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 811-21944
First Trust Exchange-Traded Fund II
(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: September 30
Date of reporting period: September 30, 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. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Report to Stockholders.
The registrant’s annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows:
FIRST TRUST
First Trust Exchange-Traded Fund II
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Book 1
First Trust STOXX(R) European Select Dividend Index Fund (FDD)
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (FFR)
First Trust Dow Jones Global Select Dividend Index Fund (FGD)
First Trust Global Wind Energy ETF (FAN)
First Trust Global Engineering and Construction ETF (FLM)
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (GRID)
First Trust Indxx Global Natural Resources Income ETF (FTRI)
First Trust Indxx Global Agriculture ETF (FTAG)
First Trust BICK Index Fund (BICK)
First Trust Indxx NextG ETF (NXTG)
First Trust NASDAQ Global Auto Index Fund (CARZ)
First Trust Cloud Computing ETF (SKYY)
First Trust International Equity Opportunities ETF (FPXI)
First Trust Nasdaq Cybersecurity ETF (CIBR)
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Annual Report
September 30, 2021
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL REPORT
SEPTEMBER 30, 2021
<TABLE>
<CAPTION>
<S> <C>
Shareholder Letter ......................................................................... 2
Market Overview ............................................................................ 3
Fund Performance Overview
First Trust STOXX(R) European Select Dividend Index Fund (FDD) ....................... 4
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (FFR) .......... 6
First Trust Dow Jones Global Select Dividend Index Fund (FGD) ........................ 8
First Trust Global Wind Energy ETF (FAN) ............................................. 10
First Trust Global Engineering and Construction ETF (FLM) ............................ 12
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (GRID) ...... 14
First Trust Indxx Global Natural Resources Income ETF (FTRI) ......................... 16
First Trust Indxx Global Agriculture ETF (FTAG) ...................................... 18
First Trust BICK Index Fund (BICK) ................................................... 20
First Trust Indxx NextG ETF (NXTG) ................................................... 22
First Trust NASDAQ Global Auto Index Fund (CARZ) ..................................... 24
First Trust Cloud Computing ETF (SKYY) ............................................... 26
First Trust International Equity Opportunities ETF (FPXI) ............................ 28
First Trust Nasdaq Cybersecurity ETF (CIBR) .......................................... 30
Notes to Fund Performance Overview ......................................................... 32
Understanding Your Fund Expenses ........................................................... 33
Portfolio of Investments
First Trust STOXX(R) European Select Dividend Index Fund (FDD) ....................... 35
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (FFR) .......... 37
First Trust Dow Jones Global Select Dividend Index Fund (FGD) ........................ 44
First Trust Global Wind Energy ETF (FAN) ............................................. 47
First Trust Global Engineering and Construction ETF (FLM) ............................ 50
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (GRID) ...... 53
First Trust Indxx Global Natural Resources Income ETF (FTRI) ......................... 56
First Trust Indxx Global Agriculture ETF (FTAG) ...................................... 59
First Trust BICK Index Fund (BICK) ................................................... 61
First Trust Indxx NextG ETF (NXTG) ................................................... 64
First Trust NASDAQ Global Auto Index Fund (CARZ) ..................................... 68
First Trust Cloud Computing ETF (SKYY) ............................................... 71
First Trust International Equity Opportunities ETF (FPXI) ............................ 73
First Trust Nasdaq Cybersecurity ETF (CIBR) .......................................... 76
Statements of Assets and Liabilities ....................................................... 78
Statements of Operations ................................................................... 82
Statements of Changes in Net Assets ........................................................ 86
Financial Highlights ....................................................................... 94
Notes to Financial Statements .............................................................. 101
Report of Independent Registered Public Accounting Firm .................................... 113
Additional Information ..................................................................... 114
Board of Trustees and Officers ............................................................. 124
Privacy Policy ............................................................................. 126
</TABLE>
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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 II (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 II
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
SEPTEMBER 30, 2021
Dear Shareholders,
First Trust is pleased to provide you with the annual report for certain series
of the First Trust Exchange-Traded Fund II (the "Funds"), which contains
detailed information about the Funds for the twelve months ended September 30,
2021.
A great deal has changed over the past 18 months. Suffice it to say that the
dominant story in 2020 was the onset of the coronavirus ("COVID-19") pandemic.
It is still a huge story 20 months later, mostly due to the arrival of the Delta
variant in the U.S. and the subsequent surge in cases around mid-2021. The Delta
variant is twice as contagious as the previous variants, according to the
Centers for Disease Control and Prevention ("CDC"). Fortunately, we have come to
learn that the existing vaccines approved by the U.S. Food and Drug
Administration have been effective in providing protection against the Delta
variant, particularly with respect to keeping the people already vaccinated out
of the intensive care unit. As I'm sure you are aware, a significant percentage
of the U.S. population has chosen not to be vaccinated. These individuals have
proven to be much more vulnerable to the virus and account for the lion's share
of hospitalizations, according to the CDC. While it is these individuals right
to choose, unless mandated by a private company or government agency, the
universe of people that have not gotten vaccinated is large enough that it has
likely delayed the full economic recovery, at least on the margin, in our
opinion. In the U.S., the path chosen by the federal government to help mitigate
the economic fallout from the pandemic has been to inject trillions of dollars
of liquidity (stimulus) into the financial system. To date, it appears to have
been effective, however, it has contributed to a new and potentially ominous
headwind for the economy: inflation.
The Consumer Price Index came in at 5.4% year-over-year in September 2021, the
largest increase since 2008, according to data from the Bureau of Labor
Statistics ("BLS"). The BLS also reported that the Producer Price Index was up
8.6% compared to a year ago, its highest level since 1981. These two barometers
of inflation are clearly elevated. Why is rising inflation worth noting? It
tends to reduce the purchasing power of the currency one uses over time. In the
case of the U.S., it reduces how much consumers can buy with their dollars. A
modest amount of inflation can be a sign that the economy is healthy. Too much
inflation can derail an economy. While we are not even close to that point yet,
investors should monitor the direction of inflation moving forward because the
U.S. economy has yet to fully reopen from the COVID-19 pandemic and millions of
workers remain on the sideline. Earlier this year, Federal Reserve Chairman
Jerome Powell proclaimed that the spike in inflation in the U.S. would be
relatively short-lived, or "transitory." He cited the pandemic-related
bottlenecks in the global supply chain for creating shortages in such critical
industries as semiconductors as being largely responsible for the sharp rise in
prices. With prices rising nearly across the board, his take on inflation is
losing credibility with each passing month, in my opinion. If inflation
continues to run hotter-than-expected, we believe that the Federal Reserve will
likely have to alter its easy monetary policy in favor of one that boosts
interest rates and bond yields.
The markets have performed quite well over the past 18 months. I believe that
the combination of the federal government's efforts in fast-tracking the
vaccines, its decisiveness in injecting trillions of dollars of capital into the
financial system to help backstop it, and the ability of millions of workers to
adapt to working efficiently from home helped boost the confidence levels of
investors throughout. Having said that, I still feel we need to fully reopen the
U.S. economy, put the millions of people out of work back to work and remedy the
global supply chain bottlenecks. While investors should be prepared for the
possibility of some additional volatility moving forward, due to inflationary
pressures, the potential for higher interest rates and bond yields, and next
year's mid-term election season, we encourage them to stay the course.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
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MARKET OVERVIEW
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FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL REPORT
SEPTEMBER 30, 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 GLOBAL ECONOMY
The International Monetary Fund ("IMF") reported in its latest release that
global gross domestic product ("GDP") growth is expected to come in at 5.9% in
2021 and 4.9% in 2022, up from -3.1% in 2020. Keep in mind that the onset of the
coronavirus ("COVID-19") pandemic in the U.S. and most global regions occurred
in the first quarter of 2020. The IMF sees the U.S. economy growing at 6.0% in
2021 and 5.2% in 2022, up from -3.4% in 2020. With respect to all Advanced
Economies, the IMF is projecting GDP growth of 5.2% in 2021 and 4.5% in 2022, up
from -4.5% in 2020. Lastly, the IMF projects Emerging Market and Developing
Economies to grow at a rate of 6.4% in 2021 and 5.1% in 2022, up from -2.1% in
2020. Looking ahead to 2022, the outlook for growth is encouraging, but down a
bit from the strong pandemic-induced recovery in 2021. The IMF is concerned that
inflationary pressures stemming from the global supply chain bottlenecks could
push prices higher if the problems persist. That scenario could, in turn, cause
central banks to raise rates quickly to try and prevent inflation from
overheating.
One of the better barometers for judging the overall business climate is mergers
and acquisitions ("M&A") activity, in our opinion. M&A deals totaled $4.3
trillion over the first nine months of 2021, the most ever recorded for that
period, according to data from Refinitiv. The $1.52 trillion in deal value
registered in the third quarter of 2021 was the highest ever for a calendar
quarter. Executives are expanding their businesses aggressively in the current
climate.
PERFORMANCE OF GLOBAL STOCKS AND BONDS
U.S. equities performed extremely well over the past year. The S&P 500(R), S&P
MidCap 400(R) and S&P SmallCap 600(R) Indices posted total returns of 30.00%,
43.68% and 57.64%, respectively, for the 12-month period ended September 30,
2021. Small- and mid-capitalization ("cap") stocks significantly outperformed
large-cap stocks over the period, an indication that investors were willing to
assume more risk despite the ongoing COVID-19 pandemic, in our opinion. All 11
sectors that comprise the S&P 500(R) Index were up on a total return basis. The
top-performer was the Energy sector, up 82.99%, while the worst result came from
the Utilities sector, up just 11.01%.
A Bloomberg survey of 21 equity strategists found that their average 2021
year-end price target for the S&P 500(R) Index was 4,466 as of September 21,
2021, up from 4,335 on August 20, 2021, according to its own release. The
highest and lowest estimates were 4,825 (up from 4,700) and 3,800 (unchanged),
respectively. On September 30, 2021, the S&P 500(R) Index closed at 4,307.54,
which was 5.06% below its all-time closing high of 4,536.95 on September 2,
2021. As of October 1, 2021, Bloomberg's 2021, 2022 and 2023 consensus earnings
growth rate estimates for the S&P 500(R) Index stood at 44.90%, 8.95% and 9.80%,
respectively.
Foreign equities also performed well, but the broader indices continue to lag
the performance of the major U.S. stock indices. Over the past 12 months, the
MSCI World ex USA and MSCI Emerging Markets Indices posted total returns of
26.50% (USD) and 18.20% (USD), respectively, according to Bloomberg. The major
foreign bond indices had mixed results. The Bloomberg Global Aggregate Index of
higher quality debt posted a total return of -0.91% (USD), while the Bloomberg
EM Hard Currency Aggregate Index of emerging markets debt rose by 3.15% (USD),
according Bloomberg. Over that same period, the U.S. dollar rose by 0.36%
against a basket of major currencies, as measured by the U.S. Dollar Index
(DXY). The slight bump in the dollar had little influence on the performance of
these foreign indices, in our opinion.
In the U.S. bond market, the top-performing major debt group we track was
speculative-grade corporate bonds. The Bloomberg U.S. Corporate High Yield Index
posted a total return of 11.28% for the 12-month period ended September 30,
2021. The worst-performing U.S. debt group that we track was government bonds.
The Bloomberg U.S. Treasury: Intermediate Index posted a total return of -1.38%.
The yield on the benchmark 10-Year Treasury Note ("T-Note") rose by 80 basis
points in the period to close at 1.49% on September 30, 2021, according to
Bloomberg. For comparative purposes, the average yield on the 10-Year T-Note was
2.04% for the 10-year period ended September 30, 2021.
Page 3
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
First Trust STOXX(R) European Select 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 STOXX(R) Europe Select
Dividend 30 Index (the "STOXX Index"). The shares of the Fund are listed and
trade on the NYSE Arca, Inc. under the ticker symbol "FDD." 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 STOXX Index.
The STOXX Index consists of 30 high dividend-yielding securities selected from
the STOXX(R) Europe 600 Index, including secondary lines of those companies
(where there are multiple lines of equity capital in a company), which covers 18
European countries: Austria, Belgium, Czech Republic, Denmark, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland and the United Kingdom. In addition, a company must
have a non-negative five-year dividend-per-share growth rate and a
dividend-to-earnings ratio of 60% or less. The STOXX Index is compiled and
maintained by STOXX Limited.
<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 (8/27/07) Ended Ended (8/27/07)
9/30/21 9/30/21 9/30/21 to 9/30/21 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 40.19% 7.72% 6.29% -0.89% 45.02% 84.04% -11.86%
Market Price 40.70% 7.73% 6.31% -0.90% 45.13% 84.37% -11.90%
INDEX PERFORMANCE
STOXX(R) Europe Select
Dividend 30 Index 41.39% 8.29% 6.66% -0.40% 48.91% 90.56% -5.51%
STOXX(R) Europe 600 Index 27.19% 9.21% 8.58% 3.14% 55.34% 127.88% 54.63%
MSCI Europe Index 27.25% 8.85% 8.15% 2.82% 52.79% 118.96% 47.89%
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</TABLE>
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of 40.19% during the
12-month period covered by this report. During the same period, the MSCI Europe
Index (the "Benchmark") generated a return of 27.25%. The greatest allocation in
the Fund were the investments in Germany, which received an allocation of 22.8%
and contributed 7.9% to the Fund's return, and the investments in the United
Kingdom ("U.K."), which received an allocation of 21.8% and contributed 10.2% to
the Fund's return. The 10.2% contribution to the Fund's return from the U.K.
investments was the greatest contribution of any country. No country represented
in the Fund had a negative contribution to the Fund's return during the period
covered by this report. The Fund's currency exposure had a -0.3% impact on the
Fund's performance. On a relative basis, the Fund outperformed the Benchmark.
The greatest source of outperformance came from investments in the U.K., which
earned 3.6% of outperformance for the Fund versus the Benchmark. Investments in
Belgium caused the most underperformance for the Fund versus the Benchmark.
These investments caused 0.4% of underperformance during the period covered by
this report.
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The STOXX Index and the trademarks used in the index name are the intellectual
property of STOXX Limited, Zurich, Switzerland ("STOXX"), Deutsche Borse Group
and/or their licensors. The STOXX Index is used under license from STOXX. The
Fund is in no way sponsored, endorsed, sold or promoted by STOXX and/or its
licensors and neither STOXX nor its licensors shall have any liability with
respect thereto.
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD) (CONTINUED)
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% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Financials 33.1%
Communication Services 16.2
Utilities 12.1
Materials 12.1
Real Estate 11.6
Health Care 5.7
Consumer Discretionary 4.2
Energy 3.0
Industrials 2.0
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Total 100.0%
======
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% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Rio Tinto PLC 7.4%
GlaxoSmithKline PLC 5.7
SSE PLC 5.2
Legal & General Group PLC 5.0
NN Group N.V. 4.4
SCOR SE 4.1
IG Group Holdings PLC 4.0
Proximus SADP 4.0
Orange S.A. 3.8
Snam S.p.A. 3.5
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Total 47.1%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2011 - SEPTEMBER 30, 2021
First Trust STOXX(R) European STOXX(R) Europe STOXX(R) Europe MSCI Europe
Select Dividend Index Fund Select Dividend 30 Index 600 Index Index
----------------------------- ---------------------- --------------- -----------
<S> <C> <C> <C> <C>
9/30/11 $10,000 $10,000 $10,000 $10,000
3/31/12 10,756 10,697 11,681 11,663
9/30/12 10,773 10,725 11,770 11,731
3/31/13 10,763 10,731 12,979 12,894
9/30/13 12,205 12,206 14,738 14,573
3/31/14 13,654 13,676 16,308 16,052
9/30/14 13,265 13,307 15,615 15,421
3/31/15 13,038 13,119 15,515 15,259
9/30/15 12,217 12,257 14,354 13,982
3/31/16 12,548 12,658 14,358 13,971
9/30/16 12,691 12,797 14,670 14,330
3/31/17 13,324 13,489 15,673 15,335
9/30/17 15,093 15,282 17,944 17,526
3/31/18 15,470 15,682 17,994 17,558
9/30/18 15,204 15,447 17,891 17,474
3/31/19 14,985 15,251 17,286 16,904
9/30/19 15,562 15,827 17,748 17,342
3/31/20 11,810 12,271 14,678 14,283
9/30/20 13,127 13,478 17,917 17,205
3/31/21 18,121 18,712 21,533 20,703
9/30/21 18,404 19,056 22,788 21,896
</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.
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate 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 FTSE
EPRA/NAREIT Developed Index (the "FTSE Index"). The shares of the Fund are
listed and trade on the NYSE Arca, Inc. under the ticker symbol "FFR." 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 FTSE
Index.
The FTSE Index is compiled and maintained by FTSE International Limited. The
FTSE Index is modified market cap weighted based on free float market
capitalization and includes the securities of listed real estate companies or
real estate investment trusts ("REITs") that are publicly traded on an official
stock exchange located in North America, Europe or Asia and provide an audited
annual report in English.
<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 (8/27/07) Ended Ended (8/27/07)
9/30/21 9/30/21 9/30/21 to 9/30/21 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 29.95% 4.74% 8.51% 3.33% 26.08% 126.35% 58.72%
Market Price 30.87% 4.82% 8.60% 3.34% 26.51% 128.13% 58.79%
INDEX PERFORMANCE
FTSE EPRA/NAREIT
Developed Index 30.81% 5.51% 9.27% 4.17% 30.78% 142.63% 77.77%
S&P Global REIT Index 31.61% 4.65% 8.70% 3.94% 25.53% 130.35% 72.32%
MSCI World REIT Index 27.01% 6.79% 9.80% 4.33% 38.90% 154.70% 81.73%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 29.95% during the 12-month period covered by
this report. During the same period, the S&P Global REIT Index (the "Benchmark")
generated a return of 31.61%. Securities in the United States received the
largest portfolio allocation for the period with a 55.0% weight. These
securities also generated a 20.3% contribution to the Fund's return during the
period, which was the Fund's largest. Finnish securities received a small
allocation of 0.3% in the Fund and generated the smallest contribution to the
Fund's return with a 0.0% contribution during the period. The Fund's currency
exposure had a -0.3% impact on performance. On a relative basis, the Fund
underperformed the Benchmark. Securities in Singapore generated the largest
relative outperformance for the Fund with 0.3% of outperformance during the
period. German securities provided the largest relative drag on the Fund's
performance with the Fund underperforming the Benchmark by -1.8% during the
period.
-----------------------------
The Fund has been developed solely by First Trust. The Fund is not in any way
connected to or sponsored, endorsed, sold or promoted by the London Stock
Exchange Group plc and its group undertakings, including FTSE International
Limited (collectively, the "LSE Group"), European Public Real Estate Association
("EPRA"), or the National Association of Real Estate Investments Trusts
("Nareit") (and together the "Licensor Parties"). FTSE Russell is a trading name
of certain of the LSE Group companies. All rights in the FTSE Index vest in the
Licensor Parties. "FTSE(R)" and "FTSE Russell(R)" are trademarks of the relevant
LSE Group company and are used by any other LSE Group company under license.
"Nareit(R)" is a trademark of Nareit, "EPRA(R)" is a trademark of EPRA and all
are used by the LSE Group under license. The FTSE Index is calculated by or on
behalf of FTSE International Limited or its affiliate, agent or partner. The
Licensor Parties do not accept any liability whatsoever to any person arising
out of (a) the use of, reliance on or any error in the FTSE Index or (b)
investment in or operation of the Fund. The Licensor Parties make no claim,
prediction, warranty or representation either as to the results to be obtained
from the Fund or the suitability of the FTSE Index for the purpose to which it
is being put by First Trust.
Page 6
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
(CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Real Estate 99.8%
Health Care 0.1
Consumer Discretionary 0.1
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Prologis, Inc. 4.9%
Equinix, Inc. 3.7
Public Storage 2.4
Simon Property Group, Inc. 2.2
Digital Realty Trust, Inc. 2.1
Welltower, Inc. 1.8
Vonovia SE 1.8
AvalonBay Communities, Inc. 1.6
Equity Residential 1.6
Alexandria Real Estate Equities, Inc. 1.6
------
Total 23.7%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2011 - SEPTEMBER 30, 2021
First Trust FTSE EPRA/NAREIT Developed FTSE EPRA/NAREIT S&P Global MSCI World
Markets Real Estate Index Fund Developed Index REIT Index REIT Index
--------------------------------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C>
9/30/11 $10,000 $10,000 $10,000 $10,000
3/31/12 12,146 12,121 12,098 12,055
9/30/12 13,022 13,059 12,880 12,960
3/31/13 14,620 14,697 14,397 14,185
9/30/13 14,327 14,489 13,742 13,500
3/31/14 14,770 14,998 14,561 14,191
9/30/14 15,167 15,461 15,076 14,862
3/31/15 17,007 17,406 17,135 16,760
9/30/15 15,618 16,014 15,696 15,605
3/31/16 17,095 17,627 17,605 17,632
9/30/16 17,951 18,552 18,351 18,337
3/31/17 17,299 17,955 17,665 17,681
9/30/17 18,071 18,835 18,165 18,295
3/31/18 17,908 18,699 17,622 17,949
9/30/18 18,791 19,703 18,683 18,875
3/31/19 20,322 21,395 20,077 20,929
9/30/19 21,269 22,482 21,500 22,718
3/31/20 15,471 16,428 15,383 17,411
9/30/20 17,414 18,547 17,506 20,052
3/31/21 20,850 22,334 20,928 22,857
9/30/21 22,635 24,263 23,035 25,470
</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 DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
First Trust Dow Jones Global Select 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 Dow Jones Global Select
Dividend Index (the "Select Dividend Index"). The shares of the Fund are listed
and trade on the NYSE Arca, Inc. under the ticker symbol "FGD." 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 Select Dividend
Index.
The Select Dividend Index is an indicated annual dividend yield weighted index
of 100 stocks selected from the developed-market portion of the Dow Jones World
Index(SM). Indicated annual dividend yield is a stock's unadjusted indicated
annual dividend (not including any special dividends) divided by its unadjusted
price.
<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 (11/21/07) Ended Ended (11/21/07)
9/30/21 9/30/21 9/30/21 to 9/30/21 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 46.94% 6.79% 7.02% 3.82% 38.89% 97.08% 68.15%
Market Price 47.46% 6.84% 7.08% 3.82% 39.23% 98.13% 68.03%
INDEX PERFORMANCE
Dow Jones Global Select
Dividend Index 48.00% 7.19% 7.16% 4.04% 41.53% 99.63% 73.07%
Dow Jones World Developed
Markets Index(SM) 29.63% 13.76% 12.90% 7.43% 90.54% 236.55% 170.07%
MSCI World Index 28.82% 13.74% 12.68% 7.06% 90.37% 229.96% 157.29%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 46.94% during the 12-month period covered by
this report. During the same period, the MSCI World Index (the "Benchmark")
generated a return of 28.82%. The United States received the largest allocation
to the Fund and generated the largest contribution to the Fund's return during
the period, at 20.7% and 19.3%, respectively. Investments in Swedish securities
generated the smallest contribution to the Fund's return at 0.1% during the
period. Currency exposure for the Fund resulted in a 0.3% impact on the Fund's
return. On a relative basis, the Fund outperformed the Benchmark. Investments in
the United States generated 12.6% of relative outperformance, the largest source
of outperformance during the period. Investments in Hong Kong were a source of
relative underperformance with a -0.9% drag during the period.
-----------------------------
The Select Dividend Index is a product of S&P Dow Jones Indices LLC or its
affiliates ("SPDJI"), and has been licensed for use by First Trust. Standard &
Poor's(R) and S&P(R) are registered trademarks 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(s) nor do they have any
liability for any errors, omissions, or interruptions of the Select Dividend
Index.
Page 8
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Financials 48.7%
Communication Services 11.5
Utilities 9.6
Materials 7.5
Consumer Staples 5.9
Energy 5.4
Real Estate 4.3
Industrials 3.2
Consumer Discretionary 3.0
Information Technology 0.9
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Enagas S.A. 1.7%
Telefonica S.A. 1.7
Labrador Iron Ore Royalty Corp. 1.7
Meritz Securities Co., Ltd. 1.7
Industrial Bank of Korea 1.6
Mapfre S.A. 1.5
Red Electrica Corp., S.A. 1.5
British American Tobacco PLC 1.4
Shaw Communications, Inc., Class B 1.4
Woori Financial Group, Inc. 1.4
------
Total 15.6%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2011 - SEPTEMBER 30, 2021
First Trust Dow Jones Global Dow Jones Global Dow Jones World Developed MSCI World
Select Dividend Index Fund Select Dividend Index Markets Index(SM) Index
---------------------------- ----------------------- ------------------------- ----------
<S> <C> <C> <C> <C>
9/30/11 $10,000 $10,000 $10,000 $10,000
3/31/12 11,311 11,211 12,018 12,003
9/30/12 11,758 11,675 12,166 12,159
3/31/13 12,367 12,274 13,529 13,426
9/30/13 13,450 13,370 14,774 14,616
3/31/14 14,788 14,719 16,197 15,984
9/30/14 14,601 14,527 16,544 16,399
3/31/15 14,173 14,114 17,176 16,948
9/30/15 12,482 12,371 15,776 15,565
3/31/16 13,276 13,244 16,615 16,363
9/30/16 14,189 14,105 17,662 17,332
3/31/17 14,978 14,965 19,154 18,779
9/30/17 16,196 16,180 20,954 20,480
3/31/18 16,345 16,292 21,910 21,318
9/30/18 16,562 16,558 23,301 22,783
3/31/19 15,686 15,682 22,625 22,188
9/30/19 16,030 16,024 23,578 23,200
3/31/20 11,601 11,627 20,088 19,882
9/30/20 13,405 13,488 25,962 25,612
3/31/21 19,184 19,402 31,414 30,624
9/30/21 19,708 19,963 33,655 32,996
</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 GLOBAL WIND ENERGY ETF (FAN)
First Trust Global Wind Energy 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 Global Wind Energy
Index(TM) (the "Index"). The shares of the Fund are listed and trade on the NYSE
Arca, Inc. under the ticker symbol "FAN." 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 developed, maintained and sponsored by Nasdaq, Inc. The Index
provides a benchmark for investors interested in tracking public companies
throughout the world that are active in the wind energy industry.
<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 (6/16/08) Ended Ended (6/16/08)
9/30/21 9/30/21 9/30/21 to 9/30/21 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 21.76% 12.84% 12.53% -0.64% 82.91% 225.55% -8.23%
Market Price 21.25% 12.69% 12.61% -0.65% 81.76% 227.87% -8.36%
INDEX PERFORMANCE
ISE Clean Edge Global Wind
Energy Index(TM) 23.10% 13.80% 13.39% 0.18% 90.83% 251.21% 2.47%
Russell 3000(R) Index 31.88% 16.85% 16.60% 11.33% 117.85% 364.64% 316.39%
MSCI World Index 28.82% 13.74% 12.68% 7.66% 90.37% 229.96% 166.71%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 21.76% during the 12-month period covered by
this report. During the same period, the MSCI World Index (the "Benchmark")
generated a return of 28.82%. The Utilities industry received the largest
allocation in the Fund and generated the largest contribution to the Fund's
return at 56.9% and 11.5%, respectively. The smallest contribution to the Fund's
return was 0.4%, which came from investments in the Energy industry. On a
relative basis, the Fund underperformed the Benchmark. The largest source of
underperformance came from investments in the Utilities industry where the Fund
underperformed the Benchmark by -4.5%, on a relative basis. The Fund did not
outperform the Benchmark in any of the industries in which the Fund was invested
during the period.
-----------------------------
Nasdaq(R), Clean Edge(R), and ISE Clean Edge Global Wind Energy Index(TM) 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 GLOBAL WIND ENERGY ETF (FAN) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Utilities 60.6%
Industrials 36.0
Materials 2.7
Energy 0.7
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
China Longyuan Power Group Corp.,
Ltd., Class H 8.4%
Vestas Wind Systems A/S 8.3
Orsted A/S 6.9
Northland Power, Inc. 6.8
Siemens Gamesa Renewable Energy S.A. 5.9
EDP Renovaveis S.A. 3.9
Boralex, Inc., Class A 3.0
Innergex Renewable Energy, Inc. 2.4
Nordex SE 2.2
General Electric Co. 2.0
------
Total 49.8%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2011 - SEPTEMBER 30, 2021
First Trust Global ISE Clean Edge Global Russell 3000(R) MSCI World
Wind Energy ETF Wind Energy Index(TM) Index Index
------------------ ------------------------ --------------- ----------
<S> <C> <C> <C> <C>
9/30/11 $10,000 $10,000 $10,000 $10,000
3/31/12 9,705 9,691 12,655 12,003
9/30/12 8,386 8,424 13,021 12,159
3/31/13 9,624 9,667 14,499 13,426
9/30/13 13,135 13,272 15,833 14,617
3/31/14 15,298 15,519 17,777 15,985
9/30/14 14,734 14,977 18,645 16,399
3/31/15 14,180 14,486 19,974 16,948
9/30/15 13,648 13,965 18,552 15,565
3/31/16 15,460 15,962 19,906 16,363
9/30/16 17,799 18,406 21,327 17,332
3/31/17 17,676 18,443 23,500 18,779
9/30/17 18,904 19,740 25,314 20,480
3/31/18 19,248 20,068 26,744 21,318
9/30/18 18,351 19,263 29,763 22,783
3/31/19 19,390 20,403 29,087 22,188
9/30/19 19,743 20,891 30,632 23,200
3/31/20 18,475 19,679 26,435 19,882
9/30/20 26,737 28,531 35,227 25,612
3/31/21 34,427 36,973 42,963 30,624
9/30/21 32,555 35,121 46,464 32,996
</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 GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
First Trust Global Engineering and Construction 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 Global Engineering
and Construction(TM) Index (the "Index"). The shares of the Fund are listed and
trade on the NYSE Arca, Inc. under the ticker symbol "FLM." The Fund will
normally invest in at least 90% of its net assets (including investment
borrowings) in the common stocks and depositary receipts that comprise the
Index.
The Index is developed, maintained and sponsored by Nasdaq, Inc. The Index
provides a benchmark for investors interested in tracking public companies
throughout the world that are active in the engineering and construction
industries.
<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 (10/13/08) Ended Ended (10/13/08)
9/30/21 9/30/21 9/30/21 to 9/30/21 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 30.19% 4.10% 6.74% 6.45% 22.25% 91.93% 125.00%
Market Price 30.51% 4.18% 6.82% 6.46% 22.73% 93.34% 125.19%
INDEX PERFORMANCE
ISE Global Engineering and
Construction(TM) Index 32.16% 5.29% 7.86% 7.99% 29.41% 113.06% 170.99%
Russell 3000(R) Index 31.88% 16.85% 16.60% 14.32% 117.85% 364.64% 466.90%
MSCI World Industrials Index 27.02% 11.44% 12.20% 10.97% 71.84% 216.07% 285.46%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 30.19% during the 12-month period covered by
this report. During the same period, the MSCI World Industrials Index (the
"Benchmark") generated a return of 27.02%. The Construction & Engineering
industry received the largest allocation in the Fund during the period with an
84.5% weight. This industry also generated the largest contribution to the
Fund's return at 26.5% for the period. The only negative contribution to the
Fund's return came from the investment in the Maeda Road Construction Co., Ltd.,
which generated a -0.0% contribution to the Fund's return. The Fund's currency
exposure had a -2.1% impact on performance. On a relative basis, the Fund
outperformed the Benchmark. The Fund's investments in the Construction &
Engineering industry generated 3.0% of relative outperformance compared to the
Benchmark, while investments in the Building Products industry caused a -1.4%
drag on relative performance.
-----------------------------
Nasdaq(R) and the ISE Global Engineering and Construction(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 12
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 99.2%
Utilities 0.7
Energy 0.1
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Quanta Services, Inc. 4.1%
Kingspan Group PLC 3.6
Bouygues S.A. 3.4
Jacobs Engineering Group, Inc. 3.3
Vinci S.A. 3.3
AECOM 3.2
KBR, Inc. 2.9
Eiffage S.A. 2.8
Skanska AB, Class B 2.8
Taisei Corp. 2.7
------
Total 32.1%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2011 - SEPTEMBER 30, 2021
First Trust Global Engineering ISE Global Engineering and Russell 3000(R) MSCI World
and Construction ETF Construction(TM) Index Index Industrials Index
---------------------------------- -------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
9/30/11 $10,000 $10,000 $10,000 $10,000
3/31/12 12,202 12,135 12,655 12,357
9/30/12 11,793 11,811 13,021 12,092
3/31/13 13,006 13,047 14,499 13,893
9/30/13 14,745 14,922 15,833 15,500
3/31/14 16,153 16,413 17,777 16,899
9/30/14 15,049 15,358 18,645 16,766
3/31/15 14,661 15,188 19,974 17,356
9/30/15 13,967 14,510 18,552 15,598
3/31/16 14,822 15,513 19,906 17,224
9/30/16 15,700 16,462 21,327 18,393
3/31/17 16,848 17,788 23,500 20,076
9/30/17 18,588 19,707 25,314 22,375
3/31/18 18,720 19,808 26,744 23,116
9/30/18 18,900 20,157 29,763 24,024
3/31/19 16,708 17,907 29,087 23,003
9/30/19 15,943 17,150 30,632 23,932
3/31/20 12,306 13,459 26,435 18,978
9/30/20 14,745 16,120 35,227 24,881
3/31/21 19,432 21,419 42,963 30,925
9/30/21 19,193 21,306 46,464 31,607
</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 NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure 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 Clean Edge Smart Grid Infrastructure Index(TM) (the "Index"). The shares of
the Fund are listed and trade on The Nasdaq Stock Market LLC under the ticker
symbol "GRID." 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 act as a transparent and liquid benchmark for the grid
and electric energy infrastructure sector. The Index includes companies that are
primarily engaged and involved in electric grid, electric meters and devices,
networks, energy storage and management, and enabling software used by the smart
grid infrastructure sector. Clean Edge, Inc. and Nasdaq, Inc. serve as index
providers to the Index.
<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 (11/16/09) Ended Ended (11/16/09)
9/30/21 9/30/21 9/30/21 to 9/30/21 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 48.35% 20.06% 15.67% 11.13% 149.45% 328.89% 249.99%
Market Price 48.30% 20.07% 15.66% 11.14% 149.53% 328.46% 250.22%
INDEX PERFORMANCE
Nasdaq OMX Clean Edge Smart Grid
Infrastructure Index(TM) 49.98% 21.13% 16.58% 12.07% 160.82% 363.64% 286.76%
Russell 3000(R) Index 31.88% 16.85% 16.60% 14.44% 117.85% 364.64% 395.86%
S&P Composite 1500(R) Industrials Index 30.92% 12.96% 15.36% 13.47% 83.95% 317.26% 348.24%
MSCI World Industrials Index 27.02% 11.44% 12.20% 10.34% 71.84% 216.07% 221.58%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 48.35% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500(R) Industrials Index
(the "Benchmark") generated a return of 30.92%. The Electrical Equipment
industry received the greatest allocation in the Fund during the period covered
by this report. Investments in this industry also had the greatest contribution
to the Fund's return of any industry, with a 13.6% contribution to the Fund's
return. No industry in the Fund had a negative contribution to the Fund's return
during the period covered by this report. The Fund's currency exposure had a
-1.3% impact on the Fund's performance. On a relative basis, the Fund
outperformed the Benchmark. The greatest source of outperformance for the Fund
was from investments in the Auto Components industry. This industry was absent
from the Benchmark but received an allocation of 9.5% in the Fund and caused
3.7% of outperformance for the Fund versus the Benchmark. Meanwhile, the
greatest source of underperformance came from investments in the Electric
Utilities industry. This industry was also absent from the Benchmark and the
Fund's 10.0% allocation caused -1.7% of underperformance for the Fund versus the
Benchmark.
-----------------------------
Nasdaq(R), Nasdaq OMX(R), Clean Edge(R), and Nasdaq OMX Clean Edge Smart Grid
Infrastructure Index(TM) 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 NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
(CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 51.5%
Information Technology 23.7
Utilities 13.6
Consumer Discretionary 11.2
Materials 0.0*
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Aptiv PLC 8.3%
Schneider Electric SE 7.9
Johnson Controls International PLC 7.8
ABB Ltd. 7.7
Eaton Corp. PLC 7.6
Quanta Services, Inc. 4.8
SolarEdge Technologies, Inc. 3.9
Prysmian S.p.A. 3.8
Terna Rete Elettrica Nazionale S.p.A. 3.8
Red Electrica Corp., S.A. 3.7
------
Total 59.3%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2011 - SEPTEMBER 30, 2021
First Trust NASDAQ(R) NASDAQ OMX Russell S&P Composite MSCI World
Clean Edge(R) Smart Grid Clean Edge Smart Grid 3000(R) Industrials 1500(R) Industrials
Infrastructure Index Fund Infrastructure Index(TM) Index Index Index
------------------------- --------------------------- ------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
9/30/11 $10,000 $10,000 $10,000 $10,000 $10,000
3/31/12 11,706 11,679 12,655 13,107 12,357
9/30/12 12,082 12,113 13,021 13,035 12,092
3/31/13 13,474 13,565 14,499 15,241 13,892
9/30/13 14,310 14,486 15,833 17,041 15,500
3/31/14 16,481 16,753 17,777 19,330 16,900
9/30/14 15,195 15,503 18,645 19,643 16,766
3/31/15 15,418 15,787 19,974 20,939 17,356
9/30/15 13,679 14,025 18,552 18,939 15,598
3/31/16 15,073 15,558 19,906 21,390 17,225
9/30/16 17,197 17,777 21,327 22,682 18,395
3/31/17 18,458 19,165 23,500 25,526 20,078
9/30/17 21,793 22,691 25,314 27,895 22,377
3/31/18 22,100 23,034 26,744 29,187 23,118
9/30/18 21,433 22,451 29,763 31,236 24,027
3/31/19 19,721 20,725 29,087 30,005 23,006
9/30/19 22,575 23,902 30,632 31,478 23,935
3/31/20 19,613 20,914 26,435 24,150 18,980
9/30/20 28,917 30,917 35,227 31,868 24,883
3/31/21 39,619 42,607 42,963 41,687 30,927
9/30/21 42,889 46,364 46,464 41,726 31,607
</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 INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
First Trust Indxx Global Natural Resources Income 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 Indxx Global Natural
Resources Income Index (the "Index"). The shares of the Fund are listed and
traded on The Nasdaq Stock Market LLC under the ticker symbol "FTRI." 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 owned and is developed, maintained and sponsored by Indxx, LLC. The
Index is a free float adjusted market capitalization weighted index designed to
measure the market performance of the 50 highest dividend yielding companies
involved in the upstream (i.e., generally exploration and production) segment of
the natural resources sector.
<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 (3/11/10) Ended Ended (3/11/10)
9/30/21 9/30/21 9/30/21 to 9/30/21 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 42.87% 9.10% -3.23% -3.76% 54.55% -27.97% -35.82%
Market Price 42.06% 9.15% -3.15% -3.74% 54.89% -27.36% -35.59%
INDEX PERFORMANCE
Indxx Global Natural Resources Income Index* 44.91% 10.27% N/A N/A 63.07% N/A N/A
MSCI ACWI Materials Index 26.81% 11.79% 6.49% 4.73% 74.58% 87.59% 70.64%
MSCI ACWI Index 27.44% 13.20% 11.90% 9.84% 85.84% 207.94% 195.81%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
* Effective on the close of business December 18, 2015, the Fund's underlying
index changed from the ISE Global Copper(TM) Index to the Indxx Global Natural
Resources Income Index. Therefore, the Fund's performance and total returns
shown for the period prior to December 18, 2015, are not necessarily indicative
of the performance the Fund, based on its current index, would have generated.
Since the Fund's new underlying index had an inception date of June 1, 2015, it
was not in existence for all the periods disclosed.
PERFORMANCE REVIEW
The Fund generated a NAV return of 42.87% during the 12-month period covered by
this report. During the same period, the MSCI ACWI Materials Index (the
"Benchmark") generated a return of 26.81%. The industry with the greatest
allocation during the period covered by this report was Metals & Mining.
Investments in this industry received an allocation of 43.0% and contributed
13.5% to the Fund's performance. The industry with the greatest contribution to
return, however, was the Oil, Gas & Consumable Fuels industry. This industry
carried an average weight of 22.3% but contributed an 18.7% to the Fund's
return. The only industry with a negative contribution to the Fund's return was
the Construction Materials industry, and its contribution to return was a drag
of less than 5 basis points, or -0.0%. The Fund's currency exposure had a 2.4%
impact on the Fund's performance. On a relative basis, the Fund outperformed the
Benchmark. The greatest source of outperformance came from investments in the
Oil, Gas & Consumable Fuels industry. This industry was absent from the
Benchmark and contributed 13.4% to outperformance in the Fund. Meanwhile, the
industry with the greatest allocation, Metals & Mining, was actually the
industry with the most negative contribution to the Fund's performance versus
the Benchmark. This industry had a weight of 43.0% in the Fund compared to 37.3%
in the Benchmark which resulted in -2.5% of underperformance for the Fund versus
the Benchmark.
-----------------------------
Indxx and the Index are trademarks of Indxx, LLC ("Indxx") and have been
licensed for use for certain purposes by First Trust. The Fund is not sponsored,
endorsed, sold or promoted by Indxx, and Indxx makes no representation regarding
the advisability of trading in such product. The Index is determined, composed
and calculated by Indxx without regard to First Trust or the Fund.
Page 16
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Materials 62.5%
Energy 15.9
Utilities 10.8
Consumer Staples 10.8
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Rio Tinto PLC, ADR 9.5%
BHP Group PLC, ADR 9.3
Petroleo Brasileiro S.A., ADR 8.2
Vale S.A., ADR 8.1
Nutrien Ltd. 5.1
Tyson Foods, Inc., Class A 4.9
Veolia Environnement S.A. 4.9
Archer-Daniels-Midland Co. 4.8
International Paper Co. 4.6
Fortescue Metals Group Ltd. 3.9
------
Total 63.3%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2011 - SEPTEMBER 30, 2021
First Trust Indxx Global MSCI ACWI MSCI ACWI
Natural Resources Income ETF Materials Index Index
---------------------------- ----------------- ------------
<S> <C> <C> <C>
9/30/11 $10,000 $10,000 $10,000
3/31/12 12,328 11,575 11,991
9/30/12 11,382 11,066 12,098
3/31/13 10,388 11,083 13,253
9/30/13 9,075 11,109 14,243
3/31/14 9,010 11,653 15,451
9/30/14 8,860 11,333 15,856
3/31/15 6,947 10,831 16,289
9/30/15 4,652 8,663 14,800
3/31/16 4,349 9,485 15,581
9/30/16 4,661 10,746 16,569
3/31/17 4,980 11,927 17,924
9/30/17 5,382 13,300 19,659
3/31/18 5,735 13,812 20,571
9/30/18 5,982 13,914 21,581
3/31/19 5,902 13,394 21,121
9/30/19 5,717 13,242 21,879
3/31/20 4,277 10,545 18,745
9/30/20 5,043 14,794 24,164
3/31/21 7,096 18,624 28,980
9/30/21 7,203 18,759 30,794
</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 INDXX GLOBAL AGRICULTURE ETF (FTAG)
First Trust Indxx Global Agriculture 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 Indxx Global Agriculture Index (the
"Index"). The shares of the Fund are listed and traded on The Nasdaq Stock
Market LLC under the ticker symbol "FTAG." 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 owned and is developed, maintained and sponsored by Indxx, LLC. The
Index is a market capitalization weighted index designed to measure the
performance of companies that are directly or indirectly engaged in improving
agricultural yields. The Index is composed of farmland companies and firms
involved in chemicals and fertilizers, seeds, irrigation equipment, and farm
machinery.
<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 (3/11/10) Ended Ended (3/11/10)
9/30/21 9/30/21 9/30/21 to 9/30/21 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 37.94% 8.48% -9.62% -11.83% 50.26% -63.63% -76.67%
Market Price 37.96% 8.40% -9.55% -11.86% 49.68% -63.35% -76.76%
INDEX PERFORMANCE
Indxx Global Agriculture Index* 40.14% 9.61% N/A N/A 58.21% N/A N/A
MSCI ACWI Index 27.44% 13.20% 11.90% 9.84% 85.84% 207.94% 195.81%
MSCI ACWI Materials Index 26.81% 11.79% 6.49% 4.73% 74.58% 87.59% 70.64%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
* Effective on the close of business December 18, 2015, the Fund's underlying
index changed from the ISE Global Platinum(TM) Index to the Indxx Global
Agriculture Index. Therefore, the Fund's performance and total returns shown for
the period prior to December 18, 2015, are not necessarily indicative of the
performance the Fund, based on its current Index, would have generated. Since
the Fund's new underlying index had an inception date of June 1, 2015, it was
not in existence for all the periods disclosed.
PERFORMANCE REVIEW
The Fund generated a NAV return of 37.94% during the 12-month period covered by
this report. During the same period, the MSCI ACWI Materials Index (the
"Benchmark") generated a return of 26.81%. The industry with the greatest
allocation in the Fund was the Chemicals industry, which received an allocation
of 51.6% during the period covered by this report. This industry also had the
greatest contribution to the Fund's return, with a 23.6% contribution. The most
negatively contributing industry was the Pharmaceuticals industry. Investments
in this industry received an allocation of 9.2% and contributed -1.3% to the
Fund's return. The Fund's currency exposure had a -0.5% impact on the Fund's
performance. On a relative basis, the Fund outperformed the Benchmark. Both the
Chemicals industry and the Machinery industry were huge drivers of the Fund's
outperformance. The Chemicals industry had a similar weight in the Fund and the
Benchmark but, due to the selection effect, contributed 10.9% to the Fund's
outperformance versus the Benchmark. The Machinery industry, meanwhile, was
absent from the Benchmark. The overweighting in the Fund to the Machinery
industry earned 5.3% of outperformance for the Fund versus the Benchmark. The
Fund also allocated 9.2% to the Pharmaceuticals industry, which was absent from
the Benchmark, and this overweight caused -4.0% of underperformance for the
Fund.
-----------------------------
Indxx and the Index are trademarks of Indxx, LLC ("Indxx") and have been
licensed for use for certain purposes by First Trust. The Fund is not sponsored,
endorsed, sold or promoted by Indxx and Indxx makes no representation regarding
the advisability of trading in such product. The Index is determined, composed
and calculated by Indxx without regard to First Trust or the Fund.
Page 18
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Materials 53.2%
Industrials 29.1
Health Care 9.2
Consumer Staples 6.1
Consumer Discretionary 2.4
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
BASF SE 9.8%
Bayer AG 9.2
Deere & Co. 9.0
Nutrien Ltd. 6.4
Industries Qatar QSC 4.5
Corteva, Inc. 4.3
Kubota Corp. 4.3
CNH Industrial N.V. 4.0
Wilmar International Ltd. 3.5
Petronas Chemicals Group Bhd 2.9
------
Total 57.9%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2011 - SEPTEMBER 30, 2021
First Trust Indxx MSCI ACWI MSCI ACWI
Global Agriculture ETF Index Materials Index
---------------------- ------------- ------------------
<S> <C> <C> <C>
9/30/11 $10,000 $10,000 $10,000
3/31/12 10,249 11,991 11,575
9/30/12 7,592 12,098 11,066
3/31/13 7,274 13,253 11,083
9/30/13 6,845 14,243 11,109
3/31/14 6,801 15,451 11,653
9/30/14 6,117 15,856 11,333
3/31/15 5,062 16,289 10,831
9/30/15 2,985 14,800 8,663
3/31/16 2,308 15,581 9,485
9/30/16 2,420 16,569 10,746
3/31/17 2,779 17,924 11,927
9/30/17 3,076 19,659 13,300
3/31/18 3,034 20,571 13,812
9/30/18 3,029 21,581 13,914
3/31/19 2,712 21,121 13,394
9/30/19 2,723 21,879 13,241
3/31/20 1,944 18,744 10,544
9/30/20 2,638 24,163 14,792
3/31/21 3,679 28,979 18,622
9/30/21 3,637 30,794 18,759
</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 BICK INDEX FUND (BICK)
The First Trust BICK Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE BICK(TM) Index (the "Index"). The
shares of the Fund are listed and trade on The Nasdaq Stock Market LLC under the
ticker symbol "BICK." 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 developed, maintained and sponsored by Nasdaq, Inc. The Index is
designed to provide a benchmark for investors interested in tracking some of the
largest and most liquid public companies that are domiciled in Brazil, India,
China (including Hong Kong) and South Korea that are accessible for investment
by U.S. investors.
<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 (4/12/10) Ended Ended (4/12/10)
9/30/21 9/30/21 9/30/21 to 9/30/21 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 18.28% 9.45% 5.83% 2.56% 57.04% 76.19% 33.66%
Market Price 17.88% 9.47% 5.91% 2.54% 57.23% 77.55% 33.40%
INDEX PERFORMANCE
ISE BICK(TM) Index 20.16% 10.72% 6.69% 3.54% 66.35% 91.14% 48.99%
MSCI ACWI Index 27.44% 13.20% 11.90% 9.52% 85.84% 207.94% 183.63%
MSCI Emerging Markets Index 18.20% 9.23% 6.09% 4.11% 55.51% 80.54% 58.76%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 18.28% during the 12-month period covered by
this report. During the same period, the MSCI Emerging Markets Index (the
"Benchmark") generated a return of 18.20%. South Korean securities held the
largest weight in the Fund at 25.3% while Indian securities generated the
largest contribution to the Fund's return at 10.7%. The only negative
contribution to the Fund during the period came from investments in Chinese
securities, which generated -1.7% to the Fund's return. The Fund's currency
exposure resulted in a 0.5% impact on the Fund's performance. On a relative
basis, the Fund outperformed the Benchmark. Investments in Brazilian securities
were the largest source of outperformance with 0.7% compared to the Benchmark.
Chinese securities generated the largest drag on relative performance with the
Fund underperforming the Benchmark by -0.2% in these securities during the
period covered by this report.
-----------------------------
Nasdaq(R) and ISE BICK(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 20
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST BICK INDEX FUND (BICK) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 24.8%
Financials 17.4
Information Technology 14.0
Communication Services 8.9
Health Care 8.1
Materials 7.7
Energy 5.6
Industrials 5.1
Utilities 4.3
Consumer Staples 3.0
Real Estate 1.1
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Tata Motors Ltd., ADR 2.6%
Reliance Industries Ltd., GDR 2.5
MakeMyTrip Ltd. 2.4
State Bank of India, GDR 2.4
Dr. Reddy's Laboratories Ltd., ADR 2.3
WNS (Holdings) Ltd., ADR 2.2
Azure Power Global Ltd. 2.2
ICICI Bank Ltd., ADR 2.2
Wipro Ltd., ADR 2.1
Infosys Ltd., ADR 2.1
------
Total 23.0%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2011 - SEPTEMBER 30, 2021
First Trust BICK ISE BICK(TM) MSCI ACWI MSCI Emerging
Index Fund Index Index Markets Index
---------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
9/30/11 $10,000 $10,000 $10,000 $10,000
3/31/12 11,859 11,724 11,991 11,913
9/30/12 10,978 10,924 12,098 11,693
3/31/13 11,178 11,116 13,253 12,119
9/30/13 11,054 11,098 14,243 11,808
3/31/14 11,611 11,709 15,451 11,972
9/30/14 11,930 12,100 15,856 12,316
3/31/15 11,201 11,443 16,289 12,024
9/30/15 9,049 9,189 14,800 9,940
3/31/16 9,732 9,971 15,581 10,577
9/30/16 11,220 11,491 16,569 11,608
3/31/17 12,171 12,525 17,924 12,397
9/30/17 14,264 14,767 19,659 14,214
3/31/18 15,307 15,820 20,571 15,466
9/30/18 13,293 13,939 21,581 14,099
3/31/19 13,823 14,575 21,121 14,340
9/30/19 13,058 13,800 21,878 13,817
3/31/20 10,518 11,231 18,744 11,807
9/30/20 14,895 15,907 24,165 15,273
3/31/21 19,194 20,655 28,981 18,699
9/30/21 17,619 19,114 30,794 18,054
</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>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INDXX NEXTG ETF (NXTG)
The First Trust Indxx NextG 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 Indxx 5G & NextG Thematic Index(SM) (the
"Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market
LLC under the ticker symbol "NXTG." 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 owned and is developed, maintained and sponsored by Indxx, LLC. The
Index is designed to track the performance of companies that have devoted, or
have committed to devote, material resources to the research, development and
application of fifth generation (5G) and next generation digital cellular
technologies as they emerge.
<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 (2/17/11) Ended Ended (2/17/11)
9/30/21 9/30/21 9/30/21 to 9/30/21 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 30.62% 14.41% 14.31% 10.40% 96.01% 280.98% 185.87%
Market Price 30.27% 14.49% 14.33% 10.39% 96.70% 281.48% 185.74%
INDEX PERFORMANCE
Indxx 5G & NextG Thematic Index(SM)(1) (2) 32.67% N/A N/A N/A N/A N/A N/A
MSCI World Index(3) 28.82% 13.74% 12.68% 9.89% 90.37% 229.96% 172.25%
MSCI ACWI Information Technology Index 30.26% 26.21% 20.99% 17.69% 220.24% 571.95% 463.74%
MSCI ACWI Index(3) 27.44% 13.20% 11.90% 9.15% 85.84% 207.94% 153.37%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
(1) On May 30, 2019, the Fund's underlying index changed from the Nasdaq CTA
Smartphone Index(SM) to the Indxx 5G & NextG Thematic Index(SM).
Therefore, the Fund's performance and historical returns shown for the
periods prior to this date are not necessarily indicative of the
performance that the Fund, based on its current index, would have
generated.
(2) Performance data is not available for all the periods shown in the table
for the index because performance data does not exist for some of the
entire periods.
(3) On December 31, 2020, the Fund's benchmark changed from the MSCI World
Index to the MSCI ACWI Index, because the Advisor believes that the MSCI
ACWI Index better reflects the investment strategies of the Fund.
PERFORMANCE REVIEW
The Fund generated a NAV return of 30.62% during the 12-month period covered by
this report. During the same period, the MSCI ACWI Information Technology Index
(the "Benchmark") generated a return of 30.26%. The Semiconductors &
Semiconductor Equipment industry received the greatest allocation of any
industry in the Fund, with an average weight during the period of 26.4%.
Investments in this industry performed well and contributed 12.4% to the Fund's
return, which was more than any other industry. No industry had a negative
contribution to the Fund's return during the period covered by this report. The
Fund's currency exposure had a -0.6% impact on performance. On a relative basis,
the Fund outperformed the Benchmark. The industry with the greatest contribution
to the Fund's outperformance was the Technology Hardware, Storage & Peripherals
industry. Investments in this industry were underweight in the Fund and caused
2.5% of outperformance for the Fund versus the Benchmark. Meanwhile, the
Diversified Telecommunication Services industry caused the most underperformance
for the Fund versus the Benchmark, with a -2.9% contribution to the Fund's
underperformance.
-----------------------------
Indxx and the Index are trademarks of Indxx, LLC ("Indxx") and have been
licensed for use for certain purposes by First Trust. The Fund is not sponsored,
endorsed, sold or promoted by Indxx and Indxx makes no representation regarding
the advisability of trading in such product. The Index is determined, composed
and calculated by Indxx without regard to First Trust or the Fund.
Page 22
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INDXX NEXTG ETF (NXTG) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 56.7%
Communication Services 32.3
Real Estate 7.8
Consumer Discretionary 2.2
Industrials 1.0
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
HCL Technologies Ltd. 1.5%
Tech Mahindra Ltd. 1.5
Advanced Micro Devices, Inc. 1.5
United Microelectronics Corp. 1.4
NVIDIA Corp. 1.4
Xilinx, Inc. 1.4
Marvell Technology, Inc. 1.4
NEC Corp. 1.3
STMicroelectronics N.V. 1.3
Tata Consultancy Services Ltd. 1.3
------
Total 14.0%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2011 - SEPTEMBER 30, 2021
First Trust Indxx MSCI World MSCI ACWI Information MSCI ACWI
NextG ETF Index Technology Index Index
-------------------- ------------- --------------------- -------------
<S> <C> <C> <C> <C>
9/30/11 $10,000 $10,000 $10,000 $10,000
3/31/12 12,312 12,003 12,841 11,991
9/30/12 10,403 12,159 12,594 12,098
3/31/13 12,024 13,426 12,842 13,253
9/30/13 14,628 14,616 14,012 14,243
3/31/14 16,151 15,984 15,919 15,451
9/30/14 16,992 16,398 17,285 15,856
3/31/15 18,554 16,947 18,457 16,289
9/30/15 16,253 15,564 17,078 14,800
3/31/16 17,457 16,362 18,815 15,581
9/30/16 19,438 17,331 20,984 16,569
3/31/17 21,955 18,778 23,504 17,924
9/30/17 24,043 20,479 27,276 19,659
3/31/18 25,231 21,317 30,377 20,571
9/30/18 24,091 22,781 33,506 21,581
3/31/19 23,744 22,186 32,993 21,121
9/30/19 24,518 23,198 35,623 21,879
3/31/20 22,821 19,881 35,206 18,744
9/30/20 29,168 25,611 51,577 24,163
3/31/21 36,037 30,623 60,453 28,979
9/30/21 38,098 32,996 67,195 30,794
</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 23
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
The First Trust NASDAQ Global Auto 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 Global Auto Index(SM) (the
"Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market
LLC under the ticker symbol "CARZ." 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 owned and was developed by Nasdaq, Inc. (the "Index Provider"). The
Index is designed to track the performance of the largest and most liquid
companies engaged in the manufacturing of automobiles. To be eligible for
inclusion in the Index, a security must be issued by a company classified as an
"Automobile Manufacturer" by the Industry Classification Benchmark. In addition,
a security must be listed on an Index-eligible global stock exchange, as
determined by the Index Provider, have a minimum float-adjusted worldwide market
capitalization of at least $500 million and a minimum three-month average daily
dollar trading volume of $1 million and a minimum free float of 20%.
<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 (5/9/11) Ended Ended (5/9/11)
9/30/21 9/30/21 9/30/21 to 9/30/21 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 50.43% 14.02% 11.84% 8.39% 92.72% 206.20% 131.03%
Market Price 50.71% 14.22% 11.94% 8.43% 94.43% 208.85% 131.89%
INDEX PERFORMANCE
Nasdaq Global Auto Index(SM) 52.09% 15.26% 12.71% 9.44% 103.44% 230.83% 155.30%
MSCI World Index 28.82% 13.74% 12.68% 10.09% 90.37% 229.96% 171.62%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 50.43% during the 12-month period covered by
this report. During the same period, the MSCI World Index (the "Benchmark")
generated a return of 28.82%. Tesla, Inc. was the largest holding in the Fund
during the period with an 8.0% weight and it also had the largest contribution
to the Fund's return at 5.3%. Fisker, Inc. provided the largest negative
contribution to the Fund's return during the period at -0.2%. Currency
contributed -2.9% to the Fund's return during the period. On a relative basis,
the Fund outperformed the Benchmark with Tesla, Inc. providing the largest
source of relative outperformance at 3.4%. Subaru Corp. provided the largest
drag on relative performance at -1.5% during the period.
-----------------------------
Nasdaq(R), Nasdaq OMX(R), and Nasdaq Global Auto Index(SM) and the 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 24
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 100.0%
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
General Motors Co. 8.7%
Tesla, Inc. 8.5
Daimler AG 8.5
Toyota Motor Corp. 8.2
Honda Motor Co., Ltd. 8.2
Ford Motor Co. 4.4
Suzuki Motor Corp. 4.2
Bayerische Motoren Werke AG 4.0
Subaru Corp. 4.0
Porsche Automobil Holding SE
(Preference Shares) 4.0
------
Total 62.7%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2011 - SEPTEMBER 30, 2021
First Trust NASDAQ Nasdaq Global Auto MSCI World
Global Auto Index Fund Index Index(SM) Index
---------------------- --------------------- ----------
<S> <C> <C> <C>
9/30/11 $10,000 $10,000 $10,000
3/31/12 12,358 12,258 12,003
9/30/12 10,977 10,935 12,159
3/31/13 13,532 13,478 13,426
9/30/13 17,502 17,598 14,616
3/31/14 18,017 18,191 15,984
9/30/14 17,343 17,565 16,398
3/31/15 18,600 18,919 16,947
9/30/15 15,542 15,818 15,564
3/31/16 15,673 16,090 16,362
9/30/16 15,891 16,261 17,331
3/31/17 17,350 17,947 18,778
9/30/17 19,619 20,368 20,479
3/31/18 20,147 20,873 21,317
9/30/18 18,134 18,990 22,781
3/31/19 16,551 17,397 22,186
9/30/19 16,505 17,441 23,200
3/31/20 12,452 13,259 19,883
9/30/20 20,355 21,750 25,613
3/31/21 30,000 32,225 30,626
9/30/21 30,620 33,082 32,996
</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 25
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
The First Trust Cloud Computing 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 CTA Cloud Computing Index(TM) (the
"Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market
LLC under the ticker symbol "SKYY." 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 owned by Nasdaq, Inc. The Index is designed to provide a benchmark
for investors interested in tracking companies involved in the cloud computing
industry. To be eligible for inclusion in the Index, a security must be issued
by a cloud computing company classified by the Consumer Technology Association
("CTA"). A cloud computing company is a company engaged in one or more of the
following activities: Infrastructure-as-a-Service, Platform-as-a-Service or
Software-as-a-Service. In addition, securities included in the Index must have a
minimum capitalization of $500 million.
<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 (7/5/11) Ended Ended (7/5/11)
9/30/21 9/30/21 9/30/21 to 9/30/21 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 34.55% 25.83% 21.19% 17.90% 215.39% 583.15% 439.81%
Market Price 34.58% 25.82% 21.18% 17.90% 215.36% 582.65% 439.75%
INDEX PERFORMANCE
ISE CTA Cloud Computing Index(TM)(1) 35.36% 26.41% 21.86% 18.56% 222.80% 622.25% 471.25%
S&P 500(R) Index 30.00% 16.90% 16.63% 14.39% 118.26% 365.86% 296.02%
S&P Composite 1500(R) Information
Technology Index 29.78% 27.88% 22.84% 20.85% 241.94% 682.06% 594.91%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
(1) On June 24, 2019, the Fund's underlying index changed its methodology and
changed its name from "ISE Cloud Computing(TM) Index" to "ISE CTA Cloud
Computing Index(TM)."
PERFORMANCE REVIEW
The Fund generated a NAV return of 34.55% 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 30.00%. The Fund allocated 84.7% to the Information
Technology sector, which returned 40.7% and contributed 33.9% to the Fund's
return. The Fund's allocation to the Consumer Discretionary sector contributed
-2.3% to the Fund's return as a result of its 7.0% allocation and -25.9% return.
On a relative basis, the Fund outperformed the Benchmark. The greatest source of
outperformance for the Fund was the investments in the Information Technology
sector where the Fund over allocated the well performing sector by 57.4% and
outperformed the Benchmark by 11.8%. These two factors led to the Fund earning
9.7% of relative outperformance. The Fund did not have any allocation to the
Financials sector, which had a 59.1% return in the Benchmark. This factor led to
a -3.1% drag on relative return.
-----------------------------
Nasdaq(R) and the 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 26
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CLOUD COMPUTING ETF (SKYY) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 86.0%
Consumer Discretionary 6.6
Communication Services 6.4
Health Care 1.0
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
DigitalOcean Holdings, Inc. 4.6%
Rackspace Technology, Inc. 3.7
MongoDB, Inc. 3.6
VMware, Inc., Class A 3.6
Oracle Corp. 3.5
Pure Storage, Inc., Class A 3.5
Amazon.com, Inc. 3.4
Microsoft Corp. 3.4
Arista Networks, Inc. 3.4
Alphabet, Inc., Class A 3.3
------
Total 36.0%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2011 - SEPTEMBER 30, 2021
First Trust Cloud ISE CTA Cloud S&P 500(R) S&P Composite 1500(R)
Computing ETF Computing Index(TM) Index Information Technology Index
--------------------- ----------------------- ---------- ----------------------------
<S> <C> <C> <C> <C>
9/30/11 $10,000 $10,000 $10,000 $10,000
3/31/12 13,419 13,454 12,589 13,211
9/30/12 12,483 12,561 13,020 13,161
3/31/13 13,327 13,454 14,347 13,147
9/30/13 15,456 15,648 15,538 14,313
3/31/14 16,944 17,211 17,482 16,493
9/30/14 17,186 17,514 18,604 18,179
3/31/15 18,413 18,821 19,707 19,417
9/30/15 17,708 18,149 18,489 18,623
3/31/16 18,714 19,278 20,059 20,793
9/30/16 21,656 22,376 21,343 22,874
3/31/17 24,538 25,200 23,503 26,081
9/30/17 26,638 27,440 25,315 29,425
3/31/18 30,836 31,863 26,793 33,083
9/30/18 36,177 37,512 29,850 38,370
3/31/19 37,049 38,559 29,337 38,017
9/30/18 36,382 38,027 31,121 41,587
3/31/20 35,243 36,928 27,290 41,450
9/30/20 50,768 53,365 35,834 60,268
3/31/21 61,983 65,361 42,668 69,585
9/30/21 68,315 72,225 46,586 78,206
</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 27
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
First Trust International Equity Opportunities ETF (formerly First Trust
International IPO 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 IPOX(R) International Index (the "Index"). The shares of the
Fund are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol
"FPXI." 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 owned and is developed, maintained and sponsored by IPOX(R)
Schuster LLC (the "Index Provider"). The Index is a market-cap weighted
portfolio measuring the performance of the top 50 companies domiciled outside
the United States ranked quarterly by market capitalization in the IPOX(R)
Global Composite Index (the "Base Index") and represents, on average, 25% of the
total market capitalization of the Base Index, a fully market
capitalization-weighted index constructed and managed to provide a broad and
objective view of global aftermarket performance of initial public offerings and
spin-offs in all world countries (both developed and emerging market countries).
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (11/4/14) Ended (11/4/14)
9/30/21 9/30/21 to 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 13.73% 19.47% 12.79% 143.38% 129.56%
Market Price 12.98% 19.30% 12.75% 141.64% 128.98%
INDEX PERFORMANCE
IPOX(R) International Index 15.41% 20.60% 13.72% 155.15% 142.97%
MSCI World ex USA Index 26.50% 8.88% 6.15% 52.99% 51.04%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 13.73% during the 12-month period covered by
this report. During the same period, the MSCI World ex USA Index (the
"Benchmark") generated a return of 26.50%. The Consumer Discretionary sector
received the largest Fund allocation with 23.7% of the Fund's weight allocated
to securities in this sector. The Health Care sector generated the largest
contribution to the Fund's performance with a 4.7% contribution. The sector with
the smallest contribution to the Fund's return was the 0.0% generated by the
Real Estate sector. The Fund's currency exposure resulted in a -0.5% impact to
the Fund's return. On a relative basis, the Fund underperformed the Benchmark.
The largest source of relative underperformance came from the Consumer
Discretionary sector where the Fund underperformed the Benchmark by -7.0%. The
Fund did, however, outperform the Benchmark by 3.5% in the Health Care sector.
-----------------------------
IPOX(R) and the 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.
Page 28
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 23.0%
Health Care 19.9
Consumer Discretionary 15.3
Communication Services 15.2
Financials 13.8
Energy 6.3
Real Estate 2.2
Materials 1.6
Utilities 1.6
Consumer Staples 1.1
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Adyen N.V. 8.7%
Sea Ltd., ADR 6.8
Saudi Arabian Oil Co. 6.3
SoftBank Corp. 6.0
Siemens Healthineers AG 4.5
Mercari, Inc. 4.0
China Merchants Bank Co., Ltd., Class H 3.5
Inmode Ltd. 3.1
Dassault Systemes SE 2.7
Takeda Pharmaceutical Co., Ltd., ADR 2.7
------
Total 48.3%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 4, 2014 - SEPTEMBER 30, 2021
First Trust International IPOX(R) International MSCI World
Equity Opportunities ETF Index ex USA Index
------------------------- ------------------ ------------
<S> <C> <C> <C>
11/4/14 $10,000 $10,000 $10,000
3/31/15 9,798 9,813 10,252
9/30/15 8,526 8,522 9,212
3/31/16 8,864 8,954 9,386
9/30/16 9,432 9,523 9,872
3/31/17 9,913 10,072 10,506
9/30/17 11,952 12,204 11,722
3/31/18 12,949 13,217 11,951
9/30/18 12,352 12,713 12,036
3/31/19 12,308 12,716 11,594
9/30/19 12,920 13,403 11,922
3/31/20 13,086 13,684 9,866
9/30/20 20,185 21,054 11,940
3/31/21 23,365 24,630 14,391
9/30/21 22,956 24,297 15,104
</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 29
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
The First Trust Nasdaq Cybersecurity 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 CTA Cybersecurity Index(TM) (the
"Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market
LLC under the ticker symbol "CIBR." 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 owned by Nasdaq, Inc. (the "Index Provider"). The Index Provider
and the Consumer Technology Association ("CTA") have jointly developed the
eligibility and selection criteria and rules for the Index. The Index includes
securities of companies classified as "cybersecurity" companies by the CTA.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (7/6/15) Ended (7/6/15)
9/30/21 9/30/21 to 9/30/21 9/30/21 to 9/30/21
<S> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 40.50% 20.41% 16.09% 153.14% 153.59%
Market Price 40.39% 20.41% 16.09% 153.08% 153.53%
INDEX PERFORMANCE
Nasdaq CTA Cybersecurity Index(TM) 41.43% 21.27% 16.94% 162.30% 165.29%
S&P 500(R) Index 30.00% 16.90% 14.69% 118.26% 135.01%
S&P Composite 1500(R) Information Technology Index 29.78% 27.88% 24.95% 241.94% 300.98%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 40.50% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500(R) Information
Technology Index (the "Benchmark") generated a return of 29.78%. The securities
in the Software industry received the largest Fund allocation at 54.8% and this
industry also generated the largest contribution to the Fund's return at 22.6%.
The smallest contribution to the Fund's return was 1.6% which came from
investments in the Aerospace & Defense industry. The Fund's currency exposure
resulted in a 0.1% impact on the Fund's return. On a relative basis, the Fund
outperformed the Benchmark. The largest source of relative outperformance was
the 7.6% generated by investments in the Software industry. The Fund's lack of
investment in the Semiconductors & Semiconductor Equipment industry resulted in
a -2.0% drag on relative Fund performance.
-----------------------------
Nasdaq(R) and the 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 30
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 88.7%
Industrials 11.3
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Palo Alto Networks, Inc. 6.6%
Accenture PLC, Class A 6.0
Cisco Systems, Inc. 5.8
Okta, Inc. 5.7
Crowdstrike Holdings, Inc., Class A 5.5
Tenable Holdings, Inc. 3.3
VMware, Inc., Class A 3.2
Leidos Holdings, Inc. 3.1
FireEye, Inc. 3.1
F5 Networks, Inc. 3.1
------
Total 45.4%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 6, 2015 - SEPTEMBER 30, 2021
First Trust Nasdaq Nasdaq CTA S&P 500(R) S&P Composite 500(R)
Cybersecurity ETF Cybersecurity Index(TM) Index Information Technology Index
--------------------- ----------------------- ---------- ----------------------------
<S> <C> <C> <C> <C>
7/6/15 $10,000 $10,000 $10,000 $10,000
9/30/15 8,575 8,585 9,328 9,547
3/31/16 8,595 8,645 10,120 10,659
9/30/16 10,018 10,113 10,768 11,726
3/31/17 10,993 11,137 11,858 13,370
9/30/17 11,093 11,276 12,772 15,084
3/31/18 12,713 12,943 13,518 16,959
9/30/18 14,475 14,808 15,060 19,669
3/31/19 14,271 14,642 14,801 19,488
9/30/19 14,074 14,493 15,701 21,318
3/31/20 13,318 13,794 13,767 21,250
9/30/20 18,050 18,758 18,077 30,898
3/31/21 21,665 22,591 21,525 35,674
9/30/21 25,359 26,529 23,501 40,098
</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 31
<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. For certain Funds, 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 32
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
UNDERSTANDING YOUR FUND EXPENSES
SEPTEMBER 30, 2021 (UNAUDITED)
As a shareholder of First Trust STOXX(R) European Select Dividend Index Fund,
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund, First
Trust Dow Jones Global Select Dividend Index Fund, First Trust Global Wind
Energy ETF, First Trust Global Engineering and Construction ETF, First Trust
NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund, First Trust Indxx
Global Natural Resources Income ETF, First Trust Indxx Global Agriculture ETF,
First Trust BICK Index Fund, First Trust Indxx NextG ETF, First Trust NASDAQ
Global Auto Index Fund, First Trust Cloud Computing ETF, First Trust
International Equity Opportunities ETF or First Trust Nasdaq Cybersecurity 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 (in U.S. dollars)
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 September 30, 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
APRIL 1, 2021 SEPTEMBER 30, 2021 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
Actual $1,000.00 $1,015.60 0.58% $2.93
Hypothetical (5% return before expenses) $1,000.00 $1,022.16 0.58% $2.94
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
Actual $1,000.00 $1,085.40 0.60% $3.14
Hypothetical (5% return before expenses) $1,000.00 $1,022.06 0.60% $3.04
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
Actual $1,000.00 $1,026.70 0.57% $2.90
Hypothetical (5% return before expenses) $1,000.00 $1,022.21 0.57% $2.89
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
Actual $1,000.00 $ 945.60 0.60% $2.93
Hypothetical (5% return before expenses) $1,000.00 $1,022.06 0.60% $3.04
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
Actual $1,000.00 $ 987.80 0.70% $3.49
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
</TABLE>
Page 33
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
SEPTEMBER 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
APRIL 1, 2021 SEPTEMBER 30, 2021 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
Actual $1,000.00 $1,082.80 0.61% $3.18
Hypothetical (5% return before expenses) $1,000.00 $1,022.01 0.61% $3.09
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
Actual $1,000.00 $1,015.40 0.70% $3.54
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
Actual $1,000.00 $ 989.10 0.70% $3.49
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST BICK INDEX FUND (BICK)
Actual $1,000.00 $ 917.90 0.64% $3.08
Hypothetical (5% return before expenses) $1,000.00 $1,021.86 0.64% $3.24
FIRST TRUST INDXX NEXTG ETF (NXTG)
Actual $1,000.00 $1,057.30 0.70% $3.61
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
Actual $1,000.00 $1,020.70 0.70% $3.55
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
Actual $1,000.00 $1,102.10 0.60% $3.16
Hypothetical (5% return before expenses) $1,000.00 $1,022.06 0.60% $3.04
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
Actual $1,000.00 $ 982.50 0.70% $3.48
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
Actual $1,000.00 $1,170.50 0.60% $3.26
Hypothetical (5% return before expenses) $1,000.00 $1,022.06 0.60% $3.04
</TABLE>
(a) These expense ratios reflect expense caps for certain Funds. See Note 3 in
the 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 (April 1,
2021 through September 30, 2021), multiplied by 183/365 (to reflect the
six-month period).
Page 34
<PAGE>
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.1%
AUSTRIA -- 3.0%
143,059 OMV AG (b) $ 8,614,357
---------------
BELGIUM -- 6.5%
150,402 Ageas S.A./N.V. (b) 7,447,948
566,207 Proximus SADP (b) 11,236,044
---------------
18,683,992
---------------
FINLAND -- 5.5%
320,306 Fortum Oyj (b) 9,726,409
170,426 Nokian Renkaat Oyj (b) 6,089,892
---------------
15,816,301
---------------
FRANCE -- 13.2%
96,843 Covivio (b) 8,138,375
987,911 Orange S.A. (b) 10,684,086
110,708 Publicis Groupe S.A. (b) 7,437,095
403,633 SCOR SE (b) 11,622,927
---------------
37,882,483
---------------
GERMANY -- 14.5%
30,896 Allianz SE (b) 6,922,092
510,072 alstria office REIT-AG (b) 9,252,223
89,929 Deutsche Post AG (b) 5,639,411
189,333 Evonik Industries AG (b) 5,936,936
59,815 Porsche Automobil Holding SE
(Preference Shares) (b) 5,915,106
267,448 TAG Immobilien AG (b) 7,819,706
---------------
41,485,474
---------------
ITALY -- 11.3%
265,017 Assicurazioni Generali S.p.A. (b) 5,612,827
701,136 Poste Italiane S.p.A. (b) (c) (d) 9,627,894
1,780,168 Snam S.p.A. (b) 9,847,659
17,656,271 Telecom Italia S.p.A. (b) 7,124,928
---------------
32,213,308
---------------
LUXEMBOURG -- 2.7%
307,573 Grand City Properties S.A. (b) 7,658,943
---------------
NETHERLANDS -- 4.4%
240,281 NN Group N.V. (b) 12,586,417
---------------
SWEDEN -- 3.3%
641,387 Tele2 AB, Class B (b) 9,496,842
---------------
SWITZERLAND -- 7.7%
152,570 Holcim Ltd. (b) 7,351,587
13,843 Swiss Life Holding AG (b) 6,975,040
18,500 Zurich Insurance Group AG (b) 7,565,027
---------------
21,891,654
---------------
UNITED KINGDOM -- 27.0%
855,152 GlaxoSmithKline PLC (b) 16,139,432
1,042,448 IG Group Holdings PLC (b) 11,264,930
3,778,538 Legal & General Group PLC (b) 14,196,300
319,090 Rio Tinto PLC (b) 20,917,033
700,705 SSE PLC (b) 14,753,439
---------------
77,271,134
---------------
TOTAL COMMON STOCKS -- 99.1% 283,600,905
(Cost $259,862,284) ---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
MONEY MARKET FUNDS -- 0.1%
182,972 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (e) $ 182,972
(Cost $182,972) ---------------
TOTAL INVESTMENTS -- 99.2% 283,783,877
(Cost $260,045,256) (f)
NET OTHER ASSETS AND
LIABILITIES -- 0.8% 2,246,969
---------------
NET ASSETS -- 100.0% $ 286,030,846
===============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$283,600,905 or 99.1% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(d) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(e) Rate shown reflects yield as of September 30, 2021.
(f) Aggregate cost for federal income tax purposes is $261,191,710. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$34,215,884 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$11,623,717. The net unrealized appreciation was $22,592,167.
See Notes to Financial Statements Page 35
<PAGE>
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common
Stocks* $ 283,600,905 $ -- $ 283,600,905 $ --
Money Market
Funds 182,972 182,972 -- --
--------------------------------------------------------------
Total
Investments $ 283,783,877 $ 182,972 $ 283,600,905 $ --
==============================================================
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
Euro 61.6%
British Pound Sterling 27.2
Swiss Franc 7.7
Swedish Krona 3.4
United States Dollar 0.1
------
Total 100.0%
======
Page 36 See Notes to Financial Statements
<PAGE>
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 98.9%
AUSTRALIA -- 3.6%
8,416 Abacus Property Group (b) $ 21,325
3,482 APN Industria REIT (b) 8,627
5,833 Arena REIT (b) 17,664
7,569 Aventus Group (b) 17,385
196,196 BGP Holdings
PLC (b) (c) (d) (e) (f) 0
8,865 BWP Trust (b) 25,332
8,310 Centuria Industrial REIT (b) 22,095
8,390 Centuria Office REIT (b) 15,099
9,707 Charter Hall Long Wale REIT (b) 34,310
8,832 Charter Hall Retail REIT (b) 25,041
5,985 Charter Hall Social
Infrastructure REIT (b) 15,348
25,830 Cromwell Property Group (b) 14,771
19,613 Dexus (b) 150,953
34,931 GPT Group (The) (b) 125,818
5,066 Growthpoint Properties Australia
Ltd. (b) 14,837
2,500 Home Consortium Ltd. (b) 13,809
6,915 HomeCo Daily Needs
REIT (b) (g) 7,866
3,140 Hotel Property Investments (b) 7,770
5,405 Ingenia Communities Group (b) 25,436
1,712 Lifestyle Communities Ltd. (b) 27,010
71,722 Mirvac Group (b) 152,141
20,777 National Storage REIT (b) 34,097
94,557 Scentre Group (b) 201,252
19,666 Shopping Centres Australasia
Property Group (b) 37,670
43,491 Stockland (b) 137,918
68,691 Vicinity Centres (b) 81,209
14,311 Waypoint REIT (b) 28,071
---------------
1,262,854
---------------
AUSTRIA -- 0.1%
756 CA Immobilien Anlagen AG (b) 32,015
---------------
BELGIUM -- 1.1%
654 Aedifica S.A. (b) 81,647
94 Ascencio (b) 5,360
391 Befimmo S.A. (b) 15,690
547 Cofinimmo S.A. (b) 82,947
430 Intervest Offices & Warehouses
N.V. (b) 11,767
75 Leasinvest Real Estate S.C.A. 6,168
223 Montea N.V. 29,551
183 Retail Estates N.V. (b) 13,380
2,565 Warehouses De Pauw C.V.A. (b) 103,930
367 Xior Student Housing N.V. (g) 20,724
---------------
371,164
---------------
BERMUDA -- 0.3%
21,117 Hongkong Land Holdings Ltd. (b) 100,869
---------------
CANADA -- 3.0%
2,289 Allied Properties Real Estate
Investment Trust 72,686
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
CANADA (CONTINUED)
1,710 Artis Real Estate Investment
Trust $ 15,350
689 Boardwalk Real Estate Investment
Trust 25,725
3,113 Canadian Apartment Properties
REIT 145,278
3,915 Chartwell Retirement Residences 37,277
4,652 Choice Properties Real Estate
Investment Trust 52,338
3,037 Cominar Real Estate Investment
Trust 23,954
1,745 Crombie Real Estate Investment
Trust 23,944
3,634 Dream Industrial Real Estate
Investment Trust 46,479
674 Dream Office Real Estate
Investment Trust 12,239
3,943 First Capital Real Estate
Investment Trust 54,479
1,121 Granite Real Estate Investment
Trust 79,725
5,126 H&R Real Estate Investment
Trust 63,255
2,347 InterRent Real Estate Investment
Trust 31,001
1,958 Killam Apartment Real Estate
Investment Trust 32,850
3,368 NorthWest Healthcare Properties
Real Estate Investment Trust 34,329
5,763 RioCan Real Estate Investment
Trust 98,461
2,358 SmartCentres Real Estate
Investment Trust 55,217
2,826 Summit Industrial Income REIT 46,498
3,676 Tricon Residential, Inc. 49,048
1,256 WPT Industrial Real Estate
Investment Trust 27,230
---------------
1,027,363
---------------
CAYMAN ISLANDS -- 1.1%
36,202 CK Asset Holdings Ltd. (b) 208,877
30,340 Wharf Real Estate Investment
Co., Ltd. (b) 155,884
---------------
364,761
---------------
FINLAND -- 0.2%
1,399 Citycon Oyj (b) 11,211
3,553 Kojamo Oyj (b) 73,775
---------------
84,986
---------------
FRANCE -- 1.0%
730 Carmila S.A. (b) 10,898
912 Covivio (b) 76,642
939 Gecina S.A. (b) 126,329
593 ICADE (b) 46,306
3,295 Klepierre S.A. (b) 73,687
1,138 Mercialys S.A. (b) 12,090
---------------
345,952
---------------
See Notes to Financial Statements Page 37
<PAGE>
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
GERMANY -- 3.6%
3,242 alstria office REIT-AG (b) $ 58,807
931 Deutsche EuroShop AG (b) 18,942
4,388 Deutsche Wohnen SE (b) 268,302
1,286 Hamborner REIT AG (b) 13,896
1,328 LEG Immobilien SE (b) 187,584
2,299 TAG Immobilien AG (b) 67,219
132 TLG Immobilien AG (b) 4,010
10,490 Vonovia SE (b) 629,544
---------------
1,248,304
---------------
GUERNSEY -- 0.2%
4,370 BMO Real Estate Investments
Ltd. 4,263
6,703 Regional REIT Ltd. (b) (g) (h) 7,979
8,947 Schroder Real Estate Investment
Trust Ltd. 5,931
17,632 Sirius Real Estate Ltd. (b) 30,961
7,231 Standard Life Investment Property
Income Trust Ltd. (b) 6,929
---------------
56,063
---------------
HONG KONG -- 3.3%
36,417 Champion REIT (b) 19,100
25,157 Fortune Real Estate Investment
Trust (b) 25,010
37,370 Hang Lung Properties Ltd. (b) 85,168
24,000 Henderson Land Development
Co., Ltd. (b) 91,642
10,646 Hysan Development Co., Ltd. 34,668
37,864 Link REIT (b) 324,243
25,916 New World Development Co.,
Ltd. (b) 105,407
21,382 Prosperity REIT (b) 8,498
63,095 Sino Land Co., Ltd. (b) 84,882
25,642 Sun Hung Kai Properties Ltd. (b) 320,175
19,584 Sunlight Real Estate Investment
Trust 11,295
19,226 Swire Properties Ltd. (b) 48,031
---------------
1,158,119
---------------
IRELAND -- 0.1%
12,068 Hibernia REIT PLC 16,327
8,065 Irish Residential Properties REIT
PLC 13,490
---------------
29,817
---------------
ISRAEL -- 0.2%
2,592 Amot Investments Ltd. (b) 18,316
643 Azrieli Group Ltd. (b) 57,882
---------------
76,198
---------------
ITALY -- 0.0%
1,188 Immobiliare Grande Distribuzione
SIIQ S.p.A. (b) (e) 5,373
---------------
JAPAN -- 10.3%
12 Activia Properties, Inc. (b) 49,071
23 Advance Residence Investment
Corp. 74,810
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
JAPAN (CONTINUED)
2,123 AEON Mall Co., Ltd. (b) $ 32,665
28 AEON REIT Investment Corp. (b) 37,618
11 Comforia Residential REIT, Inc. 33,950
38 Daiwa House REIT Investment
Corp. (b) 111,593
5 Daiwa Office Investment Corp. (b) 33,743
35 Daiwa Securities Living
Investments Corp. (b) 35,046
8 Frontier Real Estate Investment
Corp. (b) 35,062
13 Fukuoka REIT Corp. (b) 19,498
18 Global One Real Estate
Investment Corp. (b) 18,704
77 GLP J-REIT 126,748
12 Hankyu Hanshin REIT, Inc. (b) 17,709
17 Heiwa Real Estate REIT, Inc. (b) 25,054
4 Hoshino Resorts REIT, Inc. (b) 26,361
6,567 Hulic Co., Ltd. (b) 73,133
21 Hulic REIT, Inc. (b) 33,011
21 Ichigo Office REIT Investment
Corp. (b) 16,946
35 Industrial & Infrastructure Fund
Investment Corp. (b) 63,770
52 Invesco Office J-REIT, Inc. (b) 10,545
89 Invincible Investment Corp. (b) 34,868
22 Japan Excellent, Inc. (b) 26,939
81 Japan Hotel REIT Investment
Corp. (b) 48,626
16 Japan Logistics Fund, Inc. 47,585
125 Japan Metropolitan Fund
Invest (b) 120,026
16 Japan Prime Realty Investment
Corp. (b) 57,965
23 Japan Real Estate Investment
Corp. (b) 137,960
7 Kenedix Office Investment
Corp. (b) 48,115
18 Kenedix Residential Next
Investment Corp. (b) 35,081
10 Kenedix Retail REIT Corp. (b) 25,932
33 LaSalle Logiport REIT 55,596
20,742 Mitsubishi Estate Co., Ltd. (b) 330,271
7 Mitsubishi Estate Logistics REIT
Investment Corp. (b) 30,749
16,753 Mitsui Fudosan Co., Ltd. (b) 397,966
9 Mitsui Fudosan Logistics Park,
Inc. 47,711
29 Mori Hills REIT Investment
Corp. (b) 39,296
18 Mori Trust Sogo REIT, Inc. (b) 23,884
8 Nippon Accommodations Fund,
Inc. (b) 44,821
27 Nippon Building Fund, Inc. (b) 175,413
41 Nippon Prologis REIT, Inc. (b) 137,024
7 NIPPON REIT Investment
Corp. (b) 27,222
Page 38 See Notes to Financial Statements
<PAGE>
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
JAPAN (CONTINUED)
2,120 Nomura Real Estate Holdings,
Inc. (b) $ 55,117
82 Nomura Real Estate Master Fund,
Inc. (b) 118,020
23 NTT UD REIT Investment
Corp. (b) 31,608
47 Orix JREIT, Inc. (b) 81,797
74 Sekisui House REIT, Inc. (b) 61,269
11 SOSiLA Logistics REIT, Inc. (b) 16,348
4 Starts Proceed Investment
Corp. (b) 8,900
7,179 Sumitomo Realty & Development
Co., Ltd. (b) 262,401
3,550 Tokyo Tatemono Co., Ltd. (b) 56,222
16 Tokyu REIT, Inc. (b) 26,528
54 United Urban Investment
Corp. (b) 72,985
---------------
3,559,282
---------------
JERSEY -- 0.0%
1,466 Phoenix Spree Deutschland Ltd. 7,605
---------------
LUXEMBOURG -- 0.7%
1,661 ADLER Group S.A. (g) (h) 28,283
21,860 Aroundtown S.A. (b) 150,591
1,801 Grand City Properties S.A. (b) 44,847
458 Shurgard Self Storage S.A. 25,120
---------------
248,841
---------------
MULTI-NATIONAL -- 0.5%
2,458 Unibail-Rodamco-
Westfield (b) (e) 180,910
---------------
NETHERLANDS -- 0.1%
920 Eurocommercial Properties N.V. 19,656
344 NSI N.V. 12,751
312 Vastned Retail N.V. (b) 8,385
734 Wereldhave N.V. (b) 10,428
---------------
51,220
---------------
NEW ZEALAND -- 0.3%
15,155 Argosy Property Ltd. (b) 16,875
19,892 Goodman Property Trust (b) 33,110
28,606 Kiwi Property Group Ltd. (b) 22,739
22,586 Precinct Properties New Zealand
Ltd. (b) 26,155
7,691 Stride Property Group 12,955
---------------
111,834
---------------
NORWAY -- 0.1%
1,625 Entra ASA (g) (h) 34,854
---------------
SINGAPORE -- 3.1%
10,100 AIMS APAC REIT 10,711
23,200 ARA LOGOS Logistics Trust (b) 15,695
62,156 Ascendas Real Estate Investment
Trust (b) 137,003
32,676 Ascott Residence Trust (b) 22,126
78,891 CapitaLand Integrated
Commercial Trust (b) 117,473
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
SINGAPORE (CONTINUED)
46,834 Capitaland Investment Ltd. (e) $ 117,275
14,467 CDL Hospitality Trusts (b) 10,992
8,520 City Developments Ltd. (b) 43,120
5,800 Cromwell European Real Estate
Investment Trust (g) 17,535
48,700 ESR-REIT (b) 16,632
17,600 Far East Hospitality Trust (b) 8,000
19,673 Frasers Centrepoint Trust (b) 32,742
51,364 Frasers Logistics & Commercial
Trust (b) (g) 57,303
22,094 Keppel DC REIT (b) 40,328
15,300 Keppel Pacific Oak US REIT (g) 12,011
38,793 Keppel REIT (b) 30,201
16,000 Lendlease Global Commercial
REIT (b) 10,230
26,276 Manulife US Real Estate
Investment Trust (b) (g) 18,315
39,966 Mapletree Commercial Trust (b) 60,567
33,682 Mapletree Industrial Trust (b) 68,831
52,277 Mapletree Logistics Trust (b) 78,151
38,900 OUE Commercial Real Estate
Investment Trust 13,035
7,059 Parkway Life Real Estate
Investment Trust 24,175
11,600 Prime US REIT (b) (g) 9,911
17,100 SPH REIT (b) 11,811
25,700 Starhill Global REIT (b) 11,804
37,879 Suntec Real Estate Investment
Trust (b) 39,418
8,915 UOL Group Ltd. (b) 44,830
---------------
1,080,225
---------------
SPAIN -- 0.4%
6,173 Inmobiliaria Colonial Socimi S.A. 59,921
1,092 Lar Espana Real Estate
Socimi S.A. 6,793
6,044 Merlin Properties Socimi S.A. (b) 61,988
---------------
128,702
---------------
SWEDEN -- 2.4%
816 Atrium Ljungberg AB, Class B (b) 17,075
3,762 Castellum AB (b) 91,839
502 Catena AB 27,180
718 Cibus Nordic Real Estate AB 16,977
11,870 Corem Property Group AB,
Class B (b) 31,377
1,528 Dios Fastigheter AB (b) 14,876
4,694 Fabege AB (b) 70,799
1,833 Fastighets AB Balder,
Class B (b) (e) 110,157
1,954 Hufvudstaden AB, Class A (b) 29,183
1,122 K-fast Holding AB (b) (e) (g) 9,271
3,427 Kungsleden AB (b) 45,157
3,310 Nyfosa AB 46,808
1,608 Pandox AB (e) 25,495
982 Platzer Fastigheter Holding AB,
Class B 14,807
3,130 Sagax AB, Class B (b) 97,606
See Notes to Financial Statements Page 39
<PAGE>
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SWEDEN (CONTINUED)
18,114 Samhallsbyggnadsbolaget i
Norden AB $ 100,312
3,039 Wallenstam AB, Class B (b) 44,915
2,416 Wihlborgs Fastigheter AB (b) 48,022
---------------
841,856
---------------
SWITZERLAND -- 1.0%
255 Allreal Holding AG 50,620
53 Hiag Immobilien Holding AG (b) 5,695
21 Intershop Holding AG 13,092
117 Mobimo Holding AG (b) 38,836
161 Peach Property Group AG 10,573
784 PSP Swiss Property AG (b) 94,459
1,368 Swiss Prime Site AG (b) 133,627
---------------
346,902
---------------
UNITED KINGDOM -- 4.4%
5,687 Aberdeen Standard European
Logistics Income
PLC (b) (g) (h) 8,500
47,896 Assura PLC (b) 45,978
3,077 Big Yellow Group PLC 57,836
16,847 British Land (The) Co. PLC (b) 111,790
13,393 Capital & Counties Properties
PLC (b) 29,760
11,338 Civitas Social Housing
PLC (b) (g) 13,342
2,843 CLS Holdings PLC (b) 8,481
7,063 Custodian REIT PLC (b) 8,876
1,836 Derwent London PLC (b) 85,071
10,685 Empiric Student Property PLC (e) 12,756
8,293 GCP Student Living PLC (b) 23,562
13,265 Grainger PLC (b) 54,430
4,615 Great Portland Estates PLC (b) 46,321
76,587 Hammerson PLC (b) 33,047
1,837 Helical PLC (b) 10,958
4,717 Impact Healthcare REIT
PLC (b) (g) 7,001
12,982 Land Securities Group PLC (b) 120,997
16,041 LondonMetric Property PLC (b) 51,567
12,741 LXI REIT PLC (b) (g) 23,600
5,508 NewRiver REIT PLC 6,182
23,899 Primary Health Properties PLC (b) 48,489
8,482 PRS REIT (The) PLC 11,429
3,735 Safestore Holdings PLC 52,791
21,813 Segro PLC (b) 350,401
5,068 Shaftesbury PLC (b) 41,375
9,316 Target Healthcare REIT PLC 14,410
6,646 Triple Point Social Housing REIT
PLC (g) (h) 8,462
31,324 Tritax Big Box REIT PLC (b) 89,564
11,214 Tritax EuroBox PLC (g) (h) 17,074
5,798 UNITE Group (The) PLC (b) 84,794
2,432 Workspace Group PLC 27,034
---------------
1,505,878
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
UNITED STATES -- 57.8%
1,570 Acadia Realty Trust $ 32,044
1,229 Agree Realty Corp. 81,397
1,309 Alexander & Baldwin, Inc. 30,683
2,806 Alexandria Real Estate Equities,
Inc. 536,142
902 American Assets Trust, Inc. 33,753
2,490 American Campus Communities,
Inc. 120,640
2,140 American Finance Trust, Inc. 17,206
5,146 American Homes 4 Rent, Class A 196,166
4,748 Americold Realty Trust 137,929
2,842 Apartment Income REIT Corp. 138,718
2,692 Apartment Investment and
Management Co., Class A 18,440
3,874 Apple Hospitality REIT, Inc. 60,938
1,091 Armada Hoffler Properties, Inc. 14,587
2,537 AvalonBay Communities, Inc. 562,301
2,841 Boston Properties, Inc. 307,822
3,066 Brandywine Realty Trust 41,146
5,384 Brixmor Property Group, Inc. 119,040
2,796 Broadstone Net Lease, Inc. 69,369
1,770 Camden Property Trust 261,022
1,744 CareTrust REIT, Inc. 35,438
254 Centerspace 24,003
2,072 Columbia Property Trust, Inc. 39,409
427 Community Healthcare Trust, Inc. 19,296
796 CoreSite Realty Corp. 110,278
2,041 Corporate Office Properties Trust 55,066
2,696 Cousins Properties, Inc. 100,534
3,652 CubeSmart 176,939
2,255 CyrusOne, Inc. 174,560
3,780 DiamondRock Hospitality Co. (e) 35,721
5,107 Digital Realty Trust, Inc. 737,706
8,768 DigitalBridge Group, Inc. (e) 52,871
4,289 Diversified Healthcare Trust 14,540
3,025 Douglas Emmett, Inc. 95,620
6,810 Duke Realty Corp. 325,995
1,524 Easterly Government Properties,
Inc. 31,486
719 EastGroup Properties, Inc. 119,807
2,584 Empire State Realty Trust, Inc.,
Class A 25,918
1,346 EPR Properties 66,465
1,627 Equinix, Inc. 1,285,542
2,119 Equity Commonwealth (e) 55,052
3,161 Equity LifeStyle Properties, Inc. 246,874
6,707 Equity Residential 542,730
2,116 Essential Properties Realty
Trust, Inc. 59,079
1,179 Essex Property Trust, Inc. 376,973
2,386 Extra Space Storage, Inc. 400,824
1,404 Federal Realty Investment Trust 165,658
2,340 First Industrial Realty Trust,
Inc. 121,867
1,375 Four Corners Property Trust, Inc. 36,932
4,010 Gaming and Leisure Properties,
Inc. 185,743
Page 40 See Notes to Financial Statements
<PAGE>
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
UNITED STATES (CONTINUED)
720 Getty Realty Corp. $ 21,103
1,825 Global Net Lease, Inc. 29,236
2,630 Healthcare Realty Trust, Inc. 78,321
3,957 Healthcare Trust of America,
Inc., Class A 117,365
9,808 Healthpeak Properties, Inc. 328,372
1,869 Highwoods Properties, Inc. 81,974
12,862 Host Hotels & Resorts, Inc. (e) 210,036
2,695 Hudson Pacific Properties, Inc. 70,798
1,899 Independence Realty Trust, Inc. 38,645
1,174 Industrial Logistics Properties
Trust 29,831
429 Innovative Industrial Properties,
Inc. 99,172
10,490 Invitation Homes, Inc. 402,082
2,253 JBG SMITH Properties 66,711
2,170 Kennedy-Wilson Holdings, Inc. 45,396
2,111 Kilroy Realty Corp. 139,769
10,568 Kimco Realty Corp. 219,286
1,507 Kite Realty Group Trust 30,683
4,958 Lexington Realty Trust 63,215
1,415 Life Storage, Inc. 162,357
704 LTC Properties, Inc. 22,310
3,865 Macerich (The) Co. 64,584
1,587 Mack-Cali Realty Corp. (e) 27,169
10,750 Medical Properties Trust, Inc. 215,753
2,099 Mid-America Apartment
Communities, Inc. 391,988
1,721 Monmouth Real Estate Investment
Corp. 32,097
790 National Health Investors, Inc. 42,265
3,177 National Retail Properties, Inc. 137,215
1,468 National Storage Affiliates Trust 77,496
403 NexPoint Residential Trust, Inc. 24,938
865 Office Properties Income Trust 21,910
4,340 Omega Healthcare Investors, Inc. 130,026
3,374 Paramount Group, Inc. 30,332
4,270 Park Hotels & Resorts, Inc. (e) 81,728
2,350 Pebblebrook Hotel Trust 52,664
3,897 Physicians Realty Trust 68,665
2,242 Piedmont Office Realty Trust,
Inc., Class A 39,078
13,424 Prologis, Inc. 1,683,772
364 PS Business Parks, Inc. 57,053
2,744 Public Storage 815,242
7,089 Realty Income Corp. 459,793
3,072 Regency Centers Corp. 206,838
2,148 Retail Opportunity Investments
Corp. 37,418
3,877 Retail Properties of America,
Inc., Class A 49,936
2,508 Rexford Industrial Realty, Inc. 142,329
2,989 RLJ Lodging Trust 44,417
1,457 RPT Realty 18,591
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
UNITED STATES (CONTINUED)
972 Ryman Hospitality Properties,
Inc. (e) $ 81,356
3,985 Sabra Health Care REIT, Inc. 58,659
323 Safehold, Inc. 23,220
2,966 Service Properties Trust 33,249
5,936 Simon Property Group, Inc. 771,502
3,132 SITE Centers Corp. 48,358
1,217 SL Green Realty Corp. 86,212
2,159 Spirit Realty Capital, Inc. 99,400
2,951 STAG Industrial, Inc. 115,827
4,443 STORE Capital Corp. 142,309
1,874 Summit Hotel Properties, Inc. (e) 18,047
2,084 Sun Communities, Inc. 385,748
3,935 Sunstone Hotel Investors,
Inc. (e) 46,984
1,849 Tanger Factory Outlet Centers,
Inc. 30,139
1,256 Terreno Realty Corp. 79,417
5,372 UDR, Inc. 284,609
232 Universal Health Realty Income
Trust 12,823
2,092 Urban Edge Properties 38,305
6,915 Ventas, Inc. 381,777
4,163 VEREIT, Inc. 188,292
10,681 VICI Properties, Inc. 303,447
3,191 Vornado Realty Trust 134,054
1,530 Washington Real Estate
Investment Trust 37,868
7,693 Welltower, Inc. 633,903
3,324 WP Carey, Inc. 242,785
2,059 Xenia Hotels & Resorts, Inc. (e) 36,527
---------------
20,023,045
---------------
TOTAL COMMON STOCKS -- 98.9% 34,284,992
(Cost $31,071,376) ---------------
INVESTMENT COMPANIES (a) -- 0.1%
GUERNSEY -- 0.1%
9,429 BMO Commercial Property
Trust Ltd. 12,234
9,970 Picton Property Income Ltd. 12,762
13,409 UK Commercial Property REIT
Ltd. (b) 13,227
---------------
TOTAL INVESTMENT COMPANIES
-- 0.1% 38,223
(Cost $43,521) ---------------
RIGHTS (a) -- 0.0%
AUSTRALIA -- 0.0%
1,160 APN Industria REIT, expiring
10/20/21 (b) (d) (e) 0
(Cost $0) ---------------
See Notes to Financial Statements Page 41
<PAGE>
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
MONEY MARKET FUNDS -- 0.4%
129,206 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (i) $ 129,206
(Cost $129,206) ---------------
TOTAL INVESTMENTS -- 99.4% 34,452,421
(Cost $31,244,103) (j)
NET OTHER ASSETS AND
LIABILITIES -- 0.6% 204,572
---------------
NET ASSETS -- 100.0% $ 34,656,993
===============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$11,802,476 or 34.1% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) This security's value was determined using significant unobservable inputs
(see Note 2A - Portfolio Valuation in the Notes to Financial Statements).
(d) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by First Trust Advisors, L.P.,
the Fund's Advisor.
(e) Non-income producing security.
(f) This is a restricted security which cannot be traded as a result of the
in-specie distribution. It was acquired on August 6, 2009 at a cost of $0
and has a carrying value per share of $0.
(g) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the Securities Act of 1933, as
amended (the "1933 Act").
(h) This security is exempt from registration upon resale under Rule 144A of
the 1933 Act and may be resold in transactions exempt from registration,
normally to qualified institutional buyers. This security is not
restricted on the foreign exchange where it trades freely without any
additional registration. As such, it does not require the additional
disclosure required of restricted securities.
(i) Rate shown reflects yield as of September 30, 2021.
(j) Aggregate cost for federal income tax purposes is $32,185,061. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$5,896,246 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$3,628,886. The net unrealized appreciation was $2,267,360.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common Stocks:
Australia $ 1,262,854 $ -- $ 1,262,854 $ --**
Belgium 371,164 56,443 314,721 --
Canada 1,027,363 1,027,363 -- --
Guernsey 56,063 10,194 45,869 --
Hong Kong 1,158,119 45,963 1,112,156 --
Ireland 29,817 29,817 -- --
Japan 3,559,282 386,400 3,172,882 --
Jersey 7,605 7,605 -- --
Luxembourg 248,841 53,403 195,438 --
Netherlands 51,220 32,407 18,813 --
New Zealand 111,834 12,955 98,879 --
Norway 34,854 34,854 -- --
Singapore 1,080,225 194,742 885,483 --
Spain 128,702 66,714 61,988 --
Sweden 841,856 231,579 610,277 --
Switzerland 346,902 74,285 272,617 --
United
Kingdom 1,505,878 207,974 1,297,904 --
United States 20,023,045 20,023,045 -- --
Other Country
Categories* 2,439,368 -- 2,439,368 --
Investment
Companies:
Guernsey 38,223 24,996 13,227 --
Rights* --** -- --** --
Money Market
Funds 129,206 129,206 -- --
--------------------------------------------------------------
Total
Investments $ 34,452,421 $ 22,649,945 $ 11,802,476 $ --**
==============================================================
* See Portfolio of Investments for country breakout.
** Investment is valued at $0.
Level 3 Common Stocks are fair valued by the Advisor's Pricing Committee and are
footnoted in the Portfolio of Investments.
Level 3 Common Stocks values are based on unobservable and non-quantitative
inputs.
Page 42 See Notes to Financial Statements
<PAGE>
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 59.0%
Japanese Yen 10.3
Euro 8.0
British Pound Sterling 4.7
Hong Kong Dollar 4.4
Australian Dollar 3.7
Singapore Dollar 3.0
Canadian Dollar 2.9
Swedish Krona 2.4
Swiss Franc 1.0
New Zealand Dollar 0.3
Israeli Shekel 0.2
Norwegian Krone 0.1
------
Total 100.0%
======
See Notes to Financial Statements Page 43
<PAGE>
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 98.9%
AUSTRALIA -- 2.1%
564,026 Fortescue Metals Group Ltd. (b) $ 6,008,022
146,098 JB Hi-Fi Ltd. (b) 4,750,325
---------------
10,758,347
---------------
BELGIUM -- 0.8%
83,220 Ageas S.A./N.V. (b) 4,121,077
---------------
BERMUDA -- 3.5%
803,538 CK Infrastructure Holdings
Ltd. (b) 4,481,840
1,546,065 Kerry Properties Ltd. (b) 4,066,858
99,411 Lazard Ltd., Class A 4,553,024
597,748 VTech Holdings Ltd. (b) 4,346,718
---------------
17,448,440
---------------
CANADA -- 14.4%
66,792 Bank of Nova Scotia (The) 4,111,088
120,686 BCE, Inc. 6,045,734
43,637 Canadian Imperial Bank of
Commerce 4,857,743
201,501 Canadian Utilities Ltd., Class A 5,429,677
179,675 Great-West Lifeco, Inc. 5,467,136
186,302 IGM Financial, Inc. 6,655,744
306,904 Labrador Iron Ore Royalty Corp. 8,533,996
124,538 Laurentian Bank of Canada 3,952,651
177,624 Manulife Financial Corp. 3,418,974
197,480 Power Corp. of Canada 6,509,387
245,268 Shaw Communications, Inc.,
Class B 7,129,929
122,773 TC Energy Corp. 5,908,923
200,853 TELUS Corp. 4,414,770
---------------
72,435,752
---------------
CAYMAN ISLANDS -- 0.7%
541,556 CK Hutchison Holdings Ltd. (b) 3,612,791
---------------
FINLAND -- 1.1%
181,037 Fortum Oyj (b) 5,497,368
---------------
FRANCE -- 2.0%
86,316 Nexity S.A. (b) 4,104,489
120,857 TotalEnergies SE (b) 5,776,697
---------------
9,881,186
---------------
GERMANY -- 1.4%
16,337 Allianz SE (b) 3,660,222
48,770 BASF SE (b) 3,697,254
---------------
7,357,476
---------------
HONG KONG -- 5.1%
1,311,313 BOC Hong Kong Holdings
Ltd. (b) 3,951,537
162,655 Hang Seng Bank Ltd. (b) 2,786,088
1,056,111 Henderson Land Development
Co., Ltd. (b) 4,032,675
895,248 Hysan Development Co., Ltd. 2,915,293
870,197 New World Development Co.,
Ltd. (b) 3,539,314
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
HONG KONG (CONTINUED)
10,792,890 PCCW Ltd. (b) $ 5,538,470
506,762 Swire Pacific Ltd., Class A (b) 2,998,532
---------------
25,761,909
---------------
ISRAEL -- 1.3%
363,250 Plus500 Ltd. 6,803,259
---------------
ITALY -- 6.0%
2,771,974 A2A S.p.A. (b) 5,680,139
851,133 Anima Holding S.p.A. (b) (c) (d) 4,055,627
192,321 Azimut Holding S.p.A. (b) 5,268,332
269,601 Eni S.p.A. (b) 3,595,172
366,622 Poste Italiane S.p.A. (b) (c) (d) 5,034,398
2,294,288 UnipolSai Assicurazioni
S.p.A. (b) 6,432,479
---------------
30,066,147
---------------
JAPAN -- 6.5%
206,754 Aozora Bank Ltd. (b) 5,055,874
343,600 Haseko Corp. (b) 4,587,647
139,476 Idemitsu Kosan Co., Ltd. (b) 3,669,149
312,270 Japan Tobacco, Inc. (b) 6,118,699
146,100 MS&AD Insurance Group
Holdings, Inc. (b) 4,886,569
1,014,000 Resona Holdings, Inc. (b) 4,056,015
120,200 Sumitomo Mitsui Financial
Group, Inc. (b) 4,228,560
---------------
32,602,513
---------------
JERSEY -- 2.4%
5,008,717 Centamin PLC (b) 6,412,119
135,626 Janus Henderson Group PLC 5,605,422
---------------
12,017,541
---------------
LUXEMBOURG -- 1.1%
103,770 APERAM S.A. (b) 5,752,777
---------------
NETHERLANDS -- 2.6%
32,299 LyondellBasell Industries N.V.,
Class A 3,031,261
109,595 NN Group N.V. (b) 5,740,813
235,910 SBM Offshore N.V. (b) 4,205,829
---------------
12,977,903
---------------
NEW ZEALAND -- 0.9%
1,450,361 Spark New Zealand Ltd. (b) 4,771,510
---------------
SINGAPORE -- 0.8%
2,192,036 Singapore Telecommunications
Ltd. (b) 3,946,251
---------------
SOUTH KOREA -- 12.2%
829,652 BNK Financial Group, Inc. (b) 6,148,413
117,819 DB Insurance Co., Ltd. (b) 6,303,748
704,995 DGB Financial Group, Inc. (b) 5,877,086
121,044 Hana Financial Group, Inc. (b) 4,705,202
882,731 Industrial Bank of Korea (b) 7,777,563
77,270 KB Financial Group, Inc. (b) 3,593,637
75,415 KT&G Corp. (b) 5,159,402
2,050,530 Meritz Securities Co., Ltd. (b) 8,498,037
158,157 Samsung Securities Co., Ltd. (b) 6,317,748
Page 44 See Notes to Financial Statements
<PAGE>
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SOUTH KOREA (CONTINUED)
717,338 Woori Financial Group, Inc. (b) $ 7,001,335
---------------
61,382,171
---------------
SPAIN -- 10.0%
209,356 ACS Actividades de Construccion
y Servicios S.A. (b) 5,671,157
325,548 Cia de Distribucion Integral
Logista Holdings S.A. (b) 6,846,333
392,021 Enagas S.A. (b) 8,712,303
3,438,429 Mapfre S.A. (b) 7,493,852
236,237 Naturgy Energy Group S.A. (b) 5,946,287
363,863 Red Electrica Corp., S.A. (b) 7,299,896
1,829,274 Telefonica S.A. (b) 8,583,978
---------------
50,553,806
---------------
SWEDEN -- 1.0%
1,185,737 Telia Co., AB (b) 4,877,804
---------------
SWITZERLAND -- 2.7%
37,235 Helvetia Holding AG (b) 4,039,321
60,342 Swiss Re AG (b) 5,150,201
10,962 Zurich Insurance Group AG (b) 4,482,585
---------------
13,672,107
---------------
UNITED KINGDOM -- 7.1%
1,488,581 abrdn PLC (b) 5,090,886
205,580 British American Tobacco
PLC (b) 7,185,954
746,008 Drax Group PLC 4,842,915
1,302,340 Jupiter Fund Management
PLC (b) 4,364,482
1,494,119 Legal & General Group PLC (b) 5,613,537
554,299 Phoenix Group Holdings PLC (b) 4,792,034
60,690 Rio Tinto PLC (b) 3,978,360
---------------
35,868,168
---------------
UNITED STATES -- 13.2%
141,322 Altria Group, Inc. 6,432,977
214,698 AT&T, Inc. 5,798,993
48,801 Comerica, Inc. 3,928,481
140,913 First Financial Bancorp 3,298,773
226,660 H&R Block, Inc. 5,666,500
206,537 Huntington Bancshares, Inc. 3,193,062
506,111 Lumen Technologies, Inc. 6,270,715
63,031 Marathon Petroleum Corp. 3,895,946
339,151 Navient Corp. 6,691,449
304,517 Northwest Bancshares, Inc. 4,043,986
49,349 Prudential Financial, Inc. 5,191,515
232,156 Umpqua Holdings Corp. 4,701,159
92,347 Universal Corp. 4,463,131
126,811 Unum Group 3,177,884
---------------
66,754,571
---------------
TOTAL INVESTMENTS -- 98.9% 498,920,874
(Cost $467,931,904) (e)
NET OTHER ASSETS AND
LIABILITIES -- 1.1% 5,533,269
---------------
NET ASSETS -- 100.0% $ 504,454,143
===============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$331,979,377 or 65.8% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(d) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(e) Aggregate cost for federal income tax purposes is $477,258,667. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$55,192,454 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$33,530,247. The net unrealized appreciation was $21,662,207.
See Notes to Financial Statements Page 45
<PAGE>
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common Stocks:
Bermuda $ 17,448,440 $ 4,553,024 $ 12,895,416 $ --
Canada 72,435,752 72,435,752 -- --
Hong Kong 25,761,909 2,915,293 22,846,616 --
Israel 6,803,259 6,803,259 -- --
Jersey 12,017,541 5,605,422 6,412,119 --
Netherlands 12,977,903 3,031,261 9,946,642 --
United
Kingdom 35,868,168 4,842,915 31,025,253 --
United States 66,754,571 66,754,571 -- --
Other Country
Categories* 248,853,331 -- 248,853,331 --
--------------------------------------------------------------
Total
Investments $ 498,920,874 $ 166,941,497 $ 331,979,377 $ --
==============================================================
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
Euro 24.7%
United States Dollar 16.0
Canadian Dollar 14.5
South Korean Won 12.3
British Pound Sterling 9.8
Hong Kong Dollar 8.5
Japanese Yen 6.5
Swiss Franc 2.7
Australian Dollar 2.2
Swedish Krona 1.0
New Zealand Dollar 1.0
Singapore Dollar 0.8
------
Total 100.0%
======
Page 46 See Notes to Financial Statements
<PAGE>
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.8%
AUSTRALIA -- 1.1%
1,040,732 AGL Energy Ltd. (b) $ 4,297,895
---------------
BERMUDA -- 0.8%
25,118,869 Concord New Energy Group
Ltd. (b) 3,137,347
---------------
CANADA -- 14.0%
390,773 Boralex, Inc., Class A 11,538,694
572,029 Innergex Renewable Energy, Inc. 9,168,000
833,338 Northland Power, Inc. 26,185,736
478,221 TransAlta Renewables, Inc. 7,169,917
---------------
54,062,347
---------------
CAYMAN ISLANDS -- 0.4%
1,905,193 China High Speed Transmission
Equipment Group Co.,
Ltd. (b) (c) 1,600,200
---------------
CHINA -- 11.9%
9,859,821 China Datang Corp. Renewable
Power Co., Ltd., Class H (b) 4,393,066
13,251,132 China Longyuan Power Group
Corp., Ltd., Class H (b) 32,515,748
2,611,198 China Suntien Green Energy
Corp., Ltd., Class H (b) 2,606,265
3,049,726 Xinjiang Goldwind Science &
Technology Co., Ltd.,
Class H (b) 6,413,017
---------------
45,928,096
---------------
DENMARK -- 15.2%
203,052 Orsted A/S (b) (d) (e) 26,765,228
799,272 Vestas Wind Systems A/S (b) 32,065,250
---------------
58,830,478
---------------
FRANCE -- 2.7%
563,211 Engie S.A. (b) 7,368,575
75,066 Neoen S.A. (b) (c) (d) (e) 3,024,934
---------------
10,393,509
---------------
GERMANY -- 6.8%
26,577 Energiekontor AG (b) 1,848,301
508,996 Nordex SE (b) (c) (f) 8,545,025
206,494 RWE AG (b) 7,282,683
94,007 SGL Carbon SE (b) (c) 1,018,960
277,985 Siemens Energy AG (b) (c) 7,435,929
---------------
26,130,898
---------------
GREECE -- 0.8%
233,564 Terna Energy S.A. 3,105,890
---------------
ITALY -- 4.7%
885,431 Enel S.p.A. (b) 6,795,851
522,215 Falck Renewables S.p.A. (b) 4,059,973
214,398 Prysmian S.p.A. (b) 7,488,578
---------------
18,344,402
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
JAPAN -- 2.0%
1,194,510 Toray Industries, Inc. (b) $ 7,590,149
---------------
PORTUGAL -- 2.0%
1,468,804 EDP - Energias de Portugal S.A. 7,715,772
---------------
SOUTH KOREA -- 2.3%
115,246 CS Wind Corp. (b) 7,432,418
47,727 Dongkuk Structures &
Construction Co., Ltd. (b) 240,806
474,471 Unison Co., Ltd. (b) (c) 1,401,102
---------------
9,074,326
---------------
SPAIN -- 15.0%
41,235 Acciona S.A. (b) 6,855,039
606,827 EDP Renovaveis S.A. 15,056,451
335,603 Endesa S.A. (b) 6,768,255
651,060 Iberdrola S.A. (b) 6,549,923
891,753 Siemens Gamesa Renewable
Energy S.A. (b) (c) 22,665,643
---------------
57,895,311
---------------
SWEDEN -- 2.4%
97,358 Eolus Vind AB, Class B (b) (f) 1,727,122
316,719 SKF AB, Class B (b) 7,468,620
---------------
9,195,742
---------------
SWITZERLAND -- 3.6%
217,828 ABB Ltd. (b) 7,286,744
32,633 BKW AG (b) 3,523,064
1,581 Gurit Holding AG 2,961,989
---------------
13,771,797
---------------
UNITED KINGDOM -- 2.0%
359,005 SSE PLC (b) 7,558,899
---------------
UNITED STATES -- 12.1%
132,684 Alliant Energy Corp. 7,427,650
40,695 American Superconductor
Corp. (c) 593,333
64,680 Arcosa, Inc. 3,244,996
77,067 Duke Energy Corp. 7,520,969
76,519 General Electric Co. 7,883,753
120,455 Hexcel Corp. (c) 7,153,822
96,034 NextEra Energy, Inc. 7,540,590
155,191 TPI Composites, Inc. (c) 5,237,696
---------------
46,602,809
---------------
TOTAL COMMON STOCKS -- 99.8% $ 385,235,867
(Cost $354,388,566) ---------------
See Notes to Financial Statements Page 47
<PAGE>
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.6%
$ 65,882 Bank of America Corp.,
0.05% (g), dated 09/30/21, due
10/01/21, with a maturity
value of $65,882.
Collateralized by U.S.
Treasury Securities, interest
rates of 0.125% to 0.625%,
due 01/15/24 to 01/15/30. The
value of the collateral
including accrued interest is
$67,200. (h) $ 65,882
1,029,716 Citigroup, Inc., 0.05% (g), dated
09/30/21, due 10/01/21, with a
maturity value of $1,029,717.
Collateralized by U.S.
Treasury Securities, interest
rates of 0.000% to 6.000%, due
10/07/21 to 08/15/51. The
value of the collateral
including accrued interest is
$1,050,310. (h) 1,029,716
1,029,716 JPMorgan Chase & Co.,
0.05% (g), dated 09/30/21, due
10/01/21, with a maturity
value of $1,029,717.
Collateralized by U.S.
Treasury Securities, interest
rates of 0.500% to 2.875%, due
02/15/23 to 04/30/26. The
value of the collateral
including accrued interest is
$1,050,310. (h) 1,029,716
---------------
TOTAL REPURCHASE AGREEMENTS
-- 0.6% 2,125,314
(Cost $2,125,314) ---------------
TOTAL INVESTMENTS -- 100.4% 387,361,181
(Cost $356,513,880) (i)
NET OTHER ASSETS AND
LIABILITIES -- (0.4)% (1,440,925)
---------------
NET ASSETS -- 100.0% $ 385,920,256
===============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$255,730,609 or 66.3% of net assets Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(e) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act. (f) All or a
portion of this security is on loan (see Note 2E - 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 $1,951,399 and the total value
of the collateral held by the Fund is $2,125,314.
(g) Rate shown reflects yield as of September 30, 2021.
(h) This security serves as collateral for securities on loan.
(i) Aggregate cost for federal income tax purposes is $359,686,414. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$66,706,696 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$39,031,929. The net unrealized appreciation was $27,674,767.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common Stocks:
Canada $ 54,062,347 $ 54,062,347 $ -- $ --
Greece 3,105,890 3,105,890 -- --
Portugal 7,715,772 7,715,772 -- --
Spain 57,895,311 15,056,451 42,838,860 --
Switzerland 13,771,797 2,961,989 10,809,808 --
United States 46,602,809 46,602,809 -- --
Other Country
Categories* 202,081,941 -- 202,081,941 --
Repurchase
Agreements 2,125,314 -- 2,125,314 --
--------------------------------------------------------------
Total
Investments $ 387,361,181 $ 129,505,258 $ 257,855,923 $ --
==============================================================
* See Portfolio of Investments for country breakout.
Page 48 See Notes to Financial Statements
<PAGE>
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 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) $ 1,951,399
Non-cash Collateral(2) (1,951,399)
---------------
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 September 30, 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) $ 2,125,314
Non-cash Collateral(4) (2,125,314)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
Euro 31.9%
Danish Krone 15.2
Canadian Dollar 14.0
Hong Kong Dollar 13.1
United States Dollar 12.6
Swiss Franc 3.5
Swedish Krona 2.4
South Korean Won 2.3
Japanese Yen 2.0
British Pound Sterling 1.9
Australian Dollar 1.1
------
Total 100.0%
======
See Notes to Financial Statements Page 49
<PAGE>
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.6%
AUSTRALIA -- 3.0%
8,073 CIMIC Group Ltd. (b) $ 112,765
44,324 Downer EDI Ltd. (b) 202,029
1,727 Monadelphous Group Ltd. (b) 11,149
---------------
325,943
---------------
CANADA -- 5.2%
3,057 Aecon Group, Inc. 46,268
8,454 SNC-Lavalin Group, Inc. 234,811
5,912 Stantec, Inc. 277,723
---------------
558,802
---------------
CAYMAN ISLANDS -- 1.0%
120,326 China State Construction
International Holdings
Ltd. (b) 105,051
---------------
CHINA -- 1.8%
386,901 China Railway Group Ltd.,
Class H (b) 192,025
---------------
FINLAND -- 0.1%
3,197 YIT OYJ (b) 16,892
---------------
FRANCE -- 9.4%
8,719 Bouygues S.A. (b) 360,681
2,983 Eiffage S.A. (b) 301,481
3,364 Vinci S.A. (b) 349,885
---------------
1,012,047
---------------
GERMANY -- 2.0%
2,663 HOCHTIEF AG (b) 212,311
---------------
IRELAND -- 3.6%
3,857 Kingspan Group PLC (b) 384,732
---------------
ITALY -- 0.5%
21,943 Webuild S.p.A. (b) (c) 55,657
---------------
JAPAN -- 29.5%
35,100 Chiyoda Corp. (b) (c) (d) 122,955
9,100 COMSYS Holdings Corp. (b) (c) 240,048
25,500 JGC Holdings Corp. (b) 237,200
21,400 Kajima Corp. (b) 274,232
3,200 Kandenko Co., Ltd. (b) 26,456
11,000 Kinden Corp. (b) 185,477
3,370 Kumagai Gumi Co., Ltd. (b) 87,205
9,600 Kyowa Exeo Corp. (b) 235,329
16,600 Maeda Corp. (b) (e) 134,089
4,100 Nippo Corp. (b) 146,932
4,520 Nishimatsu Construction Co.,
Ltd. (b) (c) 139,841
33,600 Obayashi Corp. (b) 276,957
2,300 Okumura Corp. (b) 61,485
22,400 Penta-Ocean Construction Co.,
Ltd. (b) 152,062
2,400 Raito Kogyo Co., Ltd. (b) 42,310
35,400 Shimizu Corp. (b) 264,981
3,600 SHO-BOND Holdings Co.,
Ltd. (b) 159,516
8,900 Taisei Corp. (b) (c) 285,172
16,700 Toda Corp. (b) (c) 116,605
---------------
3,188,852
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
NETHERLANDS -- 4.0%
4,076 Arcadis N.V. (b) $ 203,586
4,805 Boskalis Westminster (b) 146,270
24,641 Koninklijke BAM Groep
N.V. (b) (d) 78,376
---------------
428,232
---------------
NORWAY -- 0.5%
4,421 Veidekke ASA (b) 54,044
---------------
PHILIPPINES -- 0.7%
13,300 Manila Electric Co. (b) 77,478
---------------
SOUTH KOREA -- 3.8%
29,039 Daewoo Engineering &
Construction Co., Ltd. (b) (d) 163,894
6,872 GS Engineering & Construction
Corp. (b) 244,789
---------------
408,683
---------------
SPAIN -- 3.4%
10,145 ACS Actividades de Construccion
y Servicios S.A. (b) 274,814
36,615 Sacyr S.A. (b) 89,977
459 Tecnicas Reunidas S.A. (b) (d) 4,340
---------------
369,131
---------------
SWEDEN -- 5.0%
5,824 NCC AB, Class B (b) 91,745
14,342 Peab AB, Class B (b) 148,308
11,950 Skanska AB, Class B (b) 299,797
---------------
539,850
---------------
UNITED KINGDOM -- 1.6%
47,729 Balfour Beatty PLC (b) 173,309
---------------
UNITED STATES -- 24.5%
5,372 AECOM (d) 339,242
3,342 Dycom Industries, Inc. (d) 238,084
2,404 EMCOR Group, Inc. 277,374
14,604 Fluor Corp. (d) 233,226
4,245 Granite Construction, Inc. 167,890
2,644 Jacobs Engineering Group, Inc. 350,409
7,926 KBR, Inc. 312,284
2,946 MasTec, Inc. (d) 254,181
3,870 Quanta Services, Inc. 440,483
2,128 Tutor Perini Corp. (d) 27,621
---------------
2,640,794
---------------
TOTAL COMMON STOCKS -- 99.6% 10,743,833
(Cost $9,747,563) ---------------
WARRANTS (a) -- 0.0%
ITALY -- 0.0%
1,985 Webuild S.p.A., expiring
8/2/30 (b) (c) (d) (e) 2,469
(Cost $0) ---------------
Page 50 See Notes to Financial Statements
<PAGE>
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
MONEY MARKET FUNDS -- 3.9%
425,639 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (f) (g) $ 425,639
(Cost $425,639) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 4.1%
$ 441,627 BNP Paribas S.A., 0.03% (f),
dated 09/30/21, due 10/01/21,
with a maturity value of
$441,628. Collateralized by
U.S. Treasury Notes, interest
rates of 0.375% to 0.750%, due
04/15/24 to 01/31/28. The
value of the collateral
including accrued interest is
$452,845. (g) 441,627
(Cost $441,627) ---------------
TOTAL INVESTMENTS -- 107.6% 11,613,568
(Cost $10,614,829) (h)
NET OTHER ASSETS AND
LIABILITIES -- (7.6)% (823,935)
---------------
NET ASSETS -- 100.0% $ 10,789,633
===============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$7,546,706 or 69.9% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) All or a portion of this security is on loan (see Note 2E - 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 $824,090 and the
total value of the collateral held by the Fund is $867,266.
(d) Non-income producing security.
(e) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by First Trust Advisors, L.P.,
the Fund's Advisor.
(f) Rate shown reflects yield as of September 30, 2021.
(g) This security serves as collateral for securities on loan.
(h) Aggregate cost for federal income tax purposes is $10,774,496. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$2,200,970 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$1,361,898. The net unrealized appreciation was $839,072.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common Stocks:
Canada $ 558,802 $ 558,802 $ -- $ --
United States 2,640,794 2,640,794 -- --
Other Country
Categories* 7,544,237 -- 7,544,237 --
Warrant* 2,469 -- 2,469 --
Money Market
Funds 425,639 425,639 -- --
Repurchase
Agreements 441,627 -- 441,627 --
--------------------------------------------------------------
Total
Investments $ 11,613,568 $ 3,625,235 $ 7,988,333 $ --
==============================================================
* See Portfolio of Investments for country breakout.
See Notes to Financial Statements Page 51
<PAGE>
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 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) $ 824,090
Non-cash Collateral(2) (824,090)
---------------
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 September 30, 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) $ 441,627
Non-cash Collateral(4) (441,627)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 30.2%
Japanese Yen 27.4
Euro 21.4
Canadian Dollar 4.8
Swedish Krona 4.6
South Korean Won 3.5
Australian Dollar 2.8
Hong Kong Dollar 2.6
British Pound Sterling 1.5
Philippine Peso 0.7
Norwegian Krone 0.5
------
Total 100.0%
======
Page 52 See Notes to Financial Statements
<PAGE>
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.9%
BELGIUM -- 3.3%
152,909 Elia Group S.A./N.V. (b) $ 18,272,604
---------------
CANADA -- 0.3%
29,516 Fortis, Inc. 1,309,414
3,166 Stella-Jones, Inc. 106,608
---------------
1,416,022
---------------
CAYMAN ISLANDS -- 0.1%
1,110,653 Wasion Holdings Ltd. (b) 374,782
---------------
CHINA -- 0.3%
51,865 BYD Co., Ltd., Class H (b) 1,612,089
---------------
DENMARK -- 0.8%
101,830 NKT A/S (b) (c) 4,423,440
---------------
FRANCE -- 8.2%
115,932 Engie S.A. (b) 1,516,756
1,729 Nexans S.A. (b) 161,218
262,465 Schneider Electric SE (b) 43,714,449
---------------
45,392,423
---------------
GERMANY -- 2.1%
140,634 E. ON SE (b) 1,716,530
529 PSI Software AG (b) 22,920
46,855 Siemens AG (b) 7,663,157
45,221 SMA Solar Technology AG (b) (d) 1,934,480
---------------
11,337,087
---------------
IRELAND -- 17.5%
278,431 Eaton Corp. PLC 41,572,533
626,689 Johnson Controls International
PLC 42,664,987
370,437 nVent Electric PLC 11,976,228
---------------
96,213,748
---------------
ITALY -- 8.2%
420,309 Enel S.p.A. (b) 3,225,952
603,582 Prysmian S.p.A. (b) 21,082,150
2,965,250 Terna Rete Elettrica Nazionale
S.p.A. (b) 21,043,730
---------------
45,351,832
---------------
JAPAN -- 2.2%
4,535 GS Yuasa Corp. (b) 102,538
60,624 Hitachi Ltd. (b) 3,586,559
95,999 Meidensha Corp. (b) 2,115,263
16,853 NEC Corp. (b) 913,281
15,625 NGK Insulators Ltd. (b) 264,862
125,390 Nissin Electric Co., Ltd. (b) 1,534,190
100,126 Osaki Electric Co., Ltd. (b) 496,269
153,770 Panasonic Corp. (b) 1,906,041
25,000 Takaoka Toko Co., Ltd. (b) 325,493
21,486 Toshiba Corp. (b) 904,368
---------------
12,148,864
---------------
JERSEY -- 8.3%
308,011 Aptiv PLC (c) 45,884,399
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
NETHERLANDS -- 1.5%
51,535 Alfen Beheer BV (b) (c) (e) (f) $ 5,439,549
14,447 NXP Semiconductors N.V. 2,829,734
3,947 STMicroelectronics N.V. (d) 172,208
---------------
8,441,491
---------------
PORTUGAL -- 0.5%
837,859 REN - Redes Energeticas
Nacionais SGPS S.A. (b) 2,476,306
---------------
SOUTH KOREA -- 3.7%
34,269 Samsung SDI Co., Ltd. (b) 20,449,003
---------------
SPAIN -- 3.7%
1,025,643 Red Electrica Corp., S.A. (b) 20,576,667
---------------
SWITZERLAND -- 8.3%
1,265,952 ABB Ltd. (b) 42,348,403
50,689 Landis+Gyr Group AG (b) 3,255,515
---------------
45,603,918
---------------
TAIWAN -- 0.1%
30,020 Advantech Co., Ltd. (b) 391,222
---------------
UNITED KINGDOM -- 0.7%
210,702 National Grid PLC (b) 2,510,666
59,468 SSE PLC (b) 1,252,107
---------------
3,762,773
---------------
UNITED STATES -- 30.1%
78,193 Advanced Energy Industries,
Inc. 6,861,436
32,140 AES (The) Corp. 733,756
57,724 American Superconductor
Corp. (c) 841,616
31,306 Analog Devices, Inc. 5,243,129
2,424 Arcosa, Inc. 121,612
1,178 AZZ, Inc. 62,670
2,275 Belden, Inc. 132,542
198,564 Cisco Systems, Inc. 10,807,839
1,518 Digi International, Inc. (c) 31,908
37,447 Emerson Electric Co. 3,527,507
2,397 EnerSys 178,433
134,913 Enphase Energy, Inc. (c) 20,232,903
1,223 ESCO Technologies, Inc. 94,171
3,715 Generac Holdings, Inc. (c) 1,518,209
59,131 General Electric Co. 6,092,267
43,244 Honeywell International, Inc. 9,179,836
2,964 Hubbell, Inc. 535,506
56,146 International Business Machines
Corp. 7,800,364
79,318 Itron, Inc. (c) 5,998,820
2,979 MasTec, Inc. (c) 257,028
30,776 MYR Group, Inc. (c) 3,062,212
52,353 NVIDIA Corp. 10,845,448
103,184 Oracle Corp. 8,990,422
229,561 Quanta Services, Inc. 26,128,633
80,884 SolarEdge Technologies, Inc. (c) 21,452,054
15,929 Tesla, Inc. (c) 12,352,621
14,657 Trimble, Inc. (c) 1,205,538
1,234 Valmont Industries, Inc. 290,138
See Notes to Financial Statements Page 53
<PAGE>
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
UNITED STATES (CONTINUED)
2,619 WESCO International, Inc. (c) $ 302,023
24,477 Willdan Group, Inc. (c) 871,136
---------------
165,751,777
---------------
TOTAL COMMON STOCKS -- 99.9% 549,880,447
(Cost $499,208,576) ---------------
MONEY MARKET FUNDS -- 0.2%
976,453 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (g) (h) 976,453
(Cost $976,453) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.2%
$ 1,013,131 BNP Paribas S.A., 0.03% (g),
dated 09/30/21, due 10/01/21,
with a maturity value of
$1,013,132. Collateralized by
U.S. Treasury Notes, interest
rates of 0.375% to 0.750%, due
04/15/24 to 01/31/28. The
value of the collateral
including accrued interest is
$1,038,866. (h) 1,013,131
(Cost $1,013,131) ---------------
TOTAL INVESTMENTS -- 100.3% 551,870,031
(Cost $501,198,160) (i)
NET OTHER ASSETS AND
LIABILITIES -- (0.3)% (1,607,536)
---------------
NET ASSETS -- 100.0% $ 550,262,495
===============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$237,612,559 or 43.2% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) All or a portion of this security is on loan (see Note 2E - 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 $1,880,610 and the
total value of the collateral held by the Fund is $1,989,584.
(e) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(f) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(g) Rate shown reflects yield as of September 30, 2021.
(h) This security serves as collateral for securities on loan.
(i) Aggregate cost for federal income tax purposes is $505,698,182. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$63,355,586 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$17,183,737. The net unrealized appreciation was $46,171,849.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common Stocks:
Canada $ 1,416,022 $ 1,416,022 $ -- $ --
Ireland 96,213,748 96,213,748 -- --
Jersey 45,884,399 45,884,399 -- --
Netherlands 8,441,491 3,001,942 5,439,549 --
United States 165,751,777 165,751,777 -- --
Other Country
Categories* 232,173,010 -- 232,173,010 --
Money Market
Funds 976,453 976,453 -- --
Repurchase
Agreements 1,013,131 -- 1,013,131 --
--------------------------------------------------------------
Total
Investments $ 551,870,031 $ 313,244,341 $ 238,625,690 $ --
==============================================================
* See Portfolio of Investments for country breakout.
Page 54 See Notes to Financial Statements
<PAGE>
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 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) $ 1,880,610
Non-cash Collateral(2) (1,880,610)
---------------
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 September 30, 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) $ 1,013,131
Non-cash Collateral(4) (1,013,131)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 56.7%
Euro 27.0
Swiss Franc 8.3
South Korean Won 3.7
Japanese Yen 2.2
Danish Krone 0.8
British Pound Sterling 0.7
Hong Kong Dollar 0.3
Canadian Dollar 0.2
New Taiwan Dollar 0.1
------
Total 100.0%
======
See Notes to Financial Statements Page 55
<PAGE>
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 98.2%
AUSTRALIA -- 6.6%
133,681 Beach Energy Ltd. (b) $ 142,770
147,549 Evolution Mining Ltd. (b) 373,081
128,993 Fortescue Metals Group Ltd. (b) 1,374,037
13,987 Mineral Resources Ltd. (b) 443,893
59,236 St Barbara Ltd. (b) 57,090
---------------
2,390,871
---------------
BERMUDA -- 1.6%
68,110 China Water Affairs Group
Ltd. (b) 76,101
340,266 Kunlun Energy Co., Ltd. (b) 354,295
131,103 Nine Dragons Paper Holdings
Ltd. (b) 160,028
---------------
590,424
---------------
BRAZIL -- 16.4%
16,239 Cia de Saneamento de Minas
Gerais-COPASA 41,181
284,475 Petroleo Brasileiro S.A., ADR 2,941,472
7,636 SLC Agricola S.A. 64,136
208,157 Vale S.A., ADR 2,903,790
---------------
5,950,579
---------------
CANADA -- 5.0%
28,072 Nutrien Ltd. 1,819,908
---------------
CAYMAN ISLANDS -- 0.2%
104,559 Lee & Man Paper Manufacturing
Ltd. (b) 76,424
---------------
CHINA -- 2.8%
168,990 China Coal Energy Co., Ltd.,
Class H (b) 128,233
290,314 China Shenhua Energy Co., Ltd.,
Class H (b) 676,271
115,059 Yanzhou Coal Mining Co., Ltd.,
Class H (b) 216,970
---------------
1,021,474
---------------
FRANCE -- 5.1%
2,946 Imerys S.A. (b) 126,923
56,852 Veolia Environnement S.A. (b) 1,737,152
---------------
1,864,075
---------------
INDIA -- 2.0%
1,056 Bayer CropScience Ltd. (b) 75,192
182,997 Coal India Ltd. (b) 454,751
97,814 NMDC Ltd. (b) 187,156
---------------
717,099
---------------
INDONESIA -- 0.4%
1,205,122 Adaro Energy Tbk PT (b) 147,318
---------------
IRELAND -- 3.2%
22,082 Smurfit Kappa Group PLC (b) 1,162,578
---------------
JAPAN -- 0.2%
11,226 Itoham Yonekyu Holdings,
Inc. (b) 73,340
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
LUXEMBOURG -- 0.6%
4,055 APERAM S.A. (b) $ 224,800
---------------
MALAYSIA -- 0.4%
36,600 PPB Group Bhd 160,510
---------------
NORWAY -- 1.8%
12,801 Yara International ASA (b) 634,114
---------------
PORTUGAL -- 0.2%
17,815 Navigator (The) Co., S.A. (b) 62,686
---------------
SOUTH AFRICA -- 3.6%
9,007 African Rainbow Minerals
Ltd. (b) 114,965
21,060 Exxaro Resources Ltd. 225,204
69,945 Impala Platinum Holdings Ltd. (b) 788,270
4,817 Kumba Iron Ore Ltd. (b) 158,262
---------------
1,286,701
---------------
SWEDEN -- 2.0%
23,073 Boliden AB (b) 738,808
---------------
TAIWAN -- 0.7%
60,012 Taiwan Fertilizer Co., Ltd. (b) 145,321
89,531 YFY, Inc. (b) 108,762
---------------
254,083
---------------
THAILAND -- 0.1%
112,450 TTW PCL 39,217
---------------
UNITED KINGDOM -- 25.8%
65,113 BHP Group PLC, ADR (c) 3,300,578
43,377 Ferrexpo PLC (b) 190,131
41,505 Mondi PLC (b) 1,017,121
50,887 Rio Tinto PLC, ADR (c) 3,400,269
20,259 Severn Trent PLC (b) 709,250
57,593 United Utilities Group PLC (b) 749,593
---------------
9,366,942
---------------
UNITED STATES -- 19.5%
2,651 Andersons (The), Inc. 81,730
28,414 Archer-Daniels-Midland Co. 1,705,124
33,642 Cabot Oil & Gas Corp. 732,050
18,370 CF Industries Holdings, Inc. 1,025,414
29,097 International Paper Co. 1,627,104
2,349 SJW Group 155,175
22,335 Tyson Foods, Inc., Class A 1,763,125
---------------
7,089,722
---------------
TOTAL COMMON STOCKS -- 98.2% 35,671,673
(Cost $38,074,762) ---------------
MONEY MARKET FUNDS -- 7.7%
2,785,792 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (d) (e) 2,785,792
(Cost $2,785,792) ---------------
Page 56 See Notes to Financial Statements
<PAGE>
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 8.0%
$ 2,890,436 BNP Paribas S.A, 0.03% (d),
dated 09/30/21, due 10/01/21,
with a maturity value of
$2,890,438. Collateralized by
U.S. Treasury Notes, interest
rates of 0.375% to 0.750%, due
04/15/24 to 01/31/28. The
value of the collateral
including accrued interest is
$2,963,856. (e) $ 2,890,436
(Cost $2,890,436) ---------------
TOTAL INVESTMENTS -- 113.9% 41,347,901
(Cost $43,750,990) (f)
NET OTHER ASSETS AND
LIABILITIES -- (13.9)% (5,036,160)
---------------
NET ASSETS -- 100.0% $ 36,311,741
===============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$13,685,686 or 37.7% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) All or a portion of this security is on loan (see Note 2E - 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 $5,653,782 and the
total value of the collateral held by the Fund is $5,676,228.
(d) Rate shown reflects yield as of September 30, 2021.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $44,067,431. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,955,064 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$4,674,594. The net unrealized depreciation was $2,719,530.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
Brazil $ 5,950,579 $ 5,950,579 $ -- $ --
Canada 1,819,908 1,819,908 -- --
Malaysia 160,510 160,510 -- --
South Africa 1,286,701 225,204 1,061,497 --
United
Kingdom 9,366,942 6,700,847 2,666,095 --
United States 7,089,722 7,089,722 -- --
Other Country
Categories* 9,997,311 -- 9,997,311 --
Money Market
Funds 2,785,792 2,785,792 -- --
Repurchase
Agreements 2,890,436 -- 2,890,436 --
---------------------------------------------------------------
Total
Investments $ 41,347,901 $ 24,732,562 $ 16,615,339 $ --
===============================================================
* See Portfolio of Investments for country breakout.
See Notes to Financial Statements Page 57
<PAGE>
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 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) $ 5,653,782
Non-cash Collateral(2) (5,653,782)
---------------
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 September 30, 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) $ 2,890,436
Non-cash Collateral(4) (2,890,436)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 65.6%
Euro 8.0
British Pound Sterling 6.4
Australian Dollar 5.8
Hong Kong Dollar 4.1
South African Rand 3.1
Swedish Krona 1.8
Indian Rupee 1.7
Norwegian Krone 1.5
New Taiwan Dollar 0.6
Malaysian Ringgit 0.4
Indonesian Rupiah 0.4
Brazilian Real 0.3
Japanese Yen 0.2
Thai Baht 0.1
------
Total 100.0%
======
Page 58 See Notes to Financial Statements
<PAGE>
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.8%
AUSTRALIA -- 0.9%
19,200 Incitec Pivot Ltd. (b) $ 39,938
3,756 Nufarm Ltd. (b) (c) 12,832
---------------
52,770
---------------
BERMUDA -- 2.0%
1,398 Bunge Ltd. 113,685
---------------
CANADA -- 6.4%
5,513 Nutrien Ltd. 357,827
---------------
CHILE -- 1.4%
1,412 Sociedad Quimica y Minera de
Chile S.A., ADR 75,853
---------------
CHINA -- 0.2%
17,003 China BlueChemical Ltd.,
Class H (b) 6,206
4,715 First Tractor Co., Ltd.,
Class H (b) 2,290
---------------
8,496
---------------
GERMANY -- 22.1%
7,223 BASF SE (b) 547,576
9,490 Bayer AG (b) 515,073
4,607 Evonik Industries AG (b) 144,462
1,892 K+S AG (b) (c) 30,347
---------------
1,237,458
---------------
INDIA -- 8.0%
445 Bayer CropScience Ltd. (b) 31,686
4,112 Chambal Fertilizers and
Chemicals Ltd. (b) 18,694
2,899 Coromandel International Ltd. (b) 30,893
1,333 Escorts Ltd. (b) 26,478
1,900 Godrej Agrovet Ltd. (b) (d) (e) 16,329
12,287 Mahindra & Mahindra Ltd. (b) 132,315
1,500 PI Industries Ltd. (b) 64,054
4,937 Sumitomo Chemical India Ltd. (b) 26,683
2,519 Tata Chemicals Ltd. (b) 31,073
7,552 UPL Ltd. (b) 71,786
---------------
449,991
---------------
JAPAN -- 8.9%
11,200 Kubota Corp. (b) 238,366
1,300 Kumiai Chemical Industry Co.,
Ltd. (b) 10,170
2,000 Mitsui Chemicals, Inc. (b) 66,818
1,400 Nissan Chemical Corp. (b) 81,881
500 Sakata Seed Corp. (b) 15,678
16,400 Sumitomo Chemical Co., Ltd. (b) 85,120
---------------
498,033
---------------
MALAYSIA -- 2.9%
79,101 Petronas Chemicals Group Bhd 164,380
---------------
MEXICO -- 0.9%
20,760 Orbia Advance Corp. SAB de CV 53,294
---------------
NETHERLANDS -- 5.1%
13,388 CNH Industrial N.V. 222,375
2,083 OCI N.V. (b) (c) 61,539
---------------
283,914
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
NORWAY -- 2.2%
2,518 Yara International ASA (b) $ 124,732
---------------
QATAR -- 4.5%
59,809 Industries Qatar QSC 253,790
---------------
RUSSIA -- 1.6%
1,280 PhosAgro PJSC (b) 89,898
---------------
SINGAPORE -- 3.5%
63,300 Wilmar International Ltd. (b) 195,559
---------------
SWITZERLAND -- 0.9%
101 Bucher Industries AG (b) 47,956
---------------
TAIWAN -- 0.4%
9,557 Taiwan Fertilizer Co., Ltd. (b) 23,143
---------------
TURKEY -- 0.3%
3,302 Gubre Fabrikalari TAS (c) 18,068
---------------
UNITED STATES -- 27.6%
745 AGCO Corp. 91,285
118 Alamo Group, Inc. 16,465
2,126 CF Industries Holdings, Inc. 118,673
336 Compass Minerals International,
Inc. 21,638
5,703 Corteva, Inc. 239,982
1,496 Deere & Co. 501,265
1,272 FMC Corp. 116,464
108 Lindsay Corp. 16,393
3,756 Mosaic (The) Co. 134,164
355 Raven Industries, Inc. (c) 20,452
552 Scotts Miracle-Gro (The) Co. 80,791
440 SiteOne Landscape Supply,
Inc. (c) 87,767
1,052 Toro (The) Co. 102,475
---------------
1,547,814
---------------
TOTAL INVESTMENTS -- 99.8% 5,596,661
(Cost $4,829,605) (f)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 12,383
---------------
NET ASSETS -- 100.0% $ 5,609,044
===============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$2,789,575 or 49.7% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days
See Notes to Financial Statements Page 59
<PAGE>
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
when this threshold is not exceeded, these securities are typically valued
at the last sale price on the exchange on which they are principally
traded.
(c) Non-income producing security.
(d) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(e) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(f) Aggregate cost for federal income tax purposes is $4,849,546. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,206,422 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$459,307. The net unrealized appreciation was $747,115.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common Stocks:
Bermuda $ 113,685 $ 113,685 $ -- $ --
Canada 357,827 357,827 -- --
Chile 75,853 75,853 -- --
Malaysia 164,380 164,380 -- --
Mexico 53,294 53,294 -- --
Netherlands 283,914 222,375 61,539 --
Qatar 253,790 253,790 -- --
Turkey 18,068 18,068 -- --
United States 1,547,814 1,547,814 -- --
Other Country
Categories* 2,728,036 -- 2,728,036 --
--------------------------------------------------------------
Total
Investments $ 5,596,661 $ 2,807,086 $ 2,789,575 $ --
==============================================================
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 35.0%
Euro 23.2
Japanese Yen 8.9
Indian Rupee 8.0
Canadian Dollar 6.4
Qatar Riyal 4.5
Singapore Dollar 3.5
Malaysian Ringgit 2.9
Norwegian Krone 2.2
Russian Ruble 1.6
Mexican Peso 1.0
Australian Dollar 1.0
Swiss Franc 0.9
New Taiwan Dollar 0.4
Turkish Lira 0.3
Hong Kong Dollar 0.2
------
Total 100.0%
======
Page 60 See Notes to Financial Statements
<PAGE>
FIRST TRUST BICK INDEX FUND (BICK)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.9%
BRAZIL -- 20.7%
286,895 Ambev S.A., ADR $ 791,830
115,769 Americanas S.A. (b) 656,040
340,313 B3 S.A. - Brasil Bolsa Balcao 798,641
208,767 Banco Bradesco S.A., ADR 799,578
157,351 Banco do Brasil S.A. 837,934
127,244 Centrais Eletricas
Brasileiras S.A. 895,142
137,355 Cia Siderurgica Nacional S.A. 725,901
217,152 Cosan S.A. 907,965
169,075 Gerdau S.A. (Preference Shares) 841,378
157,720 Itau Unibanco Holding S.A., ADR 831,184
414,204 Itausa S.A. (Preference Shares) 851,112
153,616 JBS S.A. 1,043,147
86,336 Localiza Rent a Car S.A. 868,473
125,807 Lojas Renner S.A. 791,239
262,511 Magazine Luiza S.A. 692,220
92,759 Natura & Co. Holding S.A. (b) 776,888
86,280 Petroleo Brasileiro S.A., ADR 892,135
69,576 Rede D'Or Sao Luiz S.A. (c) (e) 866,099
78,495 Suzano S.A. (b) 778,356
49,044 Vale S.A., ADR 684,164
460,847 Via S.A. (b) 651,613
134,651 WEG S.A. 976,673
---------------
17,957,712
---------------
CAYMAN ISLANDS -- 21.4%
5,601 Alibaba Group Holding Ltd.,
ADR (b) 829,228
45,054 ANTA Sports Products Ltd. (d) 850,776
5,956 Baidu, Inc., ADR (b) 915,735
11,657 Bilibili, Inc., ADR (b) 771,344
11,905 JD.com, Inc., ADR (b) 860,017
51,701 KE Holdings, Inc., ADR (b) 944,060
86,100 Kuaishou Technology
(b) (c) (d) (e) 918,919
30,307 Li Auto, Inc., ADR (b) 796,771
69,500 Li Ning Co., Ltd. (d) 801,039
29,181 Meituan, Class B (b) (c) (d) (e) 931,500
9,600 NetEase, Inc., ADR 819,840
23,792 NIO, Inc., ADR (b) 847,709
15,727 Pagseguro Digital Ltd.,
Class A (b) 813,401
9,351 Pinduoduo, Inc., ADR (b) 847,855
20,096 StoneCo., Ltd., Class A (b) 697,733
30,900 Sunny Optical Technology Group
Co., Ltd. (d) 809,113
15,155 Tencent Holdings Ltd. (d) 904,735
30,675 Trip.com Group Ltd., ADR (b) 943,256
60,269 Wuxi Biologics Cayman,
Inc. (b) (c) (d) (e) 977,581
290,865 Xiaomi Corp., Class B
(b) (c) (d) (e) 798,854
19,225 XP, Inc., Class A (b) 772,268
22,007 XPeng, Inc., ADR (b) 782,129
---------------
18,633,863
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
CHINA -- 5.1%
27,454 BYD Co., Ltd., Class H (d) $ 853,336
1,294,244 China Construction Bank Corp.,
Class H (d) 923,680
113,000 China Merchants Bank Co., Ltd.,
Class H (d) 899,271
1,676,036 Industrial & Commercial Bank of
China Ltd., Class H (d) 929,067
120,611 Ping An Insurance (Group) Co. of
China Ltd., Class H (d) 824,904
---------------
4,430,258
---------------
INDIA -- 20.2%
30,346 Dr. Reddy's Laboratories Ltd.,
ADR 1,976,739
24,882 HDFC Bank Ltd., ADR 1,818,625
99,312 ICICI Bank Ltd., ADR 1,874,017
81,801 Infosys Ltd., ADR 1,820,072
31,504 Reliance Industries Ltd., GDR (c) 2,145,422
33,308 State Bank of India, GDR (e) 2,048,442
99,009 Tata Motors Ltd., ADR (b) (f) 2,218,792
118,377 Vedanta Ltd., ADR 1,808,801
208,618 Wipro Ltd., ADR 1,842,097
---------------
17,553,007
---------------
JERSEY -- 2.2%
23,493 WNS (Holdings) Ltd., ADR (b) 1,921,727
---------------
MAURITIUS -- 4.6%
86,754 Azure Power Global Ltd. (b) (f) 1,908,588
75,465 MakeMyTrip Ltd. (b) 2,051,893
---------------
3,960,481
---------------
SOUTH KOREA -- 23.7%
8,766 Celltrion Healthcare Co.,
Ltd. (d) (g) 801,820
3,701 Celltrion, Inc. (d) (g) 803,929
51,885 Doosan Heavy Industries &
Construction Co., Ltd. (b) (d) 892,991
25,819 HMM Co., Ltd. (b) (d) 728,255
3,746 HYBE Co., Ltd. (b) (d) 934,775
3,908 Hyundai Mobis Co., Ltd. (d) 824,659
5,103 Hyundai Motor Co. (d) 849,474
6,996 Kakao Corp. 697,236
20,499 KB Financial Group, Inc. (d) 953,358
12,743 Kia Corp. (d) 860,618
45,184 Korea Electric Power Corp. (d) 894,409
34,646 Korean Air Lines Co.,
Ltd. (b) (d) 975,555
1,431 LG Chem Ltd. (d) 928,104
7,637 LG Electronics, Inc. (d) 811,829
2,470 NAVER Corp. (d) 801,433
3,218 POSCO (d) 886,104
1,124 Samsung Biologics Co.,
Ltd. (b) (c) (d) (e) 824,783
5,878 Samsung Electro-Mechanics Co.,
Ltd. (d) 869,807
14,138 Samsung Electronics Co., Ltd. (d) 876,480
1,367 Samsung SDI Co., Ltd. (d) 815,716
3,459 SK Bioscience Co., Ltd. (b) (d) 781,253
See Notes to Financial Statements Page 61
<PAGE>
FIRST TRUST BICK INDEX FUND (BICK)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SOUTH KOREA (CONTINUED)
10,182 SK Hynix, Inc. (d) $ 871,644
4,346 SK Innovation Co., Ltd. (b) (d) 956,818
3,639 SK Telecom Co., Ltd. (d) 988,412
---------------
20,629,462
---------------
UNITED STATES -- 2.0%
31,218 Coupang, Inc. (b) 869,422
15,193 Yum China Holdings, Inc. 882,865
---------------
1,752,287
---------------
TOTAL COMMON STOCKS -- 99.9% 86,838,797
(Cost $76,859,851) ---------------
MONEY MARKET FUNDS -- 1.7%
1,454,298 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (h) (i) 1,454,298
(Cost $1,454,298) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.7%
$ 1,508,926 BNP Paribas S.A., 0.03% (h),
dated 09/30/21, due 10/01/21,
with a maturity value of
$1,508,927. Collateralized by
U.S. Treasury Notes, interest
rates of 0.375% to 0.750%, due
04/15/24 to 01/31/28. The
value of the collateral
including accrued interest is
$1,547,255. (i) 1,508,926
(Cost $1,508,926) ---------------
TOTAL INVESTMENTS -- 103.3% 89,802,021
(Cost $79,823,075) (j)
NET OTHER ASSETS AND
LIABILITIES -- (3.3)% (2,836,779)
---------------
NET ASSETS -- 100.0% $ 86,965,242
===============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) Non-income producing security.
(c) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(d) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$31,355,001 or 36.05% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(e) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(f) All or a portion of this security is on loan (see Note 2E - 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 $2,913,900 and the
total value of the collateral held by the Fund is $2,963,224.
(g) Non-income producing security which makes payment-in-kind ("PIK")
distributions. For the fiscal year ended September 30, 2021, the Fund
received 140 and 50 PIK shares of Celltrion Healthcare Co., Ltd and
Celltrion, Inc., respectively.
(h) Rate shown reflects yield as of September 30, 2021.
(i) This security serves as collateral for securities on loan.
(j) Aggregate cost for federal income tax purposes is $81,504,719. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$17,553,778 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$9,256,476. The net unrealized appreciation was $8,297,302.
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
Page 62 See Notes to Financial Statements
<PAGE>
FIRST TRUST BICK INDEX FUND (BICK)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common Stocks:
Brazil $ 17,957,712 $ 17,957,712 $ -- $ --
Cayman
Islands 18,633,863 11,641,346 6,992,517 --
India 17,553,007 17,553,007 -- --
Jersey 1,921,727 1,921,727 -- --
Mauritius 3,960,481 3,960,481 -- --
South Korea 20,629,462 697,236 19,932,226 --
United States 1,752,287 1,752,287 -- --
Other Country
Categories* 4,430,258 -- 4,430,258 --
Money Market
Funds 1,454,298 1,454,298 -- --
Repurchase
Agreements 1,508,926 -- 1,508,926 --
--------------------------------------------------------------
Total
Investments $ 89,802,021 $ 56,938,094 $ 32,863,927 $ --
==============================================================
* See Portfolio of Investments for country 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) $ 2,913,900
Non-cash Collateral(2) (2,913,900)
---------------
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 September 30, 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) $ 1,508,926
Non-cash Collateral(4) (1,508,926)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 48.8%
South Korean Won 23.0
Brazilian Real 15.5
Hong Kong Dollar 12.7
------
Total 100.0%
======
See Notes to Financial Statements Page 63
<PAGE>
FIRST TRUST INDXX NEXTG ETF (NXTG)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.9%
AUSTRALIA -- 0.7%
2,524,888 Telstra Corp., Ltd. (b) $ 7,074,996
---------------
BRAZIL -- 0.5%
743,234 Telefonica Brasil S.A., ADR 5,767,496
---------------
CANADA -- 1.8%
137,584 BCE, Inc. 6,892,235
135,467 Rogers Communications, Inc.,
Class B 6,326,285
308,033 TELUS Corp. 6,770,598
---------------
19,989,118
---------------
CAYMAN ISLANDS -- 0.8%
161,270 GDS Holdings Ltd., ADR (c) 9,129,495
---------------
CHINA -- 2.4%
90,121,009 China Tower Corp., Ltd.,
Class H (b) (d) (e) 11,777,163
4,287,645 ZTE Corp., Class H (b) 14,068,515
---------------
25,845,678
---------------
FINLAND -- 2.3%
206,408 Elisa OYJ 12,824,887
2,305,501 Nokia OYJ, ADR (c) 12,564,981
---------------
25,389,868
---------------
FRANCE -- 0.5%
548,673 Orange S.A. (b) 5,933,803
---------------
GERMANY -- 2.4%
324,007 Deutsche Telekom AG (b) 6,497,677
305,528 Infineon Technologies AG (b) 12,495,504
2,523,603 Telefonica Deutschland Holding
AG (b) 7,171,414
---------------
26,164,595
---------------
GUERNSEY -- 1.1%
155,684 Amdocs Ltd. 11,786,836
---------------
HONG KONG -- 1.3%
10,523,104 Lenovo Group Ltd. (b) 13,735,016
---------------
INDIA -- 7.7%
935,309 Bharti Airtel Ltd. (b) (c) 8,646,023
946,067 HCL Technologies Ltd. (b) 16,226,421
630,564 Infosys Ltd., ADR 14,030,049
284,919 Tata Consultancy Services
Ltd. (b) 14,439,199
860,469 Tech Mahindra Ltd. (b) 15,930,752
1,522,077 Wipro Ltd., ADR 13,439,940
---------------
82,712,384
---------------
ITALY -- 1.6%
1,087,829 Infrastrutture Wireless Italiane
S.p.A. (b) (d) (e) 12,116,234
12,659,810 Telecom Italia S.p.A. (b) 4,950,113
---------------
17,066,347
---------------
JAPAN -- 10.4%
73,332 Fujitsu Ltd. (b) 13,251,874
210,548 KDDI Corp. (b) 6,931,896
199,471 Kyocera Corp. (b) 12,469,191
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
JAPAN (CONTINUED)
786,665 Mitsubishi Electric Corp. (b) $ 10,932,752
266,859 NEC Corp. (b) 14,461,359
478,266 Nippon Telegraph & Telephone
Corp. (b) 13,252,353
1,161,959 Renesas Electronics Corp. (b) (c) 14,300,650
975,498 SoftBank Corp. (b) 13,232,432
127,476 Sony Group Corp. (b) 14,152,226
---------------
112,984,733
---------------
MALAYSIA -- 0.7%
6,782,355 DiGi.Com Bhd (b) 7,181,946
---------------
NETHERLANDS -- 2.5%
62,381 NXP Semiconductors N.V. 12,218,567
331,422 STMicroelectronics N.V. (b) 14,456,477
---------------
26,675,044
---------------
NEW ZEALAND -- 0.6%
2,043,615 Spark New Zealand Ltd. (b) 6,723,243
---------------
NORWAY -- 1.1%
719,952 Telenor ASA (b) 12,118,231
---------------
PHILIPPINES -- 1.7%
183,120 Globe Telecom, Inc. (b) 10,703,934
250,861 PLDT, Inc., ADR (f) 8,170,543
---------------
18,874,477
---------------
QATAR -- 1.2%
6,544,158 Ooredoo QPSC 13,190,765
---------------
RUSSIA -- 0.7%
736,178 Mobile TeleSystems PJSC, ADR 7,096,756
---------------
SINGAPORE -- 0.7%
3,968,652 Singapore Telecommunications
Ltd. (b) 7,144,634
---------------
SOUTH AFRICA -- 1.4%
877,279 MTN Group Ltd. (b) (c) 8,239,975
699,951 Vodacom Group Ltd. 6,695,173
---------------
14,935,148
---------------
SOUTH KOREA -- 4.5%
849,464 KT Corp., ADR 11,569,700
93,300 LG Electronics, Inc. (b) 9,917,989
172,778 Samsung Electronics Co., Ltd. (b) 10,711,303
74,441 Samsung SDS Co., Ltd. (b) 9,987,942
23,743 SK Telecom Co., Ltd. (b) 6,448,987
---------------
48,635,921
---------------
SPAIN -- 1.3%
112,557 Cellnex Telecom S.A. (b) (d) (e) 6,942,859
1,398,957 Telefonica S.A. (b) 6,564,690
---------------
13,507,549
---------------
SWEDEN -- 2.8%
499,685 Tele2 AB, Class B (b) (f) 7,398,699
953,271 Telefonaktiebolaget LM Ericsson,
Class B (b) (f) 10,759,502
2,823,564 Telia Co., AB (b) 11,615,386
---------------
29,773,587
---------------
Page 64 See Notes to Financial Statements
<PAGE>
FIRST TRUST INDXX NEXTG ETF (NXTG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SWITZERLAND -- 0.6%
11,861 Swisscom AG (b) $ 6,825,780
---------------
TAIWAN -- 7.3%
2,978,841 ASE Technology Holding Co.,
Ltd. (b) 11,524,580
1,686,533 Chunghwa Telecom Co., Ltd. (b) 6,681,234
1,176,391 Delta Electronics, Inc. (b) 10,540,668
347,731 MediaTek, Inc. (b) 11,192,589
3,352,995 Taiwan Mobile Co., Ltd. (b) 11,892,017
106,072 Taiwan Semiconductor
Manufacturing Co., Ltd., ADR 11,842,939
6,738,547 United Microelectronics Corp. (b) 15,274,596
---------------
78,948,623
---------------
THAILAND -- 0.7%
1,253,800 Advanced Info Service PCL (b) 7,234,023
---------------
UNITED ARAB EMIRATES -- 0.7%
1,163,104 Emirates Telecommunications
Group Co. PJSC (b) 7,603,101
---------------
UNITED KINGDOM -- 1.4%
4,544,164 BT Group PLC (b) (c) 9,741,834
3,801,676 Vodafone Group PLC (b) 5,784,979
---------------
15,526,813
---------------
UNITED STATES -- 36.5%
153,775 Advanced Micro Devices, Inc. (c) 15,823,447
46,312 American Tower Corp. 12,291,668
74,949 Analog Devices, Inc. 12,552,458
99,451 Apple, Inc. 14,072,316
33,974 Arista Networks, Inc. (c) 11,674,825
239,169 AT&T, Inc. 6,459,955
26,762 Broadcom, Inc. 12,977,697
212,539 Ciena Corp. (c) 10,913,878
227,910 Cisco Systems, Inc. 12,405,141
90,916 CoreSite Realty Corp. 12,595,503
62,634 Crown Castle International Corp. 10,855,725
152,670 CyrusOne, Inc. 11,818,185
76,502 Digital Realty Trust, Inc. 11,050,714
15,240 Equinix, Inc. 12,041,581
64,552 F5 Networks, Inc. (c) 12,831,647
802,425 Hewlett Packard Enterprise Co. 11,434,556
218,576 Intel Corp. 11,645,729
83,312 International Business Machines
Corp. 11,574,536
433,527 Juniper Networks, Inc. 11,930,663
84,209 Keysight Technologies, Inc. (c) 13,834,697
154,305 Lumentum Holdings, Inc. (c) 12,890,640
242,123 Marvell Technology, Inc. 14,602,438
81,739 Microchip Technology, Inc. 12,546,119
158,198 Micron Technology, Inc. 11,228,894
71,976 NVIDIA Corp. 14,910,548
68,568 Qorvo, Inc. (c) 11,463,884
93,443 QUALCOMM, Inc. 12,052,278
39,359 SBA Communications Corp. 13,010,905
74,034 Skyworks Solutions, Inc. 12,199,323
47,634 T-Mobile US, Inc. (c) 6,085,720
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
UNITED STATES (CONTINUED)
121,712 Verizon Communications, Inc. $ 6,573,665
76,714 VMware, Inc., Class A (c) (f) 11,407,372
97,383 Xilinx, Inc. 14,703,859
---------------
394,460,566
---------------
TOTAL COMMON STOCKS -- 99.9% 1,080,036,572
(Cost $902,441,602) ---------------
RIGHTS (a)-- 0.0%
INDIA -- 0.0%
66,335 Bharti Airtel Ltd., expiring
10/26/21 (b) (c) (g) 137,000
(Cost $0) ---------------
MONEY MARKET FUNDS -- 1.3%
13,734,894 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (h) (i) 13,734,894
(Cost $13,734,894) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.3%
$ 14,250,823 BNP Paribas S.A., 0.03% (h),
dated 09/30/21, due 10/01/21,
with a maturity value of
$14,250,835. Collateralized by
U.S. Treasury Notes, interest
rates of 0.375% to 0.750%, due
04/15/24 to 01/31/28. The
value of the collateral
including accrued interest is
$14,612,811. (i) 14,250,823
(Cost $14,250,823) ---------------
TOTAL INVESTMENTS -- 102.5% 1,108,159,289
(Cost $930,427,319) (j)
NET OTHER ASSETS AND
LIABILITIES -- (2.5)% (26,549,656)
---------------
NET ASSETS -- 100.0% $ 1,081,609,633
================
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
See Notes to Financial Statements Page 65
<PAGE>
FIRST TRUST INDXX NEXTG ETF (NXTG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$515,395,761 or 47.7% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(e) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(f) All or a portion of this security is on loan (see Note 2E - 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 $26,954,574 and the
total value of the collateral held by the Fund is $27,985,717.
(g) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by First Trust Advisors, L.P.,
the Fund's Advisor.
(h) Rate shown reflects yield as of September 30, 2021.
(i) This security serves as collateral for securities on loan.
(j) Aggregate cost for federal income tax purposes is $938,228,836. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$198,185,144 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$28,254,691. The net unrealized appreciation was $169,930,453.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common Stocks:
Brazil $ 5,767,496 $ 5,767,496 $ -- $ --
Canada 19,989,118 19,989,118 -- --
Cayman
Islands 9,129,495 9,129,495 -- --
Finland 25,389,868 25,389,868 -- --
Guernsey 11,786,836 11,786,836 -- --
India 82,712,384 27,469,989 55,242,395 --
Netherlands 26,675,044 12,218,567 14,456,477 --
Philippines 18,874,477 8,170,543 10,703,934 --
Qatar 13,190,765 13,190,765 -- --
Russia 7,096,756 7,096,756 -- --
South Africa 14,935,148 6,695,173 8,239,975
South Korea 48,635,921 11,569,700 37,066,221 --
Taiwan 78,948,623 11,842,939 67,105,684
United States 394,460,566 394,460,566 -- --
Other Country
Categories* 322,444,075 -- 322,444,075 --
Rights* 137,000 -- 137,000 --
Money Market
Funds 13,734,894 13,734,894 -- --
Repurchase
Agreements 14,250,823 -- 14,250,823 --
--------------------------------------------------------------
Total
Investments $1,108,159,289 $ 578,512,705 $ 529,646,584 $ --
==============================================================
* See Portfolio of Investments for country breakout.
Page 66 See Notes to Financial Statements
<PAGE>
FIRST TRUST INDXX NEXTG ETF (NXTG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 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) $ 26,954,574
Non-cash Collateral(2) (26,954,574)
---------------
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 September 30, 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) $ 14,250,823
Non-cash Collateral(4) (14,250,823)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 48.7%
Japanese Yen 10.2
Euro 8.1
New Taiwan Dollar 6.1
Indian Rupee 5.0
Hong Kong Dollar 3.6
South Korean Won 3.3
Swedish Krona 2.7
Canadian Dollar 1.8
British Pound Sterling 1.4
South African Rand 1.3
Qatar Riyal 1.2
Norwegian Krone 1.1
Philippine Peso 1.0
United Arab Emirates Dirham 0.7
Thai Baht 0.7
Malaysian Ringgit 0.7
Singapore Dollar 0.6
Australian Dollar 0.6
Swiss Franc 0.6
New Zealand Dollar 0.6
------
Total 100.0%
======
See Notes to Financial Statements Page 67
<PAGE>
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.5%
BERMUDA -- 0.4%
589,699 Brilliance China Automotive
Holdings Ltd. (b) (c) (d) $ 235,587
---------------
CAYMAN ISLANDS -- 3.9%
712,187 Geely Automobile Holdings
Ltd. (b) 2,044,410
263,377 Yadea Group Holdings
Ltd. (b) (e) (f) 430,194
---------------
2,474,604
---------------
CHINA -- 9.1%
432,082 BAIC Motor Corp., Ltd.,
Class H (b) (e) (f) 149,261
75,922 BYD Co., Ltd., Class H (b) 2,359,838
256,470 Chongqing Changan Automobile
Co., Ltd., Class B (b) 155,904
538,985 Dongfeng Motor Group Co., Ltd.,
Class H (b) 479,966
559,430 Great Wall Motor Co., Ltd.,
Class H (b) 2,058,440
690,119 Guangzhou Automobile Group
Co., Ltd., Class H (b) 606,436
---------------
5,809,845
---------------
FRANCE -- 2.8%
50,664 Renault S.A. (b) (d) 1,797,396
---------------
GERMANY -- 20.2%
27,135 Bayerische Motoren Werke
AG (b) 2,577,247
61,072 Daimler AG (b) 5,388,467
25,430 Porsche Automobil Holding SE
(Preference Shares) (b) 2,514,773
10,834 Volkswagen AG (Preference
Shares) (b) 2,414,918
---------------
12,895,405
---------------
JAPAN -- 31.1%
169,264 Honda Motor Co., Ltd. (b) (g) 5,203,821
146,897 Mazda Motor Corp. (b) (d) 1,271,237
167,735 Mitsubishi Motors Corp. (b) (d) 457,538
488,909 Nissan Motor Co., Ltd. (b) (d) 2,443,307
8,100 Nissan Shatai Co., Ltd. (b) 57,863
138,910 Subaru Corp. (b) 2,567,018
59,511 Suzuki Motor Corp. (b) 2,658,895
294,760 Toyota Motor Corp. (b) 5,251,853
---------------
19,911,532
---------------
SINGAPORE -- 0.5%
24,150 Jardine Cycle & Carriage Ltd. (b) 342,528
---------------
SOUTH KOREA -- 7.4%
14,047 Hyundai Motor Co. (b) 2,338,341
35,075 Kia Corp. (b) 2,368,845
---------------
4,707,186
---------------
TAIWAN -- 0.5%
62,328 China Motor Corp. (b) 164,555
122,373 Yulon Motor Co., Ltd. (b) 185,516
---------------
350,071
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
UNITED KINGDOM -- 0.6%
15,643 Aston Martin Lagonda Global
Holdings PLC (b) (d) (e) (f) $ 403,245
---------------
UNITED STATES -- 23.0%
26,156 Canoo, Inc. (d) (g) 201,140
37,671 Fisker, Inc. (d) (g) 551,880
197,576 Ford Motor Co. (d) 2,797,676
105,057 General Motors Co. (d) 5,537,554
27,721 Lordstown Motors Corp.,
Class A (d) (g) 221,214
6,998 Tesla, Inc. (d) 5,426,809
---------------
14,736,273
---------------
TOTAL COMMON STOCKS -- 99.5% 63,663,672
(Cost $60,491,342) ---------------
MONEY MARKET FUNDS -- 2.2%
1,394,164 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (h) (i) 1,394,164
(Cost $1,394,164) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.2%
$ 1,446,533 BNP Paribas S.A., 0.03% (h),
dated 09/30/21, due 10/01/21,
with a maturity value of
$1,446,534. Collateralized by
U.S. Treasury Notes, interest
rates of 0.375% to 0.750%, due
04/15/24 to 01/31/28. The
value of the collateral
including accrued interest is
$1,483,277. (i) 1,446,533
(Cost $1,446,533) ---------------
TOTAL INVESTMENTS -- 103.9% 66,504,369
(Cost $63,332,039) (j)
NET OTHER ASSETS AND
LIABILITIES -- (3.9)% (2,515,009)
---------------
NET ASSETS -- 100.0% $ 63,989,360
===============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
Page 68 See Notes to Financial Statements
<PAGE>
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$48,927,399 or 76.5% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by First Trust Advisors, L.P.,
the Fund's Advisor.
(d) Non-income producing security.
(e) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(f) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(g) All or a portion of this security is on loan (see Note 2E - 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 $2,703,950 and the
total value of the collateral held by the Fund is $2,840,697.
(h) Rate shown reflects yield as of September 30, 2021.
(i) This security serves as collateral for securities on loan.
(j) Aggregate cost for federal income tax purposes is $64,617,197. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$6,870,593 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$4,983,421. The net unrealized appreciation was $1,887,172.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common Stocks:
United States $ 14,736,273 $ 14,736,273 $ -- $ --
Other Country
Categories* 48,927,399 -- 48,927,399 --
Money Market
Funds 1,394,164 1,394,164 -- --
Repurchase
Agreements 1,446,533 -- 1,446,533 --
--------------------------------------------------------------
Total
Investments $ 66,504,369 $ 16,130,437 $ 50,373,932 $ --
==============================================================
* See Portfolio of Investments for country breakout.
See Notes to Financial Statements Page 69
<PAGE>
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 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) $ 2,703,950
Non-cash Collateral(2) (2,703,950)
---------------
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 September 30, 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) $ 1,446,533
Non-cash Collateral(4) (1,446,533)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
Japanese Yen 30.0%
United States Dollar 26.4
Euro 22.1
Hong Kong Dollar 12.8
South Korean Won 7.1
British Pound Sterling 0.6
New Taiwan Dollar 0.5
Singapore Dollar 0.5
------
Total 100.0%
======
Page 70 See Notes to Financial Statements
<PAGE>
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.8%
CANADA -- 2.1%
685,288 Open Text Corp. $ 33,400,937
73,926 Shopify, Inc., Class A (b) 100,227,392
---------------
133,628,329
---------------
CAYMAN ISLANDS -- 6.4%
1,350,055 Alibaba Group Holding Ltd.,
ADR (b) 199,875,643
7,003,600 Kingsoft Cloud Holdings Ltd.,
ADR (b) (c) 198,341,952
---------------
398,217,595
---------------
GERMANY -- 1.1%
500,525 SAP SE, ADR (c) 67,590,896
---------------
JERSEY -- 0.5%
538,239 Mimecast Ltd. (b) 34,232,000
---------------
NETHERLANDS -- 0.6%
235,502 Elastic N.V. (b) 35,087,443
---------------
UNITED KINGDOM -- 1.9%
307,095 Atlassian Corp. PLC, Class A (b) 120,203,125
---------------
UNITED STATES -- 87.2%
169,838 Adobe, Inc. (b) 97,779,133
1,327,129 Akamai Technologies, Inc. (b) 138,804,422
77,903 Alphabet, Inc., Class A (b) 208,275,229
64,956 Amazon.com, Inc. (b) 213,383,058
626,447 Anaplan, Inc. (b) 38,144,358
318,158 Appfolio, Inc., Class A (b) 38,306,223
701,013 Appian Corp. (b) (c) 64,850,713
610,087 Arista Networks, Inc. (b) 209,650,297
497,343 Asana, Inc., Class A (b) 51,644,097
209,096 Avalara, Inc. (b) 36,543,708
344,403 Blackline, Inc. (b) 40,660,218
1,457,499 Box, Inc., Class A (b) 34,499,001
2,546,549 Cisco Systems, Inc. 138,608,662
1,461,041 Citrix Systems, Inc. 156,871,972
311,201 Cloudflare, Inc., Class A (b) 35,056,793
153,485 Coupa Software, Inc. (b) 33,640,842
133,717 Crowdstrike Holdings, Inc.,
Class A (b) 32,864,964
272,672 Datadog, Inc., Class A (b) 38,542,187
3,655,089 DigitalOcean Holdings, Inc. (b) 283,744,559
126,837 DocuSign, Inc. (b) 32,651,649
839,649 Domo, Inc., Class B (b) 70,899,962
1,184,937 Dropbox, Inc., Class A (b) 34,623,859
239,372 Everbridge, Inc. (b) 36,154,747
2,585,390 Fastly, Inc., Class A (b) (c) 104,553,172
7,291,264 Hewlett Packard Enterprise Co. 103,900,512
164,686 HubSpot, Inc. (b) 111,342,558
803,212 International Business Machines
Corp. 111,590,243
66,373 Intuit, Inc. 35,808,897
15,274,113 Lumen Technologies, Inc. 189,246,260
746,807 Microsoft Corp. 210,539,830
162,354 MicroStrategy, Inc.,
Class A (b) (c) 93,905,554
1,916,078 Momentive Global, Inc. (b) 37,555,129
479,472 MongoDB, Inc. (b) 226,075,843
1,267,549 NetApp, Inc. 113,775,198
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
UNITED STATES (CONTINUED)
2,529,404 Oracle Corp. $ 220,386,971
81,500 Palo Alto Networks, Inc. (b) 39,038,500
76,855 Paycom Software, Inc. (b) 38,100,866
139,578 Paylocity Holding Corp. (b) 39,137,671
8,728,065 Pure Storage, Inc., Class A (b) 219,598,115
426,544 Q2 Holdings, Inc. (b) 34,183,236
320,107 Qualys, Inc. (b) 35,624,708
16,137,860 Rackspace Technology,
Inc. (b) (c) 229,480,369
446,851 RingCentral, Inc., Class A (b) 97,190,093
424,937 salesforce.com, Inc. (b) 115,251,413
175,134 ServiceNow, Inc. (b) 108,980,634
472,218 Smartsheet, Inc., Class A (b) 32,498,043
123,456 Snowflake, Inc., Class A (b) 37,336,798
737,379 Splunk, Inc. (b) 106,706,115
308,999 Sprout Social, Inc.,
Class A (b) 37,682,428
1,200,076 Tabula Rasa HealthCare,
Inc. (b) 31,453,992
315,787 Twilio, Inc., Class A (b) 100,751,842
113,184 Veeva Systems, Inc.,
Class A (b) 32,616,233
1,514,381 VMware, Inc., Class A (b) (c) 225,188,455
137,554 Workday, Inc., Class A (b) 34,373,369
803,615 Workiva, Inc. (b) 113,277,570
304,000 Zendesk, Inc. (b) 35,382,560
129,792 Zoom Video Communications,
Inc., Class A (b) 33,940,608
134,994 Zscaler, Inc. (b) 35,398,127
---------------
5,438,072,565
---------------
TOTAL COMMON STOCKS -- 99.8% 6,227,031,953
(Cost $5,188,656,922) ---------------
MONEY MARKET FUNDS -- 2.3%
144,497,553 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (d) (e) 144,497,553
(Cost $144,497,553) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.4%
$149,925,378 BNP Paribas S.A., 0.03% (d),
dated 09/30/21, due 10/01/21,
with a maturity value of
$149,925,503. Collateralized
by U.S. Treasury Notes,
interest rates of 0.375% to
0.750%, due 04/15/24 to
01/31/28. The value of the
collateral including accrued
interest is $153,733,661. (e) 149,925,378
(Cost $149,925,378) ---------------
TOTAL INVESTMENTS -- 104.5% 6,521,454,884
(Cost $5,483,079,853) (f)
NET OTHER ASSETS AND
LIABILITIES -- (4.5)% (282,005,741)
---------------
NET ASSETS -- 100.0% $ 6,239,449,143
===============
See Notes to Financial Statements Page 71
<PAGE>
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) Non-income producing security.
(c) All or a portion of this security is on loan (see Note 2E - 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 $285,573,134 and the
total value of the collateral held by the Fund is $294,422,931.
(d) Rate shown reflects yield as of September 30, 2021.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $5,537,778,150. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,432,610,052 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$448,933,318. The net unrealized appreciation was $983,676,734.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common
Stocks* $6,227,031,953 $ 6,227,031,953 $ -- $ --
Money
Market
Funds 144,497,553 144,497,553 -- --
Repurchase
Agreements 149,925,378 -- 149,925,378 --
--------------------------------------------------------------
Total
Investments $6,521,454,884 $ 6,371,529,506 $ 149,925,378 $ --
==============================================================
* See Portfolio of Investments for country 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) $ 285,573,134
Non-cash Collateral(2) (285,573,134)
---------------
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 September 30, 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) $ 149,925,378
Non-cash Collateral(4) (149,925,378)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 72 See Notes to Financial Statements
<PAGE>
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.7%
AUSTRALIA -- 2.9%
175,384 Macquarie Group Ltd. (b) $ 22,658,988
1,101,372 Netwealth Group Ltd. (b) 11,367,955
---------------
34,026,943
---------------
BERMUDA -- 1.0%
886,618 Liberty Latin America Ltd.,
Class C (c) 11,632,428
---------------
BRAZIL -- 0.9%
2,341,905 Pet Center Comercio e
Participacoes S.A. 10,062,999
---------------
CANADA -- 4.0%
62,233 Docebo, Inc. (c) 4,544,394
305,122 Lightspeed Commerce, Inc. (c) 29,442,611
110,870 Nuvei Corp. (c) (d) (e) 12,701,119
---------------
46,688,124
---------------
CAYMAN ISLANDS -- 17.9%
6,333,656 China Risun Group Ltd. (b) (e) 3,958,001
3,299,371 Country Garden Services Holdings
Co., Ltd. (b) 26,071,439
450,592 Huazhu Group Ltd., ADR (c) 20,664,149
728,736 Meituan, Class B (b) (c) (d) (e) 23,262,310
469,662 Pagseguro Digital Ltd.,
Class A (c) 24,290,919
248,689 Sea Ltd., ADR (c) 79,264,645
1,209,544 Wuxi Biologics Cayman,
Inc. (b) (c) (d) (e) 19,619,162
265,847 XP, Inc., Class A (c) 10,679,074
---------------
207,809,699
---------------
CHINA -- 6.6%
188,451 CanSino Biologics, Inc.,
Class H (b) (c) (d) (e) 6,665,570
5,096,844 China Merchants Bank Co., Ltd.,
Class H (b) 40,561,438
7,236,989 China Merchants Securities Co.,
Ltd., Class H (b) (d) (e) (f) 11,531,620
755,483 Pharmaron Beijing Co., Ltd.,
Class H (b) (d) (e) 18,022,749
---------------
76,781,377
---------------
DENMARK -- 1.2%
312,330 Genmab A/S, ADR (c) 13,648,821
---------------
FRANCE -- 4.1%
601,277 Dassault Systemes SE (b) 31,642,403
317,887 La Francaise des Jeux
SAEM (b) (d) (e) 16,344,804
---------------
47,987,207
---------------
GERMANY -- 8.1%
103,790 BioNTech SE, ADR (c) 28,333,632
152,953 HelloFresh SE (b) (c) 14,097,184
804,587 Siemens Healthineers
AG (b) (d) (e) 52,181,687
---------------
94,612,503
---------------
ISRAEL -- 3.1%
227,009 Inmode Ltd. (c) 36,196,585
---------------
ITALY -- 2.6%
1,598,623 Nexi S.p.A. (b) (c) (d) (e) 29,810,495
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
JAPAN -- 13.4%
80,200 JMDC, Inc. (b) (c) $ 5,478,506
829,516 Mercari, Inc. (b) (c) 45,837,398
111,700 RENOVA, Inc. (b) (c) 4,582,521
5,121,917 SoftBank Corp. (b) 69,477,762
1,880,995 Takeda Pharmaceutical Co., Ltd.,
ADR (f) 30,810,698
---------------
156,186,885
---------------
JERSEY -- 1.2%
327,826 Janus Henderson Group PLC 13,549,049
---------------
LUXEMBOURG -- 0.3%
1,707,083 Samsonite International
S.A. (b) (c) (d) (e) 3,665,965
---------------
MALAYSIA -- 1.2%
14,923,340 MR DIY Group M Bhd (b) (d) (e) 13,854,862
---------------
MEXICO -- 1.0%
5,635,373 Becle SAB de CV 12,165,406
---------------
NETHERLANDS -- 10.3%
36,204 Adyen N.V. (b) (c) (d) (e) 101,202,995
234,693 Prosus N.V. (b) 18,785,010
---------------
119,988,005
---------------
NORWAY -- 1.0%
669,863 Adevinta ASA (b) (c) 11,479,053
---------------
SAUDI ARABIA -- 8.0%
432,727 Dr. Sulaiman Al Habib Medical
Services Group Co. (b) 20,048,385
7,608,385 Saudi Arabian Oil Co. (b) (d) (e) 72,964,901
---------------
93,013,286
---------------
SWEDEN -- 5.8%
520,430 EQT AB (b) 21,610,166
1,188,808 Nordnet AB (b) 21,296,068
1,002,326 Sinch AB (b) (c) (d) (e) 19,437,097
328,275 Tele2 AB, Class B (b) 4,860,678
---------------
67,204,009
---------------
THAILAND -- 2.4%
11,158,900 Gulf Energy Development
PCL (b) (e) 13,620,531
8,165,500 SCG Packaging PCL (b) 14,508,916
---------------
28,129,447
---------------
UNITED KINGDOM -- 1.8%
2,396,628 Virgin Money UK PLC (b) (c) 6,560,503
945,901 Wise PLC, Class A (c) 13,853,893
---------------
20,414,396
---------------
VIRGIN ISLANDS -- 0.9%
216,861 Capri Holdings Ltd. (c) 10,498,241
---------------
TOTAL COMMON STOCKS -- 99.7% 1,159,405,785
(Cost $1,062,868,618) ---------------
MONEY MARKET FUNDS -- 1.3%
15,256,261 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (g) (h) 15,256,261
(Cost $15,256,261) ---------------
See Notes to Financial Statements Page 73
<PAGE>
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.3%
$ 15,829,338 BNP Paribas S.A., 0.03% (g),
dated 09/30/21, due 10/01/21,
with a maturity value of
$15,829,351. Collateralized by
U.S. Treasury Notes, interest
rates of 0.375% to 0.750%, due
04/15/24 to 01/31/28. The
value of the collateral
including accrued interest is
$16,231,422. (h) $ 15,829,338
(Cost $15,829,338) ---------------
TOTAL INVESTMENTS -- 102.3% 1,190,491,384
(Cost $1,093,954,217) (i)
NET OTHER ASSETS AND
LIABILITIES -- (2.3)% (27,232,581)
---------------
NET ASSETS -- 100.0% $ 1,163,258,803
===============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$797,067,122 or 68.5% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(e) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(f) All or a portion of this security is on loan (see Note 2E - 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 $29,402,180 and the
total value of the collateral held by the Fund is $31,085,599.
(g) Rate shown reflects yield as of September 30, 2021.
(h) This security serves as collateral for securities on loan.
(i) Aggregate cost for federal income tax purposes is $1,101,316,741. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$145,947,176 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$56,772,533. The net unrealized appreciation was $89,174,643.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common Stocks:
Bermuda $ 11,632,428 $ 11,632,428 $ -- $ --
Brazil 10,062,999 10,062,999 -- --
Canada 46,688,124 46,688,124 -- --
Cayman
Islands 207,809,699 134,898,787 72,910,912 --
Denmark 13,648,821 13,648,821 -- --
Germany 94,612,503 28,333,632 66,278,871 --
Israel 36,196,585 36,196,585 -- --
Japan 156,186,885 30,810,698 125,376,187 --
Jersey 13,549,049 13,549,049 -- --
Mexico 12,165,406 12,165,406 -- --
United
Kingdom 20,414,396 13,853,893 6,560,503 --
Virgin
Islands 10,498,241 10,498,241 -- --
Other
Country
Categories* 525,940,649 -- 525,940,649 --
Money Market
Funds 15,256,261 15,256,261 -- --
Repurchase
Agreements 15,829,338 -- 15,829,338 --
--------------------------------------------------------------
Total
Investments $1,190,491,384 $ 377,594,924 $ 812,896,460 $ --
==============================================================
* See Portfolio of Investments for country breakout.
Page 74 See Notes to Financial Statements
<PAGE>
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 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) $ 29,402,180
Non-cash Collateral(2) (29,402,180)
---------------
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 September 30, 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) $ 15,829,338
Non-cash Collateral(4) (15,829,338)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 26.1%
Euro 22.2
Hong Kong Dollar 12.9
Japanese Yen 10.5
Saudi Riyal 7.8
Swedish Krona 5.6
Canadian Dollar 3.9
Australian Dollar 2.9
Thai Baht 2.4
British Pound Sterling 1.7
Malaysian Ringgit 1.2
Mexican Peso 1.0
Norwegian Krone 1.0
Brazilian Real 0.8
------
Total 100.0%
======
See Notes to Financial Statements Page 75
<PAGE>
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.8%
FRANCE -- 2.0%
991,124 Thales S.A. (b) $ 96,094,651
---------------
INDIA -- 0.8%
1,656,093 Infosys Ltd., ADR 36,848,069
---------------
IRELAND -- 6.0%
895,561 Accenture PLC, Class A 286,507,875
---------------
ISRAEL -- 6.7%
1,199,614 Check Point Software
Technologies Ltd. (c) 135,604,366
897,378 CyberArk Software Ltd. (c) 141,624,196
933,275 Radware Ltd. (c) 31,470,033
1,137,132 Tufin Software Technologies
Ltd. (c) 11,178,008
---------------
319,876,603
---------------
JAPAN -- 2.5%
2,143,373 Trend Micro, Inc. (b) 119,360,393
---------------
JERSEY -- 2.9%
2,158,790 Mimecast Ltd. (c) 137,299,044
---------------
UNITED STATES -- 78.9%
2,170,732 A10 Networks, Inc. (c) 29,261,467
1,330,746 Akamai Technologies, Inc. (c) 139,182,724
1,839,890 Booz Allen Hamilton Holding
Corp. 145,995,271
5,106,928 Cisco Systems, Inc. 277,970,091
1,248,167 Cloudflare, Inc., Class A (c) 140,606,013
1,072,650 Crowdstrike Holdings, Inc.,
Class A (c) 263,635,917
740,326 F5 Networks, Inc. (c) 147,162,002
8,285,089 FireEye, Inc. (c) 147,474,584
478,232 Fortinet, Inc. (c) 139,662,873
5,200,334 Juniper Networks, Inc. 143,113,192
1,536,099 Leidos Holdings, Inc. 147,665,197
510,256 ManTech International Corp.,
Class A 38,738,635
1,143,447 Okta, Inc. (c) 271,385,711
1,005,063 OneSpan, Inc. (c) 18,875,083
653,749 Palo Alto Networks, Inc. (c) 313,145,771
1,104,714 Qualys, Inc. (c) 122,943,621
1,240,159 Rapid7, Inc. (c) 140,162,770
1,717,313 Ribbon Communications, Inc. (c) 10,269,532
3,216,083 Sailpoint Technologies Holdings,
Inc. (c) 137,905,639
1,296,614 Science Applications
International Corp. 110,938,294
985,833 Splunk, Inc. (c) 142,659,893
3,396,554 Tenable Holdings, Inc. (c) 156,717,002
2,183,823 Varonis Systems, Inc. (c) 132,885,630
696,856 VeriSign, Inc. (c) 142,862,449
1,012,338 VMware, Inc., Class A (c) (d) 150,534,661
1,504,599 Zix Corp. (c) 10,637,515
541,446 Zscaler, Inc. (c) 141,977,970
---------------
3,764,369,507
---------------
TOTAL COMMON STOCKS -- 99.8% 4,760,356,142
(Cost $3,890,106,278) ---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
MONEY MARKET FUNDS -- 1.2%
55,289,302 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (e) (f) $ 55,289,302
(Cost $55,289,302) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.2%
$ 57,366,158 BNP Paribas S.A, 0.03% (e),
dated 09/30/21, due 10/01/21,
with a maturity value of
$57,366,206. Collateralized by
U.S. Treasury Notes, interest
rates of 0.375% to 0.750%, due
04/15/24 to 01/31/28. The
value of the collateral
including accrued interest is
$58,823,327. (f) 57,366,158
(Cost $57,366,158) ---------------
TOTAL INVESTMENTS -- 102.2% 4,873,011,602
(Cost $4,002,761,738) (g)
NET OTHER ASSETS AND
LIABILITIES -- (2.2)% (102,714,038)
---------------
NET ASSETS -- 100.0% $ 4,770,297,564
===============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$215,455,044 or 4.5% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) All or a portion of this security is on loan (see Note 2E - 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 $109,097,473 and the
total value of the collateral held by the Fund is $112,655,460.
(e) Rate shown reflects yield as of September 30, 2021.
(f) This security serves as collateral for securities on loan.
Page 76 See Notes to Financial Statements
<PAGE>
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
(g) Aggregate cost for federal income tax purposes is $4,063,937,653. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$917,705,504 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$108,631,555. The net unrealized appreciation was $809,073,949.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
--------------------------------------------------------------
Common Stocks:
France $ 96,094,651 $ -- $ 96,094,651 $ --
Japan 119,360,393 -- 119,360,393 --
Other
Country
Categories* 4,544,901,098 4,544,901,098 -- --
Money Market
Funds 55,289,302 55,289,302 -- --
Repurchase
Agreements 57,366,158 -- 57,366,158 --
--------------------------------------------------------------
Total
Investments $4,873,011,602 $ 4,600,190,400 $ 272,821,202 $ --
==============================================================
* See Portfolio of Investments for country 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) $ 109,097,473
Non-cash Collateral(2) (109,097,473)
---------------
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 September 30, 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) $ 57,366,158
Non-cash Collateral(4) (57,366,158)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 95.6%
Japanese Yen 2.4
Euro 2.0
------
Total 100.0%
======
See Notes to Financial Statements Page 77
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2021
<TABLE>
<CAPTION>
FIRST TRUST
FIRST TRUST FTSE EPRA/NAREIT
STOXX(R) EUROPEAN DEVELOPED MARKETS
SELECT DIVIDEND REAL ESTATE
INDEX FUND INDEX FUND
(FDD) (FFR)
---------------------- ----------------------
ASSETS:
<S> <C> <C>
Investments, at value ................................................. $ 283,783,877 $ 34,452,421
Cash .................................................................. -- --
Foreign currency, at value ............................................ -- 4,312
Due from authorized participant ....................................... -- --
Receivables:
Reclaims ........................................................... 1,688,639 23,179
Dividends .......................................................... 999,174 128,486
Investment securities sold ......................................... -- 107,811
Capital shares sold ................................................ -- --
From investment advisor ............................................ -- 12,348
Securities lending income .......................................... -- --
---------------- ----------------
TOTAL ASSETS ....................................................... 286,471,690 34,728,557
---------------- ----------------
LIABILITIES:
Due to custodian ...................................................... -- --
Due to custodian foreign currency ..................................... 268 --
Payables:
Investment securities purchased .................................... -- --
Licensing fees ..................................................... 235,123 11,711
Investment advisory fees ........................................... 97,743 --
Audit and tax fees ................................................. 55,112 38,112
Shareholder reporting fees ......................................... 13,595 5,296
Foreign capital gains tax .......................................... -- --
Collateral for securities on loan .................................. -- --
Capital shares redeemed ............................................ -- --
Other liabilities ..................................................... 39,003 16,445
---------------- ----------------
TOTAL LIABILITIES .................................................. 440,844 71,564
---------------- ----------------
NET ASSETS ............................................................ $ 286,030,846 $ 34,656,993
================ ================
NET ASSETS CONSIST OF:
Paid-in capital ....................................................... $ 329,312,543 $ 33,345,046
Par value ............................................................. 206,033 6,916
Accumulated distributable earnings (loss) ............................. (43,487,730) 1,305,031
---------------- ----------------
NET ASSETS ............................................................ $ 286,030,846 $ 34,656,993
================ ================
NET ASSET VALUE, per share ............................................ $ 13.88 $ 50.11
================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share) ............................. 20,603,334 691,608
================ ================
Investments, at cost .................................................. $ 260,045,256 $ 31,244,103
================ ================
Foreign currency, at cost (proceeds) .................................. $ (267) $ 4,350
================ ================
Securities on loan, at value .......................................... $ -- $ --
================ ================
</TABLE>
Page 78 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST
FIRST TRUST FIRST TRUST GLOBAL NASDAQ(R) CLEAN FIRST TRUST
DOW JONES GLOBAL GLOBAL ENGINEERING EDGE(R) SMART GRID INDXX GLOBAL
SELECT DIVIDEND WIND ENERGY AND CONSTRUCTION INFRASTRUCTURE NATURAL RESOURCES
INDEX FUND ETF ETF INDEX FUND INCOME ETF
(FGD) (FAN) (FLM) (GRID) (FTRI)
--------------------- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
$ 498,920,874 $ 387,361,181 $ 11,613,568 $ 551,870,031 $ 41,347,901
-- -- 34,121 240,445 254,882
1,374,466 192,934 2 -- 61,353
-- -- -- -- 1,750,903
1,138,644 445,582 5,524 284,509 5,510
4,949,203 508,129 41,069 302,567 500,876
3,708,998 -- -- -- --
-- -- -- -- --
-- -- 9,171 -- --
-- 1,222 400 1,002 498
--------------- --------------- --------------- --------------- ---------------
510,092,185 388,509,048 11,703,855 552,698,554 43,921,923
--------------- --------------- --------------- --------------- ---------------
1,477,592 138,252 -- 12 --
-- -- -- -- --
-- -- -- -- 1,907,199
81,501 98,286 2,734 111,082 --
173,114 89,334 -- 184,200 20,693
59,612 34,612 34,612 36,014 --
24,606 34,495 3,797 24,216 --
-- -- -- -- 6,062
-- 2,125,314 867,266 1,989,584 5,676,228
3,747,902 -- -- -- --
73,715 68,499 5,813 90,951 --
--------------- --------------- --------------- --------------- ---------------
5,638,042 2,588,792 914,222 2,436,059 7,610,182
--------------- --------------- --------------- --------------- ---------------
$ 504,454,143 $ 385,920,256 $ 10,789,633 $ 550,262,495 $ 36,311,741
=============== =============== =============== =============== ===============
$ 666,703,413 $ 410,481,216 $ 18,260,078 $ 504,554,927 $ 99,197,140
202,000 184,500 2,000 59,500 28,000
(162,451,270) (24,745,460) (7,472,445) 45,648,068 (62,913,399)
--------------- --------------- --------------- --------------- ---------------
$ 504,454,143 $ 385,920,256 $ 10,789,633 $ 550,262,495 $ 36,311,741
=============== =============== =============== =============== ===============
$ 24.97 $ 20.92 $ 53.95 $ 92.48 $ 12.97
=============== =============== =============== =============== ===============
20,200,002 18,450,002 200,002 5,950,002 2,800,002
=============== =============== =============== =============== ===============
$ 467,931,904 $ 356,513,880 $ 10,614,829 $ 501,198,160 $ 43,750,990
=============== =============== =============== =============== ===============
$ 1,384,895 $ 193,105 $ 2 $ (12) $ 61,353
=============== =============== =============== =============== ===============
$ -- $ 1,951,399 $ 824,090 $ 1,880,610 $ 5,653,782
=============== =============== =============== =============== ===============
</TABLE>
See Notes to Financial Statements Page 79
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
SEPTEMBER 30, 2021
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST
INDXX GLOBAL BICK
AGRICULTURE ETF INDEX FUND
(FTAG) (BICK)
---------------------- ----------------------
ASSETS:
<S> <C> <C>
Investments, at value ................................................. $ 5,596,661 $ 89,802,021
Cash .................................................................. 1,702 22,736
Foreign currency, at value ............................................ 4,278 4,533
Due from authorized participant ....................................... -- --
Receivables:
Reclaims ........................................................... 10,720 --
Dividends .......................................................... 9,462 144,949
Investment securities sold -- --
Capital shares sold ................................................ -- --
From investment advisor ............................................ -- --
Securities lending income .......................................... -- 2,035
---------------- ----------------
TOTAL ASSETS ....................................................... 5,622,823 89,976,274
---------------- ----------------
LIABILITIES:
Due to custodian ...................................................... -- --
Due to custodian foreign currency ..................................... -- --
Payables:
Investment securities purchased .................................... -- --
Licensing fees ..................................................... -- --
Investment advisory fees ........................................... 3,235 47,808
Audit and tax fees ................................................. -- --
Shareholder reporting fees ......................................... -- --
Foreign capital gains tax .......................................... 10,544 --
Collateral for securities on loan .................................. -- 2,963,224
Capital shares redeemed ............................................ -- --
Other liabilities ..................................................... -- --
---------------- ----------------
TOTAL LIABILITIES .................................................. 13,779 3,011,032
---------------- ----------------
NET ASSETS ............................................................ $ 5,609,044 $ 86,965,242
================ ================
NET ASSETS CONSIST OF:
Paid-in capital ....................................................... $ 24,288,395 $ 109,431,354
Par value ............................................................. 1,899 25,500
Accumulated distributable earnings (loss) ............................. (18,681,250) (22,491,612)
---------------- ----------------
NET ASSETS ............................................................ $ 5,609,044 $ 86,965,242
================ ================
NET ASSET VALUE, per share ............................................ $ 29.53 $ 34.10
================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share) ............................. 189,928 2,550,002
================ ================
Investments, at cost .................................................. $ 4,829,605 $ 79,823,075
================ ================
Foreign currency, at cost (proceeds) .................................. $ 4,285 $ 4,559
================ ================
Securities on loan, at value .......................................... $ -- $ 2,913,900
================ ================
</TABLE>
Page 80 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
FIRST TRUST NASDAQ GLOBAL CLOUD INTERNATIONAL NASDAQ
INDXX NEXTG AUTO COMPUTING EQUITY CYBERSECURITY
ETF INDEX FUND ETF OPPORTUNITIES ETF ETF
(NXTG) (CARZ) (SKYY) (FPXI) (CIBR)
--------------------- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
$ 1,108,159,289 $ 66,504,369 $ 6,521,454,884 $ 1,190,491,384 $ 4,873,011,602
1,946,015 129,052 13,518,225 2,552,730 11,612,014
10,474 -- -- 73,540 3
-- -- -- 6,798,697 --
124,345 29,895 395,272 161,308 88,709
2,610,843 202,657 1,335,174 1,783,857 269,093
-- -- -- -- --
7,652,877 -- 5,278,654 -- --
-- -- -- -- --
15,281 1,426 394,826 5,616 398,802
--------------- --------------- --------------- --------------- ---------------
1,120,519,124 66,867,399 6,542,377,035 1,201,867,132 4,885,380,223
--------------- --------------- --------------- --------------- ---------------
-- -- -- -- --
-- 33 -- -- --
7,652,229 -- 5,268,453 -- --
-- -- -- -- --
638,013 37,309 3,236,508 724,033 2,427,199
-- -- -- -- --
-- -- -- -- --
2,630,471 -- -- -- --
27,985,717 2,840,697 294,422,931 31,085,599 112,655,460
3,061 -- -- 6,798,697 --
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
38,909,491 2,878,039 302,927,892 38,608,329 115,082,659
--------------- --------------- --------------- --------------- ---------------
$ 1,081,609,633 $ 63,989,360 $ 6,239,449,143 $ 1,163,258,803 $ 4,770,297,564
=============== =============== =============== =============== ===============
$ 907,420,222 $ 65,988,572 $ 5,372,217,411 $ 1,157,615,216 $ 4,004,133,797
141,500 11,000 592,000 181,500 977,500
174,047,911 (2,010,212) 866,639,732 5,462,087 765,186,267
--------------- --------------- --------------- --------------- ---------------
$ 1,081,609,633 $ 63,989,360 $ 6,239,449,143 $ 1,163,258,803 $ 4,770,297,564
=============== =============== =============== =============== ===============
$ 76.44 $ 58.17 $ 105.40 $ 64.09 $ 48.80
=============== =============== =============== =============== ===============
14,150,002 1,100,002 59,200,002 18,150,002 97,750,002
=============== =============== =============== =============== ===============
$ 930,427,319 $ 63,332,039 $ 5,483,079,853 $ 1,093,954,217 $ 4,002,761,738
=============== =============== =============== =============== ===============
$ 10,574 $ (33) $ -- $ 73,663 $ 3
=============== =============== =============== =============== ===============
$ 26,954,574 $ 2,703,950 $ 285,573,134 $ 29,402,180 $ 109,097,473
=============== =============== =============== =============== ===============
</TABLE>
See Notes to Financial Statements Page 81
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2021
<TABLE>
<CAPTION>
FIRST TRUST
FIRST TRUST FTSE EPRA/NAREIT
STOXX(R) EUROPEAN DEVELOPED MARKETS
SELECT DIVIDEND REAL ESTATE
INDEX FUND INDEX FUND
(FDD) (FFR)
---------------------- ----------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................................. $ 12,358,461 $ 984,867
Securities lending income (net of fees) ............................... -- --
Foreign withholding tax ............................................... (1,105,691) (36,491)
---------------- ----------------
Total investment income 11,252,770 948,376
---------------- ----------------
EXPENSES:
Investment advisory fees .............................................. 970,199 135,106
Licensing fees ........................................................ 147,579 40,580
Accounting and administration fees .................................... 122,539 22,995
Audit and tax fees .................................................... 67,721 39,922
Shareholder reporting fees ............................................ 29,930 17,415
Custodian fees ........................................................ 20,455 34,956
Transfer agent fees ................................................... 12,087 1,682
Listing fees .......................................................... 9,274 9,274
Trustees' fees and expenses ........................................... 6,070 5,979
Legal fees ............................................................ 4,644 987
Registration and filing fees .......................................... 3,970 --
Expenses previously waived and expenses reimbursed by the investment
advisor ............................................................ -- --
Other expenses ........................................................ 4,115 2,147
---------------- ----------------
Total expenses ..................................................... 1,398,583 311,043
Less fees waived and expenses reimbursed by
the investment advisor .......................................... -- (108,383)
---------------- ----------------
Net expenses ....................................................... 1,398,583 202,660
---------------- ----------------
NET INVESTMENT INCOME (LOSS)........................................... 9,854,187 745,716
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ........................................................ 14,955,433 32,612
In-kind redemptions ................................................ 6,494,349 1,069,901
Foreign currency transactions ...................................... (38,754) (2,200)
Foreign capital gains tax .......................................... -- --
---------------- ----------------
Net realized gain (loss) .............................................. 21,411,028 1,100,313
---------------- ----------------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................ 35,092,220 6,369,883
Foreign currency translation ....................................... (53,780) (1,131)
Deferred foreign capital gains tax ................................. -- --
---------------- ----------------
Net change in unrealized appreciation (depreciation) .................. 35,038,440 6,368,752
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ............................... 56,449,468 7,469,065
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS .................................................... $ 66,303,655 $ 8,214,781
================ ================
</TABLE>
(a) Fund is subject to a unitary fee (see Note 3 in the Notes to Financial
Statements).
Page 82 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST
FIRST TRUST FIRST TRUST GLOBAL NASDAQ(R) CLEAN FIRST TRUST
DOW JONES GLOBAL GLOBAL ENGINEERING EDGE(R) SMART GRID INDXX GLOBAL
SELECT DIVIDEND WIND ENERGY AND CONSTRUCTION INFRASTRUCTURE NATURAL RESOURCES
INDEX FUND ETF ETF INDEX FUND INCOME ETF
(FGD) (FAN) (FLM) (GRID) (FTRI)
--------------------- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
$ 27,442,405 $ 8,308,461 $ 241,773 $ 5,562,724 $ 2,114,977
-- 142,085 2,711 33,537 1,595
(1,764,967) (958,726) (22,433) (519,675) (75,622)
--------------- --------------- --------------- --------------- ---------------
25,677,438 7,491,820 222,051 5,076,586 2,040,950
--------------- --------------- --------------- --------------- ---------------
1,810,271 1,540,959 35,317 1,166,503 146,432 (a)
261,773 385,173 8,827 262,471 --
228,236 194,415 6,549 147,527 --
72,618 34,784 34,901 39,517 --
48,363 81,982 15,817 53,959 --
83,816 77,673 5,354 30,797 --
22,556 19,249 440 14,573 --
9,274 9,778 9,778 6,077 --
6,165 6,232 5,973 6,167 --
8,894 9,893 666 7,469 --
3,645 13,571 229 32,654 --
-- -- -- 63,759 --
6,716 4,729 1,802 2,840 --
--------------- --------------- --------------- --------------- ---------------
2,562,327 2,378,438 125,653 1,834,313 146,432
-- (66,999) (63,848) -- --
--------------- --------------- --------------- --------------- ---------------
2,562,327 2,311,439 61,805 1,834,313 146,432
--------------- --------------- --------------- --------------- ---------------
23,115,111 5,180,381 160,246 3,242,273 1,894,518
--------------- --------------- --------------- --------------- ---------------
(2,777,496) (693,682) (279,639) (3,937,787) 1,334,895
49,608,338 35,842,546 -- 12,836,119 --
(139,976) (52,118) (530) (58,192) (13,276)
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
46,690,866 35,096,746 (280,169) 8,840,140 1,321,619
--------------- --------------- --------------- --------------- ---------------
76,384,796 (2,890,281) 1,887,903 42,354,367 (2,200,121)
(52,422) (18,435) (106) (4,318) 647
-- -- -- -- (6,062)
--------------- --------------- --------------- --------------- ---------------
76,332,374 (2,908,716) 1,887,797 42,350,049 (2,205,536)
--------------- --------------- --------------- --------------- ---------------
123,023,240 32,188,030 1,607,628 51,190,189 (883,917)
--------------- --------------- --------------- --------------- ---------------
$ 146,138,351 $ 37,368,411 $ 1,767,874 $ 54,432,462 $ 1,010,601
=============== =============== =============== =============== ===============
</TABLE>
See Notes to Financial Statements Page 83
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED SEPTEMBER 30, 2021
<TABLE>
<CAPTION>
FIRST TRUST
INDXX GLOBAL FIRST TRUST
AGRICULTURE BICK
ETF INDEX FUND
(FTAG) (BICK)
---------------------- ----------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............................................................. $ 129,980 $ 1,339,902
Securities lending income (net of fees)................................ -- 26,170
Foreign withholding tax................................................ (14,931) (118,797)
---------------- ----------------
Total investment income 115,049 1,247,275
---------------- ----------------
EXPENSES:
Investment advisory fees .............................................. 31,675 (a) 542,952 (a)
Licensing fees ........................................................ -- --
Accounting and administration fees .................................... -- --
Audit and tax fees .................................................... -- --
Shareholder reporting fees ............................................ -- --
Custodian fees ........................................................ -- --
Transfer agent fees ................................................... -- --
Listing fees .......................................................... -- --
Trustees' fees and expenses ........................................... -- --
Legal fees ............................................................ -- --
Registration and filing fees .......................................... -- --
Expenses previously waived and expenses reimbursed by the investment
advisor ............................................................ -- --
Other expenses ........................................................ -- --
---------------- ----------------
Total expenses ..................................................... 31,675 542,952
Less fees waived and expenses reimbursed by
the investment advisor .......................................... -- --
---------------- ----------------
Net expenses ....................................................... 31,675 542,952
---------------- ----------------
NET INVESTMENT INCOME (LOSS) .......................................... 83,374 704,323
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ........................................................ 47,153 (751,528)
In-kind redemptions ................................................ -- 1,053,883
Foreign currency transactions ...................................... (851) (16,070)
Foreign capital gains tax .......................................... (267) --
---------------- ----------------
Net realized gain (loss) .............................................. 46,035 286,285
---------------- ----------------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................ 949,439 8,022,125
Foreign currency translation ....................................... (340) (593)
Deferred foreign capital gains tax (6,466) --
---------------- ----------------
Net change in unrealized appreciation (depreciation) .................. 942,633 8,021,532
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ............................... 988,668 8,307,817
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS .................................................... $ 1,072,042 $ 9,012,140
================ ================
</TABLE>
(a) Fund is subject to a unitary fee (see Note 3 in the Notes to Financial
Statements).
Page 84 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
FIRST TRUST NASDAQ GLOBAL CLOUD INTERNATIONAL NASDAQ
INDXX NEXTG AUTO COMPUTING EQUITY CYBERSECURITY
ETF INDEX FUND ETF OPPORTUNITIES ETF ETF
(NXTG) (CARZ) (SKYY) (FPXI) (CIBR)
--------------------- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
$ 21,631,578 $ 1,245,056 $ 43,723,390 $ 14,952,817 $ 23,642,788
156,882 11,775 2,353,646 681,143 398,802
(2,074,242) (150,623) (300,493) (1,306,872) (360,689)
--------------- --------------- --------------- --------------- ---------------
19,714,218 1,106,208 45,776,543 14,327,088 23,680,901
--------------- --------------- --------------- --------------- ---------------
6,523,713 (a) 414,721 (a) 36,304,183 (a) 6,864,737 (a) 21,244,195 (a)
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
6,523,713 414,721 36,304,183 6,864,737 21,244,195
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
6,523,713 414,721 36,304,183 6,864,737 21,244,195
--------------- --------------- --------------- --------------- ---------------
13,190,505 691,487 9,472,360 7,462,351 2,436,706
--------------- --------------- --------------- --------------- ---------------
(3,150,657) (1,570,754) (47,172,442) (83,450,490) (14,427,364)
86,101,898 12,425,388 1,481,108,955 25,177,495 429,590,517
(374,330) (16,451) -- (181,803) (24,647)
(1,062,871) -- -- -- --
--------------- --------------- --------------- --------------- ---------------
81,514,040 10,838,183 1,433,936,513 (58,454,798) 415,138,506
--------------- --------------- --------------- --------------- ---------------
117,391,521 5,024,013 235,787,379 60,061,734 582,215,555
(1,829) 114 -- 4,478 (13,452)
(2,630,471) -- -- -- --
--------------- --------------- --------------- --------------- ---------------
114,759,221 5,024,127 235,787,379 60,066,212 582,202,103
--------------- --------------- --------------- --------------- ---------------
196,273,261 15,862,310 1,669,723,892 1,611,414 997,340,609
--------------- --------------- --------------- --------------- ---------------
$ 209,463,766 $ 16,553,797 $ 1,679,196,252 $ 9,073,765 $ 999,777,315
=============== =============== =============== =============== ===============
</TABLE>
See Notes to Financial Statements Page 85
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FIRST TRUST
STOXX(R) EUROPEAN
SELECT DIVIDEND
INDEX FUND
(FDD)
---------------------------------------
YEAR ENDED YEAR ENDED
9/30/2021 9/30/2020
------------------ ------------------
OPERATIONS:
<S> <C> <C>
Net investment income (loss)........................................................ $ 9,854,187 $ 9,746,591
Net realized gain (loss)............................................................ 21,411,028 (68,012,847)
Net increase from payment by the advisor............................................ -- --
Net change in unrealized appreciation (depreciation)................................ 35,038,440 2,157,675
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations.................................................................. 66,303,655 (56,108,581)
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................... (9,883,719) (9,499,846)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................... 81,399,807 22,397,192
Cost of shares redeemed............................................................. (32,016,164) (70,479,677)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.................................................... 49,383,643 (48,082,485)
---------------- ----------------
Total increase (decrease) in net assets............................................. 105,803,579 (113,690,912)
NET ASSETS:
Beginning of period................................................................. 180,227,267 293,918,179
---------------- ----------------
End of period....................................................................... $ 286,030,846 $ 180,227,267
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period............................................. 17,553,334 23,053,334
Shares sold......................................................................... 5,550,000 1,600,000
Shares redeemed..................................................................... (2,500,000) (7,100,000)
---------------- ----------------
Shares outstanding, end of period................................................... 20,603,334 17,553,334
================ ================
</TABLE>
Page 86 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST
FTSE EPRA/NAREIT DOW JONES FIRST TRUST
DEVELOPED MARKETS REAL ESTATE GLOBAL SELECT DIVIDEND GLOBAL WIND ENERGY
INDEX FUND INDEX FUND ETF
(FFR) (FGD) (FAN)
---------------------------------------- --------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/2021 9/30/2020 9/30/2021 9/30/2020 9/30/2021 9/30/2020
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
$ 745,716 $ 1,158,864 $ 23,115,111 $ 29,030,096 $ 5,180,381 $ 2,006,911
1,100,313 (289,037) 46,690,866 (118,795,433) 35,096,746 (2,424,628)
-- -- -- -- -- --
6,368,752 (11,697,826) 76,332,374 (17,797,799) (2,908,716) 32,827,377
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
8,214,781 (10,827,999) 146,138,351 (107,563,136) 37,368,411 32,409,660
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(233,141) (2,248,427) (22,659,267) (29,511,768) (6,120,596) (2,010,555)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
2,562,370 2,470,109 231,712,385 59,303,361 237,937,542 102,329,499
(8,557,560) (13,159,351) (195,225,987) (110,271,559) (88,339,911) (3,155,559)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(5,995,190) (10,689,242) 36,486,398 (50,968,198) 149,597,631 99,173,940
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
1,986,450 (23,765,668) 159,965,482 (188,043,102) 180,845,446 129,573,045
32,670,543 56,436,211 344,488,661 532,531,763 205,074,810 75,501,765
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 34,656,993 $ 32,670,543 $ 504,454,143 $ 344,488,661 $ 385,920,256 $ 205,074,810
================ ================ ================ ================ ================ ================
841,608 1,141,608 19,300,002 23,250,002 11,750,002 5,750,002
50,000 50,000 9,050,000 2,450,000 10,800,000 6,250,000
(200,000) (350,000) (8,150,000) (6,400,000) (4,100,000) (250,000)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
691,608 841,608 20,200,002 19,300,002 18,450,002 11,750,002
================ ================ ================ ================ ================ ================
</TABLE>
See Notes to Financial Statements Page 87
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FIRST TRUST
GLOBAL ENGINEERING
AND CONSTRUCTION
ETF
(FLM)
---------------------------------------
YEAR ENDED YEAR ENDED
9/30/2021 9/30/2020
------------------ ------------------
OPERATIONS:
<S> <C> <C>
Net investment income (loss)........................................................ $ 160,246 $ 203,777
Net realized gain (loss)............................................................ (280,169) (366,607)
Net increase from payment by the advisor............................................ -- --
Net change in unrealized appreciation (depreciation)................................ 1,887,797 (239,121)
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations.................................................................. 1,767,874 (401,951)
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................... (143,267) (207,908)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................... 2,855,164 --
Cost of shares redeemed............................................................. -- (2,489,438)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.................................................... 2,855,164 (2,489,438)
---------------- ----------------
Total increase (decrease) in net assets............................................. 4,479,771 (3,099,297)
NET ASSETS:
Beginning of period................................................................. 6,309,862 9,409,159
---------------- ----------------
End of period....................................................................... $ 10,789,633 $ 6,309,862
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period............................................. 150,002 200,002
Shares sold......................................................................... 50,000 --
Shares redeemed..................................................................... -- (50,000)
---------------- ----------------
Shares outstanding, end of period................................................... 200,002 150,002
================ ================
</TABLE>
Page 88 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST
NASDAQ(R) CLEAN EDGE(R) INDXX GLOBAL FIRST TRUST
SMART GRID INFRASTRUCTURE NATURAL RESOURCES INDXX GLOBAL
INDEX FUND INCOME ETF AGRICULTURE ETF
(GRID) (FTRI) (FTAG)
---------------------------------------- --------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/2021 9/30/2020 9/30/2021 9/30/2020 9/30/2021 9/30/2020
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
$ 3,242,273 $ 468,582 $ 1,894,518 $ 314,979 $ 83,374 $ 62,970
8,840,140 1,516,049 1,321,619 (1,111,105) 46,035 (311,190)
-- -- -- -- -- --
42,350,049 7,530,176 (2,205,536) 20,445 942,633 142,251
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
54,432,462 9,514,807 1,010,601 (775,681) 1,072,042 (105,969)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(3,258,036) (369,941) (1,526,281) (343,681) (76,502) (54,334)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
474,084,702 22,728,389 31,087,104 -- 1,573,503 --
(31,575,616) (2,526,309) -- (592,651) -- --
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
442,509,086 20,202,080 31,087,104 (592,651) 1,573,503 --
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
493,683,512 29,346,946 30,571,424 (1,712,013) 2,569,043 (160,303)
56,578,983 27,232,037 5,740,317 7,452,330 3,040,001 3,200,304
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 550,262,495 $ 56,578,983 $ 36,311,741 $ 5,740,317 $ 5,609,044 $ 3,040,001
================ ================ ================ ================ ================ ================
900,002 550,002 600,002 650,002 139,928 139,928
5,400,000 400,000 2,200,000 -- 50,000 --
(350,000) (50,000) -- (50,000) -- --
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
5,950,002 900,002 2,800,002 600,002 189,928 139,928
================ ================ ================ ================ ================ ================
</TABLE>
See Notes to Financial Statements Page 89
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FIRST TRUST
BICK
INDEX FUND
(BICK)
---------------------------------------
YEAR ENDED YEAR ENDED
9/30/2021 9/30/2020
------------------ ------------------
OPERATIONS:
<S> <C> <C>
Net investment income (loss)........................................................ $ 704,323 $ 558,660
Net realized gain (loss)............................................................ 286,285 (4,705,431)
Net increase from payment by the advisor............................................ -- --
Net change in unrealized appreciation (depreciation)................................ 8,021,532 4,781,924
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations.................................................................. 9,012,140 635,153
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................... (563,280) (775,621)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................... 24,312,835 7,430,446
Cost of shares redeemed............................................................. (6,733,788) (62,855,887)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.................................................... 17,579,047 (55,425,441)
---------------- ----------------
Total increase (decrease) in net assets............................................. 26,027,907 (55,565,909)
NET ASSETS:
Beginning of period................................................................. 60,937,335 116,503,244
---------------- ----------------
End of period....................................................................... $ 86,965,242 $ 60,937,335
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period............................................. 2,100,002 4,550,002
Shares sold......................................................................... 650,000 250,000
Shares redeemed..................................................................... (200,000) (2,700,000)
---------------- ----------------
Shares outstanding, end of period................................................... 2,550,002 2,100,002
================ ================
</TABLE>
Page 90 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST
FIRST TRUST NASDAQ FIRST TRUST
INDXX NEXTG GLOBAL AUTO CLOUD COMPUTING
ETF INDEX FUND ETF
(NXTG) (CARZ) (SKYY)
---------------------------------------- --------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/2021 9/30/2020 9/30/2021 9/30/2020 9/30/2021 9/30/2020
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
$ 13,190,505 $ 5,543,997 $ 691,487 $ 204,420 $ 9,472,360 $ 7,732,715
81,514,040 11,563,540 10,838,183 3,036,237 1,433,936,513 381,228,554
-- -- -- -- -- --
114,759,221 52,847,743 5,024,127 1,129,834 235,787,379 797,519,832
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
209,463,766 69,955,280 16,553,797 4,370,491 1,679,196,252 1,186,481,101
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(8,671,946) (5,116,621) (535,126) (256,391) (11,051,410) (8,515,791)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
509,273,872 384,483,696 66,534,380 11,510,144 2,762,307,799 2,872,076,000
(218,991,266) (54,802,400) (47,810,092) (4,001,084) (3,154,828,076) (1,254,414,356)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
290,282,606 329,681,296 18,724,288 7,509,060 (392,520,277) 1,617,661,644
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
491,074,426 394,519,955 34,742,959 11,623,160 1,275,624,565 2,795,626,954
590,535,207 196,015,252 29,246,401 17,623,241 4,963,824,578 2,168,197,624
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 1,081,609,633 $ 590,535,207 $ 63,989,360 $ 29,246,401 $ 6,239,449,143 $ 4,963,824,578
================ ================ ================ ================ ================ ================
10,000,002 3,900,002 750,002 550,002 63,250,002 38,450,002
7,200,000 7,100,000 1,200,000 300,000 27,200,000 43,350,000
(3,050,000) (1,000,000) (850,000) (100,000) (31,250,000) (18,550,000)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
14,150,002 10,000,002 1,100,002 750,002 59,200,002 63,250,002
================ ================ ================ ================ ================ ================
</TABLE>
See Notes to Financial Statements Page 91
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FIRST TRUST
INTERNATIONAL
EQUITY
OPPORTUNITIES ETF
(FPXI)
---------------------------------------
YEAR ENDED YEAR ENDED
9/30/2021 9/30/2020
------------------ ------------------
OPERATIONS:
<S> <C> <C>
Net investment income (loss)........................................................ $ 7,462,351 $ 398,607
Net realized gain (loss)............................................................ (58,454,798) 7,966,839
Net increase from payment by the advisor............................................ -- 806
Net change in unrealized appreciation (depreciation)................................ 60,066,212 33,900,257
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations.................................................................. 9,073,765 42,266,509
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................... (6,104,611) (374,400)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................... 893,325,867 354,994,527
Cost of shares redeemed............................................................. (89,839,649) (71,013,884)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.................................................... 803,486,218 283,980,643
---------------- ----------------
Total increase (decrease) in net assets............................................. 806,455,372 325,872,752
NET ASSETS:
Beginning of period................................................................. 356,803,431 30,930,679
---------------- ----------------
End of period....................................................................... $ 1,163,258,803 $ 356,803,431
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period............................................. 6,300,002 850,002
Shares sold......................................................................... 13,200,000 6,850,000
Shares redeemed..................................................................... (1,350,000) (1,400,000)
---------------- ----------------
Shares outstanding, end of period................................................... 18,150,002 6,300,002
================ ================
</TABLE>
Page 92 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
FIRST TRUST
NASDAQ
CYBERSECURITY ETF
(CIBR)
----------------------------------------
YEAR ENDED YEAR ENDED
9/30/2021 9/30/2020
------------------ ------------------
<S> <C>
$ 2,436,706 $ 23,199,240
415,138,506 105,970,783
-- --
582,202,103 233,902,808
---------------- ----------------
999,777,315 363,072,831
---------------- ----------------
(4,694,250) (23,668,226)
---------------- ----------------
2,560,530,212 1,421,549,328
(964,304,085) (561,615,357)
---------------- ----------------
1,596,226,127 859,933,971
---------------- ----------------
2,591,309,192 1,199,338,576
2,178,988,372 979,649,796
---------------- ----------------
$ 4,770,297,564 $ 2,178,988,372
================ ================
62,650,002 35,450,002
55,350,000 44,800,000
(20,250,000) (17,600,000)
---------------- ----------------
97,750,002 62,650,002
================ ================
</TABLE>
See Notes to Financial Statements Page 93
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.27 $ 12.75 $ 13.12 $ 13.61 $ 11.82
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.52 0.52 0.66 0.59 0.42
Net realized and unrealized gain (loss) 3.61 (2.50) (0.37) (0.49) 1.79
----------- ----------- ----------- ----------- -----------
Total from investment operations 4.13 (1.98) 0.29 0.10 2.21
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.52) (0.50) (0.66) (0.59) (0.42)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 13.88 $ 10.27 $ 12.75 $ 13.12 $ 13.61
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 40.19% (15.64)% 2.35% 0.74% 18.93%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 286,031 $ 180,227 $ 293,918 $ 454,824 $ 529,527
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.58% 0.57% 0.58% 0.57% 0.60%
Ratio of net expenses to average net assets 0.58% 0.57% 0.58% 0.57% 0.60%
Ratio of net investment income (loss) to
average net assets 4.06% 3.84% 4.84% 4.25% 3.96%
Portfolio turnover rate (b) 58% 98% 24% 35% 21%
</TABLE>
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 38.82 $ 49.44 $ 45.07 $ 44.96 $ 46.18
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.89 0.62 1.25 1.48 0.89
Net realized and unrealized gain (loss) 10.74 (9.27) 4.55 0.31 (0.65)
----------- ----------- ----------- ----------- -----------
Total from investment operations 11.63 (8.65) 5.80 1.79 0.24
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.34) (1.97) (1.43) (1.68) (1.46)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 50.11 $ 38.82 $ 49.44 $ 45.07 $ 44.96
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 29.95% (18.12)% 13.19% 3.99% 0.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 34,657 $ 32,671 $ 56,436 $ 45,074 $ 51,700
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.92% 0.85% 0.89% 0.85% 0.70%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 2.21% 2.52% 2.61% 3.48% 2.40%
Portfolio turnover rate (b) 11% 7% 7% 9% 6%
</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 94 See Notes to Financial Statements
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.85 $ 22.90 $ 25.16 $ 25.73 $ 23.49
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.22 1.30 1.39 1.15 1.03
Net realized and unrealized gain (loss) 7.10 (5.04) (2.24) (0.58) 2.23
----------- ----------- ----------- ----------- -----------
Total from investment operations 8.32 (3.74) (0.85) 0.57 3.26
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.20) (1.31) (1.41) (1.14) (1.02)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 24.97 $ 17.85 $ 22.90 $ 25.16 $ 25.73
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 46.94% (16.33)% (3.21)% 2.26% 14.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 504,454 $ 344,489 $ 532,532 $ 484,280 $ 470,887
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.57% 0.57% 0.59% 0.58% 0.58%
Ratio of net expenses to average net assets 0.57% 0.57% 0.59% 0.58% 0.58%
Ratio of net investment income (loss) to
average net assets 5.11% 6.16% 6.20% 4.48% 4.43%
Portfolio turnover rate (b) 38% 67% 31% 31% 35%
</TABLE>
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.45 $ 13.13 $ 12.50 $ 13.13 $ 13.30
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.28 0.26 0.30 0.28 0.41
Net realized and unrealized gain (loss) 3.52 4.33 0.64 (0.66) 0.32
----------- ----------- ----------- ----------- -----------
Total from investment operations 3.80 4.59 0.94 (0.38) 0.73
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.33) (0.27) (0.31) (0.25) (0.90)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 20.92 $ 17.45 $ 13.13 $ 12.50 $ 13.13
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 21.76% 35.42% 7.58% (2.92)% 6.21%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 385,920 $ 205,075 $ 75,502 $ 79,362 $ 100,467
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.62% 0.66% 0.71% 0.68% 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 1.34% 1.86% 2.32% 2.21% 2.88%
Portfolio turnover rate (b) 31% 42% 30% 22% 78%
</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 95
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 42.07 $ 47.05 $ 56.78 $ 56.89 $ 48.63
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.87 1.28 0.87 0.79 0.62
Net realized and unrealized gain (loss) 11.79 (4.93) (9.71) 0.16 8.27
----------- ----------- ----------- ----------- -----------
Total from investment operations 12.66 (3.65) (8.84) 0.95 8.89
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.78) (1.33) (0.89) (1.06) (0.63)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 53.95 $ 42.07 $ 47.05 $ 56.78 $ 56.89
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 30.19% (7.52)% (15.64)% 1.67% 18.39%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 10,790 $ 6,310 $ 9,409 $ 14,194 $ 17,066
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 1.42% 1.43% 1.21% 0.88% 0.92%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.81% 2.68% 1.64% 1.45% 1.20%
Portfolio turnover rate (b) 18% 20% 14% 16% 20%
</TABLE>
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 62.87 $ 49.51 $ 47.62 $ 49.00 $ 39.19
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.64 0.58 0.67 0.52 0.57
Net realized and unrealized gain (loss) 29.73 13.27 1.84 (1.32) 9.82
----------- ----------- ----------- ----------- -----------
Total from investment operations 30.37 13.85 2.51 (0.80) 10.39
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.76) (0.49) (0.62) (0.58) (0.58)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 92.48 $ 62.87 $ 49.51 $ 47.62 $ 49.00
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 48.35% 28.10% 5.32% (1.66)% 26.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 550,262 $ 56,579 $ 27,232 $ 33,333 $ 26,951
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.63% 0.75% 0.82% 0.74% 0.84%
Ratio of net expenses to average net assets 0.63% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.11% 1.30% 1.40% 1.10% 1.44%
Portfolio turnover rate (b) 20% 53% 31% 60% 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.
Page 96 See Notes to Financial Statements
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.57 $ 11.47 $ 12.73 $ 11.88 $ 10.66
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.80 0.53 0.72 0.48 0.41
Net realized and unrealized gain (loss) 3.29 (a) (1.86) (1.28) 0.83 1.22
----------- ----------- ----------- ----------- -----------
Total from investment operations 4.09 (1.33) (0.56) 1.31 1.63
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.69) (0.57) (0.70) (0.46) (0.41)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 12.97 $ 9.57 $ 11.47 $ 12.73 $ 11.88
=========== =========== =========== =========== ===========
TOTAL RETURN (b) 42.87% (11.80)% (4.42)% 11.12% 15.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 36,312 $ 5,740 $ 7,452 $ 8,908 $ 8,913
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
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 9.06% 4.94% 5.95% 3.74% 3.39%
Portfolio turnover rate (c) 99% 66% 84% 50% 61%
</TABLE>
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.73 $ 22.87 $ 26.21 $ 26.96 $ 21.55
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.45 0.45 0.51 0.44 0.39
Net realized and unrealized gain (loss) 7.78 (1.20) (3.17) (0.83) 5.41
----------- ----------- ----------- ----------- -----------
Total from investment operations 8.23 (0.75) (2.66) (0.39) 5.80
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.43) (0.39) (0.64) (0.36) (0.39)
Return on Capital -- -- (0.04) -- --
----------- ----------- ----------- ----------- -----------
Total distributions (0.43) (0.39) (0.68) (0.36) (0.39)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 29.53 $ 21.73 $ 22.87 $ 26.21 $ 26.96
=========== =========== =========== =========== ===========
TOTAL RETURN (b) 37.94% (3.19)% (10.16)% (1.46)% 27.09%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 5,609 $ 3,040 $ 3,200 $ 4,979 $ 7,816
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.84% 2.16% 1.93% 1.56% 1.80%
Portfolio turnover rate (c) 12% 17% 20% 30% 38%
</TABLE>
(a) The per share amount does not correlate with the aggregate realized and
unrealized gain (loss) due to the timing of the Fund share sales and
repurchases in relation to market value fluctuation of the underlying
investments.
(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) 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 97
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST BICK INDEX FUND (BICK)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 29.02 $ 25.61 $ 26.48 $ 28.77 $ 22.94
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.30 0.08 0.33 0.40 0.33
Net realized and unrealized gain (loss) 5.01 3.53 (0.80) (2.34) 5.85
----------- ----------- ----------- ----------- -----------
Total from investment operations 5.31 3.61 (0.47) (1.94) 6.18
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.23) (0.20) (0.40) (0.35) (0.35)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 34.10 $ 29.02 $ 25.61 $ 26.48 $ 28.77
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 18.28% 14.07% (1.76)% (6.82)% 27.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 86,965 $ 60,937 $ 116,503 $ 190,648 $ 202,863
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.64% 0.64% 0.64% 0.64% 0.64%
Ratio of net expenses to average net assets 0.64% 0.64% 0.64% 0.64% 0.64%
Ratio of net investment income (loss) to
average net assets 0.83% 0.60% 1.25% 1.33% 2.15%
Portfolio turnover rate (b) 92% 58% 66% 65% 86%
</TABLE>
FIRST TRUST INDXX NEXTG ETF (NXTG)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 59.05 $ 50.26 $ 49.63 $ 50.52 $ 41.29
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.95 0.69 0.37 0.72 0.44
Net realized and unrealized gain (loss) 17.10 8.79 0.50 (0.60) 9.29
----------- ----------- ----------- ----------- -----------
Total from investment operations 18.05 9.48 0.87 0.12 9.73
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.62) (0.69) (0.24) (1.01) (0.50)
Net realized gain (0.04) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions (0.66) (0.69) (0.24) (1.01) (0.50)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 76.44 $ 59.05 $ 50.26 $ 49.63 $ 50.52
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 30.62% 18.97% 1.78% 0.20% 23.68%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,081,610 $ 590,535 $ 196,015 $ 17,370 $ 17,683
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.42% 1.52% 1.73% 1.34% 1.04%
Portfolio turnover rate (b) 27% 30% 59% 80% 18%
</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 98 See Notes to Financial Statements
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 39.00 $ 32.04 $ 36.33 $ 40.25 $ 33.39
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.60 0.34 1.02 0.98 0.87
Net realized and unrealized gain (loss) 19.04 7.07 (4.28) (3.98) 6.87
----------- ----------- ----------- ----------- -----------
Total from investment operations 19.64 7.41 (3.26) (3.00) 7.74
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.47) (0.45) (1.03) (0.92) (0.88)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 58.17 $ 39.00 $ 32.04 $ 36.33 $ 40.25
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 50.43% 23.33% (8.97)% (7.57)% 23.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 63,989 $ 29,246 $ 17,623 $ 18,167 $ 18,112
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.17% 1.09% 3.19% 2.44% 2.20%
Portfolio turnover rate (b) 42% 36% 24% 16% 17%
</TABLE>
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 78.48 $ 56.39 $ 56.71 $ 41.88 $ 34.17
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.15 0.16 0.59 0.14 0.13
Net realized and unrealized gain (loss) 26.95 22.10 (0.31) 14.84 7.72
----------- ----------- ----------- ----------- -----------
Total from investment operations 27.10 22.26 0.28 14.98 7.85
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.18) (0.17) (0.60) (0.15) (0.14)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 105.40 $ 78.48 $ 56.39 $ 56.71 $ 41.88
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 34.55% 39.54% 0.57% 35.80% 23.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 6,239,449 $ 4,963,825 $ 2,168,198 $ 2,067,140 $ 1,088,930
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 0.16% 0.24% 1.02% 0.28% 0.34%
Portfolio turnover rate (b) 33% 35% 85% 7% 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.
(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 99
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 56.64 $ 36.39 $ 35.10 $ 34.51 $ 27.47
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.40 0.11 0.30 0.49 0.22
Net realized and unrealized gain (loss) 7.39 20.32 (a) 1.29 0.66 7.07
----------- ----------- ----------- ----------- -----------
Total from investment operations 7.79 20.43 1.59 1.15 7.29
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.34) (0.18) (0.30) (0.56) (0.25)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 64.09 $ 56.64 $ 36.39 $ 35.10 $ 34.51
=========== =========== =========== =========== ===========
TOTAL RETURN (b) 13.73% 56.24% (a) 4.60% 3.35% 26.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,163,259 $ 356,803 $ 30,931 $ 26,322 $ 22,429
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
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 0.76% 0.38% 0.86% 1.42% 1.62%
Portfolio turnover rate (c) 118% 114% 98% 83% 58%
</TABLE>
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 34.78 $ 27.63 $ 28.49 $ 21.85 $ 19.77
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.04 0.50 0.06 0.02 0.03
Net realized and unrealized gain (loss) 14.04 7.16 (0.86) 6.64 2.09
----------- ----------- ----------- ----------- -----------
Total from investment operations 14.08 7.66 (0.80) 6.66 2.12
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.06) (0.51) (0.06) (0.02) (0.04)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 48.80 $ 34.78 $ 27.63 $ 28.49 $ 21.85
=========== =========== =========== =========== ===========
TOTAL RETURN (b) 40.50% 28.27% (2.78)% 30.49% 10.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 4,770,298 $ 2,178,988 $ 979,650 $ 847,673 $ 313,575
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 0.07% 1.54% 0.20% 0.04% 0.13%
Portfolio turnover rate (c) 35% 46% 58% 56% 67%
</TABLE>
(a) The Fund received a payment from the advisor in the amount of $806, 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.
(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 100 See Notes to Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
1. ORGANIZATION
First Trust Exchange-Traded Fund II (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on July 6, 2006,
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 sixteen exchange-traded funds. This report
covers the fourteen funds (each a "Fund" and collectively, the "Funds") listed
below:
First Trust STOXX(R) European Select Dividend Index Fund - (NYSE Arca,
Inc. ("NYSE Arca") ticker "FDD")
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund -
(NYSE Arca ticker "FFR")
First Trust Dow Jones Global Select Dividend Index Fund - (NYSE Arca
ticker "FGD")
First Trust Global Wind Energy ETF - (NYSE Arca ticker "FAN")
First Trust Global Engineering and Construction ETF - (NYSE Arca ticker
"FLM")
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index
Fund - (The Nasdaq Stock Market LLC ("Nasdaq") ticker "GRID")
First Trust Indxx Global Natural Resources Income ETF - (Nasdaq ticker
"FTRI")
First Trust Indxx Global Agriculture ETF - (Nasdaq ticker "FTAG")
First Trust BICK Index Fund - (Nasdaq ticker "BICK")
First Trust Indxx NextG ETF - (Nasdaq ticker "NXTG")
First Trust NASDAQ Global Auto Index Fund - (Nasdaq ticker "CARZ")
First Trust Cloud Computing ETF - (Nasdaq ticker "SKYY")
First Trust International Equity Opportunities ETF - (Nasdaq ticker
"FPXI")
First Trust Nasdaq Cybersecurity ETF - (Nasdaq ticker "CIBR")
Each Fund represents a separate series of shares 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 STOXX(R) European Select Dividend Index Fund STOXX(R) Europe Select Dividend 30 Index
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund FTSE EPRA/NAREIT Developed Index
First Trust Dow Jones Global Select Dividend Index Fund Dow Jones Global Select Dividend Index
First Trust Global Wind Energy ETF ISE Clean Edge Global Wind Energy Index(TM)
First Trust Global Engineering and Construction ETF ISE Global Engineering and Construction(TM) Index
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund Nasdaq OMX Clean Edge Smart Grid
Infrastructure Index(TM)
First Trust Indxx Global Natural Resources Income ETF Indxx Global Natural Resources Income Index
First Trust Indxx Global Agriculture ETF Indxx Global Agriculture Index
First Trust BICK Index Fund ISE BICK(TM) Index
First Trust Indxx NextG ETF Indxx 5G & NextG Thematic Index(SM)
First Trust NASDAQ Global Auto Index Fund Nasdaq Global Auto Index(SM)
First Trust Cloud Computing ETF ISE CTA Cloud Computing Index(TM)
First Trust International Equity Opportunities ETF IPOX(R) International Index
First Trust Nasdaq Cybersecurity ETF Nasdaq CTA Cybersecurity Index(TM)
</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.
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
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.
Securities trading on foreign exchanges or over-the-counter markets that
close prior to the NYSE close may be valued using a systematic fair
valuation model provided by a third-party pricing service. If these
foreign securities meet certain criteria in relation to the valuation
model, their valuation is systematically adjusted to reflect the impact of
movement in the U.S. market after the close of the foreign markets.
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.
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund or exchange-traded fund trading of similar
securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
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.
Because foreign markets may be open on different days than the days during which
investors may transact in the shares of a Fund, the value of the Fund's
securities may change on the days when investors are not able to transact in the
shares of the Fund. The value of securities denominated in foreign currencies is
converted into U.S. dollars using exchange rates determined daily as of the
close of regular trading on the NYSE. Any use of a different rate from the rates
used by a relevant index may adversely affect the Fund's ability to track the
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 September 30, 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.
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.
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
D. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statements of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statements of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received and are included in "Net
realized gain (loss) on foreign currency transactions" on the Statements of
Operations. The portion of foreign currency gains and losses related to
fluctuations in exchange rates between the initial purchase settlement date and
subsequent sale trade date is included in "Net realized gain (loss) on
investments" on the Statements of Operations.
E. SECURITIES LENDING
The Funds may lend securities representing up to 33 1/3% of the value of their
total assets to broker-dealers, banks and other institutions to generate
additional income. When a Fund loans its portfolio securities, it will receive,
at the inception of each loan, collateral equal to at least 102% (for domestic
securities) or 105% (for international securities) of the market value of the
loaned securities. The collateral amount is valued at the beginning of each
business day and is compared to the market value of the loaned securities from
the prior business day to determine if additional collateral is required. If
additional collateral is required, a request is sent to the borrower. Securities
lending involves the risk that the Fund may lose money because the borrower of
the Fund's loaned securities fails to return the securities in a timely manner
or at all. The Fund could also lose money in the event of (i) a decline in the
value of the collateral provided for the loaned securities, (ii) a decline in
the value of any investments made with cash collateral or (iii) an increase in
the value of the loaned securities if the borrower does not increase the
collateral accordingly and the borrower fails to return the securities. These
events could also trigger adverse tax consequences for the Funds.
Under the Funds' Securities Lending Agency Agreement, the securities lending
agent will generally bear the risk that a borrower may default on its obligation
to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as each
Fund's securities lending agent and is responsible for executing the lending of
the portfolio securities to creditworthy borrowers with the exception of FAN.
The Bank of New York Mellon ("BNYM") acts as FAN'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 September 30, 2021, only FAN, FLM, GRID, FTRI, BICK,
NXTG, CARZ, SKYY, FPXI, and CIBR had securities in the securities lending
program. During the fiscal year ended September 30, 2021, FAN, FLM, GRID, FTRI,
BICK, NXTG, CARZ, SKYY, FPXI, and CIBR 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.
F. REPURCHASE AGREEMENTS
Repurchase agreements involve the purchase of securities subject to the seller's
agreement to repurchase the securities at a mutually agreed upon date and price,
under the terms of a Master Repurchase Agreement ("MRA"). During the term of a
repurchase agreement, the value of the underlying securities held as collateral
on behalf of a Fund, including accrued interest, is required to exceed the value
of the repurchase agreement, including accrued interest. The underlying
securities for all repurchase agreements are held at the Funds' custodian or
designated sub-custodians under tri-party repurchase agreements.
MRAs govern transactions between a Fund and select counterparties. The MRAs
contain provisions for, among other things, initiation, income payments, events
of default, and maintenance of collateral for repurchase agreements.
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 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 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 September 30, 2021, were received
as collateral for lending securities.
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly, or as the Board 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 significantly modified portfolio securities
held by the Funds and have no impact on net assets or NAV per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future.
The tax character of distributions paid by each Fund during the fiscal year
ended September 30, 2021 was as follows:
<TABLE>
<CAPTION>
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
---------------- -------------- --------------
<S> <C> <C> <C>
First Trust STOXX(R) European Select Dividend Index Fund $ 9,883,719 $ -- $ --
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 233,141 -- --
First Trust Dow Jones Global Select Dividend Index Fund 22,659,267 -- --
First Trust Global Wind Energy ETF 6,120,596 -- --
First Trust Global Engineering and Construction ETF 143,267 -- --
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 3,258,036 -- --
First Trust Indxx Global Natural Resources Income ETF 1,526,281 -- --
First Trust Indxx Global Agriculture ETF 76,502 -- --
First Trust BICK Index Fund 563,280 -- --
First Trust Indxx NextG ETF 8,671,946 -- --
First Trust NASDAQ Global Auto Index Fund 535,126 -- --
First Trust Cloud Computing ETF 11,051,410 -- --
First Trust International Equity Opportunities ETF 6,104,611 -- --
First Trust Nasdaq Cybersecurity ETF 4,694,250 -- --
</TABLE>
The tax character of distributions paid by each Fund during the fiscal year
ended September 30, 2020 was as follows:
<TABLE>
<CAPTION>
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
---------------- -------------- --------------
<S> <C> <C> <C>
First Trust STOXX(R) European Select Dividend Index Fund $ 9,499,846 $ -- $ --
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 2,248,427 -- --
First Trust Dow Jones Global Select Dividend Index Fund 29,511,768 -- --
First Trust Global Wind Energy ETF 2,010,555 -- --
First Trust Global Engineering and Construction ETF 207,908 -- --
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 369,941 -- --
First Trust Indxx Global Natural Resources Income ETF 343,681 -- --
First Trust Indxx Global Agriculture ETF 54,334 -- --
First Trust BICK Index Fund 775,621 -- --
First Trust Indxx NextG ETF 5,116,621 -- --
First Trust NASDAQ Global Auto Index Fund 256,391 -- --
First Trust Cloud Computing ETF 8,515,791 -- --
First Trust International Equity Opportunities ETF 374,400 -- --
First Trust Nasdaq Cybersecurity ETF 23,668,226 -- --
</TABLE>
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
As of September 30, 2021, the components of distributable earnings on a tax
basis for each Fund were as follows:
<TABLE>
<CAPTION>
Accumulated Net
Undistributed Capital and Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
---------------- -------------- --------------
<S> <C> <C> <C>
First Trust STOXX(R) European Select Dividend Index Fund $ 312,025 $ (66,398,474) $ 22,598,719
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 522,614 (1,484,414) 2,266,831
First Trust Dow Jones Global Select Dividend Index Fund 4,063,610 (188,171,697) 21,656,817
First Trust Global Wind Energy ETF 844,206 (53,254,998) 27,665,332
First Trust Global Engineering and Construction ETF 48,711 (8,360,205) 839,049
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 49,897 (573,216) 46,171,387
First Trust Indxx Global Natural Resources Income ETF 398,906 (60,586,878) (2,725,427)
First Trust Indxx Global Agriculture ETF 15,681 (19,433,604) 736,673
First Trust BICK Index Fund 152,143 (30,940,610) 8,296,855
First Trust Indxx NextG ETF 4,740,124 2,009,586 167,298,201
First Trust NASDAQ Global Auto Index Fund 209,766 (4,106,876) 1,886,898
First Trust Cloud Computing ETF -- (117,037,002) 983,676,734
First Trust International Equity Opportunities ETF 1,343,451 (85,061,565) 89,180,201
First Trust Nasdaq Cybersecurity ETF -- (43,875,482) 809,061,749
</TABLE>
H. INCOME AND OTHER 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
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.
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 the 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
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
(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 offset 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. Taxable years ended 2018, 2019,
2020, and 2021 remain open to federal and state audit. As of September 30, 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 September 30, 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 STOXX(R) European Select Dividend Index Fund $ 66,398,474
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund* 1,484,414
First Trust Dow Jones Global Select Dividend Index Fund 188,171,697
First Trust Global Wind Energy ETF 53,254,998
First Trust Global Engineering and Construction ETF 8,360,205
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 573,216
First Trust Indxx Global Natural Resources Income ETF 60,586,878
First Trust Indxx Global Agriculture ETF 19,433,604
First Trust BICK Index Fund 30,940,610
First Trust Indxx NextG ETF --
First Trust NASDAQ Global Auto Index Fund 4,106,876
First Trust Cloud Computing ETF 117,037,002
First Trust International Equity Opportunities ETF 85,061,565
First Trust Nasdaq Cybersecurity ETF 43,875,482
</TABLE>
* $75,097 of First Trust FTSE EPRA/NAREIT Developed Markets Real Estate 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 $34,965 per year.
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
During the taxable year ended September 30, 2021, the following Funds utilized
non-expiring capital loss carryforwards in the following amounts:
<TABLE>
<CAPTION>
Capital Loss
Carryforward
Utilized
---------------------
<S> <C>
First Trust STOXX(R) European Select Dividend Index Fund $ 14,703,151
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 156,259
First Trust Indxx Global Natural Resources Income ETF 1,611,960
First Trust Indxx Global Agriculture ETF 50,032
First Trust Indxx NextG ETF 342,410
First Trust Nasdaq Cybersecurity ETF 1,901,108
</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 September 30, 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 September 30, 2021, the adjustments for each Fund were as follows:
<TABLE>
<CAPTION>
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) on Paid-in
Income (Loss) Investments Capital
---------------- -------------- --------------
<S> <C> <C> <C>
First Trust STOXX(R) European Select Dividend Index Fund $ (38,629) $ (6,263,397) $ 6,302,026
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate
Index Fund 186,470 (835,447) 648,977
First Trust Dow Jones Global Select Dividend Index Fund (336,447) (46,446,001) 46,782,448
First Trust Global Wind Energy ETF 1,670,285 (36,606,927) 34,936,642
First Trust Global Engineering and Construction ETF 3,203 (3,203) --
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (58,192) (11,653,667) 11,711,859
First Trust Indxx Global Natural Resources Income ETF 13,974 (13,794) (180)
First Trust Indxx Global Agriculture ETF (1,118) 1,118 --
First Trust BICK Index Fund 128,470 (1,160,066) 1,031,596
First Trust Indxx NextG ETF (1,404,491) (83,885,757) 85,290,248
First Trust NASDAQ Global Auto Index Fund (10,874) (11,636,742) 11,647,616
First Trust Cloud Computing ETF 1,579,050 (1,461,491,221) 1,459,912,171
First Trust International Equity Opportunities ETF (126,723) (24,034,115) 24,160,838
First Trust Nasdaq Cybersecurity ETF 2,285,777 (422,395,202) 420,109,425
</TABLE>
I. EXPENSES
Expenses that are directly related to one of the Funds are charged directly to
the respective Fund, except for First Trust Indxx Global Natural Resources
Income ETF, First Trust Indxx Global Agriculture ETF, First Trust BICK Index
Fund, First Trust Indxx NextG ETF, First Trust NASDAQ Global Auto Index Fund,
First Trust Cloud Computing ETF, First Trust International Equity Opportunities
ETF, and First Trust Nasdaq Cybersecurity ETF (the "Unitary Fee Funds"), for
which expenses other than excluded expenses (discussed in Note 3) are paid by
the Advisor. General expenses of the Trust are allocated to all the Funds based
upon the net assets of each Fund.
Page 108
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
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 STOXX(R) European Select Dividend Index Fund STOXX Limited
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund FTSE International Limited
First Trust Dow Jones Global Select Dividend Index Fund S&P Dow Jones Indices LLC
First Trust Global Wind Energy ETF Nasdaq, Inc.
First Trust Global Engineering and Construction ETF Nasdaq, Inc.
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund Nasdaq, Inc.
First Trust Indxx Global Natural Resources Income ETF Indxx, LLC
First Trust Indxx Global Agriculture ETF Indxx, LLC
First Trust BICK Index Fund Nasdaq, Inc.
First Trust Indxx NextG ETF Indxx, LLC
First Trust NASDAQ Global Auto Index Fund Nasdaq, Inc.
First Trust Cloud Computing ETF Nasdaq, Inc.
First Trust International Equity Opportunities ETF IPOX(R) Schuster LLC
First Trust Nasdaq Cybersecurity ETF Nasdaq, Inc.
</TABLE>
The respective license agreements allow for the use of each Fund's respective
index and of certain trademarks and trade names of the respective Licensors. The
Funds are sub-licensees to the applicable license agreements. The Funds, except
for the Unitary Fee Funds, are required to pay licensing fees, which are shown
on the Statements of Operations. The licensing fees for the Unitary Fee Funds
are paid by First Trust from the unitary investment advisory fees it receives
from each of these Funds.
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 following Unitary Fee Funds, First Trust is paid an annual unitary
management fee at the specified rate of such Fund's average daily net assets and
is responsible for the expenses of such Fund including the cost of transfer
agency, custody, fund administration, legal, audit and other services, and
excluding fee payments under the Investment Management Agreement, distribution
and service fees payable pursuant to a Rule 12b-1 plan, if any, brokerage
expense, acquired fund fees and expenses, taxes, interest, and extraordinary
expenses.
% of Daily
Net Assets
------------
First Trust Indxx Global Natural Resources Income ETF 0.70%
First Trust Indxx Global Agriculture ETF 0.70%
First Trust BICK Index Fund 0.64%
First Trust Indxx NextG ETF 0.70%
First Trust NASDAQ Global Auto Index Fund 0.70%
First Trust Cloud Computing ETF 0.60%
First Trust International Equity Opportunities ETF 0.70%
First Trust Nasdaq Cybersecurity ETF 0.60%
For the First Trust STOXX(R) European Select Dividend Index Fund, First Trust
FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund, First Trust Dow Jones
Global Select Dividend Index Fund, First Trust Global Wind Energy ETF, First
Trust Global Engineering and Construction ETF, and First Trust NASDAQ(R) Clean
Edge(R) Smart Grid Infrastructure Index Fund (such Funds, the "Expense Cap
Funds"), First Trust is paid an annual management fee of 0.40% of such Fund's
average daily net assets.
For the Expense Cap Funds, 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 such Fund (excluding interest
expense, brokerage commissions and other trading expenses, acquired fund fees
and expenses, taxes and extraordinary expenses) exceed the following amount as a
percentage of average daily net assets per year (the "Expense Cap") at least
through January 31, 2023.
Page 109
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
<TABLE>
<CAPTION>
Expense Cap
-------------
<S> <C>
First Trust STOXX(R) European Select Dividend Index Fund 0.60%
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 0.60%
First Trust Dow Jones Global Select Dividend Index Fund 0.60%
First Trust Global Wind Energy ETF 0.60%
First Trust Global Engineering and Construction ETF 0.70%
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure 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 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
September 30, 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 Expense Year Year Year
Fee Reim- Ended Ended Ended
Waivers bursements 9/30/2019 9/30/2020 9/30/2021 Total
---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
First Trust FTSE EPRA/NAREIT Developed
Markets Real Estate Index Fund $ 108,383 $ -- $ 140,904 $ 114,648 $ 108,383 $363,935
First Trust Global Wind Energy ETF 66,999 -- 83,187 69,675 66,999 219,861
First Trust Global Engineering and
Construction ETF 63,848 -- 57,523 55,317 63,848 176,688
</TABLE>
During the fiscal year ended September 30, 2021, First Trust recovered fees that
were previously waived from First Trust NASDAQ(R) Clean Edge(R) Smart Grid
Infrastructure Index Fund of $63,759. As of September 30, 2021, the Fund did not
have any remaining fees previously waived or expenses reimbursed that were
subject to recovery.
For the fiscal year ended September 30, 2020, the First Trust International
Equity Opportunities ETF received a payment from the Advisor of $806 in
connection with a trade error.
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 Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Trust for acting in such capacities.
Page 110
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
4. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended September 30, 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 STOXX(R) European Select Dividend Index Fund $ 136,834,908 $ 136,501,350
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 4,529,411 3,739,317
First Trust Dow Jones Global Select Dividend Index Fund 203,104,337 167,285,266
First Trust Global Wind Energy ETF 140,267,789 116,406,790
First Trust Global Engineering and Construction ETF 1,752,449 1,532,354
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 77,873,695 58,060,338
First Trust Indxx Global Natural Resources Income ETF 21,715,887 20,247,287
First Trust Indxx Global Agriculture ETF 773,485 542,575
First Trust BICK Index Fund 85,301,825 75,253,288
First Trust Indxx NextG ETF 352,977,599 248,401,335
First Trust NASDAQ Global Auto Index Fund 35,537,405 24,277,705
First Trust Cloud Computing ETF 1,980,346,940 1,951,413,971
First Trust International Equity Opportunities ETF 1,425,726,659 1,125,132,154
First Trust Nasdaq Cybersecurity ETF 1,220,887,135 1,215,981,567
</TABLE>
For the fiscal year ended September 30, 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 STOXX(R) European Select Dividend Index Fund $ 79,891,581 $ 31,658,934
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 2,566,854 8,533,644
First Trust Dow Jones Global Select Dividend Index Fund 186,254,789 187,782,190
First Trust Global Wind Energy ETF 212,349,518 86,085,996
First Trust Global Engineering and Construction ETF 2,624,492 --
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 453,907,379 31,389,699
First Trust Indxx Global Natural Resources Income ETF 29,414,045 --
First Trust Indxx Global Agriculture ETF 1,341,669 --
First Trust BICK Index Fund 11,496,622 3,824,208
First Trust Indxx NextG ETF 405,835,397 217,667,769
First Trust NASDAQ Global Auto Index Fund 51,138,203 43,605,855
First Trust Cloud Computing ETF 2,744,952,677 3,174,792,038
First Trust International Equity Opportunities ETF 582,068,781 80,318,801
First Trust Nasdaq Cybersecurity ETF 2,539,474,572 959,244,293
</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.
Page 111
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
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 January 31, 2023.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there was the following subsequent event:
First Trust previously announced that First Trust NASDAQ Global Auto Index 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 S-Network Electric
& Future Vehicle Ecosystem Index (the "New Index"). The Fund expects to begin
tracking the New Index prior to the end of January 2022. Currently, 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
Global Auto Index(SM). The New Index will be composed of approximately 116
securities issued by companies that are materially engaged in the development
and sales of electric and autonomous vehicle technologies. Included in the New
Index are companies engaged in the manufacture of electric and autonomous
vehicle manufacturing as well as the production of products, technologies and
materials that enable the development of electric and autonomous vehicles.
Additionally, at the time of the Fund's change to the New Index, the Fund's name
is expected to change to First Trust S-Network Electric & Future Vehicle
Ecosystem ETF. The Fund's shares will continue to be listed for trading on
Nasdaq and S-Network Global Indexes Inc. will serve as the Fund's index
provider.
Page 112
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--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND
II:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First
Trust STOXX(R) European Select Dividend Index Fund, First Trust FTSE EPRA/NAREIT
Developed Markets Real Estate Index Fund, First Trust Dow Jones Global Select
Dividend Index Fund, First Trust Global Wind Energy ETF, First Trust Global
Engineering and Construction ETF, First Trust NASDAQ(R) Clean Edge(R) Smart Grid
Infrastructure Index Fund, First Trust Indxx Global Natural Resources Income
ETF, First Trust Indxx Global Agriculture ETF, First Trust BICK Index Fund,
First Trust Indxx NextG ETF, First Trust NASDAQ Global Auto Index Fund, First
Trust Cloud Computing ETF, First Trust International Equity Opportunities ETF,
and First Trust Nasdaq Cybersecurity ETF (the "Funds"), each a series of the
First Trust Exchange-Traded Fund II, including the portfolios of investments, as
of September 30, 2021, the related statements of operations for the year then
ended, the statement 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 the Funds as of September 30, 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 September 30, 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
November 22, 2021
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 113
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 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 September 30, 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 STOXX(R) European Select Dividend Index Fund 0.00%
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 0.00%
First Trust Dow Jones Global Select Dividend Index Fund 14.05%
First Trust Global Wind Energy ETF 8.03%
First Trust Global Engineering and Construction ETF 5.27%
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 17.78%
First Trust Indxx Global Natural Resources Income ETF 8.41%
First Trust Indxx Global Agriculture ETF 20.25%
First Trust BICK Index Fund 0.00%
First Trust Indxx NextG ETF 25.77%
First Trust NASDAQ Global Auto Index Fund 2.02%
First Trust Cloud Computing ETF 100.00%
First Trust International Equity Opportunities ETF 0.00%
First Trust Nasdaq Cybersecurity ETF 100.00%
</TABLE>
For the taxable year ended September 30, 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 STOXX(R) European Select Dividend Index Fund 100.00%
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 26.31%
First Trust Dow Jones Global Select Dividend Index Fund 82.63%
First Trust Global Wind Energy ETF 94.45%
First Trust Global Engineering and Construction ETF 100.00%
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 100.00%
First Trust Indxx Global Natural Resources Income ETF 77.75%
First Trust Indxx Global Agriculture ETF 100.00%
First Trust BICK Index Fund 74.54%
First Trust Indxx NextG ETF 86.32%
First Trust NASDAQ Global Auto Index Fund 100.00%
First Trust Cloud Computing ETF 100.00%
First Trust International Equity Opportunities ETF 80.15%
First Trust Nasdaq Cybersecurity ETF 100.00%
</TABLE>
Page 114
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021 (UNAUDITED)
A portion of each of the Funds' 2021 ordinary dividends (including short-term
capital gains) paid to its shareholders during the fiscal year ended September
30, 2021, may be eligible for the Qualified Business Income Deduction (QBI)
under the 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.
The following Funds meet the requirements of Section 853 of the Code and elect
to pass through to their shareholders credit for foreign taxes paid. For the
taxable year ended September 30, 2021, the total amounts of income received by
the Funds from sources within foreign countries and possessions of the United
States and of taxes paid to such countries are as follows:
<TABLE>
<CAPTION>
Gross Foreign Income Foreign Taxes Paid
--------------------------- ---------------------------
Amount Per Share Amount Per Share
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
First Trust STOXX(R) European Select Dividend Index Fund $ 12,358,461 $ 0.60 $ 1,156,434 $ 0.06
First Trust Dow Jones Global Select Dividend Index Fund 23,643,539 1.17 2,079,283 0.10
First Trust Global Wind Energy ETF 7,538,894 0.41 809,545 0.04
First Trust Global Engineering and Construction ETF 232,201 1.16 20,035 0.10
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure
Index Fund 4,922,761 0.83 420,356 0.07
First Trust Indxx Global Natural Resources Income ETF 1,988,775 0.71 71,449 0.03
First Trust Indxx Global Agriculture ETF 111,586 0.59 15,182 0.08
First Trust BICK Index Fund 1,336,993 0.52 117,189 0.05
First Trust Indxx NextG ETF 16,380,089 1.16 2,903,461 0.21
First Trust NASDAQ Global Auto Index Fund 1,236,665 1.12 145,566 0.13
First Trust International Equity Opportunities ETF 14,943,319 0.82 714,477 0.04
</TABLE>
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
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,
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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
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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.
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.
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SEPTEMBER 30, 2021 (UNAUDITED)
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
ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT
(NON-UNITARY FEE FUNDS)
The Board of Trustees of First Trust Exchange-Traded Fund II (the "Trust"),
including the Independent Trustees, unanimously approved the continuation of the
Investment Management Agreement (the "Agreement") with First Trust Advisors L.P.
(the "Advisor") on behalf of the following six series of the Trust (each a
"Fund" and collectively, the "Funds"):
First Trust STOXX(R) European Select Dividend Index Fund (FDD)
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund
(FFR)
First Trust Dow Jones Global Select Dividend Index Fund (FGD)
First Trust Global Engineering and Construction ETF (FLM)
First Trust Global Wind Energy ETF (FAN)
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index
Fund (GRID)
The Board approved the continuation of the Agreement for each Fund for a
one-year period ending June 30, 2022 at a meeting held on June 6-7, 2021. The
Board determined for each Fund that the continuation of the Agreement is in the
best interests of the Fund in light of the nature, extent and quality of the
services provided and such other matters as the Board considered to be relevant
in the exercise of its business judgment.
To reach this determination for each Fund, the Board considered its duties under
the Investment Company Act of 1940, as amended (the "1940 Act"), as well as
under the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. At meetings held on April 26, 2021 and June 6-7, 2021, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor responding to requests for information from counsel to the Independent
Trustees, submitted on behalf of the Independent Trustees, that, among other
things, outlined: the services provided by the Advisor to each Fund (including
the relevant personnel responsible for these services and their experience); the
advisory fee rate payable by each Fund as compared to fees charged to a peer
group of funds (the "Expense Group") and a broad peer universe of funds (the
"Expense Universe"), each assembled by Broadridge Financial Solutions, Inc.
("Broadridge"), an independent source, and as compared to fees charged to other
clients of the Advisor, including other exchange-traded funds ("ETFs") managed
by the Advisor; the expense ratio of each Fund as compared to expense ratios of
the funds in the Fund's Expense Group and Expense Universe; performance
information for each Fund, including comparisons of each Fund's performance to
that of one or more relevant benchmark indexes and to that of a performance
group of funds and a broad performance universe of funds (the "Performance
Universe"), each assembled by Broadridge; the nature of expenses incurred in
providing services to each Fund and the potential for the Advisor to realize
economies of scale, if any; profitability and other financial data for the
Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust
Portfolios L.P. ("FTP"); and information on the Advisor's compliance program.
The Board reviewed initial materials with the Advisor at the meeting held on
April 26, 2021, prior to which the Independent Trustees and their counsel met
separately to discuss the information provided by the Advisor. Following the
April meeting, counsel to the Independent Trustees, on behalf of the Independent
Trustees, requested certain clarifications and supplements to the materials
provided, and the information provided in response to those requests was
considered at an executive session of the Independent Trustees and their counsel
held prior to the June 6-7, 2021 meeting, as well as at the June meeting. The
Board applied its business judgment to determine whether the arrangement between
the Trust and the Advisor continues to be a reasonable business arrangement from
each Fund's perspective. The Board determined that, given the totality of the
information provided with respect to the Agreement, the Board had received
sufficient information to renew the Agreement. The Board considered that
shareholders chose to invest or remain invested in a Fund knowing that the
Advisor manages the Fund and knowing the Fund's advisory fee.
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In reviewing the Agreement for each Fund, the Board considered the nature,
extent and quality of the services provided by the Advisor under the Agreement.
The Board considered that the Advisor is responsible for the overall management
and administration of the Trust and each Fund and reviewed all of the services
provided by the Advisor to the Funds, as well as the background and experience
of the persons responsible for such services. In reviewing the services
provided, the Board noted the compliance program that had been developed by the
Advisor and considered that it includes a robust program for monitoring the
Advisor's and each Fund's compliance with the 1940 Act, as well as each Fund's
compliance with its investment objective, policies and restrictions. The Board
also considered a report from the Advisor with respect to its risk management
functions related to the operation of the Funds. Finally, as part of the Board's
consideration of the Advisor's services, the Advisor, in its written materials
and at the April 26, 2021 meeting, described to the Board the scope of its
ongoing investment in additional personnel and infrastructure to maintain and
improve the quality of services provided to the Funds and the other funds in the
First Trust Fund Complex. In light of the information presented and the
considerations made, the Board concluded that the nature, extent and quality of
the services provided to the Trust and each Fund by the Advisor under the
Agreement have been and are expected to remain satisfactory and that the Advisor
has managed each Fund consistent with its investment objective, policies and
restrictions.
The Board considered the advisory fee rate payable by each Fund under the
Agreement for the services provided. The Board considered that the Advisor
agreed to extend the current expense cap for each Fund through January 31, 2023.
For each Fund, the Board noted that expenses reimbursed and fees waived are
subject to recovery by the Advisor for up to three years from the date the fee
was waived or expense was incurred, but no reimbursement payment would be made
by the 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. The Board
received and reviewed information showing the advisory or unitary fee rates and
expense ratios of the peer funds in the Expense Groups, as well as advisory and
unitary fee rates charged by the Advisor to other fund (including ETFs) and
non-fund clients, as applicable. Because each Fund's Expense Group included peer
funds that pay a unitary fee, the Board determined that expense ratios were the
most relevant comparative data point. Based on the information provided, the
Board noted that the total (net) expense ratio of FGD was below the median total
(net) expense ratio of the peer funds in its Expense Group, that the total (net)
expense ratio of FAN was equal to the median total (net) expense ratio of the
peer funds in its Expense Group and that the total (net) expense ratio of each
other Fund was above the median total (net) expense ratio of the peer funds in
its respective Expense Group. With respect to the Expense Groups, the Board, at
the April 26, 2021 meeting, discussed with the Advisor limitations in creating
peer groups for index ETFs, including differences in underlying indexes and
index-tracking methodologies that can result in greater management complexities
across seemingly comparable ETFs, and different business models that may affect
the pricing of services among ETF sponsors. The Board took these limitations and
differences into account in considering the peer data. With respect to fees
charged to other non-ETF clients, the Board considered differences between the
Funds and other non-ETF clients that limited their comparability. With respect
to each of FFR and FLM, the Board noted that at the April 26, 2021 meeting, the
Advisor recommended and the Board approved the adoption of a unitary fee
structure for the Fund, subject to shareholder approval. In considering the
advisory fee rates overall, the Board also considered the Advisor's statement
that it seeks to meet investor needs through innovative and value-added
investment solutions and the Advisor's demonstrated long-term commitment to each
Fund and the other funds in the First Trust Fund Complex.
The Board considered performance information for each Fund. The Board noted the
process it has established for monitoring each Fund's performance and portfolio
risk on an ongoing basis, which includes quarterly performance reporting from
the Advisor for the Funds. The Board determined that this process continues to
be effective for reviewing each Fund's performance. The Board received and
reviewed information for periods ended December 31, 2020 regarding the
performance of each Fund's underlying index, the correlation between each Fund's
performance and that of its underlying index, each Fund's tracking difference
and each Fund's excess return as compared to its benchmark index. With respect
to each of FFR and FLM, the Board noted that at the April 26, 2021 meeting, the
Advisor recommended and the Board approved changes to the Fund's investment
objective and name. Based on the information provided and its ongoing review of
performance, the Board concluded that each Fund was correlated to its underlying
index and that the tracking difference for each Fund was within a reasonable
range. In addition, the Board reviewed data prepared by Broadridge comparing
each Fund's performance to that of its respective Performance Universe and to
that of a broad-based benchmark index. However, given each Fund's objective of
seeking investment results that correspond generally to the performance of its
underlying index, the Board placed more emphasis on its review of correlation
and tracking difference.
On the basis of all the information provided on the fees, expenses and
performance of each Fund and the ongoing oversight by the Board, the Board
concluded that the advisory fee for each Fund continues to be reasonable and
appropriate in light of the nature, extent and quality of the services provided
by the Advisor to each Fund under the Agreement.
The Board considered information and discussed with the Advisor whether there
were any economies of scale in connection with providing advisory services to
the Funds and noted the Advisor's statement that it believes its expenses will
likely increase during the next twelve months as the Advisor continues to hire
personnel and build infrastructure, including technology, to improve the
services to the Funds. The Board considered the revenues and allocated costs
(including the allocation methodology) of the Advisor in serving as investment
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advisor to each Fund for the twelve months ended December 31, 2020 and the
estimated profitability level for each Fund calculated by the Advisor based on
such data, as well as complex-wide and product-line profitability data, for the
same period. The Board noted the inherent limitations in the profitability
analysis and concluded that, based on the information provided, the Advisor's
profitability level for each Fund was not unreasonable. In addition, the Board
considered fall-out benefits described by the Advisor that may be realized from
its relationship with the Funds. The Board considered that the Advisor had
identified as a fall-out benefit to the Advisor and FTP their exposure to
investors and brokers who, absent their exposure to the Funds, may have had no
dealings with the Advisor or FTP, and noted that the Advisor does not utilize
soft dollars in connection with the Funds. The Board concluded that the
character and amount of potential fall-out benefits to the Advisor were not
unreasonable.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreement continue to be fair and reasonable and that the continuation of
the Agreement is in the best interests of each Fund. No single factor was
determinative in the Board's analysis.
BOARD CONSIDERATIONS REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENTS
(UNITARY FEE FUNDS)
The Board of Trustees of First Trust Exchange-Traded Fund II (the "Trust"),
including the Independent Trustees, unanimously approved the continuation of the
Investment Management Agreements (as applicable to a specific Fund, the
"Agreement" and collectively, the "Agreements") with First Trust Advisors L.P.
(the "Advisor") on behalf of the following eight series of the Trust (each a
"Fund" and collectively, the "Funds"):
First Trust Indxx NextG ETF (NXTG)
First Trust BICK Index Fund (BICK)
First Trust Indxx Global Natural Resources Income ETF (FTRI)
First Trust Indxx Global Agriculture ETF (FTAG)
First Trust NASDAQ Global Auto Index Fund (CARZ)
First Trust Cloud Computing ETF (SKYY)
First Trust International Equity Opportunities ETF (FPXI)
First Trust Nasdaq Cybersecurity ETF (CIBR)
The Board approved the continuation of the Agreement for each Fund for a
one-year period ending June 30, 2022 at a meeting held on June 6-7, 2021. The
Board determined for each Fund that the continuation of the Agreement is in the
best interests of the Fund in light of the nature, extent and quality of the
services provided and such other matters as the Board considered to be relevant
in the exercise of its business judgment.
To reach this determination for each Fund, the Board considered its duties under
the Investment Company Act of 1940, as amended (the "1940 Act"), as well as
under the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. At meetings held on April 26, 2021 and June 6-7, 2021, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor responding to requests for information from counsel to the Independent
Trustees, submitted on behalf of the Independent Trustees, that, among other
things, outlined: the services provided by the Advisor to each Fund (including
the relevant personnel responsible for these services and their experience); the
unitary fee rate payable by each Fund as compared to fees charged to a peer
group of funds (the "Expense Group") and a broad peer universe of funds (the
"Expense Universe"), each assembled by Broadridge Financial Solutions, Inc.
("Broadridge"), an independent source, and as compared to fees charged to other
clients of the Advisor, including other exchange-traded funds ("ETFs") managed
by the Advisor; the expense ratio of each Fund as compared to expense ratios of
the funds in the Fund's Expense Group and Expense Universe; performance
information for each Fund, including comparisons of each Fund's performance to
that of one or more relevant benchmark indexes and to that of a performance
group of funds and a broad performance universe of funds (the "Performance
Universe"), each assembled by Broadridge; the nature of expenses incurred in
providing services to each Fund and the potential for the Advisor to realize
economies of scale, if any; profitability and other financial data for the
Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust
Portfolios L.P. ("FTP"); and information on the Advisor's compliance program.
The Board reviewed initial materials with the Advisor at the meeting held on
April 26, 2021, prior to which the Independent Trustees and their counsel met
separately to discuss the information provided by the Advisor. Following the
April meeting, counsel to the Independent Trustees, on behalf of the Independent
Trustees, requested certain clarifications and supplements to the materials
provided, and the information provided in response to those requests was
considered at an executive session of the Independent Trustees and their counsel
held prior to the June 6-7, 2021 meeting, as well as at the June meeting. The
Board applied its business judgment to determine whether the arrangement between
the Trust and the Advisor continues to be a reasonable business arrangement from
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each Fund's perspective. The Board determined that, given the totality of the
information provided with respect to the Agreements, the Board had received
sufficient information to renew the Agreements. The Board considered that
shareholders chose to invest or remain invested in a Fund knowing that the
Advisor manages the Fund and knowing the Fund's unitary fee.
In reviewing the Agreement for each Fund, the Board considered the nature,
extent and quality of the services provided by the Advisor under the Agreement.
The Board considered that the Advisor is responsible for the overall management
and administration of the Trust and each Fund and reviewed all of the services
provided by the Advisor to the Funds, as well as the background and experience
of the persons responsible for such services. In reviewing the services
provided, the Board noted the compliance program that had been developed by the
Advisor and considered that it includes a robust program for monitoring the
Advisor's and each Fund's compliance with the 1940 Act, as well as each Fund's
compliance with its investment objective, policies and restrictions. The Board
also considered a report from the Advisor with respect to its risk management
functions related to the operation of the Funds. Finally, as part of the Board's
consideration of the Advisor's services, the Advisor, in its written materials
and at the April 26, 2021 meeting, described to the Board the scope of its
ongoing investment in additional personnel and infrastructure to maintain and
improve the quality of services provided to the Funds and the other funds in the
First Trust Fund Complex. In light of the information presented and the
considerations made, the Board concluded that the nature, extent and quality of
the services provided to the Trust and each Fund by the Advisor under the
Agreements have been and are expected to remain satisfactory and that the
Advisor has managed each Fund consistent with its investment objective, policies
and restrictions.
The Board considered the unitary fee rate payable by each Fund under the
applicable Agreement for the services provided. The Board considered that as
part of the unitary fee the Advisor is responsible for each Fund's expenses,
including the cost of transfer agency, custody, fund administration, legal,
audit and other services and license fees, if any, but excluding the fee payment
under the applicable Agreement and interest, taxes, brokerage commissions and
other expenses connected with the execution of portfolio transactions,
distribution and service fees pursuant to a Rule 12b-1 plan, if any, and
extraordinary expenses, if any. The Board received and reviewed information
showing the advisory or unitary fee rates and expense ratios of the peer funds
in the Expense Groups, as well as advisory and unitary fee rates charged by the
Advisor to other fund (including ETFs) and non-fund clients, as applicable.
Because each Fund pays a unitary fee, the Board determined that expense ratios
were the most relevant comparative data point. Based on the information
provided, the Board noted that the unitary fee rate for CIBR was equal to the
median total (net) expense ratio of the peer funds in its Expense Group and that
the unitary fee rate for each other Fund was above the median total (net)
expense ratio of the peer funds in its respective Expense Group. With respect to
the Expense Groups, the Board, at the April 26, 2021 meeting, discussed with the
Advisor limitations in creating peer groups for index ETFs, including
differences in underlying indexes and index-tracking methodologies that can
result in greater management complexities across seemingly comparable ETFs, and
different business models that may affect the pricing of services among ETF
sponsors. The Board took these limitations and differences into account in
considering the peer data. With respect to fees charged to other non-ETF
clients, the Board considered differences between the Funds and other non-ETF
clients that limited their comparability. In considering the unitary fee rates
overall, the Board also considered the Advisor's statement that it seeks to meet
investor needs through innovative and value-added investment solutions and the
Advisor's demonstrated long-term commitment to each Fund and the other funds in
the First Trust Fund Complex.
The Board considered performance information for each Fund. The Board noted the
process it has established for monitoring each Fund's performance and portfolio
risk on an ongoing basis, which includes quarterly performance reporting from
the Advisor for the Funds. The Board determined that this process continues to
be effective for reviewing each Fund's performance. The Board received and
reviewed information for periods ended December 31, 2020 regarding the
performance of each Fund's underlying index, the correlation between each Fund's
performance and that of its underlying index, each Fund's tracking difference
and each Fund's excess return as compared to its benchmark index. With respect
to CARZ, the Board noted that at the April 26, 2021 meeting, the Advisor
recommended and the Board approved changes to the Fund's investment objective
and name, and that those changes would take effect in July 2021. With respect to
NXTG, the Board noted that during 2019, it approved changes to the Fund's
investment objective and, effective May 29, 2019, the Fund changed its name and
ticker symbol and began tracking the Indxx 5G & NextG Thematic Index and that
the performance information included a blend of the old and new indexes. With
respect to FTRI and FTAG, the Board noted that during 2015, shareholders of each
Fund approved changes to each Fund's investment objective and, effective
December 18, 2015, each Fund changed its name and ticker symbol, FTRI began
tracking the Indxx Global Natural Resources Income Index and FTAG began tracking
the Indxx Global Agricultural Index, and that the performance information
included a blend of the old and new indexes. Based on the information provided
and its ongoing review of performance, the Board concluded that each Fund was
correlated to its underlying index and that the tracking difference for each
Fund was within a reasonable range. In addition, the Board reviewed data
prepared by Broadridge comparing each Fund's performance to that of its
respective Performance Universe and to that of a broad-based benchmark index and
noted the Advisor's discussion of FTRI's and FTAG's performance at the April 26,
2021 meeting. However, given each Fund's objective of seeking investment results
that correspond generally to the performance of its underlying index, the Board
placed more emphasis on its review of correlation and tracking difference.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021 (UNAUDITED)
On the basis of all the information provided on the unitary fee and performance
of each Fund and the ongoing oversight by the Board, the Board concluded that
the unitary fee for each Fund continues to be reasonable and appropriate in
light of the nature, extent and quality of the services provided by the Advisor
to each Fund under the Agreements.
The Board considered information and discussed with the Advisor whether there
were any economies of scale in connection with providing advisory services to
the Funds and noted the Advisor's statement that it believes its expenses will
likely increase during the next twelve months as the Advisor continues to hire
personnel and build infrastructure, including technology, to improve the
services to the Funds. The Board noted that any reduction in fixed costs
associated with the management of the Funds would benefit the Advisor, but that
the unitary fee structure provides a level of certainty in expenses for the
Funds. The Board considered the revenues and allocated costs (including the
allocation methodology) of the Advisor in serving as investment advisor to each
Fund for the twelve months ended December 31, 2020 and the estimated
profitability level for each Fund calculated by the Advisor based on such data,
as well as complex-wide and product-line profitability data, for the same
period. The Board noted the inherent limitations in the profitability analysis
and concluded that, based on the information provided, the Advisor's
profitability level for each Fund was not unreasonable. In addition, the Board
considered fall-out benefits described by the Advisor that may be realized from
its relationship with the Funds. The Board considered that the Advisor had
identified as a fall-out benefit to the Advisor and FTP their exposure to
investors and brokers who, absent their exposure to the Funds, may have had no
dealings with the Advisor or FTP, and noted that the Advisor does not utilize
soft dollars in connection with the Funds. The Board concluded that the
character and amount of potential fall-out benefits to the Advisor were not
unreasonable.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreements continue to be fair and reasonable and that the continuation
of the Agreements is in the best interests of each Fund. No single factor was
determinative in the Board's analysis.
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 II 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, 2020, the amount of remuneration paid (or to
be paid) by First Trust Advisors L.P. in respect of the Funds is $3,929,732.
This figure is comprised of $235,182 paid (or to be paid) in fixed compensation
and $3,694,550 paid (or to be paid) in variable compensation. There were a total
of 24 beneficiaries of the remuneration described above. Those amounts include
$2,052,017 paid (or to be paid) to senior management of First Trust Advisors
L.P. and $1,877,715 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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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021 (UNAUDITED)
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Funds and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the April 26, 2021 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 20, 2020 through the Liquidity Committee's annual meeting held
on March 16, 2021 and assessed the Program's adequacy and effectiveness of
implementation during this period, including the operation of the highly liquid
investment minimum for each fund that is required under the Program to have one,
and any material changes to the Program. Note that because the Funds primarily
hold assets that are highly liquid investments, the Funds have not adopted any
highly liquid investment minimums.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
BOARD OF TRUSTEES
Effective November 1, 2021, Denise M. Keefe was appointed as a Trustee of the
Trust. Ms. Keefe is Executive Vice President of Advocate Aurora Health and
President of Advocate Aurora Continuing Health Division (together, "Advocate"),
one of the largest integrated healthcare systems in the U.S. serving Illinois
and Wisconsin. Ms. Keefe has been employed by Advocate since 1993 and is
responsible for the Continuing Health Division's strategic direction, fiscal
management, business development, revenue enhancement, operational efficiencies,
and human resource management of 4,000 employees. Ms. Keefe also currently
serves on the boards of several organizations within the Advocate Aurora
Continuing Health Division and other health care organizations, including RML
Long Term Acute Care Hospitals (since 2014) and Senior Helpers (since 2021).
Prior thereto, Ms. Keefe was Corporate Vice President, Marketing and Business
Development for the Visiting Nurse Association of Chicago (1989 - 1992) and a
former Board Member of Sherman West Court Skilled Nursing Facility.
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 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 OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
NAME, YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 213 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. 213 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 213 Director of Trust
(1956) Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 213 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 213 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
</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 II
SEPTEMBER 30, 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 Accounting President (April 2012 to July 2016), First Trust
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
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o 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 II
SEPTEMBER 30, 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 126
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<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund II
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
<PAGE>
[BLANK BACK COVER]
<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund II
--------------------------------------------------------------------------------
Book 2
First Trust IPOX(R) Europe Equity Opportunities ETF (FPXE)
First Trust Dow Jones International Internet ETF (FDNI)
----------------------
Annual Report
for the Year Ended
September 30, 2021
----------------------
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL REPORT
SEPTEMBER 30, 2021
<TABLE>
<CAPTION>
<S> <C>
Shareholder Letter ...................................................................... 2
Market Overview ......................................................................... 3
Fund Performance Overview
First Trust IPOX(R) Europe Equity Opportunities ETF (FPXE) ........................ 4
First Trust Dow Jones International Internet ETF (FDNI) ........................... 6
Notes to Fund Performance Overview ...................................................... 8
Understanding Your Fund Expenses ........................................................ 9
Portfolio of Investments
First Trust IPOX(R) Europe Equity Opportunities ETF (FPXE) ........................ 10
First Trust Dow Jones International Internet ETF (FDNI) ........................... 13
Statements of Assets and Liabilities .................................................... 15
Statements of Operations ................................................................ 16
Statements of Changes in Net Assets ..................................................... 17
Financial Highlights .................................................................... 18
Notes to Financial Statements ........................................................... 19
Report of Independent Registered Public Accounting Firm ................................. 26
Additional Information .................................................................. 27
Board of Trustees and Officers .......................................................... 33
Privacy Policy .......................................................................... 35
</TABLE>
<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 II (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 II
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
SEPTEMBER 30, 2021
Dear Shareholders,
First Trust is pleased to provide you with the annual report for certain series
of the First Trust Exchange-Traded Fund II (the "Funds"), which contains
detailed information about the Funds for the twelve months ended September 30,
2021.
A great deal has changed over the past 18 months. Suffice it to say that the
dominant story in 2020 was the onset of the coronavirus ("COVID-19") pandemic.
It is still a huge story 20 months later, mostly due to the arrival of the Delta
variant in the U.S. and the subsequent surge in cases around mid-2021. The Delta
variant is twice as contagious as the previous variants, according to the
Centers for Disease Control and Prevention ("CDC"). Fortunately, we have come to
learn that the existing vaccines approved by the U.S. Food and Drug
Administration have been effective in providing protection against the Delta
variant, particularly with respect to keeping the people already vaccinated out
of the intensive care unit. As I'm sure you are aware, a significant percentage
of the U.S. population has chosen not to be vaccinated. These individuals have
proven to be much more vulnerable to the virus and account for the lion's share
of hospitalizations, according to the CDC. While it is these individuals right
to choose, unless mandated by a private company or government agency, the
universe of people that have not gotten vaccinated is large enough that it has
likely delayed the full economic recovery, at least on the margin, in our
opinion. In the U.S., the path chosen by the federal government to help mitigate
the economic fallout from the pandemic has been to inject trillions of dollars
of liquidity (stimulus) into the financial system. To date, it appears to have
been effective, however, it has contributed to a new and potentially ominous
headwind for the economy: inflation.
The Consumer Price Index came in at 5.4% year-over-year in September 2021, the
largest increase since 2008, according to data from the Bureau of Labor
Statistics ("BLS"). The BLS also reported that the Producer Price Index was up
8.6% compared to a year ago, its highest level since 1981. These two barometers
of inflation are clearly elevated. Why is rising inflation worth noting? It
tends to reduce the purchasing power of the currency one uses over time. In the
case of the U.S., it reduces how much consumers can buy with their dollars. A
modest amount of inflation can be a sign that the economy is healthy. Too much
inflation can derail an economy. While we are not even close to that point yet,
investors should monitor the direction of inflation moving forward because the
U.S. economy has yet to fully reopen from the COVID-19 pandemic and millions of
workers remain on the sideline. Earlier this year, Federal Reserve Chairman
Jerome Powell proclaimed that the spike in inflation in the U.S. would be
relatively short-lived, or "transitory." He cited the pandemic-related
bottlenecks in the global supply chain for creating shortages in such critical
industries as semiconductors as being largely responsible for the sharp rise in
prices. With prices rising nearly across the board, his take on inflation is
losing credibility with each passing month, in my opinion. If inflation
continues to run hotter-than-expected, we believe that the Federal Reserve will
likely have to alter its easy monetary policy in favor of one that boosts
interest rates and bond yields.
The markets have performed quite well over the past 18 months. I believe that
the combination of the federal government's efforts in fast-tracking the
vaccines, its decisiveness in injecting trillions of dollars of capital into the
financial system to help backstop it, and the ability of millions of workers to
adapt to working efficiently from home helped boost the confidence levels of
investors throughout. Having said that, I still feel we need to fully reopen the
U.S. economy, put the millions of people out of work back to work and remedy the
global supply chain bottlenecks. While investors should be prepared for the
possibility of some additional volatility moving forward, due to inflationary
pressures, the potential for higher interest rates and bond yields, and next
year's mid-term election season, we encourage them to stay the course.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
<PAGE>
--------------------------------------------------------------------------------
MARKET OVERVIEW
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL REPORT
SEPTEMBER 30, 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 GLOBAL ECONOMY
The International Monetary Fund ("IMF") reported in its latest release that
global gross domestic product ("GDP") growth is expected to come in at 5.9% in
2021 and 4.9% in 2022, up from -3.1% in 2020. Keep in mind that the onset of the
coronavirus ("COVID-19") pandemic in the U.S. and most global regions occurred
in the first quarter of 2020. The IMF sees the U.S. economy growing at 6.0% in
2021 and 5.2% in 2022, up from -3.4% in 2020. With respect to all Advanced
Economies, the IMF is projecting GDP growth of 5.2% in 2021 and 4.5% in 2022, up
from -4.5% in 2020. Lastly, the IMF projects Emerging Market and Developing
Economies to grow at a rate of 6.4% in 2021 and 5.1% in 2022, up from -2.1% in
2020. Looking ahead to 2022, the outlook for growth is encouraging, but down a
bit from the strong pandemic-induced recovery in 2021. The IMF is concerned that
inflationary pressures stemming from the global supply chain bottlenecks could
push prices higher if the problems persist. That scenario could, in turn, cause
central banks to raise rates quickly to try and prevent inflation from
overheating.
One of the better barometers for judging the overall business climate is mergers
and acquisitions ("M&A") activity, in our opinion. M&A deals totaled $4.3
trillion over the first nine months of 2021, the most ever recorded for that
period, according to data from Refinitiv. The $1.52 trillion in deal value
registered in the third quarter of 2021 was the highest ever for a calendar
quarter. Executives are expanding their businesses aggressively in the current
climate.
PERFORMANCE OF GLOBAL STOCKS AND BONDS
U.S. equities performed extremely well over the past year. The S&P 500(R), S&P
MidCap 400(R) and S&P SmallCap 600(R) Indices posted total returns of 30.00%,
43.68% and 57.64%, respectively, for the 12-month period ended September 30,
2021. Small- and mid-capitalization ("cap") stocks significantly outperformed
large-cap stocks over the period, an indication that investors were willing to
assume more risk despite the ongoing COVID-19 pandemic, in our opinion. All 11
sectors that comprise the S&P 500(R) Index were up on a total return basis. The
top-performer was the Energy sector, up 82.99%, while the worst result came from
the Utilities sector, up just 11.01%.
A Bloomberg survey of 21 equity strategists found that their average 2021
year-end price target for the S&P 500(R) Index was 4,466 as of September 21,
2021, up from 4,335 on August 20, 2021, according to its own release. The
highest and lowest estimates were 4,825 (up from 4,700) and 3,800 (unchanged),
respectively. On September 30, 2021, the S&P 500(R) Index closed at 4,307.54,
which was 5.06% below its all-time closing high of 4,536.95 on September 2,
2021. As of October 1, 2021, Bloomberg's 2021, 2022 and 2023 consensus earnings
growth rate estimates for the S&P 500(R) Index stood at 44.90%, 8.95% and 9.80%,
respectively.
Foreign equities also performed well, but the broader indices continue to lag
the performance of the major U.S. stock indices. Over the past 12 months, the
MSCI World ex USA and MSCI Emerging Markets Indices posted total returns of
26.50% (USD) and 18.20% (USD), respectively, according to Bloomberg. The major
foreign bond indices had mixed results. The Bloomberg Global Aggregate Index of
higher quality debt posted a total return of -0.91% (USD), while the Bloomberg
EM Hard Currency Aggregate Index of emerging markets debt rose by 3.15% (USD),
according Bloomberg. Over that same period, the U.S. dollar rose by 0.36%
against a basket of major currencies, as measured by the U.S. Dollar Index
(DXY). The slight bump in the dollar had little influence on the performance of
these foreign indices, in our opinion.
In the U.S. bond market, the top-performing major debt group we track was
speculative-grade corporate bonds. The Bloomberg U.S. Corporate High Yield Index
posted a total return of 11.28% for the 12-month period ended September 30,
2021. The worst-performing U.S. debt group that we track was government bonds.
The Bloomberg U.S. Treasury: Intermediate Index posted a total return of -1.38%.
The yield on the benchmark 10-Year Treasury Note ("T-Note") rose by 80 basis
points in the period to close at 1.49% on September 30, 2021, according to
Bloomberg. For comparative purposes, the average yield on the 10-Year T-Note was
2.04% for the 10-year period ended September 30, 2021.
Page 3
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
The First Trust IPOX(R) Europe 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 Europe Index
(the "Index"). The shares of the Fund are listed and trade on The Nasdaq Stock
Market LLC under the ticker symbol "FPXE." 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 owned,
developed, maintained and sponsored by IPOX(R) Schuster LLC. 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 companies that are economically tied to Europe.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
Inception Inception
1 Year Ended (10/4/18) (10/4/18)
9/30/21 to 9/30/21 to 9/30/21
<S> <C> <C> <C>
FUND PERFORMANCE
NAV 24.19% 17.39% 61.47%
Market Price 23.63% 17.41% 61.56%
INDEX PERFORMANCE
IPOX(R) 100 Europe Index 25.58% 18.87% 67.66%
MSCI Europe Index 27.25% 8.44% 27.39%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 8.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of 24.19% during the period
covered by this report. During the same period, the MSCI Europe Index (the
"Benchmark") generated a return of 27.25%. Over the period, the Fund allocated
24.7% to the Consumer Discretionary sector, which was more than the weight given
to any other sector. Investments in the Consumer Discretionary sector returned
23.5% during the period, contributing 5.3% to the Fund's return. Securities from
the Health Care sector provided a greater contribution to the Fund's return than
any other sector during the same period. With a 17.5% allocation, Health Care
securities returned 42.4% and contributed 6.3% to the Fund's total return.
Investments in the Consumer Staples sector caused the greatest drag on the
Fund's portfolio. This sector received a 2.7% allocation during the period and
contributed -0.2% to the Fund's total return, stemming from its -8.1% return.
The Fund's currency exposure caused 0.03% of performance during the period. On a
relative basis, the Fund underperformed the Benchmark. The leading cause of the
underperformance was attributable to the Fund underperforming the Benchmark
among securities from the Consumer Discretionary sector. The Fund underperformed
the Benchmark by -12.5%, which created -2.9% of relative drag. The Communication
Services sector, likewise, created -2.1% of relative drag as the Fund
underperformed the Benchmark by -33.7%. The Fund reversed 3.7% of relative drag
as it outperformed the Benchmark among securities from the Health Care sector by
30.2%.
-----------------------------
IPOX(R) and the Index are registered international trademarks 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.
Page 4
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 24.1%
Health Care 17.6
Consumer Discretionary 16.3
Industrials 15.0
Financials 10.8
Communication Services 6.9
Consumer Staples 3.8
Utilities 2.2
Materials 1.6
Real Estate 1.5
Energy 0.2
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Adyen N.V. 7.9%
Siemens Healthineers AG 7.8
Prosus N.V. 3.6
BioNTech SE, ADR 3.5
Dassault Systemes SE 3.2
Nexi S.p.A. 2.9
DSV A/S 2.7
NXP Semiconductors N.V. 2.7
NatWest Group PLC 2.6
Universal Music Group N.V. 2.3
------
Total 39.2%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
OCTOBER 4, 2018 - SEPTEMBER 30, 2021
First Trust IPOX(R)
Europe Equity IPOX(R) 100 MSCI Europe
Opportunities ETF Europe Index Index
-------------------------- ------------ -----------
<S> <C> <C> <C>
10/4/18 $10,000 $10,000 $10,000
3/31/19 9,715 9,769 9,836
9/30/19 10,132 10,255 10,091
3/31/20 9,587 9,800 8,311
9/30/20 13,003 13,352 10,011
3/31/21 14,757 15,217 12,046
9/30/21 16,147 16,766 12,739
</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 DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
The First Trust Dow Jones International Internet 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 International
Internet Index (the "Index"). The shares of the Fund are listed and trade on The
Nasdaq Stock Market LLC under the ticker symbol "FDNI." 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
developed, maintained and sponsored by S&P Dow Jones Indices LLC and is designed
to measure the performance of securities of non-US issuers whose primary
business focus is Internet-related.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
Inception Inception
1 Year Ended (11/5/18) (11/5/18)
9/30/21 to 9/30/21 to 9/30/21
<S> <C> <C> <C>
FUND PERFORMANCE
NAV 2.42% 29.21% 110.31%
Market Price 2.11% 29.13% 109.96%
INDEX PERFORMANCE
Dow Jones International Internet Index 3.57% 30.25% 115.28%
MSCI ACWI ex-USA Information Technology Index 36.71% 29.65% 112.44%
MSCI ACWI ex-USA Index 23.92% 10.91% 35.06%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 8.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 2.42% during the period covered by this
report. During the same period, the MSCI ACWI ex-USA Information Technology
Index (the "Benchmark") generated a return of 36.71%. Over the period, the Fund
was most heavily weighted towards the Consumer Discretionary sector. This sector
received an allocation of 41.9% and contributed -5.9% to the Fund's overall
return, as a result of the sector's -16.4% return in the Fund. The greatest
contributing sector to the Fund's return was the Information Technology sector,
which was given a 19.8% allocation and had a 41.5% return, leading to a 6.4%
contribution to the Fund's performance. The Fund's currency exposure caused 0.7%
of performance during the period. On a relative basis, the Fund underperformed
the Benchmark during the period. The Benchmark invests solely in securities from
the Information Technology sector, while the Fund invested 41.9% in the Consumer
Discretionary sector, 34.6% in the Communication Services sector, and only 19.8%
in the Information Technology sector. The investments in the Consumer
Discretionary sector caused -24.2% of relative underperformance for the Fund due
to the Fund over allocating this poor performing sector. The Fund's allocation
to the Information Technology sector reversed 0.8% of relative underperformance
as the Fund outperformed the Benchmark by 4.3%.
-----------------------------
Dow Jones International Internet 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 6
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 40.3%
Communication Services 35.1
Information Technology 22.5
Health Care 2.1
------
Total 100.0%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Shopify, Inc., Class A 10.4%
Tencent Holdings Ltd. 10.1
Alibaba Group Holding Ltd., ADR 9.9
Meituan, Class B 8.7
Prosus N.V. 4.7
Sea Ltd., ADR 4.7
Adyen N.V. 4.4
JD.com, Inc., ADR 4.4
Atlassian Corp. PLC, Class A 3.6
NAVER Corp. 3.2
------
Total 64.1%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 5, 2018 - SEPTEMBER 30, 2021
MSCI All Country World MSCI All
First Trust Dow Jones Dow Jones International ex-USA Information Country World
International Internet ETF Internet Index Technology Index ex-USA Index
-------------------------- ----------------------- ---------------------------- -------------
<S> <C> <C> <C> <C>
11/5/18 $10,000 $10,000 $10,000 $10,000
3/31/19 11,275 11,318 10,863 10,463
9/30/19 10,907 10,977 11,546 10,581
3/31/20 11,865 12,008 11,000 8,834
9/30/20 20,535 20,785 15,539 10,899
3/31/21 23,574 24,042 20,050 13,199
9/30/21 21,033 21,527 21,243 13,505
</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>
--------------------------------------------------------------------------------
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 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.
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 8
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
UNDERSTANDING YOUR FUND EXPENSES
SEPTEMBER 30, 2021 (UNAUDITED)
As a shareholder of First Trust IPOX(R) Europe Equity Opportunities ETF or First
Trust Dow Jones International Internet 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 (in U.S. dollars) 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 September 30, 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
APRIL 1, 2021 SEPTEMBER 30, 2021 PERIOD PERIOD (a)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
Actual $1,000.00 $1,094.40 0.70% $3.68
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
Actual $1,000.00 $ 892.20 0.65% $3.08
Hypothetical (5% return before expenses) $1,000.00 $1,021.81 0.65% $3.29
</TABLE>
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (April 1,
2021 through September 30, 2021), multiplied by 183/365 (to reflect the
six-month period).
Page 9
<PAGE>
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.9%
AUSTRIA -- 0.8%
354 ANDRITZ AG (b) $ 19,401
1,063 BAWAG Group AG (b) (c) (d) 67,274
--------------
86,675
--------------
BELGIUM -- 1.6%
660 D'ieteren Group (b) 96,847
663 UCB S.A. (b) 74,241
--------------
171,088
--------------
BERMUDA -- 0.2%
942 Myovant Sciences Ltd. (e) 21,138
--------------
CYPRUS -- 1.1%
2,416 HeadHunter Group PLC, ADR 117,901
--------------
DENMARK -- 5.0%
1,186 DSV A/S (b) 283,886
2,798 Genmab A/S, ADR (e) 122,272
511 Netcompany Group A/S (b) (c) (d) 58,941
3,323 Scandinavian Tobacco Group
A/S (b) (c) (d) 65,583
--------------
530,682
--------------
FINLAND -- 0.7%
64 Harvia OYJ (b) (d) 3,399
632 Kojamo OYJ (b) 13,123
229 Musti Group OYJ (b) 8,172
1,309 Terveystalo OYJ (c) (d) 16,376
404 TietoEVRY OYJ (b) 12,150
803 Tokmanni Group Corp. (b) 19,529
--------------
72,749
--------------
FRANCE -- 7.8%
2,109 Danone S.A. (b) 143,787
6,578 Dassault Systemes SE (b) 346,169
2,929 La Francaise des Jeux
SAEM (b) (c) (d) 150,601
893 Pernod Ricard S.A. (b) 196,873
--------------
837,430
--------------
GERMANY -- 17.2%
1,364 BioNTech SE, ADR (e) 372,358
184 Dermapharm Holding SE (b) 17,707
682 DWS Group GmbH & Co.
KGaA (b) (c) (d) 28,647
2,074 HelloFresh SE (b) (e) 191,154
549 Knorr-Bremse AG (b) 58,738
12,879 Siemens Healthineers
AG (b) (c) (d) 835,271
4,989 Uniper SE (b) 207,689
3,706 Vantage Towers AG 125,866
--------------
1,837,430
--------------
IRELAND -- 1.7%
5,730 nVent Electric PLC 185,251
--------------
ISRAEL -- 4.2%
436 Global-e Online Ltd. (e) 31,305
1,041 Inmode Ltd. (e) 165,988
946 Kornit Digital Ltd. (e) 136,924
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ISRAEL (CONTINUED)
150 Monday.com Ltd. (e) (f) $ 48,930
410 Riskified Ltd., Class A (e) 9,352
1,176 ZIM Integrated Shipping Services
Ltd. 59,623
--------------
452,122
--------------
ITALY -- 4.3%
4,830 Italgas S.p.A. (b) 30,884
16,394 Nexi S.p.A. (b) (c) (d) (e) 305,709
17,042 Pirelli & C S.p.A. (b) (c) (d) 99,700
1,008 Stevanato Group S.p.A. (e) 25,512
--------------
461,805
--------------
JERSEY -- 0.9%
2,350 Janus Henderson Group PLC 97,125
--------------
LUXEMBOURG -- 1.4%
545 Befesa S.A. (b) (c) (d) 41,449
488 Spotify Technology S.A. (e) 109,966
--------------
151,415
--------------
NETHERLANDS -- 19.8%
301 Adyen N.V. (b) (c) (d) (e) 841,402
297 Alfen Beheer BV (b) (c) (d) (e) 31,349
5,413 CTP N.V. (b) (c) (d) 117,575
971 IMCD N.V. (b) 185,829
294 MYT Netherlands Parent BV,
ADR (e) 7,909
1,446 NXP Semiconductors N.V. 283,228
4,781 Prosus N.V. (b) 382,675
1,226 Technip Energies N.V. (b) (e) 19,224
9,374 Universal Music Group N.V. 250,990
--------------
2,120,181
--------------
NORWAY -- 1.8%
3,549 Adevinta ASA (b) (e) 60,817
572 Crayon Group Holding
ASA (b) (c) (d) (e) 10,718
19,615 Elkem ASA (b) (c) (d) 84,594
3,415 Europris ASA (b) (c) (d) 22,613
1,246 Pexip Holding ASA (b) (e) 10,056
--------------
188,798
--------------
SPAIN -- 0.1%
7,419 Linea Directa Aseguradora SA
Cia de Seguros y Reaseguros (b) 14,632
--------------
SWEDEN -- 14.3%
322 Ambea AB (c) (d) 2,358
983 BICO Group AB (b) (e) 58,194
1,386 Bravida Holding AB (b) (c) (d) 18,706
682 Cibus Nordic Real Estate AB 16,126
468 Cint Group AB (b) (e) 5,296
5,799 EQT AB (b) 240,796
1,356 Evolution AB (b) (c) (d) 205,352
621 Instalco AB (b) (d) 28,395
7,741 Lifco AB, Class B (b) 207,918
3,083 Medicover AB, Class B (b) 82,559
892 MIPS AB (b) (d) 89,455
5,965 Nordnet AB publ (b) 106,856
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SWEDEN (CONTINUED)
977 Nyfosa AB $ 13,816
431 Olink Holding AB, ADR (e) 10,452
9,909 Sinch AB (b) (c) (d) (e) 192,155
7,059 Tele2 AB, Class B (b) 104,521
2,851 Thule Group AB (b) (c) (d) 142,939
--------------
1,525,894
--------------
SWITZERLAND -- 3.2%
341 Galenica AG (b) (c) (d) 24,056
141 PolyPeptide Group
AG (b) (c) (d) (e) 17,923
159 Sensirion Holding
AG (b) (c) (d) (e) 19,326
2,876 SIG Combibloc Group AG (b) 76,471
511 VAT Group AG (b) (c) (d) 201,677
--------------
339,453
--------------
UNITED KINGDOM -- 11.6%
51,236 Airtel Africa PLC (c) (d) 68,828
1,399 AJ Bell PLC 7,521
8,581 Allfunds Group PLC (b) (e) 166,828
307 Auction Technology Group
PLC (e) 5,502
3,525 Avast PLC (b) (c) (d) 26,939
869 Bicycle Therapeutics PLC,
ADR (e) 36,142
5,208 Biffa PLC (c) (d) (e) 25,262
2,806 Bridgepoint Group PLC (c) (d) (e) 19,055
5,944 Darktrace PLC (e) 65,673
5,853 Deliveroo PLC (c) (d) (e) 22,807
1,311 Endava PLC, ADR (e) 178,099
1,532 Finablr PLC (b) (c) (e) (g) (h) 0
3,117 Forterra PLC (c) (d) 11,655
91,928 NatWest Group PLC (b) 277,150
22,015 Ninety One PLC 76,353
5,815 Quilter PLC (b) (c) (d) 11,151
4,157 THG PLC (b) (e) 28,381
3,279 Trustpilot Group
PLC (b) (c) (d) (e) 17,011
13,497 Virgin Money UK PLC (b) (e) 36,946
11,017 Wise PLC, Class A (e) 161,358
--------------
1,242,661
--------------
UNITED STATES -- 1.0%
3,053 Veoneer, Inc. (e) 103,985
--------------
VIRGIN ISLANDS -- 1.2%
2,591 Capri Holdings Ltd. (e) 125,430
--------------
TOTAL COMMON STOCKS -- 99.9% 10,683,845
(Cost $9,956,163) --------------
MONEY MARKET FUNDS -- 0.2%
22,196 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (i) (j) 22,196
(Cost $22,196) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.2%
$ 23,029 BNP Paribas S.A., 0.03% (i),
dated 09/30/21, due 10/01/21,
with a maturity value of
$23,029. Collateralized by
U.S. Treasury Notes, interest
rates of 0.375% to 0.750%, due
04/15/24 to 01/31/28. The
value of the collateral
including accrued interest is
$23,614. (j) $ 23,029
(Cost $23,029) --------------
TOTAL INVESTMENTS -- 100.3% 10,729,070
(Cost $10,001,388) (k)
NET OTHER ASSETS AND
LIABILITIES -- (0.3)% (37,141)
--------------
NET ASSETS -- 100.0% $ 10,691,929
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$7,545,409 or 70.6% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(d) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(e) Non-income producing security.
(f) All or a portion of this security is on loan (see Note 2E - 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 $44,037 and the
total value of the collateral held by the Fund is $45,225.
(g) This security's value was determined using significant unobservable inputs
(see Note 2A - Portfolio Valuation in the Notes to Financial Statements).
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
(h) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by First Trust Advisors, L.P.,
the Fund's advisor.
(i) Rate shown reflects yield as of September 30, 2021.
(j) This security serves as collateral for securities on loan.
(k) Aggregate cost for federal income tax purposes is $10,087,266. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,188,008 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$546,204. The net unrealized appreciation was $641,804.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
----------------------------------------------------
Common Stocks:
Bermuda $ 21,138 $ 21,138 $ -- $ --
Cyprus 117,901 117,901 -- --
Denmark 530,682 122,272 408,410 --
Finland 72,749 16,376 56,373 --
Germany 1,837,430 498,224 1,339,206 --
Ireland 185,251 185,251 -- --
Israel 452,122 452,122 -- --
Italy 461,805 25,512 436,293 --
Jersey 97,125 97,125 -- --
Luxembourg 151,415 109,966 41,449 --
Netherlands 2,120,181 542,127 1,578,054 --
Sweden 1,525,894 42,752 1,483,142 --
United
Kingdom 1,242,661 678,255 564,406 --**
United States 103,985 103,985 -- --
Virgin Islands 125,430 125,430 -- --
Other Country
Categories* 1,638,076 -- 1,638,076 --
Money Market
Funds 22,196 22,196 -- --
Repurchase
Agreements 23,029 -- 23,029 --
----------------------------------------------------
Total
Investments $ 10,729,070 $ 3,160,632 $ 7,568,438 $ --**
====================================================
* See Portfolio of Investments for Country breakout.
** Investment is valued at $0.
Level 3 Common Stocks are fair valued by the Advisor's Pricing Committee and are
footnoted in the Portfolio of Investments.
Level 3 Common Stocks values are based on unobservable and non-quantitative
inputs.
---------------------------------
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) $ 44,037
Non-cash Collateral(2) (44,037)
--------------
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 September 30, 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) $ 23,029
Non-cash Collateral(4) (23,029)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
Euro 47.7%
United States Dollar 21.4
Swedish Krona 14.1
British Pound Sterling 8.0
Danish Krone 3.8
Swiss Franc 3.2
Norwegian Krone 1.8
------
Total 100.0%
======
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2021
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 96.4%
AUSTRALIA -- 1.9%
17,165 Afterpay Ltd. (b) (c) $ 1,491,213
23,999 SEEK Ltd. (b) 527,577
--------------
2,018,790
--------------
CANADA -- 10.0%
7,662 Shopify, Inc., Class A (c) 10,400,019
--------------
CAYMAN ISLANDS -- 47.5%
67,130 Alibaba Group Holding Ltd.,
ADR (c) 9,938,597
18,507 Baidu, Inc., ADR (c) 2,845,451
14,747 Bilibili, Inc., ADR (c) 975,809
21,171 Farfetch Ltd., Class A (c) 793,489
60,914 JD.com, Inc., ADR (c) 4,400,427
98,866 Kuaishou Technology
(b) (c) (d) (e) 1,055,167
273,267 Meituan, Class B (b) (c) (d) (e) 8,723,079
24,593 NetEase, Inc., ADR 2,100,242
13,663 Pagseguro Digital Ltd.,
Class A (c) 706,650
29,774 Pinduoduo, Inc., ADR (c) 2,699,609
14,670 Sea Ltd., ADR (c) 4,675,769
169,609 Tencent Holdings Ltd. (b) 10,125,447
25,249 Vipshop Holdings Ltd., ADR (c) 281,274
--------------
49,321,010
--------------
GERMANY -- 4.4%
12,857 Delivery Hero SE (b) (c) (d) (e) 1,639,971
11,801 HelloFresh SE (b) (c) 1,087,660
5,689 Scout24 AG (b) (d) (e) 394,033
10,236 TeamViewer AG (b) (c) (d) (e) 299,459
13,136 Zalando SE (b) (c) (d) (e) 1,198,020
--------------
4,619,143
--------------
ISLE OF MAN -- 1.1%
39,747 Entain PLC (b) (c) 1,135,239
--------------
ISRAEL -- 0.7%
3,829 Wix.com Ltd. (c) 750,369
--------------
JAPAN -- 4.2%
29,072 M3, Inc. (b) 2,071,913
31,382 Nexon Co., Ltd. (b) 503,698
62,173 Rakuten Group, Inc. (b) 605,612
176,676 Z Holdings Corp. (b) 1,130,737
--------------
4,311,960
--------------
LUXEMBOURG -- 2.0%
9,324 Spotify Technology S.A. (c) 2,101,070
--------------
NETHERLANDS -- 11.2%
1,592 Adyen N.V. (b) (c) (d) (e) 4,450,203
10,222 Just Eat Takeaway.com
N.V. (b) (c) (d) (e) 746,858
59,115 Prosus N.V. (b) 4,731,611
21,799 Yandex N.V., Class A (c) 1,737,162
--------------
11,665,834
--------------
NEW ZEALAND -- 0.8%
8,768 Xero Ltd. (b) (c) 860,392
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SOUTH AFRICA -- 2.4%
14,780 Naspers Ltd., Class N (b) $ 2,442,835
--------------
SOUTH KOREA -- 5.7%
21,093 Kakao Corp. 2,102,174
10,018 NAVER Corp. (b) 3,250,510
1,086 NCSoft Corp. (b) 550,117
--------------
5,902,801
--------------
UNITED KINGDOM -- 4.5%
9,183 Atlassian Corp. PLC, Class A (c) 3,594,410
65,772 Auto Trader Group PLC (b) (d) (e) 518,691
59,430 Rightmove PLC (b) 545,998
--------------
4,659,099
--------------
TOTAL INVESTMENTS -- 96.4% 100,188,561
(Cost $106,119,716) (f)
NET OTHER ASSETS AND
LIABILITIES -- 3.6% 3,714,181
--------------
NET ASSETS -- 100.0% $ 103,902,742
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2021, securities noted as such are valued at
$50,086,040 or 48.2% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(e) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2021
(f) Aggregate cost for federal income tax purposes is $108,393,241. As of
September 30, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$11,185,748 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$19,390,428. The net unrealized depreciation was $8,204,680.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
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
9/30/2021 PRICES INPUTS INPUTS
----------------------------------------------------
Common Stocks:
Canada $ 10,400,019 $10,400,019 $ -- $ --
Cayman
Islands 49,321,010 29,417,317 19,903,693 --
Israel 750,369 750,369 -- --
Luxembourg 2,101,070 2,101,070 -- --
Netherlands 11,665,834 1,737,162 9,928,672 --
South Korea 5,902,801 2,102,174 3,800,627 --
United
Kingdom 4,659,099 3,594,410 1,064,689 --
Other Country
Categories* 15,388,359 -- 15,388,359 --
----------------------------------------------------
Total
Investments $100,188,561 $50,102,521 $50,086,040 $ --
====================================================
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
United States Dollar 37.5%
Hong Kong Dollar 19.9
Euro 14.5
Canadian Dollar 10.4
South Korean Won 5.9
Japanese Yen 4.3
Australian Dollar 2.9
South African Rand 2.4
British Pound Sterling 2.2
------
Total 100.0%
======
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2021
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST
IPOX(R) EUROPE DOW JONES
EQUITY INTERNATIONAL
OPPORTUNITIES ETF INTERNET ETF
(FPXE) (FDNI)
---------------------- ----------------------
ASSETS:
<S> <C> <C>
Investments, at value ................................................. $ 10,729,070 $ 100,188,561
Cash .................................................................. 7,674 53,235
Foreign currency, at value ............................................ 55 --
Receivables:
Investment securities sold ......................................... -- 3,718,565
Reclaims ........................................................... 4,689 --
Dividends .......................................................... 1,278 2,402
Securities lending income .......................................... 33 --
---------------- ----------------
Total Assets ....................................................... 10,742,799 103,962,763
---------------- ----------------
LIABILITIES:
Payables:
Collateral for securities on loan .................................. 45,225 --
Investment advisory fees ........................................... 5,645 60,021
---------------- ----------------
Total Liabilities .................................................. 50,870 60,021
---------------- ----------------
NET ASSETS ............................................................ $ 10,691,929 $ 103,902,742
================ ================
NET ASSETS CONSIST OF:
Paid-in capital ....................................................... $ 10,390,775 $ 115,123,282
Par value ............................................................. 3,500 26,000
Accumulated distributable earnings (loss) ............................. 297,654 (11,246,540)
---------------- ----------------
NET ASSETS ............................................................ $ 10,691,929 $ 103,902,742
================ ================
NET ASSET VALUE, per share ............................................ $ 30.55 $ 39.96
================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share) ............................. 350,002 2,600,002
================ ================
Investments, at cost .................................................. $ 10,001,388 $ 106,119,716
================ ================
Foreign currency, at cost (proceeds) .................................. $ 55 $ --
================ ================
Securities on loan, at value .......................................... $ 44,037 $ --
================ ================
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2021
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST
IPOX(R) EUROPE DOW JONES
EQUITY INTERNATIONAL
OPPORTUNITIES ETF INTERNET ETF
(FPXE) (FDNI)
---------------------- ----------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............................................................. $ 68,971 $ 119,104
Securities lending income (net of fees)................................ 3,715 --
Foreign withholding tax................................................ (9,717) (6,019)
---------------- ----------------
Total investment income 62,969 113,085
---------------- ----------------
EXPENSES:
Investment advisory fees............................................... 36,322 704,570
---------------- ----------------
Total expenses 36,322 704,570
---------------- ----------------
NET INVESTMENT INCOME (LOSS)........................................... 26,647 (591,485)
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments (239,050) (4,846,921)
In-kind redemptions 287,410 9,329,366
Foreign currency transactions (692) (22,100)
---------------- ----------------
Net realized gain (loss)............................................... 47,668 4,460,345
---------------- ----------------
Net change in unrealized appreciation (depreciation) on:
Investments 182,279 (12,737,747)
Foreign currency translation (155) 88
---------------- ----------------
Net change in unrealized appreciation (depreciation)................... 182,124 (12,737,659)
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 229,792 (8,277,314)
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 256,439 $ (8,868,799)
================ ================
</TABLE>
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST
IPOX(R) EUROPE EQUITY DOW JONES INTERNATIONAL
OPPORTUNITIES ETF INTERNET ETF
(FPXE) (FDNI)
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/2021 9/30/2020 9/30/2021 9/30/2020
------------- ------------- ------------- -------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss)................................ $ 26,647 $ 14,604 $ (591,485) $ (68,610)
Net realized gain (loss).................................... 47,668 81,940 4,460,345 506,589
Net change in unrealized appreciation (depreciation)........ 182,124 373,968 (12,737,659) 6,929,710
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations.......................................... 256,439 470,512 (8,868,799) 7,367,689
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations....................................... (43,541) (23,081) (145,080) (61,741)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................... 9,415,730 1,085,057 93,036,318 39,002,716
Cost of shares redeemed..................................... (1,424,855) (1,010,545) (28,969,729) (1,662,339)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions............................ 7,990,875 74,512 64,066,589 37,340,377
------------- ------------- ------------- -------------
Total increase (decrease) in net assets..................... 8,203,773 521,943 55,052,710 44,646,325
NET ASSETS:
Beginning of period......................................... 2,488,156 1,966,213 48,850,032 4,203,707
------------- ------------- ------------- -------------
End of period............................................... $ 10,691,929 $ 2,488,156 $ 103,902,742 $ 48,850,032
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period..................... 100,002 100,002 1,250,002 200,002
Shares sold................................................. 300,000 50,000 2,000,000 1,100,000
Shares redeemed............................................. (50,000) (50,000) (650,000) (50,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period........................... 350,002 100,002 2,600,002 1,250,002
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------- PERIOD ENDED
2021 2020 9/30/2019 (a)
----------- ----------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 24.88 $ 19.66 $ 19.70
--------- --------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.25 0.22 0.33
Net realized and unrealized gain (loss) 5.75 5.30 (0.06)
--------- --------- -----------
Total from investment operations 6.00 5.52 0.27
--------- --------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.33) (0.30) (0.31)
--------- --------- -----------
Net asset value, end of period $ 30.55 $ 24.88 $ 19.66
========= ========= ===========
TOTAL RETURN (b) 24.19% 28.33% 1.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 10,692 $ 2,488 $ 1,966
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.70% 0.70% 0.70% (c)
Ratio of net investment income (loss) to
average net assets 0.51% 0.74% 1.77% (c)
Portfolio turnover rate (d) 118% 63% 67%
</TABLE>
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------- PERIOD ENDED
2021 2020 9/30/2019 (a)
----------- ----------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 39.08 $ 21.02 $ 19.69
--------- --------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.18) (0.03) 0.75
Net realized and unrealized gain (loss) 1.13 (e) 18.40 1.04
--------- --------- -----------
Total from investment operations 0.95 18.37 1.79
--------- --------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.07) (0.31) (0.46)
--------- --------- -----------
Net asset value, end of period $ 39.96 $ 39.08 $ 21.02
========= ========= ===========
TOTAL RETURN (b) 2.42% 88.27% 9.07%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 103,903 $ 48,850 $ 4,204
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.65% 0.65% 0.65% (c)
Ratio of net investment income (loss) to
average net assets (0.55)% (0.50)% 4.42% (c)
Portfolio turnover rate (d) 34% 23% 61%
</TABLE>
(a) Inception dates for FPXE and FDNI are October 4, 2018 and November 5,
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.
(e) The per share amount does not correlate with the aggregate realized and
unrealized gain (loss) due to the timing of the Fund share sales and
repurchases in relation to market value fluctuation of the underlying
investments.
Page 18 See Notes to Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
1. ORGANIZATION
First Trust Exchange-Traded Fund II (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on July 6, 2006,
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 sixteen exchange-traded funds. This report
covers the two funds (each a "Fund" and collectively, the "Funds") listed below.
The shares of each Fund are listed and traded on The Nasdaq Stock Market LLC
("Nasdaq").
First Trust IPOX(R) Europe Equity Opportunities ETF - (ticker "FPXE")
First Trust Dow Jones International Internet ETF - (ticker "FDNI")
Each Fund represents a separate series of shares 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 IPOX(R) Europe Equity Opportunities ETF IPOX(R) 100 Europe Index
First Trust Dow Jones International Internet ETF Dow Jones International Internet 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.
Securities trading on foreign exchanges or over-the-counter markets that
close prior to the NYSE close may be valued using a systematic fair
valuation model provided by a third-party pricing service. If these
foreign securities meet certain criteria in relation to the valuation
model, their valuation is systematically adjusted to reflect the impact of
movement in the U.S. market after the close of the foreign markets.
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.
Page 19
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
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.
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund or exchange-traded fund trading of similar
securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
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.
Because foreign markets may be open on different days than the days during which
investors may transact in the shares of a Fund, the value of the Fund's
securities may change on the days when investors are not able to transact in the
shares of the Fund. The value of securities denominated in foreign currencies is
converted into U.S. dollars using exchange rates determined daily as of the
close of regular trading on the NYSE. Any use of a different rate from the rates
used by a relevant index may adversely affect the Fund's ability to track the
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 September 30, 2021, is
included with each Fund's Portfolio of Investments.
Page 20
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 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.
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. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statements of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statements of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received and are included in "Net
realized gain (loss) on foreign currency transactions" on the Statements of
Operations. The portion of foreign currency gains and losses related to
fluctuations in exchange rates between the initial purchase settlement date and
subsequent sale trade date is included in "Net realized gain (loss) on
investments" on the Statements of Operations.
E. SECURITIES LENDING
The Funds may lend securities representing up to 33 1/3% of the value of their
total assets to broker-dealers, banks and other institutions to generate
additional income. When a Fund loans its portfolio securities, it will receive,
at the inception of each loan, collateral equal to at least 102% (for domestic
securities) or 105% (for international securities) of the market value of the
loaned securities. The collateral amount is valued at the beginning of each
business day and is compared to the market value of the loaned securities from
the prior business day to determine if additional collateral is required. If
additional collateral is required, a request is sent to the borrower. Securities
lending involves the risk that the Fund may lose money because the borrower of
the Fund's loaned securities fails to return the securities in a timely manner
or at all. The Fund could also lose money in the event of (i) a decline in the
value of the collateral provided for the loaned securities, (ii) a decline in
the value of any investments made with cash collateral or (iii) an increase in
the value of the loaned securities if the borrower does not increase the
collateral accordingly and the borrower fails to return the securities. These
events could also trigger adverse tax consequences for the Funds.
Under the Funds' Securities Lending Agency Agreement, the securities lending
agent will generally bear the risk that a borrower may default on its obligation
to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as each
Funds' securities lending agent and is responsible for executing the lending of
the portfolio securities to creditworthy borrower. 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 September 30, 2021, only
FPXE had securities in the securities lending program.
In the event of a default by a borrower with respect to any loan, BBH will
exercise any and all remedies provided under the applicable borrower agreement
to make the Funds whole. These remedies include purchasing replacement
securities by applying the collateral held from the defaulting broker against
the purchase cost of the replacement securities. If, despite such efforts by BBH
Page 21
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
to exercise these remedies, a Fund sustains losses as a result of a borrower's
default, BBH will indemnify the Fund by purchasing replacement securities at its
own expense, or paying the Fund an amount equal to the market value of the
replacement securities, subject to certain limitations which are set forth in
detail in the Securities Lending Agency Agreement between the Trust on behalf of
the Funds and BBH.
F. REPURCHASE AGREEMENTS
Repurchase agreements involve the purchase of securities subject to the seller's
agreement to repurchase the securities at a mutually agreed upon date and price,
under the terms of a Master Repurchase Agreement ("MRA"). During the term of a
repurchase agreement, the value of the underlying securities held as collateral
on behalf of a Fund, including accrued interest, is required to exceed the value
of the repurchase agreement, including accrued interest. The underlying
securities for all repurchase agreements are held at the Funds' custodian or
designated sub-custodians under tri-party repurchase agreements.
MRAs govern transactions between a Fund and select counterparties. The MRAs
maintain provisions for, among other things, initiation, income payments, events
of default, and maintenance of collateral for repurchase agreements.
Repurchase agreements received for lending securities are collateralized by U.S.
Treasury securities. The U.S. Treasury securities are held in a joint custody
account at BBH on behalf of the Funds participating in the securities lending
program. In the event the counterparty defaults on the repurchase agreement, the
U.S. Treasury securities can either be maintained as part of a Fund's portfolio
or sold for cash. A Fund could suffer a loss to the extent that the proceeds
from the sale of the underlying collateral held by the Fund are 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 September 30, 2021, were received
as collateral for lending securities.
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly, or as the Board 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 significantly modified portfolio securities
held by the Funds and have no impact on net assets or NAV per share.
Temporary differences, which arise from recognizing certain items of income,
expense and gain/loss in different periods for financial statement and tax
purposes, will reverse at some time in the future.
The tax character of distributions paid by each Fund during the fiscal year
ended September 30, 2021 was as follows:
<TABLE>
<CAPTION>
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
---------------- -------------- --------------
<S> <C> <C> <C>
First Trust IPOX(R) Europe Equity Opportunities ETF $ 43,541 $ -- $ --
First Trust Dow Jones International Internet ETF 145,080 -- --
</TABLE>
The tax character of distributions paid by each Fund during the fiscal year
ended September 30, 2020 was as follows:
<TABLE>
<CAPTION>
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
---------------- -------------- --------------
<S> <C> <C> <C>
First Trust IPOX(R) Europe Equity Opportunities ETF $ 23,081 $ -- $ --
First Trust Dow Jones International Internet ETF 61,741 -- --
</TABLE>
As of September 30, 2021, the components of distributable earnings on a tax
basis for each Fund were as follows:
<TABLE>
<CAPTION>
Accumulated Net
Undistributed Capital and Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
---------------- -------------- --------------
<S> <C> <C> <C>
First Trust IPOX(R) Europe Equity Opportunities ETF $ 10,268 $ (354,453) $ 641,839
First Trust Dow Jones International Internet ETF (726,839) (2,315,094) (8,204,607)
</TABLE>
Page 22
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
H. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of each Fund's taxable income
exceeds the distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ended 2019, 2020,
and 2021 remain open to federal and state audit. As of September 30, 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 September 30, 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.
Non-Expiring
Capital Loss
Carryforwards
---------------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 354,453
First Trust Dow Jones International Internet ETF 2,315,094
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 September 30, 2021, the following
Fund incurred and elected to defer late year ordinary or capital losses as
follows:
<TABLE>
<CAPTION>
Qualified Late Year Losses
-------------------------------------
Ordinary Losses Capital Losses
--------------- --------------
<S> <C> <C>
First Trust Dow Jones International Internet ETF $ 726,839 $ --
</TABLE>
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 September 30, 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 IPOX(R) Europe Equity Opportunities ETF $ 7,562 $ (245,051) $ 237,489
First Trust Dow Jones International Internet ETF 87,051 (8,684,558) 8,597,507
</TABLE>
I. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3). 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 IPOX(R) Europe Equity Opportunities ETF IPOX(R) Schuster LLC
First Trust Dow Jones International Internet ETF S&P Dow Jones Indices LLC
</TABLE>
The respective license agreements allow for the use of each Fund's respective
index and of certain trademarks and trade names of the respective Licensors. The
Funds are sub-licensees to the applicable license agreements. The Funds'
licensing fees are paid by First Trust from the unitary investment advisory fees
it receives from each of the Funds.
Page 23
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
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.
Pursuant to the Investment Management Agreement between the Trust and the
Advisor, First Trust manages the investment of the Funds' assets and is
responsible for the expenses of each Fund including the cost of transfer agency,
custody, fund administration, legal, audit and other services and license fees
(if any), but excluding fee payments under the Investment Management Agreement,
interest, taxes, acquired fund fees and expenses, 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, which are paid by each respective Fund. FPXE and FDNI
have each agreed to pay First Trust an annual unitary management fee equal to
0.70% and 0.65% of its average daily net assets, respectively.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended September 30, 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 IPOX(R) Europe Equity Opportunities ETF $ 6,154,783 $ 6,165,621
First Trust Dow Jones International Internet ETF 50,790,565 35,281,992
</TABLE>
For the fiscal year ended September 30, 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 IPOX(R) Europe Equity Opportunities ETF $ 9,400,300 $ 1,418,587
First Trust Dow Jones International Internet ETF 71,693,483 27,046,554
</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.
Page 24
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021
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 January 31, 2023.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
Page 25
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND
II:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First
Trust IPOX(R) Europe Equity Opportunities ETF and First Trust Dow Jones
International Internet ETF (the "Funds"), each a series of the First Trust
Exchange-Traded Fund II, including the portfolios of investments, as of
September 30, 2021, and the related statements of operations for the year then
ended, the statement of changes in 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, and the related notes. In our opinion, the financial statements and
financial highlights present fairly, in all material respects, the financial
position of the Funds as of September 30, 2021, and the results of their
operations for the year then ended, the statement of changes in 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>
----------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL FUNDS INCLUDED
IN THE TRUST FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
First Trust IPOX(R) Europe Equity For the years ended September 30, 2021 and 2020, and for the period from October 4,
Opportunities ETF 2018 (commencement of operations) through September 30, 2019
----------------------------------------------------------------------------------------------------------------------------
First Trust Dow Jones International For the years ended September 30, 2021 and 2020, and for the period from November 5,
Internet ETF 2018 (commencement of operations) through September 30, 2019
----------------------------------------------------------------------------------------------------------------------------
</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 September 30, 2021, by correspondence
with the custodian and brokers. We believe that our audits provide a reasonable
basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
November 22, 2021
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 26
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 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 September 30, 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 IPOX(R) Europe Equity Opportunities ETF 0.00%
First Trust Dow Jones International Internet ETF 0.00%
</TABLE>
For the taxable year ended September 30, 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 IPOX(R) Europe Equity Opportunities ETF 83.43%
First Trust Dow Jones International Internet ETF 31.17%
</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 September
30, 2021, may be eligible for the Qualified Business Income Deduction (QBI)
under the 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.
The following Funds meet the requirements of Section 853 of the Code and elect
to pass through to their shareholders credit for foreign taxes paid. For the
taxable year ended September 30, 2021, the total amounts of income received by
the Funds from sources within foreign countries and possessions of the United
States and of taxes paid to such countries are as follows:
<TABLE>
<CAPTION>
Gross Foreign Income Foreign Taxes Paid
--------------------------- ---------------------------
Amount Per Share Amount Per Share
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
First Trust IPOX(R) Europe Equity Opportunities ETF $ 68,922 $ 0.20 $ 8,117 $ 0.02
First Trust Dow Jones International Internet ETF 119,104 0.05 6,019 0.00
</TABLE>
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.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021 (UNAUDITED)
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
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
Page 28
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021 (UNAUDITED)
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; 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.
Page 29
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021 (UNAUDITED)
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
ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENTS
The Board of Trustees of First Trust Exchange-Traded Fund II (the "Trust"),
including the Independent Trustees, unanimously approved the continuation of the
Investment Management Agreements (as applicable to a specific Fund, the
"Agreement" and collectively, the "Agreements") with First Trust Advisors L.P.
(the "Advisor") on behalf of the following two series of the Trust (each a
"Fund" and collectively, the "Funds"):
First Trust IPOX(R) Europe Equity Opportunities ETF (FPXE)
First Trust Dow Jones International Internet ETF (FDNI)
The Board approved the continuation of the Agreement for each Fund for a
one-year period ending June 30, 2022 at a meeting held on June 6-7, 2021. The
Board determined for each Fund that the continuation of the Agreement is in the
best interests of the Fund in light of the nature, extent and quality of the
services provided and such other matters as the Board considered to be relevant
in the exercise of its business judgment.
To reach this determination for each Fund, the Board considered its duties under
the Investment Company Act of 1940, as amended (the "1940 Act"), as well as
under the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. At meetings held on April 26, 2021 and June 6-7, 2021, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor responding to requests for information from counsel to the Independent
Trustees, submitted on behalf of the Independent Trustees, that, among other
things, outlined: the services provided by the Advisor to each Fund (including
the relevant personnel responsible for these services and their experience); the
unitary fee rate payable by each Fund as compared to fees charged to a peer
group of funds (the "Expense Group") and a broad peer universe of funds (the
"Expense Universe"), each assembled by Broadridge Financial Solutions, Inc.
("Broadridge"), an independent source, and as compared to fees charged to other
Page 30
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021 (UNAUDITED)
clients of the Advisor, including other exchange-traded funds ("ETFs") managed
by the Advisor; the expense ratio of each Fund as compared to expense ratios of
the funds in the Fund's Expense Group and Expense Universe; performance
information for each Fund, including comparisons of each Fund's performance to
that of one or more relevant benchmark indexes and to that of a performance
group of funds and a broad performance universe of funds (the "Performance
Universe"), each assembled by Broadridge; the nature of expenses incurred in
providing services to each Fund and the potential for the Advisor to realize
economies of scale, if any; profitability and other financial data for the
Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust
Portfolios L.P. ("FTP"); and information on the Advisor's compliance program.
The Board reviewed initial materials with the Advisor at the meeting held on
April 26, 2021, prior to which the Independent Trustees and their counsel met
separately to discuss the information provided by the Advisor. Following the
April meeting, counsel to the Independent Trustees, on behalf of the Independent
Trustees, requested certain clarifications and supplements to the materials
provided, and the information provided in response to those requests was
considered at an executive session of the Independent Trustees and their counsel
held prior to the June 6-7, 2021 meeting, as well as at the June meeting. The
Board applied its business judgment to determine whether the arrangement between
the Trust and the Advisor continues to be a reasonable business arrangement from
each Fund's perspective. The Board determined that, given the totality of the
information provided with respect to the Agreements, the Board had received
sufficient information to renew the Agreements. The Board considered that
shareholders chose to invest or remain invested in a Fund knowing that the
Advisor manages the Fund and knowing the Fund's unitary fee.
In reviewing the Agreement for each Fund, the Board considered the nature,
extent and quality of the services provided by the Advisor under the Agreement.
The Board considered that the Advisor is responsible for the overall management
and administration of the Trust and each Fund and reviewed all of the services
provided by the Advisor to the Funds, as well as the background and experience
of the persons responsible for such services. In reviewing the services
provided, the Board noted the compliance program that had been developed by the
Advisor and considered that it includes a robust program for monitoring the
Advisor's and each Fund's compliance with the 1940 Act, as well as each Fund's
compliance with its investment objective, policies and restrictions. The Board
also considered a report from the Advisor with respect to its risk management
functions related to the operation of the Funds. Finally, as part of the Board's
consideration of the Advisor's services, the Advisor, in its written materials
and at the April 26, 2021 meeting, described to the Board the scope of its
ongoing investment in additional personnel and infrastructure to maintain and
improve the quality of services provided to the Funds and the other funds in the
First Trust Fund Complex. In light of the information presented and the
considerations made, the Board concluded that the nature, extent and quality of
the services provided to the Trust and each Fund by the Advisor under the
Agreements have been and are expected to remain satisfactory and that the
Advisor has managed each Fund consistent with its investment objective, policies
and restrictions.
The Board considered the unitary fee rate payable by each Fund under the
applicable Agreement for the services provided. The Board considered that as
part of the unitary fee the Advisor is responsible for each Fund's expenses,
including the cost of transfer agency, custody, fund administration, legal,
audit and other services and license fees, if any, but excluding the fee payment
under the applicable Agreement and interest, taxes, brokerage commissions and
other expenses connected with the execution of portfolio transactions,
distribution and service fees pursuant to a Rule 12b-1 plan, if any, and
extraordinary expenses, if any. The Board received and reviewed information
showing the advisory or unitary fee rates and expense ratios of the peer funds
in the Expense Groups, as well as advisory and unitary fee rates charged by the
Advisor to other fund (including ETFs) and non-fund clients, as applicable.
Because each Fund pays a unitary fee, the Board determined that expense ratios
were the most relevant comparative data point. Based on the information
provided, the Board noted that the unitary fee rate for each Fund was above the
median total (net) expense ratio of the peer funds in its respective Expense
Group. With respect to the Expense Groups, the Board, at the April 26, 2021
meeting, discussed with the Advisor limitations in creating peer groups for
index ETFs, including differences in underlying indexes and index-tracking
methodologies that can result in greater management complexities across
seemingly comparable ETFs, and different business models that may affect the
pricing of services among ETF sponsors. The Board took these limitations and
differences into account in considering the peer data. With respect to fees
charged to other non-ETF clients, the Board considered differences between the
Funds and other non-ETF clients that limited their comparability. In considering
the unitary fee rates overall, the Board also considered the Advisor's statement
that it seeks to meet investor needs through innovative and value-added
investment solutions and the Advisor's demonstrated long-term commitment to each
Fund and the other funds in the First Trust Fund Complex.
The Board considered performance information for each Fund. The Board noted the
process it has established for monitoring each Fund's performance and portfolio
risk on an ongoing basis, which includes quarterly performance reporting from
the Advisor for the Funds. The Board determined that this process continues to
be effective for reviewing each Fund's performance. The Board received and
reviewed information for periods ended December 31, 2020 regarding the
performance of each Fund's underlying index, the correlation between each Fund's
performance and that of its underlying index, each Fund's tracking difference
and each Fund's excess return as compared to its benchmark index. Based on the
information provided and its ongoing review of performance, the Board concluded
that each Fund was correlated to its underlying index and that the tracking
difference for each Fund was within a reasonable range. In addition, the Board
reviewed data prepared by Broadridge comparing each Fund's performance to that
of its respective Performance Universe and to that of a broad-based benchmark
index, but given each Fund's objective of seeking investment results that
correspond generally to the performance of its underlying index, the Board
placed more emphasis on its review of correlation and tracking difference.
Page 31
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2021 (UNAUDITED)
On the basis of all the information provided on the unitary fee and performance
of each Fund and the ongoing oversight by the Board, the Board concluded that
the unitary fee for each Fund continues to be reasonable and appropriate in
light of the nature, extent and quality of the services provided by the Advisor
to each Fund under the Agreements.
The Board considered information and discussed with the Advisor whether there
were any economies of scale in connection with providing advisory services to
the Funds and noted the Advisor's statement that it believes its expenses will
likely increase during the next twelve months as the Advisor continues to hire
personnel and build infrastructure, including technology, to improve the
services to the Funds. The Board noted that any reduction in fixed costs
associated with the management of the Funds would benefit the Advisor, but that
the unitary fee structure provides a level of certainty in expenses for the
Funds. The Board considered the revenues and allocated costs (including the
allocation methodology) of the Advisor in serving as investment advisor to each
Fund for the twelve months ended December 31, 2020 and the estimated
profitability level for each Fund calculated by the Advisor based on such data,
as well as complex-wide and product-line profitability data, for the same
period. The Board noted the inherent limitations in the profitability analysis
and concluded that, based on the information provided, the Advisor's
profitability level for each Fund was not unreasonable. In addition, the Board
considered fall-out benefits described by the Advisor that may be realized from
its relationship with the Funds. The Board considered that the Advisor had
identified as a fall-out benefit to the Advisor and FTP their exposure to
investors and brokers who, absent their exposure to the Funds, may have had no
dealings with the Advisor or FTP, and noted that the Advisor does not utilize
soft dollars in connection with the Funds. The Board concluded that the
character and amount of potential fall-out benefits to the Advisor were not
unreasonable.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreements continue to be fair and reasonable and that the continuation
of the Agreements is in the best interests of each Fund. No single factor was
determinative in the Board's analysis.
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Funds and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the April 26, 2021 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 20, 2020 through the Liquidity Committee's annual meeting held
on March 16, 2021 and assessed the Program's adequacy and effectiveness of
implementation during this period, including the operation of the highly liquid
investment minimum for each fund that is required under the Program to have one,
and any material changes to the Program. Note that because the Funds primarily
hold assets that are highly liquid investments, the Funds have not adopted any
highly liquid investment minimums.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
BOARD OF TRUSTEES
Effective November 1, 2021, Denise M. Keefe was appointed as a Trustee of the
Funds. Ms. Keefe is Executive Vice President of Advocate Aurora Health and
President of Advocate Aurora Continuing Health Division (together, "Advocate"),
one of the largest integrated healthcare systems in the U.S. serving Illinois
and Wisconsin. Ms. Keefe has been employed by Advocate since 1993 and is
responsible for the Continuing Health Division's strategic direction, fiscal
management, business development, revenue enhancement, operational efficiencies,
and human resource management of 4,000 employees. Ms. Keefe also currently
serves on the boards of several organizations within the Advocate Aurora
Continuing Health Division and other health care organizations, including RML
Long Term Acute Care Hospitals (since 2014) and Senior Helpers (since 2021).
Prior thereto, Ms. Keefe was Corporate Vice President, Marketing and Business
Development for the Visiting Nurse Association of Chicago (1989 - 1992) and a
former Board Member of Sherman West Court Skilled Nursing Facility.
Page 32
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 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 OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
NAME, YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 213 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. 213 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 213 Director of Trust
(1956) Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 213 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 213 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
</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 33
<PAGE>
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 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 Accounting President (April 2012 to July 2016), First Trust
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
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o 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 II
SEPTEMBER 30, 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 35
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<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund II
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
<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 (Registrant) -- 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 $330,400 for the fiscal year ended September 30, 2020 and $334,000 for the fiscal year ended September 30, 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 the fiscal year ended September 30, 2020 and $0 for the fiscal year ended September 30, 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 the fiscal year ended September 30, 2020 and $0 for the fiscal year ended September 30, 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 $153,898 for the fiscal year ended September 30, 2020, and $79,025 for the fiscal year ended September 30, 2021. These fees were for tax consultation and/or tax return preparation.
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 the fiscal year ended September 30, 2020 and $0 for the fiscal year ended September 30, 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 the fiscal year ended September 30, 2020 and $0 for the fiscal year ended September 30, 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 the fiscal year ended September 30, 2020 and $0 for the fiscal year ended September 30, 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 and distributor 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:
Registrant: Advisor and Distributor:
(b) 0% (b) 0%
(c) 0% (c) 0%
(d) 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 September 30, 2020 were $153,898 for the registrant, $47,170 for the registrant’s investment advisor and $70,330 for the registrant’s distributor and for the fiscal year ended September 30, 2021 were $79,025 for the registrant, $23,200 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.
(i) Not applicable.
(j) Not applicable.
Items 5. Audit Committee of Listed Registrants.
| (a) | | 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. The audit committee of the registrant is comprised of: Richard E. Erickson, Thomas R. Kadlec, Robert F. Keith and Niel B. Nielson. |
Item 6. Investments.
| (a) | | The 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 directors, 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 II |
| 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.
