UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-21774
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First Trust Exchange-Traded Fund
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 765-8000
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Date of fiscal year end: December 31
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Date of reporting period: June 30, 2016
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
The registrant's semi-annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
FIRST TRUST
First Trust Exchange-Traded Fund
Book 1
First Trust Dow Jones Select MicroCap Index Fund (FDM)
First Trust Morningstar Dividend Leaders Index Fund (FDL)
First Trust US IPO Index Fund (FPX)
First Trust NYSE Arca Biotechnology Index Fund (FBT)
First Trust Dow Jones Internet Index Fund (FDN)
First Trust Capital Strength ETF (FTCS)
First Trust Value Line(R) Dividend Index Fund (FVD)
First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)
Semi-Annual Report
June 30, 2016
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016
Shareholder Letter........................................................... 2
Market Overview.............................................................. 3
Fund Performance Overview
First Trust Dow Jones Select MicroCap Index Fund (FDM).................... 4
First Trust Morningstar Dividend Leaders Index Fund (FDL)................. 6
First Trust US IPO Index Fund (FPX)....................................... 8
First Trust NYSE Arca Biotechnology Index Fund (FBT)...................... 10
First Trust Dow Jones Internet Index Fund (FDN)........................... 12
First Trust Capital Strength ETF (FTCS)................................... 14
First Trust Value Line(R) Dividend Index Fund (FVD)....................... 16
First Trust Value Line(R) 100 Exchange-Traded Fund (FVL).................. 18
Notes to Fund Performance Overview........................................... 20
Understanding Your Fund Expenses............................................. 21
Portfolio of Investments
First Trust Dow Jones Select MicroCap Index Fund (FDM).................... 23
First Trust Morningstar Dividend Leaders Index Fund (FDL)................. 28
First Trust US IPO Index Fund (FPX)....................................... 30
First Trust NYSE Arca Biotechnology Index Fund (FBT)...................... 34
First Trust Dow Jones Internet Index Fund (FDN)........................... 36
First Trust Capital Strength ETF (FTCS)................................... 38
First Trust Value Line(R) Dividend Index Fund (FVD)....................... 40
First Trust Value Line(R) 100 Exchange-Traded Fund (FVL).................. 44
Statements of Assets and Liabilities......................................... 48
Statements of Operations..................................................... 50
Statements of Changes in Net Assets.......................................... 52
Financial Highlights......................................................... 56
Notes to Financial Statements................................................ 60
Additional Information....................................................... 69
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (each such series is referred to as a "Fund" and collectively, as the
"Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund shares may therefore be less than what you paid
for them. Accordingly, you can lose money by investing in a Fund. See "Risk
Considerations" in the Additional Information Section of this report for a
discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns, net asset value and share price will fluctuate and Fund shares, when
sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at http://www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
each Fund. It includes details about each Fund's portfolio and presents data and
analysis that provide insight into each Fund's performance and investment
approach.
By reading the market overview by Robert F. Carey, Chief Market Strategist of
the Advisor, you may obtain an understanding of how the market environment
affected the performance of each Fund. The statistical information that follows
may help you understand each Fund's performance compared to that of relevant
market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in each
Fund are spelled out in its prospectus, statement of additional information,
this report and other Fund regulatory filings.
Page 1
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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
JUNE 30, 2016
Dear Shareholders:
Thank you for your investment in First Trust Exchange-Traded Fund (the "Trust").
First Trust Advisors L.P. ("First Trust") is pleased to provide you with this
semi-annual report which contains detailed information about your investment for
the six months ended June 30, 2016, including a market overview and the
financial reports for the period. We encourage you to read this report and
discuss it with your financial advisor.
While markets were up and down during 2015, we believe there are three important
things to remember. First, the U.S. economy grew, despite the massive decline in
oil prices. Second, the tapering that began in 2014 by the Federal Reserve (the
"Fed") did not stop growth in the U.S. economy. Finally, the long-anticipated
rate hike by the Fed in December had little effect on the money supply, and the
stock market was not shocked by the hike. Early in 2016, many investors were
concerned that the volatility we saw in the market in 2015 would continue, and
it did. From December 31, 2015 through February 11, 2016, the S&P 500(R) Index
declined by 10.27%. Since then, the market has made a steady comeback, and as of
June 30, 2016, the S&P 500(R) Index was up 15.73%.
First Trust believes that having a long-term investment horizon and investing in
quality products can help you reach your goals, regardless of how the market
behaves. We have always maintained perspective about the markets and believe
investors should as well. We will continue to strive to provide quality
investment opportunities each and every day, which has been one of the hallmarks
of our firm since its inception 25 years ago.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value our relationship with you and will continue to focus on helping
investors like you reach your financial goals.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
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MARKET OVERVIEW
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FIRST TRUST EXCHANGE-TRADED FUND
SEMI-ANNUAL REPORT
JUNE 30, 2016
ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of research and analysis of
the First Trust product line. Mr. Carey has 25 years of experience as an Equity
and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst
("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE ECONOMY/INVESTING
One of the reasons cited by the Federal Reserve for not raising interest rates
beyond the initial 0.25% hike in the federal funds target rate on December 16,
2015 is the slowdown in global growth. The International Monetary Fund reduced
its global growth estimate for 2016 from 3.4% in January to 3.2% in April. It
also shaved its 2017 estimate by 0.1% to 3.5%, according to its own release. To
help put this concern into perspective, the rate was 5.4% in 2010.
Shocks can come from anywhere at any time. The Brexit (British + Exit) vote held
on June 23, 2016 certainly qualifies. The citizens of the United Kingdom
("U.K.") voted 52% to 48% to leave the European Union ("EU"), according to the
BBC. The news was not well-received by the global equities markets. It is not
known how it might impact the European recovery underway. In the two trading
days (June 24 & June 27) following the vote, total world equity market
capitalization ("cap") dropped from $63.81 trillion to $60.17 trillion, or a
decline of $3.64 trillion, according to Bloomberg. The global equities markets,
however, rebounded to close on June 30 at a combined market cap of $62.70
trillion. The U.K. and the EU are likely going to need months to negotiate
Brexit.
ETFGI, an industry research group, reported that total assets invested in
exchange-traded funds ("ETFs") and other exchange-traded products ("ETPs")
reached a record high of $3.18 trillion globally in June 2016, according to its
own release. Total assets invested in U.S. ETFs/ETPs reached a record high $2.26
trillion in June 2016.
U.S. STOCKS AND BONDS
In the first six months of 2016, the major U.S. stock indices posted positive
results. The S&P 500(R) Index, S&P MidCap 400 Index and S&P SmallCap 600(R)
Index posted total returns of 3.84%, 7.93%, and 6.23%, respectively, according
to Bloomberg. Eight of the 10 major S&P 500(R) Index sectors posted positive
total returns. The top performing sectors were Telecommunication Services,
Utilities and Energy, up 24.85%, 23.41% and 16.10%, respectively. The two
sectors that posted losses were Financials and Information Technology, down
3.05% and 0.32%, respectively.
The stock market appeared to rebound with the recovery in the price of crude oil
in mid-February. Crude oil began its plunge in June 2014. It declined from a
2014-high of $107.26 per barrel on June 20, 2014 to a low of $26.21 per barrel
on February 11, 2016, according to Bloomberg. It fell 29.24% from December 31,
2015 through February 11, 2016, and then rebounded by 84.40% to $48.33 per
barrel on June 30, 2016. From December 31, 2015 through February 11, 2016, the
S&P 500(R) Index posted a total return of -10.27%, according to Bloomberg. From
February 11, 2016 through June 30, 2016, the index gained 15.73%. Energy stocks
had been the best performing sector for a decade. From June 30, 2004 through
June 30, 2014, the S&P 500(R) Energy Index posted a cumulative total return of
254.41%, according to Bloomberg. The next best performing sector was utilities,
up 176.37%, as measured by the S&P 500(R) Utilities Index for the same period.
In the U.S. bond market, the top-performing major debt group was high yield
corporate bonds. The Barclays U.S. Corporate High Yield Index posted a total
return of 9.06%. The worst performing major debt group was mortgages, though the
group still generated a positive return. The Barclays GNMA 30-Year Index posted
a total return of 2.67%. The yield on the benchmark 10-Year Treasury note
(T-Note) declined by 80 basis points, from 2.27% (December 31, 2015) to 1.47%
(June 30, 2016). Over the past decade, the average yield on the 10-Year T-Note
was 2.31%.
FOREIGN STOCKS AND BONDS
The U.S. dollar declined by 2.52% against a basket of major currencies in the
first six months of 2016, as measured by the U.S. Dollar Index (DXY). DXY had
appreciated 23.63% in the 18-month period ended December 31, 2015. With respect
to U.S. investors, a stronger U.S. dollar can negatively impact returns on
foreign securities.
Due to a dip in the value of the U.S. dollar and some downward pressure on
interest rates in most major economies around the globe, foreign bond indices
performed well in the first six months of 2016. The Barclays EM Hard Currency
Aggregate Index of emerging markets debt posted a total return of 9.06% (USD),
while the Barclays Global Aggregate Index of higher quality debt rose 8.96%
(USD). Foreign equities finished mixed. The MSCI Emerging Markets Index of
stocks posted a total return of 6.41% (USD), while the MSCI World Index
(excluding the U.S.) posted a total return of -2.98% (USD).
Page 3
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
The First Trust Dow Jones Select MicroCap Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Dow Jones Select
MicroCap Index(SM) (the "Index"). The Fund will normally invest at least 80% of
its net assets (including investment borrowings) in common stocks of U.S.
micro-capitalization companies which are publicly traded in the United States.
The Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index measures the performance of selected U.S.
micro-capitalization companies chosen from all common stocks traded on the New
York Stock Exchange ("NYSE"), NYSE MKT and The Nasdaq Stock Market LLC
("Nasdaq") that are comparatively liquid and have strong fundamentals relative
to the micro-capitalization segment as a whole. The Fund's shares are listed for
trading on the NYSE Arca, Inc. ("NYSE Arca"). The first day of secondary market
trading in shares of the Fund was September 30, 2005.
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PERFORMANCE
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AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
6 Months 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended Ended (9/27/05) Ended Ended (9/27/05)
6/30/16 6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV 2.50% -2.03% 9.28% 5.32% 5.84% 55.85% 67.85% 84.10%
Market Value 2.78% -1.88% 9.34% 5.34% 5.85% 56.26% 68.30% 84.33%
INDEX PERFORMANCE
Dow Jones Select MicroCap Index(SM) 2.78% -1.40% 9.96% 6.02% 6.56% 60.73% 79.46% 98.00%
Russell 2000(R) Index 2.22% -6.73% 8.35% 6.20% 6.77% 49.35% 82.43% 102.38%
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(See Notes to Fund Performance Overview on page 20.)
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% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
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Financials 37.00%
Industrials 17.85
Consumer Discretionary 15.58
Information Technology 9.57
Materials 4.71
Health Care 4.68
Consumer Staples 4.68
Utilities 2.19
Telecommunication Services 2.09
Energy 1.65
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Total 100.00%
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% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
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Chimera Investment Corp. 3.35%
Gibraltar Industries, Inc. 1.07
Banc of California, Inc. 1.01
BMC Stock Holdings, Inc. 0.94
Cavco Industries, Inc. 0.88
CenterState Banks, Inc. 0.86
Hersha Hospitality Trust 0.86
U.S. Physical Therapy, Inc. 0.86
Perficient, Inc. 0.83
Central Garden & Pet Co., Class A 0.82
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Total 11.48%
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Dow Jones and Dow Jones Select MicroCap Index(SM) are products of S&P Dow Jones
Indices LLC ("SPDJI"), and have been licensed for use by First Trust on behalf
of the Fund. The Fund, based on the Dow Jones Select MicroCap Index(SM), is not
sponsored, endorsed, sold or promoted by SPDJI, Dow Jones Trademark Holdings LLC
("Dow Jones") or their respective affiliates, and SPDJI, Dow Jones and their
respective affiliates make no representation regarding the advisability of
trading in the Fund.
Page 4
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2005 - JUNE 30, 2016
First Trust
Dow Jones Dow Jones
Select MicroCap Select MicroCap Russell 2000(R)
Index Fund Index(SM) Index
12/05 $10,000 $10,000 $10,000
06/06 10,573 10,612 10,821
12/06 11,568 11,652 11,836
06/07 12,286 12,416 12,599
12/07 10,871 11,036 11,650
06/08 9,539 9,714 10,558
12/08 7,249 7,413 7,714
06/09 7,096 7,280 7,918
12/09 8,759 9,036 9,810
06/10 8,515 8,805 9,619
12/10 11,016 11,424 12,445
06/11 11,386 11,850 13,218
12/11 10,060 10,492 11,927
06/12 10,708 11,204 12,944
12/12 11,657 12,243 13,876
06/13 13,550 14,274 16,077
12/13 16,706 17,660 19,263
06/14 16,594 17,596 19,877
12/14 17,220 18,307 20,205
06/15 18,115 19,314 21,165
12/15 17,316 18,528 19,313
06/16 17,749 19,043 19,742
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
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NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
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FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 87 2 0 0
01/01/12 - 12/31/12 70 0 0 0
01/01/13 - 12/31/13 151 1 0 0
01/01/14 - 12/31/14 93 1 0 0
01/01/15 - 12/31/15 112 0 0 0
01/01/16 - 06/30/16 49 0 0 0
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NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
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FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 161 2 0 0
01/01/12 - 12/31/12 179 1 0 0
01/01/13 - 12/31/13 98 2 0 0
01/01/14 - 12/31/14 158 0 0 0
01/01/15 - 12/31/15 140 0 0 0
01/01/16 - 06/30/16 76 0 0 0
Page 5
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
The First Trust Morningstar Dividend Leaders Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Morningstar(R) Dividend
Leaders Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its assets in common stocks that comprise the Index. The Index offers investors
a benchmark for dividend portfolios as well as a means to invest in a portfolio
of stocks that have a consistent record of growing dividends as well as the
ability to sustain them. The Index consists of the top 100 stocks, based on
dividend yield, of the securities listed on one of the three major exchanges
(NYSE, NYSE MKT or Nasdaq) that have been selected through the application of
Morningstar, Inc.'s proprietary multi-step screening process. The Index is
rebalanced four times annually in March, June, September and December. The
Fund's shares are listed for trading on the NYSE Arca. The first day of
secondary market trading in shares of the Fund was March 15, 2006.
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PERFORMANCE
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AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
6 Months 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended Ended (3/9/06) Ended Ended (3/9/06)
6/30/16 6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV 14.72% 21.53% 13.61% 6.70% 6.92% 89.24% 91.24% 99.37%
Market Value 14.76% 21.53% 13.61% 6.67% 6.92% 89.23% 90.73% 99.31%
INDEX PERFORMANCE
Morningstar(R) Dividend Leaders
Index(SM) 15.06% 22.16% 14.20% 7.23% 7.45% 94.20% 101.04% 109.83%
S&P 500(R) Index 3.84% 3.99% 12.10% 7.42% 7.23% 77.02% 104.65% 105.42%
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(See Notes to Fund Performance Overview on page 20.)
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% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
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Telecommunication Services 19.68%
Consumer Staples 18.03
Information Technology 17.36
Utilities 13.72
Health Care 11.11
Industrials 6.68
Financials 4.40
Materials 4.16
Consumer Discretionary 3.72
Energy 1.14
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Total 100.00%
=======
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% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
AT&T, Inc. 10.71%
Verizon Communications, Inc. 8.97
Procter & Gamble (The) Co. 6.56
Pfizer, Inc. 6.53
Philip Morris International, Inc. 5.69
Cisco Systems, Inc. 4.63
Merck & Co., Inc. 4.58
Intel Corp. 4.54
International Business Machines Corp. 4.38
Altria Group, Inc. 4.18
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Total 60.77%
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Morningstar(R) is a service mark of Morningstar, Inc. and has been licensed for
use by First Trust on behalf of the Fund. The Fund is not sponsored, endorsed,
issued, sold or promoted by Morningstar, Inc., nor does this company make any
representation regarding the advisability of investing in the Fund.
Page 6
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MARCH 9, 2006 - JUNE 30, 2016
First Trust
Morningstar Morningstar(R)
Dividend Leaders Dividend Leaders S&P 500(R)
Index Fund Index(SM) Index
03/06 $10,000 $10,000 $10,000
12/06 12,077 12,110 11,317
06/07 12,392 12,462 12,104
12/07 10,793 10,870 11,939
06/08 7,995 8,069 10,516
12/08 7,371 7,462 7,522
06/09 6,961 7,067 7,760
12/09 8,420 8,567 9,512
06/10 8,039 8,197 8,879
12/10 9,771 9,995 10,945
06/11 10,535 10,806 11,604
12/11 11,182 11,498 11,176
06/12 12,107 12,491 12,236
12/12 12,204 12,620 12,964
06/13 13,908 14,421 14,756
12/13 14,978 15,569 17,163
06/14 16,519 17,221 18,388
12/14 16,919 17,679 19,513
06/15 16,406 17,180 19,753
12/15 17,381 18,240 19,783
06/16 19,939 20,987 20,543
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
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NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 219 0 0 0
01/01/12 - 12/31/12 171 0 0 0
01/01/13 - 12/31/13 171 0 0 0
01/01/14 - 12/31/14 190 0 0 0
01/01/15 - 12/31/15 151 0 0 0
01/01/16 - 06/30/16 80 0 0 0
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NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 33 0 0 0
01/01/12 - 12/31/12 79 0 0 0
01/01/13 - 12/31/13 81 0 0 0
01/01/14 - 12/31/14 62 0 0 0
01/01/15 - 12/31/15 101 0 0 0
01/01/16 - 06/30/16 45 0 0 0
Page 7
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST US IPO INDEX FUND (FPX)
The First Trust US IPO Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the IPOX(R)-100 U.S. Index (the "Index").
The Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index is a modified value-weighted price index measuring
the performance of the top 100 U.S. companies ranked quarterly by market
capitalization in the IPOX Global Composite Index. The Index utilizes a 10%
capping on all constituents and includes the 100 largest, typically best
performing and most liquid initial public offerings ("IPOs") of the U.S.
companies in the IPOX Global Composite Index. The IPOX Global Composite Index is
reconstituted regularly with IPOs being added to the IPOX Global Composite Index
at their seventh trading day upon "going public" and automatically exiting after
1,000 trading days or approximately four years thereafter. The Index is
reconstituted quarterly to reflect changes in the stock market values of the
IPOX Global Composite Index constituents and IPO activity during the past
quarter, with potential new companies entering the Index while other companies
reaching 1,000 days in the Index automatically drop out. The Fund's shares are
listed for trading on the NYSE Arca. The first day of secondary market trading
in shares of the Fund was April 13, 2006.
-------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
6 Months 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended Ended (4/12/06) Ended Ended (4/12/06)
6/30/16 6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV -0.65% -6.55% 15.44% 10.98% 10.43% 105.06% 183.55% 175.61%
Market Value -0.61% -6.48% 15.46% 11.02% 10.43% 105.17% 184.49% 175.67%
INDEX PERFORMANCE
IPOX(R)-100 U.S. Index -0.42% -6.05% 16.13% 11.65% 11.11% 111.19% 200.96% 193.29%
S&P 500(R) Index 3.84% 3.99% 12.10% 7.42% 7.16% 77.02% 104.65% 102.62%
Russell 3000(R) Index 3.62% 2.14% 11.60% 7.40% 7.10% 73.08% 104.11% 101.47%
-------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 31.86%
Health Care 20.38
Consumer Staples 14.12
Consumer Discretionary 13.66
Financials 8.95
Industrials 6.01
Energy 2.83
Materials 1.24
Telecommunication Services 0.63
Utilities 0.32
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Kraft Heinz (The) Co. 10.02%
Facebook, Inc., Class A 9.86
AbbVie, Inc. 9.33
Shire PLC, ADR 5.14
PayPal Holdings, Inc. 4.12
Hewlett Packard Enterprise Co. 2.83
NXP Semiconductors N.V. 2.52
Zoetis, Inc. 2.19
Hilton Worldwide Holdings, Inc. 2.08
Synchrony Financial 1.96
-------
Total 50.05%
=======
The Fund is not sponsored, endorsed, sold or promoted by IPOX(R). IPOX(R) makes
no representation or warranty, express or implied, to the owners of the Fund or
any member of the public regarding the advisability of trading in the Fund.
Page 8
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST US IPO INDEX FUND (FPX) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 12, 2006 - JUNE 30, 2016
First Trust
US IPO IPOX(R)-100 S&P 500(R) Russell 3000(R)
Index Fund U.S. Index Index Index
04/06 $10,000 $10,000 $10,000 $10,000
12/06 11,100 11,154 11,162 11,064
06/07 12,385 12,481 11,939 11,851
12/07 12,712 12,844 11,776 11,633
06/08 11,784 11,941 10,373 10,348
12/08 7,134 7,245 7,419 7,293
06/09 8,087 8,248 7,654 7,599
12/09 10,339 10,575 9,382 9,360
06/10 9,726 9,980 8,758 8,794
12/10 12,228 12,594 10,796 10,945
06/11 13,439 13,889 11,446 11,640
12/11 12,607 13,071 11,023 11,057
06/12 14,314 14,885 12,069 12,088
12/12 16,391 17,092 12,788 12,873
06/13 19,143 20,011 14,555 14,683
12/13 24,256 25,446 16,929 17,192
06/14 25,859 27,214 18,137 18,385
12/14 27,144 28,651 19,247 19,350
06/15 29,489 31,218 19,484 19,725
12/15 27,737 29,451 19,513 19,443
06/16 27,557 29,327 20,262 20,147
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 135 0 0 0
01/01/12 - 12/31/12 149 2 0 0
01/01/13 - 12/31/13 220 0 0 0
01/01/14 - 12/31/14 158 0 0 0
01/01/15 - 12/31/15 172 0 0 0
01/01/16 - 06/30/16 41 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 116 1 0 0
01/01/12 - 12/31/12 97 2 0 0
01/01/13 - 12/31/13 32 0 0 0
01/01/14 - 12/31/14 94 0 0 0
01/01/15 - 12/31/15 80 0 0 0
01/01/16 - 06/30/16 84 0 0 0
Page 9
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT)
The First Trust NYSE Arca Biotechnology Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the NYSE Arca Biotechnology Index(SM)
(the "Index"). The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Index is an equal dollar-weighted
index designed to measure the performance of a cross section of companies in the
biotechnology industry that are primarily involved in the use of biological
processes to develop products or provide services. Such processes include, but
are not limited to, recombinant DNA technology, molecular biology, genetic
engineering, monoclonal antibody-based technology, lipid/liposome technology and
genomics. This Index is rebalanced quarterly based on closing prices on the
third Friday in January, April, July and October to ensure that each component
stock continues to represent approximately equal weight in the Index. The Fund's
shares are listed for trading on the NYSE Arca. The first day of secondary
market trading in shares of the Fund was June 23, 2006.
-------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
6 Months 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended Ended (6/19/06) Ended Ended (6/19/06)
6/30/16 6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV -20.82% -27.79% 15.38% 15.87% 16.27% 104.51% 336.41% 353.64%
Market Value -20.80% -27.78% 15.36% 15.86% 16.27% 104.30% 335.93% 353.59%
INDEX PERFORMANCE
NYSE Arca Biotechnology Index(SM) -20.58% -27.42% 15.92% 16.50% 16.90% 109.32% 360.51% 378.92%
S&P Composite 1500 Health Care
Index 0.58% -1.96% 17.32% 11.40% 11.47% 122.30% 194.38% 197.29%
NASDAQ(R) Biotechnology Index -23.75% -30.03% 19.78% 13.98% 14.32% 146.52% 270.13% 282.67%
S&P 500(R) Index 3.84% 3.99% 12.10% 7.42% 7.66% 77.02% 104.65% 109.72%
-------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.)
-----------------------------------------------------------
% OF TOTAL
INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Biotechnology 79.36%
Life Sciences Tools & Services 17.33
Pharmaceuticals 3.31
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Novavax, Inc. 4.68%
Bio-Techne Corp. 4.28
Medivation, Inc. 4.15
Grifols S.A., ADR 3.84
Alkermes PLC 3.84
Seattle Genetics, Inc. 3.72
Vertex Pharmaceuticals, Inc. 3.71
Incyte Corp. 3.62
Charles River Laboratories
International, Inc. 3.61
Neurocrine Biosciences, Inc. 3.44
-------
Total 38.89%
=======
The NYSE Arca Biotechnology Index(SM) is a trademark of NYSE Euronext or its
affiliates ("NYSE Euronext") and is licensed for use by First Trust on behalf of
the Fund. The Fund is not sponsored or endorsed by NYSE Euronext. NYSE Euronext
makes no representation or warranty, express or implied, to the owners of the
Fund or any member of the public regarding the advisability of investing in the
Fund or the ability of the Fund to track the performance of the various sectors
represented in the stock market.
Page 10
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 19, 2006 - JUNE 30, 2016
First Trust
NYSE Arca NYSE Arca
Biotechnology Biotechnology NASDAQ(R) S&P 500(R) S&P Composite 1500
Index Fund Index(SM) Biotechnology Index Index Health Care Index
06/06 $10,000 $10,000 $10,000 $10,000 $10,000
12/06 11,775 11,815 11,114 11,554 11,194
06/07 12,105 12,179 11,177 12,358 11,919
12/07 12,205 12,320 11,630 12,189 12,092
06/08 11,410 11,557 11,086 10,736 10,593
12/08 9,968 10,138 10,200 7,679 9,218
06/09 10,722 10,921 10,491 7,922 9,305
12/09 14,441 14,758 11,828 9,711 11,132
06/10 15,629 16,026 11,227 9,065 10,324
12/10 19,768 20,327 13,726 11,174 11,712
06/11 22,182 22,880 15,694 11,847 13,374
12/11 16,534 17,096 15,385 11,410 13,104
06/12 22,185 23,013 19,204 12,493 14,610
12/12 23,299 24,233 20,352 13,236 15,510
06/13 29,413 30,705 25,829 15,066 18,703
12/13 34,975 36,600 33,787 17,523 22,049
06/14 41,655 43,638 38,352 18,774 24,298
12/14 51,636 54,137 45,413 19,923 27,515
06/15 62,831 65,982 54,688 20,167 30,322
12/15 57,296 60,301 50,186 20,198 29,555
06/16 45,367 47,891 38,267 20,974 29,726
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 151 1 0 0
01/01/12 - 12/31/12 121 0 0 0
01/01/13 - 12/31/13 204 0 0 0
01/01/14 - 12/31/14 183 0 0 0
01/01/15 - 12/31/15 159 0 0 0
01/01/16 - 06/30/16 57 1 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 100 0 0 0
01/01/12 - 12/31/12 128 1 0 0
01/01/13 - 12/31/13 48 0 0 0
01/01/14 - 12/31/14 69 0 0 0
01/01/15 - 12/31/15 93 0 0 0
01/01/16 - 06/30/16 67 0 0 0
Page 11
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
The First Trust Dow Jones Internet Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Dow Jones Internet Composite
Index(SM) (the "Index"). The Fund will normally invest at least 90% of its
assets in common stocks that comprise the Index. The Index represents companies
that generate the majority of their revenues via the Internet. The Index was
designed and is maintained according to a set of rules that were devised with
the goal of providing clear and accurate views of the growing Internet market
segment. The Index aims to consistently represent 80% of the float-adjusted
Internet equity universe. For its stock to be eligible for the "universe," a
company must generate at least 50% of annual sales/revenues from the Internet,
and be currently included in the Dow Jones U.S. Index. The Fund's shares are
listed for trading on the NYSE Arca. The first day of secondary market trading
in shares of the Fund was June 23, 2006.
-------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
6 Months 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended Ended (6/19/06) Ended Ended (6/19/06)
6/30/16 6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV -3.38% 7.35% 14.77% 13.07% 13.69% 99.10% 241.45% 262.11%
Market Value -3.31% 7.38% 14.77% 13.08% 13.69% 99.16% 241.80% 262.31%
INDEX PERFORMANCE
Dow Jones Internet Composite
Index(SM) -3.14% 7.89% 15.42% 13.68% 14.30% 104.81% 260.42% 282.20%
S&P 500(R) Index 3.84% 3.99% 12.10% 7.42% 7.66% 77.02% 104.65% 109.72%
S&P Composite 1500 Information
Technology Index 0.06% 4.31% 12.92% 9.85% 9.96% 83.62% 155.86% 159.17%
-------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 72.07%
Consumer Discretionary 20.17
Financials 3.97
Health Care 2.73
Telecommunication Services 1.06
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Amazon.com, Inc. 10.04%
Facebook, Inc., Class A 9.84
salesforce.com, Inc. 5.00
Alphabet, Inc., Class A 4.86
Alphabet, Inc., Class C 4.81
PayPal Holdings, Inc. 4.56
Netflix, Inc. 4.41
LinkedIn Corp., Class A 4.30
Yahoo!, Inc. 4.27
eBay, Inc. 3.65
-------
Total 55.74%
=======
Dow Jones and Dow Jones Internet Composite Index(SM) are products of S&P Dow
Jones Indices ("SPDJI") and have been licensed for use by First Trust on behalf
of the Fund. The Fund, based on the Dow Jones Internet Composite Index(SM), is
not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones Trademark Holdings
LLC ("Dow Jones") or their respective affiliates and SPDJI, Dow Jones and their
respective affiliates make no representation regarding the advisability of
trading in the Fund.
Page 12
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 19, 2006 - JUNE 30, 2016
First Trust Dow Jones S&P Composite
Dow Jones Internet Composite S&P 500(R) 1500 Information
Internet Index Fund Index(SM) Index Technology Index
06/06 $10,000 $10,000 $10,000 $10,000
12/06 11,285 11,314 11,554 11,574
06/07 12,975 13,043 12,358 12,716
12/07 12,545 12,651 12,189 13,360
06/08 11,203 11,326 10,736 11,638
12/08 7,023 7,114 7,679 7,629
06/09 9,374 9,524 7,922 9,506
12/09 12,587 12,825 9,711 12,286
06/10 11,980 12,222 9,065 11,055
12/10 17,197 17,603 11,174 13,776
06/11 18,186 18,661 11,847 14,115
12/11 16,209 16,703 11,410 13,930
06/12 17,741 18,337 12,493 15,702
12/12 19,590 20,317 13,236 15,985
06/13 22,779 23,691 15,065 17,061
12/13 30,050 31,362 17,523 20,620
06/14 29,906 31,266 18,773 22,362
12/14 30,779 32,238 19,922 24,527
06/15 33,731 35,427 20,167 24,846
12/15 37,479 39,460 20,197 25,899
06/16 36,212 38,221 20,973 25,915
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 151 0 0 0
01/01/12 - 12/31/12 122 0 0 0
01/01/13 - 12/31/13 200 0 0 0
01/01/14 - 12/31/14 148 0 0 0
01/01/15 - 12/31/15 201 0 0 0
01/01/16 - 06/30/16 61 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 101 0 0 0
01/01/12 - 12/31/12 128 0 0 0
01/01/13 - 12/31/13 52 0 0 0
01/01/14 - 12/31/14 104 0 0 0
01/01/15 - 12/31/15 51 0 0 0
01/01/16 - 06/30/16 64 0 0 0
Page 13
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
The First Trust Capital Strength ETF (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called The Capital Strength Index(TM) (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in common stocks that comprise the Index. The
Index is initially equally-weighted and is made up of the top 50 stocks out of
the universe of the largest 500 U.S. companies included in the Nasdaq US
Benchmark Index, ranked by one- and three-year daily volatility. Companies with
less than $1 billion in cash and short term investments, companies with
long-term debt divided by market capitalization greater than 30%, and companies
with return on equity less than 15% are excluded from the Index. The Index is
reconstituted and rebalanced on a quarterly basis. The Fund's shares are listed
for trading on the Nasdaq. The first day of secondary market trading in shares
of the Fund was July 11, 2006.
-------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (7/6/06) Ended (7/6/06)
6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV 5.34% 7.25% 12.17% 8.86% 77.54% 133.39%
Market Value 5.36% 7.28% 12.18% 8.86% 77.66% 133.45%
INDEX PERFORMANCE
The Capital Strength Index(TM)* 5.73% 8.01% N/A N/A N/A N/A
S&P 500 Value Index** 6.24% 3.38% 11.18% 5.74% 69.84% 74.53%
S&P 500(R) Index 3.84% 3.99% 12.10% 7.40% 77.02% 103.93%
-------------------------------------------------------------------------------------------------------------------------------
* On June 4, 2013, the Fund's underlying index changed from the Credit
Suisse U.S. Value Index, Powered by HOLT(TM) to The Capital Strength
Index(SM). On June 18, 2010, the Fund's underlying index changed from the
Deutsche Bank CROCI(R) US+ Index(TM) to the Credit Suisse U.S. Value
Index, Powered by HOLT(TM). Since the Fund's new underlying index had an
inception date of March 20, 2013, it was not in existence for some of the
periods disclosed.
** The Fund no longer uses the S&P 500 Value Index as a comparative index for
the Fund as the Advisor has determined that this index is no longer
representative of the Fund's investment strategy and portfolio holdings.
The S&P 500 Value Index will be represented in performance comparisons of
the Fund until May 1, 2018.
(See Notes to Fund Performance Overview on page 20.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 24.35%
Information Technology 19.82
Consumer Discretionary 18.85
Consumer Staples 18.57
Health Care 10.51
Financials 6.10
Materials 1.80
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Altria Group, Inc. 2.23%
UnitedHealth Group, Inc. 2.22
Reynolds American, Inc. 2.21
Northrop Grumman Corp. 2.20
Johnson & Johnson 2.20
Lockheed Martin Corp. 2.20
Marsh & McLennan Cos., Inc. 2.19
Stryker Corp. 2.18
Raytheon Co. 2.16
Texas Instruments, Inc. 2.12
-------
Total 21.91%
=======
"Credit Suisse," "HOLT" and "Credit Suisse U.S. Value Index, Powered by
HOLT(TM)," are trademarks of Credit Suisse Group AG, Credit Suisse Securities
(USA) LLC or one of their affiliates.
The Capital Strength Index(TM) is the trademark (the "Mark") of the Nasdaq OMX
Group ("Nasdaq OMX"). The Mark is licensed for use by First Trust Portfolios
L.P. The Fund has not been passed on by Nasdaq OMX as to its legality or
suitability. The Fund is not issued, endorsed, sold or promoted by Nasdaq OMX.
The Fund should not be construed in any way as investment advice by Nasdaq OMX.
NASDAQ OMX MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE FUND
OR THE CAPITAL STRENGTH INDEX(TM).
Page 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CAPITAL STRENGTH ETF (FTCS) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 6, 2006 - JUNE 30, 2016
First Trust
Capital Strength S&P 500 S&P 500(R)
ETF Value Index Index
07/06 $10,000 $10,000 $10,000
12/06 11,074 11,294 11,235
06/07 12,444 12,126 12,016
12/07 12,210 11,519 11,852
06/08 11,253 9,671 10,440
12/08 7,665 7,002 7,467
06/09 8,640 6,903 7,703
12/09 10,686 8,484 9,443
06/10 9,880 8,034 8,815
12/10 12,185 9,765 10,866
06/11 13,144 10,276 11,520
12/11 11,827 9,718 11,095
06/12 12,469 10,585 12,148
12/12 13,890 11,436 12,871
06/13 16,203 13,235 14,650
12/13 18,876 15,093 17,039
06/14 19,929 16,143 18,256
12/14 21,794 16,957 19,373
06/15 21,757 16,881 19,611
12/15 22,153 16,425 19,640
06/16 23,336 17,450 20,394
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 129 0 0 0
01/01/12 - 12/31/12 147 0 0 0
01/01/13 - 12/31/13 134 0 0 0
01/01/14 - 12/31/14 108 9 0 0
01/01/15 - 12/31/15 190 2 0 0
01/01/16 - 06/30/16 91 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 123 0 0 0
01/01/12 - 12/31/12 103 0 0 0
01/01/13 - 12/31/13 117 1 0 0
01/01/14 - 12/31/14 131 4 0 0
01/01/15 - 12/31/15 57 3 0 0
01/01/16 - 06/30/16 34 0 0 0
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
The First Trust Value Line(R) Dividend Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Value Line(R) Dividend Index (the
"Index"). The Fund will normally invest at least 90% of its assets in common
stocks that comprise the Index. The Index is designed to objectively identify
and select those stocks from the universe of stocks which Value Line, Inc.(R)
gives a Safety(TM) Ranking of #1 or #2 in the Value Line(R) Safety(TM) Ranking
System and have the potential to pay above-average dividends and achieve capital
appreciation. The Index is rebalanced on a monthly basis. The Fund's shares are
listed for trading on the NYSE Arca.
-------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
6 Months 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended Ended (8/19/03) Ended Ended (8/19/03)
6/30/16 6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV 14.08% 17.96% 13.70% 9.02% 9.91% 90.03% 137.25% 237.09%
Market Value 14.08% 18.01% 13.67% 10.08% 9.91% 89.79% 161.18% 237.09%
INDEX PERFORMANCE
Value Line(R) Dividend Index* 14.58% 19.00% 14.64% N/A N/A 97.97% N/A N/A
S&P 500(R) Index 3.84% 3.99% 12.10% 7.42% 8.12% 77.02% 104.65% 173.02%
Dow Jones U.S. Select Dividend
Index(SM)* 15.55% 17.87% 14.23% 7.53% N/A 94.53% 106.60% N/A
-------------------------------------------------------------------------------------------------------------------------------
On December 15, 2006, the Fund acquired the assets and adopted the
financial and performance history of First Trust Value Line(R) Dividend
Fund (the "Predecessor FVD Fund," a closed-end fund), which had an
inception date of August 19, 2003. The inception date total returns at net
asset value ("NAV") include the sales load of $0.675 per share on the
initial offering. The investment goals, strategies and policies of the
Fund are substantially similar to those of the Predecessor FVD Fund. The
inception date of the Index was July 3, 2006. Returns for the Index are
only disclosed for those periods in which the Index was in existence for
the entire period. The cumulative total returns for the period from the
reorganization date (December 15, 2006) through period end (June 30, 2016)
were 108.40% and 109.40% at NAV and Market Value, respectively. That
compares to an Index return of 124.74% for the same period. The average
annual total returns for the period from the reorganization date (December
15, 2006) through period end (June 30, 2016) were 8.00% and 8.06% at NAV
and Market Value, respectively. That compares to an Index return of 8.86%
for the same period.
NAV and Market Value returns assume that all distributions have been
reinvested in the Fund at NAV and Market Value, respectively. Prior to
December 15, 2006, NAV and Market Value returns assumed that all
distributions were reinvested at prices obtained by the Dividend
Reinvestment Plan of the Predecessor FVD Fund and the price used to
calculate Market Value return was the AMEX (now known as the NYSE MKT)
closing market price of the Predecessor FVD Fund.
* Performance data is not available for all the periods shown in the table
because performance data does not exist for the periods shown.
(See Notes to Fund Performance Overview on page 20.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Utilities 23.17%
Financials 19.51
Industrials 12.94
Consumer Staples 12.42
Information Technology 8.85
Consumer Discretionary 7.71
Health Care 7.51
Energy 3.71
Materials 2.58
Telecommunication Services 1.60
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Hershey (The) Co. 0.61%
Realty Income Corp. 0.56
IDACORP, Inc. 0.56
General Mills, Inc. 0.56
Paychex, Inc. 0.56
Eli Lilly and Co. 0.56
Cincinnati Financial Corp. 0.56
Northwest Natural Gas Co. 0.56
American States Water Co. 0.56
Sanofi, ADR 0.56
-------
Total 5.65%
=======
Value Line is a registered trademark of Value Line, Inc. that is licensed to
First Trust on behalf of the Fund. The Fund is not sponsored, recommended, sold,
or promoted by Value Line Publishing LLC, Value Line, Inc. or any of their
affiliates.
Page 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2005 - JUNE 30, 2016
First Trust Dow Jones
Value Line(R) S&P 500(R) U.S. Select Dividend
Dividend Index Fund Index Index(SM)
12/05 $10,000 $10,000 $10,000
06/06 10,575 10,271 10,501
12/06 12,010 11,580 11,954
06/07 12,333 12,386 12,454
12/07 11,600 12,216 11,337
06/08 10,470 10,761 8,910
12/08 8,796 7,697 7,825
06/09 8,690 7,940 6,844
12/09 10,518 9,733 8,696
06/10 10,215 9,086 8,584
12/10 12,209 11,200 10,289
06/11 13,202 11,874 11,152
12/11 13,312 11,436 11,567
06/12 14,155 12,521 12,323
12/12 14,800 13,266 12,820
06/13 16,856 15,099 14,596
12/13 18,732 17,562 16,546
06/14 20,329 18,816 18,178
12/14 21,720 19,968 19,087
06/15 21,268 20,214 18,406
12/15 21,991 20,244 18,776
06/16 25,087 21,021 21,696
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 218 1 0 0
01/01/12 - 12/31/12 205 0 0 0
01/01/13 - 12/31/13 238 0 0 0
01/01/14 - 12/31/14 223 0 0 0
01/01/15 - 12/31/15 179 0 0 0
01/01/16 - 06/30/16 101 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 33 0 0 0
01/01/12 - 12/31/12 44 1 0 0
01/01/13 - 12/31/13 14 0 0 0
01/01/14 - 12/31/14 29 0 0 0
01/01/15 - 12/31/15 73 0 0 0
01/01/16 - 06/30/16 24 0 0 0
Page 17
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
The First Trust Value Line(R) 100 Exchange-Traded Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Value Line(R) 100 Index
(the "Index"). The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Index is an equal-dollar weighted
index that is designed to objectively identify and select 100 stocks from the
universe of stocks to which Value Line(R) assigns a #1 ranking in the Value
Line(R) Timeliness(TM) Ranking System (the "Ranking System"). At any one time
only 100 stocks are assigned a #1 ranking in the Ranking System. The Index is
rebalanced quarterly. The Fund's shares are listed for trading on the NYSE Arca.
-------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
6 Months 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended Ended (6/12/03) Ended Ended (6/12/03)
6/30/16 6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV 3.44% -2.38% 8.03% 3.72% 5.70% 47.13% 44.09% 106.12%
Market Value 3.49% -2.34% 7.97% 4.53% 5.70% 46.72% 55.82% 106.12%
INDEX PERFORMANCE
Value Line(R) 100 Index* 3.89% -1.58% 8.95% N/A N/A 53.52% N/A N/A
Russell 3000(R)- Index 3.62% 2.14% 11.60% 7.40% 8.34% 73.08% 104.11% 184.53%
-------------------------------------------------------------------------------------------------------------------------------
On June 15, 2007, the Fund acquired the assets and adopted the financial and
performance history of First Trust Value Line(R) 100 Fund (the "Predecessor
FVL Fund," a closed-end fund), which had an inception date of June 12, 2003.
The inception date total returns at NAV include the sales load of $0.675 per
share on the initial offering. The investment goals, strategies and policies
of the Fund are substantially similar to those of the Predecessor FVL Fund.
The inception date of the Index was January 16, 2007. Returns for the Index
are only disclosed for those periods in which the Index was in existence for
the entire period. The cumulative total returns for the period from the
reorganization date through period end (June 30, 2016) were 25.11% and 25.12%
at NAV and Market Value, respectively. That compares to an Index return of
35.15% for that same period. The average annual total returns for the period
from the reorganization date (June 15, 2007) through period end (June 30,
2016) were 2.51% and 2.51% at NAV and Market Value, respectively. That
compares to an Index return of 3.39% for the same period.
NAV and Market Value returns assume that all distributions have been
reinvested in the Fund at NAV and Market Value, respectively. Prior to June
15, 2007, NAV and Market Value returns assumed that all distributions were
reinvested at prices obtained by the Dividend Reinvestment Plan of the
Predecessor FVL Fund and the price used to calculate Market Value return was
the AMEX (now known as the NYSE MKT) closing market price of the Predecessor
FVL Fund.
* Performance data is not available for all the periods shown in the table for
the index because performance data does not exist for each of the entire
periods.
(See Notes to Fund Performance Overview on page 20.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 19.89%
Health Care 18.69
Industrials 15.36
Consumer Staples 13.52
Utilities 10.98
Financials 7.37
Consumer Discretionary 6.00
Materials 5.08
Telecommunication Services 2.09
Energy 1.02
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
National Beverage Corp. 2.08%
Edwards Lifesciences Corp. 1.38
Southwest Gas Corp. 1.19
Digital Realty Trust, Inc. 1.19
Reynolds American, Inc. 1.19
Spire, Inc. 1.16
Teleflex, Inc. 1.14
Universal Electronics, Inc. 1.14
CSG Systems International, Inc. 1.14
Zimmer Biomet Holdings, Inc. 1.13
-------
Total 12.74%
=======
Value Line is a registered trademark of Value Line, Inc. that is licensed to
First Trust on behalf of the Fund. The Fund is not sponsored, recommended, sold,
or promoted by Value Line Publishing LLC, Value Line, Inc. or any of their
affiliates.
Page 18
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2005 - JUNE 30, 2016
First Trust
Value Line(R) 100 Russell 3000(R)
Exchange-Traded Fund Index
12/05 $10,000 $10,000
06/06 10,216 10,323
12/06 10,460 11,571
06/07 11,682 12,394
12/07 12,543 12,166
06/08 11,472 10,822
12/08 6,486 7,627
06/09 6,234 7,946
12/09 7,312 9,787
06/10 7,249 9,195
12/10 9,469 11,444
06/11 10,006 12,171
12/11 8,719 11,561
06/12 8,962 12,638
12/12 9,462 13,459
06/13 10,872 15,351
12/13 13,194 17,975
06/14 14,622 19,223
12/14 14,691 20,233
06/15 15,080 20,626
12/15 14,231 20,330
06/16 14,721 21,066
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 137 2 0 0
01/01/12 - 12/31/12 73 0 0 0
01/01/13 - 12/31/13 100 0 0 0
01/01/14 - 12/31/14 165 0 0 0
01/01/15 - 12/31/15 130 0 0 0
01/01/16 - 06/30/16 51 1 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 111 2 0 0
01/01/12 - 12/31/12 177 0 0 0
01/01/13 - 12/31/13 152 0 0 0
01/01/14 - 12/31/14 87 0 0 0
01/01/15 - 12/31/15 122 0 0 0
01/01/16 - 06/30/16 73 0 0 0
Page 19
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average annual total returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative total
returns" represent the total change in value of an investment over the periods
indicated. The total returns would have been lower if certain fees had not been
waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
each Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike a Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 20
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
JUNE 30, 2016 (UNAUDITED)
As a shareholder of First Trust Dow Jones Select MicroCap Index Fund, First
Trust Morningstar Dividend Leaders Index Fund, First Trust US IPO Index Fund,
First Trust NYSE Arca Biotechnology Index Fund, First Trust Dow Jones Internet
Index Fund, First Trust Capital Strength ETF, First Trust Value Line(R) Dividend
Index Fund or First Trust Value Line(R) 100 Exchange-Traded Fund (each a "Fund"
and collectively, the "Funds"), you incur two types of costs: (1) transaction
costs; and (2) ongoing costs, including management fees, distribution and/or
service fees, and other Fund expenses. This Example is intended to help you
understand your ongoing costs of investing in the Funds and to compare these
costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended June 30, 2016.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
-----------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JANUARY 1, 2016 JUNE 30, 2016 PERIOD (A) PERIOD (B)
-----------------------------------------------------------------------------------------------------------------------
FIRST TRUST DOW JONES SELECT MICROCAP INDEX
FUND (FDM)
Actual $1,000.00 $1,025.00 0.60% $3.02
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX
FUND (FDL)
Actual $1,000.00 $1,147.20 0.45% $2.40
Hypothetical (5% return before expenses) $1,000.00 $1,022.63 0.45% $2.26
FIRST TRUST US IPO INDEX FUND (FPX)
Actual $1,000.00 $ 993.50 0.60% $2.97
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX
FUND (FBT)
Actual $1,000.00 $ 791.80 0.57% $2.54
Hypothetical (5% return before expenses) $1,000.00 $1,022.03 0.57% $2.87
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
Actual $1,000.00 $ 966.20 0.54% $2.64
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.54% $2.72
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
Actual $1,000.00 $1,053.40 0.65% $3.32
Hypothetical (5% return before expenses) $1,000.00 $1,021.63 0.65% $3.27
Page 21
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JANUARY 1, 2016 JUNE 30, 2016 PERIOD (A) PERIOD (B)
-----------------------------------------------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
Actual $1,000.00 $1,140.80 0.70% $3.73
Hypothetical (5% return before expenses) $1,000.00 $1,021.38 0.70% $3.52
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED
FUND (FVL)
Actual $1,000.00 $1,034.40 0.70% $3.54
Hypothetical (5% return before expenses) $1,000.00 $1,021.38 0.70% $3.52
(a) These expense ratios reflect an expense cap for certain Funds. See Note 3
in Notes to Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (January 1,
2016 through June 30, 2016), multiplied by 182/366 (to reflect the
one-half year period).
Page 22
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 1.1%
2,509 National Presto Industries, Inc. $ 236,724
4,521 Sparton Corp. (a) 98,422
5,509 Vectrus, Inc. (a) 156,952
--------------
492,098
--------------
AIR FREIGHT & LOGISTICS -- 0.3%
4,438 Park-Ohio Holdings Corp. 125,507
--------------
AUTO COMPONENTS -- 2.7%
10,565 Fox Factory Holding Corp. (a) 183,514
22,275 Modine Manufacturing Co. (a) 196,020
4,385 Shiloh Industries, Inc. (a) 31,967
13,362 Stoneridge, Inc. (a) 199,628
1,840 Strattec Security Corp. 75,017
11,540 Superior Industries
International, Inc. 309,041
10,923 Tower International, Inc. 224,795
--------------
1,219,982
--------------
AUTOMOBILES -- 0.7%
13,880 Winnebago Industries, Inc. 318,130
--------------
BANKS -- 20.7%
3,439 Access National Corp. 67,095
6,696 Arrow Financial Corp. 202,822
25,350 Banc of California, Inc. 458,835
2,841 Bank of Marin Bancorp 137,419
3,109 Bar Harbor Bankshares 109,126
5,136 Bridge Bancorp, Inc. 145,862
7,981 Bryn Mawr Bank Corp. 233,045
3,764 Camden National Corp. 158,088
15,782 Cascade Bancorp (a) 87,432
24,752 CenterState Banks, Inc. 389,844
19,004 CoBiz Financial, Inc. 222,347
8,519 Community Trust Bancorp, Inc. 295,269
10,333 Enterprise Financial Services
Corp. 288,187
3,678 Farmers Capital Bank Corp. 100,593
10,254 Fidelity Southern Corp. 160,680
7,109 Financial Institutions, Inc. 185,332
9,640 First Bancorp 169,471
16,341 First Busey Corp. 349,534
4,086 First Business Financial
Services, Inc. 95,898
7,774 First Community Bancshares, Inc. 174,449
7,246 First Connecticut Bancorp, Inc. 119,994
5,750 First Financial Corp. 210,565
14,055 Flushing Financial Corp. 279,413
1,370 Franklin Financial Network,
Inc. (a) 42,963
7,322 German American Bancorp, Inc. 234,084
5,020 Great Southern Bancorp, Inc. 185,589
5,480 Green Bancorp, Inc. (a) 47,786
7,873 Guaranty Bancorp 131,479
15,474 Heritage Financial Corp. 272,033
8,304 HomeTrust Bancshares, Inc. (a) 153,624
4,515 Horizon Bancorp 113,507
10,974 Independent Bank Corp. 159,233
19,795 Lakeland Bancorp, Inc. 225,267
13,482 Macatawa Bank Corp. 100,037
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BANKS (CONTINUED)
11,733 MainSource Financial Group, Inc. $ 258,713
8,382 Mercantile Bank Corp. 199,995
4,926 MidSouth Bancorp, Inc. 49,457
3,336 Northrim BanCorp, Inc. 87,703
3,959 Old Line Bancshares, Inc. 71,262
15,254 Old Second Bancorp, Inc. 104,185
9,627 Pacific Continental Corp. 151,240
10,948 Pacific Premier Bancorp, Inc. (a) 262,752
25,619 Park Sterling Corp. 181,639
7,330 Peapack-Gladstone Financial Corp. 135,678
9,372 Peoples Bancorp, Inc. 204,216
6,056 QCR Holdings, Inc. 164,663
4,526 Republic Bancorp, Inc., Class A 125,053
13,113 Seacoast Banking Corp. of
Florida (a) 212,955
5,551 Sierra Bancorp 92,646
10,231 TriCo Bancshares 282,376
11,249 TriState Capital Holdings,
Inc. (a) 154,449
7,945 Triumph Bancorp, Inc. (a) 127,120
10,390 Univest Corp. of Pennsylvania 218,398
--------------
9,391,402
--------------
BEVERAGES -- 0.6%
6,546 MGP Ingredients, Inc. 250,254
--------------
BUILDING PRODUCTS -- 1.6%
15,350 Gibraltar Industries, Inc. (a) 484,599
9,017 Insteel Industries, Inc. 257,796
--------------
742,395
--------------
CAPITAL MARKETS -- 1.4%
7,765 INTL FCStone, Inc. (a) 211,907
7,605 Manning & Napier, Inc. 72,247
5,173 Oppenheimer Holdings, Inc.,
Class A 79,975
7,310 Piper Jaffray Cos. (a) 275,587
--------------
639,716
--------------
CHEMICALS -- 2.8%
3,699 Core Molding Technologies,
Inc. (a) 50,491
11,734 FutureFuel Corp. 127,666
4,904 Hawkins, Inc. 212,883
3,875 KMG Chemicals, Inc. 100,711
23,238 OMNOVA Solutions, Inc. (a) 168,476
22,338 Rayonier Advanced Materials, Inc. 303,573
9,990 Trecora Resources (a) 104,196
12,808 Tredegar Corp. 206,465
--------------
1,274,461
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.0%
13,455 Ennis, Inc. 258,067
19,815 InnerWorkings, Inc. (a) 163,870
16,430 Kimball International, Inc.,
Class B 186,973
9,346 SP Plus Corp. (a) 211,033
14,593 TRC Cos., Inc. (a) 92,228
--------------
912,171
--------------
See Notes to Financial Statements Page 23
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMMUNICATIONS EQUIPMENT
-- 1.2%
4,552 Bel Fuse, Inc., Class B $ 80,935
18,866 CalAmp Corp. (a) 279,405
12,029 Comtech Telecommunications Corp. 154,452
3,117 TESSCO Technologies, Inc. 43,295
--------------
558,087
--------------
CONSTRUCTION & ENGINEERING
-- 1.3%
6,518 Argan, Inc. 271,931
9,407 MYR Group, Inc. (a) 226,521
14,091 Orion Group Holdings, Inc. (a) 74,823
--------------
573,275
--------------
CONSUMER FINANCE -- 0.6%
9,197 Consumer Portfolio Services,
Inc. (a) 34,673
13,862 Enova International, Inc. (a) 102,024
6,046 Nicholas Financial, Inc. (a) 62,153
5,077 Regional Management Corp. (a) 74,429
--------------
273,279
--------------
CONTAINERS & PACKAGING -- 0.9%
2,056 AEP Industries, Inc. 165,426
11,312 Myers Industries, Inc. 162,893
3,227 UFP Technologies, Inc. (a) 72,736
--------------
401,055
--------------
DIVERSIFIED CONSUMER SERVICES
-- 1.8%
8,840 Bridgepoint Education, Inc. (a) 64,002
7,712 Carriage Services, Inc. 182,620
3,628 Collectors Universe, Inc. 71,653
16,541 K12, Inc. (a) 206,597
5,757 Strayer Education, Inc. (a) 282,841
10,932 Universal Technical Institute,
Inc. 24,706
--------------
832,419
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.3%
12,253 GAIN Capital Holdings, Inc. 77,439
4,579 Marlin Business Services Corp. 74,638
--------------
152,077
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.6%
5,942 Hawaiian Telcom Holdco, Inc. (a) 125,911
8,599 IDT Corp., Class B 122,020
17,590 Inteliquent, Inc. 349,865
12,017 Lumos Networks Corp. (a) 145,406
--------------
743,202
--------------
ELECTRICAL EQUIPMENT -- 0.2%
3,203 Allied Motion Technologies, Inc. 74,502
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 3.6%
16,908 CTS Corp. 302,991
19,974 Daktronics, Inc. 124,838
9,116 Electro Rent Corp. 140,478
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS (CONTINUED)
2,889 ePlus, Inc. (a) $ 236,291
11,029 Kimball Electronics, Inc. (a) 137,311
16,213 Novanta, Inc. (a) 245,627
10,444 Park Electrochemical Corp. 151,751
9,301 PC Connection, Inc. 221,364
6,272 Vishay Precision Group, Inc. (a) 84,170
--------------
1,644,821
--------------
ENERGY EQUIPMENT & SERVICES
-- 1.7%
16,622 Hornbeck Offshore Services,
Inc. (a) 138,628
6,639 Natural Gas Services Group,
Inc. (a) 152,033
43,412 Newpark Resources, Inc. (a) 251,355
63,990 Parker Drilling Co. (a) 146,537
3,404 PHI, Inc. (a) 60,864
--------------
749,417
--------------
FOOD & STAPLES RETAILING -- 0.6%
9,606 Chefs' Warehouse (The), Inc. (a) 153,696
3,598 Village Super Market, Inc.,
Class A 103,946
--------------
257,642
--------------
FOOD PRODUCTS -- 1.7%
1,415 Alico, Inc. 42,804
2,943 Farmer Bros. Co. (a) 94,353
10,123 Inventure Foods, Inc. (a) 79,061
4,443 John B. Sanfilippo & Son, Inc. 189,405
13,973 Landec Corp. (a) 150,349
11,485 Omega Protein Corp. (a) 229,585
--------------
785,557
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 0.3%
5,311 Exactech, Inc. (a) 142,016
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.1%
3,545 Addus HomeCare Corp. (a) 61,789
4,498 Almost Family, Inc. (a) 191,660
5,254 CorVel Corp. (a) 226,868
23,236 Five Star Quality Care, Inc. (a) 54,372
4,957 Landauer, Inc. 204,030
12,223 Triple-S Management Corp.,
Class B (a) 298,608
6,453 U.S. Physical Therapy, Inc. 388,535
--------------
1,425,862
--------------
HEALTH CARE TECHNOLOGY -- 0.5%
5,515 Computer Programs and Systems,
Inc. 220,159
--------------
HOTELS, RESTAURANTS & LEISURE
-- 1.8%
6,902 Bravo Brio Restaurant Group,
Inc. (a) 56,527
12,139 Del Frisco's Restaurant Group,
Inc. (a) 173,830
9,696 Marcus (The) Corp. 204,586
Page 24 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOTELS, RESTAURANTS & LEISURE
(CONTINUED)
5,603 Monarch Casino & Resort, Inc. (a) $ 123,098
17,417 Ruth's Hospitality Group, Inc. 277,801
--------------
835,842
--------------
HOUSEHOLD DURABLES -- 2.9%
5,229 Bassett Furniture Industries,
Inc. 125,182
4,285 Cavco Industries, Inc. (a) 401,505
7,188 Century Communities, Inc. (a) 124,640
3,201 Flexsteel Industries, Inc. 126,824
5,953 Hooker Furniture Corp. 127,930
7,592 LGI Homes, Inc. (a) 242,488
6,947 New Home Co., (The), Inc. (a) 66,274
14,511 ZAGG, Inc. (a) 76,183
--------------
1,291,026
--------------
HOUSEHOLD PRODUCTS -- 1.2%
17,106 Central Garden & Pet Co.,
Class A (a) 371,371
4,667 Orchids Paper Products Co. 166,005
--------------
537,376
--------------
INSURANCE -- 0.9%
6,494 Federated National Holding Co. 123,646
4,497 HCI Group, Inc. 122,678
15,649 State National Cos., Inc. 164,784
--------------
411,108
--------------
INTERNET & CATALOG RETAIL -- 0.4%
10,417 PetMed Express, Inc. 195,423
--------------
INTERNET SOFTWARE & SERVICES
-- 0.5%
21,410 DHI Group, Inc. (a) 133,384
12,687 Liquidity Services, Inc. (a) 99,466
--------------
232,850
--------------
IT SERVICES -- 1.8%
12,593 Hackett Group (The), Inc. 174,665
14,425 Information Services Group,
Inc. (a) 54,094
29,249 Lionbridge Technologies, Inc. (a) 115,534
18,634 Perficient, Inc. (a) 378,456
22,405 Planet Payment, Inc. (a) 100,598
--------------
823,347
--------------
LEISURE PRODUCTS -- 0.4%
7,397 JAKKS Pacific, Inc. (a) 58,510
9,248 Malibu Boats, Inc., Class A (a) 111,716
--------------
170,226
--------------
MACHINERY -- 5.2%
4,841 Alamo Group, Inc. 319,361
10,378 Columbus McKinnon Corp. 146,849
13,908 Commercial Vehicle Group, Inc. (a) 72,322
11,614 Douglas Dynamics, Inc. 298,828
11,088 Global Brass & Copper Holdings,
Inc. 302,591
5,062 Graham Corp. 93,242
3,388 Hurco Cos., Inc. 94,288
5,602 Kadant, Inc. 288,559
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MACHINERY (CONTINUED)
8,840 Lydall, Inc. (a) $ 340,870
5,856 Miller Industries, Inc. 120,575
13,928 NN, Inc. 194,853
4,979 Twin Disc, Inc. 53,474
5,778 Xerium Technologies, Inc. (a) 36,864
--------------
2,362,676
--------------
MEDIA -- 0.7%
12,756 Entercom Communications Corp.,
Class A 173,099
26,740 Lee Enterprises, Inc. (a) 51,074
8,270 Reading International, Inc.,
Class A (a) 103,292
--------------
327,465
--------------
METALS & MINING -- 1.0%
6,442 Haynes International, Inc. 206,659
10,339 Materion Corp. 255,994
--------------
462,653
--------------
MULTI-UTILITIES -- 0.6%
6,810 Unitil Corp. 290,583
--------------
PERSONAL PRODUCTS -- 0.6%
4,830 Medifast, Inc. 160,694
3,434 Natural Health Trends Corp. (b) 96,804
8,800 Synutra International, Inc. (a) 33,528
--------------
291,026
--------------
PHARMACEUTICALS -- 0.7%
25,759 SciClone Pharmaceuticals, Inc. (a) 336,412
--------------
PROFESSIONAL SERVICES -- 3.1%
25,514 CBIZ, Inc. (a) 265,601
4,628 CRA International, Inc. (a) 116,718
6,715 Franklin Covey Co. (a) 102,941
8,645 GP Strategies Corp. (a) 187,510
9,000 Heidrick & Struggles
International, Inc. 151,920
15,349 Kelly Services, Inc., Class A 291,170
18,973 Resources Connection, Inc. 280,421
--------------
1,396,281
--------------
REAL ESTATE INVESTMENT TRUSTS
-- 7.4%
14,540 AG Mortgage Investment Trust,
Inc. 209,958
16,462 Apollo Residential Mortgage, Inc. 220,591
21,480 Arbor Realty Trust, Inc. 154,441
14,698 Ares Commercial Real Estate Corp. 180,639
16,160 Armada Hoffler Properties, Inc. 222,038
96,892 Chimera Investment Corp. 1,521,204
3,388 Ellington Residential Mortgage
REIT 44,247
22,727 Hersha Hospitality Trust 389,768
16,101 Resource Capital Corp. 207,059
21,636 Western Asset Mortgage Capital
Corp. 203,162
--------------
3,353,107
--------------
See Notes to Financial Statements Page 25
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.8%
9,107 RE/MAX Holdings, Inc., Class A $ 366,648
--------------
ROAD & RAIL -- 1.2%
14,252 Celadon Group, Inc. 116,439
6,291 Covenant Transportation Group,
Inc., Class A (a) 113,678
11,881 Marten Transport Ltd. 235,244
1,388 P.A.M. Transportation Services,
Inc. (a) 22,055
4,106 Universal Logistics Holdings,
Inc. 52,968
--------------
540,384
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.9%
13,037 Cohu, Inc. 141,451
12,861 IXYS Corp. 131,825
34,725 Photronics, Inc. (a) 309,400
16,826 Ultra Clean Holdings, Inc. (a) 95,740
27,622 Xcerra Corp. (a) 158,827
--------------
837,243
--------------
SOFTWARE -- 0.6%
13,553 American Software, Inc., Class A 142,035
4,671 QAD, Inc., Class A 90,010
3,537 Zedge, Inc., Class B (a) 16,235
--------------
248,280
--------------
SPECIALTY RETAIL -- 2.4%
9,477 Big 5 Sporting Goods Corp. 87,852
7,511 Build-A-Bear Workshop, Inc. (a) 100,798
7,694 Citi Trends, Inc. 119,488
10,383 Haverty Furniture Cos., Inc. 187,205
7,413 Kirkland's, Inc. (a) 108,823
7,352 Shoe Carnival, Inc. 184,241
16,330 Sportsman's Warehouse Holdings,
Inc. (a) 131,620
13,970 Stage Stores, Inc. 68,173
15,319 Stein Mart, Inc. 118,263
--------------
1,106,463
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.7%
4,805 Culp, Inc. 132,762
8,447 Movado Group, Inc. 183,131
6,032 Perry Ellis International,
Inc. (a) 121,364
3,603 Rocky Brands, Inc. 41,146
4,362 Superior Uniform Group, Inc. 83,271
7,734 Unifi, Inc. (a) 210,597
--------------
772,271
--------------
THRIFTS & MORTGAGE FINANCE
-- 4.9%
21,864 Bank Mutual Corp. 167,915
15,911 Dime Community Bancshares, Inc. 270,646
4,604 Federal Agricultural Mortgage
Corp., Class C 160,311
4,626 First Defiance Financial Corp. 179,720
10,879 HomeStreet, Inc. (a) 216,710
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE
(CONTINUED)
4,263 Impac Mortgage Holdings,
Inc. (a) (b) $ 66,844
3,555 Meta Financial Group, Inc. 181,163
10,463 OceanFirst Financial Corp. 190,113
4,144 Territorial Bancorp, Inc. 109,692
49,288 TrustCo Bank Corp. NY 315,936
24,489 United Community Financial Corp. 148,893
12,933 Waterstone Financial, Inc. 198,263
--------------
2,206,206
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.9%
24,006 BMC Stock Holdings, Inc. (a) 427,787
6,554 DXP Enterprises, Inc. (a) 97,851
16,290 H&E Equipment Services, Inc. 309,999
8,573 Houston Wire & Cable Co. 45,008
--------------
880,645
--------------
WATER UTILITIES -- 1.6%
8,382 Middlesex Water Co. 363,611
8,645 SJW Corp. 340,440
--------------
704,051
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.5%
10,635 Spok Holdings, Inc. 203,820
--------------
TOTAL COMMON STOCKS -- 100.0% 45,382,898
(Cost $44,356,900) --------------
MONEY MARKET FUNDS -- 0.0%
31,619 Goldman Sachs Financial
Square Treasury Obligations
Fund - Institutional Class -
0.26% (c) (d) 31,619
(Cost $31,619) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.2%
$ 18,908 JPMorgan Chase & Co., 0.30% (c),
dated 06/30/16, due 07/01/16,
with a maturity value of
$18,909. Collateralized by
U.S. Treasury Notes, interest
rates of 2.000% to 2.625%,
due 11/15/20 to 11/30/20.
The value of the collateral
including accrued interest is
$19,323. (d) 18,908
Page 26 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS (CONTINUED)
$ 71,113 RBC Capital Markets LLC,
0.35% (c), dated 06/30/16,
due 07/01/16, with a maturity
value of $71,114.
Collateralized by U.S.
Treasury Notes, interest rate
of 1.500%, due 08/31/18 to
05/31/20. The value of the
collateral including accrued
interest is $72,721. (d) $ 71,113
--------------
TOTAL REPURCHASE AGREEMENTS
-- 0.2% 90,021
(Cost $90,021) --------------
TOTAL INVESTMENTS -- 100.2% 45,504,538
(Cost $44,478,540) (e)
NET OTHER ASSETS AND
LIABILITIES -- (0.2)% (111,353)
--------------
NET ASSETS -- 100.0% $ 45,393,185
==============
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $119,083 and the total value of the collateral held by the
Fund is $121,640.
(c) Interest rate shown reflects yield as of June 30, 2016.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $4,893,139 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $3,867,141.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------
Common Stocks* $45,382,898 $ -- $ --
Money Market
Funds 31,619 -- --
Repurchase
Agreements -- 90,021 --
-----------------------------------------------
Total Investments $45,414,517 $ 90,021 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
---------------------------------
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) $ 119,083
Non-cash Collateral(2) (119,083)
--------------
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 June 30, 2016, 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) $ 90,021
Non-cash Collateral(4) (90,021)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At June 30, 2016, the value of the collateral received from each seller
exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 27
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 2.3%
278,756 Boeing (The) Co. $ 36,202,042
--------------
BANKS -- 0.9%
106,835 F.N.B. Corp. 1,339,711
39,489 Hancock Holding Co. 1,031,058
75,069 Old National Bancorp 940,614
78,374 PacWest Bancorp 3,117,718
7,224 Park National Corp. 663,019
188,915 People's United Financial, Inc. 2,769,494
35,721 Trustmark Corp. 887,667
126,018 Umpqua Holdings Corp. 1,949,498
31,154 United Bankshares, Inc. 1,168,586
--------------
13,867,365
--------------
CAPITAL MARKETS -- 0.5%
224,287 Invesco Ltd. 5,728,290
101,347 Waddell & Reed Financial, Inc.,
Class A 1,745,195
--------------
7,473,485
--------------
CHEMICALS -- 3.0%
127,804 CF Industries Holdings, Inc. 3,080,077
546,554 Dow Chemical (The) Co. 27,169,199
84,860 Huntsman Corp. 1,141,367
200,156 LyondellBasell Industries N.V.,
Class A 14,895,610
78,667 Olin Corp. 1,954,088
--------------
48,240,341
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.2%
184,084 R.R. Donnelley & Sons Co. 3,114,701
--------------
COMMUNICATIONS EQUIPMENT
-- 4.6%
2,549,184 Cisco Systems, Inc. 73,136,089
--------------
CONTAINERS & PACKAGING -- 0.9%
232,978 International Paper Co. 9,873,608
132,961 WestRock Co. 5,168,194
--------------
15,041,802
--------------
DIVERSIFIED CONSUMER SERVICES
-- 0.2%
121,342 H&R Block, Inc. 2,790,866
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 19.7%
3,918,146 AT&T, Inc. 169,303,089
2,539,287 Verizon Communications, Inc. 141,793,786
--------------
311,096,875
--------------
ELECTRIC UTILITIES -- 8.2%
22,652 ALLETE, Inc. 1,463,999
236,082 American Electric Power Co., Inc. 16,546,987
400,993 Duke Energy Corp. 34,401,190
109,784 Entergy Corp. 8,930,928
78,553 Great Plains Energy, Inc. 2,388,011
57,241 Hawaiian Electric Industries,
Inc. 1,876,932
100,113 OGE Energy Corp. 3,278,701
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ELECTRIC UTILITIES (CONTINUED)
51,917 Pinnacle West Capital Corp. $ 4,208,392
375,921 PPL Corp. 14,191,018
592,719 Southern (The) Co. 31,787,520
232,634 Xcel Energy, Inc. 10,417,351
--------------
129,491,029
--------------
ELECTRICAL EQUIPMENT -- 2.0%
234,861 Eaton Corp. PLC 14,028,248
322,532 Emerson Electric Co. 16,823,269
--------------
30,851,517
--------------
FOOD PRODUCTS -- 0.1%
32,694 B&G Foods, Inc. 1,575,851
18,337 Cal-Maine Foods, Inc. 812,696
--------------
2,388,547
--------------
GAS UTILITIES -- 0.3%
12,532 Northwest Natural Gas Co. 812,324
87,571 Questar Corp. 2,221,676
39,703 South Jersey Industries, Inc. 1,255,409
--------------
4,289,409
--------------
HOUSEHOLD DURABLES -- 0.4%
78,624 Garmin Ltd. 3,335,230
22,698 M.D.C. Holdings, Inc. 552,469
33,295 Tupperware Brands Corp. 1,873,843
--------------
5,761,542
--------------
HOUSEHOLD PRODUCTS -- 6.6%
1,224,802 Procter & Gamble (The) Co. 103,703,985
--------------
INSURANCE -- 3.0%
559,462 MetLife, Inc. 22,283,371
136,319 Old Republic International Corp. 2,629,594
132,936 Principal Financial Group, Inc. 5,464,999
228,811 Prudential Financial, Inc. 16,323,377
--------------
46,701,341
--------------
IT SERVICES -- 4.7%
456,062 International Business Machines
Corp. 69,221,090
225,782 Western Union (The) Co. 4,330,499
--------------
73,551,589
--------------
MACHINERY -- 2.1%
326,944 Caterpillar, Inc. 24,785,625
73,817 Cummins, Inc. 8,299,984
35,713 Kennametal, Inc. 789,614
--------------
33,875,223
--------------
COMMON STOCKS (CONTINUED)
MEDIA -- 0.6%
20,233 Meredith Corp. 1,050,295
41,886 Regal Entertainment Group,
Class A 923,167
4,863 Viacom, Inc., Class A 225,741
176,698 Viacom, Inc., Class B 7,327,666
--------------
9,526,869
--------------
METALS & MINING -- 0.1%
16,668 Compass Minerals International,
Inc. 1,236,599
--------------
Page 28 See Notes to Financial Statements
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTILINE RETAIL -- 0.9%
136,767 Kohl's Corp. $ 5,186,205
184,076 Macy's, Inc. 6,186,794
66,504 Nordstrom, Inc. 2,530,477
--------------
13,903,476
--------------
MULTI-UTILITIES -- 5.2%
117,906 Ameren Corp. 6,317,403
29,343 Avista Corp. 1,314,566
270,791 CenterPoint Energy, Inc. 6,498,984
153,525 Consolidated Edison, Inc. 12,349,551
335,878 Dominion Resources, Inc. 26,174,973
88,780 MDU Resources Group, Inc. 2,130,720
22,875 NorthWestern Corp. 1,442,726
266,037 Public Service Enterprise Group,
Inc. 12,399,985
65,931 SCANA Corp. 4,988,339
143,962 WEC Energy Group, Inc. 9,400,719
--------------
83,017,966
--------------
OIL, GAS & CONSUMABLE FUELS
-- 1.1%
123,056 HollyFrontier Corp. 2,925,041
294,389 Valero Energy Corp. 15,013,839
--------------
17,938,880
--------------
PAPER & FOREST PRODUCTS -- 0.1%
36,202 Domtar Corp. 1,267,432
--------------
PERSONAL PRODUCTS -- 0.1%
27,079 Nu Skin Enterprises, Inc.,
Class A 1,250,779
--------------
PHARMACEUTICALS -- 11.1%
1,255,246 Merck & Co., Inc. 72,314,722
2,931,949 Pfizer, Inc. 103,233,924
--------------
175,548,646
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 7.3%
2,186,850 Intel Corp. 71,728,680
65,533 Intersil Corp., Class A 887,317
804,930 QUALCOMM, Inc. 43,120,100
--------------
115,736,097
--------------
SPECIALTY RETAIL -- 1.3%
40,373 Abercrombie & Fitch Co., Class A 719,043
142,723 Best Buy Co., Inc. 4,367,324
15,410 Buckle (The), Inc. 400,506
151,746 Gap (The), Inc. 3,220,050
123,607 L Brands, Inc. 8,297,738
494,986 Staples, Inc. 4,266,779
--------------
21,271,440
--------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 0.8%
39,862 Diebold, Inc. 989,773
868,700 HP, Inc. 10,902,185
--------------
11,891,958
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.3%
135,904 Coach, Inc. $ 5,536,729
--------------
THRIFTS & MORTGAGE FINANCE
-- 0.1%
58,520 Northwest Bancshares, Inc. 867,851
29,784 Provident Financial Services,
Inc. 584,958
--------------
1,452,809
--------------
TOBACCO -- 11.2%
956,863 Altria Group, Inc. 65,985,273
883,596 Philip Morris International, Inc. 89,879,385
390,404 Reynolds American, Inc. 21,054,488
12,264 Universal Corp. 708,123
--------------
177,627,269
--------------
TRADING COMPANIES &
DISTRIBUTORS -- 0.1%
37,863 Aircastle Ltd. 740,600
19,145 GATX Corp. 841,806
--------------
1,582,406
--------------
TOTAL INVESTMENTS -- 100.0% 1,580,367,103
(Cost $1,450,601,875) (a)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 601,057
--------------
NET ASSETS -- 100.0% $1,580,968,160
==============
(a) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $137,961,189 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $8,195,961.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------
Common Stocks* $1,580,367,103 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
See Notes to Financial Statements Page 29
FIRST TRUST US IPO INDEX FUND (FPX)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AUTOMOBILES -- 1.0%
886,988 Fiat Chrysler Automobiles
N.V. (a) $ 5,428,366
--------------
BANKS -- 2.0%
276,335 Citizens Financial Group, Inc. 5,521,173
77,845 First Republic Bank 5,448,372
--------------
10,969,545
--------------
BIOTECHNOLOGY -- 14.8%
844,894 AbbVie, Inc. 52,307,388
55,131 Juno Therapeutics, Inc. (a) (b) 2,119,236
156,469 Shire PLC, ADR 28,802,813
--------------
83,229,437
--------------
BUILDING PRODUCTS -- 1.5%
50,011 Allegion PLC 3,472,264
80,122 Fortune Brands Home & Security,
Inc. 4,644,672
--------------
8,116,936
--------------
CHEMICALS -- 0.6%
124,737 Axalta Coating Systems Ltd. (b) 3,309,273
--------------
COMMUNICATIONS EQUIPMENT
-- 1.7%
100,239 CommScope Holding Co., Inc. (b) 3,110,416
30,968 Lumentum Holdings, Inc. (b) 749,426
46,808 Palo Alto Networks, Inc. (b) 5,740,533
--------------
9,600,375
--------------
CONSTRUCTION MATERIALS -- 0.2%
58,969 Summit Materials, Inc.,
Class A (b) 1,206,506
--------------
CONSUMER FINANCE -- 2.7%
252,705 Ally Financial, Inc. (b) 4,313,675
435,633 Synchrony Financial (b) 11,012,802
--------------
15,326,477
--------------
CONTAINERS & PACKAGING -- 0.4%
63,158 Berry Plastics Group, Inc. (b) 2,453,688
--------------
DIVERSIFIED CONSUMER SERVICES
-- 0.9%
31,186 Bright Horizons Family Solutions,
Inc. (b) 2,067,944
70,910 ServiceMaster Global Holdings,
Inc. (b) 2,822,218
--------------
4,890,162
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.7%
50,339 Bats Global Markets, Inc. (b) 1,293,209
106,546 Voya Financial, Inc. 2,638,079
--------------
3,931,288
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.6%
126,538 Zayo Group Holdings, Inc. (b) 3,534,206
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.3%
86,513 CDW Corp. 3,467,441
113,853 Fitbit, Inc., Class A (a) (b) 1,391,284
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS (CONTINUED)
88,925 Keysight Technologies, Inc. (b) $ 2,586,828
--------------
7,445,553
--------------
FOOD & STAPLES RETAILING -- 0.7%
53,606 Performance Food Group Co. (b) 1,442,537
111,598 US Foods Holding Corp. (b) 2,705,136
--------------
4,147,673
--------------
FOOD PRODUCTS -- 12.3%
102,513 Blue Buffalo Pet Products,
Inc. (a) (b) 2,392,653
635,205 Kraft Heinz (The) Co. 56,202,938
61,030 Pinnacle Foods, Inc. 2,825,079
36,143 Post Holdings, Inc. (b) 2,988,665
92,421 WhiteWave Foods (The) Co. (b) 4,338,242
--------------
68,747,577
--------------
GAS UTILITIES -- 0.3%
27,248 ONE Gas, Inc. 1,814,444
--------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 0.2%
14,795 Nevro Corp. (b) 1,091,279
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 0.4%
74,016 Premier, Inc., Class A (b) 2,420,323
--------------
HEALTH CARE TECHNOLOGY -- 1.2%
172,325 IMS Health Holdings, Inc. (b) 4,370,162
70,400 Veeva Systems, Inc., Class A (b) 2,402,048
--------------
6,772,210
--------------
HOTELS, RESTAURANTS & LEISURE
-- 6.1%
126,850 Aramark 4,239,327
21,814 Dave & Buster's Entertainment,
Inc. (b) 1,020,677
517,046 Hilton Worldwide Holdings, Inc. 11,649,046
118,587 Norwegian Cruise Line Holdings
Ltd. (b) 4,724,506
51,492 Planet Fitness, Inc., Class A (b) 972,169
60,075 Red Rock Resorts, Inc.,
Class A (b) 1,320,449
240,734 Restaurant Brands International,
Inc. (a) 10,014,534
--------------
33,940,708
--------------
HOUSEHOLD PRODUCTS -- 0.3%
32,300 Energizer Holdings, Inc. 1,663,127
--------------
INTERNET & CATALOG RETAIL -- 1.2%
76,116 TripAdvisor, Inc. (b) 4,894,259
44,255 Wayfair, Inc., Class A (a) (b) 1,725,945
--------------
6,620,204
--------------
INTERNET SOFTWARE & SERVICES
-- 12.4%
483,828 Facebook, Inc., Class A (b) 55,291,864
83,879 GoDaddy, Inc., Class A (b) 2,616,186
130,017 Match Group, Inc. (a) (b) 1,960,006
366,665 Twitter, Inc. (b) 6,200,305
Page 30 See Notes to Financial Statements
FIRST TRUST US IPO INDEX FUND (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INTERNET SOFTWARE & SERVICES
(CONTINUED)
93,579 Zillow Group, Inc., Class C (b) $ 3,395,046
--------------
69,463,407
--------------
IT SERVICES -- 8.2%
80,407 Black Knight Financial Services,
Inc., Class A (b) 3,023,303
85,307 CSRA, Inc. 1,998,743
474,087 First Data Corp., Class A (b) 5,248,143
633,153 PayPal Holdings, Inc. (b) 23,116,416
144,757 Sabre Corp. 3,878,040
23,417 Science Applications International
Corp. 1,366,382
175,158 Square, Inc., Class A (b) 1,585,180
99,975 Vantiv, Inc., Class A (b) 5,658,585
--------------
45,874,792
--------------
LEISURE PRODUCTS -- 0.3%
31,726 Vista Outdoor, Inc. (b) 1,514,282
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.5%
28,325 INC Research Holdings, Inc.,
Class A (b) 1,080,032
31,634 PRA Health Sciences, Inc. (b) 1,321,036
62,513 Quintiles Transnational Holdings,
Inc. (b) 4,083,349
68,683 VWR Corp. (b) 1,984,939
--------------
8,469,356
--------------
MACHINERY -- 1.4%
88,659 Allison Transmission Holdings,
Inc. 2,502,843
71,640 Manitowoc Foodservice, Inc. (b) 1,262,297
93,454 Xylem, Inc. 4,172,721
--------------
7,937,861
--------------
MEDIA -- 3.1%
50,902 AMC Entertainment Holdings, Inc.,
Class A 1,405,404
2,998 Cable One, Inc. 1,533,207
60,873 Gannett Co., Inc. 840,656
94,857 Liberty Broadband Corp.,
Class A (b) 5,634,506
174,940 Liberty SiriusXM Group,
Class A (b) 5,486,119
12,781 Madison Square Garden (The) Co.,
Class A (b) 2,204,850
--------------
17,104,742
--------------
OIL, GAS & CONSUMABLE FUELS
-- 2.8%
158,890 Antero Resources Corp. (b) 4,127,962
121,038 Cheniere Energy Partners LP
Holdings LLC 2,412,288
37,457 Diamondback Energy, Inc. (b) 3,416,453
103,437 Parsley Energy, Inc., Class A (b) 2,799,005
53,683 PBF Energy, Inc., Class A 1,276,582
53,099 RSP Permian, Inc. (b) 1,852,624
--------------
15,884,914
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
PERSONAL PRODUCTS -- 0.8%
177,136 Coty, Inc., Class A (a) $ 4,603,765
--------------
PHARMACEUTICALS -- 2.2%
259,212 Zoetis, Inc. 12,302,201
--------------
PROFESSIONAL SERVICES -- 2.3%
188,481 Nielsen Holdings PLC 9,795,358
95,421 TransUnion (b) 3,190,878
--------------
12,986,236
--------------
REAL ESTATE INVESTMENT TRUSTS
-- 3.6%
79,206 Communications Sales & Leasing,
Inc. 2,289,053
105,561 Gaming and Leisure Properties,
Inc. 3,639,743
261,195 MGM Growth Properties LLC,
Class A 6,968,683
250,568 Spirit Realty Capital, Inc. 3,199,753
79,210 STORE Capital Corp. 2,332,735
51,915 Urban Edge Properties 1,550,182
--------------
19,980,149
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.5%
180,749 NXP Semiconductors N.V. (b) 14,159,877
--------------
SOFTWARE -- 2.9%
81,146 CDK Global, Inc. 4,502,791
37,885 Guidewire Software, Inc. (b) 2,339,778
85,120 ServiceNow, Inc. (b) 5,651,968
69,415 Splunk, Inc. (b) 3,760,905
--------------
16,255,442
--------------
SPECIALTY RETAIL -- 1.3%
37,358 Burlington Stores, Inc. (b) 2,492,152
108,503 Michaels Cos., (The), Inc. (b) 3,085,825
20,580 Murphy USA, Inc. (b) 1,526,213
--------------
7,104,190
--------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 2.8%
868,066 Hewlett Packard Enterprise Co. 15,859,566
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.8%
104,797 HD Supply Holdings, Inc. (b) 3,649,032
56,118 NOW, Inc. (b) 1,017,980
--------------
4,667,012
--------------
TOTAL COMMON STOCKS -- 100.0% 560,827,149
--------------
(Cost $523,379,883)
MONEY MARKET FUNDS -- 0.6%
3,441,252 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.26% (c) (d) 3,441,252
(Cost $3,441,252) --------------
See Notes to Financial Statements Page 31
FIRST TRUST US IPO INDEX FUND (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.7%
$ 2,057,918 JPMorgan Chase & Co., 0.30% (c),
dated 06/30/16, due 07/01/16,
with a maturity value of
$2,057,935. Collateralized by
U.S. Treasury Notes, interest
rates of 2.000% to 2.625%, due
11/15/20 to 11/30/20. The
value of the collateral
including accrued interest is
$2,103,040. (d) $ 2,057,918
7,739,676 RBC Capital Markets LLC,
0.35% (c), dated 06/30/16,
due 07/01/16, with a maturity
value of $7,739,751.
Collateralized by U.S.
Treasury Notes, interest rate
of 1.500%, due 08/31/18 to
05/31/20. The value of the
collateral including accrued
interest is $7,914,696. (d) 7,739,676
--------------
TOTAL REPURCHASE AGREEMENTS
-- 1.7% 9,797,594
(Cost $9,797,594) --------------
TOTAL INVESTMENTS -- 102.3% 574,065,995
(Cost $536,618,729) (e)
NET OTHER ASSETS AND
LIABILITIES -- (2.3)% (13,087,634)
--------------
NET ASSETS -- 100.0% $ 560,978,361
==============
(a) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $12,991,750 and the total value of the collateral held by
the Fund is $13,238,846.
(b) Non-income producing security.
(c) Interest rate shown reflects yield as of June 30, 2016.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $64,413,727 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $26,966,461.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------
Common Stocks* $560,827,149 $ -- $ --
Money Market
Funds 3,441,252 -- --
Repurchase
Agreements -- 9,797,594 --
-----------------------------------------------
Total Investments $564,268,401 $ 9,797,594 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
Page 32 See Notes to Financial Statements
FIRST TRUST US IPO INDEX FUND (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
---------------------------------
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) $ 12,991,750
Non-cash Collateral(2) (12,991,750)
--------------
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 June 30, 2016, 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) $ 9,797,594
Non-cash Collateral(4) (9,797,594)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At June 30, 2016, the value of the collateral received from each seller
exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 33
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
BIOTECHNOLOGY -- 79.4%
856,324 ACADIA Pharmaceuticals,
Inc. (a) (b) $ 27,796,277
591,071 Agios Pharmaceuticals,
Inc. (a) (b) 24,762,920
187,369 Alexion Pharmaceuticals, Inc. (b) 21,877,204
724,267 Alkermes PLC (b) 31,302,820
417,247 Alnylam Pharmaceuticals, Inc. (b) 23,153,036
179,467 Amgen, Inc. 27,305,904
106,853 Biogen, Inc. (b) 25,839,192
331,093 BioMarin Pharmaceutical, Inc. (b) 25,759,035
267,506 Celgene Corp. (b) 26,384,117
814,558 Cepheid (b) 25,047,658
291,964 Gilead Sciences, Inc. 24,355,637
1,878,944 Grifols S.A., ADR 31,321,996
369,092 Incyte Corp. (b) 29,519,978
191,885 Intercept Pharmaceuticals,
Inc. (a) (b) 27,378,152
675,726 Ionis Pharmaceuticals,
Inc. (a) (b) 15,737,658
647,885 Juno Therapeutics, Inc. (a) (b) 24,904,699
560,977 Medivation, Inc. (b) 33,826,913
737,053 Myriad Genetics, Inc. (b) 22,553,822
617,037 Neurocrine Biosciences, Inc. (b) 28,044,332
5,248,180 Novavax, Inc. (a) (b) 38,154,269
70,730 Regeneron Pharmaceuticals,
Inc. (b) 24,701,038
749,848 Seattle Genetics, Inc. (a) (b) 30,301,358
248,699 United Therapeutics Corp. (b) 26,342,198
351,030 Vertex Pharmaceuticals, Inc. (b) 30,195,601
--------------
646,565,814
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 17.3%
308,895 Bio-Techne Corp. 34,834,089
356,674 Charles River Laboratories
International, Inc. (b) 29,404,205
165,166 Illumina, Inc. (b) 23,186,003
1,237,457 QIAGEN N.V. (b) 26,988,937
409,728 Quintiles Transnational Holdings,
Inc. (b) 26,763,433
--------------
141,176,667
--------------
PHARMACEUTICALS -- 3.3%
1,896,629 Nektar Therapeutics (b) 26,989,031
--------------
TOTAL COMMON STOCKS -- 100.0% 814,731,512
(Cost $1,049,166,947) --------------
MONEY MARKET FUNDS -- 3.7%
30,015,378 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.26% (c) (d) 30,015,378
(Cost $30,015,378) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 10.5%
$ 17,949,623 JPMorgan Chase & Co.,
0.30% (c), dated 06/30/16, due
07/01/16, with a maturity
value of $17,949,773.
Collateralized by U.S.
Treasury Notes, interest
rates of 2.000% to 2.625%,
due 11/15/20 to 11/30/20. The
value of the collateral
including accrued interest is
$18,343,188. (d) $ 17,949,623
67,507,194 RBC Capital Markets LLC,
0.35% (c), dated 06/30/16, due
07/01/16, with a maturity
value of $67,507,850.
Collateralized by U.S.
Treasury Notes, interest rate
of 1.500%, due 08/31/18 to
05/31/20. The value of the
collateral including accrued
interest is $69,033,762. (d) 67,507,194
--------------
TOTAL REPURCHASE AGREEMENTS
-- 10.5% 85,456,817
(Cost $85,456,817) --------------
TOTAL INVESTMENTS -- 114.2% 930,203,707
(Cost $1,164,639,142) (e)
NET OTHER ASSETS AND
LIABILITIES -- (14.2)% (115,698,742)
--------------
NET ASSETS -- 100.0% $ 814,504,965
==============
(a) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $110,128,123 and the total value of the collateral held by
the Fund is $115,472,195.
(b) Non-income producing security.
(c) Interest rate shown reflects yield as of June 30, 2016.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $15,388,588 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $249,824,023.
ADR - American Depositary Receipt
Page 34 See Notes to Financial Statements
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------
Common Stocks* $814,731,512 $ -- $ --
Money Market
Funds 30,015,378 -- --
Repurchase
Agreements -- 85,456,817 --
-----------------------------------------------
Total Investments $844,746,890 $85,456,817 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
---------------------------------
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) $ 110,128,123
Non-cash Collateral(2) (110,128,123)
--------------
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 June 30, 2016, 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) $ 85,456,817
Non-cash Collateral(4) (85,456,817)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At June 30, 2016, the value of the collateral received from each seller
exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 35
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.1%
CAPITAL MARKETS -- 4.0%
2,483,188 E*TRADE Financial Corp. (a) $ 58,330,086
2,229,235 TD Ameritrade Holding Corp. 63,477,467
--------------
121,807,553
--------------
COMMUNICATIONS EQUIPMENT
-- 5.0%
561,003 Arista Networks, Inc. (a) (b) 36,117,373
2,970,771 Juniper Networks, Inc. 66,812,640
695,640 NETGEAR, Inc. (a) 33,070,725
2,071,274 Sonus Networks, Inc. (a) 17,999,371
--------------
154,000,109
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.1%
5,343,846 Vonage Holdings Corp. (a) 32,597,461
--------------
HEALTH CARE TECHNOLOGY -- 2.7%
3,028,518 Allscripts Healthcare Solutions,
Inc. (a) 38,462,179
1,329,603 Veeva Systems, Inc., Class A (a) 45,366,054
--------------
83,828,233
--------------
INTERNET & CATALOG RETAIL
-- 20.2%
430,543 Amazon.com, Inc. (a) 308,105,182
774,925 Expedia, Inc. 82,374,528
9,156,113 Groupon, Inc. (a) (b) 29,757,367
1,480,798 Netflix, Inc. (a) 135,463,401
988,464 TripAdvisor, Inc. (a) 63,558,235
--------------
619,258,713
--------------
INTERNET SOFTWARE & SERVICES
-- 52.7%
913,061 2U, Inc. (a) (b) 26,853,124
1,362,118 Akamai Technologies, Inc. (a) 76,183,260
212,050 Alphabet, Inc., Class A (a) 149,183,536
213,255 Alphabet, Inc., Class C (a) 147,593,785
1,916,961 Blucora, Inc. (a) 19,859,716
882,597 Cornerstone OnDemand, Inc. (a) 33,591,642
542,897 Demandware, Inc. (a) 40,662,985
3,416,565 EarthLink Holdings Corp. 21,866,016
4,791,582 eBay, Inc. (a) 112,170,935
2,297,211 Endurance International Group
Holdings, Inc. (a) (b) 20,651,927
2,642,548 Facebook, Inc., Class A (a) 301,990,385
972,409 GoDaddy, Inc., Class A (a) 30,329,437
947,650 IAC/InterActiveCorp 53,352,695
663,169 j2 Global, Inc. 41,892,386
697,801 LinkedIn Corp., Class A (a) 132,058,839
3,474,953 Pandora Media, Inc. (a) (b) 43,263,165
1,683,177 Rackspace Hosting, Inc. (a) 35,111,072
2,564,775 TrueCar, Inc. (a) (b) 20,133,484
4,881,971 Twitter, Inc. (a) 82,554,129
814,771 VeriSign, Inc. (a) (b) 70,445,101
1,459,876 Web.com Group, Inc. (a) 26,540,546
3,486,484 Yahoo!, Inc. (a) 130,952,339
--------------
1,617,240,504
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
IT SERVICES -- 4.6%
3,838,439 PayPal Holdings, Inc. (a) $ 140,141,408
--------------
SOFTWARE -- 9.8%
992,803 Citrix Systems, Inc. (a) 79,513,592
610,470 Ebix, Inc. (b) 29,241,513
537,059 NetSuite, Inc. (a) (b) 39,097,895
1,933,573 salesforce.com, Inc. (a) 153,545,032
--------------
301,398,032
--------------
TOTAL COMMON STOCKS
-- 100.1% 3,070,272,013
(Cost $3,135,160,251) --------------
MONEY MARKET FUNDS -- 1.1%
35,078,101 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.26% (c) (d) 35,078,101
167,739 Morgan Stanley Institutional
Liquidity Fund - Treasury
Portfolio - Institutional
Class - 0.26% (c) 167,739
--------------
TOTAL MONEY MARKET FUNDS
-- 1.1% 35,245,840
(Cost $35,245,840) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 3.3%
$ 20,977,203 JPMorgan Chase & Co., 0.30% (c),
dated 06/30/16, due 07/01/16,
with a maturity value of
$20,977,378. Collateralized
by U.S. Treasury Notes,
interest rates of 2.000% to
2.625%, due 11/15/20 to
11/30/20. The value of the
collateral including accrued
interest is $21,437,151. (d) 20,977,203
78,893,697 RBC Capital Markets LLC,
0.35% (c), dated 06/30/16,
due 07/01/16, with a maturity
value of $78,894,464.
Collateralized by U.S.
Treasury Notes, interest rate
of 1.500%, due 08/31/18 to
05/31/20. The value of the
collateral including accrued
interest is $80,677,752. (d) 78,893,697
--------------
TOTAL REPURCHASE AGREEMENTS
-- 3.3% 99,870,900
(Cost $99,870,900) --------------
TOTAL INVESTMENTS -- 104.5% 3,205,388,753
(Cost $3,270,276,991) (e)
NET OTHER ASSETS AND
LIABILITIES -- (4.5)% (137,059,244)
--------------
NET ASSETS -- 100.0% $3,068,329,509
==============
Page 36 See Notes to Financial Statements
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $133,060,299 and the total value of the collateral held by
the Fund is $134,949,001.
(c) Interest rate shown reflects yield as of June 30, 2016.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $274,325,264 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $339,213,502.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------
Common Stocks* $3,070,272,013 $ -- $ --
Money Market
Funds 35,245,840 -- --
Repurchase
Agreements -- 99,870,900 --
-----------------------------------------------
Total Investments $3,105,517,853 $99,870,900 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
---------------------------------
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) $ 133,060,299
Non-cash Collateral(2) (133,060,299)
--------------
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 June 30, 2016, 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) $ 99,870,900
Non-cash Collateral(4) (99,870,900)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At June 30, 2016, the value of the collateral received from each seller
exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 37
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 10.6%
32,772 General Dynamics Corp. $ 4,563,173
38,541 Honeywell International, Inc. 4,483,089
19,565 Lockheed Martin Corp. 4,855,446
21,884 Northrop Grumman Corp. 4,864,376
35,152 Raytheon Co. 4,778,914
--------------
23,544,998
--------------
AIR FREIGHT & LOGISTICS -- 2.0%
41,860 United Parcel Service, Inc.,
Class B 4,509,159
--------------
BEVERAGES -- 4.0%
95,834 Coca-Cola (The) Co. 4,344,155
42,574 PepsiCo, Inc. 4,510,290
--------------
8,854,445
--------------
CAPITAL MARKETS -- 1.9%
57,728 T. Rowe Price Group, Inc. 4,212,412
--------------
CHEMICALS -- 1.8%
38,300 PPG Industries, Inc. 3,988,945
--------------
ELECTRICAL EQUIPMENT -- 3.8%
79,861 Emerson Electric Co. 4,165,550
37,805 Rockwell Automation, Inc. 4,340,770
--------------
8,506,320
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.9%
75,212 Amphenol Corp., Class A 4,311,904
--------------
FOOD & STAPLES RETAILING -- 6.1%
28,843 Costco Wholesale Corp. 4,529,505
119,695 Kroger (The) Co. 4,403,579
63,972 Wal-Mart Stores, Inc. 4,671,235
--------------
13,604,319
--------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 2.2%
40,236 Stryker Corp. 4,821,480
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 4.1%
52,438 Cardinal Health, Inc. 4,090,688
34,697 UnitedHealth Group, Inc. 4,899,217
--------------
8,989,905
--------------
HOTELS, RESTAURANTS & LEISURE
-- 3.8%
34,574 McDonald's Corp. 4,160,635
73,011 Starbucks Corp. 4,170,388
--------------
8,331,023
--------------
HOUSEHOLD PRODUCTS -- 2.1%
62,006 Colgate-Palmolive Co. 4,538,839
--------------
INDUSTRIAL CONGLOMERATES -- 2.1%
26,176 3M Co. 4,583,941
--------------
INSURANCE -- 4.2%
70,891 Marsh & McLennan Cos., Inc. 4,853,198
132,155 Progressive (The) Corp. 4,427,192
--------------
9,280,390
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
IT SERVICES -- 9.7%
38,477 Accenture PLC, Class A $ 4,359,059
49,006 Automatic Data Processing, Inc. 4,502,181
29,119 International Business Machines
Corp. 4,419,682
45,696 MasterCard, Inc., Class A 4,023,990
55,169 Visa, Inc., Class A 4,091,885
--------------
21,396,797
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 2.1%
32,530 Waters Corp. (a) 4,575,345
--------------
MACHINERY -- 5.7%
42,124 Illinois Tool Works, Inc. 4,387,636
79,203 PACCAR, Inc. 4,108,260
38,849 Parker-Hannifin Corp. 4,197,634
--------------
12,693,530
--------------
MEDIA -- 5.9%
187,359 Interpublic Group of Cos. (The),
Inc. 4,327,993
52,407 Omnicom Group, Inc. 4,270,646
44,811 Walt Disney (The) Co. 4,383,412
--------------
12,982,051
--------------
MULTILINE RETAIL -- 1.7%
53,486 Target Corp. 3,734,393
--------------
PERSONAL PRODUCTS -- 1.9%
46,529 Estee Lauder (The) Cos., Inc.,
Class A 4,235,070
--------------
PHARMACEUTICALS -- 2.2%
40,097 Johnson & Johnson 4,863,766
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 6.2%
98,307 Linear Technology Corp. 4,574,224
74,969 Texas Instruments, Inc. 4,696,808
96,021 Xilinx, Inc. 4,429,449
--------------
13,700,481
--------------
SOFTWARE -- 2.0%
107,702 Oracle Corp. 4,408,243
--------------
SPECIALTY RETAIL -- 5.7%
71,953 Foot Locker, Inc. 3,947,342
32,723 Home Depot (The), Inc. 4,178,400
57,153 TJX (The) Cos., Inc. 4,413,926
--------------
12,539,668
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.9%
74,251 NIKE, Inc., Class B 4,098,655
--------------
TOBACCO -- 4.4%
71,627 Altria Group, Inc. 4,939,398
90,643 Reynolds American, Inc. 4,888,377
--------------
9,827,775
--------------
Page 38 See Notes to Financial Statements
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
DESCRIPTION VALUE
------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 221,133,854
(Cost $205,106,598) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 2,571
--------------
NET ASSETS -- 100.0% $ 221,136,425
==============
(a) Non-income producing security.
(b) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $19,181,795 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $3,154,539.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------
Common Stocks* $221,133,854 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
See Notes to Financial Statements Page 39
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 2.6%
82,296 Boeing (The) Co. $ 10,687,781
77,525 General Dynamics Corp. 10,794,581
45,780 Lockheed Martin Corp. 11,361,223
81,039 Raytheon Co. 11,017,252
107,424 United Technologies Corp. 11,016,331
--------------
54,877,168
--------------
AIR FREIGHT & LOGISTICS -- 1.1%
150,599 C.H. Robinson Worldwide, Inc. 11,181,976
102,965 United Parcel Service, Inc.,
Class B 11,091,390
--------------
22,273,366
--------------
AUTOMOBILES -- 0.5%
103,253 Toyota Motor Corp., ADR 10,324,268
--------------
BANKS -- 7.1%
160,252 Bank of Hawaii Corp. 11,025,338
170,729 Bank of Montreal 10,822,511
215,057 Bank of Nova Scotia (The) 10,539,944
305,501 BB&T Corp. 10,878,891
137,116 Canadian Imperial Bank of
Commerce 10,293,298
170,834 Cullen/Frost Bankers, Inc. 10,887,251
93,060 M&T Bank Corp. 11,002,484
120,251 Park National Corp. 11,036,637
713,112 People's United Financial, Inc. 10,454,222
130,021 PNC Financial Services Group
(The), Inc. 10,582,409
179,236 Royal Bank of Canada 10,591,055
250,221 Toronto-Dominion (The) Bank 10,741,987
265,047 U.S. Bancorp 10,689,345
232,786 Wells Fargo & Co. 11,017,761
--------------
150,563,133
--------------
BEVERAGES -- 2.7%
86,404 Anheuser-Busch InBev S.A./N.V.,
ADR 11,377,679
242,892 Coca-Cola (The) Co. 11,010,294
102,489 Diageo PLC, ADR 11,568,958
118,784 Dr Pepper Snapple Group, Inc. 11,478,098
105,690 PepsiCo, Inc. 11,196,799
--------------
56,631,828
--------------
BIOTECHNOLOGY -- 0.5%
72,521 Amgen, Inc. 11,034,070
--------------
CAPITAL MARKETS -- 1.6%
31,358 BlackRock, Inc. 10,741,056
323,611 Franklin Resources, Inc. 10,798,899
151,300 T. Rowe Price Group, Inc. 11,040,361
--------------
32,580,316
--------------
CHEMICALS -- 1.5%
75,846 Air Products and Chemicals, Inc. 10,773,166
161,725 E.I. du Pont de Nemours and Co. 10,479,780
96,998 Praxair, Inc. 10,901,605
--------------
32,154,551
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.1%
220,933 Republic Services, Inc. $ 11,336,072
174,593 Waste Management, Inc. 11,570,278
--------------
22,906,350
--------------
COMMUNICATIONS EQUIPMENT
-- 1.5%
379,338 Cisco Systems, Inc. 10,883,207
131,355 Harris Corp. 10,960,261
159,836 Motorola Solutions, Inc. 10,544,381
--------------
32,387,849
--------------
CONTAINERS & PACKAGING -- 1.1%
214,286 Bemis Co., Inc. 11,033,586
226,603 Sonoco Products Co. 11,253,105
--------------
22,286,691
--------------
DISTRIBUTORS -- 0.5%
111,929 Genuine Parts Co. 11,332,811
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.5%
116,175 CME Group, Inc. 11,315,445
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.6%
267,889 AT&T, Inc. 11,575,484
336,262 TELUS Corp. 10,827,636
203,205 Verizon Communications, Inc. 11,346,967
--------------
33,750,087
--------------
ELECTRIC UTILITIES -- 11.3%
176,810 ALLETE, Inc. 11,427,230
280,926 Alliant Energy Corp. 11,152,762
163,561 American Electric Power Co., Inc. 11,463,991
244,284 Brookfield Infrastructure
Partners L.P. (a) 11,056,294
133,225 Duke Energy Corp. 11,429,373
147,763 Edison International 11,476,752
239,518 El Paso Electric Co. 11,322,016
323,707 Empire District Electric (The)
Co. 10,996,327
192,280 Eversource Energy 11,517,572
322,365 Hawaiian Electric Industries,
Inc. 10,570,348
145,624 IDACORP, Inc. 11,846,512
199,322 MGE Energy, Inc. 11,264,683
87,943 NextEra Energy, Inc. 11,467,767
352,530 OGE Energy Corp. 11,545,358
343,970 Otter Tail Corp. 11,519,555
140,999 Pinnacle West Capital Corp. 11,429,379
257,604 Portland General Electric Co. 11,365,488
275,322 PPL Corp. 10,393,406
214,473 Southern (The) Co. 11,502,187
195,790 Westar Energy, Inc. 10,981,861
255,561 Xcel Energy, Inc. 11,444,022
--------------
237,172,883
--------------
ELECTRICAL EQUIPMENT -- 1.5%
175,389 Eaton Corp. PLC 10,475,985
204,728 Emerson Electric Co. 10,678,613
107,164 Hubbell, Inc. 11,302,587
--------------
32,457,185
--------------
Page 40 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ENERGY EQUIPMENT & SERVICES
-- 0.5%
140,802 Schlumberger Ltd. $ 11,134,622
--------------
FOOD & STAPLES RETAILING -- 1.6%
218,710 Sysco Corp. 11,097,345
153,652 Wal-Mart Stores, Inc. 11,219,669
220,034 Weis Markets, Inc. 11,122,719
--------------
33,439,733
--------------
FOOD PRODUCTS -- 3.3%
257,364 Archer-Daniels-Midland Co. 11,038,342
232,055 ConAgra Foods, Inc. 11,094,549
165,833 General Mills, Inc. 11,827,210
113,036 Hershey (The) Co. 12,828,456
142,142 Kellogg Co. 11,605,894
127,781 Kraft Heinz (The) Co. 11,306,063
--------------
69,700,514
--------------
GAS UTILITIES -- 4.9%
143,415 Atmos Energy Corp. 11,662,508
297,435 New Jersey Resources Corp. 11,466,119
180,719 Northwest Natural Gas Co. 11,714,206
182,558 Piedmont Natural Gas Co., Inc. 10,975,387
436,987 Questar Corp. 11,086,360
362,822 South Jersey Industries, Inc. 11,472,432
161,866 Spire, Inc. 11,466,587
251,493 UGI Corp. 11,380,058
161,606 WGL Holdings, Inc. 11,440,089
--------------
102,663,746
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 0.5%
289,400 Abbott Laboratories 11,376,314
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.1%
142,839 Cardinal Health, Inc. 11,142,870
297,196 Owens & Minor, Inc. 11,109,187
--------------
22,252,057
--------------
HOTELS, RESTAURANTS & LEISURE
-- 1.0%
65,407 Cracker Barrel Old Country Store,
Inc. 11,215,338
88,518 McDonald's Corp. 10,652,256
--------------
21,867,594
--------------
HOUSEHOLD DURABLES -- 1.0%
256,924 Garmin Ltd. 10,898,716
216,508 Leggett & Platt, Inc. 11,065,724
--------------
21,964,440
--------------
HOUSEHOLD PRODUCTS -- 2.1%
82,560 Clorox (The) Co. 11,425,479
152,487 Colgate-Palmolive Co. 11,162,048
82,216 Kimberly-Clark Corp. 11,303,056
131,557 Procter & Gamble (The) Co. 11,138,931
--------------
45,029,514
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 0.5%
63,794 3M Co. $ 11,171,605
--------------
INSURANCE -- 6.5%
233,445 Arthur J. Gallagher & Co. 11,111,982
127,413 Assurant, Inc. 10,997,016
207,030 Axis Capital Holdings Ltd. 11,386,650
87,600 Chubb Ltd. 11,450,196
156,717 Cincinnati Financial Corp. 11,736,536
167,055 Endurance Specialty Holdings Ltd. 11,219,414
113,220 Erie Indemnity Co., Class A 11,247,275
62,385 Everest Re Group, Ltd. 11,395,868
132,191 Hanover Insurance Group (The),
Inc. 11,186,002
212,967 Mercury General Corp. 11,321,326
343,012 Progressive (The) Corp. 11,490,902
97,008 Travelers (The) Cos., Inc. 11,547,832
--------------
136,090,999
--------------
IT SERVICES -- 1.6%
122,705 Automatic Data Processing, Inc. 11,272,908
71,122 International Business Machines
Corp. 10,794,897
197,699 Paychex, Inc. 11,763,091
--------------
33,830,896
--------------
LEISURE PRODUCTS -- 0.5%
336,978 Mattel, Inc. 10,544,042
--------------
MACHINERY -- 2.0%
142,931 Caterpillar, Inc. 10,835,599
127,649 Deere & Co. 10,344,675
153,332 Dover Corp. 10,628,975
96,024 Parker-Hannifin Corp. 10,375,393
--------------
42,184,642
--------------
MEDIA -- 2.0%
131,697 Omnicom Group, Inc. 10,731,988
575,898 Shaw Communications, Inc.,
Class B 11,057,242
263,951 Thomson Reuters Corp. 10,668,899
97,144 WPP PLC, ADR 10,153,491
--------------
42,611,620
--------------
MULTILINE RETAIL -- 1.1%
298,156 Kohl's Corp. 11,306,076
160,692 Target Corp. 11,219,515
--------------
22,525,591
--------------
MULTI-UTILITIES -- 6.5%
212,742 Ameren Corp. 11,398,716
257,783 Avista Corp. 11,548,678
175,250 Black Hills Corp. 11,047,760
250,810 CMS Energy Corp. 11,502,147
141,598 Consolidated Edison, Inc. 11,390,143
146,921 Dominion Resources, Inc. 11,449,554
116,342 DTE Energy Co. 11,531,819
465,083 MDU Resources Group, Inc. 11,161,992
246,229 Public Service Enterprise Group,
Inc. 11,476,734
153,099 SCANA Corp. 11,583,470
See Notes to Financial Statements Page 41
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTI-UTILITIES (CONTINUED)
212,967 Vectren Corp. $ 11,216,972
173,581 WEC Energy Group, Inc. 11,334,839
--------------
136,642,824
--------------
OIL, GAS & CONSUMABLE FUELS
-- 3.2%
106,463 Chevron Corp. 11,160,516
260,044 Enbridge, Inc. 11,015,464
119,899 Exxon Mobil Corp. 11,239,332
202,758 Royal Dutch Shell PLC, Class B,
ADR 11,354,448
227,743 TOTAL S.A., ADR 10,954,439
249,431 TransCanada Corp. 11,279,270
--------------
67,003,469
--------------
PERSONAL PRODUCTS -- 0.6%
241,051 Unilever PLC, ADR 11,548,753
--------------
PHARMACEUTICALS -- 5.4%
384,405 AstraZeneca PLC, ADR 11,605,187
153,950 Bristol-Myers Squibb Co. 11,323,022
149,078 Eli Lilly and Co. 11,739,893
263,302 GlaxoSmithKline PLC, ADR 11,411,509
93,738 Johnson & Johnson 11,370,419
194,599 Merck & Co., Inc. 11,210,848
138,874 Novartis AG, ADR 11,458,494
316,657 Pfizer, Inc. 11,149,493
279,415 Sanofi, ADR 11,693,518
210,216 Teva Pharmaceutical Industries
Ltd., ADR 10,559,150
--------------
113,521,533
--------------
PROFESSIONAL SERVICES -- 1.0%
203,825 Nielsen Holdings PLC 10,592,785
276,996 Robert Half International, Inc. 10,570,168
--------------
21,162,953
--------------
REAL ESTATE INVESTMENT TRUSTS
-- 2.7%
62,793 AvalonBay Communities, Inc. 11,327,229
69,730 Federal Realty Investment Trust 11,543,801
45,347 Public Storage 11,590,240
171,363 Realty Income Corp. 11,885,738
52,779 Simon Property Group, Inc. 11,447,765
--------------
57,794,773
--------------
ROAD & RAIL -- 1.0%
127,560 Norfolk Southern Corp. 10,859,183
124,010 Union Pacific Corp. 10,819,872
--------------
21,679,055
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.6%
192,380 Analog Devices, Inc. 10,896,403
339,603 Intel Corp. 11,138,979
233,889 Linear Technology Corp. 10,882,855
210,615 Microchip Technology, Inc. 10,690,817
202,721 QUALCOMM, Inc. 10,859,764
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (CONTINUED)
414,292 Taiwan Semiconductor
Manufacturing Co., Ltd., ADR $ 10,866,879
176,170 Texas Instruments, Inc. 11,037,051
--------------
76,372,748
--------------
SOFTWARE -- 1.1%
330,654 CA, Inc. 10,855,371
218,192 Microsoft Corp. 11,164,885
--------------
22,020,256
--------------
SPECIALTY RETAIL -- 0.5%
85,602 Home Depot (The), Inc. 10,930,519
--------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 1.0%
114,886 Apple, Inc. 10,983,101
376,203 Canon, Inc., ADR 10,763,168
--------------
21,746,269
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.5%
169,324 VF Corp. 10,411,733
--------------
THRIFTS & MORTGAGE FINANCE
-- 1.1%
814,676 Capitol Federal Financial, Inc. 11,364,730
760,783 Northwest Bancshares, Inc. 11,282,412
--------------
22,647,142
--------------
TOBACCO -- 2.2%
165,833 Altria Group, Inc. 11,435,844
88,667 British American Tobacco PLC,
ADR 11,480,603
107,580 Philip Morris International, Inc. 10,943,038
214,079 Reynolds American, Inc. 11,545,280
--------------
45,404,765
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 2.1%
242,550 Fastenal Co. 10,766,794
149,988 MSC Industrial Direct Co., Inc.,
Class A 10,583,153
49,027 W.W. Grainger, Inc. 11,141,386
81,046 Watsco, Inc. 11,402,362
--------------
43,893,695
--------------
WATER UTILITIES -- 0.6%
267,114 American States Water Co. 11,704,936
--------------
TOTAL INVESTMENTS -- 100.0% 2,106,921,353
(Cost $1,888,546,941) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 803,603
--------------
NET ASSETS -- 100.0% $2,107,724,956
==============
Page 42 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
(a) Master Limited Partnership ("MLP").
(b) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $231,488,752 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $13,114,340.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------
Common Stocks* $2,106,921,353 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
See Notes to Financial Statements Page 43
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 2.0%
7,470 HEICO Corp. $ 499,071
4,198 Honeywell International, Inc. 488,311
--------------
987,382
--------------
AIRLINES -- 1.0%
12,932 Hawaiian Holdings, Inc. (a) 490,899
--------------
AUTOMOBILES -- 1.0%
7,986 Thor Industries, Inc. 517,014
--------------
BANKS -- 1.0%
10,428 Commerce Bancshares, Inc. 499,501
--------------
BEVERAGES -- 4.1%
3,185 Constellation Brands, Inc.,
Class A 526,799
4,864 Molson Coors Brewing Co.,
Class B 491,896
16,428 National Beverage Corp. (a) 1,031,843
--------------
2,050,538
--------------
BUILDING PRODUCTS -- 3.0%
17,276 AAON, Inc. 475,263
7,701 American Woodmark Corp. (a) 511,192
5,560 Universal Forest Products, Inc. 515,357
--------------
1,501,812
--------------
CHEMICALS -- 0.9%
3,102 Air Products and Chemicals, Inc. 440,608
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 3.2%
10,869 Copart, Inc. (a) 532,690
6,297 G&K Services, Inc., Class A 482,161
8,265 Waste Management, Inc. 547,721
--------------
1,562,572
--------------
CONTAINERS & PACKAGING -- 2.1%
6,910 Avery Dennison Corp. 516,523
10,194 Sonoco Products Co. 506,234
--------------
1,022,757
--------------
DISTRIBUTORS -- 1.0%
4,737 Genuine Parts Co. 479,621
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.1%
12,051 AT&T, Inc. 520,724
--------------
ELECTRIC UTILITIES -- 2.1%
13,312 Alliant Energy Corp. 528,486
11,824 Xcel Energy, Inc. 529,479
--------------
1,057,965
--------------
ELECTRICAL EQUIPMENT -- 1.0%
1,972 Acuity Brands, Inc. 488,977
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 4.7%
4,837 Coherent, Inc. (a) 443,940
11,311 Itron, Inc. (a) 487,504
19,071 Orbotech Ltd. (a) 487,264
6,282 Tech Data Corp. (a) 451,362
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS (CONTINUED)
18,407 Trimble Navigation Ltd. (a) $ 448,394
--------------
2,318,464
--------------
FOOD & STAPLES RETAILING -- 1.0%
9,914 Sysco Corp. 503,036
--------------
FOOD PRODUCTS -- 3.1%
7,405 Calavo Growers, Inc. 496,135
7,520 Campbell Soup Co. 500,306
4,920 McCormick & Co., Inc. 524,816
--------------
1,521,257
--------------
GAS UTILITIES -- 3.4%
7,499 Southwest Gas Corp. 590,246
8,123 Spire, Inc. 575,434
11,748 UGI Corp. 531,597
--------------
1,697,277
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 9.9%
2,925 Becton, Dickinson and Co. 496,051
2,305 C. R. Bard, Inc. 542,044
6,915 Cantel Medical Corp. 475,268
40,819 CryoLife, Inc. 482,072
6,872 Edwards Lifesciences Corp. (a) 685,345
4,629 Stryker Corp. 554,693
3,200 Teleflex, Inc. 567,392
6,965 West Pharmaceutical Services,
Inc. 528,504
4,650 Zimmer Biomet Holdings, Inc. 559,767
--------------
4,891,136
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.1%
10,049 Amedisys, Inc. (a) 507,274
10,226 Patterson Cos., Inc. 489,723
7,840 VCA, Inc. (a) 530,062
--------------
1,527,059
--------------
HOTELS, RESTAURANTS & LEISURE
-- 0.9%
17,183 Sonic Corp. 464,800
--------------
HOUSEHOLD DURABLES -- 1.1%
7,846 Universal Electronics, Inc. (a) 567,109
--------------
HOUSEHOLD PRODUCTS -- 3.0%
22,258 Central Garden & Pet Co. (a) 508,150
3,797 Clorox (The) Co. 525,467
3,334 Kimberly-Clark Corp. 458,358
--------------
1,491,975
--------------
INDUSTRIAL CONGLOMERATES -- 1.0%
2,944 3M Co. 515,553
--------------
INSURANCE -- 1.0%
5,093 Erie Indemnity Co., Class A 505,939
--------------
IT SERVICES -- 6.1%
4,349 Accenture PLC, Class A 492,698
5,453 Automatic Data Processing, Inc. 500,967
13,992 CSG Systems International, Inc. 564,018
Page 44 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
IT SERVICES (CONTINUED)
6,742 Fidelity National Information
Services, Inc. $ 496,751
6,759 Global Payments, Inc. 482,457
9,271 Total System Services, Inc. 492,383
--------------
3,029,274
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 3.8%
4,430 Bio-Techne Corp. 499,571
16,077 Bruker Corp. 365,591
5,988 Charles River Laboratories
International, Inc. (a) 493,651
3,403 Thermo Fisher Scientific, Inc. 502,827
--------------
1,861,640
--------------
MACHINERY -- 2.1%
8,825 Astec Industries, Inc. 495,524
11,642 Xylem, Inc. 519,815
--------------
1,015,339
--------------
MEDIA -- 0.9%
5,496 Omnicom Group, Inc. 447,869
--------------
METALS & MINING -- 2.1%
24,871 Barrick Gold Corp. 530,996
7,280 Royal Gold, Inc. 524,305
--------------
1,055,301
--------------
MULTI-UTILITIES -- 2.2%
12,165 Avista Corp. 544,992
8,289 WEC Energy Group, Inc. 541,272
--------------
1,086,264
--------------
OIL, GAS & CONSUMABLE FUELS
-- 1.0%
10,674 ONEOK, Inc. 506,481
--------------
PHARMACEUTICALS -- 2.0%
4,044 Johnson & Johnson 490,537
14,245 Pfizer, Inc. 501,567
--------------
992,104
--------------
PROFESSIONAL SERVICES -- 2.1%
3,957 Equifax, Inc. 508,079
7,125 Insperity, Inc. 550,264
--------------
1,058,343
--------------
REAL ESTATE INVESTMENT TRUSTS
-- 5.3%
5,403 Digital Realty Trust, Inc. 588,873
3,278 Federal Realty Investment Trust 542,673
18,155 Mack-Cali Realty Corp. 490,185
23,381 Pennsylvania Real Estate
Investment Trust 501,522
7,610 Realty Income Corp. 527,830
--------------
2,651,083
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 4.1%
20,798 Applied Materials, Inc. $ 498,528
3,079 Broadcom Ltd. 478,477
18,236 CEVA, Inc. (a) 495,472
11,427 NVIDIA Corp. 537,183
--------------
2,009,660
--------------
SOFTWARE -- 4.1%
5,290 Adobe Systems, Inc. (a) 506,729
19,286 Cadence Design Systems, Inc. (a) 468,650
4,938 Fair Isaac Corp. 558,043
6,051 salesforce.com, Inc. (a) 480,510
--------------
2,013,932
--------------
SPECIALTY RETAIL -- 1.0%
2,046 Ulta Salon, Cosmetics & Fragrance,
Inc. (a) 498,487
--------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 1.0%
36,485 3D Systems Corp. (a) 499,480
--------------
TOBACCO -- 2.3%
8,046 Altria Group, Inc. 554,852
10,903 Reynolds American, Inc. 587,999
--------------
1,142,851
--------------
WATER UTILITIES -- 3.2%
15,392 California Water Service Group 537,642
9,374 Connecticut Water Service, Inc. 526,819
12,544 Middlesex Water Co. 544,159
--------------
1,608,620
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 1.0%
17,391 Telephone and Data Systems, Inc. 515,817
--------------
TOTAL INVESTMENTS -- 100.0% 49,616,520
(Cost $46,931,492) (b)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (18,081)
--------------
NET ASSETS -- 100.0% $ 49,598,439
==============
(a) Non-income producing security.
(b) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $3,103,729 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $418,701.
See Notes to Financial Statements Page 45
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------
Common Stocks* $49,616,520 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
Page 46 See Notes to Financial Statements
This page intentionally left blank.
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2016 (UNAUDITED)
FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR FIRST TRUST
MICROCAP DIVIDEND LEADERS US IPO
INDEX FUND INDEX FUND INDEX FUND
(FDM) (FDL) (FPX)
---------------- ------------------ ----------------
ASSETS:
Investments, at value............................................... $ 45,414,517 $1,580,367,103 $ 564,268,401
Repurchase agreements, at value..................................... 90,021 -- 9,797,594
Cash................................................................ -- -- --
Receivables:
Capital shares sold........................................... -- 1,301,569 --
Investment securities sold.................................... 227,262 3,064,350 --
Dividends..................................................... 130,640 3,890,751 672,416
Securities lending income..................................... 1,397 -- 49,829
Interest...................................................... -- -- --
Reclaims...................................................... -- -- 6,391
Prepaid expenses.................................................... 13,196 6,350 4,475
-------------- -------------- --------------
TOTAL ASSETS.................................................. 45,877,033 1,588,630,123 574,799,106
-------------- -------------- --------------
LIABILITIES:
Due to custodian.................................................... 169,771 848,625 98,615
Payables:
Capital shares redeemed....................................... -- -- --
Investment securities purchased............................... 152,367 5,874,930 --
Investment advisory fees...................................... 9,188 307,094 163,339
Collateral for securities on loan............................. 121,640 -- 13,238,846
Audit and tax fees............................................ 17,108 17,109 17,109
Printing fees................................................. 3,381 37,426 37,371
Trustees' fees................................................ 53 -- 73
Licensing fees................................................ -- 333,874 132,036
Other liabilities................................................... 10,340 242,905 133,356
-------------- -------------- --------------
TOTAL LIABILITIES............................................. 483,848 7,661,963 13,820,745
-------------- -------------- --------------
NET ASSETS.......................................................... $ 45,393,185 $1,580,968,160 $ 560,978,361
============== ============== ==============
NET ASSETS CONSIST OF:
Paid-in capital..................................................... $ 66,522,708 $1,446,922,350 $ 567,276,823
Par value........................................................... 13,550 589,500 111,000
Accumulated net investment income (loss)............................ 98,127 1,854,528 50,687
Accumulated net realized gain (loss) on investments and
foreign currency transactions.................................... (22,267,198) 1,836,554 (43,907,415)
Net unrealized appreciation (depreciation) on investments........... 1,025,998 129,765,228 37,447,266
-------------- -------------- --------------
NET ASSETS.......................................................... $ 45,393,185 $1,580,968,160 $ 560,978,361
============== ============== ==============
NET ASSET VALUE, per share.......................................... $ 33.50 $ 26.82 $ 50.54
============== ============== ==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)....................................... 1,355,000 58,950,002 11,100,002
============== ============== ==============
Investments, at cost................................................ $ 44,388,519 $1,450,601,875 $ 526,821,135
============== ============== ==============
Repurchase agreements, at cost...................................... $ 90,021 $ -- $ 9,797,594
============== ============== ==============
Securities on loan, at value........................................ $ 119,083 $ -- $ 12,991,750
============== ============== ==============
Page 48 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NYSE ARCA DOW JONES CAPITAL VALUE LINE(R) VALUE LINE(R) 100
BIOTECHNOLOGY INTERNET STRENGTH DIVIDEND EXCHANGE-TRADED
INDEX FUND INDEX FUND ETF INDEX FUND FUND
(FBT) (FDN) (FTCS) (FVD) (FVL)
----------------- ----------------- ----------------- ----------------- -----------------
$ 844,746,890 $ 3,105,517,853 $ 221,133,854 $ 2,106,921,353 $ 49,616,520
85,456,817 99,870,900 -- -- --
485,463 -- -- -- --
-- -- -- 53,368,194 --
-- 10,517,727 -- 21,307,694 --
-- 171,477 274,146 4,156,181 57,379
49,602 70,924 -- -- --
-- 55 -- -- --
69,324 -- -- 191,918 911
14,115 16,698 508 6,978 2,700
--------------- --------------- --------------- --------------- ---------------
930,822,211 3,216,165,634 221,408,508 2,185,952,318 49,677,510
--------------- --------------- --------------- --------------- ---------------
-- 938 95,541 583,497 1,078
-- 10,510,447 -- -- --
-- -- -- 75,920,913 --
277,822 1,030,429 98,050 692,697 10,385
115,472,195 134,949,001 -- -- --
17,109 17,109 17,108 17,109 17,108
110,025 156,236 8,091 46,202 3,453
102 49 42 -- 55
170,463 470,571 8,844 670,058 19,178
269,530 701,345 44,407 296,886 27,814
--------------- --------------- --------------- --------------- ---------------
116,317,246 147,836,125 272,083 78,227,362 79,071
--------------- --------------- --------------- --------------- ---------------
$ 814,504,965 $ 3,068,329,509 $ 221,136,425 $ 2,107,724,956 $ 49,598,439
=============== =============== =============== =============== ===============
$ 1,560,928,956 $ 3,054,408,245 $ 234,041,803 $ 1,934,369,944 $ 131,237,063
91,000 425,500 55,500 782,380 24,400
(1,881,283) (5,560,966) 42,454 1,681,622 12,085
(510,198,273) 83,944,968 (29,030,588) (47,483,402) (84,360,137)
(234,435,435) (64,888,238) 16,027,256 218,374,412 2,685,028
--------------- --------------- --------------- --------------- ---------------
$ 814,504,965 $ 3,068,329,509 $ 221,136,425 $ 2,107,724,956 $ 49,598,439
=============== =============== =============== =============== ===============
$ 89.51 $ 72.11 $ 39.84 $ 26.94 $ 20.33
=============== =============== =============== =============== ===============
9,100,002 42,550,002 5,550,002 78,237,986 2,439,982
=============== =============== =============== =============== ===============
$ 1,079,182,325 $ 3,170,406,091 $ 205,106,598 $ 1,888,546,941 $ 46,931,492
=============== =============== =============== =============== ===============
$ 85,456,817 $ 99,870,900 $ -- $ -- $ --
=============== =============== =============== =============== ===============
$ 110,128,123 $ 133,060,299 $ -- $ -- $ --
=============== =============== =============== =============== ===============
See Notes to Financial Statements Page 49
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2016 (UNAUDITED)
FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR FIRST TRUST
MICROCAP DIVIDEND LEADERS US IPO
INDEX FUND INDEX FUND INDEX FUND
(FDM) (FDL) (FPX)
---------------- ------------------ ----------------
INVESTMENT INCOME:
Dividends........................................................... $ 570,281 $ 23,213,502 $ 4,038,872
Securities lending income (net of fees)............................. 1,397 -- 507,144
Interest............................................................ -- -- --
Foreign tax withholding............................................. -- -- (22,125)
-------------- -------------- --------------
Total investment income....................................... 571,678 23,213,502 4,523,891
-------------- -------------- --------------
EXPENSES:
Investment advisory fees............................................ 117,047 1,857,711 1,197,139
Licensing fees...................................................... 14,233 562,905 299,285
Accounting and administration fees.................................. 14,035 283,126 136,528
Audit and tax fees.................................................. 12,394 12,395 12,395
Custodian fees...................................................... 6,374 73,780 47,105
Trustees' fees and expenses......................................... 4,353 5,385 4,736
Listing fees........................................................ 3,669 4,913 4,184
Printing fees....................................................... 3,104 35,586 39,478
Legal fees.......................................................... 2,435 72,838 28,087
Transfer agent fees................................................. 1,170 27,637 14,964
Expenses previously waived or reimbursed............................ -- -- --
Registration and filing fees........................................ (285) -- 2,300
Other expenses...................................................... 1,508 11,437 10,084
-------------- -------------- --------------
Total expenses................................................ 180,037 2,947,713 1,796,285
Less fees waived and expenses reimbursed by the investment
advisor..................................................... (39,581) (161,147) (576)
-------------- -------------- --------------
Net expenses.................................................. 140,456 2,786,566 1,795,709
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)........................................ 431,222 20,426,936 2,728,182
-------------- -------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................... 141,295 (14,367,543) (23,506,050)
In-kind redemptions........................................... 407,081 76,667,757 25,198,491
-------------- -------------- --------------
Net realized gain (loss)............................................ 548,376 62,300,214 1,692,441
-------------- -------------- --------------
Net change in unrealized appreciation (depreciation) on
investments...................................................... 106,832 90,636,818 (26,938,803)
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................. 655,208 152,937,032 (25,246,362)
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................................. $ 1,086,430 $ 173,363,968 $ (22,518,180)
============== ============== ==============
Page 50 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NYSE ARCA DOW JONES CAPITAL VALUE LINE(R) VALUE LINE(R) 100
BIOTECHNOLOGY INTERNET STRENGTH DIVIDEND EXCHANGE-TRADED
INDEX FUND INDEX FUND ETF INDEX FUND FUND
(FBT) (FDN) (FTCS) (FVD) (FVL)
----------------- ----------------- ----------------- ----------------- -----------------
$ 1,273,168 $ 2,633,514 $ 2,210,368 $ 25,783,455 $ 323,761
496,827 525,712 -- -- --
-- 1,660 -- -- --
(77,181) -- -- (512,766) (1,570)
--------------- --------------- --------------- --------------- ---------------
1,692,814 3,160,886 2,210,368 25,270,689 322,191
--------------- --------------- --------------- --------------- ---------------
2,517,504 6,428,691 466,205 3,814,472 119,635
503,501 929,270 13,032 1,155,951 38,204
248,255 612,827 45,452 337,929 12,308
12,395 12,395 12,394 12,395 12,394
83,495 224,542 12,415 87,755 4,249
4,341 10,640 4,565 5,602 4,346
4,913 6,156 404 12,886 10,939
102,658 213,568 10,466 46,654 3,339
24,382 158,080 10,617 85,559 2,334
27,009 52,611 4,662 31,504 1,196
-- -- 21,771 -- --
5,564 36,333 1,586 (1,957) --
40,080 36,739 2,499 15,102 1,618
--------------- --------------- --------------- --------------- ---------------
3,574,097 8,721,852 606,068 5,603,852 210,562
-- -- -- (263,592) (43,073)
--------------- --------------- --------------- --------------- ---------------
3,574,097 8,721,852 606,068 5,340,260 167,489
--------------- --------------- --------------- --------------- ---------------
(1,881,283) (5,560,966) 1,604,300 19,930,429 154,702
--------------- --------------- --------------- --------------- ---------------
(131,688,674) (31,308,566) (5,453,278) (2,845,306) (426,558)
(207,680,894) 228,412,675 1,305,758 27,158,849 90,795
--------------- --------------- --------------- --------------- ---------------
(339,369,568) 197,104,109 (4,147,520) 24,313,543 (335,763)
--------------- --------------- --------------- --------------- ---------------
(501,667,546) (533,812,934) 12,588,930 167,872,418 1,665,773
--------------- --------------- --------------- --------------- ---------------
(841,037,114) (336,708,825) 8,441,410 192,185,961 1,330,010
--------------- --------------- --------------- --------------- ---------------
$ (842,918,397) $ (342,269,791) $ 10,045,710 $ 212,116,390 $ 1,484,712
=============== =============== =============== =============== ===============
See Notes to Financial Statements Page 51
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR
MICROCAP DIVIDEND LEADERS
INDEX FUND INDEX FUND
(FDM) (FDL)
----------------------------- ------------------------------
For the For the
Six Months Six Months
Ended For the Year Ended For the Year
6/30/2016 Ended 6/30/2016 Ended
(Unaudited) 12/31/2015 (Unaudited) 12/31/2015
------------- ------------- -------------- -------------
OPERATIONS:
Net investment income (loss)........................... $ 431,222 $ 759,114 $ 20,426,936 $ 31,928,966
Net realized gain (loss)............................... 548,376 3,694,341 62,300,214 11,749,117
Net increase from payment by the advisor............... -- -- -- --
Net change in unrealized appreciation (depreciation)... 106,832 (4,419,000) 90,636,818 (26,130,013)
------------- ------------- -------------- -------------
Net increase (decrease) in net assets resulting
from operations..................................... 1,086,430 34,455 173,363,968 17,548,070
------------- ------------- -------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (333,095) (743,446) (18,510,381) (32,145,837)
------------- ------------- -------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................. -- 31,352,476 1,180,830,777 141,457,821
Cost of shares redeemed................................ (4,911,532) (32,739,987) (630,009,799) (236,717,928)
------------- ------------- -------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................... (4,911,532) (1,387,511) 550,820,978 (95,260,107)
------------- ------------- -------------- -------------
Total increase (decrease) in net assets................ (4,158,197) (2,096,502) 705,674,565 (109,857,874)
NET ASSETS:
Beginning of period.................................... 49,551,382 51,647,884 875,293,595 985,151,469
------------- ------------- -------------- -------------
End of period.......................................... $ 45,393,185 $ 49,551,382 $1,580,968,160 $ 875,293,595
============= ============= ============== =============
Accumulated net investment income (loss)
at end of period.................................... $ 98,127 $ -- $ 1,854,528 $ (62,027)
============= ============= ============== =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................ 1,505,000 1,555,000 36,950,002 41,150,002
Shares sold............................................ -- 950,000 45,900,000 6,000,000
Shares redeemed........................................ (150,000) (1,000,000) (23,900,000) (10,200,000)
------------- ------------- -------------- -------------
Shares outstanding, end of period...................... 1,355,000 1,505,000 58,950,002 36,950,002
============= ============= ============== =============
Page 52 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
FIRST TRUST NYSE ARCA DOW JONES
US IPO BIOTECHNOLOGY INTERNET
INDEX FUND INDEX FUND INDEX FUND
(FPX) (FBT) (FDN)
----------------------------- ------------------------------- -------------------------------
For the For the For the
Six Months Six Months Six Months
Ended For the Year Ended For the Year Ended For the Year
6/30/2016 Ended 6/30/2016 Ended 6/30/2016 Ended
(Unaudited) 12/31/2015 (Unaudited) 12/31/2015 (Unaudited) 12/31/2015
------------- ------------- -------------- -------------- -------------- --------------
$ 2,728,182 $ 4,415,039 $ (1,881,283) $ 2,588,933 $ (5,560,966) $ (9,194,381)
1,692,441 (3,584,153) (339,369,568) 326,617,811 197,104,109 189,050,659
-- -- -- -- -- --
(26,938,803) (7,795,816) (501,667,546) (147,075,543) (533,812,934) 375,900,470
------------- ------------- -------------- -------------- -------------- --------------
(22,518,180) (6,964,930) (842,918,397) 182,131,201 (342,269,791) 555,756,748
------------- ------------- -------------- -------------- -------------- --------------
(2,677,495) (4,530,346) -- (3,747,095) -- --
------------- ------------- -------------- -------------- -------------- --------------
2,542,299 372,941,483 388,543,667 2,367,869,339 273,904,945 3,428,956,816
(206,061,112) (107,696,610) (2,168,144,720) (1,235,810,318) (1,778,127,040) (1,046,685,047)
------------- ------------- -------------- -------------- -------------- --------------
(203,518,813) 265,244,873 (1,779,601,053) 1,132,059,021 (1,504,222,095) 2,382,271,769
------------- ------------- -------------- -------------- -------------- --------------
(228,714,488) 253,749,597 (2,622,519,450) 1,310,443,127 (1,846,491,886) 2,938,028,517
789,692,849 535,943,252 3,437,024,415 2,126,581,288 4,914,821,395 1,976,792,878
------------- ------------- -------------- -------------- -------------- --------------
$ 560,978,361 $ 789,692,849 $ 814,504,965 $3,437,024,415 $3,068,329,509 $4,914,821,395
============= ============= ============== ============== ============== ==============
$ 50,687 $ -- $ (1,881,283) $ -- $ (5,560,966) $ --
============= ============= ============== ============== ============== ==============
15,450,002 10,650,002 30,400,002 20,850,002 65,850,002 32,250,002
50,000 6,900,000 4,450,000 20,350,000 4,100,000 49,100,000
(4,400,000) (2,100,000) (25,750,000) (10,800,000) (27,400,000) (15,500,000)
------------- ------------- -------------- -------------- -------------- --------------
11,100,002 15,450,002 9,100,002 30,400,002 42,550,002 65,850,002
============= ============= ============== ============== ============== ==============
See Notes to Financial Statements Page 53
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST FIRST TRUST
CAPITAL STRENGTH VALUE LINE(R) DIVIDEND
ETF INDEX FUND
(FTCS) (FVD)
----------------------------- -------------------------------
For the For the
Six Months Six Months
Ended For the Year Ended For the Year
6/30/2016 Ended 6/30/2016 Ended
(Unaudited) 12/31/2015 (Unaudited) 12/31/2015
------------- ------------- -------------- --------------
OPERATIONS:
Net investment income (loss)........................... $ 1,604,300 $ 1,863,793 $ 19,930,429 $ 27,999,971
Net realized gain (loss)............................... (4,147,520) 7,692,653 24,313,543 70,182,866
Net increase from payment by the advisor............... -- -- -- --
Net change in unrealized appreciation (depreciation)... 12,588,930 (7,484,967) 167,872,418 (85,527,963)
------------- ------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations..................................... 10,045,710 2,071,479 212,116,390 12,654,874
------------- ------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (1,561,846) (1,868,316) (18,248,807) (28,470,161)
------------- ------------- -------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................. 59,730,679 146,883,652 905,464,824 703,563,120
Cost of shares redeemed................................ (12,892,781) (66,958,092) (179,638,517) (589,015,540)
------------- ------------- -------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................... 46,837,898 79,925,560 725,826,307 114,547,580
------------- ------------- -------------- --------------
Total increase (decrease) in net assets................ 55,321,762 80,128,723 919,693,890 98,732,293
NET ASSETS:
Beginning of period.................................... 165,814,663 85,685,940 1,188,031,066 1,089,298,773
------------- ------------- -------------- --------------
End of period.......................................... $ 221,136,425 $ 165,814,663 $2,107,724,956 $1,188,031,066
============= ============= ============== ==============
Accumulated net investment income (loss)
at end of period.................................... $ 42,454 $ -- $ 1,681,622 $ --
============= ============= ============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................ 4,350,002 2,250,002 49,787,986 45,137,986
Shares sold............................................ 1,550,000 3,850,000 35,450,000 29,150,000
Shares redeemed........................................ (350,000) (1,750,000) (7,000,000) (24,500,000)
------------- ------------- -------------- --------------
Shares outstanding, end of period...................... 5,550,002 4,350,002 78,237,986 49,787,986
============= ============= ============== ==============
Page 54 See Notes to Financial Statements
FIRST TRUST
VALUE LINE(R) 100
EXCHANGE-TRADED FUND
(FVL)
-----------------------------
For the
Six Months
Ended For the Year
6/30/2016 Ended
(Unaudited) 12/31/2015
------------- -------------
$ 154,702 $ 188,382
(335,763) (464,240)
-- 95,996
1,665,773 (1,386,028)
------------- -------------
1,484,712 (1,565,890)
------------- -------------
(142,617) (184,307)
------------- -------------
-- 5,252,525
(4,756,616) (10,497,440)
------------- -------------
(4,756,616) (5,244,915)
------------- -------------
(3,414,521) (6,995,112)
53,012,960 60,008,072
------------- -------------
$ 49,598,439 $ 53,012,960
============= =============
$ 12,085 $ --
============= =============
2,689,982 2,939,982
-- 250,000
(250,000) (500,000)
------------- -------------
2,439,982 2,689,982
============= =============
See Notes to Financial Statements Page 55
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 ----------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 32.92 $ 33.21 $ 32.47 $ 22.87 $ 20.09 $ 22.17
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.31 0.49 0.23 0.25 0.35 0.10
Net realized and unrealized gain (loss) 0.51 (0.30) 0.76 9.62 2.83 (2.02)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.82 0.19 0.99 9.87 3.18 (1.92)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.24) (0.48) (0.25) (0.27) (0.40) (0.16)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 33.50 $ 32.92 $ 33.21 $ 32.47 $ 22.87 $ 20.09
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 2.50% 0.55% 3.08% 43.32% 15.86% (8.69)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 45,393 $ 49,551 $ 51,648 $ 91,080 $ 41,281 $ 52,328
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.77% (b) 0.73% 0.70% 0.72% 0.76% 0.71%
Ratio of net expenses to average net assets 0.60% (b) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.84% (b) 1.46% 0.71% 0.93% 1.38% 0.40%
Portfolio turnover rate (c) 6% 63% 49% 70% 71% 59%
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 ----------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 23.69 $ 23.94 $ 21.93 $ 18.46 $ 17.57 $ 15.92
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.38 0.86 0.80 0.69 0.71 0.61
Net realized and unrealized gain (loss) 3.10 (0.25) 2.01 3.47 0.89 1.65
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 3.48 0.61 2.81 4.16 1.60 2.26
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.35) (0.86) (0.80) (0.69) (0.71) (0.61)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 26.82 $ 23.69 $ 23.94 $ 21.93 $ 18.46 $ 17.57
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 14.72% 2.73% 12.96% 22.71% 9.14% 14.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,580,968 $ 875,294 $ 985,151 $ 687,437 $ 545,517 $ 447,030
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.48% (b) 0.48% 0.49% 0.49% 0.51% 0.56%
Ratio of net expenses to average net assets 0.45% (b) 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of net investment income (loss) to
average net assets 3.30% (b) 3.59% 3.55% 3.61% 3.88% 3.98%
Portfolio turnover rate (c) 52% 61% 40% 35% 31% 27%
(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) Annualized.
(c) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 56 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST US IPO INDEX FUND (FPX)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 ----------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 51.11 $ 50.32 $ 45.34 $ 30.82 $ 23.99 $ 23.51
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.24 0.31 0.41 0.22 0.31 0.18
Net realized and unrealized gain (loss) (0.58) 0.80 4.97 14.53 6.87 0.55
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (0.34) 1.11 5.38 14.75 7.18 0.73
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.23) (0.32) (0.40) (0.23) (0.35) (0.25)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 50.54 $ 51.11 $ 50.32 $ 45.34 $ 30.82 $ 23.99
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) (0.65)% 2.19% 11.91% 47.98% 30.01% 3.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 560,978 $ 789,693 $ 535,943 $ 351,376 $ 24,659 $ 15,594
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.60% (b) 0.60% 0.60% 0.66% 1.01% 1.01%
Ratio of net expenses to average net assets 0.60% (b) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.91% (b) 0.61% 0.89% 0.69% 1.27% 0.70%
Portfolio turnover rate (c) 26% 41% 46% 30% 48% 44%
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 ----------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 113.06 $ 101.99 $ 69.12 $ 46.05 $ 32.68 $ 39.07
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.21) 0.09 0.04 (0.10) (0.22) (0.30)
Net realized and unrealized gain (loss) (23.34) 11.11 32.88 23.17 13.59 (6.09)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (23.55) 11.20 32.92 23.07 13.37 (6.39)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- (0.13) (0.05) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 89.51 $ 113.06 $ 101.99 $ 69.12 $ 46.05 $ 32.68
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) (20.82)% 10.97% 47.63% 50.10% 40.91% (16.36)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 814,505 $3,437,024 $2,126,581 $ 953,910 $ 239,445 $ 183,030
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.57% (b) 0.55% 0.58% 0.60% 0.61% 0.61%
Ratio of net expenses to average net assets 0.57% (b) 0.55% 0.58% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets (0.30)% (b) 0.08% 0.06% (0.26)% (0.48)% (0.54)%
Portfolio turnover rate (c) 21% 30% 58% 48% 39% 44%
(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) Annualized.
(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 57
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 ----------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 74.64 $ 61.30 $ 59.84 $ 39.01 $ 32.28 $ 34.27
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.13) (0.14) (0.08) (0.11) (0.08) (0.10)
Net realized and unrealized gain (loss) (2.40) 13.48 1.54 20.94 6.81 (1.87)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (2.53) 13.34 1.46 20.83 6.73 (1.97)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- -- -- -- -- (0.02)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 72.11 $ 74.64 $ 61.30 $ 59.84 $ 39.01 $ 32.28
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) (3.38)% 21.77% 2.42% 53.40% 20.85% (5.74)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $3,068,330 $4,914,821 $1,976,793 $1,929,852 $ 557,882 $ 519,683
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.54% (b) 0.54% 0.54% 0.57% 0.60% 0.60%
Ratio of net expenses to average net assets 0.54% (b) 0.54% 0.54% 0.57% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets (0.35)% (b) (0.29)% (0.13)% (0.28)% (0.23)% (0.25)%
Portfolio turnover rate (c) 7% 28% 27% 17% 33% 18%
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 ----------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 38.12 $ 38.08 $ 33.70 $ 25.16 $ 21.82 $ 22.90
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.32 0.57 0.72 0.45 0.45 0.35
Net realized and unrealized gain (loss) 1.71 0.04 4.43 8.54 3.34 (1.01)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.03 0.61 5.15 8.99 3.79 (0.66)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.31) (0.57) (0.77) (0.45) (0.45) (0.42)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 39.84 $ 38.12 $ 38.08 $ 33.70 $ 25.16 $ 21.82
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 5.34% 1.64% 15.46% 35.90% 17.45% (2.94)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 221,136 $ 165,815 $ 85,686 $ 65,706 $ 32,707 $ 31,643
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.65% (b) 0.65% 0.66% 0.76% 0.83% 0.82%
Ratio of net expenses to average net assets 0.65% (b) 0.65% 0.65% 0.65% 0.65% 0.65%
Ratio of net investment income (loss) to
average net assets 1.72% (b) 1.59% 2.07% 1.59% 1.84% 1.51%
Portfolio turnover rate (c) 40% 96% 89% 156% 84% 114%
(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) Annualized.
(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 58 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 ----------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 23.86 $ 24.13 $ 21.36 $ 17.29 $ 16.01 $ 15.08
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.29 0.55 0.58 0.50 0.50 0.42
Net realized and unrealized gain (loss) 3.06 (0.26) 2.78 4.06 1.28 0.93
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 3.35 0.29 3.36 4.56 1.78 1.35
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.27) (0.56) (0.59) (0.49) (0.50) (0.42)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 26.94 $ 23.86 $ 24.13 $ 21.36 $ 17.29 $ 16.01
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 14.08% 1.26% 15.94% 26.57% 11.17% 9.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,107,725 $1,188,031 $1,089,299 $ 796,361 $ 508,103 $ 366,399
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.73% (b) 0.74% 0.75% 0.76% 0.78% 0.79%
Ratio of net expenses to average net assets 0.70% (b) 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 2.61% (b) 2.40% 2.63% 2.57% 3.03% 2.84%
Portfolio turnover rate (c) 30% 82% 63% 71% 54% 53%
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 ----------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 19.71 $ 20.41 $ 18.44 $ 13.27 $ 12.37 $ 13.52
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.06 0.07 0.11 0.06 0.15 0.08
Net realized and unrealized gain (loss) 0.62 (0.71) (d) 1.98 5.17 0.90 (1.15)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.68 (0.64) 2.09 5.23 1.05 (1.07)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.06) (0.06) (0.12) (0.06) (0.15) (0.08)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 20.33 $ 19.71 $ 20.41 $ 18.44 $ 13.27 $ 12.37
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 3.44% (3.13)% (d) 11.33% 39.44% 8.53% (7.92)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 49,598 $ 53,013 $ 60,008 $ 56,058 $ 45,635 $ 55,543
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.88% (b) 0.84% 0.84% 0.87% 0.87% 0.82%
Ratio of net expenses to average net assets 0.70% (b) 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 0.65% (b) 0.32% 0.57% 0.35% 1.03% 0.47%
Portfolio turnover rate (c) 206% 404% 325% 350% 304% 202%
(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) Annualized.
(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. (d) The Fund received a payment from the Advisor in the
amount of $95,996 in connection with a trade error. The payment from the
Advisor represents $0.03 per share. Since the Advisor reimbursed the Fund,
there was no effect on the Fund's total return.
See Notes to Financial Statements Page 59
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on August 8,
2003, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of nineteen exchange-traded funds. This report
covers the eight funds listed below:
First Trust Dow Jones Select MicroCap Index Fund - (NYSE Arca, Inc. ("NYSE
Arca") ticker "FDM")
First Trust Morningstar Dividend Leaders Index Fund - (NYSE Arca ticker
"FDL")
First Trust US IPO Index Fund - (NYSE Arca ticker "FPX")
First Trust NYSE Arca Biotechnology Index Fund - (NYSE Arca ticker "FBT")
First Trust Dow Jones Internet Index Fund - (NYSE Arca ticker "FDN")
First Trust Capital Strength ETF - (The Nasdaq Stock Market LLC ("Nasdaq")
ticker "FTCS")
First Trust Value Line(R) Dividend Index Fund - (NYSE Arca ticker "FVD")
First Trust Value Line(R) 100 Exchange-Traded Fund - (NYSE Arca ticker
"FVL")
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual
funds, each Fund issues and redeems shares on a continuous basis, at net asset
value ("NAV"), only in large specified blocks consisting of 50,000 shares called
a "Creation Unit." Creation Units are issued and redeemed principally in-kind
for securities included in a Fund's relevant index. Except when aggregated in
Creation Units, each Fund's shares are not redeemable securities. The investment
objective of each Fund is to seek investment results that correspond generally
to the price and yield (before the Fund's fees and expenses) of the following
indices:
FUND INDEX
First Trust Dow Jones Select MicroCap Index Fund Dow Jones Select MicroCap Index(SM)
First Trust Morningstar Dividend Leaders Index Fund Morningstar(R) Dividend Leaders Index(SM)
First Trust US IPO Index Fund IPOX(R)-100 U.S. Index
First Trust NYSE Arca Biotechnology Index Fund NYSE Arca Biotechnology Index(SM)
First Trust Dow Jones Internet Index Fund Dow Jones Internet Composite Index(SM)
First Trust Capital Strength ETF The Capital Strength Index(TM)
First Trust Value Line(R) Dividend Index Fund Value Line(R) Dividend Index
First Trust Value Line(R) 100 Exchange-Traded Fund Value Line(R) 100 Index
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds, each of which is an investment company within the scope of Financial
Accounting Standards Board ("FASB") Accounting Standards Update 2013-08, follow
accounting and reporting guidance under FASB Accounting Standards Codification
Topic 946, "Financial Services-Investment Companies." The following is a summary
of significant accounting policies consistently followed by the Funds in the
preparation of the financial statements. The preparation of the financial
statements in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP") requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
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
Page 60
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Overnight repurchase agreements are valued at amortized cost when it
represents the best estimate of fair value.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a pricing service is unable to provide a market
price; securities whose trading has been formally suspended; a security whose
market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the pricing service, does not reflect the security's fair value. As a general
principle, the current fair value of a security would appear to be the amount
which the owner might reasonably expect to receive for the security upon its
current sale. When fair value prices are used, generally they will differ from
market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
In addition, differences between the prices used to calculate a Fund's NAV and
the prices used by such Fund's corresponding index could result in a difference
between a Fund's performance and the performance of its underlying index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
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 June 30, 2016, is
included with each Fund's Portfolio of Investments.
Page 61
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Distributions received from a Fund's investments in real estate investment trust
("REITs") may be comprised of return of capital, capital gains and income. The
actual character of the amounts received during the year is not known until
after the REITs' fiscal year end. A Fund records the character of distributions
received from REITs during the year based on estimates available. The
characterization of distributions received by a Fund may be subsequently revised
based on information received from the REITs after their tax reporting periods
conclude.
C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES
Offsetting Assets and Liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset on the
Statements of Assets and Liabilities, and disclose instruments and transactions
subject to master netting or similar agreements. These disclosure requirements
are intended to help investors and other financial statement users better assess
the effect or potential effect of offsetting arrangements on a fund's financial
position. The transactions subject to offsetting disclosures are derivative
instruments, repurchase agreements and reverse repurchase agreements, and
securities borrowing and securities lending transactions.
This disclosure, if applicable, is included within each Fund's Portfolio of
Investments under the heading "Offsetting Assets and Liabilities." For financial
reporting purposes, the Funds do not offset financial assets and financial
liabilities that are subject to master netting arrangements ("MNAs") or similar
agreements on the Statements of Assets and Liabilities. MNAs provide the right,
in the event of default (including bankruptcy and insolvency) for the
non-defaulting counterparty to liquidate the collateral and calculate the net
exposure to the defaulting party or request additional collateral.
D. SECURITIES LENDING
The Funds may lend securities representing up to 33 1/3% of the value of their
total assets to broker-dealers, banks and other institutions to generate
additional income. When a Fund loans its portfolio securities, it will receive,
at the inception of each loan, collateral equal to at least 102% (for domestic
securities) or 105% (for international securities) of the market value of the
loaned securities. The collateral amount is valued at the beginning of each
business day and is compared to the market value of the loaned securities from
the prior business day to determine if additional collateral is required. If
additional collateral is required, a request is sent to the borrower. Securities
lending involves the risk that the Fund may lose money because the borrower of
the Fund's loaned securities fails to return the securities in a timely manner
or at all. The Fund could also lose money in the event of (i) a decline in the
value of the collateral provided for the loaned securities, (ii) a decline in
the value of any investments made with cash collateral or (iii) an increase in
the value of the loaned securities if the borrower does not increase the
collateral accordingly and the borrower fails to return the securities. These
events could also trigger adverse tax consequences for the Funds.
Under the Funds' Securities Lending Agency Agreement, the securities lending
agent will generally bear the risk that a borrower may default on its obligation
to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the
Funds' securities lending agent and is responsible for executing the lending of
the portfolio securities to creditworthy borrowers. The Funds, however, will be
responsible for the risks associated with the investment of cash collateral. A
Fund may lose money on its investment of cash collateral, which may affect its
ability to repay the collateral to the borrower without the use of other Fund
assets. Each Fund that engages in securities lending receives compensation (net
of any rebate and securities lending agent fees) for lending its securities.
Compensation can be in the form of fees received from the securities lending
agent or dividends or interest earned from the investment of cash collateral.
The dividend and interest earned on the securities loaned is accounted for in
the same manner as other dividend and interest income. At June 30, 2016, only
FDM, FPX, FBT and FDN have securities in the securities lending program.
In the event of a default by a borrower with respect to any loan, BBH will
exercise any and all remedies provided under the applicable borrower agreement
to make the Funds whole. These remedies include purchasing replacement
securities by applying the collateral held from the defaulting broker against
the purchase cost of the replacement securities. If, despite such efforts by BBH
to exercise these remedies, a Fund sustains losses as a result of a borrower's
default, BBH will indemnify the Fund by purchasing replacement securities at its
own expense, or paying the Fund an amount equal to the market value of the
replacement securities, subject to certain limitations which are set forth in
detail in the Securities Lending Agency Agreement between the Trust on behalf of
the Funds and BBH.
Page 62
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
E. REPURCHASE AGREEMENTS
Repurchase agreements involve the purchase of securities subject to the seller's
agreement to repurchase the securities at a mutually agreed upon date and price,
under the terms of a Master Repurchase Agreement ("MRA"). During the term of a
repurchase agreement, the value of the underlying securities held as collateral
on behalf of a Fund, including accrued interest, is required to exceed the value
of the repurchase agreement, including accrued interest. The underlying
securities for all repurchase agreements are held at the Funds' custodian or
designated sub-custodians under tri-party repurchase agreements.
MRAs govern transactions between a Fund and select counterparties. The MRAs
contain provisions for, among other things, initiation, income payments, events
of default, and maintenance of collateral for repurchase agreements.
Repurchase agreements received for lending securities are collateralized by U.S.
Treasury Notes. The U.S. Treasury Notes are held in a joint custody account at
BBH on behalf of the Funds participating in the securities lending program. In
the event the counterparty defaults on the repurchase agreement, the U.S.
Treasury Notes can either be maintained as part of a Fund's portfolio or sold
for cash. A Fund could suffer a loss to the extent that the proceeds from the
sale of the underlying collateral held by the Fund is less than the repurchase
price and the Fund's costs associated with the delay and enforcement of the MRA.
While the Funds may invest in repurchase agreements, any repurchase agreements
held by the Funds during the six months ended June 30, 2016, were received as
collateral for lending securities.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually.
Distributions from income and capital gains are determined in accordance with
income tax regulations, which may differ from U.S. GAAP. Certain capital
accounts in the financial statements are periodically adjusted for permanent
differences in order to reflect their tax character. These permanent differences
are primarily due to the varying treatment of income and gain/loss on
significantly modified portfolio securities held by the Funds and have no impact
on net assets or NAV per share. Temporary differences, which arise from
recognizing certain items of income, expense and gain/loss in different periods
for financial statement and tax purposes, will reverse at some time in the
future.
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2015 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ---------------- ----------------
First Trust Dow Jones Select MicroCap Index Fund $ 743,446 $ -- $ --
First Trust Morningstar Dividend Leaders Index Fund 32,145,837 -- --
First Trust US IPO Index Fund 4,530,346 -- --
First Trust NYSE Arca Biotechnology Index Fund 3,747,095 -- --
First Trust Dow Jones Internet Index Fund -- -- --
First Trust Capital Strength ETF 1,868,316 -- --
First Trust Value Line(R) Dividend Index Fund 28,470,161 -- --
First Trust Value Line(R) 100 Exchange-Traded Fund 184,307 -- --
Page 63
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
As of December 31, 2015, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ ---------------- ----------------
First Trust Dow Jones Select MicroCap Index Fund $ -- $(21,847,201) $ (49,207)
First Trust Morningstar Dividend Leaders Index Fund (58,812) (55,945,417) 34,606,952
First Trust US IPO Index Fund -- (41,646,138) 60,432,351
First Trust NYSE Arca Biotechnology Index Fund -- (141,896,651) 238,300,057
First Trust Dow Jones Internet Index Fund -- (49,380,673) 405,146,228
First Trust Capital Strength ETF -- (24,133,781) 2,689,039
First Trust Value Line(R) Dividend Index Fund -- (36,814,938) 15,519,987
First Trust Value Line(R) 100 Exchange-Traded Fund -- (83,967,724) 962,605
G. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ending 2012, 2013,
2014 and 2015 remain open to federal and state audit. As of June 30, 2016,
management has evaluated the application of these standards to the Funds, and
has determined that no provision for income tax is required in the Funds'
financial statements for uncertain tax positions.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses arising in taxable years after December 22, 2010, may be
carried forward indefinitely, and their character is retained as short-term
and/or long-term losses. Previously, net capital losses were carried forward for
up to eight years and treated as short-term losses. As a transition rule, the
Act requires that post-enactment net capital losses be used before pre-enactment
net capital losses. At December 31, 2015, the Funds had pre-enactment and
post-enactment net capital losses for federal income tax purposes as shown in
the following table. To the extent that these loss carryforwards are used to
offset future capital gains, it is probable that the capital gains so offset
will not be distributed to Fund shareholders. The Funds are subject to certain
limitations, under U.S. tax rules, on the use of capital loss carryforwards and
net unrealized built-in losses. These limitations apply when there has been a
50% change in ownership.
Capital Capital Capital
Loss Loss Loss Post- Total
Available Available Available Enactment - Capital
Through Through Through No Loss
2016 2017 2018 Expiration Available
---------- ----------- ----------- ----------- -----------
First Trust Dow Jones Select MicroCap Index Fund $ 902,807 $ 3,227,616 $ 5,096,533 $12,620,245 $21,847,201
First Trust Morningstar Dividend Leaders Index Fund 14,962,284 16,831,977 473,435 23,677,721 55,945,417
First Trust US IPO Index Fund 2,682,788 1,127,563 65,058 37,770,729 41,646,138
First Trust NYSE Arca Biotechnology Index Fund 2,061,136 5,787,577 1,039,054 133,008,884 141,896,651
First Trust Dow Jones Internet Index Fund 6,295,170 1,163,966 -- 41,921,537 49,380,673
First Trust Capital Strength ETF 11,401,861 11,336,270 1,367,556 28,094 24,133,781
First Trust Value Line(R) Dividend Index Fund 16,730,748 19,646,203 437,987 -- 36,814,938
First Trust Value Line(R) 100 Exchange-Traded Fund 47,805,834 29,477,928 -- 6,683,962 83,967,724
During the taxable year ended December 31, 2015, the following Funds utilized
capital loss carryforwards in the following amounts:
Pre-Enactment Post-Enactment
Capital Loss Capital Loss
Carryforward Utilized Carryforward Utilized
--------------------- ---------------------
First Trust Capital Strength ETF $ -- $ 140,681
First Trust Value Line(R) Dividend Index Fund 2,184,539 --
Page 64
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for Federal
income tax purposes. For the fiscal year ended December 31, 2015, the following
Fund incurred and elected to defer net ordinary losses as follows:
Qualified Late Year Losses
---------------------------------
Ordinary Losses Capital Losses
--------------- --------------
First Trust Morningstar Dividend Leaders Index Fund $ 58,812 $ --
H. EXPENSES
Expenses that are directly related to one of the Funds are charged directly to
the respective Fund. General expenses of the Trust are allocated to all the
Funds based upon the net assets of each Fund.
First Trust has entered into licensing agreements with each of the following
"Licensors" for the respective Funds:
FUND LICENSOR
First Trust Dow Jones Select MicroCap Index Fund S&P Dow Jones Indices LLC
First Trust Morningstar Dividend Leaders Index Fund Morningstar, Inc.
First Trust US IPO Index Fund IPOX(R) Schuster LLC
First Trust NYSE Arca Biotechnology Index Fund NYSE Euronext
First Trust Dow Jones Internet Index Fund S&P Dow Jones Indices LLC
First Trust Capital Strength ETF Nasdaq, Inc.
First Trust Value Line(R) Dividend Index Fund Value Line Publishing, Inc.(R)
First Trust Value Line(R) 100 Exchange-Traded Fund Value Line Publishing, Inc.(R)
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The respective Funds are
required to pay licensing fees, which are shown on the Statements of Operations.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
For these services, First Trust is entitled to receive monthly fees from each
Fund calculated at the following annual rates:
% of Average
Daily Net Assets
----------------
First Trust Dow Jones Select MicroCap Index Fund 0.50%
First Trust Morningstar Dividend Leaders Index Fund 0.30%
First Trust US IPO Index Fund 0.40%
First Trust NYSE Arca Biotechnology Index Fund 0.40%
First Trust Dow Jones Internet Index Fund 0.40%
First Trust Capital Strength ETF 0.50%
First Trust Value Line(R) Dividend Index Fund 0.50%
First Trust Value Line(R) 100 Exchange-Traded Fund 0.50%
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
The Trust and First Trust have entered into an Expense Reimbursement, Fee Waiver
and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to
waive fees and/or reimburse Fund expenses to the extent that the operating
expenses of each Fund (excluding interest expense, brokerage commissions and
other trading expenses, acquired fund fees and expenses, taxes and extraordinary
expenses) exceed the below amount as a percentage of average daily net assets
per year (the "Expense Cap"). The Expense Cap will be in effect until at least
April 30, 2018.
Expense Cap
-----------------
First Trust Dow Jones Select MicroCap Index Fund 0.60%
First Trust Morningstar Dividend Leaders Index Fund 0.45%
First Trust US IPO Index Fund 0.60%
First Trust NYSE Arca Biotechnology Index Fund 0.60%
First Trust Dow Jones Internet Index Fund 0.60%
First Trust Capital Strength ETF 0.65%
First Trust Value Line(R) Dividend Index Fund 0.70%
First Trust Value Line(R) 100 Exchange-Traded Fund 0.70%
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee was waived or expense was incurred, but no reimbursement payment will be
made by a Fund if it results in the Fund exceeding an expense ratio equal to the
Expense Cap in place at the time the expenses were reimbursed or fees waived by
First Trust. These amounts are included in "Expenses previously waived or
reimbursed" on the Statements of Operations.
The advisory fee waivers and expense reimbursements for the six months ended
June 30, 2016 and the fees waived or expenses borne by First Trust subject to
recovery from the applicable Fund for the periods indicated were as follows:
Fees Waived or Expenses Borne
by First Trust Subject to Recovery
------------------------------------------------
Advisory Year Year Year Six Months
Fee Expense Ended Ended Ended Ended
Waivers Reimbursement 12/31/2013 12/31/2014 12/31/2015 6/30/2016 Total
--------- ------------- ---------- ---------- ---------- ---------- ----------
First Trust Dow Jones Select
MicroCap Index Fund $ 39,581 $ -- $ 72,007 $ 66,284 $ 69,191 $ 39,581 $ 247,063
First Trust Morningstar Dividend
Leaders Index Fund 161,147 -- 115,157 273,147 260,965 161,147 810,416
First Trust US IPO Index Fund 576 -- 56,005 23,043 -- 576 79,624
First Trust NYSE Arca
Biotechnology Index Fund -- -- -- -- -- -- --
First Trust Dow Jones Internet
Index Fund -- -- -- -- -- -- --
First Trust Capital Strength ETF -- -- 15,252 4,069 -- -- 19,321
First Trust Value Line(R) Dividend
Index Fund 263,592 -- 198,684 408,933 464,054 263,592 1,335,263
First Trust Value Line(R) 100
Exchange-Traded Fund 43,073 -- 40,707 85,675 83,472 43,073 252,927
During the six months ended June 30, 2016, First Trust recovered fees that were
previously waived from First Trust Capital Strength ETF of $21,771.
During the fiscal year ended December 31, 2015, the First Trust Value Line(R)
100 Exchange-Traded Fund received a payment from the Advisor of $95,996 in
connection with a trade error.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund
or is an index fund.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
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 six months ended June 30, 2016, the cost of purchases and proceeds from
sales of investments for each Fund, excluding short-term investments and in-kind
transactions, were as follows:
Purchases Sales
--------------- ---------------
First Trust Dow Jones Select MicroCap Index Fund $ 2,849,455 $ 2,659,348
First Trust Morningstar Dividend Leaders Index Fund 647,353,456 640,949,990
First Trust US IPO Index Fund 159,123,241 159,326,857
First Trust NYSE Arca Biotechnology Index Fund 306,864,062 305,443,428
First Trust Dow Jones Internet Index Fund 251,372,472 253,788,024
First Trust Capital Strength ETF 76,864,579 76,681,081
First Trust Value Line(R) Dividend Index Fund 472,794,698 469,153,968
First Trust Value Line(R) 100 Exchange-Traded Fund 100,910,286 100,928,439
For the six months ended June 30, 2016, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
--------------- ---------------
First Trust Dow Jones Select MicroCap Index Fund $ -- $ 4,906,288
First Trust Morningstar Dividend Leaders Index Fund 1,176,037,617 627,491,376
First Trust US IPO Index Fund 2,541,203 205,925,264
First Trust NYSE Arca Biotechnology Index Fund 388,654,655 2,171,444,125
First Trust Dow Jones Internet Index Fund 273,976,110 1,777,928,161
First Trust Capital Strength ETF 59,557,271 12,879,947
First Trust Value Line(R) Dividend Index Fund 903,293,025 179,209,585
First Trust Value Line(R) 100 Exchange-Traded Fund -- 4,757,191
5. CREATION, REDEMPTION AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Such transactions are generally permitted on an
in-kind basis, with a balancing cash component to equate the transaction to the
daily NAV per Share of each Fund on the transaction date times the number of
Shares in a Creation Unit. Authorized Participants purchasing Creation Units
must pay to BNYM, as transfer agent, a standard creation transaction fee (the
"Creation Transaction Fee"), which is based on the number of different
securities in a Creation Unit of each Fund according to the fee schedule set
forth below:
Number of Securities Creation
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
The Creation Transaction Fee is applicable to each purchase transaction
regardless of the number of Creation Units purchased in the transaction. An
additional variable fee of up to three times the Creation Transaction Fee may be
charged to approximate additional expenses incurred by a Fund with respect to
transactions effected outside of the clearing process (i.e., through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. The price for each Creation Unit will equal the daily
NAV per Share of a Fund on the transaction date times the number of Shares in a
Creation Unit plus the fees described above and, if applicable, any transfer
taxes.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a standard redemption transaction fee (the "Redemption Transaction Fee"),
which is based on the number of different securities in a Creation Unit of each
Fund according to the fee schedule set forth below:
Number of Securities Redemption
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
The Redemption Transaction Fee is applicable to each redemption transaction
regardless of the number of Creation Units redeemed in the transaction. An
additional variable fee of up to three times the Redemption Transaction Fee may
be charged to approximate additional expenses incurred by a Fund with respect to
redemptions effected outside of the clearing process or to the extent that
redemptions are for cash. Each Fund reserves the right to effect redemptions in
cash. A shareholder may request cash redemption in lieu of securities; however,
a Fund may, in its discretion, reject any such request.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before June 30, 2017.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
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ADDITIONAL INFORMATION
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Funds' website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files its complete schedule of each Fund's portfolio holdings with the
SEC for the first and third quarters of each fiscal year on Form N-Q. The
Trust's Form N-Qs are available (1) by calling (800) 988-5891; (2) on the Funds'
website located at http://www.ftportfolios.com; (3) on the SEC's website at
http://www.sec.gov; and (4) for review and copying at the SEC's Public Reference
Room ("PRR") in Washington, DC. Information regarding the operation of the PRR
may be obtained by calling (800) SEC-0330.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. YOU SHOULD CONSIDER EACH FUND'S INVESTMENT
OBJECTIVE, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. YOU CAN
DOWNLOAD EACH FUND'S PROSPECTUS AT HTTP://WWW.FTPORTFOLIOS.COM OR CONTACT FIRST
TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS
THIS AND OTHER INFORMATION ABOUT EACH FUND. FOR ADDITIONAL INFORMATION ABOUT THE
RISKS ASSOCIATED WITH INVESTING IN THE FUNDS, PLEASE SEE THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION, AS WELL AS OTHER REGULATORY FILINGS. READ THESE
DOCUMENTS CAREFULLY BEFORE YOU INVEST. FIRST TRUST PORTFOLIOS L.P. IS THE
DISTRIBUTOR OF THE FIRST TRUST EXCHANGE-TRADED FUND.
The following summarizes some of the risks that should be considered for the
Funds.
Each Fund's shares will change in value, and you could lose money by investing
in a Fund. Shares are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates and perceived trends in stock prices. Overall stock values could decline
generally or could underperform other investments. Overall stock market values
could decline generally or could underperform other investments.
An investment in a Fund involves risks similar to those of investing in any fund
of equity securities traded on an exchange. Investors buying or selling Fund
shares on the secondary market may incur brokerage commissions. In addition,
investors who sell Fund shares may receive less than the Fund shares' net asset
value. Unlike shares of open-end funds, investors are generally not able to
purchase exchange-traded fund ("ETF") shares directly from a Fund and individual
ETF shares are not redeemable. However, specified large blocks of ETF shares
called creation units can be purchased from, or redeemed to, a Fund.
Each Fund is subject to index tracking risk. You should anticipate that the
value of Fund shares will decline, more or less, in correlation with any decline
in the value of the index that the Fund seeks to track.
Each Fund's return may not match the return of the index it seeks to track for a
number of reasons. While First Trust seeks to have a correlation of 0.95 or
better, before expenses, between a Fund's performance and the performance of its
corresponding index, there can be no assurance that a Fund will be able to
achieve such a correlation. Accordingly, each Fund's performance may correlate
to a lesser extent and may possibly vary substantially from the performance of
its corresponding index.
Each Fund is also exposed to additional market risk due to a policy of investing
principally in the securities included in its corresponding index. As a result
of such policies, securities held by each Fund will generally not be bought or
sold in response to market fluctuations and the securities may be issued by
companies concentrated in a particular industry. As a result, each Fund will
generally not sell a stock because the stock's issuer is in financial trouble,
unless that stock is removed or is anticipated to be removed from the index the
Fund seeks to track.
Each Fund relies on a license from an index provider that permits the Fund to
use its corresponding index and associated trade names and trademarks in
connection with the name and investment strategies of the Fund. Such licenses
may be terminated by the respective index provider and, as a result, each Fund
may lose its ability to use such intellectual property. There is also no
guarantee that the index provider has all rights to license the respective
intellectual property to First Trust, on behalf of the Fund. Accordingly, in the
event the license is terminated or the index provider does not have rights to
license the particular intellectual property, it may have a significant effect
on the operation of the related Fund.
Each Fund is subject to issuer specific changes risk. The value of an individual
security or a particular type of security can be more volatile than the market
as a whole and can perform differently from the value of the market as a whole.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
Each Fund will be concentrated in the securities of companies of a given
industry if the Fund's corresponding index is concentrated in such industry. A
concentration makes a Fund more susceptible to any single occurrence affecting
the related industry and may subject a Fund to greater market risk than less
concentrated funds.
With the exception of First Trust Dow Jones Select MicroCap Index Fund, First
Trust Value Line(R) Dividend Index Fund and First Trust Value Line(R) 100
Exchange-Traded Fund, each Fund is considered to be non-diversified. As a
result, those Funds are exposed to additional market risk. A non-diversified
fund may invest a relatively high percentage of its assets in a limited number
of issuers. As a result, changes in the market value of a single portfolio
security could cause greater fluctuations in share price than would occur in a
diversified fund. Furthermore, non-diversified funds are more susceptible to any
single political, regulatory or economic occurrence.
The Funds are not actively managed. The Funds may be affected by a general
decline in certain market segments relating to their corresponding index. The
Funds invest in securities included in or representative of their corresponding
index regardless of their investment merit. The Funds generally will not attempt
to take defensive positions in declining markets.
The First Trust Dow Jones Select MicroCap Index Fund invests in
micro-capitalization companies. Such companies may be more vulnerable to adverse
general market or economic developments, may be less liquid, and may experience
greater price volatility than larger, more established companies.
The First Trust Dow Jones Internet Index Fund invests in stocks of companies in
the technology sector. You should be aware that an investment in a portfolio
which invests in a particular sector involves additional risks, including
limited diversification. The companies engaged in the technology sector are
subject to fierce competition and high research and development costs, and their
products and services may be subject to rapid obsolescence.
The First Trust NYSE Arca Biotechnology Index Fund is concentrated in stocks of
companies in the biotechnology sector.
You should be aware that an investment in a portfolio which is concentrated in a
particular sector involves additional risks, including limited diversification.
The companies engaged in the biotechnology sector are subject to fierce
competition, substantial research and development costs, governmental
regulations and pricing constraints, and their products and services may be
subject to rapid obsolescence.
The First Trust NYSE Arca Biotechnology Index Fund invests in the securities of
companies in the health care sector. Because companies in the health care sector
are involved in medical services or health care including biotechnology research
and production, drugs and pharmaceuticals and health care facilities and
services, general problems of these companies include extensive competition,
generic drug sales or the loss of patent protection, product liability
litigation and increased government regulations.
The First Trust US IPO Index Fund invests in companies that have recently
conducted an initial public offering. The stocks of such companies are often
subject to extreme price volatility and speculative trading.
The First Trust Dow Jones Select Micro Cap Index Fund and First Trust Capital
Strength ETF invest in securities of companies in the financials sector. Banks,
thrifts and their holding companies are especially subject to the adverse
effects of economic recession; volatile interest rates; portfolio concentrations
in geographic markets and in commercial and residential real estate loans; and
competition from new entrants in their fields of business. Although recently
enacted legislation repealed most of the barriers which separated the banking,
insurance and securities industries, these industries are still extensively
regulated at both the federal and state level and may be adversely affected by
increased regulations. The downturn in the U.S. and world economies has
adversely affected banks, thrifts and other companies in the financials sector.
The First Trust Dow Jones Internet Index Fund invests in securities of companies
in the information technology industry. Information technology companies are
generally subject to the risks of rapidly changing technologies; short product
life cycles; fierce competition; and aggressive pricing and reduced profit
margins. The First Trust Dow Jones Internet Index Fund invests in the securities
of Internet companies. Internet companies are subject to rapid changes in
technology, worldwide competition, rapid obsolescence of products and services,
loss of patent protections, cyclical market patterns, evolving industry
standards and frequent new product introductions. The Fund's investment in
Internet companies may also be subject to the risk of owning small
capitalization companies that have recently begun operations.
The First Trust US IPO Index Fund, First Trust Value Line(R) 100 Exchange-Traded
Fund and First Trust Dow Jones Internet Index Fund invest in the securities of
companies in the consumer discretionary sector. Because companies in the
consumer discretionary sector manufacture products and provide discretionary
services directly to the consumer, the success of these companies is tied
closely to the performance of the overall domestic and international economy,
interest rates, competition and consumer confidence. Success depends heavily on
disposable household income and consumer spending. Changes in demographics and
consumer tastes can also affect the demand for, and success of, consumer
discretionary products in the marketplace.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
The First Trust Morningstar Dividend Leaders Index Fund and First Trust Value
Line(R) Dividend Index Fund invest in the securities of utilities companies.
Utilities companies are subject to the imposition of rate caps, increased
competition due to deregulation, the difficulty in obtaining an adequate return
on invested capital or in financing large construction projects, the limitations
on operations and increased costs and delays attributable to environmental
considerations, and the capital market's ability to absorb utility debt. In
addition, taxes, government regulation, international politics, price and supply
fluctuations, volatile interest rates and energy conservation may cause
difficulties for utilities. Utilities issuers have been experiencing certain of
these problems to varying degrees.
With the exception of First Trust Capital Strength ETF and First Trust Dow Jones
Select MicroCap Index Fund, the Funds may invest in small capitalization and
mid-capitalization companies. Such companies' securities may be less liquid and
may experience greater price volatility than securities of larger, more
established companies.
Because a Fund's corresponding index may include American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs") and/or stocks of non-U.S.
companies, the investments of certain Funds, including but not limited to, the
First Trust Value Line(R) 100 Exchange-Traded Fund, involves risks of investing
in non-U.S. securities that are in addition to the risk associated with domestic
securities. Non-U.S. companies, in general, are not subject to the regulatory
requirements of U.S. companies and, as such, there may be less publicly
available information about these companies. Moreover, non-U.S. accounting,
auditing and financial reporting standards generally are different from those
applicable to U.S. companies. In addition, non-U.S. companies are exposed to
additional economic, political, social or diplomatic events. ADRs and ADSs also
involve substantially identical risks to those associated with investments in
non-U.S. securities. In addition, the issuers of certain depositary receipts,
particularly unsponsored or unregistered depositary receipts, are under no
obligation to distribute shareholder communications to the holders of such
receipts, or to pass through to them any voting rights with respect to the
deposited securities.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT
MANAGEMENT AGREEMENT
The Board of Trustees (the "Board") of the First Trust Exchange-Traded Fund (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" or "First Trust") on behalf of the following
eight series of the Trust (each a "Fund" and collectively, the "Funds"):
First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)
First Trust Value Line(R) Dividend Index Fund (FVD)
First Trust Dow Jones Select MicroCap Index Fund (FDM)
First Trust Morningstar Dividend Leaders Index Fund (FDL)
First Trust US IPO Index Fund (FPX)
First Trust NYSE Arca Biotechnology Index Fund (FBT)
First Trust Dow Jones Internet Index Fund (FDN)
First Trust Capital Strength ETF (FTCS)
The Board approved the continuation of the Agreement for each Fund for a
one-year period ending June 30, 2017 at a meeting held on June 13, 2016. The
Board determined for each Fund that the continuation of the Agreement is in the
best interests of the Fund in light of the extent and quality of the services
provided and such other matters as the Board considered to be relevant in the
exercise of its reasonable 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 22, 2016 and June 13, 2016, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor responding to requests for information from counsel to 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 (all of which were exchange-traded funds
("ETFs")) compiled by Management Practice, Inc. ("MPI"), an independent source
(the "MPI Peer Group"), and as compared to fees charged to other clients of the
Advisor, including other ETFs managed by the Advisor; expenses of each Fund as
compared to expense ratios of the funds in the Fund's MPI Peer Group;
performance information for each Fund; the nature of expenses incurred in
providing services to each Fund and the potential for economies of scale, if
any; financial data on the Advisor; any fall-out benefits to the Advisor and its
affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's
compliance program. The Board reviewed initial materials with the Advisor at a
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
special meeting held on April 22, 2016, prior to which the Independent Trustees
and their counsel met separately to discuss the information provided by the
Advisor. Following the April meeting, independent legal counsel 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
independent legal counsel held prior to the June 13, 2016 meeting, as well as at
the meeting held that day. 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 as well as from the
perspective of shareholders. 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.
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. The Board considered the background and
experience of the persons responsible for the day-to-day management of the
Funds. 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 and
policies. In addition, as part of the Board's consideration of the Advisor's
services, the Advisor, in its written materials and at the April 22, 2016
meeting, described to the Board the scope of its ongoing investment in
additional infrastructure and personnel 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 the Fund's investment objective and policies.
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 April 30, 2018.
For each Fund, the Board noted that expenses borne or fees waived by the Advisor
are to be subject to reimbursement by the Fund for up to three years from the
date the expense was incurred or fee was waived, but no reimbursement payment
would be made by the Fund if it would result in the Fund exceeding an expense
ratio equal to the expense cap in place at the time the expenses were borne or
fees were waived by the Advisor. The Board received and reviewed information
showing the advisory or unitary fee rates and expense ratios of the peer funds
in the MPI Peer Groups, as well as advisory fee rates charged by the Advisor to
other fund (including ETFs) and non-fund clients, as applicable. Because each
Fund's MPI Peer 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 FDN was below the median total (net) expense ratio of the peer funds in
its MPI Peer Group, the total (net) expense ratio of FDM was equal to the median
total (net) expense ratio of the peer funds in its MPI Peer Group and that the
total (net) expense ratios of FDL, FVD, FBT, FTCS, FVL and FPX were above the
median total (net) expense ratio of the peer funds in each Fund's respective MPI
Peer Group. With respect to the MPI Peer Groups, the Board discussed with
representatives of 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 clients, the Board considered differences between the Funds and
other clients that limited their comparability. 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 description of its long-term commitment to each Fund.
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, 2015 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 consistent with the Fund's prospectus. In addition,
the Board reviewed data prepared by MPI comparing each Fund's performance to its
respective MPI Peer Group and to a broad-based benchmark, 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.
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.
Page 72
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
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 expects its expenses to
increase over the next twelve months as the Advisor continues to make
investments in personnel and infrastructure. 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, 2015 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.
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 its
management of the Funds' portfolios.
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 the Trust and each Fund. No single
factor was determinative in the Board's analysis.
Page 73
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FIRST TRUST
FIRST TRUST EXCHANGE-TRADED FUND
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
101 Barclay Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund
Book 2
First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)
First Trust NASDAQ-100-Technology Sector Index Fund (QTEC)
First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT)
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)
First Trust S&P REIT Index Fund (FRI)
First Trust ISE Water Index Fund (FIW)
First Trust ISE-Revere Natural Gas Index Fund (FCG)
First Trust ISE Chindia Index Fund (FNI)
First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)
Semi-Annual Report
June 30, 2016
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016
Shareholder Letter........................................................... 2
Market Overview.............................................................. 3
Fund Performance Overview
First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)................... 4
First Trust NASDAQ-100-Technology Sector Index Fund (QTEC)................ 6
First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT)............. 8
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)........ 10
First Trust S&P REIT Index Fund (FRI)..................................... 12
First Trust ISE Water Index Fund (FIW).................................... 14
First Trust ISE-Revere Natural Gas Index Fund (FCG)....................... 16
First Trust ISE Chindia Index Fund (FNI).................................. 18
First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)................ 20
Notes to Fund Performance Overview........................................... 22
Understanding Your Fund Expenses............................................. 23
Portfolio of Investments
First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)................... 25
First Trust NASDAQ-100-Technology Sector Index Fund (QTEC)................ 28
First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT)............. 29
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)........ 32
First Trust S&P REIT Index Fund (FRI)..................................... 34
First Trust ISE Water Index Fund (FIW).................................... 37
First Trust ISE-Revere Natural Gas Index Fund (FCG)....................... 39
First Trust ISE Chindia Index Fund (FNI).................................. 41
First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)................ 44
Statements of Assets and Liabilities......................................... 48
Statements of Operations..................................................... 50
Statements of Changes in Net Assets.......................................... 52
Financial Highlights......................................................... 56
Notes to Financial Statements................................................ 61
Additional Information....................................................... 70
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (each such series is referred to as a "Fund" and collectively, as the
"Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund shares may therefore be less than what you paid
for them. Accordingly, you can lose money by investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns, net asset value and share price will fluctuate and Fund shares, when
sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at http://www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
each Fund. It includes details about each Fund's portfolio and presents data and
analysis that provide insight into each Fund's performance and investment
approach.
By reading the market overview by Robert F. Carey, Chief Market Strategist of
the Advisor, you may obtain an understanding of how the market environment
affected the performance of each Fund. The statistical information that follows
may help you understand each Fund's performance compared to that of relevant
market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in each
Fund are spelled out in its prospectus, statement of additional information,
this report and other Fund regulatory filings.
Page 1
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SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
JUNE 30, 2016
Dear Shareholders:
Thank you for your investment in First Trust Exchange-Traded Fund (the "Trust").
First Trust Advisors L.P. ("First Trust") is pleased to provide you with this
semi-annual report which contains detailed information about your investment for
the six months ended June 30, 2016, including a market overview and the
financial reports for the period. We encourage you to read this report and
discuss it with your financial advisor.
While markets were up and down during 2015, we believe there are three important
things to remember. First, the U.S. economy grew, despite the massive decline in
oil prices. Second, the tapering that began in 2014 by the Federal Reserve (the
"Fed") did not stop growth in the U.S. economy. Finally, the long-anticipated
rate hike by the Fed in December had little effect on the money supply, and the
stock market was not shocked by the hike. Early in 2016, many investors were
concerned that the volatility we saw in the market in 2015 would continue, and
it did. From December 31, 2015 through February 11, 2016, the S&P 500(R) Index
declined by 10.27%. Since then, the market has made a steady comeback, and as of
June 30, 2016, the S&P 500(R) Index was up 15.73%.
First Trust believes that having a long-term investment horizon and investing in
quality products can help you reach your goals, regardless of how the market
behaves. We have always maintained perspective about the markets and believe
investors should as well. We will continue to strive to provide quality
investment opportunities each and every day, which has been one of the hallmarks
of our firm since its inception 25 years ago.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value our relationship with you and will continue to focus on helping
investors like you reach your financial goals.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
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MARKET OVERVIEW
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
SEMI-ANNUAL REPORT
JUNE 30, 2016
ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of research and analysis of
the First Trust product line. Mr. Carey has 25 years of experience as an Equity
and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst
("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE ECONOMY/INVESTING
One of the reasons cited by the Federal Reserve for not raising interest rates
beyond the initial 0.25% hike in the federal funds target rate on December 16,
2015 is the slowdown in global growth. The International Monetary Fund reduced
its global growth estimate for 2016 from 3.4% in January to 3.2% in April. It
also shaved its 2017 estimate by 0.1% to 3.5%, according to its own release. To
help put this concern into perspective, the rate was 5.4% in 2010.
Shocks can come from anywhere at any time. The Brexit (British + Exit) vote held
on June 23, 2016 certainly qualifies. The citizens of the United Kingdom
("U.K.") voted 52% to 48% to leave the European Union ("EU"), according to the
BBC. The news was not well-received by the global equities markets. It is not
known how it might impact the European recovery underway. In the two trading
days (June 24 & June 27) following the vote, total world equity market
capitalization ("cap") dropped from $63.81 trillion to $60.17 trillion, or a
decline of $3.64 trillion, according to Bloomberg. The global equities markets,
however, rebounded to close on June 30 at a combined market cap of $62.70
trillion. The U.K. and the EU are likely going to need months to negotiate
Brexit.
ETFGI, an industry research group, reported that total assets invested in
exchange-traded funds ("ETFs") and other exchange-traded products ("ETPs")
reached a record high of $3.18 trillion globally in June 2016, according to its
own release. Total assets invested in U.S. ETFs/ETPs reached a record high $2.26
trillion in June 2016.
U.S. STOCKS AND BONDS
In the first six months of 2016, the major U.S. stock indices posted positive
results. The S&P 500(R) Index, S&P MidCap 400 Index and S&P SmallCap 600(R)
Index posted total returns of 3.84%, 7.93%, and 6.23%, respectively, according
to Bloomberg. Eight of the 10 major S&P 500(R) Index sectors posted positive
total returns. The top performing sectors were Telecommunication Services,
Utilities and Energy, up 24.85%, 23.41% and 16.10%, respectively. The two
sectors that posted losses were Financials and Information Technology, down
3.05% and 0.32%, respectively.
The stock market appeared to rebound with the recovery in the price of crude oil
in mid-February. Crude oil began its plunge in June 2014. It declined from a
2014-high of $107.26 per barrel on June 20, 2014 to a low of $26.21 per barrel
on February 11, 2016, according to Bloomberg. It fell 29.24% from December 31,
2015 through February 11, 2016, and then rebounded by 84.40% to $48.33 per
barrel on June 30, 2016. From December 31, 2015 through February 11, 2016, the
S&P 500(R) Index posted a total return of -10.27%, according to Bloomberg. From
February 11, 2016 through June 30, 2016, the index gained 15.73%. Energy stocks
had been the best performing sector for a decade. From June 30, 2004 through
June 30, 2014, the S&P 500(R) Energy Index posted a cumulative total return of
254.41%, according to Bloomberg. The next best performing sector was utilities,
up 176.37%, as measured by the S&P 500(R) Utilities Index for the same period.
In the U.S. bond market, the top-performing major debt group was high yield
corporate bonds. The Barclays U.S. Corporate High Yield Index posted a total
return of 9.06%. The worst performing major debt group was mortgages, though the
group still generated a positive return. The Barclays GNMA 30-Year Index posted
a total return of 2.67%. The yield on the benchmark 10-Year Treasury note
(T-Note) declined by 80 basis points, from 2.27% (December 31, 2015) to 1.47%
(June 30, 2016). Over the past decade, the average yield on the 10-Year T-Note
was 2.31%.
FOREIGN STOCKS AND BONDS
The U.S. dollar declined by 2.52% against a basket of major currencies in the
first six months of 2016, as measured by the U.S. Dollar Index (DXY). DXY had
appreciated 23.63% in the 18-month period ended December 31, 2015. With respect
to U.S. investors, a stronger U.S. dollar can negatively impact returns on
foreign securities.
Due to a dip in the value of the U.S. dollar and some downward pressure on
interest rates in most major economies around the globe, foreign bond indices
performed well in the first six months of 2016. The Barclays EM Hard Currency
Aggregate Index of emerging markets debt posted a total return of 9.06% (USD),
while the Barclays Global Aggregate Index of higher quality debt rose 8.96%
(USD). Foreign equities finished mixed. The MSCI Emerging Markets Index of
stocks posted a total return of 6.41% (USD), while the MSCI World Index
(excluding the U.S.) posted a total return of -2.98% (USD).
Page 3
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
The First Trust NASDAQ-100 Equal Weighted Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Equal
Weighted Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its assets in common stocks that comprise the Index. The Index is the
equal-weighted version of the NASDAQ-100 Index(R), which includes 100 of the
largest non-financial securities listed on The Nasdaq Stock Market LLC
("Nasdaq") based on market capitalization. The Index contains the same
securities as the NASDAQ-100 Index(R), but each of the securities is initially
set at a weight of 1.00% of the Index which is rebalanced quarterly. The Fund's
shares are listed for trading on the Nasdaq. The first day of secondary market
trading in shares of the Fund was April 25, 2006.
-----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
6 Months 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended Ended (4/19/06) Ended Ended (4/19/06)
6/30/16 6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV -2.88% -3.02% 11.45% 9.15% 8.10% 71.92% 139.94% 121.22%
Market Value -2.90% -3.08% 11.43% 9.14% 8.09% 71.77% 139.70% 121.12%
INDEX PERFORMANCE
NASDAQ-100 Equal Weighted Index(SM) -2.63% -2.42% 12.15% 9.83% 8.77% 77.40% 155.38% 135.71%
S&P 500(R) Index 3.84% 3.99% 12.10% 7.42% 6.99% 77.02% 104.65% 99.22%
NASDAQ-100 Index(R) -3.17% 1.77% 15.16% 11.92% 10.64% 102.54% 208.41% 180.45%
-----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 41.19%
Consumer Discretionary 26.90
Health Care 16.81
Consumer Staples 6.11
Industrials 5.90
Telecommunication Services 3.09
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
NetEase, Inc., ADR 1.17%
Micron Technology, Inc. 1.12
Paychex, Inc. 1.08
Cerner Corp. 1.08
SBA Communications Corp., Class A 1.07
Ctrip.com International Ltd., ADR 1.07
Intuit, Inc. 1.05
JD.com, Inc., ADR 1.04
Akamai Technologies, Inc. 1.04
Seagate Technology PLC 1.04
-------
Total 10.76%
=======
-----------------------------
Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Equal Weighted
Index(SM) are trademarks of Nasdaq, Inc. (which with its affiliates is referred
to as the Corporations) and are licensed for use by First Trust on behalf of the
Fund. The Fund has not been passed on by the Corporations as to its legality or
suitability. The Fund is not issued, endorsed, sold, or promoted by the
Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH
RESPECT TO THE FUND.
Page 4
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 19, 2006 - JUNE 30, 2016
First Trust NASDAQ-100 NASDAQ-100 Equal S&P 500(R) NASDAQ-100
Equal Weighted Index Fund Weighted Index(SM) Index Index(R)
04/06 $10,000 $10,000 $10,000 $10,000
12/06 10,060 10,097 10,975 10,168
06/07 11,050 11,117 11,739 11,217
12/07 11,040 11,142 11,579 12,124
06/08 9,673 9,785 10,199 10,708
12/08 6,187 6,292 7,295 7,084
06/09 7,653 7,803 7,526 8,671
12/09 9,871 10,100 9,225 10,954
06/10 9,314 9,561 8,612 10,278
12/10 11,968 12,321 10,616 13,161
06/11 12,867 13,288 11,254 13,849
12/11 11,636 12,063 10,839 13,645
06/12 12,704 13,203 11,868 15,750
12/12 13,365 13,927 12,574 16,145
06/13 15,450 16,172 14,312 17,774
12/13 18,704 19,636 16,646 22,109
06/14 20,197 21,268 17,835 23,849
12/14 22,283 23,531 18,927 26,396
06/15 22,811 24,159 19,160 27,556
12/15 22,779 24,210 19,189 28,964
06/16 22,123 23,573 19,926 28,046
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 151 0 0 0
01/01/12 - 12/31/12 157 0 0 0
01/01/13 - 12/31/13 203 0 0 0
01/01/14 - 12/31/14 161 3 0 0
01/01/15 - 12/31/15 126 1 0 0
01/01/16 - 06/30/16 32 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 101 0 0 0
01/01/12 - 12/31/12 92 1 0 0
01/01/13 - 12/31/13 49 0 0 0
01/01/14 - 12/31/14 87 1 0 0
01/01/15 - 12/31/15 122 3 0 0
01/01/16 - 06/30/16 93 0 0 0
Page 5
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
The First Trust NASDAQ-100-Technology Sector Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Technology
Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its assets in common stocks that comprise the Index. The Index is an
equal-weighted index based on the securities of the NASDAQ-100 Index(R) that are
classified as "technology" according to the Industry Classification Benchmark
classification system. The NASDAQ-100 Index(R) includes 100 of the largest
domestic and international non-financial companies listed on the Nasdaq based on
market capitalization. The NASDAQ-100 Index(R) is rebalanced four times annually
in March, June, September and December. The Fund's shares are listed for trading
on the Nasdaq. The first day of secondary market trading in shares of the Fund
was April 25, 2006.
-----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
6 Months 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended Ended (4/19/06) Ended Ended (4/19/06)
6/30/16 6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV 2.93% 4.09% 12.08% 10.05% 8.51% 76.83% 160.63% 130.01%
Market Value 2.86% 4.07% 12.07% 10.04% 8.51% 76.79% 160.27% 129.95%
INDEX PERFORMANCE
NASDAQ-100 Technology Sector Index(SM) 3.30% 4.79% 12.79% 10.75% 9.20% 82.55% 177.63% 145.28%
S&P 500(R) Index 3.84% 3.99% 12.10% 7.42% 6.99% 77.02% 104.65% 99.22%
S&P 500 Information Technology Index -0.32% 4.79% 13.42% 10.02% 8.62% 87.69% 159.96% 132.40%
-----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION (1) LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 96.94%
Health Care 3.06
-------
Total 100.00%
=======
(1) The above sector classification is based on Standard & Poor's Global
Industry Classification Standard ("GICS"), and is different than the
industry sector classification system used by the Index to select
securities, which is the Industry Classification Benchmark ("ICB") system,
the joint classification system of Dow Jones Indexes and FTSE Group.
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
NetEase, Inc., ADR 3.33%
Micron Technology, Inc. 3.19
Cerner Corp. 3.06
Intuit, Inc. 2.99
Akamai Technologies, Inc. 2.95
Seagate Technology PLC 2.95
Intel Corp. 2.92
Symantec Corp. 2.90
Applied Materials, Inc. 2.88
Microsoft Corp. 2.87
-------
Total 30.04%
=======
-----------------------------
Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Technology Sector
Index(SM) are trademarks of Nasdaq, Inc. (which with its affiliates is referred
to as the Corporations) and are licensed for use by First Trust on behalf of the
Fund. The Fund has not been passed on by the Corporations as to its legality or
suitability. The Fund is not issued, endorsed, sold, or promoted by the
Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH
RESPECT TO THE FUND.
Page 6
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 19, 2006 - JUNE 30, 2016
First Trust NASDAQ-100
NASDAQ-100- Technology Technology Sector S&P 500 Information S&P 500(R)
Sector Index Fund Index(SM) Technology Index Index
04/06 $10,000 $10,000 $10,000 $10,000
12/06 9,985 10,020 10,296 10,975
06/07 10,925 10,989 11,256 11,739
12/07 10,750 10,847 11,975 11,579
06/08 9,755 9,872 10,409 10,199
12/08 5,885 5,983 6,809 7,295
06/09 7,890 8,048 8,502 7,526
12/09 10,587 10,838 11,011 9,224
06/10 9,782 10,041 9,847 8,611
12/10 12,907 13,293 12,133 10,615
06/11 13,006 13,435 12,383 11,253
12/11 12,165 12,606 12,426 10,839
06/12 12,720 13,222 14,084 11,868
12/12 13,141 13,702 14,269 12,574
06/13 14,681 15,357 15,175 14,312
12/13 18,150 19,047 18,325 16,646
06/14 20,531 21,615 19,963 17,835
12/14 22,656 23,930 22,011 18,927
06/15 22,096 23,404 22,178 19,160
12/15 22,343 23,741 23,316 19,189
06/16 22,998 24,524 23,241 19,926
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 161 0 0 0
01/01/12 - 12/31/12 132 0 0 0
01/01/13 - 12/31/13 170 0 0 0
01/01/14 - 12/31/14 171 4 0 0
01/01/15 - 12/31/15 164 2 0 0
01/01/16 - 06/30/16 47 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 91 0 0 0
01/01/12 - 12/31/12 117 1 0 0
01/01/13 - 12/31/13 81 1 0 0
01/01/14 - 12/31/14 76 1 0 0
01/01/15 - 12/31/15 85 1 0 0
01/01/16 - 06/30/16 78 0 0 0
Page 7
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
The First Trust NASDAQ-100 Ex-Technology Sector Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Ex-Tech
Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its assets in common stocks that comprise the Index. The Index contains
securities of the NASDAQ-100 Index(R) that are not classified as "technology"
according to the Industry Classification Benchmark classification system and, as
a result, is a subset of the NASDAQ-100 Index(R). The NASDAQ-100 Index(R)
includes 100 of the largest domestic and international non-financial companies
listed on the Nasdaq based on market capitalization. The Index is
equally-weighted and is rebalanced four times annually in March, June, September
and December. The Fund's shares are listed for trading on the Nasdaq. The first
day of secondary market trading in shares of the Fund was February 15, 2007.
-----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (2/8/07) Ended (2/8/07)
6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV -6.05% -6.66% 11.23% 7.87% 70.28% 103.69%
Market Value -5.93% -6.71% 11.23% 7.87% 70.24% 103.64%
INDEX PERFORMANCE
NASDAQ-100 Ex-Tech Sector Index(SM) -5.86% -6.14% 11.92% 8.55% 75.63% 116.03%
Russell 1000(R) Index 3.74% 2.93% 11.88% 6.36% 75.31% 78.41%
-----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 41.36%
Health Care 24.31
Information Technology 11.02
Consumer Staples 9.43
Industrials 9.11
Telecommunication Services 4.77
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Paychex, Inc. 1.67%
SBA Communications Corp., Class A 1.66
Ctrip.com International Ltd., ADR 1.65
JD.com, Inc., ADR 1.61
Automatic Data Processing, Inc. 1.60
Whole Foods Market, Inc. 1.60
Comcast Corp., Class A 1.60
Ross Stores, Inc. 1.60
Kraft Heinz (The) Co. 1.59
O'Reilly Automotive, Inc. 1.59
-------
Total 16.17%
=======
-----------------------------
Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Ex-Tech Sector
Index(SM) are trademarks of Nasdaq, Inc. (which with its affiliates is referred
to as the Corporations) and are licensed for use by First Trust on behalf of the
Fund. The Fund has not been passed on by the Corporations as to its legality or
suitability. The Fund is not issued, endorsed, sold, or promoted by the
Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH
RESPECT TO THE FUND.
Page 8
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 8, 2007 - JUNE 30, 2016
First Trust NASDAQ-100 Ex-Technology NASDAQ-100 Ex-Tech Russell 1000(R)
Sector Index Fund Sector Index(SM) Index
02/07 $10,000 $10,000 $10,000
12/07 10,595 10,653 10,282
06/08 9,057 9,126 9,131
12/08 6,029 6,102 6,417
06/09 7,060 7,165 6,694
12/09 8,848 9,009 8,241
06/10 8,454 8,633 7,714
12/10 10,674 10,935 9,568
06/11 11,961 12,294 10,177
12/11 10,558 10,894 9,711
06/12 11,906 12,317 10,622
12/12 12,703 13,172 11,306
06/13 15,089 15,721 12,879
12/13 17,942 18,744 15,050
06/14 18,764 19,668 16,144
12/14 20,697 21,749 17,043
06/15 21,821 23,016 17,334
12/15 21,679 22,947 17,199
06/16 20,367 21,602 17,842
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 159 0 0 0
01/01/12 - 12/31/12 127 1 0 0
01/01/13 - 12/31/13 145 13 0 0
01/01/14 - 12/31/14 151 14 0 0
01/01/15 - 12/31/15 201 6 0 0
01/01/16 - 06/30/16 38 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 93 0 0 0
01/01/12 - 12/31/12 111 11 0 0
01/01/13 - 12/31/13 82 12 0 0
01/01/14 - 12/31/14 79 7 1 0
01/01/15 - 12/31/15 42 3 0 0
01/01/16 - 06/30/16 87 0 0 0
Page 9
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
The First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (the "Fund")
seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the NASDAQ(R)
Clean Edge(R) Green Energy Index (the "Index"). The Fund will normally invest at
least 90% of its assets in common stocks that comprise the Index. The Index is
an equity index designed to track the performance of clean energy companies that
are publicly traded in the United States and includes companies engaged in
manufacturing, development, distribution and installation of emerging
clean-energy technologies including, but not limited to, solar photovoltaics,
biofuels and advanced batteries. The Index is a modified market capitalization
weighted index in which larger companies receive a larger Index weighting. The
Index weighting methodology also includes caps to prevent high concentrations
among larger alternative energy stocks. The Index is reconstituted semi-annually
in March and September and rebalanced quarterly. The Fund's shares are listed
for trading on the Nasdaq. The first day of secondary market trading in shares
of the Fund was February 14, 2007.
-----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (2/8/07) Ended (2/8/07)
6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV -9.80% -21.36% -0.49% -3.08% -2.41% -25.44%
Market Value -9.86% -21.41% -0.51% -3.08% -2.53% -25.48%
INDEX PERFORMANCE
NASDAQ(R) Clean Edge(R) Green Energy Index -10.03% -21.53% -0.69% -2.87% -3.41% -23.89%
Russell 2000(R) Index 2.22% -6.73% 8.35% 5.19% 49.35% 60.77%
-----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 54.53%
Industrials 19.74
Utilities 14.15
Consumer Discretionary 7.79
Energy 2.40
Financials 1.39
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Linear Technology Corp. 8.05%
Acuity Brands, Inc. 7.84
Tesla Motors, Inc. 7.79
First Solar, Inc. 7.49
Hexcel Corp. 5.85
Universal Display Corp. 4.13
Cree, Inc. 4.05
Microsemi Corp. 3.96
SolarCity Corp. 3.88
AVX Corp. 3.75
-------
Total 56.79%
=======
-----------------------------
Nasdaq(R) and Clean Edge(R) are the registered trademarks (the "Marks") of
Nasdaq, Inc. ("Nasdaq") and Clean Edge, Inc. ("Clean Edge(R)") respectively.
Nasdaq and Clean Edge(R) are, collectively with their affiliates, the
"Corporations." The Marks are licensed for use by First Trust on behalf of the
Fund. The Fund has not been passed on by the Corporations as to its legality or
suitability. The Fund is not issued, endorsed, sold, or promoted by the
Corporations. The Fund should not be construed in any way as investment advice
by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY
WITH RESPECT TO THE FUND.
Page 10
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 8, 2007 - JUNE 30, 2016
First Trust NASDAQ(R)
Clean Edge(R) Green NASDAQ(R) Clean Edge(R) Russell 2000(R)
Energy Index Fund Green Energy Index Index
02/07 $10,000 $10,000 $10,000
12/07 15,430 15,522 9,489
06/08 12,350 12,472 8,599
12/08 5,595 5,675 6,283
06/09 6,920 7,038 6,449
12/09 8,045 8,213 7,990
06/10 6,665 6,824 7,834
12/10 8,210 8,434 10,136
06/11 7,640 7,879 10,765
12/11 4,825 4,992 9,713
06/12 4,670 4,822 10,542
12/12 4,801 4,927 11,301
06/13 7,177 7,346 13,093
12/13 9,111 9,329 15,688
06/14 10,479 10,732 16,188
12/14 8,834 9,037 16,455
06/15 9,481 9,700 17,237
12/15 8,266 8,460 15,729
06/16 7,456 7,611 16,078
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 125 5 0 0
01/01/12 - 12/31/12 37 6 1 0
01/01/13 - 12/31/13 168 5 0 0
01/01/14 - 12/31/14 122 3 0 0
01/01/15 - 12/31/15 160 1 0 0
01/01/16 - 06/30/16 37 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 116 6 0 0
01/01/12 - 12/31/12 153 52 1 0
01/01/13 - 12/31/13 75 4 0 0
01/01/14 - 12/31/14 124 3 0 0
01/01/15 - 12/31/15 89 2 0 0
01/01/16 - 06/30/16 88 0 0 0
Page 11
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST S&P REIT INDEX FUND (FRI)
The First Trust S&P REIT Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the S&P United States REIT Index (the
"Index"). The Fund will normally invest at least 90% of its assets in common
stocks that comprise the Index. The Index is a subset of the S&P Developed REIT
Index, which measures the performance of more than 200 REITs or REIT-like
structures in 15 developed markets. The S&P Developed REIT Index is a sub-index
of the S&P Global REIT Index. The S&P Developed REIT Index aims to represent an
accurate measure of the REIT developed equity market, reflecting the risk and
return characteristics of this broad universe on an on-going basis. The Index
contains those constituents of the S&P Developed REIT Index that are domiciled
in the United States. As of March 31, 2016, the Index is comprised of 155
companies. The Index includes the securities of small and mid cap companies. The
Fund's shares are listed for trading on the NYSE Arca. The first day of
secondary market trading in shares of the Fund was May 10, 2007.
-----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (5/8/07) Ended (5/8/07)
6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV 12.96% 22.97% 11.85% 4.96% 75.03% 55.74%
Market Value 12.90% 23.08% 11.84% 4.97% 74.99% 55.81%
INDEX PERFORMANCE
S&P United States REIT Index* 13.29% 23.71% 12.45% N/A 79.83% N/A
FTSE EPRA/NAREIT North America Index 13.12% 22.60% 11.56% 5.15% 72.77% 58.32%
Russell 3000(R) Index 3.62% 2.14% 11.60% 5.96% 73.08% 69.80%
-----------------------------------------------------------------------------------------------------------------------------------
* On November 6, 2008, the Fund's underlying index changed from the S&P REIT
Composite Index to the S&P United States REIT Index. Effective December
31, 2008, the S&P REIT Composite Index was discontinued. Therefore, the
Fund's performance and historical returns shown for the periods prior to
November 6, 2008 are not necessarily indicative of the performance that
the Fund, based on its current Index, would have generated. The inception
date of the Index was June 30, 2008. Returns for the Index are only
disclosed for those periods in which the Index was in existence for the
whole period.
(See Notes to Fund Performance Overview on page 22.)
-----------------------------------------------------------
% OF TOTAL
REIT CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Retail 25.54%
Residential 16.06
Specialized 14.51
Health Care 12.82
Office 12.26
Diversified 7.62
Industrial 6.12
Hotel & Resort 5.07
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Simon Property Group, Inc. 8.26%
Public Storage 4.63
Welltower, Inc. 3.35
Prologis, Inc. 3.17
Equity Residential 3.10
AvalonBay Communities, Inc. 3.04
Ventas, Inc. 3.03
Boston Properties, Inc. 2.49
Realty Income Corp. 2.20
Vornado Realty Trust 2.19
-------
Total 35.46%
=======
-----------------------------
Standard & Poor's(R), S&P(R) and S&P United States REIT Index are registered
trademarks of Standard & Poor's Financial Services LLC ("S&P") and have been
licensed for use by First Trust on behalf of the Fund. The Fund is not
sponsored, endorsed, sold or promoted by S&P or its affiliates, and S&P and its
affiliates make no representation, warranty or condition regarding the
advisability of buying, selling or holding shares of the Fund.
Page 12
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST S&P REIT INDEX FUND (FRI) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - JUNE 30, 2016
First Trust S&P REIT FTSE EPRA/NAREIT Russell 3000(R)
Index Fund North America Index Index
05/07 $10,000 $10,000 $10,000
12/07 8,093 8,206 9,811
06/08 7,739 7,843 8,728
12/08 4,947 4,872 6,151
06/09 4,319 4,381 6,405
12/09 6,333 6,442 7,889
06/10 6,679 6,772 7,412
12/10 8,090 8,287 9,225
06/11 8,899 9,163 9,811
12/11 8,729 8,965 9,319
06/12 10,007 10,276 10,188
12/12 10,247 1,0593 10,849
06/13 10,871 11,091 12,374
12/13 10,434 10,728 14,489
06/14 12,245 12,560 15,495
12/14 13,523 13,748 16,308
06/15 12,667 12,915 16,624
12/15 13,789 13,997 16,386
06/16 15,576 15,833 16,979
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 149 1 0 0
01/01/12 - 12/31/12 159 0 0 0
01/01/13 - 12/31/13 130 0 0 0
01/01/14 - 12/31/14 193 0 0 0
01/01/15 - 12/31/15 130 0 0 0
01/01/16 - 06/30/16 76 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 102 0 0 0
01/01/12 - 12/31/12 91 0 0 0
01/01/13 - 12/31/13 122 0 0 0
01/01/14 - 12/31/14 59 0 0 0
01/01/15 - 12/31/15 122 0 0 0
01/01/16 - 06/30/16 49 0 0 0
Page 13
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE WATER INDEX FUND (FIW)
The First Trust ISE Water Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE Water(TM) Index (the "Index"). The
Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index is a modified market capitalization weighted index
comprised of 34 stocks that derive a substantial portion of their revenues from
the potable and wastewater industries. The Index is rebalanced on a semi-annual
basis. The Fund's shares are listed for trading on the NYSE Arca. The first day
of secondary market trading in shares of the Fund was May 11, 2007.
-----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (5/8/07) Ended (5/8/07)
6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV 17.39% 13.38% 9.73% 7.24% 59.07% 89.45%
Market Value 17.51% 13.45% 9.74% 7.24% 59.17% 89.50%
INDEX PERFORMANCE
ISE Water(TM) Index 17.80% 14.14% 10.48% 7.96% 64.58% 101.48%
Russell 3000(R) Index 3.62% 2.14% 11.60% 5.96% 73.08% 69.80%
-----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 56.51%
Utilities 18.61
Health Care 12.25
Materials 5.73
Information Technology 4.92
Financials 1.98
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
American Water Works Co., Inc. 4.39%
IDEXX Laboratories, Inc. 4.21
Danaher Corp. 4.10
Roper Technologies, Inc. 3.99
Ashland, Inc. 3.97
Pentair PLC 3.96
Agilent Technologies, Inc. 3.94
Xylem, Inc. 3.92
IDEX Corp. 3.85
Aqua America, Inc. 3.72
-------
Total 40.05%
=======
-----------------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE Water(TM) Index" are
trademarks of the International Securities Exchange, LLC and have been licensed
for use for certain purposes by First Trust on behalf of the Fund. The Fund,
based on the ISE Water(TM) Index, is not sponsored, endorsed, sold or promoted
by the International Securities Exchange, LLC and the International Securities
Exchange, LLC makes no representation regarding the advisability of trading in
such product.
Page 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE WATER INDEX FUND (FIW) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - JUNE 30, 2016
First Trust ISE ISE Water(TM) Russell 3000(R)
Water Index Fund Index Index
05/07 $10,000 $10,000 $10,000
12/07 11,212 11,260 9,811
06/08 10,992 11,056 8,728
12/08 7,915 7,987 6,151
06/09 8,168 8,276 6,405
12/09 9,522 9,681 7,889
06/10 8,989 9,168 7,412
12/10 11,378 11,653 9,225
06/11 11,910 12,243 9,811
12/11 10,738 11,076 9,319
06/12 11,803 12,225 10,188
12/12 13,619 14,153 10,849
06/13 14,585 15,220 12,374
12/13 17,830 18,667 14,489
06/14 18,338 19,251 15,495
12/14 17,894 18,847 16,308
06/15 16,709 17,652 16,624
12/15 16,138 17,103 16,386
06/16 18,944 20,147 16,979
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 131 0 0 0
01/01/12 - 12/31/12 121 1 0 0
01/01/13 - 12/31/13 197 0 0 0
01/01/14 - 12/31/14 195 0 0 0
01/01/15 - 12/31/15 133 0 0 0
01/01/16 - 06/30/16 66 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 121 0 0 0
01/01/12 - 12/31/12 127 1 0 0
01/01/13 - 12/31/13 55 0 0 0
01/01/14 - 12/31/14 56 1 0 0
01/01/15 - 12/31/15 119 0 0 0
01/01/16 - 06/30/16 59 0 0 0
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (FCG)
The First Trust ISE-Revere Natural Gas Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the ISE-Revere Natural Gas(TM) Index
(the "Index"). The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Index is designed to take advantage
of both event-driven news and long term trends in the natural gas industry.
Equity securities are selected for inclusion in the Index using a quantitative
ranking and screening system that begins with the universe of equity securities
of issuers that are involved in the exploration and production of natural gas
and that satisfy market capitalization, liquidity and weighting concentration
requirements. After application of the screens, the remaining equity securities
are divided into two groups, one for equity securities issued by master limited
partnerships ("MLPs") and one for equity securities issued by entities that are
not master limited partnerships ("non-MLPs"). The Index is allocated 85% to
equity securities issued by non-MLPs, and the remaining 15% consists of equity
securities issued by MLPs. The Index uses a linear-based capitalization-weighted
methodology for each of the MLP and non-MLP group of constituents that initially
ranks the equity securities based on market capitalization and average daily
trading volume, and then adjusts the combined rankings of each equity security
by a factor relating to its market capitalization. The resulting linear weight
distribution prevents a few large component stocks from dominating the Index
while allowing smaller companies to adequately influence Index performance. The
Fund's shares are listed for trading on the NYSE Arca. The first day of
secondary market trading in shares of the Fund was May 11, 2007.
-----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (5/8/07) Ended (5/8/07)
6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV 10.91% -46.79% -24.79% -13.52% -75.94% -73.51%
Market Value 10.66% -46.79% -24.79% -13.52% -75.94% -73.50%
INDEX PERFORMANCE
ISE-Revere Natural Gas(TM) Index 10.64% -47.22% -24.82% -13.26% -75.99% -72.77%
S&P Composite 1500 Energy Index 15.57% -5.50% -0.05% 2.27% -0.23% 22.75%
Russell 3000(R) Index 3.62% 2.14% 11.60% 5.96% 73.08% 69.80%
-----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
-----------------------------------------------------------
% OF TOTAL
SUB-INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Oil & Gas Exploration & Production 79.28%
Oil & Gas Storage & Transportation 15.22
Integrated Oil & Gas 4.10
Oil & Gas Drilling 1.18
Oil & Gas Refining & Marketing 0.22
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Anadarko Petroleum Corp. 6.88%
Continental Resources, Inc. 6.55
Devon Energy Corp. 6.20
Encana Corp. 6.09
Concho Resources, Inc. 5.71
Noble Energy, Inc. 5.35
Cabot Oil & Gas Corp. 5.32
EQT Corp. 4.73
Cimarex Energy Co. 4.51
Newfield Exploration Co. 4.18
-------
Total 55.52%
=======
-----------------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE-Revere Natural
Gas(TM) Index" are trademarks of the International Securities Exchange, LLC and
have been licensed for use for certain purposes by First Trust on behalf of the
Fund. The Fund, based on the ISE-Revere Natural Gas(TM) Index, is not sponsored,
endorsed, sold or promoted by the International Securities Exchange, LLC and the
International Securities Exchange, LLC makes no representation regarding the
advisability of trading in such product.
Page 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (FCG) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - JUNE 30, 2016
First Trust ISE-Revere ISE-Revere Natural Russell 3000(R) S&P Composite 1500
Natural Gas Index Fund Gas(TM) Index Index Energy Index
05/07 $10,000 $10,000 $10,000 $10,000
12/07 11,166 11,213 9,804 12,170
06/08 15,755 15,942 8,721 13,578
12/08 5,967 6,016 6,147 7,810
06/09 6,454 6,518 6,405 7,740
12/09 8,903 9,017 7,889 9,092
06/10 7,752 7,891 7,412 8,016
12/10 9,992 10,254 9,225 11,036
06/11 11,012 11,342 9,811 12,304
12/11 9,308 9,620 9,319 11,469
06/12 8,426 8,735 10,188 11,132
12/12 8,051 8,375 10,849 11,967
06/13 8,290 8,639 12,374 13,130
12/13 10,075 10,530 14,489 15,006
06/14 12,210 12,790 15,495 16,951
12/14 5,842 6,105 16,308 13,630
06/15 4,980 5,159 16,624 12,991
12/15 2,389 2,461 16,386 10,621
06/16 2,650 2,723 16,979 12,275
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 151 0 0 0
01/01/12 - 12/31/12 151 0 0 0
01/01/13 - 12/31/13 149 0 0 0
01/01/14 - 12/31/14 140 1 0 0
01/01/15 - 12/31/15 155 1 0 0
01/01/16 - 06/30/16 86 6 1 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 101 0 0 0
01/01/12 - 12/31/12 99 0 0 0
01/01/13 - 12/31/13 103 0 0 0
01/01/14 - 12/31/14 111 0 0 0
01/01/15 - 12/31/15 93 3 0 0
01/01/16 - 06/30/16 31 1 0 0
Page 17
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE CHINDIA INDEX FUND (FNI)
The First Trust ISE Chindia Index Fund (the "Fund") seeks investment results
that correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE ChIndia(TM) Index (the "Index"). The
Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index is a non-market capitalization weighted portfolio
of 50 American Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs")
and/or stocks selected from a universe of all listed ADRs, ADSs, and/or stocks
of companies from China and India currently trading on a U.S. exchange. The
Index is rebalanced on a semi-annual basis. The Fund's shares are listed for
trading on the NYSE Arca. The first day of secondary market trading in shares of
the Fund was May 11, 2007.
-----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (5/8/07) Ended (5/8/07)
6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV -3.64% -10.33% 2.62% 4.42% 13.82% 48.50%
Market Value -3.61% -10.39% 2.67% 4.42% 14.10% 48.50%
INDEX PERFORMANCE
ISE ChIndia(TM) Index -3.38% -9.83% 2.95% 4.96% 15.65% 55.72%
Russell 3000(R) Index 3.62% 2.14% 11.60% 5.96% 73.08% 69.80%
MSCI Emerging Markets Index 6.41% -12.06% -3.78% 0.51% -17.54% 4.76%
-----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 43.14%
Consumer Discretionary 23.78
Financials 15.14
Health Care 5.72
Telecommunication Services 5.33
Materials 2.28
Energy 2.04
Industrials 1.94
Utilities 0.63
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Alibaba Group Holding Ltd., ADR 7.22%
HDFC Bank Ltd., ADR 7.08
JD.com, Inc., ADR 6.95
Baidu, Inc., ADR 6.93
Infosys Ltd., ADR 6.80
ICICI Bank Ltd., ADR 6.71
NetEase, Inc., ADR 4.70
Dr. Reddy's Laboratories Ltd., ADR 4.47
Ctrip.com International Ltd., ADR 4.06
Wipro Ltd., ADR 4.02
-------
Total 58.94%
=======
-----------------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE ChIndia(TM) Index"
are trademarks of the International Securities Exchange, LLC and have been
licensed for use for certain purposes by First Trust on behalf of the Fund. The
Fund, based on the ISE ChIndia(TM) Index, is not sponsored, endorsed, sold or
promoted by the International Securities Exchange, LLC and the International
Securities Exchange, LLC makes no representation regarding the advisability of
trading in such product.
Page 18
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE CHINDIA INDEX FUND (FNI) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - JUNE 30, 2016
First Trust ISE Chindia ISE ChIndia(TM) Russell 3000(R) MSCI Emerging
Index Fund Index Index Markets Index
05/07 $10,000 $10,000 $10,000 $10,000
12/07 13,873 13,952 9,804 12,715
06/08 9,985 10,059 8,721 11,220
12/08 5,968 6,031 6,147 5,934
06/09 8,329 8,451 6,405 8,071
12/09 10,836 11,031 7,889 10,593
06/10 10,540 10,767 7,412 9,939
12/10 12,836 13,175 9,225 12,592
06/11 13,047 13,466 9,811 12,703
12/11 9,497 9,771 9,319 10,273
06/12 10,069 10,375 10,188 10,677
12/12 11,121 11,483 10,849 12,145
06/13 11,258 11,659 12,374 10,983
12/13 15,103 15,665 14,489 11,829
06/14 16,047 16,680 15,495 12,555
12/14 15,461 16,096 16,308 11,571
06/15 16,560 17,273 16,624 11,912
12/15 15,411 16,121 16,386 9,844
06/16 14,850 15,576 16,979 1 0,475
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
QUARTER ENDED 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 65 1 0 0
01/01/12 - 12/31/12 63 1 0 0
01/01/13 - 12/31/13 66 0 0 0
01/01/14 - 12/31/14 96 0 0 0
01/01/15 - 12/31/15 147 0 0 0
01/01/16 - 06/30/16 56 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
QUARTER ENDED 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 186 0 0 0
01/01/12 - 12/31/12 175 11 0 0
01/01/13 - 12/31/13 185 1 0 0
01/01/14 - 12/31/14 155 1 0 0
01/01/15 - 12/31/15 105 0 0 0
01/01/16 - 06/30/16 69 0 0 0
Page 19
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
The First Trust NASDAQ(R) ABA Community Bank Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ OMX(R) ABA
Community Bank Index(SM) (the "Index"). The Fund will normally invest at least
90% of its assets in common stocks that comprise the Index. The Index includes a
subset of banks and thrifts or their holding companies listed on Nasdaq. The
Index is jointly owned and was developed by Nasdaq and the American Bankers
Association ("ABA"). For the purposes of the Index, a "community bank" is
considered to be all U.S. banks and thrifts or their holding companies listed on
Nasdaq excluding the 50 largest U.S. banks by asset size. Also excluded are
banks that have an international specialization and those banks that have a
credit-card specialization, as screened by the ABA based on the most recent data
from the Federal Deposit Insurance Company. Banks with an international
specialization are those institutions with assets greater than $10 billion and
more than 25% of total assets in foreign offices. Banks with a credit-card
specialization are those institutions with credit-card loans plus securitized
receivables in excess of 50% of total assets plus securitized receivables.
Securities in the Index must have a market capitalization of at least $200
million and a three-month average daily trading volume of at least $500
thousand. The Index is rebalanced quarterly and reconstituted semi-annually. The
Fund's shares are listed for trading on the Nasdaq. The first day of secondary
market trading in shares of the Fund was July 1, 2009.
-----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (6/29/09) Ended (6/29/09)
6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV -1.70% -2.82% 10.92% 11.19% 67.92% 110.21%
Market Value -1.80% -2.87% 10.91% 11.19% 67.85% 110.12%
INDEX PERFORMANCE
NASDAQ OMX(R) ABA Community Bank Index(SM) -1.40% -2.26% 11.62% 11.90% 73.23% 119.80%
S&P Composite 1500 Financials Index -1.62% -2.55% 10.70% 12.14% 66.23% 123.07%
Russell 3000(R) Index 3.62% 2.14% 11.60% 14.81% 73.08% 163.12%
-----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
-----------------------------------------------------------
% OF TOTAL
INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Banks 86.62%
Thrifts & Mortgage Finance 13.04
IT Services 0.34
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Signature Bank 3.92%
TFS Financial Corp. 2.89
East West Bancorp, Inc. 2.88
PacWest Bancorp 2.80
Commerce Bancshares, Inc. 2.70
BOK Financial Corp. 2.43
Investors Bancorp, Inc. 2.07
PrivateBancorp, Inc. 2.04
Umpqua Holdings Corp. 1.99
Bank of the Ozarks, Inc. 1.99
-------
Total 25.71%
=======
-----------------------------
Nasdaq(R), OMX(R), Nasdaq OMX(R), and NASDAQ OMX(R) ABA Community Bank Index(SM)
are trademarks of Nasdaq, Inc. ("Nasdaq") and American Bankers Association
("ABA") (Nasdaq and ABA, collectively with their affiliates, are referred to as
the "Corporations") and are licensed for use by First Trust on behalf of the
Fund. The Fund has not been passed on by the Corporations as to its legality or
suitability. The Fund is not issued, endorsed, sold, or promoted by the
Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH
RESPECT TO THE FUND.
Page 20
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 29, 2009 - JUNE 30, 2016
First Trust NASDAQ(R) ABA NASDAQ OMX(R) ABA S&P Composite 1500 Russell 3000(R)
Community Bank Index Fund Community Bank Index(SM) Financials Index Index
06/09 $10,000 $10,000 $10,000 $10,000
12/09 11,280 11,318 12,112 12,224
06/10 11,438 11,505 11,744 11,484
12/10 12,721 12,846 13,722 14,293
06/11 12,520 12,688 13,420 15,201
12/11 11,898 12,095 11,662 14,439
06/12 13,081 13,343 13,227 15,785
12/12 13,507 13,817 14,806 16,809
06/13 16,006 16,427 17,584 19,172
12/13 19,302 19,873 19,879 22,448
06/14 19,296 19,929 20,907 24,006
12/14 19,827 20,537 22,839 25,266
06/15 21,637 22,484 22,892 25,761
12/15 21,390 22,288 22,677 25,388
06/16 21,026 21,976 22,310 26,307
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 135 2 0 0
01/01/12 - 12/31/12 100 17 1 0
01/01/13 - 12/31/13 139 24 0 0
01/01/14 - 12/31/14 115 9 0 0
01/01/15 - 12/31/15 137 5 0 0
01/01/16 - 06/30/16 63 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 111 4 0 0
01/01/12 - 12/31/12 114 18 0 0
01/01/13 - 12/31/13 72 17 0 0
01/01/14 - 12/31/14 116 12 0 0
01/01/15 - 12/31/15 110 0 0 0
01/01/16 - 06/30/16 62 0 0 0
Page 21
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average annual total returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative total
returns" represent the total change in value of an investment over the periods
indicated. The total returns would have been lower if certain fees had not been
waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
each Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike a Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 22
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
JUNE 30, 2016 (UNAUDITED)
As a shareholder of First Trust NASDAQ-100 Equal Weighted Index Fund, First
Trust NASDAQ-100-Technology Sector Index Fund, First Trust NASDAQ-100
Ex-Technology Sector Index Fund, First Trust NASDAQ(R) Clean Edge(R) Green
Energy Index Fund, First Trust S&P REIT Index Fund, First Trust ISE Water Index
Fund, First Trust ISE-Revere Natural Gas Index Fund, First Trust ISE Chindia
Index Fund or First Trust NASDAQ(R) ABA Community Bank Index Fund (each a "Fund"
and collectively, the "Funds"), you incur two types of costs: (1) transaction
costs; and (2) ongoing costs, including management fees, distribution and/or
service fees, and other Fund expenses. This Example is intended to help you
understand your ongoing costs of investing in the Funds and to compare these
costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended June 30, 2016.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JANUARY 1, 2016 JUNE 30, 2016 PERIOD (a) PERIOD (b)
--------------------------------------------------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
Actual $1,000.00 $ 971.20 0.60% $2.94
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
Actual $1,000.00 $1,029.30 0.60% $3.03
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
Actual $1,000.00 $ 939.50 0.60% $2.89
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
Actual $1,000.00 $ 902.00 0.60% $2.84
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST S&P REIT INDEX FUND (FRI)
Actual $1,000.00 $1,129.60 0.49% $2.59
Hypothetical (5% return before expenses) $1,000.00 $1,022.43 0.49% $2.46
FIRST TRUST ISE WATER INDEX FUND (FIW)
Actual $1,000.00 $1,173.90 0.58% $3.13
Hypothetical (5% return before expenses) $1,000.00 $1,021.98 0.58% $2.92
Page 23
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JANUARY 1, 2016 JUNE 30, 2016 PERIOD (a) PERIOD (b)
--------------------------------------------------------------------------------------------------------------------------
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (FCG)
Actual $1,000.00 $1,109.10 0.60% $3.15
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST ISE CHINDIA INDEX FUND (FNI)
Actual $1,000.00 $ 963.60 0.60% $2.93
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
Actual $1,000.00 $ 983.00 0.60% $2.96
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
(a) These expense ratios reflect an expense cap for certain Funds. See Note 3
in Notes to Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (January 1,
2016 through June 30, 2016), multiplied by 182/366 (to reflect the
one-half year period).
Page 24
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AIRLINES -- 1.0%
124,689 American Airlines Group, Inc. $ 3,529,946
--------------
AUTOMOBILES -- 1.0%
16,979 Tesla Motors, Inc. (a) (b) 3,604,302
--------------
BEVERAGES -- 1.0%
23,454 Monster Beverage Corp. (b) 3,769,292
--------------
BIOTECHNOLOGY -- 8.8%
29,220 Alexion Pharmaceuticals, Inc. (b) 3,411,727
24,451 Amgen, Inc. 3,720,220
15,358 Biogen, Inc. (b) 3,713,872
43,624 BioMarin Pharmaceutical, Inc. (b) 3,393,947
37,050 Celgene Corp. (b) 3,654,241
44,264 Gilead Sciences, Inc. 3,692,503
47,443 Incyte Corp. (b) 3,794,491
10,328 Regeneron Pharmaceuticals,
Inc. (b) 3,606,847
42,181 Vertex Pharmaceuticals, Inc. (b) 3,628,410
--------------
32,616,258
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.0%
36,050 Stericycle, Inc. (b) 3,753,526
--------------
COMMUNICATIONS EQUIPMENT
-- 1.0%
126,368 Cisco Systems, Inc. 3,625,498
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.1%
36,694 SBA Communications Corp.,
Class A (b) 3,960,750
--------------
FOOD & STAPLES RETAILING -- 3.0%
23,468 Costco Wholesale Corp. 3,685,415
44,264 Walgreens Boots Alliance, Inc. 3,685,863
119,671 Whole Foods Market, Inc. 3,831,865
--------------
11,203,143
--------------
FOOD PRODUCTS -- 2.1%
43,131 Kraft Heinz (The) Co. 3,816,231
83,069 Mondelez International, Inc.,
Class A 3,780,470
--------------
7,596,701
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.0%
57,876 DENTSPLY SIRONA, Inc. 3,590,627
5,701 Intuitive Surgical, Inc. (b) 3,770,699
--------------
7,361,326
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 2.0%
49,052 Express Scripts Holding Co. (b) 3,718,142
21,159 Henry Schein, Inc. (b) 3,740,911
--------------
7,459,053
--------------
HEALTH CARE TECHNOLOGY -- 1.1%
67,936 Cerner Corp. (b) 3,981,050
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE
-- 2.9%
55,037 Marriott International, Inc.,
Class A (a) $ 3,657,759
84,333 Norwegian Cruise Line Holdings
Ltd. (b) 3,359,827
66,142 Starbucks Corp. 3,778,031
--------------
10,795,617
--------------
INTERNET & CATALOG RETAIL -- 8.0%
5,179 Amazon.com, Inc. (b) 3,706,196
96,121 Ctrip.com International Ltd.,
ADR (b) 3,960,185
35,129 Expedia, Inc. 3,734,213
181,736 JD.com, Inc., ADR (b) 3,858,255
73,520 Liberty Interactive Corp.,
Class A (b) 1,865,202
49,410 Liberty Ventures, Series A (b) 1,831,629
38,733 Netflix, Inc. (b) 3,543,295
2,794 Priceline Group (The), Inc. (b) 3,488,058
57,995 TripAdvisor, Inc. (b) 3,729,078
--------------
29,716,111
--------------
INTERNET SOFTWARE & SERVICES
-- 7.2%
68,779 Akamai Technologies, Inc. (b) 3,846,810
2,597 Alphabet, Inc., Class A (b) 1,827,067
2,644 Alphabet, Inc., Class C (b) 1,829,912
22,488 Baidu, Inc., ADR (b) 3,713,893
153,777 eBay, Inc. (b) 3,599,920
32,369 Facebook, Inc., Class A (b) 3,699,129
22,429 NetEase, Inc., ADR 4,333,731
99,035 Yahoo!, Inc. (b) 3,719,755
--------------
26,570,217
--------------
IT SERVICES -- 5.1%
41,757 Automatic Data Processing, Inc. 3,836,216
61,433 Cognizant Technology Solutions
Corp., Class A (b) 3,516,425
35,032 Fiserv, Inc. (b) 3,809,029
67,015 Paychex, Inc. 3,987,393
98,955 PayPal Holdings, Inc. (b) 3,612,847
--------------
18,761,910
--------------
LEISURE PRODUCTS -- 1.0%
115,223 Mattel, Inc. 3,605,328
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.0%
26,693 Illumina, Inc. (b) 3,747,163
--------------
MACHINERY -- 0.9%
67,287 PACCAR, Inc. 3,490,177
--------------
MEDIA -- 7.9%
16,550 Charter Communications, Inc.,
Class A (b) 3,783,992
58,656 Comcast Corp., Class A 3,823,785
71,480 Discovery Communications, Inc.,
Class A (b) 1,803,440
73,906 Discovery Communications, Inc.,
Class C (b) 1,762,658
See Notes to Financial Statements Page 25
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDIA (CONTINUED)
69,026 DISH Network Corp., Class A (b) $ 3,616,962
60,691 Liberty Global PLC, Class A (b) 1,763,681
62,136 Liberty Global PLC, Series C (b) 1,780,196
6,604 Liberty Global PLC LiLAC,
Class A (b) 213,045
6,729 Liberty Global PLC LiLAC,
Class C (b) 218,625
933,253 Sirius XM Holdings, Inc. (a) (b) 3,686,349
63,513 Twenty-First Century Fox, Inc.,
Class A 1,718,027
63,734 Twenty-First Century Fox, Inc.,
Class B 1,736,752
82,358 Viacom, Inc., Class B 3,415,386
--------------
29,322,898
--------------
MULTILINE RETAIL -- 1.0%
39,947 Dollar Tree, Inc. (b) 3,764,605
--------------
PHARMACEUTICALS -- 1.9%
222,528 Endo International PLC (b) 3,469,211
81,278 Mylan N.V. (b) 3,514,461
--------------
6,983,672
--------------
PROFESSIONAL SERVICES -- 1.0%
47,023 Verisk Analytics, Inc. (b) 3,812,625
--------------
ROAD & RAIL -- 1.0%
136,761 CSX Corp. 3,566,727
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 14.0%
65,340 Analog Devices, Inc. 3,700,858
156,140 Applied Materials, Inc. 3,742,676
23,451 Broadcom Ltd. 3,644,285
115,188 Intel Corp. 3,778,166
44,135 Lam Research Corp. 3,709,988
79,271 Linear Technology Corp. 3,688,480
100,421 Maxim Integrated Products, Inc. 3,584,025
299,865 Micron Technology, Inc. (b) 4,126,142
78,304 NVIDIA Corp. 3,681,071
43,030 NXP Semiconductors N.V. (b) 3,370,970
68,317 QUALCOMM, Inc. 3,659,742
57,188 Skyworks Solutions, Inc. 3,618,857
59,370 Texas Instruments, Inc. 3,719,531
78,844 Xilinx, Inc. 3,637,074
--------------
51,661,865
--------------
SOFTWARE -- 10.0%
96,070 Activision Blizzard, Inc. 3,807,254
38,276 Adobe Systems, Inc. (b) 3,666,458
64,544 Autodesk, Inc. (b) 3,494,412
111,842 CA, Inc. 3,671,773
45,082 Check Point Software
Technologies Ltd. (b) 3,592,134
43,651 Citrix Systems, Inc. (b) 3,496,008
49,092 Electronic Arts, Inc. (b) 3,719,210
34,723 Intuit, Inc. 3,875,434
72,977 Microsoft Corp. 3,734,233
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SOFTWARE (CONTINUED)
183,192 Symantec Corp. $ 3,762,764
--------------
36,819,680
--------------
SPECIALTY RETAIL -- 5.0%
83,429 Bed Bath & Beyond, Inc. 3,605,802
14,072 O'Reilly Automotive, Inc. (b) 3,814,919
67,435 Ross Stores, Inc. 3,822,890
39,934 Tractor Supply Co. 3,641,182
15,369 Ulta Salon, Cosmetics &
Fragrance, Inc. (b) 3,744,503
--------------
18,629,296
--------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 4.0%
38,376 Apple, Inc. 3,668,745
147,158 NetApp, Inc. 3,618,615
157,552 Seagate Technology PLC (a) 3,837,967
78,522 Western Digital Corp. 3,710,950
--------------
14,836,277
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.0%
82,266 Fastenal Co. 3,651,788
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 2.0%
87,583 T-Mobile US, Inc. (b) 3,789,716
118,355 Vodafone Group PLC, ADR 3,655,986
--------------
7,445,702
--------------
TOTAL COMMON STOCKS -- 100.0% 369,642,503
(Cost $386,454,448) --------------
MONEY MARKET FUNDS -- 0.8%
2,896,201 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.26% (c) (d) 2,896,201
(Cost $2,896,201) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.2%
$ 1,731,969 JPMorgan Chase & Co., 0.30% (c),
dated 06/30/16, due 07/01/16,
with a maturity value of
$1,731,984. Collateralized by
U.S. Treasury Notes, interest
rates of 2.000% to 2.625%, due
11/15/20 to 11/30/20. The value
of the collateral including
accrued interest is
$1,769,945. (d) 1,731,969
6,513,808 RBC Capital Markets LLC,
0.35% (c), dated 06/30/16, due
07/01/16, with a maturity value
of $6,513,871. Collateralized
by U.S. Treasury Notes,
interest rate of 1.500%, due
08/31/18 to 05/31/20. The value
of the collateral including
accrued interest is
$6,661,107. (d) 6,513,808
--------------
Page 26 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
DESCRIPTION VALUE
-------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
-- 2.2% $ 8,245,777
(Cost $8,245,777) --------------
TOTAL INVESTMENTS -- 103.0% 380,784,481
(Cost $397,596,426) (e)
NET OTHER ASSETS AND
LIABILITIES -- (3.0)% (11,129,180)
--------------
NET ASSETS -- 100.0% $ 369,655,301
==============
(a) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $11,070,765 and the total value of the collateral held by
the Fund is $11,141,978.
(b) Non-income producing security.
(c) Interest rate shown reflects yield as of June 30, 2016.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $34,375,021 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $51,186,966.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 369,642,503 $ -- $ --
Money Market Funds 2,896,201 -- --
Repurchase Agreements -- 8,245,777 --
-----------------------------------------------
Total Investments $ 372,538,704 $ 8,245,777 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the Statements
of Assets and Liabilities(1) $ 11,070,765
Non-cash Collateral(2) (11,070,765)
--------------
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 June 30, 2016, 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) $ 8,245,777
Non-cash Collateral(4) (8,245,777)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At June 30, 2016, the value of the collateral received from each seller
exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 27
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
COMMUNICATIONS EQUIPMENT
-- 2.8%
251,961 Cisco Systems, Inc. $ 7,228,761
--------------
HEALTH CARE TECHNOLOGY -- 3.1%
135,005 Cerner Corp. (a) 7,911,293
--------------
INTERNET SOFTWARE & SERVICES
-- 17.6%
136,267 Akamai Technologies, Inc. (a) 7,621,413
5,155 Alphabet, Inc., Class A (a) 3,626,697
5,248 Alphabet, Inc., Class C (a) 3,632,141
44,675 Baidu, Inc., ADR (a) 7,378,076
64,179 Facebook, Inc., Class A (a) 7,334,376
44,489 NetEase, Inc., ADR 8,596,165
196,561 Yahoo!, Inc. (a) 7,382,831
--------------
45,571,699
--------------
IT SERVICES -- 2.7%
122,349 Cognizant Technology Solutions
Corp., Class A (a) 7,003,257
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 39.8%
129,621 Analog Devices, Inc. 7,341,733
310,006 Applied Materials, Inc. 7,430,844
46,583 Broadcom Ltd. 7,238,998
229,597 Intel Corp. 7,530,782
87,966 Lam Research Corp. 7,394,422
157,756 Linear Technology Corp. 7,340,387
199,925 Maxim Integrated Products, Inc. 7,135,323
599,192 Micron Technology, Inc. (a) 8,244,882
155,040 NVIDIA Corp. 7,288,430
85,411 NXP Semiconductors N.V. (a) 6,691,098
136,207 QUALCOMM, Inc. 7,296,609
113,782 Skyworks Solutions, Inc. 7,200,125
118,217 Texas Instruments, Inc. 7,406,295
156,739 Xilinx, Inc. 7,230,370
--------------
102,770,298
--------------
SOFTWARE -- 22.6%
75,910 Adobe Systems, Inc. (a) 7,271,419
128,257 Autodesk, Inc. (a) 6,943,834
222,612 CA, Inc. 7,308,352
89,551 Check Point Software
Technologies Ltd. (a) 7,135,424
86,796 Citrix Systems, Inc. (a) 6,951,492
69,213 Intuit, Inc. 7,724,863
145,042 Microsoft Corp. 7,421,799
363,941 Symantec Corp. 7,475,348
--------------
58,232,531
--------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 11.4%
76,009 Apple, Inc. 7,266,460
292,722 NetApp, Inc. 7,198,034
312,851 Seagate Technology PLC 7,621,050
155,579 Western Digital Corp. 7,352,664
--------------
29,438,208
--------------
DESCRIPTION VALUE
-------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 258,156,047
(Cost $250,369,929) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 3,282
--------------
NET ASSETS -- 100.0% $ 258,159,329
==============
(a) Non-income producing security.
(b) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $27,726,381 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $19,940,263.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 258,156,047 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
Page 28 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 100.0%
AIRLINES -- 1.5%
68,881 American Airlines Group, Inc. $ 1,950,021
--------------
AUTOMOBILES -- 1.5%
9,379 Tesla Motors, Inc. (b) (c) 1,990,974
--------------
BEVERAGES -- 1.6%
12,957 Monster Beverage Corp. (c) 2,082,319
--------------
BIOTECHNOLOGY -- 13.6%
16,142 Alexion Pharmaceuticals, Inc. (c) 1,884,740
13,507 Amgen, Inc. 2,055,090
8,484 Biogen, Inc. (c) 2,051,601
24,099 BioMarin Pharmaceutical, Inc. (c) 1,874,902
20,468 Celgene Corp. (c) 2,018,759
24,452 Gilead Sciences, Inc. 2,039,786
26,209 Incyte Corp. (c) 2,096,196
5,706 Regeneron Pharmaceuticals,
Inc. (c) 1,992,706
23,302 Vertex Pharmaceuticals, Inc. (c) 2,004,438
--------------
18,018,218
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.6%
19,915 Stericycle, Inc. (c) 2,073,550
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.6%
20,271 SBA Communications Corp.,
Class A (c) 2,188,052
--------------
FOOD & STAPLES RETAILING -- 4.7%
12,964 Costco Wholesale Corp. 2,035,867
24,452 Walgreens Boots Alliance, Inc. 2,036,118
66,110 Whole Foods Market, Inc. 2,116,842
--------------
6,188,827
--------------
FOOD PRODUCTS -- 3.2%
23,827 Kraft Heinz (The) Co. 2,108,213
45,890 Mondelez International, Inc.,
Class A 2,088,454
--------------
4,196,667
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 3.1%
31,972 DENTSPLY SIRONA, Inc. 1,983,543
3,149 Intuitive Surgical, Inc. (c) 2,082,780
--------------
4,066,323
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.1%
27,098 Express Scripts Holding Co. (c) 2,054,029
11,689 Henry Schein, Inc. (c) 2,066,615
--------------
4,120,644
--------------
HOTELS, RESTAURANTS & LEISURE
-- 4.5%
30,404 Marriott International, Inc.,
Class A (b) 2,020,650
46,588 Norwegian Cruise Line Holdings
Ltd. (c) 1,856,066
36,539 Starbucks Corp. 2,087,107
--------------
5,963,823
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 12.4%
2,861 Amazon.com, Inc. (c) $ 2,047,389
53,100 Ctrip.com International Ltd.,
ADR (c) 2,187,720
19,406 Expedia, Inc. 2,062,858
100,396 JD.com, Inc., ADR (c) 2,131,407
40,614 Liberty Interactive Corp.
Class A (c) 1,030,377
27,296 Liberty Ventures, Series A (c) 1,011,863
21,397 Netflix, Inc. (c) 1,957,398
1,544 Priceline Group (The), Inc. (c) 1,927,545
32,038 TripAdvisor, Inc. (c) 2,060,043
--------------
16,416,600
--------------
INTERNET SOFTWARE & SERVICES
-- 1.5%
84,951 eBay, Inc. (c) 1,988,703
--------------
IT SERVICES -- 6.4%
23,068 Automatic Data Processing, Inc. 2,119,257
19,352 Fiserv, Inc. (c) 2,104,143
37,021 Paychex, Inc. 2,202,750
54,665 PayPal Holdings, Inc. (c) 1,995,819
--------------
8,421,969
--------------
LEISURE PRODUCTS -- 1.5%
63,653 Mattel, Inc. 1,991,702
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.6%
14,746 Illumina, Inc. (c) 2,070,043
--------------
MACHINERY -- 1.4%
37,171 PACCAR, Inc. 1,928,060
--------------
MEDIA -- 12.1%
9,143 Charter Communications, Inc.,
Class A (c) 2,090,455
32,403 Comcast Corp., Class A 2,112,352
39,488 Discovery Communications, Inc.,
Class A (c) 996,282
40,828 Discovery Communications, Inc.,
Class C (c) 973,748
38,132 DISH Network Corp., Class A (c) 1,998,117
29,169 Liberty Global PLC, Class A (c) 847,651
29,750 Liberty Global PLC, Series C (c) 852,337
3,637 Liberty Global PLC LiLAC,
Class A (c) 117,330
3,710 Liberty Global PLC LiLAC,
Class C (c) 120,538
515,555 Sirius XM Holdings, Inc. (b) (c) 2,036,442
35,086 Twenty-First Century Fox, Inc.,
Class A 949,076
35,209 Twenty-First Century Fox, Inc.,
Class B 959,445
45,497 Viacom, Inc., Class B 1,886,761
--------------
15,940,534
--------------
MULTILINE RETAIL -- 1.6%
22,068 Dollar Tree, Inc. (c) 2,079,688
--------------
See Notes to Financial Statements Page 29
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
PHARMACEUTICALS -- 2.9%
122,930 Endo International PLC (c) $ 1,916,479
44,901 Mylan N.V. (c) 1,941,519
--------------
3,857,998
--------------
PROFESSIONAL SERVICES -- 1.6%
25,977 Verisk Analytics, Inc. (c) 2,106,215
--------------
ROAD & RAIL -- 1.5%
75,551 CSX Corp. 1,970,370
--------------
SOFTWARE -- 3.1%
53,072 Activision Blizzard, Inc. 2,103,244
27,120 Electronic Arts, Inc. (c) 2,054,611
--------------
4,157,855
--------------
SPECIALTY RETAIL -- 7.8%
46,088 Bed Bath & Beyond, Inc. 1,991,923
7,774 O'Reilly Automotive, Inc. (c) 2,107,531
37,253 Ross Stores, Inc. 2,111,873
22,061 Tractor Supply Co. 2,011,522
8,490 Ulta Salon, Cosmetics &
Fragrance, Inc. (c) 2,068,504
--------------
10,291,353
--------------
TRADING COMPANIES &
DISTRIBUTORS -- 1.5%
45,446 Fastenal Co. 2,017,348
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 3.1%
48,383 T-Mobile US, Inc. (c) 2,093,532
65,383 Vodafone Group PLC, ADR 2,019,681
--------------
4,113,213
--------------
TOTAL COMMON STOCKS -- 100.0% 132,191,069
(Cost $135,841,643) --------------
MONEY MARKET FUNDS -- 1.0%
1,276,437 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.26% (d) (e) 1,276,437
(Cost $1,276,437) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.7%
$ 763,327 JPMorgan Chase & Co., 0.30% (d),
dated 06/30/16, due 07/01/16,
with a maturity value of
$763,334. Collateralized by
U.S. Treasury Notes, interest
rates of 2.000% to 2.625%, due
11/15/20 to 11/30/20. The value
of the collateral including
accrued interest is
$780,064. (e) $ 763,327
2,870,817 RBC Capital Markets LLC,
0.35% (d), dated 06/30/16, due
07/01/16, with a maturity value
of $2,870,845. Collateralized
by U.S. Treasury Notes,
interest rate of 1.500%, due
08/31/18 to 05/31/20. The value
of the collateral including
accrued interest is
$2,935,736. (e) 2,870,817
--------------
TOTAL REPURCHASE AGREEMENTS
-- 2.7% 3,634,144
(Cost $3,634,144) --------------
TOTAL INVESTMENTS -- 103.7% 137,101,650
(Cost $140,752,224) (f)
NET OTHER ASSETS AND
LIABILITIES -- (3.7)% (4,919,770)
--------------
NET ASSETS -- 100.0% $ 132,181,880
==============
(a) The industry allocation is based on Standard & Poor's Global Industry
Classification Standard (GICS), and is different than the industry sector
classification system used by the Index to select securities, which is the
Industry Classification Benchmark (ICB) system, which is maintained by
FTSE International Limited.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $4,878,122 and the total value of the collateral held by the
Fund is $4,910,581.
(c) Non-income producing security.
(d) Interest rate shown reflects yield as of June 30, 2016.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $12,447,168 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $16,097,742.
ADR - American Depositary Receipt
Page 30 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 132,191,069 $ -- $ --
Money Market Funds 1,276,437 -- --
Repurchase Agreements -- 3,634,144 --
-----------------------------------------------
Total Investments $ 133,467,506 $ 3,634,144 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 4,878,122
Non-cash Collateral(2) (4,878,122)
--------------
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 June 30, 2016, the value of the collateral received from each borrower
exceeded the value of the related securities loaned. This amount is
disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
-------------------------------------------------------------
Total gross amount presented on the Statements
of Assets and Liabilities(3) $ 3,634,144
Non-cash Collateral(4) (3,634,144)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At June 30, 2016, the value of the collateral received from each seller
exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 31
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 5.8%
83,571 Hexcel Corp. $ 3,479,896
--------------
AUTOMOBILES -- 7.8%
21,835 Tesla Motors, Inc. (a) (b) 4,635,134
--------------
ELECTRICAL EQUIPMENT -- 13.9%
18,817 Acuity Brands, Inc. 4,665,863
154,122 Ballard Power Systems,
Inc. (a) (b) 192,653
28,480 FuelCell Energy, Inc. (a) (b) 177,146
177,145 Plug Power, Inc. (a) (b) 329,490
96,609 SolarCity Corp. (a) (b) 2,311,853
100,198 Sunrun, Inc. (a) (b) 594,174
--------------
8,271,179
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 10.9%
164,565 AVX Corp. 2,234,793
37,536 Itron, Inc. (b) 1,617,801
31,395 Maxwell Technologies, Inc. (b) 165,766
36,294 Universal Display Corp. (b) 2,460,733
--------------
6,479,093
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 14.2%
19,665 8point3 Energy Partners L.P. (c) 310,707
98,482 Atlantica Yield PLC (a) 1,829,796
41,161 NextEra Energy Partners, L.P. (c) 1,250,471
48,535 Ormat Technologies, Inc. 2,123,892
73,633 Pattern Energy Group, Inc. 1,691,350
111,169 TerraForm Global, Inc., Class A 362,411
78,647 TerraForm Power, Inc., Class A (a) 857,252
--------------
8,425,879
--------------
OIL, GAS & CONSUMABLE FUELS
-- 2.4%
207,517 Amyris, Inc. (b) 93,486
37,798 Green Plains, Inc. 745,377
38,593 Pacific Ethanol, Inc. (b) 210,332
42,959 Renewable Energy Group, Inc. (b) 379,328
--------------
1,428,523
--------------
REAL ESTATE INVESTMENT TRUSTS
-- 1.4%
38,276 Hannon Armstrong Sustainable
Infrastructure Capital, Inc. 826,762
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 42.3%
38,885 Advanced Energy Industries,
Inc. (b) 1,476,074
56,443 Canadian Solar, Inc. (a) (b) 853,418
98,689 Cree, Inc. (b) 2,411,959
91,970 First Solar, Inc. (b) 4,458,706
30,996 IXYS Corp. 317,709
39,589 JA Solar Holdings Co., Ltd.,
ADR (b) 271,185
22,003 JinkoSolar Holding Co., Ltd.,
ADR (a) (b) 448,421
103,007 Linear Technology Corp. 4,792,916
72,041 Microsemi Corp. (b) 2,354,300
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (CONTINUED)
249,451 ON Semiconductor Corp. (b) $ 2,200,158
28,303 Power Integrations, Inc. 1,417,131
40,026 SolarEdge Technologies,
Inc. (a) (b) 784,510
135,656 SunPower Corp. (a) (b) 2,101,311
84,235 Trina Solar Ltd., ADR (a) (b) 651,979
39,154 Veeco Instruments, Inc. (b) 648,390
--------------
25,188,167
--------------
SOFTWARE -- 1.3%
30,019 EnerNOC, Inc. (b) 189,720
50,016 Silver Spring Networks, Inc. (b) 607,694
--------------
797,414
--------------
TOTAL COMMON STOCKS -- 100.0% 59,532,047
(Cost $71,409,804) --------------
MONEY MARKET FUNDS -- 5.1%
3,060,069 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.26% (d) (e) 3,060,069
(Cost $3,060,069) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 14.6%
$ 1,829,965 JPMorgan Chase & Co., 0.30% (d),
dated 06/30/16, due 07/01/16,
with a maturity value of
$1,829,980. Collateralized by
U.S. Treasury Notes, interest
rates of 2.000% to 2.625%, due
11/15/20 to 11/30/20. The value
of the collateral including
accrued interest is
$1,870,089. (e) 1,829,965
6,882,360 RBC Capital Markets LLC,
0.35% (d), dated 06/30/16, due
07/01/16, with a maturity value
of $6,882,428. Collateralized
by U.S. Treasury Notes,
interest rate of 1.500%, due
08/31/18 to 05/31/20. The value
of the collateral including
accrued interest is
$7,037,994. (e) 6,882,360
--------------
TOTAL REPURCHASE AGREEMENTS
-- 14.6% 8,712,325
(Cost $8,712,325) --------------
TOTAL INVESTMENTS -- 119.7% 71,304,441
(Cost $83,182,198) (f)
NET OTHER ASSETS AND
LIABILITIES -- (19.7)% (11,754,113)
--------------
NET ASSETS -- 100.0% $ 59,550,328
==============
Page 32 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
(a) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $11,582,702 and the total value of the collateral held by
the Fund is $11,772,394.
(b) Non-income producing security.
(c) Master Limited Partnership ("MLP").
(d) Interest rate shown reflects yield as of June 30, 2016.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $4,885,059 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $16,762,816.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 59,532,047 $ -- $ --
Money Market Funds 3,060,069 -- --
Repurchase Agreements -- 8,712,325 --
-----------------------------------------------
Total Investments $ 62,592,116 $ 8,712,325 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 11,582,702
Non-cash Collateral(2) (11,582,702)
--------------
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 June 30, 2016, 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) $ 8,712,325
Non-cash Collateral(4) (8,712,325)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At June 30, 2016, the value of the collateral received from each seller
exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 33
FIRST TRUST S&P REIT INDEX FUND (FRI)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.7%
DIVERSIFIED REITS -- 7.6%
15,655 American Assets Trust, Inc. $ 664,398
12,399 Armada Hoffler Properties, Inc. 170,362
79,081 Cousins Properties, Inc. 822,442
48,436 Empire State Realty Trust, Inc.,
Class A 919,800
23,018 First Potomac Realty Trust 211,766
86,966 Forest City Realty Trust, Inc.,
Class A 1,940,212
8,956 Gladstone Commercial Corp. 151,267
66,922 Global Net Lease, Inc. 532,030
167,052 Gramercy Property Trust 1,540,220
47,959 Investors Real Estate Trust 310,295
83,802 Lexington Realty Trust 847,238
58,095 Liberty Property Trust 2,307,533
71,517 NorthStar Realty Finance Corp. 817,439
5,711 One Liberty Properties, Inc. 136,207
7,716 PS Business Parks, Inc. 818,513
24,792 Select Income REIT 644,344
190,026 Spirit Realty Capital, Inc. 2,426,632
60,068 STORE Capital Corp. 1,769,003
358,457 VEREIT, Inc. 3,634,754
28,897 Washington Real Estate Investment
Trust 909,100
10,850 Whitestone REIT 163,618
14,430 Winthrop Realty Trust (a) 126,840
38,632 WP Carey, Inc. 2,681,833
--------------
24,545,846
--------------
HEALTH CARE REITS -- 12.8%
33,258 Care Capital Properties, Inc. 871,692
22,951 CareTrust REIT, Inc. 316,265
5,099 Community Healthcare Trust, Inc. 107,793
185,047 HCP, Inc. 6,546,963
41,517 Healthcare Realty Trust, Inc. 1,452,680
54,135 Healthcare Trust of America, Inc.,
Class A 1,750,726
15,016 LTC Properties, Inc. 776,778
94,245 Medical Properties Trust, Inc. 1,433,466
13,848 National Health Investors, Inc. 1,039,846
32,529 New Senior Investment Group, Inc. 347,410
65,598 Omega Healthcare Investors, Inc. 2,227,052
53,215 Physicians Realty Trust 1,118,047
25,865 Sabra Health Care REIT, Inc. 533,724
94,081 Senior Housing Properties Trust 1,959,707
4,865 Universal Health Realty Income
Trust 278,181
133,957 Ventas, Inc. 9,754,749
141,438 Welltower, Inc. 10,773,332
--------------
41,288,411
--------------
HOTEL & RESORT REITS -- 5.0%
61,586 Apple Hospitality REIT, Inc. 1,158,433
10,151 Ashford Hospitality Prime, Inc. 143,535
32,223 Ashford Hospitality Trust, Inc. 173,038
15,193 Chatham Lodging Trust 333,942
23,806 Chesapeake Lodging Trust 553,490
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HOTEL & RESORT REITS (CONTINUED)
79,575 DiamondRock Hospitality Co. $ 718,562
50,661 FelCor Lodging Trust, Inc. 315,618
17,452 Hersha Hospitality Trust 299,302
60,038 Hospitality Properties Trust 1,729,094
296,072 Host Hotels & Resorts, Inc. 4,799,327
44,792 LaSalle Hotel Properties 1,056,195
28,549 Pebblebrook Hotel Trust 749,411
49,451 RLJ Lodging Trust 1,060,724
20,172 Ryman Hospitality Properties, Inc. 1,021,712
34,565 Summit Hotel Properties, Inc. 457,641
85,814 Sunstone Hotel Investors, Inc. 1,035,775
42,766 Xenia Hotels & Resorts, Inc. 717,613
--------------
16,323,412
--------------
INDUSTRIAL REITS -- 6.1%
35,082 DCT Industrial Trust, Inc. 1,685,339
137,055 Duke Realty Corp. 3,653,886
12,754 EastGroup Properties, Inc. 879,006
46,298 First Industrial Realty Trust,
Inc. 1,288,010
26,171 Monmouth Real Estate Investment
Corp. 347,028
208,134 Prologis, Inc. 10,206,891
26,158 Rexford Industrial Realty, Inc. 551,672
27,012 STAG Industrial, Inc. 643,156
17,204 Terreno Realty Corp. 445,068
--------------
19,700,056
--------------
OFFICE REITS -- 12.2%
29,272 Alexandria Real Estate Equities,
Inc. 3,030,237
60,853 Boston Properties, Inc. 8,026,511
69,343 Brandywine Realty Trust 1,164,962
8,401 City Office REIT, Inc. 109,045
48,920 Columbia Property Trust, Inc. 1,046,888
37,497 Corporate Office Properties Trust 1,108,786
55,624 Douglas Emmett, Inc. 1,975,765
8,532 Easterly Government Properties,
Inc. 168,336
49,725 Equity Commonwealth (a) 1,448,489
35,329 Franklin Street Properties Corp. 433,487
28,186 Government Properties Income
Trust 649,969
38,587 Highwoods Properties, Inc. 2,037,394
35,309 Hudson Pacific Properties, Inc. 1,030,317
36,513 Kilroy Realty Corp. 2,420,447
35,520 Mack-Cali Realty Corp. 959,040
65,390 New York REIT, Inc. 604,858
24,043 NorthStar Realty Europe Corp. 222,398
32,306 Parkway Properties, Inc. 540,479
57,485 Piedmont Office Realty Trust, Inc.,
Class A 1,238,227
39,719 SL Green Realty Corp. 4,228,882
70,295 Vornado Realty Trust 7,037,935
--------------
39,482,452
--------------
Page 34 See Notes to Financial Statements
FIRST TRUST S&P REIT INDEX FUND (FRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RESIDENTIAL REITS -- 16.0%
51,674 American Campus Communities,
Inc. $ 2,732,004
69,864 American Homes 4 Rent, Class A 1,430,815
62,049 Apartment Investment &
Management Co., Class A 2,740,084
54,335 AvalonBay Communities, Inc. 9,801,491
7,265 Bluerock Residential Growth
REIT, Inc. 94,445
34,475 Camden Property Trust 3,048,279
14,880 Colony Starwood Homes 452,649
26,176 Education Realty Trust, Inc. 1,207,761
31,846 Equity LifeStyle Properties, Inc. 2,549,272
144,810 Equity Residential 9,974,513
25,923 Essex Property Trust, Inc. 5,912,777
12,034 Independence Realty Trust, Inc. 98,438
29,913 Mid-America Apartment
Communities, Inc. 3,182,743
66,062 Monogram Residential Trust, Inc. 674,493
8,433 NexPoint Residential Trust, Inc. 153,481
21,192 Post Properties, Inc. 1,293,772
9,184 Preferred Apartment Communities,
Inc., Class A 135,188
14,055 Silver Bay Realty Trust Corp. 239,357
25,687 Sun Communities, Inc. 1,968,652
105,836 UDR, Inc. 3,907,465
9,810 UMH Properties, Inc. 110,362
--------------
51,708,041
--------------
RETAIL REITS -- 25.5%
28,365 Acadia Realty Trust 1,007,525
9,369 Agree Realty Corp. 451,961
1,502 Alexander's, Inc. 614,663
81,803 Brixmor Property Group, Inc. 2,164,507
60,225 CBL & Associates Properties, Inc. 560,695
29,761 Cedar Realty Trust, Inc. 221,124
121,605 DDR Corp. 2,205,915
36,036 Equity One, Inc. 1,159,639
28,087 Federal Realty Investment Trust 4,649,803
230,931 General Growth Properties, Inc. 6,886,362
10,421 Getty Realty Corp. 223,530
166,264 Kimco Realty Corp. 5,217,364
33,026 Kite Realty Group Trust 925,719
50,008 Macerich (The) Co. 4,270,183
57,064 National Retail Properties, Inc. 2,951,350
27,522 Pennsylvania Real Estate
Investment Trust 590,347
31,393 Ramco-Gershenson Properties
Trust 615,617
102,075 Realty Income Corp. 7,079,922
38,678 Regency Centers Corp. 3,238,509
39,861 Retail Opportunity Investments
Corp. 863,788
94,033 Retail Properties of America, Inc.,
Class A 1,589,158
14,941 Rouse Properties, Inc. 272,673
4,507 Saul Centers, Inc. 278,127
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
RETAIL REITS (CONTINUED)
5,836 Seritage Growth Properties,
Class A $ 290,866
122,584 Simon Property Group, Inc. 26,588,470
37,658 Tanger Factory Outlet Centers,
Inc. 1,513,098
23,903 Taubman Centers, Inc. 1,773,603
36,620 Urban Edge Properties 1,093,473
10,485 Urstadt Biddle Properties, Inc.,
Class A 259,818
45,743 Weingarten Realty Investors 1,867,229
73,413 WP GLIMCHER, Inc. 821,492
--------------
82,246,530
--------------
SPECIALIZED REITS -- 14.5%
12,086 CoreSite Realty Corp. 1,071,907
46,548 Corrections Corp. of America 1,630,111
70,324 CubeSmart 2,171,605
27,755 CyrusOne, Inc. 1,544,843
58,167 Digital Realty Trust, Inc. 6,339,621
29,492 DuPont Fabros Technology, Inc. 1,402,050
25,194 EPR Properties 2,032,652
49,601 Extra Space Storage, Inc. 4,590,077
4,778 Farmland Partners, Inc. 54,087
21,343 Four Corners Property Trust, Inc. 439,452
75,250 Gaming and Leisure Properties,
Inc. 2,594,620
29,307 GEO Group (The), Inc. 1,001,713
94,686 Iron Mountain, Inc. 3,771,344
9,155 National Storage Affiliates Trust 190,607
58,389 Public Storage 14,923,645
18,541 QTS Realty Trust, Inc., Class A 1,037,925
18,360 Sovran Self Storage, Inc. 1,926,331
--------------
46,722,590
--------------
TOTAL COMMON STOCKS -- 99.7% 322,017,338
(Cost $300,845,725)
MONEY MARKET FUNDS -- 0.0%
53,967 Morgan Stanley Institutional
Liquidity Fund - Treasury
Portfolio - Institutional
Class - 0.26% (b) 53,967
(Cost $53,967) --------------
TOTAL INVESTMENTS -- 99.7% 322,071,305
(Cost $300,899,692) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.3% 869,137
--------------
NET ASSETS -- 100.0% $ 322,940,442
==============
(a) Non-income producing security.
(b) Interest rate shown reflects yield as of June 30, 2016.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $31,900,893 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $10,729,280.
See Notes to Financial Statements Page 35
FIRST TRUST S&P REIT INDEX FUND (FRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 322,017,338 $ -- $ --
Money Market Funds 53,967 -- --
-----------------------------------------------
Total Investments $ 322,071,305 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
Page 36 See Notes to Financial Statements
FIRST TRUST ISE WATER INDEX FUND (FIW)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
CHEMICALS -- 5.7%
43,925 Ashland, Inc. $ 5,041,272
169,467 Calgon Carbon Corp. 2,228,491
--------------
7,269,763
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 3.1%
125,806 Tetra Tech, Inc. 3,867,906
--------------
CONSTRUCTION & ENGINEERING
-- 13.0%
136,598 AECOM (a) 4,339,718
129,003 Aegion Corp. (a) 2,516,849
299,854 Layne Christensen Co. (a) (b) 2,428,817
253,796 Northwest Pipe Co. (a) 2,735,921
33,239 Valmont Industries, Inc. 4,496,240
--------------
16,517,545
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 2.0%
265,025 PICO Holdings, Inc. (a) 2,507,137
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 4.9%
34,184 Badger Meter, Inc. 2,496,458
87,023 Itron, Inc. (a) 3,750,691
--------------
6,247,149
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 8.3%
51,466 Danaher Corp. 5,198,066
57,506 IDEXX Laboratories, Inc. (a) 5,340,007
--------------
10,538,073
--------------
INDUSTRIAL CONGLOMERATES -- 4.0%
29,691 Roper Technologies, Inc. 5,064,097
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 4.0%
112,679 Agilent Technologies, Inc. 4,998,440
--------------
MACHINERY -- 36.4%
76,084 Crane Co. 4,315,485
237,505 Energy Recovery, Inc. (a) 2,111,419
100,553 Flowserve Corp. 4,541,979
86,923 Gorman-Rupp (The) Co. 2,382,559
59,473 IDEX Corp. 4,882,733
35,361 Lindsay Corp. (b) 2,399,598
119,530 Mueller Industries, Inc. 3,810,616
337,441 Mueller Water Products, Inc.,
Class A 3,853,576
86,074 Pentair PLC 5,017,254
207,431 Rexnord Corp. (a) 4,071,871
66,690 Watts Water Technologies, Inc.,
Class A 3,885,359
111,305 Xylem, Inc. 4,969,768
--------------
46,242,217
--------------
WATER UTILITIES -- 18.6%
61,818 American States Water Co. 2,708,865
65,950 American Water Works Co., Inc. 5,573,434
132,275 Aqua America, Inc. 4,716,926
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
WATER UTILITIES (CONTINUED)
80,086 California Water Service Group $ 2,797,404
315,500 Cia de Saneamento Basico do
Estado de Sao Paulo, ADR 2,826,880
177,075 Consolidated Water Co., Ltd. 2,312,600
67,840 SJW Corp. 2,671,539
--------------
23,607,648
--------------
TOTAL COMMON STOCKS -- 100.0% 126,859,975
(Cost $120,469,530) --------------
MONEY MARKET FUNDS -- 0.4%
541,726 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.26% (c) (d) 541,726
35,796 Morgan Stanley Institutional
Liquidity Fund - Treasury
Portfolio - Institutional
Class - 0.26% (c) 35,796
--------------
TOTAL MONEY MARKET FUNDS
-- 0.4% 577,522
(Cost $577,522) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.2%
$ 323,960 JPMorgan Chase & Co., 0.30% (c),
dated 06/30/16, due 07/01/16,
with a maturity value of
$323,963. Collateralized by
U.S. Treasury Notes, interest
rates of 2.000% to 2.625%, due
11/15/20 to 11/30/20. The value
of the collateral including
accrued interest is
$331,063. (d) 323,960
1,218,389 RBC Capital Markets LLC,
0.35% (c), dated 06/30/16, due
07/01/16, with a maturity value
of $1,218,401. Collateralized
by U.S. Treasury Notes,
interest rate of 1.500%, due
08/31/18 to 05/31/20. The value
of the collateral including
accrued interest is
$1,245,941. (d) 1,218,389
--------------
TOTAL REPURCHASE AGREEMENTS
-- 1.2% 1,542,349
(Cost $1,542,349) --------------
TOTAL INVESTMENTS -- 101.6% 128,979,846
(Cost $122,589,401) (e)
NET OTHER ASSETS AND
LIABILITIES -- (1.6)% (2,071,952)
--------------
NET ASSETS -- 100.0% $ 126,907,894
==============
See Notes to Financial Statements Page 37
FIRST TRUST ISE WATER INDEX FUND (FIW)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $2,037,726 and the total value of the collateral held by the
Fund is $2,084,075.
(c) Interest rate shown reflects yield as of June 30, 2016.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $15,044,962 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $8,654,517.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 126,859,975 $ -- $ --
Money Market Funds 577,522 -- --
Repurchase Agreements -- 1,542,349 --
-----------------------------------------------
Total Investments $ 127,437,497 $ 1,542,349 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
---------------------------------
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) $ 2,037,726
Non-cash Collateral(2) (2,037,726)
--------------
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 June 30, 2016, 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) $ 1,542,349
Non-cash Collateral(4) (1,542,349)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At June 30, 2016, the value of the collateral received from each seller
exceeded the value of the repurchase agreements.
Page 38 See Notes to Financial Statements
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (FCG)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.1%
ENERGY EQUIPMENT & SERVICES
-- 1.2%
166,851 Unit Corp. (a) $ 2,596,202
--------------
OIL, GAS & CONSUMABLE FUELS
-- 98.9%
283,471 Anadarko Petroleum Corp. 15,094,831
277,158 Antero Resources Corp. (a) 7,200,565
452,952 Cabot Oil & Gas Corp. 11,658,985
82,913 Cimarex Energy Co. 9,893,179
154,060 Columbia Pipeline Group, Inc. 3,926,989
104,962 Concho Resources, Inc. (a) 12,518,818
317,517 Continental Resources, Inc. (a) 14,373,995
375,433 Devon Energy Corp. 13,609,446
108,772 Enbridge Energy Partners, L.P. (b) 2,523,510
1,714,051 Encana Corp. 13,352,457
134,029 EQT Corp. 10,377,865
26,581 EQT Midstream Partners, L.P. (b) 2,134,454
86,813 Golar LNG Ltd. (c) 1,345,602
178,349 Gulfport Energy Corp. (a) 5,575,190
308,856 Kinder Morgan, Inc. 5,781,784
96,578 Matador Resources Co. (a) 1,912,244
250,565 Memorial Resource Development
Corp. (a) 3,978,972
207,782 Newfield Exploration Co. (a) 9,179,809
327,473 Noble Energy, Inc. 11,746,457
9,590 NuStar Energy, L.P. (b) 477,582
91,044 ONEOK Partners, L.P. (b) 3,647,223
81,741 PDC Energy, Inc. (a) 4,709,099
277,517 QEP Resources, Inc. 4,892,625
205,850 Range Resources Corp. 8,880,369
74,821 Rice Energy, Inc. (a) 1,649,055
92,806 SM Energy Co. 2,505,762
536,580 Southwestern Energy Co. (a) 6,750,176
147,198 Spectra Energy Corp. 5,391,863
63,519 Spectra Energy Partners, L.P. (b) 2,996,826
519,801 Statoil ASA, ADR (c) 8,997,755
138,552 Synergy Resources Corp. (a) 922,756
19,896 Western Gas Partners, L.P. (b) 1,002,758
133,559 Williams Partners, L.P. (b) 4,626,484
337,521 WPX Energy, Inc. (a) 3,142,321
--------------
216,777,806
--------------
TOTAL COMMON STOCKS -- 100.1% 219,374,008
(Cost $213,181,938) --------------
MONEY MARKET FUNDS -- 0.2%
426,789 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.26% (d) (e) 426,789
71,402 Morgan Stanley Institutional
Liquidity Fund - Treasury
Portfolio - Institutional
Class - 0.26% (d) 71,402
--------------
TOTAL MONEY MARKET FUNDS -- 0.2% 498,191
(Cost $498,191) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.5%
$ 255,226 JPMorgan Chase & Co., 0.30% (d),
dated 06/30/16, due 07/01/16,
with a maturity value of
$255,228. Collateralized by
U.S. Treasury Notes, interest
rates of 2.000% to 2.625%, due
11/15/20 to 11/30/20. The value
of the collateral including
accrued interest is
$260,822. (e) $ 255,226
959,885 RBC Capital Markets LLC,
0.35% (d), dated 06/30/16, due
07/01/16, with a maturity value
of $959,895. Collateralized by
U.S. Treasury Notes, interest
rate of 1.500%, due 08/31/18 to
05/31/20. The value of the
collateral including accrued
interest is $981,592. (e) 959,885
--------------
TOTAL REPURCHASE AGREEMENTS
-- 0.5% 1,215,111
(Cost $1,215,111) --------------
TOTAL INVESTMENTS -- 100.8% 221,087,310
(Cost $214,895,240) (f)
NET OTHER ASSETS AND
LIABILITIES -- (0.8)% (1,832,299)
--------------
NET ASSETS -- 100.0% $ 219,255,011
==============
(a) Non-income producing security.
(b) Master Limited Partnership ("MLP").
(c) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $1,575,900 and the total value of the collateral held by the
Fund is $1,641,900.
(d) Interest rate shown reflects yield as of June 30, 2016.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $11,571,276 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $5,379,206.
ADR - American Depositary Receipt
See Notes to Financial Statements Page 39
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (FCG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 219,374,008 $ -- $ --
Money Market Funds 498,191 -- --
Repurchase Agreements -- 1,215,111 --
-----------------------------------------------
Total Investments $ 219,872,199 $ 1,215,111 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
-----------------------------
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) $ 1,575,900
Non-cash Collateral(2) (1,575,900)
--------------
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 June 30, 2016, 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) $ 1,215,111
Non-cash Collateral(4) (1,215,111)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At June 30, 2016, the value of the collateral received from each seller
exceeded the value of the repurchase agreements.
Page 40 See Notes to Financial Statements
FIRST TRUST ISE CHINDIA INDEX FUND (FNI)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.7%
AIRLINES -- 0.6%
41,805 China Eastern Airlines Corp. Ltd.,
ADR (a) (b) $ 1,059,339
--------------
AUTOMOBILES -- 4.0%
192,349 Tata Motors Ltd., ADR 6,668,740
--------------
BANKS -- 13.7%
177,758 HDFC Bank Ltd., ADR 11,794,243
1,556,710 ICICI Bank Ltd., ADR 11,177,178
--------------
22,971,421
--------------
BIOTECHNOLOGY -- 0.6%
9,705 China Biologic Products, Inc. (b) 1,031,836
--------------
CAPITAL MARKETS -- 0.7%
46,917 Noah Holdings Ltd., ADR (a) (b) 1,131,169
--------------
DIVERSIFIED CONSUMER SERVICES
-- 2.2%
28,946 New Oriental Education &
Technology Group, Inc., ADR 1,212,258
51,498 Nord Anglia Education,
Inc. (a) (b) 1,088,668
20,699 TAL Education Group, ADR (b) 1,284,580
--------------
3,585,506
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.3%
25,013 China Telecom Corp., Ltd.,
ADR (a) 1,125,335
103,708 China Unicom (Hong Kong) Ltd.,
ADR (a) 1,079,600
--------------
2,204,935
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 0.6%
57,218 iKang Healthcare Group, Inc.,
ADR (b) 1,049,378
--------------
HOTELS, RESTAURANTS & LEISURE
-- 2.1%
32,945 China Lodging Group Ltd., ADR 1,200,186
82,180 Melco Crown Entertainment Ltd.,
ADR 1,033,825
144,659 Tuniu Corp., ADR (a) (b) 1,219,475
--------------
3,453,486
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.6%
41,805 Huaneng Power International, Inc.,
ADR 1,043,871
--------------
INSURANCE -- 0.7%
105,157 China Life Insurance Co., Ltd.,
ADR (a) 1,131,489
--------------
INTERNET & CATALOG RETAIL -- 15.5%
164,409 Ctrip.com International Ltd.,
ADR (b) 6,773,651
545,514 JD.com, Inc., ADR (b) 11,581,262
215,808 MakeMyTrip Ltd. (a) (b) 3,206,907
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INTERNET & CATALOG RETAIL
(CONTINUED)
40,055 Qunar Cayman Islands Ltd.,
ADR (a) (b) $ 1,193,239
283,948 Vipshop Holdings Ltd., ADR (b) 3,171,699
--------------
25,926,758
--------------
INTERNET SOFTWARE & SERVICES
-- 28.4%
92,034 21Vianet Group, Inc., ADR (b) 939,667
70,514 58.com, Inc., ADR (a) (b) 3,235,887
151,324 Alibaba Group Holding Ltd.,
ADR (b) 12,034,798
45,080 Autohome, Inc., ADR (b) 906,559
69,933 Baidu, Inc., ADR (b) 11,549,435
49,971 Bitauto Holdings Ltd., ADR (a) (b) 1,347,218
92,639 Momo, Inc., ADR (a) (b) 936,580
40,529 NetEase, Inc., ADR 7,831,013
44,363 Qihoo 360 Technology Co., Ltd.,
ADR (b) 3,240,717
21,603 SINA Corp. (b) 1,120,548
28,414 Sohu.com, Inc. (b) 1,075,754
235,561 SouFun Holdings Ltd., ADR (a) (b) 1,184,872
41,666 Weibo Corp., ADR (a) (b) 1,183,731
28,740 YY, Inc., ADR (b) 973,424
--------------
47,560,203
--------------
IT SERVICES -- 12.6%
635,427 Infosys Ltd., ADR 11,342,372
542,551 Wipro Ltd., ADR (a) 6,705,930
108,295 WNS (Holdings) Ltd., ADR (b) 2,923,965
--------------
20,972,267
--------------
MARINE -- 0.6%
73,748 Seaspan Corp. (a) 1,029,522
--------------
METALS & MINING -- 2.3%
482,002 Vedanta Ltd., ADR 3,793,356
--------------
OIL, GAS & CONSUMABLE FUELS
-- 2.0%
16,099 China Petroleum & Chemical
Corp., ADR 1,159,128
9,362 CNOOC Ltd., ADR 1,167,067
15,907 PetroChina Co., Ltd., ADR 1,080,403
--------------
3,406,598
--------------
PHARMACEUTICALS -- 4.5%
145,563 Dr. Reddy's Laboratories Ltd.,
ADR 7,457,192
--------------
PROFESSIONAL SERVICES -- 0.7%
39,383 51job, Inc., ADR (a) (b) 1,154,316
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.4%
56,417 JinkoSolar Holding Co., Ltd.,
ADR (a) (b) 1,149,779
156,714 Trina Solar Ltd., ADR (a) (b) 1,212,966
--------------
2,362,745
--------------
See Notes to Financial Statements Page 41
FIRST TRUST ISE CHINDIA INDEX FUND (FNI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SOFTWARE -- 0.6%
106,951 Cheetah Mobile, Inc., ADR (a) (b) $ 1,016,035
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 4.0%
115,436 China Mobile Ltd., ADR 6,683,744
--------------
TOTAL COMMON STOCKS -- 99.7% 166,693,906
(Cost $178,934,623) --------------
MONEY MARKET FUNDS -- 2.6%
4,308,230 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.26% (c) (d) 4,308,230
(Cost $4,308,230) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 7.3%
$ 2,576,383 JPMorgan Chase & Co., 0.30% (c),
dated 06/30/16, due 07/01/16,
with a maturity value of
$2,576,404. Collateralized by
U.S. Treasury Notes, interest
rates of 2.000% to 2.625%, due
11/15/20 to 11/30/20. The value
of the collateral including
accrued interest is
$2,632,873. (d) 2,576,383
9,689,584 RBC Capital Markets LLC,
0.35% (c), dated 06/30/16, due
07/01/16, with a maturity value
of $9,689,678. Collateralized
by U.S. Treasury Notes,
interest rate of 1.500%, due
08/31/18 to 05/31/20. The value
of the collateral including
accrued interest is
$9,908,699. (d) 9,689,584
--------------
TOTAL REPURCHASE AGREEMENTS
-- 7.3% 12,265,967
(Cost $12,265,967) --------------
TOTAL INVESTMENTS -- 109.6% 183,268,103
(Cost $195,508,820) (e)
NET OTHER ASSETS AND
LIABILITIES -- (9.6)% (16,015,335)
--------------
NET ASSETS -- 100.0% $ 167,252,768
==============
(a) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $16,328,792 and the total value of the collateral held by
the Fund is $16,574,197.
(b) Non-income producing security.
(c) Interest rate shown reflects yield as of June 30, 2016.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $8,804,032 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $21,044,749.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 166,693,906 $ -- $ --
Money Market Funds 4,308,230 -- --
Repurchase Agreements -- 12,265,967 --
-----------------------------------------------
Total Investments $ 171,002,136 $ 12,265,967 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
COUNTRY ALLOCATION AS A PERCENTAGE OF NET ASSETS**:
----------------------------------------------------
Cayman Islands 49.6%
India 35.2
United States 11.2
Hong Kong 5.3
China 4.0
Mauritius 1.9
Jersey 1.8
Marshall Islands 0.6
Net Other Assets and Liabilities (9.6)
-------
100.0%
=======
** Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index.
Page 42 See Notes to Financial Statements
FIRST TRUST ISE CHINDIA INDEX FUND (FNI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
-----------------------------
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) $ 16,328,792
Non-cash Collateral(2) (16,328,792)
--------------
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 June 30, 2016, 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) $ 12,265,967
Non-cash Collateral(4) (12,265,967)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At June 30, 2016, the value of the collateral received from each seller
exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 43
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 100.0%
BANKS -- 86.6%
25,527 1st Source Corp. $ 826,820
8,505 American National Bankshares,
Inc. 214,156
34,397 Ameris Bancorp 1,021,591
12,812 Arrow Financial Corp. 388,075
24,294 Atlantic Capital Bancshares,
Inc. (a) 351,291
15,352 BancFirst Corp. 926,033
37,472 Bancorp (The), Inc. (a) 225,581
6,040 Bank of Marin Bancorp 292,155
89,596 Bank of the Ozarks, Inc. 3,361,642
32,720 Banner Corp. 1,391,909
78,612 BBCN Bancorp, Inc. 1,172,891
27,384 Blue Hills Bancorp, Inc. 404,188
40,329 BNC Bancorp 915,872
65,330 BOK Financial Corp. (b) 4,096,191
81,908 Boston Private Financial Holdings,
Inc. 964,876
17,241 Bridge Bancorp, Inc. 489,644
69,520 Brookline Bancorp, Inc. 766,806
16,598 Bryn Mawr Bank Corp. 484,662
10,144 Camden National Corp. 426,048
26,304 Capital Bank Financial Corp.,
Class A 757,555
32,011 Cardinal Financial Corp. 702,321
11,885 Carolina Financial Corp. 222,012
77,861 Cathay General Bancorp 2,195,680
47,360 CenterState Banks, Inc. 745,920
37,772 Chemical Financial Corp. 1,408,518
14,805 City Holding Co. 673,183
40,855 CoBiz Financial, Inc. 478,003
57,281 Columbia Banking System, Inc. 1,607,305
95,344 Commerce Bancshares, Inc. 4,566,978
17,341 Community Trust Bancorp, Inc. 601,039
29,804 ConnectOne Bancorp, Inc. 467,625
17,298 CU Bancorp (a) 393,184
106,462 CVB Financial Corp. 1,744,912
33,173 Eagle Bancorp, Inc. (a) 1,595,953
142,303 East West Bancorp, Inc. 4,863,917
19,772 Enterprise Financial Services Corp. 551,441
25,154 Fidelity Southern Corp. 394,163
14,317 Financial Institutions, Inc. 373,244
19,622 First Bancorp 344,955
37,670 First Busey Corp. 805,761
10,868 First Citizens BancShares, Inc.,
Class A 2,813,834
17,296 First Community Bancshares, Inc. 388,122
15,614 First Connecticut Bancorp, Inc. 258,568
61,087 First Financial Bancorp 1,188,142
65,234 First Financial Bankshares, Inc. 2,139,023
12,090 First Financial Corp. 442,736
15,887 First Foundation, Inc. (a) 341,570
20,746 First Interstate BancSystem, Inc.,
Class A 582,963
40,241 First Merchants Corp. 1,003,208
80,314 First Midwest Bancorp, Inc. 1,410,314
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BANKS (CONTINUED)
18,840 First NBC Bank Holding Co. (a) $ 316,324
15,383 First of Long Island (The) Corp. 441,031
28,608 Flushing Financial Corp. 568,727
171,303 Fulton Financial Corp. 2,312,590
15,063 German American Bancorp, Inc. 481,564
75,219 Glacier Bancorp, Inc. 1,999,321
13,721 Great Southern Bancorp, Inc. 507,265
20,526 Guaranty Bancorp 342,784
76,548 Hancock Holding Co. 1,998,668
31,849 Hanmi Financial Corp. 748,133
24,216 Heartland Financial USA, Inc. 854,583
29,598 Heritage Financial Corp. 520,333
138,629 Home BancShares, Inc. 2,743,468
17,851 HomeTrust Bancshares, Inc. (a) 330,243
11,834 Horizon Bancorp 297,507
40,717 IBERIABANK Corp. 2,432,026
25,974 Independent Bank Corp./MA 1,187,012
20,998 Independent Bank Corp./MI 304,681
18,231 Independent Bank Group, Inc. 782,292
65,121 International Bancshares Corp. 1,699,007
315,111 Investors Bancorp, Inc. 3,491,430
40,726 Lakeland Bancorp, Inc. 463,462
16,489 Lakeland Financial Corp. 775,148
47,052 LegacyTexas Financial Group, Inc. 1,266,169
29,100 Live Oak Bancshares, Inc. 410,601
21,365 MainSource Financial Group, Inc. 471,098
72,754 MB Financial, Inc. 2,639,515
16,038 Mercantile Bank Corp. 382,667
42,420 NBT Bancorp, Inc. 1,214,485
4,201 Nicolet Bankshares, Inc. (a) 159,974
133,255 Old National Bancorp 1,669,685
33,836 Opus Bank 1,143,657
19,390 Pacific Continental Corp. 304,617
27,205 Pacific Premier Bancorp, Inc. (a) 652,920
118,710 PacWest Bancorp 4,722,284
52,707 Park Sterling Corp. 373,693
16,121 Peapack-Gladstone Financial Corp. 298,400
17,932 Peoples Bancorp, Inc. 390,738
41,521 Pinnacle Financial Partners, Inc. 2,028,301
102,411 Popular, Inc. 3,000,642
13,905 Preferred Bank 401,507
78,395 PrivateBancorp, Inc. 3,451,732
12,876 QCR Holdings, Inc. 350,098
41,539 Renasant Corp. 1,342,956
18,426 Republic Bancorp, Inc., Class A 509,110
34,466 S&T Bancorp, Inc. 842,694
23,567 Sandy Spring Bancorp, Inc. 684,857
37,449 Seacoast Banking Corp. of
Florida (a) 608,172
25,885 ServisFirst Bancshares, Inc. 1,278,460
13,113 Sierra Bancorp 218,856
53,014 Signature Bank (a) 6,622,509
29,946 Simmons First National Corp.,
Class A 1,383,056
23,882 South State Corp. 1,625,170
25,891 Southside Bancshares, Inc. 800,550
18,779 Southwest Bancorp, Inc. 317,928
Page 44 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
36,422 State Bank Financial Corp. $ 741,188
22,100 Stock Yards Bancorp, Inc. 623,883
12,658 Stonegate Bank 408,474
45,332 Texas Capital Bancshares, Inc. (a) 2,119,724
51,034 TowneBank 1,104,886
22,501 TriCo Bancshares 621,028
17,886 Triumph Bancorp, Inc. (a) 286,176
66,773 Trustmark Corp. 1,659,309
48,864 UMB Financial Corp. 2,600,053
217,713 Umpqua Holdings Corp. 3,368,020
43,217 Union Bankshares Corp. 1,067,892
68,843 United Bankshares, Inc. 2,582,301
69,428 United Community Banks, Inc. 1,269,838
19,372 Univest Corp. of Pennsylvania 407,199
16,848 Washington Trust Bancorp, Inc. 638,876
37,884 WesBanco, Inc. 1,176,298
25,179 Westamerica Bancorporation (b) 1,240,318
47,955 Wintrust Financial Corp. 2,445,705
--------------
146,308,448
--------------
IT SERVICES -- 0.4%
11,102 Cass Information Systems, Inc. 573,973
--------------
THRIFTS & MORTGAGE FINANCE
-- 13.0%
44,983 Bank Mutual Corp. 345,470
19,691 BankFinancial Corp. 236,095
74,486 Beneficial Bancorp, Inc. (a) 947,462
62,274 BofI Holding, Inc. (a) (b) 1,102,873
135,507 Capitol Federal Financial, Inc. 1,890,323
23,701 Clifton Bancorp, Inc. 357,174
37,127 Dime Community Bancshares, Inc. 631,530
8,851 First Defiance Financial Corp. 343,861
24,489 HomeStreet, Inc. (a) 487,821
92,362 Kearny Financial Corp. 1,161,914
53,254 Meridian Bancorp, Inc. 787,094
8,398 Meta Financial Group, Inc. 427,962
47,759 Northfield Bancorp, Inc. 708,266
100,584 Northwest Bancshares, Inc. 1,491,661
25,342 OceanFirst Financial Corp. 460,464
44,556 Oritani Financial Corp. 712,450
9,553 Territorial Bancorp, Inc. 252,868
283,310 TFS Financial Corp. 4,878,598
94,305 TrustCo Bank Corp. NY 604,495
49,540 United Financial Bancorp, Inc. 643,029
89,934 Washington Federal, Inc. 2,181,799
28,774 Waterstone Financial, Inc. 441,105
29,168 WSFS Financial Corp. 938,918
--------------
22,033,232
--------------
TOTAL COMMON STOCKS -- 100.0% 168,915,653
(Cost $180,688,095) --------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MONEY MARKET FUNDS -- 0.2%
399,381 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.26% (c) (d) $ 399,381
(Cost $399,381) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.7%
$ 238,836 JPMorgan Chase & Co., 0.30% (c),
dated 06/30/16, due 07/01/16,
with a maturity value of
$238,838. Collateralized by
U.S. Treasury Notes, interest
rates of 2.000% to 2.625%, due
11/15/20 to 11/30/20. The value
of the collateral including
accrued interest is
$244,072. (d) 238,836
898,243 RBC Capital Markets LLC,
0.35% (c), dated 06/30/16, due
07/01/16, with a maturity value
of $898,252. Collateralized by
U.S. Treasury Notes, interest
rate of 1.500%, due 08/31/18 to
05/31/20. The value of the
collateral including accrued
interest is $918,555. (d) 898,243
--------------
TOTAL REPURCHASE AGREEMENTS
-- 0.7% 1,137,079
(Cost $1,137,079) --------------
TOTAL INVESTMENTS -- 100.9% 170,452,113
(Cost $182,224,555) (e)
NET OTHER ASSETS AND
LIABILITIES -- (0.9)% (1,456,182)
--------------
NET ASSETS -- 100.0% $ 168,995,931
==============
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $1,539,189 and the total value of the collateral held by the
Fund is $1,536,460.
(c) Interest rate shown reflects yield as of June 30, 2016.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $2,080,737 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $13,853,179.
See Notes to Financial Statements Page 45
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 168,915,653 $ -- $ --
Money Market Funds 399,381 -- --
Repurchase Agreements -- 1,137,079 --
-----------------------------------------------
Total Investments $ 169,315,034 $ 1,137,079 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
-----------------------------
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) $ 1,539,189
Non-cash Collateral(2) (1,536,460)
--------------
Net Amount $ 2,729
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) The collateral requirements are determined at the beginning of each
business day based on the market value of the loaned securities from the
end of the prior day. On June 30, 2016, the last business day of the
period, there was sufficient collateral based on the end of day market
value from the prior business day; however, as a result of market movement
from June 29 to June 30, the value of the related securities loaned was
above the collateral value received. See Note 2D - Securities Lending in
the Notes to Financial Statements.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
-------------------------------------------------------------
Total gross amount presented on the Statements
of Assets and Liabilities(3) $ 1,137,079
Non-cash Collateral(4) (1,137,079)
--------------
Net Amount $ --
==============
(3) The amount is included in "Repurchase agreements, at value" on the
Statements of Assets and Liabilities.
(4) At June 30, 2016, the value of the collateral received from each seller
exceeded the value of the repurchase agreements.
Page 46 See Notes to Financial Statements
This page intentionally left blank.
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2016 (UNAUDITED)
FIRST TRUST FIRST TRUST
NASDAQ-100 FIRST TRUST NASDAQ-100
EQUAL NASDAQ-100- EX-TECHNOLOGY
WEIGHTED TECHNOLOGY SECTOR SECTOR
INDEX FUND INDEX FUND INDEX FUND
(QQEW) (QTEC) (QQXT)
---------------- ------------------ ----------------
ASSETS:
Investments, at value............................................... $ 372,538,704 $ 258,156,047 $ 133,467,506
Repurchase agreements, at value..................................... 8,245,777 -- 3,634,144
Cash................................................................ 22,254 155,356 --
Receivables:
Capital shares sold........................................... -- -- --
Investment securities sold.................................... 5,115 -- 7,493
Dividends..................................................... 303,684 77,790 149,864
Securities lending income..................................... 4,654 -- 2,551
Interest...................................................... -- -- 9
Prepaid expenses.................................................... 1,880 970 551
-------------- -------------- --------------
TOTAL ASSETS.................................................. 381,122,068 258,390,163 137,262,118
-------------- -------------- --------------
LIABILITIES:
Due to custodian.................................................... -- -- 37,165
Payables:
Capital shares redeemed....................................... 5,116 -- 7,493
Investment securities purchased............................... -- -- --
Investment advisory fees...................................... 101,557 76,675 23,730
Collateral for securities on loan............................. 11,141,978 -- 4,910,581
Licensing fees................................................ 95,283 67,195 36,821
Printing fees................................................. 31,134 20,521 13,264
Audit and tax fees............................................ 17,108 17,108 17,108
Trustees' fees................................................ 73 65 63
Other liabilities................................................... 74,518 49,270 34,013
-------------- -------------- --------------
TOTAL LIABILITIES............................................. 11,466,767 230,834 5,080,238
-------------- -------------- --------------
NET ASSETS.......................................................... $ 369,655,301 $ 258,159,329 $ 132,181,880
============== ============== ==============
NET ASSETS CONSIST OF:
Paid-in capital..................................................... $ 402,991,899 $ 258,501,500 $ 132,082,287
Par value........................................................... 88,000 59,500 34,000
Accumulated net investment income (loss)............................ 13,523 29,108 (384)
Accumulated net realized gain (loss) on investments................. (16,626,176) (8,216,897) 3,716,551
Net unrealized appreciation (depreciation) on investments........... (16,811,945) 7,786,118 (3,650,574)
-------------- -------------- --------------
NET ASSETS.......................................................... $ 369,655,301 $ 258,159,329 $ 132,181,880
============== ============== ==============
NET ASSET VALUE, per share.......................................... $ 42.01 $ 43.39 $ 38.88
============== ============== ==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)....................................... 8,800,002 5,950,002 3,400,002
============== ============== ==============
Investments, at cost................................................ $ 389,350,649 $ 250,369,929 $ 137,118,080
============== ============== ==============
Repurchase agreements, at cost...................................... $ 8,245,777 $ -- $ 3,634,144
============== ============== ==============
Securities on loan, at value........................................ $ 11,070,765 $ -- $ 4,878,122
============== ============== ==============
Page 48 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
NASDAQ(R) FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST NASDAQ(R) ABA
CLEAN EDGE(R) S&P ISE ISE-REVERE ISE COMMUNITY
GREEN ENERGY REIT WATER NATURAL GAS CHINDIA BANK
INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND
(QCLN) (FRI) (FIW) (FCG) (FNI) (QABA)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 62,592,116 $ 322,071,305 $ 127,437,497 $ 219,872,199 $ 171,002,136 $ 169,315,034
8,712,325 -- 1,542,349 1,215,111 12,265,967 1,137,079
37 -- 2,707 -- -- --
-- 7,395,581 -- 13,476,215 -- --
-- 17,134 -- 15,716,056 -- --
34,529 1,056,076 105,915 3,194 690,756 234,361
52,218 -- 5,947 777 42,796 852
-- 29 42 100 -- --
228 3,222 2,883 4,153 3,086 467
-------------- -------------- -------------- -------------- -------------- --------------
71,391,453 330,543,347 129,097,340 250,287,805 184,004,741 170,687,793
-------------- -------------- -------------- -------------- -------------- --------------
-- 938 -- 938 14,107 20,170
-- -- -- 15,708,357 -- --
-- 7,375,404 -- 13,483,828 -- --
16,617 71,734 42,817 55,196 53,650 18,136
11,772,394 -- 2,084,075 1,641,900 16,574,19 7 1,536,460
15,263 73,151 15,605 53,441 34,522 37,673
7,731 15,550 9,696 21,092 13,546 19,781
17,108 17,108 17,108 17,108 17,108 17,108
56 30 36 30 57 63
11,956 48,990 20,109 50,904 44,786 42,471
-------------- -------------- -------------- -------------- -------------- --------------
11,841,125 7,602,905 2,189,446 31,032,794 16,751,973 1,691,862
-------------- -------------- -------------- -------------- -------------- --------------
$ 59,550,328 $ 322,940,442 $ 126,907,894 $ 219,255,011 $ 167,252,768 $ 168,995,931
============== ============== ============== ============== ============== ==============
$ 116,822,167 $ 300,452,807 $ 131,529,424 $ 753,164,014 $ 262,729,186 $ 185,475,738
41,500 131,000 36,000 89,984 61,500 44,500
35,829 2,298,057 34,135 (1,981,654) 82,458 211,364
(45,471,411) (1,113,035) (11,082,110) (538,209,403) (83,379,659) (4,963,229)
(11,877,757) 21,171,613 6,390,445 6,192,070 (12,240,717) (11,772,442)
-------------- -------------- -------------- -------------- -------------- --------------
$ 59,550,328 $ 322,940,442 $ 126,907,894 $ 219,255,011 $ 167,252,768 $ 168,995,931
============== ============== ============== ============== ============== ==============
$ 14.35 $ 24.65 $ 35.25 $ 24.37 $ 27.20 $ 37.98
============== ============== ============== ============== ============== ==============
4,150,002 13,100,002 3,600,002 8,998,365 6,150,002 4,450,002
============== ============== ============== ============== ============== ==============
$ 74,469,873 $ 300,899,692 $ 121,047,052 $ 213,680,129 $ 183,242,853 $ 181,087,476
============== ============== ============== ============== ============== ==============
$ 8,712,325 $ -- $ 1,542,349 $ 1,215,111 $ 12,265,967 $ 1,137,079
============== ============== ============== ============== ============== ==============
$ 11,582,702 $ -- $ 2,037,726 $ 1,575,900 $ 16,328,792 $ 1,539,189
============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 49
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2016 (UNAUDITED)
FIRST TRUST FIRST TRUST
NASDAQ-100 FIRST TRUST NASDAQ-100
EQUAL NASDAQ-100- EX-TECHNOLOGY
WEIGHTED TECHNOLOGY SECTOR SECTOR
INDEX FUND INDEX FUND INDEX FUND
(QQEW) (QTEC) (QQXT)
---------------- ------------------ ----------------
INVESTMENT INCOME:
Dividends........................................................... $ 3,187,170 $ 4,043,326 $ 656,973
Securities lending income (net of fees)............................. 76,766 -- 43,225
Interest............................................................ -- -- 259
Foreign tax withholding............................................. (11,164) -- --
-------------- -------------- --------------
Total investment income....................................... 3,252,772 4,043,326 700,457
-------------- -------------- --------------
EXPENSES:
Investment advisory fees............................................ 797,835 540,934 309,178
Licensing fees...................................................... 199,459 135,234 77,294
Accounting and administration fees.................................. 90,940 62,959 37,077
Custodian fees...................................................... 59,023 18,372 23,427
Printing fees....................................................... 27,214 19,769 16,095
Legal fees.......................................................... 18,500 13,919 8,189
Audit and tax fees.................................................. 12,394 12,394 12,394
Transfer agent fees................................................. 9,973 6,762 3,865
Trustees' fees and expenses......................................... 4,578 4,555 4,517
Listing fees........................................................ 3,238 3,671 2,952
Registration and filing fees........................................ -- -- 799
Other expenses...................................................... 8,249 5,038 2,918
-------------- -------------- --------------
Total expenses................................................ 1,231,403 823,607 498,705
Less fees waived and expenses reimbursed by the investment
advisor.................................................... (34,650) (12,205) (34,939)
-------------- -------------- --------------
Net expenses.................................................. 1,196,753 811,402 463,766
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)........................................ 2,056,019 3,231,924 236,691
-------------- -------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................... (5,208,313) (2,969,129) (1,098,422)
In-kind redemptions........................................... 13,560,977 17,237,709 11,580,433
-------------- -------------- --------------
Net realized gain (loss)............................................ 8,352,664 14,268,580 10,482,011
-------------- -------------- --------------
Net change in unrealized appreciation (depreciation) on investments. (34,124,408) (12,518,484) (22,891,248)
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................. (25,771,744) 1,750,096 (12,409,237)
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................................. $ (23,715,725) $ 4,982,020 $ (12,172,546)
============== ============== ==============
Page 50 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
NASDAQ(R) FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST NASDAQ(R) ABA
CLEAN EDGE(R) S&P ISE ISE-REVERE ISE COMMUNITY
GREEN ENERGY REIT WATER NATURAL GAS CHINDIA BANK
INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND
(QCLN) (FRI) (FIW) (FCG) (FNI) (QABA)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 245,006 $ 5,945,822 $ 741,338 $ 855,591 $ 1,450,529 $ 1,941,655
352,129 -- 5,947 1,004,702 230,008 852
-- 454 132 281 -- --
-- -- (34,832) (93,031) (55,872) (2,960)
-------------- -------------- -------------- -------------- -------------- --------------
597,135 5,946,276 712,585 1,767,543 1,624,665 1,939,547
-------------- -------------- -------------- -------------- -------------- --------------
122,398 368,067 222,482 370,078 353,487 347,414
30,600 98,151 27,810 92,519 70,697 78,168
14,763 59,750 26,449 43,891 40,268 43,411
6,794 17,396 7,459 27,074 27,688 12,876
6,902 17,396 4,807 20,095 8,203 33,915
3,095 13,741 5,959 11,069 8,822 10,048
12,394 12,394 12,394 12,394 12,394 12,394
1,530 6,135 2,781 4,626 4,419 4,343
4,332 4,568 4,379 4,473 4,459 4,862
3,025 4,475 5,469 6,902 5,658 2,954
(607) -- -- (1,834) 1,306 934
2,313 4,155 2,720 3,918 3,344 2,705
-------------- -------------- -------------- -------------- -------------- --------------
207,539 606,228 322,709 595,205 540,745 554,024
(23,942) -- -- (40,088) (10,515) (32,902)
-------------- -------------- -------------- -------------- -------------- --------------
183,597 606,228 322,709 555,117 530,230 521,122
-------------- -------------- -------------- -------------- -------------- --------------
413,538 5,340,048 389,876 1,212,426 1,094,435 1,418,425
-------------- -------------- -------------- -------------- -------------- --------------
(6,242,510) (1,142,298) (4,023,651) (170,241,518) (11,611,058) (789,616)
728,896 1,294,411 5,558,170 29,293,790 (2,099,928) (1,066,417)
-------------- -------------- -------------- -------------- -------------- --------------
(5,513,614) 152,113 1,534,519 (140,947,728) (13,710,986) (1,856,033)
-------------- -------------- -------------- -------------- -------------- --------------
(1,791,537) 27,147,202 15,502,348 172,725,447 1,173,373 (7,535,817)
-------------- -------------- -------------- -------------- -------------- --------------
(7,305,151) 27,299,315 17,036,867 31,777,719 (12,537,613) (9,391,850)
-------------- -------------- -------------- -------------- -------------- --------------
$ (6,891,613) $ 32,639,363 $ 17,426,743 $ 32,990,145 $ (11,443,178) $ (7,973,425)
============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 51
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
NASDAQ-100 NASDAQ-100-
EQUAL WEIGHTED TECHNOLOGY SECTOR
INDEX FUND INDEX FUND
(QQEW) (QTEC)
----------------------------- -----------------------------
For the Six For the Six
Months Ended For the Year Months Ended For the Year
6/30/2016 Ended 6/30/2016 Ended
(Unaudited) 12/31/2015 (Unaudited) 12/31/2015
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss)........................... $ 2,056,019 $ 3,082,310 $ 3,231,924 $ 2,766,046
Net realized gain (loss)............................... 8,352,664 41,765,707 14,268,580 44,818,868
Net change in unrealized appreciation (depreciation)... (34,124,408) (34,310,836) (12,518,484) (55,092,351)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations..................................... (23,715,725) 10,537,181 4,982,020 (7,507,437)
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (2,042,496) (3,678,500) (3,202,816) (3,154,776)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................. 16,759,549 195,067,101 26,331,058 76,107,779
Cost of shares redeemed................................ (154,024,841) (247,074,977) (72,686,060) (129,579,619)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................... (137,265,292) (52,007,876) (46,355,002) (53,471,840)
------------- ------------- ------------- -------------
Total increase (decrease) in net assets................ (163,023,513) (45,149,195) (44,575,798) (64,134,053)
NET ASSETS:
Beginning of period.................................... 532,678,814 577,828,009 302,735,127 366,869,180
------------- ------------- ------------- -------------
End of period.......................................... $ 369,655,301 $ 532,678,814 $ 258,159,329 $ 302,735,127
============= ============= ============= =============
Accumulated net investment income (loss)
at end of period.................................... $ 13,523 $ -- $ 29,108 $ --
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................ 12,250,002 13,500,002 7,100,002 8,400,002
Shares sold............................................ 400,000 4,450,000 650,000 1,750,000
Shares redeemed as a result of reverse share split
(See Note 4)........................................ -- -- -- --
Shares redeemed........................................ (3,850,000) (5,700,000) (1,800,000) (3,050,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period...................... 8,800,002 12,250,002 5,950,002 7,100,002
============= ============= ============= =============
Page 52 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
NASDAQ-100 NASDAQ(R) S&P FIRST TRUST
EX-TECHNOLOGY SECTOR CLEAN EDGE(R) GREEN ENERGY REIT ISE WATER
INDEX FUND INDEX FUND INDEX FUND INDEX FUND
(QQXT) (QCLN) (FRI) (FIW)
----------------------------- ------------------------------- ------------------------------- -------------------------------
For the Six For the Six For the Six For the Six
Months Ended For the Year Months Ended For the Year Months Ended For the Year Months Ended For the Year
6/30/2016 Ended 6/30/2016 Ended 6/30/2016 Ended 6/30/2016 Ended
(Unaudited) 12/31/2015 (Unaudited) 12/31/2015 (Unaudited) 12/31/2015 (Unaudited) 12/31/2015
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 236,691 $ 497,186 $ 413,538 $ 523,436 $ 5,340,048 $ 5,848,521 $ 389,876 $ 1,102,605
10,482,011 5,502,730 (5,513,614) (4,852,254) 152,113 23,006,725 1,534,519 9,174,441
(22,891,248) (186,256) (1,791,537) (1,381,171) 27,147,202 (22,518,489) 15,502,348 (30,704,492)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(12,172,546) 5,813,660 (6,891,613) (5,709,989) 32,639,363 6,336,757 17,426,743 (20,427,446)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(237,075) (636,390) (390,025) (527,840) (3,041,991) (6,276,431) (363,400) (1,094,946)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
22,735,596 80,613,411 2,142,506 4,544,831 82,259,652 119,979,221 31,608,140 9,558,341
(62,591,575) (18,537,885) (4,965,420) (18,268,019) (15,166,539) (232,919,287) (24,195,381) (84,154,350)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(39,855,979) 62,075,526 (2,822,914) (13,723,188) 67,093,113 (112,940,066) 7,412,759 (74,596,009)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
(52,265,600) 67,252,796 (10,104,552) (19,961,017) 96,690,485 (112,879,740) 24,476,102 (96,118,401)
184,447,480 117,194,684 69,654,880 89,615,897 226,249,957 339,129,697 102,431,792 198,550,193
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 132,181,880 $ 184,447,480 $ 59,550,328 $ 69,654,880 $ 322,940,442 $ 226,249,957 $ 126,907,894 $ 102,431,792
============= ============= ============== ============== ============== ============== ============== ==============
$ (384) $ -- $ 35,829 $ 12,316 $ 2,298,057 $ -- $ 34,135 $ 7,659
============= ============= ============== ============== ============== ============== ============== ==============
4,450,002 2,950,002 4,350,002 5,200,002 10,250,002 15,250,002 3,400,002 5,900,002
600,000 1,950,000 150,000 250,000 3,550,000 5,250,000 900,000 300,000
-- -- -- -- -- -- -- --
(1,650,000) (450,000) (350,000) (1,100,000) (700,000) (10,250,000) (700,000) (2,800,000)
------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
3,400,002 4,450,002 4,150,002 4,350,002 13,100,002 10,250,002 3,600,002 3,400,002
============= ============= ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 53
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
ISE-REVERE FIRST TRUST
NATURAL GAS ISE CHINDIA
INDEX FUND INDEX FUND
(FCG) (FNI)
----------------------------- -----------------------------
For the Six For the Six
Months Ended For the Year Months Ended For the Year
6/30/2016 Ended 6/30/2016 Ended
(Unaudited) 12/31/2015 (Unaudited) 12/31/2015
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss)........................... $ 1,212,426 $ 5,401,247 $ 1,094,435 $ 1,407,972
Net realized gain (loss)............................... (140,947,728) (182,923,218) (13,710,986) (5,169,003)
Net change in unrealized appreciation (depreciation)... 172,725,447 (5,578,141) 1,173,373 (22,242,010)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations..................................... 32,990,145 (183,100,112) (11,443,178) (26,003,041)
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (3,194,080) (5,545,080) (805,520) (1,676,190)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................. 292,614,171 248,375,073 2,725,776 248,313,891
Cost of shares redeemed................................ (256,197,650) (153,633,016) (44,411,899) (111,110,415)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................... 36,416,521 94,742,057 (41,686,123) 137,203,476
------------- ------------- ------------- -------------
Total increase (decrease) in net assets................ 66,212,586 (93,903,135) (53,934,821) 109,524,245
NET ASSETS:
Beginning of period.................................... 153,042,425 246,945,560 221,187,589 111,663,344
------------- ------------- ------------- -------------
End of period.......................................... $ 219,255,011 $ 153,042,425 $ 167,252,768 $ 221,187,589
============= ============= ============= =============
Accumulated net investment income (loss)
at end of period.................................... $ (1,981,654) $ -- $ 82,458 $ (206,457)
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................ 6,860,000 4,400,000 (a) 7,800,002 3,900,002
Shares sold............................................ 40,850,000 7,080,000 (a) 100,000 7,950,000
Shares redeemed as a result of reverse share split
(See Note 4)........................................ (9,561,635) -- -- --
Shares redeemed........................................ (29,150,000) (4,620,000)(a) (1,750,000) (4,050,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period...................... 8,998,365 6,860,000 6,150,002 7,800,002
============= ============= ============= =============
(a) Share amounts have been adjusted to reflect the 1-for-5 reverse stock
split that was effective May 2, 2016.
Page 54 See Notes to Financial Statements
FIRST TRUST
NASDAQ(R) ABA
COMMUNITY BANK
INDEX FUND
(QABA)
-----------------------------
For the Six
Months Ended For the Year
6/30/2016 Ended
(Unaudited) 12/31/2015
------------- -------------
$ 1,418,425 $ 1,745,776
(1,856,033) 6,013,312
(7,535,817) (10,201,193)
------------- -------------
(7,973,425) (2,442,105)
------------- -------------
(1,319,831) (1,652,931)
------------- -------------
9,891,235 198,934,541
(55,504,175) (80,755,559)
------------- -------------
(45,612,940) 118,178,982
------------- -------------
(54,906,196) 114,083,946
223,902,127 109,818,181
------------- -------------
$ 168,995,931 $ 223,902,127
============= =============
$ 211,364 $ 112,770
============= =============
5,750,002 3,000,002
250,000 4,950,000
-- --
(1,550,000) (2,200,000)
------------- -------------
4,450,002 5,750,002
============= =============
See Notes to Financial Statements Page 55
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 --------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 43.48 $ 42.80 $ 36.35 $ 26.10 $ 22.98 $ 23.74
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.22 0.22 0.41 0.17 0.27 0.05
Net realized and unrealized gain (loss) (1.47) 0.73 6.49 10.25 3.14 (0.70)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (1.25) 0.95 6.90 10.42 3.41 (0.65)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.22) (0.27) (0.45) (0.17) (0.29) (0.11)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 42.01 $ 43.48 $ 42.80 $ 36.35 $ 26.10 $ 22.98
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) (2.88)% 2.22% 19.13% 39.95% 14.86% (2.77)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 369,655 $ 532,679 $ 577,828 $ 288,945 $ 84,815 $ 73,539
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.62%(b) 0.60% 0.61% 0.63% 0.68% 0.68%
Ratio of net expenses to average net
assets 0.60%(b) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.03%(b) 0.51% 1.10% 0.60% 1.01% 0.23%
Portfolio turnover rate (c) 12% 31% 27% 38% 34% 27%
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 --------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 42.64 $ 43.67 $ 35.43 $ 25.86 $ 24.14 $ 25.69
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.50 0.37 0.45 0.24 0.19 0.00 (d) (e)
Net realized and unrealized gain (loss) 0.75 (0.98) 8.32 9.59 1.74 (1.47)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.25 (0.61) 8.77 9.83 1.93 (1.47)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.50) (0.42) (0.53) (0.26) (0.21) (0.08)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 43.39 $ 42.64 $ 43.67 $ 35.43 $ 25.86 $ 24.14
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 2.93% (1.37)% 24.83% 38.12% 8.02% (5.75)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 258,159 $ 302,735 $ 366,869 $ 177,165 $ 106,008 $ 149,660
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.61%(b) 0.60% 0.61% 0.62% 0.65% 0.63%
Ratio of net expenses to average net
assets 0.60%(b) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 2.39%(b) 0.83% 1.32% 0.80% 0.63% (0.02)%
Portfolio turnover rate (c) 12% 23% 20% 33% 26% 21%
<FN>
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Annualized.
(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.
(d) Amount represents less than $0.01 per share.
(e) Per share amounts have been calculated using the average share method.
</FN>
Page 56 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 --------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 41.45 $ 39.73 $ 34.77 $ 24.70 $ 20.80 $ 21.10
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.06 0.13 0.32 0.10 0.31 0.06
Net realized and unrealized gain (loss) (2.57) 1.75 4.97 10.06 3.92 (0.28)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (2.51) 1.88 5.29 10.16 4.23 (0.22)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.06) (0.16) (0.33) (0.09) (0.33) (0.08)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 38.88 $ 41.45 $ 39.73 $ 34.77 $ 24.70 $ 20.80
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) (6.05)% 4.75% 15.35% 41.24% 20.31% (1.08)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 132,182 $ 184,447 $ 117,195 $ 90,396 $ 41,982 $ 30,157
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.65%(b) 0.63% 0.64% 0.67% 0.76% 0.78%
Ratio of net expenses to average net
assets 0.60%(b) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.31%(b) 0.33% 0.90% 0.38% 1.34% 0.31%
Portfolio turnover rate (c) 14% 39% 23% 33% 40% 37%
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 --------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 16.01 $ 17.23 $ 17.90 $ 9.48 $ 9.65 $ 16.42
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.10 0.11 0.13 0.07 0.13 (0.03)
Net realized and unrealized gain (loss) (1.67) (1.21) (0.66) 8.42 (0.18) (6.74)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (1.57) (1.10) (0.53) 8.49 (0.05) (6.77)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.09) (0.12) (0.14) (0.07) (0.12) --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 14.35 $ 16.01 $ 17.23 $ 17.90 $ 9.48 $ 9.65
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) (9.80)% (6.43)% (3.05)% 89.79% (0.50)% (41.23)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 59,550 $ 69,655 $ 89,616 $ 97,574 $ 13,740 $ 20,740
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.68%(b) 0.65% 0.64% 0.70% 0.98% 0.77%
Ratio of net expenses to average net
assets 0.60%(b) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.35%(b) 0.65% 0.61% 0.60% 1.19% (0.18)%
Portfolio turnover rate (c) 27% 35% 37% 49% 24% 22%
<FN>
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Annualized.
(c) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
</FN>
See Notes to Financial Statements Page 57
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST S&P REIT INDEX FUND (FRI)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 --------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 22.07 $ 22.24 $ 17.54 $ 17.75 $ 15.47 $ 14.65
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.45 0.55 0.41 0.52 0.38 0.28
Net realized and unrealized gain (loss) 2.40 (0.13) 4.75 (0.19) 2.30 0.88
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.85 0.42 5.16 0.33 2.68 1.16
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.27) (0.59) (0.46) (0.54) (0.37) (0.34)
Net realized gain -- -- -- -- (0.03) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.27) (0.59) (0.46) (0.54) (0.40) (0.34)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 24.65 $ 22.07 $ 22.24 $ 17.54 $ 17.75 $ 15.47
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 12.96% 1.97% 29.61% 1.82% 17.39% 7.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 322,940 $ 226,250 $ 339,130 $ 148,210 $ 402,888 $ 324,961
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.49%(b) 0.48% 0.50% 0.50% 0.50% 0.57%
Ratio of net expenses to average net
assets 0.49%(b) 0.48% 0.50% 0.50% 0.50% 0.50%
Ratio of net investment income (loss) to
average net assets 4.35%(b) 2.30% 2.35% 2.31% 2.15% 2.03%
Portfolio turnover rate (c) 3% 8% 11% 11% 8% 9%
FIRST TRUST ISE WATER INDEX FUND (FIW)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 --------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 30.13 $ 33.65 $ 33.79 $ 25.99 $ 20.71 $ 22.13
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.11 0.23 0.25 0.21 0.23 0.16
Net realized and unrealized gain (loss) 5.12 (3.52) (0.14) 7.80 5.30 (1.39)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 5.23 (3.29) 0.11 8.01 5.53 (1.23)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.11) (0.23) (0.25) (0.21) (0.25) (0.19)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 35.25 $ 30.13 $ 33.65 $ 33.79 $ 25.99 $ 20.71
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 17.39% (9.81)% 0.36% 30.91% 26.83% (5.62)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 126,908 $ 102,432 $ 198,550 $ 197,643 $ 72,769 $ 57,986
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.58%(b) 0.57% 0.59% 0.60% 0.63% 0.64%
Ratio of net expenses to average net
assets 0.58%(b) 0.57% 0.59% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.70%(b) 0.70% 0.75% 0.75% 1.02% 0.79%
Portfolio turnover rate (c) 20% 17% 24% 45% 31% 31%
<FN>
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Annualized.
(c) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
</FN>
Page 58 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (FCG)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 --------------------------------------------------------------------
(UNAUDITED) 2015 (a) 2014 (a) 2013 (a) 2012 (a) 2011 (a)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 22.30 $ 56.10 $ 97.65 $ 78.35 $ 90.95 $ 98.00
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.12 1.00 0.70 0.35 0.35 0.40
Net realized and unrealized gain (loss) 2.29 (33.75) (41.50) 19.30 (12.60) (7.05)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.41 (32.75) (40.80) 19.65 (12.25) (6.65)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.34) (1.05) (0.75) (0.35) (0.35) (0.40)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 24.37 $ 22.30 $ 56.10 $ 97.65 $ 78.35 $ 90.95
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 10.91% (59.10)% (42.02)% 25.13% (13.51)% (6.85)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 219,255 $ 153,042 $ 246,946 $ 464,795 $ 387,899 $ 346,556
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.64%(c) 0.62% 0.61% 0.60% 0.63% 0.63%
Ratio of net expenses to average net
assets 0.60%(c) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.31%(c) 2.44% 0.74% 0.40% 0.40% 0.39%
Portfolio turnover rate (d) 83% 67% 42% 49% 41% 43%
FIRST TRUST ISE CHINDIA INDEX FUND (FNI)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 --------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 28.36 $ 28.63 $ 28.22 $ 20.97 $ 18.23 $ 25.01
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.17 0.15 0.20 0.20 0.35 0.27
Net realized and unrealized gain (loss) (1.20) (0.24) 0.48 7.26 2.74 (6.75)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (1.03) (0.09) 0.68 7.46 3.09 (6.48)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.13) (0.18) (0.27) (0.21) (0.35) (0.30)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 27.20 $ 28.36 $ 28.63 $ 28.22 $ 20.97 $ 18.23
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) (3.64)% (0.32)% 2.37% 35.81% 17.11% (26.02)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 167,253 $ 221,188 $ 111,663 $ 71,962 $ 66,066 $ 79,287
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.61%(c) 0.62% 0.65% 0.66% 0.73% 0.66%
Ratio of net expenses to average net
assets 0.60%(c) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.24%(c) 0.64% 0.54% 0.79% 1.60% 1.00%
Portfolio turnover rate (d) 30% 68% 40% 40% 29% 23%
<FN>
(a) All per share amounts and net asset values have been adjusted to reflect
the impact of the 1-for-5 reverse share split on May 2, 2016. The net
asset values reported on December 31, 2015, 2014, 2013, 2012 and 2011
prior to the reverse share split restatement were $4.46, $11.22, $19.53,
$15.67 and $18.19, respectively.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(c) 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.
</FN>
See Notes to Financial Statements Page 59
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 --------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 38.94 $ 36.61 $ 36.11 $ 25.56 $ 22.97 $ 24.95
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.32 0.56 0.47 0.37 0.48 0.37
Net realized and unrealized gain (loss) (0.99) 2.31 0.50 10.55 2.62 (1.98)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (0.67) 2.87 0.97 10.92 3.10 (1.61)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.29) (0.54) (0.47) (0.37) (0.51) (0.37)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 37.98 $ 38.94 $ 36.61 $ 36.11 $ 25.56 $ 22.97
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) (1.70)% 7.88% 2.72% 42.89% 13.52% (6.48)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 168,996 $ 223,902 $ 109,818 $ 52,362 $ 8,945 $ 12,634
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.64%(b) 0.62% 0.64% 0.76% 1.04% 0.96%
Ratio of net expenses to average net
assets 0.60%(b) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.63%(b) 1.52% 1.41% 1.38% 1.90% 1.62%
Portfolio turnover rate (c) 6% 19% 26% 29% 17% 29%
<FN>
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Annualized.
(c) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
</FN>
Page 60 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on August 8,
2003, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of nineteen exchange-traded funds. This report
covers the nine funds listed below:
First Trust NASDAQ-100 Equal Weighted Index Fund - (The Nasdaq Stock
Market LLC ("Nasdaq") ticker "QQEW")
First Trust NASDAQ-100-Technology Sector Index Fund - (Nasdaq ticker
"QTEC")
First Trust NASDAQ-100 Ex-Technology Sector Index Fund - (Nasdaq
ticker "QQXT")
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund - (Nasdaq
ticker "QCLN")
First Trust S&P REIT Index Fund - (NYSE Arca, Inc. ("NYSE Arca") ticker
"FRI")
First Trust ISE Water Index Fund - (NYSE Arca ticker "FIW")
First Trust ISE-Revere Natural Gas Index Fund - (NYSE Arca ticker "FCG")
First Trust ISE Chindia Index Fund - (NYSE Arca ticker "FNI")
First Trust NASDAQ(R) ABA Community Bank Index Fund - (Nasdaq ticker
"QABA")
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual
funds, each Fund issues and redeems shares on a continuous basis, at net asset
value ("NAV"), only in large specified blocks consisting of 50,000 shares called
a "Creation Unit." Creation Units are issued and redeemed principally in-kind
for securities included in a Fund's relevant index. Except when aggregated in
Creation Units, each Fund's shares are not redeemable securities. The investment
objective of each Fund is to seek investment results that correspond generally
to the price and yield (before the Fund's fees and expenses) of the following
indices:
FUND INDEX
First Trust NASDAQ-100 Equal Weighted Index Fund NASDAQ-100 Equal Weighted Index(SM)
First Trust NASDAQ-100-Technology Sector Index Fund NASDAQ-100 Technology Sector Index(SM)
First Trust NASDAQ-100 Ex-Technology Sector Index Fund NASDAQ-100 Ex-Tech Sector Index(SM)
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund NASDAQ(R) Clean Edge(R) Green Energy Index(SM)
First Trust S&P REIT Index Fund S&P United States REIT Index
First Trust ISE Water Index Fund ISE Water(TM) Index
First Trust ISE-Revere Natural Gas Index Fund ISE-Revere Natural Gas(TM) Index
First Trust ISE Chindia Index Fund ISE ChIndia(TM) Index
First Trust NASDAQ(R) ABA Community Bank Index Fund NASDAQ OMX(R) ABA Community Bank Index(SM)
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds, each of which is an investment company within the scope of Financial
Accounting Standards Board ("FASB") Accounting Standards Update 2013-08, follow
accounting and reporting guidance under FASB Accounting Standards Codification
Topic 946, "Financial Services-Investment Companies." The following is a summary
of significant accounting policies consistently followed by the Funds in the
preparation of the financial statements. The preparation of the financial
statements in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP") requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using the data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
Page 61
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with the 1940 Act. Investments valued by the
Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to
the Portfolio of Investments. Each Fund's investments are valued as follows:
Common stocks, real estate investment trusts ("REITs") and other equity
securities listed on any national or foreign exchange (excluding Nasdaq
and the London Stock Exchange Alternative Investment Market ("AIM")) are
valued at the last sale price on the exchange on which they are
principally traded or, for Nasdaq and AIM securities, the official closing
price. Securities traded on more than one securities exchange are valued
at the last sale price or official closing price, as applicable, at the
close of the securities exchange representing the principal market for
such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Overnight repurchase agreements are valued at amortized cost when it
represents the best estimate of fair value.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a pricing service is unable to provide a market
price; securities whose trading has been formally suspended; a security whose
market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the pricing service, does not reflect the security's fair value. As a general
principle, the current fair value of a security would appear to be the amount
which the owner might reasonably expect to receive for the security upon its
current sale. When fair value prices are used, generally they will differ from
market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
In addition, differences between the prices used to calculate a Fund's NAV and
the prices used by such Fund's corresponding index could result in a difference
between a Fund's performance and the performance of its underlying index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
Page 62
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
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 June 30, 2016, is
included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Distributions received from a Fund's investments in master limited partnerships
("MLPs") generally are comprised of return of capital and investment income. A
Fund records estimated return of capital and investment income based on
historical information available from each MLP. These estimates may subsequently
be revised based on information received from the MLPs after their tax reporting
periods are concluded.
Distributions received from a Fund's investments in REITs may be comprised of
return of capital, capital gains and income. The actual character of the amounts
received during the year is not known until after the REITs' fiscal year end. A
Fund records the character of distributions received from the REITs during the
year based on estimates available. The characterization of distributions
received by a Fund may be subsequently revised based on information received
from the REITs after their tax reporting periods conclude.
C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES
Offsetting Assets and Liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset on the
Statements of Assets and Liabilities, and disclose instruments and transactions
subject to master netting or similar agreements. These disclosure requirements
are intended to help investors and other financial statement users better assess
the effect or potential effect of offsetting arrangements on a fund's financial
position. The transactions subject to offsetting disclosures are derivative
instruments, repurchase agreements and reverse repurchase agreements, and
securities borrowing and securities lending transactions.
This disclosure, if applicable, is included within each Fund's Portfolio of
Investments under the heading "Offsetting Assets and Liabilities". For financial
reporting purposes, the Funds do not offset financial assets and financial
liabilities that are subject to master netting arrangements ("MNAs") or similar
agreements on the Statements of Assets and Liabilities. MNAs provide the right,
in the event of default (including bankruptcy and insolvency), for the
non-defaulting counterparty to liquidate the collateral and calculate the net
exposure to the defaulting party or request additional collateral.
D. SECURITIES LENDING
The Funds may lend securities representing up to 33 1/3% of the value of their
total assets to broker-dealers, banks and other institutions to generate
additional income. When a Fund loans its portfolio securities, it will receive,
at the inception of each loan, collateral equal to at least 102% (for domestic
securities) or 105% (for international securities) of the market value of the
loaned securities. The collateral amount is valued at the beginning of each
business day and is compared to the market value of the loaned securities from
the prior business day to determine if additional collateral is required. If
additional collateral is required, a request is sent to the borrower. Securities
lending involves the risk that the Fund may lose money because the borrower of
the Fund's loaned securities fails to return the securities in a timely manner
or at all. The Fund could also lose money in the event of (i) a decline in the
value of the collateral provided for the loaned securities, (ii) a decline in
the value of any investments made with cash collateral or (iii) an increase in
the value of the loaned securities if the borrower does not increase the
collateral accordingly and the borrower fails to return the securities. These
events could also trigger adverse tax consequences for the Funds.
Under the Funds' Securities Lending Agency Agreement, the securities lending
agent will generally bear the risk that a borrower may default on its obligation
to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the
Funds' securities lending agent and is responsible for executing the lending of
the portfolio securities to creditworthy borrowers. The Funds, however, will be
responsible for the risks associated with the investment of cash collateral. A
Fund may lose money on its investment of cash collateral, which may affect its
ability to repay the collateral to the borrower without the use of other Fund
assets. Each Fund that engages in securities lending receives compensation (net
of any rebate and securities lending agent fees) for lending its securities.
Compensation can be in the form of fees received from the securities lending
agent or dividends or interest earned from the investment of cash collateral.
The dividend and interest earned on the securities loaned is accounted for in
the same manner as other dividend and interest income. At June 30, 2016, QQEW,
QQXT, QCLN, FIW, FCG, FNI and QABA have securities in the securities lending
program.
Page 63
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
In the event of a default by a borrower with respect to any loan, BBH will
exercise any and all remedies provided under the applicable borrower agreement
to make the Funds whole. These remedies include purchasing replacement
securities by applying the collateral held from the defaulting broker against
the purchase cost of the replacement securities. If, despite such efforts by BBH
to exercise these remedies, a Fund sustains losses as a result of a borrower's
default, BBH will indemnify the Fund by purchasing replacement securities at its
own expense, or paying the Fund an amount equal to the market value of the
replacement securities, subject to certain limitations which are set forth in
detail in the Securities Lending Agency Agreement between the Trust on behalf of
the Funds and BBH.
E. REPURCHASE AGREEMENTS
Repurchase agreements involve the purchase of securities subject to the seller's
agreement to repurchase the securities at a mutually agreed upon date and price,
under the terms of a Master Repurchase Agreement ("MRA"). During the term of a
repurchase agreement, the value of the underlying securities held as collateral
on behalf of a Fund, including accrued interest, is required to exceed the value
of the repurchase agreement, including accrued interest. The underlying
securities for all repurchase agreements are held at the Funds' custodian or
designated sub-custodians under tri-party repurchase agreements.
MRAs govern transactions between a Fund and select counterparties. The MRAs
contain provisions for, among other things, initiation, income payments, events
of default, and maintenance of collateral for repurchase agreements.
Repurchase agreements received for lending securities are collateralized by U.S.
Treasury Notes. The U.S. Treasury Notes are held in a joint custody account at
BBH on behalf of the Funds participating in the securities lending program. In
the event the counterparty defaults on the repurchase agreement, the U.S.
Treasury Notes can either be maintained as part of a Fund's portfolio or sold
for cash. A Fund could suffer a loss to the extent that the proceeds from the
sale of the underlying collateral held by the Fund is less than the repurchase
price and the Fund's costs associated with the delay and enforcement of the MRA.
While the Funds may invest in repurchase agreements, any repurchase agreements
held by the Funds during the six months ended June 30, 2016, were received as
collateral for lending securities.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually. Distributions from income and capital gains are determined in
accordance with income tax regulations, which may differ from U.S. GAAP. Certain
capital accounts in the financial statements are periodically adjusted for
permanent differences in order to reflect their tax character. These permanent
differences are primarily due to the varying treatment of income and gain/loss
on significantly modified portfolio securities held by the Funds and have no
impact on net assets or NAV per share. Temporary differences, which arise from
recognizing certain items of income, expense and gain/loss in different periods
for financial statement and tax purposes, will reverse at some time in the
future.
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2015 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ---------------- ----------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ 3,678,500 $ -- $ --
First Trust NASDAQ-100-Technology Sector Index Fund 3,154,776 -- --
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 636,390 -- --
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 527,840 -- --
First Trust S&P REIT Index Fund 6,276,431 -- --
First Trust ISE Water Index Fund 1,094,946 -- --
First Trust ISE-Revere Natural Gas Index Fund 5,545,080 -- --
First Trust ISE Chindia Index Fund 1,676,190 -- --
First Trust NASDAQ(R) ABA Community Bank Index Fund 1,652,931 -- --
Page 64
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
As of December 31, 2015, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ ---------------- ----------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ -- $ (19,936,392) $ 12,270,015
First Trust NASDAQ-100-Technology Sector Index Fund -- (19,112,273) 16,931,398
First Trust NASDAQ-100 Ex-Technology Sector Index Fund -- (5,117,833) 17,593,047
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 12,316 (38,540,783) (11,503,234)
First Trust S&P REIT Index Fund -- -- (7,240,737)
First Trust ISE Water Index Fund 7,659 (12,224,967) (9,503,565)
First Trust ISE-Revere Natural Gas Index Fund -- (373,003,580) (190,791,472)
First Trust ISE Chindia Index Fund 22,787 (67,469,120) (15,842,887)
First Trust NASDAQ(R) ABA Community Bank Index Fund 112,770 (1,301,315) (6,042,506)
G. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ending 2012, 2013,
2014 and 2015 remain open to federal and state audit. As of June 30, 2016,
management has evaluated the application of these standards to the Funds, and
has determined that no provision for income tax is required in the Funds'
financial statements for uncertain tax positions.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses arising in taxable years after December 22, 2010, may be
carried forward indefinitely, and their character is retained as short-term
and/or long-term losses. Previously, net capital losses were carried forward for
up to eight years and treated as short-term losses. As a transition rule, the
Act requires that post-enactment net capital losses be used before pre-enactment
net capital losses. At December 31, 2015, the Funds, except for First Trust S&P
REIT Index Fund, had pre-enactment and post-enactment net capital losses for
federal income tax purposes as shown in the following table. To the extent that
these loss carryforwards are used to offset future capital gains, it is probable
that the capital gains so offset will not be distributed to Fund shareholders.
The Funds are subject to certain limitations, under U.S. tax rules, on the use
of capital loss carryforwards and net unrealized built-in losses. These
limitations apply when there has been a 50% change in ownership.
Capital Capital Capital
Loss Loss Loss Post- Total
Available Available Available Enactment - Capital
Through Through Through No Loss
2016 2017 2018 Expiration Available
---------- ----------- ----------- ----------- -----------
First Trust NASDAQ-100 Equal Weighted Index Fund $1,957,170 $ 4,681,103 $ -- $13,298,119 $19,936,392
First Trust NASDAQ-100-Technology Sector Index Fund 1,421,664 2,016,911 -- 15,673,698 19,112,273
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 143,597 1,051,894 80,899 3,841,443 5,117,833
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 4,246,707 7,483,633 5,884,801 20,925,642 38,540,783
First Trust ISE Water Index Fund 318,246 5,768,328 2,198,674 3,939,719 12,224,967
First Trust ISE-Revere Natural Gas Index Fund 7,264,703 32,569,413 40,089,981 293,079,483 373,003,580
First Trust ISE Chindia Index Fund 11,116,593 11,686,955 7,245,147 37,420,425 67,469,120
First Trust NASDAQ(R) ABA Community Bank Index Fund -- 4,787 116,604 1,179,924 1,301,315
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
H. EXPENSES
Expenses that are directly related to one of the Funds are charged directly to
the respective Fund. General expenses of the Trust are allocated to all the
Funds based upon the net assets of each Fund.
First Trust has entered into licensing agreements with each of the following
"Licensors" for the respective Funds:
FUND LICENSOR
First Trust NASDAQ-100 Equal Weighted Index Fund ` The Nasdaq Stock Market LLC
First Trust NASDAQ-100-Technology Sector Index Fund The Nasdaq Stock Market LLC
First Trust NASDAQ-100 Ex-Technology Sector Index Fund The Nasdaq Stock Market LLC
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund The Nasdaq Stock Market LLC /Clean Edge(R), Inc.
First Trust S&P REIT Index Fund S&P Dow Jones Indices LLC
First Trust ISE Water Index Fund International Securities Exchange, LLC
First Trust ISE-Revere Natural Gas Index Fund International Securities Exchange, LLC
First Trust ISE Chindia Index Fund International Securities Exchange, LLC
First Trust NASDAQ(R)ABA Community Bank Index Fund The Nasdaq Stock Market LLC
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The respective Funds are
required to pay licensing fees, which are shown on the Statements of Operations.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
For these services, First Trust is entitled to receive monthly fees from each
Fund calculated at the following annual rates:
% of Average
Daily Net Assets
----------------
First Trust NASDAQ-100 Equal Weighted Index Fund 0.40%
First Trust NASDAQ-100-Technology Sector Index Fund 0.40%
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 0.40%
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 0.40%
First Trust S&P REIT Index Fund 0.30%
First Trust ISE Water Index Fund 0.40%
First Trust ISE-Revere Natural Gas Index Fund 0.40%
First Trust ISE Chindia Index Fund 0.40%
First Trust NASDAQ(R)ABA Community Bank Index Fund 0.40%
The Trust and the Advisor have entered into an Expense Reimbursement, Fee Waiver
and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to
waive fees and/or reimburse Fund expenses to the extent that the operating
expenses of each Fund (excluding interest expense, brokerage commissions and
other trading expenses, acquired fund fees and expenses, taxes and extraordinary
expenses) exceed the below amount as a percentage of average daily net assets
per year (the "Expense Cap"). The Expense Cap will be in effect until at least
April 30, 2018.
Expense Cap
----------------
First Trust NASDAQ-100 Equal Weighted Index Fund 0.60%
First Trust NASDAQ-100-Technology Sector Index Fund 0.60%
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 0.60%
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 0.60%
First Trust S&P REIT Index Fund 0.50%
First Trust ISE Water Index Fund 0.60%
First Trust ISE-Revere Natural Gas Index Fund 0.60%
First Trust ISE Chindia Index Fund 0.60%
First Trust NASDAQ(R)ABA Community Bank Index Fund 0.60%
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee was waived or expense was incurred, but no reimbursement payment will be
made by a Fund if it results in the Fund exceeding an expense ratio equal to the
Expense Cap in place at the time the expenses were reimbursed or fees were
waived by First Trust. These amounts would be included in "Expenses previously
waived or reimbursed" on the Statements of Operations.
The advisory fee waivers and expense reimbursements for the six months ended
June 30, 2016 and fees waived or expenses borne by First Trust subject to
recovery from the applicable Fund for the periods indicated were as follows:
Fees Waived or Expenses Borne
by First Trust Subject to Recovery
------------------------------------------------------------
Advisory Year Year Year Six Months
Fee Expense Ended Ended Ended Ended
Waivers Reimbursement 12/31/2013 12/31/2014 12/31/2015 6/30/2016 Total
--------- ------------- ---------- ---------- ---------- --------- ---------
First Trust NASDAQ-100 Equal
Weighted Index Fund $ 34,650 $ -- $ 32,037 $ 41,566 $ -- $ 34,650 $ 108,253
First Trust NASDAQ-100-
Technology Sector Index Fund 12,205 -- 8,521 33,593 10,215 12,205 64,534
First Trust NASDAQ-100 Ex-
Technology Sector Index Fund 34,939 -- 23,612 40,262 38,410 34,939 137,223
First Trust NASDAQ(R) Clean
Edge(R) Green Energy Index Fund 23,942 -- 28,004 50,372 38,617 23,942 140,935
First Trust S&P REIT Index Fund -- -- -- -- -- -- --
First Trust ISE Water Index Fund -- -- -- -- -- -- --
First Trust ISE-Revere Natural
Gas Index Fund 40,088 -- -- 42,386 37,153 40,088 119,627
First Trust ISE Chindia Index Fund 10,515 -- 34,354 33,734 38,142 10,515 116,745
First Trust NASDAQ(R) ABA
Community Bank Index Fund 32,902 -- 21,657 37,176 22,638 32,902 114,373
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
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. REVERSE SHARE SPLIT
On April 22, 2016, the Trust's Board of Trustees approved a one-for-five reverse
share split, whereby every five outstanding shares of the First Trust ISE-Revere
Natural Gas Fund ("FCG") as of the close of business on April 29, 2016
automatically converted to one share as of the opening of business on May 2,
2016. In addition, at the opening of business on May 2, 2016, FCG's shares no
longer traded under the CUSIP number 33734J102, and instead began trading under
the new CUSIP number 33733E807.
For the year ended December 31, 2015, all share transactions on the Statements
of Changes in Net Assets, and all prior years' per share data on the Financial
Highlights have been adjusted to reflect the reverse share split. For the six
months ended June 30, 2016, the share transactions on the Statements of Changes
in Net Assets reflect the actual transactions, including the impact of the
reverse share split. As a result of the reverse share split, fractional shares
totaling 1,635 shares were redeemed and paid out to shareholders. The reverse
share split had no impact on the overall value of a shareholder's investment in
FCG.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
5. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2016, the cost of purchases and proceeds from
sales of investments for each Fund, excluding short-term investments and in-kind
transactions, were as follows:
Purchases Sales
--------------- ---------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ 47,796,789 $ 47,614,651
First Trust NASDAQ-100-Technology Sector Index Fund 32,018,369 32,237,160
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 21,211,998 21,049,447
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 17,178,411 17,125,896
First Trust S&P REIT Index Fund 10,188,972 7,316,485
First Trust ISE Water Index Fund 23,441,774 23,454,397
First Trust ISE-Revere Natural Gas Index Fund 156,516,117 155,173,749
First Trust ISE Chindia Index Fund 55,639,770 57,331,150
First Trust NASDAQ(R) ABA Community Bank Index Fund 11,177,558 11,125,194
For the six months ended June 30, 2016, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
--------------- ---------------
First Trust NASDAQ-100 Equal Weighted Index Fund $ 16,734,782 $ 153,878,485
First Trust NASDAQ-100-Technology Sector Index Fund 26,299,092 72,515,603
First Trust NASDAQ-100 Ex-Technology Sector Index Fund 22,701,705 62,547,952
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 2,136,171 4,950,448
First Trust S&P REIT Index Fund 82,035,489 15,078,757
First Trust ISE Water Index Fund 31,582,356 24,157,115
First Trust ISE-Revere Natural Gas Index Fund 289,559,131 255,689,725
First Trust ISE Chindia Index Fund 2,724,674 44,360,976
First Trust NASDAQ(R) ABA Community Bank Index Fund 9,875,637 55,371,629
6. CREATION, REDEMPTION AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Such transactions are generally permitted on an
in-kind basis, with a balancing cash component to equate the transaction to the
daily NAV per Share of each Fund on the transaction date times the number of
Shares in a Creation Unit. Authorized Participants purchasing Creation Units
must pay to BNYM, as transfer agent, a standard creation transaction fee (the
"Creation Transaction Fee"), which is based on the number of different
securities in a Creation Unit of each Fund according to the fee schedule set
forth below:
Number of Securities Creation
in a Creation Unit Transaction Fee
-------------------- ---------------
101-499 $1,000
500 or more $1,500
The Creation Transaction Fee is applicable to each purchase transaction
regardless of the number of Creation Units purchased in the transaction. An
additional variable fee of up to three times the Creation Transaction Fee may be
charged to approximate additional expenses incurred by a Fund with respect to
transactions effected outside of the clearing process (i.e., through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. The price for each Creation Unit will equal the daily
NAV per Share of a Fund on the transaction date times the number of Shares in a
Creation Unit plus the fees described above and, if applicable, any transfer
taxes.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a standard redemption transaction fee (the "Redemption Transaction Fee"),
which is based on the number of different securities in a Creation Unit of each
Fund according to the fee schedule set forth below:
Number of Securities Redemption
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
The Redemption Transaction Fee is applicable to each redemption transaction
regardless of the number of Creation Units redeemed in the transaction. An
additional variable fee of up to three times the Redemption Transaction Fee may
be charged to approximate additional expenses incurred by a Fund with respect to
redemptions effected outside of the clearing process or to the extent that
redemptions are for cash. Each Fund reserves the right to effect redemptions in
cash. A shareholder may request cash redemption in lieu of securities; however,
a Fund may, in its discretion, reject any such request.
7. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before June 30, 2017.
8. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Funds' website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files its complete schedule of each Fund's portfolio holdings with the
SEC for the first and third quarters of each fiscal year on Form N-Q. The
Trust's Form N-Qs are available (1) by calling (800) 988-5891; (2) on the Funds'
website located at http://www.ftportfolios.com; (3) on the SEC's website at
http://www.sec.gov; and (4) for review and copying at the SEC's Public Reference
Room ("PRR") in Washington, DC. Information regarding the operation of the PRR
may be obtained by calling (800) SEC-0330.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. YOU SHOULD CONSIDER EACH FUND'S INVESTMENT
OBJECTIVE, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. YOU CAN
DOWNLOAD EACH FUND'S PROSPECTUS AT HTTP://WWW.FTPORTFOLIOS.COM OR CONTACT FIRST
TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS
THIS AND OTHER INFORMATION ABOUT EACH FUND. FOR ADDITIONAL INFORMATION ABOUT THE
RISKS ASSOCIATED WITH INVESTING IN THE FUNDS, PLEASE SEE THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION, AS WELL AS OTHER REGULATORY FILINGS. READ THESE
DOCUMENTS CAREFULLY BEFORE YOU INVEST. FIRST TRUST PORTFOLIOS L.P. IS THE
DISTRIBUTOR OF THE FIRST TRUST EXCHANGE-TRADED FUND.
The following summarizes some of the risks that should be considered for the
Funds.
Each Fund's shares will change in value, and you could lose money by investing
in a Fund. Shares are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates and perceived trends in stock prices. Overall stock values could decline
generally or could underperform other investments. Overall stock market values
could decline generally or could underperform other investments.
An investment in a Fund involves risks similar to those of investing in any fund
of equity securities traded on an exchange. Investors buying or selling Fund
shares on the secondary market may incur brokerage commissions. In addition,
investors who sell Fund shares may receive less than the Fund shares' net asset
value. Unlike shares of open-end funds, investors are generally not able to
purchase exchange-traded fund ("ETF") shares directly from a Fund and individual
ETF shares are not redeemable. However, specified large blocks of ETF shares
called creation units can be purchased from, or redeemed to, a Fund.
Each Fund is subject to index tracking risk. You should anticipate that the
value of Fund shares will decline, more or less, in correlation with any decline
in the value of the index that the Fund seeks to track.
Each Fund's return may not match the return of the index it seeks to track for a
number of reasons. While First Trust seeks to have a correlation of 0.95 or
better, before expenses, between a Fund's performance and the performance of its
corresponding index, there can be no assurance that a Fund will be able to
achieve such a correlation. Accordingly, each Fund's performance may correlate
to a lesser extent and may possibly vary substantially from the performance of
its corresponding index.
Each Fund is also exposed to additional market risk due to a policy of investing
principally in the securities included in its corresponding index. As a result
of such policies, securities held by each Fund will generally not be bought or
sold in response to market fluctuations and the securities may be issued by
companies concentrated in a particular industry. As a result, each Fund will
generally not sell a stock because the stock's issuer is in financial trouble,
unless that stock is removed or is anticipated to be removed from the index the
Fund seeks to track.
Each Fund relies on a license from an index provider that permits the Fund to
use its corresponding index and associated trade names and trademarks in
connection with the name and investment strategies of the Fund. Such licenses
may be terminated by the respective index provider and, as a result, each Fund
may lose its ability to use such intellectual property. There is also no
guarantee that the index provider has all rights to license the respective
intellectual property to First Trust, on behalf of the Fund. Accordingly, in the
event the license is terminated or the index provider does not have rights to
license the particular intellectual property, it may have a significant effect
on the operation of the related Fund.
Each Fund is subject to issuer specific changes risk. The value of an individual
security or a particular type of security can be more volatile than the market
as a whole and can perform differently from the value of the market as a whole.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
Each Fund will be concentrated in the securities of companies of a given
industry if the Fund's corresponding index is concentrated in such industry. A
concentration makes a Fund more susceptible to any single occurrence affecting
the related industry and may subject a Fund to greater market risk than less
concentrated funds.
Each Fund is considered to be non-diversified. As a result, those Funds are
exposed to additional market risk. A non-diversified fund may invest a
relatively high percentage of its assets in a limited number of issuers. As a
result, changes in the market value of a single portfolio security could cause
greater fluctuations in share price than would occur in a diversified fund.
Furthermore, non-diversified funds are more susceptible to any single political,
regulatory or economic occurrence.
The Funds are not actively managed. The Funds may be affected by a general
decline in certain market segments relating to their corresponding index. The
Funds invest in securities included in or representative of their corresponding
index regardless of their investment merit. The Funds generally will not attempt
to take defensive positions in declining markets.
The First Trust NASDAQ-100 Equal Weighted Index Fund and the First Trust
NASDAQ-100-Technology Sector Index Fund invest in stocks of companies in the
technology sector. You should be aware that an investment in a portfolio which
invests in a particular sector involves additional risks, including limited
diversification. The companies engaged in the technology sector are subject to
fierce competition and high research and development costs, and their products
and services may be subject to rapid obsolescence.
First Trust S&P REIT Index Fund and First Trust NASDAQ(R) ABA Community Bank
Index Fund invest in securities of companies in the financials sector. Banks,
thrifts and their holding companies are especially subject to the adverse
effects of economic recession; volatile interest rates; portfolio concentrations
in geographic markets and in commercial and residential real estate loans; and
competition from new entrants in their fields of business. Although recently
enacted legislation repealed most of the barriers which separated the banking,
insurance and securities industries, these industries are still extensively
regulated at both the federal and state level and may be adversely affected by
increased regulations. The downturn in the U.S. and world economies has
adversely affected banks, thrifts and other companies in the financials sector.
The First Trust ISE Chindia Index Fund, the First Trust NASDAQ-100 Equal
Weighted Index Fund, the First Trust NASDAQ-100-Technology Sector Index Fund and
the First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund invest in
securities of companies in the information technology industry. Information
technology companies are generally subject to the risks of rapidly changing
technologies; short product life cycles; fierce competition; and aggressive
pricing and reduced profit margins.
The First Trust NASDAQ-100 Ex-Technology Sector Index Fund and First Trust
NASDAQ-100 Equal Weighted Index Fund invest in the securities of companies in
the consumer discretionary sector. Because companies in the consumer
discretionary sector manufacture products and provide discretionary services
directly to the consumer, the success of these companies is tied closely to the
performance of the overall domestic and international economy, interest rates,
competition and consumer confidence. Success depends heavily on disposable
household income and consumer spending. Changes in demographics and consumer
tastes can also affect the demand for, and success of, consumer discretionary
products in the marketplace.
The First Trust ISE-Revere Natural Gas Index Fund invests in the securities of
companies in the energy sector. General problems of issuers in the energy sector
include volatile fluctuations in price and supply of energy fuels, international
politics, terrorist attacks, reduced demand as a result of increases in energy
efficiency and energy conservation, the success of exploration projects,
clean-up and litigation costs relating to oil spills and environmental damage,
and tax and other regulatory policies of various governments. In addition,
recent oil prices have been at historic highs and extremely volatile.
The First Trust ISE Water Index Fund and the First Trust NASDAQ(R) Clean Edge(R)
Green Energy Index Fund invest in the securities of companies in the industrials
sector. General risks of these companies include the general state of the
economy, intense competition, consolidation, domestic and international
politics, excess capacity and consumer demand and spending trends. In addition,
they may also be significantly affected by overall capital spending levels,
economic cycles, technical obsolescence, delays in modernization, labor
relations, government regulations and e-commerce initiatives.
The First Trust S&P REIT Index Fund invests in companies in the real estate
industry, including real estate investment trusts ("REITs") and is subject to
the risks associated with investing in real estate (any of which could cause the
value of a REIT's stock price to decline), which may include, but are not
limited to, possible declines in the value of real estate, adverse general and
local economic conditions, possible lack of availability of mortgage funds,
overbuilding in a REIT's market, changes in interest rates and environmental
problems. Furthermore, increases in interest rates typically lower the present
value of a REIT's future earnings stream, and may make financing property
purchases and improvements more costly.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
The First Trust NASDAQ-100 Ex-Technology Sector Index Fund invests in the
securities of companies in the health care sector. Because companies in the
health care sector are involved in medical services or health care including
biotechnology research and production, drugs and pharmaceuticals and health care
facilities and services, general problems of these companies include extensive
competition, generic drug sales or the loss of patent protection, product
liability litigation and increased government regulations.
The First Trust ISE Water Index Fund invests in the securities of utilities
companies. Utilities companies are subject to the imposition of rate caps,
increased competition due to deregulation, the difficulty in obtaining an
adequate return on invested capital or in financing large construction projects,
the limitations on operations and increased costs and delays attributable to
environmental considerations, and the capital market's ability to absorb utility
debt. In addition, taxes, government regulation, international politics, price
and supply fluctuations, volatile interest rates and energy conservation may
cause difficulties for utilities. Utilities issuers have been experiencing
certain of these problems to varying degrees.
The Funds may invest in small capitalization and mid-capitalization companies.
Such companies' securities may be less liquid and may experience greater price
volatility than securities of larger, more established companies.
Because a Fund's corresponding index may include American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs") and/or stocks of non-U.S.
companies, the investments of certain Funds, including but not limited to, the
First Trust ISE Chindia Index Fund, the First Trust ISE-Revere Natural Gas Index
Fund and the First Trust ISE Water Index Fund involve risks of investing in
non-U.S. securities that are in addition to the risk associated with domestic
securities. Non-U.S. companies, in general, are not subject to the regulatory
requirements of U.S. companies and, as such, there may be less publicly
available information about these companies. Moreover, non-U.S. accounting,
auditing and financial reporting standards generally are different from those
applicable to U.S. companies. In addition, non-U.S. companies are exposed to
additional economic, political, social or diplomatic events. ADRs and ADSs also
involve substantially identical risks to those associated with investments in
non-U.S. securities. In addition, the issuers of certain depositary receipts,
particularly unsponsored or unregistered depositary receipts, are under no
obligation to distribute shareholder communications to the holders of such
receipts, or to pass through to them any voting rights with respect to the
deposited securities.
The First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund invests in
renewable and alternative energy companies. You should be aware that share
prices of renewable and alternative energy companies have been significantly
more volatile than shares of companies operating in other more established
industries and the securities included in the First Trust NASDAQ(R) Clean
Edge(R) Green Energy Index Fund may be subject to sharp price declines. This
industry is relatively nascent and under-researched in comparison to more
established and mature sectors, and should therefore be regarded as having
greater investment risk.
The First Trust ISE Water Index Fund invests in companies in the potable water
and wastewater industries. You should be aware that adverse developments in
these industries may significantly affect the value of the shares of the First
Trust ISE Water Index Fund. Companies involved in the potable water and
wastewater industries are subject to environmental considerations, taxes,
government regulation, price and supply fluctuations, competition and
conservation.
The First Trust ISE-Revere Natural Gas Index Fund invests in companies in the
natural gas industry. You should be aware that one of the natural gas industry's
primary risks is the competitive risk associated with the prices of alternative
fuels, such as coal and oil. Additionally, the natural gas industry is sensitive
to increased interest rates because of the industry's capital intensive nature.
Furthermore, there are additional risks and hazards that are inherent in the
natural gas industry that may cause the price of natural gas to widely
fluctuate.
The First Trust ISE Chindia Index Fund invests in the securities of Chinese and
Indian companies. You should be aware that investments in such companies are
subject to additional risks, which are associated with possible adverse
economic, political and social developments in those countries.
The First Trust NASDAQ(R) ABA Community Bank Index Fund is concentrated in the
securities of NASDAQ(R) listed community banks as defined by its corresponding
index which involves additional risks, including limited diversification. These
companies are subject to certain risks, including the adverse effects of
volatile interest rates, economic recession, increased competition from new
entrants in the field, and potential increased regulation. The financial
performance of these companies may also be highly dependent upon the business
environment in certain geographic regions of the United States and may be
adversely impacted by any downturn or unfavorable economic or employment
developments in their local markets and the United States as a whole. These
companies may also be subject to interest rate risks and changes in monetary
policy as their earnings are largely dependent upon their net interest income
and lending risks that could further increase because of increases in interest
rates and/or continuing economic weakness.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 72
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT
MANAGEMENT AGREEMENT
The Board of Trustees (the "Board") of the First Trust Exchange-Traded Fund (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" or "First Trust") on behalf of the following
nine series of the Trust (each a "Fund" and collectively, the "Funds"):
First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)
First Trust NASDAQ-100-Technology Sector Index Fund (QTEC)
First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT)
First Trust ISE Chindia Index Fund (FNI)
First Trust ISE Water Index Fund (FIW)
First Trust ISE-Revere Natural Gas Index Fund (FCG)
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)
First Trust S&P REIT Index Fund (FRI)
First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)
The Board approved the continuation of the Agreement for each Fund for a
one-year period ending June 30, 2017 at a meeting held on June 13, 2016. The
Board determined for each Fund that the continuation of the Agreement is in the
best interests of the Fund in light of the extent and quality of the services
provided and such other matters as the Board considered to be relevant in the
exercise of its reasonable 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 22, 2016 and June 13, 2016, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor responding to requests for information from counsel to 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 (substantially all of which were
exchange-traded funds ("ETFs")) compiled by Management Practice, Inc. ("MPI"),
an independent source (the "MPI Peer Group"), and as compared to fees charged to
other clients of the Advisor, including other ETFs managed by the Advisor;
expenses of each Fund as compared to expense ratios of the funds in the Fund's
MPI Peer Group; performance information for each Fund; the nature of expenses
incurred in providing services to each Fund and the potential for economies of
scale, if any; financial data on the Advisor; any fall-out benefits to the
Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information
on the Advisor's compliance program. The Board reviewed initial materials with
the Advisor at a special meeting held on April 22, 2016, prior to which the
Independent Trustees and their counsel met separately to discuss the information
provided by the Advisor. Following the April meeting, independent legal counsel
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 independent legal counsel held prior to the June 13, 2016 meeting,
as well as at the meeting held that day. 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 as well as
from the perspective of shareholders. 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.
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. The Board considered the background and
experience of the persons responsible for the day-to-day management of the
Funds. 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 and
policies. In addition, as part of the Board's consideration of the Advisor's
services, the Advisor, in its written materials and at the April 22, 2016
meeting, described to the Board the scope of its ongoing investment in
additional infrastructure and personnel 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 the Fund's investment objective and policies.
Page 73
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
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 April 30, 2018.
For each Fund, the Board noted that expenses borne or fees waived by the Advisor
are to be subject to reimbursement by the Fund for up to three years from the
date the expense was incurred or fee was waived, but no reimbursement payment
would be made by the Fund if it would result in the Fund exceeding an expense
ratio equal to the expense cap in place at the time the expenses were borne or
fees were waived by the Advisor. The Board received and reviewed information
showing the advisory or unitary fee rates and expense ratios of the peer funds
in the MPI Peer Groups, as well as advisory fee rates charged by the Advisor to
other fund (including ETFs) and non-fund clients, as applicable. Because each
Fund's MPI Peer Group (except for FIW) 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 ratios of QCLN, FIW and FNI were below the median total (net)
expense ratio of the peer funds in each Fund's respective MPI Peer Group and
that the total (net) expense ratios of FCG, QABA, FRI, QQEW, QTEC and QQXT were
above the median total (net) expense ratio of the peer funds in each Fund's
respective MPI Peer Group. With respect to the MPI Peer Groups, the Board
discussed with representatives of 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 clients, the Board considered differences between the Funds and
other clients that limited their comparability. 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 description of its long-term commitment to each Fund.
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, 2015 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 consistent with the Fund's prospectus. In addition,
the Board reviewed data prepared by MPI comparing each Fund's performance to its
respective MPI Peer Group and to a broad-based benchmark, 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.
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 expects its expenses to
increase over the next twelve months as the Advisor continues to make
investments in personnel and infrastructure. 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, 2015 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.
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 its
management of the Funds' portfolios.
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 the Trust and each Fund. No single
factor was determinative in the Board's analysis.
Page 74
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FIRST TRUST
First Trust Exchange-Traded Fund
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
101 Barclay Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund
Book 3
First Trust Total US Market AlphaDEX(R) ETF (TUSA)
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund (VIXH)
Semi-Annual Report
June 30, 2016
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016
Shareholder Letter.......................................................... 2
Market Overview............................................................. 3
Fund Performance Overview
First Trust Total US Market AlphaDEX(R) ETF (TUSA)....................... 4
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund (VIXH)............. 6
Notes to Fund Performance Overview.......................................... 8
Understanding Your Fund Expenses............................................ 9
Portfolio of Investments
First Trust Total US Market AlphaDEX(R) ETF (TUSA)....................... 10
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund (VIXH)............. 25
Statements of Assets and Liabilities........................................ 32
Statements of Operations.................................................... 33
Statements of Changes in Net Assets......................................... 34
Financial Highlights........................................................ 35
Notes to Financial Statements............................................... 36
Additional Information...................................................... 44
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (each such series is referred to as a "Fund" and collectively, as the
"Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund shares may therefore be less than what you paid
for them. Accordingly, you can lose money by investing in a Fund. See "Risk
Considerations" in the Additional Information Section of this report for a
discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns, net asset value and share price will fluctuate and Fund shares, when
sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at http://www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
each Fund. It includes details about each Fund's portfolio and presents data and
analysis that provide insight into each Fund's performance and investment
approach.
By reading the market overview by Robert F. Carey, Chief Market Strategist of
the Advisor, you may obtain an understanding of how the market environment
affected the performance of each Fund. The statistical information that follows
may help you understand each Fund's performance compared to that of relevant
market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in each
Fund are spelled out in its prospectus, statement of additional information,
this report and other Fund regulatory filings.
Page 1
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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
JUNE 30, 2016
Dear Shareholders:
Thank you for your investment in First Trust Exchange-Traded Fund (the "Trust").
First Trust Advisors L.P. ("First Trust") is pleased to provide you with this
semi-annual report which contains detailed information about your investment for
the six months ended June 30, 2016, including a market overview and the
financial reports for the period. We encourage you to read this report and
discuss it with your financial advisor.
While markets were up and down during 2015, we believe there are three important
things to remember. First, the U.S. economy grew, despite the massive decline in
oil prices. Second, the tapering that began in 2014 by the Federal Reserve (the
"Fed") did not stop growth in the U.S. economy. Finally, the long-anticipated
rate hike by the Fed in December had little effect on the money supply, and the
stock market was not shocked by the hike. Early in 2016, many investors were
concerned that the volatility we saw in the market in 2015 would continue, and
it did. From December 31, 2015 through February 11, 2016, the S&P 500(R) Index
declined by 10.27%. Since then, the market has made a steady comeback, and as of
June 30, 2016, the S&P 500(R) Index was up 15.73%.
First Trust believes that having a long-term investment horizon and investing in
quality products can help you reach your goals, regardless of how the market
behaves. We have always maintained perspective about the markets and believe
investors should as well. We will continue to strive to provide quality
investment opportunities each and every day, which has been one of the hallmarks
of our firm since its inception 25 years ago.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value our relationship with you and will continue to focus on helping
investors like you reach your financial goals.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
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MARKET OVERVIEW
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
SEMI-ANNUAL REPORT
JUNE 30, 2016
ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of research and analysis of
the First Trust product line. Mr. Carey has 25 years of experience as an Equity
and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst
("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE ECONOMY/INVESTING
One of the reasons cited by the Federal Reserve for not raising interest rates
beyond the initial 0.25% hike in the federal funds target rate on December 16,
2015 is the slowdown in global growth. The International Monetary Fund reduced
its global growth estimate for 2016 from 3.4% in January to 3.2% in April. It
also shaved its 2017 estimate by 0.1% to 3.5%, according to its own release. To
help put this concern into perspective, the rate was 5.4% in 2010.
Shocks can come from anywhere at any time. The Brexit (British + Exit) vote held
on June 23, 2016 certainly qualifies. The citizens of the United Kingdom
("U.K.") voted 52% to 48% to leave the European Union ("EU"), according to the
BBC. The news was not well-received by the global equities markets. It is not
known how it might impact the European recovery underway. In the two trading
days (June 24 & June 27) following the vote, total world equity market
capitalization ("cap") dropped from $63.81 trillion to $60.17 trillion, or a
decline of $3.64 trillion, according to Bloomberg. The global equities markets,
however, rebounded to close on June 30 at a combined market cap of $62.70
trillion. The U.K. and the EU are likely going to need months to negotiate this
Brexit.
ETFGI, an industry research group, reported that total assets invested in
exchange-traded funds ("ETFs") and other exchange-traded products ("ETPs")
reached a record high of $3.18 trillion globally in June 2016, according to its
own release. Total assets invested in U.S. ETFs/ETPs reached a record high $2.26
trillion in June 2016.
U.S. STOCKS AND BONDS
In the first six months of 2016, the major U.S. stock indices posted positive
results. The S&P 500(R) Index, S&P MidCap 400 Index and S&P SmallCap 600(R)
Index posted total returns of 3.84%, 7.93%, and 6.23%, respectively, according
to Bloomberg. Eight of the 10 major S&P 500(R) Index sectors posted positive
total returns. The top performing sectors were Telecommunication Services,
Utilities and Energy, up 24.85%, 23.41% and 16.10%, respectively. The two
sectors that posted losses were Financials and Information Technology, down
3.05% and 0.32%, respectively.
The stock market appeared to rebound with the recovery in the price of crude oil
in mid-February. Crude oil began its plunge in June 2014. It declined from a
2014-high of $107.26 per barrel on June 20, 2014 to a low of $26.21 per barrel
on February 11, 2016, according to Bloomberg. It fell 29.24% from December 31,
2015 through February 11, 2016, and then rebounded by 84.40% to $48.33 per
barrel on June 30, 2016. From December 31, 2015 through February 11, 2016, the
S&P 500(R) Index posted a total return of -10.27%, according to Bloomberg. From
February 11, 2016 through June 30, 2016, the index gained 15.73%. Energy stocks
had been the best performing sector for a decade. From June 30, 2004 through
June 30, 2014, the S&P 500(R) Energy Index posted a cumulative total return of
254.41%, according to Bloomberg. The next best performing sector was utilities,
up 176.37%, as measured by the S&P 500(R) Utilities Index for the same period.
In the U.S. bond market, the top-performing major debt group was high yield
corporate bonds. The Barclays U.S. Corporate High Yield Index posted a total
return of 9.06%. The worst performing major debt group was mortgages, though the
group still generated a positive return. The Barclays GNMA 30-Year Index posted
a total return of 2.67%. The yield on the benchmark 10-Year Treasury note
(T-Note) declined by 80 basis points, from 2.27% (December 31, 2015) to 1.47%
(June 30, 2016). Over the past decade, the average yield on the 10-Year T-Note
was 2.31%.
FOREIGN STOCKS AND BONDS
The U.S. dollar declined by 2.52% against a basket of major currencies in the
first six months of 2016, as measured by the U.S. Dollar Index (DXY). DXY had
appreciated 23.63% in the 18-month period ended December 31, 2015. With respect
to U.S. investors, a stronger U.S. dollar can negatively impact returns on
foreign securities.
Due to a dip in the value of the U.S. dollar and some downward pressure on
interest rates in most major economies around the globe, foreign bond indices
performed well in the first six months of 2016. The Barclays EM Hard Currency
Aggregate Index of emerging markets debt posted a total return of 9.06% (USD),
while the Barclays Global Aggregate Index of higher quality debt rose 8.96%
(USD). Foreign equities finished mixed. The MSCI Emerging Markets Index of
stocks posted a total return of 6.41% (USD), while the MSCI World Index
(excluding the U.S.) posted a total return of -2.98% (USD).
Page 3
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
The First Trust Total US Market AlphaDEX(R) ETF (formerly the First Trust Value
Line(R) Equity Allocation Index Fund) (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the NASDAQ AlphaDEX(R) Total US Market Index
(the "Index"). The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Index is designed to quantitatively
identify and select stocks across market capitalizations (including large-cap,
mid-cap and small-cap companies) that exhibit growth and value factors and
appear to have the greatest potential for capital appreciation. The Index is a
modified equal-dollar weighted index. The Index is reconstituted and balanced on
a quarterly basis. The Fund's shares are listed for trading on The Nasdaq Stock
Market LLC. The first day of secondary market trading in shares of the Fund was
December 7, 2006.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (12/5/06) Ended (12/5/06)
6/30/16 6/30/16 6/30/16 to 6/30/16 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV 3.26% -4.05% 5.19% 3.68% 28.76% 41.34%
Market Value 3.18% -4.67% 5.15% 3.67% 28.56% 41.14%
INDEX PERFORMANCE
NASDAQ AlphaDEX(R) Total US Market Index* 3.73% -3.27% N/A N/A N/A N/A
Russell 3000(R) Index 3.62% 2.14% 11.60% 6.47% 73.08% 82.23%
---------------------------------------------------------------------------------------------------------------------------
* On January 9, 2015, the Fund's underlying index changed from the Value
Line(R) Equity Allocation Index to the NASDAQ AlphaDEX(R) Total US Market
Index. Therefore, the Fund's performance and total returns shown for the
period prior to January 9, 2015, are not necessarily indicative of the
performance the Fund, based on its current index, would have generated.
Since the Fund's new underlying index had an inception date of September
8, 2014, it was not in existence for all of the periods disclosed. The
Value Line(R) Equity Allocation Index is not shown above as the index
terminated on January 9, 2015 and information on this index is no longer
available.
(See Notes to Fund Performance Overview on page 8.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Financials 21.75%
Consumer Discretionary 17.06
Industrials 15.17
Information Technology 14.11
Utilities 7.26
Health Care 6.78
Consumer Staples 6.57
Materials 4.48
Energy 4.20
Telecommunication Services 2.62
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
NVIDIA Corp. 0.54%
Micron Technology, Inc. 0.54
Ulta Salon, Cosmetics & Fragrance, Inc. 0.52
American Water Works Co., Inc. 0.50
Archer-Daniels-Midland Co. 0.49
Dollar Tree, Inc. 0.47
Vulcan Materials Co. 0.47
Northrop Grumman Corp. 0.46
Fiserv, Inc. 0.44
Bunge Ltd. 0.43
-------
Total 4.86%
=======
-----------------------------
The NASDAQ AlphaDEX(R) Total US Market Index (the "Index") is a trademark of The
Nasdaq OMX Group and has been licensed for use by First Trust Portfolios L.P.
AlphaDEX(R) is a trademark owned by First Trust Portfolios L.P. and has been
licensed to The Nasdaq OMX Group for use in the name of the Index. The First
Trust Total US Market AlphaDEX(R) ETF is not sponsored, endorsed, sold or
promoted by The Nasdaq OMX Group and The Nasdaq OMX Group makes no
representation or warranty regarding the advisability of investing in the First
Trust Total US Market AlphaDEX(R) ETF or as to the result to be obtained by any
person from use of the Index in connection with the trading of the First Trust
Total US Market AlphaDEX(R) ETF.
Page 4
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 5, 2006 - JUNE 30, 2016
First Trust
Total US Market Russell 3000(R)
AlphaDEX(R) ETF Index
12/5/06 $10,000 $10,000
12/06 9,890 10,008
06/07 10,610 10,720
12/07 10,350 10,522
06/08 9,470 9,360
12/08 6,681 6,597
06/09 7,037 6,874
12/09 8,962 8,466
06/10 8,831 7,954
12/10 10,741 9,900
06/11 10,976 10,529
12/11 9,714 10,001
06/12 9,883 10,933
12/12 10,563 11,643
06/13 12,087 13,280
12/13 14,223 15,550
06/14 14,940 16,629
12/14 14,559 17,502
06/15 14,731 17,842
12/15 13,688 17,587
06/16 14,134 18,224
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 1, 2011 through June
30, 2016. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 146 1 0 0
01/01/12 - 12/31/12 124 1 0 0
01/01/13 - 12/31/13 140 0 0 0
01/01/14 - 12/31/14 178 0 0 0
01/01/15 - 12/31/15 115 15 0 0
01/01/16 - 06/30/16 48 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/11 - 12/31/11 105 0 0 0
01/01/12 - 12/31/12 122 3 0 0
01/01/13 - 12/31/13 104 8 0 0
01/01/14 - 12/31/14 68 6 0 0
01/01/15 - 12/31/15 110 12 0 0
01/01/16 - 06/30/16 77 0 0 0
Page 5
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
The First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the CBOE(R) VIX(R) Tail
Hedge Index (the "Index"). The Fund will normally invest at least 90% of its
assets in common stocks and call options included in the Index. The Index is
composed of each of the equity securities comprising the S&P 500(R) Index and an
out-of-the-money call option position on the Chicago Board Options Exchange
Market Volatility Index (the "VIX Index"). The VIX Index is quoted in percentage
points, is calculated and disseminated in real-time by The Chicago Board Options
Exchange ("CBOE(R)") and is a way of measuring the market's expectation of
volatility in the S&P 500(R) over the next 30-day period. The Index, and in turn
the Fund, tracks the performance of an S&P 500(R) stock portfolio (with
dividends reinvested), and call options on the VIX Index. The amount of the
Index allocated to call options on the VIX Index is reevaluated and rebalanced
each month, depending on the level of forward expected volatility in the S&P
500(R) Index, as measured by the closest to maturity VIX Index futures. The
Index is designed to help address extreme downward movements in the market by
hedging its portfolio through purchasing call options on the VIX Index, or "tail
hedging." The Index is reconstituted and rebalanced monthly. The Fund's shares
are listed for trading on the NYSE Arca, Inc. The first day of secondary market
trading in shares of the Fund was August 30, 2012.
----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (8/29/12) Inception (8/29/12)
6/30/16 6/30/16 to 6/30/16 to 6/30/16
FUND PERFORMANCE
NAV -1.41% -4.74% 6.10% 25.49%
Market Value -1.62% -4.75% 6.04% 25.22%
INDEX PERFORMANCE
CBOE(R) VIX(R) Tail Hedge Index -1.22% -4.27% 6.54% 27.52%
S&P 500(R) Index 3.84% 3.99% 13.31% 61.50%
----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 8.)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 19.77%
Financials 15.76
Health Care 15.01
Consumer Discretionary 12.35
Consumer Staples 10.56
Industrials 9.87
Energy 7.38
Utilities 3.57
Telecommunication Services 2.91
Materials 2.82
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Apple, Inc. 2.88%
Microsoft Corp. 2.21
Exxon Mobil Corp. 2.14
Johnson & Johnson 1.84
General Electric Co. 1.59
Amazon.com, Inc. 1.52
Berkshire Hathaway, Inc., Class B 1.49
AT&T, Inc. 1.46
Facebook, Inc., Class A 1.44
JPMorgan Chase & Co. 1.25
-------
Total 17.82%
=======
-----------------------------
S&P(R) and S&P 500(R) are registered trademarks of Standard & Poor's Financial
Services LLC ("SPFS"); and CBOE(R), Chicago Board Options Exchange(R), CBOE
Volatility Index(R) and VIX(R) are registered trademarks of Chicago Board
Options Exchange, Incorporated ("CBOE(R)"); and these trademarks have been
licensed for use by the S&P Dow Jones Indices LLC and sublicensed for certain
purposes by First Trust.
Page 6
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 29, 2012 - JUNE 30, 2016
First Trust CBOE(R) S&P 500(R) CBOE(R) VIX(R) S&P 500(R)
VIX(R) Tail Hedge Fund Tail Hdge Index Index
08/12 $10,000 $10,000 $10,000
12/12 9,863 9,880 10,193
06/13 10,686 10,719 11,602
12/13 11,738 11,799 13,494
06/14 12,251 12,345 14,457
12/14 13,525 13,666 15,342
06/15 13,175 13,320 15,531
12/15 12,730 12,910 15,554
06/16 12,551 12,752 16,151
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2016
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period August 30, 2012 (commencement
of trading) through June 30, 2016. Shareholders may pay more than NAV when they
buy Fund shares and receive less than NAV when they sell those shares because
shares are bought and sold at current market price. Data presented represents
past performance and cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
08/30/12 - 12/31/12 57 3 0 0
01/01/13 - 12/31/13 155 5 0 0
01/01/14 - 12/31/14 152 2 0 1
01/01/15 - 12/31/15 98 1 0 1
01/01/16 - 06/30/16 24 3 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
08/30/12 - 12/31/12 21 1 1 0
01/01/13 - 12/31/13 92 0 0 0
01/01/14 - 12/31/14 95 2 0 0
01/01/15 - 12/31/15 148 1 1 2
01/01/16 - 06/30/16 95 2 1 0
Page 7
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average annual total returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative total
returns" represent the total change in value of an investment over the periods
indicated. The total returns would have been lower if certain fees had not been
waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
each Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike a Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 8
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
JUNE 30, 2016 (UNAUDITED)
As a shareholder of First Trust Total US Market AlphaDEX(R) ETF or First Trust
CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund (each a "Fund" and collectively, the
"Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing
costs, including management fees, distribution and/or service fees, and other
Fund expenses. This Example is intended to help you understand your ongoing
costs of investing in the Funds and to compare these costs with the ongoing
costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended June 30, 2016.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JANUARY 1, 2016 JUNE 30, 2016 PERIOD PERIOD (b)
--------------------------------------------------------------------------------------------------------------------------
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF
(TUSA)
Actual $1,000.00 $1,032.60 0.70% (a) $3.54
Hypothetical (5% return before expenses) $1,000.00 $1,021.38 0.70% (a) $3.52
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE
FUND (VIXH)
Actual $1,000.00 $ 985.90 0.60% $2.96
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
(a) These expense ratios reflect an expense cap. See Note 3 in Notes to
Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (January 1,
2016 through June 30, 2016), multiplied by 182/366 (to reflect the
one-half year period).
Page 9
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.8%
AEROSPACE & DEFENSE -- 2.0%
206 AAR Corp. $ 4,808
47 B/E Aerospace, Inc. 2,170
192 BWX Technologies, Inc. 6,868
57 Curtiss-Wright Corp. 4,802
221 DigitalGlobe, Inc. (a) 4,727
30 Esterline Technologies Corp. (a) 1,861
109 General Dynamics Corp. 15,177
143 HEICO Corp. 9,554
128 Honeywell International, Inc. 14,889
31 Huntington Ingalls Industries,
Inc. 5,209
32 Lockheed Martin Corp. 7,941
189 Mercury Systems, Inc. (a) 4,699
84 Moog, Inc., Class A (a) 4,529
57 National Presto Industries, Inc. 5,378
181 Northrop Grumman Corp. 40,233
25 Orbital ATK, Inc. 2,129
98 Teledyne Technologies, Inc. (a) 9,707
787 Textron, Inc. 28,773
152 Triumph Group, Inc. 5,396
--------------
178,850
--------------
AIR FREIGHT & LOGISTICS -- 0.4%
187 Air Transport Services Group,
Inc. (a) 2,423
91 Atlas Air Worldwide Holdings,
Inc. (a) 3,769
88 Expeditors International of
Washington, Inc. 4,316
42 Forward Air Corp. 1,870
47 Hub Group, Inc., Class A (a) 1,803
136 United Parcel Service, Inc.,
Class B 14,650
156 XPO Logistics, Inc. (a) 4,097
--------------
32,928
--------------
AIRLINES -- 1.4%
175 Alaska Air Group, Inc. 10,201
12 Allegiant Travel Co. 1,818
875 American Airlines Group, Inc. 24,771
295 Delta Air Lines, Inc. 10,747
101 Hawaiian Holdings, Inc. (a) 3,834
102 JetBlue Airways Corp. (a) 1,689
239 SkyWest, Inc. 6,324
641 Southwest Airlines Co. 25,133
224 Spirit Airlines, Inc. (a) 10,051
599 United Continental Holdings,
Inc. (a) 24,583
124 Virgin America, Inc. (a) 6,970
--------------
126,121
--------------
AUTO COMPONENTS -- 0.9%
187 American Axle & Manufacturing
Holdings, Inc. (a) 2,708
280 BorgWarner, Inc. 8,266
129 Cooper Tire & Rubber Co. 3,847
53 Cooper-Standard Holding, Inc. (a) 4,186
204 Dana Holding Corp. 2,154
53 Dorman Products, Inc. (a) 3,032
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
AUTO COMPONENTS (CONTINUED)
59 Drew Industries, Inc. $ 5,005
61 Fox Factory Holding Corp. (a) 1,059
686 Gentex Corp. 10,599
196 Goodyear Tire & Rubber (The) Co. 5,029
97 Lear Corp. 9,871
126 Motorcar Parts of America,
Inc. (a) 3,425
83 Standard Motor Products, Inc. 3,302
173 Superior Industries International,
Inc. 4,633
37 Tenneco, Inc. (a) 1,725
176 Tower International, Inc. 3,622
135 Visteon Corp. 8,884
--------------
81,347
--------------
AUTOMOBILES -- 1.0%
2,658 Ford Motor Co. 33,411
1,142 General Motors Co. 32,318
126 Harley-Davidson, Inc. 5,708
135 Thor Industries, Inc. 8,740
128 Winnebago Industries, Inc. 2,934
--------------
83,111
--------------
BANKS -- 5.7%
90 1st Source Corp. 2,915
360 Associated Banc-Corp. 6,174
273 Banc of California, Inc. 4,941
34 BancFirst Corp. 2,051
90 BancorpSouth, Inc. 2,042
2,123 Bank of America Corp. 28,172
63 Bank of Hawaii Corp. 4,334
51 Bank of the Ozarks, Inc. 1,914
63 BankUnited, Inc. 1,935
216 BB&T Corp. 7,692
118 BOK Financial Corp. 7,399
167 Boston Private Financial Holdings,
Inc. 1,967
87 Brookline Bancorp, Inc. 960
31 Capital Bank Financial Corp.,
Class A 893
129 CenterState Banks, Inc. 2,032
88 Central Pacific Financial Corp. 2,077
54 Chemical Financial Corp. 2,014
347 CIT Group, Inc. 11,073
688 Citigroup, Inc. 29,164
1,028 Citizens Financial Group, Inc. 20,539
40 City Holding Co. 1,819
171 Comerica, Inc. 7,033
48 Commerce Bancshares, Inc. 2,299
25 Community Bank System, Inc. 1,027
54 Community Trust Bancorp, Inc. 1,872
117 Cullen/Frost Bankers, Inc. 7,456
40 Eagle Bancorp, Inc. (a) 1,924
199 East West Bancorp, Inc. 6,802
74 F.N.B. Corp. 928
29 FCB Financial Holdings, Inc.,
Class A (a) 986
1,720 Fifth Third Bancorp 30,255
655 First BanCorp (a) 2,600
Page 10 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
47 First Busey Corp. $ 1,005
34 First Citizens BancShares, Inc.,
Class A 8,803
105 First Financial Bancorp 2,042
68 First Interstate BancSystem, Inc.,
Class A 1,911
81 First Merchants Corp. 2,019
53 First Midwest Bancorp, Inc. 931
44 Flushing Financial Corp. 875
143 Fulton Financial Corp. 1,930
105 Great Western Bancorp, Inc. 3,312
125 Hancock Holding Co. 3,264
130 Hanmi Financial Corp. 3,054
93 Heartland Financial USA, Inc. 3,282
101 Hilltop Holdings, Inc. (a) 2,120
210 Home BancShares, Inc. 4,156
903 Huntington Bancshares, Inc. 8,073
37 IBERIABANK Corp. 2,210
116 International Bancshares Corp. 3,026
185 Investors Bancorp, Inc. 2,050
364 JPMorgan Chase & Co. 22,619
1,950 KeyCorp 21,547
59 MB Financial, Inc. 2,141
235 Old National Bancorp 2,945
28 Opus Bank 946
90 Pacific Premier Bancorp, Inc. (a) 2,160
270 People's United Financial, Inc. 3,958
255 PNC Financial Services Group
(The), Inc. 20,754
376 Popular, Inc. 11,017
56 PrivateBancorp, Inc. 2,466
186 Prosperity Bancshares, Inc. 9,484
3,657 Regions Financial Corp. 31,121
69 Sandy Spring Bancorp, Inc. 2,005
43 ServisFirst Bancshares, Inc. 2,124
16 Signature Bank (a) 1,999
38 Southside Bancshares, Inc. 1,175
37 Stock Yards Bancorp, Inc. 1,044
796 SunTrust Banks, Inc. 32,700
149 Synovus Financial Corp. 4,320
312 TCF Financial Corp. 3,947
50 Texas Capital Bancshares, Inc. (a) 2,338
45 Tompkins Financial Corp. 2,925
76 TriCo Bancshares 2,098
125 Trustmark Corp. 3,106
177 U.S. Bancorp 7,138
19 UMB Financial Corp. 1,011
407 Umpqua Holdings Corp. 6,296
120 Webster Financial Corp. 4,074
297 Wells Fargo & Co. 14,057
64 WesBanco, Inc. 1,987
64 Western Alliance Bancorp (a) 2,090
65 Wintrust Financial Corp. 3,315
267 Zions Bancorporation 6,710
--------------
496,969
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BEVERAGES -- 0.4%
18 Coca-Cola Bottling Co.
Consolidated $ 2,654
142 Constellation Brands, Inc.,
Class A 23,487
68 National Beverage Corp. (a) 4,271
--------------
30,412
--------------
BIOTECHNOLOGY -- 0.3%
79 Emergent BioSolutions, Inc. (a) 2,222
118 Five Prime Therapeutics, Inc. (a) 4,879
549 Inovio Pharmaceuticals, Inc. (a) 5,073
127 Intrexon Corp. (a) 3,125
160 Lexicon Pharmaceuticals, Inc. (a) 2,296
18 Ligand Pharmaceuticals, Inc. (a) 2,147
47 Medivation, Inc. (a) 2,834
414 OPKO Health, Inc. (a) 3,867
--------------
26,443
--------------
BUILDING PRODUCTS -- 1.6%
113 A.O. Smith Corp. 9,956
137 AAON, Inc. 3,769
34 Allegion PLC 2,361
38 American Woodmark Corp. (a) 2,522
44 Apogee Enterprises, Inc. 2,039
424 Builders FirstSource, Inc. (a) 4,770
154 Fortune Brands Home & Security,
Inc. 8,927
167 Gibraltar Industries, Inc. (a) 5,272
186 Griffon Corp. 3,136
156 Insteel Industries, Inc. 4,460
64 Lennox International, Inc. 9,126
1,141 Masco Corp. 35,303
228 Owens Corning 11,747
105 Patrick Industries, Inc. (a) 6,331
340 Ply Gem Holdings, Inc. (a) 4,954
165 Quanex Building Products Corp. 3,067
25 Simpson Manufacturing Co., Inc. 999
80 Trex Co., Inc. (a) 3,594
56 Universal Forest Products, Inc. 5,191
434 USG Corp. (a) 11,701
--------------
139,225
--------------
CAPITAL MARKETS -- 1.8%
76 Ameriprise Financial, Inc. 6,829
317 BGC Partners, Inc., Class A 2,761
176 E*TRADE Financial Corp. (a) 4,134
128 Eaton Vance Corp. 4,523
37 Evercore Partners, Inc., Class A 1,635
149 Federated Investors, Inc., Class B 4,288
919 Franklin Resources, Inc. 30,667
26 GAMCO Investors, Inc., Class A 852
91 Goldman Sachs Group (The), Inc. 13,521
43 Greenhill & Co., Inc. 692
466 Invesco Ltd. 11,902
216 Investment Technology Group, Inc. 3,611
131 Janus Capital Group, Inc. 1,824
400 KCG Holdings, Inc., Class A (a) 5,320
62 Legg Mason, Inc. 1,828
260 LPL Financial Holdings, Inc. 5,858
See Notes to Financial Statements Page 11
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CAPITAL MARKETS (CONTINUED)
68 Moelis & Co., Class A $ 1,530
1,148 Morgan Stanley 29,825
58 Piper Jaffray Cos. (a) 2,187
90 Raymond James Financial, Inc. 4,437
245 State Street Corp. 13,210
65 Stifel Financial Corp. (a) 2,044
37 Virtus Investment Partners, Inc. 2,634
203 Waddell & Reed Financial, Inc.,
Class A 3,496
--------------
159,608
--------------
CHEMICALS -- 2.1%
70 A. Schulman, Inc. 1,709
101 Albemarle Corp. 8,010
59 Ashland, Inc. 6,771
221 Axalta Coating Systems Ltd. (a) 5,863
273 Calgon Carbon Corp. 3,590
145 Chemtura Corp. (a) 3,825
298 Eastman Chemical Co. 20,234
242 Ferro Corp. (a) 3,238
213 FMC Corp. 9,864
23 H.B. Fuller Co. 1,012
144 Huntsman Corp. 1,937
93 Innophos Holdings, Inc. 3,926
419 LyondellBasell Industries N.V.,
Class A 31,182
50 Minerals Technologies, Inc. 2,840
399 Mosaic (The) Co. 10,446
5 NewMarket Corp. 2,072
248 Olin Corp. 6,160
63 PolyOne Corp. 2,220
11 Quaker Chemical Corp. 981
148 Scotts Miracle-Gro (The) Co.,
Class A 10,347
34 Sensient Technologies Corp. 2,415
76 Sherwin-Williams (The) Co. 22,319
69 Stepan Co. 4,108
130 Trinseo S.A. (a) 5,581
232 Westlake Chemical Corp. 9,958
--------------
180,608
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.2%
59 ABM Industries, Inc. 2,152
426 ACCO Brands Corp. (a) 4,401
80 Cintas Corp. 7,850
19 Clean Harbors, Inc. (a) 990
211 Copart, Inc. (a) 10,341
57 Covanta Holding Corp. 938
138 Deluxe Corp. 9,159
13 G&K Services, Inc., Class A 995
78 Healthcare Services Group, Inc. 3,228
124 Herman Miller, Inc. 3,706
73 HNI Corp. 3,394
169 KAR Auction Services, Inc. 7,054
88 Knoll, Inc. 2,137
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES
(CONTINUED)
56 Matthews International Corp.,
Class A $ 3,116
191 McGrath RentCorp 5,843
200 Pitney Bowes, Inc. 3,560
131 R.R. Donnelley & Sons Co. 2,216
301 Republic Services, Inc. 15,444
159 Rollins, Inc. 4,654
257 Steelcase, Inc., Class A 3,487
31 Team, Inc. (a) 770
44 UniFirst Corp. 5,092
65 US Ecology, Inc. 2,987
98 Viad Corp. 3,038
84 West Corp. 1,651
--------------
108,203
--------------
COMMUNICATIONS EQUIPMENT
-- 0.8%
34 Arista Networks, Inc. (a) 2,189
1,017 Brocade Communications
Systems, Inc. 9,336
107 CalAmp Corp. (a) 1,585
1,008 Cisco Systems, Inc. 28,919
108 EchoStar Corp., Class A (a) 4,288
41 F5 Networks, Inc. (a) 4,667
52 Finisar Corp. (a) 911
34 InterDigital, Inc. 1,893
47 NETGEAR, Inc. (a) 2,234
24 Plantronics, Inc. 1,056
343 Polycom, Inc. (a) 3,859
29 Ubiquiti Networks, Inc. (a) 1,121
117 ViaSat, Inc. (a) 8,354
--------------
70,412
--------------
CONSTRUCTION & ENGINEERING
-- 0.7%
210 AECOM (a) 6,672
151 Comfort Systems USA, Inc. 4,918
44 Dycom Industries, Inc. (a) 3,950
177 EMCOR Group, Inc. 8,719
120 Fluor Corp. 5,914
20 Granite Construction, Inc. 911
148 Jacobs Engineering Group, Inc. (a) 7,372
247 KBR, Inc. 3,270
39 Primoris Services Corp. 738
477 Quanta Services, Inc. (a) 11,028
246 Tutor Perini Corp. (a) 5,793
--------------
59,285
--------------
CONSTRUCTION MATERIALS -- 0.8%
61 Eagle Materials, Inc. 4,706
193 Headwaters, Inc. (a) 3,462
67 Martin Marietta Materials, Inc. 12,864
197 Summit Materials, Inc.,
Class A (a) 4,031
80 US Concrete, Inc. (a) 4,873
340 Vulcan Materials Co. 40,922
--------------
70,858
--------------
Page 12 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CONSUMER FINANCE -- 1.4%
575 Ally Financial, Inc. (a) $ 9,815
117 American Express Co. 7,109
414 Capital One Financial Corp. 26,293
99 Cash America International, Inc. 4,219
423 Discover Financial Services 22,669
149 Encore Capital Group, Inc. (a) 3,506
21 First Cash Financial Services,
Inc. 1,078
83 Green Dot Corp., Class A (a) 1,908
719 Navient Corp. 8,592
97 Nelnet, Inc., Class A 3,371
163 PRA Group, Inc. (a) 3,935
1,026 Santander Consumer USA
Holdings, Inc. (a) 10,599
1,015 SLM Corp. (a) 6,273
501 Synchrony Financial (a) 12,665
--------------
122,032
--------------
CONTAINERS & PACKAGING -- 0.6%
82 AptarGroup, Inc. 6,489
149 Avery Dennison Corp. 11,138
83 Bemis Co., Inc. 4,274
238 Berry Plastics Group, Inc. (a) 9,246
43 Crown Holdings, Inc. (a) 2,179
503 Graphic Packaging Holding Co. 6,307
29 Greif, Inc., Class A 1,081
90 Sealed Air Corp. 4,137
81 Silgan Holdings, Inc. 4,168
133 Sonoco Products Co. 6,605
--------------
55,624
--------------
DISTRIBUTORS -- 0.3%
337 LKQ Corp. (a) 10,683
123 Pool Corp. 11,566
--------------
22,249
--------------
DIVERSIFIED CONSUMER SERVICES
-- 0.3%
66 Bright Horizons Family Solutions,
Inc. (a) 4,376
73 Capella Education Co. 3,843
67 Grand Canyon Education, Inc. (a) 2,675
159 LifeLock, Inc. (a) 2,514
87 Service Corp. International 2,352
171 ServiceMaster Global Holdings,
Inc. (a) 6,806
132 Weight Watchers International,
Inc. (a) 1,535
--------------
24,101
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 1.0%
152 Berkshire Hathaway, Inc.,
Class B (a) 22,008
33 CBOE Holdings, Inc. 2,199
399 Leucadia National Corp. 6,915
86 MarketAxess Holdings, Inc. 12,504
73 Morningstar, Inc. 5,970
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
(CONTINUED)
116 MSCI, Inc. $ 8,946
432 Nasdaq, Inc. 27,937
145 Voya Financial, Inc. 3,590
--------------
90,069
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.9%
733 AT&T, Inc. 31,673
898 CenturyLink, Inc. 26,051
989 Cincinnati Bell, Inc. (a) 4,520
98 Cogent Communications Holdings,
Inc. 3,926
186 Consolidated Communications
Holdings, Inc. 5,067
1,540 Frontier Communications Corp. 7,607
157 General Communication, Inc.,
Class A (a) 2,481
365 Iridium Communications, Inc. (a) 3,241
679 Level 3 Communications, Inc. (a) 34,962
472 ORBCOMM, Inc. (a) 4,696
663 Verizon Communications, Inc. 37,022
419 Vonage Holdings Corp. (a) 2,556
249 Windstream Holdings, Inc. 2,308
--------------
166,110
--------------
ELECTRIC UTILITIES -- 3.2%
154 ALLETE, Inc. 9,953
174 Alliant Energy Corp. 6,908
324 American Electric Power Co., Inc. 22,709
267 Duke Energy Corp. 22,906
200 Edison International 15,534
63 El Paso Electric Co. 2,978
181 Entergy Corp. 14,724
492 Eversource Energy 29,471
800 Exelon Corp. 29,088
598 FirstEnergy Corp. 20,876
267 Great Plains Energy, Inc. 8,117
87 IDACORP, Inc. 7,077
55 MGE Energy, Inc. 3,108
61 NextEra Energy, Inc. 7,954
301 OGE Energy Corp. 9,858
97 Otter Tail Corp. 3,249
240 PG&E Corp. 15,341
115 Pinnacle West Capital Corp. 9,322
28 PNM Resources, Inc. 992
218 Portland General Electric Co. 9,618
188 PPL Corp. 7,097
139 Southern (The) Co. 7,455
174 Westar Energy, Inc. 9,760
172 Xcel Energy, Inc. 7,702
--------------
281,797
--------------
ELECTRICAL EQUIPMENT -- 1.0%
99 Acuity Brands, Inc. 24,548
51 AZZ, Inc. 3,059
459 Eaton Corp. PLC 27,416
264 Emerson Electric Co. 13,770
See Notes to Financial Statements Page 13
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRICAL EQUIPMENT (CONTINUED)
98 Encore Wire Corp. $ 3,654
52 EnerSys 3,093
41 Hubbell, Inc. 4,324
61 Regal Beloit Corp. 3,358
--------------
83,222
--------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 2.6%
124 Amphenol Corp., Class A 7,109
73 Anixter International, Inc. (a) 3,890
167 Arrow Electronics, Inc. (a) 10,337
243 Avnet, Inc. 9,844
381 AVX Corp. 5,174
43 Badger Meter, Inc. 3,140
208 Benchmark Electronics, Inc. (a) 4,399
207 CDW Corp. 8,297
1,718 Corning, Inc. 35,185
22 Dolby Laboratories, Inc., Class A 1,053
48 ePlus, Inc. (a) 3,926
148 Fabrinet (a) 5,494
24 FEI Co. 2,565
196 FLIR Systems, Inc. 6,066
176 II-VI, Inc. (a) 3,302
134 Insight Enterprises, Inc. (a) 3,484
90 IPG Photonics Corp. (a) 7,200
559 Jabil Circuit, Inc. 10,325
388 Keysight Technologies, Inc. (a) 11,287
31 Littelfuse, Inc. 3,664
131 Methode Electronics, Inc. 4,484
31 MTS Systems Corp. 1,359
71 National Instruments Corp. 1,946
148 PC Connection, Inc. 3,522
97 Plexus Corp. (a) 4,190
214 QLogic Corp. (a) 3,154
32 Rogers Corp. (a) 1,955
205 Sanmina Corp. (a) 5,496
71 ScanSource, Inc. (a) 2,635
93 SYNNEX Corp. 8,818
579 TE Connectivity Ltd. 33,067
62 Tech Data Corp. (a) 4,455
576 TTM Technologies, Inc. (a) 4,337
18 Universal Display Corp. (a) 1,220
76 VeriFone Systems, Inc. (a) 1,409
62 Zebra Technologies Corp.,
Class A (a) 3,106
--------------
230,894
--------------
ENERGY EQUIPMENT & SERVICES
-- 0.7%
522 Atwood Oceanics, Inc. 6,535
202 Bristow Group, Inc. 2,305
19 Core Laboratories N.V. 2,354
44 Diamond Offshore Drilling, Inc. 1,070
79 Dril-Quip, Inc. (a) 4,616
315 FMC Technologies, Inc. (a) 8,401
116 Frank's International N.V. 1,695
183 Helmerich & Payne, Inc. 12,285
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES
(CONTINUED)
702 McDermott International, Inc. (a) $ 3,468
416 Nabors Industries Ltd. 4,181
324 Oceaneering International, Inc. 9,675
91 Oil States International, Inc. (a) 2,992
163 Patterson-UTI Energy, Inc. 3,475
18 SEACOR Holdings, Inc. (a) 1,043
--------------
64,095
--------------
FOOD & STAPLES RETAILING -- 1.1%
30 Andersons (The), Inc. 1,066
57 Casey's General Stores, Inc. 7,496
102 Ingles Markets, Inc., Class A 3,805
34 PriceSmart, Inc. 3,181
118 Smart & Final Stores, Inc. (a) 1,757
126 SpartanNash Co. 3,853
371 Sprouts Farmers Market, Inc. (a) 8,496
166 SUPERVALU, Inc. (a) 784
95 United Natural Foods, Inc. (a) 4,446
170 Walgreens Boots Alliance, Inc. 14,156
314 Wal-Mart Stores, Inc. 22,928
85 Weis Markets, Inc. 4,297
692 Whole Foods Market, Inc. 22,158
--------------
98,423
--------------
FOOD PRODUCTS -- 3.6%
988 Archer-Daniels-Midland Co. 42,375
27 B&G Foods, Inc. 1,301
633 Bunge Ltd. 37,442
84 Calavo Growers, Inc. 5,628
74 Cal-Maine Foods, Inc. 3,280
562 Campbell Soup Co. 37,390
161 ConAgra Foods, Inc. 7,698
291 Darling Ingredients, Inc. (a) 4,336
45 Fresh Del Monte Produce, Inc. 2,449
113 General Mills, Inc. 8,059
105 Hain Celestial Group (The),
Inc. (a) 5,224
664 Hormel Foods Corp. 24,302
40 Ingredion, Inc. 5,176
69 John B. Sanfilippo & Son, Inc. 2,942
94 Kellogg Co. 7,675
58 Lancaster Colony Corp. 7,401
289 McCormick & Co., Inc. 30,828
374 Pilgrim's Pride Corp. 9,530
145 Pinnacle Foods, Inc. 6,712
157 Post Holdings, Inc. (a) 12,982
53 Sanderson Farms, Inc. 4,592
3 Seaboard Corp. (a) 8,612
55 Tootsie Roll Industries, Inc. 2,119
538 Tyson Foods, Inc., Class A 35,933
106 WhiteWave Foods (The) Co. (a) 4,976
--------------
318,962
--------------
GAS UTILITIES -- 0.9%
116 Atmos Energy Corp. 9,433
46 Chesapeake Utilities Corp. 3,044
236 New Jersey Resources Corp. 9,098
36 Northwest Natural Gas Co. 2,333
176 ONE Gas, Inc. 11,720
Page 14 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
GAS UTILITIES (CONTINUED)
101 South Jersey Industries, Inc. $ 3,194
131 Southwest Gas Corp. 10,311
159 Spire, Inc. 11,263
160 UGI Corp. 7,240
149 WGL Holdings, Inc. 10,548
--------------
78,184
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.3%
68 ABIOMED, Inc. (a) 7,432
148 Align Technology, Inc. (a) 11,921
43 Anika Therapeutics, Inc. (a) 2,307
5 Atrion Corp. 2,139
95 Becton, Dickinson and Co. 16,111
35 C. R. Bard, Inc. 8,231
54 Cantel Medical Corp. 3,711
23 CONMED Corp. 1,098
14 Cooper (The) Cos., Inc. 2,402
87 Cynosure, Inc., Class A (a) 4,232
76 Danaher Corp. 7,676
70 DENTSPLY SIRONA, Inc. 4,343
244 Edwards Lifesciences Corp. (a) 24,334
55 IDEXX Laboratories, Inc. (a) 5,107
64 Inogen, Inc. (a) 3,207
29 Insulet Corp. (a) 877
14 Integra LifeSciences Holdings
Corp. (a) 1,117
36 Intuitive Surgical, Inc. (a) 23,811
69 Masimo Corp. (a) 3,624
46 Meridian Bioscience, Inc. 897
103 Merit Medical Systems, Inc. (a) 2,042
19 Neogen Corp. (a) 1,069
34 Nevro Corp. (a) 2,508
37 ResMed, Inc. 2,340
130 St. Jude Medical, Inc. 10,140
201 Stryker Corp. 24,086
55 Teleflex, Inc. 9,752
54 Varian Medical Systems, Inc. (a) 4,440
124 West Pharmaceutical Services, Inc. 9,409
--------------
200,363
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.2%
34 Adeptus Health, Inc., Class A (a) 1,756
64 Aetna, Inc. 7,816
106 Air Methods Corp. (a) 3,798
99 Amedisys, Inc. (a) 4,998
142 AMN Healthcare Services, Inc. (a) 5,676
87 AmSurg Corp. (a) 6,746
155 Anthem, Inc. 20,358
271 Brookdale Senior Living, Inc. (a) 4,184
140 Centene Corp. (a) 9,992
7 Chemed Corp. 954
314 Community Health Systems,
Inc. (a) 3,784
49 CorVel Corp. (a) 2,116
85 Ensign Group (The), Inc. 1,786
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES
(CONTINUED)
32 ExamWorks Group, Inc. (a) $ 1,115
209 Express Scripts Holding Co. (a) 15,842
368 HCA Holdings, Inc. (a) 28,340
114 HealthSouth Corp. 4,425
208 Henry Schein, Inc. (a) 36,774
77 Kindred Healthcare, Inc. 869
155 LifePoint Health, Inc. (a) 10,132
28 Magellan Health, Inc. (a) 1,842
134 Molina Healthcare, Inc. (a) 6,687
61 National HealthCare Corp. 3,949
24 Owens & Minor, Inc. 897
46 Patterson Cos., Inc. 2,203
216 PharMerica Corp. (a) 5,327
94 Providence Service (The) Corp. (a) 4,219
402 Quest Diagnostics, Inc. 32,727
324 Select Medical Holdings Corp. (a) 3,522
103 Surgical Care Affiliates, Inc. (a) 4,910
51 Team Health Holdings, Inc. (a) 2,074
74 Tenet Healthcare Corp. (a) 2,045
192 Triple-S Management Corp.,
Class B (a) 4,691
19 U.S. Physical Therapy, Inc. 1,144
173 Universal Health Services, Inc.,
Class B 23,199
149 VCA, Inc. (a) 10,074
--------------
280,971
--------------
HEALTH CARE TECHNOLOGY -- 0.1%
163 Allscripts Healthcare Solutions,
Inc. (a) 2,070
31 athenahealth, Inc. (a) 4,278
67 HMS Holdings Corp. (a) 1,180
162 IMS Health Holdings, Inc. (a) 4,108
63 Quality Systems, Inc. 751
--------------
12,387
--------------
HOTELS, RESTAURANTS & LEISURE
-- 2.0%
195 Aramark 6,517
69 BJ's Restaurants, Inc. (a) 3,024
113 Bloomin' Brands, Inc. 2,019
20 Bob Evans Farms, Inc. 759
139 Boyd Gaming Corp. (a) 2,558
47 Brinker International, Inc. 2,140
704 Caesars Entertainment Corp. (a) 5,414
272 Carnival Corp. 12,022
36 Cheesecake Factory (The), Inc. 1,733
35 Choice Hotels International, Inc. 1,667
26 Churchill Downs, Inc. 3,285
14 Cracker Barrel Old Country Store,
Inc. 2,401
65 Darden Restaurants, Inc. 4,117
49 Dave & Buster's Entertainment,
Inc. (a) 2,293
92 Denny's Corp. (a) 987
39 Diamond Resorts International,
Inc. (a) 1,168
See Notes to Financial Statements Page 15
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOTELS, RESTAURANTS & LEISURE
(CONTINUED)
82 Domino's Pizza, Inc. $ 10,773
91 Dunkin' Brands Group, Inc. 3,969
19 Hyatt Hotels Corp., Class A (a) 934
78 International Speedway Corp.,
Class A 2,609
265 Interval Leisure Group, Inc. 4,214
68 Isle of Capri Casinos, Inc. (a) 1,246
153 La Quinta Holdings, Inc. (a) 1,744
101 Marriott International, Inc.,
Class A 6,712
28 Marriott Vacations Worldwide
Corp. 1,918
114 McDonald's Corp. 13,719
42 Panera Bread Co., Class A (a) 8,902
59 Red Robin Gourmet Burgers,
Inc. (a) 2,798
156 Ruth's Hospitality Group, Inc. 2,488
406 Scientific Games Corp.,
Class A (a) 3,731
45 SeaWorld Entertainment, Inc. 645
116 Six Flags Entertainment Corp. 6,722
109 Sonic Corp. 2,948
120 Starbucks Corp. 6,854
247 Texas Roadhouse, Inc. 11,263
81 Vail Resorts, Inc. 11,197
988 Wendy's (The) Co. 9,505
85 Wyndham Worldwide Corp. 6,055
98 Zoe's Kitchen, Inc. (a) 3,554
--------------
176,604
--------------
HOUSEHOLD DURABLES -- 1.8%
193 CalAtlantic Group, Inc. 7,085
51 Cavco Industries, Inc. (a) 4,779
712 D.R. Horton, Inc. 22,414
120 Ethan Allen Interiors, Inc. 3,965
215 Garmin Ltd. 9,120
121 Harman International Industries,
Inc. 8,690
37 Helen of Troy Ltd. (a) 3,805
144 Installed Building Products,
Inc. (a) 5,226
108 iRobot Corp. (a) 3,789
268 KB Home 4,076
107 La-Z-Boy, Inc. 2,977
44 Leggett & Platt, Inc. 2,249
594 Lennar Corp., Class A 27,383
115 M.D.C. Holdings, Inc. 2,799
131 Meritage Homes Corp. (a) 4,918
6 NVR, Inc. (a) 10,682
575 PulteGroup, Inc. 11,207
35 Tempur Sealy International,
Inc. (a) 1,936
292 Toll Brothers, Inc. (a) 7,858
129 TopBuild Corp. (a) 4,670
81 TRI Pointe Group, Inc. (a) 957
16 Tupperware Brands Corp. 900
40 Whirlpool Corp. 6,665
--------------
158,150
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.6%
117 Central Garden & Pet Co.,
Class A (a) $ 2,540
78 Church & Dwight Co., Inc. 8,025
275 HRG Group, Inc. (a) 3,776
107 Kimberly-Clark Corp. 14,710
87 Procter & Gamble (The) Co. 7,366
79 Spectrum Brands Holdings, Inc. 9,426
18 WD-40 Co. 2,114
--------------
47,957
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.3%
547 AES (The) Corp. 6,826
568 Calpine Corp. (a) 8,378
333 Dynegy, Inc. (a) 5,741
46 Ormat Technologies, Inc. 2,013
425 Talen Energy Corp. (a) 5,759
--------------
28,717
--------------
INDUSTRIAL CONGLOMERATES -- 0.1%
65 Carlisle Cos., Inc. 6,869
--------------
INSURANCE -- 5.5%
114 Aflac, Inc. 8,226
17 Alleghany Corp. (a) 9,343
62 Allied World Assurance Co.
Holdings AG 2,179
213 Allstate (The) Corp. 14,899
303 Ambac Financial Group, Inc. (a) 4,987
228 American Equity Investment Life
Holding Co. 3,249
61 American Financial Group, Inc. 4,510
266 American International Group, Inc. 14,069
56 American National Insurance Co. 6,336
18 AMERISAFE, Inc. 1,102
61 Arch Capital Group Ltd. (a) 4,392
91 Argo Group International Holdings
Ltd. 4,723
145 Arthur J. Gallagher & Co. 6,902
226 Aspen Insurance Holdings Ltd. 10,482
425 Assured Guaranty Ltd. 10,782
194 Axis Capital Holdings Ltd. 10,670
241 Brown & Brown, Inc. 9,030
481 CNO Financial Group, Inc. 8,398
136 Employers Holdings, Inc. 3,947
132 Endurance Specialty Holdings Ltd. 8,865
24 Enstar Group Ltd. (a) 3,888
55 Everest Re Group Ltd. 10,047
31 FBL Financial Group, Inc., Class A 1,881
226 First American Financial Corp. 9,090
635 FNF Group 23,813
119 Hanover Insurance Group (The),
Inc. 10,070
311 Hartford Financial Services Group
(The), Inc. 13,802
60 Horace Mann Educators Corp. 2,027
36 Infinity Property & Casualty Corp. 2,904
30 James River Group Holdings Ltd. 1,019
97 Kemper Corp. 3,005
Page 16 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
549 Lincoln National Corp. $ 21,285
370 Maiden Holdings Ltd. 4,529
8 Markel Corp. (a) 7,622
354 Marsh & McLennan Cos., Inc. 24,235
541 MBIA, Inc. (a) 3,695
327 MetLife, Inc. 13,024
177 National General Holdings Corp. 3,791
17 National Western Life Group, Inc.,
Class A 3,320
23 Navigators Group (The), Inc. 2,115
353 Old Republic International Corp. 6,809
43 Primerica, Inc. 2,461
364 Principal Financial Group, Inc. 14,964
43 ProAssurance Corp. 2,303
397 Prudential Financial, Inc. 28,322
67 Reinsurance Group of America,
Inc. 6,498
72 RenaissanceRe Holdings Ltd. 8,456
129 RLI Corp. 8,873
105 Selective Insurance Group, Inc. 4,012
130 State Auto Financial Corp. 2,848
119 Torchmark Corp. 7,357
246 Travelers (The) Cos., Inc. 29,284
109 United Fire Group, Inc. 4,625
278 Unum Group 8,838
182 Validus Holdings Ltd. 8,843
115 W. R. Berkley Corp. 6,891
8 White Mountains Insurance Group
Ltd. 6,736
195 XL Group PLC 6,495
--------------
476,868
--------------
INTERNET & CATALOG RETAIL -- 0.4%
36 Amazon.com, Inc. (a) 25,762
18 HSN, Inc. 881
284 Liberty Interactive Corp.
Class A (a) 7,205
46 Nutrisystem, Inc. 1,167
89 Wayfair, Inc., Class A (a) (b) 3,471
--------------
38,486
--------------
INTERNET SOFTWARE & SERVICES
-- 1.0%
19 Alphabet, Inc., Class A (a) 13,367
53 Cimpress N.V. (a) 4,901
29 Cornerstone OnDemand, Inc. (a) 1,104
11 CoStar Group, Inc. (a) 2,405
314 Facebook, Inc., Class A (a) 35,884
46 IAC/InterActiveCorp 2,590
108 inContact, Inc. (a) 1,496
499 Rackspace Hosting, Inc. (a) 10,409
36 Stamps.com, Inc. (a) 3,147
97 VeriSign, Inc. (a) 8,387
76 WebMD Health Corp. (a) 4,416
--------------
88,106
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
IT SERVICES -- 2.9%
249 Accenture PLC, Class A $ 28,209
71 Booz Allen Hamilton Holding
Corp. 2,104
73 Broadridge Financial Solutions,
Inc. 4,760
27 CACI International, Inc.,
Class A (a) 2,441
80 Cardtronics, Inc., Class A (a) 3,185
313 Computer Sciences Corp. 15,540
172 Convergys Corp. 4,300
124 CoreLogic, Inc. (a) 4,771
106 CSG Systems International, Inc. 4,273
95 DST Systems, Inc. 11,061
58 EPAM Systems, Inc. (a) 3,730
58 Euronet Worldwide, Inc. (a) 4,013
92 ExlService Holdings, Inc. (a) 4,822
350 Fiserv, Inc. (a) 38,055
48 Gartner, Inc. (a) 4,676
396 Genpact Ltd. (a) 10,629
132 Global Payments, Inc. 9,422
47 International Business Machines
Corp. 7,134
76 Jack Henry & Associates, Inc. 6,633
128 Leidos Holdings, Inc. 6,127
90 ManTech International Corp.,
Class A 3,404
41 MAXIMUS, Inc. 2,270
194 NeuStar, Inc., Class A (a) 4,561
44 Perficient, Inc. (a) 894
149 Sabre Corp. 3,992
95 Sykes Enterprises, Inc. (a) 2,751
86 Syntel, Inc. (a) 3,892
103 TeleTech Holdings, Inc. 2,794
136 Total System Services, Inc. 7,223
200 Vantiv, Inc., Class A (a) 11,320
372 Western Union (The) Co. 7,135
2,572 Xerox Corp. 24,408
--------------
250,529
--------------
LEISURE PRODUCTS -- 0.6%
45 Brunswick Corp. 2,039
358 Hasbro, Inc. 30,069
248 Nautilus, Inc. (a) 4,424
66 Polaris Industries, Inc. 5,396
180 Smith & Wesson Holding Corp. (a) 4,892
56 Sturm Ruger & Co., Inc. 3,585
--------------
50,405
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.6%
31 Bio-Rad Laboratories, Inc.,
Class A (a) 4,434
23 Bio-Techne Corp. 2,594
384 Bruker Corp. 8,732
43 Cambrex Corp. (a) 2,224
57 Charles River Laboratories
International, Inc. (a) 4,699
See Notes to Financial Statements Page 17
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
LIFE SCIENCES TOOLS & SERVICES
(CONTINUED)
70 INC Research Holdings, Inc.,
Class A (a) $ 2,669
49 Luminex Corp. (a) 991
12 Mettler-Toledo International,
Inc. (a) 4,379
338 Pacific Biosciences of California,
Inc. (a) 2,378
34 PAREXEL International Corp. (a) 2,138
44 PerkinElmer, Inc. 2,306
201 PRA Health Sciences, Inc. (a) 8,394
33 Quintiles Transnational Holdings,
Inc. (a) 2,156
159 VWR Corp. (a) 4,595
--------------
52,689
--------------
MACHINERY -- 3.2%
217 AGCO Corp. 10,227
69 Alamo Group, Inc. 4,552
76 Albany International Corp.,
Class A 3,035
80 Allison Transmission Holdings,
Inc. 2,258
69 Altra Industrial Motion Corp. 1,862
117 American Railcar Industries, Inc. 4,618
21 Astec Industries, Inc. 1,179
109 Barnes Group, Inc. 3,610
120 Briggs & Stratton Corp. 2,542
17 CLARCOR, Inc. 1,034
301 Colfax Corp. (a) 7,965
160 Crane Co. 9,075
326 Cummins, Inc. 36,656
67 Donaldson Co., Inc. 2,302
335 Dover Corp. 23,222
49 ESCO Technologies, Inc. 1,957
48 Flowserve Corp. 2,168
59 Franklin Electric Co., Inc. 1,950
37 Gorman-Rupp (The) Co. 1,014
128 Graco, Inc. 10,111
173 Greenbrier (The) Cos., Inc. (b) 5,040
32 Hillenbrand, Inc. 961
43 Hyster-Yale Materials Handling,
Inc. 2,558
52 IDEX Corp. 4,269
292 ITT, Inc. 9,338
85 John Bean Technologies Corp. 5,204
29 Lydall, Inc. (a) 1,118
1,105 Manitowoc (The) Co., Inc. 6,022
40 Middleby (The) Corp. (a) 4,610
65 Mueller Industries, Inc. 2,072
291 Mueller Water Products, Inc.,
Class A 3,323
28 Nordson Corp. 2,341
94 Oshkosh Corp. 4,485
656 PACCAR, Inc. 34,027
50 Proto Labs, Inc. (a) 2,878
52 RBC Bearings, Inc. (a) 3,770
47 Rexnord Corp. (a) 923
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MACHINERY (CONTINUED)
191 SPX FLOW, Inc. (a) $ 4,979
68 Stanley Black & Decker, Inc. 7,563
29 Sun Hydraulics Corp. 861
125 Toro (The) Co. 11,025
588 Trinity Industries, Inc. 10,919
362 Wabash National Corp. (a) 4,597
20 WABCO Holdings, Inc. (a) 1,831
54 Wabtec Corp. 3,793
83 Woodward, Inc. 4,784
105 Xylem, Inc. 4,688
--------------
279,316
--------------
MARINE -- 0.1%
179 Kirby Corp. (a) 11,168
48 Matson, Inc. 1,550
--------------
12,718
--------------
MEDIA -- 2.2%
103 AMC Entertainment Holdings,
Inc., Class A 2,844
2 Cable One, Inc. 1,023
95 Charter Communications, Inc.,
Class A (a) 21,721
120 Cinemark Holdings, Inc. 4,375
235 Comcast Corp., Class A 15,320
1,253 Discovery Communications, Inc.,
Class A (a) 31,613
153 DreamWorks Animation SKG,
Inc., Class A (a) 6,253
257 Entravision Communications
Corp., Class A 1,727
316 Gannett Co., Inc. 4,364
59 John Wiley & Sons, Inc., Class A 3,079
111 Liberty Broadband Corp.,
Class C (a) 6,660
96 Live Nation Entertainment,
Inc. (a) 2,256
60 Meredith Corp. 3,115
63 National CineMedia, Inc. 975
287 New Media Investment Group, Inc. 5,186
674 News Corp., Class A 7,650
136 Regal Entertainment Group,
Class A (b) 2,997
128 Scholastic Corp. 5,070
131 Scripps Networks Interactive,
Inc., Class A 8,157
93 Sinclair Broadcast Group, Inc.,
Class A 2,777
367 TEGNA, Inc. 8,503
198 Time Warner, Inc. 14,561
281 Tribune Media Co., Class A 11,010
522 Viacom, Inc., Class B 21,647
163 World Wrestling Entertainment,
Inc., Class A 3,001
--------------
195,884
--------------
METALS & MINING -- 0.7%
1,158 AK Steel Holding Corp. (a) 5,396
749 Alcoa, Inc. 6,943
Page 18 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
METALS & MINING (CONTINUED)
84 Carpenter Technology Corp. $ 2,766
407 Century Aluminum Co. (a) 2,576
226 Commercial Metals Co. 3,820
540 Newmont Mining Corp. 21,125
156 Reliance Steel & Aluminum Co. 11,997
19 Royal Gold, Inc. 1,368
54 Worthington Industries, Inc. 2,284
--------------
58,275
--------------
MULTILINE RETAIL -- 1.3%
63 Big Lots, Inc. 3,157
56 Dillard's, Inc., Class A 3,394
435 Dollar Tree, Inc. (a) 40,994
770 Kohl's Corp. 29,198
488 Macy's, Inc. 16,402
262 Target Corp. 18,293
--------------
111,438
--------------
MULTI-UTILITIES -- 2.2%
430 Ameren Corp. 23,039
94 Avista Corp. 4,211
676 CMS Energy Corp. 31,001
187 Consolidated Edison, Inc. 15,042
79 DTE Energy Co. 7,831
274 NiSource, Inc. 7,267
139 NorthWestern Corp. 8,767
761 Public Service Enterprise Group,
Inc. 35,470
409 SCANA Corp. 30,945
69 Sempra Energy 7,867
90 Unitil Corp. 3,840
128 Vectren Corp. 6,742
119 WEC Energy Group, Inc. 7,771
--------------
189,793
--------------
OIL, GAS & CONSUMABLE FUELS
-- 3.5%
464 Alon USA Energy, Inc. 3,007
87 Antero Resources Corp. (a) 2,260
108 Callon Petroleum Co. (a) 1,213
301 Chevron Corp. 31,554
356 ConocoPhillips 15,521
169 CONSOL Energy, Inc. 2,719
142 Continental Resources, Inc. (a) 6,428
412 CVR Energy, Inc. 6,386
251 Delek US Holdings, Inc. 3,316
28 Diamondback Energy, Inc. (a) 2,554
258 Exxon Mobil Corp. 24,185
240 Green Plains, Inc. 4,733
305 HollyFrontier Corp. 7,250
773 Marathon Oil Corp. 11,603
965 Marathon Petroleum Corp. 36,631
526 Oasis Petroleum, Inc. (a) 4,913
286 Parsley Energy, Inc., Class A (a) 7,739
130 PBF Energy, Inc., Class A 3,091
414 Phillips 66 32,847
271 QEP Resources, Inc. 4,778
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS
(CONTINUED)
69 Rice Energy, Inc. (a) $ 1,521
66 RSP Permian, Inc. (a) 2,303
171 SemGroup Corp., Class A 5,568
204 SM Energy Co. 5,508
32 Targa Resources Corp. 1,348
417 Tesoro Corp. 31,242
559 Valero Energy Corp. 28,509
370 Western Refining, Inc. 7,633
133 World Fuel Services Corp. 6,316
--------------
302,676
--------------
PAPER & FOREST PRODUCTS -- 0.3%
231 Boise Cascade Co. (a) 5,302
79 Clearwater Paper Corp. (a) 5,164
345 KapStone Paper and Packaging
Corp. 4,488
15 Neenah Paper, Inc. 1,086
231 P.H. Glatfelter Co. 4,518
152 Schweitzer-Mauduit International,
Inc. 5,363
--------------
25,921
--------------
PERSONAL PRODUCTS -- 0.5%
138 Coty, Inc., Class A (b) 3,587
304 Estee Lauder (The) Cos., Inc.,
Class A 27,670
140 Herbalife Ltd. (a) 8,194
75 Nu Skin Enterprises, Inc., Class A 3,464
105 Revlon, Inc., Class A (a) 3,379
8 USANA Health Sciences, Inc. (a) 892
--------------
47,186
--------------
PHARMACEUTICALS -- 0.2%
161 Catalent, Inc. (a) 3,701
228 Innoviva, Inc. (b) 2,401
70 Nektar Therapeutics (a) 996
62 Omeros Corp. (a) 652
72 Prestige Brands Holdings, Inc. (a) 3,989
125 Supernus Pharmaceuticals, Inc. (a) 2,546
204 Theravance Biopharma, Inc. (a) 4,629
--------------
18,914
--------------
PROFESSIONAL SERVICES -- 0.9%
188 Equifax, Inc. 24,139
38 Exponent, Inc. 2,220
81 FTI Consulting, Inc. (a) 3,295
49 Huron Consulting Group, Inc. (a) 2,961
139 ICF International, Inc. (a) 5,685
250 Kelly Services, Inc., Class A 4,742
106 ManpowerGroup, Inc. 6,820
193 Mistras Group, Inc. (a) 4,607
303 Navigant Consulting, Inc. (a) 4,893
26 On Assignment, Inc. (a) 961
184 Resources Connection, Inc. 2,720
92 Robert Half International, Inc. 3,511
425 RPX Corp. (a) 3,897
183 TrueBlue, Inc. (a) 3,462
See Notes to Financial Statements Page 19
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
PROFESSIONAL SERVICES (CONTINUED)
57 WageWorks, Inc. (a) $ 3,409
--------------
77,322
--------------
REAL ESTATE INVESTMENT TRUSTS
-- 5.7%
27 Acadia Realty Trust 959
99 Agree Realty Corp. 4,776
24 Alexandria Real Estate Equities,
Inc. 2,485
137 American Campus Communities,
Inc. 7,243
116 American Capital Agency Corp. 2,299
135 American Homes 4 Rent, Class A 2,765
70 American Tower Corp. 7,953
51 Apartment Investment &
Management Co., Class A 2,252
326 Apple Hospitality REIT, Inc. 6,132
750 Ashford Hospitality Trust, Inc. 4,028
36 Blackstone Mortgage Trust, Inc.,
Class A 996
68 Brandywine Realty Trust 1,142
84 Brixmor Property Group, Inc. 2,223
51 Camden Property Trust 4,509
387 Capstead Mortgage Corp. 3,754
322 CBL & Associates Properties, Inc. 2,998
36 Chesapeake Lodging Trust 837
282 Chimera Investment Corp. 4,427
77 Colony Starwood Homes 2,342
41 CoreSite Realty Corp. 3,636
73 Corporate Office Properties Trust 2,159
269 Corrections Corp. of America 9,420
184 Cousins Properties, Inc. 1,914
259 CubeSmart 7,998
42 CyrusOne, Inc. 2,338
109 DCT Industrial Trust, Inc. 5,236
121 DDR Corp. 2,195
378 DiamondRock Hospitality Co. 3,413
243 Digital Realty Trust, Inc. 26,485
71 Douglas Emmett, Inc. 2,522
96 Duke Realty Corp. 2,559
94 DuPont Fabros Technology, Inc. 4,469
16 EastGroup Properties, Inc. 1,103
46 Education Realty Trust, Inc. 2,122
97 EPR Properties 7,826
43 Equinix, Inc. 16,672
229 Equity Commonwealth (a) 6,671
118 Equity LifeStyle Properties, Inc. 9,446
150 Equity One, Inc. 4,827
230 Extra Space Storage, Inc. 21,284
42 First Industrial Realty Trust,
Inc. 1,168
510 Forest City Realty Trust, Inc.,
Class A 11,378
55 GEO Group (The), Inc. 1,880
193 Getty Realty Corp. 4,140
510 Gramercy Property Trust 4,702
209 Healthcare Realty Trust, Inc. 7,313
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS
(CONTINUED)
220 Healthcare Trust of America, Inc.,
Class A $ 7,115
135 Highwoods Properties, Inc. 7,128
324 Hospitality Properties Trust 9,331
33 Hudson Pacific Properties, Inc. 963
157 Invesco Mortgage Capital, Inc. 2,149
127 Iron Mountain, Inc. 5,058
499 Kimco Realty Corp. 15,659
104 Kite Realty Group Trust 2,915
70 Lamar Advertising Co., Class A 4,641
189 LaSalle Hotel Properties 4,457
445 Lexington Realty Trust 4,499
64 Liberty Property Trust 2,542
21 LTC Properties, Inc. 1,086
41 Mack-Cali Realty Corp. 1,107
332 Medical Properties Trust, Inc. 5,050
698 MFA Financial, Inc. 5,074
84 Mid-America Apartment
Communities, Inc. 8,938
161 Monmouth Real Estate Investment
Corp. 2,135
97 Monogram Residential Trust, Inc. 990
29 National Health Investors, Inc. 2,178
140 National Retail Properties, Inc. 7,241
102 Outfront Media, Inc. 2,465
281 PennyMac Mortgage Investment
Trust 4,561
206 Physicians Realty Trust 4,328
106 Piedmont Office Realty Trust,
Inc., Class A 2,283
36 Post Properties, Inc. 2,198
19 PS Business Parks, Inc. 2,016
104 Public Storage 26,581
20 QTS Realty Trust, Inc., Class A 1,120
106 Ramco-Gershenson Properties
Trust 2,079
230 Realty Income Corp. 15,953
293 Redwood Trust, Inc. 4,046
58 Regency Centers Corp. 4,856
143 Retail Opportunity Investments
Corp. 3,099
136 Retail Properties of America,
Inc., Class A 2,298
158 Rexford Industrial Realty, Inc. 3,332
209 RLJ Lodging Trust 4,483
166 Select Income REIT 4,314
361 Senior Housing Properties Trust 7,520
55 Sovran Self Storage, Inc. 5,771
383 Spirit Realty Capital, Inc. 4,891
94 STAG Industrial, Inc. 2,238
80 Summit Hotel Properties, Inc. 1,059
90 Sun Communities, Inc. 6,898
342 Sunstone Hotel Investors, Inc. 4,128
118 Tanger Factory Outlet Centers,
Inc. 4,741
122 Terreno Realty Corp. 3,156
1,356 Two Harbors Investment Corp. 11,607
Page 20 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS
(CONTINUED)
34 Universal Health Realty Income
Trust $ 1,944
74 Urban Edge Properties 2,210
46 Urstadt Biddle Properties, Inc.,
Class A 1,140
243 VEREIT, Inc. 2,464
66 Washington Real Estate Investment
Trust 2,076
57 Weingarten Realty Investors 2,327
202 WP GLIMCHER, Inc. 2,260
306 Xenia Hotels & Resorts, Inc. 5,135
--------------
500,829
--------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.1%
92 Jones Lang LaSalle, Inc. 8,966
119 Realogy Holdings Corp. (a) 3,453
--------------
12,419
--------------
ROAD & RAIL -- 1.5%
6 AMERCO 2,247
222 ArcBest Corp. 3,608
35 Avis Budget Group, Inc. (a) 1,128
1,115 CSX Corp. 29,079
137 Genesee & Wyoming, Inc.,
Class A (a) 8,076
206 Heartland Express, Inc. 3,582
613 Hertz Holdings, Inc. (a) 6,786
51 J.B. Hunt Transport Services, Inc. 4,127
76 Kansas City Southern 6,847
146 Knight Transportation, Inc. 3,881
15 Landstar System, Inc. 1,030
256 Marten Transport Ltd. 5,069
124 Old Dominion Freight Line,
Inc. (a) 7,478
166 Ryder System, Inc. 10,149
170 Saia, Inc. (a) 4,274
154 Swift Transportation Co. (a) 2,373
271 Union Pacific Corp. 23,645
176 Werner Enterprises, Inc. 4,043
--------------
127,422
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.5%
1,007 Advanced Micro Devices, Inc. (a) 5,176
812 Amkor Technology, Inc. (a) 4,669
1,355 Applied Materials, Inc. 32,479
92 Brooks Automation, Inc. 1,032
47 Cabot Microelectronics Corp. 1,990
79 Cirrus Logic, Inc. (a) 3,064
190 Diodes, Inc. (a) 3,570
211 Entegris, Inc. (a) 3,053
157 First Solar, Inc. (a) 7,611
143 Inphi Corp. (a) 4,580
105 Integrated Device Technology,
Inc. (a) 2,114
1,109 Intel Corp. 36,375
174 Lam Research Corp. 14,627
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (CONTINUED)
337 Lattice Semiconductor Corp. (a) $ 1,803
44 MACOM Technology Solutions
Holdings, Inc. (a) 1,451
418 Marvell Technology Group Ltd. 3,984
259 MaxLinear, Inc., Class A (a) 4,657
3,427 Micron Technology, Inc. (a) 47,156
225 Microsemi Corp. (a) 7,353
76 MKS Instruments, Inc. 3,273
45 Monolithic Power Systems, Inc. 3,074
341 NeoPhotonics Corp. (a) 3,250
1,007 NVIDIA Corp. 47,339
898 ON Semiconductor Corp. (a) 7,920
276 Photronics, Inc. (a) 2,459
19 Power Integrations, Inc. 951
43 Qorvo, Inc. (a) 2,376
561 QUALCOMM, Inc. 30,053
209 Rambus, Inc. (a) 2,525
81 Synaptics, Inc. (a) 4,354
399 Teradyne, Inc. 7,856
--------------
302,174
--------------
SOFTWARE -- 2.1%
190 8x8, Inc. (a) 2,776
77 Adobe Systems, Inc. (a) 7,376
60 Aspen Technology, Inc. (a) 2,414
103 Blackbaud, Inc. 6,994
63 Bottomline Technologies (de),
Inc. (a) 1,356
699 CA, Inc. 22,948
274 Cadence Design Systems, Inc. (a) 6,658
46 CDK Global, Inc. 2,553
183 Citrix Systems, Inc. (a) 14,657
44 CommVault Systems, Inc. (a) 1,900
117 Ebix, Inc. 5,604
53 Ellie Mae, Inc. (a) 4,857
101 Fair Isaac Corp. 11,414
154 Gigamon, Inc. (a) 5,758
69 Intuit, Inc. 7,701
141 Mentor Graphics Corp. 2,998
390 Microsoft Corp. 19,956
346 Nuance Communications, Inc. (a) 5,408
27 Paycom Software, Inc. (a) 1,167
29 Paylocity Holding Corp. (a) 1,253
75 Pegasystems, Inc. 2,021
92 RealPage, Inc. (a) 2,054
209 Rubicon Project (The), Inc. (a) 2,853
324 Silver Spring Networks, Inc. (a) 3,937
390 Symantec Corp. 8,011
89 Synopsys, Inc. (a) 4,813
286 Take-Two Interactive Software,
Inc. (a) 10,845
22 Ultimate Software Group (The),
Inc. (a) 4,626
82 VMware, Inc., Class A (a) 4,692
28 Workday, Inc., Class A (a) 2,091
--------------
181,691
--------------
See Notes to Financial Statements Page 21
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SPECIALTY RETAIL -- 5.4%
191 Aaron's, Inc. $ 4,181
61 Abercrombie & Fitch Co., Class A 1,086
646 American Eagle Outfitters, Inc. 10,291
48 Asbury Automotive Group, Inc. (a) 2,532
184 AutoNation, Inc. (a) 8,644
36 AutoZone, Inc. (a) 28,578
232 Barnes & Noble, Inc. 2,633
217 Bed Bath & Beyond, Inc. 9,379
1,106 Best Buy Co., Inc. 33,844
85 Buckle (The), Inc. 2,209
191 Burlington Stores, Inc. (a) 12,742
133 Cabela's, Inc. (a) 6,658
34 Caleres, Inc. 823
74 Cato (The) Corp., Class A 2,791
11 Children's Place (The), Inc. 882
169 CST Brands, Inc. 7,281
184 Dick's Sporting Goods, Inc. 8,291
104 DSW, Inc., Class A 2,203
179 Express, Inc. (a) 2,597
45 Finish Line (The), Inc., Class A 909
116 Five Below, Inc. (a) 5,384
250 Francesca's Holdings Corp. (a) 2,763
339 GameStop Corp., Class A 9,011
976 Gap (The), Inc. 20,711
53 Genesco, Inc. (a) 3,408
90 GNC Holdings, Inc., Class A 2,186
49 Group 1 Automotive, Inc. 2,419
204 Guess?, Inc. 3,070
107 Hibbett Sports, Inc. (a) 3,723
215 Home Depot (The), Inc. 27,453
11 Lithia Motors, Inc., Class A 782
189 Lowe's Cos., Inc. 14,963
23 Mattress Firm Holding Corp.
(a) (b) 772
385 Michaels (The) Cos., Inc. (a) 10,949
27 Monro Muffler Brake, Inc. 1,716
105 Murphy USA, Inc. (a) 7,787
79 O'Reilly Automotive, Inc. (a) 21,417
26 Outerwall, Inc. 1,092
227 Penske Automotive Group, Inc. 7,141
546 Pier 1 Imports, Inc. 2,806
620 Ross Stores, Inc. 35,148
66 Sally Beauty Holdings, Inc. (a) 1,941
148 Select Comfort Corp. (a) 3,164
259 Sonic Automotive, Inc., Class A 4,431
976 Staples, Inc. 8,413
59 Tiffany & Co. 3,578
193 Tile Shop Holdings, Inc. (a) 3,837
366 TJX (The) Cos., Inc. 28,266
238 Tractor Supply Co. 21,701
185 Ulta Salon, Cosmetics &
Fragrance, Inc. (a) 45,073
260 Urban Outfitters, Inc. (a) 7,150
155 Vitamin Shoppe, Inc. (a) 4,738
157 Williams-Sonoma, Inc. 8,184
--------------
473,731
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 1.3%
263 Apple, Inc. $ 25,143
2,024 Hewlett Packard Enterprise Co. 36,978
29 Lexmark International, Inc.,
Class A 1,095
237 NetApp, Inc. 5,828
187 Seagate Technology PLC 4,555
56 Super Micro Computer, Inc. (a) 1,391
760 Western Digital Corp. 35,918
--------------
110,908
--------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.8%
102 Carter's, Inc. 10,860
358 Coach, Inc. 14,585
72 Columbia Sportswear Co. 4,143
80 Deckers Outdoor Corp. (a) 4,602
108 Fossil Group, Inc. (a) 3,081
20 G-III Apparel Group Ltd. (a) 914
139 Movado Group, Inc. 3,013
109 PVH Corp. 10,271
112 Ralph Lauren Corp. 10,037
212 Skechers U.S.A., Inc., Class A (a) 6,301
26 Steven Madden Ltd. (a) 889
94 Vera Bradley, Inc. (a) 1,332
156 Wolverine World Wide, Inc. 3,170
--------------
73,198
--------------
THRIFTS & MORTGAGE FINANCE
-- 0.5%
70 Beneficial Bancorp, Inc. (a) 890
72 Capitol Federal Financial, Inc. 1,004
190 EverBank Financial Corp. 2,823
134 Flagstar Bancorp, Inc. (a) 3,271
77 Kearny Financial Corp. 969
39 LendingTree, Inc. (a) (b) 3,445
624 MGIC Investment Corp. (a) 3,713
290 Nationstar Mortgage Holdings,
Inc. (a) 3,265
116 Northfield Bancorp, Inc. 1,720
169 Oritani Financial Corp. 2,702
95 Provident Financial Services, Inc. 1,866
386 Radian Group, Inc. 4,022
124 TFS Financial Corp. 2,135
158 TrustCo Bank Corp. NY 1,013
76 United Financial Bancorp, Inc. 987
79 Walker & Dunlop, Inc. (a) 1,800
127 Washington Federal, Inc. 3,081
29 WSFS Financial Corp. 934
--------------
39,640
--------------
TOBACCO -- 0.3%
229 Altria Group, Inc. 15,792
73 Philip Morris International, Inc. 7,426
84 Universal Corp. 4,850
94 Vector Group Ltd. 2,107
--------------
30,175
--------------
Page 22 See Notes to Financial Statements
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TRADING COMPANIES &
DISTRIBUTORS -- 1.1%
67 Air Lease Corp. $ 1,794
43 Aircastle Ltd. 841
66 Applied Industrial Technologies,
Inc. 2,979
93 Beacon Roofing Supply, Inc. (a) 4,229
732 Fastenal Co. 32,494
101 GATX Corp. 4,441
109 H&E Equipment Services, Inc. 2,074
260 HD Supply Holdings, Inc. (a) 9,053
67 Kaman Corp. 2,849
56 MSC Industrial Direct Co., Inc.,
Class A 3,951
262 Rush Enterprises, Inc., Class A
(a) 5,646
35 United Rentals, Inc. (a) 2,349
103 Veritiv Corp. (a) 3,871
80 Watsco, Inc. 11,255
88 WESCO International, Inc. (a) 4,531
--------------
92,357
--------------
WATER UTILITIES -- 0.6%
521 American Water Works Co., Inc. 44,030
203 Aqua America, Inc. 7,239
36 California Water Service Group 1,257
79 SJW Corp. 3,111
--------------
55,637
--------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.7%
143 Shenandoah Telecommunications
Co. 5,586
8,248 Sprint Corp. (a) 37,363
159 Telephone and Data Systems, Inc. 4,716
187 T-Mobile US, Inc. (a) 8,092
105 United States Cellular Corp. (a) 4,123
--------------
59,880
--------------
TOTAL COMMON STOCKS -- 99.8% 8,728,747
(Cost $8,261,397) --------------
MONEY MARKET FUNDS -- 0.4%
4,027 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.26% (c) (d) 4,027
34,728 Morgan Stanley Institutional
Liquidity Fund - Treasury
Portfolio - Institutional
Class - 0.26% (c) 34,728
--------------
TOTAL MONEY MARKET FUNDS
-- 0.4% 38,755
(Cost $38,755) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.1%
$ 2,408 JPMorgan Chase & Co., 0.30% (c),
dated 06/30/16, due 07/01/16,
with a maturity value of
$2,408. Collateralized by U.S.
Treasury Notes, interest rates
of 2.000% to 2.625%, due
11/15/20 to 11/30/20. The value
of the collateral including
accrued interest is
$2,461. (d) $ 2,408
9,057 RBC Capital Markets LLC,
0.35% (c), dated 06/30/16, due
07/01/16, with a maturity value
of $9,057. Collateralized by
U.S. Treasury Notes, interest
rate of 1.500%, due 08/31/18 to
05/31/20. The value of the
collateral including accrued
interest is $9,261. (d) 9,057
--------------
TOTAL REPURCHASE AGREEMENTS
-- 0.1% 11,465
(Cost $11,465) --------------
TOTAL INVESTMENTS -- 100.3% 8,778,967
(Cost $8,311,617) (e)
NET OTHER ASSETS AND
LIABILITIES -- (0.3)% (28,221)
--------------
NET ASSETS -- 100.0% $ 8,750,746
==============
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2E - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $15,345 and the total value of the collateral held by the
Fund is $15,492.
(c) Interest rate shown reflects yield as of June 30, 2016.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $836,645 and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over value was $369,295.
See Notes to Financial Statements Page 23
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 8,728,747 $ -- $ --
Money Market Funds 38,755 -- --
Repurchase
Agreements -- 11,465 --
-----------------------------------------------
Total Investments $ 8,767,502 $ 11,465 $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
---------------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2D - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the Statements
of Assets and Liabilities(1) $ 15,345
Non-cash Collateral(2) (15,345)
--------------
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 June 30, 2016, 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) $ 11,465
Non-cash Collateral(4) (11,465)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At June 30, 2016, the value of the collateral received from each seller
exceeded the value of the repurchase agreements.
Page 24 See Notes to Financial Statements
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS -- 99.8%
AEROSPACE & DEFENSE -- 2.6%
116 Boeing (The) Co. $ 15,065
57 General Dynamics Corp. 7,937
149 Honeywell International, Inc. 17,332
15 L-3 Communications Holdings, Inc. 2,200
51 Lockheed Martin Corp. 12,657
35 Northrop Grumman Corp. 7,780
58 Raytheon Co. 7,885
25 Rockwell Collins, Inc. 2,128
52 Textron, Inc. 1,901
10 TransDigm Group, Inc. (a) 2,637
151 United Technologies Corp. 15,485
--------------
93,007
--------------
AIR FREIGHT & LOGISTICS -- 0.7%
28 C.H. Robinson Worldwide, Inc. 2,079
35 Expeditors International of
Washington, Inc. 1,716
48 FedEx Corp. 7,285
134 United Parcel Service, Inc.,
Class B 14,435
--------------
25,515
--------------
AIRLINES -- 0.5%
24 Alaska Air Group, Inc. 1,399
117 American Airlines Group, Inc. 3,312
151 Delta Air Lines, Inc. 5,501
123 Southwest Airlines Co. 4,823
65 United Continental Holdings,
Inc. (a) 2,668
--------------
17,703
--------------
AUTO COMPONENTS -- 0.3%
42 BorgWarner, Inc. 1,240
54 Delphi Automotive PLC 3,380
52 Goodyear Tire & Rubber (The) Co. 1,334
125 Johnson Controls, Inc. 5,533
--------------
11,487
--------------
AUTOMOBILES -- 0.5%
754 Ford Motor Co. 9,478
272 General Motors Co. 7,697
36 Harley-Davidson, Inc. 1,631
--------------
18,806
--------------
BANKS -- 5.2%
1,998 Bank of America Corp. 26,514
154 BB&T Corp. 5,484
570 Citigroup, Inc. 24,162
102 Citizens Financial Group, Inc. 2,038
34 Comerica, Inc. 1,398
152 Fifth Third Bancorp 2,674
154 Huntington Bancshares, Inc. 1,377
710 JPMorgan Chase & Co. 44,119
162 KeyCorp 1,790
31 M&T Bank Corp. 3,665
60 People's United Financial, Inc. 880
97 PNC Financial Services Group
(The), Inc. 7,895
249 Regions Financial Corp. 2,119
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
BANKS (CONTINUED)
98 SunTrust Banks, Inc. $ 4,026
316 U.S. Bancorp 12,744
894 Wells Fargo & Co. 42,313
40 Zions Bancorporation 1,005
--------------
184,203
--------------
BEVERAGES -- 2.3%
19 Brown-Forman Corp., Class B 1,895
754 Coca-Cola (The) Co. 34,179
34 Constellation Brands, Inc.,
Class A 5,624
36 Dr Pepper Snapple Group, Inc. 3,479
36 Molson Coors Brewing Co.,
Class B 3,641
27 Monster Beverage Corp. (a) 4,339
280 PepsiCo, Inc. 29,663
--------------
82,820
--------------
BIOTECHNOLOGY -- 2.9%
312 AbbVie, Inc. 19,316
44 Alexion Pharmaceuticals, Inc. (a) 5,138
146 Amgen, Inc. 22,214
42 Biogen, Inc. (a) 10,156
151 Celgene Corp. (a) 14,893
258 Gilead Sciences, Inc. 21,522
15 Regeneron Pharmaceuticals,
Inc. (a) 5,239
48 Vertex Pharmaceuticals, Inc. (a) 4,129
--------------
102,607
--------------
BUILDING PRODUCTS -- 0.1%
19 Allegion PLC 1,319
30 Fortune Brands Home & Security,
Inc. 1,739
65 Masco Corp. 2,011
--------------
5,069
--------------
CAPITAL MARKETS -- 1.8%
10 Affiliated Managers Group,
Inc. (a) 1,408
33 Ameriprise Financial, Inc. 2,965
208 Bank of New York Mellon (The)
Corp. 8,081
24 BlackRock, Inc. 8,221
233 Charles Schwab (The) Corp. 5,897
55 E*TRADE Financial Corp. (a) 1,292
72 Franklin Resources, Inc. 2,403
76 Goldman Sachs Group (The), Inc. 11,292
81 Invesco Ltd. 2,069
21 Legg Mason, Inc. 619
296 Morgan Stanley 7,690
42 Northern Trust Corp. 2,783
77 State Street Corp. 4,152
48 T. Rowe Price Group, Inc. 3,502
--------------
62,374
--------------
CHEMICALS -- 2.0%
38 Air Products and Chemicals, Inc. 5,398
45 CF Industries Holdings, Inc. 1,085
216 Dow Chemical (The) Co. 10,737
169 E.I. du Pont de Nemours and Co. 10,951
29 Eastman Chemical Co. 1,969
See Notes to Financial Statements Page 25
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CHEMICALS (CONTINUED)
52 Ecolab, Inc. $ 6,167
26 FMC Corp. 1,204
15 International Flavors &
Fragrances, Inc. 1,891
67 LyondellBasell Industries N.V.,
Class A 4,986
85 Monsanto Co. 8,790
68 Mosaic (The) Co. 1,780
52 PPG Industries, Inc. 5,416
55 Praxair, Inc. 6,182
15 Sherwin-Williams (The) Co. 4,405
--------------
70,961
--------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.4%
17 Cintas Corp. 1,668
37 Pitney Bowes, Inc. 659
46 Republic Services, Inc. 2,360
16 Stericycle, Inc. (a) 1,666
82 Tyco International PLC 3,493
80 Waste Management, Inc. 5,302
--------------
15,148
--------------
COMMUNICATIONS EQUIPMENT
-- 1.0%
974 Cisco Systems, Inc. 27,944
13 F5 Networks, Inc. (a) 1,480
24 Harris Corp. 2,003
68 Juniper Networks, Inc. 1,529
31 Motorola Solutions, Inc. 2,045
--------------
35,001
--------------
CONSTRUCTION & ENGINEERING
-- 0.1%
27 Fluor Corp. 1,331
24 Jacobs Engineering Group, Inc. (a) 1,195
29 Quanta Services, Inc. (a) 670
--------------
3,196
--------------
CONSTRUCTION MATERIALS -- 0.2%
12 Martin Marietta Materials, Inc. 2,304
26 Vulcan Materials Co. 3,129
--------------
5,433
--------------
CONSUMER FINANCE -- 0.7%
159 American Express Co. 9,661
99 Capital One Financial Corp. 6,287
80 Discover Financial Services 4,287
66 Navient Corp. 789
161 Synchrony Financial (a) 4,070
--------------
25,094
--------------
CONTAINERS & PACKAGING -- 0.3%
17 Avery Dennison Corp. 1,271
27 Ball Corp. 1,952
80 International Paper Co. 3,390
31 Owens-Illinois, Inc. (a) 558
38 Sealed Air Corp. 1,747
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
CONTAINERS & PACKAGING
(CONTINUED)
49 WestRock Co. $ 1,905
--------------
10,823
--------------
DISTRIBUTORS -- 0.1%
29 Genuine Parts Co. 2,936
59 LKQ Corp. (a) 1,871
--------------
4,807
--------------
DIVERSIFIED CONSUMER SERVICES
-- 0.0%
46 H&R Block, Inc. 1,058
--------------
DIVERSIFIED FINANCIAL SERVICES
-- 2.2%
363 Berkshire Hathaway, Inc.,
Class B (a) 52,559
65 CME Group, Inc. 6,331
23 Intercontinental Exchange, Inc. 5,887
64 Leucadia National Corp. 1,109
33 Moody's Corp. 3,092
22 Nasdaq, Inc. 1,423
51 S&P Global, Inc. 5,470
--------------
75,871
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.9%
1,190 AT&T, Inc. 51,420
105 CenturyLink, Inc. 3,046
226 Frontier Communications Corp. 1,117
56 Level 3 Communications, Inc. (a) 2,883
788 Verizon Communications, Inc. 44,002
--------------
102,468
--------------
ELECTRIC UTILITIES -- 2.2%
44 Alliant Energy Corp. 1,747
95 American Electric Power Co., Inc. 6,659
133 Duke Energy Corp. 11,410
63 Edison International 4,893
35 Entergy Corp. 2,847
61 Eversource Energy 3,654
178 Exelon Corp. 6,472
82 FirstEnergy Corp. 2,863
89 NextEra Energy, Inc. 11,606
95 PG&E Corp. 6,072
21 Pinnacle West Capital Corp. 1,702
130 PPL Corp. 4,907
177 Southern (The) Co. 9,493
98 Xcel Energy, Inc. 4,388
--------------
78,713
--------------
ELECTRICAL EQUIPMENT -- 0.5%
8 Acuity Brands, Inc. 1,984
46 AMETEK, Inc. 2,127
89 Eaton Corp. PLC 5,316
124 Emerson Electric Co. 6,468
25 Rockwell Automation, Inc. 2,870
--------------
18,765
--------------
Page 26 See Notes to Financial Statements
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.4%
60 Amphenol Corp., Class A $ 3,440
215 Corning, Inc. 4,403
27 FLIR Systems, Inc. 836
69 TE Connectivity Ltd. 3,940
--------------
12,619
--------------
ENERGY EQUIPMENT & SERVICES
-- 1.1%
85 Baker Hughes, Inc. 3,836
12 Diamond Offshore Drilling, Inc. 292
44 FMC Technologies, Inc. (a) 1,173
166 Halliburton Co. 7,518
21 Helmerich & Payne, Inc. 1,410
73 National Oilwell Varco, Inc. 2,456
269 Schlumberger Ltd. 21,273
66 Transocean Ltd. 785
--------------
38,743
--------------
FOOD & STAPLES RETAILING -- 2.4%
85 Costco Wholesale Corp. 13,348
208 CVS Health Corp. 19,914
189 Kroger (The) Co. 6,953
102 Sysco Corp. 5,176
167 Walgreens Boots Alliance, Inc. 13,906
296 Wal-Mart Stores, Inc. 21,614
63 Whole Foods Market, Inc. 2,017
--------------
82,928
--------------
FOOD PRODUCTS -- 1.9%
115 Archer-Daniels-Midland Co. 4,932
35 Campbell Soup Co. 2,329
84 ConAgra Foods, Inc. 4,016
115 General Mills, Inc. 8,202
28 Hershey (The) Co. 3,178
52 Hormel Foods Corp. 1,903
23 J.M. Smucker (The) Co. 3,505
49 Kellogg Co. 4,001
115 Kraft Heinz (The) Co. 10,175
22 McCormick & Co., Inc. 2,347
36 Mead Johnson Nutrition Co. 3,267
304 Mondelez International, Inc.,
Class A 13,835
57 Tyson Foods, Inc., Class A 3,807
--------------
65,497
--------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.8%
285 Abbott Laboratories 11,203
106 Baxter International, Inc. 4,793
41 Becton, Dickinson and Co. 6,953
261 Boston Scientific Corp. (a) 6,100
14 C. R. Bard, Inc. 3,292
116 Danaher Corp. 11,716
47 DENTSPLY SIRONA, Inc. 2,916
42 Edwards Lifesciences Corp. (a) 4,189
48 Hologic, Inc. (a) 1,661
7 Intuitive Surgical, Inc. (a) 4,630
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
HEALTH CARE EQUIPMENT &
SUPPLIES (CONTINUED)
272 Medtronic PLC $ 23,601
55 St. Jude Medical, Inc. 4,290
61 Stryker Corp. 7,310
18 Varian Medical Systems, Inc. (a) 1,480
35 Zimmer Biomet Holdings, Inc. 4,213
--------------
98,347
--------------
HEALTH CARE PROVIDERS & SERVICES
-- 2.8%
68 Aetna, Inc. 8,305
37 AmerisourceBergen Corp. 2,935
51 Anthem, Inc. 6,698
64 Cardinal Health, Inc. 4,993
33 Centene Corp. (a) 2,355
49 Cigna Corp. 6,271
32 DaVita HealthCare Partners,
Inc. (a) 2,474
122 Express Scripts Holding Co. (a) 9,248
59 HCA Holdings, Inc. (a) 4,544
16 Henry Schein, Inc. (a) 2,829
29 Humana, Inc. 5,216
20 Laboratory Corp. of America
Holdings (a) 2,605
44 McKesson Corp. 8,213
16 Patterson Cos., Inc. 766
28 Quest Diagnostics, Inc. 2,279
184 UnitedHealth Group, Inc. 25,981
17 Universal Health Services, Inc.,
Class B 2,280
--------------
97,992
--------------
HEALTH CARE TECHNOLOGY -- 0.1%
59 Cerner Corp. (a) 3,457
--------------
HOTELS, RESTAURANTS & LEISURE
-- 1.7%
87 Carnival Corp. 3,845
6 Chipotle Mexican Grill, Inc. (a) 2,417
22 Darden Restaurants, Inc. 1,394
37 Marriott International, Inc.,
Class A 2,459
170 McDonald's Corp. 20,458
33 Royal Caribbean Cruises Ltd. 2,216
286 Starbucks Corp. 16,336
33 Starwood Hotels & Resorts
Worldwide, Inc. 2,440
22 Wyndham Worldwide Corp. 1,567
16 Wynn Resorts Ltd. 1,450
79 Yum! Brands, Inc. 6,551
--------------
61,133
--------------
HOUSEHOLD DURABLES -- 0.5%
64 D.R. Horton, Inc. 2,015
23 Garmin Ltd. 976
14 Harman International Industries,
Inc. 1,005
26 Leggett & Platt, Inc. 1,329
35 Lennar Corp., Class A 1,613
12 Mohawk Industries, Inc. (a) 2,277
88 Newell Brands, Inc. 4,274
See Notes to Financial Statements Page 27
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOUSEHOLD DURABLES (CONTINUED)
61 PulteGroup, Inc. $ 1,189
15 Whirlpool Corp. 2,500
--------------
17,178
--------------
HOUSEHOLD PRODUCTS -- 2.0%
25 Church & Dwight Co., Inc. 2,572
25 Clorox (The) Co. 3,460
173 Colgate-Palmolive Co. 12,663
70 Kimberly-Clark Corp. 9,624
513 Procter & Gamble (The) Co. 43,436
--------------
71,755
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.1%
128 AES (The) Corp. 1,598
61 NRG Energy, Inc. 914
--------------
2,512
--------------
INDUSTRIAL CONGLOMERATES -- 2.3%
117 3M Co. 20,489
1,782 General Electric Co. 56,098
20 Roper Technologies, Inc. 3,411
--------------
79,998
--------------
INSURANCE -- 2.7%
81 Aflac, Inc. 5,845
73 Allstate (The) Corp. 5,106
217 American International Group, Inc. 11,477
52 Aon PLC 5,680
34 Arthur J. Gallagher & Co. 1,619
13 Assurant, Inc. 1,122
89 Chubb Ltd. 11,633
29 Cincinnati Financial Corp. 2,172
77 Hartford Financial Services Group
(The), Inc. 3,417
47 Lincoln National Corp. 1,822
52 Loews Corp. 2,137
101 Marsh & McLennan Cos., Inc. 6,915
212 MetLife, Inc. 8,444
52 Principal Financial Group, Inc. 2,138
113 Progressive (The) Corp. 3,786
86 Prudential Financial, Inc. 6,135
22 Torchmark Corp. 1,360
57 Travelers (The) Cos., Inc. 6,785
46 Unum Group 1,462
27 Willis Towers Watson PLC 3,356
56 XL Group PLC 1,865
--------------
94,276
--------------
INTERNET & CATALOG RETAIL -- 2.2%
75 Amazon.com, Inc. (a) 53,671
23 Expedia, Inc. 2,445
83 Netflix, Inc. (a) 7,593
10 Priceline Group (The), Inc. (a) 12,484
22 TripAdvisor, Inc. (a) 1,415
--------------
77,608
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INTERNET SOFTWARE & SERVICES
-- 4.1%
34 Akamai Technologies, Inc. (a) $ 1,901
57 Alphabet, Inc., Class A (a) 40,101
57 Alphabet, Inc., Class C (a) 39,450
210 eBay, Inc. (a) 4,916
444 Facebook, Inc., Class A (a) 50,740
19 VeriSign, Inc. (a) 1,643
169 Yahoo!, Inc. (a) 6,348
--------------
145,099
--------------
IT SERVICES -- 3.7%
121 Accenture PLC, Class A 13,708
11 Alliance Data Systems Corp. (a) 2,155
89 Automatic Data Processing, Inc. 8,177
118 Cognizant Technology Solutions
Corp., Class A (a) 6,754
26 CSRA, Inc. 609
53 Fidelity National Information
Services, Inc. 3,905
43 Fiserv, Inc. (a) 4,675
30 Global Payments, Inc. 2,141
171 International Business Machines
Corp. 25,954
188 MasterCard, Inc., Class A 16,555
62 Paychex, Inc. 3,689
215 PayPal Holdings, Inc. (a) 7,850
26 Teradata Corp. (a) 652
33 Total System Services, Inc. 1,753
371 Visa, Inc., Class A 27,517
97 Western Union (The) Co. 1,861
184 Xerox Corp. 1,746
--------------
129,701
--------------
LEISURE PRODUCTS -- 0.1%
22 Hasbro, Inc. 1,848
66 Mattel, Inc. 2,065
--------------
3,913
--------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.6%
63 Agilent Technologies, Inc. 2,795
28 Illumina, Inc. (a) 3,931
21 PerkinElmer, Inc. 1,101
77 Thermo Fisher Scientific, Inc. 11,377
16 Waters Corp. (a) 2,250
--------------
21,454
--------------
MACHINERY -- 1.3%
113 Caterpillar, Inc. 8,567
31 Cummins, Inc. 3,486
58 Deere & Co. 4,700
30 Dover Corp. 2,080
25 Flowserve Corp. 1,129
63 Illinois Tool Works, Inc. 6,562
50 Ingersoll-Rand PLC 3,184
68 PACCAR, Inc. 3,527
26 Parker-Hannifin Corp. 2,809
35 Pentair PLC 2,040
11 Snap-on, Inc. 1,736
Page 28 See Notes to Financial Statements
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MACHINERY (CONTINUED)
29 Stanley Black & Decker, Inc. $ 3,225
35 Xylem, Inc. 1,563
--------------
44,608
--------------
MEDIA -- 2.7%
82 CBS Corp., Class B 4,464
471 Comcast Corp., Class A 30,704
29 Discovery Communications, Inc.,
Class A (a) 732
46 Discovery Communications, Inc.,
Class C (a) 1,097
78 Interpublic Group of Cos. (The),
Inc. 1,802
74 News Corp., Class A 840
21 News Corp., Class B 245
46 Omnicom Group, Inc. 3,748
18 Scripps Networks Interactive,
Inc., Class A 1,121
43 TEGNA, Inc. 996
153 Time Warner, Inc. 11,252
217 Twenty-First Century Fox, Inc.,
Class A 5,870
83 Twenty-First Century Fox, Inc.,
Class B 2,262
67 Viacom, Inc., Class B 2,778
290 Walt Disney (The) Co. 28,368
--------------
96,279
--------------
METALS & MINING -- 0.3%
254 Alcoa, Inc. 2,355
242 Freeport-McMoRan, Inc. 2,696
102 Newmont Mining Corp. 3,990
62 Nucor Corp. 3,063
--------------
12,104
--------------
MULTILINE RETAIL -- 0.6%
56 Dollar General Corp. 5,264
45 Dollar Tree, Inc. (a) 4,241
37 Kohl's Corp. 1,403
60 Macy's, Inc. 2,017
25 Nordstrom, Inc. 951
114 Target Corp. 7,959
--------------
21,835
--------------
MULTI-UTILITIES -- 1.2%
47 Ameren Corp. 2,518
83 CenterPoint Energy, Inc. 1,992
54 CMS Energy Corp. 2,477
57 Consolidated Edison, Inc. 4,585
115 Dominion Resources, Inc. 8,962
35 DTE Energy Co. 3,469
62 NiSource, Inc. 1,644
98 Public Service Enterprise Group,
Inc. 4,568
28 SCANA Corp. 2,119
46 Sempra Energy 5,245
61 WEC Energy Group, Inc. 3,983
--------------
41,562
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS
-- 6.3%
98 Anadarko Petroleum Corp. $ 5,218
73 Apache Corp. 4,064
89 Cabot Oil & Gas Corp. 2,291
113 Chesapeake Energy Corp. (a) 484
364 Chevron Corp. 38,158
18 Cimarex Energy Co. 2,148
77 Columbia Pipeline Group, Inc. 1,963
25 Concho Resources, Inc. (a) 2,982
239 ConocoPhillips 10,420
99 Devon Energy Corp. 3,589
106 EOG Resources, Inc. 8,842
31 EQT Corp. 2,400
804 Exxon Mobil Corp. 75,367
51 Hess Corp. 3,065
354 Kinder Morgan, Inc. 6,627
163 Marathon Oil Corp. 2,447
102 Marathon Petroleum Corp. 3,872
31 Murphy Oil Corp. 984
38 Newfield Exploration Co. (a) 1,679
83 Noble Energy, Inc. 2,977
148 Occidental Petroleum Corp. 11,183
41 ONEOK, Inc. 1,945
91 Phillips 66 7,220
32 Pioneer Natural Resources Co. 4,839
33 Range Resources Corp. 1,424
92 Southwestern Energy Co. (a) 1,157
130 Spectra Energy Corp. 4,762
23 Tesoro Corp. 1,723
91 Valero Energy Corp. 4,641
132 Williams (The) Cos., Inc. 2,855
--------------
221,326
--------------
PERSONAL PRODUCTS -- 0.1%
43 Estee Lauder (The) Cos., Inc.,
Class A 3,914
--------------
PHARMACEUTICALS -- 5.8%
76 Allergan PLC (a) 17,563
323 Bristol-Myers Squibb Co. 23,757
188 Eli Lilly and Co. 14,805
40 Endo International PLC (a) 624
534 Johnson & Johnson 64,774
22 Mallinckrodt PLC (a) 1,337
537 Merck & Co., Inc. 30,936
80 Mylan N.V. (a) 3,459
28 Perrigo Co. PLC 2,539
1,170 Pfizer, Inc. 41,196
89 Zoetis, Inc. 4,224
--------------
205,214
--------------
PROFESSIONAL SERVICES -- 0.3%
7 Dun & Bradstreet (The) Corp. 853
23 Equifax, Inc. 2,953
70 Nielsen Holdings PLC 3,638
25 Robert Half International, Inc. 954
30 Verisk Analytics, Inc. (a) 2,432
--------------
10,830
--------------
See Notes to Financial Statements Page 29
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS
-- 3.2%
82 American Tower Corp. $ 9,316
30 Apartment Investment &
Management Co., Class A 1,325
27 AvalonBay Communities, Inc. 4,871
30 Boston Properties, Inc. 3,957
65 Crown Castle International Corp. 6,593
28 Digital Realty Trust, Inc. 3,052
13 Equinix, Inc. 5,040
71 Equity Residential 4,890
13 Essex Property Trust, Inc. 2,965
24 Extra Space Storage, Inc. 2,221
13 Federal Realty Investment Trust 2,152
113 General Growth Properties, Inc. 3,370
90 HCP, Inc. 3,184
146 Host Hotels & Resorts, Inc. 2,367
47 Iron Mountain, Inc. 1,872
80 Kimco Realty Corp. 2,510
25 Macerich (The) Co. 2,135
102 Prologis, Inc. 5,002
28 Public Storage 7,156
48 Realty Income Corp. 3,329
60 Simon Property Group, Inc. 13,014
19 SL Green Realty Corp. 2,023
52 UDR, Inc. 1,920
65 Ventas, Inc. 4,733
34 Vornado Realty Trust 3,404
69 Welltower, Inc. 5,256
145 Weyerhaeuser Co. 4,317
--------------
111,974
--------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.0%
56 CBRE Group, Inc., Class A (a) 1,483
--------------
ROAD & RAIL -- 0.8%
186 CSX Corp. 4,851
17 J.B. Hunt Transport Services, Inc. 1,376
21 Kansas City Southern 1,892
58 Norfolk Southern Corp. 4,938
10 Ryder System, Inc. 611
164 Union Pacific Corp. 14,309
--------------
27,977
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.8%
60 Analog Devices, Inc. 3,398
211 Applied Materials, Inc. 5,058
72 Broadcom Ltd. 11,189
15 First Solar, Inc. (a) 727
914 Intel Corp. 29,979
30 KLA-Tencor Corp. 2,198
31 Lam Research Corp. 2,606
46 Linear Technology Corp. 2,140
40 Microchip Technology, Inc. 2,030
201 Micron Technology, Inc. (a) 2,766
99 NVIDIA Corp. 4,654
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (CONTINUED)
25 Qorvo, Inc. (a) $ 1,382
285 QUALCOMM, Inc. 15,268
37 Skyworks Solutions, Inc. 2,341
195 Texas Instruments, Inc. 12,217
49 Xilinx, Inc. 2,260
--------------
100,213
--------------
SOFTWARE -- 4.2%
98 Activision Blizzard, Inc. 3,884
96 Adobe Systems, Inc. (a) 9,196
44 Autodesk, Inc. (a) 2,382
57 CA, Inc. 1,871
30 Citrix Systems, Inc. (a) 2,403
60 Electronic Arts, Inc. (a) 4,545
50 Intuit, Inc. 5,580
1,523 Microsoft Corp. 77,932
603 Oracle Corp. 24,681
35 Red Hat, Inc. (a) 2,541
122 salesforce.com, Inc. (a) 9,688
118 Symantec Corp. 2,424
--------------
147,127
--------------
SPECIALTY RETAIL -- 2.6%
14 Advance Auto Parts, Inc. 2,263
14 AutoNation, Inc. (a) 658
6 AutoZone, Inc. (a) 4,763
32 Bed Bath & Beyond, Inc. 1,383
55 Best Buy Co., Inc. 1,683
38 CarMax, Inc. (a) 1,863
27 Foot Locker, Inc. 1,481
44 Gap (The), Inc. 934
241 Home Depot (The), Inc. 30,773
49 L Brands, Inc. 3,289
172 Lowe's Cos., Inc. 13,617
19 O'Reilly Automotive, Inc. (a) 5,151
78 Ross Stores, Inc. 4,422
15 Signet Jewelers Ltd. 1,236
125 Staples, Inc. 1,077
22 Tiffany & Co. 1,334
130 TJX (The) Cos., Inc. 10,040
26 Tractor Supply Co. 2,371
12 Ulta Salon, Cosmetics &
Fragrance, Inc. (a) 2,924
17 Urban Outfitters, Inc. (a) 468
--------------
91,730
--------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 3.6%
1,061 Apple, Inc. 101,432
377 EMC Corp. 10,243
322 Hewlett Packard Enterprise Co. 5,883
334 HP, Inc. 4,192
56 NetApp, Inc. 1,377
57 Seagate Technology PLC 1,388
54 Western Digital Corp. 2,552
--------------
127,067
--------------
Page 30 See Notes to Financial Statements
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TEXTILES, APPAREL & LUXURY GOODS
-- 0.8%
54 Coach, Inc. $ 2,200
76 Hanesbrands, Inc. 1,910
35 Michael Kors Holdings Ltd. (a) 1,732
258 NIKE, Inc., Class B 14,242
16 PVH Corp. 1,508
11 Ralph Lauren Corp. 986
35 Under Armour, Inc., Class A (a) 1,404
35 Under Armour, Inc., Class C (b) 1,274
66 VF Corp. 4,058
--------------
29,314
--------------
TOBACCO -- 1.9%
379 Altria Group, Inc. 26,136
300 Philip Morris International, Inc. 30,516
160 Reynolds American, Inc. 8,629
--------------
65,281
--------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.2%
56 Fastenal Co. 2,486
18 United Rentals, Inc. (a) 1,208
11 W.W. Grainger, Inc. 2,499
--------------
6,193
--------------
WATER UTILITIES -- 0.1%
34 American Water Works Co., Inc. 2,873
--------------
TOTAL COMMON STOCKS -- 99.8% 3,524,043
(Cost $2,899,570) --------------
CONTRACTS DESCRIPTION VALUE
-------------------------------------------------------------
OPTIONS PURCHASED -- 0.2%
CALL OPTIONS -- 0.2%
295 VIX US, expiring 07/20/16,
Strike Price $27 (a) 8,850
(Cost $35,412) --------------
TOTAL INVESTMENTS -- 100.0% 3,532,893
(Cost $2,934,982) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (40)
--------------
NET ASSETS -- 100.0% $ 3,532,853
==============
(a) Non-income producing security.
(b) Non-income producing security which makes payment-in-kind ("PIK")
distributions. For the six months ended June 30, 2016, the Fund received
fractional PIK shares of Under Armour, Inc., Class C.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $755,758 and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over value was $157,847.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------
Common Stocks* $ 3,524,043 $ -- $ --
Options Purchased 8,850 -- --
-----------------------------------------------
Total Investments $ 3,532,893 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2016.
See Notes to Financial Statements Page 31
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2016 (UNAUDITED)
FIRST TRUST
FIRST TRUST CBOE(R)
TOTAL US MARKET S&P 500(R)
ALPHADEX(R) VIX(R)
ETF TAIL HEDGE FUND
(TUSA) (VIXH)
---------------- ----------------
ASSETS:
Investments, at value................................................................ $ 8,778,967 $ 3,532,893
Receivables:
Investment securities sold..................................................... -- 2,788
From investment advisor........................................................ 20,035 --
Dividends...................................................................... 9,320 4,013
Securities lending income...................................................... 27 --
Interest....................................................................... 10 --
Prepaid expenses..................................................................... 3,802 --
-------------- --------------
TOTAL ASSETS................................................................... 8,812,161 3,539,694
-------------- --------------
LIABILITIES:
Due to custodian..................................................................... 938 3,077
Payables:
Investment securities purchased................................................ -- 2,017
Investment advisory fees....................................................... -- 1,747
Audit and tax fees............................................................. 17,108 --
Collateral for securities on loan.............................................. 15,492 --
Printing fees.................................................................. 1,236 --
Licensing fees................................................................. 936 --
Trustees' fees................................................................. 53 --
Other liabilities.................................................................... 25,652 --
-------------- --------------
TOTAL LIABILITIES.............................................................. 61,415 6,841
-------------- --------------
NET ASSETS........................................................................... $ 8,750,746 $ 3,532,853
============== ==============
NET ASSETS CONSIST OF:
Paid-in capital...................................................................... $ 12,513,419 $ 3,802,651
Par value............................................................................ 3,500 1,500
Accumulated net investment income (loss)............................................. 9,074 2,475
Accumulated net realized gain (loss) on investments.................................. (4,242,597) (871,684)
Net unrealized appreciation (depreciation) on investments............................ 467,350 597,911
-------------- --------------
NET ASSETS........................................................................... $ 8,750,746 $ 3,532,853
============== ==============
NET ASSET VALUE, per share........................................................... $ 25.00 $ 23.55
============== ==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)........................................................ 350,002 150,002
============== ==============
Investments, at cost................................................................. $ 8,311,617 $ 2,934,982
============== ==============
Securities on loan, at value......................................................... $ 15,345 $ --
============== ==============
Page 32 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2016 (UNAUDITED)
FIRST TRUST
FIRST TRUST CBOE(R)
TOTAL US MARKET S&P 500(R)
ALPHADEX(R) VIX(R)
ETF TAIL HEDGE FUND
(TUSA) (VIXH)
---------------- ----------------
INVESTMENT INCOME:
Dividends............................................................................ $ 85,144 $ 40,125
Interest............................................................................. 45 --
Securities lending income (net of fees).............................................. 27 --
Foreign tax withholding.............................................................. (18) --
-------------- --------------
Total investment income........................................................ 85,198 40,125
-------------- --------------
EXPENSES:
Accounting and administration fees................................................... 24,068 --
Investment advisory fees............................................................. 20,769 10,440 (a)
Custodian fees....................................................................... 14,449 --
Audit and tax fees................................................................... 12,394 --
Listing fees......................................................................... 8,458 --
Licensing fees....................................................................... 5,279 --
Trustees' fees and expenses.......................................................... 4,327 --
Printing fees........................................................................ 1,462 --
Legal fees........................................................................... 482 --
Transfer agent fees.................................................................. 208 --
Registration and filing fees......................................................... (72) --
Other expenses....................................................................... 614 --
-------------- --------------
Total expenses................................................................. 92,438 10,440
Less fees waived and expenses reimbursed by the investment advisor............. (63,361) --
-------------- --------------
Net expenses................................................................... 29,077 10,440
-------------- --------------
NET INVESTMENT INCOME (LOSS)......................................................... 56,121 29,685
-------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.................................................................... (548,339) 8,973
Options........................................................................ -- (162,876)
-------------- --------------
Net realized gain (loss)............................................................. (548,339) (153,903)
-------------- --------------
Net change in unrealized appreciation (depreciation) on:
Investments.................................................................... 771,950 81,439
Options........................................................................ -- (7,397)
-------------- --------------
Net change in unrealized appreciation (depreciation) on investments.................. 771,950 74,042
-------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS).............................................. 223,611 (79,861)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................................................... $ 279,732 $ (50,176)
============== ==============
(a) Fund is subject to a Unitary Fee (see Note 3 in the Notes to Financial
Statements).
See Notes to Financial Statements Page 33
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST
FIRST TRUST CBOE(R)
TOTAL US MARKET S&P 500(R)
ALPHADEX(R) VIX(R)
ETF TAIL HEDGE FUND
(TUSA) (VIXH)
----------------------------- -----------------------------
For the Six For the Six
Months Ended For the Year Months Ended For the Year
6/30/2016 Ended 6/30/2016 Ended
(Unaudited) 12/31/2015 (Unaudited) 12/31/2015
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss)........................... $ 56,121 $ 62,257 $ 29,685 $ 55,327
Net realized gain (loss)............................... (548,339) 69,168 (153,903) (244,840)
Net change in unrealized appreciation (depreciation)... 771,950 (496,144) 74,042 (38,707)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations..................................... 279,732 (364,719) (50,176) (228,220)
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (46,655) (65,921) (27,210) (56,416)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................. -- 4,949,444 -- --
Cost of shares redeemed................................ -- (1,226,230) -- --
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................... -- 3,723,214 -- --
------------- ------------- ------------- -------------
Total increase (decrease) in net assets................ 233,077 3,292,574 (77,386) (284,636)
NET ASSETS:
Beginning of period.................................... 8,517,669 5,225,095 3,610,239 3,894,875
------------- ------------- ------------- -------------
End of period.......................................... $ 8,750,746 $ 8,517,669 $ 3,532,853 $ 3,610,239
============= ============= ============= =============
Accumulated net investment income (loss)
at end of period.................................... $ 9,074 $ (392) $ 2,475 $ --
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................ 350,002 200,002 150,002 150,002
Shares sold............................................ -- 200,000 -- --
Shares redeemed........................................ -- (50,000) -- --
------------- ------------- ------------- -------------
Shares outstanding, end of period...................... 350,002 350,002 150,002 150,002
============= ============= ============= =============
Page 34 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2016 ------------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 24.34 $ 26.13 $ 25.80 $ 19.34 $ 18.16 $ 20.30
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.16 0.22 0.27 0.21 0.34 0.21
Net realized and unrealized gain (loss) 0.63 (1.78) 0.34 6.47 1.24 (2.14)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.79 (1.56) 0.61 6.68 1.58 (1.93)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.13) (0.23) (0.28) (0.22) (0.40) (0.21)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 25.00 $ 24.34 $ 26.13 25.80 $ 19.34 $ 18.16
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 3.26% (5.99)% 2.36% 34.65% 8.74% (9.56)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 8,751 $ 8,518 $ 5,225 $ 5,160 $ 3,868 $ 6,357
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 2.23% (b) 1.97% 3.17% 2.01% 1.85% 1.39%
Ratio of net expenses to average net assets 0.70% (b) 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.35% (b) 0.96% 1.05% 0.91% 1.64% 1.05%
Portfolio turnover rate (c) 64% 170% 183% 186% 203% 184%
FIRST TRUST CBOE(R) S&P 500(R) VIX(R) TAIL HEDGE FUND (VIXH)
SIX MONTHS FOR THE PERIOD
ENDED YEAR ENDED DECEMBER 31, 8/29/2012 (d)
6/30/2016 ------------------------------------------ THROUGH
(UNAUDITED) 2015 2014 2013 12/31/2012
------------ ------------ ------------ ------------ --------------
Net asset value, beginning of period $ 24.07 $ 25.97 $ 22.86 $ 19.51 $ 19.89
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.20 0.37 0.34 0.34 0.11
Net realized and unrealized gain (loss) (0.54) (1.89) 3.11 3.34 (0.38)
---------- ---------- ---------- ---------- ----------
Total from investment operations (0.34) (1.52) 3.45 3.68 (0.27)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.18) (0.38) (0.34) (0.33) (0.11)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 23.55 $ 24.07 $ 25.97 $ 22.86 $ 19.51
========== ========== ========== ========== ==========
TOTAL RETURN (a) (1.41)% (5.88)% 15.22% 19.00% (1.37)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3,533 $ 3,610 $ 3,895 $ 5,716 $ 2,927
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.60% (b) 0.60% 0.60% 0.60% 0.60% (b)
Ratio of net expenses to average net assets 0.60% (b) 0.60% 0.60% 0.60% 0.60% (b)
Ratio of net investment income (loss) to
average net assets 1.71% (b) 1.46% 1.42% 1.53% 1.97% (b)
Portfolio turnover rate (c) 2% 7% 7% 4% 2%
<FN>
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns for First Trust Total US Market
AlphaDEX(R) ETF would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(b) Annualized.
(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.
(d) Inception date is consistent with the commencement of investment
operations and is the date the initial creation units were established.
</FN>
See Notes to Financial Statements Page 35
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on August 8,
2003, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of nineteen exchange-traded funds. This report
covers the two funds listed below:
First Trust Total US Market AlphaDEX(R) ETF - (The Nasdaq Stock Market LLC
("Nasdaq") ticker "TUSA")
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund - (NYSE Arca, Inc.
("NYSE Arca") ticker "VIXH")
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual
funds, each Fund issues and redeems shares on a continuous basis, at net asset
value ("NAV"), only in large specified blocks consisting of 50,000 shares called
a "Creation Unit." Creation Units are issued and redeemed principally in-kind
for securities included in a Fund's relevant index. Except when aggregated in
Creation Units, each Fund's shares are not redeemable securities. The investment
objective of each Fund is to seek investment results that correspond generally
to the price and yield (before the Fund's fees and expenses) of the following
indices:
FUND INDEX
First Trust Total US Market AlphaDEX(R) ETF NASDAQ AlphaDEX(R) Total US Market Index
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund CBOE(R) VIX(R) Tail Hedge Index
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds, each of which is an investment company within the scope of Financial
Accounting Standards Board ("FASB") Accounting Standards Update 2013-08, follow
accounting and reporting guidance under FASB Accounting Standards Codification
Topic 946, "Financial Services-Investment Companies." The following is a summary
of significant accounting policies consistently followed by the Funds in the
preparation of the financial statements. The preparation of the financial
statements in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP") requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using the data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with the 1940 Act. Investments valued by the
Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to
the Portfolio of Investments. Each Fund's investments are valued as follows:
Common stocks, real estate investment trusts ("REITs") and other equity
securities listed on any national or foreign exchange (excluding Nasdaq
and the London Stock Exchange Alternative Investment Market ("AIM")) are
valued at the last sale price on the exchange on which they are
principally traded or, for Nasdaq and AIM securities, the official closing
price. Securities traded on more than one securities exchange are valued
at the last sale price or official closing price, as applicable, at the
close of the securities exchange representing the principal market for
such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Exchange-traded options contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded options contracts are fair valued at the mean
Page 36
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
of their most recent bid and asked price, if available, and otherwise at
their closing bid price. Over-the-counter options contracts are fair
valued at the mean of their most recent bid and asked price, if available,
and otherwise at closing bid price.
Overnight repurchase agreements are valued at amortized cost when it
represents the best estimate of fair value.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board 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 pricing service is unable to provide a market
price; securities whose trading has been formally suspended; a security whose
market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the pricing service, does not reflect the security's fair value. As a general
principle, the current fair value of a security would appear to be the amount
which the owner might reasonably expect to receive for the security upon its
current sale. When fair value prices are used, generally they will differ from
market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
In addition, differences between the prices used to calculate a Fund's NAV and
the prices used by such Fund's corresponding index could result in a difference
between a Fund's performance and the performance of its underlying index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
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 June 30, 2016, is
included with each Fund's Portfolio of Investments.
B. CALL OPTIONS
The First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund ("VIXH") is subject to
equity price risk in the normal course of pursuing its investment objective and
may purchase out-of-the-money call options on the Chicago Board Options Exchange
Market Volatility Index (the "VIX Index") to hedge against changes in the value
of equities. Also, VIXH may sell call options on the VIX Index in order to close
out existing positions. The purchase of call options involves the risk of loss
of all or a part of the cash paid for the call options (the premium). The market
risk associated with purchasing options on the VIX Index is limited to the
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
premium paid. When VIXH purchases a call option, the premium paid represents the
cost of the call option, which is included in "Investments, at cost" on the
Statements of Assets and Liabilities. Options are marked-to-market daily and
their value will be affected by changes in the market value of the stocks
included in the stock index.
If VIXH elects to exercise a call option on the VIX Index, settlement does not
occur by the delivery of the securities comprising the VIX Index. VIXH, as
holder of the stock index option, receives an amount of cash if the closing
level of the stock index upon which the option is based is greater than, in the
case of a call, or less than in the case of a put, the exercise price of the
option. This amount of cash is equal to the difference between the closing price
of the stock index and the exercise price of the option expressed in dollars
times a specified multiple. If VIXH elects to allow a call option to expire,
then the equity price risk for purchased options is limited to the premium
initially paid. Gain or loss on options is presented separately as "Net realized
gain (loss) on Options" on the Statements of Operations.
For the six months ended June 30, 2016, VIXH recorded a change in unrealized
loss of $7,397 on the options, which is included in the "Net change in
unrealized appreciation (depreciation) on Options" on the Statements of
Operations. For the six months ended June 30, 2016, VIXH recorded a realized
loss on options of $162,876, which is included in "Net realized gain (loss) on
Options" on the Statements of Operations.
At June 30, 2016, VIXH held 295 options contracts with a notional value of
$7,965. This is representative of contracts held throughout the period.
C. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Distributions received from a Fund's investments in REITs may be comprised of
return of capital, capital gains and income. The actual character of the amounts
received during the year is not known until after the REITs' fiscal year end. A
Fund records the character of distributions received from the REITs during the
year based on estimates available. The characterization of distributions
received by a Fund may be subsequently revised based on information received
from the REITs after their tax reporting periods conclude.
D. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES
Offsetting Assets and Liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset on the
Statements of Assets and Liabilities, and disclose instruments and transactions
subject to master netting or similar agreements. These disclosure requirements
are intended to help investors and other financial statement users better assess
the effect or potential effect of offsetting arrangements on a fund's financial
position. The transactions subject to offsetting disclosures are derivative
instruments, repurchase agreements and reverse repurchase agreements, and
securities borrowing and securities lending transactions.
This disclosure, if applicable, is included within each Fund's Portfolio of
Investments under the heading "Offsetting Assets and Liabilities". For financial
reporting purposes, the Funds do not offset financial assets and financial
liabilities that are subject to master netting arrangements ("MNAs") or similar
agreements on the Statements of Assets and Liabilities. MNAs provide the right,
in the event of default (including bankruptcy and insolvency), for the
non-defaulting counterparty to liquidate the collateral and calculate the net
exposure to the defaulting party or request additional collateral.
E. SECURITIES LENDING
The Funds may lend securities representing up to 33 1/3% of the value of their
total assets to broker-dealers, banks and other institutions to generate
additional income. When a Fund loans its portfolio securities, it will receive,
at the inception of each loan, collateral equal to at least 102% (for domestic
securities) or 105% (for international securities) of the market value of the
loaned securities. The collateral amount is valued at the beginning of each
business day and is compared to the market value of the loaned securities from
the prior business day to determine if additional collateral is required. If
additional collateral is required, a request is sent to the borrower. Securities
lending involves the risk that the Fund may lose money because the borrower of
the Fund's loaned securities fails to return the securities in a timely manner
or at all. The Fund could also lose money in the event of (i) a decline in the
value of the collateral provided for the loaned securities, (ii) a decline in
the value of any investments made with cash collateral or (iii) an increase in
the value of the loaned securities if the borrower does not increase the
collateral accordingly and the borrower fails to return the securities. These
events could also trigger adverse tax consequences for the Funds.
Under the Funds' Securities Lending Agency Agreement, the securities lending
agent will generally bear the risk that a borrower may default on its obligation
to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the
Funds' securities lending agent and is responsible for executing the lending of
the portfolio securities to creditworthy borrowers. The Funds, however, will be
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
responsible for the risks associated with the investment of cash collateral. A
Fund may lose money on its investment of cash collateral, which may affect its
ability to repay the collateral to the borrower without the use of other Fund
assets. Each Fund that engages in securities lending receives compensation (net
of any rebate and securities lending agent fees) for lending its securities.
Compensation can be in the form of fees received from the securities lending
agent or dividends or interest earned from the investment of cash collateral.
The dividend and interest earned on the securities loaned is accounted for in
the same manner as other dividend and interest income. At June 30, 2016, only
TUSA has securities in the securities lending program.
In the event of a default by a borrower with respect to any loan, BBH will
exercise any and all remedies provided under the applicable borrower agreement
to make the Funds whole. These remedies include purchasing replacement
securities by applying the collateral held from the defaulting broker against
the purchase cost of the replacement securities. If, despite such efforts by BBH
to exercise these remedies, a Fund sustains losses as a result of a borrower's
default, BBH will indemnify the Fund by purchasing replacement securities at its
own expense, or paying the Fund an amount equal to the market value of the
replacement securities, subject to certain limitations which are set forth in
detail in the Securities Lending Agency Agreement between the Trust on behalf of
the Funds and BBH.
F. REPURCHASE AGREEMENTS
Repurchase agreements involve the purchase of securities subject to the seller's
agreement to repurchase the securities at a mutually agreed upon date and price,
under the terms of a Master Repurchase Agreement ("MRA"). During the term of a
repurchase agreement, the value of the underlying securities held as collateral
on behalf of a Fund, including accrued interest, is required to exceed the value
of the repurchase agreement, including accrued interest. The underlying
securities for all repurchase agreements are held at the Funds' custodian or
designated sub-custodians under tri-party repurchase agreements.
MRAs govern transactions between a Fund and select counterparties. The MRAs
contain provisions for, among other things, initiation, income payments, events
of default, and maintenance of collateral for repurchase agreements.
Repurchase agreements received for lending securities are collateralized by U.S.
Treasury Notes. The U.S. Treasury Notes are held in a joint custody account at
BBH on behalf of the Funds participating in the securities lending program. In
the event the counterparty defaults on the repurchase agreement, the U.S.
Treasury Notes can either be maintained as part of a Fund's portfolio or sold
for cash. A Fund could suffer a loss to the extent that the proceeds from the
sale of the underlying collateral held by the Fund is less than the repurchase
price and the Fund's costs associated with the delay and enforcement of the MRA.
While the Funds may invest in repurchase agreements, any repurchase agreements
held by the Funds during the six months ended June 30, 2016, 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 income and capital gains are determined in accordance with
income tax regulations, which may differ from U.S. GAAP. Certain capital
accounts in the financial statements are periodically adjusted for permanent
differences in order to reflect their tax character. These permanent differences
are primarily due to the varying treatment of income and gain/loss on
significantly modified portfolio securities held by the Funds and have no impact
on net assets or NAV per share. Temporary differences, which arise from
recognizing certain items of income, expense and gain/loss in different periods
for financial statement and tax purposes, will reverse at some time in the
future.
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2015 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ---------------- ----------------
First Trust Total US Market AlphaDEX(R) ETF $ 65,921 $ -- $ --
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund 56,416 -- --
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
As of December 31, 2015, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ ---------------- ----------------
First Trust Total US Market Alpha DEX(R) ETF $ (341) $ (3,635,762) $ (363,147)
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund -- (728,641) 534,729
H. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ending 2012, 2013,
2014 and 2015 remain open to federal and state audit. As of June 30, 2016,
management has evaluated the application of these standards to the Funds, and
has determined that no provision for income tax is required in the Funds'
financial statements for uncertain tax positions.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses arising in taxable years after December 22, 2010, may be
carried forward indefinitely, and their character is retained as short-term
and/or long-term losses. Previously, net capital losses were carried forward for
up to eight years and treated as short-term losses. As a transition rule, the
Act requires that post-enactment net capital losses be used before pre-enactment
net capital losses. At December 31, 2015, the Funds had pre-enactment and
post-enactment net capital losses for federal income tax purposes as shown in
the following table. To the extent that these loss carryforwards are used to
offset future capital gains, it is probable that the capital gains so offset
will not be distributed to Fund shareholders. The Funds are subject to certain
limitations, under U.S. tax rules, on the use of capital loss carryforwards and
net unrealized built-in losses. These limitations apply when there has been a
50% change in ownership.
Capital Loss Capital Loss Post- Total
Available Available Enactment - Capital
Through Through No Loss
2016 2017 Expiration Available
------------ ------------ ----------- -----------
First Trust Total US Market AlphaDEX(R) ETF $ 1,168,041 $ 2,421,122 $ 46,599 $ 3,635,762
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund -- -- 728,641 728,641
During the taxable year ended December 31, 2015, the following Fund utilized
capital loss carryforwards in the following amounts:
Pre-Enactment Post-Enactment
Capital Loss Capital Loss
Carryforward Carryforward
Utilized Utilized
--------------------- ---------------------
First Trust Total US Market AlphaDEX(R) ETF $ -- $ 35,145
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for Federal
income tax purposes. For the fiscal year ended December 31, 2015, the following
Fund incurred and elected to defer net ordinary losses as follows:
Qualified Late Year Losses
--------------------------
Ordinary Losses Capital Losses
--------------------- ---------------------
First Trust Total US Market AlphaDEX(R) ETF $ 341 $ --
I. EXPENSES
Expenses that are directly related to First Trust Total US Market AlphaDEX(R)
ETF are charged directly to the Fund. Expenses for First Trust CBOE(R) S&P
500(R) VIX(R) Tail Hedge Fund (the "Unitary Fee Fund"), 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
First Trust has entered into licensing agreements with each of the following
"Licensors" for the respective Funds:
FUND LICENSOR
First Trust Total US Market AlphaDEX(R) ETF Nasdaq, Inc.
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund Standard & Poor's Financial Services, LLC
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The First Trust Total US
Market AlphaDEX(R) ETF is required to pay licensing fees, which are shown on the
Statements of Operations.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
For the First Trust Total US Market AlphaDEX(R) ETF, First Trust is paid an
annual management fee of 0.50% of the Fund's average daily net assets. For such
Fund, the Trust and the Advisor have entered into an Expense Reimbursement, Fee
Waiver and Recovery Agreement ("Recovery Agreement") in which First Trust has
agreed to waive fees and/or reimburse Fund expenses to the extent that the
operating expenses of the Fund (excluding interest expense, brokerage
commissions and other trading expenses, acquired fund fees and expenses, taxes
and extraordinary expenses) exceed 0.70% of average daily net assets per year
(the "Expense Cap"). The Expense Cap will be in effect until at least April 30,
2018.
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee was waived or expense was incurred, but no reimbursement payment will be
made by the Fund if it results in the Fund exceeding an expense ratio equal to
the Expense Cap in place at the time the expenses were reimbursed or fees were
waived by First Trust. This amount would be included in "Expenses previously
waived or reimbursed" on the Statements of Operations.
The advisory fee waivers and expense reimbursements for the six months ended
June 30, 2016 and fees waived or expenses borne by First Trust subject to
recovery from the Fund for the periods indicated were as follows:
Fees Waived or Expenses Borne
by First Trust Subject to Recovery
-------------------------------------------------------------
Advisory Year Year Year Six Months
Fee Expense Ended Ended Ended Ended
Waivers Reimbursement 12/31/2013 12/31/2014 12/31/2015 6/30/2016 Total
--------- ------------- ---------- ---------- ---------- ---------- ---------
First Trust Total US Market
AlphaDEX(R) ETF $ 63,361 $ -- $ 31,772 $ 128,690 $ 81,875 $ 63,361 $ 305,698
For the First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund, First Trust is
paid an annual unitary management fee of 0.60% of such Fund's average daily net
assets and is responsible for the expenses of such Fund including the cost of
transfer agency, custody, fund administration, legal, audit and other services,
and excluding distribution and service fees pursuant to a Rule 12b-1 plan, if
any, brokerage expenses, taxes, interest, and extraordinary expenses.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund
or is an index fund.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
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 six months ended June 30, 2016, the cost of purchases and proceeds from
sales of investments for each Fund, excluding short-term investments and in-kind
transactions, were as follows:
Purchases Sales
--------------- ---------------
First Trust Total US Market AlphaDEX(R) ETF $ 5,444,495 $ 5,440,234
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund 69,128 223,831
For the six months ended June 30, 2016, the Funds had no in-kind transactions.
5. CREATION, REDEMPTION AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Such transactions are generally permitted on an
in-kind basis, with a balancing cash component to equate the transaction to the
daily NAV per Share of each Fund on the transaction date times the number of
Shares in a Creation Unit. Authorized Participants purchasing First Trust Total
US Market AlphaDex(R) ETF Creation Units must pay to BNYM, as transfer agent, a
standard creation transaction fee (the "Creation Transaction Fee"), which is
based on the number of different securities in a Creation Unit of the Fund,
according to the fee schedule set forth below:
Number of Securities Creation
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
The standard creation transaction fee for First Trust CBOE(R) S&P 500(R) VIX(R)
Tail Hedge Fund is currently $1,500.
The Creation Transaction Fee is applicable to each purchase transaction
regardless of the number of Creation Units purchased in the transaction. An
additional variable fee of up to three times the Creation Transaction Fee may be
charged to approximate additional expenses incurred by a Fund with respect to
transactions effected outside of the clearing process (i.e., through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. The price for each Creation Unit will equal the daily
NAV per Share of the Fund on the transaction date times the number of Shares in
a Creation Unit plus the fees described above and, if applicable, any transfer
taxes.
Authorized Participants redeeming First Trust Total US Market AlphaDex(R) ETF
Creation Units must pay to BNYM, as transfer agent, a standard redemption
transaction fee (the "Redemption Transaction Fee"), which is based on the number
of different securities in a Creation Unit of a Fund, according to the fee
schedule set forth below:
Number of Securities Redemption
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $ 500
101-499 $1,000
500 or more $1,500
The standard redemption transaction fee for First Trust CBOE(R) S&P 500(R)
VIX(R) Tail Hedge Fund is currently $1,500.
The Redemption Transaction Fee is applicable to each redemption transaction
regardless of the number of Creation Units redeemed in the transaction. An
additional variable fee of up to three times the Redemption Transaction Fee may
be charged to approximate additional expenses incurred by a Fund with respect to
redemptions effected outside of the clearing process or to the extent that
redemptions are for cash. Each Fund reserves the right to effect redemptions in
cash. A shareholder may request cash redemption in lieu of securities; however,
a Fund may, in its discretion, reject any such request.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
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 June 30, 2017.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Funds' website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files its complete schedule of each Fund's portfolio holdings with the
SEC for the first and third quarters of each fiscal year on Form N-Q. The
Trust's Form N-Qs are available (1) by calling (800) 988-5891; (2) on the Funds'
website located at http://www.ftportfolios.com; (3) on the SEC's website at
http://www.sec.gov; and (4) for review and copying at the SEC's Public Reference
Room ("PRR") in Washington, DC. Information regarding the operation of the PRR
may be obtained by calling (800) SEC-0330.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. YOU SHOULD CONSIDER EACH FUND'S INVESTMENT
OBJECTIVE, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. YOU CAN
DOWNLOAD EACH FUND'S PROSPECTUS AT HTTP://WWW.FTPORTFOLIOS.COM OR CONTACT FIRST
TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS
THIS AND OTHER INFORMATION ABOUT EACH FUND. FOR ADDITIONAL INFORMATION ABOUT THE
RISKS ASSOCIATED WITH INVESTING IN THE FUNDS, PLEASE SEE THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION, AS WELL AS OTHER REGULATORY FILINGS. READ THESE
DOCUMENTS CAREFULLY BEFORE YOU INVEST. FIRST TRUST PORTFOLIOS L.P. IS THE
DISTRIBUTOR OF THE FIRST TRUST EXCHANGE-TRADED FUND.
The following summarizes some of the risks that should be considered for the
Funds.
Each Fund's shares will change in value, and you could lose money by investing
in a Fund. Shares are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates and perceived trends in stock prices. Overall stock values could decline
generally or could underperform other investments. Overall stock market values
could decline generally or could underperform other investments.
An investment in a Fund involves risks similar to those of investing in any fund
of equity securities traded on an exchange. Investors buying or selling Fund
shares on the secondary market may incur brokerage commissions. In addition,
investors who sell Fund shares may receive less than the Fund shares' net asset
value. Unlike shares of open-end funds, investors are generally not able to
purchase exchange-traded fund ("ETF") shares directly from a Fund and individual
ETF shares are not redeemable. However, specified large blocks of ETF shares
called creation units can be purchased from, or redeemed to, a Fund.
Each Fund is subject to index tracking risk. You should anticipate that the
value of Fund shares will decline, more or less, in correlation with any decline
in the value of the index that the Fund seeks to track.
Each Fund's return may not match the return of the index it seeks to track for a
number of reasons. While First Trust seeks to have a correlation of 0.95 or
better, before expenses, between a Fund's performance and the performance of its
corresponding index, there can be no assurance that a Fund will be able to
achieve such a correlation. Accordingly, each Fund's performance may correlate
to a lesser extent and may possibly vary substantially from the performance of
its corresponding index.
Each Fund is also exposed to additional market risk due to a policy of investing
principally in the securities included in its corresponding index. As a result
of such policies, securities held by each Fund will generally not be bought or
sold in response to market fluctuations and the securities may be issued by
companies concentrated in a particular industry. As a result, each Fund will
generally not sell a stock because the stock's issuer is in financial trouble,
unless that stock is removed or is anticipated to be removed from the index the
Fund seeks to track.
Each Fund relies on a license from an index provider that permits the Fund to
use its corresponding index and associated trade names and trademarks in
connection with the name and investment strategies of the Fund. Such licenses
may be terminated by the respective index provider and, as a result, each Fund
may lose its ability to use such intellectual property. There is also no
guarantee that the index provider has all rights to license the respective
intellectual property to First Trust, on behalf of the Fund. Accordingly, in the
event the license is terminated or the index provider does not have rights to
license the particular intellectual property, it may have a significant effect
on the operation of the related Fund.
Each Fund is subject to issuer specific changes risk. The value of an individual
security or a particular type of security can be more volatile than the market
as a whole and can perform differently from the value of the market as a whole.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
Each Fund will be concentrated in the securities of companies of a given
industry if the Fund's corresponding index is concentrated in such industry. A
concentration makes a Fund more susceptible to any single occurrence affecting
the related industry and may subject a Fund to greater market risk than less
concentrated funds.
The First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund is considered to be
non-diversified. As a result, the Fund is exposed to additional market risk. A
non-diversified fund may invest a relatively high percentage of its assets in a
limited number of issuers. As a result, changes in the market value of a single
portfolio security could cause greater fluctuations in share price than would
occur in a diversified fund. Furthermore, non-diversified funds are more
susceptible to any single political, regulatory or economic occurrence.
The Funds are not actively managed. The Funds may be affected by a general
decline in certain market segments relating to their corresponding index. The
Funds invest in securities included in or representative of their corresponding
index regardless of their investment merit. The Funds generally will not attempt
to take defensive positions in declining markets.
The First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund invests in securities
of companies in the information technology industry. Information technology
companies are generally subject to the risks of rapidly changing technologies;
short product life cycles; fierce competition; and aggressive pricing and
reduced profit margins.
The Funds may invest in small capitalization and mid-capitalization companies.
Such companies' securities may be less liquid and may experience greater price
volatility than securities of larger, more established companies.
Because a Fund's corresponding index may include American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs") and/or stocks of non-U.S.
companies, the investments of the Funds involve risks of investing in non-U.S.
securities that are in addition to the risk associated with domestic securities.
Non-U.S. companies, in general, are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available information
about these companies. Moreover, non-U.S. accounting, auditing and financial
reporting standards generally are different from those applicable to U.S.
companies. In addition, non-U.S. companies are exposed to additional economic,
political, social or diplomatic events. ADRs and ADSs also involve substantially
identical risks to those associated with investments in non-U.S. securities. In
addition, the issuers of certain depositary receipts, particularly unsponsored
or unregistered depositary receipts, are under no obligation to distribute
shareholder communications to the holders of such receipts, or to pass through
to them any voting rights with respect to the deposited securities.
Each Fund currently has fewer assets than larger funds and large inflows and
outflows may have a positive or negative impact on the Fund's market exposure
for limited periods of time.
The First Trust Total US Market AlphaDEX(R) ETF invests in consumer
discretionary companies that manufacture products and provide discretionary
services directly to the consumer. The success of these companies is tied
closely to the performance of the overall domestic and international economies,
interest rates, competition, consumer confidence, disposable household income
and consumer spending. Changes in demographics and consumer tastes can affect
the demand for and success of these products.
The First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund's use of options and
other derivatives can lead to losses because of adverse movements in the price
or value of the underlying asset, index or rate, which may be magnified by
certain features of the derivatives. These risks are heightened when the First
Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund's portfolio managers use
derivatives to enhance the Fund's return or as a substitute for a position or
security, rather than solely to hedge (or offset) the risk of a position or
security held by the Fund. The option positions employed, as dictated by the
attempt to replicate the Index, may present additional risk. The value of an
option may be adversely affected if the market for the option becomes less
liquid or smaller, and will be affected by changes in the value and dividend
rates of the stock subject to the option, an increase in interest rates, a
change in the actual and perceived volatility of the stock market and the common
stock and the remaining time to expiration. Additionally, the value of an option
does not increase or decrease at the same rate as the underlying stock (although
they generally move in the same direction).
Unlike most exchange-traded funds, the First Trust CBOE(R) S&P 500(R) VIX(R)
Tail Hedge Fund may effect a portion of creations and redemptions for cash,
rather than in-kind securities. Particularly, the call option portion of the
Fund's portfolio, if applicable, may be redeemed for cash. As a result, an
investment in the Fund may be less tax-efficient than an investment in a more
conventional exchange-traded fund. Because the Fund may effect a portion of
redemptions for cash, rather than in-kind distributions, it may be required to
sell portfolio securities in order to obtain the cash needed to distribute
redemption proceeds. A sale of shares may result in capital gains or losses, and
may also result in higher brokerage costs.
The First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund invests in information
technology companies that are generally subject to risks from rapidly changing
technologies, short product life cycles, fierce competition, aggressive pricing,
reduced profit margins, the loss of patent, copyright and trademark protections,
cyclical market patterns, evolving industry standards; and frequent new product
Page 45
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
introductions. These companies may be smaller and less experienced, with limited
product lines, markets or financial resources and fewer experienced management
or marketing personnel. Internet related information technology companies, have
experienced extreme price and volume fluctuations that are often unrelated to
their operating performance.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT
MANAGEMENT AGREEMENT
The Board of Trustees (the "Board") of the First Trust Exchange-Traded Fund (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" or "First Trust") on behalf of the following
series of the Trust (each a "Fund" and collectively, the "Funds"):
First Trust Total US Market AlphaDEX(R) ETF (TUSA)
First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund (VIXH)
The Board approved the continuation of the Agreement for each Fund for a
one-year period ending June 30, 2017 at a meeting held on June 13, 2016. The
Board determined for each Fund that the continuation of the Agreement is in the
best interests of the Fund in light of the extent and quality of the services
provided and such other matters as the Board considered to be relevant in the
exercise of its reasonable 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 22, 2016 and June 13, 2016, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor responding to requests for information from counsel to 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 TUSA and the unitary fee
rate payable by VIXH as compared to fees charged to a peer group of funds
(substantially all of which were exchange-traded funds ("ETFs")) compiled by
Management Practice, Inc. ("MPI"), an independent source (the "MPI Peer Group"),
and as compared to fees charged to other clients of the Advisor, including other
ETFs managed by the Advisor; expenses of each Fund as compared to expense ratios
of the funds in the Fund's MPI Peer Group; performance information for each
Fund; the nature of expenses incurred in providing services to each Fund and the
potential for economies of scale, if any; financial data on the Advisor; any
fall-out benefits to the Advisor and its affiliate, First Trust Portfolios L.P.
("FTP"); and information on the Advisor's compliance program. The Board reviewed
initial materials with the Advisor at a special meeting held on April 22, 2016,
prior to which the Independent Trustees and their counsel met separately to
discuss the information provided by the Advisor. Following the April meeting,
independent legal counsel 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 independent legal counsel held
prior to the June 13, 2016 meeting, as well as at the meeting held that day. 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 as well as from the perspective of shareholders. 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
TUSA's advisory fee and VIXH'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. The Board considered the background and
experience of the persons responsible for the day-to-day management of the
Funds. 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 and
policies. In addition, as part of the Board's consideration of the Advisor's
services, the Advisor, in its written materials and at the April 22, 2016
meeting, described to the Board the scope of its ongoing investment in
additional infrastructure and personnel 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 the Fund's investment objective and policies.
Page 46
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2016 (UNAUDITED)
The Board considered the advisory fee rate payable by TUSA and the unitary fee
rate payable by VIXH under the Agreements for the services provided. The Board
considered that the Advisor agreed to extend the current expense cap for TUSA
through April 30, 2018 and noted that expenses borne or fees waived by the
Advisor for TUSA are to be subject to reimbursement by the Fund for up to three
years from the date the expense was incurred or fee was waived, but no
reimbursement payment would be made by the Fund if it would result in the Fund
exceeding an expense ratio equal to the expense cap in place at the time the
expenses were borne or fees were waived by the Advisor. The Board considered
that as part of VIXH's unitary fee the Advisor is responsible for the Fund's
expenses, including the cost of transfer agency, custody, fund administration,
legal, audit, licensing and other services, but excluding interest, taxes,
brokerage commissions and other expenses connected with the execution of
portfolio transactions, distribution and service fees pursuant to a Rule 12b-1
plan, if any, and extraordinary expenses. The Board received and reviewed
information showing the advisory or unitary fee rates and expense ratios of the
peer funds in the MPI Peer Groups, as well as advisory fee rates charged by the
Advisor to other fund (including ETFs) and non-fund clients, as applicable.
Because each Fund's MPI Peer Group included peer funds that pay a unitary fee
and because VIXH 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 VIXH's unitary fee was at the median total (net)
expense ratio of the peer funds in VIXH's MPI Peer Group and that the total
(net) expense ratio of TUSA was above the median total (net) expense ratio of
the peer funds in TUSA's MPI Peer Group. With respect to the MPI Peer Groups,
the Board discussed with representatives of 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 clients, the Board considered differences between the Funds and
other clients that limited their comparability. In considering the advisory fee
rate for TUSA and the unitary fee rate for VIXH 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 description of
its long-term commitment to each Fund.
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, 2015 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 consistent with the Fund's prospectus. In addition,
the Board reviewed data prepared by MPI comparing each Fund's performance to its
respective MPI Peer Group and to a broad-based benchmark, 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.
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 TUSA and the unitary fee for VIXH continue
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 expects its expenses to
increase over the next twelve months as the Advisor continues to make
investments in personnel and infrastructure. For VIXH, the Board noted that any
reduction in fixed costs associated with the management of the Fund would
benefit the Advisor, but that the unitary fee structure provides a level of
certainty in expenses for the Fund. The Board 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, 2015
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. 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 its management of the
Funds' portfolios.
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 the Trust and each Fund. No single
factor was determinative in the Board's analysis.
Page 47
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FIRST TRUST
First Trust Exchange-Traded Fund
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
101 Barclay Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. Code of Ethics.
Not applicable.
ITEM 3. Audit Committee Financial Expert.
Not applicable.
ITEM 4. Principal Accountant Fees and Services.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEMS 6. SCHEDULE OF INVESTMENTS.
Schedules of Investments in securities of unaffiliated issuers as of the close
of the reporting period are 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 registrant's last fiscal quarter
that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not Applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not Applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) First Trust Exchange-Traded Fund
-------------------------------------------------
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: August 22, 2016
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: August 22, 2016
------------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: August 22, 2016
------------------
* Print the name and title of each signing officer under his or her signature.