 -- --
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 515,676 -- --
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 275,655 -- --
First Trust S&P REIT Index Fund 2,732,665 -- --
First Trust Water ETF 4,964,311 -- --
First Trust Natural Gas ETF 6,273,849 -- --
First Trust Chindia ETF -- -- --
First Trust NASDAQ(R) ABA Community Bank Index Fund 2,215,667 -- --
</TABLE>
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2020 was as follows:
<TABLE>
<CAPTION>
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
------------------ ---------------- -----------------
<S> <C> <C> <C>
First Trust NASDAQ-100 Equal Weighted Index Fund $ 3,745,681 $ -- $ --
First Trust NASDAQ-100-Technology Sector Index Fund 14,694,706 -- --
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 389,766 -- --
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 3,181,371 -- --
First Trust S&P REIT Index Fund 2,857,361 -- --
First Trust Water ETF 3,656,056 -- --
First Trust Natural Gas ETF 6,156 -- 3,810,423
First Trust Chindia ETF 754,006 -- --
First Trust NASDAQ(R) ABA Community Bank Index Fund 2,302,952 -- --
</TABLE>
As of December 31, 2021, the components of distributable earnings on a tax basis
for each Fund were as follows:
<TABLE>
<CAPTION>
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ ---------------- -----------------
<S> <C> <C> <C>
First Trust NASDAQ-100 Equal Weighted Index Fund $ -- $(41,657,511) $ 274,748,302
First Trust NASDAQ-100-Technology Sector Index Fund -- (87,032,982) 986,139,564
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 72,211 (12,461,720) 29,658,380
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund -- (102,551,191) 119,996,386
First Trust S&P REIT Index Fund 264,063 (917,724) 22,342,931
First Trust Water ETF 153,922 (7,085,901) 372,919,181
First Trust Natural Gas ETF -- (514,196,506) 32,399,852
First Trust Chindia ETF -- (84,735,549) (13,729,950)
First Trust NASDAQ(R) ABA Community Bank Index Fund 38,419 (11,584,896) 4,002,286
</TABLE>
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.
Certain countries assess a capital gains tax on securities sold in their local
markets. This tax is accrued as the securities in these foreign markets
appreciate in value and is paid at the time of sale to the extent a capital gain
is realized. Taxes accrued on securities in an unrealized appreciation position,
if any, are included in "Net change in unrealized appreciation (depreciation) on
deferred foreign capital gains tax" on the Statements of Operations. The capital
gains tax paid on securities sold, if any, is included in "Net realized gain
(loss) on foreign capital gains tax" on the Statements of Operations.
India's Finance Bill, 2018 ("Finance Bill, 2018") was enacted into law on March
29, 2018 and amongst other provisions, it introduced a long-term capital gains
tax beginning April 1, 2018. Long-term capital gains on the sale of listed
shares in excess of INR 0.1 million are taxed at the rate of 10% (plus
applicable surcharge and cess (which is a type of tax)) subject to satisfaction
of certain conditions. Long-term capital gains accruing as of January 31, 2018
are considered exempt due to a grandfather clause in the provision. The
aforesaid exemption from long-term capital gains tax is available with respect
to shares acquired between October 1, 2004 and March 31, 2018 only if on such
acquisitions Securities Transaction Tax ("STT") was chargeable. Certain
exceptions in this regard, such as acquisition of shares in a public offer,
bonus, rights issued, etc. for which the condition of chargeability of STT on
acquisition is not applicable, have been notified.
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
In the case of the sale of listed shares held by a Fund for one year or less,
the income is classified as short-term capital gains and is taxable at 15% (plus
applicable surcharge and cess) provided the shares are sold on the stock
exchange and subjected to STT. For above purposes, the applicable rate of
surcharge is 2% or 5% (depending on the level of income of the Fund). The
Finance Bill, 2018 increases the cess imposed on the sum of tax and surcharge
from 3% to 4%. The cess 4% rate is applied to the capital gains tax, resulting
in a higher effective rate of capital gains tax.
Where the sale of shares is outside the stock exchange and not subject to STT,
the long-term capital gains are taxed at 10% (plus applicable surcharge and
cess) and short-term capital gains are taxed at 30% (plus applicable surcharge
and cess). The Finance Bill, 2018, approves the carry forward of long-term
capital losses to be offset against long-term capital gains. Short-term losses
can be netted against both short-term gains and long-term gains.
Until March 31, 2020, dividends received by a Fund from Indian companies were
exempt from tax in India because Indian companies were required to pay dividend
distribution tax. The Indian Finance Act, 2020 has amended the dividend taxation
framework effective April 1, 2020 and accordingly dividends would now be taxable
in the hands of the shareholders at 20%, plus applicable surcharge and cess.
Subsequent to the Indian Finance Act, 2020, "The Taxation and Other Laws
(Relaxation and Amendment of Certain Provisions) Bill, 2020" (the "Bill") was
enacted into law and is effective retroactively to April 1, 2020. The Bill caps
the maximum surcharge at 15% of the tax on dividend income earned by the Fund.
The highest effective tax rate proposed for non-corporate entities on dividends
will be 23.92%. Note the Fund will not obtain relief under the US-India tax
treaty as the treaty rate of 25% is higher than the domestic rate. Any excess
taxes withheld can be off-set against capital gains tax liability during the
year or claimed as a refund in the annual tax return.
Please note that the above description is based on current provisions of Indian
law, and any change or modification made by subsequent legislation, regulation,
or administrative or judicial decision could increase the Indian tax liability
of a Fund and thus reduce the return to a Fund's shareholders. There can be no
assurance that the Indian tax authorities and/or regulators will not take a
position contrary to the views expressed herein. If the Indian tax authorities
and/or regulators take a position contrary to the views expressed herein,
adverse unpredictable consequences may follow.
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. The taxable years ended 2018,
2019, 2020, and 2021 remain open to federal and state audit. As of December 31,
2021, 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.
Each Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
Each Fund is 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. At December 31, 2021, for
federal income tax purposes, each applicable Fund had a capital loss
carryforward available that is shown in the table below, to the extent provided
by regulations, to offset future capital gains. 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 each applicable Fund's
shareholders.
<TABLE>
<CAPTION>
Non-Expiring
Capital Loss
Carryforwards
------------------
<S> <C>
First Trust NASDAQ-100 Equal Weighted Index Fund $ 41,657,511
First Trust NASDAQ-100-Technology Sector Index Fund 87,032,982
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 12,461,720
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 102,551,191
First Trust S&P REIT Index Fund 917,724
First Trust Water ETF 7,085,901
First Trust Natural Gas ETF 514,196,506
First Trust Chindia ETF 84,735,549
First Trust NASDAQ(R) ABA Community Bank Index Fund 11,584,896
</TABLE>
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
During the taxable year ended December 31, 2021, the following Funds utilized
non-expiring capital loss carryforwards in the following amount:
<TABLE>
<CAPTION>
Capital Loss
Carryforward
Utilized
------------------
<S> <C>
First Trust NASDAQ-100-Technology Sector Index Fund $ 647,941
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 1,583,963
First Trust S&P REIT Index Fund 1,201,443
First Trust Water ETF 5,562,787
First Trust Natural Gas ETF 3,639,247
First Trust NASDAQ(R) ABA Community Bank Index Fund 1,628,972
</TABLE>
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended December 31, 2021, the Funds had
no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended December 31, 2021, the adjustments for each Fund were as follows:
<TABLE>
<CAPTION>
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) Paid-in
Income (Loss) on Investments Capital
------------------ ------------------ ------------------
<S> <C> <C> <C>
First Trust NASDAQ-100 Equal Weighted Index Fund $ 26,676 $ (189,491,674) $ 189,464,998
First Trust NASDAQ-100-Technology Sector Index Fund 165,359 (799,302,868) 799,137,509
First Trust NASDAQ-100 Ex-Technology Sector Index Fund -- (15,572,565) 15,572,565
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 13,002,282 (315,407,419) 302,405,137
First Trust S&P REIT Index Fund 76,356 (4,354,190) 4,277,834
First Trust Water ETF -- (82,978,172) 82,978,172
First Trust Natural Gas ETF (1,168,042) (76,606,392) 77,774,434
First Trust Chindia ETF 472,328 (61,847,060) 61,374,732
First Trust NASDAQ(R) ABA Community Bank Index Fund -- (7,619,272) 7,619,272
</TABLE>
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:
<TABLE>
<CAPTION>
FUND LICENSOR
<S> <C>
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. and Clean Edge(R)
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
</TABLE>
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The respective Funds are
required to pay licensing fees, which are shown on the Statements of Operations.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
For these services, First Trust is entitled to receive monthly fees from each
Fund calculated at the following annual rates:
<TABLE>
<CAPTION>
% of Average
Daily Net Assets
----------------
<S> <C>
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%
</TABLE>
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, 2023.
<TABLE>
<CAPTION>
Expense Cap
----------------
<S> <C>
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%
</TABLE>
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee or expense was incurred, but no reimbursement payment will be made by a Fund
if it results in the Fund exceeding (i) the applicable expense limitation in
place for the most recent fiscal year for which such expense limitation was in
place, (ii) the applicable expense limitation in place at the time the fees were
waived, or (iii) the current expense limitation. These amounts would be included
in "Expenses previously waived or reimbursed" on the Statements of Operations.
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
The advisory fee waivers and expense reimbursements for the fiscal year ended
December 31, 2021 and the fees waived or expenses borne by First Trust subject
to recovery from the applicable Fund for the periods indicated were as follows:
<TABLE>
<CAPTION>
Fees Waived or Expenses Borne by
First Trust Subject to Recovery
------------------------------------------------
Advisory Year Year Year
Fee Expense Ended Ended Ended
Waivers Reimbursement 12/31/2019 12/31/2020 12/31/2021 Total
--------- ------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
First Trust NASDAQ-100 Ex-Technology Sector
Index Fund $ 23,534 $ -- $ 34,524 $ 24,666 $ 23,534 $ 82,724
First Trust S&P REIT Index Fund 14,335 -- 22,365 24,447 14,335 61,147
First Trust Natural Gas ETF 9,649 -- 41,266 59,597 9,649 110,512
First Trust NASDAQ(R) ABA Community Bank
Index Fund 32,356 -- -- 31,508 32,356 63,864
</TABLE>
During the fiscal year ended December 31, 2021, First Trust recovered fees that
were previously waived from First Trust NASDAQ(R) Clean Edge(R) Green Energy
Index Fund of $78,177. As of December 31, 2021, the Fund did not have any
remaining fees previously waived or expenses reimbursed that were subject to
recovery.
The Trust has multiple service agreements with BNYM. Under the service
agreements, BNYM performs custodial, fund accounting, certain administrative
services, and transfer agency services for each Fund. As custodian, BNYM is
responsible for custody of each Fund's assets. As fund accountant and
administrator, BNYM is responsible for maintaining the books and records of each
Fund's securities and cash. As transfer agent, BNYM is responsible for
maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank
of New York Mellon Corporation, a financial holding company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairs 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 Chairs
rotate every three years. The officers and "Interested" Trustee receive no
compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended December 31, 2021, the cost of purchases and proceeds
from sales of investments for each Fund, excluding short-term investments and
in-kind transactions, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------------- ---------------
<S> <C> <C>
First Trust NASDAQ-100 Equal Weighted Index Fund $ 302,968,281 $ 301,248,088
First Trust NASDAQ-100-Technology Sector Index Fund 918,025,074 921,540,704
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 36,000,647 35,878,313
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 780,654,450 784,343,384
First Trust S&P REIT Index Fund 10,238,678 8,695,616
First Trust Water ETF 161,241,105 160,668,329
First Trust Natural Gas ETF 113,024,563 114,423,787
First Trust Chindia ETF 91,165,134 90,890,378
First Trust NASDAQ(R) ABA Community Bank Index Fund 28,339,248 28,196,776
</TABLE>
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
For the fiscal year ended December 31, 2021, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------------- ---------------
<S> <C> <C>
First Trust NASDAQ-100 Equal Weighted Index Fund $ 455,901,237 $ 439,993,765
First Trust NASDAQ-100-Technology Sector Index Fund 1,498,623,387 1,646,400,140
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 8,830,530 33,734,294
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 1,748,134,023 622,923,997
First Trust S&P REIT Index Fund 151,483,799 34,375,457
First Trust Water ETF 801,472,105 168,809,041
First Trust Natural Gas ETF 388,976,741 177,985,464
First Trust Chindia ETF 59,500,833 168,887,389
First Trust NASDAQ(R) ABA Community Bank Index Fund 41,720,694 36,065,775
</TABLE>
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Each Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with a Fund or one of the Fund's
service providers to purchase and redeem Fund shares directly with the Fund in
large blocks of shares known as "Creation Units." Prior to the start of trading
on every business day, a Fund publishes through the National Securities Clearing
Corporation ("NSCC") the "basket" of securities, cash or other assets that it
will accept in exchange for a Creation Unit of the Fund's shares. An Authorized
Participant that wishes to effectuate a creation of a Fund's shares deposits
with the Fund the "basket" of securities, cash or other assets identified by the
Fund that day, and then receives the Creation Unit of the Fund's shares in
return for those assets. After purchasing a Creation Unit, the Authorized
Participant may continue to hold the Fund's shares or sell them in the secondary
market. The redemption process is the reverse of the purchase process: the
Authorized Participant redeems a Creation Unit of a Fund's shares for a basket
of securities, cash or other assets. The combination of the creation and
redemption process with secondary market trading in a Fund's shares and
underlying securities provides arbitrage opportunities that are designed to help
keep the market price of a Fund's shares at or close to the NAV per share of the
Fund.
Each Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of a Fund times the number of shares in
a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
Each Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of a Fund times the number
of shares in a Creation Unit, minus the fees described above and, if applicable,
any operational processing and brokerage costs, transfer fees, stamp taxes and
part or all of the spread between the expected bid and offer side of the market
related to the securities comprising the redemption basket. Investors who use
the services of a broker or other such intermediary in addition to an Authorized
Participant to effect a redemption of a Creation Unit may also be assessed an
amount to cover the cost of such services. The redemption fee charged by a Fund
will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no
more than 2% of the value of the shares redeemed.
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, 2023.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First
Trust NASDAQ-100 Equal Weighted Index Fund, First Trust NASDAQ-100-Technology
Sector Index Fund, First Trust NASDAQ-100 Ex-Technology Sector Index Fund, First
Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund, First Trust S&P REIT
Index Fund, First Trust Water ETF, First Trust Natural Gas ETF, First Trust
Chindia ETF, and First Trust NASDAQ(R) ABA Community Bank Index Fund (the
"Funds"), each a series of First Trust Exchange-Traded Fund, including the
portfolios of investments, as of December 31, 2021, the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, the financial highlights for
each of the five years in the period then ended, and the related notes. In our
opinion, the financial statements and financial highlights present fairly, in
all material respects, the financial position of each of the Funds as of
December 31, 2021, 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, 2021, 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 23, 2022
We have served as the auditor of one or more First Trust investment companies
since 2001.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
each Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal
quarter within 60 days after the end of the relevant fiscal quarter on Form
N-PORT. Portfolio holdings information for the third month of each fiscal
quarter will be publicly available on the SEC's website at www.sec.gov. Each
Fund's complete schedule of portfolio holdings for the second and fourth
quarters of each fiscal year is included in the semi-annual and annual reports
to shareholders, respectively, and is filed with the SEC on Form N-CSR. The
semi-annual and annual report for each Fund is available to investors within 60
days after the period to which it relates. Each Fund's Forms N-PORT and Forms
N-CSR are available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable year ended December 31, 2021, the following percentages of
income dividend paid by the Funds qualify for the dividends received deduction
available to corporations:
<TABLE>
<CAPTION>
Dividends Received Deduction
----------------------------
<S> <C>
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 44.96%
First Trust S&P REIT Index Fund 0.00%
First Trust Water ETF 100.00%
First Trust Natural Gas ETF 84.93%
First Trust Chindia ETF 0.00%
First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00%
</TABLE>
For the taxable year ended December 31, 2021, the following percentages of
income dividend paid by the Funds are hereby designated as qualified dividend
income:
<TABLE>
<CAPTION>
Qualified Dividend Income
----------------------------
<S> <C>
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 58.52%
First Trust S&P REIT Index Fund 0.00%
First Trust Water ETF 100.00%
First Trust Natural Gas ETF 84.93%
First Trust Chindia ETF 0.00%
First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00%
</TABLE>
A portion of each of the Funds' 2021 ordinary dividends (including short-term
capital gains) paid to its shareholders during the fiscal year ended December
31, 2021, may be eligible for the Qualified Business Income Deduction (QBI)
under Internal Revenue Code of 1986, as amended (the "Code"), Section 199A for
the aggregate dividends each Fund received from the underlying Real Estate
Investment Trusts (REITs) these Funds invest in.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
CONCENTRATION RISK. To the extent that a fund is able to invest a significant
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
more broadly diversified.
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.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
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.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 2021. The unavailability or replacement of LIBOR may affect the
value, liquidity or return on certain fund investments and may result in costs
incurred in connection with closing out positions and entering into new trades.
Any potential effects of the transition away from LIBOR on the fund or on
certain instruments in which the fund invests can be difficult to ascertain, and
they may vary depending on a variety of factors, and they could result in losses
to the fund.
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. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. While the development of
vaccines has slowed the spread of the virus and allowed for the resumption of
"reasonably" normal business activity in the United States, many countries
continue to impose lockdown measures in an attempt to slow the spread.
Additionally, there is no guarantee that vaccines will be effective against
emerging variants of the disease.
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;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; 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.
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
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.
VARIABLE INTEREST ENTITIES RISK. In order to gain exposure to certain Chinese
companies that are included in a Fund's Index but are unavailable to direct
investment by foreign investors, certain Funds invest significantly in
non-Chinese shell companies that have created structures known as variable
interest entities ("VIEs") in order to gain exposure to such Chinese companies.
In China, direct ownership of companies in certain sectors by foreign
individuals and entities is prohibited. In order to allow for foreign investment
in these businesses, many Chinese companies have created VIE structures to
enable indirect foreign ownership. In such an arrangement, a Chinese operating
company typically establishes an offshore shell company in another jurisdiction,
such as the Cayman Islands. That shell company enters into service and other
contracts with the Chinese issuer or operating company to obtain economic
exposure to the Chinese company, then issues shares on an exchange outside of
mainland China, and U.S. investors hold stock in the non-Chinese shell company
rather than directly in the Chinese issuer or operating company. This
arrangement allows U.S. investors, such as the Fund, to obtain economic exposure
to the Chinese issuer or operating company through contractual means rather than
through formal equity ownership. Because neither the shell company nor the Fund
owns actual equity interests in the Chinese operating company, they do not have
the voting rights or other types of control that an equity holder would expect
to benefit from. Although VIEs are a longstanding industry practice and well
known to officials and regulators in China, VIEs are not formally recognized
under Chinese law. Intervention by the Chinese government with respect to VIEs
could significantly affect the Chinese company's performance and the
enforceability of the VIE's contractual arrangements that establish the links
between the Chinese company and the shell company in which the Fund invests.
This could considerably impact the financial condition of the shell company in
which the Fund invests by limiting its ability to consolidate the financial
results of the Chinese operating company into its own financial statements, as
well as make the value of the shares held by the Fund effectively worthless.
Further, if Chinese officials prohibit the existence of VIEs, the market value
of the Fund's associated holdings would likely suffer significant, and possibly
permanent effects, which could negatively impact the Fund's net asset value and
could result in substantial losses. Further, it is uncertain whether any new
laws, rules or regulations relating to VIE structures will be adopted or, if
adopted, what impact they would have on the value of the Fund's shares.
VIEs are also subject to the investment risks associated with the underlying
Chinese issuer or operating company. Chinese companies are not subject to the
same degree of regulatory requirements or accounting standards and oversight as
companies in more developed countries. As a result, information about the
Chinese securities and VIEs in which the Fund invests may be less reliable and
incomplete. There also may be significant obstacles to obtaining information
necessary for investigations into or litigation against Chinese companies and
VIEs, and shareholders may have limited legal remedies, which could negatively
impact the Fund. Additionally, U.S.-listed VIEs may be delisted if they do not
meet U.S. accounting standards and auditor oversight requirements. Delisting
would significantly decrease the liquidity and value of the securities, decrease
the ability of the Fund to invest in such securities and may increase the cost
of the Fund if required to seek alternative markets in which to invest in such
securities.
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 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, 2021, the amount of remuneration paid (or to
be paid) by First Trust Advisors L.P. in respect of the Funds is $5,069,026.
This figure is comprised of $195,059 paid (or to be paid) in fixed compensation
and $4,873,967 paid (or to be paid) in variable compensation. There were a total
of 24 beneficiaries of the remuneration described above. Those amounts include
$2,603,118 paid (or to be paid) to senior management of First Trust Advisors
L.P. and $2,465,908 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").
Page 76
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
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 77
<PAGE>
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (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.
<TABLE>
<CAPTION>
NUMBER OF
PORTFOLIOS IN
TERM OF OFFICE THE FIRST TRUST OTHER TRUSTEESHIPS
NAME, AND YEAR FIRST FUND COMPLEX OR DIRECTORSHIPS HELD
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY BY TRUSTEE DURING
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 216 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 216 Director of ADM Investor
(1957) (Futures Commission Merchant) Services, Inc., ADM
o Since Inception Investor Services
International, Futures
Industry Association,
and National Futures
Association
Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate Aurora 216 Director and Board Chair
(1964) Health and President, Advocate Aurora of Advocate Home Health
Services, Advocate Home
o Since 2021 Continuing Health Division (Integrated Care Products and
Healthcare System) Advocate Hospice;
Director and Board Chair
of Aurora At Home
(since 2018); Director
of Advocate
Physician Partners
Accountable Care
Organization; Director
and Board Chair of
RML Long Term
Acute Care Hospitals;
and Director of Senior
Helpers (since 2021)
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 216 Director of Trust
(1956) and Management Consulting) Company of Illinois
o Since Inception
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 216 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust
Chairman of the Board Advisors L.P. and First Trust Portfolios 216 None
(1955) L.P., Chairman of the Board of
o Since Inception Directors, BondWave LLC (Software
Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
</TABLE>
-----------------------------
(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 78
<PAGE>
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
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)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
o Since January 2016 to 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 First
(1970) 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. and
(1966) First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
</TABLE>
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 79
<PAGE>
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (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
professional or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2021
Page 80
<PAGE>
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
320 South Canal Street
Chicago, IL 60606
<PAGE>
[BLANK BACK COVER]
<PAGE>
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, 2021
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2021
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........................................ 40
Statements of Operations.................................................... 41
Statements of Changes in Net Assets......................................... 42
Financial Highlights........................................................ 44
Notes to Financial Statements............................................... 46
Report of Independent Registered Public Accounting Firm..................... 55
Additional Information...................................................... 56
Board of Trustees and Officers.............................................. 59
Privacy Policy.............................................................. 61
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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's 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 certain 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
<PAGE>
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2021
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, 2021.
Being that this is a year-end review, I would like to touch on the state of the
business climate and securities markets in the U.S. The two biggest stories in
2021 were clearly the ongoing fight against the coronavirus ("COVID-19")
pandemic and the surge in the rate of inflation, which I believe is a byproduct
of that fight. The COVID-19 pandemic is closing in on its second anniversary and
it continues to curb economic activity in the U.S. and abroad. It is nearly as
challenging today as it was at its peak in 2020.
The emergence of the Omicron variant in the latter half of 2021 was particularly
disappointing because we had been making some inroads into fully reopening the
U.S. economy until its arrival. Americans were dining out. Airline travel was
picking up and people were even taking cruises again. We have learned that the
Omicron variant, while seemingly not as dangerous as its predecessor, the Delta
variant, at least in terms of the number of deaths to date, is still extremely
contagious, especially for those individuals who have not been vaccinated. The
U.S. federal government has funneled trillions of dollars of stimulus and
subsidies into the financial system to mitigate the economic fallout from the
pandemic. That level of support is unprecedented and has likely fueled much of
the surge in inflation, as measured by the Consumer Price Index ("CPI"). The
standard definition for inflation is "too many dollars chasing too few goods."
The explosion of the U.S. money supply has easily overwhelmed the volume of
goods available to consumers. Global supply chain bottlenecks, including the
backlog of container ships at ports in Southern California, have also
contributed to the shortages of goods. In December 2021, the trailing 12-month
rate on the CPI was 7.0%, up from 1.4% last December, according to the U.S.
Bureau of Labor Statistics. The last time inflation was this elevated was in
1982.
Since the onset of COVID-19, companies and millions of employees have scrambled
to adapt to the new normal of working remotely, typically from home. What an
amazing thing to watch. While opinions may vary, it has become evident that the
workplace culture has probably changed forever. According to Barron's magazine,
we should look for more of a hybrid arrangement moving forward that would entail
workers being at the office for three days a week and home for two. I do not
believe that the stock and bond markets would have performed nearly as well over
the past two years had U.S. businesses not overcome the adversity brought their
way by COVID-19. Oh, and the trillions of dollars from the government. In 2021,
the S&P 500(R) Index posted a total return of 28.71%, and that came on the heels
of an 18.40% gain in 2020, according to Bloomberg. From 1926-2021 (a span of 96
years), the S&P 500(R) Index posted an average annual total return of 10.44%,
according to Morningstar/Ibbotson Associates. Investors should relish these
outsized returns. Bond investors have earned more modest total returns over the
past two years. Bond returns were higher for most bond categories in 2020 due to
the artificially depressed yield on the 10-Year Treasury Note ("T-Note"). The
10-Year T-Note yield trended higher in 2021, putting some pressure on bond
prices. Expect the Federal Reserve to tighten monetary policy by raising
short-term interest rates. It could begin as early as March 2022. While the
markets could experience some near-term pain, I believe normalizing interest
rates and bond yields will prove to be a healthy and necessary transition for
the markets long-term.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
<PAGE>
--------------------------------------------------------------------------------
MARKET OVERVIEW
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2021
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 more than 30 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
Inflation surged in 2021 and it looks as though it is here to stay. Federal
Reserve (the "Fed") Chairman Jerome Powell has changed his expectations on
inflation from characterizing it as transitory to it being more persistent in
nature. In the hopes of keeping inflation from becoming entrenched, the Fed
announced it will expedite the tapering of its monthly bond buying program as of
December 2021. This program has been successful at pushing down intermediate and
longer maturity bond yields and keeping them artificially low to help stimulate
economic activity. The Fed will reduce its purchases of Treasuries and
mortgage-backed securities by $30 billion per month. At that pace, it should be
done buying bonds in the open market by the end of March 2022. They also foresee
hiking short-term interest rates three times in 2022. The Federal Funds target
rate (upper bound) is currently at 0.25%. The trailing 12-month Consumer Price
Index rate stood at 7.0% in December 2021, according to the U.S. Bureau of Labor
Statistics. That is up significantly from 1.4% in December 2020 and well above
its 2.3% average rate over the past 30 years.
The global growth forecast from the International Monetary Fund ("IMF") released
in October 2021 sees real gross domestic product growth rising by 4.9% worldwide
in 2022, down from its 5.9% projection for 2021. The IMF is calling for a 5.2%
growth rate for the U.S. in 2022, down from its 6.0% estimate for 2021. As has
been the case for many years, Emerging Market and Developing Economies are
expected to grow faster than Advanced Economies. Their 2022 growth rate
estimates are 5.1% and 4.5%, respectively.
The exchange-traded funds ("ETFs") and related exchange-traded products ("ETPs")
industry grew significantly in 2021. ETFGI, an independent research and
consultancy firm, reported that total assets invested in ETFs/ETPs listed in the
U.S. stood at an all-time high of $7.21 trillion as of year-end, up 31.81% from
the $5.47 trillion at the end of 2020, according to its own release. Net inflows
to ETFs/ETPs listed in the U.S. hit a record high of $919.78 billion in 2021,
topping the prior record of $490.19 billion in 2020. U.S. ETF/ETP assets
represent approximately 72% of total global ETF/ETP assets.
U.S. STOCKS AND BONDS
In 2021, three of the major U.S. stock indices posted substantial double-digit
gains. The S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R)
Index posted total returns of 28.71%, 24.76%, and 26.82%, respectively,
according to Bloomberg. All 11 major sectors that comprise the S&P 500(R) Index
posted positive double-digit total returns. The top-performing sectors were
Energy, Real Estate, Financials and Information Technology, up 54.64%, 46.14%,
35.04% and 34.53%, respectively, while the worst-performing sector was
Utilities, up 17.67%. As we have noted often, we believe that when the major
stock indices are trading at or near their record highs in maturing bull
markets, corporate earnings need to continue to grow to drive the market higher.
Bloomberg's consensus year-over-year earnings growth rate estimates for the S&P
500(R) Index for 2022 and 2023 were 8.74% and 9.97%, respectively, as of
December 31, 2021. These projections, while positive, are more typical than
Bloomberg's 2021 growth estimate of 47.26%, which reflects a robust rebound from
the coronavirus-induced -12.44% earnings growth rate posted in 2020.
The yield on the benchmark 10-Year Treasury Note closed trading on December 31,
2021, at 1.51%, according to Bloomberg. The 1.51% yield stood 52 basis points
("bps") below its 2.03% average for the 10-year period ended December 31, 2021.
Its yield rose 59 bps in 2021. The more than half-point rise was enough of a
headwind to push the returns of taxable investment-grade bonds into negative
territory. It was risk-on for investors in 2021. The top performing fixed-income
bond category we track was high yield corporates. The Bloomberg U.S. Corporate
High Yield Index posted a total return of 5.28% for the year. Investors were
willing to accept more risk to garner a higher return. The good news is that the
default rate on speculative-grade (high yield) debt is low by historical
standards. Moody's reported that its global speculative-grade default rate stood
at 1.7% in December. Moody's puts the historical average default rate at 4.1%
(1983-2021). Its baseline scenario sees the default rate increasing to 2.4% by
December 2022 but staying well below its average.
FOREIGN STOCKS AND BONDS
The U.S. dollar appreciated by 6.37% against a basket of major currencies in
2021, as measured by the U.S. Dollar Index ("DXY"), according to Bloomberg. The
DXY closed 2021 at a reading of 95.67, above its 20-year average of 88.89. The
stronger U.S. dollar likely had a negative influence on the returns of unhedged
foreign securities held by U.S. investors.
The Bloomberg EM Hard Currency Aggregate Index of emerging markets debt posted a
total return of -2.57% (USD), while the Bloomberg Global Aggregate Index of
higher quality debt declined 4.71% (USD). With respect to equities, the MSCI
Emerging Markets Index of stocks posted a total return of -2.54% (USD), while
the MSCI World ex USA Index rose by 12.62% (USD) on a total return basis,
according to Bloomberg.
Page 3
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
The First Trust Total US Market AlphaDEX(R) ETF (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the NASDAQ AlphaDEX(R) Total US Market
Index (the "Index"). The Fund will normally invest at least 90% of its net
assets (including investment borrowings) in the common stocks that comprise the
Index. The Index is a modified market capitalization index designed to
quantitatively identify and select U.S. exchange-listed securities issued by
small, mid and large cap U.S. companies that exhibit growth and value factors
and appear to have the greatest potential for capital appreciation. The Index is
rebalanced and reconstituted quarterly and the Fund will make corresponding
changes to its portfolio shortly after the Index changes are made public. The
Fund's shares are listed for trading on The Nasdaq Stock Market LLC. The first
day of secondary market trading in shares of the Fund was December 7, 2006.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 25.12% 13.86% 12.03% 7.62% 91.35% 211.33% 202.44%
Market Value 25.31% 13.87% 12.04% 7.63% 91.48% 211.72% 203.03%
INDEX PERFORMANCE
NASDAQ AlphaDEX(R) Total US Market Index* 26.08% 14.72% N/A N/A 98.68% N/A N/A
Russell 3000(R) Index 25.66% 17.97% 16.30% 10.54% 128.45% 352.85% 352.91%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* On January 9, 2015, the Fund's underlying index changed from the Value
Line(R) Equity Allocation Index to the NASDAQ AlphaDEX(R) Total US Market
Index. Therefore, the Fund's performance and total returns shown for the
periods prior to January 9, 2015, are not necessarily indicative of the
performance the Fund, based on its current index, would have generated.
Since the Fund's current underlying index had an inception date of
September 8, 2014, it was not in existence for all of the periods
disclosed. (See Notes to Fund Performance Overview on page 12.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of 25.12% during the
12-month period covered by this report. During the same period, the Russell
3000(R) Index (the "Benchmark") generated a return of 25.66%. The sector with
the highest allocation in the Fund was the Financials sector, which received a
19.7% weighting. Investments in this sector returned 35.4% and contributed 6.4%
to the Fund's total overall performance. The worst performing sector were the
investments in the Communication Services sector, which returned 5.3%. These
investments received an allocation of 5.1% and contributed 0.7% to the Fund's
total return. On a relative basis, the Fund slightly underperformed the
Benchmark. The greatest area of underperformance was in the investments in
Information Technology stocks. Investments in this sector caused -2.3% of
underperformance. Meanwhile, investments in the Consumer Discretionary sector
caused 0.9% of outperformance for the Fund versus the Benchmark.
-----------------------------
Nasdaq(R) and NASDAQ AlphaDEX(R) Total US Market Index are registered trademarks
and service marks of Nasdaq, Inc. (together with its affiliates hereinafter
referred to as the "Corporations") and are licensed for use by First Trust.
AlphaDEX(R) is a registered trademark owned by First Trust that has been
licensed to Nasdaq, Inc. for use in the name of the Index. 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
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Financials 20.8%
Information Technology 15.2
Consumer Discretionary 14.4
Health Care 12.5
Industrials 11.6
Materials 5.6
Utilities 5.1
Energy 3.8
Consumer Staples 3.8
Real Estate 3.6
Communication Services 3.6
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Micron Technology, Inc. 0.5%
D.R. Horton, Inc. 0.5
Lennar Corp., Class A 0.5
AutoZone, Inc. 0.5
Fortinet, Inc. 0.5
KKR & Co., Inc. 0.5
DuPont de Nemours, Inc. 0.5
Tractor Supply Co. 0.5
Palo Alto Networks, Inc. 0.5
PerkinElmer, Inc. 0.5
-------
Total 5.0%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust
Total US Market Russell 3000(R)
AlphaDEX(R) ETF Index
<S> <C> <C>
12/11 $10,000 $10,000
06/12 10,174 10,932
12/12 10,874 11,641
06/13 12,443 13,278
12/13 14,642 15,547
06/14 15,380 16,626
12/14 14,988 17,499
06/15 15,165 17,838
12/15 14,091 17,583
06/16 14,550 18,220
12/16 16,271 19,822
06/17 17,499 21,592
12/17 19,433 24,010
06/18 20,294 24,783
12/18 17,465 22,751
06/19 20,446 27,008
12/19 21,893 29,809
06/20 19,110 28,772
12/20 24,884 36,039
06/21 29,502 41,484
12/21 31,133 45,285
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 5
<PAGE>
--------------------------------------------------------------------------------
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 the common stocks or an
exchange-traded fund ("ETF") that comprise the Index. The Index is a modified
market-capitalization weighted index designed to tactically allocate exposure to
one of three allocations: (i) Nasdaq US 500 Large Cap Index; (ii) Nasdaq US 500
Large Cap Equal Weight Index; or (iii) First Trust Enhanced Short Maturity ETF
("FTSM") (each, an "Underlying Allocation"), based on daily relative strength
readings. The Nasdaq US 500 Large Cap Index and the Nasdaq US 500 Large Cap
Equal Weight Index (each, an "Underlying Equity Index") are equity indices that
seek to provide exposure to the 500 securities with the highest float-adjusted
market capitalization comprising the Nasdaq US Benchmark Index. Therefore, each
Underlying Equity Index is composed of the same constituent securities. What
differs, however, is the methodology each Underlying Equity Index utilizes to
assign security weights. The Nasdaq US 500 Large Cap Index assigns security
weights based on market capitalization and the Nasdaq US 500 Large Cap Equal
Weight Index weights components equally. The third Underlying Allocation is
FTSM. FTSM is an actively-managed ETF that invests in short-duration securities,
which are primarily U.S. dollar-denominated, investment-grade securities. The
Index is rebalanced and reconstituted periodically and the Fund will make
corresponding changes to its portfolio shortly after the Index changes are made
public. The 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 August 30,
2012.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
12/31/21 12/31/21 to 12/31/21 12/31/21 to 12/31/21
<S> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 25.71% 9.36% 7.71% 56.43% 100.19%
Market Value 25.77% 9.32% 7.71% 56.14% 100.07%
INDEX PERFORMANCE
Nasdaq Dorsey Wright People's Portfolio Index* 26.48% N/A N/A N/A N/A
S&P 500(R) Index 28.71% 18.47% 16.20% 133.41% 306.45%
Nasdaq US 500 Large Cap Index 26.48% 18.70% N/A 135.62% N/A
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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 25.71% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index (the "Benchmark")
generated a return of 28.71%. The Information Technology sector received the
largest allocation in the Fund during the period with a weight of 29.9% and
generated the largest contribution to the Fund's return at 9.2%. Investments in
the Utilities sector generated the smallest contribution to the Fund's return
during the period at 0.4%. On a relative basis, the Fund underperformed the
Benchmark. The Fund's investments in the Communication Services sector were the
largest source of underperformance compared to the Benchmark where the Fund
underperformed by -1.0%. The Fund's relative underperformance was marginally
reduced by investments in the Financials sector where the Fund outperformed the
Benchmark by 0.1%.
-----------------------------
Nasdaq(R) and Nasdaq Dorsey Wright People's Portfolio Index are registered
trademarks and service marks of Nasdaq, Inc. (together with its affiliates
hereinafter 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
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 31.3%
Health Care 13.7
Consumer Discretionary 12.8
Financials 10.4
Communication Services 8.5
Industrials 7.7
Consumer Staples 6.0
Real Estate 2.8
Energy 2.6
Utilities 2.4
Materials 1.8
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Apple, Inc. 7.1%
Microsoft Corp. 6.4
Amazon.com, Inc. 3.8
Tesla, Inc. 2.3
Alphabet, Inc., Class A 2.2
Meta Platforms, Inc., Class A 1.9
NVIDIA Corp. 1.7
UnitedHealth Group, Inc. 1.2
JPMorgan Chase & Co. 1.2
Johnson & Johnson 1.1
-------
Total 28.9%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 29, 2012 - DECEMBER 31, 2021
First Trust
Dorsey Wright S&P 500(R)
People's Portfolio ETF Index
<S> <C> <C>
08/12 $10,000 $10,000
12/12 9,863 10,193
06/13 10,686 11,602
12/13 11,738 13,494
06/14 12,251 14,457
12/14 13,525 15,342
06/15 13,175 15,531
12/15 12,730 15,554
06/16 12,551 16,151
12/16 12,800 17,414
06/17 13,952 19,040
12/17 15,579 21,214
06/18 15,782 21,776
12/18 14,292 20,284
06/19 17,139 24,045
12/19 18,609 26,673
06/20 14,206 25,851
12/20 15,925 31,580
06/21 18,157 36,396
12/21 20,019 40,645
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 7
<PAGE>
--------------------------------------------------------------------------------
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(R) Equal
Weight Index (the "Index"). The Fund will normally invest at least 90% of its
net assets (including investment borrowings) in the common stocks that comprise
the Index. The Index is an equal weight version of the Dow Jones Industrial
Average(R) (the "DJIA"). The 30 securities comprising the DJIA are issued by
blue-chip U.S. companies covering all industries, with the exception of
transportation and utilities. Inclusion in the DJIA is not governed by
quantitative rules but rather is based on the following criteria: (i) the
company is not a utility or in the transportation business; (ii) the company has
a premier reputation in its field; (iii) the company has a history of successful
growth; (iv) there is wide interest in the company among individual and
institutional investors; and (v) the company should be incorporated and
headquartered in the U.S. Whenever one component is changed, the others are
reviewed. For the sake of historical continuity, composition changes are rarely
made. In the event that there is a change in the components of the DJIA, the
component removed from the DJIA will simultaneously be removed from the Index
and the component that replaces the removed component will be added to the Index
at the same weight as the component that was removed. The Index is rebalanced
quarterly and reconstituted as needed and the Fund will make corresponding
changes to its portfolio shortly after the Index changes are made public. The
Fund's shares are listed for trading on the NYSE Arca, Inc. The first day of
secondary market trading in shares of the Fund was August 9, 2017.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Inception Inception
Ended (8/8/17) (8/8/17)
12/31/21 to 12/31/21 to 12/31/21
<S> <C> <C> <C>
FUND PERFORMANCE
NAV 18.63% 13.22% 72.63%
Market Value 18.59% 13.22% 72.63%
INDEX PERFORMANCE
Dow Jones Industrial Average(R) Equal Weight Index 19.35% 13.94% 77.53%
Dow Jones Industrial Average(R) 20.95% 14.51% 81.46%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 12.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 18.63% during the 12-month period covered by
this report. During the same period, the Dow Jones Industrial Average(R) (the
"Benchmark") generated a return of 20.95%. The Information Technology sector
received the largest investment allocation during the period with an average
weight of 23.5%. This sector also generated the largest contribution to the
Fund's return at 5.6%. Investments in the Communication Services sector
generated the largest negative contribution to the Fund's return at -0.7%. On a
relative basis, the Fund underperformed the Benchmark. The largest source of
underperformance came from the Consumer Discretionary sector where the Fund
underperformed the Benchmark by -0.7%. The Industrials sector generated positive
relative performance for the Fund where the Fund outperformed by 0.9% versus the
Benchmark.
-----------------------------
Dow Jones Industrial Average(R) Equal Weight Index ("Index") is a product of S&P
Dow Jones Indices LLC or its affiliates ("SPDJI") and has been licensed for use
by First Trust. S&P(R) is a registered trademark of Standard & Poor's Financial
Services LLC ("S&P"); Dow Jones(R) is a registered trademark of Dow Jones
Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed
for use by SPDJI and sublicensed for certain purposes by First Trust. The Fund
is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their
respective affiliates and none of such parties make any representation regarding
the advisability of investing in such product nor do they have any liability for
any errors, omissions, or interruptions of the Index.
Page 8
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 23.3%
Health Care 13.8
Consumer Staples 13.7
Industrials 13.1
Financials 13.0
Consumer Discretionary 9.8
Communication Services 6.7
Materials 3.4
Energy 3.2
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
International Business Machines Corp. 3.5%
Cisco Systems, Inc. 3.5
Amgen, Inc. 3.5
Merck & Co., Inc. 3.5
Walgreens Boots Alliance, Inc. 3.5
Procter & Gamble (The) Co. 3.4
Coca-Cola (The) Co. 3.4
UnitedHealth Group, Inc. 3.4
Dow, Inc. 3.4
Verizon Communications, Inc. 3.4
-------
Total 34.5%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 8, 2017 - DECEMBER 31, 2021
Dow Jones Industrial
First Trust Dow 30 Average(R) Equal Dow Jones Industrial
Equal Weight ETF Weight Index Average(R)
<S> <C> <C> <C>
08/17 $10,000 $10,000 $10,000
12/17 11,102 11,124 11,302
06/18 11,024 11,069 11,219
12/18 11,004 11,079 10,908
06/19 12,615 12,739 12,588
12/19 13,676 13,849 13,674
06/20 12,342 12,576 12,521
12/20 14,552 14,874 15,004
06/21 16,500 16,922 17,072
12/21 17,263 17,753 18,146
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 9
<PAGE>
--------------------------------------------------------------------------------
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 the common stocks that comprise
the Index. The Index is owned and was developed by Lunt Capital Management, Inc.
(the "Index Provider"). The Index is calculated and maintained by Nasdaq, Inc.
The Index is designed to track the performance of U.S. securities exhibiting
desirable factor exposure. The Index utilizes the Index Provider's risk-adjusted
relative strength methodology to allocate exposure to securities exhibiting
either high or low levels of the characteristics associated with one of four
primary investing factors: momentum, value, quality and volatility. The Index is
rebalanced and reconstituted periodically and the Fund will make corresponding
changes to its portfolio after the Index changes are made public. The Fund's
shares are listed for trading on CBOE BZX Exchange, Inc. The first day of
secondary market trading in shares of the Fund was July 26, 2018.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Inception Inception
Ended (7/25/18) (7/25/18)
12/31/21 to 12/31/21 to 12/31/21
<S> <C> <C> <C>
FUND PERFORMANCE
NAV 21.22% 18.77% 80.60%
Market Value 21.21% 18.78% 80.65%
INDEX PERFORMANCE
Lunt Capital Large Cap Factor Rotation Index 22.10% 19.68% 85.40%
Nasdaq US 500 Large Cap Index 26.48% 18.63% 79.85%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 12.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 21.22% during the 12-month period covered by
this report. During the same period, the Nasdaq US 500 Large Cap Index (the
"Benchmark") generated a return of 26.48%. The Health Care sector received the
largest allocation in the Fund during the period with an average weight of
19.8%. The Fund's investments in the Energy sector generated the largest
contribution to the Fund's return at 5.5% while investments in the Communication
Services sector generated the largest negative contribution at -0.7%. On a
relative basis, the Fund underperformed the Benchmark. The Information
Technology sector was the largest source of underperformance where the Fund
lagged the Benchmark by -7.0%. A portion of the Fund's relative underperformance
was reduced by investments in the Energy sector where the Fund outperformed the
Benchmark by 3.2%.
-----------------------------
Lunt Capital Management, Inc. ("Lunt") and the Lunt Capital Large Cap Factor
Rotation Index ("Lunt Index") are trademarks of Lunt and have been licensed for
use for certain purposes by First Trust. The First Trust Lunt U.S. Factor
Rotation ETF is based on the Lunt Index and is not sponsored, endorsed, sold or
promoted by Lunt, and Lunt makes no representation regarding the advisability of
trading in such fund. Lunt has contracted with Nasdaq, Inc. to calculate and
maintain the Lunt Index. The Fund is not sponsored, endorsed, sold or promoted
by Nasdaq, Inc. or its affiliates (Nasdaq, with its affiliates, hereinafter
referred to as the "Corporations"). The Corporations have not passed on the
legality or suitability of, or the accuracy or adequacy of descriptions and
disclosures relating to, the Fund. The 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, or the ability of the Lunt Index to track general stock
performance.
Page 10
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 32.5%
Health Care 19.2
Industrials 10.5
Consumer Discretionary 10.4
Financials 9.7
Consumer Staples 9.1
Communication Services 4.1
Real Estate 2.2
Materials 1.8
Utilities 0.5
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Procter & Gamble (The) Co. 1.8%
Quest Diagnostics, Inc. 1.7
Cloudflare, Inc., Class A 1.7
Moody's Corp. 1.6
Colgate-Palmolive Co. 1.6
Costco Wholesale Corp. 1.5
IDEXX Laboratories, Inc. 1.5
Bill.com Holdings, Inc. 1.4
Monster Beverage Corp. 1.4
Zscaler, Inc. 1.3
-------
Total 15.5%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 25, 2018 - DECEMBER 31, 2021
First Trust Lunt U.S. Lunt Capital Large Cap Nasdaq US 500
Factor Rotation ETF Factor Rotation Index Large Cap Index
<S> <C> <C> <C>
07/18 $10,000 $10,000 $10,000
12/18 8,791 8,813 8,869
06/19 10,828 10,901 10,567
12/19 11,459 11,578 11,711
06/20 11,988 12,168 11,509
12/20 14,899 15,184 14,220
06/21 17,627 18,031 16,261
12/21 18,060 18,540 17,985
</TABLE>
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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 11
<PAGE>
--------------------------------------------------------------------------------
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 of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV was 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
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2021 (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 (12b-1) 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, 2021.
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.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2021 DECEMBER 31, 2021 PERIOD PERIOD (b)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
Actual $1,000.00 $1,055.40 0.70% (a) $3.63
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% (a) $3.57
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO
ETF (DWPP)
Actual $1,000.00 $1,102.50 0.60% $3.18
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW)
Actual $1,000.00 $1,046.20 0.50% $2.58
Hypothetical (5% return before expenses) $1,000.00 $1,022.68 0.50% $2.55
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR)
Actual $1,000.00 $1,024.60 0.65% $3.32
Hypothetical (5% return before expenses) $1,000.00 $1,021.93 0.65% $3.31
</TABLE>
(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,
2021 through December 31, 2021), multiplied by 184/365 (to reflect the
six-month period).
Page 13
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 1.0%
242 AAR Corp. (a) $ 9,445
101 Axon Enterprise, Inc. (a) 15,857
218 BWX Technologies, Inc. 10,438
140 Curtiss-Wright Corp. 19,414
200 General Dynamics Corp. 41,694
122 Huntington Ingalls Industries,
Inc. 22,782
89 L3Harris Technologies, Inc. 18,978
57 Lockheed Martin Corp. 20,258
184 Maxar Technologies, Inc. 5,434
56 Mercury Systems, Inc. (a) 3,083
164 Northrop Grumman Corp. 63,480
78 Parsons Corp. (a) 2,625
169 Textron, Inc. 13,047
140 Triumph Group, Inc. (a) 2,594
--------------
249,129
--------------
AIR FREIGHT & LOGISTICS -- 0.7%
404 Air Transport Services Group,
Inc. (a) 11,870
160 Atlas Air Worldwide Holdings,
Inc. (a) 15,059
136 C.H. Robinson Worldwide, Inc. 14,638
329 Expeditors International of
Washington, Inc. 44,182
360 FedEx Corp. 93,110
76 Hub Group, Inc., Class A (a) 6,402
--------------
185,261
--------------
AIRLINES -- 0.0%
287 American Airlines Group, Inc. (a) 5,154
212 SkyWest, Inc. (a) 8,332
--------------
13,486
--------------
AUTO COMPONENTS -- 1.0%
189 Adient PLC (a) 9,049
1,187 American Axle & Manufacturing
Holdings, Inc. (a) 11,075
263 Aptiv PLC (a) 43,382
680 BorgWarner, Inc. 30,648
470 Dana, Inc. 10,725
28 Dorman Products, Inc. (a) 3,164
122 Fox Factory Holding Corp. (a) 20,752
534 Gentex Corp. 18,610
161 Gentherm, Inc. (a) 13,991
442 Goodyear Tire & Rubber (The)
Co. (a) 9,423
58 LCI Industries 9,040
189 Lear Corp. 34,578
94 Patrick Industries, Inc. 7,585
239 Standard Motor Products, Inc. 12,521
732 Tenneco, Inc., Class A (a) 8,272
103 XPEL, Inc. (a) (b) 7,033
--------------
249,848
--------------
AUTOMOBILES -- 1.4%
4,179 Ford Motor Co. 86,798
1,871 General Motors Co. (a) 109,697
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
AUTOMOBILES (CONTINUED)
481 Harley-Davidson, Inc. $ 18,129
102 Tesla, Inc. (a) 107,792
239 Thor Industries, Inc. 24,801
144 Winnebago Industries, Inc. 10,788
--------------
358,005
--------------
BANKS -- 5.8%
166 1st Source Corp. 8,234
151 Ameris Bancorp 7,502
366 Associated Banc-Corp. 8,268
212 Atlantic Union Bankshares Corp. 7,906
282 Banc of California, Inc. 5,533
43 BancFirst Corp. 3,034
411 Bancorp (The), Inc. (a) 10,402
461 Bank of America Corp. 20,510
410 Bank OZK 19,077
124 BankUnited, Inc. 5,246
142 Banner Corp. 8,615
97 Berkshire Hills Bancorp, Inc. 2,758
262 BOK Financial Corp. 27,638
342 Brookline Bancorp, Inc. 5,537
426 Byline Bancorp, Inc. 11,651
263 Cadence Bank 7,835
127 Cathay General Bancorp 5,460
1,124 Citigroup, Inc. 67,878
500 Citizens Financial Group, Inc. 23,625
33 City Holding Co. 2,699
138 Columbia Banking System, Inc. 4,515
219 Comerica, Inc. 19,053
177 Commerce Bancshares, Inc. 12,167
261 ConnectOne Bancorp, Inc. 8,537
99 Cullen/Frost Bankers, Inc. 12,481
303 Customers Bancorp, Inc. (a) 19,807
257 CVB Financial Corp. 5,502
91 Eagle Bancorp, Inc. 5,309
151 East West Bancorp, Inc. 11,881
58 Enterprise Financial Services
Corp. 2,731
674 F.N.B. Corp. 8,176
61 FB Financial Corp. 2,673
923 Fifth Third Bancorp 40,197
121 First Bancorp 5,532
398 First BanCorp 5,484
318 First Busey Corp. 8,624
21 First Citizens BancShares, Inc.,
Class A 17,427
383 First Commonwealth Financial
Corp. 6,163
334 First Financial Bancorp 8,143
99 First Foundation, Inc. 2,461
89 First Hawaiian, Inc. 2,432
1,443 First Horizon Corp. 23,564
130 First Interstate BancSystem, Inc.,
Class A 5,287
124 First Merchants Corp. 5,194
513 Fulton Financial Corp. 8,721
68 German American Bancorp, Inc. 2,651
212 Glacier Bancorp, Inc. 12,020
111 Hancock Whitney Corp. 5,552
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
163 Heartland Financial USA, Inc. $ 8,249
400 Hilltop Holdings, Inc. 14,056
222 Home BancShares, Inc. 5,406
362 Hope Bancorp, Inc. 5,325
1,268 Huntington Bancshares, Inc. 19,553
34 Independent Bank Corp. 2,772
73 Independent Bank Group, Inc. 5,267
188 International Bancshares Corp. 7,969
241 JPMorgan Chase & Co. 38,162
2,737 KeyCorp 63,307
123 Live Oak Bancshares, Inc. 10,737
118 M&T Bank Corp. 18,122
199 Meta Financial Group, Inc. 11,872
129 National Bank Holdings Corp.,
Class A 5,668
217 NBT Bancorp, Inc. 8,359
244 OceanFirst Financial Corp. 5,417
414 OFG Bancorp 10,996
617 Old National Bancorp 11,180
62 Origin Bancorp, Inc. 2,661
126 Pacific Premier Bancorp, Inc. 5,044
173 PacWest Bancorp 7,814
21 Park National Corp. 2,884
188 Pinnacle Financial Partners, Inc. 17,954
100 PNC Financial Services Group
(The), Inc. 20,052
302 Popular, Inc. 24,776
39 Preferred Bank 2,800
248 Prosperity Bancshares, Inc. 17,930
3,702 Regions Financial Corp. 80,704
218 Renasant Corp. 8,273
154 Republic Bancorp, Inc., Class A 7,829
178 S&T Bancorp, Inc. 5,611
171 Sandy Spring Bancorp, Inc. 8,222
78 Seacoast Banking Corp. of Florida 2,760
101 ServisFirst Bancshares, Inc. 8,579
64 Signature Bank 20,702
266 Simmons First National Corp.,
Class A 7,868
137 Southside Bancshares, Inc. 5,729
237 SouthState Corp. 18,986
152 SVB Financial Group (a) 103,093
402 Synovus Financial Corp. 19,244
131 Texas Capital Bancshares,
Inc. (a) 7,893
32 Tompkins Financial Corp. 2,675
252 TowneBank 7,961
120 TriCo Bancshares 5,155
130 Triumph Bancorp, Inc. (a) 15,480
668 Truist Financial Corp. 39,111
243 Trustmark Corp. 7,888
330 U.S. Bancorp 18,536
54 UMB Financial Corp. 5,730
387 Umpqua Holdings Corp. 7,446
216 United Bankshares, Inc. 7,837
159 United Community Banks, Inc. 5,715
1,324 Valley National Bancorp 18,205
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BANKS (CONTINUED)
132 Veritex Holdings, Inc. $ 5,251
48 Webster Financial Corp. 2,680
1,274 Wells Fargo & Co. 61,127
307 WesBanco, Inc. 10,742
216 Western Alliance Bancorp 23,252
98 Wintrust Financial Corp. 8,900
380 Zions Bancorp N.A. 24,001
--------------
1,469,209
--------------
BEVERAGES -- 0.2%
327 Celsius Holdings, Inc. (a) 24,384
7 Coca-Cola Consolidated, Inc. 4,334
80 MGP Ingredients, Inc. 6,799
127 Molson Coors Beverage Co.,
Class B 5,887
--------------
41,404
--------------
BIOTECHNOLOGY -- 2.2%
343 Alector, Inc. (a) 7,083
254 Alkermes PLC (a) 5,908
208 Alnylam Pharmaceuticals, Inc. (a) 35,273
300 Arcus Biosciences, Inc. (a) 12,141
242 Avid Bioservices, Inc. (a) 7,062
546 BioCryst Pharmaceuticals,
Inc. (a) 7,562
211 Biohaven Pharmaceutical Holding
Co., Ltd. (a) 29,078
171 Blueprint Medicines Corp. (a) 18,316
242 Celldex Therapeutics, Inc. (a) 9,351
292 Cytokinetics, Inc. (a) 13,309
680 Dynavax Technologies Corp. (a) 9,568
261 Emergent BioSolutions, Inc. (a) 11,346
561 Gilead Sciences, Inc. 40,734
144 Halozyme Therapeutics, Inc. (a) 5,790
540 Horizon Therapeutics PLC (a) 58,190
157 Inhibrx, Inc. (a) 6,856
800 Ironwood Pharmaceuticals,
Inc. (a) 9,328
178 Kymera Therapeutics, Inc. (a) 11,301
67 Mirati Therapeutics, Inc. (a) 9,828
257 Moderna, Inc. (a) 65,273
47 Morphic Holding, Inc. (a) 2,227
81 Myriad Genetics, Inc. (a) 2,236
106 Natera, Inc. (a) 9,899
113 Novavax, Inc. (a) 16,167
716 OPKO Health, Inc. (a) 3,444
183 Prothena Corp. PLC (a) 9,040
98 Regeneron Pharmaceuticals,
Inc. (a) 61,889
187 REGENXBIO, Inc. (a) 6,115
294 Sage Therapeutics, Inc. (a) 12,507
127 Sarepta Therapeutics, Inc. (a) 11,436
408 uniQure N.V. (a) 8,462
128 United Therapeutics Corp. (a) 27,658
--------------
544,377
--------------
BUILDING PRODUCTS -- 1.0%
109 Advanced Drainage Systems, Inc. 14,838
44 Allegion PLC 5,827
160 American Woodmark Corp. (a) 10,432
61 Armstrong World Industries, Inc. 7,083
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
BUILDING PRODUCTS (CONTINUED)
568 Builders FirstSource, Inc. (a) $ 48,683
30 Carlisle Cos., Inc. 7,444
358 Cornerstone Building Brands,
Inc. (a) 6,244
41 CSW Industrials, Inc. 4,955
197 Fortune Brands Home & Security,
Inc. 21,059
319 Griffon Corp. 9,085
313 JELD-WEN Holding, Inc. (a) 8,251
343 Owens Corning 31,042
273 PGT Innovations, Inc. (a) 6,140
317 Resideo Technologies, Inc. (a) 8,252
164 Simpson Manufacturing Co., Inc. 22,807
116 Trex Co., Inc. (a) 15,663
153 UFP Industries, Inc. 14,078
366 Zurn Water Solutions Corp. 13,322
--------------
255,205
--------------
CAPITAL MARKETS -- 4.8%
78 Affiliated Managers Group, Inc. 12,832
287 Apollo Global Management, Inc. 20,787
398 Ares Management Corp., Class A 32,345
184 B. Riley Financial, Inc. 16,350
1,141 Bank of New York Mellon (The)
Corp. 66,269
848 Blackstone, Inc. 109,723
300 Brightsphere Investment Group,
Inc. 7,680
621 Carlyle Group (The), Inc. 34,093
48 Cboe Global Markets, Inc. 6,259
62 Cohen & Steers, Inc. 5,736
381 Cowen, Inc., Class A 13,754
378 Donnelley Financial Solutions,
Inc. (a) 17,819
176 Evercore, Inc., Class A 23,910
30 FactSet Research Systems, Inc. 14,580
241 Federated Hermes, Inc. 9,057
150 Focus Financial Partners, Inc.,
Class A (a) 8,958
791 Franklin Resources, Inc. 26,491
227 GCM Grosvenor, Inc., Class A 2,383
209 Goldman Sachs Group (The), Inc. 79,953
827 Golub Capital BDC, Inc. (c) 12,769
142 Houlihan Lokey, Inc. 14,700
1,219 Invesco Ltd. 28,061
791 Jefferies Financial Group, Inc. 30,691
1,620 KKR & Co., Inc. 120,690
257 Lazard Ltd., Class A 11,213
188 LPL Financial Holdings, Inc. 30,097
176 Moelis & Co., Class A 11,002
604 Morgan Stanley 59,289
68 Morningstar, Inc. 23,255
98 MSCI, Inc. 60,044
409 Nasdaq, Inc. 85,894
94 Piper Sandler Cos. 16,780
132 PJT Partners, Inc., Class A 9,780
254 Raymond James Financial, Inc. 25,502
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
CAPITAL MARKETS (CONTINUED)
469 Sculptor Capital Management, Inc. $ 10,013
298 SEI Investments Co. 18,160
464 State Street Corp. 43,152
307 StepStone Group, Inc., Class A 12,762
346 Stifel Financial Corp. 24,365
119 StoneX Group, Inc. (a) 7,289
100 T. Rowe Price Group, Inc. 19,664
72 Tradeweb Markets, Inc., Class A 7,210
299 Victory Capital Holdings, Inc.,
Class A 10,922
42 Virtus Investment Partners, Inc. 12,478
--------------
1,214,761
--------------
CHEMICALS -- 3.3%
263 AdvanSix, Inc. 12,427
180 Albemarle Corp. 42,079
198 Ashland Global Holdings, Inc. 21,317
112 Avient Corp. 6,266
402 Axalta Coating Systems Ltd. (a) 13,314
36 Balchem Corp. 6,070
196 Celanese Corp. 32,940
211 CF Industries Holdings, Inc. 14,935
51 Chase Corp. 5,078
404 Chemours (The) Co. 13,558
1,407 Corteva, Inc. 66,523
1,371 Dow, Inc. 77,763
1,450 DuPont de Nemours, Inc. 117,131
117 Eastman Chemical Co. 14,146
1,084 Element Solutions, Inc. 26,319
129 FMC Corp. 14,176
358 GCP Applied Technologies,
Inc. (a) 11,334
40 H.B. Fuller Co. 3,240
993 Huntsman Corp. 34,636
73 Ingevity Corp. (a) 5,234
31 Innospec, Inc. 2,800
421 Kronos Worldwide, Inc. 6,319
339 Livent Corp. (a) 8,265
1,051 LyondellBasell Industries N.V.,
Class A 96,934
112 Minerals Technologies, Inc. 8,193
822 Mosaic (The) Co. 32,296
16 NewMarket Corp. 5,483
609 Olin Corp. 35,030
573 Orion Engineered Carbons S.A. 10,520
11 Quaker Chemical Corp. 2,539
151 RPM International, Inc. 15,251
69 Stepan Co. 8,576
754 Valvoline, Inc. 28,117
322 Westlake Chemical Corp. 31,276
--------------
830,085
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.4%
58 ABM Industries, Inc. 2,369
1,453 ADT, Inc. 12,220
51 Brady Corp., Class A 2,749
354 BrightView Holdings, Inc. (a) 4,984
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMMERCIAL SERVICES & SUPPLIES
(CONTINUED)
69 Casella Waste Systems, Inc.,
Class A (a) $ 5,894
113 Clean Harbors, Inc. (a) 11,274
141 Copart, Inc. (a) 21,379
146 Deluxe Corp. 4,688
154 Harsco Corp. (a) 2,573
104 Healthcare Services Group, Inc. 1,850
142 HNI Corp. 5,971
108 IAA, Inc. (a) 5,467
478 KAR Auction Services, Inc. (a) 7,466
151 Matthews International Corp.,
Class A 5,537
211 Montrose Environmental Group,
Inc. (a) 14,878
24 UniFirst Corp. 5,050
--------------
114,349
--------------
COMMUNICATIONS EQUIPMENT
-- 0.6%
264 Calix, Inc. (a) 21,112
458 Ciena Corp. (a) 35,252
530 Extreme Networks, Inc. (a) 8,321
30 F5, Inc. (a) 7,341
213 Juniper Networks, Inc. 7,606
281 Lumentum Holdings, Inc. (a) 29,721
84 Motorola Solutions, Inc. 22,823
409 NETGEAR, Inc. (a) 11,947
97 NetScout Systems, Inc. (a) 3,209
94 Viasat, Inc. (a) 4,187
--------------
151,519
--------------
CONSTRUCTION & ENGINEERING
-- 0.8%
89 Ameresco, Inc., Class A (a) 7,248
157 Arcosa, Inc. 8,274
73 Comfort Systems USA, Inc. 7,223
313 Construction Partners, Inc.,
Class A (a) 9,205
37 Dycom Industries, Inc. (a) 3,469
153 EMCOR Group, Inc. 19,491
114 IES Holdings, Inc. (a) 5,773
272 MasTec, Inc. (a) 25,100
131 MYR Group, Inc. (a) 14,482
53 NV5 Global, Inc. (a) 7,321
533 Primoris Services Corp. 12,781
258 Quanta Services, Inc. 29,582
76 Valmont Industries, Inc. 19,038
556 WillScot Mobile Mini Holdings
Corp. (a) 22,707
--------------
191,694
--------------
CONSTRUCTION MATERIALS -- 0.0%
44 Eagle Materials, Inc. 7,324
163 Summit Materials, Inc.,
Class A (a) 6,543
--------------
13,867
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
CONSUMER FINANCE -- 1.6%
1,546 Ally Financial, Inc. $ 73,605
487 Capital One Financial Corp. 70,659
40 Credit Acceptance Corp. (a) 27,507
479 Discover Financial Services 55,353
266 Encore Capital Group,
Inc. (a) (c) 16,521
378 Enova International, Inc. (a) 15,483
370 LendingClub Corp. (a) 8,947
530 Navient Corp. 11,247
132 Nelnet, Inc., Class A 12,894
107 OneMain Holdings, Inc. 5,354
248 PRA Group, Inc. (a) 12,452
249 PROG Holdings, Inc. (a) 11,232
334 SLM Corp. 6,570
1,210 Synchrony Financial 56,132
56 World Acceptance Corp. (a) 13,744
--------------
397,700
--------------
CONTAINERS & PACKAGING -- 0.8%
99 AptarGroup, Inc. 12,126
113 Avery Dennison Corp. 24,472
387 Berry Global Group, Inc. (a) 28,553
58 Crown Holdings, Inc. 6,416
618 Graphic Packaging Holding Co. 12,051
162 Greif, Inc., Class A 9,780
701 International Paper Co. 32,933
183 O-I Glass, Inc. (a) 2,202
128 Packaging Corp. of America 17,427
390 Ranpak Holdings Corp. (a) 14,656
322 Sealed Air Corp. 21,725
137 Silgan Holdings, Inc. 5,869
236 Westrock Co. 10,469
--------------
198,679
--------------
DISTRIBUTORS -- 0.2%
468 LKQ Corp. 28,094
46 Pool Corp. 26,036
--------------
54,130
--------------
DIVERSIFIED CONSUMER SERVICES
-- 0.3%
208 Adtalem Global Education,
Inc. (a) 6,149
22 Graham Holdings Co., Class B 13,856
89 Grand Canyon Education, Inc. (a) 7,628
209 H&R Block, Inc. 4,924
972 Houghton Mifflin Harcourt Co. (a) 15,649
196 Service Corp. International 13,914
111 Strategic Education, Inc. 6,420
218 Stride, Inc. (a) 7,266
141 Terminix Global Holdings,
Inc. (a) 6,378
--------------
82,184
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.6%
361 Berkshire Hathaway, Inc.,
Class B (a) 107,939
420 Cannae Holdings, Inc. (a) 14,763
383 Voya Financial, Inc. 25,397
--------------
148,099
--------------
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.8%
1,451 AT&T, Inc. $ 35,695
512 EchoStar Corp., Class A (a) 13,491
1,054 Frontier Communications Parent,
Inc. (a) 31,082
62 IDT Corp., Class B (a) 2,738
148 Iridium Communications, Inc. (a) 6,111
797 Liberty Latin America Ltd.,
Class C (a) 9,086
1,898 Lumen Technologies, Inc. 23,820
1,461 Verizon Communications, Inc. 75,913
--------------
197,936
--------------
ELECTRIC UTILITIES -- 2.8%
176 ALLETE, Inc. 11,678
316 Alliant Energy Corp. 19,424
729 American Electric Power Co., Inc. 64,859
401 Duke Energy Corp. 42,065
1,067 Edison International 72,823
592 Entergy Corp. 66,689
378 Evergy, Inc. 25,935
479 Eversource Energy 43,579
1,224 Exelon Corp. 70,698
1,100 FirstEnergy Corp. 45,749
128 Hawaiian Electric Industries,
Inc. 5,312
171 IDACORP, Inc. 19,376
36 MGE Energy, Inc. 2,961
576 NRG Energy, Inc. 24,814
713 OGE Energy Corp. 27,365
93 Otter Tail Corp. 6,642
2,449 PG&E Corp. (a) 29,731
324 Pinnacle West Capital Corp. 22,871
167 Portland General Electric Co. 8,838
702 PPL Corp. 21,102
632 Southern (The) Co. 43,342
627 Xcel Energy, Inc. 42,448
--------------
718,301
--------------
ELECTRICAL EQUIPMENT -- 0.8%
102 Acuity Brands, Inc. 21,595
150 Atkore, Inc. (a) 16,679
98 AZZ, Inc. 5,418
208 Emerson Electric Co. 19,338
138 Encore Wire Corp. 19,748
70 EnerSys 5,534
144 Generac Holdings, Inc. (a) 50,677
32 Hubbell, Inc. 6,665
118 Regal Rexnord Corp. 20,081
732 Vertiv Holdings Co. 18,278
78 Vicor Corp. (a) 9,904
--------------
193,917
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 2.0%
536 Amphenol Corp., Class A 46,879
262 Arrow Electronics, Inc. (a) 35,179
353 Avnet, Inc. 14,554
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS (CONTINUED)
51 Badger Meter, Inc. $ 5,435
293 Benchmark Electronics, Inc. 7,940
326 CDW Corp. 66,758
1,621 Corning, Inc. 60,350
102 ePlus, Inc. (a) 5,496
29 Insight Enterprises, Inc. (a) 3,091
74 IPG Photonics Corp. (a) 12,738
503 Jabil, Inc. 35,386
360 Keysight Technologies, Inc. (a) 74,344
418 Knowles Corp. (a) 9,760
87 Littelfuse, Inc. 27,377
249 Methode Electronics, Inc. 12,243
28 OSI Systems, Inc. (a) 2,610
119 PC Connection, Inc. 5,132
59 Plexus Corp. (a) 5,658
14 Rogers Corp. (a) 3,822
339 Sanmina Corp. (a) 14,055
57 TD SYNNEX Corp. 6,519
623 TTM Technologies, Inc. (a) 9,283
520 Vishay Intertechnology, Inc. 11,372
350 Vontier Corp. 10,755
38 Zebra Technologies Corp.,
Class A (a) 22,618
--------------
509,354
--------------
ENERGY EQUIPMENT & SERVICES
-- 0.1%
950 Archrock, Inc. 7,106
170 Aspen Aerogels, Inc. (a) 8,464
238 Baker Hughes Co. 5,726
392 Oceaneering International,
Inc. (a) 4,434
290 Patterson-UTI Energy, Inc. 2,451
2,757 Transocean Ltd. (a) 7,609
--------------
35,790
--------------
ENTERTAINMENT -- 0.1%
32 Netflix, Inc. (a) 19,278
183 Warner Music Group Corp.,
Class A 7,902
--------------
27,180
--------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 2.7%
121 American Campus Communities,
Inc. 6,932
974 American Finance Trust, Inc. 8,893
154 American Homes 4 Rent, Class A 6,716
973 Brandywine Realty Trust 13,058
532 Brixmor Property Group, Inc. 13,518
28 Centerspace 3,105
97 Corporate Office Properties Trust 2,713
473 Cousins Properties, Inc. 19,052
242 CubeSmart 13,772
76 CyrusOne, Inc. 6,819
36 EastGroup Properties, Inc. 8,203
260 Empire State Realty Trust, Inc.,
Class A 2,314
150 Equity LifeStyle Properties, Inc. 13,149
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
EQUITY REAL ESTATE INVESTMENT
TRUSTS (CONTINUED)
50 Federal Realty Investment Trust $ 6,816
113 First Industrial Realty Trust,
Inc. 7,481
98 Four Corners Property Trust, Inc. 2,882
178 Getty Realty Corp. 5,712
327 Global Net Lease, Inc. 4,997
198 Healthcare Trust of America,
Inc., Class A 6,611
134 Highwoods Properties, Inc. 5,975
100 Hudson Pacific Properties, Inc. 2,471
257 Independence Realty Trust, Inc. 6,638
309 Industrial Logistics Properties
Trust 7,740
128 Innovative Industrial Properties,
Inc. 33,652
677 Iron Mountain, Inc. 35,427
312 iStar, Inc. (c) 8,059
443 Kilroy Realty Corp. 29,442
283 Kimco Realty Corp. 6,976
156 Lamar Advertising Co., Class A 18,923
102 Life Storage, Inc. 15,624
248 LTC Properties, Inc. 8,467
879 Medical Properties Trust, Inc. 20,771
106 Mid-America Apartment
Communities, Inc. 24,321
147 National Health Investors, Inc. 8,448
408 National Retail Properties, Inc. 19,613
50 National Storage Affiliates Trust 3,460
221 NETSTREIT Corp. 5,061
42 NexPoint Residential Trust, Inc. 3,521
309 Office Properties Income Trust 7,676
581 Paramount Group, Inc. 4,846
148 Physicians Realty Trust 2,787
253 PotlatchDeltic Corp. 15,236
174 Regency Centers Corp. 13,111
103 Rexford Industrial Realty, Inc. 8,354
614 RPT Realty 8,215
178 Sabra Health Care REIT, Inc. 2,410
59 Saul Centers, Inc. 3,128
169 SITE Centers Corp. 2,675
332 SL Green Realty Corp. 23,804
150 STAG Industrial, Inc. 7,194
107 Sun Communities, Inc. 22,467
222 UDR, Inc. 13,318
228 UMH Properties, Inc. 6,231
140 Vornado Realty Trust 5,860
2,772 Weyerhaeuser Co. 114,151
161 WP Carey, Inc. 13,210
--------------
692,005
--------------
FOOD & STAPLES RETAILING -- 0.9%
944 Albertsons Cos., Inc., Class A 28,499
423 Andersons (The), Inc. 16,374
536 BJ's Wholesale Club Holdings,
Inc. (a) 35,896
93 Casey's General Stores, Inc. 18,354
121 Grocery Outlet Holding Corp. (a) 3,422
198 Ingles Markets, Inc., Class A 17,095
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
FOOD & STAPLES RETAILING
(CONTINUED)
484 Kroger (The) Co. $ 21,906
33 PriceSmart, Inc. 2,415
451 Sprouts Farmers Market, Inc. (a) 13,386
162 United Natural Foods, Inc. (a) 7,951
170 US Foods Holding Corp. (a) 5,921
833 Walgreens Boots Alliance, Inc. 43,449
249 Weis Markets, Inc. 16,404
--------------
231,072
--------------
FOOD PRODUCTS -- 2.2%
1,314 Archer-Daniels-Midland Co. 88,813
88 B&G Foods, Inc. (c) 2,704
361 Bunge Ltd. 33,703
422 Campbell Soup Co. 18,340
694 Conagra Brands, Inc. 23,700
327 Darling Ingredients, Inc. (a) 22,658
498 Flowers Foods, Inc. 13,680
406 Fresh Del Monte Produce, Inc. 11,206
656 General Mills, Inc. 44,201
478 Hormel Foods Corp. 23,331
301 Hostess Brands, Inc. (a) 6,146
132 Ingredion, Inc. 12,757
196 J.M. Smucker (The) Co. 26,621
32 John B Sanfilippo & Son, Inc. 2,885
1,064 Kraft Heinz (The) Co. 38,198
34 Lancaster Colony Corp. 5,630
142 Mission Produce, Inc. (a) 2,229
673 Mondelez International, Inc.,
Class A 44,627
107 Post Holdings, Inc. (a) 12,062
3 Seaboard Corp. 11,805
151 Simply Good Foods (The) Co. (a) 6,277
131 TreeHouse Foods, Inc. (a) 5,310
1,249 Tyson Foods, Inc., Class A 108,863
--------------
565,746
--------------
GAS UTILITIES -- 0.5%
267 Atmos Energy Corp. 27,974
22 Chesapeake Utilities Corp. 3,208
50 National Fuel Gas Co. 3,197
76 New Jersey Resources Corp. 3,120
227 Northwest Natural Holding Co. 11,073
123 ONE Gas, Inc. 9,543
491 South Jersey Industries, Inc. 12,825
157 Southwest Gas Holdings, Inc. 10,998
171 Spire, Inc. 11,153
690 UGI Corp. 31,678
--------------
124,769
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.2%
18 ABIOMED, Inc. (a) 6,465
119 Align Technology, Inc. (a) 78,204
201 AngioDynamics, Inc. (a) 5,544
40 Axonics, Inc. (a) 2,240
62 BioLife Solutions, Inc. (a) 2,311
20 CONMED Corp. 2,835
118 CryoPort, Inc. (a) 6,982
See Notes to Financial Statements Page 19
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HEALTH CARE EQUIPMENT &
SUPPLIES (CONTINUED)
202 DENTSPLY SIRONA, Inc. $ 11,270
72 Dexcom, Inc. (a) 38,660
347 Edwards Lifesciences Corp. (a) 44,954
422 Envista Holdings Corp. (a) 19,015
230 Globus Medical, Inc., Class A (a) 16,606
50 Heska Corp. (a) 9,124
1,336 Hologic, Inc. (a) 102,284
29 Integer Holdings Corp. (a) 2,482
86 Integra LifeSciences Holdings
Corp. (a) 5,761
60 Intuitive Surgical, Inc. (a) 21,558
203 Lantheus Holdings, Inc. (a) 5,865
43 Masimo Corp. (a) 12,590
109 Merit Medical Systems, Inc. (a) 6,791
9 Mesa Laboratories, Inc. 2,953
80 OrthoPediatrics Corp. (a) 4,789
22 Penumbra, Inc. (a) 6,321
124 Quidel Corp. (a) 16,739
149 ResMed, Inc. 38,812
143 Shockwave Medical, Inc. (a) 25,501
91 STAAR Surgical Co. (a) 8,308
148 Tandem Diabetes Care, Inc. (a) 22,277
370 Varex Imaging Corp. (a) 11,673
362 ViewRay, Inc. (a) 1,995
133 Zimmer Biomet Holdings, Inc. 16,896
--------------
557,805
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.1%
277 Acadia Healthcare Co., Inc. (a) 16,814
549 Agiliti, Inc. (a) 12,715
113 AMN Healthcare Services, Inc. (a) 13,823
53 Anthem, Inc. 24,568
258 Apollo Medical Holdings, Inc. (a) 18,958
414 Brookdale Senior Living, Inc. (a) 2,136
492 Cigna Corp. 112,978
57 CorVel Corp. (a) 11,856
698 CVS Health Corp. 72,006
152 DaVita, Inc. (a) 17,292
157 Encompass Health Corp. 10,246
87 Fulgent Genetics, Inc. (a) 8,751
407 HCA Healthcare, Inc. 104,566
231 Henry Schein, Inc. (a) 17,909
51 Humana, Inc. 23,657
133 Joint (The) Corp. (a) 8,737
350 Laboratory Corp. of America
Holdings (a) 109,973
38 LHC Group, Inc. (a) 5,215
72 ModivCare, Inc. (a) 10,677
22 Molina Healthcare, Inc. (a) 6,998
187 National HealthCare Corp. 12,705
539 Option Care Health, Inc. (a) 15,329
87 Patterson Cos., Inc. 2,553
68 Premier, Inc., Class A 2,800
420 Progyny, Inc. (a) 21,147
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES
(CONTINUED)
202 Quest Diagnostics, Inc. $ 34,948
357 RadNet, Inc. (a) 10,749
488 Select Medical Holdings Corp. 14,347
442 Tenet Healthcare Corp. (a) 36,107
212 Universal Health Services, Inc.,
Class B 27,488
--------------
788,048
--------------
HEALTH CARE TECHNOLOGY -- 0.4%
278 Cerner Corp. 25,818
421 Evolent Health, Inc., Class A (a) 11,649
101 Inspire Medical Systems, Inc. (a) 23,236
80 Omnicell, Inc. (a) 14,435
152 OptimizeRx Corp. (a) 9,440
42 Phreesia, Inc. (a) 1,750
114 Vocera Communications, Inc. (a) 7,392
--------------
93,720
--------------
HOTELS, RESTAURANTS & LEISURE
-- 1.4%
372 Boyd Gaming Corp. (a) 24,392
878 Caesars Entertainment, Inc. (a) 82,119
43 Chipotle Mexican Grill, Inc. (a) 75,175
47 Choice Hotels International, Inc. 7,331
98 Churchill Downs, Inc. 23,608
38 Cracker Barrel Old Country Store,
Inc. 4,888
41 Domino's Pizza, Inc. 23,137
432 Everi Holdings, Inc. (a) 9,223
266 Golden Entertainment, Inc. (a) 13,441
110 Hilton Grand Vacations, Inc. (a) 5,732
117 Monarch Casino & Resort, Inc. (a) 8,652
81 Penn National Gaming, Inc. (a) 4,200
256 Red Rock Resorts, Inc., Class A 14,083
283 Scientific Games Corp. (a) 18,913
94 SeaWorld Entertainment, Inc. (a) 6,097
64 Texas Roadhouse, Inc. 5,714
72 Wingstop, Inc. 12,442
160 Yum! Brands, Inc. 22,218
--------------
361,365
--------------
HOUSEHOLD DURABLES -- 3.3%
11 Cavco Industries, Inc. (a) 3,494
212 Century Communities, Inc. 17,340
1,174 D.R. Horton, Inc. 127,320
508 Garmin Ltd. 69,174
128 Green Brick Partners, Inc. (a) 3,882
52 Helen of Troy Ltd. (a) 12,712
33 iRobot Corp. (a) 2,174
336 KB Home 15,029
324 La-Z-Boy, Inc. 11,765
393 Leggett & Platt, Inc. 16,176
1,052 Lennar Corp., Class A 122,200
19 LGI Homes, Inc. (a) 2,935
119 Lovesac (The) Co. (a) 7,885
280 M.D.C. Holdings, Inc. 15,632
226 M/I Homes, Inc. (a) 14,053
Page 20 See Notes to Financial Statements
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOUSEHOLD DURABLES (CONTINUED)
134 Meritage Homes Corp. (a) $ 16,356
167 Mohawk Industries, Inc. (a) 30,424
1,062 Newell Brands, Inc. 23,194
17 NVR, Inc. (a) 100,451
640 PulteGroup, Inc. 36,582
218 Skyline Champion Corp. (a) 17,218
81 Sonos, Inc. (a) 2,414
507 Taylor Morrison Home Corp. (a) 17,725
633 Tempur Sealy International, Inc. 29,770
531 Toll Brothers, Inc. 38,439
58 TopBuild Corp. (a) 16,003
621 Tri Pointe Homes, Inc. (a) 17,320
123 Tupperware Brands Corp. (a) 1,881
144 Whirlpool Corp. 33,791
--------------
823,339
--------------
HOUSEHOLD PRODUCTS -- 0.1%
182 Central Garden & Pet Co.,
Class A (a) 8,709
644 Reynolds Consumer Products, Inc. 20,222
28 Spectrum Brands Holdings, Inc. 2,848
--------------
31,779
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.0%
343 Vistra Corp. 7,810
--------------
INDUSTRIAL CONGLOMERATES -- 0.2%
224 3M Co. 39,789
--------------
INSURANCE -- 6.5%
1,892 Aflac, Inc. 110,474
48 Alleghany Corp. (a) 32,044
774 Allstate (The) Corp. 91,061
442 American Equity Investment Life
Holding Co. 17,203
192 American Financial Group, Inc. 26,365
1,438 American International Group,
Inc. 81,765
100 AMERISAFE, Inc. 5,383
138 Aon PLC, Class A 41,477
770 Arch Capital Group Ltd. (a) 34,226
50 Argo Group International Holdings
Ltd. 2,905
74 Assurant, Inc. 11,534
223 Assured Guaranty Ltd. 11,195
170 Axis Capital Holdings Ltd. 9,260
106 Brown & Brown, Inc. 7,450
236 BRP Group, Inc., Class A (a) 8,522
454 Chubb Ltd. 87,763
863 Cincinnati Financial Corp. 98,322
560 CNA Financial Corp. 24,685
554 CNO Financial Group, Inc. 13,207
64 eHealth, Inc. (a) 1,632
331 Employers Holdings, Inc. 13,697
56 Enstar Group Ltd. (a) 13,865
33 Erie Indemnity Co., Class A 6,358
118 Everest Re Group Ltd. 32,323
648 Fidelity National Financial, Inc. 33,813
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INSURANCE (CONTINUED)
438 First American Financial Corp. $ 34,265
3,483 Genworth Financial, Inc.,
Class A (a) 14,106
264 Globe Life, Inc. 24,742
69 Goosehead Insurance, Inc.,
Class A 8,975
181 Hanover Insurance Group (The),
Inc. 23,722
1,123 Hartford Financial Services Group
(The), Inc. 77,532
118 HCI Group, Inc. 9,858
262 Horace Mann Educators Corp. 10,139
118 Kemper Corp. 6,937
257 Lincoln National Corp. 17,543
436 Loews Corp. 25,183
24 Markel Corp. (a) 29,616
234 Mercury General Corp. 12,416
634 MetLife, Inc. 39,619
1,271 Old Republic International Corp. 31,241
77 Primerica, Inc. 11,802
273 Principal Financial Group, Inc. 19,746
873 Progressive (The) Corp. 89,613
750 Prudential Financial, Inc. 81,180
211 Reinsurance Group of America,
Inc. 23,102
84 RenaissanceRe Holdings Ltd. 14,224
59 RLI Corp. 6,614
164 Safety Insurance Group, Inc. 13,945
311 Selective Insurance Group, Inc. 25,483
1,411 SiriusPoint Ltd. (a) 11,471
207 Stewart Information Services
Corp. 16,504
519 Travelers (The) Cos., Inc. 81,187
938 Unum Group 23,047
241 W.R. Berkley Corp. 19,856
12 White Mountains Insurance Group
Ltd. 12,167
--------------
1,632,364
--------------
INTERACTIVE MEDIA & SERVICES
-- 1.0%
37 Alphabet, Inc., Class A (a) 107,191
332 Cargurus, Inc. (a) 11,168
218 fuboTV, Inc. (a) (c) 3,383
226 IAC/InterActiveCorp (a) 29,540
1,068 Snap, Inc., Class A (a) 50,228
203 Ziff Davis, Inc. (a) 22,505
288 ZoomInfo Technologies, Inc. (a) 18,490
--------------
242,505
--------------
INTERNET & DIRECT MARKETING
RETAIL -- 0.6%
86 1-800-Flowers.com, Inc.,
Class A (a) 2,010
1,416 eBay, Inc. 94,164
94 Etsy, Inc. (a) 20,581
33 Overstock.com, Inc. (a) 1,947
1,470 Qurate Retail, Inc., Series A 11,172
127 Revolve Group, Inc. (a) 7,117
92 Shutterstock, Inc. 10,201
--------------
147,192
--------------
See Notes to Financial Statements Page 21
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
IT SERVICES -- 2.9%
184 Accenture PLC, Class A $ 76,277
91 Alliance Data Systems Corp. 6,058
118 Broadridge Financial Solutions,
Inc. 21,573
700 Cloudflare, Inc., Class A (a) 92,050
528 Cognizant Technology Solutions
Corp., Class A 46,844
1,189 Conduent, Inc. (a) 6,349
54 CSG Systems International, Inc. 3,111
700 DXC Technology Co. (a) 22,533
138 EPAM Systems, Inc. (a) 92,246
114 EVERTEC, Inc. 5,698
84 ExlService Holdings, Inc. (a) 12,161
324 Gartner, Inc. (a) 108,320
123 Genpact Ltd. 6,529
447 Grid Dynamics Holdings, Inc. (a) 16,973
36 Jack Henry & Associates, Inc. 6,012
282 Maximus, Inc. 22,467
168 MongoDB, Inc. (a) 88,931
113 Perficient, Inc. (a) 14,610
130 Snowflake, Inc., Class A (a) 44,037
782 SolarWinds Corp. 11,096
103 Switch, Inc., Class A 2,950
126 TTEC Holdings, Inc. 11,409
208 Unisys Corp. (a) 4,278
581 Western Union (The) Co. 10,365
--------------
732,877
--------------
LEISURE PRODUCTS -- 0.7%
112 Acushnet Holdings Corp. 5,945
247 Brunswick Corp. 24,880
1,063 Callaway Golf Co. (a) 29,169
132 Hasbro, Inc. 13,435
99 Johnson Outdoors, Inc., Class A 9,275
38 Malibu Boats, Inc., Class A (a) 2,612
633 Mattel, Inc. (a) 13,648
197 Polaris, Inc. 21,652
629 Smith & Wesson Brands, Inc. 11,196
107 Sturm Ruger & Co., Inc. 7,278
259 Vista Outdoor, Inc. (a) 11,932
206 YETI Holdings, Inc. (a) 17,063
--------------
168,085
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 3.5%
376 Agilent Technologies, Inc. 60,028
2,411 Avantor, Inc. (a) 101,599
132 Bio-Rad Laboratories, Inc.,
Class A (a) 99,735
81 Bio-Techne Corp. 41,904
301 Bruker Corp. 25,257
191 Charles River Laboratories
International, Inc. (a) 71,965
112 Codexis, Inc. (a) 3,502
259 Danaher Corp. 85,214
93 Medpace Holdings, Inc. (a) 20,240
122 NeoGenomics, Inc. (a) 4,163
569 PerkinElmer, Inc. 114,403
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES
(CONTINUED)
102 Repligen Corp. (a) $ 27,014
201 Syneos Health, Inc. (a) 20,639
103 Thermo Fisher Scientific, Inc. 68,726
166 Waters Corp. (a) 61,852
186 West Pharmaceutical Services,
Inc. 87,236
--------------
893,477
--------------
MACHINERY -- 3.0%
96 AGCO Corp. 11,138
19 Alamo Group, Inc. 2,796
148 Allison Transmission Holdings,
Inc. 5,380
94 Altra Industrial Motion Corp. 4,848
49 Astec Industries, Inc. 3,394
126 Barnes Group, Inc. 5,870
123 Chart Industries, Inc. (a) 19,617
257 Colfax Corp. (a) 11,814
186 Crane Co. 18,922
262 Cummins, Inc. 57,153
204 Donaldson Co., Inc. 12,089
209 Evoqua Water Technologies
Corp. (a) 9,771
68 Federal Signal Corp. 2,947
339 Flowserve Corp. 10,373
1,118 Fortive Corp. 85,292
1,083 Gates Industrial Corp. PLC (a) 17,231
73 Gorman-Rupp (The) Co. 3,252
61 Greenbrier (The) Cos., Inc. 2,799
128 Helios Technologies, Inc. 13,462
122 Hillenbrand, Inc. 6,343
39 Kadant, Inc. 8,989
152 Kennametal, Inc. 5,458
46 Lincoln Electric Holdings, Inc. 6,416
368 Meritor, Inc. (a) 9,119
103 Middleby (The) Corp. (a) 20,266
254 Mueller Industries, Inc. 15,077
24 Nordson Corp. 6,127
230 Oshkosh Corp. 25,923
238 Otis Worldwide Corp. 20,723
750 PACCAR, Inc. 66,195
211 Parker-Hannifin Corp. 67,123
39 Proto Labs, Inc. (a) 2,003
28 RBC Bearings, Inc. (a) 5,655
207 Shyft Group (The), Inc. 10,170
113 Snap-on, Inc. 24,338
49 SPX Corp. (a) 2,924
27 Standex International Corp. 2,988
450 Stanley Black & Decker, Inc. 84,879
62 Terex Corp. 2,725
359 Timken (The) Co. 24,875
62 Watts Water Technologies, Inc.,
Class A 12,039
137 Westinghouse Air Brake
Technologies Corp. 12,619
52 Woodward, Inc. 5,692
--------------
746,814
--------------
Page 22 See Notes to Financial Statements
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MARINE -- 0.1%
163 Kirby Corp. (a) $ 9,685
130 Matson, Inc. 11,704
--------------
21,389
--------------
MEDIA -- 1.5%
283 Altice USA, Inc., Class A (a) 4,579
224 AMC Networks, Inc., Class A (a) 7,715
202 Boston Omaha Corp., Class A (a) 5,803
3,856 Clear Channel Outdoor Holdings,
Inc. (a) 12,763
701 Comcast Corp., Class A 35,281
1,158 Discovery, Inc., Class A (a) (c) 27,259
677 DISH Network Corp., Class A (a) 21,962
723 E.W. Scripps (The) Co.,
Class A (a) 13,990
489 Fox Corp., Class A 18,044
1,956 Gannett Co., Inc. (a) 10,426
572 Gray Television, Inc. 11,532
209 iHeartMedia, Inc., Class A (a) 4,397
160 Interpublic Group of (The) Cos.,
Inc. 5,992
100 John Wiley & Sons, Inc., Class A 5,727
119 New York Times (The) Co.,
Class A 5,748
250 News Corp., Class A 5,578
193 Nexstar Media Group, Inc.,
Class A 29,139
162 Omnicom Group, Inc. 11,870
73 Scholastic Corp. 2,917
330 Sinclair Broadcast Group, Inc.,
Class A 8,722
127 TechTarget, Inc. (a) 12,149
530 TEGNA, Inc. 9,837
348 Thryv Holdings, Inc. (a) 14,313
2,496 ViacomCBS, Inc., Class B 75,329
399 WideOpenWest, Inc. (a) 8,586
--------------
369,658
--------------
METALS & MINING -- 1.3%
600 Alcoa Corp. 35,748
1,187 Cleveland-Cliffs, Inc. (a) 25,841
1,693 Coeur Mining, Inc. (a) 8,533
343 Commercial Metals Co. 12,447
38 Materion Corp. 3,494
1,001 Nucor Corp. 114,264
207 Reliance Steel & Aluminum Co. 33,579
298 Schnitzer Steel Industries, Inc.,
Class A 15,472
502 Steel Dynamics, Inc. 31,159
1,338 United States Steel Corp. 31,858
198 Worthington Industries, Inc. 10,823
--------------
323,218
--------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS -- 0.8%
1,863 AGNC Investment Corp. 28,020
3,490 Annaly Capital Management, Inc. 27,292
704 Apollo Commercial Real Estate
Finance, Inc. 9,265
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS (CONTINUED)
564 Arbor Realty Trust, Inc. $ 10,332
172 Blackstone Mortgage Trust, Inc.,
Class A 5,267
880 Chimera Investment Corp. 13,270
496 KKR Real Estate Finance Trust,
Inc. 10,332
237 Ladder Capital Corp. 2,842
2,858 MFA Financial, Inc. 13,032
950 New Residential Investment Corp. 10,175
3,067 New York Mortgage Trust, Inc. 11,409
531 PennyMac Mortgage Investment
Trust 9,202
724 Ready Capital Corp. 11,316
1,013 Redwood Trust, Inc. 13,361
844 TPG RE Finance Trust, Inc. 10,398
2,060 Two Harbors Investment Corp. 11,886
--------------
197,399
--------------
MULTILINE RETAIL -- 1.0%
301 Big Lots, Inc. 13,560
76 Dillard's, Inc., Class A 18,622
614 Dollar Tree, Inc. (a) 86,279
296 Franchise Group, Inc. 15,439
624 Kohl's Corp. 30,819
1,040 Macy's, Inc. 27,227
292 Ollie's Bargain Outlet Holdings,
Inc. (a) 14,948
172 Target Corp. 39,808
--------------
246,702
--------------
MULTI-UTILITIES -- 1.6%
483 Ameren Corp. 42,992
267 Avista Corp. 11,345
124 Black Hills Corp. 8,751
717 CenterPoint Energy, Inc. 20,012
197 CMS Energy Corp. 12,815
816 Consolidated Edison, Inc. 69,621
268 Dominion Energy, Inc. 21,054
707 DTE Energy Co. 84,515
792 MDU Resources Group, Inc. 24,425
486 NiSource, Inc. 13,418
182 NorthWestern Corp. 10,403
643 Public Service Enterprise Group,
Inc. 42,907
444 WEC Energy Group, Inc. 43,099
--------------
405,357
--------------
OIL, GAS & CONSUMABLE FUELS
-- 3.6%
76 Altus Midstream Co., Class A 4,660
251 Antero Midstream Corp. 2,430
694 Antero Resources Corp. (a) 12,145
274 APA Corp. 7,368
254 California Resources Corp. 10,848
213 Callon Petroleum Co. (a) 10,064
1,010 Cheniere Energy, Inc. 102,434
477 Chesapeake Energy Corp. 30,776
387 Chevron Corp. 45,414
See Notes to Financial Statements Page 23
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
OIL, GAS & CONSUMABLE FUELS
(CONTINUED)
163 Civitas Resources, Inc. $ 7,982
207 CNX Resources Corp. (a) 2,846
1,262 Comstock Resources, Inc. (a) 10,210
578 ConocoPhillips 41,720
382 Continental Resources, Inc. 17,098
557 Coterra Energy, Inc. 10,583
800 Crescent Energy, Inc.,
Class A (a) 10,144
149 Denbury, Inc. (a) 11,412
662 Devon Energy Corp. 29,161
249 Diamondback Energy, Inc. 26,855
983 EOG Resources, Inc. 87,320
1,030 Equitrans Midstream Corp. 10,650
316 HollyFrontier Corp. 10,358
3,537 Kinder Morgan, Inc. 56,097
882 Kosmos Energy Ltd. (a) 3,052
129 Laredo Petroleum, Inc. (a) 7,757
588 Magnolia Oil & Gas Corp., Class A 11,096
1,290 Marathon Oil Corp. 21,182
343 Matador Resources Co. 12,664
367 Northern Oil And Gas, Inc. 7,553
131 Oasis Petroleum, Inc. 16,505
1,700 ONEOK, Inc. 99,892
893 Ovintiv, Inc. 30,094
499 Par Pacific Holdings, Inc. (a) 8,228
276 PDC Energy, Inc. 13,463
577 Range Resources Corp. (a) 10,288
208 Renewable Energy Group, Inc. (a) 8,828
496 SM Energy Co. 14,622
1,887 Southwestern Energy Co. (a) 8,793
379 Talos Energy, Inc. (a) 3,714
597 Targa Resources Corp. 31,187
1,337 Tellurian, Inc. (a) 4,118
223 Whiting Petroleum Corp. (a) 14,424
756 Williams (The) Cos., Inc. 19,686
233 World Fuel Services Corp. 6,167
--------------
911,888
--------------
PAPER & FOREST PRODUCTS -- 0.2%
479 Louisiana-Pacific Corp. 37,530
227 Schweitzer-Mauduit International,
Inc. 6,787
--------------
44,317
--------------
PERSONAL PRODUCTS -- 0.2%
340 BellRing Brands, Inc.,
Class A (a) 9,700
216 Edgewell Personal Care Co. 9,873
139 Herbalife Nutrition Ltd. (a) 5,689
140 Inter Parfums, Inc. 14,966
322 Nu Skin Enterprises, Inc.,
Class A 16,342
57 USANA Health Sciences, Inc. (a) 5,769
--------------
62,339
--------------
PHARMACEUTICALS -- 1.1%
979 Amneal Pharmaceuticals, Inc. (a) 4,689
143 Arvinas, Inc. (a) 11,746
593 Catalent, Inc. (a) 75,922
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
PHARMACEUTICALS (CONTINUED)
86 Eli Lilly & Co. $ 23,755
463 Fulcrum Therapeutics, Inc. (a) 8,190
204 Harmony Biosciences Holdings,
Inc. (a) 8,699
626 Innoviva, Inc. (a) 10,799
46 Jazz Pharmaceuticals PLC (a) 5,860
93 Pacira BioSciences, Inc. (a) 5,596
1,376 Pfizer, Inc. 81,253
93 Prestige Consumer Healthcare,
Inc. (a) 5,640
293 Supernus Pharmaceuticals,
Inc. (a) 8,544
1,301 Viatris, Inc. 17,603
--------------
268,296
--------------
PROFESSIONAL SERVICES -- 1.2%
104 ASGN, Inc. (a) 12,834
74 Booz Allen Hamilton Holding
Corp. 6,274
90 CACI International, Inc.,
Class A (a) 24,229
81 CBIZ, Inc. (a) 3,169
350 Dun & Bradstreet Holdings,
Inc. (a) 7,171
311 Equifax, Inc. 91,058
156 Exponent, Inc. 18,210
131 FTI Consulting, Inc. (a) 20,098
29 ICF International, Inc. 2,974
118 Insperity, Inc. 13,937
44 Jacobs Engineering Group, Inc. 6,126
144 Korn Ferry 10,905
122 Leidos Holdings, Inc. 10,846
54 ManpowerGroup, Inc. 5,256
69 ManTech International Corp.,
Class A 5,032
234 Robert Half International, Inc. 26,096
206 Science Applications International
Corp. 17,219
62 TriNet Group, Inc. (a) 5,906
193 TrueBlue, Inc. (a) 5,340
130 Upwork, Inc. (a) 4,441
--------------
297,121
--------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.9%
1,013 CBRE Group, Inc., Class A (a) 109,920
102 Douglas Elliman, Inc. (a) 1,173
591 eXp World Holdings, Inc. 19,911
561 Forestar Group, Inc. (a) 12,202
133 Howard Hughes (The) Corp. (a) 13,537
71 Jones Lang LaSalle, Inc. (a) 19,123
500 Kennedy-Wilson Holdings, Inc. 11,940
129 Marcus & Millichap, Inc. (a) 6,638
913 Newmark Group, Inc., Class A 17,073
744 Realogy Holdings Corp. (a) 12,507
62 St. Joe (The) Co. 3,227
--------------
227,251
--------------
Page 24 See Notes to Financial Statements
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ROAD & RAIL -- 1.5%
37 AMERCO $ 26,870
96 ArcBest Corp. 11,506
254 Avis Budget Group, Inc. (a) 52,672
659 CSX Corp. 24,778
652 Heartland Express, Inc. 10,967
70 J.B. Hunt Transport Services,
Inc. 14,308
574 Knight-Swift Transportation
Holdings, Inc. 34,979
74 Landstar System, Inc. 13,247
666 Marten Transport Ltd. 11,429
82 Norfolk Southern Corp. 24,412
207 Old Dominion Freight Line, Inc. 74,185
127 Ryder System, Inc. 10,469
99 Saia, Inc. (a) 33,366
460 Schneider National, Inc., Class B 12,379
236 Werner Enterprises, Inc. 11,248
221 XPO Logistics, Inc. (a) 17,112
--------------
383,927
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.3%
94 ACM Research, Inc., Class A (a) 8,015
576 Advanced Micro Devices, Inc. (a) 82,886
68 Ambarella, Inc. (a) 13,797
1,178 Amkor Technology, Inc. 29,203
56 Axcelis Technologies, Inc. (a) 4,175
287 Azenta, Inc. 29,593
32 Cirrus Logic, Inc. (a) 2,945
144 Diodes, Inc. (a) 15,813
140 Entegris, Inc. 19,401
247 First Solar, Inc. (a) 21,529
127 Ichor Holdings Ltd. (a) 5,846
46 Impinj, Inc. (a) 4,080
1,851 Intel Corp. 95,326
363 Lattice Semiconductor Corp. (a) 27,973
121 MACOM Technology Solutions
Holdings, Inc. (a) 9,474
266 MaxLinear, Inc. (a) 20,054
1,389 Micron Technology, Inc. 129,385
117 MKS Instruments, Inc. 20,378
162 Monolithic Power Systems, Inc. 79,919
286 NVIDIA Corp. 84,115
129 ON Semiconductor Corp. (a) 8,762
144 Onto Innovation, Inc. (a) 14,577
297 Power Integrations, Inc. 27,588
118 Rambus, Inc. (a) 3,468
100 Semtech Corp. (a) 8,893
64 SiTime Corp. (a) 18,723
131 Synaptics, Inc. (a) 37,926
353 Veeco Instruments, Inc. (a) 10,050
--------------
833,894
--------------
SOFTWARE -- 5.3%
776 A10 Networks, Inc. 12,866
38 Altair Engineering, Inc.,
Class A (a) 2,938
193 Anaplan, Inc. (a) 8,849
283 Asana, Inc., Class A (a) 21,098
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SOFTWARE (CONTINUED)
101 Avalara, Inc. (a) $ 13,040
97 Bentley Systems, Inc., Class B 4,688
369 Bill.com Holdings, Inc. (a) 91,936
81 Black Knight, Inc. (a) 6,714
100 Blackline, Inc. (a) 10,354
130 Cadence Design Systems, Inc. (a) 24,225
138 CDK Global, Inc. 5,760
104 Ceridian HCM Holding, Inc. (a) 10,864
69 CommVault Systems, Inc. (a) 4,755
160 Crowdstrike Holdings, Inc.,
Class A (a) 32,760
558 Datadog, Inc., Class A (a) 99,385
86 Digital Turbine, Inc. (a) 5,245
93 Domo, Inc., Class B (a) 4,613
402 Dropbox, Inc., Class A (a) 9,865
331 Dynatrace, Inc. (a) 19,976
119 Elastic N.V. (a) 14,648
78 Everbridge, Inc. (a) 5,252
338 Fortinet, Inc. (a) 121,477
50 Guidewire Software, Inc. (a) 5,676
146 HubSpot, Inc. (a) 96,236
110 Intuit, Inc. 70,754
68 Jamf Holding Corp. (a) 2,585
77 Manhattan Associates, Inc. (a) 11,973
82 Marathon Digital Holdings,
Inc. (a) 2,694
123 Mimecast Ltd. (a) 9,787
82 nCino, Inc. (a) 4,499
37 New Relic, Inc. (a) 4,069
312 Nutanix, Inc., Class A (a) 9,940
679 Oracle Corp. 59,216
206 Palo Alto Networks, Inc. (a) 114,693
119 Paycom Software, Inc. (a) 49,408
84 Paylocity Holding Corp. (a) 19,837
107 Progress Software Corp. 5,165
208 Rapid7, Inc. (a) 24,480
394 SecureWorks Corp., Class A (a) 6,292
32 ServiceNow, Inc. (a) 20,772
86 Smartsheet, Inc., Class A (a) 6,661
107 Sprout Social, Inc., Class A (a) 9,704
64 SPS Commerce, Inc. (a) 9,110
66 Synopsys, Inc. (a) 24,321
113 Tenable Holdings, Inc. (a) 6,223
512 Teradata Corp. (a) 21,745
469 Unity Software, Inc. (a) 67,062
290 Varonis Systems, Inc. (a) 14,146
648 Vonage Holdings Corp. (a) 13,472
167 Workiva, Inc. (a) 21,792
139 Xperi Holding Corp. 2,628
301 Zscaler, Inc. (a) 96,720
--------------
1,342,968
--------------
SPECIALTY RETAIL -- 3.9%
278 Abercrombie & Fitch Co.,
Class A (a) 9,683
261 Academy Sports & Outdoors,
Inc. (a) 11,458
28 Advance Auto Parts, Inc. 6,717
228 American Eagle Outfitters, Inc. 5,773
See Notes to Financial Statements Page 25
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SPECIALTY RETAIL (CONTINUED)
40 Asbury Automotive Group, Inc. (a) $ 6,909
241 AutoNation, Inc. (a) 28,161
58 AutoZone, Inc. (a) 121,591
1,564 Bath & Body Works, Inc. 109,152
453 Bed Bath & Beyond, Inc. (a) (c) 6,605
747 Best Buy Co., Inc. 75,895
147 Boot Barn Holdings, Inc. (a) 18,088
132 Buckle (The), Inc. 5,585
66 Carvana Co. (a) 15,298
104 Children's Place (The), Inc. (a) 8,246
246 Dick's Sporting Goods, Inc. 28,288
33 Five Below, Inc. (a) 6,827
243 Floor & Decor Holdings, Inc.,
Class A (a) 31,592
643 Foot Locker, Inc. 28,054
1,036 Gap (The), Inc. 18,285
70 Group 1 Automotive, Inc. 13,665
124 Guess?, Inc. 2,936
111 Hibbett, Inc. 7,984
93 Lithia Motors, Inc. 27,616
269 MarineMax, Inc. (a) 15,882
16 Murphy USA, Inc. 3,188
184 National Vision Holdings,
Inc. (a) 8,830
129 O'Reilly Automotive, Inc. (a) 91,104
130 ODP (The) Corp. (a) 5,106
292 Penske Automotive Group, Inc. 31,308
186 Rent-A-Center, Inc. 8,936
27 RH (a) 14,470
310 Sally Beauty Holdings, Inc. (a) 5,723
132 Signet Jewelers Ltd. 11,488
28 Sleep Number Corp. (a) 2,145
199 Sonic Automotive, Inc., Class A 9,841
487 Tractor Supply Co. 116,198
440 Urban Outfitters, Inc. (a) 12,918
167 Williams-Sonoma, Inc. 28,245
329 Zumiez, Inc. (a) 15,789
--------------
975,579
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 1.0%
139 Apple, Inc. 24,682
90 Avid Technology, Inc. (a) 2,931
5,537 Hewlett Packard Enterprise Co. 87,319
262 NetApp, Inc. 24,101
701 Pure Storage, Inc., Class A (a) 22,818
143 Super Micro Computer, Inc. (a) 6,285
1,049 Western Digital Corp. (a) 68,405
648 Xerox Holdings Corp. 14,671
--------------
251,212
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.6%
53 Carter's, Inc. 5,365
184 Columbia Sportswear Co. 17,929
204 Crocs, Inc. (a) 26,157
49 Deckers Outdoor Corp. (a) 17,949
461 G-III Apparel Group Ltd. (a) 12,742
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
(CONTINUED)
104 Kontoor Brands, Inc. $ 5,330
171 PVH Corp. 18,237
53 Ralph Lauren Corp. 6,299
419 Skechers U.S.A., Inc.,
Class A (a) 18,185
318 Tapestry, Inc. 12,911
582 Under Armour, Inc., Class A (a) 12,332
--------------
153,436
--------------
THRIFTS & MORTGAGE FINANCE
-- 0.8%
152 Axos Financial, Inc. (a) 8,498
141 Columbia Financial, Inc. (a) 2,941
668 Essent Group Ltd. 30,414
24 Federal Agricultural Mortgage
Corp., Class C 2,974
420 Kearny Financial Corp. 5,565
199 Merchants Bancorp 9,419
873 MGIC Investment Corp. 12,589
318 Mr. Cooper Group, Inc. (a) 13,232
1,370 New York Community Bancorp, Inc. 16,728
578 NMI Holdings, Inc., Class A (a) 12,629
590 Northwest Bancshares, Inc. 8,354
213 PennyMac Financial Services, Inc. 14,863
328 Premier Financial Corp. 10,139
334 Provident Financial Services,
Inc. 8,089
574 Radian Group, Inc. 12,129
92 Walker & Dunlop, Inc. 13,881
152 Washington Federal, Inc. 5,074
152 WSFS Financial Corp. 7,618
--------------
195,136
--------------
TOBACCO -- 0.1%
217 Universal Corp. 11,918
204 Vector Group Ltd. 2,342
--------------
14,260
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.0%
747 Air Lease Corp. 33,040
58 Applied Industrial Technologies,
Inc. 5,957
164 Beacon Roofing Supply, Inc. (a) 9,405
242 Boise Cascade Co. 17,230
58 GATX Corp. 6,043
179 GMS, Inc. (a) 10,760
80 Herc Holdings, Inc. 12,524
109 McGrath RentCorp 8,748
32 MSC Industrial Direct Co., Inc.,
Class A 2,690
231 Rush Enterprises, Inc., Class A 12,853
148 SiteOne Landscape Supply,
Inc. (a) 35,857
201 Triton International Ltd. 12,106
57 United Rentals, Inc. (a) 18,941
219 Univar Solutions, Inc. (a) 6,209
88 Veritiv Corp. (a) 10,786
22 Watsco, Inc. 6,883
254 WESCO International, Inc. (a) 33,424
--------------
243,456
--------------
Page 26 See Notes to Financial Statements
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
WATER UTILITIES -- 0.1%
89 California Water Service Group $ 6,395
256 Essential Utilities, Inc. 13,745
77 Middlesex Water Co. 9,263
40 SJW Group 2,928
--------------
32,331
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.3%
302 Gogo, Inc. (a) 4,086
331 Shenandoah Telecommunications
Co. 8,440
670 Telephone and Data Systems, Inc. 13,501
307 T-Mobile US, Inc. (a) 35,606
410 United States Cellular Corp. (a) 12,923
--------------
74,556
--------------
TOTAL COMMON STOCKS -- 99.9% 25,201,720
(Cost $21,723,060) --------------
MONEY MARKET FUNDS -- 0.4%
46,775 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (d) (e) 46,775
57,234 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (d) 57,234
--------------
TOTAL MONEY MARKET FUNDS
-- 0.4% 104,009
(Cost $104,009) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.1%
$ 20,769 BNP Paribas S.A., 0.03% (d),
dated 12/31/21, due 01/03/22,
with a maturity value of
$20,769. Collateralized by
U.S. Treasury Note interest
rate of 1.50%, due 11/30/28.
The value of the collateral
including accrued interest
is $21,175. (e) 20,769
(Cost $20,769) --------------
TOTAL INVESTMENTS -- 100.4% 25,326,498
(Cost $21,847,838) (f)
NET OTHER ASSETS AND
LIABILITIES -- (0.4)% (103,230)
--------------
NET ASSETS -- 100.0% $ 25,223,268
==============
(a) Non-income producing security.
(b) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the Securities Act of 1933, as
amended.
(c) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $65,395 and the
total value of the collateral held by the Fund is $67,544.
(d) Rate shown reflects yield as of December 31, 2021.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $21,957,413. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$4,018,858 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$649,773. The net unrealized appreciation was $3,369,085.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
Common ------------------------------------------------------
Stocks* $ 25,201,720 $ 25,201,720 $ -- $ --
Money Market
Funds 104,009 104,009 -- --
Repurchase
Agreements 20,769 -- 20,769 --
------------------------------------------------------
Total
Investments $ 25,326,498 $ 25,305,729 $ 20,769 $ --
======================================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 27
<PAGE>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
---------------------------------
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) $ 65,395
Non-cash Collateral(2) (65,395)
--------------
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, 2021, 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) $ 20,769
Non-cash Collateral(4) (20,769)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 28 See Notes to Financial Statements
<PAGE>
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 1.4%
186 Boeing (The) Co. (a) $ 37,446
74 General Dynamics Corp. 15,427
14 HEICO Corp. 2,019
58 L3Harris Technologies, Inc. 12,368
87 Lockheed Martin Corp. 30,921
46 Northrop Grumman Corp. 17,805
474 Raytheon Technologies Corp. 40,792
55 Textron, Inc. 4,246
15 TransDigm Group, Inc. (a) 9,544
--------------
170,568
--------------
AIR FREIGHT & LOGISTICS -- 0.6%
49 Expeditors International of
Washington, Inc. 6,580
74 FedEx Corp. 19,139
231 United Parcel Service, Inc.,
Class B 49,513
--------------
75,232
--------------
AIRLINES -- 0.2%
203 Delta Air Lines, Inc. (a) 7,933
159 Southwest Airlines Co. (a) 6,812
94 United Airlines Holdings,
Inc. (a) 4,115
--------------
18,860
--------------
AUTO COMPONENTS -- 0.1%
86 Aptiv PLC (a) 14,186
--------------
AUTOMOBILES -- 2.6%
1,242 Ford Motor Co. 25,796
404 General Motors Co. (a) 23,687
264 Tesla, Inc. (a) 278,990
--------------
328,473
--------------
BANKS -- 3.9%
2,279 Bank of America Corp. 101,393
628 Citigroup, Inc. 37,925
119 Citizens Financial Group, Inc. 5,623
188 Fifth Third Bancorp 8,187
57 First Republic Bank 11,771
430 Huntington Bancshares, Inc. 6,631
935 JPMorgan Chase & Co. 148,057
253 KeyCorp 5,852
38 M&T Bank Corp. 5,836
134 PNC Financial Services Group
(The), Inc. 26,870
284 Regions Financial Corp. 6,191
18 SVB Financial Group (a) 12,208
422 Truist Financial Corp. 24,708
427 U.S. Bancorp 23,984
1,262 Wells Fargo & Co. 60,551
--------------
485,787
--------------
BEVERAGES -- 1.5%
98 Brown-Forman Corp., Class B 7,140
1,244 Coca-Cola (The) Co. 73,657
52 Constellation Brands, Inc.,
Class A 13,051
278 Keurig Dr Pepper, Inc. 10,247
111 Monster Beverage Corp. (a) 10,660
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BEVERAGES (CONTINUED)
438 PepsiCo, Inc. $ 76,085
--------------
190,840
--------------
BIOTECHNOLOGY -- 1.9%
559 AbbVie, Inc. 75,689
29 Alnylam Pharmaceuticals, Inc. (a) 4,918
168 Amgen, Inc. 37,795
39 Biogen, Inc. (a) 9,357
45 Exact Sciences Corp. (a) 3,502
337 Gilead Sciences, Inc. 24,469
67 Horizon Therapeutics PLC (a) 7,220
60 Incyte Corp. (a) 4,404
115 Moderna, Inc. (a) 29,208
26 Regeneron Pharmaceuticals,
Inc. (a) 16,419
54 Seagen, Inc. (a) 8,348
76 Vertex Pharmaceuticals, Inc. (a) 16,690
--------------
238,019
--------------
BUILDING PRODUCTS -- 0.4%
219 Carrier Global Corp. 11,879
223 Johnson Controls International
PLC 18,132
73 Masco Corp. 5,126
68 Trane Technologies PLC 13,738
--------------
48,875
--------------
CAPITAL MARKETS -- 3.4%
33 Ameriprise Financial, Inc. 9,955
238 Bank of New York Mellon (The)
Corp. 13,823
43 BlackRock, Inc. 39,369
217 Blackstone, Inc. 28,078
77 Carlyle Group (The), Inc. 4,227
453 Charles Schwab (The) Corp. 38,097
103 CME Group, Inc. 23,531
49 Coinbase Global, Inc.,
Class A (a) 12,366
94 Franklin Resources, Inc. 3,148
106 Goldman Sachs Group (The), Inc. 40,550
178 Intercontinental Exchange, Inc. 24,345
185 KKR & Co., Inc. 13,782
10 MarketAxess Holdings, Inc. 4,113
51 Moody's Corp. 19,920
449 Morgan Stanley 44,074
26 MSCI, Inc. 15,930
34 Nasdaq, Inc. 7,140
66 Northern Trust Corp. 7,894
59 Raymond James Financial, Inc. 5,924
76 S&P Global, Inc. 35,867
116 State Street Corp. 10,788
67 T. Rowe Price Group, Inc. 13,175
--------------
416,096
--------------
CHEMICALS -- 1.2%
66 Air Products and Chemicals, Inc. 20,081
37 Albemarle Corp. 8,649
33 Celanese Corp. 5,546
231 Corteva, Inc. 10,922
220 Dow, Inc. 12,478
See Notes to Financial Statements Page 29
<PAGE>
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CHEMICALS (CONTINUED)
164 DuPont de Nemours, Inc. $ 13,248
37 Eastman Chemical Co. 4,474
81 Ecolab, Inc. 19,002
72 International Flavors &
Fragrances, Inc. 10,847
65 LyondellBasell Industries N.V.,
Class A 5,995
71 PPG Industries, Inc. 12,243
76 Sherwin-Williams (The) Co. 26,764
--------------
150,249
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.5%
28 Cintas Corp. 12,409
70 Copart, Inc. (a) 10,613
66 Republic Services, Inc. 9,204
86 Rollins, Inc. 2,942
132 Waste Management, Inc. 22,031
--------------
57,199
--------------
COMMUNICATIONS EQUIPMENT
-- 0.9%
76 Arista Networks, Inc. (a) 10,925
1,335 Cisco Systems, Inc. 84,599
47 Motorola Solutions, Inc. 12,770
2 Ubiquiti, Inc. 613
--------------
108,907
--------------
CONSTRUCTION MATERIALS -- 0.1%
17 Martin Marietta Materials, Inc. 7,489
39 Vulcan Materials Co. 8,095
--------------
15,584
--------------
CONSUMER FINANCE -- 0.6%
110 Ally Financial, Inc. 5,237
199 American Express Co. 32,557
128 Capital One Financial Corp. 18,572
86 Discover Financial Services 9,938
147 Synchrony Financial 6,819
--------------
73,123
--------------
CONTAINERS & PACKAGING -- 0.2%
23 Avery Dennison Corp. 4,981
94 Ball Corp. 9,050
100 International Paper Co. 4,698
--------------
18,729
--------------
DISTRIBUTORS -- 0.1%
42 Genuine Parts Co. 5,888
92 LKQ Corp. 5,523
12 Pool Corp. 6,792
--------------
18,203
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.9%
388 Berkshire Hathaway, Inc.,
Class B (a) 116,012
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.0%
2,147 AT&T, Inc. $ 52,816
1,328 Verizon Communications, Inc. 69,003
--------------
121,819
--------------
ELECTRIC UTILITIES -- 1.6%
73 Alliant Energy Corp. 4,487
151 American Electric Power Co., Inc. 13,435
231 Duke Energy Corp. 24,232
113 Edison International 7,712
57 Entergy Corp. 6,421
69 Evergy, Inc. 4,734
96 Eversource Energy 8,734
276 Exelon Corp. 15,942
162 FirstEnergy Corp. 6,738
621 NextEra Energy, Inc. 57,977
389 PG&E Corp. (a) 4,722
221 PPL Corp. 6,643
335 Southern (The) Co. 22,974
138 Xcel Energy, Inc. 9,343
--------------
194,094
--------------
ELECTRICAL EQUIPMENT -- 0.6%
73 AMETEK, Inc. 10,734
126 Eaton Corp. PLC 21,775
188 Emerson Electric Co. 17,478
19 Generac Holdings, Inc. (a) 6,686
155 Plug Power, Inc. (a) 4,376
35 Rockwell Automation, Inc. 12,210
--------------
73,259
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.7%
165 Amphenol Corp., Class A 14,431
43 CDW Corp. 8,805
51 Cognex Corp. 3,966
246 Corning, Inc. 9,159
55 Keysight Technologies, Inc. (a) 11,358
98 TE Connectivity Ltd. 15,811
13 Teledyne Technologies, Inc. (a) 5,680
71 Trimble, Inc. (a) 6,190
16 Zebra Technologies Corp.,
Class A (a) 9,523
--------------
84,923
--------------
ENERGY EQUIPMENT & SERVICES
-- 0.2%
190 Baker Hughes Co. 4,571
263 Halliburton Co. 6,015
444 Schlumberger N.V. 13,298
--------------
23,884
--------------
ENTERTAINMENT -- 1.9%
246 Activision Blizzard, Inc. 16,366
153 AMC Entertainment Holdings,
Inc., Class A (a) 4,162
81 Electronic Arts, Inc. 10,684
55 Liberty Media Corp.-Liberty
Formula One, Class C (a) 3,478
Page 30 See Notes to Financial Statements
<PAGE>
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ENTERTAINMENT (CONTINUED)
45 Live Nation Entertainment,
Inc. (a) $ 5,386
130 Netflix, Inc. (a) 78,317
95 ROBLOX Corp., Class A (a) 9,800
34 Roku, Inc. (a) 7,759
34 Take-Two Interactive Software,
Inc. (a) 6,043
575 Walt Disney (The) Co. (a) 89,062
--------------
231,057
--------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 2.7%
42 Alexandria Real Estate Equities,
Inc. 9,364
144 American Tower Corp. 42,120
41 AvalonBay Communities, Inc. 10,356
40 Boston Properties, Inc. 4,607
27 Camden Property Trust 4,824
130 Crown Castle International Corp. 27,136
79 Digital Realty Trust, Inc. 13,973
112 Duke Realty Corp. 7,352
27 Equinix, Inc. 22,838
49 Equity LifeStyle Properties, Inc. 4,295
94 Equity Residential 8,507
19 Essex Property Trust, Inc. 6,692
39 Extra Space Storage, Inc. 8,842
159 Healthpeak Properties, Inc. 5,738
179 Invitation Homes, Inc. 8,116
34 Mid-America Apartment
Communities, Inc. 7,801
220 Prologis, Inc. 37,039
46 Public Storage 17,230
179 Realty Income Corp. 12,815
32 SBA Communications Corp. 12,449
97 Simon Property Group, Inc. 15,498
36 Sun Communities, Inc. 7,559
92 UDR, Inc. 5,519
117 Ventas, Inc. 5,981
169 VICI Properties, Inc. 5,089
128 Welltower, Inc. 10,979
211 Weyerhaeuser Co. 8,689
59 WP Carey, Inc. 4,841
--------------
336,249
--------------
FOOD & STAPLES RETAILING -- 1.4%
140 Costco Wholesale Corp. 79,478
200 Kroger (The) Co. 9,052
162 Sysco Corp. 12,725
227 Walgreens Boots Alliance, Inc. 11,840
450 Walmart, Inc. 65,111
--------------
178,206
--------------
FOOD PRODUCTS -- 0.8%
150 Archer-Daniels-Midland Co. 10,138
134 Conagra Brands, Inc. 4,576
192 General Mills, Inc. 12,937
43 Hershey (The) Co. 8,319
91 Hormel Foods Corp. 4,442
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
FOOD PRODUCTS (CONTINUED)
82 Kellogg Co. $ 5,282
225 Kraft Heinz (The) Co. 8,078
63 McCormick & Co., Inc. 6,086
441 Mondelez International, Inc.,
Class A 29,243
93 Tyson Foods, Inc., Class A 8,106
--------------
97,207
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 3.0%
560 Abbott Laboratories 78,814
12 ABIOMED, Inc. (a) 4,310
23 Align Technology, Inc. (a) 15,115
143 Baxter International, Inc. 12,275
85 Becton, Dickinson and Co. 21,376
419 Boston Scientific Corp. (a) 17,799
14 Cooper (The) Cos., Inc. 5,865
59 DENTSPLY SIRONA, Inc. 3,292
27 Dexcom, Inc. (a) 14,498
198 Edwards Lifesciences Corp. (a) 25,651
62 Hologic, Inc. (a) 4,747
24 IDEXX Laboratories, Inc. (a) 15,803
14 Insulet Corp. (a) 3,725
105 Intuitive Surgical, Inc. (a) 37,726
15 Masimo Corp. (a) 4,392
426 Medtronic PLC 44,070
17 Novocure Ltd. (a) 1,276
41 ResMed, Inc. 10,680
28 STERIS PLC 6,815
106 Stryker Corp. 28,346
12 Teleflex, Inc. 3,942
63 Zimmer Biomet Holdings, Inc. 8,004
--------------
368,521
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 2.8%
47 AmerisourceBergen Corp. 6,246
77 Anthem, Inc. 35,693
80 Cardinal Health, Inc. 4,119
172 Centene Corp. (a) 14,173
100 Cigna Corp. 22,963
418 CVS Health Corp. 43,121
70 HCA Healthcare, Inc. 17,985
35 Humana, Inc. 16,235
30 Laboratory Corp. of America
Holdings (a) 9,426
46 McKesson Corp. 11,434
14 Molina Healthcare, Inc. (a) 4,453
30 Oak Street Health, Inc. (a) 994
37 Quest Diagnostics, Inc. 6,401
298 UnitedHealth Group, Inc. 149,638
--------------
342,881
--------------
HEALTH CARE TECHNOLOGY -- 0.2%
88 Cerner Corp. 8,173
43 Teladoc Health, Inc. (a) 3,948
38 Veeva Systems, Inc., Class A (a) 9,708
--------------
21,829
--------------
See Notes to Financial Statements Page 31
<PAGE>
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOTELS, RESTAURANTS & LEISURE
-- 2.0%
103 Airbnb, Inc., Class A (a) $ 17,149
13 Booking Holdings, Inc. (a) 31,190
53 Caesars Entertainment, Inc. (a) 4,957
267 Carnival Corp. (a) 5,372
8 Chipotle Mexican Grill, Inc. (a) 13,986
31 Darden Restaurants, Inc. 4,670
10 Domino's Pizza, Inc. 5,643
129 DraftKings, Inc., Class A (a) 3,544
46 Expedia Group, Inc. (a) 8,313
77 Hilton Worldwide Holdings,
Inc. (a) 12,011
104 Las Vegas Sands Corp. (a) 3,915
92 Marriott International, Inc.,
Class A (a) 15,202
236 McDonald's Corp. 63,265
122 MGM Resorts International 5,475
56 Royal Caribbean Cruises Ltd. (a) 4,306
371 Starbucks Corp. 43,396
76 Yum! Brands, Inc. 10,553
--------------
252,947
--------------
HOUSEHOLD DURABLES -- 0.3%
98 D.R. Horton, Inc. 10,628
48 Garmin Ltd. 6,536
71 Lennar Corp., Class A 8,247
1 NVR, Inc. (a) 5,909
--------------
31,320
--------------
HOUSEHOLD PRODUCTS -- 1.4%
73 Church & Dwight Co., Inc. 7,483
37 Clorox (The) Co. 6,451
267 Colgate-Palmolive Co. 22,786
101 Kimberly-Clark Corp. 14,435
766 Procter & Gamble (The) Co. 125,302
--------------
176,457
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.0%
175 AES (The) Corp. 4,253
--------------
INDUSTRIAL CONGLOMERATES -- 1.0%
182 3M Co. 32,329
292 General Electric Co. 27,585
218 Honeywell International, Inc. 45,455
30 Roper Technologies, Inc. 14,756
--------------
120,125
--------------
INSURANCE -- 1.6%
193 Aflac, Inc. 11,269
91 Allstate (The) Corp. 10,706
239 American International Group,
Inc. 13,589
66 Aon PLC, Class A 19,837
93 Arch Capital Group Ltd. (a) 4,134
62 Arthur J. Gallagher & Co. 10,520
71 Brown & Brown, Inc. 4,990
129 Chubb Ltd. 24,937
43 Cincinnati Financial Corp. 4,899
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INSURANCE (CONTINUED)
96 Hartford Financial Services Group
(The), Inc. $ 6,628
4 Markel Corp. (a) 4,936
150 Marsh & McLennan Cos., Inc. 26,073
226 MetLife, Inc. 14,123
68 Principal Financial Group, Inc. 4,918
176 Progressive (The) Corp. 18,066
112 Prudential Financial, Inc. 12,123
69 Travelers (The) Cos., Inc. 10,794
--------------
202,542
--------------
INTERACTIVE MEDIA & SERVICES
-- 4.5%
95 Alphabet, Inc., Class A (a) 275,219
84 Match Group, Inc. (a) 11,109
711 Meta Platforms, Inc., Class A (a) 239,145
162 Pinterest, Inc., Class A (a) 5,889
360 Snap, Inc., Class A (a) 16,931
253 Twitter, Inc. (a) 10,934
--------------
559,227
--------------
INTERNET & DIRECT MARKETING
RETAIL -- 4.0%
140 Amazon.com, Inc. (a) 466,808
59 DoorDash, Inc., Class A (a) 8,785
186 eBay, Inc. 12,369
36 Etsy, Inc. (a) 7,882
18 Wayfair, Inc., Class A (a) 3,419
--------------
499,263
--------------
IT SERVICES -- 5.2%
200 Accenture PLC, Class A 82,910
48 Akamai Technologies, Inc. (a) 5,618
133 Automatic Data Processing, Inc. 32,795
126 Block, Inc. (a) 20,350
35 Broadridge Financial Solutions,
Inc. 6,399
62 Cloudflare, Inc., Class A (a) 8,153
166 Cognizant Technology Solutions
Corp., Class A 14,728
17 EPAM Systems, Inc. (a) 11,364
183 Fidelity National Information
Services, Inc. 19,974
175 Fiserv, Inc. (a) 18,163
23 FleetCor Technologies, Inc. (a) 5,148
26 Gartner, Inc. (a) 8,692
82 Global Payments, Inc. 11,085
284 International Business Machines
Corp. 37,959
274 Mastercard, Inc., Class A 98,454
15 MongoDB, Inc. (a) 7,940
43 Okta, Inc. (a) 9,639
96 Paychex, Inc. 13,104
372 PayPal Holdings, Inc. (a) 70,152
86 Snowflake, Inc., Class A (a) 29,133
53 Twilio, Inc., Class A (a) 13,957
29 VeriSign, Inc. (a) 7,361
528 Visa, Inc., Class A 114,423
--------------
647,501
--------------
Page 32 See Notes to Financial Statements
<PAGE>
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
LEISURE PRODUCTS -- 0.0%
87 Peloton Interactive, Inc.,
Class A (a) $ 3,111
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 2.1%
22 10X Genomics, Inc., Class A (a) 3,277
83 Agilent Technologies, Inc. 13,251
170 Avantor, Inc. (a) 7,164
6 Bio-Rad Laboratories, Inc.,
Class A (a) 4,534
12 Bio-Techne Corp. 6,208
14 Charles River Laboratories
International, Inc. (a) 5,275
213 Danaher Corp. 70,079
43 Illumina, Inc. (a) 16,359
57 IQVIA Holdings, Inc. (a) 16,082
6 Mettler-Toledo International,
Inc. (a) 10,183
34 PerkinElmer, Inc. 6,836
125 Thermo Fisher Scientific, Inc. 83,405
17 Waters Corp. (a) 6,334
20 West Pharmaceutical Services, Inc. 9,380
--------------
258,367
--------------
MACHINERY -- 1.4%
171 Caterpillar, Inc. 35,353
43 Cummins, Inc. 9,380
89 Deere & Co. 30,517
43 Dover Corp. 7,809
107 Fortive Corp. 8,163
23 IDEX Corp. 5,435
84 Illinois Tool Works, Inc. 20,731
103 Ingersoll Rand, Inc. 6,373
134 Otis Worldwide Corp. 11,667
110 PACCAR, Inc. 9,709
41 Parker-Hannifin Corp. 13,043
49 Stanley Black & Decker, Inc. 9,242
59 Westinghouse Air Brake
Technologies Corp. 5,434
51 Xylem, Inc. 6,116
--------------
178,972
--------------
MEDIA -- 1.0%
36 Charter Communications, Inc.,
Class A (a) 23,471
1,443 Comcast Corp., Class A 72,626
89 Fox Corp., Class A 3,284
44 Liberty Broadband Corp.,
Class C (a) 7,088
63 Omnicom Group, Inc. 4,616
253 Sirius XM Holdings, Inc. 1,607
182 ViacomCBS, Inc., Class B 5,493
--------------
118,185
--------------
METALS & MINING -- 0.3%
441 Freeport-McMoRan, Inc. 18,403
237 Newmont Corp. 14,699
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
METALS & MINING (CONTINUED)
77 Nucor Corp. $ 8,789
--------------
41,891
--------------
MULTILINE RETAIL -- 0.5%
63 Dollar General Corp. 14,857
71 Dollar Tree, Inc. (a) 9,977
143 Target Corp. 33,096
--------------
57,930
--------------
MULTI-UTILITIES -- 0.6%
72 Ameren Corp. 6,409
173 CenterPoint Energy, Inc. 4,829
81 CMS Energy Corp. 5,269
104 Consolidated Edison, Inc. 8,873
256 Dominion Energy, Inc. 20,111
50 DTE Energy Co. 5,977
150 Public Service Enterprise Group,
Inc. 10,010
80 Sempra Energy 10,582
87 WEC Energy Group, Inc. 8,445
--------------
80,505
--------------
OIL, GAS & CONSUMABLE FUELS
-- 2.4%
80 Cheniere Energy, Inc. 8,114
610 Chevron Corp. 71,583
417 ConocoPhillips 30,099
204 Devon Energy Corp. 8,986
148 EOG Resources, Inc. 13,147
1,340 Exxon Mobil Corp. 81,995
77 Hess Corp. 5,700
639 Kinder Morgan, Inc. 10,135
183 Marathon Petroleum Corp. 11,710
296 Occidental Petroleum Corp. 8,581
131 ONEOK, Inc. 7,698
139 Phillips 66 10,072
73 Pioneer Natural Resources Co. 13,277
122 Valero Energy Corp. 9,163
365 Williams (The) Cos., Inc. 9,505
--------------
299,765
--------------
PERSONAL PRODUCTS -- 0.2%
73 Estee Lauder (The) Cos., Inc.,
Class A 27,025
--------------
PHARMACEUTICALS -- 3.8%
702 Bristol-Myers Squibb Co. 43,770
45 Catalent, Inc. (a) 5,761
117 Elanco Animal Health, Inc. (a) 3,320
251 Eli Lilly & Co. 69,331
833 Johnson & Johnson 142,501
759 Merck & Co., Inc. 58,170
1,776 Pfizer, Inc. 104,873
383 Viatris, Inc. 5,182
150 Zoetis, Inc. 36,605
--------------
469,513
--------------
See Notes to Financial Statements Page 33
<PAGE>
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
PROFESSIONAL SERVICES -- 0.4%
112 CoStar Group, Inc. (a) $ 8,851
36 Equifax, Inc. 10,541
36 Jacobs Engineering Group, Inc. 5,012
41 Leidos Holdings, Inc. 3,645
53 TransUnion 6,285
51 Verisk Analytics, Inc. 11,665
--------------
45,999
--------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.1%
100 CBRE Group, Inc., Class A (a) 10,851
44 Zillow Group, Inc., Class C (a) 2,809
--------------
13,660
--------------
ROAD & RAIL -- 1.2%
604 CSX Corp. 22,710
25 J.B. Hunt Transport Services,
Inc. 5,110
81 Lyft, Inc., Class A (a) 3,461
73 Norfolk Southern Corp. 21,733
30 Old Dominion Freight Line, Inc. 10,751
614 Uber Technologies, Inc. (a) 25,745
203 Union Pacific Corp. 51,142
29 XPO Logistics, Inc. (a) 2,246
--------------
142,898
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 6.2%
382 Advanced Micro Devices, Inc. (a) 54,970
170 Analog Devices, Inc. 29,881
271 Applied Materials, Inc. 42,644
99 Broadcom, Inc. 65,876
40 Enphase Energy, Inc. (a) 7,318
38 Entegris, Inc. 5,266
1,223 Intel Corp. 62,984
43 KLA Corp. 18,495
42 Lam Research Corp. 30,204
224 Marvell Technology, Inc. 19,598
156 Microchip Technology, Inc. 13,581
336 Micron Technology, Inc. 31,298
14 Monolithic Power Systems, Inc. 6,907
736 NVIDIA Corp. 216,465
74 NXP Semiconductors N.V. 16,856
124 ON Semiconductor Corp. (a) 8,422
33 Qorvo, Inc. (a) 5,161
354 QUALCOMM, Inc. 64,736
49 Skyworks Solutions, Inc. 7,602
48 Teradyne, Inc. 7,849
278 Texas Instruments, Inc. 52,395
--------------
768,508
--------------
SOFTWARE -- 10.9%
143 Adobe, Inc. (a) 81,090
26 ANSYS, Inc. (a) 10,429
70 Autodesk, Inc. (a) 19,683
69 Bentley Systems, Inc., Class B 3,335
27 Bill.com Holdings, Inc. (a) 6,727
83 Cadence Design Systems, Inc. (a) 15,467
31 Ceridian HCM Holding, Inc. (a) 3,238
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SOFTWARE (CONTINUED)
20 Coupa Software, Inc. (a) $ 3,161
65 Crowdstrike Holdings, Inc.,
Class A (a) 13,309
69 Datadog, Inc., Class A (a) 12,290
59 DocuSign, Inc. (a) 8,986
63 Dynatrace, Inc. (a) 3,802
8 Fair Isaac Corp. (a) 3,469
39 Fortinet, Inc. (a) 14,017
13 HubSpot, Inc. (a) 8,569
83 Intuit, Inc. 53,387
2,376 Microsoft Corp. 799,096
153 NortonLifeLock, Inc. 3,975
502 Oracle Corp. 43,779
531 Palantir Technologies, Inc.,
Class A (a) 9,670
31 Palo Alto Networks, Inc. (a) 17,260
16 Paycom Software, Inc. (a) 6,643
34 PTC, Inc. (a) 4,119
21 RingCentral, Inc., Class A (a) 3,934
288 salesforce.com, Inc. (a) 73,189
59 ServiceNow, Inc. (a) 38,298
48 Splunk, Inc. (a) 5,555
71 SS&C Technologies Holdings, Inc. 5,821
43 Synopsys, Inc. (a) 15,846
121 Trade Desk (The), Inc.,
Class A (a) 11,088
12 Tyler Technologies, Inc. (a) 6,455
63 UiPath, Inc., Class A (a) 2,717
56 Unity Software, Inc. (a) 8,007
18 VMware, Inc., Class A 2,086
61 Workday, Inc., Class A (a) 16,664
34 Zendesk, Inc. (a) 3,546
63 Zoom Video Communications,
Inc., Class A (a) 11,586
27 Zscaler, Inc. (a) 8,676
--------------
1,358,969
--------------
SPECIALTY RETAIL -- 2.4%
6 AutoZone, Inc. (a) 12,578
84 Bath & Body Works, Inc. 5,862
66 Best Buy Co., Inc. 6,706
17 Burlington Stores, Inc. (a) 4,956
49 CarMax, Inc. (a) 6,381
18 Carvana Co. (a) 4,172
330 Home Depot (The), Inc. 136,953
213 Lowe's Cos., Inc. 55,056
21 O'Reilly Automotive, Inc. (a) 14,831
97 Ross Stores, Inc. 11,085
377 TJX (The) Cos., Inc. 28,622
34 Tractor Supply Co. 8,113
17 Ulta Beauty, Inc. (a) 7,010
--------------
302,325
--------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 7.3%
4,932 Apple, Inc. 875,775
92 Dell Technologies, Inc.,
Class C (a) 5,168
389 Hewlett Packard Enterprise Co. 6,134
343 HP, Inc. 12,921
Page 34 See Notes to Financial Statements
<PAGE>
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS (CONTINUED)
52 NetApp, Inc. $ 4,783
94 Western Digital Corp. (a) 6,130
--------------
910,911
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.6%
404 NIKE, Inc., Class B 67,335
104 VF Corp. 7,615
--------------
74,950
--------------
TOBACCO -- 0.6%
541 Altria Group, Inc. 25,638
468 Philip Morris International, Inc. 44,460
--------------
70,098
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.2%
173 Fastenal Co. 11,082
22 United Rentals, Inc. (a) 7,310
15 W.W. Grainger, Inc. 7,774
--------------
26,166
--------------
WATER UTILITIES -- 0.1%
57 American Water Works Co., Inc. 10,765
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.2%
209 T-Mobile US, Inc. (a) 24,240
--------------
TOTAL INVESTMENTS -- 99.9% 12,397,259
(Cost $9,414,766) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 18,050
--------------
NET ASSETS -- 100.0% $ 12,415,309
==============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $9,418,663. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$3,122,341 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$143,745. The net unrealized appreciation was $2,978,596.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 12,397,259 $ -- $ --
=============================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 35
<PAGE>
FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 3.2%
22,042 Boeing (The) Co. (a) $ 4,437,495
--------------
BANKS -- 3.3%
28,282 JPMorgan Chase & Co. 4,478,455
--------------
BEVERAGES -- 3.5%
80,314 Coca-Cola (The) Co. 4,755,392
--------------
BIOTECHNOLOGY -- 3.5%
21,432 Amgen, Inc. 4,821,557
--------------
CAPITAL MARKETS -- 3.2%
11,559 Goldman Sachs Group (The), Inc. 4,421,896
--------------
CHEMICALS -- 3.4%
82,665 Dow, Inc. 4,688,759
--------------
COMMUNICATIONS EQUIPMENT
-- 3.5%
76,287 Cisco Systems, Inc. 4,834,307
--------------
CONSUMER FINANCE -- 3.2%
27,061 American Express Co. 4,427,180
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 3.4%
90,060 Verizon Communications, Inc. 4,679,518
--------------
ENTERTAINMENT -- 3.3%
29,598 Walt Disney (The) Co. (a) 4,584,434
--------------
FOOD & STAPLES RETAILING -- 6.8%
91,314 Walgreens Boots Alliance, Inc. 4,762,938
32,051 Walmart, Inc. 4,637,459
--------------
9,400,397
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.4%
9,452 UnitedHealth Group, Inc. 4,746,227
--------------
HOTELS, RESTAURANTS & LEISURE
-- 3.3%
17,058 McDonald's Corp. 4,572,738
--------------
HOUSEHOLD PRODUCTS -- 3.5%
29,075 Procter & Gamble (The) Co. 4,756,089
--------------
INDUSTRIAL CONGLOMERATES -- 6.5%
25,524 3M Co. 4,533,828
21,544 Honeywell International, Inc. 4,492,140
--------------
9,025,968
--------------
INSURANCE -- 3.3%
29,303 Travelers (The) Cos., Inc. 4,583,868
--------------
IT SERVICES -- 6.9%
36,426 International Business Machines
Corp. 4,868,699
21,182 Visa, Inc., Class A 4,590,351
--------------
9,459,050
--------------
MACHINERY -- 3.3%
22,215 Caterpillar, Inc. 4,592,729
--------------
OIL, GAS & CONSUMABLE FUELS
-- 3.3%
38,195 Chevron Corp. 4,482,183
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
PHARMACEUTICALS -- 6.8%
27,313 Johnson & Johnson $ 4,672,435
62,243 Merck & Co., Inc. 4,770,303
--------------
9,442,738
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.3%
89,348 Intel Corp. 4,601,422
--------------
SOFTWARE -- 6.4%
13,196 Microsoft Corp. 4,438,079
16,990 salesforce.com, Inc. (a) 4,317,668
--------------
8,755,747
--------------
SPECIALTY RETAIL -- 3.3%
10,881 Home Depot (The), Inc. 4,515,724
--------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 3.2%
25,189 Apple, Inc. 4,472,811
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 3.2%
26,735 NIKE, Inc., Class B 4,455,923
--------------
TOTAL INVESTMENTS -- 100.0% 137,992,607
(Cost $125,419,881) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 49,631
--------------
NET ASSETS -- 100.0% $ 138,042,238
==============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $126,494,485. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$15,357,189 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$3,859,067. The net unrealized appreciation was $11,498,122.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 137,992,607 $ -- $ --
=============================================
* See Portfolio of Investments for industry breakout.
Page 36 See Notes to Financial Statements
<PAGE>
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 1.6%
13,409 Lockheed Martin Corp. $ 4,765,693
8,603 Northrop Grumman Corp. 3,329,963
3,992 TransDigm Group, Inc. (a) 2,540,030
--------------
10,635,686
--------------
AIR FREIGHT & LOGISTICS -- 0.3%
14,189 Expeditors International of
Washington, Inc. 1,905,441
--------------
AUTOMOBILES -- 0.5%
3,297 Tesla, Inc. (a) 3,484,204
--------------
BEVERAGES -- 1.4%
93,658 Monster Beverage Corp. (a) 8,994,914
--------------
BIOTECHNOLOGY -- 1.0%
17,786 Alnylam Pharmaceuticals, Inc. (a) 3,016,150
21,389 Horizon Therapeutics PLC (a) 2,304,879
6,852 Vertex Pharmaceuticals, Inc. (a) 1,504,699
--------------
6,825,728
--------------
CAPITAL MARKETS -- 6.1%
46,758 Blackstone, Inc. 6,050,018
29,089 Intercontinental Exchange, Inc. 3,978,503
12,772 MarketAxess Holdings, Inc. 5,252,740
27,634 Moody's Corp. 10,793,288
10,079 MSCI, Inc. 6,175,302
15,846 Nasdaq, Inc. 3,327,818
6,507 S&P Global, Inc. 3,070,849
8,647 T. Rowe Price Group, Inc. 1,700,346
--------------
40,348,864
--------------
CHEMICALS -- 1.8%
10,427 Air Products and Chemicals, Inc. 3,172,519
12,840 Ecolab, Inc. 3,012,135
16,504 Sherwin-Williams (The) Co. 5,812,049
--------------
11,996,703
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.5%
12,183 Copart, Inc. (a) 1,847,186
28,715 Republic Services, Inc. 4,004,307
25,059 Waste Management, Inc. 4,182,347
--------------
10,033,840
--------------
COMMUNICATIONS EQUIPMENT
-- 1.0%
53,545 Cisco Systems, Inc. 3,393,147
12,210 Motorola Solutions, Inc. 3,317,457
--------------
6,710,604
--------------
DISTRIBUTORS -- 0.7%
7,935 Pool Corp. 4,491,210
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.6%
12,773 Berkshire Hathaway, Inc.,
Class B (a) 3,819,127
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.1%
115,645 AT&T, Inc. 2,844,867
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES (CONTINUED)
85,102 Verizon Communications, Inc. $ 4,421,900
--------------
7,266,767
--------------
ELECTRIC UTILITIES -- 0.5%
61,750 Exelon Corp. 3,566,680
--------------
ELECTRICAL EQUIPMENT -- 1.5%
22,721 AMETEK, Inc. 3,340,896
10,929 Generac Holdings, Inc. (a) 3,846,133
108,460 Plug Power, Inc. (a) 3,061,826
--------------
10,248,855
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.6%
22,789 Amphenol Corp., Class A 1,993,126
11,856 CDW Corp. 2,427,872
15,637 Keysight Technologies, Inc. (a) 3,229,197
5,592 Zebra Technologies Corp.,
Class A (a) 3,328,358
--------------
10,978,553
--------------
ENTERTAINMENT -- 1.0%
169,573 AMC Entertainment Holdings,
Inc., Class A (a) 4,612,386
8,311 Roku, Inc. (a) 1,896,570
--------------
6,508,956
--------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 2.2%
8,266 American Tower Corp. 2,417,805
11,888 AvalonBay Communities, Inc. 3,002,790
20,516 Equity LifeStyle Properties, Inc. 1,798,433
15,299 Extra Space Storage, Inc. 3,468,742
9,600 SBA Communications Corp. 3,734,592
--------------
14,422,362
--------------
FOOD & STAPLES RETAILING -- 2.1%
17,603 Costco Wholesale Corp. 9,993,223
25,703 Walmart, Inc. 3,718,967
--------------
13,712,190
--------------
FOOD PRODUCTS -- 1.3%
81,881 Conagra Brands, Inc. 2,796,236
57,742 General Mills, Inc. 3,890,656
9,228 Hershey (The) Co. 1,785,341
--------------
8,472,233
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 5.8%
22,250 Abbott Laboratories 3,131,465
11,871 Becton, Dickinson and Co. 2,985,319
10,504 Dexcom, Inc. (a) 5,640,123
21,703 Edwards Lifesciences Corp. (a) 2,811,624
14,921 IDEXX Laboratories, Inc. (a) 9,824,882
9,022 Insulet Corp. (a) 2,400,484
6,517 Intuitive Surgical, Inc. (a) 2,341,558
25,404 Novocure Ltd. (a) 1,907,332
17,609 ResMed, Inc. 4,586,792
9,617 Stryker Corp. 2,571,778
--------------
38,201,357
--------------
See Notes to Financial Statements Page 37
<PAGE>
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HEALTH CARE PROVIDERS & SERVICES
-- 2.4%
9,288 Laboratory Corp. of America
Holdings (a) $ 2,918,383
50,482 Oak Street Health, Inc. (a) 1,672,973
65,414 Quest Diagnostics, Inc. 11,317,276
--------------
15,908,632
--------------
HEALTH CARE TECHNOLOGY -- 1.3%
66,469 Cerner Corp. 6,172,976
9,659 Veeva Systems, Inc., Class A (a) 2,467,681
--------------
8,640,657
--------------
HOTELS, RESTAURANTS & LEISURE
-- 3.0%
32,166 Caesars Entertainment, Inc. (a) 3,008,486
1,449 Chipotle Mexican Grill, Inc. (a) 2,533,214
59,603 DraftKings, Inc., Class A (a) 1,637,295
14,937 McDonald's Corp. 4,004,162
67,565 MGM Resorts International 3,032,317
42,456 Yum! Brands, Inc. 5,895,440
--------------
20,110,914
--------------
HOUSEHOLD DURABLES -- 0.2%
11,446 Garmin Ltd. 1,558,602
--------------
HOUSEHOLD PRODUCTS -- 4.4%
17,153 Church & Dwight Co., Inc. 1,758,183
30,662 Clorox (The) Co. 5,346,226
122,498 Colgate-Palmolive Co. 10,453,979
71,725 Procter & Gamble (The) Co. 11,732,776
--------------
29,291,164
--------------
INDUSTRIAL CONGLOMERATES -- 1.1%
7,602 3M Co. 1,350,343
12,059 Honeywell International, Inc. 2,514,422
6,666 Roper Technologies, Inc. 3,278,739
--------------
7,143,504
--------------
INSURANCE -- 3.0%
15,025 Aon PLC, Class A 4,515,914
11,674 Arthur J. Gallagher & Co. 1,980,727
50,269 Marsh & McLennan Cos., Inc. 8,737,758
46,677 Progressive (The) Corp. 4,791,394
--------------
20,025,793
--------------
INTERACTIVE MEDIA & SERVICES
-- 2.0%
1,259 Alphabet, Inc., Class A (a) 3,647,373
17,117 Match Group, Inc. (a) 2,263,723
47,528 Pinterest, Inc., Class A (a) 1,727,643
115,299 Snap, Inc., Class A (a) 5,422,512
--------------
13,061,251
--------------
INTERNET & DIRECT MARKETING
RETAIL -- 0.6%
25,160 eBay, Inc. 1,673,140
10,029 Etsy, Inc. (a) 2,195,749
--------------
3,868,889
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
IT SERVICES -- 8.5%
20,755 Accenture PLC, Class A $ 8,603,985
7,608 Block, Inc. (a) 1,228,768
22,737 Broadridge Financial Solutions,
Inc. 4,156,778
84,161 Cloudflare, Inc., Class A (a) 11,067,172
7,043 EPAM Systems, Inc. (a) 4,707,893
19,973 International Business Machines
Corp. 2,669,591
7,319 Mastercard, Inc., Class A 2,629,863
6,743 MongoDB, Inc. (a) 3,569,407
12,891 Okta, Inc. (a) 2,889,775
28,969 Paychex, Inc. 3,954,269
10,941 Snowflake, Inc., Class A (a) 3,706,264
7,129 Twilio, Inc., Class A (a) 1,877,351
12,967 VeriSign, Inc. (a) 3,291,284
10,448 Visa, Inc., Class A 2,264,186
--------------
56,616,586
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 7.6%
23,639 10X Genomics, Inc., Class A (a) 3,521,265
3,389 Bio-Rad Laboratories, Inc.,
Class A (a) 2,560,627
15,397 Charles River Laboratories
International, Inc. (a) 5,801,282
15,350 Danaher Corp. 5,050,304
10,271 IQVIA Holdings, Inc. (a) 2,897,860
4,681 Mettler-Toledo International,
Inc. (a) 7,944,640
27,028 PerkinElmer, Inc. 5,434,250
11,402 Thermo Fisher Scientific, Inc. 7,607,870
15,064 Waters Corp. (a) 5,612,846
8,318 West Pharmaceutical Services,
Inc. 3,901,225
--------------
50,332,169
--------------
MACHINERY -- 0.4%
20,240 Xylem, Inc. 2,427,181
--------------
MULTILINE RETAIL -- 1.7%
29,442 Dollar General Corp. 6,943,307
18,901 Target Corp. 4,374,447
--------------
11,317,754
--------------
PHARMACEUTICALS -- 1.1%
51,767 Bristol-Myers Squibb Co. 3,227,673
21,572 Catalent, Inc. (a) 2,761,863
8,959 Johnson & Johnson 1,532,616
--------------
7,522,152
--------------
PROFESSIONAL SERVICES -- 1.6%
10,565 Equifax, Inc. 3,093,326
32,075 Verisk Analytics, Inc. 7,336,515
--------------
10,429,841
--------------
ROAD & RAIL -- 1.3%
45,484 Lyft, Inc., Class A (a) 1,943,531
9,518 Old Dominion Freight Line, Inc. 3,411,061
13,181 Union Pacific Corp. 3,320,689
--------------
8,675,281
--------------
Page 38 See Notes to Financial Statements
<PAGE>
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 4.8%
26,161 Applied Materials, Inc. $ 4,116,695
17,425 Enphase Energy, Inc. (a) 3,187,730
21,335 Entegris, Inc. 2,956,604
37,722 Marvell Technology, Inc. 3,300,298
7,389 Monolithic Power Systems, Inc. 3,645,215
29,426 NVIDIA Corp. 8,654,481
84,447 ON Semiconductor Corp. (a) 5,735,640
--------------
31,596,663
--------------
SOFTWARE -- 16.2%
11,260 Adobe, Inc. (a) 6,385,096
38,383 Bill.com Holdings, Inc. (a) 9,563,124
12,784 Coupa Software, Inc. (a) 2,020,511
24,605 Crowdstrike Holdings, Inc.,
Class A (a) 5,037,874
22,757 Datadog, Inc., Class A (a) 4,053,249
11,939 DocuSign, Inc. (a) 1,818,429
34,538 Dynatrace, Inc. (a) 2,084,368
20,713 Fortinet, Inc. (a) 7,444,252
11,846 HubSpot, Inc. (a) 7,808,291
6,131 Intuit, Inc. 3,943,582
22,330 Microsoft Corp. 7,510,026
86,825 Oracle Corp. 7,572,008
10,688 Paycom Software, Inc. (a) 4,437,551
12,595 RingCentral, Inc., Class A (a) 2,359,673
7,144 ServiceNow, Inc. (a) 4,637,242
38,715 SS&C Technologies Holdings, Inc. 3,173,856
21,212 Synopsys, Inc. (a) 7,816,622
40,946 Trade Desk (The), Inc.,
Class A (a) 3,752,291
22,130 Unity Software, Inc. (a) 3,164,369
20,201 Zendesk, Inc. (a) 2,106,762
10,914 Zoom Video Communications,
Inc., Class A (a) 2,007,194
27,462 Zscaler, Inc. (a) 8,824,365
--------------
107,520,735
--------------
SPECIALTY RETAIL -- 3.7%
13,693 Home Depot (The), Inc. 5,682,732
8,035 Lowe's Cos., Inc. 2,076,887
11,871 O'Reilly Automotive, Inc. (a) 8,383,656
34,321 Tractor Supply Co. 8,188,991
--------------
24,332,266
--------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 0.3%
12,074 Apple, Inc. 2,143,980
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.2%
70,176 Fastenal Co. 4,495,475
6,502 W.W. Grainger, Inc. 3,369,596
--------------
7,865,071
--------------
TOTAL COMMON STOCKS -- 100.0% 663,013,359
(Cost $644,091,052) --------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MONEY MARKET FUNDS -- 0.0%
182,154 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (b) $ 182,154
(Cost $182,154) --------------
TOTAL INVESTMENTS -- 100.0% 663,195,513
(Cost $644,273,206) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (190,321)
--------------
NET ASSETS -- 100.0% $ 663,005,192
==============
(a) Non-income producing security.
(b) Rate shown reflects yield as of December 31, 2021.
(c) Aggregate cost for federal income tax purposes is $657,591,562. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$46,022,174 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$40,418,223. The net unrealized appreciation was $5,603,951.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 663,013,359 $ -- $ --
Money Market
Funds 182,154 -- --
---------------------------------------------
Total Investments $ 663,195,513 $ -- $ --
=============================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 39
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2021
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
TOTAL US MARKET DORSEY WRIGHT DOW 30 LUNT U.S.
ALPHADEX(R) PEOPLE'S EQUAL WEIGHT FACTOR ROTATION
ETF PORTFOLIO ETF ETF ETF
(TUSA) (DWPP) (EDOW) (FCTR)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value............................... $ 25,326,498 $ 12,397,259 $ 137,992,607 $ 663,195,513
Cash................................................ 340 17,046 48,479 7,387
Receivables:
Dividends........................................ 22,845 7,068 56,356 148,108
Securities lending income........................ 41 -- -- --
Capital shares sold................................. -- -- 1,589,992 3,564,027
Prepaid expenses.................................... 5,396 -- -- --
-------------- -------------- -------------- --------------
Total Assets..................................... 25,355,120 12,421,373 139,687,434 666,915,035
-------------- -------------- -------------- --------------
LIABILITIES:
Payables:
Collateral for securities on loan................ 67,544 -- -- --
Audit and tax fees............................... 30,319 -- -- --
Investment advisory fees......................... 2,308 6,064 55,935 346,868
Licensing fees................................... 577 -- -- --
Shareholder reporting fees....................... 4,795 -- -- --
Investment securities purchased.................. -- -- 1,589,261 3,562,975
Other liabilities................................... 26,309 -- -- --
-------------- -------------- -------------- --------------
Total Liabilities................................ 131,852 6,064 1,645,196 3,909,843
-------------- -------------- -------------- --------------
NET ASSETS.......................................... $ 25,223,268 $ 12,415,309 $ 138,042,238 $ 663,005,192
============== ============== ============== ==============
NET ASSETS CONSIST OF:
Paid-in capital..................................... $ 24,899,845 $ 19,780,071 $ 130,585,624 $ 689,598,217
Par value........................................... 5,000 3,500 43,478 186,500
Accumulated distributable earnings (loss)........... 318,423 (7,368,262) 7,413,136 (26,779,525)
-------------- -------------- -------------- --------------
NET ASSETS.......................................... $ 25,223,268 $ 12,415,309 $ 138,042,238 $ 663,005,192
============== ============== ============== ==============
NET ASSET VALUE, per share.......................... $ 50.45 $ 35.47 $ 31.75 $ 35.55
============== ============== ============== ==============
Number of shares outstanding (unlimited number of
shares authorized, par value $0.01 per share).... 500,002 350,002 4,347,756 18,650,002
============== ============== ============== ==============
Investments, at cost................................ $ 21,847,838 $ 9,414,766 $ 125,419,881 $ 644,273,206
============== ============== ============== ==============
Securities on loan, at value........................ $ 65,395 $ -- $ -- $ --
============== ============== ============== ==============
</TABLE>
Page 40 See Notes to Financial Statements
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2021
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
TOTAL US MARKET DORSEY WRIGHT DOW 30 LUNT U.S.
ALPHADEX(R) PEOPLE'S EQUAL WEIGHT FACTOR ROTATION
ETF PORTFOLIO ETF ETF ETF
(TUSA) (DWPP) (EDOW) (FCTR)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends........................................... $ 321,410 $ 152,275 $ 2,228,152 $ 4,155,767
Securities lending income (net of fees)............. 1,684 -- -- --
Foreign withholding tax............................. (76) (26) -- --
-------------- -------------- -------------- --------------
Total investment income.......................... 323,018 152,249 2,228,152 4,155,767
-------------- -------------- -------------- --------------
EXPENSES:
Investment advisory fees............................ 104,695 66,818 (a) 505,747 (a) 2,306,828 (a)
Custodian fees...................................... 32,168 -- -- --
Audit and tax fees.................................. 31,607 -- -- --
Accounting and administration fees.................. 17,191 -- -- --
Licensing fees...................................... 11,854 -- -- --
Shareholder reporting fees.......................... 15,568 -- -- --
Trustees' fees and expenses......................... 6,308 -- -- --
Listing fees........................................ 2,541 -- -- --
Transfer agent fees................................. 1,047 -- -- --
Legal fees.......................................... 393 -- -- --
Registration and filing fees........................ 82 -- -- --
Other expenses...................................... 2,257 -- -- --
-------------- -------------- -------------- --------------
Total expenses................................... 225,711 66,818 505,747 2,306,828
Less fees waived and expenses reimbursed by the
investment advisor............................ (78,956) -- -- --
-------------- -------------- -------------- --------------
Net expenses..................................... 146,755 66,818 505,747 2,306,828
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)........................ 176,263 85,431 1,722,405 1,848,939
-------------- -------------- -------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................... 28,181 71,171 (383,603) (37,600,426)
In-kind redemptions.............................. 4,356,123 606,896 4,768,981 70,226,527
-------------- -------------- -------------- --------------
Net realized gain (loss)............................ 4,384,304 678,067 4,385,378 32,626,101
-------------- -------------- -------------- --------------
Net change in unrealized appreciation (depreciation)
on investments................................... (272,120) 1,815,679 8,652,152 2,900,642
-------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED
GAIN (LOSS)...................................... 4,112,184 2,493,746 13,037,530 35,526,743
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........................ $ 4,288,447 $ 2,579,177 $ 14,759,935 $ 37,375,682
============== ============== ============== ==============
</TABLE>
(a) Fund is subject to a Unitary Fee (see Note 3 in the Notes to Financial
Statements).
See Notes to Financial Statements Page 41
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
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
12/31/2021 12/31/2020 12/31/2021 12/31/2020
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)................................ $ 176,263 $ 146,002 $ 85,431 $ 211,578
Net realized gain (loss).................................... 4,384,304 (102,951) 678,067 (7,244,534)
Net change in unrealized appreciation (depreciation)........ (272,120) 1,663,834 1,815,679 (8,269,108)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations......................................... 4,288,447 1,706,885 2,579,177 (15,302,064)
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations....................................... (162,991) (165,965) (81,660) (240,000)
-------------- -------------- -------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................... 18,455,594 5,412,788 1,693,588 6,707,616
Proceeds from shares acquired through reorganization........ -- -- -- --
Cost of shares redeemed..................................... (13,606,364) (8,804,718) (3,150,430) (43,298,218)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions............................ 4,849,230 (3,391,930) (1,456,842) (36,590,602)
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets.................... 8,974,686 (1,851,010) 1,040,675 (52,132,666)
NET ASSETS:
Beginning of period......................................... 16,248,582 18,099,592 11,374,634 63,507,300
-------------- -------------- -------------- --------------
End of period............................................... $ 25,223,268 $ 16,248,582 $ 12,415,309 $ 11,374,634
============== ============== ============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period..................... 400,002 500,002 400,002 1,900,002
Shares sold................................................. 400,000 150,000 50,000 200,000
Shares issued through reorganization........................ -- -- -- --
Shares redeemed............................................. (300,000) (250,000) (100,000) (1,700,000)
-------------- -------------- -------------- --------------
Shares outstanding, end of period........................... 500,002 400,002 350,002 400,002
============== ============== ============== ==============
</TABLE>
Page 42 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST
DOW 30 LUNT U.S.
EQUAL WEIGHT FACTOR ROTATION
ETF ETF
(EDOW) (FCTR)
------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/2021 12/31/2020 12/31/2021 12/31/2020
-------------- -------------- -------------- --------------
<S><C> <C> <C> <C>
$ 1,722,405 $ 788,789 $ 1,848,939 $ 356,145
4,385,378 2,725,877 32,626,101 17,001,136
8,652,152 1,847,818 2,900,642 12,191,167
-------------- -------------- -------------- --------------
14,759,935 5,362,484 37,375,682 29,548,448
-------------- -------------- -------------- --------------
(1,719,752) (796,961) (1,580,945) (405,400)
-------------- -------------- -------------- --------------
75,916,321 82,844,105 1,095,761,531 229,904,890
-- 21,476,818 -- --
(22,908,579) (79,969,157) (599,707,580) (190,587,189)
-------------- -------------- -------------- --------------
53,007,742 24,351,766 496,053,951 39,317,701
-------------- -------------- -------------- --------------
66,047,925 28,917,289 531,848,688 68,460,749
71,994,313 43,077,024 131,156,504 62,695,755
-------------- -------------- -------------- --------------
$ 138,042,238 $ 71,994,313 $ 663,005,192 $ 131,156,504
============== ============== ============== ==============
2,647,756 1,650,002 4,450,002 2,750,002
2,500,000 3,650,000 31,600,000 9,500,000
-- 797,754 -- --
(800,000) (3,450,000) (17,400,000) (7,800,000)
-------------- -------------- -------------- --------------
4,347,756 2,647,756 18,650,002 4,450,002
============== ============== ============== ==============
</TABLE>
See Notes to Financial Statements Page 43
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 40.62 $ 36.20 $ 29.22 $ 32.85 $ 27.74
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.39 0.35 0.40 0.34 0.25
Net realized and unrealized gain (loss) 9.80 4.47 6.99 (3.64) 5.12
------------ ------------ ------------ ------------ ------------
Total from investment operations 10.19 4.82 7.39 (3.30) 5.37
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.36) (0.40) (0.41) (0.33) (0.26)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 50.45 $ 40.62 $ 36.20 $ 29.22 $ 32.85
============ ============ ============ ============ ============
TOTAL RETURN (a) 25.12% 13.65% 25.36% (10.13)% 19.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 25,223 $ 16,249 $ 18,100 $ 13,151 $ 14,783
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 1.08% 1.16% 1.02% 1.57% 1.69%
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 0.84% 1.04% 1.20% 1.03% 0.88%
Portfolio turnover rate (b) 98% 125% 119% 110% 112%
FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 28.44 $ 33.42 $ 25.96 $ 28.64 $ 23.80
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.25 0.11 0.37 0.33 0.30
Net realized and unrealized gain (loss) 7.02 (4.94) 7.45 (2.67) 4.84
------------ ------------ ------------ ------------ ------------
Total from investment operations 7.27 (4.83) 7.82 (2.34) 5.14
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.24) (0.15) (0.36) (0.34) (0.30)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 35.47 $ 28.44 $ 33.42 $ 25.96 $ 28.64
============ ============ ============ ============ ============
TOTAL RETURN (a) 25.71% (14.42)% 30.24% (8.26)% 21.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 12,415 $ 11,375 $ 63,507 $ 35,042 $ 30,072
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 0.77% 0.69% 1.28% 1.19% 1.29%
Portfolio turnover rate (b) 7% 114% 30% 32% 30% (c)
</TABLE>
(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.
Page 44 See Notes to Financial Statements
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------- PERIOD ENDED
2021 2020 2019 2018 12/31/2017 (a)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 27.19 $ 26.11 $ 21.43 $ 22.00 $ 19.97
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.48 0.50 0.47 0.40 0.17
Net realized and unrealized gain (loss) 4.56 1.08 4.70 (0.58) 2.03
------------ ------------ ------------ ------------ ------------
Total from investment operations 5.04 1.58 5.17 (0.18) 2.20
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.48) (0.50) (0.49) (0.39) (0.17)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 31.75 $ 27.19 $ 26.11 $ 21.43 $ 22.00
============ ============ ============ ============ ============
TOTAL RETURN (b) 18.63% 6.41% 24.27% (0.88)% 11.02%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 138,042 $ 71,994 $ 43,077 $ 12,859 $ 2,200
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50% (c)
Ratio of net expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50% (c)
Ratio of net investment income (loss) to
average net assets 1.70% 2.11% 1.99% 2.33% 1.99% (c)
Portfolio turnover rate (d) 14% 31% 13% 16% 20%
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR)
YEAR ENDED DECEMBER 31,
------------------------------------------ PERIOD ENDED
2021 2020 2019 12/31/2018 (a)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 29.47 $ 22.80 $ 17.67 $ 20.23
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.17 0.12 0.23 0.12
Net realized and unrealized gain (loss) 6.07 6.68 5.12 (2.56)
------------ ------------ ------------ ------------
Total from investment operations 6.24 6.80 5.35 (2.44)
------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.16) (0.13) (0.22) (0.12)
------------ ------------ ------------ ------------
Net asset value, end of period $ 35.55 $ 29.47 $ 22.80 $ 17.67
============ ============ ============ ============
TOTAL RETURN (b) 21.22% 30.02% 30.35% (12.09)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 663,005 $ 131,157 $ 62,696 $ 28,269
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.65% 0.65% 0.65% 0.65% (c)
Ratio of net expenses to average net assets 0.65% 0.65% 0.65% 0.65% (c)
Ratio of net investment income (loss) to
average net assets 0.52% 0.42% 1.17% 1.48% (c)
Portfolio turnover rate (d) 307% 460% 246% 183%
</TABLE>
(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.
See Notes to Financial Statements Page 45
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
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-two exchange-traded funds. This report
covers the four funds (each a "Fund" and collectively, the "Funds") listed
below:
First Trust Total US Market AlphaDEX(R) ETF - (The Nasdaq Stock Market LLC
("Nasdaq") ticker "TUSA")
First Trust Dorsey Wright People's Portfolio ETF - (Nasdaq ticker "DWPP")
First Trust Dow 30 Equal Weight ETF - (NYSE Arca, Inc. ("NYSE Arca")
ticker "EDOW")
First Trust Lunt U.S. Factor Rotation ETF - (Cboe BZX Exchange, Inc.
("Cboe BZX") ticker "FCTR")
Each Fund represents a separate series of beneficial interest in the Trust.
Unlike conventional mutual funds, each Fund issues and redeems shares on a
continuous basis, at net asset value ("NAV"), only in large blocks of shares
known as "Creation Units." 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:
<TABLE>
<CAPTION>
FUND INDEX
<S> <C>
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
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Each Fund's NAV is calculated by dividing the
value of all assets of each Fund (including accrued interest and dividends),
less all liabilities (including accrued expenses and dividends declared but
unpaid), by the total number of shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. Each Fund's investments are valued as
follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding Nasdaq and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
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.
Page 46
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
U.S. Treasuries are fair valued on the basis of valuations provided by a
third-party pricing service approved by the Trust's Board of Trustees.
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, 2021, 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 47
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
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, 2021, 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.
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.
Page 48
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
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, 2021 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, 2021 was as follows:
<TABLE>
<CAPTION>
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ---------------- -----------------
<S> <C> <C> <C>
First Trust Total US Market AlphaDEX(R) ETF $ 162,991 $ -- $ --
First Trust Dorsey Wright People's Portfolio ETF 81,660 -- --
First Trust Dow 30 Equal Weight ETF 1,719,752 -- --
First Trust Lunt U.S. Factor Rotation ETF 1,580,945 -- --
</TABLE>
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2020 was as follows:
<TABLE>
<CAPTION>
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ---------------- -----------------
<S> <C> <C> <C>
First Trust Total US Market AlphaDEX(R) ETF $ 165,965 $ -- $ --
First Trust Dorsey Wright People's Portfolio ETF 240,000 -- --
First Trust Dow 30 Equal Weight ETF 796,961 -- --
First Trust Lunt U.S. Factor Rotation ETF 405,400 -- --
</TABLE>
As of December 31, 2021, the components of distributable earnings on a tax basis
for each Fund were as follows:
<TABLE>
<CAPTION>
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ ---------------- -----------------
<S> <C> <C> <C>
First Trust Total US Market AlphaDEX(R) ETF $ 15,478 $ (3,066,140) $ 3,369,085
First Trust Dorsey Wright People's Portfolio ETF 3,829 (10,350,687) 2,978,596
First Trust Dow 30 Equal Weight ETF 2,653 (4,087,639) 11,498,122
First Trust Lunt U.S. Factor Rotation ETF 268,020 (32,651,496) 5,603,951
</TABLE>
Page 49
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
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. The taxable years ended 2018,
2019, 2020, and 2021 remain open to federal and state audit. As of December 31,
2021, 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.
Each Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
Each Fund is 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. At December 31, 2021, for
federal income tax purposes, each applicable Fund had a capital loss
carryforward available that is shown in the table below, to the extent provided
by regulations, to offset future capital gains. 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 each applicable Fund's
shareholders.
<TABLE>
<CAPTION>
Non-Expiring
Capital Loss
Carryforwards
------------------
<S> <C>
First Trust Total US Market AlphaDEX(R) ETF $ 3,066,140
First Trust Dorsey Wright People's Portfolio ETF 10,350,687
First Trust Dow 30 Equal Weight ETF* 4,087,639
First Trust Lunt U.S. Factor Rotation ETF 32,651,496
</TABLE>
* $3,196,583 of First Trust Dow 30 Equal Weight ETF's non-expiring net capital
losses is subject to loss limitation resulting from reorganization activity.
This limitation generally reduces the utilization of these losses to a maximum
of $212,620 per year.
During the taxable year ended December 31, 2021, the following Funds utilized
non-expiring capital loss carryforwards in the following amounts:
<TABLE>
<CAPTION>
Capital Loss
Carryforward
Utilized
------------------
<S> <C>
First Trust Total US Market AlphaDEX(R) ETF $ 147,994
First Trust Dorsey Wright People's Portfolio ETF 75,189
First Trust Dow 30 Equal Weight ETF 73,031
</TABLE>
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended December 31, 2021, the Funds had
no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended December 31, 2021, the adjustments for each Fund were as follows:
Page 50
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
<TABLE>
<CAPTION>
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) Paid-in
Income (Loss) on Investments Capital
------------------ ---------------- -----------------
<S> <C> <C> <C>
First Trust Total US Market AlphaDEX(R) ETF $ 14,092 $ (4,268,686) $ 4,254,594
First Trust Dorsey Wright People's Portfolio ETF 58 (606,560) 606,502
First Trust Dow 30 Equal Weight ETF -- (4,240,706) 4,240,706
First Trust Lunt U.S. Factor Rotation ETF 26 (64,248,631) 64,248,605
</TABLE>
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:
<TABLE>
<CAPTION>
FUND LICENSOR
<S> <C>
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.
</TABLE>
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The First Trust Total US
Market AlphaDEX(R) ETF is required to pay licensing fees, which are shown on the
Statements of Operations.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
For the First Trust Total US Market AlphaDEX(R) ETF, First Trust is paid an
annual management fee of 0.50% of the Fund's average daily net assets. For such
Fund, the Trust and the Advisor have entered into an Expense Reimbursement, Fee
Waiver and Recovery Agreement ("Recovery Agreement") in which First Trust has
agreed to waive fees and/or reimburse Fund expenses to the extent that the
operating expenses of the Fund (excluding interest expense, brokerage
commissions and other trading expenses, acquired fund fees and expenses, taxes
and extraordinary expenses) exceed 0.70% of average daily net assets per year
(the "Expense Cap"). The Expense Cap will be in effect until at least April 30,
2023.
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee or expense was incurred, but no reimbursement payment will be made by a Fund
if it results in the Fund exceeding (i) the applicable expense limitation in
place for the most recent fiscal year for which such expense limitation was in
place, (ii) the applicable expense limitation in place at the time the fees were
waived, or (iii) the current expense limitation. These amounts would be included
in "Expenses previously waived or reimbursed" on the Statements of Operations.
The advisory fee waivers and expense reimbursements for the fiscal year ended
December 31, 2021 and fees waived or expenses borne by First Trust subject to
recovery from the Fund for the periods indicated were as follows:
<TABLE>
<CAPTION>
Fees Waived and Expenses Borne by
First Trust Subject to Recovery
------------------------------------------------
Advisory Year Year Year
Fee Expense Ended Ended Ended
Waivers Reimbursement 12/31/2019 12/31/2020 12/31/2021 Total
--------- ------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total US Market AlphaDEX(R) ETF $ 78,956 $ -- $ 54,452 $ 63,952 $ 78,956 $ 197,360
</TABLE>
Page 51
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
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. Pursuant to a contractual agreement
between the Trust, on behalf of DWPP, and First Trust, the management fees paid
to First Trust will be reduced by the proportional amount of the acquired fund
fees and expenses of the shares of investment companies held by DWPP so that the
Fund would not bear the indirect costs of holding them, provided that the
investment companies are advised by First Trust. This contractual agreement
shall continue until the earlier of (i) its termination at the direction of the
Trust's Board of Trustees or (ii) upon the termination of the Fund's management
agreement with First Trust. First Trust does not have the right to recover the
fees waived that are attributable to acquired fund fees and expenses of the
shares of investment companies advised by First Trust.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairs 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 Chairs
rotate every three years. The officers and "Interested" Trustee receive no
compensation from the Trust for acting in such capacities.
4. REORGANIZATION
On January 30, 2020, the Board of Trustees of First Trust Mega Cap AlphaDEX(R)
Fund ("FMK") and EDOW approved a reorganization of EDOW with FMK. The
reorganization was completed on December 14, 2020. EDOW was the surviving fund.
Under the terms of the reorganization, which was tax-free, the assets of FMK
were transferred to, and the liabilities of FMK were assumed by, EDOW in
exchange for shares of EDOW. The cost of the investments received from FMK was
carried forward to EDOW for U.S. GAAP and tax purposes. The EDOW shares were
then distributed to FMK shareholders and the separate existence of FMK ceased.
The reorganization was subject to certain conditions, including that the
reorganization was approved on November 9, 2020, by the shareholders of EDOW.
When the reorganization occurred, the transactions were based on the relative
NAVs of FMK and EDOW.
The following table summarizes the asset transfers and conversion ratios for the
reorganization.
<TABLE>
<CAPTION>
Net Assets on Unrealized Accumulated Shares Acquiring Net Assets on
Acquired Shares December 11, Appreciation Net Realized Conversion (Surviving) Shares December 11,
Fund Redeemed 2020 (Depreciation) Gain (Loss) Ratio Fund Issued 2020*
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FMK 500,002 $21,476,818 $628,735 $(2,594,062) 1.595502 EDOW 797,754 $51,151,076
</TABLE>
* Amount reflects net assets of EDOW prior to the reorganization.
The following table summarizes the operations of the Acquired Fund for the
period August 1, 2020 to December 11, 2020, and the operations of EDOW, the
Acquiring (Surviving) Fund, for the fiscal year ended December 31, 2020, as
presented in the Statements of Operations and the combined Acquired and
Acquiring (Surviving) Funds' pro-forma results of operations for the fiscal year
ended December 31, 2020, assuming the acquisition had been completed on January
1, 2020.
Because the combined investment portfolios have been managed as a single
integrated portfolio since the reorganization was completed, it is not
practicable to separate the amounts of revenue and earnings of FMK that have
been included in EDOW's Statement of Operations since December 11, 2020.
Page 52
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
<TABLE>
<CAPTION>
Net Realized and
Change in
Unrealized Net Increase
Net Investment Gain (Loss) (Decrease) from
Income on Investments Operations
------------------ ------------------ ------------------
<S> <C> <C> <C>
Acquired Fund for the period August 1, 2020 to December 11, 2020
FMK $ 109,271 $ 3,543,108 $ 3,652,379
Acquiring Fund for the fiscal year ended December 31, 2020
EDOW 788,789 5,202,430 5,991,219
-------------- -------------- --------------
Combined Total $ 898,060 $ 8,745,538 $ 9,643,598
============== ============== ==============
</TABLE>
5. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended December 31, 2021, the cost of purchases and proceeds
from sales of investments for each Fund, excluding short-term investments and
in-kind transactions, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------------- ---------------
<S> <C> <C>
First Trust Total US Market AlphaDEX(R) ETF $ 20,251,911 $ 20,157,403
First Trust Dorsey Wright People's Portfolio ETF 780,471 766,798
First Trust Dow 30 Equal Weight ETF 13,842,233 13,673,530
First Trust Lunt U.S. Factor Rotation ETF 1,081,130,695 1,081,111,414
</TABLE>
For the fiscal year ended December 31, 2021, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------------- ---------------
<S> <C> <C>
First Trust Total US Market AlphaDEX(R) ETF $ 18,411,937 $ 13,629,362
First Trust Dorsey Wright People's Portfolio ETF 1,684,481 3,139,856
First Trust Dow 30 Equal Weight ETF 75,743,450 22,846,233
First Trust Lunt U.S. Factor Rotation ETF 1,093,777,118 597,273,092
</TABLE>
6. CREATION, REDEMPTION AND TRANSACTION FEES
Each Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with a Fund or one of the Fund's
service providers to purchase and redeem Fund shares directly with the Fund in
large blocks of shares known as "Creation Units." Prior to the start of trading
on every business day, a Fund publishes through the National Securities Clearing
Corporation ("NSCC") the "basket" of securities, cash or other assets that it
will accept in exchange for a Creation Unit of the Fund's shares. An Authorized
Participant that wishes to effectuate a creation of a Fund's shares deposits
with the Fund the "basket" of securities, cash or other assets identified by the
Fund that day, and then receives the Creation Unit of the Fund's shares in
return for those assets. After purchasing a Creation Unit, the Authorized
Participant may continue to hold the Fund's shares or sell them in the secondary
market. The redemption process is the reverse of the purchase process: the
Authorized Participant redeems a Creation Unit of a Fund's shares for a basket
of securities, cash or other assets. The combination of the creation and
redemption process with secondary market trading in a Fund's shares and
underlying securities provides arbitrage opportunities that are designed to help
keep the market price of a Fund's shares at or close to the NAV per share of the
Fund.
Each Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of a Fund times the number of shares in
a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
Each Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of a Fund times the number
of shares in a Creation Unit, minus the fees described above and, if applicable,
any operational processing and brokerage costs, transfer fees, stamp taxes and
Page 53
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
part or all of the spread between the expected bid and offer side of the market
related to the securities comprising the redemption basket. Investors who use
the services of a broker or other such intermediary in addition to an Authorized
Participant to effect a redemption of a Creation Unit may also be assessed an
amount to cover the cost of such services. The redemption fee charged by a Fund
will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no
more than 2% of the value of the shares redeemed.
7. 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, 2023.
8. 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.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued and has determined that
there was the following subsequent event:
On January 28, 2022, TUSA announced that the Fund will seek investment results
that correspond generally to the price and yield (before the Fund's fees and
expenses) of an index called The Dividend Strength Index (the "New Index"). The
Fund expects to begin tracking the New Index prior to the end of April 2022. The
New Index will be composed of approximately 50 U.S. equity securities selected
based on factors designed to measure financial strength and dividend yield.
Additionally, at the time of the Fund's change to the New Index, the Fund's name
is expected to be changed to "First Trust Dividend Strength ETF" and its new
ticker symbol is expected to be "DVST". The Fund's shares will continue to be
listed for trading on The Nasdaq Stock Market LLC and Nasdaq, Inc. will serve as
the Fund's index provider.
10. OTHER MATTERS
By operation of law, EDOW and FCTR now operate each as a diversified open-end
management investment company as defined in Section 5(b) of the 1940 Act.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First
Trust Total US Market AlphaDEX(R) ETF, First Trust Dorsey Wright People's
Portfolio ETF, First Trust Dow 30 Equal Weight ETF, and First Trust Lunt U.S.
Factor Rotation ETF (the "Funds"), each a series of First Trust Exchange-Traded
Fund, including the portfolios of investments, as of December 31, 2021, the
related statements of operations for the year then ended, the statements of the
changes in net assets for each of the two years in the period then ended, the
financial highlights for the periods indicated in the table below for the Funds,
and the related notes. In our opinion, the financial statements and financial
highlights present fairly, in all material respects, the financial position of
each of the Funds as of December 31, 2021, 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 the periods
listed in the table below in conformity with accounting principles generally
accepted in the United States of America.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
<S> <C>
INDIVIDUAL FUNDS
INCLUDED IN THE TRUST FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------------------------------
First Trust Total US Market For the years ended December 31, 2021, 2020, 2019, 2018, and 2017
AlphaDEX(R) ETF
First Trust Dorsey Wright
People's Portfolio ETF
--------------------------------------------------------------------------------------------------------
First Trust Dow 30 For the years ended December 31, 2021, 2020, 2019, 2018, and the
Equal Weight ETF period from August 8, 2017 (commencement of operations) through
December 31, 2017
First Trust Lunt U.S. Factor For the year ended December 31, 2021, 2020, 2019, and the period from
Rotation ETF July 25, 2018 (commencement of operations) through December 31, 2018
--------------------------------------------------------------------------------------------------------
</TABLE>
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, 2021, 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 23, 2022
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 55
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
each Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal
quarter within 60 days after the end of the relevant fiscal quarter on Form
N-PORT. Portfolio holdings information for the third month of each fiscal
quarter will be publicly available on the SEC's website at www.sec.gov. Each
Fund's complete schedule of portfolio holdings for the second and fourth
quarters of each fiscal year is included in the semi-annual and annual reports
to shareholders, respectively, and is filed with the SEC on Form N-CSR. The
semi-annual and annual report for each Fund is available to investors within 60
days after the period to which it relates. Each Fund's Forms N-PORT and Forms
N-CSR are available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable year ended December 31, 2021, the following percentages of
income dividends paid by the Funds qualify for the dividends received deduction
available to corporations:
<TABLE>
<CAPTION>
Dividends Received Deduction
----------------------------
<S> <C>
First Trust Total US Market AlphaDEX(R) ETF 100.00%
First Trust Dorsey Wright People's Portfolio ETF 100.00%
First Trust Dow 30 Equal Weight ETF 100.00%
First Trust Lunt U.S. Factor Rotation ETF 100.00%
</TABLE>
For the taxable year ended December 31, 2021, the following percentages of
income dividends paid by the Funds are hereby designated as qualified dividend
income:
<TABLE>
<CAPTION>
Qualified Dividend Income
----------------------------
<S> <C>
First Trust Total US Market AlphaDEX(R) ETF 100.00%
First Trust Dorsey Wright People's Portfolio ETF 100.00%
First Trust Dow 30 Equal Weight ETF 100.00%
First Trust Lunt U.S. Factor Rotation ETF 100.00%
</TABLE>
A portion of each of the Funds' 2021 ordinary dividends (including short-term
capital gains) paid to its shareholders during the fiscal year ended December
31, 2021, may be eligible for the Qualified Business Income Deduction (QBI)
under Internal Revenue Code Section 199A for the aggregate dividends each Fund
received from the underlying Real Estate Investment Trusts (REITs) these Funds
invest in.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a significant
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
more broadly diversified.
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.
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
Page 57
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 2021. The unavailability or replacement of LIBOR may affect the
value, liquidity or return on certain fund investments and may result in costs
incurred in connection with closing out positions and entering into new trades.
Any potential effects of the transition away from LIBOR on the fund or on
certain instruments in which the fund invests can be difficult to ascertain, and
they may vary depending on a variety of factors, and they could result in losses
to the fund.
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. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. While the development of
vaccines has slowed the spread of the virus and allowed for the resumption of
"reasonably" normal business activity in the United States, many countries
continue to impose lockdown measures in an attempt to slow the spread.
Additionally, there is no guarantee that vaccines will be effective against
emerging variants of the disease.
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;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; 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.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
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
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (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.
<TABLE>
<CAPTION>
NUMBER OF
PORTFOLIOS IN
TERM OF OFFICE THE FIRST TRUST OTHER TRUSTEESHIPS
NAME, AND YEAR FIRST FUND COMPLEX OR DIRECTORSHIPS HELD
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY BY TRUSTEE DURING
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 216 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 216 Director of ADM Investor
(1957) (Futures Commission Merchant) Services, Inc., ADM
o Since Inception Investor Services
International, Futures
Industry Association,
and National Futures
Association
Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate Aurora 216 Director and Board Chair
(1964) Health and President, Advocate Aurora of Advocate Home Health
Services, Advocate Home
o Since 2021 Continuing Health Division (Integrated Care Products and
Healthcare System) Advocate Hospice;
Director and Board Chair
of Aurora At Home
(since 2018); Director
of Advocate
Physician Partners
Accountable Care
Organization; Director
and Board Chair of
RML Long Term
Acute Care Hospitals;
and Director of Senior
Helpers (since 2021)
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 216 Director of Trust
(1956) and Management Consulting) Company of Illinois
o Since Inception
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 216 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust
Chairman of the Board Advisors L.P. and First Trust Portfolios 216 None
(1955) L.P., Chairman of the Board of
o Since Inception Directors, BondWave LLC (Software
Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
</TABLE>
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 59
<PAGE>
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
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)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
o Since January 2016 to 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 First
(1970) 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. and
(1966) First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
</TABLE>
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 60
<PAGE>
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PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (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
professional or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2021
Page 61
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<PAGE>
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
320 South Canal Street
Chicago, IL 60606
<PAGE>
[BLANK BACK COVER]
<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund
--------------------------------------------------------------------------------
FT Cboe Vest Gold Strategy Quarterly Buffer ETF (BGLD)
-------------------------------
Annual Report
For the Period January 20, 2021
(Commencement of Operations)
through December 31, 2021
-------------------------------
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
ANNUAL REPORT
DECEMBER 31, 2021
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Commentary......................................................... 4
Understanding Your Fund Expenses............................................. 6
Consolidated Portfolio of Investments........................................ 7
Consolidated Statement of Assets and Liabilities............................. 9
Consolidated Statement of Operations......................................... 10
Consolidated Statement of Changes in Net Assets.............................. 11
Consolidated Financial Highlights............................................ 12
Notes to Consolidated Financial Statements................................... 13
Report of Independent Registered Public Accounting Firm ..................... 19
Additional Information....................................................... 20
Board of Trustees and Officers .............................................. 23
Privacy Policy............................................................... 25
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/or Cboe Vest(SM) Financial LLC ("Cboe Vest" or the
"Sub-Advisor") and their respective 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
the series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (FT Cboe Vest Gold Strategy Quarterly Buffer ETF; hereinafter referred to
as the "Fund") 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/or Sub-Advisor and their respective 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 the Fund will achieve its investment objective. The
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's
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of certain other risks of
investing in the Fund.
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 the Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
the Fund. It includes details about the Fund and presents data and analysis that
provide insight into the Fund's performance and investment approach.
By reading the portfolio commentary from the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the 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 and/or Sub-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 the Fund are spelled out in the prospectus, the statement of
additional information, and other Fund regulatory filings.
<PAGE>
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2021
Dear Shareholders:
First Trust is pleased to provide you with the annual report for the FT Cboe
Vest Gold Strategy Quarterly Buffer ETF (the "Fund"), which contains detailed
information about the Fund since its inception on January 20, 2021 through
December 31, 2021. Please note that information contained in this letter and the
annual report prior to the Fund's inception date does not apply to the Fund.
Being that this is a year-end review, I would like to touch on the state of the
business climate and securities markets in the U.S. The two biggest stories in
2021 were clearly the ongoing fight against the coronavirus ("COVID-19")
pandemic and the surge in the rate of inflation, which I believe is a byproduct
of that fight. The COVID-19 pandemic is closing in on its second anniversary and
it continues to curb economic activity in the U.S. and abroad. It is nearly as
challenging today as it was at its peak in 2020.
The emergence of the Omicron variant in the latter half of 2021 was particularly
disappointing because we had been making some inroads into fully reopening the
U.S. economy until its arrival. Americans were dining out. Airline travel was
picking up and people were even taking cruises again. We have learned that the
Omicron variant, while seemingly not as dangerous as its predecessor, the Delta
variant, at least in terms of the number of deaths to date, is still extremely
contagious, especially for those individuals who have not been vaccinated. The
U.S. federal government has funneled trillions of dollars of stimulus and
subsidies into the financial system to mitigate the economic fallout from the
pandemic. That level of support is unprecedented and has likely fueled much of
the surge in inflation, as measured by the Consumer Price Index ("CPI"). The
standard definition for inflation is "too many dollars chasing too few goods."
The explosion of the U.S. money supply has easily overwhelmed the volume of
goods available to consumers. Global supply chain bottlenecks, including the
backlog of container ships at ports in Southern California, have also
contributed to the shortages of goods. In December 2021, the trailing 12-month
rate on the CPI was 7.0%, up from 1.4% last December, according to the U.S.
Bureau of Labor Statistics. The last time inflation was this elevated was in
1982.
Since the onset of COVID-19, companies and millions of employees have scrambled
to adapt to the new normal of working remotely, typically from home. What an
amazing thing to watch. While opinions may vary, it has become evident that the
workplace culture has probably changed forever. According to Barron's magazine,
we should look for more of a hybrid arrangement moving forward that would entail
workers being at the office for three days a week and home for two. I do not
believe that the stock and bond markets would have performed nearly as well over
the past two years had U.S. businesses not overcome the adversity brought their
way by COVID-19. Oh, and the trillions of dollars from the government. In 2021,
the S&P 500(R) Index posted a total return of 28.71%, and that came on the heels
of an 18.40% gain in 2020, according to Bloomberg. From 1926-2021 (a span of 96
years), the S&P 500(R) Index posted an average annual total return of 10.44%,
according to Morningstar/Ibbotson Associates. Investors should relish these
outsized returns. Bond investors have earned more modest total returns over the
past two years. Bond returns were higher for most bond categories in 2020 due to
the artificially depressed yield on the 10-Year Treasury Note ("T-Note"). The
10-Year T-Note yield trended higher in 2021, putting some pressure on bond
prices. Expect the Federal Reserve to tighten monetary policy by raising
short-term interest rates. It could begin as early as March 2022. While the
markets could experience some near-term pain, I believe normalizing interest
rates and bond yields will prove to be a healthy and necessary transition for
the markets long-term.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the Fund
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 1
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
The investment objective of the FT Cboe Vest Gold Strategy Quarterly Buffer ETF
(the "Fund") is to seek to provide investors with returns (before fees, expenses
and taxes) that match those of the SPDR(R) Gold Trust (the "Underlying ETF"), up
to a predetermined upside cap of 3.90% (before fees, expenses and taxes) and
3.68% (after fees and expenses, excluding brokerage commissions, trading fees,
taxes and extraordinary expenses not included in the Fund's management fee),
while providing a buffer against Underlying ETF losses between -5% and -15%
(before fees, expenses and taxes) over the period from December 1, 2021 to
February 28, 2022 (the "Outcome Period"). Under normal market conditions, the
Fund will invest substantially all of its assets in U.S. Treasury securities,
cash and cash equivalents, and in the shares of a wholly-owned subsidiary (the
"Subsidiary") that holds FLexible EXchange(TM) Options ("FLEX Options") that
reference the price performance of the Underlying ETF. The Fund does not invest
directly in FLEX Options. The Fund gains exposure to these investments
exclusively by investing in the Subsidiary. The Fund's investment in the
Subsidiary may not exceed 25% of the Fund's total assets at the end of each
fiscal quarter.
Subsequent Target Outcome Periods will begin on the day the prior Target Outcome
Period ends and will end on the approximate three-month anniversary of that new
Target Outcome Period. On the first day of each new Outcome Period, the Fund
resets by investing in a new set of FLEX Options that will provide a new cap for
the new Outcome Period. This means that the cap will change for each Outcome
Period based upon prevailing market conditions at the beginning of each Outcome
Period. The Fund will be perpetually offered and not terminate after the initial
or any subsequent Target Outcome Period. An investor that purchases Fund shares
other than on the first day of an Outcome Period and/or sells Fund shares prior
to the end of an Outcome Period may experience results that are very different
from the target outcomes sought by the Fund for that Outcome Period. The Fund is
classified as non-diversified under the Investment Company Act of 1940, as
amended. The shares of the Fund are listed and traded on the Cboe BZX Exchange,
Inc., under the ticker symbol "BGLD".
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception (1/20/21)
to 12/31/21
<S> <C>
FUND PERFORMANCE
NAV -5.30%
Market Price -5.35%
INDEX PERFORMANCE
LBMA Gold Price -1.86%
S&P 500(R) Index - Price Return 23.74%
--------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Cumulative Total Returns" represent the total change in value
of an investment over the period indicated.
The 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 of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Since shares of the
Fund did not trade in the secondary market until after the Fund's inception, for
the period from inception to the first day of secondary market trading in shares
of the Fund, the NAV of the Fund is used as a proxy for the secondary market
trading price to calculate market returns. NAV and market returns assume that
all distributions have been reinvested in the Fund at NAV and Market Price,
respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike 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. 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 the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
Page 2
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) (CONTINUED)
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JANUARY 20, 2021 - DECEMBER 31, 2021
FT Cboe Vest
Gold Strategy S&P 500(R) Index -
Quarterly Buffer ETF LBMA Gold Price Price Return
<S> <C> <C> <C>
1/20/21 $10,000 $10,000 $10,000
6/30/21 9,645 9,478 11,157
12/31/21 9,469 9,814 12,374
</TABLE>
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 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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 3
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
ANNUAL REPORT
DECEMBER 31, 2021 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to FT Cboe Vest Gold Strategy Quarterly Buffer ETF ("BGLD" or the
"Fund"). First Trust is responsible for the ongoing monitoring of the Fund's
investment portfolio, managing the Fund's business affairs and providing certain
administrative services necessary for the management of the Fund.
SUB-ADVISOR
Cboe Vest(SM) Financial LLC ("Cboe Vest" or the "Sub-Advisor") serves as the
investment sub-advisor to the Fund. In this capacity, Cboe Vest is responsible
for the selection and ongoing monitoring of the securities in the Fund's
investment portfolio. Cboe Vest, with principal offices at 1765 Greensboro
Station Pl, 9th Floor, McLean, Virginia 22102, was founded in 2012. Cboe Vest
had approximately $5.3 billion under management or committed to management as of
December 31, 2021.
PORTFOLIO MANAGEMENT TEAM
KARAN SOOD, MANAGING DIRECTOR OF CBOE VEST
HOWARD RUBIN, MANAGING DIRECTOR OF CBOE VEST
MARKET RECAP
From the Fund's inception date of January 20, 2021 through December 31, 2021
(the "period") global stock markets largely continued to post solid gains,
extending the massive rally from the February 2020 lows brought on by the
coronavirus ("COVID-19") pandemic. Governments across the globe continued to
support their economies with extensive fiscal and monetary programs. These
efforts, combined with extraordinarily strong corporate earnings, have fueled
equity markets across the globe. Markets moved persistently higher over the
period, with small and infrequent pullbacks.
The S&P 500(R) Index, the well-known measure of U.S. large-capitalization
("cap") stocks, ended the period up 25.4%. Mid- and small-cap stocks, as
measured by the S&P Midcap 400(R) Index and the Russell 2000(R) Small Cap Index,
rallied, but to a much smaller extent, gaining 16.5% and 4.9%, respectively, for
the same period. The Nasdaq 100 Index, a tech-heavy market measure, gained
14.6%, during the period. International markets were mixed during the period, as
evidenced by the diverging performances in broad foreign market indices. For
example, the MSCI EAFE Index (a broad measure of international stocks in
developed markets, excluding the U.S.) gained 9.2%, while the MSCI Emerging
Markets Index fell 10.1% for the same period.
During the period, gold, as measured by the price return of the SPDR(R) Gold
Trust ("GLD" or the "Underlying EFT"), fell by 2.5%.
U.S. economic data all pointed to a rapidly recovering economy. Growth in gross
domestic product ("GDP") in the most recent three quarterly reports (the first
through third quarters of 2021) came in at seasonally adjusted annualized rates
of 6.3%, 6.7%, and 2.3%, sequentially. A current Bloomberg survey of economists
shows a consensus projection of 3.8% GDP growth in 2022 (versus 2021.)
The U.S. unemployment rate, which had been sitting at a 50-year low of 3.5% in
February of 2020, shot up to 14.7% just two months later, at the height of the
pandemic frenzy. This rate had fallen to 6.4% in January of 2021, as the period
began. Throughout the period, the unemployment rate continued to move sharply
lower, ending at 3.9% in December 2021.
U.S inflation levels accelerated dramatically over the period as the Federal
Reserve (the "Fed") kept short-term interest rates near zero throughout the
period. The most recent (December 2021) Consumer Price Index report shows
year-over-year inflation running at a 7.0% rate, up from just 1.4% from the
January 2021 report. This year-over year reading was the highest since 1982. One
particular component of the economy that is overheating is the housing market.
Housing prices in the U.S. increased by 19.1% over the last twelve months,
according to the most recent (October 2021) S&P Case-Shiller U.S. National Home
Price Index.
PERFORMANCE ANALYSIS
The following table provides information pertaining to the caps and performance
for each of the quarterly Target Periods during the time from the Fund's
inception on January 20, 2021 through December 31, 2021. The Fund's cap is reset
quarterly, at the end of February, May, August, and November. The table shows
the caps that went into effect on each of the quarterly start dates. Caps are
shown both pre and post expenses.
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
ANNUAL REPORT
DECEMBER 31, 2021 (UNAUDITED)
For each quarterly target period the Fund's performance is generally impacted by
a number of factors. These factors include GLD performance, the Cap and Buffer
levels, and expenses.
<TABLE>
<CAPTION>
BGLD ACTUAL
TARGET PERIODS CAPS CAPS GLD BGLD ACTUAL BGLD TARGET VS. TARGET
START END BEFORE EXPENSES EXPENSES AFTER EXPENSES PERFORMANCE PERFORMANCE PERFORMANCE (VARIANCE)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1/20/2021 2/26/2021 6.10% 0.09% 6.01% -7.74% -5.00% -5.09% 0.09%
2/26/2021 5/28/2021 6.20% 0.22% 5.98% 10.24% 6.00% 5.98% 0.02%
5/28/2021 8/31/2021 3.94% 0.23% 3.71% -4.87% -5.02% -5.11% 0.09%
8/31/2021 11/30/2021 4.86% 0.22% 4.64% -2.47% -2.62% -2.69% 0.07%
11/30/2021 2/28/2022 3.90% 0.22% 3.68% 3.30%** 1.66%** N/A* N/A*
</TABLE>
* The target period beginning November 30, 2021, had not been completed as
of December 31, 2021. This target period will end on February 28, 2022.
** Performance from 11/30/21 through 12/31/21.
MARKET AND FUND OUTLOOK
Over the period, implied volatilities in U.S. equity markets fell sharply. We
expect to see implied volatilities rise over the coming year.
In 2021, the Fed chose to not tighten monetary policy in response to rising
inflation, claiming that the recent price increases were primarily due to
COVID-19-related economic impacts such as supply chain problems, and
characterizing the elevated inflation rates as "transitory" in nature. The Fed
is now signaling that they will begin raising short-term interest rates very
soon, and markets now anticipate three quarter-point hikes in 2022. This will
most likely lead to a headwind for equities and higher volatility in the coming
year.
From short-term Treasuries to High Yield Bonds, fixed income investments
continue to linger around all-time lows in nominal yield. Combined with the
elevated inflation levels seen in the last half of 2021, many fixed income
investments currently have negative real yields (i.e., nominal yield less
inflation.) This bodes quite poorly for future fixed income returns, leading
many market analysts to claim that the traditional "60/40 stock/bond allocation"
strategy is dead. In response, investors are looking to reallocate away from
fixed income.
Gold, historically thought of as the predominant inflation hedge, now competes
with cryptocurrencies, such as Bitcoin, for that honor. We believe that the
extremely high volatility seen in cryptocurrencies will continue to impact gold
prices, as investors sort out which inflation hedge vehicle they will want to
use going forward.
The Fund is an alternative that investors should consider. The Fund is designed
to protect investors against certain downside movements in gold prices as
measured by GLD, while limiting the investor's participation in larger upside
moves in GLD. In the current market environment, which includes elevated
inflation rates, the beginning of a Fed tightening cycle, and negative real
yields, the Fund, in appropriate allocations, could be a suitable alternative to
either equity and/or fixed income investments.
Page 5
<PAGE>
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2021 (UNAUDITED)
As a shareholder of FT Cboe Vest Gold Strategy Quarterly Buffer ETF (the
"Fund"), you incur two types of costs: (1) transaction costs; and (2) ongoing
costs, including management fees, distribution and/or service (12b-1) fees, if
any, and other Fund expenses. This Example is intended to help you understand
your ongoing costs of investing in the Fund 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, 2021.
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 the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the 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 Fund 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.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2021 DECEMBER 31, 2021 PERIOD PERIOD (a)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
Actual $1,000.00 $ 981.80 0.90% $4.50
Hypothetical (5% return before expenses) $1,000.00 $1,020.67 0.90% $4.58
</TABLE>
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (July 1,
2021 through December 31, 2021), multiplied by 184/365 (to reflect the
six-month period).
Page 6
<PAGE>
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
CONSOLIDATED PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
------------- ------------------------------------------------------------------ ------------ ------------ ------------
U.S. TREASURY BILLS -- 92.9%
<S> <C> <C> <C> <C>
$ 16,702,900 U.S. Treasury Bill (a)............................................ (b) 02/24/22 $ 16,702,357
(Cost $16,701,885) ------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------------- ------------------------------------------------------------------------------------------------ ------------
MONEY MARKET FUNDS -- 0.7%
<S> <C> <C>
117,806 Dreyfus Government Cash Management Fund, Institutional Shares - 0.03% (c)....................... 117,806
(Cost $117,806) ------------
TOTAL INVESTMENTS -- 93.6%...................................................................... 16,820,163
(Cost $16,819,691) (d) ------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
------------- --------------------------------------------------- ------------ ------------ ------------ ------------
CALL OPTIONS PURCHASED -- 8.5%
<S> <C> <C> <C> <C> <C>
1,069 SPDR(R) Gold Shares................................ $ 18,275,624 $ 157.23 02/28/22 1,531,782
(Cost $1,195,966) (d) ------------
WRITTEN OPTIONS -- (2.0)%
CALL OPTIONS WRITTEN -- (1.9)%
(1,069) SPDR(R) Gold Shares................................ (18,275,624) 171.95 02/28/22 (349,313)
(Premiums received $282,459) ------------
PUT OPTIONS WRITTEN -- (0.1)%
(1,069) SPDR(R) Gold Shares................................ (18,275,624) 140.68 02/28/22 (9,845)
(Premiums received $38,728) ------------
TOTAL WRITTEN OPTIONS........................................................................... (359,158)
(Premiums received $321,187) (d) ------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%...................................................... (12,671)
------------
NET ASSETS -- 100.0%............................................................................ $ 17,980,116
============
</TABLE>
-----------------------------
(a) This security or a portion of this security is segregated as collateral
for written options contracts.
(b) Zero coupon security.
(c) Rate shown reflects yield as of December 31, 2021.
(d) Aggregate cost for federal income tax purposes is $16,819,691. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$341,975 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$37,971. The net unrealized appreciation was $304,004. The amounts
presented are inclusive of derivative contracts.
See Notes to Consolidated Financial Statements Page 7
<PAGE>
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
CONSOLIDATED PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to
Consolidated Financial Statements):
<TABLE>
<CAPTION>
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
U.S. Treasury Bills.................................. $ 16,702,357 $ -- $ 16,702,357 $ --
Money Market Funds................................... 117,806 117,806 -- --
-------------- -------------- -------------- --------------
Total Investments.................................... 16,820,163 117,806 16,702,357 --
Call Options Purchased............................... 1,531,782 -- 1,531,782 --
-------------- -------------- -------------- --------------
Total................................................ $ 18,351,945 $ 117,806 $ 18,234,139 $ --
============== ============== ============== ==============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
Call Options Written................................. $ (349,313) $ -- $ (349,313) $ --
Put Options Written.................................. (9,845) -- (9,845) --
-------------- -------------- -------------- --------------
Total................................................ $ (359,158) $ -- $ (359,158) $ --
============== ============== ============== ==============
</TABLE>
Page 8 See Notes to Consolidated Financial Statements
<PAGE>
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2021
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................. $ 16,820,163
Options contracts purchased, at value.................................. 1,531,782
Cash................................................................... 879
Dividends receivable................................................... 3
---------------
Total Assets........................................................ 18,352,827
---------------
LIABILITIES:
Options contracts written, at value.................................... 359,158
Investment advisory fees payable....................................... 13,553
---------------
Total Liabilities................................................... 372,711
---------------
NET ASSETS............................................................. $ 17,980,116
===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 17,666,550
Par value.............................................................. 9,500
Accumulated distributable earnings (loss).............................. 304,066
---------------
NET ASSETS............................................................. $ 17,980,116
===============
NET ASSET VALUE, per share............................................. $ 18.93
===============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 950,002
===============
Investments, at cost................................................... $ 16,819,691
===============
Premiums paid on options contracts purchased........................... $ 1,195,966
===============
Premiums received on options contracts written......................... $ 321,187
===============
</TABLE>
See Notes to Consolidated Financial Statements Page 9
<PAGE>
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 2021 (a)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest............................................................... $ 2,357
Dividends.............................................................. 184
---------------
Total investment income............................................. 2,541
---------------
EXPENSES:
Investment advisory fees............................................... 74,712
---------------
Total expenses...................................................... 74,712
---------------
NET INVESTMENT INCOME (LOSS)........................................... (72,171)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... 2
Purchased options contracts......................................... (859,404)
Written options contracts........................................... 156,912
---------------
Net realized gain (loss)............................................... (702,490)
---------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 472
Purchased options contracts......................................... 335,816
Written options contracts........................................... (37,971)
---------------
Net change in unrealized appreciation (depreciation)................... 298,317
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (404,173)
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ (476,344)
===============
</TABLE>
(a) Inception date is January 20, 2021, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 10 See Notes to Consolidated Financial Statements
<PAGE>
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD
ENDED
12/31/2021 (a)
---------------
<S> <C>
OPERATIONS:
Net investment income (loss)........................................... $ (72,171)
Net realized gain (loss)............................................... (702,490)
Net change in unrealized appreciation (depreciation)................... 298,317
---------------
Net increase (decrease) in net assets resulting from operations........ (476,344)
---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 23,206,989
Cost of shares redeemed................................................ (4,750,529)
---------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................................... 18,456,460
---------------
Total increase (decrease) in net assets................................ 17,980,116
NET ASSETS:
Beginning of period.................................................... --
---------------
End of period.......................................................... $ 17,980,116
===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ --
Shares sold............................................................ 1,200,002
Shares redeemed........................................................ (250,000)
---------------
Shares outstanding, end of period...................................... 950,002
===============
</TABLE>
(a) Inception date is January 20, 2021, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
See Notes to Consolidated Financial Statements Page 11
<PAGE>
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
CONSOLIDATED FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
PERIOD
ENDED
12/31/2021 (a)
---------------
<S> <C>
Net asset value, beginning of period........................... $ 19.99
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.08)
Net realized and unrealized gain (loss)........................ (0.98)
---------
Total from investment operations............................... (1.06)
---------
Net asset value, end of period................................. $ 18.93
=========
TOTAL RETURN (b)............................................... (5.30)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 17,980
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.90% (c)
Ratio of net investment income (loss) to average net assets.... (0.87)% (c)
Portfolio turnover rate (d).................................... 0%
</TABLE>
(a) Inception date is January 20, 2021, which is consistent with the
commencement of investment operations and is the date 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 return presented does 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 12 See Notes to Consolidated Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
DECEMBER 31, 2021
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-two exchange-traded funds. This report
covers the FT Cboe Vest Gold Strategy Quarterly Buffer ETF (the "Fund"), which
trades under the ticker "BGLD" on the Cboe BZX Exchange, Inc. ("Cboe BZX"). The
Fund represents a separate series of shares of beneficial interest in the Trust.
Unlike conventional mutual funds, the Fund issues and redeems shares on a
continuous basis, at net asset value ("NAV"), only in large blocks of shares
known as "Creation Units."
The Fund is an actively managed exchange-traded fund. The Fund's investment
objective is to seek to provide investors with returns (before fees, expenses
and taxes) that match those of the SPDR(R) Gold Trust (the "Underlying ETF"), up
to a predetermined upside cap of 3.90% (before fees, expenses and taxes) and
3.68% (after fees and expenses, excluding brokerage commissions, trading fees,
taxes and extraordinary expenses not included in the Fund's management fee),
while providing a buffer against Underlying ETF losses between -5% and -15%
(before fees, expenses and taxes) over the period from December 1, 2021 to
February 28, 2022. Prior to December 1, 2021, the Fund's investment objective
included an upside cap of 3.94% and 4.86% (before fees, expenses and taxes) and
3.71% and 4.64% (after fees and expenses, excluding brokerage commissions,
trading fees, taxes and extraordinary expenses not included in the Fund's
management fee) and an Outcome Period of June 1, 2021 to August 31, 2021 and
September 1, 2021 to November 30, 2021, respectively. Under normal market
conditions, the Fund, through a wholly-owned subsidiary (the "Subsidiary"),
organized under the laws of the Cayman Islands, invests in FLexible EXchange(R)
Options ("FLEX Options") on the Underlying ETF. The Fund does not invest
directly in FLEX Options. The Fund gains exposure to these investments
exclusively by investing in the Subsidiary. The Fund's investment in the
Subsidiary may not exceed 25% of the Fund's total assets at the end of each
fiscal quarter. As of December 31, 2021, the Fund invested 17.79% of the Fund's
total assets in the Subsidiary. There can be no assurance that the Fund will
achieve its investment objective. The Fund may not be appropriate for all
investors.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
consolidated financial statements include the accounts on a consolidated basis
of the Subsidiary. All intercompany accounts and transactions have been
eliminated in consolidation. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of the
consolidated financial statements. The preparation of the consolidated 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 consolidated
financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The 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. The Fund's NAV is calculated 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 shares outstanding.
The 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 Fund's
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 Consolidated Portfolio of Investments. The Fund's investments
are valued as follows:
Exchange-traded options contracts (other than FLEX Option contracts) are
valued at the closing price in the market where such contracts are
principally traded. If no closing price is available, exchange-traded
options contracts are fair valued at the mean of their most recent bid and
asked price, if available, and otherwise at their closing bid price.
Over-the-counter options contracts are fair valued at the mean of their
most recent bid and asked price, if available, and otherwise at their
closing bid price. FLEX Option contracts are normally valued using a
model-based price provided by a third-party pricing vendor. On days when a
trade in a FLEX Option contract occurs, the trade price will be used to
value such FLEX Option contracts in lieu of the model price.
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FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
DECEMBER 31, 2021
U.S. Treasuries are fair valued on the basis of valuations provided by a
third-party pricing service approved by the Trust's Board of Trustees.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
If the Fund's investments are not able to be priced by pre-established pricing
methods, such investments may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. A variety of factors
may be considered in determining the fair value of such investments.
Valuing the Fund's holdings using fair value pricing will result in using prices
for those holdings that may differ from current market valuations. The
Subsidiary's holdings will be valued in the same manner as the Fund's holdings.
The Fund is 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 the Fund's investments as of December 31, 2021, is
included with the Fund's Consolidated Portfolio of Investments.
B. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are recorded as of the trade date. Realized gains and
losses from investment transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded daily on the accrual basis. Amortization of premiums and accretion of
discounts are recorded using the effective interest method.
C. FLEX OPTIONS
FLEX Options are customized equity or index option contracts that trade on an
exchange, but provide investors with the ability to customize key contract terms
like exercise prices, styles and expiration dates. FLEX Options are guaranteed
for settlement by the Options Clearing Corporation.
The Fund, through the Subsidiary, purchases and sells call and put FLEX Options
based on the performance of the Underlying ETF. The FLEX Options that the
Subsidiary holds that reference the Underlying ETF will give the Subsidiary the
right to receive or deliver shares of the Underlying ETF on the option
expiration date at a strike price, depending on whether the option is a put or
call option and whether the Subsidiary purchases or sells the option. The FLEX
Options held by the Subsidiary are European style options, which are exercisable
at the strike price only on the FLEX Option expiration date.
When the Subsidiary writes (sells) an option, an amount equal to the premium
received by the Subsidiary is included in "Options contracts written, at value"
on the Consolidated Statement of Assets and Liabilities. Gain or loss on written
options is presented separately as "Net realized gain (loss) on written options
contracts" on the Consolidated Statement of Operations. When the Subsidiary
purchases a call or put option, the premium paid represents the cost of the call
or put option, which is included in "Options contracts purchased, at value" on
the Consolidated Statement of Assets and Liabilities. Gain or loss on purchased
options is included in "Net realized gain (loss) on purchased options contracts"
on the Consolidated Statement of Operations.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid annually by
the Fund, or as the Board of Trustees may determine from time to time.
Distributions of net realized capital gains earned by the Fund, if any, are
distributed at least annually.
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FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
DECEMBER 31, 2021
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 consolidated financial
statements are periodically adjusted for permanent differences in order to
reflect their tax character. These permanent differences are primarily due to
the varying treatment of income and gain/loss on significantly modified
portfolio securities held by the Fund 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 consolidated financial
statement and tax purposes, will reverse at some time in the future.
There were no distributions paid during the fiscal period ended December 31,
2021.
As of December 31, 2021, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income $ --
Accumulated capital and other gain (loss) (5,687)
Net unrealized appreciation (depreciation) 304,004
E. INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying with
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), 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, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Subsidiary is classified as a controlled foreign corporation under
Subchapter N of the Code. Therefore, the Fund is required to increase its
taxable income by its share of the Subsidiary's income, whether or not such
earnings are distributed by the Subsidiary to the Fund. Net investment losses of
the Subsidiary cannot be deducted by the Fund in the current period nor carried
forward to offset taxable income in future periods.
The Fund is 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. The taxable year ended 2021
remains open to federal and state audit. As of December 31, 2021, management has
evaluated the application of these standards to the Fund and has determined that
no provision for income tax is required in the Fund's consolidated financial
statements for uncertain tax positions.
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is 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. At December 31, 2021, for
federal income tax purposes, the Fund had no non-expiring capital loss
carryforwards.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal period ended December 31, 2021, the Fund did
not incur any net ordinary losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) and net unrealized appreciation (depreciation) on the
Consolidated Statement 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). These adjustments are primarily due to the difference between book and
tax treatment of net investment income from the Subsidiary. The results of
operations and net assets were not affected by these adjustments. For the fiscal
period ended December 31, 2021, the adjustments for the Fund were as follows:
Accumulated Accumulated
Net Investment Net Realized Paid-in
Income (Loss) Gain (Loss) Capital
-------------- -------------- --------------
$ 77,920 $ 702,490 $ (780,410)
F. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
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FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
DECEMBER 31, 2021
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, 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 ongoing monitoring of the Fund's and the
Subsidiary's investment portfolios, managing the Fund's business affairs and
providing certain administrative services necessary for the management of the
Fund.
First Trust is responsible for the expenses of the Fund and the Subsidiary
including the cost of transfer agency, sub-advisory, custody, fund
administration, legal, audit and other services, but excluding fee payments
under the Investment Management Agreement, interest, taxes, acquired fund fees
and expenses, if any, brokerage commissions and other expenses connected with
the execution of portfolio transactions, distribution and service fees payable
pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Fund has
agreed to pay First Trust an annual management fee equal to 0.90% of its average
daily net assets. The Subsidiary does not pay First Trust a separate management
fee.
Cboe Vest(SM) Financial LLC ("Cboe Vest"), an affiliate of First Trust, serves
as the Fund's sub-advisor and manages the Fund's portfolio subject to First
Trust's supervision. Pursuant to the Investment Management Agreement, between
the Trust, on behalf of the Fund, and the Advisor, and the Investment
Sub-Advisory Agreement among the Trust, on behalf of the Fund, the Advisor and
Cboe Vest, First Trust will supervise Cboe Vest and its management of the
investment of the Fund's assets and will pay Cboe Vest for its services as the
Fund's sub-advisor a sub-advisory fee equal to 50% of any remaining monthly
unitary management fee paid to the Advisor after the average Fund's expenses
accrued during the most recent twelve months are subtracted from the unitary
management fee for that month.
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
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or an index fund. Additionally, the Lead Independent
Trustee and the Chairs 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 Chairs 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
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, derivatives, and in-kind transactions, for the fiscal
period ended December 31, 2021, were $0 and $0, respectively.
For the fiscal period ended December 31, 2021, the Fund did not have any in-kind
purchases or sales.
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by the Subsidiary at
December 31, 2021, the primary underlying risk exposure and the location of
these instruments as presented on the Consolidated Statement of Assets and
Liabilities.
<TABLE>
<CAPTION>
ASSET DERIVATIVES LIABILITY DERIVATIVES
---------------------------------------- ----------------------------------------
CONSOLIDATED CONSOLIDATED
DERIVATIVES STATEMENT OF ASSETS AND STATEMENT OF ASSETS AND
INSTRUMENT RISK EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE
----------------- ----------------- ------------------------ ------------- ------------------------ -------------
<S> <C> <C> <C> <C> <C>
Commodity Options contracts Options contracts
Options Risk purchased, at value $ 1,531,782 written, at value $ 359,158
</TABLE>
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FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
DECEMBER 31, 2021
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the fiscal period
ended December 31, 2021, on derivative instruments, as well as the primary
underlying risk exposure associated with the instruments.
CONSOLIDATED STATEMENT OF OPERATIONS LOCATION
-----------------------------------------------------------------------------
COMMODITY RISK EXPOSURE
Net realized gain (loss) on:
Purchased options contracts $ (859,404)
Written options contracts 156,912
Net change in unrealized appreciation (depreciation) on:
Purchased options contracts 335,816
Written options contracts (37,971)
During the fiscal period ended December 31, 2021, the premiums for purchased
options contracts opened were $3,562,338 and the premiums for purchased options
contracts closed, exercised and expired were $2,366,372.
During the fiscal period ended December 31, 2021, the premiums for written
options contracts opened were $757,016 and the premiums for written options
contracts closed, exercised and expired were $435,829.
The Fund does not have the right to offset financial assets and liabilities
related to options contracts on the Consolidated Statement of Assets and
Liabilities.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
The Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with the Fund's service providers to
purchase and redeem Fund shares directly with the Fund in large blocks of shares
known as "Creation Units." Prior to the start of trading on every business day,
the Fund publishes through the National Securities Clearing Corporation ("NSCC")
the "basket" of securities, cash or other assets that it will accept in exchange
for a Creation Unit of the Fund's shares. An Authorized Participant that wishes
to effectuate a creation of the Fund's shares deposits with the Fund the
"basket" of securities, cash or other assets identified by the Fund that day,
and then receives the Creation Unit of the Fund's shares in return for those
assets. After purchasing a Creation Unit, the Authorized Participant may
continue to hold the Fund's shares or sell them in the secondary market. The
redemption process is the reverse of the purchase process: the Authorized
Participant redeems a Creation Unit of the Fund's shares for a basket of
securities, cash or other assets. The combination of the creation and redemption
process with secondary market trading in the Fund's shares and underlying
securities provides arbitrage opportunities that are designed to help keep the
market price of the Fund's shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of the Fund times the number of shares
in a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of the Fund times the
number of shares in a Creation Unit, minus the fees described above and, if
applicable, any operational processing and brokerage costs, transfer fees, stamp
taxes and part or all of the spread between the expected bid and offer side of
the market related to the securities comprising the redemption basket. Investors
who use the services of a broker or other such intermediary in addition to an
Authorized Participant to effect a redemption of a Creation Unit may also be
assessed an amount to cover the cost of such services. The redemption fee
charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits
redemption fees to no more than 2% of the value of the shares redeemed.
7. 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 Fund is
authorized to pay an amount up to 0.25% of its average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Fund, for amounts expended to finance activities primarily intended to result in
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FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
DECEMBER 31, 2021
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 Fund, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before April 30, 2023.
8. INDEMNIFICATION
The Trust, on behalf of the Fund, 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.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through
the date the consolidated financial statements were issued and has determined
that there were no subsequent events requiring recognition or disclosure in the
consolidated financial statements that have not already been disclosed.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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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 consolidated statement of assets and
liabilities of FT Cboe Vest Gold Strategy Quarterly Buffer ETF (the "Fund"), a
series of the First Trust Exchange-Traded Fund, including the consolidated
portfolio of investments, as of December 31, 2021, the related consolidated
statement of operations, the consolidated statements of changes in net assets,
and the consolidated financial highlights for the period from January 20, 2021
(commencement of operations) through December 31, 2021, and the related notes.
In our opinion, the financial statements and financial highlights present
fairly, in all material respects, the financial position of the Fund as of
December 31, 2021, and the results of its operations, the changes in its net
assets, and the financial highlights for the period from January 20, 2021
(commencement of operations) through December 31, 2021 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 Fund's management. Our responsibility is to express an opinion on the Fund's
financial statements and financial highlights based on our audit. 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 Fund 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 audit 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 Fund is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audit 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 Fund's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit 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 audit
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, 2021, by correspondence with
the custodian and brokers; when replies were not received from brokers, we
performed other auditing procedures. We believe that our audit provides a
reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 24, 2022
We have served as the auditor of one or more First Trust investment companies
since 2001.
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ADDITIONAL INFORMATION
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FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
DECEMBER 31, 2021 (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 the 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 Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable year ended December 31, 2021, the following percentages of
ordinary income (including the short-term capital gain) distribution paid by the
Fund qualifies for the dividends received deduction available to corporations
and is hereby designated as qualified dividend income:
Dividend Received Deduction Qualified Dividend Income
--------------------------- -------------------------
0.00% 0.00%
Distributions paid to foreign shareholders during the Fund's fiscal year ended
December 31, 2021 that were properly designated by the Fund as "interest-related
dividends" or "short-term capital gain dividends," may not be subject to federal
income tax provided that the income was earned directly by such foreign
shareholders.
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 significant
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
more broadly diversified.
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.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
Page 20
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
DECEMBER 31, 2021 (UNAUDITED)
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
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.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 2021. The unavailability or replacement of LIBOR may affect the
value, liquidity or return on certain fund investments and may result in costs
Page 21
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
DECEMBER 31, 2021 (UNAUDITED)
incurred in connection with closing out positions and entering into new trades.
Any potential effects of the transition away from LIBOR on the fund or on
certain instruments in which the fund invests can be difficult to ascertain, and
they may vary depending on a variety of factors, and they could result in losses
to the fund.
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. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. While the development of
vaccines has slowed the spread of the virus and allowed for the resumption of
"reasonably" normal business activity in the United States, many countries
continue to impose lockdown measures in an attempt to slow the spread.
Additionally, there is no guarantee that vaccines will be effective against
emerging variants of the disease.
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;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; 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.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
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.
DISCLAIMER
The Fund is not sponsored, endorsed, sold or promoted by SPDR(R) Gold Shares,
SPDR, or Standard & Poor's(R) (together with their affiliates hereinafter
referred to as the "Corporations"). The Corporations have not passed on the
legality or suitability of, or the accuracy or adequacy of, descriptions and
disclosures relating to the Fund or the FLEX Options. The Corporations make no
representations or warranties, express or implied, regarding the advisability of
investing in the Fund or the FLEX Options or results to be obtained by the Fund
or the FLEX Options, shareholders or any other person or entity from use of the
SPDR(R) Gold Shares. The Corporations have no liability in connection with the
management, administration, marketing or trading of the Fund or the FLEX
Options.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 22
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
DECEMBER 31, 2021 (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.
<TABLE>
<CAPTION>
NUMBER OF
PORTFOLIOS IN
TERM OF OFFICE THE FIRST TRUST OTHER TRUSTEESHIPS
NAME, AND YEAR FIRST FUND COMPLEX OR DIRECTORSHIPS HELD
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY BY TRUSTEE DURING
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 216 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 216 Director of ADM Investor
(1957) (Futures Commission Merchant) Services, Inc., ADM
o Since Inception Investor Services
International, Futures
Industry Association,
and National Futures
Association
Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate Aurora 216 Director and Board Chair
(1964) Health and President, Advocate Aurora of Advocate Home Health
Services, Advocate Home
o Since 2021 Continuing Health Division (Integrated Care Products and
Healthcare System) Advocate Hospice;
Director and Board Chair
of Aurora At Home
(since 2018); Director
of Advocate
Physician Partners
Accountable Care
Organization; Director
and Board Chair of
RML Long Term
Acute Care Hospitals;
and Director of Senior
Helpers (since 2021)
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 216 Director of Trust
(1956) and Management Consulting) Company of Illinois
o Since Inception
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 216 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust
Chairman of the Board Advisors L.P. and First Trust Portfolios 216 None
(1955) L.P., Chairman of the Board of
o Since Inception Directors, BondWave LLC (Software
Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
</TABLE>
-----------------------------
(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 23
<PAGE>
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
DECEMBER 31, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
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)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
o Since January 2016 to 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 First
(1970) 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. and
(1966) First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
</TABLE>
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 24
<PAGE>
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD)
DECEMBER 31, 2021 (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
professional or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2021
Page 25
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<PAGE>
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<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
Cboe Vest(SM) Financial LLC
1765 Greensboro Station Pl, 9th Floor
McLean, VA 22102
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
320 South Canal Street
Chicago, IL 60606
<PAGE>
[BLANK BACK COVER]
<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund
--------------------------------------------------------------------------------
FT Cboe Vest Gold Strategy Target Income ETF(R) (IGLD)
-------------------------------
Annual Report
For the Period March 2, 2021
(Commencement of Operations)
through December 31, 2021
-------------------------------
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
ANNUAL REPORT
DECEMBER 31, 2021
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Commentary......................................................... 4
Understanding Your Fund Expenses............................................. 6
Consolidated Portfolio of Investments........................................ 7
Consolidated Statement of Assets and Liabilities............................. 9
Consolidated Statement of Operations......................................... 10
Consolidated Statement of Changes in Net Assets.............................. 11
Consolidated Financial Highlights............................................ 12
Notes to Consolidated Financial Statements................................... 13
Report of Independent Registered Public Accounting Firm...................... 19
Additional Information....................................................... 20
Board of Trustees and Officers............................................... 23
Privacy Policy............................................................... 25
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/or Cboe Vest(SM) Financial LLC ("Cboe Vest" or the
"Sub-Advisor") and their respective 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
the series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (FT Cboe Vest Gold Strategy Target Income ETF(R); hereinafter referred to
as the "Fund") 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/or Sub-Advisor and their respective 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 the Fund will achieve its investment objective. The
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's
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of certain other risks of
investing in the Fund.
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 the Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
the Fund. It includes details about the Fund and presents data and analysis that
provide insight into the Fund's performance and investment approach.
By reading the portfolio commentary from the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the 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 and/or Sub-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 the Fund are spelled out in the prospectus, the statement of
additional information, and other Fund regulatory filings.
<PAGE>
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2021
Dear Shareholders:
First Trust is pleased to provide you with the annual report for the FT Cboe
Vest Gold Strategy Target Income ETF(R) (the "Fund"), which contains detailed
information about the Fund since its inception on March 2, 2021 through December
31, 2021. Please note that information contained in this letter and the annual
report prior to the Fund's inception date does not apply to the Fund.
Being that this is a year-end review, I would like to touch on the state of the
business climate and securities markets in the U.S. The two biggest stories in
2021 were clearly the ongoing fight against the coronavirus ("COVID-19")
pandemic and the surge in the rate of inflation, which I believe is a byproduct
of that fight. The COVID-19 pandemic is closing in on its second anniversary and
it continues to curb economic activity in the U.S. and abroad. It is nearly as
challenging today as it was at its peak in 2020.
The emergence of the Omicron variant in the latter half of 2021 was particularly
disappointing because we had been making some inroads into fully reopening the
U.S. economy until its arrival. Americans were dining out. Airline travel was
picking up and people were even taking cruises again. We have learned that the
Omicron variant, while seemingly not as dangerous as its predecessor, the Delta
variant, at least in terms of the number of deaths to date, is still extremely
contagious, especially for those individuals who have not been vaccinated. The
U.S. federal government has funneled trillions of dollars of stimulus and
subsidies into the financial system to mitigate the economic fallout from the
pandemic. That level of support is unprecedented and has likely fueled much of
the surge in inflation, as measured by the Consumer Price Index ("CPI"). The
standard definition for inflation is "too many dollars chasing too few goods."
The explosion of the U.S. money supply has easily overwhelmed the volume of
goods available to consumers. Global supply chain bottlenecks, including the
backlog of container ships at ports in Southern California, have also
contributed to the shortages of goods. In December 2021, the trailing 12-month
rate on the CPI was 7.0%, up from 1.4% last December, according to the U.S.
Bureau of Labor Statistics. The last time inflation was this elevated was in
1982.
Since the onset of COVID-19, companies and millions of employees have scrambled
to adapt to the new normal of working remotely, typically from home. What an
amazing thing to watch. While opinions may vary, it has become evident that the
workplace culture has probably changed forever. According to Barron's magazine,
we should look for more of a hybrid arrangement moving forward that would entail
workers being at the office for three days a week and home for two. I do not
believe that the stock and bond markets would have performed nearly as well over
the past two years had U.S. businesses not overcome the adversity brought their
way by COVID-19. Oh, and the trillions of dollars from the government. In 2021,
the S&P 500(R) Index posted a total return of 28.71%, and that came on the heels
of an 18.40% gain in 2020, according to Bloomberg. From 1926-2021 (a span of 96
years), the S&P 500(R) Index posted an average annual total return of 10.44%,
according to Morningstar/Ibbotson Associates. Investors should relish these
outsized returns. Bond investors have earned more modest total returns over the
past two years. Bond returns were higher for most bond categories in 2020 due to
the artificially depressed yield on the 10-Year Treasury Note ("T-Note"). The
10-Year T-Note yield trended higher in 2021, putting some pressure on bond
prices. Expect the Federal Reserve to tighten monetary policy by raising
short-term interest rates. It could begin as early as March 2022. While the
markets could experience some near-term pain, I believe normalizing interest
rates and bond yields will prove to be a healthy and necessary transition for
the markets long-term.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the Fund
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 1
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
The FT Cboe Vest Gold Strategy Target Income ETF(R) (the "Fund") seeks to
deliver participation in the price returns of the SPDR(SM) Gold Trust (the
"Underlying ETF") while providing a consistent level of income. The Fund's
investments principally include short-term U.S. Treasury securities, cash and
cash equivalents, and the shares of a wholly-owned subsidiary ("Subsidiary")
that holds FLexible EXchange(R) Options ("FLEX Options") that reference the
price performance of the Underlying ETF. In seeking to achieve its objective,
the Fund, through the Subsidiary, will generally purchase or sell FLEX Options.
FLEX Options are customized equity or index option contracts that trade on an
exchange but provide investors with the ability to customize key contract terms
like exercise prices, styles and expiration dates. In combination, the purchased
call and sold put options generally provide exposure to price returns of the
Underlying ETF both on the upside and downside. The Fund's investment
sub-advisor is Cboe Vest(SM) Financial LLC. Additionally, as a means to generate
income, the Fund will employ a "partial covered call strategy" that seeks to
sell call options having a strike price roughly equal to the value of the
Underlying ETF at the inception of the Fund or each subsequent roll of the
strategy (such options are said to be "at-the-money") on only a portion of the
notional value of the call options purchased by the Fund. To execute this
strategy, the Fund will sell call options with an expiration date less than or
equal to approximately one month in the future (the "Target Income Period"). The
amount of call options sold by the Fund is based on a calculation designed to
result in the Fund generating income over the Target Income Period on the
average assets of the Fund from premiums from writing call options that is
approximately 3.85% higher annually than the annual yield from one-month U.S.
Treasury securities, before Fund fees and expenses. The Fund is classified as
"non-diversified" under the Investment Company Act of 1940, as amended. Shares
of the Fund are listed on the Cboe BZX Exchange, Inc. under the ticker symbol
"IGLD."
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception (3/2/21)
to 12/31/21
<S> <C>
FUND PERFORMANCE
NAV 3.14%
Market Value 3.44%
INDEX PERFORMANCE
LBMA Gold Price 5.30%
S&P 500(R) Index - Price Return 23.15%
--------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Cumulative Total Returns" represent the total change in value
of an investment over the period indicated.
The 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 of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Since shares of the
Fund did not trade in the secondary market until after the Fund's inception, for
the period from inception to the first day of secondary market trading in shares
of the Fund, the NAV of the Fund is used as a proxy for the secondary market
trading price to calculate market returns. NAV and market returns assume that
all distributions have been reinvested in the Fund at NAV and Market Price,
respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike 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. 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 the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
Page 2
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MARCH 2, 2021 - DECEMBER 31, 2021
FT Cboe Vest
Gold Strategy S&P 500(R) Index -
Target Income ETF(R) LBMA Gold Price Price Return
<S> <C> <C> <C>
3/2/21 $10,000 $10,000 $10,000
6/30/21 10,029 10,170 11,104
12/31/21 10,314 10,530 12,315
</TABLE>
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 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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 3
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
ANNUAL REPORT
DECEMBER 31, 2021 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to the FT Cboe Vest Gold Strategy Target Income ETF(R) ("IGLD" or the
"Fund"). First Trust is responsible for the ongoing monitoring of the Fund's
investment portfolio, managing the Fund's business affairs and providing certain
administrative services necessary for the management of the Fund.
SUB-ADVISOR
Cboe Vest(SM) Financial LLC ("Cboe Vest" or the "Sub-Advisor") serves as the
investment sub-advisor to the Fund. In this capacity, Cboe Vest is responsible
for the selection and ongoing monitoring of the securities in the Fund's
investment portfolio. Cboe Vest, with principal offices at 1765 Greensboro
Station Pl, 9th Floor, McLean, Virginia 22102, was founded in 2012. Cboe Vest
had approximately $5.3 billion under management or committed to management as of
December 31, 2021.
PORTFOLIO MANAGEMENT TEAM
KARAN SOOD, MANAGING DIRECTOR OF CBOE VEST
HOWARD RUBIN, MANAGING DIRECTOR OF CBOE VEST
MARKET RECAP
From the Fund's inception date of March 2, 2021 through December 31, 2021 (the
"period") global stock markets largely continued to post solid gains, extending
the massive rally from the February 2020 lows brought on by the coronavirus
("COVID-19") pandemic. Governments across the globe continued to support their
economies with extensive fiscal and monetary programs. These efforts, combined
with extraordinarily strong corporate earnings, have fueled equity markets
across the globe. Markets moved persistently higher over the period, with small
and infrequent pull backs.
The S&P 500(R) Index, the well-known measure of U.S. large-capitalization
("cap") stocks, ended the period up 24.6%. During the same period, mid- and
small-cap stocks, as measured by the S&P Midcap 400(R) Index and the Russell
2000(R) Small Cap Index, rallied, but to a much smaller extent, gaining 13.6%
and 1.5%, respectively. The Nasdaq 100 Index, a tech-heavy market measure,
gained 17.8% during the same period. International markets were mixed, as
evidenced by the diverging performances in broad foreign market indices. For
example, the MSCI EAFE Index (a broad measure of international stocks in
developed markets, excluding the U.S.) gained 9.0%, while the MSCI Emerging
Markets Index fell 7.4% during the same period.
During the period, gold, as measured by the price return of the SPDR(R) Gold
Trust ("GLD" or the "Underlying ETF"), gained 5.3%.
U.S. economic data all pointed to a rapidly recovering economy. Growth in gross
domestic product ("GDP") in the three most recent quarterly reports (first
through third quarters of 2021) came in at seasonally adjusted annualized rates
of 6.3%, 6.7%, and 2.3%, sequentially. A current Bloomberg survey of economists
shows a consensus projection of 3.8% GDP growth in 2022 (versus 2021.)
The U.S. unemployment rate, which had been sitting at a 50-year low of 3.5% in
February of 2020, shot up to 14.7% just two months later, at the height of the
pandemic frenzy. This rate had fallen to 6.0% in March of 2021, as the period
began. Throughout the period, the unemployment rate continued to move sharply
lower, ending at 3.9% in December 2021.
U.S. inflation levels accelerated dramatically over the year, as the Federal
Reserve (the "Fed") kept short-term interest rates near zero throughout the
period. The most recent (December 2021) Consumer Price Index report shows
year-over-year inflation running at a 7.0% rate, up from just 2.6% from the
March 2021 report. This year-over-year reading was the highest since 1982. One
particular component of the economy that is overheating is the housing market.
Housing prices in the U.S. increased by 19.1% over the last twelve months,
according to the most recent (October 2021) S&P Case-Shiller U.S. National Home
Price Index.
PERFORMANCE ANALYSIS
Generally, the Fund holds securities with the economic equivalent to a long
position in GLD. In addition, the Fund generally sells (writes) a certain amount
of one-month at-the-money covered call options on GLD each month.
The size of the covered call position may be expressed as a percentage of the
long GLD position. This percentage is referred to as the IGLD Overwrite
Percentage. At each month-end this percentage is determined such that the
targeted amount of premium collected from writing the options is approximately
3.85% over the 1-month treasury yield, divided by twelve. Thus, each month's
IGLD Overwrite Percentage is impacted by the market price of the options at the
time the options are sold. The higher the price of the options, the fewer
options that are needed to be sold to raise the targeted premium amount. Should
the short calls end the month in-the-money, the Fund will be negatively impacted
by the amount the calls are in-the-money.
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
ANNUAL REPORT
DECEMBER 31, 2021 (UNAUDITED)
The net effect of the long GLD position and the partial overwrite of options
allows the fund to participate in GLD rallies at a rate of 100% less the IGLD
Overwrite Percentage. For example, if the IGLD Overwrite Percentage is 20%, the
fund generally participates in 80% of the GLD rally for the month.
The following table provides information pertaining to the Fund's covered call
overwrite percentage and performance for each of the monthly reset periods
during the time from the Fund's inception on March 2, 2021 through December 31,
2021. The Fund's overwrite percentage is reset at the end of each month. The
table shows the overwrite percentages that went into effect on each of the
monthly start dates.
For each monthly reset period the Fund's performance is generally impacted by a
number of factors. These factors include GLD performance, implied volatility of
GLD, the overwrite percentage, and expenses.
<TABLE>
<CAPTION>
MONTHLY PERIODS GLD IGLD IGLD OVERWRITE
START END EXPENSES PERFORMANCE PERFORMANCE PERCENTAGE
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3/2/2021 3/31/2021 0.07% -1.51% -1.49% 16.13%
3/31/2021 4/30/2021 0.07% 3.56% 2.62% 20.97%
4/30/2021 5/28/2021 0.07% 7.68% 6.16% 25.00%
5/28/2021 6/30/2021 0.08% -7.15% -6.55% 25.41%
6/30/2021 7/30/2021 0.07% 2.53% 2.25% 21.21%
7/30/2021 8/31/2021 0.08% -0.08% 0.06% 23.53%
8/31/2021 9/30/2021 0.07% -3.22% -2.89% 22.17%
9/30/2021 10/29/2021 0.07% 1.48% 1.36% 20.33%
10/29/2021 11/30/2021 0.08% -0.69% -0.25% 22.09%
11/30/2021 12/31/2021 0.08% 3.30% 2.38% 22.15%
</TABLE>
MARKET AND FUND OUTLOOK
Over the period, implied volatilities in U.S. equity markets declined,
illustrated by a decrease in the Cboe Volatility Index ("VIX") from 24% to 17%.
We expect to see implied volatilities rise over the coming year.
In 2021, the Fed chose to not tighten monetary policy in response to rising
inflation, claiming that the recent price increases were primarily due to
COVID-19-related economic impacts such as supply chain problems, and
characterizing the elevated inflation rates as "transitory" in nature. The Fed
is now signaling that they will begin raising short-term interest rates very
soon, and markets now anticipate three quarter-point hikes in 2022. This will
most likely lead to a headwind for equities and higher volatility in the coming
year.
From short-term Treasuries to High Yield Bonds, fixed income investments
continue to linger around all-time lows in nominal yield. Combined with the
elevated inflation levels seen in the last half year, many fixed income
investments currently have negative real yields (i.e., nominal yield less
inflation.) This bodes quite poorly for future fixed income returns, leading
many market analysts to claim that the traditional "60/40 stock/bond allocation"
strategy is dead. In response, some investors are looking to reallocate away
from fixed income.
Gold, historically thought of as the predominant inflation hedge, now competes
with cryptocurrencies, such as Bitcoin, for that honor. We believe that the
extremely high volatility seen in cryptocurrencies will continue to impact gold
prices, as investors sort out which inflation hedge vehicle they will want to
use going forward.
We believe the Fund is an alternative that investors should consider. The Fund
seeks to deliver participation in the price returns of GLD while providing a
consistent level of income. The Fund has implemented a distribution policy
pursuant to which the Fund intends to declare and pay monthly dividends to
shareholders that are consistent with the premiums received from covered calls
written pursuant the Fund's investment strategy. The policy has no impact on the
Fund's investment strategy and may reduce the Fund's net asset value. The policy
may be amended at any time, or the Fund may cease distributions entirely, at any
time. Under the distribution policy, to the extent that sufficient investment
income is not available on a monthly basis, the Fund's distributions could
consist of return of capital in order to maintain the distribution rate. For the
fiscal period ended December 31, 2021, 100% of the Fund's distributions were
characterized as return of capital. The final determination of the source and
tax status of all 2021 distributions will be made after the end of 2021 and will
be provided on Form 1099-DIV. The foregoing is not to be construed as tax
advice. Please consult your tax advisor for further information regarding tax
matters.
In the current market environment, which includes elevated inflation rates, the
beginning of a Fed tightening cycle, and negative real yields, we believe the
Fund, in appropriate allocations, could be a suitable alternative in an
investor's portfolio to either equity and/or fixed income investments.
Page 5
<PAGE>
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2021 (UNAUDITED)
As a shareholder of FT Cboe Vest Gold Strategy Target Income ETF(R) (the
"Fund"), you incur two types of costs: (1) transaction costs; and (2) ongoing
costs, including management fees, distribution and/or service (12b-1) fees, if
any, and other Fund expenses. This Example is intended to help you understand
your ongoing costs of investing in the Fund 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, 2021.
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 the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the 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 Fund 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.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2021 DECEMBER 31, 2021 PERIOD PERIOD (a)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
Actual $1,000.00 $1,028.40 0.85% $4.35
Hypothetical (5% return before expenses) $1,000.00 $1,020.92 0.85% $4.33
</TABLE>
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (July 1,
2021 through December 31, 2021), multiplied by 184/365 (to reflect the
six-month period).
Page 6
<PAGE>
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
CONSOLIDATED PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
------------- ------------------------------------------------------------------ ------------ ------------ ------------
U.S. TREASURY BILLS -- 144.7%
<S> <C> <C> <C> <C>
$ 45,635,100 U.S. Treasury Bill (a)............................................ (b) 11/03/22 $ 45,535,162
(Cost $45,549,872) ------------
SHARES DESCRIPTION VALUE
------------- ------------------------------------------------------------------------------------------------ ------------
MONEY MARKET FUNDS -- 1.4%
<S> <C> <C>
436,565 Dreyfus Government Cash Management Fund, Institutional Shares - 0.03% (c)....................... 436,565
(Cost $436,565) ------------
TOTAL INVESTMENTS -- 146.1%..................................................................... 45,971,727
(Cost $45,986,437) (d) ------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
------------- --------------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CALL OPTIONS PURCHASED -- 0.4%
1,842 SPDR(R) Gold Shares................................ $ 31,490,832 $ 248.33 11/30/22 138,150
(Cost $220,289) (d) ------------
WRITTEN OPTIONS -- (45.8)%
CALL OPTIONS WRITTEN -- (0.3)%
(438) SPDR(R) Gold Shares................................ (7,488,048) 170.96 01/31/22 (104,244)
(Premiums received $103,468) ------------
PUT OPTIONS WRITTEN -- (45.5)%
(1,842) SPDR(R) Gold Shares................................ (31,490,832) 248.33 11/30/22 (14,314,182)
(Premiums received $15,230,551) ------------
TOTAL WRITTEN OPTIONS........................................................................... (14,418,426)
(Premiums received $15,334,019) (d) ------------
NET OTHER ASSETS AND LIABILITIES -- (0.7)%...................................................... (215,268)
------------
NET ASSETS -- 100.0%............................................................................ $ 31,476,183
============
</TABLE>
-----------------------------
(a) This security or a portion of this security is segregated as collateral
for written options contracts.
(b) Zero coupon security.
(c) Rate shown reflects yield as of December 31, 2021.
(d) Aggregate cost for federal income tax purposes is $45,986,437. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$919,624 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$96,849. The net unrealized appreciation was $822,775. The amounts
presented are inclusive of derivative contracts.
See Notes to Consolidated Financial Statements Page 7
<PAGE>
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
CONSOLIDATED PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to
Consolidated Financial Statements):
<TABLE>
<CAPTION>
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
U.S. Treasury Bills.................................. $ 45,535,162 $ -- $ 45,535,162 $ --
Money Market Funds................................... 436,565 436,565 -- --
-------------- -------------- -------------- --------------
Total Investments.................................... 45,971,727 436,565 45,535,162 --
Call Options Purchased............................... 138,150 -- 138,150 --
-------------- -------------- -------------- --------------
Total................................................ $ 46,109,877 $ 436,565 $ 45,673,312 $ --
============== ============== ============== ==============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
Call Options Written................................. $ (104,244) $ -- $ (104,244) $ --
Put Options Written.................................. (14,314,182) -- (14,314,182) --
-------------- -------------- -------------- --------------
Total................................................ $ (14,418,426) $ -- $ (14,418,426) $ --
============== ============== ============== ==============
</TABLE>
Page 8 See Notes to Consolidated Financial Statements
<PAGE>
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2021
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................. $ 45,971,727
Options contracts purchased, at value.................................. 138,150
Cash................................................................... 16,393
Receivables:
Investment securities sold.......................................... 104,639
Dividends........................................................... 12
---------------
Total Assets........................................................ 46,230,921
---------------
LIABILITIES:
Options contracts written, at value.................................... 14,418,426
Payables:
Investment securities purchased..................................... 314,208
Investment advisory fees............................................ 22,104
---------------
Total Liabilities................................................... 14,754,738
---------------
NET ASSETS............................................................. $ 31,476,183
===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 30,715,694
Par value.............................................................. 15,500
Accumulated distributable earnings (loss).............................. 744,989
---------------
NET ASSETS............................................................. $ 31,476,183
===============
NET ASSET VALUE, per share............................................. $ 20.31
===============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 1,550,002
===============
Investments, at cost................................................... $ 45,986,437
===============
Premiums paid on options contracts purchased........................... $ 220,289
===============
Premiums received on options contracts written......................... $ 15,334,019
===============
</TABLE>
See Notes to Consolidated Financial Statements Page 9
<PAGE>
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 2021 (a)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest............................................................... $ 14,920
Dividends.............................................................. 559
---------------
Total investment income............................................. 15,479
---------------
EXPENSES:
Investment advisory fees............................................... 143,854
---------------
Total expenses...................................................... 143,854
---------------
NET INVESTMENT INCOME (LOSS)........................................... (128,375)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (185)
Purchased options contracts......................................... (84,569)
Written options contracts........................................... (215,849)
---------------
Net realized gain (loss)............................................... (300,603)
---------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... (14,710)
Purchased options contracts......................................... (82,139)
Written options contracts........................................... 915,593
---------------
Net change in unrealized appreciation (depreciation)................... 818,744
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 518,141
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 389,766
===============
</TABLE>
(a) Inception date is March 2, 2021, which is consistent with the commencement
of investment operations and is the date the initial creation units were
established.
Page 10 See Notes to Consolidated Financial Statements
<PAGE>
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD
ENDED
12/31/2021 (a)
---------------
<S> <C>
OPERATIONS:
Net investment income (loss)........................................... $ (128,375)
Net realized gain (loss)............................................... (300,603)
Net change in unrealized appreciation (depreciation)................... 818,744
---------------
Net increase (decrease) in net assets resulting from operations........ 389,766
---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Return of capital...................................................... (446,336)
---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 36,504,705
Cost of shares redeemed................................................ (4,971,952)
---------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................................... 31,532,753
---------------
Total increase (decrease) in net assets................................ 31,476,183
NET ASSETS:
Beginning of period.................................................... --
---------------
End of period.......................................................... $ 31,476,183
===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ --
Shares sold............................................................ 1,800,002
Shares redeemed........................................................ (250,000)
---------------
Shares outstanding, end of period...................................... 1,550,002
===============
</TABLE>
(a) Inception date is March 2, 2021, which is consistent with the commencement
of investment operations and is the date the initial creation units were
established.
See Notes to Consolidated Financial Statements Page 11
<PAGE>
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
CONSOLIDATED FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
PERIOD
ENDED
12/31/2021 (a)
---------------
<S> <C>
Net asset value, beginning of period........................... $ 20.14
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.08)
Net realized and unrealized gain (loss)........................ 0.71
---------
Total from investment operations............................... 0.63
---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Return of capital.............................................. (0.46)
---------
Net asset value, end of period................................. $ 20.31
=========
TOTAL RETURN (b)............................................... 3.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 31,476
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets ................. 0.85% (c)
Ratio of net investment income (loss) to average net assets.... (0.76)% (c)
Portfolio turnover rate (d).................................... 0%
</TABLE>
(a) Inception date is March 2, 2021, which is consistent with the commencement
of investment operations and is the date 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 return presented does 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 12 See Notes to Consolidated Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
DECEMBER 31, 2021
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-two exchange-traded funds. This report
covers the FT Cboe Vest Gold Strategy Target Income ETF(R) (the "Fund"), which
trades under the ticker "IGLD" on the Cboe BZX Exchange, Inc. ("Cboe BZX"). The
Fund represents a separate series of shares of beneficial interest in the Trust.
Unlike conventional mutual funds, the Fund issues and redeems shares on a
continuous basis, at net asset value ("NAV"), only in large blocks of shares
known as "Creation Units."
The Fund is an actively managed exchange-traded fund. The Fund's investment
objective is to seek to deliver participation in the price returns of the
SPDR(R) Gold Trust (the "Underlying ETF") while providing a consistent level of
income. Under normal market conditions, the Fund, through a wholly-owned
subsidiary (the "Subsidiary"), organized under the laws of the Cayman Islands,
invests in FLexible EXchange(R) Options ("FLEX Options") on the Underlying ETF.
The Fund does not invest directly in FLEX Options. The Fund gains exposure to
these investments exclusively by investing in the Subsidiary. The Fund's
investment in the Subsidiary may not exceed 25% of the Fund's total assets at
the end of each fiscal quarter. As of December 31, 2021, the Fund invested
22.50% of the Fund's total assets in the Subsidiary. There can be no assurance
that the Fund will achieve its investment objective. The Fund may not be
appropriate for all investors.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
consolidated financial statements include the accounts on a consolidated basis
of the Subsidiary. All intercompany accounts and transactions have been
eliminated in consolidation. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of the
consolidated financial statements. The preparation of the consolidated 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 consolidated
financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The 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. The Fund's NAV is calculated 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 shares outstanding.
The 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 Fund's
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 Consolidated Portfolio of Investments. The Fund's investments
are valued as follows:
Exchange-traded options contracts (other than FLEX Option contracts) are
valued at the closing price in the market where such contracts are
principally traded. If no closing price is available, exchange-traded
options contracts are fair valued at the mean of their most recent bid and
asked price, if available, and otherwise at their closing bid price.
Over-the-counter options contracts are fair valued at the mean of their
most recent bid and asked price, if available, and otherwise at their
closing bid price. FLEX Option contracts are normally valued using a
model-based price provided by a third-party pricing vendor. On days when a
trade in a FLEX Option contract occurs, the trade price will be used to
value such FLEX Option contracts in lieu of the model price.
U.S. Treasuries are fair valued on the basis of valuations provided by a
third-party pricing service approved by the Trust's Board of Trustees.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
If the Fund's investments are not able to be priced by pre-established pricing
methods, such investments may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. A variety of factors
may be considered in determining the fair value of such investments.
Page 13
<PAGE>
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
DECEMBER 31, 2021
Valuing the Fund's holdings using fair value pricing will result in using prices
for those holdings that may differ from current market valuations. The
Subsidiary's holdings will be valued in the same manner as the Fund's holdings.
The Fund is 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 the Fund's investments as of December 31, 2021, is
included with the Fund's Consolidated Portfolio of Investments.
B. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are recorded as of the trade date. Realized gains and
losses from investment transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded daily on the accrual basis. Amortization of premiums and accretion of
discounts are recorded using the effective interest method.
C. FLEX OPTIONS
FLEX Options are customized equity or index option contracts that trade on an
exchange, but provide investors with the ability to customize key contract terms
like exercise prices, styles and expiration dates. FLEX Options are guaranteed
for settlement by the Options Clearing Corporation.
The Fund, through the Subsidiary, purchases and sells call and put FLEX Options
based on the performance of the Underlying ETF. The FLEX Options that the
Subsidiary holds that reference the Underlying ETF will give the Subsidiary the
right to receive or deliver shares of the Underlying ETF on the option
expiration date at a strike price, depending on whether the option is a put or
call option and whether the Subsidiary purchases or sells the option. The FLEX
Options held by the Subsidiary are European style options, which are exercisable
at the strike price only on the FLEX Option expiration date.
When the Subsidiary writes (sells) an option, an amount equal to the premium
received by the Subsidiary is included in "Options contracts written, at value"
on the Consolidated Statement of Assets and Liabilities. Gain or loss on written
options is presented separately as "Net realized gain (loss) on written options
contracts" on the Consolidated Statement of Operations. When the Subsidiary
purchases a call or put option, the premium paid represents the cost of the call
or put option, which is included in "Options contracts purchased, at value" on
the Consolidated Statement of Assets and Liabilities. Gain or loss on purchased
options is included in "Net realized gain (loss) on purchased options contracts"
on the Consolidated Statement of Operations.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid monthly by
the Fund, or as the Board of Trustees may determine from time to time.
Distributions of net realized capital gains earned by the 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 consolidated financial
statements are periodically adjusted for permanent differences in order to
reflect their tax character. These permanent differences are primarily due to
the varying treatment of income and gain/loss on significantly modified
portfolio securities held by the Fund 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 consolidated financial
statement and tax purposes, will reverse at some time in the future.
Page 14
<PAGE>
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
DECEMBER 31, 2021
The tax character of distributions paid during the fiscal period ended December
31, 2021 was as follows:
Distributions paid from:
Ordinary income $ --
Capital gains --
Return of capital 446,336
As of December 31, 2021, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income $ --
Accumulated capital and other gain (loss) (4,113)
Net unrealized appreciation (depreciation) 822,755
E. INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying with
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), 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, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Subsidiary is classified as a controlled foreign corporation under
Subchapter N of the Code. Therefore, the Fund is required to increase its
taxable income by its share of the Subsidiary's income, whether or not such
earnings are distributed by the Subsidiary to the Fund. Net investment losses of
the Subsidiary cannot be deducted by the Fund in the current period nor carried
forward to offset taxable income in future periods.
The Fund is 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. The taxable year ended 2021
remains open to federal and state audit. As of December 31, 2021, management has
evaluated the application of these standards to the Fund and has determined that
no provision for income tax is required in the Fund's consolidated financial
statements for uncertain tax positions.
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is 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. At December 31, 2021, for
federal income tax purposes, the Fund has $82 of non-expiring capital loss
carryforwards that may be carried forward indefinitely.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes.
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) and net unrealized appreciation (depreciation)) on the
Consolidated Statement 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). These adjustments are primarily due to the difference between book and
tax treatment of net investment income from the Subsidiary. The results of
operations and net assets were not affected by these adjustments. For the fiscal
period ended December 31, 2021, the adjustments for the Fund were as follows:
Accumulated Accumulated
Net Investment Net Realized Paid-in
Income (Loss) Gain (Loss) Capital
-------------- -------------- --------------
$ 54,702 $ 300,521 $ (355,223)
F. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
Page 15
<PAGE>
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
DECEMBER 31, 2021
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, 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 ongoing monitoring of the Fund's and the
Subsidiary's investment portfolios, managing the Fund's business affairs and
providing certain administrative services necessary for the management of the
Fund.
First Trust is responsible for the expenses of the Fund and the Subsidiary
including the cost of transfer agency, sub-advisory, custody, fund
administration, legal, audit and other services, but excluding fee payments
under the Investment Management Agreement, interest, taxes, acquired fund fees
and expenses, if any, brokerage commissions and other expenses connected with
the execution of portfolio transactions, distribution and service fees payable
pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Fund has
agreed to pay First Trust an annual management fee equal to 0.85% of its average
daily net assets. The Subsidiary does not pay First Trust a separate management
fee.
Cboe Vest(SM) Financial LLC ("Cboe Vest"), an affiliate of First Trust, serves
as the Fund's sub-advisor and manages the Fund's portfolio subject to First
Trust's supervision. Pursuant to the Investment Management Agreement, between
the Trust, on behalf of the Fund, and the Advisor, and the Investment
Sub-Advisory Agreement among the Trust, on behalf of the Fund, the Advisor and
Cboe Vest, First Trust will supervise Cboe Vest and its management of the
investment of the Fund's assets and will pay Cboe Vest for its services as the
Fund's sub-advisor a sub-advisory fee equal to 50% of any remaining monthly
unitary management fee paid to the Advisor after the average Fund's expenses
accrued during the most recent twelve months are subtracted from the unitary
management fee for that month.
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
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or an index fund.
Additionally, the Lead Independent Trustee and the Chairs 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 Chairs
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
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, derivatives, and in-kind transactions, for the fiscal
period ended December 31, 2021, were $0 and $0, respectively.
For the fiscal period ended December 31, 2021, the Fund did not have any in-kind
purchases or sales.
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by the Subsidiary at
December 31, 2021, the primary underlying risk exposure and the location of
these instruments as presented on the Consolidated Statement of Assets and
Liabilities.
<TABLE>
<CAPTION>
ASSET DERIVATIVES LIABILITY DERIVATIVES
---------------------------------------- ----------------------------------------
CONSOLIDATED CONSOLIDATED
DERIVATIVES STATEMENT OF ASSETS AND STATEMENT OF ASSETS AND
INSTRUMENT RISK EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE
----------------- ----------------- ------------------------ ------------- ------------------------ -------------
<S> <C> <C> <C> <C> <C>
Commodity Options contracts Options contracts
Options Risk purchased, at value $ 138,150 written, at value $ 14,418,426
</TABLE>
Page 16
<PAGE>
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
DECEMBER 31, 2021
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the fiscal period
ended December 31, 2021, on derivative instruments, as well as the primary
underlying risk exposure associated with the instruments.
CONSOLIDATED STATEMENT OF OPERATIONS LOCATION
-----------------------------------------------------------------------------
COMMODITY RISK EXPOSURE
Net realized gain (loss) on:
Purchased options contracts $ (84,569)
Written options contracts (215,849)
Net change in unrealized appreciation (depreciation) on:
Purchased options contracts (82,139)
Written options contracts 915,593
During the fiscal period ended December 31, 2021, the premiums for purchased
options contracts opened were $311,968 and the premiums for purchased options
contracts closed, exercised and expired were $91,679.
During the fiscal period ended December 31, 2021, the premiums for written
options contracts opened were $32,065,897 and the premiums for written options
contracts closed, exercised and expired were $16,731,878.
The Fund does not have the right to offset financial assets and liabilities
related to options contracts on the Consolidated Statement of Assets and
Liabilities.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
The Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with the Fund's service providers to
purchase and redeem Fund shares directly with the Fund in large blocks of shares
known as "Creation Units." Prior to the start of trading on every business day,
the Fund publishes through the National Securities Clearing Corporation ("NSCC")
the "basket" of securities, cash or other assets that it will accept in exchange
for a Creation Unit of the Fund's shares. An Authorized Participant that wishes
to effectuate a creation of the Fund's shares deposits with the Fund the
"basket" of securities, cash or other assets identified by the Fund that day,
and then receives the Creation Unit of the Fund's shares in return for those
assets. After purchasing a Creation Unit, the Authorized Participant may
continue to hold the Fund's shares or sell them in the secondary market. The
redemption process is the reverse of the purchase process: the Authorized
Participant redeems a Creation Unit of the Fund's shares for a basket of
securities, cash or other assets. The combination of the creation and redemption
process with secondary market trading in the Fund's shares and underlying
securities provides arbitrage opportunities that are designed to help keep the
market price of the Fund's shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of the Fund times the number of shares
in a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of the Fund times the
number of shares in a Creation Unit, minus the fees described above and, if
applicable, any operational processing and brokerage costs, transfer fees, stamp
taxes and part or all of the spread between the expected bid and offer side of
the market related to the securities comprising the redemption basket. Investors
who use the services of a broker or other such intermediary in addition to an
Authorized Participant to effect a redemption of a Creation Unit may also be
assessed an amount to cover the cost of such services. The redemption fee
charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits
redemption fees to no more than 2% of the value of the shares redeemed.
Page 17
<PAGE>
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
DECEMBER 31, 2021
7. 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 Fund is
authorized to pay an amount up to 0.25% of its average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Fund, 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 Fund, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before April 30, 2023.
8. INDEMNIFICATION
The Trust, on behalf of the Fund, 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.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through
the date the consolidated financial statements were issued and has determined
that there were no subsequent events requiring recognition or disclosure in the
consolidated financial statements that have not already been disclosed.
Page 18
<PAGE>
--------------------------------------------------------------------------------
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 consolidated statement of assets and
liabilities of FT Cboe Vest Gold Strategy Target Income ETF(R) (the "Fund"), a
series of the First Trust Exchange-Traded Fund, including the consolidated
portfolio of investments, as of December 31, 2021, the related consolidated
statement of operations, the consolidated statements of changes in net assets,
and the consolidated financial highlights for the period from March 2, 2021
(commencement of operations) through December 31, 2021, and the related notes.
In our opinion, the financial statements and financial highlights present
fairly, in all material respects, the financial position of the Fund as of
December 31, 2021, and the results of its operations, the changes in its net
assets, and the financial highlights for the period from March 2, 2021
(commencement of operations) through December 31, 2021 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 Fund's management. Our responsibility is to express an opinion on the Fund's
financial statements and financial highlights based on our audit. 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 Fund 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 audit 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 Fund is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audit 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 Fund's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit 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 audit
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, 2021, by correspondence with
the custodian and brokers; when replies were not received from brokers, we
performed other auditing procedures. We believe that our audit provide a
reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 24, 2022
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 19
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--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
DECEMBER 31, 2021 (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 the 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 Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable year ended December 31, 2021, the following percentages of
ordinary income (including the short-term capital gain) distributions paid by
the Fund for the dividends received deduction available to corporations and are
hereby designated as qualified dividend income:
Dividend Received Deduction Qualified Dividend Income
--------------------------- -------------------------
0.00% 0.00%
Distributions paid to foreign shareholders during the Fund's fiscal year ended
December 31, 2021 that were properly designated by the Fund as "interest-related
dividends" or "short-term capital gain dividends," may not be subject to federal
income tax provided that the income was earned directly by such foreign
shareholders.
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 significant
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
more broadly diversified.
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.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
Page 20
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
DECEMBER 31, 2021 (UNAUDITED)
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
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.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
Page 21
<PAGE>
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
DECEMBER 31, 2021 (UNAUDITED)
December 31, 2021. The unavailability or replacement of LIBOR may affect the
value, liquidity or return on certain fund investments and may result in costs
incurred in connection with closing out positions and entering into new trades.
Any potential effects of the transition away from LIBOR on the fund or on
certain instruments in which the fund invests can be difficult to ascertain, and
they may vary depending on a variety of factors, and they could result in losses
to the fund.
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. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. While the development of
vaccines has slowed the spread of the virus and allowed for the resumption of
"reasonably" normal business activity in the United States, many countries
continue to impose lockdown measures in an attempt to slow the spread.
Additionally, there is no guarantee that vaccines will be effective against
emerging variants of the disease.
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;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; 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.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
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.
DISCLAIMER
The Fund is not sponsored, endorsed, sold or promoted by SPDR(R) Gold Shares,
SPDR, or Standard & Poor's(R) (together with their affiliates hereinafter
referred to as the "Corporations"). The Corporations have not passed on the
legality or suitability of, or the accuracy or adequacy of, descriptions and
disclosures relating to the Fund or the FLEX Options. The Corporations make no
representations or warranties, express or implied, regarding the advisability of
investing in the Fund or the FLEX Options or results to be obtained by the Fund
or the FLEX Options, shareholders or any other person or entity from use of the
SPDR(R) Gold Shares. The Corporations have no liability in connection with the
management, administration, marketing or trading of the Fund or the FLEX
Options.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 22
<PAGE>
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
DECEMBER 31, 2021 (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.
<TABLE>
<CAPTION>
NUMBER OF
PORTFOLIOS IN
TERM OF OFFICE THE FIRST TRUST OTHER TRUSTEESHIPS
NAME, AND YEAR FIRST FUND COMPLEX OR DIRECTORSHIPS HELD
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY BY TRUSTEE DURING
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 216 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 216 Director of ADM Investor
(1957) (Futures Commission Merchant) Services, Inc., ADM
o Since Inception Investor Services
International, Futures
Industry Association,
and National Futures
Association
Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate Aurora 216 Director and Board Chair
(1964) Health and President, Advocate Aurora of Advocate Home Health
Services, Advocate Home
o Since 2021 Continuing Health Division (Integrated Care Products and
Healthcare System) Advocate Hospice;
Director and Board Chair
of Aurora At Home
(since 2018); Director
of Advocate
Physician Partners
Accountable Care
Organization; Director
and Board Chair of
RML Long Term
Acute Care Hospitals;
and Director of Senior
Helpers (since 2021)
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 216 Director of Trust
(1956) and Management Consulting) Company of Illinois
o Since Inception
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 216 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust
Chairman of the Board Advisors L.P. and First Trust Portfolios 216 None
(1955) L.P., Chairman of the Board of
o Since Inception Directors, BondWave LLC (Software
Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
</TABLE>
-----------------------------
(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 23
<PAGE>
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
DECEMBER 31, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
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)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
o Since January 2016 to 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 First
(1970) 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. and
(1966) First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
</TABLE>
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 24
<PAGE>
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD)
DECEMBER 31, 2021 (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
professional or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2021
Page 25
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<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
Cboe Vest(SM) Financial LLC
1765 Greensboro Station Pl, 9th Floor
McLean, VA 22102
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
320 South Canal Street
Chicago, IL 60606
<PAGE>
[BLANK BACK COVER]
<PAGE>
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, during the period covered by this report, 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. |
| (f) | | A copy of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller is filed as an exhibit pursuant to Item 13(a)(1). |
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 $394,000 for 2020 and $397,000 for 2021. |
| (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 2020 and $0 for 2021. |
Audit-Related Fees (Investment Advisor and Distributor) — The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2020 and $0 for 2021.
| (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 $63,179 for 2020 and $65,296 for 2021. The tax fees were for review of regulated investment company status. These fees were for tax consultation and/or tax return preparation and professional services rendered for PFIC (Passive Foreign Investment Company) Identification Services. |
Tax Fees (Investment Advisor 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 advisor and distributor were $0 for 2020 and $0 for 2021.
| (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 2020 and $0 for 2021. |
All Other Fees (Investment Advisor 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 advisor and distributor, other than the services reported in paragraphs (a) through (c) of this Item were $0 for 2020 and $0 for 2021.
| (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 advisor (not including a sub-advisor whose role is primarily portfolio management and is sub-contracted or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor 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 advisor (other than any sub-advisor whose role is primarily portfolio management and is sub-contracted with or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor 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 advisor 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 advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant for the fiscal year ended October 31, 2020 were $63,179 for the registrant, $23,200 for the registrant’s investment advisor and $29,500 for the registrant’s distributor and for the fiscal year ended October 31, 2021 were $65,296 for the registrant, $16,500 for the registrant’s investment advisor and $29,500 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 advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the investment advisor 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, Denise M. Keefe, 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. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407 (c) (2) (iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22 (b) (15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
| (a) | | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3 (c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)). |
| (b) | | There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Item 13. Exhibits.
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) |
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) |
| By (Signature and Title)* | | /s/ Donald P. Swade |
| | | Donald P. Swade, Treasurer, Chief Financial Officer
and Chief Accounting Officer
(principal financial officer) |
* Print the name and title of each signing officer under his or her signature.
