FIRST TRUST

First Trust Exchange-Traded Fund
Book 3

First Trust Dividend Strength ETF (FTDS)
First Trust Dow 30 Equal Weight ETF (EDOW)
First Trust Lunt U.S. Factor Rotation ETF (FCTR)
First Trust Growth Strength ETF (FTGS)
First Trust Indxx Aerospace & Defense ETF (MISL)

Annual Report
For The Period Ended
December 31, 2022

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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2022

Shareholder Letter.......................................................... 2
Market Overview............................................................. 3
Fund Performance Overview
First Trust Dividend Strength ETF (FTDS)................................. 4
First Trust Dow 30 Equal Weight ETF (EDOW)............................... 6
First Trust Lunt U.S. Factor Rotation ETF (FCTR)......................... 8
First Trust Growth Strength ETF (FTGS)................................... 10
First Trust Indxx Aerospace & Defense ETF (MISL)......................... 12
Notes to Fund Performance Overview.......................................... 14
Understanding Your Fund Expenses............................................ 15
Portfolio of Investments
First Trust Dividend Strength ETF (FTDS)................................. 16
First Trust Dow 30 Equal Weight ETF (EDOW)............................... 18
First Trust Lunt U.S. Factor Rotation ETF (FCTR)......................... 19
First Trust Growth Strength ETF (FTGS)................................... 23
First Trust Indxx Aerospace & Defense ETF (MISL)......................... 25
Statements of Assets and Liabilities........................................ 26
Statements of Operations.................................................... 27
Statements of Changes in Net Assets......................................... 28
Financial Highlights........................................................ 30
Notes to Financial Statements............................................... 33
Report of Independent Registered Public Accounting Firm..................... 42
Additional Information...................................................... 43
Board of Trustees and Officers.............................................. 51
Privacy Policy.............................................................. 53

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CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.

Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (each such series is referred to as a "Fund" and collectively, as the
"Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.

PERFORMANCE AND RISK DISCLOSURE

There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund's shares may therefore be less than what you paid
for them. Accordingly, you can lose money by investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of certain other risks of investing in the Funds.

Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.

The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at www.ftportfolios.com.

HOW TO READ THIS REPORT

This report contains information that may help you evaluate your investment. It
includes details about each Fund and presents data and analysis that provide
insight into each Fund's performance and investment approach.

By reading the market overview by Robert F. Carey, Chief Market Strategist of
the Advisor, you may obtain an understanding of how the market environment
affected the performance of each Fund. The statistical information that follows
may help you understand each Fund's performance compared to that of relevant
market benchmarks.

It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in each
Fund are spelled out in its prospectus, statement of additional information, and
other Fund regulatory filings.

Page 1

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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2022

Dear Shareholders:

First Trust is pleased to provide you with the annual report for certain funds
in the First Trust Exchange-Traded Fund (the "Funds"), which contains detailed
information about the Funds for the twelve months ended December 31, 2022.
Please note that both the First Trust Growth Strength ETF and the First Trust
Indxx Aerospace & Defense ETF were incepted on October 25, 2022 and therefore,
any information in this letter or the annual report prior to the Funds'
inception date does not apply to those Funds.

The past year was filled with challenges, several of which surely tested the
resolve of even the most seasoned investors. The year began with the same
headwinds that existed at the end of 2021, namely: stubbornly high inflation and
rising interest rates. When Russia invaded Ukraine in late February 2022, we
added war, geopolitical tension, and potential food and energy shortages to the
list. Considering the bleak backdrop at the start of the year, it probably does
not surprise you to read that with a total return of -18.11%, 2022 was the worst
year for the S&P 500(R) Index since 2008. Even the bond market struggled to
provide a haven to weary investors. The Bloomberg U.S. Aggregate Bond Index
posted a total return of -13.01% for the year; its worst total return in 45
years.

A common topic of discussion in 2022 was whether central banks around the world
had tightened monetary policy enough to quell inflation without causing excess
damage to their economies. In the U.S., the Federal Reserve (the "Fed")
described this as a "soft landing," stating it was their intent to keep the
labor market strong but to increase interest rates enough to bring inflation
down to 2.0%. True to their word, over the course of seven interest rate hikes,
the Fed increased the Federal Funds target rate (upper bound) from 0.25% (where
it stood in March 2022) to 4.50% as of December 2022. This is the highest the
Federal Funds rate has been since 2008.

The economic impact of the Fed's tighter monetary policy quickly became evident.
Excluding the economic contraction from COVID-19 in 2020, the U.S. experienced
its first decline in the gross domestic product ("GDP") growth rate since March
2014. Data from the U.S. Bureau of Economic Analysis indicates that annualized
real GDP growth rates over the first three quarters of 2022 were -1.6%, -0.6%,
and 3.2%, respectively. Thankfully, inflation, as measured by the trailing
12-month rate on the Consumer Price Index ("CPI"), appears to be responding to
the Fed's tightening. After peaking at 9.1% in June 2022, the CPI rate fell to
6.5% at the end of December 2022. For comparative purposes, the CPI rate has
averaged 2.5% over the past 30 years. Job creation has provided a respite from
dreary economic data in recent months, but that could quickly change. Nearly
125,000 employees have lost their jobs since June 2022 as more than 120 U.S.
companies announced layoffs, according to Forbes. The jury is still out on
whether the Fed will be able to pull off a soft landing, but the job market will
tell the tale, in my opinion.

Since 1928, the S&P 500(R) Index has only fallen for two consecutive years on
four occasions: The Great Depression, World War II, the oil crisis of the 1970s
and the burst of the dot-com bubble in the early 2000s. As we enter 2023, the
U.S. economy has significant obstacles to overcome to avoid a recession and
another negative year. We will be watching and reporting on what transpires.

Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.

Sincerely,

/s/ James A. Bowen

James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.

Page 2

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MARKET OVERVIEW
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FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2022

ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST
FIRST TRUST ADVISORS L.P.

Mr. Carey is responsible for the overall management of research and analysis of
the First Trust product line. Mr. Carey has more than 30 years of experience as
an Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial
Analyst ("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.

STATE OF THE ECONOMY/INVESTING

The Federal Reserve (the "Fed") remained steadfast in its battle with stubbornly
high inflation in 2022. The Federal Funds target rate (upper bound), which stood
at a mere 0.25% in January 2022 closed the year at 4.50%, its highest level in
over a decade. Fortunately, it appears that inflation, as measured by the
Consumer Price Index ("CPI") is responding to the Fed's tightening. After
peaking at 9.1% on a trailing 12-month basis in June 2022, the CPI fell to 6.5%
in December 2022. While we were glad to see a decline in the CPI, it still
stands significantly higher than the Fed's stated goal of 2.0%, suggesting that
further action by the Fed may be warranted, in my opinion.

The global growth forecast from the International Monetary Fund ("IMF") released
in October 2022 projected a 2.7% real gross domestic product ("GDP") growth rate
for 2023, down from 3.2% in 2022. The IMF is calling for a 1.0% growth rate for
the U.S. GDP in 2023, down from its 1.6% estimate for 2022. As has been the case
for many years, Emerging Market and Developing Economies are expected to grow
faster than Advanced Economies. Their 2023 growth rate estimates are 3.7% and
1.1%, respectively.

Investors continued to funnel capital into exchange-traded funds ("ETFs") and
related exchange-traded products ("ETPs") in 2022 despite the sharp sell-off in
the markets. ETFGI, an independent research and consultancy firm, reported that
total assets invested in ETFs/ETPs listed in the U.S. stood at $6.51 trillion as
of year-end, down 9.8% from $7.21 trillion at the end of 2021, according to its
own release. Net inflows to ETFs/ETPs listed in the U.S. stood at $607.23
billion in 2022, their second highest level on record, surpassed only by the
$919.78 billion of inflows in 2021.

U.S. STOCKS AND BONDS

In 2022, three of the major U.S. stock indices posted substantial double-digit
losses. The S&P 500(R) Index, the S&P MidCap 400(R) Index and the S&P SmallCap
600(R) Index posted total returns of -18.11%, -13.06%, and -16.10%,
respectively, according to Bloomberg. Of the 11 major sectors that comprise the
S&P 500(R) Index, only the Energy and Utilities sectors posted positive total
returns, up 65.72% and 1.57%, respectively. The two worst-performing sectors
were the Communication Services sector, down 39.89% and the Consumer
Discretionary sector, down 37.03%. Bloomberg's consensus year-over-year earnings
growth rate estimates for the S&P 500(R) Index for 2023 and 2024 were 1.97% and
9.87%, respectively, as of January 6, 2023.

The yield on the benchmark 10-Year Treasury Note ("T-Note") closed trading on
December 30, 2022, at 3.88%, according to Bloomberg. The 3.88% yield stood 173
basis points ("bps") above its 2.15% average for the 10-year period ended
December 30, 2022. Its yield rose 237 bps in 2022. Most bond investors likely
know that as yields increase, prices fall. As indicated by the sizeable increase
in the yield on the 10-Year T-Note, bond investors endured a challenging year of
declines in 2022. In the U.S. bond market, all the major bond groups posted
negative total returns in 2022. The top performing major debt group we track was
intermediate Treasuries. The Bloomberg U.S. Treasury Intermediate Index posted a
total return of -7.77%.

FOREIGN STOCKS AND BONDS

The U.S. dollar appreciated by 8.21% against a basket of major currencies in
2022, as measured by the U.S. Dollar Index ("DXY"), according to Bloomberg. The
DXY Index closed 2022 at a reading of 103.52, significantly above its 20-year
average of 88.53. The stronger U.S. dollar likely had a negative influence on
the returns of unhedged foreign securities held by U.S. investors.

The Bloomberg EM Hard Currency Aggregate Index of emerging markets debt posted a
total return of -16.60% (USD), while the Bloomberg Global Aggregate Index of
higher quality debt declined 16.25% (USD). With respect to equities, the MSCI
Emerging Markets Index of stocks posted a total return of -20.09% (USD), while
the MSCI World ex USA Index declined by 14.29% (USD) on a total return basis,
according to Bloomberg.

Page 3

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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST DIVIDEND STRENGTH ETF (FTDS)

The First Trust Dividend Strength ETF (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called The Dividend Strength Index(TM) (the
"Index"). The Index is owned, developed, maintained and sponsored by Nasdaq,
Inc. (the "Index Provider"). The Fund will normally invest at least 90% of its
net assets (including investment borrowings) in the common stocks and real
estate investment trusts that comprise the Index. The Index is designed to
provide exposure to well-capitalized companies with a history of increasing
their dividends. The term "well-capitalized" reflects companies that have strong
balance sheets with durable cash flow and a record of profitability. According
to the Index Provider, the Index screens companies for strong balance sheets, a
high degree of liquidity, the ability to increase dividends and a record of
dividend growth. To be eligible for inclusion in the Index, according to the
Index Provider, a security must: (i) have a minimum market capitalization of $5
billion; (ii) be ranked in the top 1,500 securities in the Nasdaq US Benchmark
Index by free-float market capitalization; and (iii) have a minimum three-month
average daily dollar trading volume of $5 million. To be included in the Index,
according to the Index Provider, a security's issuer must also have: (i) a
long-term debt to market cap ratio of less than 40%, (ii) a return on equity of
greater than 10%, (iii) a 5-year compounded dividend growth rate greater than
5%, and (iv) a dividend payout ratio of less than 50%. Each eligible security is
ranked based upon indicated dividend yield. Securities within each Industry
Classification Benchmark industry are ranked by dividend yield relative to their
industry peers, with the highest indicated dividend yielding security receiving
a rank of 1. The top 15 securities per industry are selected and combined for
the final evaluation universe. Each remaining security from the combined
evaluation universe is reranked based on indicated dividend yield with a rank of
1 representing the highest indicated dividend yield. The top 50 securities are
selected and are equally weighted. The Index is rebalanced and reconstituted
quarterly and the Fund will make corresponding changes to its portfolio shortly
after the Index changes are made public. The Fund's shares are listed for
trading on The Nasdaq Stock Market LLC. The first day of secondary market
trading in shares of the Fund was December 7, 2006.

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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 (12/5/06) Ended Ended (12/5/06)
12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22

FUND PERFORMANCE
NAV -13.75% 6.68% 9.46% 6.15% 38.18% 146.94% 160.86%
Market Price -13.78% 6.69% 9.48% 6.16% 38.25% 147.40% 161.26%

INDEX PERFORMANCE
The Dividend Strength Index(TM) (1)(2) N/A N/A N/A N/A N/A N/A N/A
Nasdaq AlphaDEX(R) Total US Market Index(1) -12.73% 7.57% N/A N/A 44.05% N/A N/A
S&P 500(R) Index(3) -18.11% 9.42% 12.56% 8.58% 56.88% 226.54% 275.53%
Russell 3000(R) Index -19.21% 8.79% 12.13% 8.41% 52.37% 214.28% 265.92%
Dow Jones U.S. Select Dividend Index 2.31% 8.38% 11.92% 7.78% 49.51% 208.30% 233.57%
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(1) On January 9, 2015, the Fund's underlying index changed from the Value
Line(R) Equity Allocation Index to the Nasdaq AlphaDEX(R) Total US Market
Index. On April 29, 2022, the Fund's underlying index changed again from
the Nasdaq AlphaDEX(R) Total US Market Index to The Dividend Strength
Index(TM). Therefore, the Fund's performance and total returns shown are
not necessarily indicative of the performance the Fund, based on its
current index, would have generated. Since the Nasdaq AlphaDEX(R) Total US
Market Index had an inception date of September 8, 2014, it was not in
existence for all of the periods disclosed.

(2) Because the Fund's underlying Index has an inception date of March 7,
2022, performance data for the Index is not available for the periods
shown in the table.

(3) The S&P 500(R) Index will serve as the Fund's new primary benchmark index.
The Fund's portfolio managers believe that the S&P 500(R) Index provides a
more appropriate comparison to Fund returns.

(See Notes to Fund Performance Overview on page 14.)

PERFORMANCE REVIEW

The Fund generated a net asset value ("NAV") return of -13.75% during the
12-month period covered by this report. During the same period, the Dow Jones
U.S. Select Dividend Index (the "Benchmark") generated a return of 2.31%.
Investments in the Financials sector were the largest sector allocation by
average weight at 27.3%. The largest contribution to the Fund's return was the
Information Technology sector, which contributed -5.6%. The largest positive
contribution to the Fund's return came from the Energy sector. This sector
contributed 2.3%, while only having an average weight of 5.0% during the period.

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Nasdaq(R) and The Dividend Strength Index(TM) are registered trademarks and
service marks of Nasdaq, Inc. (together with its affiliates hereinafter referred
to as the "Corporations") and are licensed for use by First Trust. The Fund has
not been passed on by the Corporations as to its legality or suitability. The
Fund is not issued, endorsed, sold or promoted by the Corporations. THE
CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.

Page 4

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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST DIVIDEND STRENGTH ETF (FTDS) (CONTINUED)

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% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
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Financials 30.1%
Industrials 26.8
Information Technology 11.2
Consumer Discretionary 9.8
Energy 9.5
Health Care 4.4
Materials 4.1
Consumer Staples 2.1
Real Estate 2.0
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Total 100.0%
=======

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% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Caterpillar, Inc. 2.4%
Best Buy Co., Inc. 2.4
BlackRock, Inc. 2.2
Norfolk Southern Corp. 2.2
Aflac, Inc. 2.2
Merck & Co., Inc. 2.2
Quest Diagnostics, Inc. 2.2
A.O. Smith Corp. 2.2
Hartford Financial Services
Group (The), Inc. 2.1
PACCAR, Inc. 2.1
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Total 22.2%
=======

PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2012 - DECEMBER 31, 2022

First Trust Dividend S&P 500(R) Russell 3000(R) Dow Jones U.S. Select Strength ETF Index Index Dividend Index 12/12 $10,000 $10,000 $10,000 $10,000 06/13 11,443 11,382 11,406 11,385 12/13 13,465 13,238 13,355 12,906 06/14 14,144 14,183 14,282 14,179 12/14 13,783 15,051 15,032 14,888 06/15 13,946 15,236 15,324 14,356 12/15 12,959 15,259 15,105 14,645 06/16 13,381 15,845 15,652 16,922 12/16 14,964 17,084 17,028 17,865 06/17 16,094 18,680 18,549 18,953 12/17 17,872 20,813 20,626 20,623 06/18 18,664 21,365 21,290 20,833 12/18 16,062 19,901 19,544 19,396 06/19 18,804 23,591 23,201 22,042 12/19 20,134 26,167 25,607 23,878 06/20 17,575 25,361 24,716 18,701 12/20 22,886 30,981 30,959 22,787 06/21 27,134 35,706 35,637 28,185 12/21 28,634 39,873 38,902 30,135 06/22 23,368 31,914 30,694 29,364 12/22 24,694 32,654 31,428 30,830 Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 5 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) The First Trust Dow 30 Equal Weight ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Dow Jones Industrial Average(R) Equal Weight Index (the "Index"). The Index is developed, maintained and sponsored by S&P Dow Jones Indices LLC (the "Index Provider"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks that comprise the Index. The Index is an equal weight version of the Dow Jones Industrial Average(R) (the "DJIA"). The 30 securities comprising the DJIA are issued by blue-chip U.S. companies covering all industries, with the exception of transportation and utilities. According to the Index Provider, inclusion in the DJIA is not governed by quantitative rules but rather is based on the following criteria: (i) the company is not a utility or in the transportation business; (ii) the company has a premier reputation in its field; (iii) the company has a history of successful growth; (iv) there is wide interest in the company among individual and institutional investors; and (v) the company should be incorporated and headquartered in the U.S. Whenever one component is changed, the others are reviewed. For the sake of historical continuity, composition changes are rarely made. According to the Index Provider, in the event that there is a change in the components of the DJIA, the component removed from the DJIA will simultaneously be removed from the Index, and the component that replaces the removed component will be added to the Index at the same weight as the component that was removed. The Index is rebalanced quarterly and reconstituted as needed and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. The Fund's shares are listed for trading on the NYSE Arca, Inc. The first day of secondary market trading in shares of the Fund was August 9, 2017. ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year 5 Years Inception 5 Years Inception Ended Ended (8/8/17) Ended (8/8/17) 12/31/22 12/31/22 to 12/31/22 12/31/22 to 12/31/22 FUND PERFORMANCE NAV -7.52% 7.54% 9.06% 43.81% 59.66% Market Price -7.55% 7.49% 9.05% 43.49% 59.60% INDEX PERFORMANCE Dow Jones Industrial Average(R) Equal Weight Index -7.14% 8.19% 9.71% 48.21% 64.86% Dow Jones Industrial Average(R) -6.86% 8.38% 10.21% 49.53% 69.01% ------------------------------------------------------------------------------------------------------------------------------------ (See Notes to Fund Performance Overview on page 14.) PERFORMANCE REVIEW The Fund generated a NAV return of -7.52% during the 12-month period covered by this report. During the same period, the Dow Jones Industrial Average(R) (the "Benchmark") generated a return of -6.86%. The largest sector allocation by weight in the Fund was the Information Technology sector, with an average portfolio weight of 22.8%. This sector also contributed the most to the Fund's return, contributing -6.1%. The largest positive contribution to the Fund's return came from the Health Care sector, which contributed 2.6% to the Fund's return. ----------------------------- Dow Jones Industrial Average(R) Equal Weight Index ("Index") is a product of S&P Dow Jones Indices LLC or its affiliates ("SPDJI") and has been licensed for use by First Trust. S&P(R) is a registered trademark of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones(R) is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by First Trust. The Fund is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product nor do they have any liability for any errors, omissions, or interruptions of the Index. Page 6 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 22.8% Industrials 13.7 Health Care 13.3 Financials 13.2 Consumer Staples 13.1 Consumer Discretionary 10.2 Communication Services 6.7 Energy 3.6 Materials 3.4 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- NIKE, Inc., Class B 3.6% Chevron Corp. 3.6 Boeing (The) Co. 3.6 Caterpillar, Inc. 3.5 Verizon Communications, Inc. 3.5 Merck & Co., Inc. 3.4 JPMorgan Chase & Co. 3.4 Honeywell International, Inc. 3.4 Salesforce, Inc. 3.4 Travelers (The) Cos., Inc. 3.4 ------- Total 34.8% ======= PERFORMANCE OF A $10,000 INITIAL INVESTMENT AUGUST 8, 2017 - DECEMBER 31, 2022

Dow Jones Industrial First Trust Dow 30 Average (R) Equal Dow Jones Industrial Equal Weight ETF Weight Index Average(R) 08/17 $10,000 $10,000 $10,000 12/17 11,102 11,124 11,302 06/18 11,024 11,069 11,219 12/18 11,004 11,079 10,908 06/19 12,615 12,739 12,588 12/19 13,676 13,849 13,674 06/20 12,342 12,576 12,521 12/20 14,552 14,874 15,004 06/21 16,500 16,922 17,072 12/21 17,263 17,753 18,146 06/22 14,914 15,372 15,526 12/22 15,966 16,486 16,901 Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 7 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) The First Trust Lunt U.S. Factor Rotation ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Lunt Capital Large Cap Factor Rotation Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks that comprise the Index. The Index is owned and was developed by Lunt Capital Management, Inc. (the "Index Provider"). The Index is calculated and maintained by Nasdaq, Inc. The Index is designed to track the performance of U.S. securities exhibiting desirable factor exposure. The Index utilizes the Index Provider's risk-adjusted relative strength methodology to allocate exposure to securities exhibiting either high or low levels of the characteristics associated with one of four primary investing factors: momentum, value, quality and volatility. The Index is rebalanced and reconstituted periodically and the Fund will make corresponding changes to its portfolio after the Index changes are made public. The Fund's shares are listed for trading on CBOE BZX Exchange, Inc. The first day of secondary market trading in shares of the Fund was July 26, 2018. ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Inception Inception Ended (7/25/18) (7/25/18) 12/31/22 to 12/31/22 to 12/31/22 FUND PERFORMANCE NAV -20.37% 8.54% 43.81% Market Price -20.37% 8.54% 43.86% INDEX PERFORMANCE The Lunt Capital Large Cap Factor Rotation Index -19.84% 9.34% 48.62% Nasdaq US 500 Large Cap Index(TM) -19.45% 8.72% 44.88% ------------------------------------------------------------------------------------------------------------------------------------ (See Notes to Fund Performance Overview on page 14.) PERFORMANCE REVIEW The Fund generated a NAV return of -20.37% during the 12-month period covered by this report. During the same period, the Nasdaq US 500 Large Cap Index(TM) (the "Benchmark") generated a return of -19.45%. The largest sector allocation by weight was the Financials sector, with an average portfolio weight of 17.0%. The Energy and Information Technology sectors were also highly weighted, at 15.5% each. The Information Technology sector contributed most to the Fund's return, contributing -10.2%. The largest positive contribution to the Fund's return came from the Energy sector, contributing 4.3% to the Fund's return. ----------------------------- Lunt Capital Management, Inc. ("Lunt") and the Lunt Capital Large Cap Factor Rotation Index ("Lunt Index") are trademarks of Lunt and have been licensed for use for certain purposes by First Trust. The First Trust Lunt U.S. Factor Rotation ETF is based on the Lunt Index and is not sponsored, endorsed, sold or promoted by Lunt, and Lunt makes no representation regarding the advisability of trading in such fund. Lunt has contracted with Nasdaq, Inc. to calculate and maintain the Lunt Index. The Fund is not sponsored, endorsed, sold or promoted by Nasdaq, Inc. or its affiliates (Nasdaq, with its affiliates, hereinafter referred to as the "Corporations"). The Corporations have not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the Fund. The Corporations make no representation or warranty, express or implied to the owners of the Fund or any member of the public regarding the advisability of investing in securities generally or in the Fund particularly, or the ability of the Lunt Index to track general stock performance. Page 8 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Financials 23.4% Energy 16.6 Health Care 11.7 Industrials 10.2 Consumer Staples 10.1 Information Technology 9.1 Consumer Discretionary 8.4 Materials 4.6 Communication Services 2.7 Utilities 1.6 Real Estate 1.6 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Occidental Petroleum Corp. 2.3% O'Reilly Automotive, Inc. 2.2 Cheniere Energy, Inc. 2.0 Marathon Petroleum Corp. 2.0 LPL Financial Holdings, Inc. 1.8 EQT Corp. 1.7 Texas Pacific Land Corp. 1.5 Hess Corp. 1.4 Marathon Oil Corp. 1.3 W.R. Berkley Corp. 1.2 ------- Total 17.4% ======= PERFORMANCE OF A $10,000 INITIAL INVESTMENT JULY 25, 2018 - DECEMBER 31, 2022

First Trust Lunt U.S. Lunt Capital Large Cap Nasdaq US 500 Factor Rotation ETF Factor Rotation Index Large Cap Index(TM) 07/18 $10,000 $10,000 $10,000 12/18 8,791 8,813 8,869 06/19 10,828 10,901 10,567 12/19 11,459 11,578 11,711 06/20 11,988 12,168 11,509 12/20 14,899 15,184 14,220 06/21 17,627 18,031 16,261 12/21 18,060 18,540 17,985 06/22 13,895 14,313 14,185 12/22 14,381 14,862 14,488 Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 9 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST GROWTH STRENGTH ETF (FTGS) The First Trust Growth Strength ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called The Growth Strength Index(TM) (the "Index"). Under normal market conditions, the Fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in the common stocks and real estate investment trusts ("REITs") that comprise the Index. The Index is developed, maintained and sponsored by Nasdaq, Inc. (the "Index Provider"). The Index seeks to provide exposure to a mix of domestic equities with filters for liquidity, return on equity, long-term debt, revenue and cash flow growth. Companies that do not meet requirements for maximum metrics on those criteria are filtered out of, or excluded from, the Index, according to the Index Provider. The Index is rebalanced and reconstituted quarterly and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. The Fund's shares are listed for trading on The Nasdaq Stock Market LLC. The first day of secondary market trading in shares of the Fund was October 26, 2022. ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (10/25/22) to 12/31/22 FUND PERFORMANCE NAV 1.20% Market Price 1.39% INDEX PERFORMANCE The Growth Strength Index(TM) 1.13% S&P 500(R) Index -0.15% ------------------------------------------------------------------------------------------------------------------------------------ (See Notes to Fund Performance Overview on page 14.) PERFORMANCE REVIEW The Fund generated a NAV return of 1.20% for the period from the Fund's inception date of October 25, 2022 through December 31, 2022. During the same period, the S&P 500(R) Index (the "Benchmark") generated a return of -0.15%. During the same period, the Fund was most heavily weighted towards investments in the Semiconductors & Semiconductor Equipment industry, which had an average weight of 15.6%. Investments in the Biotechnology industry generated a contribution of 1.5% to the Fund's to return, which was the greatest positive contribution of any industry. The largest negative contribution to the Fund's return was from the Automobiles industry, which contributed -0.9% to the Fund's return during the period. ----------------------------- Nasdaq(R) and The Growth Index(TM) are registered trademarks and service marks of Nasdaq, Inc. (together with its affiliates hereinafter referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 10 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST GROWTH STRENGTH ETF (FTGS) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 30.4% Health Care 26.3 Energy 14.6 Industrials 6.3 Materials 5.5 Real Estate 4.2 Financials 4.0 Communication Services 3.5 Consumer Discretionary 3.4 Consumer Staples 1.8 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Horizon Therapeutics PLC 3.4% KLA Corp. 2.5 Broadcom, Inc. 2.4 Hologic, Inc. 2.3 Etsy, Inc. 2.3 Applied Materials, Inc. 2.3 NVIDIA Corp. 2.3 Abbott Laboratories 2.2 Pfizer, Inc. 2.2 Incyte Corp. 2.2 ------- Total 24.1% ======= PERFORMANCE OF A $10,000 INITIAL INVESTMENT OCTOBER 25, 2022 - DECEMBER 31, 2022

First Trust Growth The Growth Strength S&P 500(R) Strength ETF Index(TM) Index 10/25/22 $10,000 $10,000 $10,000 12/31/22 10,120 10,113 9,985 Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 11 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST INDXX AEROSPACE & DEFENSE ETF (MISL) The First Trust Indxx Aerospace & Defense 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 US Aerospace & Defense Index (the "Index"). Under normal market conditions, the Fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in the common stocks that comprise the Index. The Fund will generally employ a full replication strategy, meaning that it will normally invest in all of the securities comprising the Index in proportion to their weightings in the Index. The Index is developed, maintained and sponsored by Indxx, Inc. (the "Index Provider"). According to the Index Provider, the Index's starting universe consists of U.S. companies engaged in business activities associated with the following aerospace and defense sub-themes, as identified by the Index Provider as Advanced Aerospace & Defense and are (1) Hypersonic: Companies involved in developing Hypersonic warfare weapons technology for defense related applications; (2) Directed Energy: Companies involved in developing weapons like high power microwaves, laser technology products and electromagnetic weapons for defense related applications; (3) Space Technologies: Companies involved in developing rockets, satellites and launch vehicles; (4) Unmanned Aerial Vehicle/Advanced Air Mobility: Companies that develop military aircrafts guided by remote control or programmed autonomously and companies involved in developing an air transportation system that moves cargo and people for defense related applications; or (5) Autonomous, Cybersecurity and C5ISR Systems: Companies involved in providing autonomous, cybersecurity, and C5ISR solutions for improving national security, enhancing public safety and designing better combat results. These sub-themes also include the commercial (non-government/defense) application of such activities. According to the Index Provider, the starting universe also includes Traditional Aerospace & Defense companies that manufacture construction materials, electronics, and telecommunications equipment used in the manufacture of aircraft for both defense and commercial aviation. From the starting universe, only companies that derive at least 50% of revenues from aerospace and defense activities in one or more of the sub-themes identified above will be eligible for inclusion in the Index, according to the Index Provider. These companies have their principal business strategies and/or growth prospects inextricably linked to aerospace and defense. The top 50 securities are selected and weighted. The Index is rebalanced quarterly and reconstituted semi-annually, and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. The Fund's shares are listed for trading on the NYSE Arca, Inc. The first day of secondary market trading in shares of the Fund was October 26, 2022. ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (10/25/22) to 12/31/22 FUND PERFORMANCE NAV 7.34% Market Price 7.44% INDEX PERFORMANCE Indxx US Aerospace & Defense Index 7.40% S&P 500(R) Index -0.15% S&P Composite 1500 Aerospace & Defense Index 9.23% ------------------------------------------------------------------------------------------------------------------------------------ (See Notes to Fund Performance Overview on page 14.) PERFORMANCE REVIEW The Fund generated a NAV return of 7.34% for the period from the Fund's inception date of October 25, 2022 through December 31, 2022. During the same period, the S&P 500(R) Index (the "Benchmark") generated a return of -0.15%. During the same period, the Fund was most heavily weighted towards investments in the Aerospace & Defense sub-industry. This sub-industry also contributed the most to the Fund's return, at 7.3%. The largest, and only negative, contribution to the Fund's return came from the Alternative Carriers sub-industry. This sub-industry had an average weight of 0.5% and contributed a relatively negligible -0.1% to the Fund's total return. ----------------------------- Indxx and Indxx US Aerospace & Defense Index ("Index") are trademarks of Indxx, Inc. ("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 12 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST INDXX AEROSPACE & DEFENSE ETF (MISL) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Industrials 99.6% Communication Services 0.4 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Boeing (The) Co. 9.6% Lockheed Martin Corp. 8.4 Raytheon Technologies Corp. 8.2 Northrop Grumman Corp. 7.9 General Dynamics Corp. 7.5 TransDigm Group, Inc. 4.1 Howmet Aerospace, Inc. 4.1 Leidos Holdings, Inc. 4.0 Textron, Inc. 4.0 HEICO Corp. 3.7 ------- Total 61.5% ======= PERFORMANCE OF A $10,000 INITIAL INVESTMENT OCTOBER 25, 2022 - DECEMBER 31, 2022

First Trust Indxx Indxx Aerospace & S&P 500(R) S&P Composite 1500 Aerospace & Defense ETF Defense Index Index Aerospace & Defense Index 10/25/22 $10,000 $10,000 $10,000 $10,000 12/31/22 10,734 10,740 9,985 10,923 Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 13 -------------------------------------------------------------------------------- NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- Total returns for the periods since inception are calculated from the inception date of each Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the periods indicated. "Cumulative Total Returns" represent the total change in value of an investment over the periods indicated. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the Advisor. Each Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint of the national best bid and offer price ("NBBO") as of the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund's NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund's NAV was calculated. Since shares of each Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in each Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund's past performance is no guarantee of future performance. Page 14 FIRST TRUST EXCHANGE-TRADED FUND UNDERSTANDING YOUR FUND EXPENSES DECEMBER 31, 2022 (UNAUDITED) As a shareholder of First Trust Dividend Strength ETF, First Trust Dow 30 Equal Weight ETF, First Trust Lunt U.S. Factor Rotation ETF, First Trust Growth Strength ETF, or First Trust Indxx Aerospace & Defense ETF (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds. The Example is based on an investment of $1,000 invested at the beginning of the period (or since inception) and held through the six-month (or shorter) period ended December 31, 2022. 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 Period" to estimate the expenses you paid on your account during this six-month (or shorter) period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. ----------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2022 DECEMBER 31, 2022 PERIOD PERIOD (b) ----------------------------------------------------------------------------------------------------------------------------- FIRST TRUST DIVIDEND STRENGTH ETF (FTDS) Actual $1,000.00 $1,056.90 0.70% (a) $3.63 Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% (a) $3.57 FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) Actual $1,000.00 $1,070.50 0.50% $2.61 Hypothetical (5% return before expenses) $1,000.00 $1,022.68 0.50% $2.55 FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) Actual $1,000.00 $1,034.90 0.65% $3.33 Hypothetical (5% return before expenses) $1,000.00 $1,021.93 0.65% $3.31 ----------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSES PAID EXPENSE RATIO DURING THE PERIOD BEGINNING ENDING BASED ON THE OCTOBER 25, 2022 (c) ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO OCTOBER 25, 2022 (c) DECEMBER 31, 2022 IN THE PERIOD DECEMBER 31, 2022 (d) ----------------------------------------------------------------------------------------------------------------------------- FIRST TRUST GROWTH STRENGTH ETF (FTGS) Actual $1,000.00 $1,012.00 0.60% $1.12 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 FIRST TRUST INDXX AEROSPACE & DEFENSE ETF (MISL) Actual $1,000.00 $1,073.40 0.60% $1.16 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 (a) These expense ratios reflect an expense cap. See Note 3 in Notes to Financial Statements. (b) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (July 1, 2022 through December 31, 2022), multiplied by 184/365 (to reflect the six-month period). (c) Inception date. (d) Actual expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (October 25, 2022 through December 31, 2022), multiplied by 68/365. Hypothetical expenses are assumed for the most recent six-month period. Page 15 FIRST TRUST DIVIDEND STRENGTH ETF (FTDS) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% AEROSPACE & DEFENSE -- 3.7% 1,492 General Dynamics Corp. $ 370,180 1,448 Huntington Ingalls Industries, Inc. 334,025 -------------- 704,205 -------------- AIR FREIGHT & LOGISTICS -- 2.0% 2,186 United Parcel Service, Inc., Class B 380,014 -------------- BANKS -- 13.3% 5,539 Comerica, Inc. 370,282 2,547 Cullen/Frost Bankers, Inc. 340,534 5,426 East West Bancorp, Inc. 357,573 5,000 Popular, Inc. 331,600 18,542 Regions Financial Corp. 399,766 10,096 Synovus Financial Corp. 379,105 7,569 Zions Bancorp N.A. 372,092 -------------- 2,550,952 -------------- BUILDING PRODUCTS -- 2.2% 7,220 A.O. Smith Corp. 413,273 -------------- CAPITAL MARKETS -- 6.3% 606 BlackRock, Inc. 429,430 4,543 Northern Trust Corp. 402,010 3,530 T. Rowe Price Group, Inc. 384,982 -------------- 1,216,422 -------------- CHEMICALS -- 2.0% 3,824 Celanese Corp. 390,966 -------------- CONTAINERS & PACKAGING -- 2.1% 3,095 Packaging Corp. of America 395,881 -------------- DISTRIBUTORS -- 2.0% 2,229 Genuine Parts Co. 386,754 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 3.8% 11,244 Corning, Inc. 359,133 3,150 TE Connectivity Ltd. 361,620 -------------- 720,753 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 2.0% 8,141 First Industrial Realty Trust, Inc. 392,885 -------------- FOOD PRODUCTS -- 2.1% 3,986 Bunge Ltd. 397,683 -------------- HEALTH CARE PROVIDERS & SERVICES -- 2.2% 2,647 Quest Diagnostics, Inc. 414,097 -------------- HOTELS, RESTAURANTS & LEISURE -- 1.8% 3,791 Texas Roadhouse, Inc. 344,791 -------------- INSURANCE -- 10.4% 5,936 Aflac, Inc. 427,036 10,265 Fidelity National Financial, Inc. 386,169 5,387 Hartford Financial Services Group (The), Inc. 408,496 SHARES DESCRIPTION VALUE ------------------------------------------------------------- INSURANCE (CONTINUED) 4,591 Principal Financial Group, Inc. $ 385,277 2,054 Travelers (The) Cos., Inc. 385,105 -------------- 1,992,083 -------------- MACHINERY -- 10.6% 1,903 Caterpillar, Inc. 455,883 1,555 Cummins, Inc. 376,761 4,126 PACCAR, Inc. 408,350 1,344 Parker-Hannifin Corp. 391,104 1,742 Snap-on, Inc. 398,029 -------------- 2,030,127 -------------- MULTILINE RETAIL -- 1.8% 2,274 Target Corp. 338,917 -------------- OIL, GAS & CONSUMABLE FUELS -- 9.5% 2,090 Chevron Corp. 375,134 2,907 ConocoPhillips 343,026 7,097 Ovintiv, Inc. 359,889 3,604 Phillips 66 375,104 2,833 Valero Energy Corp. 359,395 -------------- 1,812,548 -------------- PHARMACEUTICALS -- 2.2% 3,783 Merck & Co., Inc. 419,724 -------------- PROFESSIONAL SERVICES -- 1.9% 4,957 Robert Half International, Inc. 365,975 -------------- ROAD & RAIL -- 6.4% 2,469 Landstar System, Inc. 402,200 1,740 Norfolk Southern Corp. 428,771 1,900 Union Pacific Corp. 393,433 -------------- 1,224,404 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 5.7% 13,420 Intel Corp. 354,691 3,127 QUALCOMM, Inc. 343,782 4,302 Skyworks Solutions, Inc. 392,041 -------------- 1,090,514 -------------- SPECIALTY RETAIL -- 4.2% 5,676 Best Buy Co., Inc. 455,272 3,077 Williams-Sonoma, Inc. 353,609 -------------- 808,881 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.7% 5,517 NetApp, Inc. 331,351 -------------- TOTAL COMMON STOCKS -- 99.9% 19,123,200 (Cost $19,161,319) -------------- MONEY MARKET FUNDS -- 0.1% 13,124 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 4.10% (a) 13,124 (Cost $13,124) -------------- Page 16 See Notes to Financial Statements FIRST TRUST DIVIDEND STRENGTH ETF (FTDS) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 DESCRIPTION VALUE ------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 19,136,324 (Cost $19,174,443) NET OTHER ASSETS AND LIABILITIES -- (0.0)% (9,023) -------------- NET ASSETS -- 100.0% $ 19,127,301 ============== (a) Rate shown reflects yield as of December 31, 2022. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------- Common Stocks*............................... $ 19,123,200 $ 19,123,200 $ -- $ -- Money Market Funds........................... 13,124 13,124 -- -- ------------------------------------------------------------- Total Investments............................ $ 19,136,324 $ 19,136,324 $ -- $ -- ============================================================= * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 17 FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% AEROSPACE & DEFENSE -- 3.6% 29,639 Boeing (The) Co. (a) $ 5,645,933 -------------- BANKS -- 3.4% 40,263 JPMorgan Chase & Co. 5,399,268 -------------- BEVERAGES -- 3.4% 84,275 Coca-Cola (The) Co. 5,360,733 -------------- BIOTECHNOLOGY -- 3.2% 19,097 Amgen, Inc. 5,015,636 -------------- CAPITAL MARKETS -- 3.2% 14,817 Goldman Sachs Group (The), Inc. 5,087,862 -------------- CHEMICALS -- 3.4% 106,000 Dow, Inc. 5,341,340 -------------- COMMUNICATIONS EQUIPMENT -- 3.3% 109,806 Cisco Systems, Inc. 5,231,158 -------------- CONSUMER FINANCE -- 3.2% 34,575 American Express Co. 5,108,456 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.5% 142,278 Verizon Communications, Inc. 5,605,753 -------------- ENTERTAINMENT -- 3.1% 56,984 Walt Disney (The) Co. (a) 4,950,770 -------------- FOOD & STAPLES RETAILING -- 6.4% 131,615 Walgreens Boots Alliance, Inc. 4,917,136 36,619 Walmart, Inc. 5,192,208 -------------- 10,109,344 -------------- HEALTH CARE PROVIDERS & SERVICES -- 3.3% 9,869 UnitedHealth Group, Inc. 5,232,347 -------------- HOTELS, RESTAURANTS & LEISURE -- 3.3% 19,561 McDonald's Corp. 5,154,910 -------------- HOUSEHOLD PRODUCTS -- 3.4% 35,259 Procter & Gamble (The) Co. 5,343,854 -------------- INDUSTRIAL CONGLOMERATES -- 6.6% 42,313 3M Co. 5,074,175 25,144 Honeywell International, Inc. 5,388,359 -------------- 10,462,534 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- INSURANCE -- 3.4% 28,663 Travelers (The) Cos., Inc. $ 5,374,026 -------------- IT SERVICES -- 6.6% 36,186 International Business Machines Corp. 5,098,245 25,497 Visa, Inc., Class A 5,297,257 -------------- 10,395,502 -------------- MACHINERY -- 3.5% 23,412 Caterpillar, Inc. 5,608,579 -------------- OIL, GAS & CONSUMABLE FUELS -- 3.6% 31,674 Chevron Corp. 5,685,166 -------------- PHARMACEUTICALS -- 6.8% 30,278 Johnson & Johnson 5,348,609 48,917 Merck & Co., Inc. 5,427,341 -------------- 10,775,950 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.1% 188,428 Intel Corp. 4,980,152 -------------- SOFTWARE -- 6.7% 21,682 Microsoft Corp. 5,199,777 40,585 Salesforce, Inc. (a) 5,381,165 -------------- 10,580,942 -------------- SPECIALTY RETAIL -- 3.3% 16,604 Home Depot (The), Inc. 5,244,540 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 3.1% 37,430 Apple, Inc. 4,863,280 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 3.6% 48,630 NIKE, Inc., Class B 5,690,196 -------------- TOTAL INVESTMENTS -- 100.0% 158,248,231 (Cost $162,019,452) NET OTHER ASSETS AND LIABILITIES -- 0.0% 25,807 -------------- NET ASSETS -- 100.0% $ 158,274,038 ============== (a) Non-income producing security. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------- Common Stocks*............................... $ 158,248,231 $ 158,248,231 $ -- $ -- ============================================================= * See Portfolio of Investments for industry breakout. Page 18 See Notes to Financial Statements FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% AEROSPACE & DEFENSE -- 1.0% 3,013 Lockheed Martin Corp. $ 1,465,795 2,094 Northrop Grumman Corp. 1,142,507 -------------- 2,608,302 -------------- AIR FREIGHT & LOGISTICS -- 1.5% 16,867 Expeditors International of Washington, Inc. 1,752,819 4,547 FedEx Corp. 787,540 8,160 United Parcel Service, Inc., Class B 1,418,534 -------------- 3,958,893 -------------- AIRLINES -- 0.3% 23,200 Southwest Airlines Co. (a) 781,144 -------------- AUTOMOBILES -- 1.1% 118,572 Ford Motor Co. 1,378,992 45,970 General Motors Co. 1,546,431 -------------- 2,925,423 -------------- BANKS -- 1.9% 31,313 Citigroup, Inc. 1,416,287 27,959 Citizens Financial Group, Inc. 1,100,746 87,389 Regions Financial Corp. 1,884,107 16,821 Wells Fargo & Co. 694,539 -------------- 5,095,679 -------------- BEVERAGES -- 1.2% 12,313 Coca-Cola (The) Co. 783,230 5,448 Constellation Brands, Inc., Class A 1,262,574 11,964 Monster Beverage Corp. (a) 1,214,705 -------------- 3,260,509 -------------- BIOTECHNOLOGY -- 1.7% 18,737 AbbVie, Inc. 3,028,087 4,178 Moderna, Inc. (a) 750,452 1,104 Regeneron Pharmaceuticals, Inc. (a) 796,525 -------------- 4,575,064 -------------- BUILDING PRODUCTS -- 1.0% 10,300 Carlisle Cos., Inc. 2,427,195 784 Trane Technologies PLC 131,783 -------------- 2,558,978 -------------- CAPITAL MARKETS -- 6.8% 1,018 BlackRock, Inc. 721,385 5,974 Blackstone, Inc. 443,211 64,450 Carlyle Group (The), Inc. 1,923,188 9,681 Cboe Global Markets, Inc. 1,214,675 6,283 CME Group, Inc. 1,056,549 1,791 FactSet Research Systems, Inc. 718,567 44,444 Franklin Resources, Inc. 1,172,433 22,232 Intercontinental Exchange, Inc. 2,280,781 22,276 LPL Financial Holdings, Inc. 4,815,403 5,316 Moody's Corp. 1,481,144 13,457 State Street Corp. 1,043,859 11,778 T. Rowe Price Group, Inc. 1,284,509 -------------- 18,155,704 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- CHEMICALS -- 3.9% 10,454 Albemarle Corp. $ 2,267,055 8,528 Celanese Corp. 871,903 30,031 CF Industries Holdings, Inc. 2,558,641 27,353 Dow, Inc. 1,378,318 14,553 DuPont de Nemours, Inc. 998,772 17,227 LyondellBasell Industries N.V., Class A 1,430,358 21,712 Mosaic (The) Co. 952,505 -------------- 10,457,552 -------------- COMMERCIAL SERVICES & SUPPLIES -- 1.1% 295 Cintas Corp. 133,228 9,584 Republic Services, Inc. 1,236,240 3,328 Rollins, Inc. 121,605 8,421 Waste Management, Inc. 1,321,087 -------------- 2,812,160 -------------- COMMUNICATIONS EQUIPMENT -- 0.4% 4,417 Motorola Solutions, Inc. 1,138,305 -------------- CONSTRUCTION & ENGINEERING -- 0.4% 7,325 Quanta Services, Inc. 1,043,812 -------------- CONSUMER FINANCE -- 1.2% 17,205 Capital One Financial Corp. 1,599,377 50,235 Synchrony Financial 1,650,722 -------------- 3,250,099 -------------- CONTAINERS & PACKAGING -- 0.4% 31,012 International Paper Co. 1,073,946 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.0% 143,559 AT&T, Inc. 2,642,921 -------------- ELECTRIC UTILITIES -- 0.7% 26,741 Evergy, Inc. 1,682,811 1,403 NextEra Energy, Inc. 117,291 -------------- 1,800,102 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.4% 1,681 Amphenol Corp., Class A 127,992 723 CDW Corp. 129,113 5,459 Keysight Technologies, Inc. (a) 933,871 -------------- 1,190,976 -------------- ENTERTAINMENT -- 0.2% 62,138 Warner Bros Discovery, Inc. (a) 589,068 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 1.6% 16,607 Equity LifeStyle Properties, Inc. 1,072,812 9,662 Extra Space Storage, Inc. 1,422,053 2,094 Public Storage 586,718 35,496 VICI Properties, Inc. 1,150,071 -------------- 4,231,654 -------------- See Notes to Financial Statements Page 19 FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) FOOD & STAPLES RETAILING -- 1.9% 54,721 Albertsons Cos., Inc., Class A $ 1,134,914 249 Costco Wholesale Corp. 113,668 19,214 Kroger (The) Co. 856,560 53,457 Walgreens Boots Alliance, Inc. 1,997,153 7,845 Walmart, Inc. 1,112,343 -------------- 5,214,638 -------------- FOOD PRODUCTS -- 4.2% 20,958 Archer-Daniels-Midland Co. 1,945,950 34,007 Conagra Brands, Inc. 1,316,071 9,810 Hershey (The) Co. 2,271,702 8,470 J.M. Smucker (The) Co. 1,342,156 55,231 Kraft Heinz (The) Co. 2,248,454 35,739 Tyson Foods, Inc., Class A 2,224,753 -------------- 11,349,086 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 1.3% 14,871 Abbott Laboratories 1,632,687 16,007 Edwards Lifesciences Corp. (a) 1,194,282 1,390 IDEXX Laboratories, Inc. (a) 567,065 -------------- 3,394,034 -------------- HEALTH CARE PROVIDERS & SERVICES -- 4.1% 5,122 AmerisourceBergen Corp. 848,767 16,119 Cardinal Health, Inc. 1,239,068 11,347 Centene Corp. (a) 930,567 7,327 Cigna Corp. 2,427,728 22,343 CVS Health Corp. 2,082,144 1,586 Elevance Health, Inc. 813,570 5,155 UnitedHealth Group, Inc. 2,733,078 -------------- 11,074,922 -------------- HOTELS, RESTAURANTS & LEISURE -- 1.2% 75 Chipotle Mexican Grill, Inc. (a) 104,062 5,991 McDonald's Corp. 1,578,808 23,134 MGM Resorts International 775,683 8,618 Starbucks Corp. 854,906 -------------- 3,313,459 -------------- HOUSEHOLD DURABLES -- 1.5% 22,799 D.R. Horton, Inc. 2,032,303 22,052 Lennar Corp., Class A 1,995,706 -------------- 4,028,009 -------------- HOUSEHOLD PRODUCTS -- 1.7% 10,195 Colgate-Palmolive Co. 803,264 11,051 Kimberly-Clark Corp. 1,500,173 14,305 Procter & Gamble (The) Co. 2,168,066 -------------- 4,471,503 -------------- INSURANCE -- 13.5% 35,357 Aflac, Inc. 2,543,583 5,462 Allstate (The) Corp. 740,647 40,981 American International Group, Inc. 2,591,638 4,344 Aon PLC, Class A 1,303,808 15,498 Arch Capital Group Ltd. (a) 972,964 SHARES DESCRIPTION VALUE ------------------------------------------------------------- INSURANCE (CONTINUED) 10,982 Arthur J. Gallagher & Co. $ 2,070,546 28,144 Brown & Brown, Inc. 1,603,364 10,458 Chubb Ltd. 2,307,035 22,277 Cincinnati Financial Corp. 2,280,942 33,605 Hartford Financial Services Group (The), Inc. 2,548,267 22,752 Loews Corp. 1,327,124 1,599 Markel Corp. (a) 2,106,667 18,295 Marsh & McLennan Cos., Inc. 3,027,457 33,271 MetLife, Inc. 2,407,822 18,370 Principal Financial Group, Inc. 1,541,610 11,183 Prudential Financial, Inc. 1,112,261 13,247 Travelers (The) Cos., Inc. 2,483,680 45,571 W.R. Berkley Corp. 3,307,088 -------------- 36,276,503 -------------- INTERACTIVE MEDIA & SERVICES -- 0.4% 12,377 Alphabet, Inc., Class A (a) 1,092,023 -------------- IT SERVICES -- 3.8% 5,386 Accenture PLC, Class A 1,437,200 4,498 Automatic Data Processing, Inc. 1,074,392 6,583 Broadridge Financial Solutions, Inc. 882,978 317 EPAM Systems, Inc. (a) 103,894 1,182 Fiserv, Inc. (a) 119,465 2,535 Gartner, Inc. (a) 852,115 9,816 International Business Machines Corp. 1,382,976 6,426 Jack Henry & Associates, Inc. 1,128,149 5,015 Mastercard, Inc., Class A 1,743,866 13,717 Paychex, Inc. 1,585,136 -------------- 10,310,171 -------------- LIFE SCIENCES TOOLS & SERVICES -- 2.1% 3,057 Danaher Corp. 811,389 7,799 IQVIA Holdings, Inc. (a) 1,597,937 2,178 Mettler-Toledo International, Inc. (a) 3,148,190 223 Thermo Fisher Scientific, Inc. 122,804 -------------- 5,680,320 -------------- MACHINERY -- 2.6% 5,063 Cummins, Inc. 1,226,714 4,775 Dover Corp. 646,583 6,238 IDEX Corp. 1,424,323 8,316 Illinois Tool Works, Inc. 1,832,015 16,106 Otis Worldwide Corp. 1,261,261 8,379 Stanley Black & Decker, Inc. 629,430 -------------- 7,020,326 -------------- MEDIA -- 0.9% 21,435 Fox Corp., Class A 650,981 104,589 Paramount Global, Class B 1,765,462 -------------- 2,416,443 -------------- METALS & MINING -- 0.3% 6,895 Steel Dynamics, Inc. 673,641 -------------- Page 20 See Notes to Financial Statements FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) MULTI-UTILITIES -- 0.4% 18,902 Dominion Energy, Inc. $ 1,159,071 -------------- OIL, GAS & CONSUMABLE FUELS -- 16.6% 49,271 APA Corp. 2,299,970 36,300 Cheniere Energy, Inc. 5,443,548 27,999 ConocoPhillips 3,303,882 48,822 Devon Energy Corp. 3,003,041 1,005 Diamondback Energy, Inc. 137,464 17,034 EOG Resources, Inc. 2,206,244 136,526 EQT Corp. 4,618,675 26,787 Hess Corp. 3,798,932 128,608 Marathon Oil Corp. 3,481,418 46,516 Marathon Petroleum Corp. 5,413,997 95,913 Occidental Petroleum Corp. 6,041,560 14,860 Ovintiv, Inc. 753,551 1,717 Texas Pacific Land Corp. 4,025,043 -------------- 44,527,325 -------------- PERSONAL PRODUCTS -- 1.0% 10,854 Estee Lauder (The) Cos., Inc., Class A 2,692,986 -------------- PHARMACEUTICALS -- 2.5% 8,354 Eli Lilly & Co. 3,056,227 14,516 Merck & Co., Inc. 1,610,550 37,265 Pfizer, Inc. 1,909,459 -------------- 6,576,236 -------------- PROFESSIONAL SERVICES -- 2.1% 29,022 Booz Allen Hamilton Holding Corp. 3,033,380 1,662 CoStar Group, Inc. (a) 128,439 13,332 Leidos Holdings, Inc. 1,402,393 6,345 Verisk Analytics, Inc. 1,119,385 -------------- 5,683,597 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.9% 33,937 Intel Corp. 896,955 2,051 KLA Corp. 773,288 22,064 Micron Technology, Inc. 1,102,759 37,767 ON Semiconductor Corp. (a) 2,355,528 -------------- 5,128,530 -------------- SOFTWARE -- 0.3% 718 Cadence Design Systems, Inc. (a) 115,339 2,469 Microsoft Corp. 592,116 382 Synopsys, Inc. (a) 121,969 -------------- 829,424 -------------- SPECIALTY RETAIL -- 3.6% 13,612 Best Buy Co., Inc. 1,091,818 5,548 Home Depot (The), Inc. 1,752,391 3,425 Lowe's Cos., Inc. 682,397 6,987 O'Reilly Automotive, Inc. (a) 5,897,238 1,888 TJX (The) Cos., Inc. 150,285 -------------- 9,574,129 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 2.2% 18,023 Apple, Inc. $ 2,341,729 147,195 Hewlett Packard Enterprise Co. 2,349,232 37,049 Western Digital Corp. (a) 1,168,896 -------------- 5,859,857 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.0% 22,741 NIKE, Inc., Class B 2,660,924 -------------- TRADING COMPANIES & DISTRIBUTORS -- 0.3% 1,469 W.W. Grainger, Inc. 817,131 -------------- WATER UTILITIES -- 0.5% 26,765 Essential Utilities, Inc. 1,277,493 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.2% 3,528 T-Mobile US, Inc. (a) 493,920 -------------- TOTAL COMMON STOCKS -- 99.9% 267,745,992 (Cost $267,182,275) -------------- MONEY MARKET FUNDS -- 0.1% 148,861 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 4.10% (b) 148,861 (Cost $148,861) -------------- TOTAL INVESTMENTS -- 100.0% 267,894,853 (Cost $267,331,136) NET OTHER ASSETS AND LIABILITIES -- 0.0% 129,647 -------------- NET ASSETS -- 100.0% $ 268,024,500 ============== (a) Non-income producing security. (b) Rate shown reflects yield as of December 31, 2022. See Notes to Financial Statements Page 21 FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------- Common Stocks*............................... $ 267,745,992 $ 267,745,992 $ -- $ -- Money Market Funds........................... 148,861 148,861 -- -- ------------------------------------------------------------- Total Investments............................ $ 267,894,853 $ 267,894,853 $ -- $ -- ============================================================= * See Portfolio of Investments for industry breakout. Page 22 See Notes to Financial Statements FIRST TRUST GROWTH STRENGTH ETF (FTGS) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% AIR FREIGHT & LOGISTICS -- 4.2% 213 Expeditors International of Washington, Inc. $ 22,135 119 United Parcel Service, Inc., Class B 20,687 -------------- 42,822 -------------- AUTOMOBILES -- 1.1% 92 Tesla, Inc. (a) 11,333 -------------- BIOTECHNOLOGY -- 11.6% 134 AbbVie, Inc. 21,656 310 Horizon Therapeutics PLC (a) 35,278 280 Incyte Corp. (a) 22,489 28 Regeneron Pharmaceuticals, Inc. (a) 20,202 66 Vertex Pharmaceuticals, Inc. (a) 19,059 -------------- 118,684 -------------- CAPITAL MARKETS -- 2.1% 196 Raymond James Financial, Inc. 20,943 -------------- CHEMICALS -- 1.5% 184 CF Industries Holdings, Inc. 15,677 -------------- COMMERCIAL SERVICES & SUPPLIES -- 2.1% 360 Copart, Inc. (a) 21,920 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 2.0% 660 Weyerhaeuser Co. 20,460 -------------- FOOD & STAPLES RETAILING -- 1.8% 41 Costco Wholesale Corp. 18,716 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 4.5% 208 Abbott Laboratories 22,836 316 Hologic, Inc. (a) 23,640 -------------- 46,476 -------------- HEALTH CARE PROVIDERS & SERVICES -- 3.9% 39 Elevance Health, Inc. 20,006 39 Humana, Inc. 19,975 -------------- 39,981 -------------- INSURANCE -- 2.0% 277 W.R. Berkley Corp. 20,102 -------------- INTERACTIVE MEDIA & SERVICES -- 3.5% 196 Alphabet, Inc., Class A (a) 17,293 152 Meta Platforms, Inc., Class A (a) 18,292 -------------- 35,585 -------------- INTERNET & DIRECT MARKETING RETAIL -- 2.3% 196 Etsy, Inc. (a) 23,477 -------------- IT SERVICES -- 1.9% 73 Accenture PLC, Class A 19,479 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES -- 2.2% 40 Thermo Fisher Scientific, Inc. $ 22,028 -------------- METALS & MINING -- 3.9% 146 Nucor Corp. 19,244 213 Steel Dynamics, Inc. 20,810 -------------- 40,054 -------------- OIL, GAS & CONSUMABLE FUELS -- 14.6% 114 Chevron Corp. 20,462 159 ConocoPhillips 18,762 666 Coterra Energy, Inc. 16,364 266 Devon Energy Corp. 16,362 146 EOG Resources, Inc. 18,910 187 Exxon Mobil Corp. 20,626 678 Marathon Oil Corp. 18,353 155 Valero Energy Corp. 19,663 -------------- 149,502 -------------- PHARMACEUTICALS -- 4.1% 274 Bristol-Myers Squibb Co. 19,714 440 Pfizer, Inc. 22,546 -------------- 42,260 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 2.1% 285 CBRE Group, Inc., Class A (a) 21,934 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 15.1% 240 Applied Materials, Inc. 23,371 44 Broadcom, Inc. 24,602 78 Enphase Energy, Inc. (a) 20,667 68 KLA Corp. 25,638 159 NVIDIA Corp. 23,236 301 ON Semiconductor Corp. (a) 18,773 171 QUALCOMM, Inc. 18,800 -------------- 155,087 -------------- SOFTWARE -- 11.7% 65 Adobe, Inc. (a) 21,875 98 Autodesk, Inc. (a) 18,313 125 Cadence Design Systems, Inc. (a) 20,080 368 Fortinet, Inc. (a) 17,992 82 Microsoft Corp. 19,665 67 Synopsys, Inc. (a) 21,392 -------------- 119,317 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.7% 134 Apple, Inc. 17,411 -------------- TOTAL INVESTMENTS -- 99.9% 1,023,248 (Cost $1,015,794) NET OTHER ASSETS AND LIABILITIES -- 0.1% 1,223 -------------- NET ASSETS -- 100.0% $ 1,024,471 ============== (a) Non-income producing security. See Notes to Financial Statements Page 23 FIRST TRUST GROWTH STRENGTH ETF (FTGS) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------- Common Stocks*............................... $ 1,023,248 $ 1,023,248 $ -- $ -- ============================================================= * See Portfolio of Investments for industry breakout. Page 24 See Notes to Financial Statements FIRST TRUST INDXX AEROSPACE & DEFENSE ETF (MISL) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% AEROSPACE & DEFENSE -- 86.3% 356 AAR Corp. (a) $ 15,984 816 Aerojet Rocketdyne Holdings, Inc. (a) 45,639 254 AeroVironment, Inc. (a) 21,758 1,126 Boeing (The) Co. (a) 214,492 390 Curtiss-Wright Corp. 65,126 122 Ducommun, Inc. (a) 6,095 678 General Dynamics Corp. 168,219 536 HEICO Corp. 82,351 852 Hexcel Corp. 50,140 2,322 Howmet Aerospace, Inc. 91,510 336 Huntington Ingalls Industries, Inc. 77,508 284 Kaman Corp. 6,333 1,278 Kratos Defense & Security Solutions, Inc. (a) 13,189 344 L3Harris Technologies, Inc. 71,624 384 Lockheed Martin Corp. 186,812 752 Maxar Technologies, Inc. 38,908 586 Mercury Systems, Inc. (a) 26,218 326 Moog, Inc., Class A 28,610 322 Northrop Grumman Corp. 175,686 1,050 Parsons Corp. (a) 48,562 1,816 Raytheon Technologies Corp. 183,271 4,756 Rocket Lab USA, Inc. (a) 17,930 1,066 Spirit AeroSystems Holdings, Inc., Class A 31,554 SHARES DESCRIPTION VALUE ------------------------------------------------------------- AEROSPACE & DEFENSE (CONTINUED) 1,252 Textron, Inc. $ 88,642 146 TransDigm Group, Inc. 91,929 658 Triumph Group, Inc. (a) 6,922 2,624 Virgin Galactic Holdings, Inc. (a) 9,132 614 Woodward, Inc. 59,319 -------------- 1,923,463 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4% 1,856 AST SpaceMobile, Inc. (a) 8,946 -------------- PROFESSIONAL SERVICES -- 13.3% 238 CACI International, Inc., Class A (a) 71,540 1,410 KBR, Inc. 74,448 844 Leidos Holdings, Inc. 88,780 560 Science Applications International Corp. 62,121 -------------- 296,889 -------------- TOTAL INVESTMENTS -- 100.0% 2,229,298 (Cost $2,138,941) NET OTHER ASSETS AND LIABILITIES -- 0.0% 823 -------------- NET ASSETS -- 100.0% $ 2,230,121 ============== (a) Non-income producing security. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------- Common Stocks*............................... $ 2,229,298 $ 2,229,298 $ -- $ -- ============================================================= * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 25 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2022 FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST DIVIDEND DOW 30 LUNT U.S. GROWTH INDXX AEROSPACE STRENGTH EQUAL WEIGHT FACTOR ROTATION STRENGTH & DEFENSE ETF ETF ETF ETF ETF (FTDS) (EDOW) (FCTR) (FTGS) (MISL) ---------------- ---------------- ---------------- ---------------- ---------------- ASSETS: Investments, at value..................... $ 19,136,324 $ 158,248,231 $ 267,894,853 $ 1,023,248 $ 2,229,298 Cash...................................... -- 30,635 -- 1,379 1,571 Receivables: Dividends.............................. 43,940 61,077 292,792 383 251 Investment securities sold............. -- -- 2,785,589 -- 125 Prepaid expenses.......................... 3,763 -- -- -- -- -------------- -------------- -------------- -------------- ------------ Total Assets........................... 19,184,027 158,339,943 270,973,234 1,025,010 2,231,245 -------------- -------------- -------------- -------------- ------------ LIABILITIES: Payables: Audit and tax fees..................... 28,515 -- -- -- -- Licensing fees......................... 15,013 -- -- -- -- Shareholder reporting fees............. 1,876 -- -- -- -- Investment advisory fees............... 396 65,905 156,912 539 1,124 Trustees' fees......................... 40 -- -- -- -- Capital shares redeemed................ -- -- 2,791,822 -- -- Other liabilities......................... 10,886 -- -- -- -- -------------- -------------- -------------- -------------- ------------ Total Liabilities...................... 56,726 65,905 2,948,734 539 1,124 -------------- -------------- -------------- -------------- ------------ NET ASSETS................................ $ 19,127,301 $ 158,274,038 $ 268,024,500 $ 1,024,471 $ 2,230,121 ============== ============== ============== ============== ============ NET ASSETS CONSIST OF: Paid-in capital........................... $ 23,113,674 $ 170,102,886 $ 417,365,220 $ 1,013,856 $ 2,138,654 Par value................................. 4,500 54,978 96,000 500 1,000 Accumulated distributable earnings (loss)................................. (3,990,873) (11,883,826) (149,436,720) 10,115 90,467 -------------- -------------- -------------- -------------- ------------ NET ASSETS................................ $ 19,127,301 $ 158,274,038 $ 268,024,500 $ 1,024,471 $ 2,230,121 ============== ============== ============== ============== ============ NET ASSET VALUE, per share................ $ 42.50 $ 28.79 $ 27.92 $ 20.49 $ 22.30 ============== ============== ============== ============== ============ Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)....................... 450,002 5,497,756 9,600,002 50,002 100,002 ============== ============== ============== ============== ============ Investments, at cost...................... $ 19,174,443 $ 162,019,452 $ 267,331,136 $ 1,015,794 $ 2,138,941 ============== ============== ============== ============== ============ Page 26 See Notes to Financial Statements FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED DECEMBER 31, 2022 FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST DIVIDEND DOW 30 LUNT U.S. GROWTH INDXX AEROSPACE STRENGTH EQUAL WEIGHT FACTOR ROTATION STRENGTH & DEFENSE ETF ETF ETF ETF ETF (FTDS) (EDOW) (FCTR) (FTGS) (a) (MISL) (a) ---------------- ---------------- ---------------- ---------------- ---------------- INVESTMENT INCOME: Dividends................................. $ 517,487 $ 3,295,350 $ 7,316,341 $ 3,302 $ 3,607 Securities lending income (net of fees)... 248 -- -- -- -- Foreign withholding tax................... (785) -- (1,218) -- -- -------------- -------------- -------------- -------------- ------------ Total investment income................ 516,950 3,295,350 7,315,123 3,302 3,607 -------------- -------------- -------------- -------------- ------------ EXPENSES: Investment advisory fees.................. 95,572 671,705 (b) 2,667,939 (b) 1,156 (b) 1,908(b) Audit and tax fees........................ 27,960 -- -- -- -- Shareholder reporting fees................ 20,532 -- -- -- -- Custodian fees............................ 14,332 -- -- -- -- Accounting and administration fees........ 13,145 -- -- -- -- Licensing fees............................ 11,298 -- -- -- -- Trustees' fees and expenses............... 7,150 -- -- -- -- Listing fees.............................. 6,530 -- -- -- -- Transfer agent fees....................... 956 -- -- -- -- Legal fees................................ 438 -- -- -- -- Registration and filing fees.............. 83 -- -- -- -- Other expenses............................ 1,237 -- -- -- -- -------------- -------------- -------------- -------------- ------------ Total expenses......................... 199,233 671,705 2,667,939 1,156 1,908 Less fees waived and expenses reimbursed by the investment advisor........... (65,440) -- -- -- -- -------------- -------------- -------------- -------------- ------------ Net expenses........................... 133,793 671,705 2,667,939 1,156 1,908 -------------- -------------- -------------- -------------- ------------ NET INVESTMENT INCOME (LOSS).............. 383,157 2,623,645 4,647,184 2,146 1,699 -------------- -------------- -------------- -------------- ------------ REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments............................ (856,569) (3,348,953) (127,589,041) 2,655 101 In-kind redemptions.................... 921,741 5,976,848 11,316,423 -- -- -------------- -------------- -------------- -------------- ------------ Net realized gain (loss).................. 65,172 2,627,895 (116,272,618) 2,655 101 -------------- -------------- -------------- -------------- ------------ Net change in unrealized appreciation (depreciation) on investments.......... (3,516,779) (16,343,947) (18,358,590) 7,454 90,357 -------------- -------------- -------------- -------------- ------------ NET REALIZED AND UNREALIZED GAIN (LOSS)............................ (3,451,607) (13,716,052) (134,631,208) 10,109 90,458 -------------- -------------- -------------- -------------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.............. $ (3,068,450) $ (11,092,407) $ (129,984,024) $ 12,255 $ 92,157 ============== ============== ============== ============== ============ (a) Inception date is October 25, 2022, which is consistent with the commencement of investment operations and is the date the initial creation units were established. (b) Fund is subject to a Unitary Fee (see Note 3 in the Notes to Financial Statements). See Notes to Financial Statements Page 27 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF CHANGES IN NET ASSETS FIRST TRUST FIRST TRUST DIVIDEND DOW 30 STRENGTH EQUAL WEIGHT ETF ETF (FTDS) (EDOW) ------------------------------- ------------------------------- Year Ended Year Ended Year Ended Year Ended 12/31/2022 12/31/2021 12/31/2022 12/31/2021 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 383,157 $ 176,263 $ 2,623,645 $ 1,722,405 Net realized gain (loss).................................... 65,172 4,384,304 2,627,895 4,385,378 Net change in unrealized appreciation (depreciation)........ (3,516,779) (272,120) (16,343,947) 8,652,152 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... (3,068,450) 4,288,447 (11,092,407) 14,759,935 -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (419,147) (162,991) (2,633,200) (1,719,752) -------------- -------------- -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 2,147,136 18,455,594 72,258,682 75,916,321 Cost of shares redeemed..................................... (4,755,506) (13,606,364) (38,301,275) (22,908,579) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ (2,608,370) 4,849,230 33,957,407 53,007,742 -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... (6,095,967) 8,974,686 20,231,800 66,047,925 NET ASSETS: Beginning of period......................................... 25,223,268 16,248,582 138,042,238 71,994,313 -------------- -------------- -------------- -------------- End of period............................................... $ 19,127,301 $ 25,223,268 $ 158,274,038 $ 138,042,238 ============== ============== ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 500,002 400,002 4,347,756 2,647,756 Shares sold................................................. 50,000 400,000 2,450,000 2,500,000 Shares redeemed............................................. (100,000) (300,000) (1,300,000) (800,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 450,002 500,002 5,497,756 4,347,756 ============== ============== ============== ============== (a) Inception date is October 25, 2022, which is consistent with the commencement of investment operations and is the date the initial creation units were established. Page 28 See Notes to Financial Statements FIRST TRUST FIRST TRUST FIRST TRUST LUNT U.S. GROWTH INDXX FACTOR ROTATION STRENGTH AEROSPACE & ETF ETF DEFENSE ETF (FCTR) (FTGS) (MISL) ------------------------------- ------------------------------- Year Ended Year Ended Period Ended Period Ended 12/31/2022 12/31/2021 12/31/2022 (a) 12/31/2022 (a) -------------- -------------- -------------- -------------- $ 4,647,184 $ 1,848,939 $ 2,146 $ 1,699 (116,272,618) 32,626,101 2,655 101 (18,358,590) 2,900,642 7,454 90,357 -------------- -------------- -------------- -------------- (129,984,024) 37,375,682 12,255 92,157 -------------- -------------- -------------- -------------- (4,905,611) (1,580,945) (2,140) (1,690) -------------- -------------- -------------- -------------- 197,817,866 1,095,761,531 1,014,356 2,139,654 (457,908,923) (599,707,580) -- -- -------------- -------------- -------------- -------------- (260,091,057) 496,053,951 1,014,356 2,139,654 -------------- -------------- -------------- -------------- (394,980,692) 531,848,688 1,024,471 2,230,121 663,005,192 131,156,504 -- -- -------------- -------------- -------------- -------------- $ 268,024,500 $ 663,005,192 $ 1,024,471 $ 2,230,121 ============== ============== ============== ============== 18,650,002 4,450,002 -- -- 6,050,000 31,600,000 50,002 100,002 (15,100,000) (17,400,000) -- -- -------------- -------------- -------------- -------------- 9,600,002 18,650,002 50,002 100,002 ============== ============== ============== ============== See Notes to Financial Statements Page 29 FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD FIRST TRUST DIVIDEND STRENGTH ETF (FTDS) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 50.45 $ 40.62 $ 36.20 $ 29.22 $ 32.85 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.90 0.39 0.35 0.40 0.34 Net realized and unrealized gain (loss) (7.87) 9.80 4.47 6.99 (3.64) ---------- ---------- ---------- ---------- ---------- Total from investment operations (6.97) 10.19 4.82 7.39 (3.30) ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.98) (0.36) (0.40) (0.41) (0.33) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 42.50 $ 50.45 $ 40.62 $ 36.20 $ 29.22 ========== ========== ========== ========== ========== TOTAL RETURN (a) (13.75)% 25.12% 13.65% 25.36% (10.13)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 19,127 $ 25,223 $ 16,249 $ 18,100 $ 13,151 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 1.04% 1.08% 1.16% 1.02% 1.57% Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70% Ratio of net investment income (loss) to average net assets 2.00% 0.84% 1.04% 1.20% 1.03% Portfolio turnover rate (b) 225% (c) 98% 125% 119% 110% FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 31.75 $ 27.19 $ 26.11 $ 21.43 $ 22.00 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.55 0.48 0.50 0.47 0.40 Net realized and unrealized gain (loss) (2.96) 4.56 1.08 4.70 (0.58) ---------- ---------- ---------- ---------- ---------- Total from investment operations (2.41) 5.04 1.58 5.17 (0.18) ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.55) (0.48) (0.50) (0.49) (0.39) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 28.79 $ 31.75 $ 27.19 $ 26.11 $ 21.43 ========== ========== ========== ========== ========== TOTAL RETURN (a) (7.52)% 18.63% 6.41% 24.27% (0.88)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 158,274 $ 138,042 $ 71,994 $ 43,077 $ 12,859 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50% Ratio of net expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50% Ratio of net investment income (loss) to average net assets 1.95% 1.70% 2.11% 1.99% 2.33% Portfolio turnover rate (b) 17% 14% 31% 13% 16% (a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns for First Trust Dividend Strength ETF would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. (c) The variation in the portfolio turnover rate is due to the change in the Fund's underlying index effective April 29, 2022, which resulted in a complete rebalance of the Fund's portfolio. Page 30 See Notes to Financial Statements FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) YEAR ENDED DECEMBER 31, --------------------------------------------------------- PERIOD ENDED 2022 2021 2020 2019 12/31/2018 (a) ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 35.55 $ 29.47 $ 22.80 $ 17.67 $ 20.23 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.38 0.17 0.12 0.23 0.12 Net realized and unrealized gain (loss) (7.62) 6.07 6.68 5.12 (2.56) ---------- ---------- ---------- ---------- ---------- Total from investment operations (7.24) 6.24 6.80 5.35 (2.44) ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.39) (0.16) (0.13) (0.22) (0.12) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 27.92 $ 35.55 $ 29.47 $ 22.80 $ 17.67 ========== ========== ========== ========== ========== TOTAL RETURN (b) (20.37)% 21.22% 30.02% 30.35% (12.09)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 268,025 $ 663,005 $ 131,157 $ 62,696 $ 28,269 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.65% 0.65% 0.65% 0.65% 0.65% (c) Ratio of net expenses to average net assets 0.65% 0.65% 0.65% 0.65% 0.65% (c) Ratio of net investment income (loss) to average net assets 1.13% 0.52% 0.42% 1.17% 1.48% (c) Portfolio turnover rate (d) 379% 307% 460% 246% 183% FIRST TRUST GROWTH STRENGTH ETF (FTGS) PERIOD ENDED 12/31/2022 (a) ------------ Net asset value, beginning of period $ 20.29 ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.04 Net realized and unrealized gain (loss) 0.20 ---------- Total from investment operations 0.24 ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.04) ---------- Net asset value, end of period $ 20.49 ========== TOTAL RETURN (b) 1.20% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,024 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.60% (c) Ratio of net expenses to average net assets 0.60% (c) Ratio of net investment income (loss) to average net assets 1.11% (c) Portfolio turnover rate (d) 25% (a) Inception dates for FCTR and FTGS are July 25, 2018 and October 25, 2022, respectively, which are consistent with the respective Fund's commencement of investment operations and are the dates the initial creation units were established. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (c) Annualized. (d) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. See Notes to Financial Statements Page 31 FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD FIRST TRUST INDXX AEROSPACE & DEFENSE ETF (MISL) PERIOD ENDED 12/31/2022 (a) ------------ Net asset value, beginning of period $ 20.79 ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.02 Net realized and unrealized gain (loss) 1.51 ---------- Total from investment operations 1.53 ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.02) ---------- Net asset value, end of period $ 22.30 ========== TOTAL RETURN (b) 7.34% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 2,230 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.60% (c) Ratio of net expenses to average net assets 0.60% (c) Ratio of net investment income (loss) to average net assets 0.53% (c) Portfolio turnover rate (d) 2% (a) Inception date is October 25, 2022, which is consistent with the commencement of investment operations and is the date the initial creation units were established. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The return presented does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (c) Annualized. (d) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 32 See Notes to Financial Statements -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 1. ORGANIZATION First Trust Exchange-Traded Fund (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on August 8, 2003, and is registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of twenty-three exchange-traded funds. This report covers the five funds (each a "Fund" and collectively, the "Funds") listed below: First Trust Dividend Strength ETF - (The Nasdaq Stock Market LLC ("Nasdaq") ticker "FTDS")(1) First Trust Dow 30 Equal Weight ETF - (NYSE Arca, Inc. ("NYSE Arca") ticker "EDOW") First Trust Lunt U.S. Factor Rotation ETF - (Cboe BZX Exchange, Inc. ticker "FCTR") First Trust Growth Strength ETF (Nasdaq ticker "FTGS")(2) First Trust Indxx Aerospace & Defense ETF (NYSE Arca ticker "MISL")(2) (1) Effective on April 29, 2022, First Trust Total US Market AlphaDEX(R) ETF (Nasdaq ticker "TUSA") changed its name and ticker to First Trust Dividend Strength ETF (Nasdaq ticker "FTDS"). (2) Commenced investment operations on October 25, 2022. Each Fund represents a separate series of beneficial interest in the Trust. Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large blocks of shares known as "Creation Units." The investment objective of each Fund is to seek investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of the following indices: FUND INDEX First Trust Dividend Strength ETF The Dividend Strength Index(TM)(3) First Trust Dow 30 Equal Weight ETF Dow Jones Industrial Average(R) Equal Weight Index First Trust Lunt U.S. Factor Rotation ETF Lunt Capital Large Cap Factor Rotation Index First Trust Growth Strength ETF The Growth Strength Index(TM) First Trust Indxx Aerospace & Defense ETF Indxx US Aerospace & Defense Index (3) Prior to April 29, 2022, the index was Nasdaq AlphaDEX(R) Total US Market Index. 2. SIGNIFICANT ACCOUNTING POLICIES The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Each Fund's NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent readily available market quotations such as 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 approved by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows: Page 33 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 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 primary exchange for such securities. Shares of open-end funds are valued based on NAV per share. Securities traded in an over-the-counter market are valued at the mean of their most recent bid and asked price, if available, and otherwise at their last trade price. Overnight repurchase agreements are valued at amortized cost when it represents the most appropriate reflection of fair market value. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by 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 last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price; 2) the type of security; 3) the size of the holding; 4) the initial cost of the security; 5) transactions in comparable securities; 6) price quotes from dealers and/or third-party pricing services; 7) relationships among various securities; 8) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 9) an analysis of the issuer's financial statements; 10) the existence of merger proposals or tender offers that might affect the value of the security; and 11) other relevant factors. In addition, differences between the prices used to calculate a Fund's NAV and the prices used by such Fund's corresponding index could result in a difference between a Fund's performance and the performance of its underlying index. The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. Page 34 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of December 31, 2022, is included with each Fund's Portfolio of Investments. In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing requirements to determine fair value in good faith for purposes of the 1940 Act. The rule permits fund boards to designate a fund's investment advisor to perform fair value determinations, subject to board oversight and certain other conditions. The rule also defines when market quotations are "readily available" for purposes of the 1940 Act and requires a fund to fair value a portfolio investment when a market quotation is not readily available. The SEC also adopted new Rule 31a-4 under the 1940 Act, which sets forth recordkeeping requirements associated with fair value determinations. The compliance date for Rule 2a-5 and Rule 31a-4 was September 8, 2022. Effective September 8, 2022 and pursuant to the requirements of Rule 2a-5, the Trust's Board of Trustees designated the Advisor as its valuation designee to perform fair value determinations and approved new Advisor Valuation Procedures for the Trust. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis. Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund's understanding of the applicable country's tax rules and rates. Distributions received from a Fund's investments in real estate investment trusts ("REITs") may be comprised of return of capital, capital gains and income. The actual character of the amounts received during the year is not known until after the REITs' fiscal year end. A Fund records the character of distributions received from the REITs during the year based on estimates available. The characterization of distributions received by a Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude. C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES Offsetting Assets and Liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset on the Statements of Assets and Liabilities, and disclose instruments and transactions subject to master netting or similar agreements. These disclosure requirements are intended to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on a fund's financial position. The transactions subject to offsetting disclosures are derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. This disclosure, if applicable, is included within each Fund's Portfolio of Investments under the heading "Offsetting Assets and Liabilities." For financial reporting purposes, the Funds do not offset financial assets and financial liabilities that are subject to master netting arrangements ("MNAs") or similar agreements on the Statements of Assets and Liabilities. MNAs provide the right, in the event of default (including bankruptcy and insolvency), for the non-defaulting counterparty to liquidate the collateral and calculate the net exposure to the defaulting party or request additional collateral. D. SECURITIES LENDING The Funds may lend securities representing up to 33 1/3% of the value of their total assets to broker-dealers, banks and other institutions to generate additional income. When a Fund loans its portfolio securities, it will receive, at the inception of each loan, collateral equal to at least 102% (for domestic securities) or 105% (for international securities) of the market value of the loaned securities. The collateral amount is valued at the beginning of each business day and is compared to the market value of the loaned securities from the prior business day to determine if additional collateral is required. If additional collateral is required, a request is sent to the borrower. Securities lending involves the risk that the Fund may lose money because the borrower of the Fund's loaned securities fails to return the securities in a timely manner or at all. The Fund could also lose money in the event of (i) a decline in the value of the collateral provided for the loaned securities, (ii) a decline in the value of any investments made with cash collateral or (iii) an increase in the value of the loaned securities if the borrower does not increase the collateral accordingly and the borrower fails to return the securities. These events could also trigger adverse tax consequences for the Funds. Under the Funds' Securities Lending Agency Agreement, the securities lending agent will generally bear the risk that a borrower may default on its obligation to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the Funds' securities lending agent and is responsible for executing the lending of the portfolio securities to creditworthy borrowers. The Funds, however, will be responsible for the risks associated with the investment of cash collateral. A Fund may lose money on its investment of cash collateral, which may affect its ability to repay the collateral to the borrower without the use of other Fund assets. Each Fund that engages in securities lending receives compensation (net Page 35 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 of any rebate and securities lending agent fees) for lending its securities. Compensation can be in the form of fees received from the securities lending agent or dividends or interest earned from the investment of cash collateral. The fees received from the securities lending agent are accrued daily. The dividend and interest earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At December 31, 2022, none of the Funds had securities in the securities lending program. During the fiscal period ended December 31, 2022, only FTDS participated in the securities lending program. In the event of a default by a borrower with respect to any loan, BBH will exercise any and all remedies provided under the applicable borrower agreement to make the Funds whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If, despite such efforts by BBH to exercise these remedies, a Fund sustains losses as a result of a borrower's default, BBH will indemnify the Fund by purchasing replacement securities at its own expense, or paying the Fund an amount equal to the market value of the replacement securities, subject to certain limitations which are set forth in detail in the Securities Lending Agency Agreement between the Trust on behalf of the Funds and BBH. E. REPURCHASE AGREEMENTS Repurchase agreements involve the purchase of securities subject to the seller's agreement to repurchase the securities at a mutually agreed upon date and price, under the terms of a Master Repurchase Agreement ("MRA"). During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of a Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. The underlying securities for all repurchase agreements are held at the Funds' custodian or designated sub-custodians under tri-party repurchase agreements. MRAs govern transactions between a Fund and select counterparties. The MRAs contain provisions for, among other things, initiation, income payments, events of default, and maintenance of collateral for repurchase agreements. Repurchase agreements received for lending securities are collateralized by U.S. Treasury securities. The U.S. Treasury securities are held in a joint custody account at BBH on behalf of the Funds participating in the securities lending program. In the event the counterparty defaults on the repurchase agreement, the U.S. Treasury securities can either be maintained as part of a Fund's portfolio or sold for cash. A Fund could suffer a loss to the extent that the proceeds from the sale of the underlying collateral held by the Fund is less than the repurchase price and the Fund's costs associated with the delay and enforcement of the MRA. While the Funds may invest in repurchase agreements, any repurchase agreements held by the Funds during the fiscal period ended December 31, 2022 were received as collateral for lending securities. There were no repurchase agreements held by the Funds as of December 31, 2022. F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income of each Fund, if any, are declared and paid quarterly, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually. A Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. The tax character of distributions paid by each Fund during the fiscal period ended December 31, 2022 was as follows: Distributions Distributions Distributions paid paid paid from Ordinary from Capital from Return Income Gains of Capital ------------------ ---------------- ----------------- First Trust Dividend Strength ETF $ 419,147 $ -- $ -- First Trust Dow 30 Equal Weight ETF 2,633,200 -- -- First Trust Lunt U.S. Factor Rotation ETF 4,905,611 -- -- First Trust Growth Strength ETF 2,140 -- -- First Trust Indxx Aerospace & Defense ETF 1,690 -- -- Page 36 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 The tax character of distributions paid by each Fund during the fiscal year ended December 31, 2021 was as follows: Distributions Distributions Distributions paid paid paid from Ordinary from Capital from Return Income Gains of Capital ------------------ ---------------- ----------------- First Trust Dividend Strength ETF $ 162,991 $ -- $ -- First Trust Dow 30 Equal Weight ETF 1,719,752 -- -- First Trust Lunt U.S. Factor Rotation ETF 1,580,945 -- -- As of December 31, 2022, the components of distributable earnings on a tax basis for each Fund were as follows: Accumulated Undistributed Capital and Net Unrealized Ordinary Other Appreciation Income Gain (Loss) (Depreciation) ------------------ ---------------- ----------------- First Trust Dividend Strength ETF $ -- $ (3,921,145) $ (69,728) First Trust Dow 30 Equal Weight ETF -- (5,157,811) (6,726,015) First Trust Lunt U.S. Factor Rotation ETF 9,593 (144,354,832) (5,091,481) First Trust Growth Strength ETF 2,542 119 7,454 First Trust Indxx Aerospace & Defense ETF 212 -- 90,255 G. INCOME TAXES Each Fund intends to qualify or continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. For FTDS, EDOW, and FCTR, the taxable years ended 2019, 2020, 2021, and 2022 remain open to federal and state audit. For FTGS and MISL, the taxable period ended 2022 remains open to federal and state audit. As of December 31, 2022, management has evaluated the application of these standards to the Funds, and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions. Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At December 31, 2022, for federal income tax purposes, each applicable Fund had a capital loss carryforward available that is shown in the following table, to the extent provided by regulations, to offset future capital gains. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to each applicable Fund's shareholders. Non-Expiring Capital Loss Carryforward ------------------ First Trust Dividend Strength ETF $ 3,921,145 First Trust Dow 30 Equal Weight ETF* 5,157,811 First Trust Lunt U.S. Factor Rotation ETF 144,354,832 First Trust Growth Strength ETF -- First Trust Indxx Aerospace & Defense ETF -- * $3,196,504 of First Trust Dow 30 Equal Weight ETF's non-expiring net capital losses is subject to loss limitation resulting from reorganization activity. This limitation generally reduces the utilization of these losses to a maximum of $212,620 per year. Page 37 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal period ended December 31, 2022, 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 December 31, 2022, 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 Dividend Strength ETF $ 20,502 $ (842,201) $ 821,699 First Trust Dow 30 Equal Weight ETF 6,902 (5,578,257) 5,571,355 First Trust Lunt U.S. Factor Rotation ETF -- 12,232,440 (12,232,440) First Trust Growth Strength ETF -- -- -- First Trust Indxx Aerospace & Defense ETF -- -- -- As of December 31, 2022, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows: Gross Gross Net Unrealized Unrealized Unrealized Appreciation Tax Cost Appreciation (Depreciation) (Depreciation) ------------------ ------------------ ---------------- ----------------- First Trust Dividend Strength ETF $ 19,206,052 $ 999,018 $ (1,068,746) $ (69,728) First Trust Dow 30 Equal Weight ETF 164,974,246 11,325,952 (18,051,967) (6,726,015) First Trust Lunt U.S. Factor Rotation ETF 272,986,334 10,779,753 (15,871,234) (5,091,481) First Trust Growth Strength ETF 1,015,794 56,768 (49,314) 7,454 First Trust Indxx Aerospace & Defense ETF 2,139,043 131,377 (41,122) 90,255 H. EXPENSES Expenses that are directly related to First Trust Dividend Strength ETF are charged directly to the Fund. Expenses for First Trust Dow 30 Equal Weight ETF, First Trust Lunt U.S. Factor Rotation ETF, First Trust Growth Strength ETF, and First Trust Indxx Aerospace & Defense ETF (the "Unitary Fee Funds"), other than excluded expenses (discussed in Note 3), are paid by the Advisor. General expenses of the Trust are allocated to all the Funds based upon the net assets of each Fund. First Trust has entered into licensing agreements with each of the following "Licensors" for the respective Funds: FUND LICENSOR First Trust Dividend Strength ETF Nasdaq, Inc. First Trust Dow 30 Equal Weight ETF S&P Dow Jones Indices LLC First Trust Lunt U.S. Factor Rotation ETF Lunt Capital Management, Inc. First Trust Growth Strength ETF Nasdaq, Inc. First Trust Indxx Aerospace & Defense ETF Indxx, Inc. The respective license agreements allow for the use by First Trust of certain trademarks and trade names of the respective Licensors. The Funds are sub-licensees to the applicable license agreement. The First Trust Dividend Strength ETF is required to pay licensing fees, which are shown on the Statements of Operations. Page 38 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 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. Effective November 1, 2022, the management fee payable by First Trust Dividend Strength ETF to First Trust for these services will be reduced at certain levels of First Trust Dividend Strength ETF's net assets ("breakpoints") and calculated pursuant to the schedule below: Breakpoints ------------------------------------------------------------------------- Fund net assets up to and including $2.5 billion 0.5000% Fund net assets greater than $2.5 billion up to and including $5 billion 0.4875% Fund net assets greater than $5 billion up to and including $7.5 billion 0.4750% Fund net assets greater than $7.5 billion up to and including $10 billion 0.4625% Fund net assets greater than $10 billion up to and including $15 billion 0.4500% Fund net assets greater than $15 billion 0.4250% Prior to November 1, 2022, First Trust Dividend Strength ETF paid First Trust an annual management fee of 0.50% of the Fund's average daily net assets. For the First Trust Dividend Strength ETF, the Trust and the Advisor have entered into an Expense Reimbursement, Fee Waiver and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to waive fees and/or reimburse Fund expenses to the extent that the operating expenses of the Fund (excluding interest expense, brokerage commissions and other trading expenses, acquired fund fees and expenses, taxes and extraordinary expenses) exceed 0.70% of average daily net assets per year (the "Expense Cap"). The Expense Cap will be in effect until at least April 30, 2024. Prior to November 1, 2022, expenses reimbursed and fees waived by First Trust under the Recovery Agreement were subject to recovery by First Trust for up to three years from the date the fee or expense was incurred, but no reimbursement payment would be made by a Fund if it resulted 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. Effective November 1, 2022, in connection with the introduction of breakpoints discussed above, First Trust has agreed to remove its ability to recover previous expenses borne and fees waived under the Recovery Agreement. For First Trust Dow 30 Equal Weight ETF, First Trust Lunt U.S. Factor Rotation ETF, First Trust Growth Strength ETF, and First Trust Indxx Aerospace & Defense ETF, First Trust is paid an annual unitary management fee of such Fund's average daily net assets and is responsible for the expenses of such Fund including the cost of transfer agency, custody, fund administration, legal, audit, licensing and other services, but excluding fee payments under the Investment Management Agreement, distribution and service fees pursuant to a Rule 12b-1 plan, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, acquired fund fees and expenses, taxes, interest, and extraordinary expenses. Effective November 1, 2022, the annual unitary management fee payable by each Fund to First Trust for these services will be reduced at certain levels of each Fund's net assets ("breakpoints") and calculated pursuant to the schedule below: Breakpoints EDOW FCTR FTGS MISL ------------------------------------------------------------------------- --------------------------------- Fund net assets up to and including $2.5 billion 0.5000% 0.65000% 0.600% 0.600% Fund net assets greater than $2.5 billion up to and including $5 billion 0.4875% 0.63375% 0.585% 0.585% Fund net assets greater than $5 billion up to and including $7.5 billion 0.4750% 0.61750% 0.570% 0.570% Fund net assets greater than $7.5 billion up to and including $10 billion 0.4625% 0.60125% 0.555% 0.555% Fund net assets greater than $10 billion up to and including $15 billion 0.4500% 0.58500% 0.540% 0.540% Fund net assets greater than $15 billion 0.4250% 0.55250% 0.510% 0.510% Prior to November 1, 2022, for the First Trust Dow 30 Equal Weight ETF, First Trust Lunt U.S. Factor Rotation ETF, First Trust Growth Strength ETF, and First Trust Indxx Aerospace & Defense ETF, First Trust was paid an annual unitary management fee of 0.50%, 0.65%, 0.60%, and 0.60%, respectively, of such Fund's average daily net assets. Page 39 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund. Additionally, the Lead Independent Trustee and the Chairs of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairs rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES For the fiscal period ended December 31, 2022 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 Dividend Strength ETF $ 43,463,888 $ 43,485,643 First Trust Dow 30 Equal Weight ETF 23,442,783 23,243,481 First Trust Lunt U.S. Factor Rotation ETF 1,572,700,297 1,573,476,988 First Trust Growth Strength ETF 261,708 261,027 First Trust Indxx Aerospace & Defense ETF 32,225 32,465 For the fiscal period ended December 31, 2022, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows: Purchases Sales --------------- --------------- First Trust Dividend Strength ETF $ 2,141,151 $ 4,725,952 First Trust Dow 30 Equal Weight ETF 71,953,500 38,181,126 First Trust Lunt U.S. Factor Rotation ETF 198,179,002 457,525,110 First Trust Growth Strength ETF 1,012,577 -- First Trust Indxx Aerospace & Defense ETF 2,139,080 -- 5. CREATION, REDEMPTION AND TRANSACTION FEES Each Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as "Authorized Participants" have contractual arrangements with a Fund or one of the Fund's service providers to purchase and redeem Fund shares directly with the Fund in large blocks of shares known as "Creation Units." Prior to the start of trading on every business day, a Fund publishes through the National Securities Clearing Corporation ("NSCC") the "basket" of securities, cash or other assets that it will accept in exchange for a Creation Unit of the Fund's shares. An Authorized Participant that wishes to effectuate a creation of a Fund's shares deposits with the Fund the "basket" of securities, cash or other assets identified by the Fund that day, and then receives the Creation Unit of the Fund's shares in return for those assets. After purchasing a Creation Unit, the Authorized Participant may continue to hold the Fund's shares or sell them in the secondary market. The redemption process is the reverse of the purchase process: the Authorized Participant redeems a Creation Unit of a Fund's shares for a basket of securities, cash or other assets. The combination of the creation and redemption process with secondary market trading in a Fund's shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of a Fund's shares at or close to the NAV per share of the Fund. Page 40 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 Each Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of a Fund times the number of shares in a Creation Unit, plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the creation basket. Each Fund also imposes fees in connection with the redemption of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price received for each Creation Unit will equal the daily NAV per share of a Fund times the number of shares in a Creation Unit, minus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the redemption basket. Investors who use the services of a broker or other such intermediary in addition to an Authorized Participant to effect a redemption of a Creation Unit may also be assessed an amount to cover the cost of such services. The redemption fee charged by a Fund will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no more than 2% of the value of the shares redeemed. 6. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before April 30, 2024 for FTDS, EDOW, and FCTR, and October 20, 2024 for FTGS and MISL. 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 41 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statements of assets and liabilities of First Trust Dividend Strength ETF, First Trust Dow 30 Equal Weight ETF, First Trust Lunt U.S. Factor Rotation ETF, First Trust Growth Strength ETF, and First Trust Indxx Aerospace & Defense ETF (the "Funds"), each a series of First Trust Exchange-Traded Fund, including the portfolios of investments, as of December 31, 2022, the related statements of operations, the statements of the changes in net assets, and the financial highlights for the periods indicated in the table below for the Funds, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the Funds as of December 31, 2022, and the results of their operations, the changes in their net assets, 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 STATEMENTS OF CHANGES IN INCLUDED IN THE TRUST STATEMENTS OF OPERATIONS NET ASSETS FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------------------------------------------- First Trust Dividend Strength ETF For the year ended For the years ended For the years ended December 31, 2022 December 31, 2022 and 2021 December 31, 2022, 2021, First Trust Dow 30 Equal Weight 2020, 2019, and 2018 ETF First Trust Lunt U.S. Factor For the year ended For the years ended For the years ended Rotation ETF December 31, 2022 December 31, 2022 and 2021 December 31, 2022, 2021, 2020, 2019, and the period from July 25, 2018 (commencement of operations) through December 31, 2018 First Trust Growth Strength ETF For the period from October 25, 2022 (commencement of operations) through December 31, 2022 First Trust Indxx Aerospace & Defense ETF --------------------------------------------------------------------------------------------------------------------- BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2022, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois February 23, 2023 We have served as the auditor of one or more First Trust investment companies since 2001. Page 42 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION For the taxable year ended December 31, 2022, the following percentages of income dividends paid by the Funds qualify for the dividends received deduction available to corporations: Dividends Received Deduction ---------------------------- First Trust Dividend Strength ETF 100.00% First Trust Dow 30 Equal Weight ETF 100.00% First Trust Lunt U.S. Factor Rotation ETF 100.00% First Trust Growth Strength ETF 70.53% First Trust Indxx Aerospace & Defense ETF 100.00% For the taxable year ended December 31, 2022, the following percentages of income dividends paid by the Funds are hereby designated as qualified dividend income: Qualified Dividend Income ---------------------------- First Trust Dividend Strength ETF 100.00% First Trust Dow 30 Equal Weight ETF 100.00% First Trust Lunt U.S. Factor Rotation ETF 100.00% First Trust Growth Strength ETF 70.53% First Trust Indxx Aerospace & Defense ETF 100.00% A portion of each of the Funds' 2022 ordinary dividends (including short-term capital gains) paid to its shareholders during the fiscal year ended December 31, 2022, may be eligible for the Qualified Business Income Deduction (QBI) under Internal Revenue Code Section 199A for the aggregate dividends each Fund received from the underlying Real Estate Investment Trusts (REITs) these Funds invest in. RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a significant percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is more broadly diversified. Page 43 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor's investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund's share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market. ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads. FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities. Page 44 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) INDEX OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or more indices or ETF models. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. In addition, index rebalances may potentially result in increased trading activity in a fund's shares. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial Conduct Authority, which regulates LIBOR has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate ("SOFR") will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. MARKET RISK. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund's portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund's shares and result in increased market volatility. During any such events, a fund's shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund's shares may widen. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in Page 45 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. OPERATIONAL RISK. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund's service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund's ability to meet its investment objective. Although the funds and the funds' investment advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company's capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock. VALUATION RISK. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AGREEMENTS BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENTS FIRST TRUST GROWTH STRENGTH ETF The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, approved the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor"), on behalf of First Trust Growth Strength ETF (the "Fund"), for an initial two-year term at a meeting held on September 19, 2022. The Board determined that the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services expected to be provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. To assist the Board in its evaluation of the Agreement for the Fund, the Independent Trustees received a report from the Advisor in advance of the Board meeting responding to a request for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services to be provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the proposed unitary fee rate payable by the Fund as compared to 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 exchange-traded funds ("ETFs") managed by the Advisor; the estimated expense ratio of the Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; the nature of expenses to be incurred in providing services to the Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any indirect benefits to the Advisor and its affiliate, Page 46 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Independent Trustees and their counsel also met separately to discuss the information provided by the Advisor. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor is a reasonable business arrangement from the Fund's perspective. In evaluating whether to approve the Agreement for the Fund, the Board considered the nature, extent and quality of the services to be provided by the Advisor under the Agreement and considered that employees of the Advisor provide management services to other ETFs and to other funds in the First Trust Fund Complex with diligence and care. The Board considered that the Advisor will be responsible for the overall management and administration of the Fund and reviewed all of the services to be provided by the Advisor to the Fund. The Board also considered the background and experience of the persons who will be responsible for the day-to-day management of the Fund's investments. In reviewing the services to be 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 the Fund's compliance with the 1940 Act, as well as the Fund's compliance with its investment objective, policies and restrictions. Because the Fund had yet to commence investment operations, the Board could not consider the historical investment performance of the Fund. Because the Fund is an index ETF that is designed to track the performance of an underlying index, the Board considered reports it receives on a quarterly basis showing the correlation and tracking error between other ETFs for which the Advisor serves as investment advisor and their applicable underlying indexes. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services to be provided to the Fund by the Advisor under the Agreement are expected to be satisfactory. The Board considered the proposed unitary fee rate payable by the Fund under the Agreement for the services to be provided. The Board noted that, under the unitary fee arrangement, the Fund would pay the Advisor a unitary fee equal to an annual rate of 0.60% of its average daily net assets. The Board noted that the Advisor would be responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, acquired fund fees and expenses, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the fee rates and expense ratios of the peer funds in the Expense Group, as well as advisory and unitary fee rates charged by the Advisor to other ETFs. Because the Fund will pay a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for the Fund was above the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board discussed with representatives of the Advisor how the Expense Group was assembled and how the Fund compared and differed from the peer funds. The Board took this information into account in considering the peer data. With respect to fees charged to other ETFs managed by the Advisor, the Board considered the Advisor's statement that the Fund will be most comparable to two other index ETFs managed by the Advisor, each of which pays an advisory fee equal to an annual rate of 0.50% of its average daily net assets and is subject to an expense cap of 0.65% or 0.70% of its average daily net assets. In light of the information considered and the nature, extent and quality of the services expected to be provided to the Fund under the Agreement, the Board determined that the proposed unitary fee was fair and reasonable. The Board noted that the proposed unitary fee for the Fund was not structured to pass on to shareholders the benefits of any economies of scale as the Fund's assets grow. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Fund. The Board noted that the Advisor has continued to build infrastructure and add new staff to improve the services to the funds in the First Trust Fund Complex. The Board took into consideration the types of costs to be borne by the Advisor in connection with its services to be performed for the Fund under the Agreement. The Board considered the Advisor's estimate of the asset level for the Fund at which the Advisor expects the Agreement to be profitable to the Advisor and the Advisor's estimate of the profitability of the Agreement if the Fund's assets reach $100 million. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's estimated profitability level for the Fund was not unreasonable. The Board considered indirect benefits described by the Advisor that may be realized from its relationship with the Fund. The Board considered that the Advisor had identified as an indirect benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP. The Board also noted that the Advisor will not utilize soft dollars in connection with the Fund. The Board concluded that the character and amount of potential indirect benefits to the Advisor were not unreasonable. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, determined that the terms of the Agreement are fair and reasonable and that the approval of the Agreement is in the best interests of the Fund. No single factor was determinative in the Board's analysis. Page 47 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) FIRST TRUST INDXX AEROSPACE & DEFENSE ETF The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, approved the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor"), on behalf of First Trust Indxx Aerospace & Defense ETF (the "Fund"), for an initial two-year term at a meeting held on September 19, 2022. The Board determined that the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services expected to be provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. To assist the Board in its evaluation of the Agreement for the Fund, the Independent Trustees received a report from the Advisor in advance of the Board meeting responding to a request for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services to be provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the proposed unitary fee rate payable by the Fund as compared to 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 exchange-traded funds ("ETFs") managed by the Advisor; the estimated expense ratio of the Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; the nature of expenses to be incurred in providing services to the Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any indirect benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Independent Trustees and their counsel also met separately to discuss the information provided by the Advisor. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor is a reasonable business arrangement from the Fund's perspective. In evaluating whether to approve the Agreement for the Fund, the Board considered the nature, extent and quality of the services to be provided by the Advisor under the Agreement and considered that employees of the Advisor provide management services to other ETFs and to other funds in the First Trust Fund Complex with diligence and care. The Board considered that the Advisor will be responsible for the overall management and administration of the Fund and reviewed all of the services to be provided by the Advisor to the Fund. The Board also considered the background and experience of the persons who will be responsible for the day-to-day management of the Fund's investments. In reviewing the services to be 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 the Fund's compliance with the 1940 Act, as well as the Fund's compliance with its investment objective, policies and restrictions. Because the Fund had yet to commence investment operations, the Board could not consider the historical investment performance of the Fund. Because the Fund is an index ETF that is designed to track the performance of an underlying index, the Board considered reports it receives on a quarterly basis showing the correlation and tracking error between other ETFs for which the Advisor serves as investment advisor and their applicable underlying indexes. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services to be provided to the Fund by the Advisor under the Agreement are expected to be satisfactory. The Board considered the proposed unitary fee rate payable by the Fund under the Agreement for the services to be provided. The Board noted that, under the unitary fee arrangement, the Fund would pay the Advisor a unitary fee equal to an annual rate of 0.60% of its average daily net assets. The Board noted that the Advisor would be responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, acquired fund fees and expenses, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the fee rates and expense ratios of the peer funds in the Expense Group, as well as advisory and unitary fee rates charged by the Advisor to other ETFs. Because the Fund will pay a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for the Fund was equal to the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board discussed with representatives of the Advisor how the Expense Group was assembled and how the Fund compared and differed from the peer funds. The Board took this information into account in considering the peer data. With respect to fees charged to other ETFs managed by the Advisor, the Board considered the Advisor's statement that the Fund will be distinct compared to other funds in the First Trust Fund Complex, but similar to another index ETF managed by the Advisor that pays a unitary fee equal to an annual rate of 0.60% of its average daily net assets given each strategy's focus on U.S. listed stocks within a thematic segment of the market. In light of the information considered and the nature, extent and quality of the services expected to be provided to the Fund under the Agreement, the Board determined that the proposed unitary fee was fair and reasonable. Page 48 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) The Board noted that the proposed unitary fee for the Fund was not structured to pass on to shareholders the benefits of any economies of scale as the Fund's assets grow. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Fund. The Board noted that the Advisor has continued to build infrastructure and add new staff to improve the services to the funds in the First Trust Fund Complex. The Board took into consideration the types of costs to be borne by the Advisor in connection with its services to be performed for the Fund under the Agreement. The Board considered the Advisor's estimate of the asset level for the Fund at which the Advisor expects the Agreement to be profitable to the Advisor and the Advisor's estimate of the profitability of the Agreement if the Fund's assets reach $100 million. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's estimated profitability level for the Fund was not unreasonable. The Board considered indirect benefits described by the Advisor that may be realized from its relationship with the Fund. The Board considered that the Advisor had identified as an indirect benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP. The Board also noted that the Advisor will not utilize soft dollars in connection with the Fund. The Board concluded that the character and amount of potential indirect benefits to the Advisor were not unreasonable. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, determined that the terms of the Agreement are fair and reasonable and that the approval of the Agreement is in the best interests of the Fund. No single factor was determinative in the Board's analysis. BOARD CONSIDERATIONS REGARDING APPROVAL OF AMENDMENTS TO THE INVESTMENT MANAGEMENT AGREEMENTS The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, unanimously approved the amendment (as applicable to a specific Fund, the "Amendment" and collectively, the "Amendments") 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 three series of the Trust (each a "Fund" and collectively, the "Funds"): First Trust Dividend Strength ETF (FTDS) First Trust Dow 30 Equal Weight ETF (EDOW) First Trust Lunt U.S. Factor Rotation ETF (FCTR) The Board approved the Amendment for each Fund at a meeting held on October 24, 2022. As part of the review process, the Board reviewed information and had preliminary discussions with the Advisor regarding the proposed Amendments at meetings held on April 18, 2022, June 12-13, 2022 and September 18-19, 2022. Following those preliminary discussions, the Board requested and received information from the Advisor regarding the proposed Amendments, and that information was considered at an executive session of the Independent Trustees and their counsel held prior to the October 24, 2022 meeting, as well as at the October meeting. In reviewing the Amendment for each Fund, the Board considered that the purpose of the Amendments is to modify the advisory fee rate for FTDS and the unitary fee rate for each of EDOW and FCTR under the applicable Agreement by introducing a breakpoint schedule pursuant to which the advisory fee rate paid by FTDS and the unitary fee rate paid by each of EDOW and FCTR to the Advisor will be reduced as assets of such Fund meet certain thresholds. The Board noted the Advisor's representations that the quality and quantity of the services provided to each Fund by the Advisor under the applicable Agreement will not be reduced or modified as a result of the applicable Amendment, and that the obligations of the Advisor under each Agreement will remain the same in all respects. The Board noted that it, including the Independent Trustees, last approved the continuation of the applicable Agreement for each Fund for a one-year period ending June 30, 2023 at a meeting held on June 12-13, 2022. The Board noted that in connection with such approval it had determined for each Fund, based upon the information provided, that the terms of the applicable Agreement were fair and reasonable and that the continuation of the applicable Agreement was in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. The Board noted that with respect to FTDS, the Advisor had previously agreed to waive management fees and reimburse certain expenses for a specified period to prevent the Fund's expense ratio from exceeding a particular expense cap, that the expense cap for the Fund would continue following entry into the Amendment, and that under the current terms of the expense cap, expenses reimbursed and fees waived are subject to recovery by the Advisor for up to three years from the date the fee was waived or expense was incurred under certain conditions. The Board noted that in connection with the Amendment, the Advisor agreed to amend the terms of the expense cap to eliminate its ability to recover any fees waived or expenses reimbursed. Based on all of the information considered, the Board, including the Independent Trustees, unanimously determined that the terms of the Amendments are fair and reasonable and that the Amendments are in the best interests of each Fund. Page 49 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, unanimously approved the amendment (the "Amendment") of the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the First Trust Growth Strength ETF (the "Fund"). The Board approved the Amendment at a meeting held on October 24, 2022. As part of the review process, the Board reviewed information and had preliminary discussions with the Advisor regarding the proposed Amendment at meetings held on June 12-13, 2022 and September 18-19, 2022. Following those preliminary discussions, the Board requested and received information from the Advisor regarding the proposed Amendment, and that information was considered at an executive session of the Independent Trustees and their counsel held prior to the October 24, 2022 meeting, as well as at the October meeting. In reviewing the Amendment, the Board considered that the purpose of the Amendment is to modify the unitary fee rate for the Fund under the Agreement by introducing a breakpoint schedule pursuant to which the unitary fee rate paid by the Fund to the Advisor will be reduced as assets of the Fund meet certain thresholds. The Board noted the Advisor's representations that the quality and quantity of the services provided to the Fund by the Advisor under the Agreement will not be reduced or modified as a result of the Amendment, and that the obligations of the Advisor under the Agreement will remain the same in all respects. The Board noted that it, including the Independent Trustees, approved the Agreement for an initial two-year period ending October 20, 2024 at a meeting held on September 19, 2022. The Board noted that in connection with such approval it had determined, based upon the information provided, that the terms of the Agreement were fair and reasonable and that the approval of the Agreement was in the best interests of the Fund in light of the nature, extent and quality of the services expected to be provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. Based on all of the information considered, the Board, including the Independent Trustees, unanimously determined that the terms of the Amendment are fair and reasonable and that the Amendment is in the best interests of the Fund. The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, unanimously approved the amendment (the "Amendment") of the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the First Trust Indxx Aerospace & Defense ETF (the "Fund"). The Board approved the Amendment at a meeting held on October 24, 2022. As part of the review process, the Board reviewed information and had preliminary discussions with the Advisor regarding the proposed Amendment at meetings held on June 12-13, 2022 and September 18-19, 2022. Following those preliminary discussions, the Board requested and received information from the Advisor regarding the proposed Amendment, and that information was considered at an executive session of the Independent Trustees and their counsel held prior to the October 24, 2022 meeting, as well as at the October meeting. In reviewing the Amendment, the Board considered that the purpose of the Amendment is to modify the unitary fee rate for the Fund under the Agreement by introducing a breakpoint schedule pursuant to which the unitary fee rate paid by the Fund to the Advisor will be reduced as assets of the Fund meet certain thresholds. The Board noted the Advisor's representations that the quality and quantity of the services provided to the Fund by the Advisor under the Agreement will not be reduced or modified as a result of the Amendment, and that the obligations of the Advisor under the Agreement will remain the same in all respects. The Board noted that it, including the Independent Trustees, approved the Agreement for an initial two-year period ending October 20, 2024 at a meeting held on September 19, 2022. The Board noted that in connection with such approval it had determined, based upon the information provided, that the terms of the Agreement were fair and reasonable and that the approval of the Agreement was in the best interests of the Fund in light of the nature, extent and quality of the services expected to be provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. Based on all of the information considered, the Board, including the Independent Trustees, unanimously determined that the terms of the Amendment are fair and reasonable and that the Amendment is in the best interests of the Fund. Page 50 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (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 PORTFOLIOS IN TERM OF OFFICE THE FIRST TRUST OTHER TRUSTEESHIPS NAME, AND YEAR FIRST FUND COMPLEX OR DIRECTORSHIPS HELD YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY BY TRUSTEE DURING POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ Richard E. Erickson, Trustee o Indefinite Term Physician, Edward-Elmhurst Medical Group, 222 None (1951) Physician & Officer, Wheaton Orthopedics o Since Inception (1990 to 2021) Thomas R. Kadlec, Trustee o Indefinite Term Retired; President, ADM Investors 222 Director, National Futures (1957) Services, Inc. (Futures Commission Association and ADMIS o Since Inception Merchant) (2010 to July 2022) Singapore Ltd.; Formerly, Director of ADM Investor Services, Inc., ADM Investor Services International, ADMIS Hong Kong Ltd., and Futures Industry Association Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate Aurora 222 Director and Board Chair (1964) Health and President, Advocate Aurora of Advocate Home Health o Since 2021 Continuing Health Division (Integrated Services, Advocate Home Healthcare System) Care Products and Advocate Hospice; Director and Board Chair of Aurora At Home (since 2018); Director of Advocate Physician Partners Accountable Care Organization; Director and Board Chair of RML Long Term Acute Care Hospitals; and Director of Senior Helpers (since 2021) Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 222 Formerly, Director of (1956) and Management Consulting) Trust Company of Illinois o Since Inception Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 222 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 222 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception 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 51 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) POSITION AND TERM OF OFFICE NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer, (1966) Executive Officer First Trust Advisors L.P. and First Trust Portfolios o Since January 2016 L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1972) Officer and Chief First Trust Portfolios L.P. Accounting Officer o Since January 2016 W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel, o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and First (1970) Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Chief Compliance Officer Since January 2011 o Assistant Secretary Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1966) First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 52 -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies." For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2022 Page 53 This page intentionally left blank. This page intentionally left blank. This page intentionally left blank. FIRST TRUST FIRST TRUST EXCHANGE-TRADED FUND INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 320 South Canal Street Chicago, IL 60606 [BLANK BACK COVER]