UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-21944
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First Trust Exchange-Traded Fund II
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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: September 30
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Date of reporting period: September 30, 2019
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
FIRST TRUST
First Trust Exchange-Traded Fund II
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Book 1
First Trust STOXX(R) European Select Dividend Index Fund (FDD)
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (FFR)
First Trust Dow Jones Global Select Dividend Index Fund (FGD)
First Trust Global Wind Energy ETF (FAN)
First Trust Global Engineering and Construction ETF (FLM)
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (GRID)
First Trust Indxx Global Natural Resources Income ETF (FTRI)
First Trust Indxx Global Agriculture ETF (FTAG)
First Trust BICK Index Fund (BICK)
First Trust Indxx NextG ETF (NXTG) (formerly First Trust Nasdaq Smartphone
Index Fund)
First Trust NASDAQ Global Auto Index Fund (CARZ) First Trust Cloud Computing
ETF (SKYY)
First Trust International Equity Opportunities ETF (FPXI) (formerly First
Trust International IPO ETF)
First Trust Nasdaq Cybersecurity ETF (CIBR)
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Annual Report
September 30, 2019
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL REPORT
SEPTEMBER 30, 2019
Shareholder Letter ....................................................................... 2
Market Overview .......................................................................... 3
Fund Performance Overview
First Trust STOXX(R) European Select Dividend Index Fund (FDD) ..................... 4
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (FFR) ........ 6
First Trust Dow Jones Global Select Dividend Index Fund (FGD) ...................... 8
First Trust Global Wind Energy ETF (FAN) ........................................... 10
First Trust Global Engineering and Construction ETF (FLM) .......................... 12
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (GRID) .... 14
First Trust Indxx Global Natural Resources Income ETF (FTRI) ....................... 16
First Trust Indxx Global Agriculture ETF (FTAG) .................................... 18
First Trust BICK Index Fund (BICK) ................................................. 20
First Trust Indxx NextG ETF (NXTG) ................................................. 22
First Trust NASDAQ Global Auto Index Fund (CARZ) ................................... 24
First Trust Cloud Computing ETF (SKYY) ............................................. 26
First Trust International Equity Opportunities ETF (FPXI) .......................... 28
First Trust Nasdaq Cybersecurity ETF (CIBR) ........................................ 30
Notes to Fund Performance Overview ....................................................... 32
Understanding Your Fund Expenses ......................................................... 33
Portfolio of Investments
First Trust STOXX(R) European Select Dividend Index Fund (FDD) 35
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (FFR) ........ 36
First Trust Dow Jones Global Select Dividend Index Fund (FGD) ...................... 42
First Trust Global Wind Energy ETF (FAN) ........................................... 44
First Trust Global Engineering and Construction ETF (FLM) .......................... 46
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (GRID) .... 49
First Trust Indxx Global Natural Resources Income ETF (FTRI) ....................... 52
First Trust Indxx Global Agriculture ETF (FTAG) .................................... 55
First Trust BICK Index Fund (BICK) ................................................. 57
First Trust Indxx NextG ETF (NXTG) ................................................. 59
First Trust NASDAQ Global Auto Index Fund (CARZ) ................................... 63
First Trust Cloud Computing ETF (SKYY) ............................................. 65
First Trust International Equity Opportunities ETF (FPXI) .......................... 67
First Trust Nasdaq Cybersecurity ETF (CIBR) ........................................ 69
Statements of Assets and Liabilities ..................................................... 70
Statements of Operations ................................................................. 74
Statements of Changes in Net Assets ...................................................... 78
Financial Highlights ..................................................................... 86
Notes to Financial Statements ............................................................ 93
Report of Independent Registered Public Accounting Firm .................................. 106
Additional Information ................................................................... 108
Board of Trustees and Officers ........................................................... 116
Privacy Policy ........................................................................... 118
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund II (the "Trust") described in
this report (each such series is referred to as a "Fund" and collectively, as
the "Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund shares may therefore be less than what you paid
for them. Accordingly, you can lose money by investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund and presents data and analysis that provide
insight into each Fund's performance and investment approach.
By reading the market overview by Robert F. Carey, Chief Market Strategist of
the Advisor, you may obtain an understanding of how the market environment
affected the performance of each Fund. The statistical information that follows
may help you understand each Fund's performance compared to that of relevant
market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in each
Fund are spelled out in its prospectus, statement of additional information, and
other Fund regulatory filings.
Page 1
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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
SEPTEMBER 30, 2019
Dear Shareholders,
First Trust is pleased to provide you with the annual report for certain series
of the First Trust Exchange-Traded Fund II (the "Funds"), which contains
detailed information about the Funds for the twelve months ended September 30,
2019, including a market overview and a performance analysis. We encourage you
to read this report carefully and discuss it with your financial advisor.
One of our responsibilities as asset managers is to be good listeners. Perhaps
the most effective way in which we do this continually is by paying close
attention to mutual fund and exchange-traded fund ("ETF") money flows. After
all, investors vote with their dollars, and money flows provide valuable
feedback. Over the past 12 months, we have learned that investors, in general,
have grown more risk-averse. For the 12-month period ended September 30, 2019,
investors funneled an estimated net $290.39 billion into bond mutual funds and
ETFs, while liquidating an estimated net $54.19 billion from equity mutual funds
and ETFs, according to data from Morningstar. Over the same period, money market
funds took in an estimated net $529.80 billion. Those figures were more balanced
for the full-year 2018. Those estimated net flows were as follows: $94.42
billion (equity mutual funds & ETFs); $137.60 billion (bond mutual funds &
ETFs); and $161.60 billion (money market funds).
In addition to monitoring fund flows, we watch the performance of all the asset
classes. Market returns can either help validate or invalidate our
interpretation of money flows. As we noted above, we believe that investors have
tempered their appetite for risk, and the returns on the major sectors that
comprise the S&P 500(R) Index back it up. For the 12-month period ended
September 30, 2019, as measured by total return, the top performers by far were
Utilities, Real Estate and Consumer Staples, up 27.10%, 24.74% and 16.85%,
respectively, according to Bloomberg. The S&P 500(R) Index posted a total return
of 4.25% for the same period. These three sectors are all defensive in nature.
They also tend to distribute cash dividends that are often well above those
sectors that are more cyclical in nature. The higher dividend distributions
likely drew the attention of fixed-income investors dissatisfied with the
current low-yield climate in the bond market, in our opinion.
To be fair, the apprehension being exhibited by investors lately also extends to
corporate executives, both here in the U.S. and abroad. Data from Refinitiv
indicates that global mergers and acquisitions ("M&A") activity declined by 16%
year-over-year to $729 billion in the third quarter of 2019, the lowest
quarterly volume since 2016, according to Reuters. U.S. M&A activity plunged 40%
year-over-year to $246 billion in the third quarter of 2019, the lowest
quarterly volume in the U.S. since 2014. The ongoing trade conflict between the
U.S. and China reportedly weighed heavily on dealmaking.
The absence of a new trade deal between the U.S. and China has been a bit of a
wet blanket on the global economy. Global growth projections have been trimmed
over time by such organizations as the International Monetary Fund. The tariffs
have been in play for 18 months and counting as of September 2019. While the
lack of any significant progress in the negotiations between the U.S. and China
is a concern, we believe a remedy will be found. Remember, as bad as things may
appear in the current climate, investors with diversified investment portfolios
were most likely rewarded over the past 12 months. Stay the course and stay
engaged!
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
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MARKET OVERVIEW
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FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL REPORT
SEPTEMBER 30, 2019
ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of research and analysis of
the First Trust product line. Mr. Carey has over 27 years of experience as an
Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial
Analyst ("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service and Registered Rep.
STATE OF THE GLOBAL ECONOMY
The trade conflict between the U.S. and China remains a work-in-progress. The
Trump Administration has been steadfast in applying economic pressure to China
via trade tariffs. The two parties have held numerous talks over the 18-month
process to date but are still searching for enough common ground to forge an
agreement, or even a partial deal. We believe the ongoing dispute has clearly
been a drag on global economic growth. President Trump has been very outspoken
about his desire for the Federal Reserve (the "Fed") to lower rates to help
offset the tempered growth stemming from the tariffs. While the Fed did initiate
two 25 basis point reductions in the third quarter of 2019, which lowered the
federal funds target rate (upper bound) from 2.50% to 2.00%, President Trump
would like the Fed to be even more aggressive with rate cuts moving forward. He
cites negative interest rates and bond yields in parts of Europe and Japan as
support for his view.
The global growth forecast from the International Monetary Fund ("IMF") released
at the start of October reflects a downgrade for 2019 from its 3.3% estimate in
April 2019 to 3.0%. It sees the rate of growth rebounding to 3.4% in 2020. The
IMF notes that the escalation in trade tariffs between the U.S. and China has
negatively impacted business sentiment and confidence globally. It estimates
that real gross domestic product growth in the U.S. will be 2.4% in 2019 and
2.1% in 2020. These projections are subject to change, and we would expect them
to be adjusted higher should the U.S. and China reach an agreement on trade
policy in the not-too-distant future. While we believe a recession is inevitable
at some point, we do not see one looming in the near-term.
While we need to keep a close eye on the direction of global economic growth
moving forward, investors are still getting some positive feedback from
companies around the world. Dividend payouts from common stock continue to trend
higher. Historically speaking, rising cash dividend distributions have been a
barometer of strength in the private sector. In the second quarter of 2019
(latest data), global dividends totaled $513.8 billion, an all-time high for a
second quarter, according to Janus Henderson. It estimates that global dividends
will total $1.43 trillion for full-year 2019.
PERFORMANCE OF GLOBAL STOCKS AND BONDS
The three major Standard & Poor's stock indices delivered mixed results for the
12-month period ended September 30, 2019. The S&P 500(R) Index, S&P MidCap
400(R) Index and S&P SmallCap 600(R) Index posted total returns of 4.25%,
-2.49%, and -9.34%, respectively, according to Bloomberg. Nine of the 11 major
S&P 500(R) Index sectors posted positive total returns. The top-performing
sectors were Utilities, Real Estate and Consumer Staples, up 27.10%, 24.74% and
16.85%, respectively, on a total return basis. The worst-performing sectors were
Energy and Health Care, down 19.21% and 3.57%, respectively. We believe that
small- and mid-cap stocks succumbed to some selling pressure in the period due
to investor concerns over slowing economic growth. Small- and mid-sized
companies are inherently riskier and not nearly as well-capitalized as their
large company counterparts, in our opinion.
In the U.S. bond market, the top-performing major debt group we track was
long-term municipal bonds. The Bloomberg Barclays 22+ Year U.S. Municipal Bond
Index posted a total return of 11.30% for the 12-month period ended September
30, 2019. The worst-performing debt group that we track was high yield corporate
bonds, though it finished in positive territory. The Bloomberg Barclays U.S.
Corporate High Yield Index posted a total return of 6.36%. The yield on the
benchmark 10-Year Treasury Note ("T-Note") plunged by 139 basis points in the
period to close at 1.67% on September 30, 2019, according to Bloomberg. For
comparative purposes, the average yield on the 10-year T-Note was 2.44% for the
10-year period ended September 30, 2019. The combination of the tempering of
global growth and the Fed rate cuts were a boon for investors holding
investment-grade debt securities, in our opinion.
The U.S. dollar registered a gain of 4.47% against a basket of major currencies
for the 12-month period ended September 30, 2019, as measured by the U.S. Dollar
Index (DXY). With respect to U.S. investors, we believe a stronger U.S. dollar
can negatively impact returns on unhedged foreign securities. We believe the
dollar strengthened due to the escalating trade tariff battle between the U.S.
and China. The U.S. has often been a safe haven for foreign investors during
uncertain times.
Investors appear to have favored foreign bonds over foreign stocks for the
12-month period ended September 30, 2019. The Bloomberg Barclays Global
Aggregate Index of higher quality debt posted a total return of 7.60% (USD),
while the Bloomberg Barclays EM Hard Currency Aggregate Index of emerging
markets debt rose by 9.07% (USD), according to Bloomberg Barclays. With respect
to equities, the MSCI World ex USA Index posted a total return of -0.95% (USD),
compared to -2.02% (USD) for the MSCI Emerging Markets Index.
Page 3
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
First Trust STOXX(R) European Select Dividend Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the STOXX(R) Europe Select
Dividend 30 Index (the "STOXX Index"). The shares of the Fund are listed and
trade on the NYSE Arca, Inc. under the ticker symbol "FDD." The Fund will
normally invest at least 90% of its net assets (including investment borrowings)
in the common stocks and depositary receipts that comprise the STOXX Index.
The STOXX Index consists of 30 high dividend-yielding securities selected from
the STOXX(R) Europe 600 Index, including secondary lines of those companies
(where there are multiple lines of equity capital in a company), which covers 18
European countries: Austria, Belgium, Czech Republic, Denmark, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland and the United Kingdom. In addition, a company must
have a non-negative five-year dividend-per-share growth rate and a
dividend-to-earnings ratio of 60% or less. The STOXX Index is compiled and
maintained by STOXX Limited.
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PERFORMANCE
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AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (8/27/07) Ended Ended (8/27/07)
9/30/19 9/30/19 9/30/19 to 9/30/19 9/30/19 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV 2.35% 3.25% 3.70% -2.40% 17.32% 43.82% -25.47%
Market Price 2.43% 3.23% 3.66% -2.42% 17.20% 43.28% -25.62%
INDEX PERFORMANCE
STOXX(R) Europe Select
Dividend 30 Index 2.46% 3.53% 4.05% -1.98% 18.95% 48.80% -21.52%
STOXX(R) Europe 600 Index -0.80% 2.59% 4.87% 1.55% 13.66% 60.91% 20.43%
MSCI Europe Index -0.75% 2.38% 4.61% 1.32% 12.46% 56.98% 17.14%
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(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of 2.35% during the 12-month
period covered by this report. During the same period, the benchmark MSCI Europe
Index generated a return of -0.75%. The Financials sector was given the highest
allocation in the Fund over the period with a 35.4% allocation. The Fund's top
contributing sector was the Utilities sector with a 3.4% contribution, stemming
from its 24.2% allocation and 12.3% return. The Fund's least contributing sector
was the Energy sector with a -1.3% contribution stemming from its 7.5%
allocation and -13.1% return. The Fund's currency exposure had a -5.4% impact on
performance. On a relative basis, the Fund outperformed the benchmark. The
primary cause of the outperformance is attributable to the Fund over allocating
the benchmark among the well performing Utilities securities by 19.8%, creating
2.7% of relative outperformance. The Fund underperformed the benchmark among the
Consumer Staples sector by -37.9%, creating -2.6% of relative drag.
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The STOXX Index and the trademarks used in the index name are the intellectual
property of STOXX Limited, Zurich, Switzerland ("STOXX"), Deutsche Borse Group
and/or their licensors. The STOXX Index is used under license from STOXX. The
Fund is in no way sponsored, endorsed, sold or promoted by STOXX and/or its
licensors and neither STOXX nor its licensors shall have any liability with
respect thereto.
Page 4
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD) (CONTINUED)
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% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
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Financials 40.41%
Utilities 21.89
Real Estate 13.63
Industrials 7.22
Energy 6.47
Communication Services 6.18
Health Care 4.20
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Total 100.00%
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% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
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SSE PLC 5.62%
Intesa Sanpaolo S.p.A. 4.83
GlaxoSmithKline PLC 4.20
Royal Dutch Shell PLC, Class B 4.10
BAE Systems PLC 3.91
Societe Generale S.A. 3.89
Swiss Prime Site AG 3.82
Proximus S.A., DP 3.80
National Grid PLC 3.79
UBS Group AG 3.75
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Total 41.71%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2009 - SEPTEMBER 30, 2019
First Trust STOXX(R) European STOXX(R) Europe Select STOXX(R) Europe MSCI Europe
Select Dividend Index Fund Dividend 30 Index 600 Index Index
----------------------------- ---------------------- --------------- -----------
9/30/09 $10,000 $10,000 $10,000 $10,000
3/31/10 9,752 9,816 10,155 10,138
9/30/10 9,905 9,993 10,284 10,263
3/31/11 10,964 11,080 11,455 11,418
9/30/11 9,241 9,401 9,067 9,051
3/31/12 9,940 10,056 10,591 10,556
9/30/12 9,955 10,083 10,672 10,618
3/31/13 9,946 10,089 11,768 11,670
9/30/13 11,278 11,475 13,363 13,191
3/31/14 12,617 12,857 14,786 14,530
9/30/14 12,257 12,510 14,158 13,959
3/31/15 12,047 12,334 14,067 13,812
9/30/15 11,288 11,524 13,015 12,656
3/31/16 11,594 11,901 13,019 12,646
9/30/16 11,726 12,032 13,302 12,971
3/31/17 12,311 12,683 14,212 13,880
9/30/17 13,946 14,369 16,271 15,863
3/31/18 14,295 14,745 16,317 15,892
9/30/18 14,049 14,524 16,224 15,816
3/31/19 13,847 14,340 15,676 15,300
9/30/19 14,382 14,880 16,091 15,698
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 THROUGH SEPTEMBER 30, 2019
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 October 1, 2014 through
September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/14 - 9/30/15 145 32 2 0 63 10 0 0
10/1/15 - 9/30/16 158 27 2 0 54 12 0 0
10/1/16 - 9/30/17 181 30 0 0 38 2 0 0
10/1/17 - 9/30/18 147 4 0 0 96 4 0 0
10/1/18 - 9/30/19 86 3 1 0 160 0 1 0
Page 5
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (the
"Fund") seeks investment results that correspond generally to the price and
yield (before the Fund's fees and expenses) of an equity index called the FTSE
EPRA/NAREIT Developed Index (the "FTSE Index"). The shares of the Fund are
listed and trade on the NYSE Arca, Inc. under the ticker symbol "FFR." The Fund
will normally invest at least 90% of its net assets (including investment
borrowings) in the common stocks and depositary receipts that comprise the FTSE
Index.
The FTSE Index is compiled and maintained by FTSE International Limited. The
FTSE Index is modified market cap weighted based on free float market
capitalization and includes the securities of listed real estate companies or
real estate investment trusts ("REITs") that are publicly traded on an official
stock exchange located in North America, Europe or Asia and provide an audited
annual report in English.
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PERFORMANCE
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AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (8/27/07) Ended Ended (8/27/07)
9/30/19 9/30/19 9/30/19 to 9/30/19 9/30/19 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV 13.19% 7.00% 8.66% 3.36% 40.26% 129.49% 49.17%
Market Price 13.79% 7.02% 8.59% 3.38% 40.39% 128.06% 49.54%
INDEX PERFORMANCE
FTSE EPRA/NAREIT
Developed Index 14.11% 7.78% 9.50% 4.21% 45.42% 147.92% 64.73%
S&P Global REIT Index 15.08% 7.36% 9.71% 4.01% 42.60% 152.54% 60.81%
MSCI World REIT Index 20.36% 8.86% 10.29% 4.08% 52.86% 166.38% 62.11%
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(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 13.19% during the 12-month period covered by
this report. During the same period, the benchmark S&P Global REIT Index
generated a return of 15.08%. United States securities were given the highest
allocation in the Fund over the period with a 53.6% allocation. These securities
returned 17.7% and contributed 9.5% to the Fund's return. The Netherlands'
securities were the Fund's least contributing securities with a -0.5%
contribution, stemming from its 1.7% allocation and -21.0% return. The Fund's
top performing country was Israel with a 56.5% return, while the Netherlands was
the worst performer with a -21.0% return. The Fund's currency exposure had a
-1.1% impact on performance. On a relative basis, the Fund underperformed the
benchmark. The primary cause of the underperformance is attributable to the Fund
underperforming the benchmark among German securities by -19.6%, creating -0.9%
of relative underperformance. Underperformance of 0.3% was reversed due to the
Fund outperforming the benchmark among South African securities by 15.0%.
-----------------------------
The Fund has been developed solely by First Trust. The Fund is not in any way
connected to or sponsored, endorsed, sold or promoted by the London Stock
Exchange Group plc and its group undertakings, including FTSE International
Limited (collectively, the "LSE Group"), European Public Real Estate Association
("EPRA"), or the National Association of Real Estate Investments Trusts
("Nareit") (and together the "Licensor Parties"). FTSE Russell is a trading name
of certain of the LSE Group companies. All rights in the FTSE Index vest in the
Licensor Parties. "FTSE(R)" and "FTSE Russell(R)" are trade marks of the
relevant LSE Group company and are used by any other LSE Group company under
license. "Nareit(R)" is a trade mark of Nareit, "EPRA(R)" is a trade mark of
EPRA and all are used by the LSE Group under license. The FTSE Index is
calculated by or on behalf of FTSE International Limited or its affiliate, agent
or partner. The Licensor Parties do not accept any liability whatsoever to any
person arising out of (a) the use of, reliance on or any error in the FTSE Index
or (b) investment in or operation of the Fund. The Licensor Parties makes no
claim, prediction, warranty or representation either as to the results to be
obtained from the Fund or the suitability of the FTSE Index for the purpose to
which it is being put by First Trust.
Page 6
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
(CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Real Estate 99.77%
Health Care 0.14
Consumer Discretionary 0.09
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Prologis, Inc. 3.25%
Simon Property Group, Inc. 2.91
Welltower, Inc. 2.23
Public Storage 2.21
Equity Residential 1.92
AvalonBay Communities, Inc. 1.82
Vonovia SE 1.68
Ventas, Inc. 1.65
Digital Realty Trust, Inc. 1.64
Realty Income Corp. 1.48
------
Total 20.79%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2009 - SEPTEMBER 30, 2019
First Trust FTSE EPRA/NAREIT Developed FTSE EPRA/NAREIT S&P Global MSCI World
Markets Real Estate Index Fund Developed Index REIT Index REIT Index
-------------------------------------- ---------------- ---------- ----------
9/30/09 $10,000 $10,000 $10,000 $10,000
3/31/10 10,803 10,854 10,970 10,809
9/30/10 11,748 11,841 11,948 11,705
3/31/11 12,791 12,952 13,438 13,321
9/30/11 10,788 11,026 11,748 11,725
3/31/12 13,103 13,365 14,213 14,134
9/30/12 14,048 14,399 15,131 15,196
3/31/13 15,772 16,205 16,913 16,632
9/30/13 15,456 15,976 16,143 15,830
3/31/14 15,934 16,537 17,105 16,640
9/30/14 16,363 17,048 17,711 17,427
3/31/15 18,348 19,193 20,130 19,652
9/30/15 16,849 17,658 18,439 18,298
3/31/16 18,443 19,436 20,681 20,675
9/30/16 19,367 20,456 21,558 21,502
3/31/17 18,664 19,797 20,752 20,732
9/30/17 19,496 20,767 21,339 21,451
3/31/18 19,321 20,617 20,701 21,046
9/30/18 20,274 21,724 21,947 22,132
3/31/19 21,926 23,590 23,584 24,540
9/30/19 22,948 24,788 25,256 26,638
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 THROUGH SEPTEMBER 30, 2019
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 October 1, 2014 through
September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/14 - 9/30/15 67 14 0 0 127 44 0 0
10/1/15 - 9/30/16 35 0 0 0 184 33 1 0
10/1/16 - 9/30/17 144 4 0 0 102 1 0 0
10/1/17 - 9/30/18 34 0 0 1 209 7 0 0
10/1/18 - 9/30/19 101 1 0 0 148 0 1 0
Page 7
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
First Trust Dow Jones Global Select Dividend Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Dow Jones Global Select
Dividend Index (the "Select Dividend Index"). The shares of the Fund are listed
and trade on the NYSE Arca, Inc. under the ticker symbol "FGD." The Fund will
normally invest at least 90% of its net assets (including investment borrowings)
in the common stocks and depositary receipts that comprise the Select Dividend
Index.
The Select Dividend Index is an indicated annual dividend yield weighted index
of 100 stocks selected from the developed-market portion of the Dow Jones World
Index(SM). Indicated annual dividend yield is a stock's unadjusted indicated
annual dividend (not including any special dividends) divided by its unadjusted
price.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (11/21/07) Ended Ended (11/21/07)
9/30/19 9/30/19 9/30/19 to 9/30/19 9/30/19 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV -3.21% 1.89% 5.70% 2.68% 9.79% 74.08% 36.78%
Market Price -2.90% 1.97% 5.69% 2.67% 10.23% 73.91% 36.73%
INDEX PERFORMANCE
Dow Jones Global Select
Dividend Index -3.23% 1.98% 5.80% 2.81% 10.30% 75.78% 38.91%
Dow Jones World Developed
Markets Index(SM) 1.19% 7.34% 9.31% 5.52% 42.51% 143.62% 89.21%
MSCI World Index 1.83% 7.18% 9.01% 5.13% 41.46% 136.91% 80.90%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -3.21% during the 12-month period covered by
this report. During the same period, the benchmark MSCI World Index generated a
return of 1.83%. The Fund gave the highest allocation to Australian securities
over the period with a 13.5% weighting. These securities were also the top
contributing securities with a 2.3% contribution stemming from their 18.7%
return. The top performing country in the Fund was Switzerland with a 20.4%
return, while the Netherlands were the worst performing country in the Fund with
a -31.4% return. The United States securities were the Fund's least contributing
securities at -2.7% stemming from their 11.1% allocation and -20.7% return. The
Fund's currency exposure had a -5.2% impact on performance. On a relative basis,
the Fund underperformed the benchmark. The Fund's holdings within the United
States created -3.8% of relative underperformance due to the Fund
underperforming the benchmark by -23.6%. The Fund over allocated and
outperformed the benchmark among Australian securities by 11.1% and 12.4%,
respectively, creating 2.0% of relative outperformance.
-----------------------------
The Select Dividend Index is a product of S&P Dow Jones Indices LLC or its
affiliates ("SPDJI"), and has been licensed for use by First Trust. Standard &
Poor's(R) and S&P(R) are registered trademarks of Standard & Poor's Financial
Services LLC ("S&P"); Dow Jones(R) is a registered trademark of Dow Jones
Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed
for use by SPDJI and sublicensed for certain purposes by First Trust. The Fund
is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their
respective affiliates, and none of such parties make any representation
regarding the advisability of investing in such product(s) nor do they have any
liability for any errors, omissions, or interruptions of the Select Dividend
Index.
Page 8
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Financials 43.58%
Consumer Discretionary 15.81
Communication Services 15.10
Utilities 7.62
Energy 4.79
Industrials 4.15
Information Technology 3.67
Materials 3.38
Consumer Staples 1.90
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Standard Life Aberdeen PLC 1.79%
Harvey Norman Holdings Ltd. 1.63
CSR Ltd. 1.56
BE Semiconductor Industries N.V. 1.56
Azimut Holding S.p.A. 1.55
JB Hi-Fi Ltd. 1.51
National Australia Bank Ltd. 1.48
Intesa Sanpaolo S.p.A. 1.46
TUI AG 1.41
AT&T, Inc. 1.39
------
Total 15.34%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2009 - SEPTEMBER 30, 2019
First Trust Dow Jones Global Dow Jones Global Select Dow Jones World Developed MSCI World
Select Dividend Index Fund Dividend Index(SM) Markets Index(SM) Index
---------------------------- ----------------------- ------------------------- ----------
9/30/09 $10,000 $10,000 $10,000 $10,000
3/31/10 10,386 10,415 10,794 10,744
9/30/10 11,033 11,062 10,782 10,676
3/31/11 12,286 12,335 12,378 12,190
9/30/11 10,860 10,970 10,332 10,213
3/31/12 12,284 12,298 12,417 12,259
9/30/12 12,769 12,807 12,570 12,418
3/31/13 13,430 13,464 13,978 13,712
9/30/13 14,606 14,667 15,265 14,928
3/31/14 16,059 16,147 16,735 16,325
9/30/14 15,856 15,937 17,094 16,749
3/31/15 15,391 15,484 17,747 17,310
9/30/15 13,555 13,572 16,301 15,898
3/31/16 14,417 14,530 17,168 16,714
9/30/16 15,409 15,474 18,250 17,703
3/31/17 16,266 16,418 19,792 19,181
9/30/17 17,588 17,751 21,652 20,919
3/31/18 17,750 17,873 22,639 21,775
9/30/18 17,986 18,164 24,077 23,271
3/31/19 17,035 17,203 23,379 22,664
9/30/19 17,408 17,578 24,363 23,697
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 THROUGH SEPTEMBER 30, 2019
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 October 1, 2014 through
September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/14 - 9/30/15 105 3 0 0 136 8 0 0
10/1/15 - 9/30/16 65 2 0 0 176 10 0 0
10/1/16 - 9/30/17 184 3 0 0 62 2 0 0
10/1/17 - 9/30/18 171 3 0 0 74 2 1 0
10/1/18 - 9/30/19 184 4 1 0 60 2 0 0
Page 9
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
First Trust Global Wind Energy ETF (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE Clean Edge Global Wind Energy(TM)
Index (the "Index"). The shares of the Fund are listed and trade on the NYSE
Arca, Inc. under the ticker symbol "FAN." The Fund will normally invest at least
90% of its net assets (including investment borrowings) in the common stocks and
depositary receipts that comprise the Index.
The Index is developed, maintained and sponsored by Nasdaq, Inc. The Index
provides a benchmark for investors interested in tracking public companies
throughout the world that are active in the wind energy industry.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (6/16/08) Ended Ended (6/16/08)
9/30/19 9/30/19 9/30/19 to 9/30/19 9/30/19 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV 7.58% 6.03% 0.19% -5.06% 34.01% 1.91% -44.34%
Market Price 8.43% 6.21% 0.26% -5.03% 35.15% 2.59% -44.15%
INDEX PERFORMANCE
ISE Clean Edge Global Wind
Energy(TM) Index 8.45% 6.88% 1.01% -4.29% 39.48% 10.57% -39.05%
Russell 3000(R) Index 2.92% 10.44% 13.08% 9.36% 64.33% 241.83% 174.56%
MSCI World Index 1.83% 7.18% 9.01% 5.73% 41.46% 136.91% 87.52%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 7.58% during the 12-month period covered by
this report. During the same period, the benchmark MSCI World Index generated a
return of 1.83%. The Utilities industry was the heaviest allocated industry in
the Fund during the period with a 56.8% weighting. This industry was the highest
contributing industry in the Fund with an 8.5% contribution, stemming from its
15.3% return. The Capital Goods industry was the Fund's least contributing
industry with a -0.7% contribution, stemming from its 40.7% allocation and -3.1%
return. The Fund's currency exposure had a -4.2% impact on performance. On a
relative basis, the Fund outperformed the benchmark. The Fund over allocated the
benchmark among the well performing Utilities securities by 53.4%, which created
6.7% of relative outperformance. The Fund did not have any exposure to the well
performing Software & Services industry, which created -0.7% of relative under
performance.
-----------------------------
Nasdaq(R), Clean Edge(R), and the Index are registered trademarks and service
marks of Nasdaq, Inc. and Clean Edge, Inc., respectively (together with its
affiliates hereinafter referred to as the "Corporations") and are licensed for
use by First Trust. The Fund has not been passed on by the Corporations as to
its legality or suitability. The Fund is not issued, endorsed, sold or promoted
by the Corporations. the corporations make no warranties and bear no liability
with respect to the fund.
Page 10
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Utilities 58.53%
Industrials 39.28
Materials 2.11
Energy 0.08
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Vestas Wind Systems A/S 8.20%
Northland Power, Inc. 7.85
Siemens Gamesa Renewable Energy S.A. 7.73
Orsted A/S 7.55
Pattern Energy Group, Inc., Class A 5.69
Boralex, Inc., Class A 4.15
China Longyuan Power Group Corp., Ltd.,
Class H 3.97
Renewables Infrastructure Group (The) Ltd. 3.81
Nordex SE 2.30
Xinjiang Goldwind Science & Technology
Co., Ltd., Class H 2.28
------
Total 53.53%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2009 - SEPTEMBER 30, 2019
First Trust Global ISE Clean Edge Global Russell 3000(R) MSCI World
Wind Energy ETF Wind Energy(TM) Index Index Index
---------------- --------------------------- --------------- ----------
9/30/09 $10,000 $10,000 $10,000 $10,000
3/31/10 8,375 8,429 11,219 10,744
9/30/10 6,490 6,579 11,096 10,675
3/31/11 7,437 7,551 13,172 12,189
9/30/11 5,161 5,292 11,157 10,212
3/31/12 5,009 5,128 14,119 12,257
9/30/12 4,328 4,458 14,527 12,416
3/31/13 4,967 5,116 16,176 13,710
9/30/13 6,779 7,024 17,664 14,926
3/31/14 7,896 8,213 19,833 16,323
9/30/14 7,605 7,926 20,801 16,746
3/31/15 7,319 7,666 22,284 17,307
9/30/15 7,045 7,390 20,697 15,895
3/31/16 7,981 8,447 22,208 16,710
9/30/16 9,189 9,740 23,794 17,699
3/31/17 9,126 9,759 26,219 19,177
9/30/17 9,760 10,445 28,243 20,914
3/31/18 9,938 10,618 29,839 21,769
9/30/18 9,475 10,192 33,208 23,265
3/31/19 10,011 10,795 32,454 22,658
9/30/19 10,191 11,057 34,183 23,691
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 THROUGH SEPTEMBER 30, 2019
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 October 1, 2014 through
September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/14 - 9/30/15 58 8 0 0 130 53 2 1
10/1/15 - 9/30/16 102 20 5 1 96 27 2 0
10/1/16 - 9/30/17 138 31 0 0 79 3 0 0
10/1/17 - 9/30/18 85 13 0 0 140 12 1 0
10/1/18 - 9/30/19 77 5 0 0 152 17 0 0
Page 11
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
First Trust Global Engineering and Construction ETF (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the ISE Global Engineering
and Construction(TM) Index (the "Index"). The shares of the Fund are listed and
trade on the NYSE Arca, Inc. under the ticker symbol "FLM." The Fund will
normally invest in at least 90% of its net assets (including investment
borrowings) in the common stocks and depositary receipts that comprise the
Index.
The Index is developed, maintained and sponsored by Nasdaq, Inc. The Index
provides a benchmark for investors interested in tracking public companies
throughout the world that are active in the engineering and construction
industries.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (10/13/08) Ended Ended (10/13/08)
9/30/19 9/30/19 9/30/19 to 9/30/19 9/30/19 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV -15.64% 1.16% 3.40% 5.87% 5.93% 39.64% 86.89%
Market Price -15.46% 1.20% 3.37% 5.86% 6.12% 39.36% 86.70%
INDEX PERFORMANCE
ISE Global Engineering and
Construction(TM) Index -14.92% 2.23% 4.46% 7.37% 11.68% 54.70% 118.17%
Russell 3000(R) Index 2.92% 10.44% 13.08% 12.78% 64.33% 241.83% 273.80%
MSCI World Industrials Index -0.38% 7.38% 9.75% 10.26% 42.75% 153.51% 191.89%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -15.64% during the 12-month period covered by
this report. During the same period, the benchmark MSCI World Industrials Index
generated a return of -0.38%. Over the period, the Fund allocated 90.3% to
Capital Goods while the benchmark allocated 67.9% to this industry group. These
investments caused -13.1% return in the Fund, the worst of any sector. The
sector with the greatest return in the Fund was Software & Services, which
received 2.5% allocation and contributed 0.4% to the Fund's return. The Fund's
currency exposure caused -0.9% performance during the year. On a relative basis,
the Fund underperformed the benchmark. Most of this underperformance came from
the heavily weighted Capital Goods industry, which accounted for -11.2% of
underperformance versus the benchmark. A small amount of outperformance was
earned by simply avoiding investments in the Transportation sector. This sector
received a 20.3% allocation in the benchmark and caused 0.5% of outperformance
for the Fund versus the benchmark during the time period.
-----------------------------
Nasdaq(R) and the Index are registered trademarks and service marks of Nasdaq,
Inc. (together with its affiliates hereinafter referred to as the
"Corporations") and are licensed for use by First Trust. The Fund has not been
passed on by the Corporations as to its legality or suitability. The Fund is not
issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO
WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 12
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 94.98%
Information Technology 2.47
Energy 1.63
Utilities 0.92
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Jacobs Engineering Group, Inc. 3.59%
MasTec, Inc. 3.35
Vinci S.A. 3.31
Bouygues S.A. 3.21
Skanska AB, Class B 3.00
Quanta Services, Inc. 2.94
Taisei Corp. 2.89
Eiffage S.A. 2.86
ACS Actividades de Construccion y
Servicios S.A. 2.76
AECOM 2.74
------
Total 30.65%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2009 - SEPTEMBER 30, 2019
First Trust Global Engineering ISE Global Engineering and Russell 3000(R) MSCI World
and Construction ETF Construction(TM) Index Index Industrials Index
---------------------------------- -------------------------- --------------- -----------------
9/30/09 $10,000 $10,000 $10,000 $10,000
3/31/10 10,065 10,113 11,219 11,258
9/30/10 10,103 10,188 11,096 11,449
3/31/11 12,511 12,679 13,173 13,645
9/30/11 8,759 9,018 11,157 10,593
3/31/12 10,688 10,944 14,119 13,090
9/30/12 10,330 10,652 14,527 12,809
3/31/13 11,393 11,767 16,176 14,716
9/30/13 12,917 13,458 17,665 16,419
3/31/14 14,150 14,802 19,833 17,901
9/30/14 13,182 13,851 20,802 17,760
3/31/15 12,843 13,698 22,286 18,385
9/30/15 12,235 13,087 20,699 16,523
3/31/16 12,984 13,992 22,210 18,246
9/30/16 13,753 14,848 23,797 19,485
3/31/17 14,758 16,044 26,223 21,268
9/30/17 16,283 17,775 28,247 23,703
3/31/18 16,399 17,866 29,843 24,488
9/30/18 16,556 18,180 33,212 25,450
3/31/19 14,636 16,151 32,458 24,368
9/30/19 13,966 15,468 34,182 25,352
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 THROUGH SEPTEMBER 30, 2019
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 October 1, 2014 through
September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/14 - 9/30/15 62 2 1 0 170 17 0 0
10/1/15 - 9/30/16 64 3 1 0 159 24 2 0
10/1/16 - 9/30/17 82 0 0 0 163 6 0 0
10/1/17 - 9/30/18 85 9 0 0 148 9 0 0
10/1/18 - 9/30/19 99 6 0 0 132 13 1 0
Page 13
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (the
"Fund") seeks investment results that correspond generally to the price and
yield (before the Fund's fees and expenses) of an equity index called the NASDAQ
OMX(R) Clean Edge(R) Smart Grid Infrastructure Index(SM) (the "Index"). The
shares of the Fund are listed and trade on The Nasdaq Stock Market LLC under the
ticker symbol "GRID." The Fund will normally invest at least 90% of its net
assets (including investment borrowings) in the common stocks and depositary
receipts that comprise the Index.
The Index is designed to act as a transparent and liquid benchmark for the grid
and electric energy infrastructure sector. The Index includes companies that are
primarily engaged and involved in electric grid, electric meters and devices,
networks, energy storage and management, and enabling software used by the smart
grid infrastructure sector. Clean Edge, Inc. and Nasdaq, Inc. serve as index
providers to the Index.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (11/16/09) Ended (11/16/09)
9/30/19 9/30/19 to 9/30/19 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV 5.32% 8.23% 6.38% 48.53% 84.18%
Market Price 4.41% 8.27% 6.37% 48.76% 83.95%
INDEX PERFORMANCE
NASDAQ OMX(R) Clean Edge(R) Smart Grid
Infrastructure Index(SM) 6.46% 9.04% 7.24% 54.17% 99.37%
Russell 3000(R) Index 2.92% 10.44% 12.75% 64.33% 226.96%
S&P Composite 1500(R) Industrials Index 0.78% 9.89% 13.14% 60.27% 238.18%
MSCI World Industrials Index -0.38% 7.38% 9.44% 42.75% 143.52%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 5.32% during the 12-month period covered by
this report. During the same period, the benchmark S&P Composite 1500(R)
Industrials Index generated a return of 0.78%. The heaviest allocated industry
in the Fund during the period was the Capital Goods industry with a 42.4%
weighting. This industry had a -1.5% contribution to the Fund's return, stemming
from its -3.8% return. The Semiconductors & Semiconductor Equipment industry was
the Fund's top contributing industry with an 8.1% contribution stemming from its
15.0% weighting and 56.6% return. The Automobiles & Components industry was the
Fund's least contributing industry with a -4.3% contribution stemming from its
11.7% weighting and -28.4% return. The Fund's currency exposure had a -2.0%
impact on performance. On a relative basis, the Fund outperformed the benchmark.
The primary cause of the outperformance is attributable to the Fund over
allocating and outperforming the benchmark among the Semiconductors &
Semiconductor Equipment industry by 15% and 56.7%, respectively, creating 7.9%
of outperformance. The Fund underperformed the benchmark among the Automobiles &
Components industry by -27.8%, creating -4.1% of relative drag.
-----------------------------
NASDAQ(R), NASDAQ OMX(R), Clean Edge(R) and the Index are registered trademarks
and service marks of Nasdaq, Inc. and Clean Edge, Inc. respectively (together
with its affiliates hereinafter referred to as the "Corporations") and are
licensed for use by First Trust. The Fund has not been passed on by the
Corporations as to its legality or suitability. The Fund is not issued,
endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO
WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
(CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 34.95%
Information Technology 34.05
Utilities 18.28
Consumer Discretionary 12.72
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Aptiv PLC 8.13%
Schneider Electric SE 8.09
Terna Rete Elettrica Nazionale S.p.A. 7.90
Red Electrica Corp., S.A. 7.87
Prysmian S.p.A. 7.58
Quanta Services, Inc. 4.31
Landis+Gyr Group AG 4.23
nVent Electric PLC 4.21
Itron, Inc. 4.12
Advanced Energy Industries, Inc. 4.10
------
Total 60.54%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 16, 2009 - SEPTEMBER 30, 2019
First Trust NASDAQ(R) NASDAQ OMX(R) Russell S&P Composite MSCI World
Clean Edge(R) Smart Grid Clean Edge(R) Smart Grid 3000(R) 1500(R) Industrials Industrials
Infrastructure Index Fund Infrastructure Index(SM) Index Index Index
------------------------- --------------------------- ------- ------------------- -----------
11/16/09 $10,000 $10,000 $10,000 $10,000 $10,000
3/31/10 10,257 10,297 10,731 11,205 10,814
9/30/10 10,154 10,236 10,614 11,249 10,997
3/31/11 11,775 11,912 12,600 13,832 13,106
9/30/11 8,161 8,341 10,672 10,743 10,174
3/31/12 9,553 9,741 13,505 14,081 12,572
9/30/12 9,860 10,103 13,895 14,004 12,302
3/31/13 10,996 11,314 15,472 16,373 14,134
9/30/13 11,678 12,082 16,896 18,307 15,769
3/31/14 13,450 13,973 18,971 20,766 17,193
9/30/14 12,401 12,931 19,897 21,102 17,057
3/31/15 12,583 13,168 21,316 22,495 17,657
9/30/15 11,164 11,698 19,798 20,347 15,868
3/31/16 12,302 12,977 21,243 22,980 17,523
9/30/16 14,035 14,828 22,760 24,368 18,713
3/31/17 15,064 15,986 25,079 27,424 20,425
9/30/17 17,786 18,927 27,015 29,969 22,764
3/31/18 18,037 19,213 28,541 31,357 23,517
9/30/18 17,492 18,727 31,763 33,558 24,441
3/31/19 16,094 17,287 31,042 32,236 23,402
9/30/19 18,423 19,937 32,690 33,819 24,347
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 THROUGH SEPTEMBER 30, 2019
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 October 1, 2014 through
September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/14 - 9/30/15 72 28 13 2 99 32 4 2
10/1/15 - 9/30/16 68 48 2 0 98 37 0 0
10/1/16 - 9/30/17 150 29 4 5 59 4 0 0
10/1/17 - 9/30/18 167 20 0 1 44 19 0 0
10/1/18 - 9/30/19 55 3 0 0 191 2 0 0
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
First Trust Indxx Global Natural Resources Income ETF (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Indxx Global Natural
Resources Income Index (the "Index"). The shares of the Fund are listed and
traded on The Nasdaq Stock Market LLC under the ticker symbol "FTRI." The Fund
will normally invest at least 90% of its net assets (including investment
borrowings) in the common stocks and depositary receipts that comprise the
Index.
The Index is owned and is developed, maintained and sponsored by Indxx, LLC. The
Index is a free float adjusted market capitalization weighted index designed to
measure the market performance of the 50 highest dividend yielding companies
involved in the upstream (i.e., generally exploration and production) segment of
the natural resources sector.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (3/11/10) Ended (3/11/10)
9/30/19 9/30/19 to 9/30/19 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV -4.42% -8.39% -6.82% -35.49% -49.07%
Market Price -4.69% -8.42% -6.86% -35.58% -49.27%
INDEX PERFORMANCE
Indxx Global Natural Resources Income Index -3.51% N/A N/A N/A N/A
MSCI All Country World Materials Index -4.82% 3.16% 1.97% 16.86% 20.46%
MSCI All Country World Index 1.38% 6.65% 8.08% 37.99% 110.17%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 32.)
* Effective on the close of business December 18, 2015, the Fund's underlying
index changed from the ISE Global Copper(TM) Index to the Indxx Global Natural
Resources Income Index. Therefore, the Fund's performance and total returns
shown for the period prior to December 18, 2015, are not necessarily indicative
of the performance the Fund, based on its current index, would have generated.
Since the Fund's new underlying index had an inception date of June 1, 2015, it
was not in existence for all the periods disclosed.
PERFORMANCE REVIEW
The Fund generated a NAV return of -4.42% during the 12-month period covered by
this report. During the same period, the benchmark MSCI All Country World
Materials Index generated a return of -4.82%. The Energy industry was given the
highest allocation in the Fund over the period with a 42.4% weighting. This
industry was also the least contributing industry in the Fund with a -8.1%
contribution, stemming from its -18.7% return. The Utilities industry was the
Fund's top performing and top contributing industry in the Fund with a 20.8%
return and 2.7% contribution, stemming from its 13.9% allocation. The Fund's
currency exposure had a -2.3% impact on performance. On a relative basis, the
Fund outperformed the benchmark. The benchmark had no exposure to the well
performing Utilities securities, which created 3.3% of relative outperformance,
and had no exposure to poor performing Energy securities, which created -6.0% of
relative underperformance.
-----------------------------
Indxx and the Index are trademarks of Indxx, LLC ("Indxx") and have been
licensed for use for certain purposes by First Trust. The Fund is not sponsored,
endorsed, sold or promoted by Indxx, and Indxx makes no representation regarding
the advisability of trading in such product. The Index is determined, composed
and calculated by Indxx without regard to First Trust or the Fund.
Page 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Materials 41.44%
Energy 28.73
Utilities 12.67
Consumer Staples 12.57
Industrials 4.59
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Rio Tinto PLC, ADR 9.78%
Occidental Petroleum Corp. 9.60
CNOOC Ltd. 8.32
Archer-Daniels-Midland Co. 7.84
Veolia Environnement S.A. 4.87
MMC Norilsk Nickel PJSC 4.78
UPM-Kymmene OYJ 4.66
International Paper Co. 4.54
BHP Group PLC, ADR 4.42
Marubeni Corp. 4.27
------
Total 63.08%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MARCH 11, 2010 - SEPTEMBER 30, 2019
First Trust Indxx Global MSCI All Country MSCI All Country
Natural Resources Income ETF World Materials Index World Index
---------------------------- --------------------- ----------------
3/11/10 $10,000 $10,000 $10,000
3/31/10 10,297 10,291 10,172
9/30/10 11,208 10,440 10,220
3/31/11 14,567 12,429 11,604
9/30/11 8,910 9,096 9,606
3/31/12 10,984 10,529 11,519
9/30/12 10,141 10,066 11,621
3/31/13 9,256 10,081 12,731
9/30/13 8,085 10,105 13,681
3/31/14 8,027 10,600 14,841
9/30/14 7,893 10,309 15,230
3/31/15 6,189 9,852 15,646
9/30/15 4,144 7,880 14,216
3/31/16 3,874 8,628 14,967
9/30/16 4,152 9,775 15,916
3/31/17 4,436 10,849 17,218
9/30/17 4,794 12,098 18,885
3/31/18 5,108 12,564 19,761
9/30/18 5,327 12,657 20,731
3/31/19 5,256 12,184 20,289
9/30/19 5,093 12,046 21,017
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 THROUGH SEPTEMBER 30, 2019
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 October 1, 2014 through
September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/14 - 9/30/15 104 14 2 0 119 13 0 0
10/1/15 - 9/30/16 74 21 2 1 114 31 10 0
10/1/16 - 9/30/17 115 7 0 0 129 0 0 0
10/1/17 - 9/30/18 51 19 0 0 93 85 3 0
10/1/18 - 9/30/19 128 27 3 0 52 40 1 0
Page 17
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
First Trust Indxx Global Agriculture ETF (the "Fund") seeks investment results
that correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the Indxx Global Agriculture Index (the
"Index"). The shares of the Fund are listed and traded on The Nasdaq Stock
Market LLC under the ticker symbol "FTAG." The Fund will normally invest at
least 90% of its net assets (including investment borrowings) in the common
stocks and depositary receipts that comprise the Index.
The Index is owned and is developed, maintained and sponsored by Indxx, LLC. The
Index is a market capitalization weighted index designed to measure the
performance of companies that are directly or indirectly engaged in improving
agricultural yields. The Index is composed of farmland companies and firms
involved in chemicals and fertilizers, seeds, irrigation equipment, and farm
machinery.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (3/11/10) Ended (3/11/10)
9/30/19 9/30/19 to 9/30/19 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV -10.16% -14.94% -16.69% -55.48% -82.53%
Market Price -10.07% -14.99% -16.70% -55.59% -82.56%
INDEX PERFORMANCE
Indxx Global Agriculture Index* -9.56% N/A N/A N/A N/A
MSCI All Country World Index 1.38% 6.65% 8.08% 37.99% 110.17%
MSCI All Country World Materials Index -4.82% 3.16% 1.97% 16.86% 20.46%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 32.)
* Effective on the close of business December 18, 2015, the Fund's underlying
index changed from the ISE Global Platinum(TM) Index to the Indxx Global
Agriculture Index. Therefore, the Fund's performance and total returns shown for
the period prior to December 18, 2015, are not necessarily indicative of the
performance the Fund, based on its current Index, would have generated. Since
the Fund's new underlying index had an inception date of June 1, 2015, it was
not in existence for all the periods disclosed.
PERFORMANCE REVIEW
The Fund generated a NAV return of -10.16% during the 12-month period covered by
this report. During the same period, the benchmark MSCI All Country World
Materials Index generated a return of -4.82%. The Materials industry was given
the highest allocation in the Fund over the period, with a 58.5% weighting. This
industry had a -15.3% return, which caused it to be the least contributing
industry in the Fund at -9.0%. The top performing industry in the Fund was the
Food Beverage & Tobacco industry with a 4.8% return, while the Automobiles &
Components industry was the Fund's worst performing industry with a -33.1%
return. The Fund's currency exposure had a -1.3% impact on performance. On a
relative basis, the Fund underperformed the benchmark. The Materials industry
created -5.7% of relative underperformance as the Fund underperformed the
benchmark by -9.5%. The Fund's holdings among the Capital Goods industry created
1.9% of relative outperformance as the Fund was 22.4% overweight the benchmark
and outperformed the benchmark by 3.6%.
-----------------------------
Indxx and the Index are trademarks of Indxx, LLC ("Indxx") and have been
licensed for use for certain purposes by First Trust. The Fund is not sponsored,
endorsed, sold or promoted by Indxx, and Indxx makes no representation regarding
the advisability of trading in such product. The Index is determined, composed
and calculated by Indxx without regard to First Trust or the Fund.
Page 18
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Materials 60.78%
Industrials 21.95
Health Care 9.39
Consumer Staples 5.87
Consumer Discretionary 2.01
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Deere & Co. 10.32%
DuPont de Nemours, Inc. 10.07
BASF SE 9.93
Bayer AG 9.39
Dow, Inc. 4.67
Nutrien Ltd. 4.41
Corteva, Inc. 4.38
Kubota Corp. 3.89
Wilmar International Ltd. 3.62
Petronas Chemicals Group Bhd 3.01
------
Total 63.69%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MARCH 11, 2010 - SEPTEMBER 30, 2019
First Trust Indxx MSCI All Country MSCI All Country World
Global Agriculture ETF World Index Materials Index
---------------------- ------------------ ----------------------
3/11/10 $10,000 $10,000 $10,000
3/31/10 10,337 10,172 10,291
9/30/10 9,794 10,220 10,440
3/31/11 10,930 11,604 12,429
9/30/11 6,416 9,606 9,096
3/31/12 6,576 11,519 10,529
9/30/12 4,871 11,621 10,066
3/31/13 4,667 12,731 10,081
9/30/13 4,392 13,681 10,105
3/31/14 4,363 14,841 10,600
9/30/14 3,924 15,230 10,309
3/31/15 3,248 15,646 9,852
9/30/15 1,915 14,216 7,880
3/31/16 1,480 14,967 8,628
9/30/16 1,552 15,916 9,775
3/31/17 1,782 17,218 10,849
9/30/17 1,972 18,885 12,098
3/31/18 1,945 19,761 12,564
9/30/18 1,942 20,731 12,657
3/31/19 1,739 20,289 12,184
9/30/19 1,746 21,017 12,046
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 THROUGH SEPTEMBER 30, 2019
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 October 1, 2014 through
September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/14 - 9/30/15 96 52 7 1 55 38 3 0
10/1/15 - 9/30/16 37 20 15 16 72 47 22 24
10/1/16 - 9/30/17 120 0 0 0 122 7 2 0
10/1/17 - 9/30/18 171 5 0 0 72 3 0 0
10/1/18 - 9/30/19 18 0 1 0 221 11 0 0
Page 19
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST BICK INDEX FUND (BICK)
The First Trust BICK Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE BICK(TM) Index (the "Index"). The
shares of the Fund are listed and trade on The Nasdaq Stock Market LLC under the
ticker symbol "BICK." The Fund will normally invest at least 90% of its net
assets (including investment borrowings) in the common stocks and depositary
receipts that comprise the Index.
The Index is developed, maintained and sponsored by Nasdaq, Inc. The Index is
designed to provide a benchmark for investors interested in tracking some of the
largest and most liquid public companies that are domiciled in Brazil, India,
China (including Hong Kong) and South Korea that are accessible for investment
by U.S. investors.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (4/12/10) Ended (4/12/10)
9/30/19 9/30/19 to 9/30/19 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV -1.76% 1.83% -0.10% 9.47% -0.94%
Market Price -2.59% 1.78% -0.17% 9.24% -1.63%
INDEX PERFORMANCE
ISE BICK(TM) Index -0.97% 2.67% 0.77% 14.06% 7.58%
MSCI All Country World Index 1.38% 6.65% 7.68% 37.99% 101.52%
MSCI Emerging Markets Index -2.02% 2.33% 2.08% 12.19% 21.50%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -1.76% during the 12-month period covered by
this report. During the same period, the benchmark MSCI Emerging Markets Index
generated a return of -2.02%. Brazilian securities were the Fund's top
performing securities with a 31.2% return, while South Korean securities were
the Fund's worst performing securities with a -23.3% return. Brazil was also the
Fund's top contributing country with a 7.4% contribution, while South Korean
securities were the Fund's least contributing country with a -6.6% contribution.
The Fund's currency exposure had a -2.8% impact on performance. On a relative
basis, the Fund outperformed the benchmark. The primary cause of the
underperformance is due to the Fund underperforming South Korean securities by
-10.0%, creating -4.2% of relative drag. Relative outperformance of 6.1% was
created due to the Fund over allocating and outperforming the benchmark among
Brazilian securities by 17.7% and 1.1%, respectively.
-----------------------------
Nasdaq(R) and the Index are registered trademarks and service marks of Nasdaq,
Inc. (together with its affiliates hereinafter referred to as the
"Corporations") and are licensed for use by First Trust. The Fund has not been
passed on by the Corporations as to its legality or suitability. The Fund is not
issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO
WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 20
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST BICK INDEX FUND (BICK) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Financials 23.93%
Consumer Discretionary 19.33
Information Technology 13.67
Communication Services 12.82
Materials 7.05
Health Care 6.20
Consumer Staples 6.07
Energy 6.02
Industrials 2.01
Utilities 1.92
Real Estate 0.98
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Eros International PLC 2.11%
Vedanta Ltd., ADR 2.07
ICICI Bank Ltd., ADR 2.03
Reliance Industries Ltd., GDR 2.01
Dr. Reddy's Laboratories Ltd., ADR 1.98
HDFC Bank Ltd., ADR 1.98
Axis Bank Ltd., GDR 1.98
Tata Motors Ltd., ADR 1.91
Infosys Ltd., ADR 1.85
MakeMyTrip Ltd. 1.85
------
Total 19.77%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 12, 2010 - SEPTEMBER 30, 2019
First Trust BICK ISE BICK(TM) MSCI All Country MSCI Emerging
Index Fund Index World Index Markets Index
---------------- ------------ ---------------- -------------
4/12/10 $10,000 $10,000 $10,000 $10,000
9/30/10 10,417 10,488 9,800 10,487
3/31/11 11,231 11,311 11,127 11,486
9/30/11 7,586 7,795 9,211 8,793
3/31/12 8,996 9,139 11,045 10,475
9/30/12 8,328 8,515 11,143 10,282
3/31/13 8,480 8,665 12,207 10,656
9/30/13 8,385 8,650 13,119 10,383
3/31/14 8,808 9,127 14,231 10,527
9/30/14 9,050 9,432 14,604 10,829
3/31/15 8,497 8,920 15,003 10,572
9/30/15 6,865 7,163 13,632 8,740
3/31/16 7,383 7,773 14,352 9,300
9/30/16 8,512 8,958 15,262 10,207
3/31/17 9,234 9,764 16,510 10,901
9/30/17 10,822 11,512 18,108 12,499
3/31/18 11,613 12,333 18,948 13,600
9/30/18 10,085 10,867 19,878 12,398
3/31/19 10,487 11,363 19,455 12,610
9/30/19 9,906 10,758 20,152 12,150
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 THROUGH SEPTEMBER 30, 2019
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 October 1, 2014 through
September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/14 - 9/30/15 38 6 0 0 116 79 13 0
10/1/15 - 9/30/16 34 0 0 0 113 97 8 1
10/1/16 - 9/30/17 65 26 0 0 51 99 10 0
10/1/17 - 9/30/18 120 37 2 0 76 14 2 0
10/1/18 - 9/30/19 40 4 1 0 148 56 2 0
Page 21
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INDXX NEXTG ETF (NXTG)
The First Trust Indxx NextG ETF (formerly First Trust Nasdaq Smartphone 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 Indxx 5G & NextG Thematic Index(SM) (the "Index"). The shares of the Fund
are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol
"NXTG." The Fund will normally invest at least 90% of its net assets (including
investment borrowings) in the common stocks and depositary receipts that
comprise the Index.
The Index is owned and is developed, maintained and sponsored by Indxx, LLC. The
Index is designed to track the performance of companies that have devoted, or
have committed to devote, material resources to the research, development and
application of fifth generation (5G) and next generation digital cellular
technologies as they emerge.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (2/17/11) Ended (2/17/11)
9/30/19 9/30/19 to 9/30/19 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV 1.78% 7.61% 7.33% 44.28% 83.95%
Market Price 2.62% 7.65% 7.37% 44.55% 84.50%
INDEX PERFORMANCE
Indxx 5G & NextG Thematic Index (1) (2) N/A N/A N/A N/A N/A
Nasdaq CTA Smartphone Index(SM) (1) 1.78% 8.39% 8.20% 49.62% 97.27%
MSCI World Index 1.83% 7.18% 7.83% 41.46% 91.42%
MSCI All Country World Information Technology Index 6.32% 15.56% 13.55% 106.12% 198.88%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 32.)
(1) On May 30, 2019, the Fund's underlying index changed from the Nasdaq CTA
Smartphone Index(SM) to the Indxx 5G & NextG Thematic Index. Therefore,
the Fund's performance and historical returns shown for the periods prior
to this date are not necessarily indicative of the performance that the
Fund, based on its current index, would have generated.
(2) Performance data is not available for all the periods shown in the table
for the index because performance data does not exist for some of the
entire periods.
PERFORMANCE REVIEW
The Fund generated a NAV return of 1.78% during the 12-month period covered by
this report. During the same period, the benchmark MSCI All Country World
Information Technology Index generated a return of 6.32%. The Fund's holdings
among the Technology Hardware & Equipment industry were the top allocated
securities at 39.3%. These securities had a -3.4% return and contributed -2.4%
to the Fund's return. The Fund's holdings among the Real Estate industry were
the top contributing securities with a 3.8% contribution, stemming from its 9.2%
allocation and 44.8% return. The Fund's currency exposure had a -1.1% impact on
performance. On a relative basis, the Fund underperformed the benchmark. The
majority of the underperformance is attributable to the Fund underperforming the
benchmark among the Software & Services industry by -25.5%, creating -2.8% of
relative drag. The Fund outperformed the benchmark among the Real Estate
industry by 44.8%, which created 2.6% of relative outperformance.
-----------------------------
Indxx and the Index are trademarks of Indxx, LLC ("Indxx") and have been
licensed for use for certain purposes by First Trust. The Fund is not sponsored,
endorsed, sold or promoted by Indxx, and Indxx makes no representation regarding
the advisability of trading in such product. The Index is determined, composed
and calculated by Indxx without regard to First Trust or the Fund.
Page 22
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INDXX NEXTG ETF (NXTG) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 62.01%
Communication Services 19.33
Real Estate 13.48
Consumer Discretionary 3.05
Industrials 2.13
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Win Semiconductors Corp. 2.26%
CyrusOne, Inc. 2.03
Micron Technology, Inc. 1.93
MediaTek, Inc. 1.83
Sony Corp. 1.82
Anritsu Corp. 1.78
Taiwan Semiconductor Manufacturing
Co., Ltd., ADR 1.78
STMicroelectronics N.V. 1.77
Qorvo, Inc. 1.76
NXP Semiconductors N.V. 1.74
------
Total 18.70%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 17, 2011 - SEPTEMBER 30, 2019
First Trust Indxx Nasdaq CTA MSCI World MSCI All Country World
NextG ETF Smartphone Index(SM) Index Information Technology Index
---------------------- -------------------- ---------- ----------------------------
2/17/11 $10,000 $10,000 $10,000 $10,000
3/31/11 9,399 9,412 9,849 9,547
9/30/11 7,503 7,595 8,251 8,390
3/31/12 9,238 9,328 9,904 10,774
9/30/12 7,805 7,925 10,032 10,566
3/31/13 9,021 9,180 11,077 10,774
9/30/13 10,975 11,245 12,059 11,756
3/31/14 12,117 12,470 13,188 13,356
9/30/14 12,748 13,187 13,530 14,502
3/31/15 13,920 14,460 13,983 15,485
9/30/15 12,194 12,706 12,842 14,328
3/31/16 13,098 13,739 13,501 15,785
9/30/16 14,585 15,322 14,300 17,605
3/31/17 16,474 17,413 15,494 19,719
9/30/17 18,041 19,153 16,898 22,884
3/31/18 18,932 20,114 17,589 25,486
9/30/18 18,076 19,388 18,797 28,111
3/31/19 17,816 19,136 18,306 27,681
9/30/19 18,397 19,727 19,141 29,887
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 THROUGH SEPTEMBER 30, 2019
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 October 1, 2014 through
September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/14 - 9/30/15 123 4 0 0 118 7 0 0
10/1/15 - 9/30/16 19 0 0 0 164 67 3 0
10/1/16 - 9/30/17 59 0 0 0 159 32 1 0
10/1/17 - 9/30/18 61 1 0 0 166 21 2 0
10/1/18 - 9/30/19 110 11 0 0 119 11 0 0
Page 23
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
The First Trust NASDAQ Global Auto Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the NASDAQ OMX Global Auto Index(SM)
(the "Index"). The shares of the Fund are listed and trade on The Nasdaq Stock
Market LLC under the ticker symbol "CARZ." The Fund will normally invest at
least 90% of its net assets (including investment borrowings) in the common
stocks and depositary receipts that comprise the Index.
The Index is owned and was developed by Nasdaq, Inc. (the "Index Provider"). The
Index is designed to track the performance of the largest and most liquid
companies engaged in manufacturing of automobiles. To be eligible for inclusion
in the Index, a security must be issued by a company classified as an
"Automobile Manufacturer" by the Industry Classification Benchmark. In addition,
a security must be listed on an Index-eligible global stock exchange, as
determined by the Index Provider, have a minimum float-adjusted worldwide market
capitalization of at least $500 million and a minimum three-month average daily
dollar trading volume of $1 million.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (5/9/11) Ended (5/9/11)
9/30/19 9/30/19 to 9/30/19 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV -8.97% -0.98% 2.65% -4.82% 24.53%
Market Price -8.82% -0.87% 2.68% -4.30% 24.85%
INDEX PERFORMANCE
NASDAQ OMX Global Auto Index(SM) -8.17% -0.14% 3.60% -0.70% 34.60%
MSCI World Index 1.83% 7.18% 8.01% 41.46% 90.98%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -8.97% during the 12-month period covered by
this report. During the same period, the benchmark MSCI World Index generated a
return of 1.83%. Over this period, the Fund was almost 100% allocated to global
Automobiles & Components securities. Japan was the heaviest allocated country in
the Fund within this industry with a 33.2% weighting. Due to Japan's low return
of -11.4%, it was also the least contributing country in the Fund with a -3.9%
contribution. South Korean securities were the Fund's top contributing and top
performing securities with a 0.5% contribution and 7.3% return. The Fund's
currency exposure had a -0.4% impact on performance. On a relative basis, the
Fund underperformed the benchmark. The majority of the underperformance is
attributable to the Fund over allocating the benchmark by 97.2% and
underperforming the benchmark by -1.7% among the Automobiles & Components
industry, in all creating -9.7% of relative drag. The benchmark had a 5.8%
higher allocation to the Energy industry, which created 1.2% of relative
outperformance.
-----------------------------
NASDAQ(R), OMX(R), NASDAQ OMX(R), and the Index, are the registered trademarks
and service marks of Nasdaq, Inc. (together with its affiliates hereinafter
referred to as the "Corporations") and are licensed for use by First Trust. The
Fund has not been passed on by the Corporations as to its legality or
suitability. The Fund is not issued, endorsed, sold or promoted by the
Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH
RESPECT TO THE FUND.
Page 24
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 100.00%
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Honda Motor Co., Ltd. 8.32%
Daimler AG 8.08
Toyota Motor Corp. 7.80
General Motors Co. 7.72
Ford Motor Co. 7.64
Peugeot S.A. 4.26
Suzuki Motor Corp. 4.20
Tesla, Inc. 4.08
Volkswagen AG (Preference Shares) 4.04
Hyundai Motor Co. 4.04
------
Total 60.18%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 9, 2011 - SEPTEMBER 30, 2019
First Trust NASDAQ NASDAQ OMX Global MSCI World
Global Auto Index Fund Auto Index Index(SM) Index
---------------------- -------------------- ----------
5/9/11 $10,000 $10,000 $10,000
9/30/11 7,545 7,717 8,232
3/31/12 9,324 9,459 9,881
9/30/12 8,282 8,439 10,009
3/31/13 10,210 10,402 11,052
9/30/13 13,205 13,581 12,032
3/31/14 13,593 14,039 13,158
9/30/14 13,085 13,556 13,499
3/31/15 14,034 14,601 13,951
9/30/15 11,727 12,208 12,813
3/31/16 11,826 12,418 13,470
9/30/16 11,990 12,550 14,267
3/31/17 13,091 13,851 15,458
9/30/17 14,803 15,719 16,858
3/31/18 15,201 16,109 17,547
9/30/18 13,682 14,656 18,752
3/31/19 12,488 13,426 18,263
9/30/19 12,453 13,460 19,098
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 THROUGH SEPTEMBER 30, 2019
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 October 1, 2014 through
September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/14 - 9/30/15 90 12 1 1 129 19 0 0
10/1/15 - 9/30/16 78 7 2 0 118 42 5 1
10/1/16 - 9/30/17 91 9 0 0 124 26 1 0
10/1/17 - 9/30/18 120 12 1 0 113 5 0 0
10/1/18 - 9/30/19 114 6 0 0 126 4 1 0
Page 25
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
The First Trust Cloud Computing ETF (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE CTA Cloud Computing(TM) Index (the
"Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market
LLC under the ticker symbol "SKYY." The Fund will normally invest at least 90%
of its net assets (including investment borrowings) in the common stocks and
depositary receipts that comprise the Index.
The Index is owned by Nasdaq, Inc. The Index is designed to provide a benchmark
for investors interested in tracking companies involved in the cloud computing
industry. The cloud computing industry is a group of companies that offers
Internet and technology products, services, support and applications delivered
via the Internet. In addition, securities included in the Index must have a
minimum capitalization of $500 million. To be eligible for inclusion in the
Index, a security must be classified as a cloud computing company defined by the
Consumer Technology Association ("CTA") in at least one of the three following
categories: Infrastructure-as-a-Service, Platform-as-a-Service or
Software-as-a-Service.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (7/5/11) Ended (7/5/11)
9/30/19 9/30/19 to 9/30/19 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV 0.57% 16.18% 13.68% 111.69% 187.52%
Market Price 0.51% 16.16% 13.68% 111.53% 187.52%
INDEX PERFORMANCE
ISE CTA Cloud Computing(TM) Index (1) 1.38% 16.77% 14.30% 117.08% 200.72%
S&P 500(R) Index 4.25% 10.84% 12.53% 67.27% 164.55%
S&P Composite 1500 Information Technology Index 8.39% 18.00% 17.19% 128.76% 269.49%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 32.)
(1) On June 24, 2019, the Fund's underlying index changed its methodology and
changed its name from "ISE Cloud Computing(TM) Index" to "ISE CTA Cloud
Computing(TM) Index."
PERFORMANCE REVIEW
The Fund generated a NAV return of 0.57% during the 12-month period covered by
this report. During the same period, the benchmark S&P 500(R) Index generated a
return of 4.25%. The Fund's top allocated sector over the period was the
Information Technology sector. This sector was given a 71.7% allocation,
returned -5.7% and contributed -4.9% to the Fund's return. The Communication
Services sector was the Fund's top contributing sector with a 4.0% contribution,
stemming from its 17.7% allocation and 18.3% return. The Fund's least
contributing, and worst performing, sector was the Consumer Discretionary sector
with a -1.0% contribution, stemming from its 5.4% allocation and -10.9% return.
On a relative basis, the Fund underperformed the benchmark. The primary cause of
the underperformance is attributable to the Fund underperforming the benchmark
among Information Technology securities by -13.2%, which created -6.9% of
relative drag. The Fund did not have any exposure to the Energy sector, which
created 1.3% of relative outperformance as Energy securities had a -21.6% return
in the benchmark.
-----------------------------
Nasdaq(R) and the Index are registered trademarks and service marks of Nasdaq,
Inc. (together with its affiliates hereinafter referred to as the
"Corporations") and are licensed for use by First Trust. The Fund has not been
passed on by the Corporations as to its legality or suitability. The Fund is not
issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO
WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 26
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CLOUD COMPUTING ETF (SKYY) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 81.17%
Communication Services 9.45
Consumer Discretionary 7.95
Health Care 1.43
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
VMware, Inc., Class A 4.75%
Oracle Corp. 4.74
Alphabet, Inc., Class A 4.60
Microsoft Corp. 4.52
Amazon.com, Inc. 4.38
CenturyLink, Inc. 4.09
Alibaba Group Holding Ltd., ADR 3.57
Cisco Systems, Inc. 3.15
Citrix Systems, Inc. 3.10
Akamai Technologies, Inc. 3.06
------
Total 39.96%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 5, 2011 - SEPTEMBER 30, 2019
First Trust Cloud ISE CTA Cloud S&P 500(R) S&P Composite 1500
Computing ETF Computing(TM) Index Index Information Technology Index
--------------------- ----------------------- ---------- ----------------------------
7/5/11 $10,000 $10,000 $10,000 $10,000
9/30/11 7,902 7,909 8,501 8,886
3/31/12 10,604 10,641 10,702 11,739
9/30/12 9,864 9,934 11,068 11,695
3/31/13 10,531 10,640 12,196 11,682
9/30/13 12,214 12,376 13,209 12,718
3/31/14 13,390 13,612 14,861 14,655
9/30/14 13,581 13,852 15,815 16,153
3/31/15 14,551 14,885 16,753 17,253
9/30/15 13,994 14,354 15,718 16,547
3/31/16 14,789 15,247 17,052 18,475
9/30/16 17,114 17,697 18,143 20,324
3/31/17 19,392 19,930 19,979 23,173
9/30/17 21,052 21,701 21,519 26,144
3/31/18 24,370 25,195 22,776 29,394
9/30/18 28,591 29,662 25,375 34,091
3/31/19 29,280 30,490 24,939 33,777
9/30/18 28,753 30,069 26,455 36,949
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 THROUGH SEPTEMBER 30, 2019
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 October 1, 2014 through
September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/14 - 9/30/15 193 9 0 0 48 2 0 0
10/1/15 - 9/30/16 146 1 0 0 106 0 0 0
10/1/16 - 9/30/17 188 0 0 0 62 1 0 0
10/1/17 - 9/30/18 176 1 0 0 74 0 0 0
10/1/18 - 9/30/19 168 5 0 0 72 4 2 0
Page 27
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
First Trust International Equity Opportunities ETF (formerly First Trust
International IPO ETF) (the "Fund") seeks investment results that correspond
generally to the price and yield (before the Fund's fees and expenses) of an
index called the IPOX(R) International Index (the "Index"). The shares of the
Fund are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol
"FPXI." The Fund will normally invest at least 90% of its net assets (including
investment borrowings) in the common stocks and depositary receipts that
comprise the Index.
The Index is owned and is developed, maintained and sponsored by IPOX(R)
Schuster LLC (the "Index Provider"). The Index is a market-cap weighted
portfolio measuring the performance of the top 50 companies domiciled outside
the United States ranked quarterly by market capitalization in the IPOX Global
Composite Index (the "Base Index") and represents, on average, 25% of the total
market capitalization of the Base Index, a fully market capitalization-weighted
index constructed and managed to provide a broad and objective view of global
aftermath performance of initial public offerings and spin-offs in all world
countries (both developed and emerging market countries).
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (11/4/14) Inception (11/4/14)
9/30/19 to 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV 4.60% 5.36% 29.19%
Market Price 4.46% 5.34% 29.08%
INDEX PERFORMANCE
IPOX(R) International Index 5.42% 6.15% 34.01%
MSCI World Index ex USA Index -0.95% 3.65% 19.20%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 4.60% during the time period covered by this
report. During the same period, the benchmark MSCI World ex USA Index generated
a return of -0.95%. Over the period, the Information Technology sector received
the greatest allocation. Receiving an average weight of 16.4%, this sector
returned 1.0% and contributed 0.5% to the Fund's total return. The greatest
contribution to the Fund's return came from investments in the Communication
Services sector. This sector received an allocation of 14.1%, returned 27.8%,
and contributed 3.4% to the Fund's total return. The worst performing sector
during the period was the Consumer Discretionary sector. These investments
carried a 12.4% weight in the Fund, returned -7.1% and contributed -1.7% to the
Fund's return. The Fund's currency exposure caused -2.1% performance during the
time period. On a relative basis, the Fund outperformed the benchmark.
Investments in Communication Services contributed the most to the Fund's
outperformance, causing 1.9% of outperformance versus the benchmark. The
greatest underperformance versus the benchmark came from investments in the
Consumer Discretionary sector, which caused -1.0% of underperformance versus the
benchmark.
-----------------------------
IPOX(R) and the Index are registered international trademarks and service marks
of IPOX(R) Schuster LLC ("IPOX") and have been licensed for use by First Trust.
The Fund is not sponsored, endorsed, sold or promoted by IPOX, and IPOX makes no
representation regarding the advisability of trading in such Fund.
Page 28
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 24.24%
Communication Services 21.30
Financials 14.80
Information Technology 13.46
Health Care 10.02
Industrials 9.55
Utilities 5.03
Consumer Staples 1.60
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Softbank Corp. 8.35%
Postal Savings Bank of China Co., Ltd.,
Class H 6.36
China Tower Corp. Ltd., Class H 5.15
Prosus N.V. 5.12
Ferrari N.V. 5.11
Siemens Healthineers AG 5.07
Orsted A/S 5.03
Atlassian Corp. PLC, Class A 3.93
Yum China Holdings, Inc. 3.31
Meituan Dianping, Class B 3.05
------
Total 50.48%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 4, 2014 - SEPTEMBER 30, 2019
First Trust International IPOX(R) International MSCI World
Equity Opportunities ETF Index ex USA Index
------------------------- ------------------ -----------
11/4/14 $10,000 $10,000 $10,000
3/31/15 9,798 9,813 10,252
9/30/15 8,526 8,522 9,212
3/31/16 8,864 8,954 9,386
9/30/16 9,432 9,523 9,872
3/31/17 9,913 10,072 10,506
9/30/17 11,952 12,204 11,722
3/31/18 12,949 13,217 11,951
9/30/18 12,352 12,713 12,036
3/31/19 12,308 12,716 11,594
9/30/19 12,920 13,403 11,922
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 THROUGH SEPTEMBER 30, 2019
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 November 5, 2014
(commencement of trading) through September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
11/5/14 - 9/30/15 90 11 1 0 117 8 0 1
10/1/15 - 9/30/16 109 30 0 0 86 28 0 0
10/1/16 - 9/30/17 138 32 0 0 63 17 1 0
10/1/17 - 9/30/18 152 27 1 0 67 4 0 0
10/1/18 - 9/30/19 94 26 10 0 93 24 4 0
Page 29
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
The First Trust Nasdaq Cybersecurity ETF (the "Fund") seeks investment results
that correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the Nasdaq CTA Cybersecurity Index(SM) (the
"Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market
LLC under the ticker symbol "CIBR." The Fund will normally invest at least 90%
of its net assets (including investment borrowings) in the common stocks and
depositary receipts that comprise the Index.
The Index is owned by Nasdaq, Inc. (the "Index Provider"). The Index Provider
and the Consumer Technology Association ("CTA") have jointly developed the
eligibility and selection criteria and rules for the Index. The Index includes
securities of companies classified as "cybersecurity" companies by the CTA.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (7/6/15) Inception (7/6/15)
9/30/19 to 9/30/19 to 9/30/19
FUND PERFORMANCE
NAV -2.78% 8.40% 40.72%
Market Price -2.84% 8.45% 40.97%
INDEX PERFORMANCE
Nasdaq CTA Cybersecurity Index(SM) -2.13% 9.16% 44.94%
S&P 500(R) Index 4.25% 11.24% 56.99%
S&P Composite 1500 Information Technology Index 8.39% 19.57% 113.20%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -2.78% during the 12-month period covered by
this report. During the same period, the benchmark S&P Composite 1500
Information Technology Index generated a return of 8.39%. Over the period,
Software & Services carried more weight in the Fund than any other industry
group. Software & Services received 72.5% allocation in the Fund and contributed
0.4% to the Fund's return, which was also the highest contribution to the Fund's
performance during the period. The greatest drag on the Fund's performance came
from investments in Technology Hardware & Equipment, which received 14.2% weight
and contributed -1.8% to the Fund's return. The Fund's currency exposure caused
-0.3% performance during the year. On a relative basis, the Fund underperformed
the benchmark. Most of this underperformance came from selection of investments
in the Software & Services industry group. Investments in this industry group
were a boon in the benchmark and caused -7.9% of underperformance for the Fund
versus the benchmark. The only industry group causing outperformance versus the
benchmark was the Technology Hardware & Equipment industry group, which earned
0.2% of outperformance.
-----------------------------
Nasdaq(R) and the Index are registered trademarks and service marks of Nasdaq,
Inc. (together with its affiliates hereinafter referred to as the
"Corporations") and are licensed for use by First Trust. The Fund has not been
passed on by the Corporations as to its legality or suitability. The Fund is not
issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO
WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 30
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 93.38%
Industrials 6.62
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
VMware, Inc., Class A 6.52%
Cisco Systems, Inc. 6.49
Palo Alto Networks, Inc. 6.15
Broadcom, Inc. 6.00
Okta, Inc. 4.78
Proofpoint, Inc. 3.49
F5 Networks, Inc. 3.35
Juniper Networks, Inc. 3.28
BAE Systems PLC 3.24
Splunk, Inc. 3.24
------
Total 46.54%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 6, 2015 - SEPTEMBER 30, 2019
First Trust Nasdaq Nasdaq CTA S&P 500(R) S&P Composite 1500
Cybersecurity ETF Cybersecurity Index(SM) Index Information Technology Index
--------------------- ----------------------- ---------- ----------------------------
7/6/15 $10,000 $10,000 $10,000 $10,000
9/30/15 8,575 8,585 9,328 9,547
3/31/16 8,595 8,645 10,120 10,659
9/30/16 10,018 10,113 10,768 11,726
3/31/17 10,993 11,137 11,858 13,370
9/30/17 11,093 11,276 12,772 15,084
3/31/18 12,713 12,943 13,518 16,959
9/30/18 14,475 14,808 15,060 19,669
3/31/19 14,271 14,642 14,801 19,488
9/30/19 14,072 14,494 15,699 21,320
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 THROUGH SEPTEMBER 30, 2019
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period July 7, 2015 (commencement of
trading) through September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
7/7/15 - 9/30/15 49 7 1 0 4 0 0 0
10/1/15 - 9/30/16 140 0 0 0 113 0 0 0
10/1/16 - 9/30/17 228 2 0 0 21 0 0 0
10/1/17 - 9/30/18 222 1 0 0 28 0 0 0
10/1/18 - 9/30/19 200 4 0 0 45 2 0 0
Page 31
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated. For certain Funds, the total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of each Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
each Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in each Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike each Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 32
FIRST TRUST EXCHANGE-TRADED FUND II
UNDERSTANDING YOUR FUND EXPENSES
SEPTEMBER 30, 2019 (UNAUDITED)
As a shareholder of First Trust STOXX(R) European Select Dividend Index Fund,
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund, First
Trust Dow Jones Global Select Dividend Index Fund, First Trust Global Wind
Energy ETF, First Trust Global Engineering and Construction ETF, First Trust
NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund, First Trust Indxx
Global Natural Resources Income ETF, First Trust Indxx Global Agriculture ETF,
First Trust BICK Index Fund, First Trust Indxx NextG ETF, First Trust NASDAQ
Global Auto Index Fund, First Trust Cloud Computing ETF, First Trust
International Equity Opportunities ETF or First Trust Nasdaq Cybersecurity ETF
(each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1)
transaction costs; and (2) ongoing costs, including management fees,
distribution and/or service fees, if any, and other Fund expenses. This Example
is intended to help you understand your ongoing costs (in U.S. dollars) of
investing in the Funds and to compare these costs with the ongoing costs of
investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended September 30, 2019.
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
APRIL 1, 2019 SEPTEMBER 30, 2019 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
Actual $1,000.00 $1,038.50 0.60% $3.07
Hypothetical (5% return before expenses) $1,000.00 $1,022.06 0.60% $3.04
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
Actual $1,000.00 $1,046.60 0.60% $3.08
Hypothetical (5% return before expenses) $1,000.00 $1,022.06 0.60% $3.04
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
Actual $1,000.00 $1,021.90 0.61% $3.09
Hypothetical (5% return before expenses) $1,000.00 $1,022.01 0.61% $3.09
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
Actual $1,000.00 $1,018.20 0.60% $3.04
Hypothetical (5% return before expenses) $1,000.00 $1,022.06 0.60% $3.04
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
Actual $1,000.00 $ 954.20 0.70% $3.43
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
Page 33
FIRST TRUST EXCHANGE-TRADED FUND II
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
SEPTEMBER 30, 2019 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
APRIL 1, 2019 SEPTEMBER 30, 2019 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
Actual $1,000.00 $1,144.70 0.70% $3.76
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
Actual $1,000.00 $ 968.70 0.70% $3.45
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
Actual $1,000.00 $1,004.00 0.70% $3.52
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST BICK INDEX FUND (BICK)
Actual $1,000.00 $ 944.70 0.64% $3.12
Hypothetical (5% return before expenses) $1,000.00 $1,021.86 0.64% $3.24
FIRST TRUST INDXX NEXTG ETF (NXTG)
Actual $1,000.00 $1,032.60 0.70% $3.57
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
Actual $1,000.00 $ 997.30 0.70% $3.50
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
Actual $1,000.00 $ 982.00 0.60% $2.98
Hypothetical (5% return before expenses) $1,000.00 $1,022.06 0.60% $3.04
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
Actual $1,000.00 $1,049.70 0.70% $3.60
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
Actual $1,000.00 $ 986.20 0.60% $2.99
Hypothetical (5% return before expenses) $1,000.00 $1,022.06 0.60% $3.04
(a) These expense ratios reflect expense caps for certain Funds. See Note 3 in
the Notes to Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (April 1,
2019 through September 30, 2019), multiplied by 183/365 (to reflect the
six-month period).
Page 34
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.1%
BELGIUM -- 3.8%
372,518 Proximus S.A., DP $ 11,064,248
--------------
FINLAND -- 3.0%
378,414 Fortum OYJ 8,946,123
--------------
FRANCE -- 16.5%
286,874 CNP Assurances 5,543,806
76,973 Covivio 8,146,401
303,310 Klepierre S.A. 10,301,306
149,520 SCOR SE 6,174,930
413,533 Societe Generale S.A. 11,331,400
132,141 TOTAL S.A. 6,896,762
--------------
48,394,605
--------------
GERMANY -- 12.2%
358,033 Aareal Bank AG 10,883,779
32,299 Allianz SE 7,528,465
288,402 Deutsche Post AG 9,633,099
29,662 Muenchener Rueckversicherungs-
Gesellschaft AG in Muenchen 7,675,192
--------------
35,720,535
--------------
ITALY -- 10.8%
477,192 Assicurazioni Generali S.p.A. 9,247,685
5,924,736 Intesa Sanpaolo S.p.A. 14,048,703
1,651,145 Snam S.p.A. 8,339,680
--------------
31,636,068
--------------
MULTI-NATIONAL -- 3.4%
69,379 Unibail-Rodamco-Westfield 10,114,163
--------------
PORTUGAL -- 3.4%
2,564,858 EDP-Energias de Portugal S.A. 9,957,845
--------------
SPAIN -- 2.6%
1,916,550 Banco Santander S.A. 7,805,366
--------------
SWEDEN -- 3.0%
956,312 Skandinaviska Enskilda Banken
AB, Class A 8,789,788
--------------
SWITZERLAND -- 15.9%
113,814 Swiss Prime Site AG 11,135,652
80,097 Swiss Re AG 8,354,389
14,061 Swisscom AG 6,935,755
962,982 UBS Group AG 10,931,903
24,419 Zurich Insurance Group AG 9,346,283
--------------
46,703,982
--------------
UNITED KINGDOM -- 24.5%
1,624,038 BAE Systems PLC 11,381,904
569,886 GlaxoSmithKline PLC 12,224,405
1,018,834 National Grid PLC 11,047,567
404,975 Royal Dutch Shell PLC, Class B 11,930,508
1,068,546 SSE PLC 16,363,675
893,912 United Utilities Group PLC 9,076,398
--------------
72,024,457
--------------
DESCRIPTION VALUE
-------------------------------------------------------------
TOTAL INVESTMENTS -- 99.1% $ 291,157,180
(Cost $304,469,928) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.9% 2,760,999
--------------
NET ASSETS -- 100.0% $ 293,918,179
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) Aggregate cost for federal income tax purposes is $307,663,519. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$14,552,376 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$31,058,715. The net unrealized depreciation was $16,506,339.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 291,157,180 $ -- $ --
=============================================
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
Euro 56.2%
British Pound Sterling 24.7
Swiss Franc 16.1
Swedish Krona 3.0
------
Total 100.0%
======
See Notes to Financial Statements Page 35
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.5%
AUSTRALIA -- 3.5%
196,196 BGP Holdings PLC (b) (c) (d)
(e) (f) $ 0
16,655 BWP Trust 44,403
12,534 Charter Hall Retail REIT 35,954
81,765 Cromwell Property Group 70,088
37,397 Dexus 301,127
66,349 GPT Group (The) 275,859
133,845 Mirvac Group 276,437
174,870 Scentre Group 463,852
31,710 Shopping Centres Australasia
Property Group 55,861
81,708 Stockland 250,927
107,143 Vicinity Centres 185,853
--------------
1,960,361
--------------
AUSTRIA -- 0.2%
2,358 CA Immobilien Anlagen AG 83,657
--------------
BELGIUM -- 0.9%
842 Aedifica S.A. 97,464
176 Ascencio 10,858
730 Befimmo S.A. 44,875
884 Cofinimmo S.A. 124,487
757 Intervest Offices & Warehouses
N.V. 21,741
83 Leasinvest Real Estate S.C.A. 10,856
407 Montea C.V.A. 34,469
343 Retail Estates N.V. 32,039
613 Warehouses De Pauw C.V.A. 112,515
82 Wereldhave Belgium Comm VA 7,168
392 Xior Student Housing N.V. 21,256
--------------
517,728
--------------
BERMUDA -- 0.4%
39,622 Hongkong Land Holdings Ltd. 222,676
--------------
CANADA -- 3.1%
3,983 Allied Properties Real Estate
Investment Trust 161,052
4,332 Artis Real Estate Investment Trust 41,134
1,300 Boardwalk Real Estate Investment
Trust 43,577
5,455 Canadian Apartment Properties
REIT 224,277
7,237 Chartwell Retirement Residences 80,408
8,738 Choice Properties Real Estate
Investment Trust 95,238
6,205 Cominar Real Estate Investment
Trust 61,682
3,020 Crombie Real Estate Investment
Trust 36,016
6,174 Dream Global Real Estate
Investment Trust 77,452
3,727 Dream Industrial Real Estate
Investment Trust 37,218
1,611 Dream Office Real Estate
Investment Trust 36,005
4,553 First Capital Realty, Inc. 75,846
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
CANADA (CONTINUED)
1,688 Granite Real Estate Investment
Trust $ 81,734
9,780 H&R Real Estate Investment Trust 170,745
3,893 InterRent Real Estate Investment
Trust 48,073
2,888 Killam Apartment Real Estate
Investment Trust 43,663
1,626 Northview Apartment Real Estate
Investment Trust 35,371
3,502 NorthWest Healthcare Properties
Real Estate Investment Trust 31,112
10,467 RioCan Real Estate Investment
Trust 208,416
4,304 SmartCentres Real Estate
Investment Trust 105,582
3,523 Summit Industrial Income REIT 34,915
--------------
1,729,516
--------------
CAYMAN ISLANDS -- 1.5%
92,026 CK Asset Holdings Ltd. 623,471
41,600 Wharf Real Estate Investment
Co., Ltd. 227,169
--------------
850,640
--------------
FINLAND -- 0.1%
2,628 Citycon OYJ 27,570
2,969 Kojamo OYJ 48,606
--------------
76,176
--------------
FRANCE -- 1.4%
1,050 Carmila S.A. 18,334
1,580 Covivio 167,219
1,772 Gecina S.A. 278,508
1,089 ICADE 97,390
6,523 Klepierre S.A. 221,540
2,098 Mercialys S.A. 27,898
--------------
810,889
--------------
GERMANY -- 3.5%
5,420 alstria office REIT-AG 92,985
1,749 Deutsche EuroShop AG 49,336
12,231 Deutsche Wohnen SE 446,463
2,391 Hamborner REIT AG 24,966
2,165 LEG Immobilien AG 247,774
4,321 TAG Immobilien AG 98,621
3,172 TLG Immobilien AG 86,260
18,578 Vonovia SE 942,598
--------------
1,989,003
--------------
GUERNSEY -- 0.2%
8,211 BMO Real Estate Investments Ltd. 8,238
12,593 Regional REIT Ltd. (g) 15,948
17,749 Schroder Real Estate Investment
Trust Ltd. 12,090
32,160 Sirius Real Estate Ltd. 29,973
13,892 Standard Life Investment Property
Income Trust Ltd. 15,100
--------------
81,349
--------------
Page 36 See Notes to Financial Statements
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
HONG KONG -- 4.1%
67,461 Champion REIT $ 43,639
69,219 Hang Lung Properties Ltd. 157,201
21,462 Hysan Development Co., Ltd. 86,530
71,904 Link REIT 793,103
195,591 New World Development Co., Ltd. 254,043
109,158 Sino Land Co., Ltd. 164,064
48,773 Sun Hung Kai Properties Ltd. 701,940
36,085 Swire Properties Ltd. 113,259
--------------
2,313,779
--------------
IRELAND -- 0.2%
23,724 Green REIT PLC 49,286
23,810 Hibernia REIT PLC 38,149
14,954 Irish Residential Properties REIT
PLC 28,002
--------------
115,437
--------------
ISLE OF MAN -- 0.0%
8,672 RDI REIT PLC 11,644
--------------
ISRAEL -- 0.2%
1,252 Azrieli Group Ltd. 98,323
--------------
ITALY -- 0.0%
1,669 Immobiliare Grande Distribuzione
SIIQ S.p.A. 10,223
--------------
JAPAN -- 12.0%
24 Activia Properties, Inc. 122,525
43 Advance Residence Investment
Corp. 141,179
4,027 AEON Mall Co., Ltd. 63,501
51 AEON REIT Investment Corp. 70,233
20 Comforia Residential REIT, Inc. 64,185
64 Daiwa House REIT Investment
Corp. 179,940
9 Daiwa Office Investment Corp. 69,836
15 Frontier Real Estate Investment
Corp. 63,884
25 Fukuoka REIT Corp. 42,474
33 Global One Real Estate Investment
Corp. 44,590
124 GLP J-REIT 164,454
12,300 Hulic Co., Ltd. 125,702
38 Hulic REIT, Inc. 69,797
56 Industrial & Infrastructure Fund
Investment Corp. 80,381
297 Invesco Office J-REIT, Inc. 59,029
167 Invincible Investment Corp. 103,019
41 Japan Excellent, Inc. 66,889
153 Japan Hotel REIT Investment
Corp. 114,051
29 Japan Logistics Fund, Inc. 71,719
29 Japan Prime Realty Investment
Corp. 137,591
44 Japan Real Estate Investment Corp. 295,029
51 Japan Rental Housing Investments,
Inc. 46,932
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
JAPAN (CONTINUED)
90 Japan Retail Fund Investment
Corp. $ 190,280
13 Kenedix Office Investment Corp. 102,677
31 Kenedix Residential Next
Investment Corp. 61,125
17 Kenedix Retail REIT Corp. 42,577
41 LaSalle Logiport REIT 58,699
52 MCUBS MidCity Investment Corp. 57,086
40,466 Mitsubishi Estate Co., Ltd. 779,941
32,168 Mitsui Fudosan Co., Ltd. 797,023
12 Mitsui Fudosan Logistics Park,
Inc. 49,998
53 Mori Hills REIT Investment Corp. 84,114
34 Mori Trust Sogo REIT, Inc. 60,941
15 Nippon Accommodations Fund,
Inc. 93,364
43 Nippon Building Fund, Inc. 330,081
69 Nippon Prologis REIT, Inc. 188,956
15 NIPPON REIT Investment Corp. 62,636
3,900 Nomura Real Estate Holdings, Inc. 84,186
148 Nomura Real Estate Master Fund,
Inc. 267,187
90 Orix JREIT, Inc. 196,439
43 Premier Investment Corp. 63,073
137 Sekisui House REIT, Inc. 122,777
13,544 Sumitomo Realty & Development
Co., Ltd. 515,204
6,787 Tokyo Tatemono Co., Ltd. 95,285
30 Tokyu REIT, Inc. 57,073
101 United Urban Investment Corp. 193,359
--------------
6,751,021
--------------
JERSEY ISLAND -- 0.0%
2,937 Phoenix Spree Deutschland Ltd. 10,996
--------------
LUXEMBOURG -- 0.7%
998 ADO Properties S.A. (f) 41,118
30,367 Aroundtown S.A. 248,372
3,770 Grand City Properties S.A. 84,812
--------------
374,302
--------------
MULTI-NATIONAL -- 1.2%
4,611 Unibail-Rodamco-Westfield 672,198
--------------
NETHERLANDS -- 0.2%
1,647 Eurocommercial Properties N.V. 45,884
609 NSI N.V. 26,319
587 Vastned Retail N.V. 17,531
1,380 Wereldhave N.V. 30,684
--------------
120,418
--------------
NEW ZEALAND -- 0.1%
49,068 Kiwi Property Group Ltd. 51,313
--------------
NORWAY -- 0.1%
4,850 Entra ASA (g) 76,021
--------------
SINGAPORE -- 2.8%
86,500 Ascendas Real Estate Investment
Trust 195,261
85,890 CapitaLand Commercial Trust 128,635
See Notes to Financial Statements Page 37
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SINGAPORE (CONTINUED)
85,430 CapitaLand Ltd. $ 218,187
82,083 CapitaLand Mall Trust 156,190
26,800 CDL Hospitality Trusts 31,800
16,000 City Developments Ltd. 113,678
45,285 Fortune Real Estate Investment
Trust 51,827
24,200 Frasers Centrepoint Trust 47,974
56,700 Frasers Logistics & Industrial
Trust 50,869
34,400 Keppel DC REIT 47,538
67,500 Keppel REIT 61,535
65,421 Mapletree Commercial Trust 108,392
48,200 Mapletree Industrial Trust 84,742
83,053 Mapletree Logistics Trust 97,345
70,097 Suntec Real Estate Investment
Trust 96,360
16,800 UOL Group Ltd. 91,162
--------------
1,581,495
--------------
SPAIN -- 0.6%
11,118 Inmobiliaria Colonial Socimi S.A. 134,148
2,181 Lar Espana Real Estate Socimi S.A. 18,328
11,323 Merlin Properties Socimi S.A. 158,095
--------------
310,571
--------------
SWEDEN -- 1.8%
1,578 Atrium Ljungberg AB, Class B 34,865
9,223 Castellum AB 197,501
705 Catena AB 23,132
2,880 Dios Fastigheter AB 25,131
9,027 Fabege AB 148,738
3,317 Fastighets AB Balder, Class B (c) 125,617
1,226 Hembla AB (c) 26,839
5,517 Hemfosa Fastigheter AB 55,876
3,746 Hufvudstaden AB, Class A 67,811
17,247 Klovern AB, Class B 32,185
6,457 Kungsleden AB 58,640
5,460 Nyfosa AB (c) 37,162
2,567 Pandox AB 51,162
3,373 Sagax AB, Class D 12,918
5,574 Wallenstam AB, Class B 63,191
4,538 Wihlborgs Fastigheter AB 73,758
--------------
1,034,526
--------------
SWITZERLAND -- 1.0%
481 Allreal Holding AG 92,436
95 Hiag Immobilien Holding AG 10,756
221 Mobimo Holding AG 62,444
1,342 PSP Swiss Property AG 170,363
2,570 Swiss Prime Site AG 251,451
--------------
587,450
--------------
UNITED KINGDOM -- 4.0%
80,788 Assura PLC 70,824
5,242 Big Yellow Group PLC 66,966
31,825 British Land (The) Co. PLC 228,833
25,153 Capital & Counties Properties PLC 72,740
21,321 Civitas Social Housing PLC 22,702
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
UNITED KINGDOM (CONTINUED)
12,895 Custodian REIT PLC $ 18,645
3,433 Derwent London PLC 142,248
20,065 Empiric Student Property PLC 23,018
14,059 GCP Student Living PLC 29,559
20,582 Grainger PLC 62,254
9,020 Great Portland Estates PLC 83,179
26,229 Hammerson PLC 91,460
14,246 Hansteen Holdings PLC 16,185
3,397 Helical PLC 16,248
7,242 Impact Healthcare REIT PLC 9,884
30,326 Intu Properties PLC 16,533
24,390 Land Securities Group PLC 256,822
27,825 LondonMetric Property PLC 74,377
17,836 LXI REIT PLC 28,553
10,296 NewRiver REIT PLC 24,610
38,358 Primary Health Properties PLC 62,538
7,001 Safestore Holdings PLC 57,545
37,311 Segro PLC 371,959
7,617 Shaftesbury PLC 85,085
13,177 Target Healthcare REIT PLC 18,567
10,891 Triple Point Social Housing REIT
PLC (g) 12,561
58,408 Tritax Big Box REIT PLC 107,435
9,797 UNITE Group (The) PLC 131,541
4,550 Workspace Group PLC 53,846
--------------
2,256,717
--------------
UNITED STATES -- 55.7%
2,822 Acadia Realty Trust 80,653
1,394 Agree Realty Corp. 101,971
72 Alexander's, Inc. 25,086
3,814 Alexandria Real Estate Equities,
Inc. 587,509
1,642 American Assets Trust, Inc. 76,747
4,667 American Campus Communities,
Inc. 224,389
3,631 American Finance Trust, Inc. 50,689
8,778 American Homes 4 Rent, Class A 227,262
6,540 Americold Realty Trust 242,438
5,044 Apartment Investment &
Management Co., Class A 262,994
7,169 Apple Hospitality REIT, Inc. 118,862
4,759 AvalonBay Communities, Inc. 1,024,755
5,284 Boston Properties, Inc. 685,123
5,949 Brandywine Realty Trust 90,127
10,134 Brixmor Property Group, Inc. 205,619
2,518 Brookfield Property REIT, Inc.,
Class A 51,342
3,188 Camden Property Trust 353,900
3,243 CareTrust REIT, Inc. 76,227
1,559 Chatham Lodging Trust 28,296
16,316 Colony Capital, Inc. 98,222
3,974 Columbia Property Trust, Inc. 84,050
3,823 Corporate Office Properties Trust 113,849
4,971 Cousins Properties, Inc. 186,860
6,559 CubeSmart 228,909
3,821 CyrusOne, Inc. 302,241
Page 38 See Notes to Financial Statements
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
UNITED STATES (CONTINUED)
6,841 DiamondRock Hospitality Co. $ 70,120
7,101 Digital Realty Trust, Inc. 921,781
5,663 Douglas Emmett, Inc. 242,546
12,278 Duke Realty Corp. 417,084
2,673 Easterly Government Properties,
Inc. 56,935
1,260 EastGroup Properties, Inc. 157,525
5,048 Empire State Realty Trust, Inc.,
Class A 72,035
2,627 EPR Properties 201,911
4,109 Equity Commonwealth 140,733
2,960 Equity LifeStyle Properties, Inc. 395,456
12,502 Equity Residential 1,078,423
2,582 Essential Properties Realty Trust,
Inc. 59,154
2,236 Essex Property Trust, Inc. 730,389
4,223 Extra Space Storage, Inc. 493,331
2,549 Federal Realty Investment Trust 347,021
4,284 First Industrial Realty Trust,
Inc. 169,475
2,327 Four Corners Property Trust, Inc. 65,808
3,526 Franklin Street Properties Corp. 29,830
6,909 Gaming and Leisure Properties,
Inc. 264,200
1,133 Getty Realty Corp. 36,324
2,867 Global Net Lease, Inc. 55,906
16,803 HCP, Inc. 598,691
4,346 Healthcare Realty Trust, Inc. 145,591
6,956 Healthcare Trust of America, Inc.,
Class A 204,367
1,185 Hersha Hospitality Trust 17,633
3,485 Highwoods Properties, Inc. 156,616
24,718 Host Hotels & Resorts, Inc. 427,374
5,185 Hudson Pacific Properties, Inc. 173,490
3,056 Independence Realty Trust, Inc. 43,731
2,202 Industrial Logistics Properties
Trust 46,792
367 Innovative Industrial Properties,
Inc. 33,900
396 Investors Real Estate Trust 29,569
16,288 Invitation Homes, Inc. 482,288
4,172 JBG SMITH Properties 163,584
4,168 Kennedy-Wilson Holdings, Inc. 91,363
3,380 Kilroy Realty Corp. 263,268
13,785 Kimco Realty Corp. 287,831
2,814 Kite Realty Group Trust 45,446
7,782 Lexington Realty Trust 79,765
5,317 Liberty Property Trust 272,922
1,584 Life Storage, Inc. 166,969
1,337 LTC Properties, Inc. 68,481
4,823 Macerich (The) Co. 152,359
2,942 Mack-Cali Realty Corp. 63,724
15,118 Medical Properties Trust, Inc. 295,708
3,880 Mid-America Apartment
Communities, Inc. 504,439
3,138 Monmouth Real Estate Investment
Corp. 45,219
1,422 National Health Investors, Inc. 117,159
5,534 National Retail Properties, Inc. 312,118
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
UNITED STATES (CONTINUED)
2,016 National Storage Affiliates Trust $ 67,274
1,620 Office Properties Income Trust 49,637
7,296 Omega Healthcare Investors, Inc. 304,900
6,875 Paramount Group, Inc. 91,781
8,143 Park Hotels & Resorts, Inc. 203,331
4,418 Pebblebrook Hotel Trust 122,909
6,307 Physicians Realty Trust 111,949
4,254 Piedmont Office Realty Trust,
Inc., Class A 88,824
21,473 Prologis, Inc. 1,829,929
680 PS Business Parks, Inc. 123,726
5,061 Public Storage 1,241,311
1,859 QTS Realty Trust, Inc., Class A 95,571
10,879 Realty Income Corp. 834,202
5,680 Regency Centers Corp. 394,703
3,825 Retail Opportunity Investments
Corp. 69,730
7,272 Retail Properties of America,
Inc., Class A 89,591
507 Retail Value, Inc. 18,779
3,721 Rexford Industrial Realty, Inc. 163,798
5,849 RLJ Lodging Trust 99,375
2,653 RPT Realty 35,948
1,559 Ryman Hospitality Properties,
Inc. 127,542
6,418 Sabra Health Care REIT, Inc. 147,357
404 Saul Centers, Inc. 22,022
8,041 Senior Housing Properties Trust 74,419
1,145 Seritage Growth Properties,
Class A 48,651
5,559 Service Properties Trust 143,367
10,510 Simon Property Group, Inc. 1,635,881
4,770 SITE Centers Corp. 72,075
2,805 SL Green Realty Corp. 229,309
3,059 Spirit Realty Capital, Inc. 146,404
4,348 STAG Industrial, Inc. 128,179
7,196 STORE Capital Corp. 269,202
3,516 Summit Hotel Properties, Inc. 40,786
3,024 Sun Communities, Inc. 448,913
7,625 Sunstone Hotel Investors, Inc. 104,767
3,104 Tanger Factory Outlet Centers,
Inc. 48,050
1,994 Taubman Centers, Inc. 81,415
2,192 Terreno Realty Corp. 111,989
9,910 UDR, Inc. 480,437
436 Universal Health Realty Income
Trust 44,821
3,910 Urban Edge Properties 77,379
1,005 Urstadt Biddle Properties, Inc.,
Class A 23,818
12,726 Ventas, Inc. 929,380
36,044 VEREIT, Inc. 352,510
15,771 VICI Properties, Inc. 357,213
5,904 Vornado Realty Trust 375,908
6,346 Washington Prime Group, Inc. 26,272
2,725 Washington Real Estate Investment
Trust 74,556
4,131 Weingarten Realty Investors 120,336
13,852 Welltower, Inc. 1,255,684
See Notes to Financial Statements Page 39
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
UNITED STATES (CONTINUED)
5,774 WP Carey, Inc. $ 516,773
3,850 Xenia Hotels & Resorts, Inc. 81,312
--------------
31,458,499
--------------
TOTAL COMMON STOCKS -- 99.5% 56,156,928
(Cost $47,608,707) --------------
INVESTMENT COMPANIES (a) -- 0.1%
GUERNSEY -- 0.1%
18,021 BMO Commercial Property Trust 25,836
18,731 Picton Property Income Ltd. 20,221
22,347 UK Commercial Property REIT Ltd. 23,080
--------------
TOTAL INVESTMENT COMPANIES
-- 0.1% 69,137
(Cost $78,937) --------------
RIGHTS (a) -- 0.0%
SINGAPORE -- 0.0%
3,633 Keppel DC REIT, expiring
11/07/19 (b) (c) (e) 526
(Cost $0) --------------
MONEY MARKET FUNDS -- 0.1%
59,799 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 1.82% (h) 59,799
(Cost $59,799) --------------
TOTAL INVESTMENTS -- 99.7% 56,286,390
(Cost $47,747,443) (i)
NET OTHER ASSETS AND
LIABILITIES -- 0.3% 149,821
--------------
NET ASSETS -- 100.0% $ 56,436,211
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2019, securities noted as such are valued at
$526 or 0.0% of net assets.
(c) Non-income producing security.
(d) This is a restricted security which cannot be traded as a result of the
in-specie distribution. It was acquired on August 6, 2009 at a cost of $0
and has a carrying value per share of $0.
(e) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by First Trust Advisors, L.P.,
the Fund's advisor.
(f) This security's value was determined using significant unobservable inputs
(see Note 2A - Portfolio Valuation in the Notes to Financial Statements).
(g) This security is restricted in the U.S. and cannot be offered for public
sale without first being registered under the Securities Act of 1933, as
amended. This security is not restricted on the foreign exchange where it
trades freely without any additional registration. As such, it does not
require the additional disclosure required of restricted securities.
(h) Rate shown reflects yield as of September 30, 2019.
(i) Aggregate cost for federal income tax purposes is $49,904,865. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$9,540,373 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$3,158,848. The net unrealized appreciation was $6,381,525.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2019 PRICES INPUTS INPUTS
--------------------------------------------------------
Common
Stocks:
Australia $ 1,960,361 $ 1,960,361 $ -- $ --**
Other
Country
Categories* 54,196,567 54,196,567 -- --
Investment
Companies* 69,137 69,137 -- --
Rights* 526 -- 526 --
Money Market
Funds 59,799 59,799 -- --
--------------------------------------------------------
Total
Investments $ 56,286,390 $ 56,285,864 $ 526 $ --**
========================================================
* See Portfolio of Investments for country breakout.
** Investment is valued at $0.
As of September 30, 2019, the Fund transferred a common stock valued at $0 from
Level 2 to level 3 of the fair value hierarchy. The common stock that
transferred from Level 2 to Level 3 did so as a result of being priced using
unobservable and non-quantitative inputs.
Level 3 Common Stocks are fair valued by the Advisor's Pricing Committee and are
footnoted in the Portfolio of Investments.
Page 40 See Notes to Financial Statements
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
United States Dollar 56.4%
Japanese Yen 12.0
Euro 9.0
Hong Kong Dollar 5.7
British Pound Sterling 4.3
Australian Dollar 3.5
Canadian Dollar 3.1
Singapore Dollar 2.7
Swedish Krona 1.8
Swiss Franc 1.1
Israeli Shekel 0.2
Norwegian Krone 0.1
New Zealand Dollar 0.1
------
Total 100.0%
======
See Notes to Financial Statements Page 41
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.4%
AUSTRALIA -- 16.2%
259,369 Australia & New Zealand Banking
Group Ltd. $ 4,992,747
908,810 Bendigo & Adelaide Bank Ltd. 7,047,987
98,314 Commonwealth Bank of Australia 5,363,644
566,668 Crown Resorts Ltd. 4,608,798
2,865,927 CSR Ltd. 8,259,713
975,833 Fortescue Metals Group Ltd. 5,796,023
2,826,580 Harvey Norman Holdings Ltd. 8,642,342
348,235 JB Hi-Fi Ltd. 7,991,408
390,214 National Australia Bank Ltd. 7,822,242
435,303 Suncorp Group Ltd. 4,010,479
915,941 Sydney Airport 4,964,266
1,193,624 Tabcorp Holdings Ltd. 3,907,340
244,962 Wesfarmers Ltd. 6,580,422
322,671 Westpac Banking Corp. 6,455,206
--------------
86,442,617
--------------
BERMUDA -- 2.0%
285,914 Invesco Ltd. 4,843,383
646,209 VTech Holdings Ltd. 5,635,376
--------------
10,478,759
--------------
CANADA -- 11.9%
77,803 Bank of Nova Scotia (The) 4,419,124
109,362 BCE, Inc. 5,289,593
52,884 Canadian Imperial Bank of
Commerce 4,363,324
126,156 Emera, Inc. 5,538,161
123,973 Genworth MI Canada, Inc. 4,922,051
228,686 IGM Financial, Inc. 6,493,692
187,933 Laurentian Bank of Canada 6,387,608
80,313 National Bank of Canada 3,996,100
159,790 Norbord, Inc. 3,830,570
313,143 Russel Metals, Inc. 5,003,764
189,696 Shaw Communications, Inc.,
Class B 3,727,054
100,410 TC Energy Corp. 5,199,174
114,389 TELUS Corp. 4,070,983
--------------
63,241,198
--------------
DENMARK -- 0.8%
294,379 Danske Bank A/S 4,098,989
--------------
FINLAND -- 3.8%
227,021 Fortum OYJ 5,367,026
126,037 Nokian Renkaat OYJ 3,555,253
877,246 Nordea Bank Abp 6,221,072
125,841 Sampo OYJ, Class A 5,003,629
--------------
20,146,980
--------------
FRANCE -- 8.6%
210,504 AXA S.A. 5,375,771
117,434 BNP Paribas S.A. 5,717,655
122,794 Bouygues S.A. 4,918,613
437,020 Credit Agricole S.A. 5,306,335
337,921 Engie S.A. 5,517,408
196,230 Lagardere S.C.A. 4,341,797
1,015,051 Natixis S.A. 4,209,695
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
FRANCE (CONTINUED)
235,325 Societe Generale S.A. $ 6,448,244
78,588 TOTAL S.A. 4,101,700
--------------
45,937,218
--------------
GERMANY -- 4.2%
198,163 Aareal Bank AG 6,023,920
18,153 Allianz SE 4,231,222
92,570 Daimler AG 4,602,923
640,274 TUI AG 7,445,760
--------------
22,303,825
--------------
HONG KONG -- 1.0%
9,837,305 PCCW Ltd. 5,522,557
--------------
IRELAND -- 1.0%
103,674 Seagate Technology PLC 5,576,624
--------------
ITALY -- 7.1%
265,267 Assicurazioni Generali S.p.A. 5,140,710
436,634 Azimut Holding S.p.A. 8,195,186
818,754 Banca Mediolanum S.p.A. 6,148,664
280,428 Eni S.p.A. 4,289,543
3,259,045 Intesa Sanpaolo S.p.A. 7,727,830
2,316,220 UnipolSai Assicurazioni S.p.A. 6,159,958
--------------
37,661,891
--------------
JAPAN -- 1.6%
175,678 Aozora Bank Ltd. 4,390,122
1,512,200 Tokai Tokyo Financial Holdings,
Inc. 4,167,728
--------------
8,557,850
--------------
JERSEY ISLAND -- 1.3%
558,966 WPP PLC 6,996,439
--------------
MALTA -- 0.6%
509,738 Kindred Group PLC 2,977,426
--------------
NETHERLANDS -- 2.3%
1,023,749 Aegon N.V. 4,259,158
263,214 BE Semiconductor Industries N.V. 8,242,382
--------------
12,501,540
--------------
NEW ZEALAND -- 1.2%
2,342,585 Spark New Zealand Ltd. 6,469,163
--------------
NORWAY -- 0.6%
166,796 Equinor ASA 3,172,693
--------------
PORTUGAL -- 1.0%
1,430,762 EDP-Energias de Portugal S.A. 5,554,813
--------------
SINGAPORE -- 1.0%
2,339,440 Singapore Telecommunications Ltd. 5,247,089
--------------
SPAIN -- 3.4%
1,833,733 Mapfre S.A. 4,938,749
183,424 Naturgy Energy Group S.A. 4,866,143
216,352 Red Electrica Corp., S.A. 4,394,388
548,267 Telefonica S.A. 4,183,698
--------------
18,382,978
--------------
Page 42 See Notes to Financial Statements
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SWEDEN -- 4.4%
274,135 JM AB $ 7,006,503
563,279 Skandinaviska Enskilda Banken
AB, Class A 5,177,288
395,977 Swedbank AB, Class A 5,699,884
1,201,534 Telia Co., AB 5,379,047
--------------
23,262,722
--------------
SWITZERLAND -- 3.0%
51,368 Swiss Re AG 5,357,857
9,149 Swisscom AG 4,512,853
15,532 Zurich Insurance Group AG 5,944,816
--------------
15,815,526
--------------
UNITED KINGDOM -- 13.6%
305,470 Bovis Homes Group PLC 4,184,058
162,569 British American Tobacco PLC 6,011,561
2,194,358 BT Group PLC 4,818,193
1,441,836 Crest Nicholson Holdings PLC 6,718,912
3,748,525 Dixons Carphone PLC 5,482,375
858,647 Galliford Try PLC 7,068,205
676,367 HSBC Holdings PLC 5,194,315
3,060,295 ITV PLC 4,737,322
1,360,557 Legal & General Group PLC 4,155,394
648,041 Phoenix Group Holdings PLC 5,508,241
176,197 Royal Dutch Shell PLC, Class A 5,164,742
2,699,500 Standard Life Aberdeen PLC 9,486,138
378,575 United Utilities Group PLC 3,843,888
--------------
72,373,344
--------------
UNITED STATES -- 8.8%
98,964 Altria Group, Inc. 4,047,628
194,858 AT&T, Inc. 7,373,427
581,147 CenturyLink, Inc. 7,252,715
706,567 Ford Motor Co. 6,472,154
85,713 Helmerich & Payne, Inc. 3,434,520
224,520 Macy's, Inc. 3,489,041
128,551 PacWest Bancorp 4,671,543
85,376 Southern (The) Co. 5,273,675
266,697 Waddell & Reed Financial, Inc.,
Class A 4,581,854
--------------
46,596,557
--------------
TOTAL INVESTMENTS -- 99.4% 529,318,798
(Cost $556,761,177) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.6% 3,212,965
--------------
NET ASSETS -- 100.0% $ 532,531,763
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) Aggregate cost for federal income tax purposes is $573,181,075. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$30,995,963 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$74,858,240. The net unrealized depreciation was $43,862,277.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 529,318,798 $ -- $ --
=============================================
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
Euro 28.1%
British Pound Sterling 16.4
Australian Dollar 16.3
Canadian Dollar 12.0
United States Dollar 10.8
Swedish Krona 6.1
Swiss Franc 3.0
Hong Kong Dollar 2.1
Japanese Yen 1.6
New Zealand Dollar 1.2
Singapore Dollar 1.0
Danish Krone 0.8
Norwegian Krone 0.6
------
Total 100.0%
======
See Notes to Financial Statements Page 43
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.6%
AUSTRALIA -- 1.6%
95,914 AGL Energy Ltd. $ 1,240,365
--------------
CANADA -- 12.2%
182,868 Boralex, Inc., Class A 3,123,601
307,784 Northland Power, Inc. 5,905,476
15,096 TransAlta Renewables, Inc. 155,307
--------------
9,184,384
--------------
CAYMAN ISLANDS -- 0.9%
1,088,808 China High Speed Transmission
Equipment Group Co., Ltd. (b) 668,202
--------------
CHINA -- 6.3%
5,315,780 China Longyuan Power Group
Corp., Ltd., Class H 2,984,222
220,911 China Suntien Green Energy Corp.,
Ltd., Class H 60,599
1,446,235 Xinjiang Goldwind Science &
Technology Co., Ltd., Class H 1,712,372
--------------
4,757,193
--------------
DENMARK -- 15.7%
61,127 Orsted A/S (c) 5,680,837
79,435 Vestas Wind Systems A/S 6,166,984
--------------
11,847,821
--------------
FRANCE -- 2.1%
96,036 Engie S.A. 1,568,029
--------------
GERMANY -- 8.5%
157,032 E. ON SE 1,526,555
158,966 Nordex SE (b) (d) 1,732,656
51,243 RWE AG 1,602,409
14,598 Siemens AG 1,563,270
--------------
6,424,890
--------------
GREECE -- 1.3%
116,704 Terna Energy S.A. 943,839
--------------
GUERNSEY -- 3.8%
1,847,056 Renewables Infrastructure Group
(The) Ltd. 2,866,047
--------------
ITALY -- 3.1%
201,350 Enel S.p.A. 1,503,536
39,216 Prysmian S.p.A. 842,049
--------------
2,345,585
--------------
JAPAN -- 6.1%
38,900 Mitsubishi Heavy Industries Ltd. 1,522,542
93,310 Mitsui & Co., Ltd. 1,525,753
204,904 Toray Industries, Inc. 1,520,032
--------------
4,568,327
--------------
NETHERLANDS -- 0.5%
28,737 SIF Holding N.V. 409,065
--------------
PORTUGAL -- 1.6%
320,860 EDP-Energias de Portugal S.A. 1,245,712
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SPAIN -- 11.7%
3,129 Acciona S.A. $ 331,156
46,453 Endesa S.A. 1,222,247
141,970 Iberdrola S.A. 1,475,608
428,810 Siemens Gamesa Renewable
Energy S.A. 5,818,920
--------------
8,847,931
--------------
SWEDEN -- 1.9%
51,423 Eolus Vind AB, Class B 549,540
55,008 SKF AB, Class B 909,158
--------------
1,458,698
--------------
SWITZERLAND -- 2.4%
77,158 ABB Ltd. 1,516,025
2,857 BKW AG 212,117
52 Gurit Holding AG 69,608
--------------
1,797,750
--------------
UNITED KINGDOM -- 2.1%
104,308 SSE PLC 1,597,369
--------------
UNITED STATES -- 17.8%
27,877 Alliant Energy Corp. 1,503,407
40,874 American Superconductor Corp. (d) 320,452
15,766 Duke Energy Corp. 1,511,329
177,228 General Electric Co. 1,584,418
6,674 NextEra Energy, Inc. 1,554,975
158,966 Pattern Energy Group, Inc.,
Class A 4,280,954
81,930 TPI Composites, Inc. (d) 1,536,188
17,205 Trinity Industries, Inc. 338,594
7,779 Woodward, Inc. 838,810
--------------
13,469,127
--------------
TOTAL COMMON STOCKS -- 99.6% 75,240,334
(Cost $74,310,642) --------------
MONEY MARKET FUNDS -- 0.2%
146,929 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.00% (e) (f) 146,929
(Cost $146,929) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.5%
$ 1,105,439 BNP Paribas S.A., 2.35% (e),
dated 09/30/19, due 10/01/19,
with a maturity value of
$1,105,511. Collateralized by
U.S. Treasury Note, interest
rate of 2.875%, due 05/15/28.
The value of the collateral
including accrued interest is
$1,130,664. (f) 1,105,439
(Cost $1,105,439) --------------
Page 44 See Notes to Financial Statements
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
DESCRIPTION VALUE
-------------------------------------------------------------
TOTAL INVESTMENTS -- 101.3% $ 76,492,702
(Cost $75,563,010) (g)
NET OTHER ASSETS AND
LIABILITIES -- (1.3)% (990,937)
--------------
NET ASSETS -- 100.0% $ 75,501,765
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) 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 $1,165,264 and the total value of the collateral held by the
Fund is $1,252,368.
(c) This security is restricted in the U.S. and cannot be offered for public
sale without first being registered under the Securities Act of 1933, as
amended. This security is not restricted on the foreign exchange where it
trades freely without any additional registration. As such, it does not
require the additional disclosure required of restricted securities.
(d) Non-income producing security.
(e) Rate shown reflects yield as of September 30, 2019.
(f) This security serves as collateral for securities on loan.
(g) Aggregate cost for federal income tax purposes is $77,629,398. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$7,563,958 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$8,700,654. The net unrealized depreciation was $1,136,696.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 75,240,334 $ -- $ --
Money Market
Funds 146,929 -- --
Repurchase
Agreements -- 1,105,439 --
---------------------------------------------
Total Investments $ 75,387,263 $ 1,105,439 $ --
=============================================
* See Portfolio of Investments for country breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 1,165,264
Non-cash Collateral(2) (1,165,264)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At September 30, 2019, 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) $ 1,105,439
Non-cash Collateral(4) (1,105,439)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2019, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
Euro 28.5%
United States Dollar 19.2
Danish Krone 15.5
Canadian Dollar 12.0
Hong Kong Dollar 7.1
Japanese Yen 6.0
British Pound Sterling 5.8
Swiss Franc 2.4
Swedish Krona 1.9
Australian Dollar 1.6
------
Total 100.0%
======
See Notes to Financial Statements Page 45
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.5%
AUSTRALIA -- 4.1%
5,854 CIMIC Group Ltd. $ 124,264
35,311 Downer EDI Ltd. 185,899
6,766 Monadelphous Group Ltd. 71,925
--------------
382,088
--------------
CANADA -- 3.3%
4,213 Aecon Group, Inc. 58,003
10,034 SNC-Lavalin Group, Inc. 141,325
4,988 Stantec, Inc. 110,388
--------------
309,716
--------------
CAYMAN ISLANDS -- 1.3%
129,659 China State Construction
International Holdings Ltd. 121,922
--------------
CHINA -- 3.7%
228,358 China Communications
Construction Co., Ltd.,
Class H 178,603
270,902 China Railway Group Ltd., Class H 164,524
--------------
343,127
--------------
FINLAND -- 0.4%
5,917 YIT OYJ 34,052
--------------
FRANCE -- 9.3%
7,495 Bouygues S.A. 300,218
2,584 Eiffage S.A. 267,900
2,876 Vinci S.A. 309,772
--------------
877,890
--------------
GERMANY -- 1.9%
1,560 HOCHTIEF AG 177,854
--------------
IRELAND -- 2.2%
4,277 Kingspan Group PLC 208,846
--------------
ITALY -- 0.2%
8,996 Salini Impregilo S.p.A. (b) (c) 19,630
--------------
JAPAN -- 30.4%
31,800 Chiyoda Corp. (b) (c) 82,937
7,900 COMSYS Holdings Corp. 223,575
17,100 JGC Holdings Corp. 223,466
17,200 Kajima Corp. 225,410
7,300 Kandenko Co., Ltd. 65,219
8,800 Kinden Corp. 130,464
3,270 Kumagai Gumi Co., Ltd. 92,997
7,500 Kyowa Exeo Corp. 181,734
14,500 Maeda Corp. 126,326
4,600 Maeda Road Construction Co., Ltd. 99,977
2,900 Nippo Corp. 53,615
4,820 Nishimatsu Construction Co., Ltd. 89,602
24,900 Obayashi Corp. 247,791
3,100 Okumura Corp. 82,714
27,000 Penta-Ocean Construction Co., Ltd. 149,327
2,000 Raito Kogyo Co., Ltd. 26,229
26,800 Shimizu Corp. 242,408
3,600 SHO-BOND Holdings Co., Ltd. 126,187
7,000 Taisei Corp. 270,936
15,400 Toda Corp. 88,448
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
JAPAN (CONTINUED)
2,000 Toshiba Plant Systems & Services
Corp. $ 33,332
--------------
2,862,694
--------------
NETHERLANDS -- 2.8%
3,767 Arcadis N.V. 70,374
6,106 Boskalis Westminster 127,382
27,835 Koninklijke BAM Groep N.V. 69,537
--------------
267,293
--------------
NORWAY -- 0.4%
3,425 Veidekke ASA 38,438
--------------
PANAMA -- 0.6%
27,075 McDermott International,
Inc. (b) (c) 54,691
--------------
PHILIPPINES -- 0.9%
12,110 Manila Electric Co. 86,450
--------------
SOUTH KOREA -- 2.5%
23,238 Daewoo Engineering &
Construction Co., Ltd. (c) 93,834
5,211 GS Engineering & Construction
Corp. 143,764
--------------
237,598
--------------
SPAIN -- 4.2%
6,469 ACS Actividades de Construccion
y Servicios S.A. 258,487
25,872 Sacyr S.A. 66,268
2,959 Tecnicas Reunidas S.A. (c) 72,695
--------------
397,450
--------------
SWEDEN -- 5.3%
6,552 NCC AB, Class B 109,155
12,191 Peab AB 108,299
13,879 Skanska AB, Class B 281,132
--------------
498,586
--------------
UNITED KINGDOM -- 2.2%
42,230 Balfour Beatty PLC 115,271
9,965 Galliford Try PLC 82,030
1,742 Keller Group PLC 12,144
--------------
209,445
--------------
UNITED STATES -- 23.8%
6,835 AECOM (c) 256,722
3,260 Dycom Industries, Inc. (c) 166,423
2,977 EMCOR Group, Inc. 256,379
8,967 Fluor Corp. 171,539
4,069 Granite Construction, Inc. 130,737
3,678 Jacobs Engineering Group, Inc. 336,537
9,421 KBR, Inc. 231,191
4,831 MasTec, Inc. (c) 313,677
1,446 Matrix Service Co. (c) 24,784
7,277 Quanta Services, Inc. 275,071
5,099 Tutor Perini Corp. (c) 73,069
--------------
2,236,129
--------------
TOTAL COMMON STOCKS -- 99.5% 9,363,899
(Cost $10,013,209) --------------
Page 46 See Notes to Financial Statements
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
MONEY MARKET FUNDS -- 0.1%
11,188 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.00% (d) (e) $ 11,188
(Cost $11,188) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.9%
$ 84,178 BNP Paribas S.A., 2.35% (d), dated
09/30/19, due 10/01/19, with a
maturity value of $84,183.
Collateralized by U.S. Treasury
Note, interest rate of 2.875%,
due 05/15/28. The value of the
collateral including accrued
interest is $86,099. (e) 84,178
(Cost $84,178) --------------
TOTAL INVESTMENTS -- 100.5% 9,459,265
(Cost $10,108,575) (f)
NET OTHER ASSETS AND
LIABILITIES -- (0.5)% (50,106)
--------------
NET ASSETS -- 100.0% $ 9,409,159
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) 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 $91,993 and the total value of the collateral held by the
Fund is $95,366.
(c) Non-income producing security.
(d) Rate shown reflects yield as of September 30, 2019.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $10,185,623. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,244,974 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$1,971,332. The net unrealized depreciation was $726,358.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 9,363,899 $ -- $ --
Money Market
Funds 11,188 -- --
Repurchase
Agreements -- 84,178 --
---------------------------------------------
Total Investments $ 9,375,087 $ 84,178 $ --
=============================================
* See Portfolio of Investments for country breakout.
See Notes to Financial Statements Page 47
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
---------------------------------
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) $ 91,993
Non-cash Collateral(2) (91,993)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At September 30, 2019, 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) $ 84,178
Non-cash Collateral(4) (84,178)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2019, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
Japanese Yen 30.3%
United States Dollar 25.2
Euro 21.0
Swedish Krona 5.3
Hong Kong Dollar 4.9
Australian Dollar 4.0
Canadian Dollar 3.3
South Korean Won 2.5
British Pound Sterling 2.2
Philippine Peso 0.9
Norwegian Krone 0.4
------
Total 100.0%
======
Page 48 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 100.0%
CANADA -- 0.3%
2,098 Fortis, Inc. $ 88,696
--------------
CHINA -- 0.1%
3,279 BYD Co., Ltd., Class H 16,379
--------------
FRANCE -- 8.6%
8,911 Engie S.A. 145,494
25,109 Schneider Electric SE 2,203,096
--------------
2,348,590
--------------
GERMANY -- 2.6%
3,601 Siemens AG 385,624
11,804 SMA Solar Technology AG (b) 334,768
--------------
720,392
--------------
IRELAND -- 5.4%
1,921 Eaton Corp. PLC 159,731
3,639 Johnson Controls International
PLC 159,716
51,973 nVent Electric PLC 1,145,485
--------------
1,464,932
--------------
ITALY -- 16.5%
37,201 Enel S.p.A. 277,790
96,073 Prysmian S.p.A. 2,062,888
334,910 Terna Rete Elettrica Nazionale
S.p.A. 2,151,525
--------------
4,492,203
--------------
JAPAN -- 3.6%
4,300 Hitachi Ltd. 159,990
1,200 NEC Corp. 50,608
1,300 NGK Insulators Ltd. 18,503
33,900 Nissin Electric Co., Ltd. 411,033
29,100 Osaki Electric Co., Ltd. 177,359
11,800 Panasonic Corp. 95,557
1,900 Toshiba Corp. 57,988
--------------
971,038
--------------
JERSEY ISLAND -- 8.1%
25,321 Aptiv PLC 2,213,562
--------------
NETHERLANDS -- 0.0%
374 STMicroelectronics N.V. 7,233
--------------
SPAIN -- 7.9%
105,508 Red Electrica Corp., S.A. 2,143,004
--------------
SWITZERLAND -- 4.9%
9,136 ABB Ltd. 179,507
12,847 Landis+Gyr Group AG 1,151,409
--------------
1,330,916
--------------
TAIWAN -- 0.1%
2,087 Advantech Co., Ltd. 18,365
--------------
UNITED KINGDOM -- 0.6%
15,584 National Grid PLC 168,983
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
UNITED STATES -- 41.3%
126 Adesto Technologies Corp. (b) $ 1,079
19,424 Advanced Energy Industries,
Inc. (b) 1,115,132
10,243 American Superconductor
Corp. (b) 80,305
1,779 Analog Devices, Inc. 198,768
200 Arcosa, Inc. 6,842
93 AZZ, Inc. 4,051
16,070 Badger Meter, Inc. 862,959
182 Belden, Inc. 9,708
11,247 Cisco Systems, Inc. 555,714
117 Digi International, Inc. (b) 1,593
182 EnerSys 12,001
35,490 Enphase Energy, Inc. (b) 788,943
94 ESCO Technologies, Inc. 7,479
39,497 General Electric Co. 353,103
3,198 Honeywell International, Inc. 541,102
223 Hubbell, Inc. 29,302
3,885 International Business Machines
Corp. 564,957
15,162 Itron, Inc. (b) 1,121,381
235 MasTec, Inc. (b) 15,259
8,225 MYR Group, Inc. (b) 257,360
2,727 NVIDIA Corp. 474,689
10,113 Oracle Corp. 556,518
31,061 Quanta Services, Inc. 1,174,106
12,854 SolarEdge Technologies, Inc. (b) 1,076,137
586 Tesla, Inc. (b) 141,150
1,030 Trimble, Inc. (b) 39,974
91 Valmont Industries, Inc. 12,598
66,492 Veoneer, Inc. (b) (c) 996,715
186 WESCO International, Inc. (b) 8,885
6,423 Willdan Group, Inc. (b) 225,319
--------------
11,233,129
--------------
TOTAL COMMON STOCKS -- 100.0% 27,217,422
(Cost $26,425,693) --------------
MONEY MARKET FUNDS -- 0.2%
58,444 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.00% (d) (e) 58,444
(Cost $58,444) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.6%
$ 439,714 BNP Paribas S.A., 2.35% (d), dated
09/30/19, due 10/01/19, with a
maturity value of $439,742.
Collateralized by U.S. Treasury
Note, interest rate of 2.875%,
due 05/15/28. The value of the
collateral including accrued
interest is $449,747. (e) 439,714
(Cost $439,714) --------------
See Notes to Financial Statements Page 49
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
DESCRIPTION VALUE
-------------------------------------------------------------
TOTAL INVESTMENTS -- 101.8% $ 27,715,580
(Cost $26,923,851) (f)
NET OTHER ASSETS AND
LIABILITIES -- (1.8)% (483,543)
--------------
NET ASSETS -- 100.0% $ 27,232,037
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) Non-income producing security.
(c) All or a portion of this security is on loan (see Note 2E - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $482,318 and the total value of the collateral held by the
Fund is $498,158.
(d) Rate shown reflects yield as of September 30, 2019.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $27,016,370. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$3,323,816 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$2,624,606. The net unrealized appreciation was $699,210.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 27,217,422 $ -- $ --
Money Market
Funds 58,444 -- --
Repurchase
Agreements -- 439,714 --
---------------------------------------------
Total Investments $ 27,275,866 $ 439,714 $ --
=============================================
* See Portfolio of Investments for country breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 482,318
Non-cash Collateral(2) (482,318)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At September 30, 2019, 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) $ 439,714
Non-cash Collateral(4) (439,714)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2019, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 50 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
United States Dollar 55.6%
Euro 35.0
Swiss Franc 4.8
Japanese Yen 3.5
British Pound Sterling 0.6
Canadian Dollar 0.3
New Taiwan Dollar 0.1
Hong Kong Dollar 0.1
------
Total 100.0%
======
See Notes to Financial Statements Page 51
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.0%
AUSTRALIA -- 1.7%
70,596 Alumina Ltd. $ 112,928
8,044 New Hope Corp. Ltd. 11,944
--------------
124,872
--------------
BERMUDA -- 3.6%
4,156 Bunge Ltd. 235,313
29,857 China Oriental Group Co. Ltd. 10,323
32,286 China Water Affairs Group Ltd. 25,087
--------------
270,723
--------------
CANADA -- 2.2%
2,472 Norbord, Inc. 59,260
3,457 Vermilion Energy, Inc. (b) 57,766
12,302 Whitecap Resources, Inc. 42,714
--------------
159,740
--------------
CAYMAN ISLANDS -- 0.2%
42,619 China Zhongwang Holdings Ltd. 17,346
--------------
CHILE -- 1.0%
32,817 Empresas CMPC S.A. 76,332
--------------
CHINA -- 0.8%
13,000 Angang Steel Co. Ltd., Class H 4,744
27,000 China Shenhua Energy Co., Ltd.,
Class H 54,222
--------------
58,966
--------------
COLOMBIA -- 1.5%
6,722 Ecopetrol S.A., ADR 114,476
--------------
FINLAND -- 4.6%
11,619 UPM-Kymmene OYJ 343,453
--------------
FRANCE -- 4.8%
14,168 Veolia Environnement S.A. 359,192
--------------
HONG KONG -- 8.2%
4,032 CNOOC Ltd., ADR 613,872
--------------
INDIA -- 0.3%
27,191 National Aluminium Co., Ltd. 17,822
--------------
INDONESIA -- 0.6%
119,032 Bukit Asam Tbk PT 18,951
11,232 Indo Tambangraya Megah Tbk PT 9,812
169,190 Japfa Comfeed Indonesia Tbk PT 18,832
--------------
47,595
--------------
ISRAEL -- 1.4%
20,815 Israel Chemicals Ltd. 104,283
--------------
JAPAN -- 4.2%
47,500 Marubeni Corp. 315,290
--------------
NORWAY -- 1.3%
2,605 Austevoll Seafood ASA 24,697
1,589 Salmar ASA 69,689
--------------
94,386
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
RUSSIA -- 13.3%
4,177 Magnitogorsk Iron & Steel Works
PJSC, GDR $ 32,372
1,370 MMC Norilsk Nickel PJSC 352,476
2,903 Novolipetsk Steel PJSC, GDR 63,053
1,534 PhosAgro PJSC 58,801
837 Polyus PJSC 97,373
5,392 Severstal PJSC, GDR 77,375
29,272 Tatneft PJSC 310,255
--------------
991,705
--------------
SOUTH AFRICA -- 0.9%
7,464 Exxaro Resources Ltd. 64,364
--------------
SPAIN -- 0.2%
4,023 Ence Energia y Celulosa S.A. 15,303
--------------
THAILAND -- 0.2%
39,600 TTW PCL 17,738
--------------
TURKEY -- 0.7%
41,017 Eregli Demir ve Celik Fabrikalari
TAS 49,755
--------------
UNITED KINGDOM -- 22.7%
7,608 BHP Group PLC, ADR 325,927
18,606 Diversified Gas & Oil PLC 25,165
14,496 Evraz PLC 83,342
12,672 Pennon Group PLC 128,853
13,849 Rio Tinto PLC, ADR 721,394
7,301 Severn Trent PLC 194,350
20,646 United Utilities Group PLC 209,631
--------------
1,688,662
--------------
UNITED STATES -- 24.6%
2,620 Alliance Resource Partners,
L.P. (c) 41,946
14,089 Archer-Daniels-Midland Co. 578,635
1,896 Domtar Corp. 67,896
1,853 GrafTech International Ltd. 23,719
8,010 International Paper Co. 334,978
15,928 Occidental Petroleum Corp. 708,318
3,118 Peabody Energy Corp. 45,897
1,559 Warrior Met Coal, Inc. 30,432
--------------
1,831,821
--------------
TOTAL COMMON STOCKS -- 99.0% 7,377,696
(Cost $7,601,250) --------------
MONEY MARKET FUNDS -- 0.1%
5,074 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.00% (d) (e) 5,074
(Cost $5,074) --------------
Page 52 See Notes to Financial Statements
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.5%
$ 38,176 BNP Paribas S.A., 2.35% (d), dated
09/30/19, due 10/01/19, with a
maturity value of $38,178.
Collateralized by U.S. Treasury
Note, interest rate of 2.875%,
due 05/15/28. The value of the
collateral including accrued
interest is $39,047. (e) $ 38,176
(Cost $38,176) --------------
TOTAL INVESTMENTS -- 99.6% 7,420,946
(Cost $7,644,500) (f)
NET OTHER ASSETS AND
LIABILITIES -- 0.4% 31,384
--------------
NET ASSETS -- 100.0% $ 7,452,330
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) 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 $41,775 and the total value of the collateral held by the
Fund is $43,250.
(c) Security is a Master Limited Partnership ("MLP").
(d) Rate shown reflects yield as of September 30, 2019.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $7,655,320. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$422,999 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$657,373. The net unrealized depreciation was $234,374.
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2019 PRICES INPUTS INPUTS
--------------------------------------------------------
Common
Stocks:
Thailand $ 17,738 $ -- $ 17,738 $ --
Other Country
Categories* 7,359,958 7,359,958 -- --
Money Market
Funds 5,074 5,074 -- --
Repurchase
Agreements 38,176 -- 38,176 --
--------------------------------------------------------
Total
Investments $ 7,420,946 $ 7,365,032 $ 55,914 $ --
========================================================
* See Portfolio of Investments for country breakout.
See Notes to Financial Statements Page 53
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 41,775
Non-cash Collateral(2) (41,775)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At September 30, 2019, 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) $ 38,176
Non-cash Collateral(4) (38,176)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2019, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
United States Dollar 56.9%
Russian Ruble 11.0
Euro 9.7
British Pound Sterling 8.6
Japanese Yen 4.3
Australian Dollar 1.7
Hong Kong Dollar 1.5
Canadian Dollar 1.4
Norwegian Krone 1.3
Chilean Peso 1.0
South African Rand 0.9
Turkish Lira 0.7
Indonesian Rupiah 0.6
Indian Rupee 0.2
Thai Baht 0.2
------
Total 100.0%
======
Page 54 See Notes to Financial Statements
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.5%
AUSTRALIA -- 1.3%
1,525 GrainCorp Ltd., Class A $ 8,142
10,698 Incitec Pivot Ltd. 24,478
2,529 Nufarm Ltd. 9,627
--------------
42,247
--------------
BELGIUM -- 0.3%
287 Tessenderlo Group S.A. (b) 9,072
--------------
BERMUDA -- 1.7%
943 Bunge Ltd. 53,393
--------------
CANADA -- 4.4%
2,820 Nutrien Ltd. 140,484
--------------
CHILE -- 0.7%
802 Sociedad Quimica y Minera
de Chile S.A., ADR 22,288
--------------
GERMANY -- 22.2%
4,528 BASF SE 316,452
4,243 Bayer AG 299,170
3,105 Evonik Industries AG 76,655
1,275 K+S AG 17,670
--------------
709,947
--------------
INDIA -- 4.0%
817 Escorts Ltd. 6,690
8,279 Mahindra & Mahindra Ltd. 63,919
1,697 Tata Chemicals Ltd. 14,103
5,090 UPL Ltd. 43,377
--------------
128,089
--------------
ISRAEL -- 1.3%
8,496 Israel Chemicals Ltd. 42,565
--------------
JAPAN -- 8.0%
8,200 Kubota Corp. 123,958
1,400 Mitsui Chemicals, Inc. 31,282
1,000 Nissan Chemical Corp. 41,572
300 Sakata Seed Corp. 10,238
11,000 Sumitomo Chemical Co., Ltd. 49,341
--------------
256,391
--------------
MALAYSIA -- 3.0%
53,301 Petronas Chemicals Group Bhd 95,985
--------------
NETHERLANDS -- 3.9%
8,999 CNH Industrial N.V. 91,340
1,404 OCI N.V. (b) 33,146
--------------
124,486
--------------
NORWAY -- 2.4%
1,815 Yara International ASA 78,165
--------------
RUSSIA -- 1.0%
863 PhosAgro PJSC 33,080
--------------
SINGAPORE -- 3.6%
42,700 Wilmar International Ltd. 115,234
--------------
SWITZERLAND -- 0.7%
68 Bucher Industries AG 21,244
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
TAIWAN -- 0.3%
6,529 Taiwan Fertilizer Co., Ltd. $ 9,575
--------------
TURKEY -- 0.2%
2,465 Tekfen Holding AS 8,355
--------------
UNITED STATES -- 40.5%
508 AGCO Corp. 38,456
1,455 CF Industries Holdings, Inc. 71,586
4,989 Corteva, Inc. 139,692
1,950 Deere & Co. 328,926
3,122 Dow, Inc. 148,763
4,500 DuPont de Nemours, Inc. 320,895
869 FMC Corp. 76,194
2,571 Mosaic (The) Co. 52,705
239 Raven Industries, Inc. 7,997
370 Scotts Miracle-Gro (The) Co. 37,673
275 SiteOne Landscape Supply, Inc. (b) 20,356
710 Toro (The) Co. 52,043
--------------
1,295,286
--------------
TOTAL INVESTMENTS -- 99.5% 3,185,886
(Cost $3,511,944) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.5% 14,418
--------------
NET ASSETS -- 100.0% $ 3,200,304
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) Non-income producing security.
(c) Aggregate cost for federal income tax purposes is $3,527,912. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$153,191 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$495,217. The net unrealized depreciation was $342,026.
ADR - American Depositary Receipt
See Notes to Financial Statements Page 55
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 3,185,886 $ -- $ --
=============================================
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
United States Dollar 47.2%
Euro 23.6
Japanese Yen 8.1
Canadian Dollar 4.4
Indian Rupee 4.0
Singapore Dollar 3.6
Malaysian Ringgit 3.0
Norwegian Krone 2.5
Australian Dollar 1.3
Russian Ruble 1.0
Swiss Franc 0.7
New Taiwan Dollar 0.3
Turkish Lira 0.3
------
Total 100.0%
======
Page 56 See Notes to Financial Statements
FIRST TRUST BICK INDEX FUND (BICK)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.7%
BRAZIL -- 22.6%
249,033 Ambev S.A., ADR $ 1,150,532
104,284 B3 S.A. - Brasil Bolsa Balcao 1,099,827
141,503 Banco Bradesco S.A., ADR 1,151,834
101,036 Banco do Brasil S.A. 1,108,856
143,003 BB Seguridade Participacoes S.A. 1,210,808
122,494 BRF S.A. (b) 1,127,961
53,357 Cia Brasileira de Distribuicao
(Preference Shares) 1,027,729
90,366 Cia de Saneamento Basico do
Estado de Sao Paulo 1,074,401
325,342 Cia Siderurgica Nacional S.A. 1,037,505
129,177 IRB Brasil Resseguros S.A. 1,165,561
137,210 Itau Unibanco Holding S.A., ADR 1,153,936
380,139 Itausa - Investimentos Itau S.A.
(Preference Shares) 1,211,336
157,622 JBS S.A. 1,241,264
99,318 Localiza Rent a Car S.A. 1,086,655
92,421 Lojas Renner S.A. 1,120,410
128,738 Magazine Luiza S.A. 1,144,558
83,308 Notre Dame Intermedica
Participacoes S.A. 1,092,741
162,219 Petrobras Distribuidora S.A. 1,072,884
83,440 Petroleo Brasileiro S.A., ADR 1,207,377
211,398 Rumo S.A. (b) 1,249,578
160,657 Suzano S.A. 1,304,991
102,783 Vale S.A., ADR (b) 1,182,004
604,386 Via Varejo S.A. (b) 1,149,147
--------------
26,371,895
--------------
CAYMAN ISLANDS -- 16.3%
6,460 Alibaba Group Holding Ltd.,
ADR (b) 1,080,306
12,972 Autohome, Inc., ADR (b) 1,078,362
10,822 Baidu, Inc., ADR (b) 1,112,069
34,917 Ctrip.com International Ltd.,
ADR (b) 1,022,719
61,816 iQIYI, Inc., ADR (b) 997,092
37,069 JD.com, Inc., ADR (b) 1,045,717
119,146 Meituan Dianping, Class B (b) 1,217,652
4,434 NetEase, Inc., ADR 1,180,242
9,970 New Oriental Education &
Technology Group, Inc., ADR (b) 1,104,277
22,630 Pagseguro Digital Ltd.,
Class A (b) 1,047,995
34,501 Pinduoduo, Inc., ADR (b) 1,111,622
37,587 StoneCo., Ltd., Class A (b) 1,307,276
281,915 Sunac China Holdings Ltd. 1,133,027
81,450 Sunny Optical Technology Group
Co., Ltd. 1,197,168
31,732 TAL Education Group, ADR (b) 1,086,504
27,265 Tencent Holdings Ltd. 1,148,666
1,038,533 Xiaomi Corp., Class B (b) (c) 1,166,042
--------------
19,036,736
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
CHINA -- 7.9%
2,963,184 Bank of China Ltd., Class H $ 1,164,450
1,521,886 China Construction Bank Corp.,
Class H 1,161,167
482,721 China Life Insurance Co., Ltd.,
Class H 1,118,467
247,971 China Merchants Bank Co., Ltd.,
Class H 1,180,106
1,930,000 China Petroleum & Chemical
Corp., Class H 1,147,505
4,948,530 China Tower Corp., Ltd.,
Class H (c) 1,123,848
1,789,902 Industrial & Commercial Bank of
China Ltd., Class H 1,198,947
98,754 Ping An Insurance (Group) Co. of
China Ltd., Class H 1,134,618
--------------
9,229,108
--------------
HONG KONG -- 1.0%
756,697 CNOOC Ltd. 1,154,688
--------------
INDIA -- 19.4%
47,215 Axis Bank Ltd., GDR 2,299,370
60,818 Dr. Reddy's Laboratories Ltd., ADR 2,304,394
40,339 HDFC Bank Ltd., ADR 2,301,340
193,611 ICICI Bank Ltd., ADR 2,358,182
189,230 Infosys Ltd., ADR 2,151,545
62,659 Reliance Industries Ltd., GDR (c) 2,337,181
55,750 State Bank of India, GDR (b) 2,140,800
264,507 Tata Motors Ltd., ADR (b) 2,219,214
276,622 Vedanta Ltd., ADR 2,401,079
569,175 Wipro Ltd., ADR 2,077,489
--------------
22,590,594
--------------
ISLE OF MAN -- 2.1%
1,286,538 Eros International PLC (b) 2,457,288
--------------
JERSEY ISLAND -- 1.8%
35,772 WNS (Holdings) Ltd., ADR (b) 2,101,605
--------------
MAURITIUS -- 1.9%
94,656 MakeMyTrip Ltd. (b) 2,147,745
--------------
SOUTH KOREA -- 25.7%
10,534 Amorepacific Corp. 1,237,326
30,809 Celltrion Healthcare Co., Ltd. (d) 1,298,143
8,723 Celltrion, Inc. (d) 1,195,980
42,137 Hana Financial Group, Inc. 1,241,758
5,511 Hyundai Mobis Co., Ltd. 1,161,035
10,657 Hyundai Motor Co. 1,193,862
10,182 Kakao Corp. 1,153,418
34,495 KB Financial Group, Inc. 1,231,398
31,338 Kia Motors Corp. 1,194,677
53,599 Korea Electric Power Corp. (b) 1,160,569
4,144 LG Chem Ltd. 1,037,602
22,340 LG Electronics, Inc. 1,258,802
1,162 LG Household & Health Care Ltd. 1,269,685
9,348 NAVER Corp. 1,226,967
2,550 NCSoft Corp. 1,110,689
14,538 Netmarble Corp. (b) (c) 1,148,552
6,490 POSCO 1,231,643
See Notes to Financial Statements Page 57
FIRST TRUST BICK INDEX FUND (BICK)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SOUTH KOREA (CONTINUED)
5,091 Samsung Biologics Co.,
Ltd. (b) (c) $ 1,308,768
15,370 Samsung Electro-Mechanics Co.,
Ltd. 1,323,505
31,124 Samsung Electronics Co., Ltd. 1,276,288
5,489 Samsung SDI Co., Ltd. 1,023,322
33,606 Shinhan Financial Group Co., Ltd. 1,174,377
17,693 SK Hynix, Inc. 1,215,871
8,300 SK Innovation Co., Ltd. 1,151,862
5,718 SK Telecom Co., Ltd. 1,154,451
--------------
29,980,550
--------------
UNITED STATES -- 1.0%
24,887 Yum China Holdings, Inc. 1,130,616
--------------
TOTAL INVESTMENTS -- 99.7% 116,200,825
(Cost $119,016,745) (e)
NET OTHER ASSETS AND
LIABILITIES -- 0.3% 302,419
--------------
NET ASSETS -- 100.0% $ 116,503,244
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) Non-income producing security.
(c) This security is restricted in the U.S. and cannot be offered for public
sale without first being registered under the Securities Act of 1933, as
amended. This security is not restricted on the foreign exchange where it
trades freely without any additional registration. As such, it does not
require the additional disclosure required of restricted securities.
(d) Non-income producing security which makes payment- in-kind ("PIK")
distributions. For the fiscal year ended September 30, 2019, the Fund
received 424 and 139 shares of Celltrion Healthcare Co., Ltd. and
Celltrion, Inc., respectively.
(e) Aggregate cost for federal income tax purposes is $121,326,887. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$13,986,706 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$19,112,768. The net unrealized depreciation was $5,126,062.
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 116,200,825 $ -- $ --
=============================================
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
United States Dollar 42.5%
South Korean Won 25.8
Brazilian Real 17.7
Hong Kong Dollar 14.0
------
Total 100.0%
======
Page 58 See Notes to Financial Statements
FIRST TRUST INDXX NEXTG ETF (NXTG)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.8%
ARGENTINA -- 0.2%
48,910 Telecom Argentina S.A., ADR (b) $ 489,100
--------------
AUSTRALIA -- 0.4%
321,420 Telstra Corp., Ltd. 761,469
--------------
BRAZIL -- 0.4%
65,518 Telefonica Brasil S.A., ADR 862,872
--------------
CANADA -- 1.3%
18,972 BCE, Inc. 917,633
16,435 Rogers Communications, Inc.,
Class B 800,506
23,303 TELUS Corp. 829,329
--------------
2,547,468
--------------
CAYMAN ISLANDS -- 1.5%
1,723,580 Hutchison Telecommunications
Hong Kong Holdings Ltd. 290,280
2,389,213 Xiaomi Corp., Class B (c) (d) 2,682,556
--------------
2,972,836
--------------
CHINA -- 0.8%
1,697,062 China Telecom Corp., Ltd., Class H 772,996
310,806 ZTE Corp., Class H (d) 824,829
--------------
1,597,825
--------------
CZECH REPUBLIC -- 0.4%
83,780 O2 Czech Republic AS 757,663
--------------
FINLAND -- 2.4%
36,107 DNA OYJ 821,732
18,075 Elisa OYJ 931,853
580,306 Nokia OYJ, ADR 2,936,348
--------------
4,689,933
--------------
FRANCE -- 0.4%
54,469 Orange S.A. 854,612
--------------
GERMANY -- 2.4%
48,960 Deutsche Telekom AG 821,488
172,197 Infineon Technologies AG 3,099,084
296,769 Telefonica Deutschland
Holding AG 827,422
--------------
4,747,994
--------------
GUERNSEY -- 1.6%
48,454 Amdocs Ltd. 3,203,294
--------------
HONG KONG -- 2.9%
96,487 China Mobile Ltd. 798,344
780,927 China Unicom Hong Kong Ltd. 828,982
3,732,665 CITIC Telecom International
Holdings Ltd. 1,357,298
3,924,267 Lenovo Group Ltd. 2,618,615
--------------
5,603,239
--------------
HUNGARY -- 0.7%
897,851 Magyar Telekom
Telecommunications PLC 1,285,975
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
INDIA -- 2.9%
186,106 HCL Technologies Ltd. $ 2,837,724
275,279 Tech Mahindra Ltd. 2,775,366
--------------
5,613,090
--------------
ISRAEL -- 0.9%
91,157 Tower Semiconductor Ltd. (d) 1,753,861
--------------
JAPAN -- 9.4%
177,300 Anritsu Corp. (b) 3,474,670
41,400 Fujitsu Ltd. 3,313,914
231,500 Mitsubishi Electric Corp. 3,067,041
77,100 NEC Corp. 3,251,570
37,870 NTT DOCOMO, Inc. 964,218
64,900 Softbank Corp. 878,739
60,700 Sony Corp. 3,563,125
--------------
18,513,277
--------------
LUXEMBOURG -- 0.5%
44,704 Intelsat S.A. (d) 1,019,251
--------------
MALAYSIA -- 0.2%
193,000 TIME dotCom Bhd 420,848
--------------
MEXICO -- 0.4%
57,822 America Movil S.A.B. de C.V.,
Class L, ADR 859,235
--------------
NETHERLANDS -- 3.5%
31,210 NXP Semiconductors N.V. 3,405,635
179,110 STMicroelectronics N.V. 3,464,208
--------------
6,869,843
--------------
NORWAY -- 0.4%
39,221 Telenor ASA 786,994
--------------
PHILIPPINES -- 0.4%
36,171 PLDT, Inc., ADR 795,762
--------------
RUSSIA -- 0.7%
101,314 Mobile TeleSystems PJSC, ADR 820,643
2,811,974 Sistema PJSFC 549,778
--------------
1,370,421
--------------
SINGAPORE -- 0.6%
349,000 Singapore Telecommunications Ltd. 782,766
375,400 StarHub Ltd. 353,088
--------------
1,135,854
--------------
SOUTH AFRICA -- 0.4%
100,717 Vodacom Group Ltd. 795,628
--------------
SOUTH KOREA -- 4.1%
71,694 KT Corp., ADR 810,859
42,585 LG Electronics, Inc. 2,399,556
69,118 LG Uplus Corp. 788,748
79,715 Samsung Electronics Co., Ltd. 3,268,838
3,892 SK Telecom Co., Ltd. 785,786
--------------
8,053,787
--------------
SPAIN -- 0.4%
101,035 Telefonica S.A. 770,975
--------------
See Notes to Financial Statements Page 59
FIRST TRUST INDXX NEXTG ETF (NXTG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SWEDEN -- 2.2%
60,671 Tele2 AB, Class B $ 902,911
306,286 Telefonaktiebolaget LM Ericsson,
Class B 2,447,413
196,715 Telia Co., AB 880,657
--------------
4,230,981
--------------
SWITZERLAND -- 1.5%
17,064 Huber + Suhner AG 1,097,649
11,858 Sunrise Communications Group
AG (c) 922,573
1,710 Swisscom AG 843,478
--------------
2,863,700
--------------
TAIWAN -- 6.3%
237,960 Chunghwa Telecom Co., Ltd. 851,377
300,228 MediaTek, Inc. 3,570,860
74,725 Taiwan Semiconductor
Manufacturing Co., Ltd., ADR 3,473,218
492,955 Win Semiconductors Corp. 4,425,147
--------------
12,320,602
--------------
TURKEY -- 0.5%
413,568 Turkcell Iletisim Hizmetleri AS 952,810
--------------
UNITED KINGDOM -- 1.8%
321,025 BT Group PLC 704,881
703,798 Spirent Communications PLC 1,718,585
521,183 Vodafone Group PLC 1,038,124
--------------
3,461,590
--------------
UNITED STATES -- 47.3%
29,782 Acacia Communications, Inc. (d) 1,947,743
93,913 Advanced Micro Devices, Inc. (d) 2,722,538
14,109 American Tower Corp. 3,119,923
26,426 AT&T, Inc. 999,960
10,463 Broadcom, Inc. 2,888,520
69,415 Ciena Corp. (d) 2,723,151
52,486 Cisco Systems, Inc. 2,593,333
179,763 CommScope Holding Co., Inc. (d) 2,114,013
25,591 CoreSite Realty Corp. 3,118,263
22,237 Crown Castle International Corp. 3,091,165
50,236 CyrusOne, Inc. 3,973,668
24,790 Digital Realty Trust, Inc. 3,217,990
5,824 Equinix, Inc. 3,359,283
20,302 F5 Networks, Inc. (d) 2,850,807
205,437 Hewlett Packard Enterprise Co. 3,116,479
63,117 Intel Corp. 3,252,419
21,705 International Business Machines
Corp. 3,156,341
109,536 Juniper Networks, Inc. 2,711,016
34,763 Keysight Technologies, Inc. (d) 3,380,702
62,780 Lumentum Holdings, Inc. (d) 3,362,497
88,308 Micron Technology, Inc. (d) 3,783,998
110,747 NetScout Systems, Inc. (d) 2,553,826
46,564 Qorvo, Inc. (d) 3,452,255
64,642 QTS Realty Trust, Inc., Class A 3,323,245
42,144 QUALCOMM, Inc. 3,214,744
13,122 SBA Communications Corp. 3,164,370
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
UNITED STATES (CONTINUED)
66,979 Semtech Corp. (d) $ 3,255,849
40,183 Skyworks Solutions, Inc. 3,184,503
11,460 T-Mobile US, Inc. (d) 902,704
19,101 United States Cellular Corp. (d) 717,816
14,809 Verizon Communications, Inc. 893,871
225,198 Viavi Solutions, Inc. (d) 3,153,898
4,897 VMware, Inc., Class A 734,844
27,212 Xilinx, Inc. 2,609,631
--------------
92,645,365
--------------
TOTAL COMMON STOCKS -- 99.8% 195,608,154
(Cost $188,115,111) --------------
MONEY MARKET FUNDS -- 0.2%
315,110 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.00% (e) (f) 315,110
(Cost $315,110) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.2%
$ 2,370,763 BNP Paribas S.A., 2.35% (e), dated
09/30/19, due 10/01/19, with a
maturity value of $2,370,918.
Collateralized by U.S. Treasury
Note, interest rate of 2.875%,
due 05/15/28. The value of the
collateral including accrued
interest is $2,424,861. (f) 2,370,763
(Cost $2,370,763) --------------
TOTAL INVESTMENTS -- 101.2% 198,294,027
(Cost $190,800,984) (g)
NET OTHER ASSETS AND
LIABILITIES -- (1.2)% (2,278,775)
--------------
NET ASSETS -- 100.0% $ 196,015,252
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) 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 $2,560,758 and the total value of the collateral held by the
Fund is $2,685,873.
(c) This security is restricted in the U.S. and cannot be offered for public
sale without first being registered under the Securities Act of 1933, as
amended. This security is not restricted on the foreign exchange where it
trades freely without any additional registration. As such, it does not
require the additional disclosure required of restricted securities.
(d) Non-income producing security.
(e) Rate shown reflects yield as of September 30, 2019.
(f) This security serves as collateral for securities on loan.
Page 60 See Notes to Financial Statements
FIRST TRUST INDXX NEXTG ETF (NXTG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
(g) Aggregate cost for federal income tax purposes is $191,476,579. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$12,575,219 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$5,757,771. The net unrealized appreciation was $6,817,448.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 195,608,154 $ -- $ --
Money Market
Funds 315,110 -- --
Repurchase
Agreements -- 2,370,763 --
---------------------------------------------
Total Investments $ 195,923,264 $ 2,370,763 $ --
=============================================
* See Portfolio of Investments for country breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 2,560,758
Non-cash Collateral(2) (2,560,758)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At September 30, 2019, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 2,370,763
Non-cash Collateral(4) (2,370,763)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2019, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 61
FIRST TRUST INDXX NEXTG ETF (NXTG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
United States Dollar 58.4%
Japanese Yen 9.3
Euro 5.8
Hong Kong Dollar 5.1
New Taiwan Dollar 4.5
South Korean Won 3.7
Indian Rupee 2.8
Swedish Krona 2.1
British Pound Sterling 1.7
Swiss Franc 1.4
Canadian Dollar 1.3
Hungarian Forint 0.7
Singapore Dollar 0.6
Turkish Lira 0.5
South African Rand 0.4
Norwegian Krone 0.4
Australian Dollar 0.4
Czech Koruna 0.4
Russian Ruble 0.3
Malaysian Ringgit 0.2
------
Total 100.0%
======
Page 62 See Notes to Financial Statements
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.4%
BERMUDA -- 0.7%
122,196 Brilliance China Automotive
Holdings Ltd. $ 131,275
--------------
CAYMAN ISLANDS -- 3.7%
381,325 Geely Automobile Holdings Ltd. 647,080
--------------
CHINA -- 4.3%
107,383 BAIC Motor Corp., Ltd.,
Class H (b) 66,312
46,165 BYD Co., Ltd., Class H (c) 230,598
137,091 Dongfeng Motor Group Co., Ltd.,
Class H 130,310
209,279 Great Wall Motor Co., Ltd.,
Class H 140,183
191,212 Guangzhou Automobile Group Co.,
Ltd., Class H 182,974
--------------
750,377
--------------
FRANCE -- 8.0%
29,915 Peugeot S.A. 746,024
11,660 Renault S.A. 669,249
--------------
1,415,273
--------------
GERMANY -- 19.9%
10,001 Bayerische Motoren Werke AG 704,072
28,482 Daimler AG 1,416,230
10,333 Porsche Automobil Holding SE
(Preference Shares) 672,371
4,163 Volkswagen AG (Preference
Shares) 708,119
--------------
3,500,792
--------------
ITALY -- 0.2%
10,635 Piaggio & C. S.p.A. 31,460
--------------
JAPAN -- 33.2%
56,335 Honda Motor Co., Ltd. 1,458,067
40,459 Mazda Motor Corp. 359,033
46,300 Mitsubishi Motors Corp. 200,830
108,276 Nissan Motor Co., Ltd. 675,041
24,965 Subaru Corp. 701,906
17,359 Suzuki Motor Corp. 736,423
20,476 Toyota Motor Corp. 1,366,519
19,612 Yamaha Motor Co., Ltd. 355,147
--------------
5,852,966
--------------
MALAYSIA -- 0.1%
18,093 UMW Holdings Bhd 21,088
--------------
SOUTH KOREA -- 7.6%
6,313 Hyundai Motor Co. 707,221
16,413 Kia Motors Corp. 625,701
--------------
1,332,922
--------------
TAIWAN -- 0.4%
42,964 China Motor Corp. (d) 34,136
58,380 Yulon Motor Co., Ltd. 36,976
--------------
71,112
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
UNITED KINGDOM -- 0.1%
4,000 Aston Martin Lagonda Global
Holdings PLC (b) (e) $ 25,879
--------------
UNITED STATES -- 21.2%
146,072 Ford Motor Co. 1,338,019
36,114 General Motors Co. 1,353,553
9,308 Harley-Davidson, Inc. 334,809
2,969 Tesla, Inc. (e) 715,143
--------------
3,741,524
--------------
TOTAL COMMON STOCKS -- 99.4% 17,521,748
(Cost $20,501,862) --------------
MONEY MARKET FUNDS -- 0.1%
20,018 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.00% (f) (g) 20,018
(Cost $20,018) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.9%
$ 150,607 BNP Paribas S.A., 2.35% (f), dated
09/30/19, due 10/01/19, with a
maturity value of $150,617.
Collateralized by U.S. Treasury
Note, interest rate of 2.875%,
due 05/15/28. The value of the
collateral including accrued
interest is $154,044. (g) 150,607
(Cost $150,607) --------------
TOTAL INVESTMENTS -- 100.4% 17,692,373
(Cost $20,672,487) (h)
NET OTHER ASSETS AND
LIABILITIES -- (0.4)% (69,132)
--------------
NET ASSETS -- 100.0% $ 17,623,241
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is restricted in the U.S. and cannot be offered for public
sale without first being registered under the Securities Act of 1933, as
amended. This security is not restricted on the foreign exchange where it
trades freely without any additional registration. As such, it does not
require the additional disclosure required of restricted securities.
(c) 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 $162,340 and the total value of the collateral held by the
Fund is $170,625.
See Notes to Financial Statements Page 63
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
(d) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2019, securities noted as such are valued at
$34,136 or 0.2% of net assets.
(e) Non-income producing security.
(f) Rate shown reflects yield as of September 30, 2019.
(g) This security serves as collateral for securities on loan.
(h) Aggregate cost for federal income tax purposes is $21,159,536. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$454,870 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$3,922,033. The net unrealized depreciation was $3,467,163.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2019 PRICES INPUTS INPUTS
--------------------------------------------------------
Common
Stocks:
Taiwan $ 71,112 $ 36,976 $ 34,136 $ --
Other Country
Categories* 17,450,636 17,450,636 -- --
Money Market
Funds 20,018 20,018 -- --
Repurchase
Agreements 150,607 -- 150,607 --
--------------------------------------------------------
Total
Investments $ 17,692,373 $ 17,507,630 $ 184,743 $ --
========================================================
* See Portfolio of Investments for country breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 162,340
Non-cash Collateral(2) (162,340)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At September 30, 2019, 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) $ 150,607
Non-cash Collateral(4) (150,607)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2019, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
Japanese Yen 33.1%
Euro 28.0
United States Dollar 22.1
Hong Kong Dollar 8.6
South Korean Won 7.5
New Taiwan Dollar 0.4
British Pound Sterling 0.2
Malaysian Ringgit 0.1
------
Total 100.0%
======
Page 64 See Notes to Financial Statements
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.9%
CANADA -- 1.8%
125,918 Shopify, Inc., Class A (b) $ 39,243,604
--------------
CAYMAN ISLANDS -- 3.6%
462,090 Alibaba Group Holding Ltd.,
ADR (b) 77,275,311
--------------
GERMANY -- 1.5%
271,522 SAP SE, ADR 32,004,298
--------------
JERSEY ISLAND -- 0.6%
395,210 Mimecast Ltd. (b) 14,097,141
--------------
NETHERLANDS -- 0.7%
184,048 Elastic N.V. (b) 15,154,512
--------------
UNITED STATES -- 91.7%
170,566 Adobe, Inc. (b) 47,118,858
725,948 Akamai Technologies, Inc. (b) 66,337,128
81,523 Alphabet, Inc., Class A (b) 99,550,996
54,640 Amazon.com, Inc. (b) 94,850,122
297,735 Anaplan, Inc. (b) 13,993,545
163,774 Appfolio, Inc., Class A (b) 15,581,458
544,004 Appian Corp. (b) (c) 25,840,190
142,758 Arista Networks, Inc. (b) 34,107,741
191,795 Avalara, Inc. (b) 12,905,886
619,293 Benefitfocus, Inc. (b) 14,745,366
177,816 Blackbaud, Inc. 16,063,897
317,611 Blackline, Inc. (b) 15,184,982
1,105,668 Box, Inc., Class A (b) 18,309,862
7,107,176 CenturyLink, Inc. 88,697,556
1,382,262 Cisco Systems, Inc. 68,297,565
695,889 Citrix Systems, Inc. 67,167,206
4,531,074 Cloudera, Inc. (b) (c) 40,145,316
310,062 Cornerstone OnDemand, Inc. (b) 16,997,599
116,433 Coupa Software, Inc. (b) 15,086,224
346,453 DocuSign, Inc. (b) 21,452,370
1,302,935 Domo, Inc., Class B (b) 20,820,901
903,684 Dropbox, Inc., Class A (b) 18,227,306
925,397 Eventbrite, Inc., Class A (b) 16,388,781
187,656 Everbridge, Inc. (b) 11,580,252
255,908 Five9, Inc. (b) 13,752,496
3,511,418 Hewlett Packard Enterprise Co. 53,268,211
81,010 HubSpot, Inc. (b) 12,281,926
358,059 International Business Machines
Corp. 52,068,940
56,096 Intuit, Inc. 14,918,170
242,009 LogMeIn, Inc. 17,172,959
704,015 Microsoft Corp. 97,879,205
338,669 MicroStrategy, Inc., Class A (b) 50,248,320
531,020 MongoDB, Inc. (b) 63,977,290
1,009,734 NetApp, Inc. 53,021,132
282,105 New Relic, Inc. (b) 17,335,352
2,002,798 Nutanix, Inc., Class A (b) 52,573,448
1,864,303 Oracle Corp. 102,592,594
64,673 Paycom Software, Inc. (b) 13,548,347
2,980,823 Pure Storage, Inc., Class A (b) 50,495,142
179,832 Q2 Holdings, Inc. (b) 14,183,350
310,936 salesforce.com, Inc. (b) 46,155,340
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
UNITED STATES (CONTINUED)
185,334 ServiceNow, Inc. (b) $ 47,047,036
332,838 Smartsheet, Inc., Class A (b) 11,992,153
433,982 Splunk, Inc. (b) 51,149,119
966,304 SVMK, Inc. (b) 16,523,798
284,788 Tabula Rasa HealthCare, Inc. (b) 15,646,253
524,002 Teradata Corp. (b) 16,244,062
371,946 Twilio, Inc., Class A (b) 40,899,182
100,860 Veeva Systems, Inc., Class A (b) 15,400,313
686,197 VMware, Inc., Class A 102,970,722
91,245 Workday, Inc., Class A (b) 15,508,000
336,228 Workiva, Inc. (b) 14,736,873
201,695 Zendesk, Inc. (b) 14,699,532
176,459 Zoom Video Communications,
Inc., Class A (b) (c) 13,446,176
235,321 Zscaler, Inc. (b) 11,121,270
1,074,812 Zuora, Inc., Class A (b) 16,175,921
--------------
1,988,483,739
--------------
TOTAL COMMON STOCKS -- 99.9% 2,166,258,605
(Cost $2,161,190,785) --------------
MONEY MARKET FUNDS -- 0.2%
4,652,303 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
2.00% (d) (e) 4,652,303
(Cost $4,652,303) --------------
PRINCIPAL
VALUE DESCRIPTION VALUE
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.6%
$ 35,002,117 BNP Paribas S.A., 2.35% (d), dated
09/30/19, due 10/01/19, with a
maturity value of $35,004,402.
Collateralized by U.S. Treasury
Note, interest rate of 2.875%,
due 05/15/28. The value of the
collateral including accrued
interest is $35,800,834. (e) 35,002,117
(Cost $35,002,117) --------------
TOTAL INVESTMENTS -- 101.7% 2,205,913,025
(Cost $2,200,845,205) (f)
NET OTHER ASSETS AND
LIABILITIES -- (1.7)% (37,715,401)
--------------
NET ASSETS -- 100.0% $2,168,197,624
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) Non-income producing security.
See Notes to Financial Statements Page 65
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
(c) 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 $39,088,336 and the total value of the collateral held by
the Fund is $39,654,420.
(d) Rate shown reflects yield as of September 30, 2019.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $2,229,081,770. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$117,923,982 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$141,092,727. The net unrealized depreciation was $23,168,745.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $2,166,258,605 $ -- $ --
Money Market
Funds 4,652,303 -- --
Repurchase
Agreements -- 35,002,117 --
---------------------------------------------
Total Investments $2,170,910,908 $ 35,002,117 $ --
=============================================
* See Portfolio of Investments for country breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
-------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
-------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 39,088,336
Non-cash Collateral(2) (39,088,336)
--------------
Net Amount $ --
==============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value", is not offset and is shown on a gross
basis.
(2) At September 30, 2019, 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) $ 35,002,117
Non-cash Collateral(4) (35,002,117)
--------------
Net Amount $ --
==============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At September 30, 2019, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 66 See Notes to Financial Statements
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.6%
AUSTRALIA -- 0.4%
18,873 Netwealth Group Ltd. $ 116,046
--------------
BRAZIL -- 5.2%
9,975 Azul S.A., ADR (b) 357,305
36,449 Hapvida Participacoes e
Investimentos S.A. (c) 476,869
46,440 IRB Brasil Resseguros S.A. 419,027
26,235 Notre Dame Intermedica
Participacoes S.A. 344,121
--------------
1,597,322
--------------
CANADA -- 2.4%
2,388 Shopify, Inc., Class A (b) 744,244
--------------
CAYMAN ISLANDS -- 21.1%
158,296 Country Garden Services Holdings
Co., Ltd. 456,446
8,678 GDS Holdings Ltd., ADR (b) 347,814
209,924 Haidilao International Holding
Ltd. (c) 897,260
69,369 HKBN Ltd. 127,804
92,100 Meituan Dianping, Class B (b) 941,247
6,442 Pagseguro Digital Ltd.,
Class A (b) 298,329
25,557 Pinduoduo, Inc., ADR (b) 823,446
17,666 Sea Ltd., ADR (b) 546,763
49,490 Wuxi Biologics Cayman,
Inc. (b) (c) 505,148
475,800 Xiaomi Corp., Class B (b) (c) 534,218
82,761 Yihai International Holding Ltd. 492,066
2,675 Zai Lab Ltd., ADR (b) 86,536
22,869 ZTO Express Cayman, Inc., ADR 487,796
--------------
6,544,873
--------------
CHINA -- 11.5%
6,986,605 China Tower Corp. Ltd.,
Class H (c) 1,586,710
3,215,960 Postal Savings Bank of China Co.,
Ltd., Class H (c) 1,961,327
--------------
3,548,037
--------------
DENMARK -- 5.0%
16,690 Orsted A/S (c) 1,551,085
--------------
FRANCE -- 2.2%
9,609 Amundi S.A. (c) 670,295
--------------
GERMANY -- 8.0%
6,399 Knorr-Bremse AG 601,491
39,701 Siemens Healthineers AG (c) 1,561,912
3,210 Varta AG (b) 316,637
--------------
2,480,040
--------------
HONG KONG -- 0.3%
39,076 China Tobacco International HK
Co., Ltd. (b) 99,713
--------------
ITALY -- 3.5%
33,747 Infrastrutture Wireless Italiane
S.p.A. (c) 350,171
64,818 Poste Italiane S.p.A. (c) 736,865
--------------
1,087,036
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
JAPAN -- 10.7%
9,600 LINE Corp. (b) $ 343,158
1,800 Optorun Co., Ltd. 50,941
9,600 SG Holdings Co., Ltd. 234,839
190,100 Softbank Corp. 2,573,932
1,500 Sushiro Global Holdings Ltd. 100,856
--------------
3,303,726
--------------
NETHERLANDS -- 15.4%
37,319 ABN AMRO Bank N.V. (c) 657,934
1,175 Adyen N.V. (b) (c) 774,052
10,215 Ferrari N.V. 1,576,001
21,501 Prosus N.V. (b) 1,578,354
2,430 Takeaway.com N.V. (b) (c) 193,877
--------------
4,780,218
--------------
SINGAPORE -- 1.1%
36,728 BOC Aviation Ltd. (c) 339,037
--------------
SPAIN -- 1.6%
11,857 Cellnex Telecom S.A. (c) 489,804
--------------
SWEDEN -- 2.2%
7,211 Evolution Gaming Group AB (c) 141,817
36,543 Tele2 AB, Class B 543,836
--------------
685,653
--------------
SWITZERLAND -- 1.2%
1,985 Galenica AG (c) 113,963
1,172 Landis+Gyr Group AG 105,040
1,191 VAT Group AG (c) 150,180
--------------
369,183
--------------
UNITED KINGDOM -- 4.5%
9,644 Atlassian Corp. PLC, Class A (b) 1,209,743
2,154 Endava PLC, ADR (b) 81,529
19,083 Trainline PLC (b) (c) 98,312
--------------
1,389,584
--------------
UNITED STATES -- 3.3%
22,441 Yum China Holdings, Inc. 1,019,495
--------------
TOTAL INVESTMENTS -- 99.6% 30,815,391
(Cost $28,237,937) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.4% 115,288
--------------
NET ASSETS -- 100.0% $ 30,930,679
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) Non-income producing security.
(c) This security is restricted in the U.S. and cannot be offered for public
sale without first being registered under the Securities Act of 1933, as
amended. This security is not restricted on the foreign exchange where it
trades freely without any additional registration. As such, it does not
require the additional disclosure required of restricted securities.
See Notes to Financial Statements Page 67
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
(d) Aggregate cost for federal income tax purposes is $28,646,743. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$2,711,284 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$542,636. The net unrealized appreciation was $2,168,648.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 30,815,391 $ -- $ --
=============================================
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
Euro 30.9%
Hong Kong Dollar 25.8
United States Dollar 19.5
Japanese Yen 10.7
Danish Krone 5.0
Brazilian Real 4.0
Swedish Krona 2.2
Swiss Franc 1.2
Australian Dollar 0.4
British Pound Sterling 0.3
------
Total 100.0%
======
Page 68 See Notes to Financial Statements
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.9%
FRANCE -- 3.0%
257,133 Thales S.A. $ 29,567,759
--------------
ISRAEL -- 6.1%
279,193 Check Point Software
Technologies Ltd. (b) 30,571,633
267,657 CyberArk Software Ltd. (b) 26,717,522
112,330 Radware Ltd. (b) 2,725,126
--------------
60,014,281
--------------
JAPAN -- 3.0%
155,400 FFRI, Inc. (b) 4,541,632
515,536 Trend Micro, Inc. 24,507,330
--------------
29,048,962
--------------
JERSEY ISLAND -- 1.3%
352,685 Mimecast Ltd. (b) 12,580,274
--------------
SOUTH KOREA -- 0.3%
55,453 Ahnlab, Inc. 3,101,455
--------------
UNITED KINGDOM -- 5.1%
1,204,531 Avast PLC (c) 5,746,370
4,525,313 BAE Systems PLC 31,715,194
402,960 NCC Group PLC 863,086
1,641,428 Sophos Group PLC (c) 8,082,919
140,993 Ultra Electronics Holdings PLC 3,505,279
--------------
49,912,848
--------------
UNITED STATES -- 81.1%
373,511 A10 Networks, Inc. (b) 2,592,166
337,361 Akamai Technologies, Inc. (b) 30,828,048
398,214 Booz Allen Hamilton Holding
Corp. 28,281,158
212,770 Broadcom, Inc. 58,739,414
1,284,720 Cisco Systems, Inc. 63,478,015
233,576 F5 Networks, Inc. (b) 32,798,742
2,238,934 FireEye, Inc. (b) 29,867,380
372,030 ForeScout Technologies, Inc. (b) 14,107,378
379,757 Fortinet, Inc. (b) 29,150,147
217,522 Itron, Inc. (b) 16,087,927
1,298,309 Juniper Networks, Inc. 32,133,148
344,190 Leidos Holdings, Inc. 29,559,037
89,334 ManTech International Corp.,
Class A 6,379,341
730,903 MobileIron, Inc. (b) 4,783,760
475,395 Okta, Inc. (b) 46,807,392
170,795 OneSpan, Inc. (b) 2,476,527
295,347 Palo Alto Networks, Inc. (b) 60,200,579
264,665 Proofpoint, Inc. (b) 34,155,018
274,363 Qualys, Inc. (b) 20,733,612
526,171 Rapid7, Inc. (b) 23,882,902
214,083 Ribbon Communications, Inc. (b) 1,250,245
1,041,771 SailPoint Technologies Holding,
Inc. (b) 19,470,700
268,902 Splunk, Inc. (b) 31,692,790
1,293,284 Symantec Corp. 30,560,301
564,262 Tenable Holdings, Inc. (b) 12,628,184
240,156 Varonis Systems, Inc. (b) 14,356,526
147,504 VeriSign, Inc. (b) 27,823,679
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
UNITED STATES (CONTINUED)
425,185 VMware, Inc., Class A $ 63,803,261
691,904 Zix Corp. (b) 5,009,385
437,429 Zscaler, Inc. (b) 20,672,894
--------------
794,309,656
--------------
TOTAL INVESTMENTS -- 99.9% 978,535,235
(Cost $924,402,059) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 1,114,561
--------------
NET ASSETS -- 100.0% $ 979,649,796
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) Non-income producing security.
(c) This security is restricted in the U.S. and cannot be offered for public
sale without first being registered under the Securities Act of 1933, as
amended. This security is not restricted on the foreign exchange where it
trades freely without any additional registration. As such, it does not
require the additional disclosure required of restricted securities.
(d) Aggregate cost for federal income tax purposes is $944,302,747. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$79,820,217 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$45,587,729. The net unrealized appreciation was $34,232,488.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 978,535,235 $ -- $ --
=============================================
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
United States Dollar 88.6%
British Pound Sterling 5.1
Euro 3.0
Japanese Yen 3.0
South Korean Won 0.3
------
Total 100.0%
======
See Notes to Financial Statements Page 69
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2019
FIRST TRUST
FIRST TRUST FTSE EPRA/NAREIT
STOXX(R) EUROPEAN DEVELOPED MARKETS
SELECT DIVIDEND REAL ESTATE
INDEX FUND INDEX FUND
(FDD) (FFR)
---------------------- ----------------------
ASSETS:
Investments, at value ................................................. $ 291,157,180 $ 56,286,390
Cash .................................................................. -- 1,020
Foreign currency, at value ............................................ 39 5,599
Due from authorized participant ....................................... -- --
Receivables:
Investment securities sold ......................................... 831,001 --
Capital shares sold ................................................ -- --
Reclaims ........................................................... 2,901,958 34,058
Dividends .......................................................... 219,263 196,558
Securities lending income .......................................... -- --
From investment advisor ............................................ -- 2,168
Prepaid expenses ...................................................... 2,014 1,292
---------------- ----------------
TOTAL ASSETS ....................................................... 295,111,455 56,527,085
---------------- ----------------
LIABILITIES:
Due to authorized participant ......................................... -- --
Due to custodian ...................................................... 816,232 --
Due to custodian foreign currency ..................................... -- --
Payables:
Investment securities purchased .................................... -- --
Investment advisory fees ........................................... 95,693 --
Licensing fees ..................................................... 141,769 15,602
Shareholder reporting fees ......................................... 23,674 7,393
Audit and tax fees ................................................. 22,464 26,038
Trustees' fees ..................................................... 1,897 1,827
Collateral for securities on loan .................................. -- --
Foreign capital gains tax .......................................... -- --
Other liabilities ..................................................... 91,547 40,014
---------------- ----------------
TOTAL LIABILITIES .................................................. 1,193,276 90,874
---------------- ----------------
NET ASSETS ............................................................ $ 293,918,179 $ 56,436,211
================ ================
NET ASSETS CONSIST OF:
Paid-in capital ....................................................... $ 326,952,488 $ 49,535,039
Par value ............................................................. 230,533 11,416
Accumulated distributable earnings (loss) ............................. (33,264,842) 6,889,756
---------------- ----------------
NET ASSETS ............................................................ $ 293,918,179 $ 56,436,211
================ ================
NET ASSET VALUE, per share ............................................ $ 12.75 $ 49.44
================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share) ............................. 23,053,334 1,141,608
================ ================
Investments, at cost .................................................. $ 304,469,928 $ 47,747,443
================ ================
Foreign currency, at cost (proceeds) .................................. $ 39 $ 5,604
================ ================
Securities on loan, at value .......................................... $ -- $ --
================ ================
Page 70 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
FIRST TRUST FIRST TRUST GLOBAL NASDAQ(R) CLEAN FIRST TRUST
DOW JONES GLOBAL GLOBAL ENGINEERING EDGE(R) SMART GRID INDXX GLOBAL
SELECT DIVIDEND WIND ENERGY AND CONSTRUCTION INFRASTRUCTURE NATURAL RESOURCES
INDEX FUND ETF ETF INDEX FUND INCOME ETF
(FGD) (FAN) (FLM) (GRID) (FTRI)
--------------------- --------------------- --------------------- --------------------- ---------------------
$ 529,318,798 $ 76,492,702 $ 9,459,265 $ 27,715,580 $ 7,420,946
-- -- 32,264 9,169 6,378
390,929 480,676 1,276 -- 3
-- -- -- -- --
1,173,471 190,052 -- -- 4,979
-- -- -- -- --
1,789,683 213,398 10,380 52,025 12,925
2,248,938 157,775 38,410 13,311 59,753
-- 2,553 474 239 12
-- -- 8,721 -- --
1,394 1,278 1,263 10 --
--------------- --------------- --------------- --------------- ---------------
534,923,213 77,538,434 9,552,053 27,790,334 7,504,996
--------------- --------------- --------------- --------------- ---------------
-- -- -- -- 4,979
1,668,241 230,941 -- -- --
-- -- -- -- --
169,263 429,590 -- -- --
174,036 15,164 -- 503 4,437
149,774 36,878 2,352 12,549 --
35,280 11,430 5,019 6,337 --
26,038 25,288 25,288 25,288 --
1,946 1,834 1,817 1,821 --
-- 1,252,368 95,366 498,158 43,250
-- -- -- -- --
166,872 33,176 13,052 13,641 --
--------------- --------------- --------------- --------------- ---------------
2,391,450 2,036,669 142,894 558,297 52,666
--------------- --------------- --------------- --------------- ---------------
$ 532,531,763 $ 75,501,765 $ 9,409,159 $ 27,232,037 $ 7,452,330
=============== =============== =============== =============== ===============
$ 653,877,176 $ 126,515,946 $ 17,376,679 $ 27,900,086 $ 68,688,797
232,500 57,500 2,000 5,500 6,500
(121,577,913) (51,071,681) (7,969,520) (673,549) (61,242,967)
--------------- --------------- --------------- --------------- ---------------
$ 532,531,763 $ 75,501,765 $ 9,409,159 $ 27,232,037 $ 7,452,330
=============== =============== =============== =============== ===============
$ 22.90 $ 13.13 $ 47.05 $ 49.51 $ 11.47
=============== =============== =============== =============== ===============
23,250,002 5,750,002 200,002 550,002 650,002
=============== =============== =============== =============== ===============
$ 556,761,177 $ 75,563,010 $ 10,108,575 $ 26,923,851 $ 7,644,500
=============== =============== =============== =============== ===============
$ 391,139 $ 485,413 $ 1,276 $ -- $ 3
=============== =============== =============== =============== ===============
$ -- $ 1,165,264 $ 91,993 $ 482,318 $ 41,775
=============== =============== =============== =============== ===============
See Notes to Financial Statements Page 71
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
SEPTEMBER 30, 2019
FIRST TRUST FIRST TRUST
INDXX GLOBAL BICK
AGRICULTURE ETF INDEX FUND
(FTAG) (BICK)
---------------------- ----------------------
ASSETS:
Investments, at value ................................................. $ 3,185,886 $ 116,200,825
Cash .................................................................. 1,698 --
Foreign currency, at value ............................................ -- 8,581
Due from authorized participant ....................................... -- --
Receivables:
Investment securities sold ......................................... -- 198,127
Capital shares sold ................................................ -- --
Reclaims ........................................................... 11,455 --
Dividends .......................................................... 5,010 372,339
Securities lending income .......................................... -- --
From investment advisor ............................................ -- --
Prepaid expenses ...................................................... -- --
---------------- ----------------
TOTAL ASSETS ....................................................... 3,204,049 116,779,872
---------------- ----------------
LIABILITIES:
Due to authorized participant ......................................... -- --
Due to custodian ...................................................... -- 214,401
Due to custodian foreign currency ..................................... -- --
Payables:
Investment securities purchased .................................... -- --
Investment advisory fees ........................................... 1,853 62,227
Licensing fees ..................................................... -- --
Shareholder reporting fees ......................................... -- --
Audit and tax fees ................................................. -- --
Trustees' fees ..................................................... -- --
Collateral for securities on loan .................................. -- --
Foreign capital gains tax .......................................... 1,892 --
Other liabilities ..................................................... -- --
---------------- ----------------
TOTAL LIABILITIES .................................................. 3,745 276,628
---------------- ----------------
NET ASSETS ............................................................ $ 3,200,304 $ 116,503,244
================ ================
NET ASSETS CONSIST OF:
Paid-in capital ....................................................... $ 22,715,392 $ 146,214,021
Par value ............................................................. 1,399 45,500
Accumulated distributable earnings (loss) ............................. (19,516,487) (29,756,277)
---------------- ----------------
NET ASSETS ............................................................ $ 3,200,304 $ 116,503,244
================ ================
NET ASSET VALUE, per share ............................................ $ 22.87 $ 25.61
================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share) ............................. 139,928 4,550,002
================ ================
Investments, at cost .................................................. $ 3,511,944 $ 119,016,745
================ ================
Foreign currency, at cost (proceeds) .................................. $ -- $ 8,579
================ ================
Securities on loan, at value .......................................... $ -- $ --
================ ================
Page 72 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
FIRST TRUST NASDAQ GLOBAL CLOUD INTERNATIONAL NASDAQ
INDXX NEXTG AUTO COMPUTING EQUITY CYBERSECURITY
ETF INDEX FUND ETF OPPORTUNITIES ETF ETF
(NXTG) (CARZ) (SKYY) (FPXI) (CIBR)
--------------------- --------------------- --------------------- --------------------- ---------------------
$ 198,294,027 $ 17,692,373 $ 2,205,913,025 $ 30,815,391 $ 978,535,235
123,648 9,353 2,140,175 31,234 1,369,497
-- 1,183 -- 7,967 1
-- -- -- -- 1,904,987
-- -- -- -- --
-- -- -- -- 2,763,479
1,588 23,756 276,213 17,204 7,493
379,259 76,860 448,444 76,075 220,457
11,525 532 176,968 -- --
-- -- -- -- --
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
198,810,047 17,804,057 2,208,954,825 30,947,871 984,801,149
--------------- --------------- --------------- --------------- ---------------
-- -- -- -- --
-- -- -- -- --
8 -- -- -- --
-- -- -- -- 4,665,977
108,914 10,191 1,102,781 17,192 485,376
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
2,685,873 170,625 39,654,420 -- --
-- -- -- -- --
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
2,794,795 180,816 40,757,201 17,192 5,151,353
--------------- --------------- --------------- --------------- ---------------
$ 196,015,252 $ 17,623,241 $ 2,168,197,624 $ 30,930,679 $ 979,649,796
=============== =============== =============== =============== ===============
$ 190,612,260 $ 24,915,589 $ 2,245,394,417 $ 32,124,515 $ 982,307,889
39,000 5,500 384,500 8,500 354,500
5,363,992 (7,297,848) (77,581,293) (1,202,336) (3,012,593)
--------------- --------------- --------------- --------------- ---------------
$ 196,015,252 $ 17,623,241 $ 2,168,197,624 $ 30,930,679 $ 979,649,796
=============== =============== =============== =============== ===============
$ 50.26 $ 32.04 $ 56.39 $ 36.39 $ 27.63
=============== =============== =============== =============== ===============
3,900,002 550,002 38,450,002 850,002 35,450,002
=============== =============== =============== =============== ===============
$ 190,800,984 $ 20,672,487 $ 2,200,845,205 $ 28,237,937 $ 924,402,059
=============== =============== =============== =============== ===============
$ -- $ 1,183 $ -- $ 7,969 $ 1
=============== =============== =============== =============== ===============
$ 2,560,758 $ 162,340 $ 39,088,336 $ -- $ --
=============== =============== =============== =============== ===============
See Notes to Financial Statements Page 73
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2019
FIRST TRUST
FIRST TRUST FTSE EPRA/NAREIT
STOXX(R) EUROPEAN DEVELOPED MARKETS
SELECT DIVIDEND REAL ESTATE
INDEX FUND INDEX FUND
(FDD) (FFR)
---------------------- ----------------------
INVESTMENT INCOME:
Dividends.............................................................. $ 20,241,035 $ 1,632,726
Securities lending income (net of fees)................................ -- --
Foreign withholding tax................................................ (1,743,105) (78,708)
---------------- ----------------
Total investment income ............................................ 18,497,930 1,554,018
---------------- ----------------
EXPENSES:
Investment advisory fees............................................... 1,364,250 193,413
Licensing fees......................................................... 185,621 58,024
Accounting and administration fees..................................... 173,862 29,992
Custodian fees......................................................... 79,051 80,683
Audit and tax fees..................................................... 68,008 27,374
Shareholder reporting fees............................................. 46,058 18,173
Transfer agent fees.................................................... 17,053 2,418
Legal fees............................................................. 13,049 2,007
Listing fees........................................................... 9,569 7,063
Trustees' fees and expenses............................................ 7,482 7,179
Registration and filing fees........................................... -- 195
Other expenses......................................................... 11,029 4,503
---------------- ----------------
Total expenses ..................................................... 1,975,032 431,024
Less fees waived and expenses reimbursed by
the investment advisor .......................................... -- (140,904)
---------------- ----------------
Net expenses ....................................................... 1,975,032 290,120
---------------- ----------------
NET INVESTMENT INCOME (LOSS)........................................... 16,522,898 1,263,898
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ........................................................ (5,305,162) (301,088)
In-kind redemptions ................................................ 9,567,121 897,933
Foreign currency transactions ...................................... (41,973) (3,503)
Foreign capital gains tax .......................................... -- --
---------------- ----------------
Net realized gain (loss)............................................... 4,219,986 593,342
---------------- ----------------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................ (18,807,264) 4,419,709
Foreign currency translation ....................................... (122,738) (1,231)
Deferred foreign capital gains tax ................................. -- --
---------------- ----------------
Net change in unrealized appreciation (depreciation)................... (18,930,002) 4,418,478
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (14,710,016) 5,011,820
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 1,812,882 $ 6,275,718
================ ================
(a) Fund is subject to a unitary fee (see Note 3 in the Notes to Financial
Statements).
Page 74 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
FIRST TRUST FIRST TRUST GLOBAL NASDAQ(R) CLEAN FIRST TRUST
DOW JONES GLOBAL GLOBAL ENGINEERING EDGE(R) SMART GRID INDXX GLOBAL
SELECT DIVIDEND WIND ENERGY AND CONSTRUCTION INFRASTRUCTURE NATURAL RESOURCES
INDEX FUND ETF ETF INDEX FUND INCOME ETF
(FGD) (FAN) (FLM) (GRID) (FTRI)
--------------------- --------------------- --------------------- --------------------- ---------------------
$ 35,540,055 $ 2,249,855 $ 282,117 $ 620,268 $ 586,824
-- 82,954 9,603 20,099 1,948
(2,212,885) (206,515) (26,882) (59,013) (37,499)
--------------- --------------- --------------- --------------- ---------------
33,327,170 2,126,294 264,838 581,354 551,273
--------------- --------------- --------------- --------------- ---------------
1,965,335 290,858 45,302 110,959 58,038 (a)
286,009 72,605 11,304 24,924 --
250,335 38,142 7,911 15,501 --
152,250 43,598 17,146 14,016 --
73,207 25,009 25,009 28,061 --
73,225 24,896 12,523 15,440 --
24,567 3,636 566 1,387 --
20,060 2,834 442 1,059 --
7,063 7,483 7,483 5,988 --
7,692 7,204 7,133 7,153 --
7,641 -- (45) (201) --
11,910 3,209 2,027 1,958 --
--------------- --------------- --------------- --------------- ---------------
2,879,294 519,474 136,801 226,245 58,038
-- (83,187) (57,523) (32,068) --
--------------- --------------- --------------- --------------- ---------------
2,879,294 436,287 79,278 194,177 58,038
--------------- --------------- --------------- --------------- ---------------
30,447,876 1,690,007 185,560 387,177 493,235
--------------- --------------- --------------- --------------- ---------------
(35,870,884) (1,434,341) (636,376) (70,596) 234,328
23,889,797 1,393,732 503,953 206,151 9,686
(139,167) (7,152) (706) 6,969 (970)
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
(12,120,254) (47,761) (133,129) 142,524 243,044
--------------- --------------- --------------- --------------- ---------------
(31,331,243) 2,892,893 (2,157,651) 36,241 (1,131,015)
(73,857) (8,536) (387) (8,468) (293)
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
(31,405,100) 2,884,357 (2,158,038) 27,773 (1,131,308)
--------------- --------------- --------------- --------------- ---------------
(43,525,354) 2,836,596 (2,291,167) 170,297 (888,264)
--------------- --------------- --------------- --------------- ---------------
$ (13,077,478) $ 4,526,603 $ (2,105,607) $ 557,474 $ (395,029)
=============== =============== =============== =============== ===============
See Notes to Financial Statements Page 75
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED SEPTEMBER 30, 2019
FIRST TRUST
INDXX GLOBAL FIRST TRUST
AGRICULTURE BICK
ETF INDEX FUND
(FTAG) (BICK)
---------------------- ----------------------
INVESTMENT INCOME:
Dividends.............................................................. $ 118,135 $ 2,966,905
Securities lending income (net of fees)................................ -- --
Foreign withholding tax................................................ (10,881) (186,538)
---------------- ----------------
Total investment income ............................................ 107,254 2,780,367
---------------- ----------------
EXPENSES:
Investment advisory fees............................................... 28,551 (a) 939,952 (a)
Licensing fees......................................................... -- --
Accounting and administration fees..................................... -- --
Custodian fees......................................................... -- --
Audit and tax fees..................................................... -- --
Shareholder reporting fees............................................. -- --
Transfer agent fees.................................................... -- --
Legal fees............................................................. -- --
Listing fees........................................................... -- --
Trustees' fees and expenses............................................ -- --
Registration and filing fees........................................... -- --
Other expenses......................................................... -- --
---------------- ----------------
Total expenses ..................................................... 28,551 939,952
Less fees waived and expenses reimbursed by
the investment advisor .......................................... -- --
---------------- ----------------
Net expenses ....................................................... 28,551 939,952
---------------- ----------------
NET INVESTMENT INCOME (LOSS)........................................... 78,703 1,840,415
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ........................................................ (163,697) (13,167,136)
In-kind redemptions ................................................ (40,799) 2,335,450
Foreign currency transactions ...................................... (671) (122,976)
Foreign capital gains tax .......................................... (279) --
---------------- ----------------
Net realized gain (loss)............................................... (205,446) (10,954,662)
---------------- ----------------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................ (424,761) 2,609,547
Foreign currency translation ....................................... (524) (6,741)
Deferred foreign capital gains tax ................................. 10,391 --
---------------- ----------------
Net change in unrealized appreciation (depreciation)................... (414,894) 2,602,806
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (620,340) (8,351,856)
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ (541,637) $ (6,511,441)
================ ================
(a) Fund is subject to a unitary fee (see Note 3 in the Notes to Financial
Statements).
Page 76 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
FIRST TRUST NASDAQ GLOBAL CLOUD INTERNATIONAL NASDAQ
INDXX NEXTG AUTO COMPUTING EQUITY CYBERSECURITY
ETF INDEX FUND ETF OPPORTUNITIES ETF ETF
(NXTG) (CARZ) (SKYY) (FPXI) (CIBR)
--------------------- --------------------- --------------------- --------------------- ---------------------
$ 1,517,700 $ 812,833 $ 33,273,463 $ 406,535 $ 6,771,374
41,450 11,939 262,370 -- --
(114,482) (80,872) (387,137) (39,348) (131,538)
--------------- --------------- --------------- --------------- ---------------
1,444,668 743,900 33,148,696 367,187 6,639,836
--------------- --------------- --------------- --------------- ---------------
415,307 (a) 133,800 (a) 12,302,571 (a) 164,805 (a) 4,984,555 (a)
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
415,307 133,800 12,302,571 164,805 4,984,555
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
415,307 133,800 12,302,571 164,805 4,984,555
--------------- --------------- --------------- --------------- ---------------
1,029,361 610,100 20,846,125 202,382 1,655,281
--------------- --------------- --------------- --------------- ---------------
(1,292,476) (1,618,210) (81,358,725) (2,074,720) (37,860,147)
738,521 563,146 453,980,589 2,022,058 60,384,863
(35,639) (1,501) -- 6,702 (5,060)
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
(589,594) (1,056,565) 372,621,864 (45,960) 22,519,656
--------------- --------------- --------------- --------------- ---------------
6,528,661 (911,446) (414,864,808) 74,626 (63,337,955)
(183) (640) -- (348) 215
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
6,528,478 (912,086) (414,864,808) 74,278 (63,337,740)
--------------- --------------- --------------- --------------- ---------------
5,938,884 (1,968,651) (42,242,944) 28,318 (40,818,084)
--------------- --------------- --------------- --------------- ---------------
$ 6,968,245 $ (1,358,551) $ (21,396,819) $ 230,700 $ (39,162,803)
=============== =============== =============== =============== ===============
See Notes to Financial Statements Page 77
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST
STOXX(R) EUROPEAN
SELECT DIVIDEND
INDEX FUND
(FDD)
---------------------------------------
Year Ended Year Ended
9/30/2019 9/30/2018
------------------ ------------------
OPERATIONS:
Net investment income (loss)........................................................ $ 16,522,898 $ 22,830,152
Net realized gain (loss)............................................................ 4,219,986 12,482,381
Net change in unrealized appreciation (depreciation)................................ (18,930,002) (31,561,559)
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations.................................................................. 1,812,882 3,750,974
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................... (16,448,343) (22,961,086)
Return of capital................................................................... -- --
---------------- ----------------
Total distributions to shareholders................................................. (16,448,343) (22,961,086)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................... 20,079,043 33,402,329
Proceeds from shares acquired through reorganization................................ -- --
Cost of shares redeemed............................................................. (166,349,357) (88,895,004)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.................................................... (146,270,314) (55,492,675)
---------------- ----------------
Total increase (decrease) in net assets............................................. (160,905,775) (74,702,787)
NET ASSETS:
Beginning of period................................................................. 454,823,954 529,526,741
---------------- ----------------
End of period....................................................................... $ 293,918,179 $ 454,823,954
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period............................................. 34,653,334 38,903,334
Shares sold......................................................................... 1,550,000 2,400,000
Shares issued through reorganization................................................ -- --
Shares redeemed..................................................................... (13,150,000) (6,650,000)
---------------- ----------------
Shares outstanding, end of period................................................... 23,053,334 34,653,334
================ ================
Page 78 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
FTSE EPRA/NAREIT DOW JONES FIRST TRUST
DEVELOPED MARKETS REAL ESTATE GLOBAL SELECT DIVIDEND GLOBAL WIND ENERGY
INDEX FUND INDEX FUND ETF
(FFR) (FGD) (FAN)
---------------------------------------- --------------------------------------- ---------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/2019 9/30/2018 9/30/2019 9/30/2018 9/30/2019 9/30/2018
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
$ 1,263,898 $ 1,644,323 $ 30,447,876 $ 22,306,646 $ 1,690,007 $ 2,021,405
593,342 1,216,974 (12,120,254) 6,707,884 (47,761) 7,703,093
4,418,478 (1,125,678) (31,405,100) (18,687,717) 2,884,357 (12,612,504)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
6,275,718 1,735,619 (13,077,478) 10,326,813 4,526,603 (2,888,006)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(1,495,051) (1,810,508) (30,379,078) (22,052,312) (1,723,721) (1,611,016)
-- -- -- -- -- --
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(1,495,051) (1,810,508) (30,379,078) (22,052,312) (1,723,721) (1,611,016)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
7,018,700 -- 185,018,208 58,302,537 11,212,366 17,312,970
2,028,889 -- -- -- -- --
(2,465,739) (6,551,405) (93,309,875) (33,183,708) (17,875,844) (33,918,808)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
6,581,850 (6,551,405) 91,708,333 25,118,829 (6,663,478) (16,605,838)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
11,362,517 (6,626,294) 48,251,777 13,393,330 (3,860,596) (21,104,860)
45,073,694 51,699,988 484,279,986 470,886,656 79,362,361 100,467,221
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 56,436,211 $ 45,073,694 $ 532,531,763 $ 484,279,986 $ 75,501,765 $ 79,362,361
================ ================ ================ ================ ================ ================
1,000,002 1,150,002 19,250,002 18,300,002 6,350,002 7,650,002
150,000 -- 7,900,000 2,250,000 850,000 1,300,000
41,606 -- -- -- -- --
(50,000) (150,000) (3,900,000) (1,300,000) (1,450,000) (2,600,000)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
1,141,608 1,000,002 23,250,002 19,250,002 5,750,002 6,350,002
================ ================ ================ ================ ================ ================
See Notes to Financial Statements Page 79
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
GLOBAL ENGINEERING
AND CONSTRUCTION
ETF
(FLM)
---------------------------------------
Year Ended Year Ended
9/30/2019 9/30/2018
------------------ ------------------
OPERATIONS:
Net investment income (loss)........................................................ $ 185,560 $ 271,464
Net realized gain (loss)............................................................ (133,129) 1,341,015
Net change in unrealized appreciation (depreciation)................................ (2,158,038) (1,767,255)
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations.................................................................. (2,105,607) (154,776)
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................... (185,587) (341,187)
Return of capital................................................................... -- --
---------------- ----------------
Total distributions to shareholders................................................. (185,587) (341,187)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................... -- 3,108,725
Proceeds from shares acquired through reorganization................................ -- --
Cost of shares redeemed............................................................. (2,493,964) (5,484,426)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.................................................... (2,493,964) (2,375,701)
---------------- ----------------
Total increase (decrease) in net assets............................................. (4,785,158) (2,871,664)
NET ASSETS:
Beginning of period................................................................. 14,194,317 17,065,981
---------------- ----------------
End of period....................................................................... $ 9,409,159 $ 14,194,317
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period............................................. 250,002 300,002
Shares sold......................................................................... -- 50,000
Shares issued through reorganization................................................ -- --
Shares redeemed..................................................................... (50,000) (100,000)
---------------- ----------------
Shares outstanding, end of period................................................... 200,002 250,002
================ ================
Page 80 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
NASDAQ(R) CLEAN EDGE(R) INDXX GLOBAL FIRST TRUST
SMART GRID INFRASTRUCTURE NATURAL RESOURCES INDXX GLOBAL
INDEX FUND INCOME ETF AGRICULTURE ETF
(GRID) (FTRI) (FTAG)
---------------------------------------- --------------------------------------- ---------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/2019 9/30/2018 9/30/2019 9/30/2018 9/30/2019 9/30/2018
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
$ 387,177 $ 363,210 $ 493,235 $ 331,431 $ 78,703 $ 103,491
142,524 3,091,956 243,044 503,050 (205,446) 823,269
27,773 (4,075,063) (1,131,308) 89,168 (414,894) (1,051,274)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
557,474 (619,897) (395,029) 923,649 (541,637) (124,514)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(360,196) (398,796) (478,011) (320,671) (100,503) (90,971)
-- -- -- -- (6,587) --
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(360,196) (398,796) (478,011) (320,671) (107,090) (90,971)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
-- 12,522,625 -- -- -- 1,350,249
-- -- -- -- -- --
(6,298,315) (5,121,525) (582,416) (608,642) (1,129,832) (3,972,391)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(6,298,315) 7,401,100 (582,416) (608,642) (1,129,832) (2,622,142)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(6,101,037) 6,382,407 (1,455,456) (5,664) (1,778,559) (2,837,627)
33,333,074 26,950,667 8,907,786 8,913,450 4,978,863 7,816,490
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 27,232,037 $ 33,333,074 $ 7,452,330 $ 8,907,786 $ 3,200,304 $ 4,978,863
================ ================ ================ ================ ================ ================
700,002 550,002 700,002 750,002 189,928 289,928
-- 250,000 -- -- -- 50,000
-- -- -- -- -- --
(150,000) (100,000) (50,000) (50,000) (50,000) (150,000)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
550,002 700,002 650,002 700,002 139,928 189,928
================ ================ ================ ================ ================ ================
See Notes to Financial Statements Page 81
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
BICK
INDEX FUND
(BICK)
---------------------------------------
Year Ended Year Ended
9/30/2019 9/30/2018
------------------ ------------------
OPERATIONS:
Net investment income (loss)........................................................ $ 1,840,415 $ 3,028,554
Net realized gain (loss)............................................................ (10,954,662) 1,367,638
Net change in unrealized appreciation (depreciation)................................ 2,602,806 (22,488,608)
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations.................................................................. (6,511,441) (18,092,416)
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................... (2,279,891) (2,678,851)
Return of capital................................................................... -- --
---------------- ----------------
Total distributions to shareholders................................................. (2,279,891) (2,678,851)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................... 17,424,177 38,356,789
Proceeds from shares acquired through reorganization................................ -- --
Cost of shares redeemed............................................................. (82,778,057) (29,799,700)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.................................................... (65,353,880) 8,557,089
---------------- ----------------
Total increase (decrease) in net assets............................................. (74,145,212) (12,214,178)
NET ASSETS:
Beginning of period................................................................. 190,648,456 202,862,634
---------------- ----------------
End of period....................................................................... $ 116,503,244 $ 190,648,456
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period............................................. 7,200,002 7,050,002
Shares sold......................................................................... 650,000 1,250,000
Shares issued through reorganization................................................ -- --
Shares redeemed..................................................................... (3,300,000) (1,100,000)
---------------- ----------------
Shares outstanding, end of period................................................... 4,550,002 7,200,002
================ ================
Page 82 See Notes to Financial Statements
FIRST TRUST
FIRST TRUST NASDAQ FIRST TRUST
INDXX NEXTG GLOBAL AUTO CLOUD COMPUTING
ETF INDEX FUND ETF
(NXTG) (CARZ) (SKYY)
---------------------------------------- --------------------------------------- ---------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/2019 9/30/2018 9/30/2019 9/30/2018 9/30/2019 9/30/2018
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
$ 1,029,361 $ 215,764 $ 610,100 $ 492,875 $ 20,846,125 $ 4,152,426
(589,594) 3,299,218 (1,056,565) 212,654 372,621,864 197,763,353
6,528,478 (3,474,504) (912,086) (2,274,354) (414,864,808) 242,652,662
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
6,968,245 40,478 (1,358,551) (1,568,825) (21,396,819) 444,568,441
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(721,966) (316,837) (605,577) (458,452) (21,035,531) (4,648,945)
-- -- -- -- -- --
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(721,966) (316,837) (605,577) (458,452) (21,035,531) (4,648,945)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
177,245,669 10,472,764 6,429,028 4,140,193 1,872,262,095 969,178,677
-- -- -- -- -- --
(4,846,339) (10,510,233) (5,009,096) (2,057,562) (1,728,771,629) (430,888,455)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
172,399,330 (37,469) 1,419,932 2,082,631 143,490,466 538,290,222
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
178,645,609 (313,828) (544,196) 55,354 101,058,116 978,209,718
17,369,643 17,683,471 18,167,437 18,112,083 2,067,139,508 1,088,929,790
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 196,015,252 $ 17,369,643 $ 17,623,241 $ 18,167,437 $ 2,168,197,624 $ 2,067,139,508
================ ================ ================ ================ ================ ================
350,002 350,002 500,002 450,002 36,450,002 26,000,002
3,650,000 200,000 200,000 100,000 32,550,000 18,850,000
-- -- -- -- -- --
(100,000) (200,000) (150,000) (50,000) (30,550,000) (8,400,000)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
3,900,002 350,002 550,002 500,002 38,450,002 36,450,002
================ ================ ================ ================ ================ ================
See Notes to Financial Statements Page 83
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
INTERNATIONAL
EQUITY
OPPORTUNITIES ETF
(FPXI)
---------------------------------------
Year Ended Year Ended
9/30/2019 9/30/2018
------------------ ------------------
OPERATIONS:
Net investment income (loss)........................................................ $ 202,382 $ 351,989
Net realized gain (loss)............................................................ (45,960) (888,129)
Net change in unrealized appreciation (depreciation)................................ 74,278 971,566
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations.................................................................. 230,700 435,426
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................... (200,971) (400,571)
Return of capital................................................................... -- --
---------------- ----------------
Total distributions to shareholders................................................. (200,971) (400,571)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................... 16,491,543 5,608,443
Proceeds from shares acquired through reorganization................................ -- --
Cost of shares redeemed............................................................. (11,912,293) (1,751,068)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.................................................... 4,579,250 3,857,375
---------------- ----------------
Total increase (decrease) in net assets............................................. 4,608,979 3,892,230
NET ASSETS:
Beginning of period................................................................. 26,321,700 22,429,470
---------------- ----------------
End of period....................................................................... $ 30,930,679 $ 26,321,700
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period............................................. 750,002 650,002
Shares sold......................................................................... 450,000 150,000
Shares issued through reorganization................................................ -- --
Shares redeemed..................................................................... (350,000) (50,000)
---------------- ----------------
Shares outstanding, end of period................................................... 850,002 750,002
================ ================
Page 84 See Notes to Financial Statements
FIRST TRUST
NASDAQ
CYBERSECURITY ETF
(CIBR)
----------------------------------------
Year Ended Year Ended
9/30/2019 9/30/2018
------------------ ------------------
$ 1,655,281 $ 233,083
22,519,656 39,357,016
(63,337,740) 94,156,868
---------------- ----------------
(39,162,803) 133,746,967
---------------- ----------------
(1,844,090) (387,720)
-- --
---------------- ----------------
(1,844,090) (387,720)
---------------- ----------------
406,227,662 587,931,146
-- --
(233,244,459) (187,191,788)
---------------- ----------------
172,983,203 400,739,358
---------------- ----------------
131,976,310 534,098,605
847,673,486 313,574,881
---------------- ----------------
$ 979,649,796 $ 847,673,486
================ ================
29,750,002 14,350,002
14,350,000 22,200,000
-- --
(8,650,000) (6,800,000)
---------------- ----------------
35,450,002 29,750,002
================ ================
See Notes to Financial Statements Page 85
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 13.12 $ 13.61 $ 11.82 $ 11.92 $ 13.50
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.66 0.59 0.42 0.55 0.55
Net realized and unrealized gain (loss) (0.37) (0.49) 1.79 (0.10) (1.59)
----------- ----------- ----------- ----------- -----------
Total from investment operations 0.29 0.10 2.21 0.45 (1.04)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.66) (0.59) (0.42) (0.55) (0.54)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 12.75 $ 13.12 $ 13.61 $ 11.82 $ 11.92
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 2.35% 0.74% 18.93% 3.88% (7.90)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 293,918 $ 454,824 $ 529,527 $ 165,490 $ 165,751
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.58% 0.57% 0.60% 0.60% 0.60%
Ratio of net expenses to average net assets 0.58% 0.57% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 4.84% 4.25% 3.96% 4.63% 4.45%
Portfolio turnover rate (b) 24% 35% 21% 34% 33%
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 45.07 $ 44.96 $ 46.18 $ 41.00 $ 41.09
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.25 1.48 0.89 0.90 1.15
Net realized and unrealized gain (loss) 4.55 0.31 (0.65) 5.20 0.11
----------- ----------- ----------- ----------- -----------
Total from investment operations 5.80 1.79 0.24 6.10 1.26
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.43) (1.68) (1.46) (0.92) (1.35)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 49.44 $ 45.07 $ 44.96 $ 46.18 $ 41.00
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 13.19% 3.99% 0.67% 14.95% 2.97%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 56,436 $ 45,074 $ 51,700 $ 71,576 $ 98,394
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.89% 0.85% 0.70% 0.72% 0.71%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 2.61% 3.48% 2.40% 2.53% 2.76%
Portfolio turnover rate (b) 7% 9% 6% 6% 10%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 86 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 25.16 $ 25.73 $ 23.49 $ 21.62 $ 26.64
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.39 1.15 1.03 1.07 1.21
Net realized and unrealized gain (loss) (2.24) (0.58) 2.23 1.82 (4.97)
----------- ----------- ----------- ----------- -----------
Total from investment operations (0.85) 0.57 3.26 2.89 (3.76)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.41) (1.14) (1.02) (1.02) (1.26)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 22.90 $ 25.16 $ 25.73 $ 23.49 $ 21.62
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (3.21)% 2.26% 14.14% 13.68% (14.51)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 532,532 $ 484,280 $ 470,887 $ 344,068 $ 407,445
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.59% 0.58% 0.58% 0.58% 0.60%
Ratio of net expenses to average net assets 0.59% 0.58% 0.58% 0.58% 0.60%
Ratio of net investment income (loss) to
average net assets 6.20% 4.48% 4.43% 4.63% 4.71%
Portfolio turnover rate (b) 31% 31% 35% 43% 34%
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 12.50 $ 13.13 $ 13.30 $ 10.38 $ 11.57
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.30 0.28 0.41 0.20 0.31
Net realized and unrealized gain (loss) 0.64 (0.66) 0.32 2.93 (1.15)
----------- ----------- ----------- ----------- -----------
Total from investment operations 0.94 (0.38) 0.73 3.13 (0.84)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.31) (0.25) (0.90) (0.21) (0.35)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 13.13 $ 12.50 $ 13.13 $ 13.30 $ 10.38
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 7.58% (2.92)% 6.21% 30.42% (7.37)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 75,502 $ 79,362 $ 100,467 $ 87,096 $ 39,959
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.71% 0.68% 0.71% 0.74% 0.75%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 2.32% 2.21% 2.88% 1.80% 2.75%
Portfolio turnover rate (b) 30% 22% 78% 26% 25%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 87
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 56.78 $ 56.89 $ 48.63 $ 44.17 $ 48.12
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.87 0.79 0.62 0.96 0.60
Net realized and unrealized gain (loss) (9.71) 0.16 8.27 4.46 (4.02)
----------- ----------- ----------- ----------- -----------
Total from investment operations (8.84) 0.95 8.89 5.42 (3.42)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.89) (1.06) (0.63) (0.96) (0.53)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 47.05 $ 56.78 $ 56.89 $ 48.63 $ 44.17
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (15.64)% 1.67% 18.39% 12.40% (7.19)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 9,409 $ 14,194 $ 17,066 $ 14,588 $ 15,460
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 1.21% 0.88% 0.92% 1.03% 0.99%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.64% 1.45% 1.20% 2.01% 1.21%
Portfolio turnover rate (b) 14% 16% 20% 28% 46%
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 47.62 $ 49.00 $ 39.19 $ 31.52 $ 35.38
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.67 0.52 0.57 0.42 0.38
Net realized and unrealized gain (loss) 1.84 (1.32) 9.82 7.65 (3.88)
----------- ----------- ----------- ----------- -----------
Total from investment operations 2.51 (0.80) 10.39 8.07 (3.50)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.62) (0.58) (0.58) (0.40) (0.36)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 49.51 $ 47.62 $ 49.00 $ 39.19 $ 31.52
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 5.32% (1.66)% 26.73% 25.77% (9.97)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 27,232 $ 33,333 $ 26,951 $ 13,715 $ 11,034
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.82% 0.74% 0.84% 1.07% 0.99%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.40% 1.10% 1.44% 1.27% 1.02%
Portfolio turnover rate (b) 31% 60% 32% 37% 18%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 88 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 12.73 $ 11.88 $ 10.66 $ 10.99 $ 21.19
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.72 0.48 0.41 0.33 0.23
Net realized and unrealized gain (loss) (1.28) 0.83 1.22 (0.32) (10.23)
----------- ----------- ----------- ----------- -----------
Total from investment operations (0.56) 1.31 1.63 0.01 (10.00)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.70) (0.46) (0.41) (0.34) (0.20)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 11.47 $ 12.73 $ 11.88 $ 10.66 $ 10.99
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (4.42)% 11.12% 15.47% 0.20% (47.50)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 7,452 $ 8,908 $ 8,913 $ 10,663 $ 12,643
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 5.95% 3.74% 3.39% 3.00% 1.27%
Portfolio turnover rate (b) 84% 50% 61% 179% (c) 40%
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 26.21 $ 26.96 $ 21.55 $ 26.90 $ 56.20 (e)
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.51 0.44 0.39 0.20 0.60
Net realized and unrealized gain (loss) (3.17) (0.83) 5.41 (5.46) (28.95)
----------- ----------- ----------- ----------- -----------
Total from investment operations (2.66) (0.39) 5.80 (5.26) (28.35)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.64) (0.36) (0.39) (0.09) (0.95)
Return on capital (0.04) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions (0.68) (0.36) (0.39) (0.09) (0.95)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 22.87 $ 26.21 $ 26.96 $ 21.55 $ 26.90
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (10.16)% (1.46)% 27.09% (18.92)% (51.20)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3,200 $ 4,979 $ 7,816 $ 4,093 $ 5,380
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.72% (d) 0.70%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.72% (d) 0.70%
Ratio of net investment income (loss) to
average net assets 1.93% 1.56% 1.80% 1.74% 1.17%
Portfolio turnover rate (b) 20% 30% 38% 137% (c) 40%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(c) The variation in the portfolio turnover rate is due to the change in the
Fund's underlying index effective on the close of business December 18,
2015, which resulted in a complete rebalance of the Fund's portfolio.
(d) Includes foreign capital gains tax. If this tax expense was not included,
the expense ratio would have been 0.70%.
(e) 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 value reported on September 30, 2015 prior to the reverse share
split restatement was $5.38.
See Notes to Financial Statements Page 89
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST BICK INDEX FUND (BICK)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 26.48 $ 28.77 $ 22.94 $ 18.76 $ 25.12
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.33 0.40 0.33 0.28 0.32
Net realized and unrealized gain (loss) (0.80) (2.34) 5.85 4.19 (6.34)
----------- ----------- ----------- ----------- -----------
Total from investment operations (0.47) (1.94) 6.18 4.47 (6.02)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.40) (0.35) (0.35) (0.29) (0.34)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 25.61 $ 26.48 $ 28.77 $ 22.94 $ 18.76
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (1.76)% (6.82)% 27.14% 23.99% (24.15)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 116,503 $ 190,648 $ 202,863 $ 8,029 $ 7,503
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.64% 0.64% 0.64% 0.64% 0.64%
Ratio of net expenses to average net assets 0.64% 0.64% 0.64% 0.64% 0.64%
Ratio of net investment income (loss) to
average net assets 1.25% 1.33% 2.15% 1.37% 1.17%
Portfolio turnover rate (b) 66% 65% 86% 59% 70%
FIRST TRUST INDXX NEXTG ETF (NXTG)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 49.63 $ 50.52 $ 41.29 $ 34.93 $ 36.86
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.37 0.72 0.44 0.47 0.36
Net realized and unrealized gain (loss) 0.50 (0.60) 9.29 6.34 (1.95)
----------- ----------- ----------- ----------- -----------
Total from investment operations 0.87 0.12 9.73 6.81 (1.59)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.24) (1.01) (0.50) (0.45) (0.34)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 50.26 $ 49.63 $ 50.52 $ 41.29 $ 34.93
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 1.78% 0.20% 23.68% 19.60% (4.35)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 196,015 $ 17,370 $ 17,683 $ 10,324 $ 10,479
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.73% 1.34% 1.04% 1.14% 0.93%
Portfolio turnover rate (b) 59% 80% 18% 28% 28%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 90 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 36.33 $ 40.25 $ 33.39 $ 33.46 $ 37.93
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.02 0.98 0.87 0.80 0.64
Net realized and unrealized gain (loss) (4.28) (3.98) 6.87 (0.09) (4.50)
----------- ----------- ----------- ----------- -----------
Total from investment operations (3.26) (3.00) 7.74 0.71 (3.86)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.03) (0.92) (0.88) (0.78) (0.61)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 32.04 $ 36.33 $ 40.25 $ 33.39 $ 33.46
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (8.97)% (7.57)% 23.46% 2.24% (10.38)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 17,623 $ 18,167 $ 18,112 $ 21,705 $ 31,791
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 3.19% 2.44% 2.20% 2.16% 1.34%
Portfolio turnover rate (b) 24% 16% 17% 17% 18%
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 56.71 $ 41.88 $ 34.17 $ 28.08 $ 27.34
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.59 0.14 0.13 0.15 0.09
Net realized and unrealized gain (loss) (0.31) 14.84 7.72 6.09 0.74
----------- ----------- ----------- ----------- -----------
Total from investment operations 0.28 14.98 7.85 6.24 0.83
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.60) (0.15) (0.14) (0.15) (0.09)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 56.39 $ 56.71 $ 41.88 $ 34.17 $ 28.08
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 0.57% 35.80% 23.00% 22.30% 3.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2,168,198 $ 2,067,140 $ 1,088,930 $ 587,642 $ 470,291
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.02% 0.28% 0.34% 0.49% 0.31%
Portfolio turnover rate (b) 85% 7% 14% 23% 25%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 91
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------- PERIOD ENDED
2019 2018 2017 2016 9/30/2015 (a)
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 35.10 $ 34.51 $ 27.47 $ 25.24 $ 30.00
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.30 0.49 0.22 0.51 0.37
Net realized and unrealized gain (loss) 1.29 0.66 7.07 2.14 (4.76)
----------- ----------- ----------- ----------- -----------
Total from investment operations 1.59 1.15 7.29 2.65 (4.39)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.30) (0.56) (0.25) (0.42) (0.37)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 36.39 $ 35.10 $ 34.51 $ 27.47 $ 25.24
=========== =========== =========== =========== ===========
TOTAL RETURN (b) 4.60% 3.35% 26.71% 10.62% (14.74)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 30,931 $ 26,322 $ 22,429 $ 2,748 $ 1,262
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.71% (c) 0.70% (d)
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.71% (c) 0.70% (d)
Ratio of net investment income (loss) to
average net assets 0.86% 1.42% 1.62% 2.25% 1.01% (d)
Portfolio turnover rate (e) 98% 83% 58% 75% 98%
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------- PERIOD ENDED
2019 2018 2017 2016 9/30/2015 (a)
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 28.49 $ 21.85 $ 19.77 $ 17.15 $ 20.00
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.06 0.02 0.03 0.23 (0.01)
Net realized and unrealized gain (loss) (0.86) 6.64 2.09 2.62 (2.84)
----------- ----------- ----------- ----------- -----------
Total from investment operations (0.80) 6.66 2.12 2.85 (2.85)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.06) (0.02) (0.04) (0.23) --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 27.63 $ 28.49 $ 21.85 $ 19.77 $ 17.15
=========== =========== =========== =========== ===========
TOTAL RETURN (b) (2.78)% 30.49% 10.73% 16.83% (14.25)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 979,650 $ 847,673 $ 313,575 $ 102,815 $ 79,753
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% (d)
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% (d)
Ratio of net investment income (loss) to
average net assets 0.20% 0.04% 0.13% 1.37% (0.30)%(d)
Portfolio turnover rate (e) 58% 56% 67% 49% 7%
(a) Inception dates for FPXI and CIBR are November 4, 2014 and July 6, 2015,
respectively, which are consistent with the respective Fund's commencement
of investment operations and are the dates the initial creation units were
established.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(c) Includes excise tax. If this excise tax expense was not included, the
expense ratio would have been 0.70%.
(d) Annualized.
(e) 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 92 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
1. ORGANIZATION
First Trust Exchange-Traded Fund II (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on July 6, 2006,
and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of sixteen exchange-traded funds. This report
covers the fourteen funds listed below:
First Trust STOXX(R) European Select Dividend Index Fund - (NYSE Arca, Inc.
("NYSE Arca") ticker "FDD")
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund -
(NYSE Arca ticker "FFR")
First Trust Dow Jones Global Select Dividend Index Fund - (NYSE Arca ticker
"FGD")
First Trust Global Wind Energy ETF - (NYSE Arca ticker "FAN")
First Trust Global Engineering and Construction ETF - (NYSE Arca ticker
"FLM")
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund -
(The Nasdaq Stock Market LLC ("Nasdaq") ticker "GRID")
First Trust Indxx Global Natural Resources Income ETF - (Nasdaq ticker
"FTRI")
First Trust Indxx Global Agriculture ETF - (Nasdaq ticker "FTAG")
First Trust BICK Index Fund - (Nasdaq ticker "BICK")
First Trust Indxx NextG ETF (Nasdaq ticker "NXTG")(1)
First Trust NASDAQ Global Auto Index Fund - (Nasdaq ticker "CARZ")
First Trust Cloud Computing ETF - (Nasdaq ticker "SKYY")
First Trust International Equity Opportunities ETF - (Nasdaq ticker
"FPXI")(2)
First Trust Nasdaq Cybersecurity ETF - (Nasdaq ticker "CIBR")
(1) Effective on May 30, 2019, First Trust Nasdaq Smartphone Index Fund
(Nasdaq ticker "FONE") changed its name and ticker to First Trust Indxx
NextG ETF (Nasdaq ticker "NXTG").
(2) Effective on January 2, 2019, First Trust International IPO ETF changed
its name to First Trust International Equity Opportunities ETF. The Fund's
ticker symbol was not changed.
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." Each Fund's Creation Units are generally issued and redeemed
in-kind for securities in which a Fund invests, and in certain circumstances,
for cash, and only to and from broker-dealers and large institutional investors
that have entered into participation agreements. Except when aggregated in
Creation Units, each Fund's shares are not redeemable securities. The investment
objective of each Fund is to seek investment results that correspond generally
to the price and yield (before the Fund's fees and expenses) of the following
indices:
FUND INDEX
First Trust STOXX(R) European Select Dividend Index Fund STOXX(R) Europe Select Dividend 30 Index
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund FTSE EPRA/NAREIT Developed Index
First Trust Dow Jones Global Select Dividend Index Fund Dow Jones Global Select Dividend Index
First Trust Global Wind Energy ETF ISE Clean Edge Global Wind Energy(TM) Index
First Trust Global Engineering and Construction ETF ISE Global Engineering and Construction(TM) Index
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund NASDAQ OMX(R) Clean Edge(R) Smart Grid
Infrastructure Index(SM)
First Trust Indxx Global Natural Resources Income ETF Indxx Global Natural Resources Income Index
First Trust Indxx Global Agriculture ETF Indxx Global Agriculture Index
First Trust BICK Index Fund ISE BICK(TM) Index
First Trust Indxx NextG ETF Indxx 5G & NextG Thematic Index(SM)(3)
First Trust NASDAQ Global Auto Index Fund NASDAQ OMX Global Auto Index(SM)
First Trust Cloud Computing ETF ISE CTA Cloud Computing(TM) Index(4)
First Trust International Equity Opportunities ETF IPOX(R) International Index
First Trust Nasdaq Cybersecurity ETF Nasdaq CTA Cybersecurity Index(SM)
(3) Prior to May 30, 2019, the index was Nasdaq CTA Smartphone Index(SM).
(4) Effective June 24, 2019, the ISE Cloud Computing(TM) Index changed its
name to ISE CTA Cloud Computing(TM) Index.
Page 93
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the Funds in the preparation of the
financial statements. The preparation of the financial statements in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP") requires management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. Each Fund's investments are valued as
follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding Nasdaq and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Overnight repurchase agreements are valued at amortized cost when it
represents the best estimate of fair value.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
Page 94
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund or exchange-traded fund trading of similar
securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
In addition, differences between the prices used to calculate a Fund's NAV and
the prices used by such Fund's corresponding index could result in a difference
between a Fund's performance and the performance of its underlying index.
Because foreign markets may be open on different days than the days during which
investors may transact in the shares of a Fund, the value of the Fund's
securities may change on the days when investors are not able to transact in the
shares of the Fund. The value of securities denominated in foreign currencies is
converted into U.S. dollars using exchange rates determined daily as of the
close of regular trading on the NYSE. Any use of a different rate from the rates
used by a relevant index may adversely affect the Fund's ability to track the
index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of September 30, 2019, is
included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Withholding taxes and tax reclaims on foreign dividends have been provided for
in accordance with each Fund's understanding of the applicable country's tax
rules and rates.
Distributions received from a Fund's investments in real estate investment
trusts ("REITs") may be comprised of return of capital, capital gains and
income. The actual character of the amounts received during the year is not
known until after the REITs' fiscal year end. A Fund records the character of
distributions received from the REITs during the year based on estimates
available. The characterization of distributions received by a Fund may be
subsequently revised based on information received from the REITs after their
tax reporting periods conclude.
C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES
Offsetting Assets and Liabilities require entities to disclose both gross and
net information about instruments and transactions eligible for offset on the
Statements of Assets and Liabilities, and disclose instruments and transactions
subject to master netting or similar agreements. These disclosure requirements
are intended to help investors and other financial statement users better assess
the effect or potential effect of offsetting arrangements on a fund's financial
position. The transactions subject to offsetting disclosures are derivative
instruments, repurchase agreements and reverse repurchase agreements, and
securities borrowing and securities lending transactions.
Page 95
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
This disclosure, if applicable, is included within each Fund's Portfolio of
Investments under the heading "Offsetting Assets and Liabilities." For financial
reporting purposes, the Funds do not offset financial assets and financial
liabilities that are subject to master netting arrangements ("MNAs") or similar
agreements on the Statements of Assets and Liabilities. MNAs provide the right,
in the event of default (including bankruptcy and insolvency), for the
non-defaulting counterparty to liquidate the collateral and calculate the net
exposure to the defaulting party or request additional collateral.
D. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statements of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statements of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received and are included in "Net
realized gain (loss) on foreign currency transactions" on the Statements of
Operations. The portion of foreign currency gains and losses related to
fluctuations in exchange rates between the initial purchase settlement date and
subsequent sale trade date is included in "Net realized gain (loss) on
investments" on the Statements of Operations.
E. SECURITIES LENDING
The Funds may lend securities representing up to 33 1/3% of the value of their
total assets to broker-dealers, banks and other institutions to generate
additional income. When a Fund loans its portfolio securities, it will receive,
at the inception of each loan, collateral equal to at least 102% (for domestic
securities) or 105% (for international securities) of the market value of the
loaned securities. The collateral amount is valued at the beginning of each
business day and is compared to the market value of the loaned securities from
the prior business day to determine if additional collateral is required. If
additional collateral is required, a request is sent to the borrower. Securities
lending involves the risk that the Fund may lose money because the borrower of
the Fund's loaned securities fails to return the securities in a timely manner
or at all. The Fund could also lose money in the event of (i) a decline in the
value of the collateral provided for the loaned securities, (ii) a decline in
the value of any investments made with cash collateral or (iii) an increase in
the value of the loaned securities if the borrower does not increase the
collateral accordingly and the borrower fails to return the securities. These
events could also trigger adverse tax consequences for the Funds.
Under the Funds' Securities Lending Agency Agreement, the securities lending
agent will generally bear the risk that a borrower may default on its obligation
to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the
Funds' securities lending agent and is responsible for executing the lending of
the portfolio securities to creditworthy borrowers. The Funds, however, will be
responsible for the risks associated with the investment of cash collateral. A
Fund may lose money on its investment of cash collateral, which may affect its
ability to repay the collateral to the borrower without the use of other Fund
assets. Each Fund that engages in securities lending receives compensation (net
of any rebate and securities lending agent fees) for lending its securities.
Compensation can be in the form of fees received from the securities lending
agent or dividends or interest earned from the investment of cash collateral.
The fees received from the securities lending agent are accrued daily. The
dividend and interest earned on the securities loaned is accounted for in the
same manner as other dividend and interest income. At September 30, 2019, only
FAN, FLM, GRID, FTRI, NXTG, CARZ and SKYY had securities in the securities
lending program.
In the event of a default by a borrower with respect to any loan, BBH will
exercise any and all remedies provided under the applicable borrower agreement
to make the Funds whole. These remedies include purchasing replacement
securities by applying the collateral held from the defaulting broker against
the purchase cost of the replacement securities. If, despite such efforts by BBH
to exercise these remedies, a Fund sustains losses as a result of a borrower's
default, BBH will indemnify the Fund by purchasing replacement securities at its
own expense, or paying the Fund an amount equal to the market value of the
replacement securities, subject to certain limitations which are set forth in
detail in the Securities Lending Agency Agreement between the Trust on behalf of
the Funds and BBH.
Page 96
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
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 securities. The U.S. Treasury securities are held in a joint custody
account at BBH on behalf of the Funds participating in the securities lending
program. In the event the counterparty defaults on the repurchase agreement, the
U.S. Treasury securities can either be maintained as part of a Fund's portfolio
or sold for cash. A Fund could suffer a loss to the extent that the proceeds
from the sale of the underlying collateral held by the Fund is less than the
repurchase price and the Fund's costs associated with the delay and enforcement
of the MRA.
While the Funds may invest in repurchase agreements, any repurchase agreements
held by the Funds during the fiscal year ended September 30, 2019 were received
as collateral for lending securities.
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on significantly modified portfolio securities
held by the Funds and have no impact on net assets or NAV per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future.
The tax character of distributions paid by each Fund during the fiscal year
ended September 30, 2019 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
---------------- -------------- --------------
First Trust STOXX(R) European Select Dividend Index Fund $ 16,448,343 $ -- $ --
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 1,495,051 -- --
First Trust Dow Jones Global Select Dividend Index Fund 30,379,078 -- --
First Trust Global Wind Energy ETF 1,723,721 -- --
First Trust Global Engineering and Construction ETF 185,587 -- --
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 360,196 -- --
First Trust Indxx Global Natural Resources Income ETF 478,011 -- --
First Trust Indxx Global Agriculture ETF 100,503 -- 6,587
First Trust BICK Index Fund 2,279,891 -- --
First Trust Indxx NextG ETF 721,966 -- --
First Trust NASDAQ Global Auto Index Fund 605,577 -- --
First Trust Cloud Computing ETF 21,035,531 -- --
First Trust International Equity Opportunities ETF 200,971 -- --
First Trust Nasdaq Cybersecurity ETF 1,844,090 -- --
Page 97
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
The tax character of distributions paid by each Fund during the fiscal year
ended September 30, 2018 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
---------------- -------------- --------------
First Trust STOXX(R) European Select Dividend Index Fund $ 22,961,086 $ -- $ --
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 1,810,508 -- --
First Trust Dow Jones Global Select Dividend Index Fund 22,052,312 -- --
First Trust Global Wind Energy ETF 1,611,016 -- --
First Trust Global Engineering and Construction ETF 341,187 -- --
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 398,796 -- --
First Trust Indxx Global Natural Resources Income ETF 320,671 -- --
First Trust Indxx Global Agriculture ETF 90,971 -- --
First Trust BICK Index Fund 2,678,851 -- --
First Trust Indxx NextG ETF 316,837 -- --
First Trust NASDAQ Global Auto Index Fund 458,452 -- --
First Trust Cloud Computing ETF 4,648,945 -- --
First Trust International Equity Opportunities ETF 400,571 -- --
First Trust Nasdaq Cybersecurity ETF 387,720 -- --
As of September 30, 2019, the components of distributable earnings on a tax
basis for each Fund were as follows:
Accumulated Net
Undistributed Capital and Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
---------------- -------------- --------------
First Trust STOXX(R) European Select Dividend Index Fund $ 237,563 $ (16,857,872) $ (16,644,533)
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 1,151,621 (641,306) 6,379,441
First Trust Dow Jones Global Select Dividend Index Fund 1,837,215 (79,444,235) (43,970,893)
First Trust Global Wind Energy ETF 211,889 (50,136,387) (1,147,183)
First Trust Global Engineering and Construction ETF 23,722 (7,266,234) (727,008)
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 26,054 (1,398,268) 698,665
First Trust Indxx Global Natural Resources Income ETF 39,669 (61,047,921) (234,715)
First Trust Indxx Global Agriculture ETF -- (19,172,249) (344,238)
First Trust BICK Index Fund 280,977 (24,902,155) (5,135,099)
First Trust Indxx NextG ETF 286,107 (1,739,274) 6,817,159
First Trust NASDAQ Global Auto Index Fund 88,596 (3,917,490) (3,468,954)
First Trust Cloud Computing ETF -- (54,412,548) (23,168,745)
First Trust International Equity Opportunities ETF 73,814 (3,443,600) 2,167,450
First Trust Nasdaq Cybersecurity ETF -- (37,244,658) 34,232,065
H. INCOME AND OTHER TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of each Fund's taxable income
exceeds the distributions from such taxable income for the calendar year.
Certain countries assess a capital gains tax on securities sold in their local
markets. This tax is accrued as the securities in these foreign markets
appreciate in value and is paid at the time of sale to the extent a capital gain
is realized. Taxes accrued on securities in an unrealized appreciation position
are included in "Net change in unrealized appreciation (depreciation) on
deferred foreign capital gains tax" on the Statements of Operations. The capital
gains tax paid on securities sold, if any, is included in "Net realized gain
(loss) on foreign capital gains tax" on the Statements of Operations.
India's Finance Bill, 2018 ("Finance Bill, 2018") was enacted into law on March
29, 2018, and amongst other provisions, it introduced a long-term capital gains
tax beginning April 1, 2018. Long-term capital gains on the sale of listed
shares in excess of INR 0.1 million are taxed at the rate of 10% (plus
applicable surcharge and cess (which is a type of tax)) subject to satisfaction
of certain conditions. Long-term capital gains accruing as of January 31, 2018,
are considered exempt due to a grandfather clause in the provision. The
aforesaid exemption from long-term capital gains tax is available with respect
Page 98
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
to shares acquired between October 1, 2004 and March 31, 2018, only if on such
acquisitions Securities Transaction Tax ("STT") was chargeable. Certain
exceptions in this regard, such as acquisition of shares in a public offer,
bonus, rights issued, etc. for which the condition of chargeability of STT on
acquisition is not applicable, have been notified.
In the case of the sale of listed shares held by a Fund for one year or less,
the income is classified as short-term capital gains and is taxable at 15% (plus
applicable surcharge and cess) provided the shares are sold on the stock
exchange and subjected to STT. For above purposes, the applicable rate of
surcharge is 2% or 5% (depending on the level of income of the Fund). The
Finance Bill, 2018 increases the cess imposed on the sum of tax and surcharge
from 3% to 4%. The cess 4% rate is applied to the capital gains tax, resulting
in a higher effective rate of capital gains tax.
Where the sale of shares is outside the stock exchange and not subject to STT,
the long-term capital gains are taxed at 10% (plus applicable surcharge and
cess) and short-term capital gains are taxed at 30% (plus applicable surcharge
and cess). The Finance Bill, 2018, approves the carry forward of long-term
capital losses to be offset against long-term capital gains. Short-term losses
and long-term losses can be netted against short-term gains and long-term gains,
respectively.
Please note that the above description is based on current provisions of Indian
law, and any change or modification made by subsequent legislation, regulation,
or administrative or judicial decision could increase the Indian tax liability
of a Fund and thus reduce the return to a Fund's shareholders. There can be no
assurance that the Indian tax authorities and/or regulators will not take a
position contrary to the views expressed herein. If the Indian tax authorities
and/or regulators take a position contrary to the views expressed herein,
adverse unpredictable consequences may follow.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ending 2016, 2017,
2018, and 2019 remain open to federal and state audit. As of September 30, 2019,
management has evaluated the application of these standards to the Funds, and
has determined that no provision for income tax is required in the Funds'
financial statements for uncertain tax positions.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses arising in taxable years beginning after December 22, 2010,
may be carried forward indefinitely, and their character is retained as
short-term and/or long-term losses. Previously, net capital losses were carried
forward for up to eight years and treated as short-term losses. As a transition
rule, the Act requires that post-enactment net capital losses be used before
pre-enactment net capital losses. At September 30, 2019, the Funds had
post-enactment net capital losses for federal income tax purposes as shown in
the following table. To the extent that these loss carryforwards are used to
offset future capital gains, it is probable that the capital gains so offset
will not be distributed to Fund shareholders. The Funds are subject to certain
limitations, under U.S. tax rules, on the use of capital loss carryforwards and
net unrealized built-in losses. These limitations apply when there has been a
50% change in ownership.
Post-Enactment -
No Expiration
---------------------
First Trust STOXX(R) European Select Dividend Index Fund $ 16,857,872
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund* 641,306
First Trust Dow Jones Global Select Dividend Index Fund 79,444,235
First Trust Global Wind Energy ETF 50,136,387
First Trust Global Engineering and Construction ETF 7,266,234
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 1,398,268
First Trust Indxx Global Natural Resources Income ETF 61,047,921
First Trust Indxx Global Agriculture ETF 19,172,249
First Trust BICK Index Fund 24,902,155
First Trust Indxx NextG ETF 1,739,274
First Trust NASDAQ Global Auto Index Fund 3,917,490
First Trust Cloud Computing ETF 54,412,548
First Trust International Equity Opportunities ETF 3,443,600
First Trust Nasdaq Cybersecurity ETF 37,244,658
* $75,097 of First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index
Fund's post-enactment net capital losses is subject to loss limitation resulting
from reorganization activity. This limitation generally reduces the utilization
of these losses to a maximum of $38,346 per year.
During the taxable year ended September 30, 2019, the following Fund utilized
post-enactment capital loss carryforwards in the following amount:
Capital Loss
Carryforward Utilized
---------------------
First Trust Indxx Global Natural Resources Income ETF $ 238,413
Page 99
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
At the taxable year ended September 30, 2019, the following Funds' capital loss
carryforwards expired in the following amounts:
Capital Loss
Carryforwards Expired
---------------------
First Trust STOXX(R) European Select Dividend Index Fund $ 161,155
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 1,838
First Trust Dow Jones Global Select Dividend Index Fund 323,583
First Trust Global Wind Energy ETF 9,549,964
First Trust Global Engineering and Construction ETF 615,538
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended September 30, 2019, the Funds had
no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended September 30, 2019, the adjustments for each Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) on Paid-in
Income (Loss) Investments Capital
---------------- -------------- --------------
First Trust STOXX(R) European Select Dividend Index Fund $ (41,973) $ (7,266,563) $ 7,308,536
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate
Index Fund 218,825 (989,141) 770,316
First Trust Dow Jones Global Select Dividend Index Fund (31,642) (22,637,564) 22,669,206
First Trust Global Wind Energy ETF 154,534 8,676,452 (8,830,986)
First Trust Global Engineering and Construction ETF 14,116 123,470 (137,586)
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure
Index Fund 6,969 (110,961) 103,992
First Trust Indxx Global Natural Resources Income ETF 4,118 (13,022) 8,904
First Trust Indxx Global Agriculture ETF 3,346 40,955 (44,301)
First Trust BICK Index Fund 30,842 (2,079,609) 2,048,767
First Trust Indxx NextG ETF (3,387) (714,424) 717,811
First Trust NASDAQ Global Auto Index Fund (1,501) (353,200) 354,701
First Trust Cloud Computing ETF 189,483 (441,005,857) 440,816,374
First Trust International Equity Opportunities ETF 6,702 (1,993,526) 1,986,824
First Trust Nasdaq Cybersecurity ETF 211,911 (56,961,900) 56,749,989
I. EXPENSES
Expenses that are directly related to one of the Funds are charged directly to
the respective Fund, except for First Trust Indxx Global Natural Resources
Income ETF, First Trust Indxx Global Agriculture ETF, First Trust BICK Index
Fund, First Trust Indxx NextG ETF, First Trust NASDAQ Global Auto Index Fund,
First Trust Cloud Computing ETF, First Trust International Equity Opportunities
ETF, and First Trust Nasdaq Cybersecurity ETF (the "Unitary Fee Funds"), for
which expenses other than excluded expenses (discussed in Note 3) are paid by
the Advisor. General expenses of the Trust are allocated to all the Funds based
upon the net assets of each Fund.
Page 100
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
First Trust has entered into licensing agreements with each of the following
"Licensors" for the respective Funds:
FUND LICENSOR
First Trust STOXX(R) European Select Dividend Index Fund STOXX Limited
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund FTSE International Limited
First Trust Dow Jones Global Select Dividend Index Fund S&P Dow Jones Indices LLC
First Trust Global Wind Energy ETF Nasdaq, Inc.
First Trust Global Engineering and Construction ETF Nasdaq, Inc.
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund Nasdaq, Inc.
First Trust Indxx Global Natural Resources Income ETF Indxx, LLC
First Trust Indxx Global Agriculture ETF Indxx, LLC
First Trust BICK Index Fund Nasdaq, Inc.
First Trust Indxx NextG ETF Indxx, LLC
First Trust NASDAQ Global Auto Index Fund Nasdaq, Inc.
First Trust Cloud Computing ETF Nasdaq, Inc.
First Trust International Equity Opportunities ETF IPOX(R) Schuster LLC
First Trust Nasdaq Cybersecurity ETF Nasdaq, Inc.
The respective license agreements allow for the use of each Fund's respective
index and of certain trademarks and trade names of the respective Licensors. The
Funds are sub-licensees to the applicable license agreements. The Funds, except
for the Unitary Fee Funds, are required to pay licensing fees, which are shown
on the Statements of Operations. The licensing fees for the Unitary Fee Funds
are paid by First Trust from the unitary investment advisory fees it receives
from each of these Funds.
J. NEW ACCOUNTING PRONOUNCEMENT
On August 28, 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13,
"Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement," which amends the fair value measurement disclosure requirements of
ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified
disclosure requirements of ASC 820. In addition, the amendments clarify that
materiality is an appropriate consideration of entities when evaluating
disclosure requirements. The ASU is effective for fiscal years beginning after
December 15, 2019, including interim periods therein. Early adoption is
permitted for any eliminated or modified disclosures upon issuance of this ASU.
The Funds have early adopted ASU 2018-13 for these financial statements, which
did not result in a material impact.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
For the following Unitary Fee Funds, First Trust is paid an annual unitary
management fee at the specified rate of such Fund's average daily net assets and
is responsible for the expenses of such Fund including the cost of transfer
agency, custody, fund administration, legal, audit and other services, and
excluding fee payments under the Investment Management Agreement, distribution
and service fees payable pursuant to a Rule 12b-1 plan, if any, brokerage
expense, acquired fund fees and expenses, taxes, interest, and extraordinary
expenses.
% of Daily
Net Assets
------------
First Trust Indxx Global Natural Resources Income ETF 0.70%
First Trust Indxx Global Agriculture ETF 0.70%
First Trust BICK Index Fund 0.64%
First Trust Indxx NextG ETF 0.70%
First Trust NASDAQ Global Auto Index Fund 0.70%
First Trust Cloud Computing ETF 0.60%
First Trust International Equity Opportunities ETF 0.70%
First Trust Nasdaq Cybersecurity ETF 0.60%
For the First Trust STOXX(R) European Select Dividend Index Fund, First Trust
FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund, First Trust Dow Jones
Global Select Dividend Index Fund, First Trust Global Wind Energy ETF, First
Trust Global Engineering and Construction ETF, and First Trust NASDAQ(R) Clean
Edge(R) Smart Grid Infrastructure Index Fund (such Funds, the "Expense Cap
Funds"), First Trust is paid an annual management fee of 0.40% of such Fund's
average daily net assets.
Page 101
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
For the Expense Cap Funds, the Trust and First Trust have entered into an
Expense Reimbursement, Fee Waiver and Recovery Agreement ("Recovery Agreement")
in which First Trust has agreed to waive fees and/or reimburse Fund expenses to
the extent that the operating expenses of each such Fund (excluding interest
expense, brokerage commissions and other trading expenses, acquired fund fees
and expenses, taxes and extraordinary expenses) exceed the following amount as a
percentage of average daily net assets per year (the "Expense Cap") at least
through January 31, 2021.
Expense Cap
-------------
First Trust STOXX(R) European Select Dividend Index Fund 0.60%
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 0.60%
First Trust Dow Jones Global Select Dividend Index Fund 0.60%
First Trust Global Wind Energy ETF 0.60%
First Trust Global Engineering and Construction ETF 0.70%
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 0.70%
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee or expense was incurred, but no reimbursement payment will be made by a Fund
if it results in the Fund exceeding (i) the applicable expense limitation in
place for the most recent fiscal year for which such expense limitation was in
place, (ii) the applicable expense limitation in place at the time the fees were
waived, or (iii) the current expense limitation. These amounts would be included
in "Expenses previously waived or reimbursed" on the Statements of Operations.
The advisory fee waivers and expense reimbursements for the fiscal year ended
September 30, 2019 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 Expense Year Year Year
Fee Reim- Ended Ended Ended
Waivers bursements 9/30/2017 9/30/2018 9/30/2019 Total
---------- ---------- ---------- ---------- ---------- --------
First Trust FTSE EPRA/NAREIT Developed
Markets Real Estate Index Fund $ 140,904 $ -- $ 60,987 $ 117,546 $ 140,904 $319,437
First Trust Global Wind Energy ETF 83,187 -- 93,898 71,385 83,187 248,470
First Trust Global Engineering and
Construction ETF 45,302 12,221 33,893 33,419 57,523 124,835
First Trust NASDAQ(R) Clean Edge(R) Smart Grid
Infrastructure Index Fund 32,068 -- 28,627 13,940 32,068 74,635
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Trust for acting in such capacities.
Page 102
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
4. REORGANIZATION
On March 11, 2019, the Board of Trustees of FFR approved a reorganization of FFR
with the First Trust Heitman Global Prime Real Estate ETF ("PRME"). The merger
was completed on September 16, 2019. FFR was the surviving fund.
Under the terms of the reorganization, which was tax-free, the assets of PRME
were transferred to, and the liabilities of PRME were assumed by, FFR in
exchange for shares of FFR. The cost of the investments received from PRME was
carried forward to FFR for U.S. GAAP and tax purposes. The FFR shares were then
distributed to PRME shareholders and the separate existence of PRME ceased. The
reorganization was subject to certain conditions, including that the
reorganization was approved on August 22, 2019, by the shareholders of PRME.
When the reorganization occurred, the transactions were based on the relative
NAVs of PRME and FFR.
The following table summarizes the asset transfers and conversion ratios for the
reorganization.
Net Assets on Unrealized Accumulated Shares Acquiring Net Assets on
Acquired Shares September 13, Appreciation Net Realized Conversion (Surviving) Shares September 13,
Fund Redeemed 2019 (Depreciation) Gain (Loss) Ratio Fund Issued 2019*
--------------------------------------------------------------------------------------------------------------------------------
PRME 100,002 $ 2,028,889 $ 47,695 $ (65,869) 0.416055 FFR 41,606 $51,202,233
* Amount reflects net assets of FFR prior to the reorganization.
The following table summarizes the operations of the Acquired Fund for the
period November 1, 2018 to September 13, 2019, and the operations of FFR, the
Acquiring (Surviving) Fund, for the fiscal year ended September 30, 2019, as
presented in the Statements of Operations and the combined Acquired and
Acquiring (Surviving) Funds' pro-forma results of operations for the fiscal year
ended September 30, 2019, assuming the acquisition had been completed on October
1, 2018.
Because the combined investment portfolios have been managed as a single
integrated portfolio since the reorganization was completed, it is not
practicable to separate the amounts of revenue and earnings of PRME that have
been included in FFR's Statement of Operations since September 13, 2019.
Net Realized
and Change in
Net Unrealized Net Increase
Investment Gain (Loss) (Decrease) from
Income on Investments Operations
-------------- -------------- ---------------
Acquired Fund for the period November 1, 2018 to September 13, 2019
PRME $ 40,759 $ 197,950 $ 238,709
Acquiring Fund for the fiscal year ended September 30, 2019
FFR 1,263,898 5,011,820 6,275,718
-------------- -------------- ---------------
Combined Totals $ 1,304,657 $ 5,209,770 $ 6,514,427
============== ============== ===============
5. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended September 30, 2019, 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 STOXX(R) European Select Dividend Index Fund $ 79,761,326 $ 80,884,672
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 5,758,368 3,430,496
First Trust Dow Jones Global Select Dividend Index Fund 153,006,466 149,820,356
First Trust Global Wind Energy ETF 21,457,674 21,579,035
First Trust Global Engineering and Construction ETF 1,598,623 1,705,472
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 8,787,618 8,833,182
First Trust Indxx Global Natural Resources Income ETF 6,896,499 6,944,489
First Trust Indxx Global Agriculture ETF 825,846 964,600
First Trust BICK Index Fund 97,025,114 124,127,811
First Trust Indxx NextG ETF 64,888,977 36,129,581
First Trust NASDAQ Global Auto Index Fund 4,728,650 4,658,091
First Trust Cloud Computing ETF 1,758,755,633 1,739,395,396
First Trust International Equity Opportunities ETF 26,740,234 23,549,082
First Trust Nasdaq Cybersecurity ETF 484,418,361 483,724,556
Page 103
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
For the fiscal year ended September 30, 2019, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
---------------- --------------
First Trust STOXX(R) European Select Dividend Index Fund $ 19,790,314 $ 163,594,736
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 6,997,697 2,453,864
First Trust Dow Jones Global Select Dividend Index Fund 181,908,234 93,288,084
First Trust Global Wind Energy ETF 11,128,934 17,705,565
First Trust Global Engineering and Construction ETF -- 2,406,380
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund -- 6,267,693
First Trust Indxx Global Natural Resources Income ETF -- 568,302
First Trust Indxx Global Agriculture ETF -- 1,004,797
First Trust BICK Index Fund 7,829,022 46,584,597
First Trust Indxx NextG ETF 147,950,219 4,055,802
First Trust NASDAQ Global Auto Index Fund 5,919,330 4,591,383
First Trust Cloud Computing ETF 1,854,606,020 1,731,911,148
First Trust International Equity Opportunities ETF 12,999,985 11,641,562
First Trust Nasdaq Cybersecurity ETF 400,179,369 231,730,708
6. CREATIONS, REDEMPTIONS 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"). In order to purchase Creation Units of a Fund, an
Authorized Participant must deposit (i) a designated portfolio of equity
securities determined by First Trust (the "Deposit Securities") and generally
make or receive a cash payment referred to as the "Cash Component," which is an
amount equal to the difference between the NAV of the Fund Shares (per Creation
Unit Aggregation) and the market value of the Deposit Securities, and/or (ii)
cash in lieu of all or a portion of the Deposit Securities. If the Cash
Component is a positive number (i.e., the NAV per Creation Unit Aggregation
exceeds the Deposit Amount), the Authorized Participant will deliver the Cash
Component. If the Cash Component is a negative number (i.e., the NAV per
Creation Unit Aggregation is less than the Deposit Amount), the Authorized
Participant will receive the Cash Component. Authorized Participants purchasing
Creation Units must pay to BNYM, as transfer agent, a creation fee (the
"Creation Transaction Fee") regardless of the number of Creation Units purchased
in the transaction. The Creation Transaction Fee may vary and is based on the
composition of the securities included in each Fund's portfolio and the
countries in which the transactions are settled. The Creation Transaction Fee
may increase or decrease as each Fund's portfolio is adjusted to conform to
changes in the composition of its corresponding index. The price for each
Creation Unit will equal the daily NAV per share times the number of shares in a
Creation Unit plus the fees described above and, if applicable, any operational
processing and brokerage costs, transfer fees or stamp taxes. When a Fund
permits an Authorized Participant to substitute cash or a different security in
lieu of depositing one or more of the requisite Deposit Securities, the
Authorized Participant may also be assessed an amount to cover the cost of
purchasing the Deposit Securities and/or disposing of the substituted
securities, including operational processing and brokerage costs, transfer fees,
stamp taxes, and part or all of the spread between the expected bid and offer
side of the market related to such Deposit Securities and/or substitute
securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in each Fund's portfolio and the countries in which the
transactions are settled. The Redemption Transaction Fee may increase or
decrease as each Fund's portfolio is adjusted to conform to changes in the
composition of its corresponding index. Each Fund reserves the right to effect
redemptions in cash. An Authorized Participant may request a cash redemption in
lieu of securities; however, each 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 January 31, 2021.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
8. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND
II:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First
Trust STOXX(R) European Select Dividend Index Fund, First Trust FTSE EPRA/NAREIT
Developed Markets Real Estate Index Fund, First Trust Dow Jones Global Select
Dividend Index Fund, First Trust Global Wind Energy ETF, First Trust Global
Engineering and Construction ETF, First Trust NASDAQ(R) Clean Edge(R) Smart Grid
Infrastructure Index Fund, First Trust Indxx Global Natural Resources Income
ETF, First Trust Indxx Global Agriculture ETF, First Trust BICK Index Fund,
First Trust Indxx NextG ETF (formerly known as First Trust Nasdaq Smartphone
Index Fund), First Trust NASDAQ Global Auto Index Fund, First Trust Cloud
Computing ETF, First Trust International Equity Opportunities ETF (formerly
known as First Trust International IPO ETF), and First Trust Nasdaq
Cybersecurity ETF (the "Funds"), each a series of the First Trust
Exchange-Traded Fund II (the "Trust"), including the portfolios of investments,
as of September 30, 2019, the related statements of operations for the year
ended, the statement of changes in net assets for each of the two years in the
period then ended, the financial highlights for the periods indicated in the
table below for the Funds and the related notes. In our opinion, the financial
statements and financial highlights present fairly, in all material respects,
the financial position of each of the funds listed above included in the First
Trust Exchange-Traded Fund II as of September 30, 2019, and the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for the
periods listed in the table below, in conformity with accounting principles
generally accepted in the United States of America.
------------------------------------------------------------- --------------------------------------------------------
INDIVIDUAL FUNDS INCLUDED FINANCIAL
IN THE TRUST HIGHLIGHTS
------------------------------------------------------------- --------------------------------------------------------
First Trust STOXX(R) European Select Dividend Index Fund For the years ended September 30, 2019, 2018, 2017,
2016, and 2015
First Trust FTSE EPRA/NAREIT Developed Markets Real
Estate Index Fund
First Trust Dow Jones Global Select Dividend Index Fund
First Trust Global Wind Energy ETF
First Trust Global Engineering and Construction ETF
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure
Index Fund
First Trust Indxx Global Natural Resources Income ETF
First Trust Indxx Global Agriculture ETF
First Trust BICK Index Fund
First Trust Indxx NextG ETF (formerly known as First Trust
Nasdaq Smartphone Index Fund)
First Trust NASDAQ Global Auto Index Fund
First Trust Cloud Computing ETF
------------------------------------------------------------- --------------------------------------------------------
First Trust International Equity Opportunities ETF (formerly For the years ended September 30, 2019, 2018, 2017, 2016
known as First Trust International IPO ETF) and the period from November 4, 2014 (commencement of
operations) through September 30, 2015
------------------------------------------------------------- --------------------------------------------------------
First Trust Nasdaq Cybersecurity ETF For the years ended September 30, 2019, 2018, 2017, 2016
and the period from July 6, 2015 (commencement of
operations) through September 30, 2015
------------------------------------------------------------- --------------------------------------------------------
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of their internal
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)
--------------------------------------------------------------------------------
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Funds' internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 2019, by correspondence
with the custodian and brokers; when replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
November 21, 2019
We have served as the auditor of one or more First Trust investment companies
since 2001.
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ADDITIONAL INFORMATION
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
each Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal
quarter within 60 days after the end of the relevant fiscal quarter on Form
N-PORT. Portfolio holdings information for the third month of each fiscal
quarter will be publicly available on the SEC's website at www.sec.gov. Each
Fund's complete schedule of portfolio holdings for the second and fourth
quarters of each fiscal year is included in the semi-annual and annual reports
to shareholders, respectively, and is filed with the SEC on Form N-CSR. The
semi-annual and annual report for each Fund is available to investors within 60
days after the period to which it relates. Each Fund's Forms N-PORT and Forms
N-CSR are available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable year ended September 30, 2019, the following percentages of
income dividend paid by the Funds qualify for the dividends received deduction
available to corporations:
Dividends Received
Deduction
---------------------
First Trust STOXX(R) European Select Dividend Index Fund 0.00%
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 0.00%
First Trust Dow Jones Global Select Dividend Index Fund 12.47%
First Trust Global Wind Energy ETF 19.92%
First Trust Global Engineering and Construction ETF 9.97%
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 28.29%
First Trust Indxx Global Natural Resources Income ETF 13.17%
First Trust Indxx Global Agriculture ETF 36.30%
First Trust BICK Index Fund 0.00%
First Trust Indxx NextG ETF 28.05%
First Trust NASDAQ Global Auto Index Fund 27.71%
First Trust Cloud Computing ETF 58.27%
First Trust International Equity Opportunities ETF 0.00%
First Trust Nasdaq Cybersecurity ETF 100.00%
For the taxable year ended September 30, 2019, the following percentages of
income dividend paid by the Funds are hereby designated as qualified dividend
income:
Qualified Dividend Income
-------------------------
First Trust STOXX(R) European Select Dividend Index Fund 100.00%
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 7.85%
First Trust Dow Jones Global Select Dividend Index Fund 100.00%
First Trust Global Wind Energy ETF 100.00%
First Trust Global Engineering and Construction ETF 100.00%
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 100.00%
First Trust Indxx Global Natural Resources Income ETF 100.00%
First Trust Indxx Global Agriculture ETF 100.00%
First Trust BICK Index Fund 74.86%
First Trust Indxx NextG ETF 86.70%
First Trust NASDAQ Global Auto Index Fund 100.00%
First Trust Cloud Computing ETF 59.57%
First Trust International Equity Opportunities ETF 100.00%
First Trust Nasdaq Cybersecurity ETF 100.00%
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
A portion of each of the Funds' 2019 ordinary dividends (including short-term
capital gains) paid to its shareholders during the fiscal year ended September
30, 2019, may be eligible for the Qualified Business Income Deduction (QBI)
under Code Section 199A for the aggregate dividends each Fund received from the
underlying Real Estate Investment Trusts (REITs) these Funds invest in.
The following Funds meet the requirements of Section 853 of the Internal Revenue
Code and elect to pass through to their shareholders credit for foreign taxes
paid. For the taxable year ended September 30, 2019, the total amounts of income
received by the Funds from sources within foreign countries and possessions of
the United States and of taxes paid to such countries are as follows:
Gross Foreign Income Foreign Taxes Paid
--------------------------- ---------------------------
Amount Per Share Amount Per Share
------------- ------------ ------------- ------------
First Trust STOXX(R) European Select Dividend Index Fund $ 20,132,652 $ 0.87 $ 1,742,206 $ 0.08
First Trust Dow Jones Global Select Dividend Index Fund 31,473,768 1.35 2,212,102 0.10
First Trust Global Wind Energy ETF 1,730,393 0.30 180,999 0.03
First Trust Global Engineering and Construction ETF 228,662 1.14 21,594 0.11
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure
Index Fund 472,761 0.86 57,678 0.10
First Trust Indxx Global Natural Resources Income ETF 498,951 0.77 34,255 0.05
First Trust Indxx Global Agriculture ETF 87,715 0.63 11,144 0.08
First Trust BICK Index Fund 2,949,023 0.65 180,734 0.04
First Trust Indxx NextG ETF 1,022,567 0.26 110,936 0.03
First Trust NASDAQ Global Auto Index Fund 586,728 1.07 71,799 0.13
First Trust International Equity Opportunities ETF 403,247 0.47 36,123 0.04
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. As a result, such a fund may be included in one or more index-tracking
exchange-traded funds or mutual funds. Being a component security of such a
vehicle could greatly affect the trading activity involving a fund, the size of
the fund and the market volatility of the fund. Inclusion in an index could
significantly increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; different legal or accounting standards; and less government supervision
and regulation of exchanges in foreign countries. Investments in non-U.S.
securities may involve higher costs than investments in U.S. securities,
including higher transaction and custody costs, as well as additional taxes
imposed by non-U.S. governments. These risks may be heightened for securities of
companies located, or with significant operations, in emerging market countries.
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT
(NON-UNITARY FEE FUNDS)
The Board of Trustees (the "Board") of First Trust Exchange-Traded Fund II (the
"Trust"), including the Independent Trustees, unanimously approved the
continuation of the Investment Management Agreement (the "Agreement") with First
Trust Advisors L.P. (the "Advisor") on behalf of the following six series of the
Trust (each a "Fund" and collectively, the "Funds"):
First Trust STOXX(R) European Select Dividend Index Fund (FDD)
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (FFR)
First Trust Dow Jones Global Select Dividend Index Fund (FGD)
First Trust Global Engineering and Construction ETF (FLM)
First Trust Global Wind Energy ETF (FAN)
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index
Fund (GRID)
The Board approved the continuation of the Agreement for each Fund for a
one-year period ending June 30, 2020 at a meeting held on June 2, 2019. The
Board determined for each Fund that the continuation of the Agreement is in the
best interests of the Fund in light of the nature, extent and quality of the
services provided and such other matters as the Board considered to be relevant
in the exercise of its 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 18, 2019 and June 2, 2019, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor responding to requests for information from counsel to the Independent
Trustees, submitted on behalf of the Independent Trustees, that, among other
things, outlined: the services provided by the Advisor to each Fund (including
the relevant personnel responsible for these services and their experience); the
advisory fee rate payable by each Fund as compared to fees charged to a peer
group of funds (the "Expense Group") and a broad peer universe of funds (the
"Expense Universe"), each assembled by Broadridge Financial Solutions, Inc.
("Broadridge"), an independent source, and as compared to fees charged to other
clients of the Advisor, including other exchange-traded funds ("ETFs") managed
by the Advisor; the expense ratio of each Fund as compared to expense ratios of
the funds in the Fund's Expense Group and Expense Universe; performance
information for each Fund, including comparisons of each Fund's performance to
that of one or more relevant benchmark indexes and to that of a performance
group of funds and a broad performance universe of funds (the "Performance
Universe"), each assembled by Broadridge; the nature of expenses incurred in
providing services to each Fund and the potential for 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 the
meeting held on April 18, 2019, 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 2, 2019 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. 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, as well as the background and experience
of the persons responsible for such services. In reviewing the services
provided, the Board noted the compliance program that had been developed by the
Advisor and considered that it includes a robust program for monitoring the
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
Advisor's and each Fund's compliance with the 1940 Act, as well as each Fund's
compliance with its investment objective, policies and restrictions. The Board
also considered a report from the Advisor with respect to its risk management
functions related to the operation of the Funds. Finally, as part of the Board's
consideration of the Advisor's services, the Advisor, in its written materials
and at the April 18, 2019 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 its investment objective, policies and
restrictions.
The Board considered the advisory fee rate payable by each Fund under the
Agreement for the services provided. The Board considered that the Advisor
agreed to extend the current expense cap for each Fund through January 31, 2021.
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 Expense Groups, as well as advisory and unitary fee rates charged by the
Advisor to other fund (including ETFs) and non-fund clients, as applicable.
Because each Fund's Expense Group included peer funds that pay a unitary fee,
the Board determined that expense ratios were the most relevant comparative data
point. Based on the information provided, the Board noted that the total (net)
expense ratio of FGD was below the median total (net) expense ratio of the peer
funds in its Expense Group, that the total (net) expense ratio of FAN was equal
to the median total (net) expense ratio of the peer funds in its Expense Group
and that the total (net) expense ratio of each other Fund was above the median
total (net) expense ratio of the peer funds in its respective Expense Group.
With respect to the Expense Groups, the Board, at the April 18, 2019 meeting,
discussed with Broadridge its methodology for assembling peer groups and
discussed with the Advisor limitations in creating peer groups for index ETFs,
including differences in underlying indexes and index-tracking methodologies
that can result in greater management complexities across seemingly comparable
ETFs, and different business models that may affect the pricing of services
among ETF sponsors. The Board took these limitations and differences into
account in considering the peer data. With respect to fees charged to other
non-ETF clients, the Board considered differences between the Funds and other
non-ETF clients that limited their comparability. In considering the 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, 2018 regarding the
performance of each Fund's underlying index, the correlation between each Fund's
performance and that of its underlying index, each Fund's tracking difference
and each Fund's excess return as compared to its benchmark index. Based on the
information provided and its ongoing review of performance, the Board concluded
that each Fund was correlated to its underlying index and that the tracking
difference for each Fund was within a reasonable range. In addition, the Board
reviewed data prepared by Broadridge comparing each Fund's performance to that
of its respective Performance Universe and to that of a broad-based benchmark
index, but given each Fund's objective of seeking investment results that
correspond generally to the performance of its underlying index, the Board
placed more emphasis on its review of correlation and tracking difference.
On the basis of all the information provided on the fees, expenses and
performance of each Fund and the ongoing oversight by the Board, the Board
concluded that the advisory fee for each Fund continues to be reasonable and
appropriate in light of the nature, extent and quality of the services provided
by the Advisor to each Fund under the Agreement.
The Board considered information and discussed with the Advisor whether there
were any economies of scale in connection with providing advisory services to
the Funds and noted the Advisor's statement that it believes its expenses will
likely increase over the next twelve months as the Advisor continues to hire
personnel and build infrastructure, including technology, to improve the
services to the Funds. The Board considered the revenues and allocated costs
(including the allocation methodology) of the Advisor in serving as investment
advisor to each Fund for the twelve months ended December 31, 2018 and the
estimated profitability level for each Fund calculated by the Advisor based on
such data, as well as complex-wide and product-line profitability data, for the
same period. The Board noted the inherent limitations in the profitability
analysis and concluded that, based on the information provided, the Advisor's
profitability level for each Fund was not unreasonable. In addition, the Board
considered fall-out benefits described by the Advisor that may be realized from
its relationship with the Funds. The Board considered that the Advisor had
identified as a fall-out benefit to the Advisor and FTP their exposure to
investors and brokers who, absent their exposure to the Funds, may have had no
dealings with the Advisor or FTP, and noted that the Advisor does not utilize
soft dollars in connection with the Funds. The Board concluded that the
character and amount of potential fall-out benefits to the Advisor were not
unreasonable.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreement continue to be fair and reasonable and that the continuation of
the Agreement is in the best interests of each Fund. No single factor was
determinative in the Board's analysis.
BOARD CONSIDERATIONS REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT
(UNITARY FEE FUNDS)
The Board of Trustees of First Trust Exchange-Traded Fund II (the "Trust"),
including the Independent Trustees, unanimously approved the continuation of the
Investment Management Agreements (as applicable to a specific Fund, the
"Agreement" and collectively, the "Agreements") with First Trust Advisors L.P.
(the "Advisor") on behalf of the following eight series of the Trust (each a
"Fund" and collectively, the "Funds"):
First Trust Indxx NextG ETF (NXTG) (formerly First Trust Nasdaq Smartphone
Index Fund)
First Trust BICK Index Fund (BICK)
First Trust Indxx Global Natural Resources Income ETF (FTRI)
First Trust Indxx Global Agriculture ETF (FTAG)
First Trust NASDAQ Global Auto Index Fund (CARZ)
First Trust Cloud Computing ETF (SKYY)
First Trust International Equity Opportunities ETF (FPXI) (formerly First
Trust International IPO ETF)
First Trust Nasdaq Cybersecurity ETF (CIBR)
The Board approved the continuation of the Agreement for each Fund for a
one-year period ending June 30, 2020 at a meeting held on June 2, 2019. The
Board determined for each Fund that the continuation of the Agreement is in the
best interests of the Fund in light of the nature, extent and quality of the
services provided and such other matters as the Board considered to be relevant
in the exercise of its 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 18, 2019 and June 2, 2019, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor responding to requests for information from counsel to the Independent
Trustees, submitted on behalf of the Independent Trustees, that, among other
things, outlined: the services provided by the Advisor to each Fund (including
the relevant personnel responsible for these services and their experience); the
unitary fee rate payable by each Fund as compared to fees charged to a peer
group of funds (the "Expense Group") and a broad peer universe of funds (the
"Expense Universe"), each assembled by Broadridge Financial Solutions, Inc.
("Broadridge"), an independent source, and as compared to fees charged to other
clients of the Advisor, including other exchange-traded funds ("ETFs") managed
by the Advisor; the expense ratio of each Fund as compared to expense ratios of
the funds in the Fund's Expense Group and Expense Universe; performance
information for each Fund, including comparisons of each Fund's performance to
that of one or more relevant benchmark indexes and to that of a performance
group of funds and a broad performance universe of funds (the "Performance
Universe"), each assembled by Broadridge; the nature of expenses incurred in
providing services to each Fund and the potential for 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 the
meeting held on April 18, 2019, 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 2, 2019 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. The Board
determined that, given the totality of the information provided with respect to
the Agreements, the Board had received sufficient information to renew the
Agreements. The Board considered that shareholders chose to invest or remain
invested in a Fund knowing that the Advisor manages the Fund and knowing the
Fund's unitary fee.
In reviewing the Agreement for each Fund, the Board considered the nature,
extent and quality of the services provided by the Advisor under the Agreement.
The Board considered that the Advisor is responsible for the overall management
and administration of the Trust and each Fund and reviewed all of the services
provided by the Advisor to the Funds, as well as the background and experience
of the persons responsible for such services. In reviewing the services
provided, the Board noted the compliance program that had been developed by the
Advisor and considered that it includes a robust program for monitoring the
Advisor's and each Fund's compliance with the 1940 Act, as well as each Fund's
compliance with its investment objective, policies and restrictions. The Board
Page 113
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
also considered a report from the Advisor with respect to its risk management
functions related to the operation of the Funds. Finally, as part of the Board's
consideration of the Advisor's services, the Advisor, in its written materials
and at the April 18, 2019 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 its investment objective, policies
and restrictions.
The Board considered the unitary fee rate payable by each Fund under the
applicable Agreement for the services provided. The Board considered that as
part of the unitary fee the Advisor is responsible for each Fund's expenses,
including the cost of transfer agency, custody, fund administration, legal,
audit and other services and license fees, if any, but excluding the fee payment
under the applicable Agreement and interest, taxes, brokerage commissions and
other expenses connected with the execution of portfolio transactions,
distribution and service fees pursuant to a Rule 12b-1 plan, if any, and
extraordinary expenses. The Board received and reviewed information showing the
advisory or unitary fee rates and expense ratios of the peer funds in the
Expense Groups, as well as advisory and unitary fee rates charged by the Advisor
to other fund (including ETFs) and non-fund clients, as applicable. Because each
Fund pays a unitary fee, the Board determined that expense ratios were the most
relevant comparative data point. Based on the information provided, the Board
noted that the unitary fees for SKYY and CIBR were equal to the median total
(net) expense ratio of the peer funds in each Fund's respective Expense Group
and that the unitary fee for each other Fund was above the median total (net)
expense ratio of the peer funds in its respective Expense Group. With respect to
the Expense Groups, the Board, at the April 18, 2019 meeting, discussed with
Broadridge its methodology for assembling peer groups and discussed with the
Advisor limitations in creating peer groups for index ETFs, including
differences in underlying indexes and index-tracking methodologies that can
result in greater management complexities across seemingly comparable ETFs, and
different business models that may affect the pricing of services among ETF
sponsors. The Board took these limitations and differences into account in
considering the peer data. With respect to fees charged to other non-ETF
clients, the Board considered differences between the Funds and other non-ETF
clients that limited their comparability. In considering the unitary fee rates
overall, the Board also considered the Advisor's statement that it seeks to meet
investor needs through innovative and value-added investment solutions and the
Advisor's 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. With the exception of NXTG,
the Board received and reviewed information for periods ended December 31, 2018
regarding the performance of each Fund's underlying index, the correlation
between each Fund's performance and that of its underlying index, each Fund's
tracking difference and each Fund's excess return as compared to its benchmark
index. With respect to NXTG, the Board noted that during 2019, it approved
changes to the Fund's investment objective and, effective May 29, 2019, the Fund
changed its name and ticker symbol and began tracking the Indxx 5G & NextG
Thematic Index. The Board noted that there was no information on NXTG's
correlation and tracking difference versus its new underlying index as of
December 31, 2018. With respect to FTRI and FTAG, the Board noted that during
2015, shareholders of each Fund approved changes to each Fund's investment
objective and, effective December 18, 2015, each Fund changed its name and
ticker symbol, FTRI began tracking the Indxx Global Natural Resources Income
Index and FTAG began tracking the Indxx Global Agricultural Index, and that the
performance information included a blend of the old and new indexes. Based on
the information provided and its ongoing review of performance, the Board
concluded that each Fund was correlated to its underlying index and that the
tracking difference for each Fund was within a reasonable range. In addition,
the Board reviewed data prepared by Broadridge comparing each Fund's performance
to that of its respective Performance Universe and to that of a broad-based
benchmark index, 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 unitary fee and performance
of each Fund and the ongoing oversight by the Board, the Board concluded that
the unitary fee for each Fund continues to be reasonable and appropriate in
light of the nature, extent and quality of the services provided by the Advisor
to each Fund under the Agreements.
The Board considered information and discussed with the Advisor whether there
were any economies of scale in connection with providing advisory services to
the Funds and noted the Advisor's statement that it believes its expenses will
likely increase over the next twelve months as the Advisor continues to hire
personnel and build infrastructure, including technology, to improve the
services to the Funds. The Board noted that any reduction in fixed costs
associated with the management of the Funds would benefit the Advisor, but that
the unitary fee structure provides a level of certainty in expenses for the
Funds. The Board considered the revenues and allocated costs (including the
allocation methodology) of the Advisor in serving as investment advisor to each
Fund for the twelve months ended December 31, 2018 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
Page 114
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
period. The Board noted the inherent limitations in the profitability analysis
and concluded that, based on the information provided, the Advisor's
profitability level for each Fund was not unreasonable. In addition, the Board
considered fall-out benefits described by the Advisor that may be realized from
its relationship with the Funds. The Board considered that the Advisor had
identified as a fall-out benefit to the Advisor and FTP their exposure to
investors and brokers who, absent their exposure to the Funds, may have had no
dealings with the Advisor or FTP, and noted that the Advisor does not utilize
soft dollars in connection with the Funds. The Board concluded that the
character and amount of potential fall-out benefits to the Advisor were not
unreasonable.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreements continue to be fair and reasonable and that the continuation
of the Agreements is in the best interests of each Fund. No single factor was
determinative in the Board's analysis.
REMUNERATION
First Trust Advisors L.P. ("First Trust") is authorised and regulated by the
U.S. Securities and Exchange Commission and is entitled to market shares of
certain First Trust Exchange-Traded Fund II funds it manages (the "Funds") in
certain member states in the European Economic Area in accordance with the
cooperation arrangements in Article 42 of the Alternative Investment Fund
Managers Directive (the "Directive"). First Trust is required under the
Directive to make disclosures in respect of remuneration. The following
disclosures are made in line with First Trust's interpretation of currently
available regulatory guidance on remuneration disclosures.
During the year ended December 31, 2018, the amount of remuneration paid (or to
be paid) by First Trust Advisors L.P. in respect of the Funds is $1,699,636.
This figure is comprised of $74,478 paid (or to be paid) in fixed compensation
and $1,625,158 paid (or to be paid) in variable compensation. There were a total
of 14 beneficiaries of the remuneration described above. Those amounts include
$1,079,359 paid (or to be paid) to senior management of First Trust Advisors
L.P. and $620,277 paid (or to be paid) to other employees whose professional
activities have a material impact on the risk profiles of First Trust Advisors
L.P. or the Funds (collectively, "Code Staff").
Code Staff included in the aggregated figures disclosed above are rewarded in
line with First Trust's remuneration policy (the "Remuneration Policy") which is
determined and implemented by First Trust's senior management. The Remuneration
Policy reflects First Trust's ethos of good governance and encapsulates the
following principal objectives:
i. to provide a clear link between remuneration and performance of
First Trust and to avoid rewarding for failure;
ii. to promote sound and effective risk management consistent with the
risk profiles of the Funds managed by First Trust; and
iii. to remunerate staff in line with the business strategy, objectives,
values and interests of First Trust and the Funds managed by First
Trust in a manner that avoids conflicts of interest.
First Trust assesses various risk factors which it is exposed to when
considering and implementing remuneration for Code Staff and considers whether
any potential award to such person(s) would give rise to a conflict of interest.
First Trust does not reward failure, or consider the taking of risk or failure
to take risk in its remuneration of Code Staff.
First Trust assesses performance for the purposes of determining payments in
respect of performance-related remuneration of Code Staff by reference to a
broad range of measures including (i) individual performance (using financial
and non-financial criteria), and (ii) the overall performance of First Trust.
Remuneration is not based upon the performance of the Funds.
The elements of remuneration are balanced between fixed and variable and the
senior management sets fixed salaries at a level sufficient to ensure that
variable remuneration incentivises and rewards strong individual performance but
does not encourage excessive risk taking.
No individual is involved in setting his or her own remuneration.
Page 115
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
NAME, YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 162 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed
LLC (April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 162 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM Investor
Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 162 Director of Trust
(1956) Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 162 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services);
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products
and Services); President and Chief
Executive Officer (June 2012 to
September 2014), Dew Learning LLC
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 162 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 116
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BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer
(1966) Officer (January 2016 to Present), Controller (January 2011
o Since January 2016 to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC (Software
Development Company) and Stonebridge Advisors
LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
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PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2019
Page 118
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FIRST TRUST
First Trust Exchange-Traded Fund II
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund II
--------------------------------------------------------------------------------
Book 2
First Trust IPOX(R) Europe Equity Opportunities ETF (FPXE)
First Trust Dow Jones International Internet ETF (FDNI)
----------------------
Annual Report
For the Period Ended
September 30, 2019
----------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL REPORT
SEPTEMBER 30, 2019
Shareholder Letter ....................................................................... 2
Market Overview .......................................................................... 3
Fund Performance Overview
First Trust IPOX(R) Europe Equity Opportunities ETF (FPXE) ......................... 4
First Trust Dow Jones International Internet ETF (FDNI) ............................ 6
Notes to Fund Performance Overview ....................................................... 8
Understanding Your Fund Expenses ......................................................... 9
Portfolio of Investments
First Trust IPOX(R) Europe Equity Opportunities ETF (FPXE) ......................... 10
First Trust Dow Jones International Internet ETF (FDNI) ............................ 12
Statements of Assets and Liabilities ..................................................... 14
Statements of Operations ................................................................. 15
Statements of Changes in Net Assets ...................................................... 16
Financial Highlights ..................................................................... 17
Notes to Financial Statements ............................................................ 18
Report of Independent Registered Public Accounting Firm .................................. 24
Additional Information ................................................................... 25
Board of Trustees and Officers ........................................................... 28
Privacy Policy ........................................................................... 30
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund II (the "Trust") described in
this report (each such series is referred to as a "Fund" and collectively, as
the "Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund shares may therefore be less than what you paid
for them. Accordingly, you can lose money by investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund and presents data and analysis that provide
insight into each Fund's performance and investment approach.
By reading the market overview by Robert F. Carey, Chief Market Strategist of
the Advisor, you may obtain an understanding of how the market environment
affected the performance of each Fund. The statistical information that follows
may help you understand each Fund's performance compared to that of relevant
market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in each
Fund are spelled out in its prospectus, statement of additional information, and
other Fund regulatory filings.
Page 1
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SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
SEPTEMBER 30, 2019
Dear Shareholders,
First Trust is pleased to provide you with the annual report for certain series
of the First Trust Exchange-Traded Fund II (the "Funds"), which contains
detailed information about the Funds since their respective inception on October
4, 2018, for First Trust IPOX(R) Europe Equity Opportunities ETF, and November
5, 2018, for First Trust Dow Jones International Internet ETF, to September 30,
2019, including a market overview and a performance analysis. We encourage you
to read this report carefully and discuss it with your financial advisor.
One of our responsibilities as asset managers is to be good listeners. Perhaps
the most effective way in which we do this continually is by paying close
attention to mutual fund and exchange-traded fund ("ETF") money flows. After
all, investors vote with their dollars, and money flows provide valuable
feedback. Over the past 12 months, we have learned that investors, in general,
have grown more risk-averse. For the 12-month period ended September 30, 2019,
investors funneled an estimated net $290.39 billion into bond mutual funds and
ETFs, while liquidating an estimated net $54.19 billion from equity mutual funds
and ETFs, according to data from Morningstar. Over the same period, money market
funds took in an estimated net $529.80 billion. Those figures were more balanced
for the full-year 2018. Those estimated net flows were as follows: $94.42
billion (equity mutual funds & ETFs); $137.60 billion (bond mutual funds &
ETFs); and $161.60 billion (money market funds).
In addition to monitoring fund flows, we watch the performance of all the asset
classes. Market returns can either help validate or invalidate our
interpretation of money flows. As we noted above, we believe that investors have
tempered their appetite for risk, and the returns on the major sectors that
comprise the S&P 500(R) Index back it up. For the 12-month period ended
September 30, 2019, as measured by total return, the top performers by far were
Utilities, Real Estate and Consumer Staples, up 27.10%, 24.74% and 16.85%,
respectively, according to Bloomberg. The S&P 500(R) Index posted a total return
of 4.25% for the same period. These three sectors are all defensive in nature.
They also tend to distribute cash dividends that are often well above those
sectors that are more cyclical in nature. The higher dividend distributions
likely drew the attention of fixed-income investors dissatisfied with the
current low-yield climate in the bond market, in our opinion.
To be fair, the apprehension being exhibited by investors lately also extends to
corporate executives, both here in the U.S. and abroad. Data from Refinitiv
indicates that global mergers and acquisitions ("M&A") activity declined by 16%
year-over-year to $729 billion in the third quarter of 2019, the lowest
quarterly volume since 2016, according to Reuters. U.S. M&A activity plunged 40%
year-over-year to $246 billion in the third quarter of 2019, the lowest
quarterly volume in the U.S. since 2014. The ongoing trade conflict between the
U.S. and China reportedly weighed heavily on dealmaking.
The absence of a new trade deal between the U.S. and China has been a bit of a
wet blanket on the global economy. Global growth projections have been trimmed
over time by such organizations as the International Monetary Fund. The tariffs
have been in play for 18 months and counting as of September 2019. While the
lack of any significant progress in the negotiations between the U.S. and China
is a concern, we believe a remedy will be found. Remember, as bad as things may
appear in the current climate, investors with diversified investment portfolios
were most likely rewarded over the past 12 months. Stay the course and stay
engaged!
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
--------------------------------------------------------------------------------
MARKET OVERVIEW
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL REPORT
SEPTEMBER 30, 2019
ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of research and analysis of
the First Trust product line. Mr. Carey has over 27 years of experience as an
Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial
Analyst ("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service and Registered Rep.
STATE OF THE GLOBAL ECONOMY
The trade conflict between the U.S. and China remains a work-in-progress. The
Trump Administration has been steadfast in applying economic pressure to China
via trade tariffs. The two parties have held numerous talks over the 18-month
process to date but are still searching for enough common ground to forge an
agreement, or even a partial deal. We believe the ongoing dispute has clearly
been a drag on global economic growth. President Trump has been very outspoken
about his desire for the Federal Reserve (the "Fed") to lower rates to help
offset the tempered growth stemming from the tariffs. While the Fed did initiate
two 25 basis point reductions in the third quarter of 2019, which lowered the
federal funds target rate (upper bound) from 2.50% to 2.00%, President Trump
would like the Fed to be even more aggressive with rate cuts moving forward. He
cites negative interest rates and bond yields in parts of Europe and Japan as
support for his view.
The global growth forecast from the International Monetary Fund ("IMF") released
at the start of October reflects a downgrade for 2019 from its 3.3% estimate in
April 2019 to 3.0%. It sees the rate of growth rebounding to 3.4% in 2020. The
IMF notes that the escalation in trade tariffs between the U.S. and China has
negatively impacted business sentiment and confidence globally. It estimates
that real gross domestic product growth in the U.S. will be 2.4% in 2019 and
2.1% in 2020. These projections are subject to change, and we would expect them
to be adjusted higher should the U.S. and China reach an agreement on trade
policy in the not-too-distant future. While we believe a recession is inevitable
at some point, we do not see one looming in the near-term.
While we need to keep a close eye on the direction of global economic growth
moving forward, investors are still getting some positive feedback from
companies around the world. Dividend payouts from common stock continue to trend
higher. Historically speaking, rising cash dividend distributions have been a
barometer of strength in the private sector. In the second quarter of 2019
(latest data), global dividends totaled $513.8 billion, an all-time high for a
second quarter, according to Janus Henderson. It estimates that global dividends
will total $1.43 trillion for full-year 2019.
PERFORMANCE OF GLOBAL STOCKS AND BONDS
The three major Standard & Poor's stock indices delivered mixed results for the
12-month period ended September 30, 2019. The S&P 500(R) Index, S&P MidCap
400(R) Index and S&P SmallCap 600(R) Index posted total returns of 4.25%,
-2.49%, and -9.34%, respectively, according to Bloomberg. Nine of the 11 major
S&P 500(R) Index sectors posted positive total returns. The top-performing
sectors were Utilities, Real Estate and Consumer Staples, up 27.10%, 24.74% and
16.85%, respectively, on a total return basis. The worst-performing sectors were
Energy and Health Care, down 19.21% and 3.57%, respectively. We believe that
small- and mid-cap stocks succumbed to some selling pressure in the period due
to investor concerns over slowing economic growth. Small- and mid-sized
companies are inherently riskier and not nearly as well-capitalized as their
large company counterparts, in our opinion.
In the U.S. bond market, the top-performing major debt group we track was
long-term municipal bonds. The Bloomberg Barclays 22+ Year U.S. Municipal Bond
Index posted a total return of 11.30% for the 12-month period ended September
30, 2019. The worst-performing debt group that we track was high yield corporate
bonds, though it finished in positive territory. The Bloomberg Barclays U.S.
Corporate High Yield Index posted a total return of 6.36%. The yield on the
benchmark 10-Year Treasury Note ("T-Note") plunged by 139 basis points in the
period to close at 1.67% on September 30, 2019, according to Bloomberg. For
comparative purposes, the average yield on the 10-year T-Note was 2.44% for the
10-year period ended September 30, 2019. The combination of the tempering of
global growth and the Fed rate cuts were a boon for investors holding
investment-grade debt securities, in our opinion.
The U.S. dollar registered a gain of 4.47% against a basket of major currencies
for the 12-month period ended September 30, 2019, as measured by the U.S. Dollar
Index (DXY). With respect to U.S. investors, we believe a stronger U.S. dollar
can negatively impact returns on unhedged foreign securities. We believe the
dollar strengthened due to the escalating trade tariff battle between the U.S.
and China. The U.S. has often been a safe haven for foreign investors during
uncertain times.
Investors appear to have favored foreign bonds over foreign stocks for the
12-month period ended September 30, 2019. The Bloomberg Barclays Global
Aggregate Index of higher quality debt posted a total return of 7.60% (USD),
while the Bloomberg Barclays EM Hard Currency Aggregate Index of emerging
markets debt rose by 9.07% (USD), according to Bloomberg Barclays. With respect
to equities, the MSCI World ex USA Index posted a total return of -0.95% (USD),
compared to -2.02% (USD) for the MSCI Emerging Markets Index.
Page 3
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
The First Trust IPOX(R) Europe Equity Opportunities ETF (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the IPOX(R) 100 Europe Index
(the "Index"). The shares of the Fund are listed and trade on The Nasdaq Stock
Market LLC under the ticker symbol "FPXE." The Fund will normally invest at
least 90% of its net assets (including investment borrowings) in common stocks
and/or depositary receipts that comprise the Index. The Index is owned,
developed, maintained and sponsored by IPOX(R) Schuster LLC. The Index seeks to
measure the performance of the equity securities of the 100 largest and
typically most liquid initial public offerings ("IPOs") (including spin-offs and
equity carve-outs) of companies that are economically tied to Europe.
---------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(10/4/18)
to 9/30/19
FUND PERFORMANCE
NAV 1.32%
Market Price 1.57%
INDEX PERFORMANCE
IPOX(R) 100 Europe Index 2.55%
MSCI Europe Index 0.91%
---------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 8.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of 1.32% during the period
since its inception on October 4, 2018, through September 30, 2019. During the
same period, the benchmark MSCI Europe Index generated a return of 0.91%. Over
the period, the Fund allocated 17.8% to the Health Care Sector, which was more
than the weight given to any other sector. Investments in Health Care returned
4.0% during the period, contributing 1.5% to the Fund's return. Utilities
provided a greater contribution to the Fund's return than any other sector
during the period. With 11.1% allocation, Utilities returned 27.4% and
contributed 2.7% to the Fund's total return. Investments in the Consumer
Discretionary sector caused the greatest drag on the portfolio. This sector
received a 13.4% allocation, returned -6.8% during the period and contributed
-3.1% to the Fund's total return. The Fund's currency exposure caused -4.8%
performance during the same period. On a relative basis, the Fund outperformed
the benchmark. The well performing Utilities sector had the greatest
contribution to this outperformance, causing 1.9% of outperformance versus the
benchmark. Meanwhile, investments in the Consumer Discretionary sector caused
-2.0% of underperformance versus the benchmark, more than investments in any
other sector.
-----------------------------
IPOX(R) and the Index are registered international trademarks of IPOX(R)
Schuster LLC ("IPOX") and have been licensed for use by First Trust. The Fund is
not sponsored, endorsed, sold or promoted by IPOX and IPOX makes no
representation regarding the advisability of trading in such Fund.
Page 4
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Health Care 21.73%
Consumer Discretionary 16.18
Industrials 13.55
Financials 12.58
Information Technology 12.45
Utilities 10.84
Communication Services 7.88
Real Estate 2.38
Materials 1.32
Energy 0.94
Consumer Staples 0.15
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Novartis AG 10.19%
Prosus N.V. 4.95
Ferrari N.V. 4.94
Siemens Healthineers AG 4.90
Orsted A/S 4.86
Atlassian Corp. PLC, Class A 3.79
Alcon, Inc. 3.55
Aena SME S.A. 3.42
E. ON SE 3.35
Adyen N.V. 2.42
------
Total 46.37%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
OCTOBER 4, 2018 - SEPTEMBER 30, 2019
First Trust IPOX(R) Europe IPOX(R) 100 MSCI Europe
Equity Opportunities ETF Europe Index Index
-------------------------- ------------ -----------
10/4/18 $10,000 $10,000 $10,000
3/31/19 9,715 9,769 9,836
9/30/19 10,132 10,255 10,091
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 THROUGH SEPTEMBER 30, 2019
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 October 5, 2018 (commencement
of trading) through September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/5/18 - 9/30/19 187 8 0 0 48 4 0 0
Page 5
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
The First Trust Dow Jones International Internet ETF (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Dow Jones International
Internet Index (the "Index"). The shares of the Fund are listed and trade on The
Nasdaq Stock Market LLC under the ticker symbol "FDNI." The Fund will normally
invest at least 90% of its net assets (including investment borrowings) in the
securities that comprise the Index. The Index is developed, maintained and
sponsored by S&P Dow Jones Indices LLC and is designed to measure the
performance of securities of non-US issuers whose primary business focus is
Internet-related.
---------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(11/5/18)
to 9/30/19
FUND PERFORMANCE
NAV 9.07%
Market Price 8.56%
INDEX PERFORMANCE
Dow Jones International Internet Index 9.78%
MSCI All Country World ex-USA Information Technology Index 15.46%
---------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 8.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 9.07% during the period since its inception
on November 5, 2018, through September 30, 2019. During the same period, the
benchmark MSCI All Country World ex-USA Information Technology Index generated a
return of 15.46%. Over the period, the Fund was most heavily weighted towards
the Technology Services sector. This sector received an allocation of 59.2% and
contributed 5.9% to the Fund's overall return, more than any other sector in the
Fund during the period. The largest negative contribution to the Fund's return
came from investments in the Communications sector, which had an average weight
in the Fund of 2.9% and caused a -0.6% drag on the Fund's return. The Fund's
currency exposure caused -1.9% performance during the period. On a relative
basis, the Fund underperformed the benchmark. Most of this underperformance came
via selection effect within the overweight Technology Services sector.
Investments in this sector caused -3.2% of underperformance versus the
benchmark. Meanwhile, the Fund earned 1.6% of outperformance versus the
benchmark by simply avoiding allocations to Electronic Technology, which
received 59.9% allocation in the benchmark.
-----------------------------
The Index is a product of S&P Dow Jones Indices LLC or its affiliates ("SPDJI"),
and has been licensed for use by First Trust. Standard & Poor's(R) and S&P(R)
are registered trademarks of Standard & Poor's Financial Services LLC ("S&P");
Dow Jones(R) is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow
Jones"); and these trademarks have been licensed for use by SPDJI and
sublicensed for certain purposes by First Trust. The Fund is not sponsored,
endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective
affiliates and none of such parties make any representation regarding the
advisability of investing in such product nor do they have any liability for any
errors, omissions, or interruptions of the Index.
Page 6
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 46.39%
Communication Services 37.82
Information Technology 13.95
Health Care 1.84
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Tencent Holdings Ltd. 10.01%
Alibaba Group Holding Ltd., ADR 9.98
Naspers Ltd., Class N 9.53
Meituan Dianping, Class B 6.37
Prosus N.V. 5.67
Shopify, Inc., Class A 5.50
Baidu, Inc., ADR 5.01
JD.com, Inc., ADR 4.33
NAVER Corp. 3.36
NetEase, Inc., ADR 3.25
------
Total 63.01%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 5, 2018 - SEPTEMBER 30, 2019
First Trust Dow Jones Dow Jones International MSCI All Country World ex-USA
International Internet ETF Internet Index Information Technology Index
-------------------------- ----------------------- ------------------------------
11/5/18 $10,000 $10,000 $10,000
3/31/19 11,275 11,318 10,877
9/30/19 10,907 10,977 11,546
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 THROUGH SEPTEMBER 30, 2019
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 November 6, 2018
(commencement of trading) through September 30, 2019. 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 NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
11/6/18 - 9/30/19 104 17 0 0 88 12 3 1
Page 7
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Cumulative Total Returns" represent the total change in
value of an investment over the periods indicated.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of each Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
each Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in each Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike each Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 8
FIRST TRUST EXCHANGE-TRADED FUND II
UNDERSTANDING YOUR FUND EXPENSES
SEPTEMBER 30, 2019 (UNAUDITED)
As a shareholder of First Trust IPOX(R) Europe Equity Opportunities ETF or First
Trust Dow Jones International Internet ETF (each a "Fund" and collectively, the
"Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing
costs, including management fees, distribution and/or service fees, if any, and
other Fund expenses. This Example is intended to help you understand your
ongoing costs (in U.S. dollars) of investing in the Funds and to compare these
costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended September 30, 2019.
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 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
APRIL 1, 2019 SEPTEMBER 30, 2019 PERIOD PERIOD (a)
------------------------------------------------------------------------------------------------------------------------
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
Actual $1,000.00 $1,042.90 0.70% $3.58
Hypothetical (5% return before expenses) $1,000.00 $1,021.56 0.70% $3.55
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
Actual $1,000.00 $ 967.40 0.65% $3.21
Hypothetical (5% return before expenses) $1,000.00 $1,021.81 0.65% $3.29
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (April 1,
2019 through September 30, 2019), multiplied by 183/365 (to reflect the
six-month period).
Page 9
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.8%
AUSTRIA -- 0.5%
244 BAWAG Group AG (b) $ 9,606
--------------
CAYMAN ISLANDS -- 0.1%
269 Opera Ltd., ADR (c) 2,703
--------------
DENMARK -- 5.8%
116 Ascendis Pharma A/S, ADR (c) 11,173
122 Netcompany Group A/S (b) (c) 4,866
1,027 Orsted A/S (b) 95,444
244 Scandinavian Tobacco Group
A/S (b) 2,855
--------------
114,338
--------------
FINLAND -- 1.1%
485 DNA OYJ 11,038
604 Kojamo OYJ 9,888
--------------
20,926
--------------
FRANCE -- 4.9%
987 ALD S.A. (b) 14,093
591 Amundi S.A. (b) 41,227
136 Gaztransport Et Technigaz S.A. 13,467
446 Worldline S.A. (b) (c) 28,146
--------------
96,933
--------------
GERMANY -- 17.0%
461 Delivery Hero SE (b) (c) 20,481
489 DWS Group GmbH & Co.
KGaA (b) 14,455
6,756 E. ON SE 65,677
429 Hapag-Lloyd AG (b) 30,861
402 HelloFresh SE (c) 6,099
394 Knorr-Bremse AG 37,035
263 Scout24 AG (b) 14,992
2,443 Siemens Healthineers AG (b) 96,112
894 Uniper SE 29,321
197 Varta AG (c) 19,432
--------------
334,465
--------------
ICELAND -- 0.4%
1,883 Marel HF (b) (c) 8,620
--------------
IRELAND -- 1.0%
6,630 AIB Group PLC 19,685
--------------
ISRAEL -- 0.1%
79 Inmode Ltd (c) 1,699
--------------
ITALY -- 6.4%
1,323 Enav S.p.A. (b) 7,470
2,076 Infrastrutture Wireless Italiane
S.p.A. (b) 21,541
1,976 Italgas S.p.A. 12,755
1,533 Nexi S.p.A. (b) (c) 15,633
2,443 Pirelli & C S.p.A. (b) 14,453
3,988 Poste Italiane S.p.A. (b) 45,336
664 RAI Way S.p.A. (b) 3,857
491 Technogym S.p.A. (b) 5,459
--------------
126,504
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
JERSEY ISLAND -- 1.5%
240 Novocure Ltd. (c) $ 17,947
251 Wizz Air Holdings PLC (b) (c) 11,157
--------------
29,104
--------------
LUXEMBOURG -- 1.0%
577 Ardagh Group S.A. 9,048
83 Befesa S.A. (b) 2,967
217 Shurgard Self Storage S.A. 6,918
--------------
18,933
--------------
NETHERLANDS -- 21.4%
2,296 ABN AMRO Bank N.V., (b) 40,479
72 Adyen N.V. (b) (c) 47,431
92 Argenx SE, ADR (c) 10,484
344 ASR Nederland N.V. 12,699
134 Basic-Fit N.V. (b) (c) 4,199
187 Elastic N.V. (c) 15,398
171 Euronext N.V. (b) 13,988
628 Ferrari N.V. 96,890
622 GrandVision N.V. (b) 18,630
128 IMCD N.V. 9,466
221 Intertrust N.V. (b) 4,321
839 NN Group N.V. 29,757
1,323 Prosus N.V. (c) 97,119
314 Signify N.V. (b) 8,635
149 Takeaway.com N.V. (b) (c) 11,888
--------------
421,384
--------------
NORWAY -- 1.8%
1,664 Adevinta ASA, Class A (c) 19,278
1,420 Elkem ASA (b) 3,456
445 Entra ASA (b) 6,975
255 Fjordkraft Holding ASA (b) 1,474
278 Scatec Solar ASA (b) 3,572
--------------
34,755
--------------
SPAIN -- 5.8%
366 Aena SME S.A. (b) 67,019
730 Cellnex Telecom S.A. (b) 30,156
1,148 Merlin Properties Socimi S.A. 16,029
--------------
113,204
--------------
SWEDEN -- 4.6%
990 Bravida Holding AB (b) 8,684
444 Evolution Gaming Group AB (b) 8,732
414 Hemfosa Fastigheter AB 4,193
222 Lifco AB, Class B 10,468
410 Nyfosa AB (c) 2,791
409 Pandox AB 8,152
489 Resurs Holding AB (b) 2,898
2,248 Tele2 AB, Class B 33,455
251 THQ Nordic AB (c) 6,191
252 Thule Group AB (b) 4,772
--------------
90,336
--------------
SWITZERLAND -- 16.4%
1,194 Alcon, Inc. (c) 69,627
134 CRISPR Therapeutics AG (c) 5,493
122 Galenica AG (b) 7,004
Page 10 See Notes to Financial Statements
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SWITZERLAND (CONTINUED)
72 Landis+Gyr Group AG $ 6,453
49 Medacta Group SA (b) (c) 4,001
2,307 Novartis AG 200,038
782 SIG Combibloc Group AG 10,421
244 Stadler Rail AG (c) 10,957
73 VAT Group AG (b) 9,205
--------------
323,199
--------------
UNITED KINGDOM -- 9.5%
998 AJ Bell PLC 5,074
245 Atlantica Yield PLC 5,902
593 Atlassian Corp. PLC, Class A (c) 74,386
2,261 Auto Trader Group PLC (b) 14,178
2,395 Avast PLC (b) 11,426
133 Endava PLC, ADR (c) 5,034
432 Energean Oil & Gas PLC (c) 4,977
1,710 Finablr PLC (b) (c) 3,259
1,000 Ibstock PLC (b) 2,904
809 IntegraFin Holdings PLC 3,939
1,204 John Laing Group PLC (b) 5,433
1,221 Network International Holdings
PLC (b) (c) 8,032
232 Orchard Therapeutics PLC,
ADR (c) 2,756
4,647 Quilter PLC (b) 7,790
484 Softcat PLC 5,963
1,190 Sophos Group PLC (b) 5,860
1,087 SSP Group PLC 8,286
1,174 Trainline PLC (b) (c) 6,048
3,093 Vivo Energy PLC (b) 4,754
--------------
186,001
--------------
UNITED STATES -- 0.5%
117 SolarEdge Technologies, Inc. (c) 9,795
--------------
TOTAL INVESTMENTS -- 99.8% 1,962,190
(Cost $1,790,545) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 4,023
--------------
NET ASSETS -- 100.0% $ 1,966,213
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is restricted in the U.S. and cannot be offered for public
sale without first being registered under the Securities Act of 1933, as
amended. This security is not restricted on the foreign exchange where it
trades freely without any additional registration. As such, it does not
require the additional disclosure required of restricted securities.
(c) Non-income producing security.
(d) Aggregate cost for federal income tax purposes is $1,794,375. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$230,823 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$63,008. The net unrealized appreciation was $167,815.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 1,962,190 $ -- $ --
=============================================
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
Euro 57.9%
Swiss Franc 16.2
United States Dollar 8.7
British Pound Sterling 5.6
Danish Krone 5.2
Swedish Krona 4.6
Norwegian Krone 1.8
------
Total 100.0%
======
See Notes to Financial Statements Page 11
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2019
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.8%
CANADA -- 5.5%
742 Shopify, Inc., Class A (b) $ 230,914
--------------
CAYMAN ISLANDS -- 46.4%
681 58.com, Inc., ADR (b) 33,580
2,504 Alibaba Group Holding Ltd.,
ADR (b) 418,744
421 Autohome, Inc., ADR (b) 34,998
2,047 Baidu, Inc., ADR (b) 210,350
2,950 Ctrip.com International Ltd.,
ADR (b) 86,405
6,442 JD.com, Inc., ADR (b) 181,729
26,160 Meituan Dianping, Class B (b) 267,351
1,163 Momo, Inc., ADR 36,030
512 NetEase, Inc., ADR 136,284
1,201 Pagseguro Digital Ltd.,
Class A (b) 55,618
1,458 Sea Ltd., ADR (b) 45,125
9,967 Tencent Holdings Ltd. 419,907
2,816 Vipshop Holdings Ltd., ADR (b) 25,119
--------------
1,951,240
--------------
GERMANY -- 3.9%
978 Delivery Hero SE (b) (c) 43,449
749 Scout24 AG (c) 42,697
926 United Internet AG 33,034
983 Zalando SE (b) (c) 44,871
--------------
164,051
--------------
ISLE OF MAN -- 0.9%
4,281 GVC Holdings PLC 39,130
--------------
ISRAEL -- 0.9%
336 Wix.com Ltd. (b) 39,225
--------------
JAPAN -- 7.0%
700 CyberAgent, Inc. 26,867
3,200 M3, Inc. 77,007
3,500 Nexon Co., Ltd. (b) 42,437
6,100 Rakuten, Inc. 60,083
19,700 Yahoo Japan Corp. 55,388
1,500 ZOZO, Inc. 34,571
--------------
296,353
--------------
LUXEMBOURG -- 2.0%
719 Spotify Technology S.A. (b) 81,966
--------------
NETHERLANDS -- 10.0%
177 Adyen N.V. (b) (c) 116,602
3,242 Prosus N.V. (b) 237,990
1,820 Yandex N.V., Class A (b) 63,718
--------------
418,310
--------------
NEW ZEALAND -- 0.8%
789 Xero Ltd. (b) 33,172
--------------
SOUTH AFRICA -- 9.5%
2,637 Naspers Ltd., Class N 399,607
--------------
SOUTH KOREA -- 5.6%
378 Kakao Corp. 42,820
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SOUTH KOREA (CONTINUED)
1,074 NAVER Corp. $ 140,967
119 NCSoft Corp. 51,832
--------------
235,619
--------------
UNITED KINGDOM -- 7.3%
875 Atlassian Corp. PLC, Class A (b) 109,760
6,953 Auto Trader Group PLC (c) 43,600
4,392 Just Eat PLC (b) 36,084
4,344 Ocado Group PLC (b) 70,637
6,660 Rightmove PLC 45,087
--------------
305,168
--------------
TOTAL INVESTMENTS -- 99.8% 4,194,755
(Cost $4,317,887) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 8,952
--------------
NET ASSETS -- 100.0% $ 4,203,707
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) Non-income producing security.
(c) This security is restricted in the U.S. and cannot be offered for public
sale without first being registered under the Securities Act of 1933, as
amended. This security is not restricted on the foreign exchange where it
trades freely without any additional registration. As such, it does not
require the additional disclosure required of restricted securities.
(d) Aggregate cost for federal income tax purposes is $4,346,415. As of
September 30, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$298,220 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$449,880. The net unrealized depreciation was $151,660.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------------
Common Stocks* $ 4,194,755 $ -- $ --
=============================================
* See Portfolio of Investments for country breakout.
Page 12 See Notes to Financial Statements
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2019
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
United States Dollar 37.1%
Hong Kong Dollar 16.4
Euro 12.4
South African Rand 9.5
Japanese Yen 7.1
South Korean Won 5.6
British Pound Sterling 5.6
Canadian Dollar 5.5
Australian Dollar 0.8
------
Total 100.0%
======
See Notes to Financial Statements Page 13
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2019
FIRST TRUST FIRST TRUST
IPOX(R) EUROPE DOW JONES
EQUITY INTERNATIONAL
OPPORTUNITIES ETF INTERNET ETF
(FPXE) (FDNI)
---------------------- ----------------------
ASSETS:
Investments, at value ................................................. $ 1,962,190 $ 4,194,755
Cash .................................................................. 2,241 10,467
Foreign currency, at value ............................................ 499 445
Receivables:
Reclaims ........................................................... 1,924 72
Investment securities sold ......................................... 328 --
Dividends .......................................................... 180 342
---------------- ----------------
Total Assets ....................................................... 1,967,362 4,206,081
---------------- ----------------
LIABILITIES:
Investment advisory fees payable ...................................... 1,149 2,374
---------------- ----------------
Total Liabilities .................................................. 1,149 2,374
---------------- ----------------
NET ASSETS ............................................................ $ 1,966,213 $ 4,203,707
================ ================
NET ASSETS CONSIST OF:
Paid-in capital ....................................................... $ 1,968,757 $ 4,379,417
Par value ............................................................. 1,000 2,000
Accumulated distributable earnings (loss) ............................. (3,544) (177,710)
---------------- ----------------
NET ASSETS ............................................................ $ 1,966,213 $ 4,203,707
================ ================
NET ASSET VALUE, per share ............................................ $ 19.66 $ 21.02
================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 100,002 200,002
================ ================
Investments, at cost .................................................. $ 1,790,545 $ 4,317,887
================ ================
Foreign currency, at cost (proceeds) .................................. $ 497 $ 445
================ ================
Page 14 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 2019 (a)
FIRST TRUST FIRST TRUST
IPOX(R) EUROPE DOW JONES
EQUITY INTERNATIONAL
OPPORTUNITIES ETF INTERNET ETF
(FPXE) (FDNI)
---------------------- ----------------------
INVESTMENT INCOME:
Dividends.............................................................. $ 51,926 $ 173,201
Foreign withholding tax................................................ (5,581) (469)
---------------- ----------------
Total investment income............................................. 46,345 172,732
---------------- ----------------
EXPENSES:
Investment advisory fees............................................... 13,125 22,152
---------------- ----------------
Total expenses...................................................... 13,125 22,152
---------------- ----------------
NET INVESTMENT INCOME (LOSS)........................................... 33,220 150,580
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (177,605) (124,754)
In-kind redemptions................................................. -- 362,451
Foreign currency transactions....................................... (264) (2,719)
---------------- ----------------
Net realized gain (loss)............................................... (177,869) 234,978
---------------- ----------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 171,645 (123,132)
Foreign currency translation........................................ (20) (1)
---------------- ----------------
Net change in unrealized appreciation (depreciation)................... 171,625 (123,133)
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (6,244) 111,845
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 26,976 $ 262,425
================ ================
(a) Inception dates for FPXE and FDNI are October 4, 2018 and November 5,
2018, respectively, which are consistent with the respective Fund's
commencement of investment operations and are the dates the initial
creation units were established.
See Notes to Financial Statements Page 15
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
IPOX(R) EUROPE DOW JONES
EQUITY INTERNATIONAL
OPPORTUNITIES ETF INTERNET ETF
(FPXE) (FDNI)
------------------ ------------------
Period Ended Period Ended
9/30/2019 (a) 9/30/2019 (a)
------------------ ------------------
OPERATIONS:
Net investment income (loss)..................................................... $ 33,220 $ 150,580
Net realized gain (loss)......................................................... (177,869) 234,978
Net change in unrealized appreciation (depreciation)............................. 171,625 (123,133)
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations............................................................... 26,976 262,425
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................ (30,520) (91,831)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................ 1,969,757 6,249,885
Cost of shares redeemed.......................................................... -- (2,216,772)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions................................................. 1,969,757 4,033,113
---------------- ----------------
Total increase (decrease) in net assets.......................................... 1,966,213 4,203,707
NET ASSETS:
Beginning of period.............................................................. -- --
---------------- ----------------
End of period.................................................................... $ 1,966,213 $ 4,203,707
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.......................................... -- --
Shares sold...................................................................... 100,002 300,002
Shares redeemed.................................................................. -- (100,000)
---------------- ----------------
Shares outstanding, end of period................................................ 100,002 200,002
================ ================
(a) Inception dates for FPXE and FDNI are October 4, 2018 and November 5,
2018, respectively, which are consistent with the respective Fund's
commencement of investment operations and are the dates the initial
creation units were established.
Page 16 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
PERIOD ENDED
9/30/2019 (a)
-------------
Net asset value, beginning of period $ 19.70
-----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.33
Net realized and unrealized gain (loss) (0.06)
-----------
Total from investment operations 0.27
-----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.31)
-----------
Net asset value, end of period $ 19.66
===========
TOTAL RETURN (b) 1.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,966
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.70% (c)
Ratio of net investment income (loss) to
average net assets 1.77% (c)
Portfolio turnover rate (d) 67%
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
PERIOD ENDED
9/30/2019 (a)
-------------
Net asset value, beginning of period $ 19.69
-----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.75
Net realized and unrealized gain (loss) 1.04
-----------
Total from investment operations 1.79
-----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.46)
-----------
Net asset value, end of period $ 21.02
===========
TOTAL RETURN (b) 9.07%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 4,204
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.65% (c)
Ratio of net investment income (loss) to
average net assets 4.42% (c)
Portfolio turnover rate (d) 61%
(a) Inception dates for FPXE and FDNI are October 4, 2018 and November 5,
2018, respectively, which are consistent with the respective Fund's
commencement of investment operations and are the dates the initial
creation units were established.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The return presented does not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(c) Annualized.
(d) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 17
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
1. ORGANIZATION
First Trust Exchange-Traded Fund II (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on July 6, 2006,
and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of sixteen exchanged-traded funds. This report
covers the two funds listed below:
First Trust IPOX(R) Europe Equity Opportunities ETF - (The Nasdaq Stock
Market LLC ("Nasdaq") ticker "FPXE")(1)
First Trust Dow Jones International Internet ETF - (Nasdaq ticker "FDNI")(1)
(1) FPXE and FDNI commenced investment operations on October 4, 2018 and
November 5, 2018, respectively.
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." Each Fund's Creation Units are generally issued and redeemed
in-kind for securities in which a Fund invests, and in certain circumstances,
for cash, and only to and from broker-dealers and large institutional investors
that have entered into participation agreements. Except when aggregated in
Creation Units, each Fund's shares are not redeemable securities. The investment
objective of each Fund is to seek investment results that correspond generally
to the price and yield (before the Fund's fees and expenses) of the following
indices:
FUND INDEX
First Trust IPOX(R) Europe Equity Opportunities ETF IPOX(R) 100 Europe Index
First Trust Dow Jones International Internet ETF Dow Jones International Internet Index
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the Funds in the preparation of the
financial statements. The preparation of the financial statements in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP") requires management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. Each Fund's investments are valued as
follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding Nasdaq and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
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
Page 18
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund or exchange-traded fund trading of similar
securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
In addition, differences between the prices used to calculate a Fund's NAV and
the prices used by such Fund's corresponding index could result in a difference
between a Fund's performance and the performance of its underlying index.
Because foreign markets may be open on different days than the days during which
investors may transact in the shares of a Fund, the value of the Fund's
securities may change on the days when investors are not able to transact in the
shares of the Fund. The value of securities denominated in foreign currencies is
converted into U.S. dollars using exchange rates determined daily as of the
close of regular trading on the NYSE. Any use of a different rate from the rates
used by a relevant index may adversely affect the Fund's ability to track the
index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of September 30, 2019, is
included with each Fund's Portfolio of Investments.
Page 19
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Withholding taxes and tax reclaims on foreign dividends have been provided for
in accordance with each Fund's understanding of the applicable country's tax
rules and rates.
C. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statements of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statements of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received and are included in "Net
realized gain (loss) on foreign currency transactions" on the Statements of
Operations. The portion of foreign currency gains and losses related to
fluctuations in exchange rates between the initial purchase settlement date and
subsequent sale trade date is included in "Net realized gain (loss) on
investments" on the Statements of Operations.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on significantly modified portfolio securities
held by the Funds and have no impact on net assets or NAV per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future.
The tax character of distributions paid by each Fund during the fiscal period
ended September 30, 2019 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
---------------- -------------- --------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 30,520 $ -- $ --
First Trust Dow Jones International Internet ETF 91,831 -- --
As of September 30, 2019, the components of distributable earnings on a tax
basis for each Fund were as follows:
Accumulated Net
Undistributed Capital and Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
---------------- -------------- --------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 6,349 $ (177,688) $ 167,795
First Trust Dow Jones International Internet ETF 56,127 (82,176) (151,661)
E. INCOME TAXES
Each Fund intends to qualify as a regulated investment company by complying with
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended, which includes distributing substantially all of its net investment
income and net realized gains to shareholders. Accordingly, no provision has
been made for federal and state income taxes. However, due to the timing and
amount of distributions, each Fund may be subject to an excise tax of 4% of the
amount by which approximately 98% of each Fund's taxable income exceeds the
distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable year ending 2019
remains open to federal and state audit. As of September 30, 2019, 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.
Page 20
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
Each Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
Each Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At September 30, 2019, the
Funds had non-expiring capital loss carryforwards available 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 each applicable Fund's
shareholders.
Non-Expiring
Capital Loss
Carryforwards
---------------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 177,688
First Trust Dow Jones International Internet ETF 82,176
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal period ended September 30, 2019, the Funds
had no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
period ended September 30, 2019, the adjustments for each Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) Paid-in
Income (Loss) on Investments Capital
---------------- -------------- --------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 122 $ (122) $ --
First Trust Dow Jones International Internet ETF (2,622) (345,682) 348,304
F. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
First Trust has entered into licensing agreements with each of the following
"Licensors" for the respective Funds:
FUND LICENSOR
First Trust IPOX(R) Europe Equity Opportunities ETF IPOX(R) Schuster LLC
First Trust Dow Jones International Internet ETF S&P Dow Jones Indices LLC
The respective license agreements allow for the use of each Fund's respective
index and of certain trademarks and trade names of the respective Licensors. The
Funds are sub-licensees to the applicable license agreements. The Funds'
licensing fees are paid by First Trust from the unitary investment advisory fees
it receives from each of the Funds.
G. NEW ACCOUNTING PRONOUNCEMENT
On August 28, 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13,
"Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement," which amends the fair value measurement disclosure requirements of
ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified
disclosure requirements of ASC 820. In addition, the amendments clarify that
materiality is an appropriate consideration of entities when evaluating
disclosure requirements. The ASU is effective for fiscal years beginning after
December 15, 2019, including interim periods therein. Early adoption is
permitted for any eliminated or modified disclosures upon issuance of this ASU.
The Funds have early adopted ASU 2018-13 for these financial statements, which
did not result in a material impact.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
Page 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
Pursuant to the Investment Management Agreement between the Trust and the
Advisor, First Trust manages the investment of the Funds' assets and is
responsible for the expenses of each Fund including the cost of transfer agency,
custody, fund administration, legal, audit and other services and license fees
(if any), but excluding fee payments under the Investment Management Agreement,
interest, taxes, acquired fund fees and expenses, brokerage commissions and
other expenses connected with the execution of portfolio transactions,
distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and
extraordinary expenses, which are paid by each respective Fund. FPXE and FDNI
have each agreed to pay First Trust an annual unitary management fee equal to
0.70% and 0.65% of its average daily net assets, respectively.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the fiscal period ended September 30, 2019, 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 IPOX(R) Europe Equity Opportunities ETF $ 1,273,499 $ 1,267,598
First Trust Dow Jones International Internet ETF 2,860,220 2,198,478
For the fiscal period ended September 30, 2019, the cost of in-kind purchases
and proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
---------------- --------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 1,963,624 $ --
First Trust Dow Jones International Internet ETF 5,558,403 2,139,955
5. CREATIONS, REDEMPTIONS 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"). In order to purchase Creation Units of a Fund, an
Authorized Participant must deposit (i) a designated portfolio of equity
securities determined by First Trust (the "Deposit Securities") and generally
make or receive a cash payment referred to as the "Cash Component," which is an
amount equal to the difference between the NAV of the Fund Shares (per Creation
Unit Aggregation) and the market value of the Deposit Securities, and/or (ii)
cash in lieu of all or a portion of the Deposit Securities. If the Cash
Component is a positive number (i.e., the NAV per Creation Unit Aggregation
exceeds the Deposit Amount), the Authorized Participant will deliver the Cash
Component. If the Cash Component is a negative number (i.e., the NAV per
Creation Unit Aggregation is less than the Deposit Amount), the Authorized
Participant will receive the Cash Component. Authorized Participants purchasing
Creation Units must pay to BNYM, as transfer agent, a creation fee (the
"Creation Transaction Fee") regardless of the number of Creation Units purchased
in the transaction. The Creation Transaction Fee may vary and is based on the
composition of the securities included in each Fund's portfolio and the
countries in which the transactions are settled. The Creation Transaction Fee
may increase or decrease as each Fund's portfolio is adjusted to conform to
changes in the composition of its corresponding index. The price for each
Creation Unit will equal the daily NAV per share times the number of shares in a
Creation Unit plus the fees described above and, if applicable, any operational
processing and brokerage costs, transfer fees or stamp taxes. When a Fund
permits an Authorized Participant to substitute cash or a different security in
lieu of depositing one or more of the requisite Deposit Securities, the
Authorized Participant may also be assessed an amount to cover the cost of
purchasing the Deposit Securities and/or disposing of the substituted
securities, including operational processing and brokerage costs, transfer fees,
stamp taxes, and part or all of the spread between the expected bid and offer
side of the market related to such Deposit Securities and/or substitute
securities.
Page 22
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in each Fund's portfolio and the countries in which the
transactions are settled. The Redemption Transaction Fee may increase or
decrease as each Fund's portfolio is adjusted to conform to changes in the
composition of its corresponding index. Each Fund reserves the right to effect
redemptions in cash. An Authorized Participant may request a cash redemption in
lieu of securities; however, each 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 October 1, 2020 for
First Trust IPOX(R) Europe Equity Opportunities ETF, and October 31, 2020 for
First Trust Dow Jones International Internet ETF.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
Page 23
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND
II:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First
Trust IPOX(R) Europe Equity Opportunities ETF and First Trust Dow Jones
International Internet ETF (the "Funds"), each a series of the First Trust
Exchange-Traded Fund II (the "Trust"), including the portfolios of investments,
as of September 30, 2019, and the related statements of operations, changes in
net assets, and the financial highlights for the periods indicated in the table
below, and the related notes. In our opinion, the financial statements and
financial highlights present fairly, in all material respects, the financial
position of each of the funds listed above included in the First Trust
Exchange-Traded Fund II as of September 30, 2019, and the results of their
operations, the changes in their net assets, and the financial highlights for
the period listed in the table below, in conformity with accounting principles
generally accepted in the United States of America.
-----------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL FUNDS INCLUDED STATEMENTS OF STATEMENTS OF CHANGES FINANCIAL
IN THE TRUST OPERATIONS IN NET ASSETS HIGHLIGHTS
-----------------------------------------------------------------------------------------------------------------------------------
First Trust IPOX(R) Europe Equity For the period from October 4, 2018 (commencement of operations) through
Opportunities ETF September 30, 2019
-----------------------------------------------------------------------------------------------------------------------------------
First Trust Dow Jones International For the period from November 5, 2018 (commencement of operations) through
Internet ETF September 30, 2019
-----------------------------------------------------------------------------------------------------------------------------------
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Funds' internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 2019, by correspondence
with the custodian and brokers; when replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
November 21, 2019
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 24
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
each Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal
quarter within 60 days after the end of the relevant fiscal quarter on Form
N-PORT. Portfolio holdings information for the third month of each fiscal
quarter will be publicly available on the SEC's website at www.sec.gov. Each
Fund's complete schedule of portfolio holdings for the second and fourth
quarters of each fiscal year is included in the semi-annual and annual reports
to shareholders, respectively, and is filed with the SEC on Form N-CSR. The
semi-annual and annual report for each Fund is available to investors within 60
days after the period to which it relates. Each Fund's Forms N-PORT and Forms
N-CSR are available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable period ended September 30, 2019, the following percentages of
income dividend paid by the Funds qualified for the dividends received deduction
available to corporations:
Dividends Received Deduction
----------------------------
First Trust IPOX(R) Europe Equity Opportunities ETF 0.00%
First Trust Dow Jones International Internet ETF 0.00%
For the taxable period ended September 30, 2019, the following percentages of
income dividend paid by the Funds are hereby designated as qualified dividend
income:
Qualified Dividend Income
----------------------------
First Trust IPOX(R) Europe Equity Opportunities ETF 100.00%
First Trust Dow Jones International Internet ETF 100.00%
The following Funds meet the requirements of Section 853 of the Internal Revenue
Code and elect to pass through to their shareholders credit for foreign taxes
paid. For the taxable period ended September 30, 2019, the total amounts of
income received by the Funds from sources within foreign countries and
possessions of the United States and of taxes paid to such countries are as
follows:
Gross Foreign Income Foreign Taxes Paid
--------------------------- ---------------------------
Amount Per Share Amount Per Share
------------- ------------ ------------- ------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 51,558 $ 0.52 $ 5,561 $ 0.06
First Trust Dow Jones International Internet ETF 173,221 0.87 469 0.00
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
Page 25
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. As a result, such a fund may be included in one or more index-tracking
exchange-traded funds or mutual funds. Being a component security of such a
vehicle could greatly affect the trading activity involving a fund, the size of
the fund and the market volatility of the fund. Inclusion in an index could
significantly increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
Page 26
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; different legal or accounting standards; and less government supervision
and regulation of exchanges in foreign countries. Investments in non-U.S.
securities may involve higher costs than investments in U.S. securities,
including higher transaction and custody costs, as well as additional taxes
imposed by non-U.S. governments. These risks may be heightened for securities of
companies located, or with significant operations, in emerging market countries.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 27
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
NAME, YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 162 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed
LLC (April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 162 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM Investor
Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 162 Director of Trust
(1956) Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 162 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services);
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products
and Services); President and Chief
Executive Officer (June 2012 to
September 2014), Dew Learning LLC
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 162 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 28
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer
(1966) Officer (January 2016 to Present), Controller (January 2011
o Since January 2016 to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC (Software
Development Company) and Stonebridge Advisors
LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 29
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2019 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2019
Page 30
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FIRST TRUST
First Trust Exchange-Traded Fund II
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless
of whether these individuals are employed by the registrant or a third
party.
(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, and that relates to any element of the code of ethics
description.
(d) The registrant, during the period covered by this report, has not granted
any waivers, including an implicit waiver, from a provision of the code of
ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller,
or persons performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party, that relates
to one or more of the items set forth in paragraph (b) of this item's
instructions.
(e) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's Board of
Trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified
to serve as audit committee financial experts serving on its audit committee and
that each of them is "independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees (Registrant) -- The aggregate fees billed for each of the
last two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial statements or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements were $305,000 for the fiscal
year ended September 30, 2018 and $356,250 for the fiscal year ended September
30, 2019.
(b) Audit-Related Fees (Registrant) -- The aggregate fees billed in each
of the last two fiscal years for assurance and related services by the principal
accountant that are reasonably related to the performance of the audit of the
registrant's financial statements and are not reported under paragraph (a) of
this Item were $0 for the fiscal year ended September 30, 2018 and $0 for the
fiscal year ended September 30, 2019.
Audit-Related Fees (Investment Adviser and Distributor) -- The aggregate
fees billed in each of the last two fiscal years for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item were $0 for the fiscal year ended
September 30, 2018 and $0 for the fiscal year ended September 30, 2019.
(c) Tax Fees (Registrant) -- The aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal accountant
for tax compliance, tax advice, and tax planning to the registrant were $63,405
for the fiscal year ended September 30, 2018, and $140,941 for the fiscal year
ended September 30, 2019. These fees were for tax return review and multistate
tax compliance.
Tax Fees (Investment Adviser and Distributor) -- The aggregate fees billed
in each of the last two fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and tax planning to the
registrant's adviser and distributor were $0 for the fiscal year ended September
30, 2018 and $0 for the fiscal year ended September 30, 2019.
(d) All Other Fees (Registrant) -- The aggregate fees billed in each of
the last two fiscal years for products and services provided by the principal
accountant to the registrant, other than the services reported in paragraphs (a)
through (c) of this Item were $0 for the fiscal year ended September 30, 2018
and $0 for the fiscal year ended September 30, 2019.
All Other Fees (Investment Adviser and Distributor) -- The aggregate fees
billed in each of the last two fiscal years for products and services provided
by the principal accountant to the registrant's investment adviser and
distributor, other than the services reported in paragraphs (a) through (c) of
this Item were $0 for the fiscal year ended September 30, 2018 and $0 for the
fiscal year ended September 30, 2019.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval
Policy, the Audit Committee (the "Committee") is responsible for the
pre-approval of all audit services and permitted non-audit services (including
the fees and terms thereof) to be performed for the registrant by its
independent auditors. The Chairman of the Committee is authorized to give such
pre-approvals on behalf of the Committee up to $25,000 and report any such
pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent
auditor's engagements for non-audit services with the registrant's adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and any entity
controlling, controlled by or under common control with the investment adviser
that provides ongoing services to the registrant, if the engagement relates
directly to the operations and financial reporting of the registrant, subject to
the de minimis exceptions for non-audit services described in Rule 2-01 of
Regulation S-X. If the independent auditor has provided non-audit services to
the registrant's adviser (other than any sub-adviser whose role is primarily
portfolio management and is sub-contracted with or overseen by another
investment adviser) and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to its policies, the Committee
will consider whether the provision of such non-audit services is compatible
with the auditor's independence.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) for the registrant and the registrant's investment adviser and
distributor of this Item that were approved by the audit committee pursuant to
the pre-approval exceptions included in paragraph (c)(7)(i)(C) or
paragraph(C)(7)(ii) of Rule 2-01 of Regulation S-X are as follows:
Registrant: Adviser and Distributor:
----------- ------------------------
(b) 0% (b) 0%
(c) 0% (c) 0%
(d) 0% (d) 0%
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most recent
fiscal year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was less than fifty
percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's investment
adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment adviser),
and any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant for the fiscal year
ended September 30, 2018 were $63,405 for the registrant, $48,190 for the
registrant's investment adviser and $80,310 for the registrant's distributor and
for the fiscal year ended September 30, 2019 were $140,941 for the registrant,
$28,500 for the registrant's investment adviser and $34,400 for the registrant's
distributor.
(h) The registrant's audit committee of its Board of Trustees has
determined that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal accountant's
independence.
ITEMS 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The audit committee of the registrant is comprised of: Richard E. Erickson,
Thomas R. Kadlec, Robert F. Keith and Niel B. Nielson.
ITEM 6. INVESTMENTS.
(a) The Schedule of Investments in securities of unaffiliated issuers as of
the close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407 (c) (2) (iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22 (b) (15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3 (c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this
paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as
amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the period covered by this report that
have materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
(a) Not applicable.
(b) Not applicable.
ITEM 13. EXHIBITS.
(a) (1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a) (2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a) (3) Not applicable.
(a) (4) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) First Trust Exchange-Traded Fund II
----------------------------------------------------
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: December 5, 2019
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: December 5, 2019
------------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: December 5, 2019
------------------
* Print the name and title of each signing officer under his or her signature.