FIRST TRUST
First Trust Exchange-Traded Fund
Book 1
First Trust Dow Jones Select MicroCap Index Fund (FDM)
First Trust Morningstar Dividend Leaders Index Fund (FDL)
First Trust US Equity Opportunities ETF (FPX)
First Trust NYSE(R) Arca(R) Biotechnology Index Fund (FBT)
First Trust Dow Jones Internet Index Fund (FDN)
First Trust Capital Strength ETF (FTCS)
First Trust Value Line(R) Dividend Index Fund (FVD)
Annual Report
December 31, 2021
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2021
Shareholder Letter.......................................................... 2
Market Overview............................................................. 3
Fund Performance Overview
First Trust Dow Jones Select MicroCap Index Fund (FDM)................... 4
First Trust Morningstar Dividend Leaders Index Fund (FDL)................ 6
First Trust US Equity Opportunities ETF (FPX)............................ 8
First Trust NYSE(R) Arca(R) Biotechnology Index Fund (FBT)............... 10
First Trust Dow Jones Internet Index Fund (FDN).......................... 12
First Trust Capital Strength ETF (FTCS).................................. 14
First Trust Value Line(R) Dividend Index Fund (FVD)...................... 16
Notes to Fund Performance Overview.......................................... 18
Understanding Your Fund Expenses............................................ 19
Portfolio of Investments
First Trust Dow Jones Select MicroCap Index Fund (FDM)................... 21
First Trust Morningstar Dividend Leaders Index Fund (FDL)................ 26
First Trust US Equity Opportunities ETF (FPX)............................ 28
First Trust NYSE(R) Arca(R) Biotechnology Index Fund (FBT)............... 32
First Trust Dow Jones Internet Index Fund (FDN).......................... 33
First Trust Capital Strength ETF (FTCS).................................. 35
First Trust Value Line(R) Dividend Index Fund (FVD)...................... 37
Statements of Assets and Liabilities........................................ 42
Statements of Operations.................................................... 44
Statements of Changes in Net Assets......................................... 46
Financial Highlights........................................................ 49
Notes to Financial Statements............................................... 53
Report of Independent Registered Public Accounting Firm..................... 63
Additional Information...................................................... 64
Board of Trustees and Officers.............................................. 68
Privacy Policy.............................................................. 70
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2021
Dear Shareholders:
First Trust is pleased to provide you with the annual report for certain funds
in the First Trust Exchange-Traded Fund (the "Funds"), which contains detailed
information about the Funds for the twelve months ended December 31, 2021.
Being that this is a year-end review, I would like to touch on the state of the
business climate and securities markets in the U.S. The two biggest stories in
2021 were clearly the ongoing fight against the coronavirus ("COVID-19")
pandemic and the surge in the rate of inflation, which I believe is a byproduct
of that fight. The COVID-19 pandemic is closing in on its second anniversary and
it continues to curb economic activity in the U.S. and abroad. It is nearly as
challenging today as it was at its peak in 2020.
The emergence of the Omicron variant in the latter half of 2021 was particularly
disappointing because we had been making some inroads into fully reopening the
U.S. economy until its arrival. Americans were dining out. Airline travel was
picking up and people were even taking cruises again. We have learned that the
Omicron variant, while seemingly not as dangerous as its predecessor, the Delta
variant, at least in terms of the number of deaths to date, is still extremely
contagious, especially for those individuals who have not been vaccinated. The
U.S. federal government has funneled trillions of dollars of stimulus and
subsidies into the financial system to mitigate the economic fallout from the
pandemic. That level of support is unprecedented and has likely fueled much of
the surge in inflation, as measured by the Consumer Price Index ("CPI"). The
standard definition for inflation is "too many dollars chasing too few goods."
The explosion of the U.S. money supply has easily overwhelmed the volume of
goods available to consumers. Global supply chain bottlenecks, including the
backlog of container ships at ports in Southern California, have also
contributed to the shortages of goods. In December 2021, the trailing 12-month
rate on the CPI was 7.0%, up from 1.4% last December, according to the U.S.
Bureau of Labor Statistics. The last time inflation was this elevated was in
1982.
Since the onset of COVID-19, companies and millions of employees have scrambled
to adapt to the new normal of working remotely, typically from home. What an
amazing thing to watch. While opinions may vary, it has become evident that the
workplace culture has probably changed forever. According to Barron's magazine,
we should look for more of a hybrid arrangement moving forward that would entail
workers being at the office for three days a week and home for two. I do not
believe that the stock and bond markets would have performed nearly as well over
the past two years had U.S. businesses not overcome the adversity brought their
way by COVID-19. Oh, and the trillions of dollars from the government. In 2021,
the S&P 500(R) Index posted a total return of 28.71%, and that came on the heels
of an 18.40% gain in 2020, according to Bloomberg. From 1926-2021 (a span of 96
years), the S&P 500(R) Index posted an average annual total return of 10.44%,
according to Morningstar/Ibbotson Associates. Investors should relish these
outsized returns. Bond investors have earned more modest total returns over the
past two years. Bond returns were higher for most bond categories in 2020 due to
the artificially depressed yield on the 10-Year Treasury Note ("T-Note"). The
10-Year T-Note yield trended higher in 2021, putting some pressure on bond
prices. Expect the Federal Reserve to tighten monetary policy by raising
short-term interest rates. It could begin as early as March 2022. While the
markets could experience some near-term pain, I believe normalizing interest
rates and bond yields will prove to be a healthy and necessary transition for
the markets long-term.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
--------------------------------------------------------------------------------
MARKET OVERVIEW
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2021 (UNAUDITED)
ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of research and analysis of
the First Trust product line. Mr. Carey has more than 30 years of experience as
an Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial
Analyst ("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE ECONOMY/INVESTING
Inflation surged in 2021 and it looks as though it is here to stay. Federal
Reserve (the "Fed") Chairman Jerome Powell has changed his expectations on
inflation from characterizing it as transitory to it being more persistent in
nature. In the hopes of keeping inflation from becoming entrenched, the Fed
announced it will expedite the tapering of its monthly bond buying program as of
December 2021. This program has been successful at pushing down intermediate and
longer maturity bond yields and keeping them artificially low to help stimulate
economic activity. The Fed will reduce its purchases of Treasuries and
mortgage-backed securities by $30 billion per month. At that pace, it should be
done buying bonds in the open market by the end of March 2022. They also foresee
hiking short-term interest rates three times in 2022. The Federal Funds target
rate (upper bound) is currently at 0.25%. The trailing 12-month Consumer Price
Index rate stood at 7.0% in December 2021, according to the U.S. Bureau of Labor
Statistics. That is up significantly from 1.4% in December 2020 and well above
its 2.3% average rate over the past 30 years.
The global growth forecast from the International Monetary Fund ("IMF") released
in October 2021 sees real gross domestic product growth rising by 4.9% worldwide
in 2022, down from its 5.9% projection for 2021. The IMF is calling for a 5.2%
growth rate for the U.S. in 2022, down from its 6.0% estimate for 2021. As has
been the case for many years, Emerging Market and Developing Economies are
expected to grow faster than Advanced Economies. Their 2022 growth rate
estimates are 5.1% and 4.5%, respectively.
The exchange-traded funds ("ETFs") and related exchange-traded products ("ETPs")
industry grew significantly in 2021. ETFGI, an independent research and
consultancy firm, reported that total assets invested in ETFs/ETPs listed in the
U.S. stood at an all-time high of $7.21 trillion as of year-end, up 31.81% from
the $5.47 trillion at the end of 2020, according to its own release. Net inflows
to ETFs/ETPs listed in the U.S. hit a record high of $919.78 billion in 2021,
topping the prior record of $490.19 billion in 2020. U.S. ETF/ETP assets
represent approximately 72% of total global ETF/ETP assets.
U.S. STOCKS AND BONDS
In 2021, three of the major U.S. stock indices posted substantial double-digit
gains. The S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R)
Index posted total returns of 28.71%, 24.76%, and 26.82%, respectively,
according to Bloomberg. All 11 major sectors that comprise the S&P 500(R) Index
posted positive double-digit total returns. The top-performing sectors were
Energy, Real Estate, Financials and Information Technology, up 54.64%, 46.14%,
35.04% and 34.53%, respectively, while the worst-performing sector was
Utilities, up 17.67%. As we have noted often, we believe that when the major
stock indices are trading at or near their record highs in maturing bull
markets, corporate earnings need to continue to grow to drive the market higher.
Bloomberg's consensus year-over-year earnings growth rate estimates for the S&P
500(R) Index for 2022 and 2023 were 8.74% and 9.97%, respectively, as of
December 31, 2021. These projections, while positive, are more typical than
Bloomberg's 2021 growth estimate of 47.26%, which reflects a robust rebound from
the coronavirus-induced -12.44% earnings growth rate posted in 2020.
The yield on the benchmark 10-Year Treasury Note closed trading on December 31,
2021, at 1.51%, according to Bloomberg. The 1.51% yield stood 52 basis points
("bps") below its 2.03% average for the 10-year period ended December 31, 2021.
Its yield rose 59 bps in 2021. The more than half-point rise was enough of a
headwind to push the returns of taxable investment-grade bonds into negative
territory. It was risk-on for investors in 2021. The top performing fixed-income
bond category we track was high yield corporates. The Bloomberg U.S. Corporate
High Yield Index posted a total return of 5.28% for the year. Investors were
willing to accept more risk to garner a higher return. The good news is that the
default rate on speculative-grade (high yield) debt is low by historical
standards. Moody's reported that its global speculative-grade default rate stood
at 1.7% in December. Moody's puts the historical average default rate at 4.1%
(1983-2021). Its baseline scenario sees the default rate increasing to 2.4% by
December 2022 but staying well below its average.
FOREIGN STOCKS AND BONDS
The U.S. dollar appreciated by 6.37% against a basket of major currencies in
2021, as measured by the U.S. Dollar Index ("DXY"), according to Bloomberg. The
DXY closed 2021 at a reading of 95.67, above its 20-year average of 88.89. The
stronger U.S. dollar likely had a negative influence on the returns of unhedged
foreign securities held by U.S. investors.
The Bloomberg EM Hard Currency Aggregate Index of emerging markets debt posted a
total return of -2.57% (USD), while the Bloomberg Global Aggregate Index of
higher quality debt declined 4.71% (USD). With respect to equities, the MSCI
Emerging Markets Index of stocks posted a total return of -2.54% (USD), while
the MSCI World ex USA Index rose by 12.62% (USD) on a total return basis,
according to Bloomberg.
Page 3
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
The First Trust Dow Jones Select MicroCap Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Dow Jones Select
MicroCap Index(SM) (the "Index"). The Fund will normally invest at least 80% of
its net assets (including investment borrowings) in the common stocks of U.S.
micro-capitalization companies which are publicly traded in the United States.
The Fund will normally invest at least 90% of its net assets (including
investment borrowings) in the common stocks that comprise the Index. The Index
is designed to measure the performance of micro-cap stocks issued by U.S.
companies that are comparatively liquid and have strong fundamentals relative to
the micro-cap segment as a whole. The Index is rebalanced quarterly and
reconstituted annually and the Fund will make corresponding changes to its
portfolio shortly after the Index changes are made public. The Fund's shares are
listed for trading on the NYSE Arca, Inc. ("NYSE Arca"). The first day of
secondary market trading in shares of the Fund was September 30, 2005.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (9/27/05) Ended Ended (9/27/05)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
FUND PERFORMANCE
NAV 34.71% 9.22% 13.74% 8.52% 55.41% 262.28% 278.08%
Market Value 34.58% 9.19% 13.82% 8.53% 55.21% 264.95% 278.23%
INDEX PERFORMANCE
Dow Jones Select MicroCap Index(SM) 35.60% 10.03% 14.52% 9.28% 61.30% 287.95% 323.16%
Russell 2000(R) Index 14.82% 12.02% 13.23% 9.29% 76.39% 246.52% 323.65%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of 34.71% during the
12-month period covered by this report. During the same period, the Russell
2000(R) Index (the "Benchmark") generated a return of 14.82%. The Financials
sector received the largest allocation in the Fund during the period at 32.4%
while also providing the Fund's largest contribution to the Fund's return at
13.5%. The Health Care sector provided the largest negative contribution to the
Fund's return with a contribution of -0.6%. On a relative basis, the Fund
outperformed the Benchmark. The greatest source of relative outperformance was
found in the Financials sector where the Fund earned 7.1% of outperformance
versus the Benchmark. The Fund outperformed the Benchmark in every sector during
the 12-month period covered by this report.
-----------------------------
The Dow Jones Select MicroCap Index(SM) ("Index") is a product of S&P Dow Jones
Indices LLC or its affiliates ("SPDJI") and has been licensed for use by First
Trust. S&P(R) is a registered trademark of Standard & Poor's Financial Services
LLC ("S&P"); Dow Jones(R) is a registered trademark of Dow Jones Trademark
Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by
SPDJI and sublicensed for certain purposes by First Trust. The Fund is not
sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their
respective affiliates and none of such parties make any representation regarding
the advisability of investing in such products nor do they have any liability
for any errors, omissions, or interruptions of the Index.
Page 4
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Financials 34.1%
Industrials 14.9
Consumer Discretionary 14.5
Information Technology 9.3
Health Care 7.7
Real Estate 6.6
Materials 5.1
Consumer Staples 4.2
Energy 2.3
Communication Services 0.7
Utilities 0.6
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
AdvanSix, Inc. 1.1%
Alpha & Omega Semiconductor Ltd. 1.1
Ingles Markets, Inc., Class A 1.1
Andersons (The), Inc. 1.0
Photronics, Inc. 1.0
Federal Agricultural Mortgage Corp., Class C 1.0
Plymouth Industrial REIT, Inc. 1.0
Metropolitan Bank Holding Corp. 0.9
HomeStreet, Inc. 0.9
Banc of California, Inc. 0.9
-------
Total 10.0%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust Dow Jones
Select MicroCap Dow Jones Select Russell 2000(R)
Index Fund MicroCap Index(SM) Index
12/11 $10,000 $10,000 $10,000
06/12 10,644 10,679 10,853
12/12 11,587 11,669 11,634
06/13 13,469 13,605 13,479
12/13 16,606 16,832 16,151
06/14 16,495 16,771 16,666
12/14 17,117 17,449 16,941
06/15 18,007 18,409 17,746
12/15 17,213 17,660 16,193
06/16 17,643 18,151 16,552
12/16 23,315 24,050 19,644
06/17 23,460 24,254 20,624
12/17 25,285 26,223 22,521
06/18 27,341 28,436 24,246
12/18 22,072 23,025 20,038
06/19 24,648 25,802 23,440
12/19 28,089 29,478 25,152
06/20 21,729 22,846 21,888
12/20 26,895 28,611 30,176
06/21 34,754 37,080 35,469
12/21 36,228 38,795 34,652
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 MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
The First Trust Morningstar Dividend Leaders Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Morningstar(R) Dividend
Leaders Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its net assets (including investment borrowings) in the common stocks that
comprise the Index. The Index is designed to measure the performance of the 100
highest-yielding stocks that have a consistent record of dividend payment and
have the ability to sustain their dividend payments. The securities comprising
the Morningstar(R) US Market Index(SM) serve as the Fund's selection universe.
The Index is rebalanced quarterly and reconstituted annually and the Fund will
make corresponding changes to its portfolio shortly after the Index changes are
made public. The Fund's shares are listed for trading on the NYSE Arca. The
first day of secondary market trading in shares of the Fund was March 15, 2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (3/9/06) Ended Ended (3/9/06)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
FUND PERFORMANCE
NAV 24.76% 9.34% 11.35% 7.80% 56.31% 193.15% 227.81%
Market Value 24.83% 9.33% 11.36% 7.80% 56.18% 193.23% 227.80%
INDEX PERFORMANCE
Morningstar(R) Dividend Leaders Index(SM) 25.55% 9.94% 11.95% 8.35% 60.61% 209.15% 255.39%
S&P 500(R) Index 28.71% 18.47% 16.55% 10.95% 133.41% 362.57% 416.98%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 24.76% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index (the "Benchmark")
generated a return of 28.71%. The Fund's greatest allocation was to the
Communication Services sector, with an average weight of 17.8%. This sector
contributed -0.7% to the Fund's return, which was the worst contribution to
return of any sector. The greatest contribution to the Fund's return was the
6.5% from investments in the Financials sector. On a relative basis, the Fund
underperformed the Benchmark. The greatest source of underperformance for the
Fund was investments in the Communication Services sector. The Fund's
investments in this sector underperformed those in the Benchmark and caused
-5.8% of underperformance versus the Benchmark during the period. The sector
with the greatest outperformance for the Fund versus the Benchmark was the
Financials sector. Investments in the Financials sector caused 2.3% of
outperformance for the Fund versus the Benchmark during the period covered by
this report.
-----------------------------
Morningstar(R) and Morningstar(R) Dividend Leaders Index(SM) are registered
trademarks and service marks of Morningstar, Inc. ("Morningstar") and have been
licensed for use by First Trust on behalf of the Fund. The Fund is not
sponsored, endorsed, issued, sold or promoted by Morningstar and Morningstar
makes no representation regarding the advisability of investing in the Fund.
Page 6
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Health Care 20.1%
Consumer Staples 17.7
Communication Services 17.7
Utilities 13.9
Energy 9.6
Information Technology 9.2
Financials 8.5
Materials 2.7
Consumer Discretionary 0.5
Industrials 0.1
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
AT&T, Inc. 10.1%
Verizon Communications, Inc. 7.0
Chevron Corp. 6.6
AbbVie, Inc. 6.5
Pfizer, Inc. 6.4
Philip Morris International, Inc. 5.3
Altria Group, Inc. 4.5
Coca-Cola (The) Co. 4.5
Merck & Co., Inc. 4.4
Broadcom, Inc. 4.3
-------
Total 59.6%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust Morningstar
Dividend Leaders Morningstar(R) Dividend S&P 500(R)
Index Fund Leaders Index(SM) Index
12/11 $10,000 $10,000 $10,000
06/12 10,827 10,864 10,949
12/12 10,914 10,976 11,600
06/13 12,438 12,542 13,203
12/13 13,394 13,540 15,356
06/14 14,772 14,977 16,452
12/14 15,129 15,375 17,459
06/15 14,671 14,941 17,674
12/15 15,542 15,863 17,701
06/16 17,830 18,252 18,381
12/16 18,763 19,247 19,821
06/17 19,311 19,863 21,675
12/17 21,003 21,657 24,153
06/18 20,306 20,992 24,796
12/18 19,769 20,470 23,092
06/19 22,592 23,465 27,373
12/19 24,590 25,611 30,355
06/20 19,686 20,559 29,421
12/20 23,502 24,621 35,940
06/21 26,807 28,175 41,416
12/21 29,315 30,915 46,257
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 US EQUITY OPPORTUNITIES ETF (FPX)
The First Trust US Equity Opportunities ETF (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the IPOX(R)-100 U.S. Index (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in the common stocks that comprise the Index.
The Index seeks to measure the performance of the equity securities of the 100
largest and typically most liquid initial public offerings ("IPOs") (including
spin-offs and equity carve-outs) of U.S. companies. The Index is rebalanced and
reconstituted quarterly and the Fund will make corresponding changes to its
portfolio shortly after the Index changes are made public. The Fund's shares are
listed for trading on the NYSE Arca. The first day of secondary market trading
in shares of the Fund was April 13, 2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (4/12/06) Ended Ended (4/12/06)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
FUND PERFORMANCE
NAV 3.67% 18.42% 18.51% 13.07% 132.85% 446.63% 589.27%
Market Value 3.63% 18.39% 18.52% 13.07% 132.55% 446.85% 589.28%
INDEX PERFORMANCE
IPOX(R)-100 U.S. Index 4.19% 18.97% 19.14% 13.70% 138.34% 475.98% 652.76%
S&P 500(R) Index 28.71% 18.47% 16.55% 10.92% 133.41% 362.57% 409.92%
Russell 3000(R) Index 25.66% 17.97% 16.30% 10.79% 128.45% 352.85% 400.71%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 3.67% during the 12-month period covered by
this report. During the same period, the Russell 3000(R) Index (the "Benchmark")
generated a return of 25.66%. The Information Technology sector was the largest
sector allocation for the Fund at 34.7% and provided the second largest
contribution to the Fund's return at 4.2%. The Consumer Discretionary sector
contributed -1.5% to the Fund's return, the worst of any sector. On a relative
basis, the Fund underperformed the Benchmark. The largest source of relative
underperformance came from the Information Technology sector where the Fund
underperformed the Benchmark by -5.0%. The Fund underperformed the Benchmark in
most sectors; however, the Fund's investments in the Consumer Staples sector
significantly outperformed the Benchmark allocations in this sector and earned
0.4% of outperformance for the Fund versus the Benchmark.
-----------------------------
IPOX(R) and IPOX(R)-100 U.S. Index are registered international trademarks and
service marks of IPOX(R) Schuster LLC ("IPOX") and have been licensed for use by
First Trust. The Fund is not sponsored, endorsed, sold or promoted by IPOX, and
IPOX makes no representation regarding the advisability of trading in such Fund.
IPOX(R) is an international trademark of IPOX Schuster LLC. Index of Initial
Public Offerings (IPOX) and IPOX Derivatives Patent No. 7,698,197.
Page 8
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 33.7%
Industrials 13.3
Health Care 10.6
Consumer Discretionary 10.6
Financials 7.4
Communication Services 7.0
Real Estate 4.5
Consumer Staples 4.3
Energy 3.9
Materials 3.8
Utilities 0.9
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Marvell Technology, Inc. 10.0%
Airbnb, Inc., Class A 4.1
Tradeweb Markets, Inc., Class A 2.8
Avantor, Inc. 2.8
Uber Technologies, Inc. 2.7
ROBLOX Corp., Class A 2.6
Alcon, Inc. 2.5
Keysight Technologies, Inc. 2.3
General Dynamics Corp. 2.3
Datadog, Inc., Class A 2.2
-------
Total 34.3%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust
US Equity IPOX(R)-100 S&P 500(R) Russell 3000(R)
Opportunities ETF U.S. Index Index Index
12/11 $10,000 $10,000 $10,000 $10,000
06/12 11,354 11,388 10,949 10,932
12/12 13,001 13,077 11,600 11,641
06/13 15,184 15,311 13,203 13,278
12/13 19,240 19,469 15,356 15,547
06/14 20,512 20,822 16,452 16,626
12/14 21,531 21,921 17,459 17,499
06/15 23,391 23,885 17,674 17,838
12/15 22,002 22,533 17,701 17,583
06/16 21,859 22,438 18,381 18,220
12/16 23,477 24,163 19,818 19,822
06/17 25,987 26,811 21,669 21,592
12/17 29,807 30,833 24,144 24,010
06/18 31,366 32,513 24,784 24,783
12/18 27,357 28,433 23,086 22,751
06/19 34,418 35,867 27,366 27,015
12/19 35,695 37,243 30,354 29,809
06/20 37,376 39,066 29,421 28,773
12/20 52,729 55,285 35,943 36,037
06/21 56,825 59,725 41,422 41,481
12/21 54,663 57,598 46,257 45,285
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 NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX FUND (FBT)
The First Trust NYSE(R) Arca(R) Biotechnology Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NYSE(R) Arca
Biotechnology Index (the "Index"). The Fund will normally invest at least 90% of
its net assets (including investment borrowings) in the common stocks and
depositary receipts that comprise the Index. The Index is an equal-dollar
weighted index designed to measure the performance of a cross section of small,
mid and large capitalization companies in the biotechnology industry that are
primarily involved in the use of biological processes to develop products or
provide services. Such processes include, but are not limited to, recombinant
DNA technology, molecular biology, genetic engineering, monoclonal
antibody-based technology, lipid/liposome technology and genomics. This Index is
rebalanced and reconstituted quarterly and the Fund will make corresponding
changes to its portfolio shortly after the Index changes are made public. The
Fund's shares are listed for trading on the NYSE Arca. The first day of
secondary market trading in shares of the Fund was June 23, 2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (6/19/06) Ended Ended (6/19/06)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
FUND PERFORMANCE
NAV -3.64% 12.25% 17.38% 14.51% 78.19% 396.40% 720.83%
Market Value -3.61% 12.24% 17.38% 14.51% 78.10% 396.68% 721.02%
INDEX PERFORMANCE
NYSE(R) Arca Biotechnology Index -3.52% 12.75% 17.91% 15.10% 82.18% 419.27% 788.26%
S&P Composite 1500(R) Health Care Index 24.85% 17.70% 17.44% 12.85% 125.88% 399.07% 553.90%
NASDAQ(R) Biotechnology Index 0.02% 11.89% 16.36% 13.26% 75.37% 354.94% 592.23%
S&P 500(R) Index 28.71% 18.47% 16.55% 11.30% 133.41% 362.57% 427.80%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -3.64% during the 12-month period covered by
this report. During the same period, the S&P Composite 1500(R) Health Care Index
(the "Benchmark") returned 24.85%. The Fund's allocation to the Biotechnology
industry was its largest at 79.9%, while also providing the worst contribution
to the Fund's return at -8.3%. The industry providing the greatest contribution
to return was the Life Sciences Tools & Services industry with a 5.2%
contribution to the Fund's return. On a relative basis, the Fund underperformed
the Benchmark. The largest source of relative underperformance was found in the
Biotechnology industry, which caused -26.7% of underperformance for the Fund
versus the Benchmark. The Fund did outperform the Benchmark in the Life Sciences
Tools & Services industry, reducing a portion of the Fund's overall relative
underperformance.
-----------------------------
Source ICE Data Indices, LLC, is used with permission. "NYSE(R)" is a
service/trade mark of ICE Data Indices, LLC or its affiliates. This trademark
has been licensed, along with the NYSE(R) Arca Biotechnology Index (the "Index")
for use by First Trust Portfolios L.P. in connection with the First Trust
NYSE(R) Arca(R) Biotechnology Index Fund (the "Product"). Neither First Trust
Portfolios L.P., First Trust Exchange-Traded Fund (the "Trust") nor the Product,
as applicable, is sponsored, endorsed, sold or promoted by ICE Data Indices,
LLC, its affiliates or its Third Party Suppliers ("ICE Data and its Suppliers").
ICE Data and its Suppliers make no representations or warranties regarding the
advisability of investing in securities generally, in the Product particularly,
the Trust or the ability of the Index to track general market performance. Past
performance of an Index is not an indicator of or a guarantee of future results.
ICE DATA AND ITS SUPPLIERS DISCLAIM ANY AND ALL WARRANTIES AND REPRESENTATIONS,
EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE, INCLUDING THE INDICES, INDEX DATA AND ANY
INFORMATION INCLUDED IN, RELATED TO, OR DERIVED THEREFROM ("INDEX DATA"). ICE
DATA AND ITS SUPPLIERS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY WITH
RESPECT TO THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDICES AND
THE INDEX DATA, WHICH ARE PROVIDED ON AN "AS IS" BASIS AND YOUR USE IS AT YOUR
OWN RISK.
Page 10
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX FUND (FBT) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Biotechnology 79.9%
Life Sciences Tools & Services 17.4
Pharmaceuticals 2.7
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
ACADIA Pharmaceuticals, Inc. 4.5%
FibroGen, Inc. 4.3
Vertex Pharmaceuticals, Inc. 4.1
BioMarin Pharmaceutical, Inc. 4.0
United Therapeutics Corp. 3.9
Regeneron Pharmaceuticals, Inc. 3.9
IQVIA Holdings, Inc. 3.9
Incyte Corp. 3.8
Amgen, Inc. 3.7
QIAGEN N.V. 3.7
-------
Total 39.8%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust NYSE(R) NYSE(R) Arca NASDAQ(R) S&P Composite
Arca(R) Biotechnology Biotechnology Biotechnology S&P 500(R) 1500(R) Health
Index Fund Index Index Index Care Index
12/11 $10,000 $10,000 $10,000 $10,000 $10,000
06/12 13,418 13,461 12,482 10,949 11,149
12/12 14,092 14,174 13,229 11,600 11,836
06/13 17,788 17,932 16,785 13,203 14,275
12/13 21,152 21,375 21,957 15,356 16,829
06/14 25,192 25,485 24,923 16,452 18,546
12/14 31,228 31,617 29,510 17,459 21,001
06/15 37,998 38,535 35,941 17,674 23,143
12/15 34,650 35,217 32,982 17,701 22,557
06/16 27,436 27,969 25,149 18,381 22,688
12/16 27,859 28,472 25,941 19,818 22,094
06/17 34,930 35,786 30,439 21,669 25,733
12/17 38,165 39,204 31,553 24,144 27,058
06/18 42,928 44,187 32,544 24,784 27,946
12/18 38,086 39,309 28,756 23,086 28,874
06/19 43,165 44,663 32,480 27,366 31,299
12/19 45,625 47,338 35,978 30,354 34,898
06/20 51,407 53,482 40,968 29,419 34,682
12/20 51,520 53,760 45,487 35,938 39,978
06/21 52,933 55,394 49,376 41,419 44,699
12/21 49,640 51,927 45,494 46,257 49,907
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 DOW JONES INTERNET INDEX FUND (FDN)
The First Trust Dow Jones Internet Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Dow Jones Internet Composite
Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net
assets (including investment borrowings) in common stocks that comprise the
Index. The Index is designed to measure the performance of the largest and most
actively traded securities issued by U.S. companies in the Internet industry.
The Index is rebalanced and reconstituted quarterly and the Fund will make
corresponding changes to its portfolio shortly after the Index changes are made
public. The Fund's shares are listed for trading on the NYSE Arca. The first day
of secondary market trading in shares of the Fund was June 23, 2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (6/19/06) Ended Ended (6/19/06)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
FUND PERFORMANCE
NAV 6.43% 23.15% 21.48% 16.93% 183.27% 600.19% 1,034.99%
Market Value 6.47% 23.14% 21.49% 16.93% 183.18% 600.31% 1,035.18%
INDEX PERFORMANCE
Dow Jones Internet Composite Index(SM) 6.97% 23.84% 22.15% 17.56% 191.28% 639.38% 1,134.95%
S&P Composite 1500(R) Information
Technology Index 33.76% 31.35% 23.63% 17.11% 290.95% 734.38% 1,062.31%
S&P 500(R) Index 28.71% 18.47% 16.55% 11.30% 133.41% 362.57% 427.80%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 6.43% during the 12-month period covering
this report. During the same period, the S&P Composite 1500(R) Information
Technology Index (the "Benchmark") returned 33.76%. The Fund allocated the
largest weight to holdings in the Interactive Media & Services industry. This
industry received a 28.9% allocation and generated a 3.8% return for the Fund,
which was the largest positive contribution to the Fund's return. The Health
Care Technology industry provided the worst contribution to the Fund's return at
1.3%. On a relative basis, the Fund underperformed the Benchmark. The largest
source of underperformance came from the Application Software industry where the
Fund underperformed the Benchmark by -6.9%. A portion of the Fund's
underperformance was reduced by investments in the Data Processing & Outsourced
Services industry which provided a 2.4% return versus the Benchmark.
-----------------------------
The Dow Jones Internet Composite Index(SM) ("Index") is a product of S&P Dow
Jones Indices LLC or its affiliates ("SPDJI") and has been licensed for use by
First Trust. S&P(R) is a registered trademark of Standard & Poor's Financial
Services LLC ("S&P"); Dow Jones(R) is a registered trademark of Dow Jones
Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed
for use by SPDJI and sublicensed for certain purposes by First Trust. The Fund
is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their
respective affiliates and none of such parties make any representation regarding
the advisability of investing in such product nor do they have any liability for
any errors, omissions, or interruptions of the Index.
Page 12
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 44.9%
Communication Services 31.8
Consumer Discretionary 18.7
Health Care 3.3
Real Estate 1.3
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Amazon.com, Inc. 9.2%
Meta Platforms, Inc., Class A 7.5
Cisco Systems, Inc. 5.2
Alphabet, Inc., Class A 5.2
Netflix, Inc. 4.8
Alphabet, Inc., Class C 4.8
salesforce.com, Inc. 4.6
PayPal Holdings, Inc. 4.4
Snowflake, Inc., Class A 2.9
Airbnb, Inc., Class A 2.5
-------
Total 51.1%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust Dow Jones S&P Composite 1500(R)
Dow Jones Internet Internet Composite S&P 500(R) Information Technology
Index Fund Index(SM) Index Index
12/11 $10,000 $10,000 $10,000 $10,000
06/12 10,945 10,978 10,949 11,272
12/12 12,085 12,163 11,600 11,475
06/13 14,052 14,183 13,203 12,247
12/13 18,537 18,775 15,356 14,802
06/14 18,448 18,718 16,452 16,053
12/14 18,987 19,300 17,459 17,607
06/15 20,808 21,209 17,674 17,836
12/15 23,120 23,623 17,701 18,592
06/16 22,339 22,881 18,381 18,603
12/16 24,718 25,382 19,818 21,341
06/17 29,345 30,215 21,669 24,888
12/17 34,017 35,116 24,144 29,298
06/18 42,640 44,127 24,784 32,386
12/18 36,133 37,495 23,086 29,079
06/19 44,509 46,374 27,366 36,930
12/19 43,094 45,025 30,354 43,544
06/20 52,820 55,363 29,419 49,518
12/20 65,782 69,115 35,938 62,368
06/21 75,840 79,869 41,419 70,887
12/21 70,019 73,938 46,257 83,438
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
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
The First Trust Capital Strength ETF (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called The Capital Strength Index(SM) (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in the common stocks and real estate
investment trusts that comprise the Index. The Index seeks to provide exposure
to well-capitalized companies with strong market positions that have the
potential to provide their stockholders with a greater degree of stability and
performance over time. The Index is rebalanced and reconstituted quarterly and
the Fund will make corresponding changes to its portfolio shortly after the
Index changes are made public. The Fund's shares are listed for trading on The
Nasdaq Stock Market LLC. The first day of secondary market trading in shares of
the Fund was July 11, 2006.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (7/6/06) Ended Ended (7/6/06)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
FUND PERFORMANCE
NAV 26.61% 17.09% 16.17% 11.36% 120.05% 347.51% 429.35%
Market Value 26.68% 17.08% 16.18% 11.36% 119.97% 347.96% 429.41%
INDEX PERFORMANCE
The Capital Strength Index(SM)* 27.37% 17.82% N/A N/A 127.04% N/A N/A
S&P 500(R) Index 28.71% 18.47% 16.55% 11.14% 133.41% 362.57% 413.22%
------------------------------------------------------------------------------------------------------------------------------------
* On June 4, 2013, the Fund's underlying index changed from the Credit
Suisse U.S. Value Index, Powered by HOLT(TM) to The Capital Strength
Index(SM). On June 18, 2010, the Fund's underlying index changed from the
Deutsche Bank CROCI(R) US+ Index(TM) to the Credit Suisse U.S. Value
Index, Powered by HOLT(TM). Since the Fund's new underlying index had an
inception date of March 20, 2013, it was not in existence for some of the
periods disclosed.
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 26.61% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index (the "Benchmark")
generated a return of 28.71%. The Industrials sector received the greatest
allocation of any of the sectors in the Fund during the period, carrying an
average weight of 20.7%. Investments in the Industrials sector returned 21.0%
and contributed 4.4% to the Fund's overall return. Stock selections from the
Real Estate sector in the Fund returned -6.9% during the period, which was the
only sector with a negative return. This sector received a very low weight of
0.6% in the Fund and contributed -0.2% to the Fund's total return. On a relative
basis, the Fund slightly underperformed the Benchmark. The bulk of the
underperformance came from investments in the Consumer Staples sector. This
sector caused -2.1% of underperformance versus the Benchmark during the period.
The sector with the largest negative contribution to the Fund's underperformance
was the Information Technology sector. Investments in the Information Technology
sector outperformed the Benchmark by 2.0%.
-----------------------------
Nasdaq(R) and The Capital Strength Index(SM) are registered trademarks and
service marks of Nasdaq, Inc. (together with its affiliates hereinafter referred
to as the "Corporations") and are licensed for use by First Trust. The Fund has
not been passed on by the Corporations as to its legality or suitability. The
Fund is not issued, endorsed, sold or promoted by the Corporations. THE
CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CAPITAL STRENGTH ETF (FTCS) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 25.4%
Health Care 18.3
Industrials 17.2
Consumer Staples 16.5
Financials 11.3
Consumer Discretionary 5.5
Materials 3.9
Communication Services 1.9
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Broadcom, Inc. 2.4%
Costco Wholesale Corp. 2.3
Keysight Technologies, Inc. 2.3
Accenture PLC, Class A 2.2
Zoetis, Inc. 2.2
Abbott Laboratories 2.2
Home Depot (The), Inc. 2.2
UnitedHealth Group, Inc. 2.2
Intuit, Inc. 2.1
Automatic Data Processing, Inc. 2.1
-------
Total 22.2%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust Capital S&P 500(R)
Strength ETF Index
12/11 $10,000 $10,000
06/12 10,543 10,949
12/12 11,745 11,600
06/13 13,701 13,203
12/13 15,962 15,356
06/14 16,853 16,452
12/14 18,430 17,459
06/15 18,399 17,674
12/15 18,734 17,701
06/16 19,734 18,381
12/16 20,340 19,818
06/17 22,860 21,669
12/17 25,727 24,144
06/18 25,941 24,784
12/18 24,672 23,086
06/19 29,007 27,366
12/19 31,271 30,354
06/20 30,464 29,420
12/20 35,352 35,942
06/21 39,792 41,421
12/21 44,751 46,257
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
The First Trust Value Line(R) Dividend Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Value Line(R) Dividend Index (the
"Index"). The Fund will normally invest at least 90% of its net assets
(including investment borrowings) in the common stocks and depositary receipts
that comprise the Index. The Index seeks to measure the performance of the
securities ranked #1 or #2 according to Value Line Publishing, LLC's proprietary
Value Line(R) Safety(SM) Ranking System that are also still expected to provide
above-average dividend yield. The Index is rebalanced and reconstituted monthly,
and the Fund will make corresponding changes to its portfolio shortly after the
Index changes are made public. The Fund's shares are listed for trading on the
NYSE Arca.
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (8/19/03) Ended Ended (8/19/03)
12/31/21 12/31/21 12/31/21 to 12/31/21 12/31/21 12/31/21 to 12/31/21
FUND PERFORMANCE
NAV 24.86% 11.41% 13.02% 10.33% 71.63% 240.05% 508.25%
Market Value 24.86% 11.39% 13.02% 10.33% 71.48% 240.12% 508.39%
INDEX PERFORMANCE
Value Line(R) Dividend Index* 25.85% 12.32% 13.95% N/A 78.78% 269.07% N/A
S&P 500(R) Index 28.71% 18.47% 16.55% 11.06% 133.41% 362.57% 587.10%
Dow Jones U.S. Select Dividend Index(SM)* 32.24% 11.02% 12.82% N/A 68.69% 234.01% N/A
------------------------------------------------------------------------------------------------------------------------------------
On December 15, 2006, the Fund acquired the assets and adopted the
financial and performance history of First Trust Value Line(R) Dividend
Fund (the "Predecessor FVD Fund," a closed-end fund), which had an
inception date of August 19, 2003. The inception date total returns at net
asset value ("NAV") include the sales load of $0.675 per share on the
initial offering. The investment goals, strategies and policies of the
Fund are substantially similar to those of the Predecessor FVD Fund. The
inception date of the Index was July 3, 2006. Returns for the Index are
only disclosed for those periods in which the Index was in existence for
the entire period. The cumulative total returns for the period from the
reorganization date (December 15, 2006) through period end (December 31,
2021) were 276.05% and 277.93% at NAV and Market Value, respectively. That
compares to an Index return of 324.04% for the same period. The average
annual total returns for the period from the reorganization date (December
15, 2006) through period end (December 31, 2021) were 9.20% and 9.24% at
NAV and Market Value, respectively. That compares to an Index return of
10.08% for the same period.
NAV and Market Value returns assume that all distributions have been
reinvested in the Fund at NAV and Market Value, respectively. Prior to
December 15, 2006, NAV and Market Value returns assumed that all
distributions were reinvested at prices obtained by the Dividend
Reinvestment Plan of the Predecessor FVD Fund and the price used to
calculate Market Value return was the AMEX (now known as the NYSE
American) closing market price of the Predecessor FVD Fund.
* Performance data is not available for all the periods shown in the table
because performance data does not exist for the periods shown.
(See Notes to Fund Performance Overview on page 18.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 24.86% during the 12-month period covered by
this report. During the same period, the S&P 500(R) Index (the "Benchmark")
generated a return of 28.71%. The Utilities sector received a 19.8% allocation
within the Fund during the period, which was the Fund's largest allocation. The
Fund's investments in the Financials sector generated a 5.3% contribution to the
Fund's return, which was the largest sector return for the period. No sector in
the Fund generated a negative contribution to the Fund's return during the
period, however, investments in the Energy sector generated a 0.1% contribution,
which was the smallest for the period covered by this report. On a relative
basis, the Fund underperformed the Benchmark. The largest source of relative
underperformance came from the Utilities sector where the Fund underperformed
the Benchmark by -1.8% during the period. A portion of the Fund's overall
underperformance was partially reduced by investments in the Real Estate sector
where the Fund outperformed the Benchmark by 0.8% during the period.
-----------------------------
Value Line(R) and Value Line(R) Dividend Index are trademarks or registered
trademarks of Value Line, Inc. ("Value Line") and have been licensed for use for
certain purposes by First Trust. The Fund is not sponsored, endorsed,
recommended, sold or promoted by Value Line and Value Line makes no
representation regarding the advisability of investing in products utilizing
such strategy.
Page 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Utilities 19.5%
Industrials 16.9
Financials 14.8
Consumer Staples 11.2
Health Care 10.1
Information Technology 10.0
Materials 5.3
Real Estate 4.4
Consumer Discretionary 4.4
Communication Services 2.9
Energy 0.5
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Exelon Corp. 0.5%
Otter Tail Corp. 0.5
International Flavors & Fragrances, Inc. 0.5
MGE Energy, Inc. 0.5
Rollins, Inc. 0.5
Target Corp. 0.5
Campbell Soup Co. 0.5
Axis Capital Holdings Ltd. 0.5
C.H. Robinson Worldwide, Inc. 0.5
Avangrid, Inc. 0.5
-------
Total 5.0%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 31, 2011 - DECEMBER 31, 2021
First Trust
Value Line(R) Value Line(R) S&P 500(R) Dow Jones U.S. Select
Dividend Index Fund Dividend Index Index Dividend Index(SM)
12/11 $10,000 $10,000 $10,000 $10,000
06/12 10,633 10,685 10,949 10,654
12/12 11,117 11,209 11,600 11,084
06/13 12,661 12,822 13,203 12,619
12/13 14,070 14,302 15,356 14,305
06/14 15,269 15,592 16,452 15,716
12/14 16,313 16,722 17,459 16,502
06/15 15,974 16,438 17,674 15,913
12/15 16,517 17,073 17,701 16,233
06/16 18,843 19,562 18,381 18,757
12/16 19,812 20,646 19,818 19,802
06/17 20,890 21,854 21,669 21,008
12/17 22,285 23,397 24,144 22,859
06/18 22,111 23,306 24,784 23,092
12/18 21,512 22,756 23,088 21,492
06/19 25,186 26,760 27,368 24,424
12/19 27,235 29,036 30,354 26,467
06/20 23,276 24,950 29,420 20,730
12/20 27,231 29,326 35,942 25,258
06/21 31,146 33,679 41,421 31,242
12/21 34,005 36,907 46,257 33,401
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 17
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated. The total returns would have been lower if certain fees had not been
waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV was calculated. Since shares of each Fund did
not trade in the secondary market until after the Fund's inception, for the
period from inception to the first day of secondary market trading in shares of
the Fund, the NAV of each Fund is used as a proxy for the secondary market
trading price to calculate market returns. NAV and market returns assume that
all distributions have been reinvested in each Fund at NAV and Market Price,
respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike each Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 18
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2021 (UNAUDITED)
As a shareholder of First Trust Dow Jones Select MicroCap Index Fund, First
Trust Morningstar Dividend Leaders Index Fund, First Trust US Equity
Opportunities ETF, First Trust NYSE(R) Arca(R) Biotechnology Index Fund, First
Trust Dow Jones Internet Index Fund, First Trust Capital Strength ETF or First
Trust Value Line(R) Dividend Index Fund (each a "Fund" and collectively, the
"Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing
costs, including management fees, distribution and/or service (12b-1) fees, if
any, and other Fund expenses. This Example is intended to help you understand
your ongoing costs of investing in the Funds and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended December 31, 2021.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2021 DECEMBER 31, 2021 PERIOD (a) PERIOD (b)
--------------------------------------------------------------------------------------------------------------------------
FIRST TRUST DOW JONES SELECT MICROCAP INDEX
FUND (FDM)
Actual $1,000.00 $1,042.60 0.60% $3.09
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX
FUND (FDL)
Actual $1,000.00 $1,093.80 0.45% $2.37
Hypothetical (5% return before expenses) $1,000.00 $1,022.94 0.45% $2.29
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
Actual $1,000.00 $ 961.90 0.57% $2.82
Hypothetical (5% return before expenses) $1,000.00 $1,022.33 0.57% $2.91
FIRST TRUST NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX
FUND (FBT)
Actual $1,000.00 $ 937.90 0.55% $2.69
Hypothetical (5% return before expenses) $1,000.00 $1,022.43 0.55% $2.80
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
Actual $1,000.00 $ 923.20 0.51% $2.47
Hypothetical (5% return before expenses) $1,000.00 $1,022.63 0.51% $2.60
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
Actual $1,000.00 $1,124.80 0.55% $2.95
Hypothetical (5% return before expenses) $1,000.00 $1,022.43 0.55% $2.80
Page 19
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
DECEMBER 31, 2021 (UNAUDITED)
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2021 DECEMBER 31, 2021 PERIOD (a) PERIOD (b)
--------------------------------------------------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
Actual $1,000.00 $1,091.70 0.67% $3.53
Hypothetical (5% return before expenses) $1,000.00 $1,021.83 0.67% $3.41
(a) These expense ratios reflect expense caps for certain Funds. See Note 3 in
Notes to Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (July 1,
2021 through December 31, 2021), multiplied by 184/365 (to reflect the
six-month period).
Page 20
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 1.4%
17,600 Ducommun, Inc. (a) $ 823,152
101,205 PAE, Inc. (a) 1,004,966
19,025 Vectrus, Inc. (a) 870,774
---------------
2,698,892
---------------
AIRLINES -- 0.2%
51,235 Mesa Air Group, Inc. (a) 286,916
---------------
AUTO COMPONENTS -- 1.1%
31,154 Motorcar Parts of America,
Inc. (a) 531,799
31,047 Standard Motor Products, Inc. 1,626,552
---------------
2,158,351
---------------
BANKS -- 23.8%
30,551 Allegiance Bancshares, Inc. 1,289,558
41,478 Amerant Bancorp, Inc. 1,433,065
32,938 Atlantic Capital Bancshares,
Inc. (a) 947,626
87,754 Banc of California, Inc. 1,721,733
25,976 Bank of Marin Bancorp 967,086
24,365 Blue Ridge Bankshares, Inc. 436,134
37,928 Byline Bancorp, Inc. 1,037,331
24,088 Camden National Corp. 1,160,078
30,565 Capstar Financial Holdings, Inc. 642,782
45,367 Central Pacific Financial Corp. 1,277,988
16,335 Central Valley Community
Bancorp 339,278
24,603 Community Trust Bancorp, Inc. 1,072,937
34,098 First Bancshares (The), Inc. 1,316,865
18,375 First Financial Corp. 832,204
36,012 First of Long Island (The) Corp. 777,499
10,058 Five Star Bancorp 301,740
49,762 Flushing Financial Corp. 1,209,217
16,661 Great Southern Bancorp, Inc. 987,164
49,327 Hanmi Financial Corp. 1,168,063
77,716 HarborOne Bancorp, Inc. 1,153,305
97,768 Heritage Commerce Corp. 1,167,350
57,047 Heritage Financial Corp. 1,394,229
33,173 HomeStreet, Inc. 1,724,996
62,833 Horizon Bancorp, Inc. 1,310,068
34,515 Independent Bank Corp. 823,873
14,261 Investar Holding Corp. 262,545
82,092 Lakeland Bancorp, Inc. 1,558,927
16,403 Metropolitan Bank Holding
Corp. (a) 1,747,412
20,960 Mid Penn Bancorp, Inc. 665,270
33,571 Midland States Bancorp, Inc. 832,225
17,187 MVB Financial Corp. 713,604
19,905 Nicolet Bankshares, Inc. (a) 1,706,854
12,048 Northeast Bank 430,475
35,446 Origin Bancorp, Inc. 1,521,342
19,983 PCB Bancorp 438,827
39,901 Peoples Bancorp, Inc. 1,269,251
22,240 Preferred Bank 1,596,610
23,784 QCR Holdings, Inc. 1,331,904
45,176 TriState Capital Holdings,
Inc. (a) 1,367,026
47,771 Univest Financial Corp. 1,429,308
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
BANKS (CONTINUED)
28,109 Washington Trust Bancorp, Inc. $ 1,584,504
---------------
44,948,253
---------------
BIOTECHNOLOGY -- 3.0%
155,566 Catalyst Pharmaceuticals,
Inc. (a) 1,053,182
40,122 Dyne Therapeutics, Inc. (a) (b) 477,051
18,435 Eagle Pharmaceuticals, Inc. (a) 938,710
24,566 Enochian Biosciences,
Inc. (a) (b) 179,086
33,696 KalVista Pharmaceuticals,
Inc. (a) 445,798
60,068 Magenta Therapeutics, Inc. (a) 266,101
84,852 Ovid therapeutics, Inc. (a) 272,375
173,196 Tyme Technologies, Inc. (a) (b) 104,455
90,374 Vanda Pharmaceuticals, Inc. (a) 1,417,968
112,950 Viking Therapeutics, Inc. (a) 519,570
---------------
5,674,296
---------------
BUILDING PRODUCTS -- 1.9%
31,483 Insteel Industries, Inc. 1,253,338
54,378 Quanex Building Products Corp. 1,347,487
34,028 Tecnoglass, Inc. (b) 891,193
---------------
3,492,018
---------------
CAPITAL MARKETS -- 2.0%
5,146 Diamond Hill Investment Group,
Inc. 999,507
22,500 Greenhill & Co., Inc. 403,425
14,821 Oppenheimer Holdings, Inc.,
Class A 687,250
31,505 Sculptor Capital Management, Inc. 672,632
26,503 Victory Capital Holdings, Inc.,
Class A 968,155
---------------
3,730,969
---------------
CHEMICALS -- 3.0%
45,635 AdvanSix, Inc. 2,156,254
43,657 American Vanguard Corp. 715,538
30,482 Hawkins, Inc. 1,202,515
34,562 Koppers Holdings, Inc. (a) 1,081,791
41,599 Tredegar Corp. 491,700
---------------
5,647,798
---------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.3%
155,292 ACCO Brands Corp. 1,282,712
42,373 Ennis, Inc. 827,545
95,797 Interface, Inc. 1,527,962
59,316 Kimball International, Inc.,
Class B 606,802
---------------
4,245,021
---------------
COMMUNICATIONS EQUIPMENT
-- 2.2%
15,418 Aviat Networks, Inc. (a) 494,610
57,202 Casa Systems, Inc. (a) 324,335
18,489 Clearfield, Inc. (a) 1,560,842
55,334 Digi International, Inc. (a) 1,359,556
55,047 EMCORE Corp. (a) 384,228
---------------
4,123,571
---------------
See Notes to Financial Statements Page 21
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CONSTRUCTION & ENGINEERING
-- 1.9%
25,580 Argan, Inc. $ 989,690
47,472 Infrastructure and Energy
Alternatives, Inc. (a) (b) 436,743
46,710 Sterling Construction Co.,
Inc. (a) 1,228,473
67,935 Tutor Perini Corp. (a) 840,356
---------------
3,495,262
---------------
CONSUMER FINANCE -- 1.1%
8,815 Atlanticus Holdings Corp. (a) 628,686
34,122 Curo Group Holdings Corp. 546,293
14,953 Regional Management Corp. 859,199
---------------
2,034,178
---------------
CONTAINERS & PACKAGING -- 0.6%
58,786 Myers Industries, Inc. 1,176,308
---------------
DISTRIBUTORS -- 0.4%
42,171 Funko, Inc., Class A (a) 792,815
---------------
DIVERSIFIED CONSUMER SERVICES
-- 0.7%
113,724 Perdoceo Education Corp. (a) 1,337,394
---------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.4%
13,443 A-Mark Precious Metals, Inc. 821,367
---------------
ELECTRICAL EQUIPMENT -- 0.4%
89,098 Babcock & Wilcox Enterprises,
Inc. (a) 803,664
---------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.7%
57,139 Benchmark Electronics, Inc. 1,548,467
40,718 Kimball Electronics, Inc. (a) 886,024
20,444 Vishay Precision Group, Inc. (a) 758,881
---------------
3,193,372
---------------
ENTERTAINMENT -- 0.3%
39,803 Sciplay Corp., Class A (a) 548,485
---------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 5.6%
42,616 Bluerock Residential Growth
REIT, Inc. (b) 1,124,636
70,652 City Office REIT, Inc. 1,393,258
9,671 CTO Realty Growth, Inc. 593,993
46,053 Farmland Partners, Inc. 550,333
154,219 Franklin Street Properties Corp. 917,603
198,773 GEO Group (The), Inc. (b) 1,540,491
26,119 One Liberty Properties, Inc. 921,478
56,135 Plymouth Industrial REIT, Inc. 1,796,320
48,798 Urstadt Biddle Properties, Inc.,
Class A 1,039,397
74,889 Whitestone REIT 758,626
---------------
10,636,135
---------------
FOOD & STAPLES RETAILING -- 2.9%
50,216 Andersons (The), Inc. 1,943,862
23,135 Ingles Markets, Inc., Class A 1,997,476
58,307 SpartanNash Co. 1,501,988
---------------
5,443,326
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
FOOD PRODUCTS -- 0.8%
7,081 Alico, Inc. $ 262,209
14,392 John B Sanfilippo & Son, Inc. 1,297,583
---------------
1,559,792
---------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 1.2%
33,746 Bioventus, Inc., Class A (a) 488,980
44,053 Co-Diagnostics, Inc. (a) (b) 393,393
70,328 Meridian Bioscience, Inc. (a) 1,434,691
---------------
2,317,064
---------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.1%
57,334 Cross Country Healthcare,
Inc. (a) 1,591,592
29,695 InfuSystem Holdings, Inc. (a) 505,706
---------------
2,097,298
---------------
HEALTH CARE TECHNOLOGY -- 0.4%
23,762 Computer Programs and Systems,
Inc. (a) 696,227
---------------
HOTELS, RESTAURANTS & LEISURE
-- 1.6%
32,122 Chuy's Holdings, Inc. (a) 967,515
54,902 Del Taco Restaurants, Inc. 683,530
31,433 El Pollo Loco Holdings, Inc. (a) 446,034
12,945 RCI Hospitality Holdings, Inc. 1,008,156
---------------
3,105,235
---------------
HOUSEHOLD DURABLES -- 4.0%
47,718 Beazer Homes USA, Inc. (a) 1,108,012
58,843 Cricut, Inc., Class A (a) (b) 1,299,842
29,337 Dream Finders Homes, Inc.,
Class A (a) (b) 570,605
35,649 Ethan Allen Interiors, Inc. 937,212
10,207 Flexsteel Industries, Inc. 274,160
7,716 Hovnanian Enterprises, Inc.,
Class A (a) 982,170
21,828 Lovesac (The) Co. (a) 1,446,323
21,254 Universal Electronics, Inc. (a) 866,100
---------------
7,484,424
---------------
HOUSEHOLD PRODUCTS -- 0.4%
15,814 Central Garden & Pet Co. (a) 832,291
---------------
INSURANCE -- 1.2%
3,679 National Western Life Group,
Inc., Class A 788,925
34,645 Tiptree, Inc. 479,140
29,055 Trean Insurance Group, Inc. (a) 258,880
45,504 Universal Insurance Holdings,
Inc. 773,568
---------------
2,300,513
---------------
INTERNET & DIRECT MARKETING
RETAIL -- 1.1%
21,193 Duluth Holdings, Inc.,
Class B (a) 321,710
43,117 Liquidity Services, Inc. (a) 952,023
33,973 PetMed Express, Inc. (b) 858,158
---------------
2,131,891
---------------
Page 22 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
IT SERVICES -- 1.1%
19,090 Cass Information Systems, Inc. $ 750,619
57,222 Information Services Group, Inc. 436,032
53,869 International Money Express,
Inc. (a) 859,749
---------------
2,046,400
---------------
LEISURE PRODUCTS -- 0.7%
22,879 American Outdoor Brands, Inc. (a) 455,979
30,734 MasterCraft Boat Holdings,
Inc. (a) 870,694
---------------
1,326,673
---------------
MACHINERY -- 2.3%
25,595 Blue Bird Corp. (a) 400,306
36,873 Gorman-Rupp (The) Co. 1,642,692
15,806 Hyster-Yale Materials Handling,
Inc. 649,627
80,260 Wabash National Corp. 1,566,675
---------------
4,259,300
---------------
MARINE -- 0.1%
39,217 Pangaea Logistics Solutions Ltd. 148,240
---------------
MEDIA -- 0.4%
100,163 Entravision Communications
Corp., Class A 679,105
---------------
METALS & MINING -- 0.2%
15,094 Olympic Steel, Inc. 354,709
---------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS -- 2.5%
76,245 Ares Commercial Real Estate
Corp. 1,108,603
88,500 Ellington Financial, Inc. 1,512,465
71,296 Franklin BSP Realty Trust, Inc. 1,065,162
87,255 Granite Point Mortgage Trust,
Inc. 1,021,756
---------------
4,707,986
---------------
MULTI-UTILITIES -- 0.6%
25,911 Unitil Corp. 1,191,647
---------------
OIL, GAS & CONSUMABLE FUELS
-- 2.3%
5,226 Altus Midstream Co., Class A (b) 320,406
51,458 CONSOL Energy, Inc. (a) 1,168,611
44,929 Dorian LPG Ltd. 570,149
42,183 NextDecade Corp. (a) 120,222
8,524 REX American Resources
Corp. (a) 818,304
420,121 Uranium Energy Corp. (a) 1,407,405
---------------
4,405,097
---------------
PAPER & FOREST PRODUCTS -- 1.3%
72,227 Glatfelter Corp. 1,242,304
77,103 Resolute Forest Products, Inc. 1,177,363
---------------
2,419,667
---------------
PHARMACEUTICALS -- 2.0%
275,837 Antares Pharma, Inc. (a) 984,738
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
PHARMACEUTICALS (CONTINUED)
160,264 BioDelivery Sciences
International, Inc. (a) $ 496,819
56,077 Collegium Pharmaceutical,
Inc. (a) 1,047,518
39,277 Harrow Health, Inc. (a) (b) 339,353
32,992 Phibro Animal Health Corp.,
Class A 673,697
12,159 Rain Therapeutics, Inc. (a) (b) 156,608
---------------
3,698,733
---------------
PROFESSIONAL SERVICES -- 2.0%
12,174 Barrett Business Services, Inc. 840,737
12,048 CRA International, Inc. 1,124,801
58,448 Kelly Services, Inc., Class A 980,173
50,605 Resources Connection, Inc. 902,793
---------------
3,848,504
---------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 1.0%
2,358 American Realty Investors,
Inc. (a) 29,829
30,644 RE/MAX Holdings, Inc., Class A 934,335
24,994 RMR Group (The), Inc., Class A 866,792
---------------
1,830,956
---------------
ROAD & RAIL -- 0.6%
96,299 Daseke, Inc. (a) 966,842
40,091 US Xpress Enterprises, Inc.,
Class A (a) 235,334
---------------
1,202,176
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.7%
34,223 Alpha & Omega Semiconductor
Ltd. (a) 2,072,545
64,525 AXT, Inc. (a) 568,465
11,933 CyberOptics Corp. (a) 554,885
99,197 Photronics, Inc. (a) 1,869,863
---------------
5,065,758
---------------
SOFTWARE -- 1.3%
48,745 ChannelAdvisor Corp. (a) 1,203,027
10,162 CoreCard Corp. (a) (b) 394,286
34,623 eGain Corp. (a) 345,537
50,684 Rimini Street, Inc. (a) 302,583
21,872 Viant Technology, Inc.,
Class A (a) 212,268
---------------
2,457,701
---------------
SPECIALTY RETAIL -- 3.6%
34,021 Big 5 Sporting Goods Corp. (b) 646,739
14,724 Citi Trends, Inc. (a) 1,395,099
31,087 Conn's, Inc. (a) 731,166
24,136 Haverty Furniture Cos., Inc. 737,837
18,465 JOANN, Inc. (b) 191,667
13,045 Lazydays Holdings, Inc. (a) 280,989
15,513 OneWater Marine, Inc., Class A 945,828
28,400 Shoe Carnival, Inc. 1,109,872
70,921 Sportsman's Warehouse Holdings,
Inc. (a) 836,868
---------------
6,876,065
---------------
See Notes to Financial Statements Page 23
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 0.3%
26,029 Turtle Beach Corp. (a) $ 579,405
---------------
TEXTILES, APPAREL & LUXURY
GOODS -- 1.2%
12,663 Lakeland Industries, Inc. (a) 274,787
26,776 Movado Group, Inc. 1,120,040
11,124 Rocky Brands, Inc. 442,735
41,391 Vera Bradley, Inc. (a) 352,238
---------------
2,189,800
---------------
THRIFTS & MORTGAGE FINANCE
-- 3.1%
14,981 Federal Agricultural Mortgage
Corp., Class C 1,856,595
33,462 Finance Of America Cos., Inc.,
Class A (a) (b) 132,844
121,744 Kearny Financial Corp. 1,613,108
70,742 Northfield Bancorp, Inc. 1,143,191
31,176 TrustCo Bank Corp. 1,038,473
---------------
5,784,211
---------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.9%
15,746 BlueLinx Holdings, Inc. (a) 1,507,837
32,623 Titan Machinery, Inc. (a) 1,099,069
11,343 Transcat, Inc. (a) 1,048,433
---------------
3,655,339
---------------
TOTAL COMMON STOCKS -- 99.9% 188,540,598
(Cost $163,899,975) ---------------
MONEY MARKET FUNDS -- 2.6%
4,807,787 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (c) (d) 4,807,787
(Cost $4,807,787) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.1%
$ 2,134,740 BNP Paribas S.A., 0.03% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$2,134,746. Collateralized by
U.S. Treasury Note, interest
rate of 1.50%, due 11/30/28.
The value of the collateral
including accrued interest is
$2,176,498. (d) 2,134,740
(Cost $2,134,740) ---------------
TOTAL INVESTMENTS -- 103.6% 195,483,125
(Cost $170,842,502) (e)
NET OTHER ASSETS AND
LIABILITIES -- (3.6)% (6,746,523)
---------------
NET ASSETS -- 100.0% $ 188,736,602
===============
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $6,687,020 and the
total value of the collateral held by the Fund is $6,942,527.
(c) Rate shown reflects yield as of December 31, 2021.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $172,198,053. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$29,890,266 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$6,605,194. The net unrealized appreciation was $23,285,072.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
-------------------------------------------------------------
Common
Stocks* $ 188,540,598 $ 188,540,598 $ -- $ --
Money Market
Funds 4,807,787 4,807,787 -- --
Repurchase
Agreements 2,134,740 -- 2,134,740 --
-------------------------------------------------------------
Total
Investments $ 195,483,125 $ 193,348,385 $ 2,134,740 $ --
=============================================================
* See Portfolio of Investments for industry breakout.
Page 24 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 6,687,020
Non-cash Collateral(2) (6,687,020)
---------------
Net Amount $ --
===============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value," is not offset and is shown on a gross
basis.
(2) At December 31, 2021, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 2,134,740
Non-cash Collateral(4) (2,134,740)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 25
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.7%
BANKS -- 3.0%
61,625 Associated Banc-Corp. $ 1,392,109
15,366 Bank of Hawaii Corp. 1,287,056
156,744 Citizens Financial Group, Inc. 7,406,154
48,343 Comerica, Inc. 4,205,841
49,826 CVB Financial Corp. 1,066,775
142,629 F.N.B. Corp. 1,730,090
41,094 First Financial Bancorp 1,001,872
220,877 First Horizon Corp. 3,606,921
63,158 Fulton Financial Corp. 1,073,686
644,905 Huntington Bancshares, Inc. 9,944,435
93,926 Investors Bancorp, Inc. 1,422,979
362,483 KeyCorp 8,384,232
198,231 People's United Financial, Inc. 3,532,476
105,253 Umpqua Holdings Corp. 2,025,068
55,888 United Bankshares, Inc. 2,027,616
142,225 Valley National Bancorp 1,955,594
28,552 WesBanco, Inc. 999,034
---------------
53,061,938
---------------
BEVERAGES -- 4.5%
1,332,022 Coca-Cola (The) Co. 78,869,023
---------------
BIOTECHNOLOGY -- 8.9%
846,380 AbbVie, Inc. 114,599,852
573,368 Gilead Sciences, Inc. 41,632,251
---------------
156,232,103
---------------
CAPITAL MARKETS -- 2.9%
66,232 Apollo Global Management, Inc. 4,797,184
42,984 Ares Management Corp., Class A 3,493,310
68,027 Artisan Partners Asset Management,
Inc., Class A 3,240,806
248,045 Blackstone, Inc. 32,094,543
32,688 Federated Hermes, Inc. 1,228,415
106,153 Franklin Resources, Inc. 3,555,064
26,628 Moelis & Co., Class A 1,664,516
34,371 Virtu Financial, Inc., Class A 990,916
---------------
51,064,754
---------------
CHEMICALS -- 0.8%
148,154 LyondellBasell Industries N.V.,
Class A 13,664,243
---------------
COMMUNICATIONS EQUIPMENT
-- 0.2%
90,034 Juniper Networks, Inc. 3,215,114
---------------
CONSUMER FINANCE -- 0.1%
58,025 Navient Corp. 1,231,291
---------------
CONTAINERS & PACKAGING -- 0.5%
174,915 International Paper Co. 8,217,507
---------------
DIVERSIFIED CONSUMER SERVICES
-- 0.1%
89,048 H&R Block, Inc. 2,097,971
---------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 17.0%
7,194,722 AT&T, Inc. 176,990,161
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES (CONTINUED)
2,356,273 Verizon Communications, Inc. $ 122,431,945
---------------
299,422,106
---------------
ELECTRIC UTILITIES -- 10.0%
23,516 ALLETE, Inc. 1,560,287
208,515 American Electric Power Co., Inc. 18,551,580
27,014 Avangrid, Inc. 1,347,458
337,377 Duke Energy Corp. 35,390,847
168,904 Edison International 11,527,698
86,371 Entergy Corp. 9,729,693
88,076 Evergy, Inc. 6,042,894
314,304 Exelon Corp. 18,154,199
241,858 FirstEnergy Corp. 10,058,874
41,243 Hawaiian Electric Industries,
Inc. 1,711,585
92,034 NRG Energy, Inc. 3,964,825
102,161 OGE Energy Corp. 3,920,939
64,573 Pinnacle West Capital Corp. 4,558,208
33,752 Portland General Electric Co. 1,786,156
491,607 PPL Corp. 14,777,706
484,582 Southern (The) Co. 33,232,634
---------------
176,315,583
---------------
FOOD & STAPLES RETAILING -- 0.9%
317,364 Walgreens Boots Alliance, Inc. 16,553,706
---------------
FOOD PRODUCTS -- 1.5%
80,639 Campbell Soup Co. 3,504,571
72,184 Flowers Foods, Inc. 1,982,894
216,211 General Mills, Inc. 14,568,297
107,349 Kellogg Co. 6,915,423
---------------
26,971,185
---------------
GAS UTILITIES -- 0.5%
29,785 National Fuel Gas Co. 1,904,453
35,750 New Jersey Resources Corp. 1,467,895
19,751 ONE Gas, Inc. 1,532,480
61,090 South Jersey Industries, Inc. 1,595,671
22,514 Southwest Gas Holdings, Inc. 1,577,105
23,709 Spire, Inc. 1,546,301
---------------
9,623,905
---------------
HEALTH CARE PROVIDERS & SERVICES
-- 0.4%
132,515 Cardinal Health, Inc. 6,823,197
33,994 Patterson Cos., Inc. 997,724
---------------
7,820,921
---------------
HOUSEHOLD DURABLES -- 0.2%
171,181 Newell Brands, Inc. 3,738,593
---------------
HOUSEHOLD PRODUCTS -- 1.0%
125,920 Kimberly-Clark Corp. 17,996,486
---------------
INSURANCE -- 2.3%
27,867 Axis Capital Holdings Ltd. 1,517,915
100,198 Fidelity National Financial, Inc. 5,228,332
14,457 Mercury General Corp. 767,088
114,218 Old Republic International Corp. 2,807,478
100,147 Principal Financial Group, Inc. 7,243,633
188,933 Prudential Financial, Inc. 20,450,108
Page 26 See Notes to Financial Statements
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
114,572 Unum Group $ 2,815,034
---------------
40,829,588
---------------
IT SERVICES -- 4.3%
536,500 International Business Machines
Corp. 71,708,590
242,232 Western Union (The) Co. 4,321,419
---------------
76,030,009
---------------
MEDIA -- 0.7%
131,671 Interpublic Group of (The) Cos.,
Inc. 4,931,079
96,295 Omnicom Group, Inc. 7,055,535
---------------
11,986,614
---------------
METALS & MINING -- 1.5%
350,143 Newmont Corp. 21,715,869
63,309 Southern Copper Corp. 3,906,798
---------------
25,622,667
---------------
MULTI-UTILITIES -- 3.3%
32,664 Avista Corp. 1,387,893
25,244 Black Hills Corp. 1,781,469
150,823 Consolidated Edison, Inc. 12,868,218
62,670 DTE Energy Co. 7,491,572
150,181 NiSource, Inc. 4,146,498
25,337 NorthWestern Corp. 1,448,263
181,145 Public Service Enterprise Group,
Inc. 12,087,806
125,050 Sempra Energy 16,541,614
---------------
57,753,333
---------------
OIL, GAS & CONSUMABLE FUELS
-- 9.5%
982,302 Chevron Corp. 115,273,140
373,188 ConocoPhillips 26,936,710
69,240 Devon Energy Corp. 3,050,022
1,455,038 Kinder Morgan, Inc. 23,076,902
---------------
168,336,774
---------------
PHARMACEUTICALS -- 10.8%
1,009,109 Merck & Co., Inc. 77,338,114
1,910,058 Pfizer, Inc. 112,788,925
---------------
190,127,039
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 4.3%
112,670 Broadcom, Inc. 74,971,745
---------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 0.4%
451,619 Hewlett Packard Enterprise Co. 7,122,032
---------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.1%
133,381 Hanesbrands, Inc. 2,230,130
---------------
THRIFTS & MORTGAGE FINANCE
-- 0.2%
288,345 New York Community Bancorp,
Inc. 3,520,692
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
TOBACCO -- 9.7%
1,673,807 Altria Group, Inc. $ 79,321,714
973,095 Philip Morris International, Inc. 92,444,025
---------------
171,765,739
---------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.1%
19,082 MSC Industrial Direct Co., Inc.,
Class A 1,604,033
---------------
TOTAL INVESTMENTS -- 99.7% 1,757,996,824
(Cost $1,527,933,885) (a)
NET OTHER ASSETS AND
LIABILITIES -- 0.3% 4,912,790
---------------
NET ASSETS -- 100.0% $ 1,762,909,614
===============
(a) Aggregate cost for federal income tax purposes is $1,567,952,333. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$270,798,552 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$80,754,061. The net unrealized appreciation was $190,044,491.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
-----------------------------------------------
Common Stocks* $ 1,757,996,824 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 27
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 2.3%
201,244 General Dynamics Corp. $ 41,953,337
---------------
AIR FREIGHT & LOGISTICS -- 0.4%
82,625 GXO Logistics, Inc. (a) 7,504,829
---------------
AUTOMOBILES -- 1.8%
321,166 Rivian Automotive, Inc.,
Class A (a) (b) 33,301,703
---------------
BANKS -- 1.1%
838,800 KeyCorp 19,401,444
---------------
BEVERAGES -- 2.0%
1,021,963 Keurig Dr Pepper, Inc. 37,669,556
---------------
BIOTECHNOLOGY -- 2.5%
106,118 Cerevel Therapeutics Holdings,
Inc. (a) 3,440,345
204,347 Horizon Therapeutics PLC (a) 22,020,433
53,637 Intellia Therapeutics, Inc. (a) 6,342,039
104,300 Legend Biotech Corp., ADR (a) 4,861,423
32,459 United Therapeutics Corp. (a) 7,013,741
32,653 Zentalis Pharmaceuticals,
Inc. (a) 2,744,811
---------------
46,422,792
---------------
BUILDING PRODUCTS -- 2.5%
138,019 Builders FirstSource, Inc. (a) 11,829,608
624,573 Carrier Global Corp. 33,876,840
---------------
45,706,448
---------------
CAPITAL MARKETS -- 4.8%
116,327 Coinbase Global, Inc.,
Class A (a) 29,357,445
130,943 Focus Financial Partners, Inc.,
Class A (a) 7,819,916
519,677 Tradeweb Markets, Inc., Class A 52,040,455
---------------
89,217,816
---------------
CHEMICALS -- 3.3%
763,168 Corteva, Inc. 36,082,583
399,797 Dow, Inc. 22,676,486
116,453 Livent Corp. (a) 2,839,124
---------------
61,598,193
---------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.2%
120,636 Driven Brands Holdings, Inc. (a) 4,055,782
---------------
COMMUNICATIONS EQUIPMENT
-- 0.3%
52,109 Lumentum Holdings, Inc. (a) 5,511,569
---------------
CONSTRUCTION & ENGINEERING
-- 0.5%
241,250 WillScot Mobile Mini Holdings
Corp. (a) 9,852,650
---------------
CONSUMER FINANCE -- 0.5%
59,069 Upstart Holdings, Inc. (a) 8,937,140
---------------
CONTAINERS & PACKAGING -- 0.1%
58,666 Ranpak Holdings Corp. (a) 2,204,668
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.5%
291,727 Equitable Holdings, Inc. $ 9,565,728
---------------
ELECTRIC UTILITIES -- 0.9%
245,401 Evergy, Inc. 16,836,963
---------------
ELECTRICAL EQUIPMENT -- 0.6%
41,758 Atkore, Inc. (a) 4,643,072
270,757 Vertiv Holdings Co. 6,760,802
---------------
11,403,874
---------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 2.3%
209,762 Keysight Technologies, Inc. (a) 43,317,951
---------------
ENERGY EQUIPMENT & SERVICES
-- 0.2%
218,456 ChampionX Corp. (a) 4,414,996
---------------
ENTERTAINMENT -- 4.1%
496,958 Endeavor Group Holdings, Inc.,
Class A (a) (b) 17,338,864
458,900 ROBLOX Corp., Class A (a) 47,340,124
259,587 Warner Music Group Corp.,
Class A 11,208,967
---------------
75,887,955
---------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 3.1%
157,214 Digital Realty Trust, Inc. 27,806,440
92,329 Phillips Edison & Co., Inc. 3,050,550
313,716 Welltower, Inc. 26,907,422
---------------
57,764,412
---------------
FOOD & STAPLES RETAILING -- 1.6%
336,670 Albertsons Cos., Inc., Class A 10,164,067
293,981 BJ's Wholesale Club Holdings,
Inc. (a) 19,687,908
---------------
29,851,975
---------------
FOOD PRODUCTS -- 0.4%
166,112 Simply Good Foods (The) Co. (a) 6,905,276
---------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 3.3%
522,216 Alcon, Inc. (b) 45,495,458
145,378 Envista Holdings Corp. (a) 6,550,733
170,734 Ortho Clinical Diagnostics
Holdings PLC (a) 3,652,000
25,445 Shockwave Medical, Inc. (a) 4,537,607
---------------
60,235,798
---------------
HEALTH CARE PROVIDERS & SERVICES
-- 0.2%
65,176 Progyny, Inc. (a) 3,281,612
---------------
HOTELS, RESTAURANTS & LEISURE
-- 5.6%
457,943 Airbnb, Inc., Class A (a) 76,242,930
109,212 Expedia Group, Inc. (a) 19,736,793
139,144 Life Time Group Holdings,
Inc. (a) 2,394,668
67,155 Wyndham Hotels & Resorts, Inc. 6,020,446
---------------
104,394,837
---------------
Page 28 See Notes to Financial Statements
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOUSEHOLD DURABLES -- 0.2%
146,600 Sonos, Inc. (a) $ 4,368,680
---------------
INSURANCE -- 0.6%
80,876 BRP Group, Inc., Class A (a) 2,920,432
186,717 Ryan Specialty Group Holdings,
Inc., Class A (a) 7,534,031
---------------
10,454,463
---------------
INTERACTIVE MEDIA & SERVICES
-- 2.9%
754,147 Snap, Inc., Class A (a) 35,467,533
290,610 ZoomInfo Technologies, Inc. (a) 18,657,162
---------------
54,124,695
---------------
INTERNET & DIRECT MARKETING
RETAIL -- 1.4%
148,349 DoorDash, Inc., Class A (a) 22,089,166
52,542 Revolve Group, Inc. (a) 2,944,454
---------------
25,033,620
---------------
IT SERVICES -- 3.1%
231,892 Cloudflare, Inc., Class A (a) 30,493,798
157,359 DigitalOcean Holdings, Inc. (a) 12,640,649
58,787 Grid Dynamics Holdings, Inc. (a) 2,232,142
436,056 Switch, Inc., Class A 12,488,644
---------------
57,855,233
---------------
LEISURE PRODUCTS -- 0.6%
167,265 Hayward Holdings, Inc. (a) 4,387,361
85,275 YETI Holdings, Inc. (a) 7,063,328
---------------
11,450,689
---------------
LIFE SCIENCES TOOLS & SERVICES
-- 4.7%
80,510 10X Genomics, Inc., Class A (a) 11,992,770
1,229,898 Avantor, Inc. (a) 51,827,902
185,730 Maravai LifeSciences Holdings,
Inc., Class A (a) 7,782,087
71,232 Medpace Holdings, Inc. (a) 15,502,932
---------------
87,105,691
---------------
MACHINERY -- 1.7%
52,061 Hillenbrand, Inc. 2,706,651
336,758 Otis Worldwide Corp. 29,321,519
---------------
32,028,170
---------------
METALS & MINING -- 0.3%
128,107 MP Materials Corp. (a) 5,818,620
---------------
OIL, GAS & CONSUMABLE FUELS
-- 3.6%
182,769 Cheniere Energy, Inc. 18,536,432
166,555 Magnolia Oil & Gas Corp.,
Class A 3,142,893
175,953 Pioneer Natural Resources Co. 32,002,331
748,965 Range Resources Corp. (a) 13,354,046
---------------
67,035,702
---------------
PERSONAL PRODUCTS -- 0.3%
215,698 Beauty Health (The) Co. (a) 5,211,264
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
PROFESSIONAL SERVICES -- 1.9%
256,576 Jacobs Engineering Group, Inc. $ 35,723,076
---------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 1.4%
161,059 Cushman & Wakefield PLC (a) 3,581,952
81,842 Jones Lang LaSalle, Inc. (a) 22,043,324
---------------
25,625,276
---------------
ROAD & RAIL -- 3.1%
333,789 Hertz Global Holdings,
Inc. (a) (b) 8,341,387
1,188,551 Uber Technologies, Inc. (a) 49,835,943
---------------
58,177,330
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 11.7%
136,724 Allegro MicroSystems, Inc. (a) 4,946,675
2,122,270 Marvell Technology, Inc. 185,677,402
310,513 ON Semiconductor Corp. (a) 21,090,043
14,813 SiTime Corp. (a) 4,333,395
---------------
216,047,515
---------------
SOFTWARE -- 14.6%
269,293 AppLovin Corp., Class A (a) (b) 25,383,558
134,366 Asana, Inc., Class A (a) 10,016,985
73,913 Bill.com Holdings, Inc. (a) 18,415,424
190,614 Confluent, Inc., Class A (a) (b) 14,532,411
165,290 Crowdstrike Holdings, Inc.,
Class A (a) 33,843,128
224,879 Datadog, Inc., Class A (a) 40,053,199
71,308 DocuSign, Inc. (a) 10,860,922
256,822 Dynatrace, Inc. (a) 15,499,208
1,083,696 Palantir Technologies, Inc.,
Class A (a) 19,734,104
95,093 Procore Technologies, Inc. (a) 7,604,587
68,115 Sprout Social, Inc., Class A (a) 6,177,349
94,707 Verint Systems, Inc. (a) 4,973,065
171,819 Zoom Video Communications,
Inc., Class A (a) 31,599,232
100,962 Zscaler, Inc. (a) 32,442,119
---------------
271,135,291
---------------
SPECIALTY RETAIL -- 0.5%
191,428 Academy Sports & Outdoors,
Inc. (a) 8,403,689
---------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 1.7%
550,552 Dell Technologies, Inc.,
Class C (a) 30,924,506
---------------
TEXTILES, APPAREL & LUXURY
GOODS -- 0.5%
41,311 Kontoor Brands, Inc. 2,117,189
289,758 Levi Strauss & Co., Class A 7,252,642
---------------
9,369,831
---------------
TOTAL COMMON STOCKS -- 99.9% 1,853,092,645
(Cost $1,506,472,415) ---------------
See Notes to Financial Statements Page 29
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.3%
$ 2,969,375 Bank of America Corp., 0.05% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$2,969,379. Collateralized by
U.S. Treasury Securities,
interest rates of 0.00% to
0.88%, due 07/15/2027 to
11/15/2045. The value of the
collateral including accrued
interest is $3,028,763. (d) $ 2,969,375
20,293,609 Citigroup, Inc., 0.05% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$20,293,637. Collateralized by
U.S. Treasury Securities,
interest rates of 0.00% to
2.38%, due 01/04/2022 to
11/15/2051. The value of the
collateral including accrued
interest is $20,699,482. (d) 20,293,609
20,293,609 JPMorgan Chase & Co., 0.05% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$20,293,637. Collateralized by
U.S. Treasury Securities,
interest rates of 0.00% to
4.38%, due 01/18/2022 to
05/15/2040. The value of the
collateral including accrued
interest is $20,699,481. (d) 20,293,609
---------------
TOTAL REPURCHASE AGREEMENTS
-- 2.3% 43,556,593
(Cost $43,556,593) ---------------
TOTAL INVESTMENTS -- 102.2% 1,896,649,238
(Cost $1,550,029,008) (e)
NET OTHER ASSETS AND
LIABILITIES -- (2.2)% (40,944,220)
---------------
NET ASSETS -- 100.0% $ 1,855,705,018
===============
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $42,850,919 and the
total value of the collateral held by the Fund is $43,556,593.
(c) Rate shown reflects yield as of December 31, 2021.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $1,553,300,522. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$389,481,914 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$46,133,198. The net unrealized appreciation was $343,348,716.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
-------------------------------------------------------------
Common
Stocks* $ 1,853,092,645 $ 1,853,092,645 $ -- $ --
Repurchase
Agreements 43,556,593 -- 43,556,593 --
-------------------------------------------------------------
Total
Investments $ 1,896,649,238 $ 1,853,092,645 $ 43,556,593 $ --
=============================================================
* See Portfolio of Investments for industry breakout.
Page 30 See Notes to Financial Statements
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 42,850,919
Non-cash Collateral(2) (42,850,919)
---------------
Net Amount $ --
===============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value," is not offset and is shown on a gross
basis.
(2) At December 31, 2021, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 43,556,593
Non-cash Collateral(4) (43,556,593)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
See Notes to Financial Statements Page 31
FIRST TRUST NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX FUND (FBT)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 100.0%
BIOTECHNOLOGY -- 79.9%
3,322,115 ACADIA Pharmaceuticals,
Inc. (a) $ 77,538,164
1,256,829 Agios Pharmaceuticals, Inc. (a) 41,311,969
1,836,772 Alkermes PLC (a) 42,723,317
278,718 Alnylam Pharmaceuticals, Inc. (a) 47,264,998
280,017 Amgen, Inc. 62,995,425
206,875 Biogen, Inc. (a) 49,633,450
766,475 BioMarin Pharmaceutical, Inc. (a) 67,718,066
235,006 BioNTech SE, ADR (a) 60,584,547
5,157,063 Bluebird Bio, Inc. (a) 51,519,059
587,733 Exact Sciences Corp. (a) 45,743,259
2,666,002 Exelixis, Inc. (a) 48,734,517
5,268,816 FibroGen, Inc. (a) 74,290,306
859,958 Gilead Sciences, Inc. 62,441,550
4,090,756 Grifols S.A., ADR 45,939,190
887,225 Incyte Corp. (a) 65,122,315
1,657,163 Ionis Pharmaceuticals, Inc. (a) 50,427,470
179,609 Moderna, Inc. (a) 45,617,094
556,571 Neurocrine Biosciences, Inc. (a) 47,403,152
105,169 Regeneron Pharmaceuticals,
Inc. (a) 66,416,327
690,737 Sarepta Therapeutics, Inc. (a) 62,200,867
336,712 Seagen, Inc. (a) 52,055,675
727,091 Ultragenyx Pharmaceutical,
Inc. (a) 61,141,082
310,745 United Therapeutics Corp. (a) 67,145,780
319,833 Vertex Pharmaceuticals, Inc. (a) 70,235,327
---------------
1,366,202,906
---------------
LIFE SCIENCES TOOLS & SERVICES
-- 17.4%
116,854 Bio-Techne Corp. 60,453,248
144,120 Charles River Laboratories
International, Inc. (a) 54,301,534
141,956 Illumina, Inc. (a) 54,005,741
233,708 IQVIA Holdings, Inc. (a) 65,938,375
1,126,559 QIAGEN N.V. (a) 62,614,149
---------------
297,313,047
---------------
PHARMACEUTICALS -- 2.7%
3,360,634 Nektar Therapeutics (a) 45,402,165
---------------
TOTAL INVESTMENTS -- 100.0% 1,708,918,118
(Cost $1,749,071,411) (b)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (161,570)
---------------
NET ASSETS -- 100.0% $1,708,756,548
===============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $1,797,732,834. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$289,638,816 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$378,453,532. The net unrealized depreciation was $88,814,716.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
-----------------------------------------------
Common Stocks* $ 1,708,918,118 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
Page 32 See Notes to Financial Statements
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 100.0%
COMMUNICATIONS EQUIPMENT
-- 10.6%
1,483,365 Arista Networks, Inc. (a) $ 213,233,719
1,792,320 Ciena Corp. (a) 137,954,870
8,182,333 Cisco Systems, Inc. 518,514,442
5,254,644 CommScope Holding Co., Inc. (a) 58,011,270
3,591,420 Juniper Networks, Inc. 128,249,608
---------------
1,055,963,909
---------------
ENTERTAINMENT -- 4.8%
797,035 Netflix, Inc. (a) 480,165,766
---------------
HEALTH CARE TECHNOLOGY -- 3.3%
1,405,193 Teladoc Health, Inc. (a) 129,024,821
786,794 Veeva Systems, Inc., Class A (a) 201,010,131
---------------
330,034,952
---------------
HOTELS, RESTAURANTS & LEISURE
-- 4.3%
1,489,438 Airbnb, Inc., Class A (a) 247,976,533
1,023,452 Expedia Group, Inc. (a) 184,958,245
---------------
432,934,778
---------------
INTERACTIVE MEDIA & SERVICES
-- 27.0%
178,376 Alphabet, Inc., Class A (a) 516,762,407
165,804 Alphabet, Inc., Class C (a) 479,768,796
1,594,386 Match Group, Inc. (a) 210,857,549
2,218,586 Meta Platforms, Inc., Class A (a) 746,221,401
4,152,326 Pinterest, Inc., Class A (a) 150,937,050
4,903,634 Snap, Inc., Class A (a) 230,617,907
4,617,242 Twitter, Inc. (a) 199,557,199
2,393,762 ZoomInfo Technologies, Inc. (a) 153,679,521
---------------
2,688,401,830
---------------
INTERNET & DIRECT MARKETING
RETAIL -- 14.4%
274,563 Amazon.com, Inc. (a) 915,486,393
3,363,237 eBay, Inc. 223,655,261
795,248 Etsy, Inc. (a) 174,111,597
640,657 Wayfair, Inc., Class A (a) (b) 121,705,610
---------------
1,434,958,861
---------------
IT SERVICES -- 14.8%
1,348,082 Akamai Technologies, Inc. (a) 157,779,517
1,438,537 Cloudflare, Inc., Class A (a) 189,167,615
1,836,644 Fastly, Inc., Class A (a) (b) 65,109,030
1,711,242 GoDaddy, Inc., Class A (a) 145,215,996
866,054 Okta, Inc. (a) 194,143,325
2,322,381 PayPal Holdings, Inc. (a) 437,954,609
853,630 Snowflake, Inc., Class A (a) 289,167,163
---------------
1,478,537,255
---------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 1.3%
357,934 Zillow Group, Inc., Class A (a) 22,270,654
1,655,937 Zillow Group, Inc., Class C (a) 105,731,577
---------------
128,002,231
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
SOFTWARE -- 19.5%
2,815,723 Box, Inc., Class A (a) $ 73,743,786
1,393,056 Citrix Systems, Inc. 131,769,167
739,137 Coupa Software, Inc. (a) 116,820,603
1,303,246 Datadog, Inc., Class A (a) 232,121,145
1,253,494 DocuSign, Inc. (a) 190,919,671
3,891,508 Dropbox, Inc., Class A (a) 95,497,606
2,855,998 Nutanix, Inc., Class A (a) 90,992,096
1,821,551 salesforce.com, Inc. (a) 462,910,756
4,054,539 Vonage Holdings Corp. (a) 84,293,866
901,672 Workday, Inc., Class A (a) 246,318,757
1,161,578 Zoom Video Communications,
Inc., Class A (a) 213,625,810
---------------
1,939,013,263
---------------
TOTAL COMMON STOCKS
-- 100.0% 9,968,012,845
(Cost $8,071,072,721) ---------------
MONEY MARKET FUNDS -- 0.2%
15,988,251 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (c) (d) 15,988,251
6,346,598 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (c) 6,346,598
---------------
TOTAL MONEY MARKET FUNDS
-- 0.2% 22,334,849
(Cost $22,334,849) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.1%
$ 7,099,059 BNP Paribas S.A., 0.03% (c),
dated 12/31/21, due 01/03/22,
with a maturity value of
$7,099,077. Collateralized by
U.S. Treasury Note, interest
rate of 1.50%, due 11/30/28.
The value of the collateral
including accrued interest
is $7,237,923. (d) 7,099,059
(Cost $7,099,059) ---------------
TOTAL INVESTMENTS -- 100.3% 9,997,446,753
(Cost $8,100,506,629) (e)
NET OTHER ASSETS AND
LIABILITIES -- (0.3)% (29,873,498)
---------------
NET ASSETS -- 100.0% $ 9,967,573,255
===============
(a) Non-income producing security.
(b) All or a portion of this security is on loan (see Note 2D - Securities
Lending in the Notes to Financial Statements). The remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $19,577,306 and the
total value of the collateral held by the Fund is $23,087,310.
See Notes to Financial Statements Page 33
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
(c) Rate shown reflects yield as of December 31, 2021.
(d) This security serves as collateral for securities on loan.
(e) Aggregate cost for federal income tax purposes is $8,218,804,824. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$2,593,782,461 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$815,140,532. The net unrealized appreciation was $1,778,641,929.
------------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2021 PRICES INPUTS INPUTS
-------------------------------------------------------------
Common
Stocks* $ 9,968,012,845 $ 9,968,012,845 $ -- $ --
Money Market
Funds 22,334,849 22,334,849 -- --
Repurchase
Agreements 7,099,059 -- 7,099,059 --
-------------------------------------------------------------
Total
Investments $ 9,997,446,753 $ 9,990,347,694 $ 7,099,059 $ --
=============================================================
* See Portfolio of Investments for industry breakout.
---------------------------------
OFFSETTING ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
Offsetting assets and liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset, and to
disclose instruments and transactions subject to master netting or similar
agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities
in the Notes to Financial Statements).
The Fund's loaned securities were all subject to an enforceable Securities
Lending Agency Agreement. Securities lent in accordance with the Securities
Lending Agency Agreement on a gross basis were as follows:
SECURITIES LENDING AGENCY AGREEMENT
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 19,577,306
Non-cash Collateral(2) (19,577,306)
---------------
Net Amount $ --
===============
(1) The amount presented on the Statements of Assets and Liabilities, which is
included in "Investments, at value," is not offset and is shown on a gross
basis.
(2) At December 31, 2021, the value of the collateral received from each
borrower exceeded the value of the related securities loaned. This amount
is disclosed on the Portfolio of Investments.
The Fund's investments in repurchase agreements were all subject to an
enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis
were as follows:
REPURCHASE AGREEMENTS
--------------------------------------------------------------------------------
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 7,099,059
Non-cash Collateral(4) (7,099,059)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
(4) At December 31, 2021, the value of the collateral received from each
seller exceeded the value of the repurchase agreements.
Page 34 See Notes to Financial Statements
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 5.4%
840,771 General Dynamics Corp. $ 175,275,530
478,450 Lockheed Martin Corp. 170,045,915
442,460 Northrop Grumman Corp. 171,262,992
---------------
516,584,437
---------------
AIR FREIGHT & LOGISTICS -- 2.1%
1,507,248 Expeditors International of
Washington, Inc. 202,408,334
---------------
BEVERAGES -- 8.1%
2,559,770 Brown-Forman Corp., Class B 186,504,842
3,210,931 Coca-Cola (The) Co. 190,119,224
2,044,066 Monster Beverage Corp. (a) 196,312,099
1,101,508 PepsiCo, Inc. 191,342,955
---------------
764,279,120
---------------
BIOTECHNOLOGY -- 2.0%
841,665 Amgen, Inc. 189,349,375
---------------
CAPITAL MARKETS -- 5.8%
471,286 Moody's Corp. 184,074,886
861,649 Nasdaq, Inc. 180,954,906
394,057 S&P Global, Inc. 185,967,320
---------------
550,997,112
---------------
CHEMICALS -- 3.9%
597,645 Air Products and Chemicals, Inc. 181,839,468
794,387 Ecolab, Inc. 186,355,246
---------------
368,194,714
---------------
COMMUNICATIONS EQUIPMENT
-- 2.1%
3,166,181 Cisco Systems, Inc. 200,640,890
---------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 6.4%
2,269,779 Amphenol Corp., Class A 198,514,871
1,036,879 Keysight Technologies, Inc. (a) 214,125,882
1,187,587 TE Connectivity Ltd. 191,605,287
---------------
604,246,040
---------------
FOOD & STAPLES RETAILING -- 2.3%
386,678 Costco Wholesale Corp. 219,517,101
---------------
FOOD PRODUCTS -- 2.0%
2,908,251 Mondelez International, Inc.,
Class A 192,846,124
---------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 4.1%
1,488,906 Abbott Laboratories 209,548,630
656,842 Stryker Corp. 175,652,688
---------------
385,201,318
---------------
HEALTH CARE PROVIDERS & SERVICES
-- 4.3%
644,080 Laboratory Corp. of America
Holdings (a) 202,376,377
408,652 UnitedHealth Group, Inc. 205,200,515
---------------
407,576,892
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
HOUSEHOLD DURABLES -- 1.6%
1,120,421 Garmin Ltd. $ 152,567,728
---------------
HOUSEHOLD PRODUCTS -- 4.1%
2,294,177 Colgate-Palmolive Co. 195,785,065
1,211,265 Procter & Gamble (The) Co. 198,138,729
---------------
393,923,794
---------------
INDUSTRIAL CONGLOMERATES -- 3.5%
961,480 3M Co. 170,787,692
792,549 Honeywell International, Inc. 165,254,392
---------------
336,042,084
---------------
INSURANCE -- 5.5%
1,380,013 Allstate (The) Corp. 162,358,529
132,578 Markel Corp. (a) 163,601,252
1,917,063 Progressive (The) Corp. 196,786,517
---------------
522,746,298
---------------
INTERACTIVE MEDIA & SERVICES
-- 1.9%
61,879 Alphabet, Inc., Class A (a) 179,265,938
---------------
IT SERVICES -- 10.3%
511,766 Accenture PLC, Class A 212,152,595
821,355 Automatic Data Processing, Inc. 202,529,716
2,219,096 Cognizant Technology Solutions
Corp., Class A 196,878,197
1,468,162 Paychex, Inc. 200,404,113
757,311 Visa, Inc., Class A 164,116,867
---------------
976,081,488
---------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.9%
1,141,327 Agilent Technologies, Inc. 182,212,856
---------------
MACHINERY -- 4.0%
2,407,533 Fortive Corp. 183,670,692
782,801 Illinois Tool Works, Inc. 193,195,287
---------------
376,865,979
---------------
MULTILINE RETAIL -- 1.7%
711,941 Target Corp. 164,771,625
---------------
PHARMACEUTICALS -- 6.0%
1,084,509 Johnson & Johnson 185,526,955
2,233,260 Merck & Co., Inc. 171,157,046
865,055 Zoetis, Inc. 211,099,372
---------------
567,783,373
---------------
ROAD & RAIL -- 2.1%
776,920 Union Pacific Corp. 195,729,456
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.4%
347,606 Broadcom, Inc. 231,300,508
---------------
SOFTWARE -- 4.2%
316,811 Intuit, Inc. 203,779,172
575,032 Microsoft Corp. 193,394,762
---------------
397,173,934
---------------
SPECIALTY RETAIL -- 2.2%
499,218 Home Depot (The), Inc. 207,180,462
---------------
See Notes to Financial Statements Page 35
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
DESCRIPTION VALUE
--------------------------------------------------------------
TOTAL INVESTMENTS -- 99.9% $ 9,485,486,980
(Cost $7,936,675,780) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 6,445,218
---------------
NET ASSETS -- 100.0% $ 9,491,932,198
===============
(a) Non-income producing security.
(b) Aggregate cost for federal income tax purposes is $7,963,288,538. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,605,196,189 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$82,997,747. The net unrealized appreciation was $1,522,198,442.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
-----------------------------------------------
Common Stocks* $ 9,485,486,980 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
Page 36 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 2.9%
363,069 Elbit Systems Ltd. $ 63,221,205
298,922 General Dynamics Corp. 62,316,269
294,369 L3Harris Technologies, Inc. 62,771,246
176,755 Lockheed Martin Corp. 62,820,494
161,153 Northrop Grumman Corp. 62,377,492
726,363 Raytheon Technologies Corp. 62,510,800
---------------
376,017,506
---------------
AIR FREIGHT & LOGISTICS -- 1.0%
592,595 C.H. Robinson Worldwide, Inc. 63,781,000
287,830 United Parcel Service, Inc.,
Class B 61,693,482
---------------
125,474,482
---------------
AUTO COMPONENTS -- 0.5%
1,777,121 Gentex Corp. 61,932,667
---------------
AUTOMOBILES -- 0.5%
333,050 Toyota Motor Corp., ADR 61,714,165
---------------
BANKS -- 3.8%
575,092 Bank of Montreal 61,948,910
873,146 Bank of Nova Scotia (The) 62,595,837
527,066 Canadian Imperial Bank of
Commerce 61,434,813
906,112 Commerce Bancshares, Inc. 62,286,139
391,471 JPMorgan Chase & Co. 61,989,433
586,366 Royal Bank of Canada 62,236,887
809,658 Toronto-Dominion (The) Bank 62,084,575
1,091,200 U.S. Bancorp 61,292,704
---------------
495,869,298
---------------
BEVERAGES -- 1.9%
1,055,664 Coca-Cola (The) Co. 62,505,865
250,874 Constellation Brands, Inc.,
Class A 62,961,848
281,435 Diageo PLC, ADR 61,955,101
361,082 PepsiCo, Inc. 62,723,554
---------------
250,146,368
---------------
BIOTECHNOLOGY -- 0.9%
274,976 Amgen, Inc. 61,861,351
849,661 Gilead Sciences, Inc. 61,693,885
---------------
123,555,236
---------------
BUILDING PRODUCTS -- 1.0%
730,986 A.O. Smith Corp. 62,755,148
776,462 Johnson Controls International
PLC 63,134,125
---------------
125,889,273
---------------
CAPITAL MARKETS -- 4.2%
1,058,015 Bank of New York Mellon (The)
Corp. 61,449,511
67,109 BlackRock, Inc. 61,442,316
476,999 Cboe Global Markets, Inc. 62,200,670
269,866 CME Group, Inc. 61,653,586
159,552 Goldman Sachs Group (The), Inc. 61,036,618
586,977 Houlihan Lokey, Inc. 60,763,859
616,681 Morgan Stanley 60,533,407
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
CAPITAL MARKETS (CONTINUED)
998,629 SEI Investments Co. $ 60,856,451
310,635 T. Rowe Price Group, Inc. 61,083,267
---------------
551,019,685
---------------
CHEMICALS -- 2.9%
204,867 Air Products and Chemicals, Inc. 62,332,833
426,386 International Flavors &
Fragrances, Inc. 64,235,051
180,289 Linde PLC 62,457,518
178,698 NewMarket Corp. 61,243,379
364,767 PPG Industries, Inc. 62,900,422
624,650 Sensient Technologies Corp. 62,502,479
---------------
375,671,682
---------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.5%
451,012 Republic Services, Inc. 62,893,624
1,870,533 Rollins, Inc. 63,990,934
378,017 Waste Management, Inc. 63,091,037
---------------
189,975,595
---------------
COMMUNICATIONS EQUIPMENT
-- 1.0%
976,268 Cisco Systems, Inc. 61,866,103
1,763,458 Juniper Networks, Inc. 62,973,085
---------------
124,839,188
---------------
CONTAINERS & PACKAGING -- 2.4%
516,434 AptarGroup, Inc. 63,252,836
291,360 Avery Dennison Corp. 63,099,835
465,522 Packaging Corp. of America 63,380,820
1,478,381 Silgan Holdings, Inc. 63,333,842
1,085,651 Sonoco Products Co. 62,848,337
---------------
315,915,670
---------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.9%
2,498,583 AT&T, Inc. 61,465,142
1,196,196 BCE, Inc. 62,250,040
2,638,045 TELUS Corp. 62,178,720
1,175,303 Verizon Communications, Inc. 61,068,744
---------------
246,962,646
---------------
ELECTRIC UTILITIES -- 10.8%
953,415 ALLETE, Inc. 63,259,085
1,032,082 Alliant Energy Corp. 63,442,081
711,013 American Electric Power Co., Inc. 63,258,827
1,277,648 Avangrid, Inc. 63,729,082
599,424 Duke Energy Corp. 62,879,578
558,649 Entergy Corp. 62,931,810
917,525 Evergy, Inc. 62,951,390
693,955 Eversource Energy 63,136,026
1,129,623 Exelon Corp. 65,247,024
1,301,825 Fortis, Inc. 62,839,093
1,521,629 Hawaiian Electric Industries,
Inc. 63,147,603
561,633 IDACORP, Inc. 63,638,635
780,479 MGE Energy, Inc. 64,194,398
678,005 NextEra Energy, Inc. 63,298,547
1,650,626 OGE Energy Corp. 63,351,026
899,792 Otter Tail Corp. 64,263,145
See Notes to Financial Statements Page 37
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
898,747 Pinnacle West Capital Corp. $ 63,442,551
1,371,017 PNM Resources, Inc. 62,532,085
1,197,353 Portland General Electric Co. 63,363,921
2,096,679 PPL Corp. 63,026,171
924,649 Southern (The) Co. 63,412,428
926,592 Xcel Energy, Inc. 62,730,278
---------------
1,394,074,784
---------------
ELECTRICAL EQUIPMENT -- 1.9%
1,617,845 ABB Ltd., ADR 61,753,143
671,739 Emerson Electric Co. 62,451,575
297,096 Hubbell, Inc. 61,876,184
177,761 Rockwell Automation, Inc. 62,011,925
---------------
248,092,827
---------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.4%
1,499,151 Avnet, Inc. 61,809,996
1,656,807 Corning, Inc. 61,682,925
380,337 TE Connectivity Ltd. 61,363,571
---------------
184,856,492
---------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 4.4%
281,306 Alexandria Real Estate Equities,
Inc. 62,719,986
216,666 American Tower Corp. 63,374,805
350,670 Camden Property Trust 62,657,716
302,393 Crown Castle International Corp. 63,121,515
962,910 Duke Realty Corp. 63,205,412
275,634 Mid-America Apartment
Communities, Inc. 63,241,465
373,229 Prologis, Inc. 62,836,834
167,885 Public Storage 62,883,006
872,782 Realty Income Corp. 62,482,463
---------------
566,523,202
---------------
FOOD & STAPLES RETAILING -- 0.5%
439,862 Walmart, Inc. 63,643,633
---------------
FOOD PRODUCTS -- 5.8%
937,116 Archer-Daniels-Midland Co. 63,339,670
1,467,878 Campbell Soup Co. 63,793,978
937,256 General Mills, Inc. 63,152,309
326,071 Hershey (The) Co. 63,084,956
1,290,428 Hormel Foods Corp. 62,985,791
646,224 Ingredion, Inc. 62,451,087
393,459 J & J Snack Foods Corp. 62,150,784
462,570 J.M. Smucker (The) Co. 62,826,257
978,732 Kellogg Co. 63,049,915
380,733 Lancaster Colony Corp. 63,049,385
657,760 McCormick & Co., Inc. 63,546,194
944,979 Mondelez International, Inc.,
Class A 62,661,558
---------------
756,091,884
---------------
GAS UTILITIES -- 2.9%
594,994 Atmos Energy Corp. 62,337,521
433,365 Chesapeake Utilities Corp. 63,188,951
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
GAS UTILITIES (CONTINUED)
1,516,408 New Jersey Resources Corp. $ 62,263,712
811,896 ONE Gas, Inc. 62,995,011
959,622 Spire, Inc. 62,586,547
1,354,810 UGI Corp. 62,199,327
---------------
375,571,069
---------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 1.9%
437,687 Abbott Laboratories 61,600,068
714,955 Baxter International, Inc. 61,371,737
246,359 Becton, Dickinson and Co. 61,954,361
592,879 Medtronic PLC 61,333,333
---------------
246,259,499
---------------
HEALTH CARE PROVIDERS & SERVICES
-- 2.4%
469,410 AmerisourceBergen Corp. 62,379,895
604,635 CVS Health Corp. 62,374,147
1,918,055 Fresenius Medical Care AG &
Co. KGaA, ADR 62,260,065
1,516,782 Premier, Inc., Class A 62,445,915
365,608 Quest Diagnostics, Inc. 63,253,840
---------------
312,713,862
---------------
HOTELS, RESTAURANTS & LEISURE
-- 1.4%
230,817 McDonald's Corp. 61,875,113
542,068 Starbucks Corp. 63,405,694
448,619 Yum! Brands, Inc. 62,295,235
---------------
187,576,042
---------------
HOUSEHOLD DURABLES -- 0.5%
455,463 Garmin Ltd. 62,020,397
---------------
HOUSEHOLD PRODUCTS -- 2.4%
362,309 Clorox (The) Co. 63,172,197
737,868 Colgate-Palmolive Co. 62,969,655
442,887 Kimberly-Clark Corp. 63,297,410
382,260 Procter & Gamble (The) Co. 62,530,091
254,570 WD-40 Co. 62,278,005
---------------
314,247,358
---------------
INDUSTRIAL CONGLOMERATES -- 1.0%
350,392 3M Co. 62,240,131
299,934 Honeywell International, Inc. 62,539,238
---------------
124,779,369
---------------
INSURANCE -- 6.7%
1,063,836 Aflac, Inc. 62,117,384
533,385 Allstate (The) Corp. 62,752,745
403,720 Assurant, Inc. 62,923,799
1,171,072 Axis Capital Holdings Ltd. 63,788,292
320,008 Chubb Ltd. 61,860,747
1,403,329 CNA Financial Corp. 61,858,742
321,363 Erie Indemnity Co., Class A 61,913,796
228,283 Everest Re Group Ltd. 62,531,279
472,774 Hanover Insurance Group (The),
Inc. 61,961,760
899,401 Hartford Financial Services Group
(The), Inc. 62,094,645
356,058 Marsh & McLennan Cos., Inc. 61,890,002
Page 38 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
1,114,380 Sun Life Financial, Inc. $ 62,059,822
396,790 Travelers (The) Cos., Inc. 62,069,860
258,994 Willis Towers Watson PLC 61,508,485
---------------
871,331,358
---------------
IT SERVICES -- 3.8%
825,200 Amdocs Ltd. 61,757,968
251,394 Automatic Data Processing, Inc. 61,988,733
335,620 Broadridge Financial Solutions,
Inc. 61,358,048
570,962 Fidelity National Information
Services, Inc. 62,320,502
2,444,334 Infosys Ltd., ADR 61,866,094
470,406 International Business Machines
Corp. 62,874,466
785,123 Maximus, Inc. 62,550,749
456,465 Paychex, Inc. 62,307,473
---------------
497,024,033
---------------
MACHINERY -- 3.4%
300,009 Caterpillar, Inc. 62,023,861
286,367 Cummins, Inc. 62,468,097
1,068,598 Donaldson Co., Inc. 63,325,117
254,029 Illinois Tool Works, Inc. 62,694,357
443,712 Lincoln Electric Holdings, Inc. 61,884,513
721,623 PACCAR, Inc. 63,690,446
289,362 Snap-on, Inc. 62,322,788
---------------
438,409,179
---------------
MEDIA -- 0.5%
1,226,767 Comcast Corp., Class A 61,743,183
---------------
MULTILINE RETAIL -- 0.5%
276,283 Target Corp. 63,942,938
---------------
MULTI-UTILITIES -- 5.4%
707,189 Ameren Corp. 62,946,893
1,498,428 Avista Corp. 63,668,206
895,373 Black Hills Corp. 63,186,473
968,786 CMS Energy Corp. 63,019,529
739,463 Consolidated Edison, Inc. 63,090,983
799,626 Dominion Energy, Inc. 62,818,619
525,368 DTE Energy Co. 62,802,491
1,109,983 NorthWestern Corp. 63,446,628
951,658 Public Service Enterprise Group,
Inc. 63,504,138
475,682 Sempra Energy 62,923,215
649,822 WEC Energy Group, Inc. 63,078,221
---------------
694,485,396
---------------
OIL, GAS & CONSUMABLE FUELS
-- 0.5%
1,610,687 Enbridge, Inc. 62,945,648
---------------
PERSONAL PRODUCTS -- 0.5%
1,162,722 Unilever PLC, ADR 62,542,816
---------------
PHARMACEUTICALS -- 4.8%
1,066,397 AstraZeneca PLC, ADR 62,117,625
993,980 Bristol-Myers Squibb Co. 61,974,653
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
PHARMACEUTICALS (CONTINUED)
222,386 Eli Lilly & Co. $ 61,427,461
1,404,283 GlaxoSmithKline PLC, ADR 61,928,880
364,917 Johnson & Johnson 62,426,351
808,603 Merck & Co., Inc. 61,971,334
706,707 Novartis AG, ADR 61,815,661
554,643 Novo Nordisk A/S, ADR 62,120,016
1,045,862 Pfizer, Inc. 61,758,151
1,226,034 Sanofi, ADR 61,424,304
---------------
618,964,436
---------------
PROFESSIONAL SERVICES -- 1.0%
555,388 Robert Half International, Inc. 61,936,870
522,577 Thomson Reuters Corp. 62,510,661
---------------
124,447,531
---------------
ROAD & RAIL -- 1.4%
506,462 Canadian National Railway Co. 62,223,921
212,377 Norfolk Southern Corp. 63,226,757
249,702 Union Pacific Corp. 62,907,425
---------------
188,358,103
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.9%
352,855 Analog Devices, Inc. 62,021,323
1,192,045 Intel Corp. 61,390,317
504,609 Taiwan Semiconductor
Manufacturing Co., Ltd., ADR 60,709,509
322,744 Texas Instruments, Inc. 60,827,562
---------------
244,948,711
---------------
SOFTWARE -- 1.4%
1,290,160 Open Text Corp. 61,256,797
691,480 Oracle Corp. 60,303,971
438,212 SAP SE, ADR 61,397,883
---------------
182,958,651
---------------
SPECIALTY RETAIL -- 1.0%
153,216 Home Depot (The), Inc. 63,586,172
244,051 Lowe's Cos., Inc. 63,082,303
---------------
126,668,475
---------------
TECHNOLOGY HARDWARE, STORAGE &
PERIPHERALS -- 0.5%
2,452,073 Canon, Inc., ADR 59,904,143
---------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.9%
973,815 Fastenal Co. 62,382,589
732,640 MSC Industrial Direct Co., Inc.,
Class A 61,585,718
119,955 W.W. Grainger, Inc. 62,165,479
202,527 Watsco, Inc. 63,366,648
---------------
249,500,434
---------------
WATER UTILITIES -- 0.5%
613,263 American States Water Co. 63,435,925
---------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.5%
1,322,691 Rogers Communications, Inc.,
Class B 62,999,772
---------------
See Notes to Financial Statements Page 39
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
TOTAL INVESTMENTS -- 99.9% $12,936,044,611
(Cost $10,323,373,814) (a)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 18,142,110
---------------
NET ASSETS -- 100.0% $12,954,186,721
===============
(a) Aggregate cost for federal income tax purposes is $10,630,699,450. As of
December 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$2,563,308,042 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$257,962,881. The net unrealized appreciation was $2,305,345,161.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
-----------------------------------------------
Common
Stocks* $12,936,044,611 $ -- $ --
===============================================
* See Portfolio of Investments for industry breakout.
Page 40 See Notes to Financial Statements
This page intentionally left blank.
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2021
FIRST TRUST FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR US EQUITY
MICROCAP DIVIDEND LEADERS OPPORTUNITIES
INDEX FUND INDEX FUND ETF
(FDM) (FDL) (FPX)
------------------ ------------------ ------------------
ASSETS:
Investments, at value............................................... $ 195,483,125 $ 1,757,996,824 $ 1,896,649,238
Cash................................................................ 87,944 1,300,567 3,970,511
Due from authorized participant..................................... 5,482 -- --
Receivables:
Investment securities sold.................................... 1,441,974 -- --
Dividends..................................................... 283,988 4,768,259 203,704
Securities lending income..................................... 15,445 -- 14,779
Capital shares sold........................................... -- -- --
Reclaims...................................................... -- -- 1,135
Prepaid expenses.................................................... 1,139 11,448 13,570
---------------- ---------------- ----------------
Total Assets.................................................. 197,319,097 1,764,077,098 1,900,852,937
---------------- ---------------- ----------------
LIABILITIES:
Payables:
Collateral for securities on loan............................. 6,942,527 -- 43,556,593
Investment securities purchased............................... 1,453,724 -- --
Licensing fees................................................ 40,832 340,405 486,923
Investment advisory fees...................................... 64,782 417,005 631,847
Audit and tax fees............................................ 30,319 30,318 30,318
Shareholder reporting fees.................................... 9,284 45,604 59,210
Other liabilities................................................... 41,027 334,152 383,028
---------------- ---------------- ----------------
Total Liabilities............................................. 8,582,495 1,167,484 45,147,919
---------------- ---------------- ----------------
NET ASSETS.......................................................... $ 188,736,602 $ 1,762,909,614 $ 1,855,705,018
================ ================ ================
NET ASSETS CONSIST OF:
Paid-in capital..................................................... $ 205,727,928 $ 1,889,928,526 $ 1,851,572,512
Par value........................................................... 29,550 496,000 151,500
Accumulated distributable earnings (loss)........................... (17,020,876) (127,514,912) 3,981,006
---------------- ---------------- ----------------
NET ASSETS.......................................................... $ 188,736,602 $ 1,762,909,614 $ 1,855,705,018
================ ================ ================
NET ASSET VALUE, per share.......................................... $ 63.87 $ 35.54 $ 122.49
================ ================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)........................... 2,955,000 49,600,002 15,150,002
================ ================ ================
Investments, at cost................................................ $ 170,842,502 $ 1,527,933,885 $ 1,550,029,008
================ ================ ================
Securities on loan, at value........................................ $ 6,687,020 $ -- $ 42,850,919
================ ================ ================
Page 42 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NYSE(R) ARCA(R) DOW JONES CAPITAL VALUE LINE(R)
BIOTECHNOLOGY INTERNET STRENGTH DIVIDEND
INDEX FUND INDEX FUND ETF INDEX FUND
(FBT) (FDN) (FTCS) (FVD)
------------------ ------------------ ------------------ ------------------
$ 1,708,918,118 $ 9,997,446,753 $ 9,485,486,980 $ 12,936,044,611
1,206,957 -- 2,935,983 20,049,830
-- -- -- --
-- -- -- --
-- 39 8,774,070 21,145,319
18 7,016 -- --
-- 11,300,783 4,226,023 15,014,377
1,830 -- -- 1,289,946
11,454 69,184 71,528 82,479
---------------- ---------------- ---------------- ----------------
1,710,138,377 10,008,823,775 9,501,494,584 12,993,626,562
---------------- ---------------- ---------------- ----------------
-- 23,087,310 -- --
-- 11,299,848 4,224,683 26,411,355
350,601 1,589,363 -- 5,726,409
572,545 3,420,830 3,844,616 5,327,065
30,318 30,318 30,318 30,319
72,238 321,147 218,021 306,580
356,127 1,501,704 1,244,748 1,638,113
---------------- ---------------- ---------------- ----------------
1,381,829 41,250,520 9,562,386 39,439,841
---------------- ---------------- ---------------- ----------------
$ 1,708,756,548 $ 9,967,573,255 $ 9,491,932,198 $ 12,954,186,721
================ ================ ================ ================
$ 2,122,679,628 $ 8,629,977,749 $ 8,292,458,704 $ 11,082,370,663
105,500 441,000 1,123,000 3,012,409
(414,028,580) 1,337,154,506 1,198,350,494 1,868,803,649
---------------- ---------------- ---------------- ----------------
$ 1,708,756,548 $ 9,967,573,255 $ 9,491,932,198 $ 12,954,186,721
================ ================ ================ ================
$ 161.97 $ 226.02 $ 84.52 $ 43.00
================ ================ ================ ================
10,550,002 44,100,002 112,300,002 301,240,884
================ ================ ================ ================
$ 1,749,071,411 $ 8,100,506,629 $ 7,936,675,780 $ 10,323,373,814
================ ================ ================ ================
$ -- $ 19,577,306 $ -- $ --
================ ================ ================ ================
See Notes to Financial Statements Page 43
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2021
FIRST TRUST FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR US EQUITY
MICROCAP DIVIDEND LEADERS OPPORTUNITIES
INDEX FUND INDEX FUND ETF
(FDM) (FDL) (FPX)
------------------ ------------------ ------------------
INVESTMENT INCOME:
Dividends........................................................... $ 2,613,675 $ 70,731,356 $ 11,578,090
Securities lending income (net of fees)............................. 139,278 -- 1,335,814
Foreign withholding tax............................................. -- -- (4,031)
---------------- ---------------- ----------------
Total investment income....................................... 2,752,953 70,731,356 12,909,873
---------------- ---------------- ----------------
EXPENSES:
Investment advisory fees............................................ 808,478 4,876,050 8,100,111
Licensing fees...................................................... 112,035 1,425,974 2,021,593
Accounting and administration fees.................................. 84,543 751,568 911,747
Audit and tax fees.................................................. 30,996 30,952 30,564
Shareholder reporting fees.......................................... 26,942 97,431 137,767
Custodian fees...................................................... 17,084 127,076 155,824
Transfer agent fees................................................. 8,085 65,634 75,626
Listing fees........................................................ 7,812 9,750 7,812
Trustees' fees and expenses......................................... 6,385 7,159 7,496
Legal fees.......................................................... 3,032 29,750 32,800
Registration and filing fees........................................ 321 2,824 (12,517)
Expenses previously waived or reimbursed............................ -- -- --
Other expenses...................................................... 3,523 21,418 28,175
---------------- ---------------- ----------------
Total expenses................................................ 1,109,236 7,445,586 11,496,998
Less fees waived and expenses reimbursed by the investment
advisor.................................................... (139,062) (131,819) --
---------------- ---------------- ----------------
Net expenses.................................................. 970,174 7,313,767 11,496,998
---------------- ---------------- ----------------
NET INVESTMENT INCOME (LOSS)........................................ 1,782,779 63,417,589 1,412,875
---------------- ---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................... 5,471,316 32,339,197 (80,836,577)
In-kind redemptions........................................... 27,687,937 159,168,671 379,628,954
Foreign currency transactions................................. -- -- --
---------------- ---------------- ----------------
Net realized gain (loss)............................................ 33,159,253 191,507,868 298,792,377
---------------- ---------------- ----------------
Net change in unrealized appreciation (depreciation) on:
Investments................................................... 8,369,281 87,772,838 (231,648,485)
Foreign currency translation.................................. -- -- --
---------------- ---------------- ----------------
Net change in unrealized appreciation (depreciation)................ 8,369,281 87,772,838 (231,648,485)
---------------- ---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................. 41,528,534 279,280,706 67,143,892
---------------- ---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................................. $ 43,311,313 $ 342,698,295 $ 68,556,767
================ ================ ================
Page 44 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NYSE(R) ARCA(R) DOW JONES CAPITAL VALUE LINE(R)
BIOTECHNOLOGY INTERNET STRENGTH DIVIDEND
INDEX FUND INDEX FUND ETF INDEX FUND
(FBT) (FDN) (FTCS) (FVD)
------------------ ------------------ ------------------ ------------------
$ 6,324,032 $ 21,565,140 $ 144,008,827 $ 307,151,894
2,592 156,668 -- --
(270,687) -- -- (6,833,737)
---------------- ---------------- ---------------- ----------------
6,055,937 21,721,808 144,008,827 300,318,157
---------------- ---------------- ---------------- ----------------
7,639,573 42,311,230 40,507,949 58,233,975
1,527,877 6,275,430 54,916 14,302,348
865,320 3,106,270 2,554,281 3,347,640
30,920 30,887 30,532 35,225
147,967 664,719 479,696 626,121
154,406 820,029 606,043 868,902
72,747 289,445 227,540 316,170
7,812 13,625 5,031 66,250
7,300 12,359 11,132 12,723
31,099 172,556 139,027 211,375
(7,401) (22,151) (48,989) (13,469)
-- -- -- 255,932
33,897 196,731 99,538 166,828
---------------- ---------------- ---------------- ----------------
10,511,517 53,871,130 44,666,696 78,430,020
-- -- -- --
---------------- ---------------- ---------------- ----------------
10,511,517 53,871,130 44,666,696 78,430,020
---------------- ---------------- ---------------- ----------------
(4,455,580) (32,149,322) 99,342,131 221,888,137
---------------- ---------------- ---------------- ----------------
(78,651,815) (56,762,078) (80,353,710) 238,508,839
69,859,393 2,203,064,027 1,158,492,293 602,944,856
-- -- -- (2,702)
---------------- ---------------- ---------------- ----------------
(8,792,422) 2,146,301,949 1,078,138,583 841,450,993
---------------- ---------------- ---------------- ----------------
(58,114,526) (1,439,319,817) 761,114,952 1,485,603,869
-- -- -- 101
---------------- ---------------- ---------------- ----------------
(58,114,526) (1,439,319,817) 761,114,952 1,485,603,970
---------------- ---------------- ---------------- ----------------
(66,906,948) 706,982,132 1,839,253,535 2,327,054,963
---------------- ---------------- ---------------- ----------------
$ (71,362,528) $ 674,832,810 $ 1,938,595,666 $ 2,548,943,100
================ ================ ================ ================
See Notes to Financial Statements Page 45
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR
MICROCAP DIVIDEND LEADERS
INDEX FUND INDEX FUND
(FDM) (FDL)
--------------------------------- ---------------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/2021 12/31/2020 12/31/2021 12/31/2020
--------------- --------------- --------------- ---------------
OPERATIONS:
Net investment income (loss)............................. $ 1,782,779 $ 2,111,719 $ 63,417,589 $ 66,323,992
Net realized gain (loss)................................. 33,159,253 (29,360,877) 191,507,868 (263,732,972)
Net change in unrealized appreciation (depreciation)..... 8,369,281 7,286,636 87,772,838 33,378,185
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations....................................... 43,311,313 (19,962,522) 342,698,295 (164,030,795)
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................... (1,928,374) (2,126,197) (63,399,697) (66,635,153)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................ 86,724,692 29,127,047 644,763,236 83,773,486
Proceeds from shares acquired through reorganization..... -- -- -- --
Cost of shares redeemed.................................. (61,853,301) (40,623,522) (560,634,737) (294,624,818)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions......................... 24,871,391 (11,496,475) 84,128,499 (210,851,332)
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets.................. 66,254,330 (33,585,194) 363,427,097 (441,517,280)
NET ASSETS:
Beginning of period...................................... 122,482,272 156,067,466 1,399,482,517 1,840,999,797
--------------- --------------- --------------- ---------------
End of period............................................ $ 188,736,602 $ 122,482,272 $ 1,762,909,614 $ 1,399,482,517
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.................. 2,555,000 3,055,000 47,300,002 56,500,002
Shares sold.............................................. 1,450,000 700,000 19,250,000 2,750,000
Shares issued through reorganization..................... -- -- -- --
Shares redeemed.......................................... (1,050,000) (1,200,000) (16,950,000) (11,950,000)
--------------- --------------- --------------- ---------------
Shares outstanding, end of period........................ 2,955,000 2,555,000 49,600,002 47,300,002
=============== =============== =============== ===============
Page 46 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
US EQUITY NYSE(R) ARCA(R) DOW JONES
OPPORTUNITIES BIOTECHNOLOGY INTERNET
ETF INDEX FUND INDEX FUND
(FPX) (FBT) (FDN)
--------------------------------- --------------------------------- ---------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/2021 12/31/2020 12/31/2021 12/31/2020 12/31/2021 12/31/2020
--------------- --------------- --------------- --------------- --------------- ---------------
$ 1,412,875 $ 3,650,043 $ (4,455,580) $ (5,453,767) $ (32,149,322) $ (17,892,891)
298,792,377 181,468,921 (8,792,422) 56,195,268 2,146,301,949 1,460,876,048
(231,648,485) 391,055,130 (58,114,526) 153,873,484 (1,439,319,817) 2,472,751,255
--------------- --------------- --------------- --------------- --------------- ---------------
68,556,767 576,174,094 (71,362,528) 204,614,985 674,832,810 3,915,734,412
--------------- --------------- --------------- --------------- --------------- ---------------
(2,739,625) (5,290,041) -- -- -- --
--------------- --------------- --------------- --------------- --------------- ---------------
991,605,700 978,879,034 52,174,778 403,631,644 3,348,838,868 3,121,562,471
-- -- -- -- -- --
(1,148,090,496) (934,225,504) (314,229,031) (367,000,398) (5,131,127,308) (3,815,634,985)
--------------- --------------- --------------- --------------- --------------- ---------------
(156,484,796) 44,653,530 (262,054,253) 36,631,246 (1,782,288,440) (694,072,514)
--------------- --------------- --------------- --------------- --------------- ---------------
(90,667,654) 615,537,583 (333,416,781) 241,246,231 (1,107,455,630) 3,221,661,898
1,946,372,672 1,330,835,089 2,042,173,329 1,800,927,098 11,075,028,885 7,853,366,987
--------------- --------------- --------------- --------------- --------------- ---------------
$ 1,855,705,018 $ 1,946,372,672 $ 1,708,756,548 $ 2,042,173,329 $ 9,967,573,255 $11,075,028,885
=============== =============== =============== =============== =============== ===============
16,450,002 16,550,002 12,150,002 12,100,002 52,150,002 56,450,002
8,000,000 10,100,000 300,000 2,550,000 14,450,000 18,050,000
-- -- -- -- -- --
(9,300,000) (10,200,000) (1,900,000) (2,500,000) (22,500,000) (22,350,000)
--------------- --------------- --------------- --------------- --------------- ---------------
15,150,002 16,450,002 10,550,002 12,150,002 44,100,002 52,150,002
=============== =============== =============== =============== =============== ===============
See Notes to Financial Statements Page 47
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST FIRST TRUST
CAPITAL STRENGTH VALUE LINE(R) DIVIDEND
ETF INDEX FUND
(FTCS) (FVD)
--------------------------------- ---------------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/2021 12/31/2020 12/31/2021 12/31/2020
--------------- --------------- --------------- ---------------
OPERATIONS:
Net investment income (loss)............................. $ 99,342,131 $ 55,537,289 $ 221,888,137 $ 225,598,348
Net realized gain (loss)................................. 1,078,138,583 471,532,595 841,450,993 (446,982,237)
Net change in unrealized appreciation (depreciation)..... 761,114,952 416,336,797 1,485,603,970 94,895,748
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations....................................... 1,938,595,666 943,406,681 2,548,943,100 (126,488,141)
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................... (96,596,007) (55,671,376) (223,826,833) (231,083,030)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................ 7,347,607,864 6,487,496,472 2,745,034,380 3,432,557,406
Proceeds from shares acquired through reorganization..... -- -- -- 36,820,323
Cost of shares redeemed.................................. (6,719,583,961) (3,745,945,946) (2,265,168,318) (2,627,820,910)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions......................... 628,023,903 2,741,550,526 479,866,062 841,556,819
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets.................. 2,470,023,562 3,629,285,831 2,804,982,329 483,985,648
NET ASSETS:
Beginning of period...................................... 7,021,908,636 3,392,622,805 10,149,204,392 9,665,218,744
--------------- --------------- --------------- ---------------
End of period............................................ $ 9,491,932,198 $ 7,021,908,636 $12,954,186,721 $10,149,204,392
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.................. 103,950,002 56,200,002 289,190,884 268,287,986
Shares sold.............................................. 98,850,000 107,300,000 68,500,000 100,550,000
Shares issued through reorganization..................... -- -- -- 1,052,898
Shares redeemed.......................................... (90,500,000) (59,550,000) (56,450,000) (80,700,000)
--------------- --------------- --------------- ---------------
Shares outstanding, end of period........................ 112,300,002 103,950,002 301,240,884 289,190,884
=============== =============== =============== ===============
Page 48 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 47.94 $ 51.09 $ 40.76 $ 47.21 $ 43.98
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.64 0.80 0.66 0.56 0.42
Net realized and unrealized gain (loss) 15.98 (3.15) 10.37 (6.50) 3.27
------------ ------------ ------------ ------------ ------------
Total from investment operations 16.62 (2.35) 11.03 (5.94) 3.69
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.69) (0.80) (0.70) (0.51) (0.46)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 63.87 $ 47.94 $ 51.09 $ 40.76 $ 47.21
============ ============ ============ ============ ============
TOTAL RETURN (a) 34.71% (4.25)% 27.25% (12.68)% 8.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 188,737 $ 122,482 $ 156,067 $ 138,777 $ 97,012
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.69% 0.71% 0.70% 0.73% 0.71%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.10% 1.88% 1.42% 1.29% 0.89%
Portfolio turnover rate (b) 95% 95% 64% 75% 55%
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 29.59 $ 32.58 $ 27.24 $ 30.06 $ 27.75
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.29 1.32 1.22 1.09 0.93
Net realized and unrealized gain (loss) 5.95 (2.98) 5.34 (2.83) 2.34
------------ ------------ ------------ ------------ ------------
Total from investment operations 7.24 (1.66) 6.56 (1.74) 3.27
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.29) (1.33) (1.22) (1.08) (0.96)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 35.54 $ 29.59 $ 32.58 $ 27.24 $ 30.06
============ ============ ============ ============ ============
TOTAL RETURN (a) 24.76% (4.42)% 24.36% (5.87)% 11.93%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,762,910 $ 1,399,483 $ 1,841,000 $ 1,386,483 $ 1,719,299
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.46% 0.46% 0.46% 0.47% 0.47%
Ratio of net expenses to average net assets 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of net investment income (loss) to
average net assets 3.90% 4.73% 4.06% 3.70% 3.18%
Portfolio turnover rate (b) 59% 63% 39% 39% 43%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 49
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 118.32 $ 80.41 $ 62.07 $ 68.18 $ 54.10
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.08 0.24 0.58 0.52 0.43
Net realized and unrealized gain (loss) 4.26 38.01 18.30 (6.08) 14.12
------------ ------------ ------------ ------------ ------------
Total from investment operations 4.34 38.25 18.88 (5.56) 14.55
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.17) (0.34) (0.54) (0.55) (0.47)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 122.49 $ 118.32 $ 80.41 $ 62.07 $ 68.18
============ ============ ============ ============ ============
TOTAL RETURN (a) 3.67% 47.76% 30.45% (8.22)% 26.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,855,705 $ 1,946,373 $ 1,330,835 $ 912,479 $ 981,732
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.57% 0.57% 0.58% 0.59% 0.59%
Ratio of net expenses to average net assets 0.57% 0.57% 0.58% 0.59% 0.59%
Ratio of net investment income (loss) to
average net assets 0.07% 0.26% 0.79% 0.74% 0.71%
Portfolio turnover rate (b) 85% 75% 81% 57% 31%
FIRST TRUST NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX FUND (FBT)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 168.08 $ 148.84 $ 124.26 $ 124.52 $ 90.89
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.42) (0.45) (0.51) (0.22) (0.08)
Net realized and unrealized gain (loss) (5.69) 19.69 25.09 (0.04) 33.71
------------ ------------ ------------ ------------ ------------
Total from investment operations (6.11) 19.24 24.58 (0.26) 33.63
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 161.97 $ 168.08 $ 148.84 $ 124.26 $ 124.52
============ ============ ============ ============ ============
TOTAL RETURN (a) (3.64)% 12.93% 19.78% (0.21)% 36.99%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,708,757 $ 2,042,173 $ 1,800,927 $ 2,342,213 $ 1,207,811
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.55% 0.55% 0.55% 0.57% 0.56%
Ratio of net expenses to average net assets 0.55% 0.55% 0.55% 0.57% 0.56%
Ratio of net investment income (loss) to
average net assets (0.23)% (0.28)% (0.25)% (0.21)% (0.08)%
Portfolio turnover rate (b) 39% 26% 31% 37% 36%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 50 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 212.37 $ 139.12 $ 116.66 $ 109.82 $ 79.79
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.73) (0.34) (0.14) (0.35) (0.28)
Net realized and unrealized gain (loss) 14.38 73.59 22.60 7.19 30.31
------------ ------------ ------------ ------------ ------------
Total from investment operations 13.65 73.25 22.46 6.84 30.03
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 226.02 $ 212.37 $ 139.12 $ 116.66 $ 109.82
============ ============ ============ ============ ============
TOTAL RETURN (a) 6.43% 52.65% 19.26% 6.23% 37.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 9,967,573 $ 11,075,029 $ 7,853,367 $ 7,016,807 $ 5,490,820
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.51% 0.51% 0.52% 0.52% 0.53%
Ratio of net expenses to average net assets 0.51% 0.51% 0.52% 0.52% 0.53%
Ratio of net investment income (loss) to
average net assets (0.30)% (0.20)% (0.10)% (0.27)% (0.32)%
Portfolio turnover rate (b) 19% 39% 28% 21% 22%
FIRST TRUST CAPITAL STRENGTH ETF (FTCS)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 67.55 $ 60.37 $ 48.29 $ 50.95 $ 40.79
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.91 0.63 0.76 0.60 0.59
Net realized and unrealized gain (loss) 16.95 7.18 12.08 (2.65) 10.16
------------ ------------ ------------ ------------ ------------
Total from investment operations 17.86 7.81 12.84 (2.05) 10.75
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.89) (0.63) (0.76) (0.61) (0.59)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 84.52 $ 67.55 $ 60.37 $ 48.29 $ 50.95
============ ============ ============ ============ ============
TOTAL RETURN (a) 26.61% 13.07% 26.72% (4.09)% 26.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 9,491,932 $ 7,021,909 $ 3,392,623 $ 1,376,131 $ 624,099
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.55% 0.56% 0.58% 0.60% 0.61%
Ratio of net expenses to average net assets 0.55% 0.56% 0.58% 0.60% 0.61%
Ratio of net investment income (loss) to
average net assets 1.23% 1.10% 1.46% 1.30% 1.33%
Portfolio turnover rate (b) 117% 133% 125% 117% 85%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 51
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2021 2020 2019 2018 2017
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 35.10 $ 36.03 $ 29.07 $ 30.84 $ 28.02
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.74 0.79 0.73 0.73 0.63
Net realized and unrealized gain (loss) 7.91 (0.91) 6.96 (1.77) 2.84
------------ ------------ ------------ ------------ ------------
Total from investment operations 8.65 (0.12) 7.69 (1.04) 3.47
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.75) (0.81) (0.73) (0.73) (0.65)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 43.00 $ 35.10 $ 36.03 $ 29.07 $ 30.84
============ ============ ============ ============ ============
TOTAL RETURN (a) 24.86% (0.04)% 26.60% (3.44)% 12.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 12,954,187 $ 10,149,204 $ 9,665,219 $ 4,374,483 $ 4,194,830
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.67% 0.70% 0.71% 0.72% 0.72%
Ratio of net expenses to average net assets 0.67% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.91% 2.47% 2.36% 2.40% 2.19%
Portfolio turnover rate (b) 47% 86% 53% 58% 50%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(b) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 52
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
1. ORGANIZATION
First Trust Exchange-Traded Fund (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on August 8,
2003, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of twenty-two exchange-traded funds. This report
covers the seven funds (each a "Fund" and collectively, the "Funds") listed
below:
First Trust Dow Jones Select MicroCap Index Fund - (NYSE Arca, Inc.
("NYSE Arca") ticker "FDM")
First Trust Morningstar Dividend Leaders Index Fund - (NYSE Arca ticker
"FDL")
First Trust US Equity Opportunities ETF - (NYSE Arca ticker "FPX")
First Trust NYSE(R) Arca(R) Biotechnology Index Fund - (NYSE Arca ticker
"FBT")
First Trust Dow Jones Internet Index Fund - (NYSE Arca ticker "FDN")
First Trust Capital Strength ETF - (The Nasdaq Stock Market LLC
("Nasdaq") ticker "FTCS")
First Trust Value Line(R) Dividend Index Fund -- (NYSE Arca ticker
"FVD")
Each Fund represents a separate series of beneficial interest in the Trust.
Unlike conventional mutual funds, each Fund issues and redeems shares on a
continuous basis at net asset value ("NAV"), only in large blocks of shares
known as "Creation Units." The investment objective of each Fund is to seek
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of the following indices:
FUND INDEX
First Trust Dow Jones Select MicroCap Index Fund Dow Jones Select MicroCap Index(SM)
First Trust Morningstar Dividend Leaders Index Fund Morningstar(R) Dividend Leaders Index(SM)
First Trust US Equity Opportunities ETF IPOX(R)-100 U.S. Index
First Trust NYSE(R) Arca(R) Biotechnology Index Fund NYSE(R) Arca Biotechnology Index
First Trust Dow Jones Internet Index Fund Dow Jones Internet Composite Index(SM)
First Trust Capital Strength ETF The Capital Strength Index(SM)
First Trust Value Line(R) Dividend Index Fund Value Line(R) Dividend Index
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. Each Fund's investments are valued as
follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding Nasdaq and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Page 53
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Overnight repurchase agreements are valued at amortized cost when it
represents the best estimate of fair value.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
In addition, differences between the prices used to calculate a Fund's NAV and
the prices used by such Fund's corresponding index could result in a difference
between a Fund's performance and the performance of its underlying index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of December 31, 2021, is
included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Page 54
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
Withholding taxes and tax reclaims on foreign dividends have been provided for
in accordance with each Fund's understanding of the applicable country's tax
rules and rates.
Distributions received from a Fund's investments in real estate investment
trusts ("REITs") may be comprised of return of capital, capital gains and
income. The actual character of the amounts received during the year is not
known until after the REITs' fiscal year end. A Fund records the character of
distributions received from REITs during the year based on estimates available.
The characterization of distributions received by a Fund may be subsequently
revised based on information received from the REITs after their tax reporting
periods conclude.
C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES
Offsetting Assets and Liabilities require entities to disclose both gross and
net information about instruments and transactions eligible for offset on the
Statements of Assets and Liabilities, and disclose instruments and transactions
subject to master netting or similar agreements. These disclosure requirements
are intended to help investors and other financial statement users better assess
the effect or potential effect of offsetting arrangements on a fund's financial
position. The transactions subject to offsetting disclosures are derivative
instruments, repurchase agreements and reverse repurchase agreements, and
securities borrowing and securities lending transactions.
This disclosure, if applicable, is included within each Fund's Portfolio of
Investments under the heading "Offsetting Assets and Liabilities." For financial
reporting purposes, the Funds do not offset financial assets and financial
liabilities that are subject to master netting arrangements ("MNAs") or similar
agreements on the Statements of Assets and Liabilities. MNAs provide the right,
in the event of default (including bankruptcy and insolvency), for the
non-defaulting counterparty to liquidate the collateral and calculate the net
exposure to the defaulting party or request additional collateral.
D. SECURITIES LENDING
The Funds may lend securities representing up to 33 1/3% of the value of their
total assets to broker-dealers, banks and other institutions to generate
additional income. When a Fund loans its portfolio securities, it will receive,
at the inception of each loan, collateral equal to at least 102% (for domestic
securities) or 105% (for international securities) of the market value of the
loaned securities. The collateral amount is valued at the beginning of each
business day and is compared to the market value of the loaned securities from
the prior business day to determine if additional collateral is required. If
additional collateral is required, a request is sent to the borrower. Securities
lending involves the risk that the Fund may lose money because the borrower of
the Fund's loaned securities fails to return the securities in a timely manner
or at all. The Fund could also lose money in the event of (i) a decline in the
value of the collateral provided for the loaned securities, (ii) a decline in
the value of any investments made with cash collateral or (iii) an increase in
the value of the loaned securities if the borrower does not increase the
collateral accordingly and the borrower fails to return the securities. These
events could also trigger adverse tax consequences for the Funds.
Under the Funds' Securities Lending Agency Agreement, the securities lending
agent will generally bear the risk that a borrower may default on its obligation
to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the
Funds' securities lending agent and is responsible for executing the lending of
the portfolio securities to creditworthy borrowers with the exception of FPX.
The Bank of New York Mellon ("BNYM") acts as FPX's securities lending agent and
is responsible for executing the lending of the portfolio securities to
creditworthy borrowers. The Funds, however, will be responsible for the risks
associated with the investment of cash collateral. A Fund may lose money on its
investment of cash collateral, which may affect its ability to repay the
collateral to the borrower without the use of other Fund assets. Each Fund that
engages in securities lending receives compensation (net of any rebate and
securities lending agent fees) for lending its securities. Compensation can be
in the form of fees received from the securities lending agent or dividends or
interest earned from the investment of cash collateral. The fees received from
the securities lending agent are accrued daily. The dividend and interest earned
on the securities loaned is accounted for in the same manner as other dividend
and interest income. At December 31, 2021, only FDM, FPX and FDN had securities
in the securities lending program. During the fiscal year ended December 31,
2021, FDM, FPX, FBT and FDN participated in the securities lending program.
In the event of a default by a borrower with respect to any loan, BBH or BNYM
will exercise any and all remedies provided under the applicable borrower
agreement to make the Funds whole. These remedies include purchasing replacement
securities by applying the collateral held from the defaulting broker against
the purchase cost of the replacement securities. If, despite such efforts by BBH
and BNYM to exercise these remedies, a Fund sustains losses as a result of a
borrower's default, BBH or BNYM will indemnify the Fund by purchasing
replacement securities at its own expense, or paying the Fund an amount equal to
the market value of the replacement securities, subject to certain limitations
which are set forth in detail in the Securities Lending Agency Agreement between
the Trust on behalf of the Funds and BBH or BNYM.
Page 55
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
E. REPURCHASE AGREEMENTS
Repurchase agreements involve the purchase of securities subject to the seller's
agreement to repurchase the securities at a mutually agreed upon date and price,
under the terms of a Master Repurchase Agreement ("MRA"). During the term of a
repurchase agreement, the value of the underlying securities held as collateral
on behalf of a Fund, including accrued interest, is required to exceed the value
of the repurchase agreement, including accrued interest. The underlying
securities for all repurchase agreements are held at the Funds' custodian or
designated sub-custodians under tri-party repurchase agreements.
MRAs govern transactions between a Fund and select counterparties. The MRAs
contain provisions for, among other things, initiation, income payments, events
of default, and maintenance of collateral for repurchase agreements.
Repurchase agreements received for lending securities are collateralized by U.S.
Treasury securities. The U.S. Treasury securities are held in a joint custody
account at BBH or BNYM on behalf of the Funds participating in the securities
lending program. In the event the counterparty defaults on the repurchase
agreement, the U.S. Treasury securities can either be maintained as part of a
Fund's portfolio or sold for cash. A Fund could suffer a loss to the extent that
the proceeds from the sale of the underlying collateral held by the Fund is less
than the repurchase price and the Fund's costs associated with the delay and
enforcement of the MRA.
While the Funds may invest in repurchase agreements, any repurchase agreements
held by the Funds during the fiscal year ended December 31, 2021, were received
as collateral for lending securities.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on portfolio securities held by the Funds and
have no impact on net assets or NAV per share. Temporary differences, which
arise from recognizing certain items of income, expense and gain/loss in
different periods for financial statement and tax purposes, will reverse at some
time in the future.
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2021 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
------------------ ---------------- -----------------
First Trust Dow Jones Select MicroCap Index Fund $ 1,928,374 $ -- $ --
First Trust Morningstar Dividend Leaders Index Fund 63,399,697 -- --
First Trust US Equity Opportunities ETF 2,739,625 -- --
First Trust NYSE(R) Arca(R) Biotechnology Index Fund -- -- --
First Trust Dow Jones Internet Index Fund -- -- --
First Trust Capital Strength ETF 96,596,007 -- --
First Trust Value Line(R) Dividend Index Fund 223,826,833 -- --
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2020 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
------------------ ---------------- -----------------
First Trust Dow Jones Select MicroCap Index Fund $ 2,126,197 $ -- $ --
First Trust Morningstar Dividend Leaders Index Fund 66,635,153 -- --
First Trust US Equity Opportunities ETF 5,290,041 -- --
First Trust NYSE(R) Arca(R) Biotechnology Index Fund -- -- --
First Trust Dow Jones Internet Index Fund -- -- --
First Trust Capital Strength ETF 55,671,376 -- --
First Trust Value Line(R) Dividend Index Fund 231,083,030 -- --
Page 56
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
As of December 31, 2021, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ ---------------- -----------------
First Trust Dow Jones Select MicroCap Index Fund $ -- $ (40,305,948) $ 23,285,072
First Trust Morningstar Dividend Leaders Index Fund 443,847 (318,003,250) 190,044,491
First Trust US Equity Opportunities ETF -- (339,367,710) 343,348,716
First Trust NYSE(R) Arca(R) Biotechnology Index Fund -- (325,213,864) (88,814,716)
First Trust Dow Jones Internet Index Fund -- (441,487,423) 1,778,641,929
First Trust Capital Strength ETF 2,812,383 (326,660,331) 1,522,198,442
First Trust Value Line(R) Dividend Index Fund -- (436,542,343) 2,305,345,992
G. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of each Fund's taxable income
exceeds the distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable years ended 2018,
2019, 2020, and 2021 remain open to federal and state audit. As of December 31,
2021, management has evaluated the application of these standards to the Funds,
and has determined that no provision for income tax is required in the Funds'
financial statements for uncertain tax positions.
Each Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
Each Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At December 31, 2021, for
federal income tax purposes, each applicable Fund had a capital loss
carryforward available that is shown in the table below, to the extent provided
by regulations, to offset future capital gains. To the extent that these loss
carryforwards are used to offset future capital gains, it is probable that the
capital gains so offset will not be distributed to each applicable Fund's
shareholders.
Non-Expiring Capital
Loss Carryforwards
---------------------
First Trust Dow Jones Select MicroCap Index Fund $ 40,305,948
First Trust Morningstar Dividend Leaders Index Fund 318,003,250
First Trust US Equity Opportunities ETF 339,367,710
First Trust NYSE(R) Arca(R) Biotechnology Index Fund 325,213,864
First Trust Dow Jones Internet Index Fund 441,487,423
First Trust Capital Strength ETF 326,660,331
First Trust Value Line(R) Dividend Index Fund* 436,542,343
* $11,007,161 of First Trust Value Line(R) Dividend Index Fund's non-expiring
net capital losses is subject to loss limitation resulting from reorganization
activity. This limitation generally reduces the utilization of these losses to a
maximum of $364,521 per year.
During the taxable year ended December 31, 2021, the following Funds utilized
non-expiring capital loss carryforwards in the following amount:
Capital Loss
Carryforward Utilized
---------------------
First Trust Dow Jones Select MicroCap Index Fund $ 5,893,625
First Trust Morningstar Dividend Leaders Index Fund 44,628,469
First Trust Value Line(R) Dividend Index Fund 262,677,258
Page 57
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended December 31, 2021, the Funds had
no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended December 31, 2021, the adjustments for each Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss)
Income (Loss) on Investments Paid-in Capital
------------------ ---------------- -----------------
First Trust Dow Jones Select MicroCap Index Fund $ 54,904 $ (26,376,605) $ 26,321,701
First Trust Morningstar Dividend Leaders Index Fund -- (152,201,849) 152,201,849
First Trust US Equity Opportunities ETF 1,326,750 (367,904,669) 366,577,919
First Trust NYSE(R) Arca(R) Biotechnology Index Fund 4,455,580 (55,878,429) 51,422,849
First Trust Dow Jones Internet Index Fund 32,149,322 (2,114,501,671) 2,082,352,349
First Trust Capital Strength ETF -- (1,147,719,691) 1,147,719,691
First Trust Value Line(R) Dividend Index Fund 1,938,696 (550,352,866) 548,414,170
H. EXPENSES
Expenses that are directly related to one of the Funds are charged directly to
the respective Fund. General expenses of the Trust are allocated to all the
Funds based upon the net assets of each Fund.
First Trust has entered into licensing agreements with each of the following
"Licensors" for the respective Funds:
FUND LICENSOR
First Trust Dow Jones Select MicroCap Index Fund S&P Dow Jones Indices LLC
First Trust Morningstar Dividend Leaders Index Fund Morningstar, Inc.
First Trust US Equity Opportunities ETF IPOX(R) Schuster LLC
First Trust NYSE(R) Arca(R) Biotechnology Index Fund ICE Data Indices, LLC
First Trust Dow Jones Internet Index Fund S&P Dow Jones Indices LLC
First Trust Capital Strength ETF Nasdaq, Inc.
First Trust Value Line(R) Dividend Index Fund Value Line Publishing LLC
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The respective Funds are
required to pay licensing fees, which are shown on the Statements of Operations.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
Page 58
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
For these services, First Trust is entitled to receive monthly fees from each
Fund calculated at the following annual rates:
% of Average
Daily Net Assets
----------------
First Trust Dow Jones Select MicroCap Index Fund 0.50%
First Trust Morningstar Dividend Leaders Index Fund 0.30%
First Trust US Equity Opportunities ETF 0.40%
First Trust NYSE(R) Arca(R) Biotechnology Index Fund 0.40%
First Trust Dow Jones Internet Index Fund 0.40%
First Trust Capital Strength ETF 0.50%
First Trust Value Line(R) Dividend Index Fund 0.50%
The Trust and First Trust have entered into an Expense Reimbursement, Fee Waiver
and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to
waive fees and/or reimburse Fund expenses to the extent that the operating
expenses of each Fund (excluding interest expense, brokerage commissions and
other trading expenses, acquired fund fees and expenses, taxes and extraordinary
expenses) exceed the below amount as a percentage of average daily net assets
per year (the "Expense Cap"). The Expense Cap will be in effect until at least
April 30, 2023.
Expense Cap
----------------
First Trust Dow Jones Select MicroCap Index Fund 0.60%
First Trust Morningstar Dividend Leaders Index Fund 0.45%
First Trust US Equity Opportunities ETF 0.60%
First Trust NYSE(R) Arca(R) Biotechnology Index Fund 0.60%
First Trust Dow Jones Internet Index Fund 0.60%
First Trust Capital Strength ETF 0.65%
First Trust Value Line(R) Dividend Index Fund 0.70%
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement
are subject to recovery by First Trust for up to three years from the date the
fee or expense was incurred, but no reimbursement payment will be made by a Fund
if it results in the Fund's expenses exceeding (i) the applicable expense
limitation in place for the most recent fiscal year for which such expense
limitation was in place, (ii) the applicable expense limitation in place at the
time the fees were waived or expenses were reimbursed, or (iii) the current
expense limitation. These amounts would be included in "Expenses previously
waived or reimbursed" on the Statements of Operations.
The advisory fee waivers and expense reimbursements for the fiscal year ended
December 31, 2021 and the fees waived or expenses borne by First Trust subject
to recovery from the applicable Fund for the periods indicated were as follows:
Fees Waived or Expenses Borne by First Trust
Subject to Recovery
-------------------------------------------------
Advisory Year Year Year
Fee Expense Ended Ended Ended
Waivers Reimbursement 12/31/2019 12/31/2020 12/31/2021 Total
--------- ------------- ---------- ---------- ---------- ----------
First Trust Dow Jones Select MicroCap
Index Fund $ 139,062 $ -- $ 149,166 $ 127,387 $ 139,062 $ 415,615
First Trust Morningstar Dividend Leaders
Index Fund 131,819 -- 178,254 162,827 131,819 472,900
During the fiscal year ended December 31, 2021, First Trust recovered fees that
were previously waived from First Trust Value Line(R) Dividend Index Fund of
$255,932.
The Trust has multiple service agreements with BNYM. Under the service
agreements, BNYM performs custodial, fund accounting, certain administrative
services, and transfer agency services for each Fund. As custodian, BNYM is
responsible for custody of each Fund's assets. As fund accountant and
administrator, BNYM is responsible for maintaining the books and records of each
Fund's securities and cash. As transfer agent, BNYM is responsible for
maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank
of New York Mellon Corporation, a financial holding company.
Page 59
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairs of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee Chairs
rotate every three years. The officers and "Interested" Trustee receive no
compensation from the Trust for acting in such capacities.
4. REORGANIZATION
On January 30, 2020, the Board of Trustees of First Trust Value Line(R) 100
Exchange-Traded Fund ("FVL") and FVD approved a reorganization of FVD with FVL.
The reorganization was completed on December 14, 2020. FVD was the surviving
fund.
Under the terms of the reorganization, which was tax-free, the assets of FVL
were transferred to, and the liabilities of FVL were assumed by, FVD in exchange
for shares of FVD. The cost of the investments received from FVL was carried
forward to FVD for U.S. GAAP and tax purposes. The FVD shares were then
distributed to FVL shareholders and the separate existence of FVD ceased. The
reorganization was subject to certain conditions, including that the
reorganization was approved on November 16, 2020, by the shareholders of FVL.
When the reorganization occurred, the transactions were based on the relative
NAVs of FVL and FVD.
The following table summarizes the asset transfers and conversion ratios for the
reorganization.
Net Assets on Unrealized Accumulated Shares Acquiring Net Assets on
Acquired Shares December 11, Appreciation Net Realized Conversion (Surviving) Shares December 11,
Fund Redeemed 2020 (Depreciation) Gain (Loss) Ratio Fund Issued* 2020**
----------------------------------------------------------------------------------------------------------------------------------
FVL 1,589,982 $ 36,820,323 $ (118,448) $ (8,573,998) 0.662214 FVD 1,052,908 $10,030,756,341
* Amount includes 10 shares that were distributed cash in lieu.
** Amount reflects net assets of FVD prior to the reorganization.
The following table summarizes the operations of the Acquired Fund for the
period January 1, 2020 to December 11, 2020, and the operations of FVD, the
Acquiring (Surviving) Fund, for the fiscal year ended December 31, 2020, as
presented in the Statements of Operations and the combined Acquired and
Acquiring (Surviving) Funds' pro-forma results of operations for the fiscal year
ended December 31, 2020, assuming the acquisition had been completed on January
1, 2020.
Because the combined investment portfolios have been managed as a single
integrated portfolio since the reorganization was completed, it is not
practicable to separate the amounts of revenue and earnings of FVL that have
been included in FVD's Statement of Operations since December 11, 2020.
Net Realized and
Change in
Unrealized Net Increase
Net Investment Gain (Loss) (Decrease) from
Income on Investments Operations
--------------- ---------------- ---------------
Acquired Fund for the period January 1, 2020 to December 11, 2020
FVL $ 300,669 $ (36,518) $ 264,151
Acquiring Fund for the fiscal year ended December 31, 2020
FVD 229,162,401 (355,768,990) (126,606,589)
--------------- ---------------- ---------------
Combined Total $ 229,463,070 $ (355,805,508) $ (126,342,438)
=============== ================ ===============
Page 60
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
5. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended December 31, 2021, the cost of purchases and proceeds
from sales of investments for each Fund, excluding short-term investments and
in-kind transactions, were as follows:
Purchases Sales
--------------- ----------------
First Trust Dow Jones Select MicroCap Index Fund $ 151,425,829 $ 150,843,816
First Trust Morningstar Dividend Leaders Index Fund 942,805,851 936,013,501
First Trust US Equity Opportunities ETF 1,698,513,575 1,699,291,760
First Trust NYSE(R) Arca(R) Biotechnology Index Fund 732,799,368 737,902,246
First Trust Dow Jones Internet Index Fund 1,988,049,155 2,025,580,717
First Trust Capital Strength ETF 9,444,928,981 9,401,204,136
First Trust Value Line(R) Dividend Index Fund 5,406,139,606 5,388,778,063
For the fiscal year ended December 31, 2021, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
--------------- ----------------
First Trust Dow Jones Select MicroCap Index Fund $ 86,636,298 $ 62,269,726
First Trust Morningstar Dividend Leaders Index Fund 640,917,176 559,245,159
First Trust US Equity Opportunities ETF 990,070,036 1,145,574,219
First Trust NYSE(R) Arca(R) Biotechnology Index Fund 52,157,372 313,685,975
First Trust Dow Jones Internet Index Fund 3,348,788,042 5,123,986,490
First Trust Capital Strength ETF 7,317,538,948 6,735,390,237
First Trust Value Line(R) Dividend Index Fund 2,730,249,660 2,269,625,819
6. CREATION, REDEMPTION AND TRANSACTION FEES
Each Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with a Fund or one of the Fund's
service providers to purchase and redeem Fund shares directly with the Fund in
large blocks of shares known as "Creation Units." Prior to the start of trading
on every business day, a Fund publishes through the National Securities Clearing
Corporation ("NSCC") the "basket" of securities, cash or other assets that it
will accept in exchange for a Creation Unit of the Fund's shares. An Authorized
Participant that wishes to effectuate a creation of a Fund's shares deposits
with the Fund the "basket" of securities, cash or other assets identified by the
Fund that day, and then receives the Creation Unit of the Fund's shares in
return for those assets. After purchasing a Creation Unit, the Authorized
Participant may continue to hold the Fund's shares or sell them in the secondary
market. The redemption process is the reverse of the purchase process: the
Authorized Participant redeems a Creation Unit of a Fund's shares for a basket
of securities, cash or other assets. The combination of the creation and
redemption process with secondary market trading in a Fund's shares and
underlying securities provides arbitrage opportunities that are designed to help
keep the market price of a Fund's shares at or close to the NAV per share of the
Fund.
Each Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various facts-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of a Fund times the number of shares in
a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
Each Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of a Fund times the number
of shares in a Creation Unit, minus the fees described above and, if applicable,
any operational processing and brokerage costs, transfer fees, stamp taxes and
part or all of the spread between the expected bid and offer side of the market
related to the securities comprising the redemption basket. Investors who use
the services of a broker or other such intermediary in addition to an Authorized
Participant to effect a redemption of a Creation Unit may also be assessed an
amount to cover the cost of such services. The redemption fee charged by a Fund
will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no
more than 2% of the value of the shares redeemed.
Page 61
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021
7. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before April 30, 2023.
8. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
Page 62
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First
Trust Dow Jones Select MicroCap Index Fund, First Trust Morningstar Dividend
Leaders Index Fund, First Trust US Equity Opportunities ETF, First Trust NYSE(R)
Arca(R) Biotechnology Index Fund, First Trust Dow Jones Internet Index Fund,
First Trust Capital Strength ETF, and First Trust Value Line(R) Dividend Index
Fund (the "Funds"), each a series of First Trust Exchange-Traded Fund, including
the portfolios of investments, as of December 31, 2021, the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, the financial highlights for
each of the five years in the period then ended, and the related notes. In our
opinion, the financial statements and financial highlights present fairly, in
all material respects, the financial position of each of the Funds as of
December 31, 2021, and the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended in conformity with accounting principles generally accepted in the
United States of America.
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Funds' internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2021, by correspondence with
the custodian and brokers; when replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 23, 2022
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 63
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
each Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal
quarter within 60 days after the end of the relevant fiscal quarter on Form
N-PORT. Portfolio holdings information for the third month of each fiscal
quarter will be publicly available on the SEC's website at www.sec.gov. Each
Fund's complete schedule of portfolio holdings for the second and fourth
quarters of each fiscal year is included in the semi-annual and annual reports
to shareholders, respectively, and is filed with the SEC on Form N-CSR. The
semi-annual and annual report for each Fund is available to investors within 60
days after the period to which it relates. Each Fund's Forms N-PORT and Forms
N-CSR are available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable year ended December 31, 2021, the following percentages of
income dividends paid by the Funds qualify for the dividends received deduction
available to corporations:
Dividends Received Deduction
----------------------------
First Trust Dow Jones Select MicroCap Index Fund 100.00%
First Trust Morningstar Dividend Leaders Index Fund 100.00%
First Trust US Equity Opportunities ETF 100.00%
First Trust NYSE(R) Arca(R) Biotechnology Index Fund 0.00%
First Trust Dow Jones Internet Index Fund 0.00%
First Trust Capital Strength ETF 100.00%
First Trust Value Line(R) Dividend Index Fund 100.00%
For the taxable year ended December 31, 2021, the following percentages of
income dividends paid by the Funds are hereby designated as qualified dividend
income:
Qualified Dividend Income
----------------------------
First Trust Dow Jones Select MicroCap Index Fund 100.00%
First Trust Morningstar Dividend Leaders Index Fund 100.00%
First Trust US Equity Opportunities ETF 100.00%
First Trust NYSE(R) Arca(R) Biotechnology Index Fund 0.00%
First Trust Dow Jones Internet Index Fund 0.00%
First Trust Capital Strength ETF 100.00%
First Trust Value Line(R) Dividend Index Fund 100.00%
A portion of each of the Funds' 2021 ordinary dividends (including short-term
capital gains) paid to its shareholders during the fiscal year ended December
31, 2021, may be eligible for the Qualified Business Income Deduction (QBI)
under Internal Revenue Code Section 199A for the aggregate dividends each Fund
received from the underlying Real Estate Investment Trusts (REITs) these Funds
invest in.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
Page 64
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
CONCENTRATION RISK. To the extent that a fund is able to invest a significant
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
more broadly diversified.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
Page 65
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. As a result, such a fund may be included in one or
more index-tracking exchange-traded funds or mutual funds. Being a component
security of such a vehicle could greatly affect the trading activity involving a
fund, the size of the fund and the market volatility of the fund. Inclusion in
an index could increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 2021. The unavailability or replacement of LIBOR may affect the
value, liquidity or return on certain fund investments and may result in costs
incurred in connection with closing out positions and entering into new trades.
Any potential effects of the transition away from LIBOR on the fund or on
certain instruments in which the fund invests can be difficult to ascertain, and
they may vary depending on a variety of factors, and they could result in losses
to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. While the development of
vaccines has slowed the spread of the virus and allowed for the resumption of
"reasonably" normal business activity in the United States, many countries
continue to impose lockdown measures in an attempt to slow the spread.
Additionally, there is no guarantee that vaccines will be effective against
emerging variants of the disease.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; different legal or accounting standards; and less government
supervision and regulation of exchanges in foreign countries. Investments in
non-U.S. securities may involve higher costs than investments in U.S.
securities, including higher transaction and custody costs, as well as
additional taxes imposed by non-U.S. governments. These risks may be heightened
for securities of companies located, or with significant operations, in emerging
market countries.
Page 66
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
REMUNERATION
First Trust Advisors L.P. ("First Trust") is authorised and regulated by the
U.S. Securities and Exchange Commission and is entitled to market shares of
certain First Trust Exchange-Traded Fund funds it manages (the "Funds") in
certain member states in the European Economic Area in accordance with the
cooperation arrangements in Article 42 of the Alternative Investment Fund
Managers Directive (the "Directive"). First Trust is required under the
Directive to make disclosures in respect of remuneration. The following
disclosures are made in line with First Trust's interpretation of currently
available regulatory guidance on remuneration disclosures.
During the year ended December 31, 2021, the amount of remuneration paid (or to
be paid) by First Trust Advisors L.P. in respect of the Funds is $18,874,484.
This figure is comprised of $726,302 paid (or to be paid) in fixed compensation
and $18,148,182 paid (or to be paid) in variable compensation. There were a
total of 24 beneficiaries of the remuneration described above. Those amounts
include $9,692,694 paid (or to be paid) to senior management of First Trust
Advisors L.P. and $9,181,790 paid (or to be paid) to other employees whose
professional activities have a material impact on the risk profiles of First
Trust Advisors L.P. or the Funds (collectively, "Code Staff").
Code Staff included in the aggregated figures disclosed above are rewarded in
line with First Trust's remuneration policy (the "Remuneration Policy") which is
determined and implemented by First Trust's senior management. The Remuneration
Policy reflects First Trust's ethos of good governance and encapsulates the
following principal objectives:
i. to provide a clear link between remuneration and performance of
First Trust and to avoid rewarding for failure;
ii. to promote sound and effective risk management consistent with the
risk profiles of the Funds managed by First Trust; and
iii. to remunerate staff in line with the business strategy, objectives,
values and interests of First Trust and the Funds managed by First
Trust in a manner that avoids conflicts of interest.
First Trust assesses various risk factors which it is exposed to when
considering and implementing remuneration for Code Staff and considers whether
any potential award to such person(s) would give rise to a conflict of interest.
First Trust does not reward failure, or consider the taking of risk or failure
to take risk in its remuneration of Code Staff.
First Trust assesses performance for the purposes of determining payments in
respect of performance-related remuneration of Code Staff by reference to a
broad range of measures including (i) individual performance (using financial
and non-financial criteria), and (ii) the overall performance of First Trust.
Remuneration is not based upon the performance of the Funds.
The elements of remuneration are balanced between fixed and variable and the
senior management sets fixed salaries at a level sufficient to ensure that
variable remuneration incentivises and rewards strong individual performance but
does not encourage excessive risk taking.
No individual is involved in setting his or her own remuneration.
Page 67
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
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, Officer, Wheaton Orthopedics; 216 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 216 Director of ADM Investor
(1957) (Futures Commission Merchant) Services, Inc., ADM
o Since Inception Investor Services
International, Futures
Industry Association,
and National Futures
Association
Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate Aurora 216 Director and Board Chair
(1964) Health and President, Advocate Aurora of Advocate Home Health
Services, Advocate Home
o Since 2021 Continuing Health Division (Integrated Care Products and
Healthcare System) Advocate Hospice;
Director and Board Chair
of Aurora At Home
(since 2018); Director
of Advocate
Physician Partners
Accountable Care
Organization; Director
and Board Chair of
RML Long Term
Acute Care Hospitals;
and Director of Senior
Helpers (since 2021)
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 216 Director of Trust
(1956) and Management Consulting) Company of Illinois
o Since Inception
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 216 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust
Chairman of the Board Advisors L.P. and First Trust Portfolios 216 None
(1955) L.P., Chairman of the Board of
o Since Inception Directors, BondWave LLC (Software
Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
-----------------------------
(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 68
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (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 (January 2016 to Present), Controller (January 2011
o Since January 2016 to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer (January
2016 to Present), BondWave LLC (Software
Development Company) and Stonebridge Advisors
LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First
(1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel,
o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and First
(1970) Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Chief Compliance
Officer Since
January 2011
o Assistant Secretary
Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1966) First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 69
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2021 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
professional or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2021
Page 70
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]