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Document/Exhibit Description Pages Size 1: N-CSR Annual Report to Shareholders HTML 1.36M 4: EX-99.906 CERT Section 906 Certifications HTML 7K 3: EX-99.CERT Section 302 Certifications HTML 19K 2: EX-99.CODE ETH Code of Ethics HTML 15K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21774
First Trust Exchange-Traded Fund
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 765-8000
Date of fiscal year end: December 31
Date of reporting period: December 31, 2022
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Report to Stockholders.
| (a) | The registrant's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: |
FIRST TRUST First Trust Exchange-Traded Fund 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, 2022
-------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2022 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)................ 25 First Trust US Equity Opportunities ETF (FPX)............................ 27 First Trust NYSE(R) Arca(R) Biotechnology Index Fund (FBT)............... 30 First Trust Dow Jones Internet Index Fund (FDN).......................... 31 First Trust Capital Strength ETF (FTCS).................................. 33 First Trust Value Line(R) Dividend Index Fund (FVD)...................... 35 Statements of Assets and Liabilities........................................ 38 Statements of Operations.................................................... 40 Statements of Changes in Net Assets......................................... 42 Financial Highlights........................................................ 45 Notes to Financial Statements............................................... 49 Report of Independent Registered Public Accounting Firm..................... 58 Additional Information...................................................... 59 Board of Trustees and Officers.............................................. 64 Privacy Policy.............................................................. 66
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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, 2022 Dear Shareholders: First Trust is pleased to provide you with the annual report for certain funds in the First Trust Exchange-Traded Fund (the "Funds"), which contains detailed information about the Funds for the twelve months ended December 31, 2022. The past year was filled with challenges, several of which surely tested the resolve of even the most seasoned investors. The year began with the same headwinds that existed at the end of 2021, namely: stubbornly high inflation and rising interest rates. When Russia invaded Ukraine in late February 2022, we added war, geopolitical tension, and potential food and energy shortages to the list. Considering the bleak backdrop at the start of the year, it probably does not surprise you to read that with a total return of -18.11%, 2022 was the worst year for the S&P 500(R) Index since 2008. Even the bond market struggled to provide a haven to weary investors. The Bloomberg U.S. Aggregate Bond Index posted a total return of -13.01% for the year; its worst total return in 45 years. A common topic of discussion in 2022 was whether central banks around the world had tightened monetary policy enough to quell inflation without causing excess damage to their economies. In the U.S., the Federal Reserve (the "Fed") described this as a "soft landing," stating it was their intent to keep the labor market strong but to increase interest rates enough to bring inflation down to 2.0%. True to their word, over the course of seven interest rate hikes, the Fed increased the Federal Funds target rate (upper bound) from 0.25% (where it stood in March 2022) to 4.50% as of December 2022. This is the highest the Federal Funds rate has been since 2008. The economic impact of the Fed's tighter monetary policy quickly became evident. Excluding the economic contraction from COVID-19 in 2020, the U.S. experienced its first decline in the gross domestic product ("GDP") growth rate since March 2014. Data from the U.S. Bureau of Economic Analysis indicates that annualized real GDP growth rates over the first three quarters of 2022 were -1.6%, -0.6%, and 3.2%, respectively. Thankfully, inflation, as measured by the trailing 12-month rate on the Consumer Price Index ("CPI"), appears to be responding to the Fed's tightening. After peaking at 9.1% in June 2022, the CPI rate fell to 6.5% at the end of December 2022. For comparative purposes, the CPI rate has averaged 2.5% over the past 30 years. Job creation has provided a respite from dreary economic data in recent months, but that could quickly change. Nearly 125,000 employees have lost their jobs since June 2022 as more than 120 U.S. companies announced layoffs, according to Forbes. The jury is still out on whether the Fed will be able to pull off a soft landing, but the job market will tell the tale, in my opinion. Since 1928, the S&P 500(R) Index has only fallen for two consecutive years on four occasions: The Great Depression, World War II, the oil crisis of the 1970s and the burst of the dot-com bubble in the early 2000s. As we enter 2023, the U.S. economy has significant obstacles to overcome to avoid a recession and another negative year. We will be watching and reporting on what transpires. Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Funds again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 2
-------------------------------------------------------------------------------- MARKET OVERVIEW -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2022 (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 The Federal Reserve (the "Fed") remained steadfast in its battle with stubbornly high inflation in 2022. The Federal Funds target rate (upper bound), which stood at a mere 0.25% in January 2022 closed the year at 4.50%, its highest level in over a decade. Fortunately, it appears that inflation, as measured by the Consumer Price Index ("CPI") is responding to the Fed's tightening. After peaking at 9.1% on a trailing 12-month basis in June 2022, the CPI fell to 6.5% in December 2022. While we were glad to see a decline in the CPI, it still stands significantly higher than the Fed's stated goal of 2.0%, suggesting that further action by the Fed may be warranted, in my opinion. The global growth forecast from the International Monetary Fund ("IMF") released in October 2022 projected a 2.7% real gross domestic product ("GDP") growth rate for 2023, down from 3.2% in 2022. The IMF is calling for a 1.0% growth rate for the U.S. GDP in 2023, down from its 1.6% estimate for 2022. As has been the case for many years, Emerging Market and Developing Economies are expected to grow faster than Advanced Economies. Their 2023 growth rate estimates are 3.7% and 1.1%, respectively. Investors continued to funnel capital into exchange-traded funds ("ETFs") and related exchange-traded products ("ETPs") in 2022 despite the sharp sell-off in the markets. ETFGI, an independent research and consultancy firm, reported that total assets invested in ETFs/ETPs listed in the U.S. stood at $6.51 trillion as of year-end, down 9.8% from $7.21 trillion at the end of 2021, according to its own release. Net inflows to ETFs/ETPs listed in the U.S. stood at $607.23 billion in 2022, their second highest level on record, surpassed only by the $919.78 billion of inflows in 2021. U.S. STOCKS AND BONDS In 2022, three of the major U.S. stock indices posted substantial double-digit losses. The S&P 500(R) Index, the S&P MidCap 400(R) Index and the S&P SmallCap 600(R) Index posted total returns of -18.11%, -13.06%, and -16.10%, respectively, according to Bloomberg. Of the 11 major sectors that comprise the S&P 500(R) Index, only the Energy and Utilities sectors posted positive total returns, up 65.72% and 1.57%, respectively. The two worst-performing sectors were the Communication Services sector, down 39.89% and the Consumer Discretionary sector, down 37.03%. Bloomberg's consensus year-over-year earnings growth rate estimates for the S&P 500(R) Index for 2023 and 2024 were 1.97% and 9.87%, respectively, as of January 6, 2023. The yield on the benchmark 10-Year Treasury Note ("T-Note") closed trading on December 30, 2022, at 3.88%, according to Bloomberg. The 3.88% yield stood 173 basis points ("bps") above its 2.15% average for the 10-year period ended December 30, 2022. Its yield rose 237 bps in 2022. Most bond investors likely know that as yields increase, prices fall. As indicated by the sizeable increase in the yield on the 10-Year T-Note, bond investors endured a challenging year of declines in 2022. In the U.S. bond market, all the major bond groups posted negative total returns in 2022. The top performing major debt group we track was intermediate Treasuries. The Bloomberg U.S. Treasury Intermediate Index posted a total return of -7.77%. FOREIGN STOCKS AND BONDS The U.S. dollar appreciated by 8.21% against a basket of major currencies in 2022, as measured by the U.S. Dollar Index ("DXY"), according to Bloomberg. The DXY Index closed 2022 at a reading of 103.52, significantly above its 20-year average of 88.53. The stronger U.S. dollar likely had a negative influence on the returns of unhedged foreign securities held by U.S. investors. The Bloomberg EM Hard Currency Aggregate Index of emerging markets debt posted a total return of -16.60% (USD), while the Bloomberg Global Aggregate Index of higher quality debt declined 16.25% (USD). With respect to equities, the MSCI Emerging Markets Index of stocks posted a total return of -20.09% (USD), while the MSCI World ex USA Index declined by 14.29% (USD) on a total return basis, according to Bloomberg. Page 3
-------------------------------------------------------------------------------- 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. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (9/27/05) Ended Ended (9/27/05) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -11.56% 4.85% 10.71% 7.24% 26.74% 176.55% 234.38% Market Price -11.68% 4.78% 10.71% 7.24% 26.28% 176.50% 234.05% INDEX PERFORMANCE Dow Jones Select MicroCap Index(SM) -11.03% 5.65% 11.45% 7.98% 31.61% 195.79% 276.48% Russell 2000(R) Index -20.44% 4.13% 9.01% 7.29% 22.41% 136.96% 237.07% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 18.) PERFORMANCE REVIEW The Fund generated a net asset value ("NAV") return of -11.56% during the 12-month period covered by this report. During the same period, the Russell 2000(R) Index (the "Benchmark") generated a return of -20.44%. The Fund allocated 34.0% to the Financials sector, which was noticeably more than the allocation to any other sector. The sector with the second highest weight was the Industrials sector, with an allocation of only 15.3%. The Financials sector contributed -3.6% to the Fund's return. The sector with the greatest contribution to the Fund's return was the Energy sector. Investments in Energy securities received an allocation of 4.4% and contributed 1.5% to the Fund's return. The most negative contribution to the Fund's return came from the Consumer Discretionary sector. These investments carried an average weight of 14.8% and contributed -5.7% to the overall Fund return. ----------------------------- 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 31.8% Consumer Discretionary 18.8 Industrials 16.4 Energy 8.4 Information Technology 6.8 Materials 4.6 Health Care 4.2 Real Estate 3.7 Communication Services 2.4 Consumer Staples 2.1 Utilities 0.8 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Sitio Royalties Corp., Class A 3.6% Modine Manufacturing Co. 1.8 Titan Machinery, Inc. 1.4 RCI Hospitality Holdings, Inc. 1.4 Heritage Commerce Corp. 1.3 Collegium Pharmaceutical, Inc. 1.3 First Bancshares (The), Inc. 1.3 John B Sanfilippo & Son, Inc. 1.2 SunCoke Energy, Inc. 1.2 TrustCo Bank Corp. 1.2 ------- Total 15.7% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust Dow Jones Select MicroCap Dow Jones Select Russell 2000(R) Index Fund MicroCap Index(SM) Index <S> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 06/13 11,624 11,659 11,586 12/13 14,331 14,425 13,882 06/14 14,235 14,373 14,325 12/14 14,772 14,954 14,561 06/15 15,540 15,776 15,253 12/15 14,855 15,134 13,918 06/16 15,226 15,555 14,227 12/16 20,121 20,610 16,885 06/17 20,246 20,785 17,728 12/17 21,821 22,473 19,359 06/18 23,595 24,370 20,842 12/18 19,047 19,734 17,225 06/19 21,270 22,114 20,150 12/19 24,240 25,265 21,622 06/20 18,751 19,581 18,816 12/20 23,209 24,522 25,941 06/21 29,991 31,781 30,491 12/21 31,272 33,252 29,787 06/22 25,928 27,629 22,808 12/22 27,655 29,579 23,696 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 5
-------------------------------------------------------------------------------- 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. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (3/9/06) Ended Ended (3/9/06) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV 6.71% 8.30% 11.10% 7.73% 48.96% 186.62% 249.80% Market Price 6.68% 8.27% 11.10% 7.73% 48.81% 186.61% 249.69% INDEX PERFORMANCE Morningstar(R) Dividend Leaders Index(SM) 7.08% 8.86% 11.67% 8.27% 52.86% 201.61% 280.56% S&P 500(R) Index -18.11% 9.42% 12.56% 8.96% 56.88% 226.54% 323.35% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 18.) PERFORMANCE REVIEW The Fund generated a NAV return of 6.71% 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 -18.11%. The largest sector allocation was to the Energy sector, with an average portfolio weight of 16.4%. This sector also contributed the most to the Fund's return, contributing 6.8%. The most negative contribution to the Fund's return came from the Financials sector. This sector had an average weight of 14.1% and contributed -1.1% to the Fund's return. ----------------------------- 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 ----------------------------------------------------------- Energy 21.6% Financials 18.3 Consumer Staples 13.5 Health Care 10.1 Information Technology 9.4 Communication Services 9.2 Utilities 7.8 Industrials 6.0 Consumer Discretionary 2.6 Materials 1.5 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Exxon Mobil Corp. 10.6% Verizon Communications, Inc. 8.4 AbbVie, Inc. 7.1 Philip Morris International, Inc. 5.7 Altria Group, Inc. 4.8 Cisco Systems, Inc. 4.5 International Business Machines Corp. 4.1 Pioneer Natural Resources Co. 3.9 United Parcel Service, Inc., Class B 3.2 Citigroup, Inc. 2.9 ------- Total 55.2% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust Morningstar Dividend Leaders Morningstar(R) Dividend S&P 500(R) Index Fund Leaders Index(SM) Index <S> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 06/13 11,396 11,427 11,382 12/13 12,272 12,337 13,238 06/14 13,535 13,646 14,183 12/14 13,863 14,009 15,051 06/15 13,443 13,614 15,236 12/15 14,242 14,454 15,259 06/16 16,338 16,631 15,845 12/16 17,192 17,537 17,084 06/17 17,694 18,098 18,680 12/17 19,244 19,732 20,813 06/18 18,605 19,126 21,365 12/18 18,114 18,652 19,901 06/19 20,701 21,381 23,591 12/19 22,527 23,339 26,167 06/20 18,035 18,734 25,361 12/20 21,532 22,436 30,981 06/21 24,559 25,674 35,706 12/21 26,863 28,170 39,873 06/22 26,970 28,333 31,914 12/22 28,662 30,161 32,654 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 7
-------------------------------------------------------------------------------- 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 typically largest and 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. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (4/12/06) Ended Ended (4/12/06) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -35.05% 3.56% 10.57% 9.38% 19.12% 173.09% 347.68% Market Price -35.15% 3.51% 10.50% 9.37% 18.83% 171.45% 347.01% INDEX PERFORMANCE IPOX(R)-100 U.S. Index -34.76% 4.03% 11.13% 9.99% 21.85% 187.35% 391.10% S&P 500(R) Index -18.11% 9.42% 12.56% 8.92% 56.88% 226.54% 317.57% Russell 3000(R) Index -19.21% 8.79% 12.13% 8.72% 52.37% 214.28% 304.54% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 18.) PERFORMANCE REVIEW The Fund generated a NAV return of -35.05% during the 12-month period covered by this report. During the same period, the Russell 3000(R) Index (the "Benchmark") generated a return of -19.21%. The largest sector allocation was to the Information Technology with 24.5% average weight. This allocation generated a -17.6% contribution to the Fund's return. This was by far the Fund's largest sector weight, with the second most being allocated to the Health Care sector at a 15.2% weight. The allocation to the Health Care sector generated a -2.3% contribution to the Fund's return. The greatest contribution to the Fund's return came from the Energy sector, which contributed 1.5%. ----------------------------- 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 23.6% Health Care 21.8 Industrials 14.6 Utilities 8.8 Materials 7.2 Consumer Discretionary 6.5 Financials 6.0 Consumer Staples 3.9 Communication Services 3.5 Energy 2.8 Real Estate 1.3 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Corteva, Inc. 6.5% Block, Inc. 5.5 Sempra Energy 4.9 Regeneron Pharmaceuticals, Inc. 4.6 United Therapeutics Corp. 4.2 ON Semiconductor Corp. 3.6 Constellation Energy Corp. 3.1 Gitlab, Inc., Class A 2.7 Academy Sports & Outdoors, Inc. 2.6 Eli Lilly & Co. 2.6 ------- Total 40.3% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust US Equity IPOX(R)-100 S&P 500(R) Russell 3000(R) Opportunities ETF U.S. Index Index Index <S> <C> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 $10,000 06/13 11,679 11,708 11,382 11,406 12/13 14,798 14,888 13,238 13,355 06/14 15,776 15,923 14,183 14,282 12/14 16,560 16,764 15,051 15,032 06/15 17,991 18,266 15,236 15,324 12/15 16,922 17,232 15,259 15,105 06/16 16,812 17,160 15,845 15,652 12/16 18,056 18,480 17,084 17,028 06/17 19,986 20,505 18,680 18,549 12/17 22,924 23,581 20,813 20,626 06/18 24,123 24,866 21,365 21,290 12/18 21,040 21,745 19,901 19,544 06/19 26,470 27,429 23,591 23,201 12/19 27,444 28,477 26,167 25,607 06/20 28,739 29,870 25,361 24,716 12/20 40,554 42,272 30,981 30,954 06/21 43,705 45,666 35,706 35,631 12/21 42,040 44,040 39,873 38,898 06/22 28,251 29,665 31,914 30,691 12/22 27,309 28,735 32,654 31,428 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 9
-------------------------------------------------------------------------------- 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(R) 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. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (6/19/06) Ended Ended (6/19/06) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -4.60% 4.41% 12.89% 13.26% 24.09% 236.08% 683.07% Market Price -4.67% 4.40% 12.90% 13.25% 24.04% 236.51% 682.71% INDEX PERFORMANCE NYSE(R) Arca(R) Biotechnology Index -4.04% 4.89% 13.39% 13.84% 26.97% 251.21% 752.37% S&P Composite 1500(R) Health Care Index -3.31% 12.27% 15.09% 11.80% 78.33% 307.71% 532.25% Nasdaq(R) Biotechnology Index -10.12% 5.32% 11.95% 11.69% 29.59% 209.08% 522.16% S&P 500(R) Index -18.11% 9.42% 12.56% 9.26% 56.88% 226.54% 332.21% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 18.) PERFORMANCE REVIEW The Fund generated a NAV return of -4.60% 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 -3.31%. The Fund was highly concentrated in the Biotechnology industry, which received a 79.0% allocation in the Fund during the period covered by this report. The Biotechnology investments in the Fund contributed 5.4% to the Fund's overall return, by far the most significant driver of return. The Fund's only other significant allocation was 19.6% allocation to the Life Sciences Tools & Services industry, which contributed -6.0% to the Fund's return. ----------------------------- 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(R) 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 80.1% Life Sciences Tools & Services 19.9 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Exact Sciences Corp. 4.5% Moderna, Inc. 4.1 Grifols S.A., ADR 4.1 United Therapeutics Corp. 3.8 Gilead Sciences, Inc. 3.7 Mettler-Toledo International, Inc. 3.6 Ultragenyx Pharmaceutical, Inc. 3.6 Alnylam Pharmaceuticals, Inc. 3.5 QIAGEN N.V. 3.5 Alkermes PLC 3.5 ------- Total 37.9% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust NYSE(R) NYSE(R) Arca(R) Nasdaq(R) S&P Composite Arca(R) Biotechnology Biotechnology Biotechnology S&P 500(R) 1500(R) Health Index Fund Index Index Index Care Index <S> <C> <C> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 $10,000 $10,000 06/13 12,623 12,651 12,688 11,382 12,061 12/13 15,010 15,080 16,597 13,238 14,219 06/14 17,877 17,980 18,839 14,183 15,669 12/14 22,160 22,306 22,307 15,051 17,744 06/15 26,964 27,187 27,168 15,236 19,554 12/15 24,588 24,846 24,932 15,259 19,059 06/16 19,469 19,733 19,011 15,845 19,170 12/16 19,769 20,088 19,610 17,084 18,668 06/17 24,786 25,249 23,010 18,680 21,743 12/17 27,081 27,660 23,852 20,813 22,863 06/18 30,461 31,176 24,601 21,365 23,613 12/18 27,025 27,734 21,737 19,901 24,397 06/19 30,625 31,511 24,552 23,591 26,446 12/19 32,371 33,399 27,196 26,167 29,487 06/20 36,476 37,734 30,968 25,361 29,304 12/20 36,556 37,930 34,384 30,981 33,779 06/21 37,558 39,083 37,324 35,706 37,768 12/21 35,226 36,593 34,390 39,873 42,172 06/22 29,495 30,727 27,405 31,914 38,305 12/22 33,608 35,121 30,908 32,654 40,771 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 11
-------------------------------------------------------------------------------- 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 the 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. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (6/19/06) Ended Ended (6/19/06) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -45.51% 2.32% 12.18% 11.65% 12.15% 215.69% 518.41% Market Price -45.54% 2.31% 12.18% 11.65% 12.09% 215.61% 518.26% INDEX PERFORMANCE Dow Jones Internet Composite Index(SM) -45.24% 2.89% 12.78% 12.25% 15.29% 232.86% 576.24% S&P Composite 1500(R) Information Technology Index -27.91% 15.47% 18.02% 13.72% 105.27% 424.14% 737.86% S&P 500(R) Index -18.11% 9.42% 12.56% 9.26% 56.88% 226.54% 332.21% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 18.) PERFORMANCE REVIEW The Fund generated a NAV return of -45.51% during the 12-month period covered by this report. During the same period, the S&P Composite 1500(R) Information Technology Index (the "Benchmark") generated a return of -27.91%. The largest sector allocation was to the Information Technology sector with 46.1% average weight. This allocation caused a -18.0% contribution to the Fund's return, which was the most significant contribution to the Fund's return. This was the largest weight in the Fund, with the second most being the Communication Services sector, which had an average weight of 30.0% and contributed -15.2% to the Fund's return over the period. No sector allocation caused significant positive return to the Fund during the period covered by this report. ----------------------------- 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 48.5% Communication Services 27.3 Consumer Discretionary 18.9 Health Care 3.4 Real Estate 1.9 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Amazon.com, Inc. 8.4% Meta Platforms, Inc., Class A 6.5 Cisco Systems, Inc. 5.5 Alphabet, Inc., Class A 4.9 Salesforce, Inc. 4.7 Netflix, Inc. 4.6 Alphabet, Inc., Class C 4.4 PayPal Holdings, Inc. 3.8 Snowflake, Inc., Class A 3.1 Workday, Inc., Class A 2.8 ------- Total 48.7% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust Dow Jones S&P Composite 1500(R) Internet Dow Jones Internet Composite S&P 500(R) Information Technology Index Fund Index(SM) Index Index <S> <C> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 $10,000 06/13 11,628 11,660 11,382 10,673 12/13 15,340 15,435 13,238 12,899 06/14 15,266 15,388 14,183 13,989 12/14 15,712 15,866 15,051 15,343 06/15 17,219 17,435 15,236 15,542 12/15 19,132 19,420 15,259 16,201 06/16 18,485 18,810 15,845 16,211 12/16 20,454 20,866 17,084 18,597 06/17 24,283 24,839 18,680 21,688 12/17 28,149 28,868 20,813 25,531 06/18 35,285 36,276 21,365 28,222 12/18 29,901 30,824 19,901 25,341 06/19 36,832 38,123 23,591 32,183 12/19 35,661 37,014 26,167 37,947 06/20 43,710 45,512 25,361 43,153 12/20 54,436 56,817 30,981 54,351 06/21 62,759 65,658 35,706 61,775 12/21 57,943 60,783 39,877 72,715 06/22 32,564 34,257 31,918 53,198 12/22 31,569 33,286 32,654 52,414 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 13
-------------------------------------------------------------------------------- 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. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (7/6/06) Ended Ended (7/6/06) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -10.28% 9.31% 13.08% 9.91% 56.09% 241.86% 374.96% Market Price -10.27% 9.27% 13.09% 9.91% 55.81% 242.03% 375.02% INDEX PERFORMANCE The Capital Strength Index(SM)* -9.77% 9.99% N/A N/A 60.95% N/A N/A S&P 500(R) Index -18.11% 9.42% 12.56% 9.10% 56.88% 226.54% 320.27% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> * 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 -10.28% 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 -18.11%. The Fund allocated 27.7% to the Health Care sector, which was the largest sector weight in the Fund. The second highest weight was the Industrials sector, which had an average weight of 21.9%. These sectors contributed -0.3% each to the Fund's overall return. The most significant contribution to the Fund's return came from the allocation to the Information Technology sector. These investments received an allocation of 13.3% and contributed -3.5% to the Fund's return. No sector allocation has a significantly positive contribution to the Fund's return during the period covered by this report. ----------------------------- 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 ----------------------------------------------------------- Health Care 32.0% Industrials 20.2 Information Technology 17.5 Consumer Staples 12.1 Financials 12.1 Real Estate 3.7 Materials 2.4 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Air Products and Chemicals, Inc. 2.4% Hologic, Inc. 2.2 Procter & Gamble (The) Co. 2.2 Honeywell International, Inc. 2.2 Trane Technologies PLC 2.2 Merck & Co., Inc. 2.2 Monster Beverage Corp. 2.2 Emerson Electric Co. 2.2 Abbott Laboratories 2.2 Moody's Corp. 2.1 ------- Total 22.1% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust Capital S&P 500(R) Strength ETF Index <S> <C> <C> 12/12 $10,000 $10,000 06/13 11,665 11,382 12/13 13,590 13,238 06/14 14,348 14,183 12/14 15,691 15,051 06/15 15,664 15,236 12/15 15,949 15,259 06/16 16,801 15,845 12/16 17,317 17,084 06/17 19,463 18,680 12/17 21,904 20,813 06/18 22,086 21,365 12/18 21,006 19,901 06/19 24,697 23,591 12/19 26,625 26,167 06/20 25,938 25,362 12/20 30,099 30,985 06/21 33,879 35,708 12/21 38,100 39,877 06/22 31,695 31,918 12/22 34,186 32,654 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does 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. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (8/19/03) Ended Ended (8/19/03) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -5.24% 7.65% 11.23% 9.47% 44.59% 189.85% 476.39% Market Price -5.26% 7.64% 11.23% 9.47% 44.49% 189.84% 476.38% INDEX PERFORMANCE Value Line(R) Dividend Index* -4.60% 8.52% 12.13% N/A 50.52% 214.13% N/A S&P 500(R) Index -18.11% 9.42% 12.56% 9.33% 56.88% 226.54% 462.66% Dow Jones U.S. Select Dividend Index(SM)* 2.31% 8.38% 11.92% N/A 49.51% 208.30% N/A ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> 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, 2022) were 256.35% and 258.05% at NAV and Market Price, respectively. That compares to an Index return of 304.55% for the same period. The average annual total returns for the period from the reorganization date (December 15, 2006) through period end (December 31, 2022) were 8.24% and 8.27% at NAV and Market Price, respectively. That compares to an Index return of 9.10% for the same period. NAV and Market Price returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively. Prior to December 15, 2006, NAV and Market Price 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 Price 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 -5.24% 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 -18.11%. The Fund allocated 19.8% to the Utilities sector, which was the largest sector weight in the Fund. This allocation contributed 0.4% to the Fund's return. Other notable sector weights included the Information Technology sector, the Industrials sector, the Financials sector, and the Consumer Staples sector, all of which had 10-16% average weight over the period. The largest contributor to the Fund's return was the Information Technology sector, which contributed -1.75%. The Consumer Staples sector contributed most positively to the Fund's return at 0.8%. ----------------------------- 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 21.8% Consumer Staples 15.9 Industrials 13.3 Financials 12.1 Information Technology 11.0 Health Care 9.2 Consumer Discretionary 5.2 Materials 4.6 Real Estate 3.4 Communication Services 2.9 Energy 0.6 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Rogers Communications, Inc., Class B 0.6% Tractor Supply Co. 0.6 Verizon Communications, Inc. 0.6 Open Text Corp. 0.6 JPMorgan Chase & Co. 0.6 Cognizant Technology Solutions Corp., Class A 0.6 Bank of New York Mellon (The) Corp. 0.6 Amdocs Ltd. 0.6 Raytheon Technologies Corp. 0.6 Baxter International, Inc. 0.6 ------- Total 6.0% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 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) <S> <C> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 $10,000 06/13 11,389 11,439 11,382 11,385 12/13 12,657 12,759 13,238 12,906 06/14 13,736 13,910 14,183 14,179 12/14 14,676 14,918 15,051 14,888 06/15 14,371 14,664 15,236 14,356 12/15 14,860 15,230 15,259 14,645 06/16 16,952 17,451 15,845 16,922 12/16 17,823 18,418 17,084 17,865 06/17 18,793 19,495 18,680 18,953 12/17 20,048 20,871 20,813 20,623 06/18 19,892 20,790 21,365 20,833 12/18 19,359 20,299 19,901 19,396 06/19 22,666 23,870 23,591 22,042 12/19 24,502 25,908 26,167 23,878 06/20 20,935 22,260 25,361 18,701 12/20 24,494 26,162 30,981 22,787 06/21 28,016 30,042 35,706 28,185 12/21 30,585 32,926 39,873 30,135 06/22 27,832 30,078 31,914 29,364 12/22 28,985 31,413 32,654 30,830 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 17
-------------------------------------------------------------------------------- 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, 2022 (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, 2022. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. <TABLE> <CAPTION> -------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2022 DECEMBER 31, 2022 PERIOD (a) PERIOD (b) -------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) Actual $1,000.00 $1,066.80 0.60% $3.13 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 $1,062.90 0.45% $2.34 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 $ 966.50 0.58% $2.87 Hypothetical (5% return before expenses) $1,000.00 $1,022.28 0.58% $2.96 FIRST TRUST NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX FUND (FBT) Actual $1,000.00 $1,139.40 0.55% $2.97 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 $ 969.50 0.52% $2.58 Hypothetical (5% return before expenses) $1,000.00 $1,022.58 0.52% $2.65 FIRST TRUST CAPITAL STRENGTH ETF (FTCS) Actual $1,000.00 $1,078.50 0.55% $2.88 Hypothetical (5% return before expenses) $1,000.00 $1,022.43 0.55% $2.80 </TABLE> Page 19
FIRST TRUST EXCHANGE-TRADED FUND UNDERSTANDING YOUR FUND EXPENSES (CONTINUED) DECEMBER 31, 2022 (UNAUDITED) <TABLE> <CAPTION> -------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2022 DECEMBER 31, 2022 PERIOD (a) PERIOD (b) -------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) Actual $1,000.00 $1,041.30 0.62% $3.19 Hypothetical (5% return before expenses) $1,000.00 $1,022.08 0.62% $3.16 </TABLE> (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, 2022 through December 31, 2022), 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, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 100.0% AEROSPACE & DEFENSE -- 0.6% 12,496 National Presto Industries, Inc. $ 855,476 --------------- AIR FREIGHT & LOGISTICS -- 0.3% 92,175 Radiant Logistics, Inc. (a) 469,171 --------------- AUTO COMPONENTS -- 1.8% 128,129 Modine Manufacturing Co. (a) 2,544,642 --------------- BANKS -- 21.6% 20,929 ACNB Corp. 833,184 43,751 Amalgamated Financial Corp. 1,008,023 35,084 Bank of Marin Bancorp 1,153,562 15,928 Bankwell Financial Group, Inc. 468,761 36,558 BCB Bancorp, Inc. 657,678 59,294 Carter Bankshares, Inc. (a) 983,687 26,140 Coastal Financial Corp. (a) 1,242,173 104,024 CrossFirst Bankshares, Inc. (a) 1,290,938 16,834 Esquire Financial Holdings, Inc. 728,239 30,787 Farmers & Merchants Bancorp, Inc. (b) 836,791 11,356 Fidelity D&D Bancorp, Inc. 535,322 59,093 First Bancshares (The), Inc. 1,891,567 18,039 First Business Financial Services, Inc. 659,325 26,905 First Financial Corp. 1,239,782 13,442 First Guaranty Bancshares, Inc. (b) 315,215 52,940 First of Long Island (The) Corp. 952,920 69,635 Flushing Financial Corp. 1,349,526 28,905 FVCBankcorp, Inc. (a) 551,218 149,328 Heritage Commerce Corp. 1,941,264 34,207 HomeTrust Bancshares, Inc. 826,783 51,806 Independent Bank Corp. 1,239,200 28,386 John Marshall Bancorp, Inc. (b) 816,949 44,815 Metrocity Bankshares, Inc. 969,348 54,472 Midland States Bancorp, Inc. 1,450,045 96,467 Old Second Bancorp, Inc. 1,547,331 26,261 Orrstown Financial Services, Inc. 608,205 35,449 PCSB Financial Corp. (b) 674,949 39,226 Peapack-Gladstone Financial Corp. 1,459,992 31,935 Professional Holding Corp., Class A (a) 885,877 35,068 RBB Bancorp 731,168 112,949 Republic First Bancorp, Inc. (a) 242,840 42,977 Shore Bancshares, Inc. 749,089 14,782 Unity Bancorp, Inc. 403,992 --------------- 31,244,943 --------------- BIOTECHNOLOGY -- 0.7% 25,608 Eagle Pharmaceuticals, Inc. (a) 748,522 282,265 Selecta Biosciences, Inc. (a) 318,959 --------------- 1,067,481 --------------- BUILDING PRODUCTS -- 0.9% 47,903 Insteel Industries, Inc. 1,318,291 --------------- CAPITAL MARKETS -- 1.4% 66,174 Bridge Investment Group Holdings, Inc., Class A 797,397 SHARES DESCRIPTION VALUE -------------------------------------------------------------- CAPITAL MARKETS (CONTINUED) 103,880 GCM Grosvenor, Inc., Class A (b) $ 790,527 21,545 Silvercrest Asset Management Group, Inc., Class A 404,399 --------------- 1,992,323 --------------- CHEMICALS -- 1.3% 63,500 FutureFuel Corp. 516,255 23,885 Intrepid Potash, Inc. (a) 689,560 61,879 Tredegar Corp. 632,403 --------------- 1,838,218 --------------- COMMERCIAL SERVICES & SUPPLIES -- 2.7% 231,819 ACCO Brands Corp. 1,295,868 63,539 Ennis, Inc. 1,408,024 25,813 VSE Corp. 1,210,114 --------------- 3,914,006 --------------- COMMUNICATIONS EQUIPMENT -- 1.0% 26,448 Aviat Networks, Inc. (a) 824,913 27,925 Cambium Networks Corp. (a) 605,135 --------------- 1,430,048 --------------- CONSTRUCTION & ENGINEERING -- 1.1% 24,414 Northwest Pipe Co. (a) 822,752 103,827 Tutor Perini Corp. (a) 783,894 --------------- 1,606,646 --------------- CONSUMER FINANCE -- 0.9% 23,599 Consumer Portfolio Services, Inc. (a) (b) 208,851 132,029 EZCORP, Inc., Class A (a) 1,076,036 --------------- 1,284,887 --------------- DISTRIBUTORS -- 0.2% 16,565 Weyco Group, Inc. 350,515 --------------- DIVERSIFIED CONSUMER SERVICES -- 1.4% 46,462 American Public Education, Inc. (a) 571,018 32,208 Carriage Services, Inc. 887,008 83,044 Universal Technical Institute, Inc. (a) 558,056 --------------- 2,016,082 --------------- DIVERSIFIED FINANCIAL SERVICES -- 1.3% 94,782 Acacia Research Corp. (a) 399,032 44,413 A-Mark Precious Metals, Inc. 1,542,464 --------------- 1,941,496 --------------- ELECTRICAL EQUIPMENT -- 2.3% 180,923 Babcock & Wilcox Enterprises, Inc. (a) 1,043,926 7,260 Preformed Line Products Co. 604,685 82,370 Thermon Group Holdings, Inc. (a) 1,653,990 --------------- 3,302,601 --------------- See Notes to Financial Statements Page 21
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (CONTINUED) ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 2.8% 25,425 Bel Fuse, Inc., Class B $ 836,991 60,770 Kimball Electronics, Inc. (a) 1,372,794 26,807 Richardson Electronics Ltd. 571,793 30,867 Vishay Precision Group, Inc. (a) 1,193,010 --------------- 3,974,588 --------------- ENTERTAINMENT -- 1.0% 83,908 Reservoir Media, Inc. (a) (b) 500,931 55,817 Sciplay Corp., Class A (a) 897,537 --------------- 1,398,468 --------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 2.1% 97,682 City Office REIT, Inc. 818,575 40,687 CTO Realty Growth, Inc. 743,758 73,421 Urstadt Biddle Properties, Inc., Class A 1,391,328 --------------- 2,953,661 --------------- FOOD & STAPLES RETAILING -- 0.1% 20,088 Natural Grocers by Vitamin Cottage, Inc. 183,604 --------------- FOOD PRODUCTS -- 2.0% 21,959 John B Sanfilippo & Son, Inc. 1,785,706 13,013 Seneca Foods Corp., Class A (a) 793,142 84,665 Whole Earth Brands, Inc. (a) 344,587 --------------- 2,923,435 --------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.8% 76,037 Co-Diagnostics, Inc. (a) (b) 191,613 32,275 Sensus Healthcare, Inc. (a) 239,481 53,423 Zynex, Inc. (b) 743,114 --------------- 1,174,208 --------------- HOTELS, RESTAURANTS & LEISURE -- 4.6% 44,258 Chuy's Holdings, Inc. (a) 1,252,501 140,755 Denny's Corp. (a) 1,296,354 48,291 El Pollo Loco Holdings, Inc. 480,978 6,923 Nathan's Famous, Inc. 465,295 20,915 RCI Hospitality Holdings, Inc. 1,949,069 74,543 Ruth's Hospitality Group, Inc. 1,153,926 --------------- 6,598,123 --------------- HOUSEHOLD DURABLES -- 2.2% 20,716 Bassett Furniture Industries, Inc. 360,044 71,387 Beazer Homes USA, Inc. (a) 910,898 51,761 Dream Finders Homes, Inc., Class A (a) (b) 448,251 56,103 Ethan Allen Interiors, Inc. 1,482,241 --------------- 3,201,434 --------------- INSURANCE -- 1.5% 111,911 Citizens, Inc. (a) (b) 238,370 5,915 National Western Life Group, Inc., Class A 1,662,115 SHARES DESCRIPTION VALUE -------------------------------------------------------------- INSURANCE (CONTINUED) 44,088 Trean Insurance Group, Inc. (a) $ 264,528 --------------- 2,165,013 --------------- INTERNET & DIRECT MARKETING RETAIL -- 0.8% 32,576 Lands' End, Inc. (a) 247,252 66,510 Liquidity Services, Inc. (a) 935,130 --------------- 1,182,382 --------------- IT SERVICES -- 2.0% 29,901 Cass Information Systems, Inc. 1,370,064 56,712 Hackett Group (The), Inc. 1,155,224 83,814 Information Services Group, Inc. 385,544 --------------- 2,910,832 --------------- LEISURE PRODUCTS -- 1.9% 215,734 AMMO, Inc. (a) (b) 373,220 17,458 JAKKS Pacific, Inc. (a) 305,340 13,540 Johnson Outdoors, Inc., Class A 895,265 43,786 MasterCraft Boat Holdings, Inc. (a) 1,132,744 --------------- 2,706,569 --------------- MACHINERY -- 0.9% 73,049 Commercial Vehicle Group, Inc. (a) 497,464 86,531 Manitowoc (The) Co., Inc. (a) 792,624 --------------- 1,290,088 --------------- MARINE -- 0.3% 88,093 Pangaea Logistics Solutions Ltd. 453,679 --------------- MEDIA -- 1.4% 151,165 Entravision Communications Corp., Class A 725,592 106,174 PubMatic, Inc., Class A (a) 1,360,089 --------------- 2,085,681 --------------- METALS & MINING -- 3.3% 217,400 Gold Resource Corp. 332,622 30,648 Haynes International, Inc. 1,400,307 23,540 Olympic Steel, Inc. 790,473 59,681 Ramaco Resources, Inc. 524,596 205,113 SunCoke Energy, Inc. 1,770,125 --------------- 4,818,123 --------------- MORTGAGE REAL ESTATE INVESTMENT TRUSTS -- 2.4% 39,565 AFC Gamma, Inc. 622,358 113,990 Dynex Capital, Inc. 1,449,953 128,748 Granite Point Mortgage Trust, Inc. 690,089 56,301 Great Ajax Corp. 408,182 91,301 Sachem Capital Corp. (b) 301,293 --------------- 3,471,875 --------------- OIL, GAS & CONSUMABLE FUELS -- 8.4% 163,694 Alto Ingredients, Inc. (a) 471,439 29,232 Centrus Energy Corp., Class A (a) 949,455 78,397 Dorian LPG Ltd. 1,485,623 42,473 Epsilon Energy Ltd. 281,596 75,456 Evolution Petroleum Corp. 569,693 231,624 Ring Energy, Inc. (a) (b) 569,795 Page 22 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (CONTINUED) OIL, GAS & CONSUMABLE FUELS (CONTINUED) 77,977 SandRidge Energy, Inc. (a) $ 1,327,948 182,202 Sitio Royalties Corp., Class A (b) 5,256,528 258,534 VAALCO Energy, Inc. 1,178,915 --------------- 12,090,992 --------------- PHARMACEUTICALS -- 2.6% 186,398 Atea Pharmaceuticals, Inc. (a) 896,575 82,565 Collegium Pharmaceutical, Inc. (a) 1,915,508 50,018 Phibro Animal Health Corp., Class A 670,741 32,427 ProPhase Labs, Inc. (b) 312,272 --------------- 3,795,096 --------------- PROFESSIONAL SERVICES -- 3.3% 17,122 Barrett Business Services, Inc. 1,597,140 48,845 Heidrick & Struggles International, Inc. 1,366,195 16,701 RCM Technologies, Inc. (a) 206,090 80,467 TrueBlue, Inc. (a) 1,575,544 --------------- 4,744,969 --------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 1.6% 165,847 Douglas Elliman, Inc. 674,997 44,056 Forestar Group, Inc. (a) 678,903 35,072 RMR Group (The), Inc., Class A 990,784 --------------- 2,344,684 --------------- ROAD & RAIL -- 0.5% 20,555 Covenant Logistics Group, Inc. 710,586 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.3% 99,613 AXT, Inc. (a) 436,305 --------------- SOFTWARE -- 0.3% 15,074 CoreCard Corp. (a) 436,694 --------------- SPECIALTY RETAIL -- 4.9% 52,087 Arhaus, Inc. (a) 507,848 31,624 Build-A-Bear Workshop, Inc. (a) 753,916 307,645 Chico's FAS, Inc. (a) 1,513,613 133,653 Destination XL Group, Inc. (a) 902,158 32,534 Haverty Furniture Cos., Inc. 972,767 19,695 Lazydays Holdings, Inc. (a) (b) 235,158 26,763 OneWater Marine, Inc., Class A (a) 765,422 30,686 TravelCenters of America, Inc. (a) 1,374,119 --------------- 7,025,001 --------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.4% 82,419 Immersion Corp. (a) 579,406 --------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.1% 39,076 Movado Group, Inc. 1,260,201 31,050 Unifi, Inc. (a) 267,340 --------------- 1,527,541 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 2.7% 16,053 Ocwen Financial Corp. (a) $ 490,901 18,839 Southern Missouri Bancorp, Inc. 863,391 46,855 TrustCo Bank Corp. 1,761,280 227,675 UWM Holdings Corp. (b) 753,604 --------------- 3,869,176 --------------- TRADING COMPANIES & DISTRIBUTORS -- 3.5% 38,765 DXP Enterprises, Inc. (a) 1,067,976 95,337 Hudson Technologies, Inc. (a) 964,810 18,140 Rush Enterprises, Inc., Class B 1,020,738 49,397 Titan Machinery, Inc. (a) 1,962,543 --------------- 5,016,067 --------------- WATER UTILITIES -- 0.8% 18,846 Artesian Resources Corp., Class A 1,103,999 --------------- TOTAL COMMON STOCKS -- 100.0% 144,349,105 (Cost $154,502,442) --------------- MONEY MARKET FUNDS -- 5.2% 7,533,156 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 4.14% (c) (d) 7,533,156 (Cost $7,533,156) --------------- TOTAL INVESTMENTS -- 105.2% 151,882,261 (Cost $162,035,598) NET OTHER ASSETS AND LIABILITIES -- (5.2)% (7,440,711) --------------- NET ASSETS -- 100.0% $ 144,441,550 =============== (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 $7,244,228 and the total value of the collateral held by the Fund is $7,533,156. (c) Rate shown reflects yield as of December 31, 2022. (d) This security serves as collateral for securities on loan. See Notes to Financial Statements Page 23
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 --------------------------------- 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) $ 7,244,228 Non-cash Collateral(2) (7,244,228) --------------- 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, 2022, 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. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------------ <S> <C> <C> <C> <C> Common Stocks*................................ $ 144,349,105 $ 144,349,105 $ -- $ -- Money Market Funds............................ 7,533,156 7,533,156 -- -- ------------------------------------------------------------------ Total Investments............................. $ 151,882,261 $ 151,882,261 $ -- $ -- ================================================================== </TABLE> * See Portfolio of Investments for industry breakout. Page 24 See Notes to Financial Statements
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 99.7% AIR FREIGHT & LOGISTICS -- 3.2% 886,347 United Parcel Service, Inc., Class B $ 154,082,562 --------------- BANKS -- 11.9% 189,187 Associated Banc-Corp. 4,368,328 50,714 Bank of Hawaii Corp. 3,933,378 208,668 Cadence Bank 5,145,753 80,861 Cathay General Bancorp 3,298,320 3,077,389 Citigroup, Inc. 139,190,304 733,468 Citizens Financial Group, Inc. 28,876,635 104,951 Columbia Banking System, Inc. 3,162,174 447,473 F.N.B. Corp. 5,839,523 121,084 First Financial Bancorp 2,933,865 188,772 First Hawaiian, Inc. 4,915,623 143,488 First Interstate BancSystem, Inc., Class A 5,545,811 201,509 Fulton Financial Corp. 3,391,396 2,120,749 Huntington Bancshares, Inc. 29,902,561 1,541,721 KeyCorp 26,856,780 315,641 Old National Bancorp 5,675,225 552,020 PNC Financial Services Group (The), Inc. 87,186,039 2,294,287 Truist Financial Corp. 98,723,170 2,073,547 U.S. Bancorp 90,427,385 341,613 Umpqua Holdings Corp. 6,097,792 164,295 United Bankshares, Inc. 6,652,304 555,570 Valley National Bancorp 6,283,497 72,206 WesBanco, Inc. 2,670,178 --------------- 571,076,041 --------------- BIOTECHNOLOGY -- 9.6% 2,097,732 AbbVie, Inc. 339,014,468 1,450,509 Gilead Sciences, Inc. 124,526,198 --------------- 463,540,666 --------------- CAPITAL MARKETS -- 3.6% 184,844 Ares Management Corp., Class A 12,650,723 152,902 Artisan Partners Asset Management, Inc., Class A 4,541,190 1,132,042 Blackstone, Inc. 83,986,196 338,161 Carlyle Group (The), Inc. 10,090,724 428,127 Franklin Resources, Inc. 11,293,990 218,403 Jefferies Financial Group, Inc. 7,486,855 132,384 Moelis & Co., Class A 5,079,574 310,851 T. Rowe Price Group, Inc. 33,901,410 147,101 Virtu Financial, Inc., Class A 3,002,332 --------------- 172,032,994 --------------- CHEMICALS -- 0.9% 515,962 LyondellBasell Industries N.V., Class A 42,840,325 --------------- COMMUNICATIONS EQUIPMENT -- 4.5% 4,545,529 Cisco Systems, Inc. 216,549,002 --------------- CONSUMER FINANCE -- 0.0% 147,556 Navient Corp. 2,427,296 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- CONTAINERS & PACKAGING -- 0.6% 644,591 International Paper Co. $ 22,322,186 109,727 Sonoco Products Co. 6,661,526 --------------- 28,983,712 --------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 8.4% 10,260,551 Verizon Communications, Inc. 404,265,709 --------------- ELECTRIC UTILITIES -- 7.3% 79,729 ALLETE, Inc. 5,143,318 100,682 Avangrid, Inc. 4,327,312 1,081,541 Duke Energy Corp. 111,387,908 568,442 Edison International 36,164,280 261,119 Entergy Corp. 29,375,887 706,576 FirstEnergy Corp. 29,633,797 292,170 OGE Energy Corp. 11,555,324 175,347 Pinnacle West Capital Corp. 13,333,386 116,510 Portland General Electric Co. 5,708,990 1,468,650 Southern (The) Co. 104,876,297 --------------- 351,506,499 --------------- FOOD & STAPLES RETAILING -- 0.9% 1,178,894 Walgreens Boots Alliance, Inc. 44,043,480 --------------- FOOD PRODUCTS -- 0.9% 576,734 Conagra Brands, Inc. 22,319,606 283,485 Kellogg Co. 20,195,471 --------------- 42,515,077 --------------- GAS UTILITIES -- 0.2% 150,725 South Jersey Industries, Inc. 5,355,259 72,771 Spire, Inc. 5,011,011 --------------- 10,366,270 --------------- HEALTH CARE PROVIDERS & SERVICES -- 0.4% 234,479 Cardinal Health, Inc. 18,024,401 --------------- HOTELS, RESTAURANTS & LEISURE -- 0.5% 43,074 Cracker Barrel Old Country Store, Inc. 4,080,831 145,144 Darden Restaurants, Inc. 20,077,769 --------------- 24,158,600 --------------- HOUSEHOLD DURABLES -- 0.8% 233,908 Leggett & Platt, Inc. 7,538,855 122,588 M.D.C. Holdings, Inc. 3,873,781 940,519 Newell Brands, Inc. 12,301,988 92,971 Whirlpool Corp. 13,151,678 --------------- 36,866,302 --------------- HOUSEHOLD PRODUCTS -- 1.2% 80,663 Energizer Holdings, Inc. 2,706,244 398,754 Kimberly-Clark Corp. 54,130,855 --------------- 56,837,099 --------------- INDUSTRIAL CONGLOMERATES -- 2.3% 908,636 3M Co. 108,963,629 --------------- INSURANCE -- 2.4% 36,716 CNA Financial Corp. 1,552,353 452,538 Fidelity National Financial, Inc. 17,024,480 See Notes to Financial Statements Page 25
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (CONTINUED) INSURANCE (CONTINUED) 145,532 First American Financial Corp. $ 7,617,145 383,843 Old Republic International Corp. 9,269,808 228,789 Principal Financial Group, Inc. 19,199,973 605,338 Prudential Financial, Inc. 60,206,917 --------------- 114,870,676 --------------- IT SERVICES -- 4.4% 1,408,346 International Business Machines Corp. 198,421,868 916,261 Western Union (The) Co. 12,616,914 --------------- 211,038,782 --------------- MACHINERY -- 0.0% 89,349 Trinity Industries, Inc. 2,642,050 --------------- MEDIA -- 0.8% 491,653 Interpublic Group of (The) Cos., Inc. 16,376,961 263,707 Omnicom Group, Inc. 21,510,580 --------------- 37,887,541 --------------- MULTI-UTILITIES -- 0.2% 107,208 Avista Corp. 4,753,603 85,679 NorthWestern Corp. 5,084,192 --------------- 9,837,795 --------------- OIL, GAS & CONSUMABLE FUELS -- 21.6% 2,198,551 Devon Energy Corp. 135,232,872 4,615,642 Exxon Mobil Corp. 509,105,312 4,244,566 Kinder Morgan, Inc. 76,741,753 910,757 ONEOK, Inc. 59,836,735 630,450 Phillips 66 65,617,236 826,894 Pioneer Natural Resources Co. 188,854,321 --------------- 1,035,388,229 --------------- SPECIALTY RETAIL -- 0.7% 246,983 American Eagle Outfitters, Inc. 3,447,883 301,650 Best Buy Co., Inc. 24,195,346 115,040 Foot Locker, Inc. 4,347,362 --------------- 31,990,591 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.5% 361,951 Seagate Technology Holdings PLC $ 19,042,242 246,671 Xerox Holdings Corp. 3,601,397 --------------- 22,643,639 --------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.7% 56,721 Carter's, Inc. 4,231,954 1,152,658 Hanesbrands, Inc. 7,330,905 793,225 VF Corp. 21,900,942 --------------- 33,463,801 --------------- THRIFTS & MORTGAGE FINANCE -- 0.3% 1,283,969 New York Community Bancorp, Inc. 11,042,133 245,980 Radian Group, Inc. 4,690,839 --------------- 15,732,972 --------------- TOBACCO -- 10.5% 5,080,706 Altria Group, Inc. 232,239,071 2,689,380 Philip Morris International, Inc. 272,192,150 --------------- 504,431,221 --------------- TRADING COMPANIES & DISTRIBUTORS -- 0.4% 61,995 MSC Industrial Direct Co., Inc., Class A 5,064,991 84,927 Triton International Ltd. 5,841,279 39,609 Watsco, Inc. 9,878,485 --------------- 20,784,755 --------------- TOTAL INVESTMENTS -- 99.7% 4,789,791,716 (Cost $4,564,937,066) --------------- NET OTHER ASSETS AND LIABILITIES -- 0.3% 12,025,690 --------------- NET ASSETS -- 100.0% $ 4,801,817,406 =============== ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------------ <S> <C> <C> <C> <C> Common Stocks*................................ $ 4,789,791,716 $ 4,789,791,716 $ -- $ -- ================================================================== </TABLE> * See Portfolio of Investments for industry breakout. Page 26 See Notes to Financial Statements
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 99.6% AEROSPACE & DEFENSE -- 4.4% 64,048 General Dynamics Corp. $ 15,890,949 220,718 Leonardo DRS, Inc. (a) 2,820,776 351,206 Parsons Corp. (a) 16,243,278 --------------- 34,955,003 --------------- AUTO COMPONENTS -- 1.2% 272,105 Mobileye Global, Inc., Class A (a) (b) 9,540,001 --------------- AUTOMOBILES -- 0.4% 154,924 Rivian Automotive, Inc., Class A (a) 2,855,249 --------------- BEVERAGES -- 2.3% 516,608 Keurig Dr Pepper, Inc. 18,422,241 --------------- BIOTECHNOLOGY -- 12.4% 29,761 Arcellx, Inc. (a) 921,996 26,522 Cerevel Therapeutics Holdings, Inc. (a) 836,504 8,745 Karuna Therapeutics, Inc. (a) 1,718,392 320,160 Legend Biotech Corp., ADR (a) 15,982,387 47,323 Prometheus Biosciences, Inc. (a) 5,205,530 50,810 Regeneron Pharmaceuticals, Inc. (a) 36,658,907 165,708 REVOLUTION Medicines, Inc. (a) 3,947,165 119,854 United Therapeutics Corp. (a) 33,330,199 20,098 Vaxcyte, Inc. (a) 963,699 --------------- 99,564,779 --------------- BUILDING PRODUCTS -- 1.1% 212,822 Carrier Global Corp. 8,778,908 --------------- CAPITAL MARKETS -- 2.4% 66,815 Owl Rock Capital Corp. (b) 771,713 419,256 TPG, Inc. 11,667,894 99,404 Tradeweb Markets, Inc., Class A 6,454,302 --------------- 18,893,909 --------------- CHEMICALS -- 7.2% 883,906 Corteva, Inc. 51,955,995 119,401 Dow, Inc. 6,016,616 --------------- 57,972,611 --------------- COMMERCIAL SERVICES & SUPPLIES -- 1.6% 49,702 Driven Brands Holdings, Inc. (a) 1,357,362 91,141 Republic Services, Inc. 11,756,277 --------------- 13,113,639 --------------- CONSTRUCTION & ENGINEERING -- 1.2% 212,643 WillScot Mobile Mini Holdings Corp. (a) 9,605,084 --------------- DIVERSIFIED FINANCIAL SERVICES -- 0.9% 328,294 Corebridge Financial, Inc. 6,585,577 28,177 Jackson Financial, Inc., Class A 980,278 --------------- 7,565,855 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- ELECTRIC UTILITIES -- 3.9% 290,967 Constellation Energy Corp. $ 25,084,265 97,334 Evergy, Inc. 6,125,229 --------------- 31,209,494 --------------- ELECTRICAL EQUIPMENT -- 1.1% 389,367 Array Technologies, Inc. (a) 7,526,464 57,454 Shoals Technologies Group, Inc., Class A (a) 1,417,390 --------------- 8,943,854 --------------- ENERGY EQUIPMENT & SERVICES -- 1.5% 382,297 Baker Hughes Co. 11,289,231 39,471 ProFrac Holding Corp., Class A (a) 994,669 --------------- 12,283,900 --------------- ENTERTAINMENT -- 0.8% 32,129 Sciplay Corp., Class A (a) 516,635 412,002 Warner Bros Discovery, Inc. (a) 3,905,779 65,513 Warner Music Group Corp., Class A 2,294,265 --------------- 6,716,679 --------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 1.3% 335,014 Phillips Edison & Co., Inc. 10,666,846 --------------- FOOD & STAPLES RETAILING -- 1.0% 158,864 Albertsons Cos., Inc., Class A 3,294,839 68,426 BJ's Wholesale Club Holdings, Inc. (a) 4,527,064 20,631 Grocery Outlet Holding Corp. (a) 602,219 --------------- 8,424,122 --------------- FOOD PRODUCTS -- 0.3% 90,862 Hostess Brands, Inc. (a) 2,038,943 --------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 4.0% 142,857 Axonics, Inc. (a) 8,932,848 178,145 Bausch + Lomb Corp. (a) 2,763,029 27,661 Envista Holdings Corp. (a) 931,346 9,102 Inari Medical, Inc. (a) 578,523 72,080 PROCEPT BioRobotics Corp. (a) (b) 2,994,203 67,450 Shockwave Medical, Inc. (a) 13,868,395 37,914 TransMedics Group, Inc. (a) 2,340,052 --------------- 32,408,396 --------------- HEALTH CARE PROVIDERS & SERVICES -- 0.8% 69,874 agilon health, Inc. (a) 1,127,766 63,543 Alignment Healthcare, Inc. (a) 747,266 68,211 HealthEquity, Inc. (a) 4,204,526 --------------- 6,079,558 --------------- HOTELS, RESTAURANTS & LEISURE -- 1.4% 130,784 Airbnb, Inc., Class A (a) 11,182,032 --------------- HOUSEHOLD PRODUCTS -- 0.2% 53,408 Reynolds Consumer Products, Inc. 1,601,172 --------------- See Notes to Financial Statements Page 27
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (CONTINUED) INSURANCE -- 2.6% 14,262 Markel Corp. (a) $ 18,790,042 44,044 Ryan Specialty Holdings, Inc. (a) 1,828,267 --------------- 20,618,309 --------------- INTERACTIVE MEDIA & SERVICES -- 2.7% 55,002 Bumble, Inc., Class A (a) 1,157,792 747,632 Pinterest, Inc., Class A (a) 18,152,505 68,484 ZoomInfo Technologies, Inc. (a) 2,062,053 --------------- 21,372,350 --------------- INTERNET & DIRECT MARKETING RETAIL -- 0.9% 89,782 Chewy, Inc., Class A (a) 3,329,117 76,365 DoorDash, Inc., Class A (a) 3,728,139 --------------- 7,057,256 --------------- IT SERVICES -- 8.3% 706,637 Block, Inc. (a) 44,405,069 69,692 Cloudflare, Inc., Class A (a) 3,150,775 45,469 Shift4 Payments, Inc., Class A (a) 2,543,081 81,845 Snowflake, Inc., Class A (a) 11,748,031 265,047 Toast, Inc., Class A (a) 4,778,798 31,784 Verra Mobility Corp. (a) 439,573 --------------- 67,065,327 --------------- MACHINERY -- 2.8% 35,889 Cummins, Inc. 8,695,545 28,031 Esab Corp. 1,315,215 26,294 Hillenbrand, Inc. 1,121,965 148,423 Otis Worldwide Corp. 11,623,005 --------------- 22,755,730 --------------- MULTI-UTILITIES -- 4.9% 253,317 Sempra Energy 39,147,609 --------------- OIL, GAS & CONSUMABLE FUELS -- 1.2% 55,111 Excelerate Energy, Inc., Class A 1,380,531 57,599 HighPeak Energy, Inc. (b) 1,317,289 55,020 Magnolia Oil & Gas Corp., Class A 1,290,219 53,131 New Fortress Energy, Inc. 2,253,817 120,907 Sitio Royalties Corp., Class A (b) 3,488,167 --------------- 9,730,023 --------------- PERSONAL PRODUCTS -- 0.1% 34,454 BellRing Brands, Inc. (a) 883,401 --------------- PHARMACEUTICALS -- 4.5% 56,204 Amylyx Pharmaceuticals, Inc. (a) 2,076,738 56,421 Eli Lilly & Co. 20,641,059 150,958 Harmony Biosciences Holdings, Inc. (a) 8,317,786 127,224 Royalty Pharma PLC, Class A 5,027,892 --------------- 36,063,475 --------------- ROAD & RAIL -- 2.3% 761,338 Uber Technologies, Inc. (a) 18,827,889 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 6.3% 194,744 Allegro MicroSystems, Inc. (a) $ 5,846,215 174,299 Credo Technology Group Holding Ltd. (a) 2,319,920 254,312 GLOBALFOUNDRIES, Inc. (a) (b) 13,704,873 458,532 ON Semiconductor Corp. (a) 28,598,641 --------------- 50,469,649 --------------- SOFTWARE -- 8.8% 108,062 Bentley Systems, Inc., Class B 3,993,972 49,302 Bill.com Holdings, Inc. (a) 5,371,946 58,189 Clear Secure, Inc., Class A 1,596,124 42,460 Clearwater Analytics Holdings, Inc., Class A (a) 796,125 157,392 Crowdstrike Holdings, Inc., Class A (a) 16,571,804 79,278 Datadog, Inc., Class A (a) 5,826,933 482,564 Gitlab, Inc., Class A (a) 21,927,708 72,530 Instructure Holdings, Inc. (a) 1,700,103 89,507 Paycor HCM, Inc. (a) 2,190,236 202,875 PowerSchool Holdings, Inc., Class A (a) 4,682,355 198,074 Samsara, Inc., Class A (a) 2,462,060 38,184 Vertex, Inc., Class A (a) 554,050 49,596 Zoom Video Communications, Inc., Class A (a) 3,359,633 --------------- 71,033,049 --------------- SPECIALTY RETAIL -- 2.6% 401,058 Academy Sports & Outdoors, Inc. 21,071,587 --------------- THRIFTS & MORTGAGE FINANCE -- 0.2% 55,256 Enact Holdings, Inc. 1,332,775 --------------- TOTAL COMMON STOCKS -- 99.6% 800,250,704 (Cost $839,812,957) --------------- PRINCIPAL VALUE DESCRIPTION VALUE -------------------------------------------------------------- REPURCHASE AGREEMENTS -- 1.9% $ 479,932 Bank of America Corp., 4.25% (c), dated 12/30/22, due 01/03/23, with a maturity value of $479,989. Collateralized by U.S. Treasury Securities, interest rates of 0.75% to 4.50%, due 11/15/25 to 03/31/26. The value of the collateral including accrued interest is $489,531. (d) 479,932 7,528,680 Citigroup, Inc., 4.25% (c), dated 12/30/22, due 01/03/23, with a maturity value of $7,529,569. Collateralized by U.S. Treasury Securities, interest rates of 0.00% to 6.25%, due 06/01/23 to 02/15/52. The value of the collateral including accrued interest is $7,679,254. (d) 7,528,680 Page 28 See Notes to Financial Statements
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 PRINCIPAL VALUE DESCRIPTION VALUE -------------------------------------------------------------- $ 7,528,680 JPMorgan Chase & Co., 4.26% (c), dated 12/30/22, due 01/03/23, with a maturity value of $7,529,571. Collateralized by U.S. Treasury Securities, interest rates of 0.00% to 0.13%, due 05/15/23 to 12/28/23. The value of the collateral including accrued interest is $7,679,254. (d) $ 7,528,680 --------------- TOTAL REPURCHASE AGREEMENTS -- 1.9% 15,537,292 (Cost $15,537,292) --------------- TOTAL INVESTMENTS -- 101.5% 815,787,996 (Cost $855,350,249) NET OTHER ASSETS AND LIABILITIES -- (1.5)% (12,694,246) --------------- NET ASSETS -- 100.0% $ 803,093,750 =============== (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 $15,228,066 and the total value of the collateral held by the Fund is $15,537,292. (c) Rate shown reflects yield as of December 31, 2022. (d) This security serves as collateral for securities on loan. ADR - American Depositary Receipt --------------------------------- 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) $ 15,228,066 Non-cash Collateral(2) (15,228,066) --------------- 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, 2022, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS -------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 15,537,292 Non-cash Collateral(4) (15,537,292) --------------- Net Amount $ -- =============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2022, the value of the collateral received from each seller exceeded the value of the repurchase agreements. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------------ <S> <C> <C> <C> <C> Common Stocks*................................ $ 800,250,704 $ 800,250,704 $ -- $ -- Repurchase Agreements......................... 15,537,292 -- 15,537,292 -- ------------------------------------------------------------------ Total Investments............................. $ 815,787,996 $ 800,250,704 $ 15,537,292 $ -- ================================================================== </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 29
FIRST TRUST NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX FUND (FBT) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 100.0% BIOTECHNOLOGY -- 80.1% 2,760,493 ACADIA Pharmaceuticals, Inc. (a) $ 43,947,049 1,623,579 Agios Pharmaceuticals, Inc. (a) 45,590,098 1,969,300 Alkermes PLC (a) 51,457,809 220,417 Alnylam Pharmaceuticals, Inc. (a) 52,382,100 173,996 Amgen, Inc. 45,698,310 163,805 Biogen, Inc. (a) 45,360,881 487,020 BioMarin Pharmaceutical, Inc. (a) 50,401,700 333,004 BioNTech SE, ADR 50,023,861 1,334,042 Exact Sciences Corp. (a) 66,048,419 2,664,841 Exelixis, Inc. (a) 42,744,050 2,672,965 FibroGen, Inc. (a) 42,820,899 1,187,341 Genmab A/S, ADR (a) 50,319,512 646,653 Gilead Sciences, Inc. 55,515,160 7,209,972 Grifols S.A., ADR (a) 61,284,762 621,091 Incyte Corp. (a) 49,886,029 975,231 Ionis Pharmaceuticals, Inc. (a) 36,834,475 341,620 Moderna, Inc. (a) 61,361,784 395,138 Neurocrine Biosciences, Inc. (a) 47,195,283 61,404 Regeneron Pharmaceuticals, Inc. (a) 44,302,372 388,967 Sarepta Therapeutics, Inc. (a) 50,402,344 340,241 Seagen, Inc. (a) 43,724,371 1,138,910 Ultragenyx Pharmaceutical, Inc. (a) 52,765,700 199,893 United Therapeutics Corp. (a) 55,588,244 146,122 Vertex Pharmaceuticals, Inc. (a) 42,197,111 --------------- 1,187,852,323 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES -- 19.9% 618,965 Bio-Techne Corp. $ 51,299,819 218,986 Charles River Laboratories International, Inc. (a) 47,717,049 199,248 Illumina, Inc. (a) 40,287,946 246,066 IQVIA Holdings, Inc. (a) 50,416,463 37,327 Mettler-Toledo International, Inc. (a) 53,954,312 1,039,522 QIAGEN N.V. (a) 51,840,962 --------------- 295,516,551 --------------- TOTAL INVESTMENTS -- 100.0% 1,483,368,874 (Cost $1,383,496,890) NET OTHER ASSETS AND LIABILITIES -- (0.0)% (13,797) --------------- NET ASSETS -- 100.0% $ 1,483,355,077 =============== (a) Non-income producing security. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------------ <S> <C> <C> <C> <C> Common Stocks*................................ $ 1,483,368,874 $ 1,483,368,874 $ -- $ -- ================================================================== </TABLE> * See Portfolio of Investments for industry breakout. Page 30 See Notes to Financial Statements
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 100.0% COMMUNICATIONS EQUIPMENT -- 12.1% 759,896 Arista Networks, Inc. (a) $ 92,213,380 1,127,905 Ciena Corp. (a) 57,500,597 4,083,554 Cisco Systems, Inc. 194,540,512 3,611,989 CommScope Holding Co., Inc. (a) 26,548,119 1,883,809 Juniper Networks, Inc. 60,206,536 --------------- 431,009,144 --------------- ENTERTAINMENT -- 4.6% 550,326 Netflix, Inc. (a) 162,280,131 --------------- HEALTH CARE TECHNOLOGY -- 3.4% 1,571,258 Teladoc Health, Inc. (a) 37,160,252 514,547 Veeva Systems, Inc., Class A (a) 83,037,595 --------------- 120,197,847 --------------- HOTELS, RESTAURANTS & LEISURE -- 4.5% 1,124,119 Airbnb, Inc., Class A (a) 96,112,174 748,898 Expedia Group, Inc. (a) 65,603,465 --------------- 161,715,639 --------------- INTERACTIVE MEDIA & SERVICES -- 22.8% 1,989,384 Alphabet, Inc., Class A (a) 175,523,350 1,763,507 Alphabet, Inc., Class C (a) 156,475,976 1,492,189 Match Group, Inc. (a) 61,910,922 1,923,396 Meta Platforms, Inc., Class A (a) 231,461,475 2,964,043 Pinterest, Inc., Class A (a) 71,966,964 6,188,906 Snap, Inc., Class A (a) 55,390,709 1,861,731 ZoomInfo Technologies, Inc. (a) 56,056,720 --------------- 808,786,116 --------------- INTERNET & DIRECT MARKETING RETAIL -- 14.4% 3,549,518 Amazon.com, Inc. (a) 298,159,512 1,285,401 DoorDash, Inc., Class A (a) 62,753,277 1,978,087 eBay, Inc. 82,031,268 565,391 Etsy, Inc. (a) 67,722,534 --------------- 510,666,591 --------------- IT SERVICES -- 14.8% 768,813 Akamai Technologies, Inc. (a) 64,810,936 1,481,576 Cloudflare, Inc., Class A (a) 66,982,051 2,498,862 Fastly, Inc., Class A (a) 20,465,680 847,864 GoDaddy, Inc., Class A (a) 63,437,184 933,983 Okta, Inc. (a) 63,819,058 1,880,435 PayPal Holdings, Inc. (a) 133,924,581 772,390 Snowflake, Inc., Class A (a) 110,868,861 --------------- 524,308,351 --------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 1.8% 15,325,757 Opendoor Technologies, Inc. (a) (b) 17,777,878 395,467 Zillow Group, Inc., Class A (a) 12,342,525 1,107,047 Zillow Group, Inc., Class C (a) 35,657,984 --------------- 65,778,387 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- SOFTWARE -- 21.6% 1,426,418 Box, Inc., Class A (a) $ 44,404,392 1,736,328 Confluent, Inc., Class A (a) 38,615,935 695,031 Coupa Software, Inc. (a) 55,025,604 1,094,749 Datadog, Inc., Class A (a) 80,464,052 1,308,585 DocuSign, Inc. (a) 72,521,781 2,139,564 Dropbox, Inc., Class A (a) 47,883,442 1,675,463 Nutanix, Inc., Class A (a) 43,645,811 1,272,037 Salesforce, Inc. (a) 168,659,386 1,189,751 Smartsheet, Inc., Class A (a) 46,828,599 598,839 Workday, Inc., Class A (a) 100,203,730 1,026,329 Zoom Video Communications, Inc., Class A (a) 69,523,526 --------------- 767,776,258 --------------- TOTAL COMMON STOCKS -- 100.0% 3,552,518,464 (Cost $5,815,215,594) --------------- MONEY MARKET FUNDS -- 0.0% 191,980 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 4.14% (c) (d) 191,980 651,347 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 4.10% (c) 651,347 --------------- TOTAL MONEY MARKET FUNDS -- 0.0% 843,327 (Cost $843,327) --------------- TOTAL INVESTMENTS -- 100.0% 3,553,361,791 (Cost $5,816,058,921) NET OTHER ASSETS AND LIABILITIES -- (0.0)% (521,931) --------------- NET ASSETS -- 100.0% $ 3,552,839,860 =============== (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 $191,980 and the total value of the collateral held by the Fund is $191,980. (c) Rate shown reflects yield as of December 31, 2022. (d) This security serves as collateral for securities on loan. See Notes to Financial Statements Page 31
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 --------------------------------- 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) $ 191,980 Non-cash Collateral(2) (191,980) --------------- 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) The collateral requirements are determined at the beginning of each business day based on the market value of the loaned securities from the end of the prior day. On December 30, 2022, the last business day of the period, there was sufficient collateral based on the end of day market value from the prior business day; however, as a result of market movement from December 29 to December 30, the value of the related securities loaned was equal to the collateral value received. See Note 2D - Securities Lending in the Notes to Financial Statements. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------------ <S> <C> <C> <C> <C> Common Stocks*................................ $ 3,552,518,464 $ 3,552,518,464 $ -- $ -- Money Market Funds............................ 843,327 843,327 -- -- ------------------------------------------------------------------ Total Investments............................. $ 3,553,361,791 $ 3,553,361,791 $ -- $ -- ================================================================== </TABLE> * See Portfolio of Investments for industry breakout. Page 32 See Notes to Financial Statements
FIRST TRUST CAPITAL STRENGTH ETF (FTCS) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 100.0% AEROSPACE & DEFENSE -- 5.8% 666,754 General Dynamics Corp. $ 165,428,335 355,810 Lockheed Martin Corp. 173,098,007 309,492 Northrop Grumman Corp. 168,861,930 --------------- 507,388,272 --------------- AIR FREIGHT & LOGISTICS -- 4.0% 1,740,248 Expeditors International of Washington, Inc. 180,846,572 977,072 United Parcel Service, Inc., Class B 169,854,197 --------------- 350,700,769 --------------- BEVERAGES -- 6.2% 2,890,577 Coca-Cola (The) Co. 183,869,603 1,846,740 Monster Beverage Corp. (a) 187,499,512 934,679 PepsiCo, Inc. 168,859,108 --------------- 540,228,223 --------------- BIOTECHNOLOGY -- 6.1% 1,099,929 AbbVie, Inc. 177,759,526 642,050 Amgen, Inc. 168,628,012 2,291,765 Incyte Corp. (a) 184,074,565 --------------- 530,462,103 --------------- BUILDING PRODUCTS -- 2.2% 1,116,626 Trane Technologies PLC 187,693,664 --------------- CAPITAL MARKETS -- 8.2% 668,308 Moody's Corp. 186,203,975 2,801,350 Nasdaq, Inc. 171,862,822 1,601,639 Raymond James Financial, Inc. 171,135,127 546,571 S&P Global, Inc. 183,068,491 --------------- 712,270,415 --------------- CHEMICALS -- 2.4% 670,373 Air Products and Chemicals, Inc. 206,649,181 --------------- COMMUNICATIONS EQUIPMENT -- 2.1% 3,779,325 Cisco Systems, Inc. 180,047,043 --------------- ELECTRICAL EQUIPMENT -- 2.2% 1,945,082 Emerson Electric Co. 186,844,577 --------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 3.8% 2,260,726 Amphenol Corp., Class A 172,131,678 5,025,031 Corning, Inc. 160,499,490 --------------- 332,631,168 --------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 3.7% 552,666 Public Storage 154,851,487 5,398,902 Weyerhaeuser Co. 167,365,962 --------------- 322,217,449 --------------- FOOD & STAPLES RETAILING -- 3.7% 338,270 Costco Wholesale Corp. 154,420,255 1,182,440 Walmart, Inc. 167,658,168 --------------- 322,078,423 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 4.4% 1,701,619 Abbott Laboratories $ 186,820,750 2,587,642 Hologic, Inc. (a) 193,581,498 --------------- 380,402,248 --------------- HEALTH CARE PROVIDERS & SERVICES -- 7.5% 1,094,916 AmerisourceBergen Corp. 181,438,530 316,520 Elevance Health, Inc. 162,365,264 448,845 Molina Healthcare, Inc. (a) 148,217,596 303,071 UnitedHealth Group, Inc. 160,682,183 --------------- 652,703,573 --------------- HOUSEHOLD PRODUCTS -- 2.2% 1,258,022 Procter & Gamble (The) Co. 190,665,814 --------------- INDUSTRIAL CONGLOMERATES -- 4.1% 1,384,750 3M Co. 166,059,220 884,807 Honeywell International, Inc. 189,614,140 --------------- 355,673,360 --------------- INSURANCE -- 3.9% 2,051,663 Principal Financial Group, Inc. 172,175,559 2,267,089 W.R. Berkley Corp. 164,522,649 --------------- 336,698,208 --------------- IT SERVICES -- 11.6% 600,047 Accenture PLC, Class A 160,116,541 695,002 Automatic Data Processing, Inc. 166,008,178 2,683,392 Cognizant Technology Solutions Corp., Class A 153,463,188 534,949 Mastercard, Inc., Class A 186,017,816 1,442,175 Paychex, Inc. 166,657,743 849,677 Visa, Inc., Class A 176,528,894 --------------- 1,008,792,360 --------------- LIFE SCIENCES TOOLS & SERVICES -- 2.1% 325,625 Thermo Fisher Scientific, Inc. 179,318,431 --------------- MACHINERY -- 1.9% 694,853 Cummins, Inc. 168,355,933 --------------- PHARMACEUTICALS -- 11.9% 2,240,079 Bristol-Myers Squibb Co. 161,173,684 474,667 Eli Lilly & Co. 173,652,175 958,788 Johnson & Johnson 169,369,900 1,690,779 Merck & Co., Inc. 187,591,930 3,598,573 Pfizer, Inc. 184,390,881 1,098,786 Zoetis, Inc. 161,027,088 --------------- 1,037,205,658 --------------- TOTAL INVESTMENTS -- 100.0% 8,689,026,872 (Cost $8,149,347,016) NET OTHER ASSETS AND LIABILITIES -- 0.0% 3,120,729 --------------- NET ASSETS -- 100.0% $ 8,692,147,601 =============== (a) Non-income producing security. See Notes to Financial Statements Page 33
FIRST TRUST CAPITAL STRENGTH ETF (FTCS) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------------ <S> <C> <C> <C> <C> Common Stocks*................................ $ 8,689,026,872 $ 8,689,026,872 $ -- $ -- ================================================================== </TABLE> * See Portfolio of Investments for industry breakout. Page 34 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 99.8% AEROSPACE & DEFENSE -- 2.3% 289,077 General Dynamics Corp. $ 71,722,895 347,482 L3Harris Technologies, Inc. 72,349,227 148,286 Lockheed Martin Corp. 72,139,656 721,689 Raytheon Technologies Corp. 72,832,854 --------------- 289,044,632 --------------- AIR FREIGHT & LOGISTICS -- 1.1% 769,907 C.H. Robinson Worldwide, Inc. 70,492,685 404,855 United Parcel Service, Inc., Class B 70,379,993 --------------- 140,872,678 --------------- AUTO COMPONENTS -- 0.6% 2,655,189 Gentex Corp. 72,407,004 --------------- AUTOMOBILES -- 0.6% 522,559 Toyota Motor Corp., ADR 71,371,108 --------------- BANKS -- 4.0% 793,610 Bank of Montreal 71,901,066 1,467,611 Bank of Nova Scotia (The) 71,883,587 1,748,741 Canadian Imperial Bank of Commerce 70,736,573 545,884 JPMorgan Chase & Co. 73,203,044 759,392 Royal Bank of Canada 71,398,036 1,102,858 Toronto-Dominion (The) Bank 71,421,084 1,658,877 U.S. Bancorp 72,343,626 --------------- 502,887,016 --------------- BEVERAGES -- 2.3% 1,122,899 Coca-Cola (The) Co. 71,427,605 397,866 Diageo PLC, ADR 70,895,743 1,970,400 Keurig Dr Pepper, Inc. 70,264,464 393,192 PepsiCo, Inc. 71,034,067 --------------- 283,621,879 --------------- BIOTECHNOLOGY -- 1.7% 439,378 AbbVie, Inc. 71,007,879 271,540 Amgen, Inc. 71,317,266 845,591 Gilead Sciences, Inc. 72,593,987 --------------- 214,919,132 --------------- BUILDING PRODUCTS -- 1.2% 1,259,466 A.O. Smith Corp. 72,091,834 1,117,992 Johnson Controls International PLC 71,551,488 --------------- 143,643,322 --------------- CAPITAL MARKETS -- 3.4% 1,605,003 Bank of New York Mellon (The) Corp. 73,059,737 101,799 BlackRock, Inc. 72,137,825 424,470 CME Group, Inc. 71,378,875 207,408 Goldman Sachs Group (The), Inc. 71,219,759 803,856 Houlihan Lokey, Inc. 70,064,089 644,915 T. Rowe Price Group, Inc. 70,334,430 --------------- 428,194,715 --------------- CHEMICALS -- 2.9% 229,666 Air Products and Chemicals, Inc. 70,796,841 SHARES DESCRIPTION VALUE -------------------------------------------------------------- CHEMICALS (CONTINUED) 689,741 International Flavors & Fragrances, Inc. $ 72,312,446 231,128 NewMarket Corp. 71,906,232 565,529 PPG Industries, Inc. 71,109,617 982,639 Sensient Technologies Corp. 71,654,036 --------------- 357,779,172 --------------- COMMUNICATIONS EQUIPMENT -- 1.2% 1,509,340 Cisco Systems, Inc. 71,904,958 2,262,823 Juniper Networks, Inc. 72,319,823 --------------- 144,224,781 --------------- CONTAINERS & PACKAGING -- 1.7% 395,683 Avery Dennison Corp. 71,618,623 556,822 Packaging Corp. of America 71,223,102 1,185,894 Sonoco Products Co. 71,995,625 --------------- 214,837,350 --------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.7% 1,622,813 BCE, Inc. 71,322,631 3,643,287 TELUS Corp. 70,351,872 1,865,748 Verizon Communications, Inc. 73,510,471 --------------- 215,184,974 --------------- ELECTRIC UTILITIES -- 11.5% 1,108,490 ALLETE, Inc. 71,508,690 1,295,906 Alliant Energy Corp. 71,546,970 748,913 American Electric Power Co., Inc. 71,109,289 1,657,349 Avangrid, Inc. 71,232,860 695,838 Duke Energy Corp. 71,664,356 631,784 Entergy Corp. 71,075,700 1,131,405 Evergy, Inc. 71,199,317 850,800 Eversource Energy 71,331,072 1,665,046 Exelon Corp. 71,979,938 1,768,594 Fortis, Inc. 70,814,504 1,719,380 Hawaiian Electric Industries, Inc. 71,956,053 664,286 IDACORP, Inc. 71,643,245 851,414 NextEra Energy, Inc. 71,178,210 1,790,692 OGE Energy Corp. 70,821,869 1,230,480 Otter Tail Corp. 72,241,481 919,582 Pinnacle West Capital Corp. 69,925,015 1,470,325 PNM Resources, Inc. 71,737,157 1,462,819 Portland General Electric Co. 71,678,131 998,931 Southern (The) Co. 71,333,663 1,010,340 Xcel Energy, Inc. 70,834,937 --------------- 1,426,812,457 --------------- ELECTRICAL EQUIPMENT -- 1.7% 2,365,131 ABB Ltd., ADR 72,041,890 750,087 Emerson Electric Co. 72,053,357 304,025 Hubbell, Inc. 71,348,587 --------------- 215,443,834 --------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.2% 1,716,898 Avnet, Inc. 71,388,619 628,905 TE Connectivity Ltd. 72,198,294 --------------- 143,586,913 --------------- See Notes to Financial Statements Page 35
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (CONTINUED) EQUITY REAL ESTATE INVESTMENT TRUSTS -- 3.4% 337,319 American Tower Corp. $ 71,464,403 643,818 Camden Property Trust 72,030,358 523,168 Crown Castle, Inc. 70,962,507 458,345 Mid-America Apartment Communities, Inc. 71,955,582 253,048 Public Storage 70,901,519 1,112,609 Realty Income Corp. 70,572,789 --------------- 427,887,158 --------------- FOOD & STAPLES RETAILING -- 0.6% 1,561,629 Kroger (The) Co. 69,617,421 --------------- FOOD PRODUCTS -- 8.4% 757,374 Archer-Daniels-Midland Co. 70,322,176 1,108,828 Cal-Maine Foods, Inc. 60,375,685 1,251,115 Campbell Soup Co. 71,000,776 1,845,098 Conagra Brands, Inc. 71,405,293 2,453,384 Flowers Foods, Inc. 70,510,256 839,054 General Mills, Inc. 70,354,678 303,815 Hershey (The) Co. 70,354,440 1,570,535 Hormel Foods Corp. 71,537,869 724,823 Ingredion, Inc. 70,981,916 467,168 J & J Snack Foods Corp. 69,939,721 449,469 J.M. Smucker (The) Co. 71,222,858 992,839 Kellogg Co. 70,729,850 356,818 Lancaster Colony Corp. 70,400,191 850,900 McCormick & Co., Inc. 70,531,101 1,068,006 Mondelez International, Inc., Class A 71,182,600 --------------- 1,050,849,410 --------------- GAS UTILITIES -- 3.4% 622,620 Atmos Energy Corp. 69,777,023 599,841 Chesapeake Utilities Corp. 70,889,209 1,443,659 New Jersey Resources Corp. 71,634,360 948,679 ONE Gas, Inc. 71,833,974 1,028,172 Spire, Inc. 70,799,924 1,919,733 UGI Corp. 71,164,502 --------------- 426,098,992 --------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 1.7% 662,443 Abbott Laboratories 72,729,617 1,428,413 Baxter International, Inc. 72,806,211 924,689 Medtronic PLC 71,866,829 --------------- 217,402,657 --------------- HEALTH CARE PROVIDERS & SERVICES -- 1.7% 765,965 CVS Health Corp. 71,380,279 2,037,637 Premier, Inc., Class A 71,276,542 458,466 Quest Diagnostics, Inc. 71,722,421 --------------- 214,379,242 --------------- HOTELS, RESTAURANTS & LEISURE -- 1.7% 267,834 McDonald's Corp. 70,582,294 729,254 Starbucks Corp. 72,341,997 SHARES DESCRIPTION VALUE -------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (CONTINUED) 555,958 Yum! Brands, Inc. $ 71,207,100 --------------- 214,131,391 --------------- HOUSEHOLD DURABLES -- 0.6% 785,270 Garmin Ltd. 72,472,568 --------------- HOUSEHOLD PRODUCTS -- 3.4% 497,284 Clorox (The) Co. 69,783,864 902,001 Colgate-Palmolive Co. 71,068,659 522,521 Kimberly-Clark Corp. 70,932,226 469,549 Procter & Gamble (The) Co. 71,164,846 2,358,900 Reynolds Consumer Products, Inc. 70,719,822 445,525 WD-40 Co. 71,823,085 --------------- 425,492,502 --------------- INDUSTRIAL CONGLOMERATES -- 1.2% 596,503 3M Co. 71,532,640 335,082 Honeywell International, Inc. 71,808,072 --------------- 143,340,712 --------------- INSURANCE -- 4.6% 998,793 Aflac, Inc. 71,853,168 525,505 Allstate (The) Corp. 71,258,478 573,171 Assurant, Inc. 71,680,765 1,307,254 Axis Capital Holdings Ltd. 70,813,949 213,971 Everest Re Group Ltd. 70,882,173 521,613 Hanover Insurance Group (The), Inc. 70,485,565 1,542,473 Sun Life Financial, Inc. 71,601,597 378,218 Travelers (The) Cos., Inc. 70,912,093 --------------- 569,487,788 --------------- IT SERVICES -- 5.2% 269,318 Accenture PLC, Class A 71,864,815 801,968 Amdocs Ltd. 72,898,891 297,435 Automatic Data Processing, Inc. 71,045,324 532,887 Broadridge Financial Solutions, Inc. 71,476,133 1,279,247 Cognizant Technology Solutions Corp., Class A 73,160,136 1,261,232 CSG Systems International, Inc. 72,142,470 1,070,887 Fidelity National Information Services, Inc. 72,659,683 3,999,075 Infosys Ltd., ADR 72,023,341 617,735 Paychex, Inc. 71,385,457 --------------- 648,656,250 --------------- MACHINERY -- 2.3% 298,764 Caterpillar, Inc. 71,571,904 297,042 Cummins, Inc. 71,970,306 322,854 Illinois Tool Works, Inc. 71,124,736 314,668 Snap-on, Inc. 71,898,492 --------------- 286,565,438 --------------- MEDIA -- 0.6% 2,039,370 Comcast Corp., Class A 71,316,769 --------------- MULTI-UTILITIES -- 6.3% 800,438 Ameren Corp. 71,174,947 1,634,659 Avista Corp. 72,480,780 Page 36 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (CONTINUED) MULTI-UTILITIES (CONTINUED) 1,026,254 Black Hills Corp. $ 72,186,707 1,126,433 CMS Energy Corp. 71,337,002 747,662 Consolidated Edison, Inc. 71,259,665 1,178,872 Dominion Energy, Inc. 72,288,431 604,555 DTE Energy Co. 71,053,349 1,225,218 NorthWestern Corp. 72,704,436 1,173,272 Public Service Enterprise Group, Inc. 71,886,376 454,287 Sempra Energy 70,205,513 750,557 WEC Energy Group, Inc. 70,372,224 --------------- 786,949,430 --------------- OIL, GAS & CONSUMABLE FUELS -- 0.6% 1,814,727 Enbridge, Inc. 70,955,826 --------------- PERSONAL PRODUCTS -- 0.6% 1,403,243 Unilever PLC, ADR 70,653,285 --------------- PHARMACEUTICALS -- 4.0% 1,054,184 AstraZeneca PLC, ADR 71,473,675 983,176 Bristol-Myers Squibb Co. 70,739,513 403,786 Johnson & Johnson 71,328,797 640,657 Merck & Co., Inc. 71,080,894 788,631 Novartis AG, ADR 71,544,605 1,382,670 Pfizer, Inc. 70,848,011 1,476,993 Sanofi, ADR 71,530,771 --------------- 498,546,266 --------------- PROFESSIONAL SERVICES -- 0.6% 976,614 Robert Half International, Inc. 72,103,412 --------------- ROAD & RAIL -- 1.7% 595,006 Canadian National Railway Co. 70,734,313 289,542 Norfolk Southern Corp. 71,348,940 341,406 Union Pacific Corp. 70,694,940 --------------- 212,778,193 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.3% 437,396 Analog Devices, Inc. 71,746,066 2,746,775 Intel Corp. 72,597,263 SHARES DESCRIPTION VALUE -------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONTINUED) 956,914 Taiwan Semiconductor Manufacturing Co., Ltd., ADR $ 71,280,524 435,962 Texas Instruments, Inc. 72,029,642 --------------- 287,653,495 --------------- SOFTWARE -- 1.2% 2,474,573 Open Text Corp. 73,346,344 692,398 SAP SE, ADR 71,448,549 --------------- 144,794,893 --------------- SPECIALTY RETAIL -- 1.7% 224,842 Home Depot (The), Inc. 71,018,594 354,980 Lowe's Cos., Inc. 70,726,215 330,158 Tractor Supply Co. 74,275,646 --------------- 216,020,455 --------------- TOBACCO -- 0.6% 1,549,811 Altria Group, Inc. 70,841,861 --------------- TRADING COMPANIES & DISTRIBUTORS -- 1.1% 1,500,497 Fastenal Co. 71,003,518 284,194 Watsco, Inc. 70,877,984 --------------- 141,881,502 --------------- WATER UTILITIES -- 0.6% 764,659 American States Water Co. 70,769,190 --------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.6% 1,588,993 Rogers Communications, Inc., Class B 74,428,432 --------------- TOTAL INVESTMENTS -- 99.8% 12,420,905,505 (Cost $11,256,857,192) --------------- NET OTHER ASSETS AND LIABILITIES -- 0.2% 21,765,290 --------------- NET ASSETS -- 100.0% $12,442,670,795 =============== ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------------ <S> <C> <C> <C> <C> Common Stocks*................................ $ 12,420,905,505 $ 12,420,905,505 $ -- $ -- ================================================================== </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 37
FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2022 <TABLE> <CAPTION> FIRST TRUST FIRST TRUST FIRST TRUST DOW JONES SELECT MORNINGSTAR US EQUITY MICROCAP DIVIDEND LEADERS OPPORTUNITIES INDEX FUND INDEX FUND ETF (FDM) (FDL) (FPX) ------------------ ------------------ ------------------ <S> <C> <C> <C> ASSETS: Investments, at value............................................... $ 151,882,261 $ 4,789,791,716 $ 815,787,996 Cash................................................................ 4,379,894 2,878,783 120,669 Receivables: Dividends..................................................... 168,430 11,614,397 3,413,491 Securities lending income..................................... 13,162 -- 35,974 Capital shares sold........................................... -- 54,825,614 -- Investment securities sold.................................... -- -- -- Reclaims...................................................... 268 -- 10,993 Prepaid expenses.................................................... 1,095 29,574 5,543 ---------------- ---------------- ---------------- Total Assets.................................................. 156,445,110 4,859,140,084 819,374,666 ---------------- ---------------- ---------------- LIABILITIES: Payables: Collateral for securities on loan............................. 7,533,156 -- 15,537,292 Investment securities purchased............................... 4,313,869 54,685,545 -- Investment advisory fees...................................... 54,168 1,095,333 289,463 Licensing fees................................................ 38,625 889,571 214,210 Audit and tax fees............................................ 28,697 29,500 29,564 Shareholder reporting fees.................................... 6,421 75,825 50,899 Trustees' fees................................................ 39 -- 74 Capital shares redeemed....................................... -- -- -- Other liabilities................................................... 28,585 546,904 159,414 ---------------- ---------------- ---------------- Total Liabilities............................................. 12,003,560 57,322,678 16,280,916 ---------------- ---------------- ---------------- NET ASSETS.......................................................... $ 144,441,550 $ 4,801,817,406 $ 803,093,750 ================ ================ ================ NET ASSETS CONSIST OF: Paid-in capital..................................................... $ 209,656,622 $ 4,996,649,913 $ 1,457,083,621 Par value........................................................... 26,050 1,314,000 102,000 Accumulated distributable earnings (loss)........................... (65,241,122) (196,146,507) (654,091,871) ---------------- ---------------- ---------------- NET ASSETS.......................................................... $ 144,441,550 $ 4,801,817,406 $ 803,093,750 ================ ================ ================ NET ASSET VALUE, per share.......................................... $ 55.45 $ 36.54 $ 78.73 ================ ================ ================ Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)........................... 2,605,000 131,400,002 10,200,002 ================ ================ ================ Investments, at cost................................................ $ 162,035,598 $ 4,564,937,066 $ 855,350,249 ================ ================ ================ Securities on loan, at value........................................ $ 7,244,228 $ -- $ 15,228,066 ================ ================ ================ </TABLE> Page 38 See Notes to Financial Statements
<TABLE> <CAPTION> 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) ------------------ ------------------ ------------------ ------------------ <S> <C> <C> <C> $ 1,483,368,874 $ 3,553,361,791 $ 8,689,026,872 $ 12,420,905,505 460,816 -- 1,870,497 6,958,654 -- 3,894 6,133,720 24,103,915 172 392 -- -- -- -- 15,032,583 25,993,442 558,391 8,693,084 -- 616,275,038 69,294 -- -- 2,608,764 8,060 14,645 59,611 90,055 ---------------- ---------------- ---------------- ---------------- 1,484,465,607 3,562,073,806 8,712,123,283 13,096,935,373 ---------------- ---------------- ---------------- ---------------- -- 191,980 -- -- -- -- 15,027,325 641,859,384 505,396 1,276,011 3,632,217 5,088,746 282,027 717,197 -- 5,537,519 29,802 34,413 33,600 35,509 65,819 295,250 284,002 401,040 -- 121 65 -- -- 6,157,256 -- -- 227,486 561,718 998,473 1,342,380 ---------------- ---------------- ---------------- ---------------- 1,110,530 9,233,946 19,975,682 654,264,578 ---------------- ---------------- ---------------- ---------------- $ 1,483,355,077 $ 3,552,839,860 $ 8,692,147,601 $ 12,442,670,795 ================ ================ ================ ================ $ 2,026,803,489 $ 6,607,035,565 $ 9,012,894,078 $ 12,087,493,902 96,000 288,500 1,161,000 3,119,409 (543,544,412) (3,054,484,205) (321,907,477) 352,057,484 ---------------- ---------------- ---------------- ---------------- $ 1,483,355,077 $ 3,552,839,860 $ 8,692,147,601 $ 12,442,670,795 ================ ================ ================ ================ $ 154.52 $ 123.15 $ 74.87 $ 39.89 ================ ================ ================ ================ 9,600,002 28,850,002 116,100,002 311,940,884 ================ ================ ================ ================ $ 1,383,496,890 $ 5,816,058,921 $ 8,149,347,016 $ 11,256,857,192 ================ ================ ================ ================ $ -- $ 191,980 $ -- $ -- ================ ================ ================ ================ </TABLE> See Notes to Financial Statements Page 39
FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022 <TABLE> <CAPTION> FIRST TRUST FIRST TRUST FIRST TRUST DOW JONES SELECT MORNINGSTAR US EQUITY MICROCAP DIVIDEND LEADERS OPPORTUNITIES INDEX FUND INDEX FUND ETF (FDM) (FDL) (FPX) ------------------ ------------------ ------------------ <S> <C> <C> <C> INVESTMENT INCOME: Dividends........................................................... $ 3,493,333 $ 135,775,633 $ 15,888,322 Securities lending income (net of fees)............................. 136,895 -- 805,225 Foreign withholding tax............................................. (1,676) -- (7,393) ---------------- ---------------- ---------------- Total investment income....................................... 3,628,552 135,775,633 16,686,154 ---------------- ---------------- ---------------- EXPENSES: Investment advisory fees............................................ 780,485 8,823,942 4,647,348 Licensing fees...................................................... 93,658 2,666,829 1,161,837 Accounting and administration fees.................................. 82,336 1,219,066 563,749 Shareholder reporting fees.......................................... 30,910 205,977 113,563 Audit and tax fees.................................................. 28,226 29,888 30,032 Custodian fees...................................................... 26,713 175,011 77,510 Listing fees........................................................ 7,812 9,751 7,812 Transfer agent fees................................................. 7,805 98,735 53,375 Trustees' fees and expenses......................................... 7,227 8,614 7,811 Legal fees.......................................................... 3,550 75,024 26,043 Registration and filing fees........................................ 525 39 -- Other expenses...................................................... 3,354 34,614 25,350 ---------------- ---------------- ---------------- Total expenses................................................ 1,072,601 13,347,490 6,714,430 Less fees waived and expenses reimbursed by the investment advisor.................................................... (136,019) (75,072) -- ---------------- ---------------- ---------------- Net expenses.................................................. 936,582 13,272,418 6,714,430 ---------------- ---------------- ---------------- NET INVESTMENT INCOME (LOSS)........................................ 2,691,970 122,503,215 9,971,724 ---------------- ---------------- ---------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments................................................... (16,057,374) (88,499,113) (276,052,696) In-kind redemptions........................................... 24,436,797 123,659,147 74,963,856 Foreign currency transactions................................. -- -- -- ---------------- ---------------- ---------------- Net realized gain (loss)............................................ 8,379,423 35,160,034 (201,088,840) ---------------- ---------------- ---------------- Net change in unrealized appreciation (depreciation) on: Investments................................................... (34,793,960) (5,208,289) (386,182,483) Foreign currency translation.................................. -- -- -- ---------------- ---------------- ---------------- Net change in unrealized appreciation (depreciation)................ (34,793,960) (5,208,289) (386,182,483) ---------------- ---------------- ---------------- NET REALIZED AND UNREALIZED GAIN (LOSS)............................. (26,414,537) 29,951,745 (587,271,323) ---------------- ---------------- ---------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $ (23,722,567) $ 152,454,960 $ (577,299,599) ================ ================ ================ </TABLE> Page 40 See Notes to Financial Statements
<TABLE> <CAPTION> 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) ------------------ ------------------ ------------------ ------------------ <S> <C> <C> <C> $ 4,314,578 $ 13,366,695 $ 148,015,195 $ 338,140,219 14,159 19,816 -- -- (88,964) -- -- (7,456,737) ---------------- ---------------- ---------------- ---------------- 4,239,773 13,386,511 148,015,195 330,683,482 ---------------- ---------------- ---------------- ---------------- 5,601,871 20,800,689 41,668,743 61,052,150 1,120,374 3,123,531 92,650 12,402,873 661,525 1,855,276 2,611,800 3,497,946 142,075 549,548 651,905 904,885 30,173 39,457 38,078 41,933 94,202 381,341 555,250 727,226 7,812 9,750 4,529 53,909 60,012 155,147 234,504 332,864 7,873 10,022 11,919 13,962 31,201 100,271 202,099 286,684 -- -- 6,759 1,857 16,499 83,887 141,102 182,424 ---------------- ---------------- ---------------- ---------------- 7,773,617 27,108,919 46,219,338 79,498,713 -- -- -- -- ---------------- ---------------- ---------------- ---------------- 7,773,617 27,108,919 46,219,338 79,498,713 ---------------- ---------------- ---------------- ---------------- (3,533,844) (13,722,408) 101,795,857 251,184,769 ---------------- ---------------- ---------------- ---------------- (275,662,615) (467,650,573) (527,075,265) (120,102,011) 44,401,009 868,612,522 409,524,456 614,909,039 -- -- -- (6,949) ---------------- ---------------- ---------------- ---------------- (231,261,606) 400,961,949 (117,550,809) 494,800,079 ---------------- ---------------- ---------------- ---------------- 140,025,277 (4,159,637,254) (1,009,131,344) (1,448,622,484) -- -- -- (1,061) ---------------- ---------------- ---------------- ---------------- 140,025,277 (4,159,637,254) (1,009,131,344) (1,448,623,545) ---------------- ---------------- ---------------- ---------------- (91,236,329) (3,758,675,305) (1,126,682,153) (953,823,466) ---------------- ---------------- ---------------- ---------------- $ (94,770,173) $ (3,772,397,713) $ (1,024,886,296) $ (702,638,697) ================ ================ ================ ================ </TABLE> See Notes to Financial Statements Page 41
FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> 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 12/31/2022 12/31/2021 12/31/2022 12/31/2021 --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> OPERATIONS: Net investment income (loss)............................. $ 2,691,970 $ 1,782,779 $ 122,503,215 $ 63,417,589 Net realized gain (loss)................................. 8,379,423 33,159,253 35,160,034 191,507,868 Net change in unrealized appreciation (depreciation)..... (34,793,960) 8,369,281 (5,208,289) 87,772,838 --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations....................................... (23,722,567) 43,311,313 152,454,960 342,698,295 --------------- --------------- --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations.................................... (2,696,103) (1,928,374) (122,518,973) (63,399,697) --------------- --------------- --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................ 113,413,517 86,724,692 3,837,574,234 644,763,236 Cost of shares redeemed.................................. (131,289,899) (61,853,301) (828,602,429) (560,634,737) --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions......................... (17,876,382) 24,871,391 3,008,971,805 84,128,499 --------------- --------------- --------------- --------------- Total increase (decrease) in net assets.................. (44,295,052) 66,254,330 3,038,907,792 363,427,097 NET ASSETS: Beginning of period...................................... 188,736,602 122,482,272 1,762,909,614 1,399,482,517 --------------- --------------- --------------- --------------- End of period............................................ $ 144,441,550 $ 188,736,602 $ 4,801,817,406 $ 1,762,909,614 =============== =============== =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period.................. 2,955,000 2,555,000 49,600,002 47,300,002 Shares sold.............................................. 1,900,000 1,450,000 105,600,000 19,250,000 Shares redeemed.......................................... (2,250,000) (1,050,000) (23,800,000) (16,950,000) --------------- --------------- --------------- --------------- Shares outstanding, end of period........................ 2,605,000 2,955,000 131,400,002 49,600,002 =============== =============== =============== =============== </TABLE> Page 42 See Notes to Financial Statements
<TABLE> <CAPTION> 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 12/31/2022 12/31/2021 12/31/2022 12/31/2021 12/31/2022 12/31/2021 --------------- --------------- --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> <C> $ 9,971,724 $ 1,412,875 $ (3,533,844) $ (4,455,580) $ (13,722,408) $ (32,149,322) (201,088,840) 298,792,377 (231,261,606) (8,792,422) 400,961,949 2,146,301,949 (386,182,483) (231,648,485) 140,025,277 (58,114,526) (4,159,637,254) (1,439,319,817) --------------- --------------- --------------- --------------- --------------- --------------- (577,299,599) 68,556,767 (94,770,173) (71,362,528) (3,772,397,713) 674,832,810 --------------- --------------- --------------- --------------- --------------- --------------- (9,427,777) (2,739,625) -- -- -- -- --------------- --------------- --------------- --------------- --------------- --------------- 49,560,039 991,605,700 126,254,644 52,174,778 2,488,710,947 3,348,838,868 (515,443,931) (1,148,090,496) (256,885,942) (314,229,031) (5,131,046,629) (5,131,127,308) --------------- --------------- --------------- --------------- --------------- --------------- (465,883,892) (156,484,796) (130,631,298) (262,054,253) (2,642,335,682) (1,782,288,440) --------------- --------------- --------------- --------------- --------------- --------------- (1,052,611,268) (90,667,654) (225,401,471) (333,416,781) (6,414,733,395) (1,107,455,630) 1,855,705,018 1,946,372,672 1,708,756,548 2,042,173,329 9,967,573,255 11,075,028,885 --------------- --------------- --------------- --------------- --------------- --------------- $ 803,093,750 $ 1,855,705,018 $ 1,483,355,077 $ 1,708,756,548 $ 3,552,839,860 $ 9,967,573,255 =============== =============== =============== =============== =============== =============== 15,150,002 16,450,002 10,550,002 12,150,002 44,100,002 52,150,002 500,000 8,000,000 850,000 300,000 17,850,000 14,450,000 (5,450,000) (9,300,000) (1,800,000) (1,900,000) (33,100,000) (22,500,000) --------------- --------------- --------------- --------------- --------------- --------------- 10,200,002 15,150,002 9,600,002 10,550,002 28,850,002 44,100,002 =============== =============== =============== =============== =============== =============== </TABLE> See Notes to Financial Statements Page 43
FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) <TABLE> <CAPTION> FIRST TRUST FIRST TRUST CAPITAL STRENGTH VALUE LINE(R) DIVIDEND ETF INDEX FUND (FTCS) (FVD) --------------------------------- --------------------------------- Year Ended Year Ended Year Ended Year Ended 12/31/2022 12/31/2021 12/31/2022 12/31/2021 --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> OPERATIONS: Net investment income (loss)............................. $ 101,795,857 $ 99,342,131 $ 251,184,769 $ 221,888,137 Net realized gain (loss)................................. (117,550,809) 1,078,138,583 494,800,079 841,450,993 Net change in unrealized appreciation (depreciation)..... (1,009,131,344) 761,114,952 (1,448,623,545) 1,485,603,970 --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations....................................... (1,024,886,296) 1,938,595,666 (702,638,697) 2,548,943,100 --------------- --------------- --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations.................................... (104,442,497) (96,596,007) (255,493,903) (223,826,833) --------------- --------------- --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................ 3,134,829,083 7,347,607,864 2,857,719,852 2,745,034,380 Cost of shares redeemed.................................. (2,805,284,887) (6,719,583,961) (2,411,103,178) (2,265,168,318) --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions......................... 329,544,196 628,023,903 446,616,674 479,866,062 --------------- --------------- --------------- --------------- Total increase (decrease) in net assets.................. (799,784,597) 2,470,023,562 (511,515,926) 2,804,982,329 NET ASSETS: Beginning of period...................................... 9,491,932,198 7,021,908,636 12,954,186,721 10,149,204,392 --------------- --------------- --------------- --------------- End of period............................................ $ 8,692,147,601 $ 9,491,932,198 $12,442,670,795 $12,954,186,721 =============== =============== =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period.................. 112,300,002 103,950,002 301,240,884 289,190,884 Shares sold.............................................. 40,300,000 98,850,000 70,050,000 68,500,000 Shares redeemed.......................................... (36,500,000) (90,500,000) (59,350,000) (56,450,000) --------------- --------------- --------------- --------------- Shares outstanding, end of period........................ 116,100,002 112,300,002 311,940,884 301,240,884 =============== =============== =============== =============== </TABLE> Page 44 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 63.87 $ 47.94 $ 51.09 $ 40.76 $ 47.21 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 1.00 0.64 0.80 0.66 0.56 Net realized and unrealized gain (loss) (8.42) 15.98 (3.15) 10.37 (6.50) ------------ ------------ ------------ ------------ ------------ Total from investment operations (7.42) 16.62 (2.35) 11.03 (5.94) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (1.00) (0.69) (0.80) (0.70) (0.51) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 55.45 $ 63.87 $ 47.94 $ 51.09 $ 40.76 ============ ============ ============ ============ ============ TOTAL RETURN (a) (11.56)% 34.71% (4.25)% 27.25% (12.68)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 144,442 $ 188,737 $ 122,482 $ 156,067 $ 138,777 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.69% 0.69% 0.71% 0.70% 0.73% 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 1.72% 1.10% 1.88% 1.42% 1.29% Portfolio turnover rate (b) 84% 95% 95% 64% 75% FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 35.54 $ 29.59 $ 32.58 $ 27.24 $ 30.06 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 1.30 1.29 1.32 1.22 1.09 Net realized and unrealized gain (loss) 1.01 5.95 (2.98) 5.34 (2.83) ------------ ------------ ------------ ------------ ------------ Total from investment operations 2.31 7.24 (1.66) 6.56 (1.74) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (1.31) (1.29) (1.33) (1.22) (1.08) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 36.54 $ 35.54 $ 29.59 $ 32.58 $ 27.24 ============ ============ ============ ============ ============ TOTAL RETURN (a) 6.71% 24.76% (4.42)% 24.36% (5.87)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 4,801,817 $ 1,762,910 $ 1,399,483 $ 1,841,000 $ 1,386,483 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.45% 0.46% 0.46% 0.46% 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 4.15% 3.90% 4.73% 4.06% 3.70% Portfolio turnover rate (b) 60% 59% 63% 39% 39% </TABLE> (a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. See Notes to Financial Statements Page 45
FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 122.49 $ 118.32 $ 80.41 $ 62.07 $ 68.18 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.90 0.08 0.24 0.58 0.52 Net realized and unrealized gain (loss) (43.81) 4.26 38.01 18.30 (6.08) ------------ ------------ ------------ ------------ ------------ Total from investment operations (42.91) 4.34 38.25 18.88 (5.56) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.85) (0.17) (0.34) (0.54) (0.55) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 78.73 $ 122.49 $ 118.32 $ 80.41 $ 62.07 ============ ============ ============ ============ ============ TOTAL RETURN (a) (35.05)% 3.67% 47.76% 30.45% (8.22)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 803,094 $ 1,855,705 $ 1,946,373 $ 1,330,835 $ 912,479 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.58% 0.57% 0.57% 0.58% 0.59% Ratio of net expenses to average net assets 0.58% 0.57% 0.57% 0.58% 0.59% Ratio of net investment income (loss) to average net assets 0.86% 0.07% 0.26% 0.79% 0.74% Portfolio turnover rate (b) 115% 85% 75% 81% 57% FIRST TRUST NYSE(R) ARCA(R) BIOTECHNOLOGY INDEX FUND (FBT) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 161.97 $ 168.08 $ 148.84 $ 124.26 $ 124.52 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (0.37) (0.42) (0.45) (0.51) (0.22) Net realized and unrealized gain (loss) (7.08) (5.69) 19.69 25.09 (0.04) ------------ ------------ ------------ ------------ ------------ Total from investment operations (7.45) (6.11) 19.24 24.58 (0.26) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 154.52 $ 161.97 $ 168.08 $ 148.84 $ 124.26 ============ ============ ============ ============ ============ TOTAL RETURN (a) (4.60)% (3.64)% 12.93% 19.78% (0.21)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,483,355 $ 1,708,757 $ 2,042,173 $ 1,800,927 $ 2,342,213 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.56% 0.55% 0.55% 0.55% 0.57% Ratio of net expenses to average net assets 0.56% 0.55% 0.55% 0.55% 0.57% Ratio of net investment income (loss) to average net assets (0.25)% (0.23)% (0.28)% (0.25)% (0.21)% Portfolio turnover rate (b) 39% 39% 26% 31% 37% </TABLE> (a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 46 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 226.02 $ 212.37 $ 139.12 $ 116.66 $ 109.82 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (0.48) (0.73) (0.34) (0.14) (0.35) Net realized and unrealized gain (loss) (102.39) 14.38 73.59 22.60 7.19 ------------ ------------ ------------ ------------ ------------ Total from investment operations (102.87) 13.65 73.25 22.46 6.84 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 123.15 $ 226.02 $ 212.37 $ 139.12 $ 116.66 ============ ============ ============ ============ ============ TOTAL RETURN (a) (45.51)% 6.43% 52.65% 19.26% 6.23% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 3,552,840 $ 9,967,573 $ 11,075,029 $ 7,853,367 $ 7,016,807 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.52% 0.51% 0.51% 0.52% 0.52% Ratio of net expenses to average net assets 0.52% 0.51% 0.51% 0.52% 0.52% Ratio of net investment income (loss) to average net assets (0.26)% (0.30)% (0.20)% (0.10)% (0.27)% Portfolio turnover rate (b) 24% 19% 39% 28% 21% FIRST TRUST CAPITAL STRENGTH ETF (FTCS) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 84.52 $ 67.55 $ 60.37 $ 48.29 $ 50.95 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.90 0.91 0.63 0.76 0.60 Net realized and unrealized gain (loss) (9.63) 16.95 7.18 12.08 (2.65) ------------ ------------ ------------ ------------ ------------ Total from investment operations (8.73) 17.86 7.81 12.84 (2.05) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.92) (0.89) (0.63) (0.76) (0.61) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 74.87 $ 84.52 $ 67.55 $ 60.37 $ 48.29 ============ ============ ============ ============ ============ TOTAL RETURN (a) (10.28)% 26.61% 13.07% 26.72% (4.09)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 8,692,148 $ 9,491,932 $ 7,021,909 $ 3,392,623 $ 1,376,131 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.55% 0.55% 0.56% 0.58% 0.60% Ratio of net expenses to average net assets 0.55% 0.55% 0.56% 0.58% 0.60% Ratio of net investment income (loss) to average net assets 1.21% 1.23% 1.10 1.46% 1.30% Portfolio turnover rate (b) 135% 117% 133% 125% 117% </TABLE> (a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. See Notes to Financial Statements Page 47
FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 43.00 $ 35.10 $ 36.03 $ 29.07 $ 30.84 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.82 0.74 0.79 0.73 0.73 Net realized and unrealized gain (loss) (3.10) 7.91 (0.91) 6.96 (1.77) ------------ ------------ ------------ ------------ ------------ Total from investment operations (2.28) 8.65 (0.12) 7.69 (1.04) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.83) (0.75) (0.81) (0.73) (0.73) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 39.89 $ 43.00 $ 35.10 $ 36.03 $ 29.07 ============ ============ ============ ============ ============ TOTAL RETURN (a) (5.24)% 24.86% (0.04)% 26.60% (3.44)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 12,442,671 $ 12,954,187 $ 10,149,204 $ 9,665,219 $ 4,374,483 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.65% 0.67% 0.70% 0.71% 0.72% Ratio of net expenses to average net assets 0.65% 0.67% 0.70% 0.70% 0.70% Ratio of net investment income (loss) to average net assets 2.04% 1.91% 2.47% 2.36% 2.40% Portfolio turnover rate (b) 53% 47% 86% 53% 58% </TABLE> (a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 48 See Notes to Financial Statements
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 1. ORGANIZATION First Trust Exchange-Traded Fund (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on August 8, 2003, and is registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of twenty-three exchange-traded funds. This report covers the 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: <TABLE> <CAPTION> FUND INDEX <S> <C> 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(R) 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 </TABLE> 2. SIGNIFICANT ACCOUNTING POLICIES The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. Each Fund's NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows: Common stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the primary exchange for such securities. Page 49
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 Shares of open-end funds are valued based on NAV per share. Securities traded in an over-the-counter market are valued at the mean of their most recent bid and asked price, if available, and otherwise at their last trade price. Overnight repurchase agreements are valued at amortized cost when it represents the most appropriate reflection of fair market value. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Advisor's Pricing Committee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price; 2) the type of security; 3) the size of the holding; 4) the initial cost of the security; 5) transactions in comparable securities; 6) price quotes from dealers and/or third-party pricing services; 7) relationships among various securities; 8) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 9) an analysis of the issuer's financial statements; 10) the existence of merger proposals or tender offers that might affect the value of the security; and 11) other relevant factors. In addition, differences between the prices used to calculate a Fund's NAV and the prices used by such Fund's corresponding index could result in a difference between a Fund's performance and the performance of its underlying index. The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of December 31, 2022, is included with each Fund's Portfolio of Investments. Page 50
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing requirements to determine fair value in good faith for purposes of the 1940 Act. The rule permits fund boards to designate a fund's investment advisor to perform fair value determinations, subject to board oversight and certain other conditions. The rule also defines when market quotations are "readily available" for purposes of the 1940 Act and requires a fund to fair value a portfolio investment when a market quotation is not readily available. The SEC also adopted new Rule 31a-4 under the 1940 Act, which sets forth recordkeeping requirements associated with fair value determinations. The compliance date for Rule 2a-5 and Rule 31a-4 was September 8, 2022. Effective September 8, 2022 and pursuant to the requirements of Rule 2a-5, the Trust's Board of Trustees designated the Advisor as its valuation designee to perform fair value determinations and approved new Advisor Valuation Procedures for the Trust. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis. Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund's understanding of the applicable country's tax rules and rates. Distributions received from a Fund's investments in real estate investment trusts ("REITs") may be comprised of return of capital, capital gains and income. The actual character of the amounts received during the year is not known until after the REITs' fiscal year end. A Fund records the character of distributions received from 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 Page 51
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 interest earned from the investment of cash collateral. The fees received from the securities lending agent are accrued daily. The dividend and interest earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At December 31, 2022, only FDM, FPX and FDN had securities in the securities lending program. During the fiscal year ended December 31, 2022, 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. 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, 2022, 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. A Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. The tax character of distributions paid by each Fund during the fiscal year ended December 31, 2022 was as follows: <TABLE> <CAPTION> Distributions Distributions Distributions paid from paid from paid from Ordinary Income Capital Gains Return of Capital ------------------ ---------------- ----------------- <S> <C> <C> <C> First Trust Dow Jones Select MicroCap Index Fund $ 2,696,103 $ -- $ -- First Trust Morningstar Dividend Leaders Index Fund 122,518,973 -- -- First Trust US Equity Opportunities ETF 9,427,777 -- -- First Trust NYSE(R) Arca(R) Biotechnology Index Fund -- -- -- First Trust Dow Jones Internet Index Fund -- -- -- First Trust Capital Strength ETF 104,442,497 -- -- First Trust Value Line(R) Dividend Index Fund 255,493,903 -- -- </TABLE> Page 52
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 The tax character of distributions paid by each Fund during the fiscal year ended December 31, 2021 was as follows: <TABLE> <CAPTION> Distributions Distributions Distributions paid from paid from paid from Ordinary Income Capital Gains Return of Capital ------------------ ---------------- ----------------- <S> <C> <C> <C> 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 -- -- </TABLE> As of December 31, 2022, the components of distributable earnings on a tax basis for each Fund were as follows: <TABLE> <CAPTION> Accumulated Undistributed Capital and Net Unrealized Ordinary Other Appreciation Income Gain (Loss) (Depreciation) ------------------ ---------------- ----------------- <S> <C> <C> <C> First Trust Dow Jones Select MicroCap Index Fund $ -- $ (53,504,160) $ (11,736,962) First Trust Morningstar Dividend Leaders Index Fund 428,089 (339,388,648) 142,814,052 First Trust US Equity Opportunities ETF 564,575 (614,449,867) (40,206,579) First Trust NYSE(R) Arca(R) Biotechnology Index Fund -- (608,689,298) 65,144,886 First Trust Dow Jones Internet Index Fund -- (570,251,563) (2,484,232,642) First Trust Capital Strength ETF 165,743 (835,844,643) 513,771,423 First Trust Value Line(R) Dividend Index Fund -- (482,206,022) 834,263,506 </TABLE> 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 2019, 2020, 2021, and 2022 remain open to federal and state audit. As of December 31, 2022, management has evaluated the application of these standards to the Funds, and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions. Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At December 31, 2022, for federal income tax purposes, each applicable Fund had a capital loss carryforward available that is shown in the table below, to the extent provided by regulations, to offset future capital gains. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to each applicable Fund's shareholders. <TABLE> <CAPTION> Non-Expiring Capital Loss Carryforwards --------------------- <S> <C> First Trust Dow Jones Select MicroCap Index Fund $ 53,504,160 First Trust Morningstar Dividend Leaders Index Fund 339,388,648 First Trust US Equity Opportunities ETF 614,449,867 First Trust NYSE(R) Arca(R) Biotechnology Index Fund 608,689,298 First Trust Dow Jones Internet Index Fund 570,251,563 First Trust Capital Strength ETF 835,844,643 First Trust Value Line(R) Dividend Index Fund* 482,206,022 </TABLE> * $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 $364,518 per year. Page 53
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended December 31, 2022, the Funds had no net late year ordinary or capital losses. In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Funds and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended December 31, 2022, the adjustments for each Fund were as follows: <TABLE> <CAPTION> Accumulated Accumulated Net Realized Net Investment Gain (Loss) Paid-in Income (Loss) on Investments Capital ------------------ ---------------- ----------------- <S> <C> <C> <C> First Trust Dow Jones Select MicroCap Index Fund $ 4,133 $ (21,805,709) $ 21,801,576 First Trust Morningstar Dividend Leaders Index Fund -- (98,567,582) 98,567,582 First Trust US Equity Opportunities ETF 1,126 (71,346,627) 71,345,501 First Trust NYSE(R) Arca(R) Biotechnology Index Fund 3,533,844 (38,279,503) 34,745,659 First Trust Dow Jones Internet Index Fund 13,722,408 (632,963,406) 619,240,998 First Trust Capital Strength ETF -- (390,929,178) 390,929,178 First Trust Value Line(R) Dividend Index Fund 4,309,134 (562,922,699) 558,613,565 </TABLE> As of December 31, 2022, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows: <TABLE> <CAPTION> Gross Gross Net Unrealized Unrealized Unrealized Appreciation Tax Cost Appreciation (Depreciation) (Depreciation) ---------------- ------------------ ---------------- ----------------- <S> <C> <C> <C> <C> First Trust Dow Jones Select MicroCap Index Fund $ 163,619,223 $ 8,387,352 $ (20,124,314) $ (11,736,962) First Trust Morningstar Dividend Leaders Index Fund 4,646,977,664 380,030,909 (237,216,857) 142,814,052 First Trust US Equity Opportunities ETF 855,994,575 49,229,448 (89,436,027) (40,206,579) First Trust NYSE(R) Arca(R) Biotechnology Index Fund 1,418,223,988 258,066,097 (192,921,211) 65,144,886 First Trust Dow Jones Internet Index Fund 6,037,594,433 53,700,010 (2,537,932,652) (2,484,232,642) First Trust Capital Strength ETF 8,175,255,449 758,726,485 (244,955,062) 513,771,423 First Trust Value Line(R) Dividend Index Fund 11,586,641,769 1,501,917,776 (667,654,040) 834,263,736 </TABLE> 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: <TABLE> <CAPTION> FUND LICENSOR <S> <C> 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 </TABLE> 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. Page 54
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in each Fund's portfolio, managing the Funds' business affairs and providing certain administrative services necessary for the management of the Funds. Effective November 1, 2022, the management fee payable by each Fund to First Trust for these services will be reduced at certain levels of each Fund's net assets ("breakpoints") and calculated pursuant to the schedule below: <TABLE> <CAPTION> Breakpoints FDM FDL FPX FBT FDN FTCS FVD ------------------------------------------------------------- ------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> Fund net assets up to and including $2.5 billion 0.5000% 0.3000% 0.40% 0.40% 0.40% 0.5000% 0.5000% Fund net assets greater than $2.5 billion up to and including $5 billion 0.4875% 0.2925% 0.39% 0.39% 0.39% 0.4875% 0.4875% Fund net assets greater than $5 billion up to and including $7.5 billion 0.4750% 0.2850% 0.38% 0.38% 0.38% 0.4750% 0.4750% Fund net assets greater than $7.5 billion up to and including $10 billion 0.4625% 0.2775% 0.37% 0.37% 0.37% 0.4625% 0.4625% Fund net assets greater than $10 billion up to and including $15 billion 0.4500% 0.2700% 0.36% 0.36% 0.36% 0.4500% 0.4500% Fund net assets greater than $15 billion 0.4250% 0.2550% 0.34% 0.34% 0.34% 0.4250% 0.4250% </TABLE> Prior to November 1, 2022, First Trust was entitled to receive monthly fees from each Fund calculated at the following annual rates: <TABLE> <CAPTION> % of Average Daily Net Assets ---------------- <S> <C> 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% </TABLE> The Trust and the Advisor have entered into an Expense Reimbursement, Fee Waiver and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to waive fees and/or reimburse Fund expenses to the extent that the operating expenses of each Fund (excluding interest expense, brokerage commissions and other trading expenses, acquired fund fees and expenses, taxes and extraordinary expenses) exceed the below amount as a percentage of average daily net assets per year (the "Expense Cap"). The Expense Cap will be in effect until at least April 30, 2024. <TABLE> <CAPTION> Expense Cap ---------------- <S> <C> 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% </TABLE> Prior to November 1, 2022, expenses reimbursed and fees waived by First Trust under the Recovery Agreement were subject to recovery by First Trust for up to three years from the date the fee or expense was incurred, but no reimbursement payment would be made by a Fund if it resulted in the Fund exceeding (i) the applicable expense limitation in place for the most recent fiscal year for which such expense limitation was in place, (ii) the applicable expense limitation in place at the time the fees were waived, or (iii) the current expense limitation. These amounts would be included in "Expenses previously waived or reimbursed" on the Statements of Operations. First Trust did not recover expenses from any Funds during the year. Effective November 1, 2022, in connection with the introduction of breakpoints discussed above, First Trust has agreed to remove its ability to recover previous expenses borne and fees waived under the Recovery Agreement. Page 55
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 The Trust has multiple service agreements with BNYM. Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund. Additionally, the Lead Independent Trustee and the Chairs of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairs rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES For the fiscal year ended December 31, 2022, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows: <TABLE> <CAPTION> Purchases Sales --------------- ---------------- <S> <C> <C> First Trust Dow Jones Select MicroCap Index Fund $ 131,056,048 $ 130,339,718 First Trust Morningstar Dividend Leaders Index Fund 1,763,531,857 1,762,398,655 First Trust US Equity Opportunities ETF 1,352,447,834 1,351,967,020 First Trust NYSE(R) Arca(R) Biotechnology Index Fund 554,373,169 558,235,059 First Trust Dow Jones Internet Index Fund 1,326,762,827 1,338,175,822 First Trust Capital Strength ETF 11,327,486,939 11,322,886,717 First Trust Value Line(R) Dividend Index Fund 6,578,928,534 6,570,976,285 </TABLE> For the fiscal year ended December 31, 2022, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows: <TABLE> <CAPTION> Purchases Sales --------------- ---------------- <S> <C> <C> First Trust Dow Jones Select MicroCap Index Fund $ 113,193,549 $ 131,476,879 First Trust Morningstar Dividend Leaders Index Fund 3,822,124,767 816,139,682 First Trust US Equity Opportunities ETF 49,535,014 514,788,444 First Trust NYSE(R) Arca(R) Biotechnology Index Fund 126,235,523 256,686,261 First Trust Dow Jones Internet Index Fund 2,485,146,421 5,130,551,782 First Trust Capital Strength ETF 3,131,453,354 2,803,988,769 First Trust Value Line(R) Dividend Index Fund 2,843,444,102 2,401,526,667 </TABLE> 5. CREATION, REDEMPTION AND TRANSACTION FEES Each Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as "Authorized Participants" have contractual arrangements with a Fund or one of the Fund's service providers to purchase and redeem Fund shares directly with the Fund in large blocks of shares known as "Creation Units." Prior to the start of trading on every business day, a Fund publishes through the National Securities Clearing Corporation ("NSCC") the "basket" of securities, cash or other assets that it will accept in exchange for a Creation Unit of the Fund's shares. An Authorized Participant that wishes to effectuate a creation of a Fund's shares deposits with the Fund the "basket" of securities, cash or other assets identified by the Fund that day, and then receives the Creation Unit of the Fund's shares in return for those assets. After purchasing a Creation Unit, the Authorized Participant may continue to hold the Fund's shares or sell them in the secondary market. The redemption process is the reverse of the purchase process: the Authorized Participant redeems a Creation Unit of a Fund's shares for a basket of securities, cash or other assets. The combination of the creation and redemption process with secondary market trading in a Fund's shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of a Fund's shares at or close to the NAV per share of the Fund. Page 56
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 Each Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various 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. 6. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before April 30, 2024. 7. INDEMNIFICATION The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 8. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 57
-------------------------------------------------------------------------------- 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, 2022, 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, 2022, 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, 2022, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois February 23, 2023 We have served as the auditor of one or more First Trust investment companies since 2001. Page 58
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION For the taxable year ended December 31, 2022, the following percentages of income dividends paid by the Funds qualify for the dividends received deduction available to corporations: <TABLE> <CAPTION> Dividends Received Deduction ---------------------------- <S> <C> First Trust Dow Jones Select MicroCap Index Fund 91.54% 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% </TABLE> For the taxable year ended December 31, 2022, the following percentages of income dividends paid by the Funds are hereby designated as qualified dividend income: <TABLE> <CAPTION> Qualified Dividend Income ---------------------------- <S> <C> First Trust Dow Jones Select MicroCap Index Fund 91.54% 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% </TABLE> A portion of each of the Funds' 2022 ordinary dividends (including short-term capital gains) paid to its shareholders during the fiscal year ended December 31, 2022, may be eligible for the Qualified Business Income Deduction (QBI) under Internal Revenue Code Section 199A for the aggregate dividends each Fund received from the underlying Real Estate Investment Trusts (REITs) these Funds invest in. RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. Page 59
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (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 60
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (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 has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate ("SOFR") will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. MARKET RISK. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund's portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund's shares and result in increased market volatility. During any such events, a fund's shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund's shares may widen. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; Page 61
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. OPERATIONAL RISK. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund's service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund's ability to meet its investment objective. Although the funds and the funds' investment advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company's capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock. VALUATION RISK. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AGREEMENT BOARD CONSIDERATIONS REGARDING APPROVAL OF AMENDMENTS TO THE INVESTMENT MANAGEMENT AGREEMENT The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, unanimously approved the amendment (the "Amendment") of the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the following seven series of the Trust (each a "Fund" and collectively, the "Funds"): 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) The Board approved the Amendment for each Fund at a meeting held on October 24, 2022. As part of the review process, the Board reviewed information and had preliminary discussions with the Advisor regarding the proposed Amendment at meetings held on April 18, 2022, June 12-13, 2022 and September 18-19, 2022. Following those preliminary discussions, the Board requested and received information from the Advisor regarding the proposed Amendment, and that information was considered at an executive session of the Independent Trustees and their counsel held prior to the October 24, 2022 meeting, as well as at the October meeting. Page 62
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) In reviewing the Amendment for each Fund, the Board considered that the purpose of the Amendment is to modify the advisory fee rate for each Fund under the Agreement by introducing a breakpoint schedule pursuant to which the advisory fee rate paid by each Fund to the Advisor will be reduced as assets of such Fund meet certain thresholds. The Board noted the Advisor's representations that the quality and quantity of the services provided to each Fund by the Advisor under the Agreement will not be reduced or modified as a result of the Amendment, and that the obligations of the Advisor under the Agreement will remain the same in all respects. The Board noted that it, including the Independent Trustees, last approved the continuation of the Agreement for each Fund for a one-year period ending June 30, 2023 at a meeting held on June 12-13, 2022. The Board noted that in connection with such approval it had determined for each Fund, based upon the information provided, that the terms of the Agreement were fair and reasonable and that the continuation of the Agreement was in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. The Board noted that the Advisor had previously agreed to waive management fees and reimburse certain expenses for a specified period to prevent each Fund's expense ratio from exceeding a particular expense cap, that the expense cap for each Fund would continue following entry into the Amendment, and that under the current terms of the expense caps, expenses reimbursed and fees waived are subject to recovery by the Advisor for up to three years from the date the fee was waived or expense was incurred under certain conditions. The Board noted that in connection with the Amendment, the Advisor agreed to amend the terms of the expense caps to eliminate its ability to recover any fees waived or expenses reimbursed. Based on all of the information considered, the Board, including the Independent Trustees, unanimously determined that the terms of the Amendment are fair and reasonable and that the Amendment is in the best interests of each Fund. 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, 2022, the amount of remuneration paid (or to be paid) by First Trust Advisors L.P. in respect of the Funds is $15,479,311. This figure is comprised of $600,079 paid (or to be paid) in fixed compensation and $14,879,232 paid (or to be paid) in variable compensation. There were a total of 24 beneficiaries of the remuneration described above. Those amounts include $8,163,831 paid (or to be paid) to senior management of First Trust Advisors L.P. and $7,315,480 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 63
-------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891. <TABLE> <CAPTION> 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 ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Richard E. Erickson, Trustee o Indefinite Term Physician, Edward-Elmhurst Medical Group, 222 None (1951) Physician & Officer, Wheaton Orthopedics o Since Inception (1990 to 2021) Thomas R. Kadlec, Trustee o Indefinite Term Retired; President, ADM Investors 222 Director, National Futures (1957) Services, Inc. (Futures Commission Association and ADMIS o Since Inception Merchant) (2010 to July 2022) Singapore Ltd.; Formerly, Director of ADM Investor Services, Inc., ADM Investor Services International, ADMIS Hong Kong Ltd., and Futures Industry Association Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate Aurora 222 Director and Board Chair (1964) Health and President, Advocate Aurora of Advocate Home Health o Since 2021 Continuing Health Division (Integrated Services, Advocate Home Healthcare System) Care Products and Advocate Hospice; Director and Board Chair of Aurora At Home (since 2018); Director of Advocate Physician Partners Accountable Care Organization; Director and Board Chair of RML Long Term Acute Care Hospitals; and Director of Senior Helpers (since 2021) Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 222 Formerly, Director of (1956) and Management Consulting) Trust Company of Illinois o Since Inception Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 222 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 222 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) </TABLE> ----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 64
-------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) <TABLE> <CAPTION> POSITION AND TERM OF OFFICE NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer, (1966) Executive Officer First Trust Advisors L.P. and First Trust Portfolios o Since January 2016 L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1972) Officer and Chief First Trust Portfolios L.P. Accounting Officer o Since January 2016 W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel, o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and First (1970) Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Chief Compliance Officer Since January 2011 o Assistant Secretary Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1966) First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception </TABLE> ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 65
-------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies." For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2022 Page 66
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FIRST TRUST First Trust Exchange-Traded Fund INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 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
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FIRST TRUST First Trust Exchange-Traded Fund Book 2 First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) First Trust NASDAQ-100-Technology Sector Index Fund (QTEC) First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT) First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN) First Trust S&P REIT Index Fund (FRI) First Trust Water ETF (FIW) First Trust Natural Gas ETF (FCG) First Trust Chindia ETF (FNI) First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA) Annual Report December 31, 2022
-------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2022 Shareholder Letter.......................................................... 2 Market Overview............................................................. 3 Fund Performance Overview First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW).................. 4 First Trust NASDAQ-100-Technology Sector Index Fund (QTEC)............... 6 First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT)............ 8 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)....... 10 First Trust S&P REIT Index Fund (FRI).................................... 12 First Trust Water ETF (FIW).............................................. 14 First Trust Natural Gas ETF (FCG)........................................ 16 First Trust Chindia ETF (FNI)............................................ 18 First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)............... 20 Notes to Fund Performance Overview.......................................... 22 Understanding Your Fund Expenses............................................ 23 Portfolio of Investments First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW).................. 25 First Trust NASDAQ-100-Technology Sector Index Fund (QTEC)............... 28 First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT)............ 30 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)....... 32 First Trust S&P REIT Index Fund (FRI).................................... 34 First Trust Water ETF (FIW).............................................. 36 First Trust Natural Gas ETF (FCG)........................................ 38 First Trust Chindia ETF (FNI)............................................ 40 First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)............... 43 Statements of Assets and Liabilities........................................ 46 Statements of Operations.................................................... 48 Statements of Changes in Net Assets......................................... 50 Financial Highlights........................................................ 54 Notes to Financial Statements............................................... 59 Report of Independent Registered Public Accounting Firm..................... 71 Additional Information...................................................... 72 Board of Trustees and Officers.............................................. 78 Privacy Policy.............................................................. 80
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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 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, 2022 Dear Shareholders: First Trust is pleased to provide you with the annual report for certain funds in the First Trust Exchange-Traded Fund (the "Funds"), which contains detailed information about the Funds for the twelve months ended December 31, 2022. The past year was filled with challenges, several of which surely tested the resolve of even the most seasoned investors. The year began with the same headwinds that existed at the end of 2021, namely: stubbornly high inflation and rising interest rates. When Russia invaded Ukraine in late February 2022, we added war, geopolitical tension, and potential food and energy shortages to the list. Considering the bleak backdrop at the start of the year, it probably does not surprise you to read that with a total return of -18.11%, 2022 was the worst year for the S&P 500(R) Index since 2008. Even the bond market struggled to provide a haven to weary investors. The Bloomberg U.S. Aggregate Bond Index posted a total return of -13.01% for the year; its worst total return in 45 years. A common topic of discussion in 2022 was whether central banks around the world had tightened monetary policy enough to quell inflation without causing excess damage to their economies. In the U.S., the Federal Reserve (the "Fed") described this as a "soft landing," stating it was their intent to keep the labor market strong but to increase interest rates enough to bring inflation down to 2.0%. True to their word, over the course of seven interest rate hikes, the Fed increased the Federal Funds target rate (upper bound) from 0.25% (where it stood in March 2022) to 4.50% as of December 2022. This is the highest the Federal Funds rate has been since 2008. The economic impact of the Fed's tighter monetary policy quickly became evident. Excluding the economic contraction from COVID-19 in 2020, the U.S. experienced its first decline in the gross domestic product ("GDP") growth rate since March 2014. Data from the U.S. Bureau of Economic Analysis indicates that annualized real GDP growth rates over the first three quarters of 2022 were -1.6%, -0.6%, and 3.2%, respectively. Thankfully, inflation, as measured by the trailing 12-month rate on the Consumer Price Index ("CPI"), appears to be responding to the Fed's tightening. After peaking at 9.1% in June 2022, the CPI rate fell to 6.5% at the end of December 2022. For comparative purposes, the CPI rate has averaged 2.5% over the past 30 years. Job creation has provided a respite from dreary economic data in recent months, but that could quickly change. Nearly 125,000 employees have lost their jobs since June 2022 as more than 120 U.S. companies announced layoffs, according to Forbes. The jury is still out on whether the Fed will be able to pull off a soft landing, but the job market will tell the tale, in my opinion. Since 1928, the S&P 500(R) Index has only fallen for two consecutive years on four occasions: The Great Depression, World War II, the oil crisis of the 1970s and the burst of the dot-com bubble in the early 2000s. As we enter 2023, the U.S. economy has significant obstacles to overcome to avoid a recession and another negative year. We will be watching and reporting on what transpires. Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Funds again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 2
-------------------------------------------------------------------------------- MARKET OVERVIEW -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2022 ROBERT F. CAREY, CFA SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST FIRST TRUST ADVISORS L.P. Mr. Carey is responsible for the overall management of research and analysis of the First Trust product line. Mr. Carey has more than 30 years of experience as an Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst ("CFA") designation. He is a graduate of the University of Illinois at Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been quoted by several publications, including The Wall Street Journal, The Wall Street Reporter, Bloomberg News Service, and Registered Rep. STATE OF THE ECONOMY/INVESTING The Federal Reserve (the "Fed") remained steadfast in its battle with stubbornly high inflation in 2022. The Federal Funds target rate (upper bound), which stood at a mere 0.25% in January 2022 closed the year at 4.50%, its highest level in over a decade. Fortunately, it appears that inflation, as measured by the Consumer Price Index ("CPI") is responding to the Fed's tightening. After peaking at 9.1% on a trailing 12-month basis in June 2022, the CPI fell to 6.5% in December 2022. While we were glad to see a decline in the CPI, it still stands significantly higher than the Fed's stated goal of 2.0%, suggesting that further action by the Fed may be warranted, in my opinion. The global growth forecast from the International Monetary Fund ("IMF") released in October 2022 projected a 2.7% real gross domestic product ("GDP") growth rate for 2023, down from 3.2% in 2022. The IMF is calling for a 1.0% growth rate for the U.S. GDP in 2023, down from its 1.6% estimate for 2022. As has been the case for many years, Emerging Market and Developing Economies are expected to grow faster than Advanced Economies. Their 2023 growth rate estimates are 3.7% and 1.1%, respectively. Investors continued to funnel capital into exchange-traded funds ("ETFs") and related exchange-traded products ("ETPs") in 2022 despite the sharp sell-off in the markets. ETFGI, an independent research and consultancy firm, reported that total assets invested in ETFs/ETPs listed in the U.S. stood at $6.51 trillion as of year-end, down 9.8% from $7.21 trillion at the end of 2021, according to its own release. Net inflows to ETFs/ETPs listed in the U.S. stood at $607.23 billion in 2022, their second highest level on record, surpassed only by the $919.78 billion of inflows in 2021. U.S. STOCKS AND BONDS In 2022, three of the major U.S. stock indices posted substantial double-digit losses. The S&P 500(R) Index, the S&P MidCap 400(R) Index and the S&P SmallCap 600(R) Index posted total returns of -18.11%, -13.06%, and -16.10%, respectively, according to Bloomberg. Of the 11 major sectors that comprise the S&P 500(R) Index, only the Energy and Utilities sectors posted positive total returns, up 65.72% and 1.57%, respectively. The two worst-performing sectors were the Communication Services sector, down 39.89% and the Consumer Discretionary sector, down 37.03%. Bloomberg's consensus year-over-year earnings growth rate estimates for the S&P 500(R) Index for 2023 and 2024 were 1.97% and 9.87%, respectively, as of January 6, 2023. The yield on the benchmark 10-Year Treasury Note ("T-Note") closed trading on December 30, 2022, at 3.88%, according to Bloomberg. The 3.88% yield stood 173 basis points ("bps") above its 2.15% average for the 10-year period ended December 30, 2022. Its yield rose 237 bps in 2022. Most bond investors likely know that as yields increase, prices fall. As indicated by the sizeable increase in the yield on the 10-Year T-Note, bond investors endured a challenging year of declines in 2022. In the U.S. bond market, all the major bond groups posted negative total returns in 2022. The top performing major debt group we track was intermediate Treasuries. The Bloomberg U.S. Treasury Intermediate Index posted a total return of -7.77%. FOREIGN STOCKS AND BONDS The U.S. dollar appreciated by 8.21% against a basket of major currencies in 2022, as measured by the U.S. Dollar Index ("DXY"), according to Bloomberg. The DXY Index closed 2022 at a reading of 103.52, significantly above its 20-year average of 88.53. The stronger U.S. dollar likely had a negative influence on the returns of unhedged foreign securities held by U.S. investors. The Bloomberg EM Hard Currency Aggregate Index of emerging markets debt posted a total return of -16.60% (USD), while the Bloomberg Global Aggregate Index of higher quality debt declined 16.25% (USD). With respect to equities, the MSCI Emerging Markets Index of stocks posted a total return of -20.09% (USD), while the MSCI World ex USA Index declined by 14.29% (USD) on a total return basis, according to Bloomberg. Page 3
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) The First Trust NASDAQ-100 Equal Weighted Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Nasdaq-100 Equal Weighted Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks and depositary receipts that comprise the Index. The Index is the equal-weighted version of the Nasdaq-100 Index(R), which includes 100 of the largest U.S. and international non-financial companies listed on The Nasdaq Stock Market LLC ("Nasdaq") based on market capitalization. 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 Nasdaq. The first day of secondary market trading in shares of the Fund was April 25, 2006. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (4/19/06) Ended Ended (4/19/06) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -24.62% 9.43% 13.68% 9.87% 56.90% 260.55% 381.91% Market Price -24.63% 9.42% 13.68% 9.87% 56.83% 260.46% 381.96% INDEX PERFORMANCE Nasdaq-100 Equal Weighted Index(SM) -24.31% 10.06% 14.38% 10.54% 61.49% 283.14% 433.52% S&P 500(R) Index -18.11% 9.42% 12.56% 8.82% 56.88% 226.54% 310.58% Nasdaq-100 Index(R) -32.38% 12.36% 16.45% 12.73% 79.07% 358.37% 639.93% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a net asset value ("NAV") return of -24.62% during the 12-month period covered by this report. During the same period, the Nasdaq-100 Index(R) (the "Benchmark") generated a return of -32.38%. The Information Technology sector was the largest sector allocation with an average weight of 41.0% and contributed -16.1% to the Fund's return. The second largest sector allocation was to the Consumer Discretionary sector, at a weight of 14.9% and a -3.9% contribution to the Fund's return. The most significant positive contribution came from the investments in the Utilities sector, which at an average weight of 4.0% contributed 0.7% to the Fund's return. ----------------------------- Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Equal Weighted 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 4
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 38.4% Consumer Discretionary 15.7 Health Care 13.1 Communication Services 10.2 Industrials 9.2 Consumer Staples 7.2 Utilities 4.1 Energy 2.1 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Charter Communications, Inc., Class A 1.1% Align Technology, Inc. 1.1 Exelon Corp. 1.1 Baker Hughes Co. 1.1 O'Reilly Automotive, Inc. 1.1 Cognizant Technology Solutions Corp., Class A 1.1 PayPal Holdings, Inc. 1.1 Booking Holdings, Inc. 1.1 Fiserv, Inc. 1.0 Honeywell International, Inc. 1.0 ------- Total 10.8% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust NASDAQ-100 Equal Nasdaq-100 Equal S&P 500(R) Nasdaq-100 Weighted Index Fund Weighted Index(SM) Index Index(R) <S> <C> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 $10,000 06/13 11,560 11,612 11,382 11,009 12/13 13,995 14,099 13,238 13,692 06/14 15,112 15,271 14,183 14,770 12/14 16,673 16,896 15,051 16,350 06/15 17,068 17,347 15,236 17,073 12/15 17,044 17,383 15,259 17,945 06/16 16,553 16,926 15,845 17,376 12/16 18,240 18,713 17,084 19,251 06/17 21,127 21,739 18,680 22,481 12/17 22,984 23,726 20,813 25,601 06/18 24,069 24,915 21,365 28,328 12/18 21,799 22,633 19,901 25,611 06/19 26,673 27,784 23,591 31,207 12/19 29,599 30,926 26,167 35,716 06/20 32,127 33,669 25,361 41,748 12/20 40,654 42,736 30,981 53,170 06/21 45,252 47,728 35,706 60,263 12/21 47,833 50,620 39,877 67,789 06/22 35,411 37,565 31,918 47,981 12/22 36,055 38,314 32,654 45,837 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 5
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) The First Trust NASDAQ-100-Technology Sector Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Nasdaq-100 Technology Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks and depositary receipts that comprise the Index. The Index is an equal-weighted index composed of the securities comprising the Nasdaq-100 Index(R) that are classified as "technology" according to the Industry Classification Benchmark classification system. The Nasdaq-100 Index(R) includes 100 of the largest U.S. and international non-financial companies listed on the Nasdaq based on market capitalization. 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 Nasdaq. The first day of secondary market trading in shares of the Fund was April 25, 2006. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (4/19/06) Ended Ended (4/19/06) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -39.81% 8.44% 15.98% 11.08% 49.96% 340.39% 478.70% Market Price -39.84% 8.42% 15.98% 11.08% 49.82% 340.30% 478.57% INDEX PERFORMANCE Nasdaq-100 Technology Sector Index(SM) -39.48% 9.10% 16.70% 11.78% 54.54% 368.57% 542.13% S&P 500(R) Index -18.11% 9.42% 12.56% 8.82% 56.88% 226.54% 310.58% S&P 500 Information Technology Index -28.19% 15.81% 18.33% 12.98% 108.30% 437.99% 667.58% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -39.81% during the 12-month period covered by this report. During the same period, the S&P 500 Information Technology Index (the "Benchmark") generated a return of -28.19%. The largest industry allocations over the period were to the Semiconductors & Semiconductor Equipment industry at 40.1% and the Software industry at 41.1%. Each contributed -12.8% and -17.0% toward the Fund's return, respectively, and were the largest contributors to the Fund's return since the Fund is so concentrated in these two industries. No industry allocation had a significantly positive contribution toward the Fund's return. ----------------------------- Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Technology Sector 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 6
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION(1) LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 91.6% Communication Services 5.7 Consumer Discretionary 2.7 ------- Total 100.0% ======= (1) The above sector classification is based on Standard & Poor's Global Industry Classification Standard ("GICS") and is different than the industry sector classification system used by the Index to select securities, which is the Industry Classification Benchmark ("ICB") system, the joint classification system of Dow Jones Indexes and FTSE Group. ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Cognizant Technology Solutions Corp., Class A 3.0% Intuit, Inc. 2.9 Broadcom, Inc. 2.9 Meta Platforms, Inc., Class A 2.9 ANSYS, Inc. 2.9 Advanced Micro Devices, Inc. 2.9 Intel Corp. 2.9 Analog Devices, Inc. 2.8 Cadence Design Systems, Inc. 2.8 Adobe, Inc. 2.8 ------- Total 28.8% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust NASDAQ-100- Nasdaq-100 Technology Sector Technology Sector S&P 500(R) S&P 500 Information Index Fund Index(SM) Index Technology Index <S> <C> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 $10,000 06/13 11,172 11,208 11,382 10,635 12/13 13,812 13,901 13,238 12,843 06/14 15,624 15,775 14,183 13,991 12/14 17,241 17,465 15,051 15,426 06/15 16,815 17,081 15,236 15,543 12/15 17,003 17,327 15,259 16,340 06/16 17,501 17,899 15,845 16,288 12/16 21,299 21,864 17,084 18,603 06/17 25,356 26,103 18,680 21,808 12/17 29,362 30,321 20,813 25,827 06/18 31,517 32,641 21,365 28,634 12/18 27,981 29,064 19,901 25,753 06/19 35,329 36,810 23,591 32,740 12/19 41,515 43,395 26,167 38,705 06/20 45,471 47,687 25,361 44,491 12/20 57,630 60,620 30,981 55,689 06/21 66,355 69,992 35,706 63,352 12/21 73,159 77,429 39,877 74,914 06/22 47,766 50,701 31,918 54,755 12/22 44,039 46,857 32,654 53,799 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 7
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) The First Trust NASDAQ-100 Ex-Technology Sector Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Nasdaq-100 Ex-Tech Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks and depositary receipts that comprise the Index. The Index is an equal-weighted index composed of the securities comprising the Nasdaq-100 Index(R) that are not classified as "technology" according to the Industry Classification Benchmark classification system. The Nasdaq-100 Index(R) includes 100 of the largest U.S. and international non-financial companies listed on the Nasdaq based on market capitalization. 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 Nasdaq. The first day of secondary market trading in shares of the Fund was February 15, 2007. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (2/8/07) Ended Ended (2/8/07) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -12.85% 10.01% 12.48% 9.31% 61.15% 224.09% 311.70% Market Price -12.82% 10.02% 12.47% 9.32% 61.19% 223.91% 311.98% INDEX PERFORMANCE Nasdaq-100 Ex-Tech Sector Index(SM) -12.52% 10.64% 13.15% 9.98% 65.79% 243.92% 353.21% Russell 1000(R) Index -19.13% 9.13% 12.37% 8.45% 54.80% 221.09% 263.02% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -12.85% during the 12-month period covered by this report. During the same period, the Russell 1000(R) Index (the "Benchmark") generated a return of -19.13%. The Fund allocated a significant portion of its assets to the Consumer Discretionary sector and the Health Care sector. These two sectors had an average weight of 24.7% and 21.3%, respectively. These sectors contributed -6.8% and -1.5% to the Fund's return, respectively. The largest contribution to the Fund's return by far came from the Consumer Discretionary sector. The second highest contribution came from the Information Technology sector at -2.11%, while the allocation to the Utilities sector had the greatest positive contribution to the Fund's return at 1.2%. ----------------------------- Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Ex-Tech Sector 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 8
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Consumer Discretionary 22.9% Health Care 20.3 Industrials 14.2 Communication Services 12.7 Consumer Staples 11.0 Information Technology 9.3 Utilities 6.3 Energy 3.3 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Charter Communications, Inc., Class A 1.8% Align Technology, Inc. 1.7 Baker Hughes Co. 1.7 O'Reilly Automotive, Inc. 1.6 Booking Holdings, Inc. 1.6 Exelon Corp. 1.6 PayPal Holdings, Inc. 1.6 Fiserv, Inc. 1.6 Honeywell International, Inc. 1.6 Kraft Heinz (The) Co. 1.6 ------- Total 16.4% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust NASDAQ-100 Nasdaq-100 Ex-Technology Sector Ex-Tech Sector Russell 1000(R) Index Fund Index(SM) Index <S> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 06/13 11,878 11,935 11,391 12/13 14,124 14,230 13,312 06/14 14,771 14,932 14,280 12/14 16,292 16,512 15,075 06/15 17,177 17,466 15,333 12/15 17,065 17,414 15,213 06/16 16,033 16,394 15,782 12/16 16,702 17,125 17,046 06/17 19,087 19,632 18,626 12/17 20,110 20,743 20,742 06/18 20,743 21,454 21,333 12/18 18,988 19,693 19,750 06/19 22,772 23,699 23,471 12/19 24,371 25,436 25,957 06/20 26,277 27,506 25,228 12/20 33,264 34,930 31,399 06/21 36,215 38,151 36,093 12/21 37,193 39,319 39,705 06/22 29,885 31,660 31,391 12/22 32,409 34,392 32,109 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 9
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) The First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Nasdaq(R) Clean Edge(R) Green Energy Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks and depositary receipts that comprise the Index. The Index is designed to track the performance of small, mid and large capitalization clean-energy companies that are publicly traded in the United States. The Index is rebalanced quarterly and reconstituted semi-annually and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. The Fund's shares are listed for trading on the Nasdaq. The first day of secondary market trading in shares of the Fund was February 14, 2007. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (2/8/07) Ended Ended (2/8/07) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -30.37% 19.09% 18.19% 6.07% 139.52% 431.72% 155.28% Market Price -30.38% 19.03% 18.24% 6.07% 138.95% 434.32% 155.20% INDEX PERFORMANCE Nasdaq(R) Clean Edge(R) Green Energy Index(SM) -30.15% 19.42% 18.28% 6.30% 142.88% 436.10% 164.12% Russell 2000(R) Index -20.44% 4.13% 9.01% 6.39% 22.41% 136.96% 167.77% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -30.37% during the 12-month period covered by this report. During the same period, the Russell 2000(R) Index (the "Benchmark") generated a return of -20.44%. The largest average weight over the period was to the Information Technology sector. This sector's average weight was 37.0%, contributed 2.5% toward the Fund's return, and was the most significant positive contribution toward the Fund's overall return. Other sectors in the Fund were weighed relatively lighter, with the Consumer Discretionary sector at 19.1%, the Industrials sector at 18.3%, the Materials sector at 13.5%, and the Utilities sector at 10.5%. The most significantly negative contribution to the Fund's return was -20.2% from the Consumer Discretionary sector. ----------------------------- Nasdaq(R), Clean Edge(R), and Nasdaq(R) Clean Edge(R) Green Energy Index(SM) are registered trademarks and service marks of Nasdaq, Inc. and Clean Edge, Inc., respectively (together with its affiliates hereinafter referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 10
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 37.7% Industrials 19.9 Consumer Discretionary 16.4 Materials 13.2 Utilities 11.8 Financials 1.0 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- ON Semiconductor Corp. 8.3% Enphase Energy, Inc. 8.3 Albemarle Corp. 7.8 Tesla, Inc. 6.4 Rivian Automotive, Inc., Class A 5.8 SolarEdge Technologies, Inc. 4.8 First Solar, Inc. 4.4 Lucid Group, Inc. 3.4 Wolfspeed, Inc. 3.4 Plug Power, Inc. 2.8 ------- Total 55.4% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust NASDAQ(R) Nasdaq(R) Clean Edge(R) Green Clean Edge(R) Russell 2000(R) Energy Index Fund Green Energy Index(SM) Index <S> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 06/13 14,949 14,909 11,586 12/13 18,978 18,933 13,882 06/14 21,827 21,781 14,325 12/14 18,400 18,342 14,561 06/15 19,747 19,688 15,253 12/15 17,215 17,172 13,918 06/16 15,528 15,450 14,227 12/16 16,849 16,717 16,885 06/17 19,698 19,567 17,728 12/17 22,196 22,074 19,359 06/18 21,370 21,273 20,842 12/18 19,483 19,401 17,226 06/19 23,473 23,380 20,151 12/19 27,799 27,677 21,622 06/20 33,289 33,154 18,815 12/20 78,815 78,834 25,941 06/21 77,759 77,935 30,491 12/21 76,361 76,743 29,787 06/22 58,729 59,107 22,808 12/22 53,172 53,610 23,696 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 11
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST S&P REIT INDEX FUND (FRI) The First Trust S&P REIT Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the S&P United States REIT Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the real estate investment trusts ("REITs") that comprise the Index. The Index seeks to measure the performance of publicly traded REITs domiciled in the U.S. that meet certain eligibility requirements. The Index is rebalanced 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 May 10, 2007. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (5/8/07) Ended Ended (5/8/07) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -24.63% 3.18% 5.83% 3.85% 16.96% 76.30% 80.62% Market Price -24.68% 3.18% 5.83% 3.85% 16.92% 76.23% 80.56% INDEX PERFORMANCE S&P United States REIT Index* -24.36% 3.68% 6.37% N/A 19.80% 85.47% N/A FTSE EPRA/NAREIT North America Index -24.84% 2.97% 5.64% 3.95% 15.76% 73.02% 83.27% Russell 3000(R) Index -19.21% 8.79% 12.13% 8.15% 52.37% 214.28% 240.95% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> * On November 6, 2008, the Fund's underlying index changed from the S&P REIT Composite Index to the S&P United States REIT Index. Effective December 31, 2008, the S&P REIT Composite Index was discontinued. Therefore, the Fund's performance and historical returns shown for the periods prior to November 6, 2008 are not necessarily indicative of the performance that the Fund, based on its current Index, would have generated. The inception date of the Index was June 30, 2008. Returns for the Index are only disclosed for those periods in which the Index was in existence for the whole period. (See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -24.63% during the 12-month period covered by this report. During the same period, the Russell 3000(R) Index (the "Benchmark") generated a return of -19.21%. Prologis, Inc. was the largest holding in the Fund during the period at a 9.4% average weight and also generated the largest contribution to the Fund's return at -2.8%. The largest positive contribution to the Fund's return came from VICI Properties Inc., which contributed 0.3% to the Fund's return. ----------------------------- S&P United States REIT Index ("Index") is a product of S&P Dow Jones Indices LLC or its affiliates ("SPDJI") and has been licensed for use by First Trust. S&P(R) is a registered trademark of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones(R) is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by First Trust. The Fund is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product nor do they have any liability for any errors, omissions, or interruptions of the Index. Page 12
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST S&P REIT INDEX FUND (FRI) (CONTINUED) ----------------------------------------------------------- % OF TOTAL REIT CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Specialized 25.0% Residential 17.6 Retail 17.0 Industrial 15.7 Health Care 10.1 Office 7.0 Diversified 4.1 Hotel & Resort 3.5 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Prologis, Inc. 10.8% Equinix, Inc. 6.3 Public Storage 4.6 Realty Income Corp. 4.1 Simon Property Group, Inc. 4.0 VICI Properties, Inc. 3.3 Welltower, Inc. 3.2 Digital Realty Trust, Inc. 3.0 AvalonBay Communities, Inc. 2.4 Alexandria Real Estate Equities, Inc. 2.3 ------- Total 44.0% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust S&P United States FTSE EPRA/NAREIT Russell 3000(R) S&P REIT Index Fund REIT Index North America Index Index <S> <C> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 $10,000 06/13 10,609 10,643 10,470 11,406 12/13 10,183 10,240 10,128 13,355 06/14 11,951 12,046 11,858 14,282 12/14 13,199 13,340 12,980 15,032 06/15 12,364 12,526 12,193 15,324 12/15 13,459 13,678 13,215 15,105 06/16 15,203 15,496 14,949 15,652 12/16 14,525 14,841 14,296 17,028 06/17 14,784 15,148 14,555 18,549 12/17 15,075 15,484 14,949 20,626 06/18 15,242 15,696 15,190 21,290 12/18 14,445 14,897 14,368 19,544 06/19 16,810 17,391 16,785 23,201 12/19 17,864 18,539 17,889 25,607 06/20 14,541 15,139 14,136 24,716 12/20 16,417 17,143 16,146 30,954 06/21 19,927 20,863 19,722 35,631 12/21 23,398 24,522 23,023 38,898 06/22 18,634 19,569 18,303 30,691 12/22 17,630 18,547 17,302 31,428 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 13
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST WATER ETF (FIW) The First Trust Water ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE Clean Edge Water 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 designed to track the performance of small, mid and large capitalization companies that derive a substantial portion of their revenues from the potable water and wastewater industries. The Fund's shares are listed for trading on the NYSE Arca. The Index is rebalanced and reconstituted semi-annually and the Fund will make corresponding changes to its portfolio shortly after the changes are made public. The first day of secondary market trading in shares of the Fund was May 11, 2007. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (5/8/07) Ended Ended (5/8/07) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -15.65% 10.99% 12.61% 10.03% 68.44% 227.86% 346.53% Market Price -15.69% 10.97% 12.59% 10.03% 68.27% 227.48% 346.34% INDEX PERFORMANCE ISE Clean Edge Water Index -15.17% 11.74% 13.32% 10.75% 74.17% 249.08% 394.00% Russell 3000(R) Index -19.21% 8.79% 12.13% 8.15% 52.37% 214.28% 240.95% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -15.65% during the 12-month period covered by this report. During the same period, the Russell 3000(R) Index (the "Benchmark") generated a return of -19.21%. The largest sector allocation was to the Industrials sector, with an average portfolio weight of 54.9%. This sector also contributed the most to the Fund's return, contributing -8.1%. Other significant contributors to the Fund's return were the Health Care sector and the Utilities sector. These sectors had an average weight of 11.5% and 21.1%, respectively, and contributed -2.1% and -2.7%, respectively, toward the Fund's return. No sector allocation contributed positively toward the Fund's return. ----------------------------- Nasdaq(R), Clean Edge(R), and ISE Clean Edge Water Index are registered trademarks and service marks of Nasdaq, Inc. and Clean Edge, Inc., respectively (together with its affiliates hereinafter referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 14
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST WATER ETF (FIW) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Industrials 52.7% Utilities 19.8 Health Care 13.1 Information Technology 8.6 Materials 3.5 Consumer Staples 2.3 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Xylem, Inc. 4.8% IDEXX Laboratories, Inc. 4.6 Agilent Technologies, Inc. 4.6 IDEX Corp. 4.5 Roper Technologies, Inc. 4.2 American Water Works Co., Inc. 4.0 AECOM 4.0 Danaher Corp. 3.9 Essential Utilities, Inc. 3.8 Tetra Tech, Inc. 3.7 ------- Total 42.1% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust ISE Clean Edge Russell 3000(R) Water ETF Water Index Index <S> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 06/13 10,709 10,754 11,406 12/13 13,092 13,190 13,355 06/14 13,465 13,603 14,282 12/14 13,139 13,317 15,032 06/15 12,269 12,473 15,324 12/15 11,849 12,085 15,105 06/16 13,910 14,236 15,652 12/16 15,665 16,075 17,028 06/17 17,103 17,559 18,549 12/17 19,463 20,040 20,626 06/18 19,307 19,896 21,290 12/18 17,732 18,318 19,544 06/19 22,167 22,971 23,201 12/19 24,313 25,266 25,607 06/20 22,679 23,682 24,716 12/20 29,467 30,865 30,954 06/21 34,170 35,890 35,631 12/21 38,862 41,141 38,898 06/22 29,652 31,473 30,691 12/22 32,786 34,908 31,428 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 15
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NATURAL GAS ETF (FCG) The First Trust Natural Gas ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE-Revere Natural Gas(TM) Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks, depositary receipts and master limited partnership ("MLP") units that comprise the Index. The Index is designed to track the performance of mid and large capitalization companies that derive a substantial portion of their revenue from mid-stream activities and/or the exploration and production of natural gas. The Fund's shares are listed for trading on the NYSE Arca. 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 first day of secondary market trading in shares of the Fund was May 11, 2007. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (5/8/07) Ended Ended (5/8/07) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV 47.27% 4.28% -9.06% -7.18% 23.31% -61.32% -68.86% Market Price 47.36% 4.28% -9.07% -7.18% 23.32% -61.34% -68.86% INDEX PERFORMANCE ISE-Revere Natural Gas(TM) Index 48.06% 3.87% -9.24% -7.07% 20.89% -62.08% -68.24% S&P Composite 1500(R) Energy Index 63.77% 8.35% 5.16% 4.46% 49.36% 65.33% 97.83% Russell 3000(R) Index -19.21% 8.79% 12.13% 8.15% 52.37% 214.28% 240.95% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of 47.27% during the 12-month period covered by this report. During the same period, the S&P Composite 1500(R) Energy Index (the "Benchmark") generated a return of 63.77%. The Oil & Gas Exploration & Production sub-industry was the largest allocation in the Fund at 81.4%. This sub-industry also produced the largest contribution to the Fund's return at 38.5%. The Oil & Gas Storage and Transportation sub-industry received the second highest allocation at an average weight of 12.8% and contributed 5.0% to the Fund's return. No industry or sub-industry allocation had a significantly negative contribution to the Fund's return. ----------------------------- Nasdaq(R) and ISE-Revere Natural Gas(TM) Index are registered trademarks and service marks of Nasdaq, Inc. (together with its affiliates hereinafter referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 16
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NATURAL GAS ETF (FCG) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SUB-INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Oil & Gas Exploration & Production 80.4% Oil & Gas Storage & Transportation 14.4 Integrated Oil & Gas 3.5 Gas Utilities 1.7 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- DCP Midstream, L.P. 4.9% Western Midstream Partners, L.P. 4.8 Hess Midstream, L.P., Class A 4.8 ConocoPhillips 3.7 Pioneer Natural Resources Co. 3.5 Occidental Petroleum Corp. 3.5 EOG Resources, Inc. 3.4 Hess Corp. 3.4 Diamondback Energy, Inc. 3.2 Devon Energy Corp. 3.2 ------- Total 38.4% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust ISE-Revere Natural Russell 3000(R) S&P Composite 1500(R) Natural Gas ETF Gas(TM) Index Index Energy Index <S> <C> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 $10,000 06/13 10,297 10,315 11,406 10,972 12/13 12,514 12,573 13,355 12,540 06/14 15,166 15,271 14,282 14,165 12/14 7,257 7,289 15,032 11,390 06/15 6,187 6,160 15,324 10,856 12/15 2,969 2,939 15,105 8,876 06/16 3,293 3,252 15,652 10,258 12/16 3,548 3,521 17,028 11,299 06/17 2,827 2,814 18,549 9,737 12/17 3,139 3,137 20,626 11,067 06/18 3,239 3,248 21,290 11,889 12/18 2,047 2,054 19,544 8,930 06/19 2,043 2,057 23,201 10,027 12/19 1,722 1,741 25,607 9,826 06/20 1,092 1,059 24,716 6,268 12/20 1,322 1,279 30,954 6,504 06/21 2,474 2,403 35,631 9,571 12/21 2,627 2,561 38,898 10,092 06/22 3,393 3,317 30,691 13,215 12/22 3,868 3,792 31,428 16,533 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 17
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST CHINDIA ETF (FNI) The First Trust Chindia ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE ChIndia(TM) Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks and depositary receipts that comprise the Index. The Index is a modified market capitalization weighted index designed to track the performance of U.S. listed securities issued by small, mid and large capitalization companies domiciled in China or India. The Fund's shares are listed for trading on the NYSE Arca. The Index is rebalanced and reconstituted semi-annually and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. The first day of secondary market trading in shares of the Fund was May 11, 2007. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (5/8/07) Ended Ended (5/8/07) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -19.75% -0.25% 7.03% 5.15% -1.24% 97.36% 119.48% Market Price -19.70% -0.26% 7.05% 5.15% -1.31% 97.65% 119.48% INDEX PERFORMANCE ISE ChIndia(TM) Index -19.17% 0.34% 7.60% 5.72% 1.72% 108.11% 138.93% Russell 3000(R) Index -19.21% 8.79% 12.13% 8.15% 52.37% 214.28% 240.95% MSCI Emerging Markets Index -20.09% -1.40% 1.44% 2.18% -6.79% 15.33% 40.07% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -19.75% during the 12-month period covered by this report. During the same period, the MSCI Emerging Markets Index (the "Benchmark") generated a return of -20.09%. During the same period, the Fund held Chinese securities at an average weight of 56.2% and Indian securities at an average weight of 43.5%. These countries contributed -11.9% and -7.07% toward the Fund's return, respectively. With regard to sector allocations by country, the Fund was widely dispersed, allocating 12.0% toward Chinese Communication Services companies, 32.4% toward Chinese Consumer Discretionary companies, 16.3% toward Indian Financial companies, and 15.0% toward Indian Information Technology companies. These were the largest sector allocations as a subset of countries, and thus, returns were largely contributed to these areas. Indian Financials contributed most positively toward the Fund's return, at 1.1%. ----------------------------- Nasdaq(R) and ISE ChIndia Index(TM) are registered trademarks and service marks of Nasdaq, Inc. (together with its affiliates hereinafter referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 18
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST CHINDIA ETF (FNI) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Consumer Discretionary 37.3% Information Technology 19.0 Financials 15.6 Communication Services 14.9 Health Care 6.0 Utilities 3.4 Real Estate 1.7 Industrials 1.4 Consumer Staples 0.7 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL COUNTRY ALLOCATION(1) LONG-TERM INVESTMENTS ----------------------------------------------------------- China 62.1% India 36.5 Hong Kong 1.4 ------- Total 100.0% ======= (1) Calculated based on country of risk. ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Alibaba Group Holding Ltd., ADR 7.2% Pinduoduo, Inc., ADR 7.1 JD.com, Inc., ADR 7.0 HDFC Bank Ltd., ADR 6.9 ICICI Bank Ltd., ADR 6.6 Infosys Ltd., ADR 6.3 Baidu, Inc., ADR 4.3 NetEase, Inc., ADR 4.2 WNS (Holdings) Ltd., ADR 3.9 Dr. Reddy's Laboratories Ltd., ADR 3.8 ------- Total 57.3% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust ISE ChIndia(TM) Russell 3000(R) MSCI Emerging Chindia ETF Index Index Markets Index <S> <C> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 $10,000 06/13 10,123 10,153 11,406 9,043 12/13 13,580 13,642 13,355 9,739 06/14 14,429 14,526 14,282 10,337 12/14 13,902 14,018 15,032 9,527 06/15 14,890 15,043 15,324 9,808 12/15 13,857 14,040 15,105 8,105 06/16 13,353 13,565 15,652 8,625 12/16 13,560 13,825 17,028 9,012 06/17 17,407 17,791 18,549 10,673 12/17 19,981 20,460 20,626 12,372 06/18 19,595 20,110 21,290 11,548 12/18 15,848 16,313 19,544 10,568 06/19 18,415 19,003 23,201 11,687 12/19 20,437 21,135 25,607 12,516 06/20 20,934 21,716 24,716 11,292 12/20 30,503 31,766 30,954 14,808 06/21 32,306 33,713 35,631 15,911 12/21 24,591 25,747 38,898 14,431 06/22 20,986 22,045 30,691 11,887 12/22 19,736 20,811 31,428 11,533 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 19
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) The First Trust NASDAQ(R) ABA Community Bank Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Nasdaq OMX(R) ABA Community Bank Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks that comprise the Index. The Index is designed to track the performance of small, mid and large capitalization companies that comprise the community banking industry. The Fund's shares are listed for trading on the Nasdaq. The Index is rebalanced quarterly and reconstituted semi-annually and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. The first day of secondary market trading in shares of the Fund was July 1, 2009. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (6/29/09) Ended Ended (6/29/09) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -8.70% 2.33% 9.41% 9.29% 12.19% 145.75% 231.88% Market Price -8.70% 2.28% 9.48% 9.29% 11.94% 147.35% 231.98% INDEX PERFORMANCE Nasdaq OMX(R) ABA Community Bank Index(SM) -8.19% 2.97% 10.10% 9.99% 15.78% 161.73% 261.69% S&P Composite 1500(R) Financials Index -10.15% 6.24% 12.03% 11.98% 35.34% 211.39% 361.08% Russell 3000(R) Index -19.21% 8.79% 12.13% 13.12% 52.37% 214.28% 428.33% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -8.70% during the 12-month period covered by this report. During the same period, the S&P Composite 1500(R) Financials Index (the "Benchmark") generated a return of -10.15%. The Fund allocated 91.9% to regional banks over the same period, with 7.7% also being allocated to thrifts and mortgage finance companies. Regional banks contributed -7.3% toward the Fund's return while thrifts and mortgage finance companies contributed -0.9% toward the Fund's return. No other sub-industry contributed significantly toward the Fund's return. ----------------------------- Nasdaq(R), Nasdaq OMX(R), OMX(R), American Bankers Association(R), ABA(R) and the Nasdaq OMX(R) ABA(R) Community Bank Index(SM) are registered trademarks and service marks of Nasdaq, Inc. and American Bankers Association (together with its affiliates hereinafter referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 20
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) (CONTINUED) ----------------------------------------------------------- % OF TOTAL INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Banks 92.6% Thrifts & Mortgage Finance 7.1 IT Services 0.3 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Commerce Bancshares, Inc. 3.7% BOK Financial Corp. 3.0 SouthState Corp. 2.5 Pinnacle Financial Partners, Inc. 2.4 United Bankshares, Inc. 2.4 Old National Bancorp 2.3 Wintrust Financial Corp. 2.2 First Financial Bankshares, Inc. 2.1 Bank OZK 2.1 Hancock Whitney Corp. 1.8 ------- Total 24.5% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust NASDAQ(R) ABA Nasdaq OMX(R) Community Bank ABA Community S&P Composite 1500(R) Russell 3000(R) Index Fund Bank Index(SM) Financials Index Index <S> <C> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 $10,000 06/13 11,850 11,889 11,876 11,406 12/13 14,290 14,383 13,426 13,355 06/14 14,286 14,423 14,120 14,282 12/14 14,679 14,863 15,425 15,032 06/15 16,019 16,272 15,460 15,324 12/15 15,836 16,130 15,315 15,105 06/16 15,567 15,904 15,067 15,652 12/16 21,786 22,337 19,034 17,028 06/17 21,028 21,627 20,220 18,549 12/17 21,907 22,605 23,012 20,626 06/18 23,026 23,830 22,234 21,290 12/18 18,370 19,059 20,013 19,544 06/19 20,615 21,459 23,451 23,201 12/19 22,559 23,556 26,260 25,607 06/20 15,647 16,395 20,005 24,716 12/20 20,072 21,115 25,759 30,959 06/21 24,978 26,366 32,240 35,637 12/21 26,917 28,507 34,658 38,902 06/22 22,968 24,388 28,343 30,694 12/22 24,575 26,173 31,139 31,428 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 21
-------------------------------------------------------------------------------- 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 22
FIRST TRUST EXCHANGE-TRADED FUND UNDERSTANDING YOUR FUND EXPENSES DECEMBER 31, 2022 (UNAUDITED) As a shareholder of First Trust NASDAQ-100 Equal Weighted Index Fund, First Trust NASDAQ-100-Technology Sector Index Fund, First Trust NASDAQ-100 Ex-Technology Sector Index Fund, First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund, First Trust S&P REIT Index Fund, First Trust Water ETF, First Trust Natural Gas ETF, First Trust Chindia ETF or First Trust NASDAQ(R) ABA Community Bank Index Fund (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (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, 2022. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. <TABLE> <CAPTION> ----------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2022 DECEMBER 31, 2022 PERIOD (a) PERIOD (b) ----------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) Actual $1,000.00 $1,018.30 0.58% $2.95 Hypothetical (5% return before expenses) $1,000.00 $1,022.28 0.58% $2.96 FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) Actual $1,000.00 $ 921.90 0.58% $2.81 Hypothetical (5% return before expenses) $1,000.00 $1,022.28 0.58% $2.96 FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) Actual $1,000.00 $1,084.60 0.60% $3.15 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) Actual $1,000.00 $ 905.30 0.58% $2.79 Hypothetical (5% return before expenses) $1,000.00 $1,022.28 0.58% $2.96 FIRST TRUST S&P REIT INDEX FUND (FRI) Actual $1,000.00 $ 946.40 0.50% $2.45 Hypothetical (5% return before expenses) $1,000.00 $1,022.68 0.50% $2.55 FIRST TRUST WATER ETF (FIW) Actual $1,000.00 $1,105.60 0.54% $2.87 Hypothetical (5% return before expenses) $1,000.00 $1,022.48 0.54% $2.75 </TABLE> Page 23
FIRST TRUST EXCHANGE-TRADED FUND UNDERSTANDING YOUR FUND EXPENSES (CONTINUED) DECEMBER 31, 2022 (UNAUDITED) <TABLE> <CAPTION> ----------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2022 DECEMBER 31, 2022 PERIOD (a) PERIOD (b) ----------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST NATURAL GAS ETF (FCG) Actual $1,000.00 $1,140.30 0.60% $3.24 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 FIRST TRUST CHINDIA ETF (FNI) Actual $1,000.00 $ 940.30 0.60% $2.93 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) Actual $1,000.00 $1,070.00 0.60% $3.13 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 </TABLE> (a) These expense ratios reflect an expense cap for certain Funds. See Note 3 in Notes to Financial Statements. (b) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (July 1, 2022 through December 31, 2022), multiplied by 184/365 (to reflect the six-month period). Page 24
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 100.0% AUTOMOBILES -- 2.6% 1,518,349 Lucid Group, Inc. (a) (b) $ 10,370,324 484,382 Rivian Automotive, Inc., Class A (b) 8,927,160 72,889 Tesla, Inc. (b) 8,978,467 --------------- 28,275,951 --------------- BEVERAGES -- 3.1% 308,855 Keurig Dr Pepper, Inc. 11,013,769 110,827 Monster Beverage Corp. (b) 11,252,266 61,520 PepsiCo, Inc. 11,114,203 --------------- 33,380,238 --------------- BIOTECHNOLOGY -- 6.9% 41,467 Amgen, Inc. 10,890,893 38,940 Biogen, Inc. (b) 10,783,265 127,666 Gilead Sciences, Inc. 10,960,126 57,290 Moderna, Inc. (b) 10,290,430 15,212 Regeneron Pharmaceuticals, Inc. (b) 10,975,306 85,136 Seagen, Inc. (b) 10,940,827 36,224 Vertex Pharmaceuticals, Inc. (b) 10,460,767 --------------- 75,301,614 --------------- COMMERCIAL SERVICES & SUPPLIES -- 2.1% 24,972 Cintas Corp. 11,277,855 183,086 Copart, Inc. (b) 11,148,106 --------------- 22,425,961 --------------- COMMUNICATIONS EQUIPMENT -- 1.0% 232,553 Cisco Systems, Inc. 11,078,825 --------------- ELECTRIC UTILITIES -- 4.1% 117,471 American Electric Power Co., Inc. 11,153,871 127,023 Constellation Energy Corp. 10,950,653 269,217 Exelon Corp. 11,638,251 158,772 Xcel Energy, Inc. 11,131,505 --------------- 44,874,280 --------------- ENERGY EQUIPMENT & SERVICES -- 1.1% 390,995 Baker Hughes Co. 11,546,082 --------------- ENTERTAINMENT -- 4.1% 144,558 Activision Blizzard, Inc. 11,065,915 91,665 Electronic Arts, Inc. 11,199,630 37,612 Netflix, Inc. (b) 11,091,026 1,122,568 Warner Bros Discovery, Inc. (b) 10,641,945 --------------- 43,998,516 --------------- FOOD & STAPLES RETAILING -- 2.0% 24,035 Costco Wholesale Corp. 10,971,977 284,660 Walgreens Boots Alliance, Inc. 10,634,898 --------------- 21,606,875 --------------- FOOD PRODUCTS -- 2.1% 278,720 Kraft Heinz (The) Co. 11,346,691 167,861 Mondelez International, Inc., Class A 11,187,936 --------------- 22,534,627 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 4.2% 56,599 Align Technology, Inc. (b) $ 11,936,729 96,497 Dexcom, Inc. (b) 10,927,321 27,095 IDEXX Laboratories, Inc. (b) 11,053,676 42,009 Intuitive Surgical, Inc. (b) 11,147,088 --------------- 45,064,814 --------------- HOTELS, RESTAURANTS & LEISURE -- 4.0% 124,150 Airbnb, Inc., Class A (b) 10,614,825 5,669 Booking Holdings, Inc. (b) 11,424,622 72,003 Marriott International, Inc., Class A 10,720,527 112,241 Starbucks Corp. 11,134,307 --------------- 43,894,281 --------------- INDUSTRIAL CONGLOMERATES -- 1.0% 52,991 Honeywell International, Inc. 11,355,971 --------------- INTERACTIVE MEDIA & SERVICES -- 2.0% 61,169 Alphabet, Inc., Class A (b) 5,396,941 60,861 Alphabet, Inc., Class C (b) 5,400,196 92,009 Meta Platforms, Inc., Class A (b) 11,072,363 --------------- 21,869,500 --------------- INTERNET & DIRECT MARKETING RETAIL -- 5.0% 126,005 Amazon.com, Inc. (b) 10,584,420 268,392 eBay, Inc. 11,130,216 192,234 JD.com, Inc., ADR 10,790,095 13,159 MercadoLibre, Inc. (b) 11,135,672 126,296 Pinduoduo, Inc., ADR (b) 10,299,439 --------------- 53,939,842 --------------- IT SERVICES -- 5.2% 44,972 Automatic Data Processing, Inc. 10,742,012 200,114 Cognizant Technology Solutions Corp., Class A 11,444,520 112,644 Fiserv, Inc. (b) 11,384,929 95,370 Paychex, Inc. 11,020,957 160,583 PayPal Holdings, Inc. (b) 11,436,721 --------------- 56,029,139 --------------- LIFE SCIENCES TOOLS & SERVICES -- 1.0% 55,220 Illumina, Inc. (b) 11,165,484 --------------- MACHINERY -- 1.0% 113,399 PACCAR, Inc. 11,223,099 --------------- MEDIA -- 3.2% 36,148 Charter Communications, Inc., Class A (b) 12,257,787 319,611 Comcast Corp., Class A 11,176,797 1,858,637 Sirius XM Holdings, Inc. (a) 10,854,440 --------------- 34,289,024 --------------- MULTILINE RETAIL -- 1.0% 77,275 Dollar Tree, Inc. (b) 10,929,776 --------------- See Notes to Financial Statements Page 25
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (CONTINUED) OIL, GAS & CONSUMABLE FUELS -- 1.0% 82,233 Diamondback Energy, Inc. $ 11,247,830 --------------- PHARMACEUTICALS -- 1.0% 162,374 AstraZeneca PLC, ADR 11,008,957 --------------- PROFESSIONAL SERVICES -- 2.0% 141,462 CoStar Group, Inc. (b) 10,932,183 62,445 Verisk Analytics, Inc. 11,016,547 --------------- 21,948,730 --------------- ROAD & RAIL -- 2.0% 351,716 CSX Corp. 10,896,162 37,275 Old Dominion Freight Line, Inc. 10,577,899 --------------- 21,474,061 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 16.5% 169,594 Advanced Micro Devices, Inc. (b) 10,984,603 66,404 Analog Devices, Inc. 10,892,248 105,320 Applied Materials, Inc. 10,256,062 19,417 ASML Holding N.V. 10,609,449 19,974 Broadcom, Inc. 11,168,063 36,364 Enphase Energy, Inc. (b) 9,635,005 182,184 GLOBALFOUNDRIES, Inc. (a) (b) 9,817,896 414,862 Intel Corp. 10,964,803 28,763 KLA Corp. 10,844,514 25,014 Lam Research Corp. 10,513,384 285,366 Marvell Technology, Inc. 10,569,957 152,356 Microchip Technology, Inc. 10,703,009 212,303 Micron Technology, Inc. 10,610,904 66,731 NVIDIA Corp. 9,752,068 67,645 NXP Semiconductors N.V. 10,689,939 96,927 QUALCOMM, Inc. 10,656,154 65,531 Texas Instruments, Inc. 10,827,032 --------------- 179,495,090 --------------- SOFTWARE -- 14.7% 32,428 Adobe, Inc. (b) 10,912,995 45,580 ANSYS, Inc. (b) 11,011,672 75,442 Atlassian Corp., Class A (b) 9,707,876 57,713 Autodesk, Inc. (b) 10,784,828 68,064 Cadence Design Systems, Inc. (b) 10,933,801 98,520 Crowdstrike Holdings, Inc., Class A (b) 10,373,171 143,598 Datadog, Inc., Class A (b) 10,554,453 212,229 Fortinet, Inc. (b) 10,375,876 28,781 Intuit, Inc. 11,202,141 45,113 Microsoft Corp. 10,819,000 73,028 Palo Alto Networks, Inc. (b) 10,190,327 33,683 Synopsys, Inc. (b) 10,754,645 63,342 Workday, Inc., Class A (b) 10,599,017 157,357 Zoom Video Communications, Inc., Class A (b) 10,659,363 97,148 Zscaler, Inc. (b) 10,870,861 --------------- 159,750,026 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- SPECIALTY RETAIL -- 2.1% 13,594 O'Reilly Automotive, Inc. (b) $ 11,473,744 97,461 Ross Stores, Inc. 11,312,298 --------------- 22,786,042 --------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.0% 82,001 Apple, Inc. 10,654,390 --------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.0% 34,326 Lululemon Athletica, Inc. (b) 10,997,364 --------------- TRADING COMPANIES & DISTRIBUTORS -- 1.0% 231,357 Fastenal Co. 10,947,813 --------------- WIRELESS TELECOMMUNICATION SERVICES -- 1.0% 78,087 T-Mobile US, Inc. (b) 10,932,180 --------------- TOTAL COMMON STOCKS -- 100.0% 1,086,026,382 (Cost $1,111,728,657) MONEY MARKET FUNDS -- 2.7% 29,948,691 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 4.14% (c) (d) 29,948,691 (Cost $29,948,691) --------------- TOTAL INVESTMENTS -- 102.7% 1,115,975,073 (Cost $1,141,677,348) NET OTHER ASSETS AND LIABILITIES -- (2.7)% (29,482,011) --------------- NET ASSETS -- 100.0% $ 1,086,493,062 =============== (a) 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 $29,490,464 and the total value of the collateral held by the Fund is $29,948,691. (b) Non-income producing security. (c) Rate shown reflects yield as of December 31, 2022. (d) This security serves as collateral for securities on loan. ADR - American Depositary Receipt Page 26 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 --------------------------------- OFFSETTING ASSETS AND LIABILITIES -------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT -------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 29,490,464 Non-cash Collateral(2) (29,490,464) --------------- 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, 2022, 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. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ---------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*................................ $ 1,086,026,382 $ 1,086,026,382 $ -- $ -- Money Market Funds............................ 29,948,691 29,948,691 -- -- ---------------------------------------------------------------- Total Investments............................. $ 1,115,975,073 $ 1,115,975,073 $ -- $ -- ================================================================ </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 27
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 99.9% INTERACTIVE MEDIA & SERVICES -- 5.7% 216,532 Alphabet, Inc., Class A (a) $ 19,104,618 215,403 Alphabet, Inc., Class C (a) 19,112,708 325,422 Meta Platforms, Inc., Class A (a) 39,161,284 --------------- 77,378,610 --------------- INTERNET & DIRECT MARKETING RETAIL -- 2.7% 445,697 Pinduoduo, Inc., ADR (a) 36,346,590 --------------- IT SERVICES -- 2.9% 706,269 Cognizant Technology Solutions Corp., Class A 40,391,524 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 44.3% 600,035 Advanced Micro Devices, Inc. (a) 38,864,267 235,499 Analog Devices, Inc. 38,628,901 374,315 Applied Materials, Inc. 36,450,795 68,646 ASML Holding N.V. 37,508,174 70,631 Broadcom, Inc. 39,491,911 646,033 GLOBALFOUNDRIES, Inc. (a) (b) 34,814,718 1,470,132 Intel Corp. 38,855,589 102,130 KLA Corp. 38,506,074 88,790 Lam Research Corp. 37,318,437 1,012,521 Marvell Technology, Inc. 37,503,778 540,637 Microchip Technology, Inc. 37,979,749 752,689 Micron Technology, Inc. 37,619,396 236,204 NVIDIA Corp. 34,518,853 239,523 NXP Semiconductors N.V. 37,851,820 342,149 QUALCOMM, Inc. 37,615,861 232,164 Texas Instruments, Inc. 38,358,136 --------------- 601,886,459 --------------- SOFTWARE -- 41.5% 114,636 Adobe, Inc. (a) 38,578,453 161,381 ANSYS, Inc. (a) 38,988,036 265,534 Atlassian Corp., Class A (a) 34,168,915 203,818 Autodesk, Inc. (a) 38,087,470 240,460 Cadence Design Systems, Inc. (a) 38,627,494 348,952 Crowdstrike Holdings, Inc., Class A (a) 36,741,156 506,917 Datadog, Inc., Class A (a) 37,258,400 749,572 Fortinet, Inc. (a) 36,646,575 101,615 Intuit, Inc. 39,550,590 159,734 Microsoft Corp. 38,307,408 257,755 Palo Alto Networks, Inc. (a) 35,967,133 119,245 Synopsys, Inc. (a) 38,073,736 223,249 Workday, Inc., Class A (a) 37,356,255 555,996 Zoom Video Communications, Inc., Class A (a) 37,663,169 342,087 Zscaler, Inc. (a) 38,279,535 --------------- 564,294,325 --------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 2.8% 290,572 Apple, Inc. 37,754,020 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- TOTAL COMMON STOCKS -- 99.9% $ 1,358,051,528 (Cost $1,682,634,795) --------------- MONEY MARKET FUNDS -- 2.6% 34,396,338 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 4.14% (c) (d) 34,396,338 (Cost $34,396,338) --------------- TOTAL INVESTMENTS -- 102.5% 1,392,447,866 (Cost $1,717,031,133) NET OTHER ASSETS AND LIABILITIES -- (2.5)% (33,310,383) --------------- NET ASSETS -- 100.0% $ 1,359,137,483 =============== (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 $33,714,931 and the total value of the collateral held by the Fund is $34,396,338. (c) Rate shown reflects yield as of December 31, 2022. (d) This security serves as collateral for securities on loan. ADR - American Depositary Receipt --------------------------------- 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) $ 33,714,931 Non-cash Collateral(2) (33,714,931) --------------- 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, 2022, 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. Page 28 See Notes to Financial Statements
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ---------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*................................ $ 1,358,051,528 $ 1,358,051,528 $ -- $ -- Money Market Funds............................ 34,396,338 34,396,338 -- -- ---------------------------------------------------------------- Total Investments............................. $ 1,392,447,866 $ 1,392,447,866 $ -- $ -- ================================================================ </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 29
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (a) -- 100.0% AUTOMOBILES -- 4.0% 286,015 Lucid Group, Inc. (b) (c) $ 1,953,482 93,769 Rivian Automotive, Inc., Class A (c) 1,728,163 14,031 Tesla, Inc. (c) 1,728,339 --------------- 5,409,984 --------------- BEVERAGES -- 4.7% 58,440 Keurig Dr Pepper, Inc. 2,083,970 20,916 Monster Beverage Corp. (c) 2,123,602 11,689 PepsiCo, Inc. 2,111,735 --------------- 6,319,307 --------------- BIOTECHNOLOGY -- 10.7% 7,883 Amgen, Inc. 2,070,391 7,397 Biogen, Inc. (c) 2,048,377 24,296 Gilead Sciences, Inc. 2,085,812 10,906 Moderna, Inc. (c) 1,958,936 2,915 Regeneron Pharmaceuticals, Inc. (c) 2,103,143 16,264 Seagen, Inc. (c) 2,090,087 6,916 Vertex Pharmaceuticals, Inc. (c) 1,997,202 --------------- 14,353,948 --------------- COMMERCIAL SERVICES & SUPPLIES -- 3.2% 4,734 Cintas Corp. 2,137,969 34,905 Copart, Inc. (c) 2,125,366 --------------- 4,263,335 --------------- COMMUNICATIONS EQUIPMENT -- 1.6% 44,090 Cisco Systems, Inc. 2,100,448 --------------- ELECTRIC UTILITIES -- 6.3% 22,290 American Electric Power Co., Inc. 2,116,435 23,899 Constellation Energy Corp. 2,060,333 50,273 Exelon Corp. 2,173,302 30,148 Xcel Energy, Inc. 2,113,676 --------------- 8,463,746 --------------- ENERGY EQUIPMENT & SERVICES -- 1.6% 74,301 Baker Hughes Co. 2,194,108 --------------- ENTERTAINMENT -- 6.3% 27,707 Activision Blizzard, Inc. 2,120,971 17,315 Electronic Arts, Inc. 2,115,547 7,251 Netflix, Inc. (c) 2,138,175 212,707 Warner Bros Discovery, Inc. (c) 2,016,462 --------------- 8,391,155 --------------- FOOD & STAPLES RETAILING -- 3.1% 4,568 Costco Wholesale Corp. 2,085,292 53,980 Walgreens Boots Alliance, Inc. 2,016,693 --------------- 4,101,985 --------------- FOOD PRODUCTS -- 3.2% 52,804 Kraft Heinz (The) Co. 2,149,651 31,861 Mondelez International, Inc., Class A 2,123,535 --------------- 4,273,186 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 6.4% 10,635 Align Technology, Inc. (c) $ 2,242,922 18,389 Dexcom, Inc. (c) 2,082,370 5,170 IDEXX Laboratories, Inc. (c) 2,109,153 7,964 Intuitive Surgical, Inc. (c) 2,113,247 --------------- 8,547,692 --------------- HOTELS, RESTAURANTS & LEISURE -- 6.3% 23,534 Airbnb, Inc., Class A (c) 2,012,157 1,087 Booking Holdings, Inc. (c) 2,190,609 13,707 Marriott International, Inc., Class A 2,040,835 21,329 Starbucks Corp. 2,115,837 --------------- 8,359,438 --------------- INDUSTRIAL CONGLOMERATES -- 1.6% 10,050 Honeywell International, Inc. 2,153,715 --------------- INTERNET & DIRECT MARKETING RETAIL -- 6.2% 23,992 Amazon.com, Inc. (c) 2,015,328 51,413 eBay, Inc. 2,132,097 37,249 JD.com, Inc., ADR 2,090,786 2,498 MercadoLibre, Inc. (c) 2,113,908 --------------- 8,352,119 --------------- IT SERVICES -- 6.3% 8,532 Automatic Data Processing, Inc. 2,037,953 21,383 Fiserv, Inc. (c) 2,161,180 18,178 Paychex, Inc. 2,100,650 30,435 PayPal Holdings, Inc. (c) 2,167,581 --------------- 8,467,364 --------------- LIFE SCIENCES TOOLS & SERVICES -- 1.6% 10,564 Illumina, Inc. (c) 2,136,041 --------------- MACHINERY -- 1.6% 21,459 PACCAR, Inc. 2,123,797 --------------- MEDIA -- 4.9% 6,912 Charter Communications, Inc., Class A (c) 2,343,859 61,117 Comcast Corp., Class A 2,137,262 353,679 Sirius XM Holdings, Inc. (b) 2,065,485 --------------- 6,546,606 --------------- MULTILINE RETAIL -- 1.6% 14,777 Dollar Tree, Inc. (c) 2,090,059 --------------- OIL, GAS & CONSUMABLE FUELS -- 1.6% 15,693 Diamondback Energy, Inc. 2,146,489 --------------- PHARMACEUTICALS -- 1.6% 31,026 AstraZeneca PLC, ADR 2,103,563 --------------- PROFESSIONAL SERVICES -- 3.2% 27,032 CoStar Group, Inc. (c) 2,089,033 12,044 Verisk Analytics, Inc. 2,124,802 --------------- 4,213,835 --------------- Page 30 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (a) (CONTINUED) ROAD & RAIL -- 3.1% 66,601 CSX Corp. $ 2,063,299 7,148 Old Dominion Freight Line, Inc. 2,028,459 --------------- 4,091,758 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.4% 6,948 Enphase Energy, Inc. (c) 1,840,942 --------------- SPECIALTY RETAIL -- 3.2% 2,597 O'Reilly Automotive, Inc. (c) 2,191,946 18,499 Ross Stores, Inc. 2,147,179 --------------- 4,339,125 --------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.6% 6,562 Lululemon Athletica, Inc. (c) 2,102,334 --------------- TRADING COMPANIES & DISTRIBUTORS -- 1.6% 44,034 Fastenal Co. 2,083,689 --------------- WIRELESS TELECOMMUNICATION SERVICES -- 1.5% 14,807 T-Mobile US, Inc. (c) 2,072,980 --------------- TOTAL COMMON STOCKS -- 100.0% 133,642,748 (Cost $122,915,523) --------------- MONEY MARKET FUNDS -- 2.9% 3,862,754 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 4.14% (d) (e) 3,862,754 28,831 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 4.10% (d) 28,831 --------------- TOTAL MONEY MARKET FUNDS -- 2.9% 3,891,585 (Cost $3,891,585) --------------- TOTAL INVESTMENTS -- 102.9% 137,534,333 (Cost $126,807,108) NET OTHER ASSETS AND LIABILITIES -- (2.9)% (3,851,983) --------------- NET ASSETS -- 100.0% $ 133,682,350 =============== (a) The industry allocation is based on Standard & Poor's Global Industry Classification Standard (GICS), and is different than the industry sector classification system used by the Index to select securities, which is the Industry Classification Benchmark (ICB) system, which is maintained by FTSE International Limited. (b) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The remaining contractual maturity of all of the securities lending transactions is overnight and continuous. The aggregate value of such securities is $3,809,872 and the total value of the collateral held by the Fund is $3,862,754. (c) Non-income producing security. (d) Rate shown reflects yield as of December 31, 2022. (e) This security serves as collateral for securities on loan. ADR - American Depositary Receipt --------------------------------- 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) $ 3,809,872 Non-cash Collateral(2) (3,809,872) --------------- 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, 2022, 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. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ---------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*................................ $ 133,642,748 $ 133,642,748 $ -- $ -- Money Market Funds............................ 3,891,585 3,891,585 -- -- ---------------------------------------------------------------- Total Investments............................. $ 137,534,333 $ 137,534,333 $ -- $ -- ================================================================ </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 31
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 100.0% AUTOMOBILES -- 15.9% 1,509,605 Gogoro, Inc. (a) (b) $ 4,800,544 7,800,097 Lucid Group, Inc. (a) (b) 53,274,662 4,937,137 Rivian Automotive, Inc., Class A (b) 90,991,435 812,461 Tesla, Inc. (b) 100,078,946 1,014,333 Workhorse Group, Inc. (a) (b) 1,541,786 --------------- 250,687,373 --------------- CHEMICALS -- 11.5% 569,036 Albemarle Corp. 123,401,147 1,108,743 Livent Corp. (b) 22,030,723 441,415 Sociedad Quimica y Minera de Chile S.A., ADR 35,242,574 --------------- 180,674,444 --------------- COMMERCIAL SERVICES & SUPPLIES -- 0.3% 1,043,951 Li-Cycle Holdings Corp. (a) (b) 4,969,207 --------------- CONSTRUCTION & ENGINEERING -- 0.8% 209,634 Ameresco, Inc., Class A (b) 11,978,487 --------------- ELECTRICAL EQUIPMENT -- 18.4% 198,777 Acuity Brands, Inc. 32,919,459 319,680 Advent Technologies Holdings, Inc. (a) (b) 578,621 180,735 American Superconductor Corp. (b) 665,105 930,201 Array Technologies, Inc. (b) 17,980,785 1,843,262 Ballard Power Systems, Inc. (a) (b) 8,829,225 314,410 Blink Charging Co. (a) (b) 3,449,078 1,108,776 Bloom Energy Corp., Class A (b) 21,199,797 2,082,817 ChargePoint Holdings, Inc. (a) (b) 19,849,246 252,380 EnerSys 18,635,739 947,322 ESS Tech, Inc. (a) (b) 2,301,992 712,402 Fluence Energy, Inc. (a) (b) 12,217,694 638,427 FTC Solar, Inc. (a) (b) 1,710,984 2,506,858 FuelCell Energy, Inc. (a) (b) 6,969,065 3,603,026 Plug Power, Inc. (a) (b) 44,569,432 791,221 Shoals Technologies Group, Inc., Class A (b) 19,519,422 954,916 Stem, Inc. (b) 8,536,949 1,076,653 SunPower Corp. (b) 19,412,054 1,317,227 Sunrun, Inc. (b) 31,639,793 259,304 TPI Composites, Inc. (b) 2,629,343 947,300 Tritium DCFC Ltd. (a) (b) 1,591,464 199,690 Vicor Corp. (b) 10,733,337 867,750 Wallbox N.V. (a) (b) 3,106,545 --------------- 289,045,129 --------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 2.1% 231,078 Advanced Energy Industries, Inc. 19,821,871 279,248 Itron, Inc. (b) 14,143,911 --------------- 33,965,782 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 11.8% 981,749 Altus Power, Inc. (b) $ 6,401,003 712,327 Atlantica Sustainable Infrastructure PLC 18,449,269 375,422 Azure Power Global Ltd. (a) (b) 1,618,069 1,701,594 Brookfield Renewable Partners, L.P. (c) 43,118,392 508,118 Clearway Energy, Inc., Class C 16,193,721 887,635 Montauk Renewables, Inc. (b) 9,790,614 534,888 NextEra Energy Partners, L.P. (c) (d) 37,490,300 346,670 Ormat Technologies, Inc. 29,980,021 1,745,984 ReNew Energy Global PLC, Class A (a) (b) 9,602,912 710,275 Sunnova Energy International, Inc. (b) 12,792,053 --------------- 185,436,354 --------------- MACHINERY -- 0.5% 1,174,435 Lion Electric (The) Co. (a) (b) 2,630,734 1,394,157 Proterra, Inc. (b) 5,255,972 --------------- 7,886,706 --------------- METALS & MINING -- 1.7% 1,097,427 MP Materials Corp. (b) 26,645,528 --------------- MORTGAGE REAL ESTATE INVESTMENT TRUSTS -- 1.0% 549,985 Hannon Armstrong Sustainable Infrastructure Capital, Inc. 15,938,565 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 35.5% 1,182,505 Allegro MicroSystems, Inc. (b) 35,498,800 493,418 Enphase Energy, Inc. (b) 130,736,033 458,435 First Solar, Inc. (b) 68,668,979 278,131 Maxeon Solar Technologies Ltd. (a) (b) 4,466,784 948,457 Navitas Semiconductor Corp. (a) (b) 3,329,084 2,103,531 ON Semiconductor Corp. (b) 131,197,229 353,550 Power Integrations, Inc. 25,356,606 264,645 SolarEdge Technologies, Inc. (b) 74,965,989 291,973 Universal Display Corp. 31,544,763 767,784 Wolfspeed, Inc. (b) 53,007,807 --------------- 558,772,074 --------------- SPECIALTY RETAIL -- 0.5% 1,651,468 Allego N.V. (a) (b) 5,185,610 428,716 EVgo, Inc. (a) (b) 1,916,360 1,072,109 Volta, Inc. (b) 381,028 --------------- 7,482,998 --------------- TOTAL COMMON STOCKS -- 100.0% 1,573,482,647 (Cost $2,077,793,606) --------------- Page 32 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- MONEY MARKET FUNDS -- 8.3% 130,095,703 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 4.14% (e) (f) $ 130,095,703 (Cost $130,095,703) --------------- TOTAL INVESTMENTS -- 108.3% 1,703,578,350 (Cost $2,207,889,309) NET OTHER ASSETS AND LIABILITIES -- (8.3)% (130,074,454) --------------- NET ASSETS -- 100.0% $ 1,573,503,896 =============== (a) 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 $129,347,557 and the total value of the collateral held by the Fund is $130,095,703. (b) Non-income producing security. (c) Security is a Master Limited Partnership ("MLP"). (d) This security is taxed as a "C" corporation for federal income tax purposes. (e) Rate shown reflects yield as of December 31, 2022. (f) This security serves as collateral for securities on loan. ADR - American Depositary Receipt --------------------------------- 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) $ 129,347,557 Non-cash Collateral(2) (129,347,557) --------------- 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, 2022, 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. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ---------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*................................ $ 1,573,482,647 $ 1,573,482,647 $ -- $ -- Money Market Funds............................ 130,095,703 130,095,703 -- -- ---------------------------------------------------------------- Total Investments............................. $ 1,703,578,350 $ 1,703,578,350 $ -- $ -- ================================================================ </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 33
FIRST TRUST S&P REIT INDEX FUND (FRI) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 99.4% DIVERSIFIED REITS -- 4.1% 10,001 Alexander & Baldwin, Inc. $ 187,319 1,510 Alpine, Inc.ome Property Trust, Inc. 28,811 7,175 American Assets Trust, Inc. 190,137 9,338 Armada Hoffler Properties, Inc. 107,387 23,865 Broadstone Net Lease, Inc. 386,852 2,279 CTO Realty Growth, Inc. 41,660 18,137 Empire State Realty Trust, Inc., Class A 122,243 19,627 Essential Properties Realty Trust, Inc. 460,646 5,461 Gladstone Commercial Corp. 101,028 14,309 Global Net Lease, Inc. 179,864 11,951 iStar, Inc. 91,186 4,508 NexPoint Diversified Real Estate Trust 50,535 2,237 One Liberty Properties, Inc. 49,706 36,633 STORE Capital Corp. 1,174,454 28,680 WP Carey, Inc. 2,241,342 --------------- 5,413,170 --------------- HEALTH CARE REITS -- 10.0% 13,375 CareTrust REIT, Inc. 248,508 3,244 Community Healthcare Trust, Inc. 116,135 33,044 Diversified Healthcare Trust 21,373 8,492 Global Medical REIT, Inc. 80,504 52,464 Healthcare Realty Trust, Inc. 1,010,981 74,104 Healthpeak Properties, Inc. 1,857,787 5,585 LTC Properties, Inc. 198,435 82,439 Medical Properties Trust, Inc. 918,370 5,981 National Health Investors, Inc. 312,328 32,284 Omega Healthcare Investors, Inc. 902,338 31,469 Physicians Realty Trust 455,356 31,842 Sabra Health Care REIT, Inc. 395,796 1,750 Universal Health Realty Income Trust 83,528 55,106 Ventas, Inc. 2,482,525 65,141 Welltower, Inc. 4,269,993 --------------- 13,353,957 --------------- HOTEL & RESORT REITS -- 3.5% 29,329 Apple Hospitality REIT, Inc. 462,812 4,756 Ashford Hospitality Trust, Inc. (a) 21,259 7,979 Braemar Hotels & Resorts, Inc. 32,794 6,727 Chatham Lodging Trust 82,540 28,864 DiamondRock Hospitality Co. 236,396 4,536 Hersha Hospitality Trust, Class A 38,647 98,573 Host Hotels & Resorts, Inc. 1,582,097 30,997 Park Hotels & Resorts, Inc. 365,455 18,125 Pebblebrook Hotel Trust 242,694 22,341 RLJ Lodging Trust 236,591 7,603 Ryman Hospitality Properties, Inc. 621,773 22,811 Service Properties Trust 166,292 14,736 Summit Hotel Properties, Inc. 106,394 29,006 Sunstone Hotel Investors, Inc. 280,198 SHARES DESCRIPTION VALUE -------------------------------------------------------------- HOTEL & RESORT REITS (CONTINUED) 15,696 Xenia Hotels & Resorts, Inc. $ 206,873 --------------- 4,682,815 --------------- INDUSTRIAL REITS -- 15.6% 37,138 Americold Realty Trust, Inc. 1,051,377 6,007 EastGroup Properties, Inc. 889,396 18,216 First Industrial Realty Trust, Inc. 879,104 704 Indus Realty Trust, Inc. 44,697 9,041 Industrial Logistics Properties Trust 29,564 3,856 Innovative Industrial Properties, Inc. 390,806 38,012 LXP Industrial Trust 380,880 5,377 Plymouth Industrial REIT, Inc. 103,131 127,256 Prologis, Inc. 14,345,569 25,296 Rexford Industrial Realty, Inc. 1,382,173 24,705 STAG Industrial, Inc. 798,219 9,229 Terreno Realty Corp. 524,853 --------------- 20,819,769 --------------- OFFICE REITS -- 6.9% 20,586 Alexandria Real Estate Equities, Inc. 2,998,763 19,666 Boston Properties, Inc. 1,329,028 23,653 Brandywine Realty Trust 145,466 5,477 City Office REIT, Inc. 45,897 15,497 Corporate Office Properties Trust 401,992 20,877 Cousins Properties, Inc. 527,979 24,235 Douglas Emmett, Inc. 380,005 12,513 Easterly Government Properties, Inc. 178,561 15,085 Equity Commonwealth 376,672 12,667 Franklin Street Properties Corp. 34,581 14,501 Highwoods Properties, Inc. 405,738 17,680 Hudson Pacific Properties, Inc. 172,026 13,647 JBG SMITH Properties 259,020 14,500 Kilroy Realty Corp. 560,715 6,696 Office Properties Income Trust 89,392 7,809 Orion Office REIT, Inc. 66,689 22,728 Paramount Group, Inc. 135,004 17,012 Piedmont Office Realty Trust, Inc., Class A 156,000 2,438 Postal Realty Trust, Inc., Class A 35,424 8,867 SL Green Realty Corp. 298,983 10,926 Veris Residential, Inc. (a) 174,051 22,208 Vornado Realty Trust 462,149 --------------- 9,234,135 --------------- RESIDENTIAL REITS -- 17.5% 42,316 American Homes 4 Rent, Class A 1,275,404 20,670 Apartment Income REIT Corp. 709,188 20,905 Apartment Investment and Management Co., Class A 148,844 19,285 AvalonBay Communities, Inc. 3,114,913 528 Bluerock Homes Trust, Inc. (a) 11,252 1,644 BRT Apartments Corp. 32,288 14,687 Camden Property Trust 1,643,181 2,077 Centerspace 121,857 Page 34 See Notes to Financial Statements
FIRST TRUST S&P REIT INDEX FUND (FRI) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (CONTINUED) RESIDENTIAL REITS (CONTINUED) 1,817 Clipper Realty, Inc. $ 11,629 12,064 Elme Communities 214,739 24,118 Equity LifeStyle Properties, Inc. 1,558,023 46,891 Equity Residential 2,766,569 8,928 Essex Property Trust, Inc. 1,892,022 30,859 Independence Realty Trust, Inc. 520,283 80,075 Invitation Homes, Inc. 2,373,423 15,921 Mid-America Apartment Communities, Inc. 2,499,438 3,135 NexPoint Residential Trust, Inc. 136,435 17,079 Sun Communities, Inc. 2,442,297 42,186 UDR, Inc. 1,633,864 7,147 UMH Properties, Inc. 115,067 --------------- 23,220,716 --------------- RETAIL REITS -- 16.9% 13,090 Acadia Realty Trust 187,842 12,211 Agree Realty Corp. 866,126 295 Alexander's, Inc. 64,918 41,347 Brixmor Property Group, Inc. 937,337 3,381 CBL & Associates Properties, Inc. 78,033 10,075 Federal Realty Investment Trust 1,017,978 5,862 Getty Realty Corp. 198,429 9,295 InvenTrust Properties Corp. 220,013 85,261 Kimco Realty Corp. 1,805,828 30,205 Kite Realty Group Trust 635,815 29,609 Macerich (The) Co. 333,397 24,640 National Retail Properties, Inc. 1,127,526 18,503 Necessity Retail REIT (The), Inc. 109,723 7,566 NETSTREIT Corp. 138,685 16,145 Phillips Edison & Co., Inc. 514,057 86,459 Realty Income Corp. 5,484,094 21,233 Regency Centers Corp. 1,327,063 17,168 Retail Opportunity Investments Corp. 258,035 11,752 RPT Realty 117,990 1,779 Saul Centers, Inc. 72,370 45,073 Simon Property Group, Inc. 5,295,176 25,487 SITE Centers Corp. 348,152 19,255 Spirit Realty Capital, Inc. 768,852 14,384 Tanger Factory Outlet Centers, Inc. 258,049 16,189 Urban Edge Properties 228,103 SHARES DESCRIPTION VALUE -------------------------------------------------------------- RETAIL REITS (CONTINUED) 4,116 Urstadt Biddle Properties, Inc., Class A $ 77,998 6,399 Whitestone REIT 61,686 --------------- 22,533,275 --------------- SPECIALIZED REITS -- 24.9% 30,959 CubeSmart 1,246,100 39,638 Digital Realty Trust, Inc. 3,974,502 10,343 EPR Properties 390,138 12,757 Equinix, Inc. 8,356,218 18,463 Extra Space Storage, Inc. 2,717,384 6,847 Farmland Partners, Inc. 85,314 11,565 Four Corners Property Trust, Inc. 299,880 35,501 Gaming and Leisure Properties, Inc. 1,849,247 4,450 Gladstone Land Corp. 81,658 40,078 Iron Mountain, Inc. 1,997,888 11,716 Life Storage, Inc. 1,154,026 11,650 National Storage Affiliates Trust 420,798 21,793 Public Storage 6,106,181 3,344 Safehold, Inc. 95,705 132,772 VICI Properties, Inc. 4,301,813 --------------- 33,076,852 --------------- TOTAL COMMON STOCKS -- 99.4% 132,334,689 (Cost $175,982,717) --------------- MONEY MARKET FUNDS -- 0.2% 242,944 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 4.10% (b) 242,944 (Cost $242,944) --------------- TOTAL INVESTMENTS -- 99.6% 132,577,633 (Cost $176,225,661) NET OTHER ASSETS AND LIABILITIES -- 0.4% 520,723 --------------- NET ASSETS -- 100.0% $ 133,098,356 =============== (a) Non-income producing security. (b) Rate shown reflects yield as of December 31, 2022. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ---------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*................................ $ 132,334,689 $ 132,334,689 $ -- $ -- Money Market Funds............................ 242,944 242,944 -- -- ---------------------------------------------------------------- Total Investments............................. $ 132,577,633 $ 132,577,633 $ -- $ -- ================================================================ </TABLE> * See Portfolio of Investments for Sub-industry breakout. See Notes to Financial Statements Page 35
FIRST TRUST WATER ETF (FIW) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 99.9% BEVERAGES -- 2.3% 1,874,221 Primo Water Corp. $ 29,125,394 --------------- BUILDING PRODUCTS -- 8.2% 763,466 A.O. Smith Corp. 43,700,794 362,967 Advanced Drainage Systems, Inc. 29,752,405 1,339,409 Zurn Elkay Water Solutions Corp. 28,328,500 --------------- 101,781,699 --------------- CHEMICALS -- 3.5% 300,646 Ecolab, Inc. 43,762,032 --------------- COMMERCIAL SERVICES & SUPPLIES -- 5.1% 382,792 Montrose Environmental Group, Inc. (a) 16,992,137 317,340 Tetra Tech, Inc. 46,074,595 --------------- 63,066,732 --------------- CONSTRUCTION & ENGINEERING -- 10.5% 589,171 AECOM 50,038,293 778,687 Stantec, Inc. 37,330,255 133,446 Valmont Industries, Inc. 44,126,589 --------------- 131,495,137 --------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 4.4% 260,082 Badger Meter, Inc. 28,356,740 517,598 Itron, Inc. (a) 26,216,339 --------------- 54,573,079 --------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 4.6% 141,690 IDEXX Laboratories, Inc. (a) 57,803,852 --------------- LIFE SCIENCES TOOLS & SERVICES -- 8.5% 384,052 Agilent Technologies, Inc. 57,473,382 182,486 Danaher Corp. 48,435,434 --------------- 105,908,816 --------------- MACHINERY -- 27.3% 670,970 Energy Recovery, Inc. (a) 13,748,175 1,053,047 Evoqua Water Technologies Corp. (a) 41,700,661 808,246 Flowserve Corp. 24,796,987 283,562 Franklin Electric Co., Inc. 22,614,070 244,792 IDEX Corp. 55,893,357 95,983 Lindsay Corp. 15,630,832 389,856 Mueller Industries, Inc. 23,001,504 1,364,542 Mueller Water Products, Inc., Class A 14,682,472 968,486 Pentair PLC 43,562,500 177,790 Watts Water Technologies, Inc., Class A 25,998,232 540,666 Xylem, Inc. 59,781,440 --------------- 341,410,230 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- MULTI-UTILITIES -- 1.6% 3,143,526 Algonquin Power & Utilities Corp. (b) $ 20,495,790 --------------- SOFTWARE -- 4.2% 122,349 Roper Technologies, Inc. 52,865,779 --------------- TRADING COMPANIES & DISTRIBUTORS -- 1.6% 1,044,856 Core & Main, Inc., Class A (a) 20,176,169 --------------- WATER UTILITIES -- 18.1% 296,823 American States Water Co. 27,470,968 331,793 American Water Works Co., Inc. 50,571,889 420,762 California Water Service Group 25,515,008 3,946,677 Cia de Saneamento Basico do Estado de Sao Paulo, ADR 42,071,577 1,002,128 Essential Utilities, Inc. 47,831,569 173,394 Middlesex Water Co. 13,640,906 239,378 SJW Group 19,435,100 --------------- 226,537,017 --------------- TOTAL COMMON STOCKS -- 99.9% 1,249,001,726 (Cost $1,199,328,691) --------------- MONEY MARKET FUNDS -- 1.5% 17,779,500 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 4.14% (c) (d) 17,779,500 436,683 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 4.10% (c) 436,683 --------------- TOTAL MONEY MARKET FUNDS -- 1.5% 18,216,183 (Cost $18,216,183) --------------- TOTAL INVESTMENTS -- 101.4% 1,267,217,909 (Cost $1,217,544,874) NET OTHER ASSETS AND LIABILITIES -- (1.4)% (17,436,835) --------------- NET ASSETS -- 100.0% $ 1,249,781,074 =============== (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 $17,173,680 and the total value of the collateral held by the Fund is $17,779,500. (c) Rate shown reflects yield as of December 31, 2022. (d) This security serves as collateral for securities on loan. ADR - American Depositary Receipt Page 36 See Notes to Financial Statements
FIRST TRUST WATER ETF (FIW) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 --------------------------------- 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) $ 17,173,680 Non-cash Collateral(2) (17,173,680) --------------- 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, 2022, 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. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ---------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*................................ $ 1,249,001,726 $ 1,249,001,726 $ -- $ -- Money Market Funds............................ 18,216,183 18,216,183 -- -- ---------------------------------------------------------------- Total Investments............................. $ 1,267,217,909 $ 1,267,217,909 $ -- $ -- ================================================================ </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 37
FIRST TRUST NATURAL GAS ETF (FCG) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 99.8% GAS UTILITIES -- 1.7% 239,221 National Fuel Gas Co. $ 15,142,689 --------------- OIL, GAS & CONSUMABLE FUELS -- 98.1% 260,929 Amplify Energy Corp. (a) 2,293,566 729,033 Antero Resources Corp. (a) 22,592,733 599,495 APA Corp. 27,984,427 412,310 Callon Petroleum Co. (a) 15,292,578 243,534 Chesapeake Energy Corp. 22,982,304 132,196 Chord Energy Corp. 18,085,735 203,131 Civitas Resources, Inc. 11,767,379 829,205 CNX Resources Corp. (a) 13,963,812 902,654 Comstock Resources, Inc. 12,375,386 279,878 ConocoPhillips 33,025,604 980,508 Coterra Energy, Inc. 24,091,082 205,031 Crescent Energy, Inc., Class A (b) 2,458,322 2,687,868 Crescent Point Energy Corp. 19,218,256 1,119,954 DCP Midstream, L.P. (c) 43,443,016 462,452 Devon Energy Corp. 28,445,423 209,213 Diamondback Energy, Inc. 28,616,154 500,114 Earthstone Energy, Inc., Class A (a) (b) 7,116,622 658,922 Enerplus Corp. 11,629,973 233,407 EOG Resources, Inc. 30,230,875 679,239 EQT Corp. 22,978,655 199,217 Evolution Petroleum Corp. 1,504,088 88,816 Gulfport Energy Corp. (a) 6,540,410 210,180 Hess Corp. 29,807,728 1,410,788 Hess Midstream, L.P., Class A (b) (c) (d) 42,210,777 1,624,429 Kosmos Energy Ltd. (a) 10,331,368 146,669 Laredo Petroleum, Inc. (a) 7,541,720 579,886 Magnolia Oil & Gas Corp., Class A 13,598,327 963,981 Marathon Oil Corp. 26,094,966 358,128 Matador Resources Co. 20,499,247 411,954 Murphy Oil Corp. 17,718,142 277,059 Northern Oil and Gas, Inc. 8,538,958 474,410 Obsidian Energy Ltd. (a) 3,150,082 487,088 Occidental Petroleum Corp. 30,681,673 464,950 Ovintiv, Inc. 23,577,614 300,386 PDC Energy, Inc. 19,068,503 1,275,878 Permian Resources Corp. 11,993,253 137,320 Pioneer Natural Resources Co. 31,362,515 798,239 Range Resources Corp. 19,971,940 99,176 Ranger Oil Corp., Class A 4,009,686 22,157 Riley Exploration Permian, Inc. 652,081 247,116 SandRidge Energy, Inc. (a) 4,208,385 165,037 SilverBow Resources, Inc. (a) (b) 4,667,246 501,153 SM Energy Co. 17,455,159 3,538,371 Southwestern Energy Co. (a) 20,699,470 439,798 Talos Energy, Inc. (a) 8,303,386 4,283,496 Tellurian, Inc. (a) (b) 7,196,273 910,220 Vermilion Energy, Inc. 16,110,894 943,439 W&T Offshore, Inc. (a) 5,264,390 SHARES DESCRIPTION VALUE -------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (CONTINUED) 1,574,657 Western Midstream Partners, L.P. (c) $ 42,279,540 742,434 Woodside Energy Group Ltd., ADR (b) 17,974,327 --------------- 871,604,050 --------------- TOTAL COMMON STOCKS -- 99.8% 886,746,739 (Cost $849,721,341) --------------- MONEY MARKET FUNDS -- 6.8% 58,869,783 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 4.14% (e) (f) 58,869,783 1,437,529 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 4.10% (e) 1,437,529 --------------- TOTAL MONEY MARKET FUNDS -- 6.8% 60,307,312 (Cost $60,307,312) --------------- TOTAL INVESTMENTS -- 106.6% 947,054,051 (Cost $910,028,653) NET OTHER ASSETS AND LIABILITIES -- (6.6)% (58,910,353) --------------- NET ASSETS -- 100.0% $ 888,143,698 =============== (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 $57,517,216 and the total value of the collateral held by the Fund is $58,869,783. (c) Security is a Master Limited Partnership ("MLP"). (d) This security is taxed as a "C" corporation for federal income tax purposes. (e) Rate shown reflects yield as of December 31, 2022. (f) This security serves as collateral for securities on loan. ADR - American Depositary Receipt Page 38 See Notes to Financial Statements
FIRST TRUST NATURAL GAS ETF (FCG) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 --------------------------------- 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) $ 57,517,216 Non-cash Collateral(2) (57,517,216) --------------- 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, 2022, 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. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022, is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ---------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*................................ $ 886,746,739 $ 886,746,739 $ -- $ -- Money Market Funds............................ 60,307,312 60,307,312 -- -- ---------------------------------------------------------------- Total Investments............................. $ 947,054,051 $ 947,054,051 $ -- $ -- ================================================================ </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 39
FIRST TRUST CHINDIA ETF (FNI) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 100.0% AIR FREIGHT & LOGISTICS -- 0.8% 21,355 ZTO Express Cayman, Inc., ADR $ 573,809 --------------- AUTOMOBILES -- 5.6% 70,793 Li Auto, Inc., ADR (a) (b) 1,444,177 243,733 NIO, Inc., ADR (b) 2,376,397 49,526 XPeng, Inc., ADR (b) 492,288 --------------- 4,312,862 --------------- BANKS -- 13.5% 77,244 HDFC Bank Ltd., ADR 5,284,262 229,810 ICICI Bank Ltd., ADR 5,030,541 --------------- 10,314,803 --------------- BIOTECHNOLOGY -- 1.4% 2,794 BeiGene Ltd., ADR (b) 614,512 13,884 Zai Lab Ltd., ADR (b) 426,239 --------------- 1,040,751 --------------- CAPITAL MARKETS -- 0.5% 8,707 Futu Holdings Ltd., ADR (b) 353,939 --------------- CONSUMER FINANCE -- 1.6% 34,122 360 DigiTech, Inc., ADR 694,724 287,836 Lufax Holding Ltd., ADR 558,402 --------------- 1,253,126 --------------- DIVERSIFIED CONSUMER SERVICES -- 1.7% 18,628 New Oriental Education & Technology Group, Inc., ADR (b) 648,627 89,678 TAL Education Group, ADR (b) 632,230 --------------- 1,280,857 --------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.7% 31,309 Hollysys Automation Technologies Ltd. 514,407 --------------- ENTERTAINMENT -- 7.2% 30,840 Bilibili, Inc., ADR (a) (b) 730,600 180,261 iQIYI, Inc., ADR (b) 955,383 43,798 NetEase, Inc., ADR 3,181,049 76,373 Tencent Music Entertainment Group, ADR (b) 632,368 --------------- 5,499,400 --------------- HOTELS, RESTAURANTS & LEISURE -- 6.4% 13,986 H World Group Ltd., ADR 593,286 52,457 MakeMyTrip Ltd. (b) 1,446,240 62,764 Melco Resorts & Entertainment Ltd., ADR (b) 721,786 16,757 Trip.com Group Ltd., ADR (b) 576,441 28,256 Yum China Holdings, Inc. 1,544,190 --------------- 4,881,943 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 3.4% 272,759 Azure Power Global Ltd. (a) (b) $ 1,175,591 256,583 ReNew Energy Global PLC, Class A (b) 1,411,207 --------------- 2,586,798 --------------- INTERACTIVE MEDIA & SERVICES -- 7.7% 17,906 Autohome, Inc., ADR 547,924 28,682 Baidu, Inc., ADR (b) 3,280,647 93,271 Hello Group, Inc., ADR 837,574 28,447 Kanzhun Ltd., ADR (b) 579,465 33,587 Weibo Corp., ADR (b) 642,183 --------------- 5,887,793 --------------- INTERNET & DIRECT MARKETING RETAIL -- 22.9% 62,256 Alibaba Group Holding Ltd., ADR (b) 5,484,131 85,935 Dada Nexus Ltd., ADR (b) 598,967 95,332 JD.com, Inc., ADR 5,350,985 66,444 Pinduoduo, Inc., ADR (b) 5,418,508 48,016 Vipshop Holdings Ltd., ADR (b) 654,939 --------------- 17,507,530 --------------- IT SERVICES -- 17.3% 74,773 Chindata Group Holdings Ltd., ADR (b) 595,941 33,671 GDS Holdings Ltd., ADR (a) (b) 694,296 267,867 Infosys Ltd., ADR 4,824,285 177,277 Kingsoft Cloud Holdings Ltd., ADR (b) 678,971 106,861 Vnet Group, Inc., ADR (b) 605,902 608,381 Wipro Ltd., ADR 2,835,055 36,942 WNS (Holdings) Ltd., ADR (b) 2,954,990 --------------- 13,189,440 --------------- MULTILINE RETAIL -- 0.6% 45,332 MINISO Group Holding Ltd., ADR 486,412 --------------- PHARMACEUTICALS -- 4.6% 55,317 Dr. Reddy's Laboratories Ltd., ADR 2,862,655 44,136 HUTCHMED China Ltd., ADR (b) 652,330 --------------- 3,514,985 --------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 1.7% 92,048 KE Holdings, Inc., ADR (b) 1,284,990 --------------- ROAD & RAIL -- 0.7% 62,764 Full Truck Alliance Co., Ltd., ADR (b) 502,112 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.0% 9,407 Daqo New Energy Corp., ADR (b) 363,204 10,440 JinkoSolar Holding Co., Ltd., ADR (b) 426,787 --------------- 789,991 --------------- Page 40 See Notes to Financial Statements
FIRST TRUST CHINDIA ETF (FNI) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (CONTINUED) TOBACCO -- 0.7% 232,772 RLX Technology, Inc., ADR (b) $ 535,376 --------------- TOTAL COMMON STOCKS -- 100.0% 76,311,324 (Cost $105,228,415) --------------- PRINCIPAL VALUE DESCRIPTION VALUE -------------------------------------------------------------- REPURCHASE AGREEMENTS -- 4.5% $ 107,325 Bank of America Corp., 4.25% (c), dated 12/30/22, due 01/03/23, with a maturity value of $107,338. Collateralized by U.S. Treasury Securities, interest rates of 0.75% to 4.50%, due 11/15/25 to 03/31/26. The value of the collateral including accrued interest is $109,472. (d) 107,325 1,681,943 Citigroup, Inc., 4.25% (c), dated 12/30/22, due 01/03/23, with a maturity value of $1,682,142. Collateralized by U.S. Treasury Securities, interest rates of 0.00% to 6.25%, due 06/01/23 to 02/15/52. The value of the collateral including accrued interest is $1,715,582. (d) 1,681,943 1,681,943 JPMorgan Chase & Co., 4.26% (c), dated 12/30/22, due 01/03/23, with a maturity value of $1,682,142. Collateralized by U.S. Treasury Securities, interest rates of 0.00% to 0.13%, due 05/15/23 to 12/28/23. The value of the collateral including accrued interest is $1,715,582. (d) 1,681,943 --------------- TOTAL REPURCHASE AGREEMENTS -- 4.5% 3,471,211 (Cost $3,471,211) --------------- TOTAL INVESTMENTS -- 104.5% 79,782,535 (Cost $108,699,626) NET OTHER ASSETS AND LIABILITIES -- (4.5)% (3,457,996) --------------- NET ASSETS -- 100.0% $ 76,324,539 =============== (a) 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 $3,384,088 and the total value of the collateral held by the Fund is $3,471,211. (b) Non-income producing security. (c) Rate shown reflects yield as of December 31, 2022. (d) This security serves as collateral for securities on loan. ADR - American Depositary Receipt --------------------------------- 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) $ 3,384,088 Non-cash Collateral(2) (3,384,088) --------------- 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, 2022, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS -------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 3,471,211 Non-cash Collateral(4) (3,471,211) --------------- Net Amount $ -- =============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2022, the value of the collateral received from each seller exceeded the value of the repurchase agreements. See Notes to Financial Statements Page 41
FIRST TRUST CHINDIA ETF (FNI) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ---------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*................................ $ 76,311,324 $ 76,311,324 $ -- $ -- Repurchase Agreements......................... 3,471,211 -- 3,471,211 -- ---------------------------------------------------------------- Total Investments............................. $ 79,782,535 $ 76,311,324 $ 3,471,211 $ -- ================================================================ </TABLE> * See Portfolio of Investments for industry breakout. Page 42 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS -- 99.9% BANKS -- 92.5% 20,120 1st Source Corp. $ 1,068,171 25,032 Amalgamated Financial Corp. 576,737 27,560 Amerant Bancorp, Inc. 739,710 56,593 Ameris Bancorp 2,667,794 13,488 Arrow Financial Corp. 457,243 60,969 Atlantic Union Bankshares Corp. 2,142,451 26,824 BancFirst Corp. 2,365,340 45,681 Bancorp (The), Inc. (a) 1,296,427 7,369 Bank First Corp. (b) 683,991 13,079 Bank of Marin Bancorp 430,038 96,545 Bank OZK 3,867,593 6,293 Bankwell Financial Group, Inc. 185,203 27,901 Banner Corp. 1,763,343 10,595 BayCom Corp. 201,093 13,784 BCB Bancorp, Inc. 247,974 54,882 BOK Financial Corp. 5,696,203 62,707 Brookline Bancorp, Inc. 887,304 20,489 Business First Bancshares, Inc. 453,626 6,363 Cambridge Bancorp 528,511 11,884 Camden National Corp. 495,444 13,842 Capital City Bank Group, Inc. 449,865 17,884 Capstar Financial Holdings, Inc. 315,831 19,674 Carter Bankshares, Inc. (a) 326,392 60,723 Cathay General Bancorp 2,476,891 12,124 City Holding Co. 1,128,623 12,835 Civista Bancshares, Inc. 282,498 17,236 CNB Financial Corp. 410,044 10,578 Coastal Financial Corp. (a) 502,667 7,798 Codorus Valley Bancorp, Inc. 185,592 14,397 Colony Bankcorp, Inc. (b) 182,698 64,179 Columbia Banking System, Inc. 1,933,713 102,265 Commerce Bancshares, Inc. 6,961,179 14,622 Community Trust Bancorp, Inc. 671,588 32,024 ConnectOne Bancorp, Inc. 775,301 39,675 CrossFirst Bankshares, Inc. (a) 492,367 114,089 CVB Financial Corp. 2,937,792 31,476 Dime Community Bancshares, Inc. 1,001,881 26,047 Eagle Bancorp, Inc. 1,147,891 30,376 Enterprise Financial Services Corp. 1,487,209 13,005 Equity Bancshares, Inc., Class A 424,873 6,652 Esquire Financial Holdings, Inc. 287,766 11,102 Farmers & Merchants Bancorp, Inc. (b) 301,752 27,792 Farmers National Banc Corp. 392,423 12,513 Financial Institutions, Inc. 304,817 29,140 First Bancorp 1,248,358 19,607 First Bancshares (The), Inc. 627,620 45,073 First Busey Corp. 1,114,205 6,881 First Business Financial Services, Inc. 251,501 13,239 First Community Bankshares, Inc. 448,802 77,393 First Financial Bancorp 1,875,232 116,399 First Financial Bankshares, Inc. 4,004,126 9,810 First Financial Corp. 452,045 46,014 First Foundation, Inc. 659,381 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (CONTINUED) BANKS (CONTINUED) 104,190 First Hawaiian, Inc. $ 2,713,108 7,540 First Internet Bancorp 183,071 85,231 First Interstate BancSystem, Inc., Class A 3,294,178 48,607 First Merchants Corp. 1,998,234 16,698 First Mid Bancshares, Inc. 535,672 18,489 First of Long Island (The) Corp. 332,802 14,072 Five Star Bancorp 383,321 24,324 Flushing Financial Corp. 471,399 136,681 Fulton Financial Corp. 2,300,341 24,061 German American Bancorp, Inc. 897,475 9,966 Great Southern Bancorp, Inc. 592,877 69,929 Hancock Whitney Corp. 3,383,864 24,876 Hanmi Financial Corp. 615,681 40,138 HarborOne Bancorp, Inc. 557,918 34,637 Heartland Financial USA, Inc. 1,614,777 49,550 Heritage Commerce Corp. 644,150 28,645 Heritage Financial Corp. 877,683 15,278 HomeStreet, Inc. 421,367 12,755 HomeTrust Bancshares, Inc. 308,288 97,501 Hope Bancorp, Inc. 1,248,988 35,853 Horizon Bancorp, Inc. 540,663 54,437 Independent Bank Corp. 3,555,949 33,616 Independent Bank Group, Inc. 2,019,649 50,688 International Bancshares Corp. 2,319,483 20,685 Lakeland Financial Corp. 1,509,384 12,946 Mercantile Bank Corp. 433,432 20,653 Metrocity Bankshares, Inc. 446,724 12,963 Mid Penn Bancorp, Inc. 388,501 18,077 Midland States Bancorp, Inc. 481,210 12,751 MidWestOne Financial Group, Inc. 404,844 10,290 MVB Financial Corp. 226,586 34,957 NBT Bancorp, Inc. 1,517,833 6,079 Northeast Bank 255,926 4,638 Northrim BanCorp, Inc. 253,096 103,629 Northwest Bancshares, Inc. 1,448,733 48,263 OceanFirst Financial Corp. 1,025,589 239,008 Old National Bancorp 4,297,364 36,373 Old Second Bancorp, Inc. 583,423 25,033 Origin Bancorp, Inc. 918,711 77,533 Pacific Premier Bancorp, Inc. 2,446,942 96,136 PacWest Bancorp 2,206,321 23,229 Pathward Financial, Inc. 1,000,008 12,077 PCB Bancorp 213,642 14,624 Peapack-Gladstone Financial Corp. 544,305 23,071 Peoples Bancorp, Inc. 651,756 62,391 Pinnacle Financial Partners, Inc. 4,579,499 11,716 Preferred Bank 874,248 29,024 Premier Financial Corp. 782,777 13,778 QCR Holdings, Inc. 683,940 15,523 RBB Bancorp 323,655 45,659 Renasant Corp. 1,716,322 14,351 Republic Bancorp, Inc., Class A 587,243 31,827 S&T Bancorp, Inc. 1,087,847 See Notes to Financial Statements Page 43
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE -------------------------------------------------------------- COMMON STOCKS (CONTINUED) BANKS (CONTINUED) 36,431 Sandy Spring Bancorp, Inc. $ 1,283,464 50,169 Seacoast Banking Corp. of Florida 1,564,771 16,204 Shore Bancshares, Inc. 282,436 12,312 Sierra Bancorp 261,507 103,611 Simmons First National Corp., Class A 2,235,925 13,781 SmartFinancial, Inc. 378,978 13,871 South Plains Financial, Inc. 381,869 6,526 Southern First Bancshares, Inc. (a) 298,565 26,199 Southside Bancshares, Inc. 942,902 61,770 SouthState Corp. 4,716,757 42,677 Stellar Bancorp, Inc. 1,257,264 23,875 Stock Yards Bancorp, Inc. 1,551,398 40,722 Texas Capital Bancshares, Inc. (a) 2,455,944 11,044 Third Coast Bancshares, Inc. (a) (b) 203,541 59,439 TowneBank 1,833,099 27,196 TriCo Bancshares 1,386,724 19,974 Triumph Financial, Inc. (a) 976,129 49,742 Trustmark Corp. 1,736,493 39,424 UMB Financial Corp. 3,292,693 109,888 United Bankshares, Inc. 4,449,365 86,638 United Community Banks, Inc. 2,928,364 8,605 Unity Bancorp, Inc. 235,175 23,863 Univest Financial Corp. 623,540 44,071 Veritex Holdings, Inc. 1,237,514 53,297 Washington Federal, Inc. 1,788,114 14,018 Washington Trust Bancorp, Inc. 661,369 48,274 WesBanco, Inc. 1,785,173 13,578 West BanCorp, Inc. 346,918 21,960 Westamerica BanCorp 1,295,860 49,585 Wintrust Financial Corp. 4,190,924 --------------- 173,100,693 --------------- IT SERVICES -- 0.3% 11,148 Cass Information Systems, Inc. 510,801 --------------- THRIFTS & MORTGAGE FINANCE -- 7.1% 22,751 Blue Foundry Bancorp (a) 292,350 22,515 Bridgewater Bancshares, Inc. (a) 399,416 112,200 Capitol Federal Financial, Inc. 970,530 89,416 Columbia Financial, Inc. (a) 1,933,174 6,948 Greene County Bancorp, Inc. (b) 398,954 1,752 Hingham Institution for Savings 483,482 55,140 Kearny Financial Corp. 559,671 35,177 Merchants Bancorp 855,504 38,982 Northfield Bancorp, Inc. 613,187 7,531 Southern Missouri Bancorp, Inc. 345,146 228,824 TFS Financial Corp. 3,297,354 15,547 TrustCo Bank Corp. 584,412 18,108 Waterstone Financial, Inc. 312,182 50,258 WSFS Financial Corp. 2,278,698 --------------- 13,324,060 --------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------- TOTAL COMMON STOCKS -- 99.9% $ 186,935,554 (Cost $199,794,611) --------------- MONEY MARKET FUNDS -- 0.6% 1,192,450 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 4.14% (c) (d) 1,192,450 (Cost $1,192,450) --------------- TOTAL INVESTMENTS -- 100.5% 188,128,004 (Cost $200,987,061) NET OTHER ASSETS AND LIABILITIES -- (0.5)% (988,263) --------------- NET ASSETS -- 100.0% $ 187,139,741 =============== (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 $1,156,019 and the total value of the collateral held by the Fund is $1,192,450. (c) Rate shown reflects yield as of December 31, 2022. (d) This security serves as collateral for securities on loan. --------------------------------- OFFSETTING ASSETS AND LIABILITIES -------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT -------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 1,156,019 Non-cash Collateral(2) (1,156,019) --------------- 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, 2022, 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. Page 44 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ---------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*................................ $ 186,935,554 $ 186,935,554 $ -- $ -- Money Market Funds............................ 1,192,450 1,192,450 -- -- ---------------------------------------------------------------- Total Investments............................. $ 188,128,004 $ 188,128,004 $ -- $ -- ================================================================ </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 45
FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2022 <TABLE> <CAPTION> FIRST TRUST FIRST TRUST NASDAQ-100 FIRST TRUST NASDAQ-100 EQUAL NASDAQ-100- EX-TECHNOLOGY WEIGHTED TECHNOLOGY SECTOR SECTOR INDEX FUND INDEX FUND INDEX FUND (QQEW) (QTEC) (QQXT) ----------------- ------------------ ----------------- <S> <C> <C> <C> ASSETS: Investments, at value............................................... $ 1,115,975,073 $ 1,392,447,866 $ 137,534,333 Cash................................................................ 535,365 1,906,939 -- Receivables: Dividends..................................................... 788,018 414,052 125,890 Securities lending income..................................... 119,128 28,874 20,844 Capital shares sold........................................... -- -- -- Investment securities sold.................................... -- 15,816,477 -- Reclaims...................................................... -- -- -- Prepaid expenses.................................................... 8,414 7,900 922 --------------- ---------------- --------------- Total Assets.................................................. 1,117,425,998 1,410,622,108 137,681,989 --------------- ---------------- --------------- LIABILITIES: Payables: Collateral for securities on loan............................. 29,948,691 34,396,338 3,862,754 Investment advisory fees...................................... 395,563 494,421 43,135 Licensing fees................................................ 284,284 359,686 32,657 Shareholder reporting fees.................................... 84,640 131,886 9,190 Audit and tax fees............................................ 29,270 30,773 28,606 Investment securities purchased............................... -- -- -- Capital shares redeemed....................................... -- 15,827,752 -- Trustees' fees................................................ -- 90 31 Other liabilities................................................... 190,488 243,679 23,266 --------------- ---------------- --------------- Total Liabilities............................................. 30,932,936 51,484,625 3,999,639 --------------- ---------------- --------------- NET ASSETS.......................................................... $ 1,086,493,062 $ 1,359,137,483 $ 133,682,350 =============== ================ =============== NET ASSETS CONSIST OF: Paid-in capital..................................................... $ 1,262,483,426 $ 2,112,338,576 $ 141,246,634 Par value........................................................... 122,500 129,000 17,500 Accumulated distributable earnings (loss)........................... (176,112,864) (753,330,093) (7,581,784) --------------- ---------------- --------------- NET ASSETS.......................................................... $ 1,086,493,062 $ 1,359,137,483 $ 133,682,350 =============== ================ =============== NET ASSET VALUE, per share.......................................... $ 88.69 $ 105.36 $ 76.39 =============== ================ =============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)........................... 12,250,002 12,900,002 1,750,002 =============== ================ =============== Investments, at cost................................................ $ 1,141,677,348 $ 1,717,031,133 $ 126,807,108 =============== ================ =============== Securities on loan, at value........................................ $ 29,490,464 $ 33,714,931 $ 3,809,872 =============== ================ =============== </TABLE> Page 46 See Notes to Financial Statements
<TABLE> <CAPTION> FIRST TRUST FIRST TRUST NASDAQ(R) FIRST TRUST NASDAQ(R) ABA CLEAN EDGE(R) S&P FIRST TRUST FIRST TRUST FIRST TRUST COMMUNITY GREEN ENERGY REIT WATER NATURAL GAS CHINDIA BANK INDEX FUND INDEX FUND ETF ETF ETF INDEX FUND (QCLN) (FRI) (FIW) (FCG) (FNI) (QABA) ---------------- ------------------ ----------------- ----------------- ------------------ ------------------ <S> <C> <C> <C> <C> <C> $1,703,578,350 $ 132,577,633 $ 1,267,217,909 $ 947,054,051 $ 79,782,535 $ 188,128,004 209,174 -- -- -- 12,929 38,977 459,220 649,948 1,106,060 641,770 5,393 315,632 540,837 -- 15,083 109,851 2,445 1,954 2,354,797 -- -- 10,963,708 -- 10,605,088 9,427,620 -- -- -- 2,022,268 -- 472,848 -- 169,819 -- -- -- 18,910 1,334 10,548 9,101 652 699 -------------- ---------------- --------------- --------------- ---------------- ---------------- 1,717,061,756 133,228,915 1,268,519,419 958,778,481 81,826,222 199,090,354 -------------- ---------------- --------------- --------------- ---------------- ---------------- 130,095,703 -- 17,779,500 58,869,783 3,471,211 1,192,450 613,176 25,425 434,418 308,425 21,705 65,552 483,322 16,861 156,686 242,774 17,449 32,508 259,223 23,036 128,915 72,883 12,051 9,561 30,147 34,573 29,351 30,755 30,560 28,564 2,354,717 -- -- 10,945,211 -- 10,595,168 9,427,756 -- -- -- 1,929,876 -- -- 50 3 47 32 29 293,816 30,614 209,472 164,905 18,799 26,781 -------------- ---------------- --------------- --------------- ---------------- ---------------- 143,557,860 130,559 18,738,345 70,634,783 5,501,683 11,950,613 -------------- ---------------- --------------- --------------- ---------------- ---------------- $1,573,503,896 $ 133,098,356 $ 1,249,781,074 $ 888,143,698 $ 76,324,539 $ 187,139,741 ============== ================ =============== =============== ================ ================ $2,477,093,361 $ 178,762,407 $ 1,229,292,994 $ 1,396,184,659 $ 201,252,148 $ 215,086,972 333,500 55,500 157,500 362,484 20,000 35,500 (903,922,965) (45,719,551) 20,330,580 (508,403,445) (124,947,609) (27,982,731) -------------- ---------------- --------------- --------------- ---------------- ---------------- $1,573,503,896 $ 133,098,356 $ 1,249,781,074 $ 888,143,698 $ 76,324,539 $ 187,139,741 ============== ================ =============== =============== ================ ================ $ 47.18 $ 23.98 $ 79.35 $ 24.50 $ 38.16 $ 52.72 ============== ================ =============== =============== ================ ================ 33,350,002 5,550,002 15,750,002 36,248,365 2,000,002 3,550,002 ============== ================ =============== =============== ================ ================ $2,207,889,309 $ 176,225,661 $ 1,217,544,874 $ 910,028,653 $ 108,699,626 $ 200,987,061 ============== ================ =============== =============== ================ ================ $ 129,347,557 $ -- $ 17,173,680 $ 57,517,216 $ 3,384,088 $ 1,156,019 ============== ================ =============== =============== ================ ================ </TABLE> See Notes to Financial Statements Page 47
FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022 <TABLE> <CAPTION> FIRST TRUST FIRST TRUST NASDAQ-100 FIRST TRUST NASDAQ-100 EQUAL NASDAQ-100- EX-TECHNOLOGY WEIGHTED TECHNOLOGY SECTOR SECTOR INDEX FUND INDEX FUND INDEX FUND (QQEW) (QTEC) (QQXT) ----------------- ------------------ ----------------- <S> <C> <C> <C> INVESTMENT INCOME: Dividends........................................................... $ 12,134,696 $ 14,642,847 $ 1,575,232 Securities lending income (net of fees)............................. 1,403,197 28,875 243,508 Foreign withholding tax............................................. (51,808) (216,864) -- --------------- ---------------- --------------- Total investment income....................................... 13,486,085 14,454,858 1,818,740 --------------- ---------------- --------------- EXPENSES: Investment advisory fees............................................ 4,515,121 8,348,846 496,662 Licensing fees...................................................... 1,128,780 2,087,212 124,166 Accounting and administration fees.................................. 552,715 916,609 63,380 Shareholder reporting fees.......................................... 133,804 214,943 29,313 Custodian fees...................................................... 75,072 146,716 10,291 Transfer agent fees................................................. 53,172 77,180 6,208 Audit and tax fees.................................................. 29,471 32,458 28,117 Legal fees.......................................................... 25,864 38,727 2,867 Listing fees........................................................ 10,014 10,013 10,013 Trustees' fees and expenses......................................... 7,738 8,354 7,202 Registration and filing fees........................................ (217) -- -- Expenses previously waived or reimbursed............................ -- -- -- Other expenses...................................................... 19,819 45,298 3,092 --------------- ---------------- --------------- Total expenses................................................ 6,551,353 11,926,356 781,311 Less fees waived and expenses reimbursed by the investment advisor.................................................... -- -- (36,314) --------------- ---------------- --------------- Net expenses.................................................. 6,551,353 11,926,356 744,997 --------------- ---------------- --------------- NET INVESTMENT INCOME (LOSS)........................................ 6,934,732 2,528,502 1,073,743 --------------- ---------------- --------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments................................................... (99,073,388) (335,757,605) (4,845,889) In-kind redemptions........................................... 67,239,083 366,217,007 4,903,732 Foreign currency transactions................................. -- -- -- --------------- ---------------- --------------- Net realized gain (loss)............................................ (31,834,305) 30,459,402 57,843 --------------- ---------------- --------------- Net change in unrealized appreciation (depreciation) on: Investments................................................... (315,062,565) (1,355,869,794) (20,127,544) Foreign currency translation.................................. -- -- -- --------------- ---------------- --------------- Net change in unrealized appreciation (depreciation)................ (315,062,565) (1,355,869,794) (20,127,544) --------------- ---------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS)............................. (346,896,870) (1,325,410,392) (20,069,701) --------------- ---------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $ (339,962,138) $ (1,322,881,890) $ (18,995,958) =============== ================ =============== </TABLE> Page 48 See Notes to Financial Statements
<TABLE> <CAPTION> FIRST TRUST FIRST TRUST NASDAQ(R) FIRST TRUST NASDAQ(R) ABA CLEAN EDGE(R) S&P FIRST TRUST FIRST TRUST FIRST TRUST COMMUNITY GREEN ENERGY REIT WATER NATURAL GAS CHINDIA BANK INDEX FUND INDEX FUND ETF ETF ETF INDEX FUND (QCLN) (FRI) (FIW) (FCG) (FNI) (QABA) ---------------- ------------------ ----------------- ----------------- ------------------ ------------------ <S> <C> <C> <C> <C> <C> $ 8,367,374 $ 4,625,150 $ 15,584,285 $ 26,202,223 $ 709,711 $ 3,206,194 7,021,773 -- 94,744 640,655 66,685 10,149 (986,169) -- (470,711) (96,799) (48,799) -- -------------- ---------------- --------------- --------------- ---------------- ---------------- 14,402,978 4,625,150 15,208,318 26,746,079 727,597 3,216,343 -------------- ---------------- --------------- --------------- ---------------- ---------------- 8,486,416 592,245 5,087,181 3,123,097 391,245 474,566 2,121,604 157,936 635,897 780,774 78,249 106,778 949,454 100,832 610,076 391,403 50,729 62,480 339,031 50,914 206,805 116,105 28,695 27,476 124,159 25,406 95,773 48,734 7,595 16,138 78,040 9,871 56,795 38,920 4,891 5,932 31,208 34,126 29,635 30,433 30,052 28,060 48,611 4,502 29,801 21,716 2,063 (1,122) 10,013 9,812 12,342 12,418 12,358 10,021 8,286 7,258 7,822 7,637 7,185 7,199 (2,198) 24 1,499 (1,139) -- 94 -- -- -- 110,513 -- -- 35,963 3,417 20,458 9,392 2,657 2,192 -------------- ---------------- --------------- --------------- ---------------- ---------------- 12,230,587 996,343 6,794,084 4,690,003 615,719 739,814 -- (9,263) -- -- (28,836) (27,964) -------------- ---------------- --------------- --------------- ---------------- ---------------- 12,230,587 987,080 6,794,084 4,690,003 586,883 711,850 -------------- ---------------- --------------- --------------- ---------------- ---------------- 2,172,391 3,638,070 8,414,234 22,056,076 140,714 2,504,493 -------------- ---------------- --------------- --------------- ---------------- ---------------- (253,575,859) (3,197,596) (13,876,815) (28,004,604) (13,372,050) (3,447,713) 142,159,697 1,958,725 79,528,640 169,228,658 2,114,964 3,044,787 -- -- -- (2,032) -- -- -------------- ---------------- --------------- --------------- ---------------- ---------------- (111,416,162) (1,238,871) 65,651,825 141,222,022 (11,257,086) (402,926) -------------- ---------------- --------------- --------------- ---------------- ---------------- (703,458,148) (67,166,910) (333,862,573) (5,986,820) (15,786,295) (18,078,803) -- -- -- 131 -- -- -------------- ---------------- --------------- --------------- ---------------- ---------------- (703,458,148) (67,166,910) (333,862,573) (5,986,689) (15,786,295) (18,078,803) -------------- ---------------- --------------- --------------- ---------------- ---------------- (814,874,310) (68,405,781) (268,210,748) 135,235,333 (27,043,381) (18,481,729) -------------- ---------------- --------------- --------------- ---------------- ---------------- $ (812,701,919) $ (64,767,711) $ (259,796,514) $ 157,291,409 $ (26,902,667) $ (15,977,236) ============== ================ =============== =============== ================ ================ </TABLE> See Notes to Financial Statements Page 49
FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> FIRST TRUST FIRST TRUST NASDAQ-100 NASDAQ-100- EQUAL WEIGHTED TECHNOLOGY SECTOR INDEX FUND INDEX FUND (QQEW) (QTEC) -------------------------------- -------------------------------- Year Ended Year Ended Year Ended Year Ended 12/31/2022 12/31/2021 12/31/2022 12/31/2021 --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> OPERATIONS: Net investment income (loss)............................. $ 6,934,732 $ 3,239,829 $ 2,528,502 $ 496,531 Net realized gain (loss)................................. (31,834,305) 182,704,258 30,459,402 794,536,396 Net change in unrealized appreciation (depreciation)..... (315,062,565) 16,405,196 (1,355,869,794) 57,064,938 --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations....................................... (339,962,138) 202,349,283 (1,322,881,890) 852,097,865 --------------- --------------- --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations.................................... (6,866,581) (3,291,356) (2,234,346) (661,890) --------------- --------------- --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................ 303,095,848 456,270,076 358,662,021 1,499,345,517 Cost of shares redeemed.................................. (261,188,326) (439,183,900) (1,724,215,364) (1,650,885,696) --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions......................... 41,907,522 17,086,176 (1,365,553,343) (151,540,179) --------------- --------------- --------------- --------------- Total increase (decrease) in net assets.................. (304,921,197) 216,144,103 (2,690,669,579) 699,895,796 NET ASSETS: Beginning of period...................................... 1,391,414,259 1,175,270,156 4,049,807,062 3,349,911,266 --------------- --------------- --------------- --------------- End of period............................................ $ 1,086,493,062 $ 1,391,414,259 $ 1,359,137,483 $ 4,049,807,062 =============== =============== =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period.................. 11,750,002 11,650,002 23,100,002 24,250,002 Shares sold.............................................. 3,250,000 4,100,000 2,600,000 9,500,000 Shares redeemed.......................................... (2,750,000) (4,000,000) (12,800,000) (10,650,000) --------------- --------------- --------------- --------------- Shares outstanding, end of period........................ 12,250,002 11,750,002 12,900,002 23,100,002 =============== =============== =============== =============== </TABLE> Page 50 See Notes to Financial Statements
<TABLE> <CAPTION> FIRST TRUST FIRST TRUST FIRST TRUST NASDAQ-100 NASDAQ(R) S&P FIRST TRUST EX-TECHNOLOGY SECTOR CLEAN EDGE(R) GREEN ENERGY REIT WATER INDEX FUND INDEX FUND INDEX FUND ETF (QQXT) (QCLN) (FRI) (FIW) ----------------------------- ------------------------------- ------------------------------- ------------------------------- Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/2022 12/31/2021 12/31/2022 12/31/2021 12/31/2022 12/31/2021 12/31/2022 12/31/2021 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> <C> <C> <C> $ 1,073,743 $ 578,162 $ 2,172,391 $ (6,701,443) $ 3,638,070 $ 2,920,372 $ 8,414,234 $ 5,118,233 57,843 17,867,933 (111,416,162) 156,408,842 (1,238,871) 5,009,018 65,651,825 83,216,427 (20,127,544) (2,765,567) (703,458,148) (450,506,660) (67,166,910) 39,250,974 (333,862,573) 200,157,259 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- (18,995,958) 15,680,528 (812,701,919) (300,799,261) (64,767,711) 47,180,364 (259,796,514) 288,491,919 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- (1,136,087) (515,676) (5,415,781) (275,655) (4,101,541) (2,732,665) (8,373,346) (4,964,311) ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- 31,623,232 8,843,090 285,231,186 1,748,106,641 79,391,146 152,028,630 125,554,676 802,243,154 (14,943,882) (33,811,304) (717,271,062) (623,172,866) (113,732,649) (34,511,600) (213,394,672) (168,774,018) ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- 16,679,350 (24,968,214) (432,039,876) 1,124,933,775 (34,341,503) 117,517,030 (87,839,996) 633,469,136 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- (3,452,695) (9,803,362) (1,250,157,576) 823,858,859 (103,210,755) 161,964,729 (356,009,856) 916,996,744 137,135,045 146,938,407 2,823,661,472 1,999,802,613 236,309,111 74,344,382 1,605,790,930 688,794,186 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- $ 133,682,350 $ 137,135,045 $1,573,503,896 $2,823,661,472 $ 133,098,356 $ 236,309,111 $1,249,781,074 $1,605,790,930 ============= ============= ============== ============== ============== ============== ============== ============== 1,550,002 1,850,002 41,550,002 28,500,002 7,250,002 3,200,002 16,950,002 9,550,002 400,000 100,000 4,650,000 22,650,000 2,700,000 5,300,000 1,550,000 9,450,000 (200,000) (400,000) (12,850,000) (9,600,000) (4,400,000) (1,250,000) (2,750,000) (2,050,000) ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- 1,750,002 1,550,002 33,350,002 41,550,002 5,550,002 7,250,002 15,750,002 16,950,002 ============= ============= ============== ============== ============== ============== ============== ============== </TABLE> See Notes to Financial Statements Page 51
FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) <TABLE> <CAPTION> FIRST TRUST FIRST TRUST NATURAL GAS CHINDIA ETF ETF (FCG) (FNI) -------------------------------- -------------------------------- Year Ended Year Ended Year Ended Year Ended 12/31/2022 12/31/2021 12/31/2022 12/31/2021 --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> OPERATIONS: Net investment income (loss)............................. $ 22,056,076 $ 3,905,504 $ 140,714 $ (73,066) Net realized gain (loss)................................. 141,222,022 80,321,337 (11,257,086) 53,141,145 Net change in unrealized appreciation (depreciation)..... (5,986,689) 30,765,415 (15,786,295) (93,625,547) --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations....................................... 157,291,409 114,992,256 (26,902,667) (40,557,468) --------------- --------------- --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations.................................... (25,396,449) (6,273,849) (169,765) -- --------------- --------------- --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................ 843,634,059 389,376,422 49,922,217 59,830,685 Cost of shares redeemed.................................. (510,610,575) (178,298,282) (53,671,930) (169,075,322) --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions......................... 333,023,484 211,078,140 (3,749,713) (109,244,637) --------------- --------------- --------------- --------------- Total increase (decrease) in net assets.................. 464,918,444 319,796,547 (30,822,145) (149,802,105) NET ASSETS: Beginning of period...................................... 423,225,254 103,428,707 107,146,684 256,948,789 --------------- --------------- --------------- --------------- End of period............................................ $ 888,143,698 $ 423,225,254 $ 76,324,539 $ 107,146,684 =============== =============== =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period.................. 24,648,365 11,748,365 2,250,002 4,350,002 Shares sold.............................................. 33,450,000 24,200,000 1,250,000 900,000 Shares redeemed.......................................... (21,850,000) (11,300,000) (1,500,000) (3,000,000) --------------- --------------- --------------- --------------- Shares outstanding, end of period........................ 36,248,365 24,648,365 2,000,002 2,250,002 =============== =============== =============== =============== </TABLE> Page 52 See Notes to Financial Statements
<TABLE> <CAPTION> FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) ----------------------------- Year Ended Year Ended 12/31/2022 12/31/2021 ------------- ------------- <S> <C> $ 2,504,493 $ 2,254,086 (402,926) 8,564,425 (18,078,803) 18,576,945 ------------- ------------- (15,977,236) 29,395,456 ------------- ------------- (2,513,482) (2,215,667) ------------- ------------- 136,483,565 41,856,729 (48,799,730) (36,109,870) ------------- ------------- 87,683,835 5,746,859 ------------- ------------- 69,193,117 32,926,648 117,946,624 85,019,976 ------------- ------------- $ 187,139,741 $ 117,946,624 ============= ============= 2,000,002 1,900,002 2,450,000 750,000 (900,000) (650,000) ------------- ------------- 3,550,002 2,000,002 ============= ============= </TABLE> See Notes to Financial Statements Page 53
FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 118.42 $ 100.88 $ 73.78 $ 54.61 $ 57.88 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.60 0.28 0.34 0.36 0.32 Net realized and unrealized gain (loss) (29.74) 17.54 27.11 19.16 (3.29) (a) ------------ ------------ ------------ ------------ ------------ Total from investment operations (29.14) 17.82 27.45 19.52 (2.97) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.59) (0.28) (0.35) (0.35) (0.30) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 88.69 $ 118.42 $ 100.88 $ 73.78 $ 54.61 ============ ============ ============ ============ ============ TOTAL RETURN (b) (24.62)% 17.67% 37.35% 35.78% (5.16)% (a) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,086,493 $ 1,391,414 $ 1,175,270 $ 907,438 $ 461,464 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.58% 0.57% 0.58% 0.59% 0.60% Ratio of net expenses to average net assets 0.58% 0.57% 0.58% 0.59% 0.60% Ratio of net investment income (loss) to average net assets 0.61% 0.25% 0.41% 0.56% 0.52% Portfolio turnover rate (c) 33% 23% 28% 29% 27% FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 175.32 $ 138.14 $ 100.08 $ 67.97 $ 71.92 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.18 0.02 0.58 0.70 0.65 Net realized and unrealized gain (loss) (69.98) 37.19 38.09 32.09 (3.98) ------------ ------------ ------------ ------------ ------------ Total from investment operations (69.80) 37.21 38.67 32.79 (3.33) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.16) (0.03) (0.61) (0.68) (0.62) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 105.36 $ 175.32 $ 138.14 $ 100.08 $ 67.97 ============ ============ ============ ============ ============ TOTAL RETURN (b) (39.81)% 26.94% 38.82% 48.36% (4.70)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,359,137 $ 4,049,807 $ 3,349,911 $ 2,912,388 $ 1,950,669 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.57% 0.56% 0.57% 0.57% 0.57% Ratio of net expenses to average net assets 0.57% 0.56% 0.57% 0.57% 0.57% Ratio of net investment income (loss) to average net assets 0.12% 0.01% 0.50% 0.82% 0.84% Portfolio turnover rate (c) 28% 25% 31% 23% 21% </TABLE> (a) The Fund received a reimbursement from the Advisor in the amount of $22,098 in connection with a trade error, which represents less than $0.01 per share. Since the Advisor reimbursed the Fund, there was no effect on the Fund's total return. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (c) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 54 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 88.47 $ 79.43 $ 58.39 $ 45.66 $ 48.53 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.66 0.35 0.22 0.20 0.18 Net realized and unrealized gain (loss) (12.04) 9.00 21.04 12.73 (2.88) ------------ ------------ ------------ ------------ ------------ Total from investment operations (11.38) 9.35 21.26 12.93 (2.70) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.70) (0.31) (0.22) (0.20) (0.17) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 76.39 $ 88.47 $ 79.43 $ 58.39 $ 45.66 ============ ============ ============ ============ ============ TOTAL RETURN (a) (12.85)% 11.80% 36.48% 28.35% (5.58)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 133,682 $ 137,135 $ 146,938 $ 102,183 $ 77,618 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.63% 0.62% 0.62% 0.64% 0.64% Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 0.86% 0.40% 0.34% 0.38% 0.34% Portfolio turnover rate (b) 35% 25% 35% 31% 26% FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 67.96 $ 70.17 $ 24.91 $ 17.63 $ 20.28 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.07 (0.13) 0.11 0.13 0.12 Net realized and unrealized gain (loss) (20.70) (2.07) 45.36 7.36 (2.59) ------------ ------------ ------------ ------------ ------------ Total from investment operations (20.63) (2.20) 45.47 7.49 (2.47) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.15) (0.01) (0.21) (0.21) (0.11) Return of capital -- -- -- -- (0.07) ------------ ------------ ------------ ------------ ------------ Total distributions (0.15) (0.01) (0.21) (0.21) (0.18) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 47.18 $ 67.96 $ 70.17 $ 24.91 $ 17.63 ============ ============ ============ ============ ============ TOTAL RETURN (a) (30.37)% (3.14)% 183.52% 42.69% (12.22)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,573,504 $ 2,823,661 $ 1,999,803 $ 144,467 $ 83,731 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.58% 0.58% 0.60% 0.63% 0.65% Ratio of net expenses to average net assets 0.58% 0.58% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 0.10% (0.24)% 0.04% 0.58% 0.59% Portfolio turnover rate (b) 36% 28% 43% 26% 45% </TABLE> (a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. See Notes to Financial Statements Page 55
FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> FIRST TRUST S&P REIT INDEX FUND (FRI) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 32.59 $ 23.23 $ 26.14 $ 21.63 $ 23.28 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.53 0.50 0.52 0.56 0.69 Net realized and unrealized gain (loss) (8.54) 9.33 (2.72) 4.55 (1.65) ------------ ------------ ------------ ------------ ------------ Total from investment operations (8.01) 9.83 (2.20) 5.11 (0.96) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.60) (0.47) (0.71) (0.60) (0.69) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 23.98 $ 32.59 $ 23.23 $ 26.14 $ 21.63 ============ ============ ============ ============ ============ TOTAL RETURN (a) (24.63)% 42.52% (8.10)% 23.67% (4.19)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 133,098 $ 236,309 $ 74,344 $ 198,642 $ 115,696 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.50% 0.51% 0.52% 0.51% 0.52% Ratio of net expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50% Ratio of net investment income (loss) to average net assets 1.84% 2.04% 2.04% 2.40% 3.05% Portfolio turnover rate (b) 8% 6% 6% 10% 10% FIRST TRUST WATER ETF (FIW) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 94.74 $ 72.13 $ 59.91 $ 43.96 $ 48.58 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.53 0.36 0.38 0.32 0.35 Net realized and unrealized gain (loss) (15.39) 22.60 12.24 15.96 (4.65) ------------ ------------ ------------ ------------ ------------ Total from investment operations (14.86) 22.96 12.62 16.28 (4.30) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.53) (0.35) (0.40) (0.33) (0.32) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 79.35 $ 94.74 $ 72.13 $ 59.91 $ 43.96 ============ ============ ============ ============ ============ TOTAL RETURN (a) (15.65)% 31.89% 21.20% 37.11% (8.89)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,249,781 $ 1,605,791 $ 688,794 $ 536,168 $ 290,107 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.53% 0.53% 0.54% 0.55% 0.55% Ratio of net expenses to average net assets 0.53% 0.53% 0.54% 0.55% 0.55% Ratio of net investment income (loss) to average net assets 0.66% 0.47% 0.66% 0.61% 0.72% Portfolio turnover rate (b) 13% 15% 15% 12% 11% </TABLE> (a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 56 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> FIRST TRUST NATURAL GAS ETF (FCG) YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------- 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 17.17 $ 8.80 $ 12.05 $ 14.69 $ 22.75 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.69 0.20 0.10 0.10 0.02 Net realized and unrealized gain (loss) 7.38 8.47 (3.01) (2.39) (7.86) ------------ ------------ ------------ ------------ ------------ Total from investment operations 8.07 8.67 (2.91) (2.29) (7.84) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.74) (0.30) -- (0.11) -- Return of capital -- -- (0.34) (0.24) (0.22) ------------ ------------ ------------ ------------ ------------ Total distributions (0.74) (0.30) (0.34) (0.35) (0.22) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 24.50 $ 17.17 $ 8.80 $ 12.05 $ 14.69 ============ ============ ============ ============ ============ TOTAL RETURN (a) 47.27% 98.69% (23.22)% (15.87)% (34.77)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 888,144 $ 423,225 $ 103,429 $ 95,209 $ 88,874 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.60% 0.62% (b) 0.67% 0.65% 0.63% Ratio of net expenses to average net assets 0.60% 0.61% (b) 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 2.82% 1.41% 1.48% 0.65% 0.07% Portfolio turnover rate (c) 39% 42% 103% 61% 47% FIRST TRUST CHINDIA ETF (FNI) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 47.62 $ 59.07 $ 39.75 $ 30.93 $ 39.57 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.05 (0.12) 0.09 0.14 0.04 Net realized and unrealized gain (loss) (9.45) (11.33) 19.42 8.81 (8.16) ------------ ------------ ------------ ------------ ------------ Total from investment operations (9.40) (11.45) 19.51 8.95 (8.12) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.06) -- (0.19) (0.13) (0.52) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 38.16 $ 47.62 $ 59.07 $ 39.75 $ 30.93 ============ ============ ============ ============ ============ TOTAL RETURN (a) (19.75)% (19.38)% 49.25% 28.96% (20.68)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 76,325 $ 107,147 $ 256,949 $ 111,291 $ 133,007 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.63% 0.59% 0.60% 0.60% 0.59% Ratio of net expenses to average net assets 0.60% 0.59% 0.60% 0.60% 0.59% Ratio of net investment income (loss) to average net assets 0.14% (0.03)% 0.20% 0.35% 1.06% Portfolio turnover rate (c) 29% 43% 46% 26% 22% </TABLE> (a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) For the year ended December 31, 2021, ratio reflects excise tax of 0.01%, which is not included in the expense cap. (c) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. See Notes to Financial Statements Page 57
FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 58.97 $ 44.75 $ 51.91 $ 43.16 $ 52.34 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 1.10 1.01 1.11 1.04 0.81 Net realized and unrealized gain (loss) (6.24) 14.20 (7.13) 8.72 (9.17) ------------ ------------ ------------ ------------ ------------ Total from investment operations (5.14) 15.21 (6.02) 9.76 (8.36) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (1.11) (0.99) (1.14) (1.01) (0.82) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 52.72 $ 58.97 $ 44.75 $ 51.91 $ 43.16 ============ ============ ============ ============ ============ TOTAL RETURN (a) (8.70)% 34.08% (11.00)% 22.80% (16.14)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 187,140 $ 117,947 $ 85,020 $ 142,752 $ 228,762 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.62% 0.63% 0.64% 0.60% 0.60% Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 2.11% 1.82% 2.75% 1.98% 1.50% Portfolio turnover rate (b) 18% 23% 14% 15% 11% </TABLE> (a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 58 See Notes to Financial Statements
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 1. ORGANIZATION First Trust Exchange-Traded Fund (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on August 8, 2003, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of twenty-three exchange-traded funds. This report covers the nine funds (each a "Fund" and collectively, the "Funds") listed below: First Trust NASDAQ-100 Equal Weighted Index Fund - (The Nasdaq Stock Market LLC ("Nasdaq") ticker "QQEW") First Trust NASDAQ-100-Technology Sector Index Fund - (Nasdaq ticker "QTEC") First Trust NASDAQ-100 Ex-Technology Sector Index Fund - (Nasdaq ticker "QQXT") First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund - (Nasdaq ticker "QCLN") First Trust S&P REIT Index Fund - (NYSE Arca, Inc. ("NYSE Arca") ticker "FRI") First Trust Water ETF - (NYSE Arca ticker "FIW") First Trust Natural Gas ETF - (NYSE Arca ticker "FCG") First Trust Chindia ETF - (NYSE Arca ticker "FNI") First Trust NASDAQ(R) ABA Community Bank Index Fund - (Nasdaq ticker "QABA") 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: <TABLE> <CAPTION> FUND INDEX <S> <C> First Trust NASDAQ-100 Equal Weighted Index Fund Nasdaq-100 Equal Weighted Index(SM) First Trust NASDAQ-100-Technology Sector Index Fund Nasdaq-100 Technology Sector Index(SM) First Trust NASDAQ-100 Ex-Technology Sector Index Fund Nasdaq-100 Ex-Tech Sector Index(SM) First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund Nasdaq(R) Clean Edge(R) Green Energy Index(SM) First Trust S&P REIT Index Fund S&P United States REIT Index First Trust Water ETF ISE Clean Edge Water Index First Trust Natural Gas ETF ISE-Revere Natural Gas(TM) Index First Trust Chindia ETF ISE ChIndia(TM) Index First Trust NASDAQ(R) ABA Community Bank Index Fund Nasdaq OMX(R) ABA Community Bank Index(SM) </TABLE> 2. SIGNIFICANT ACCOUNTING POLICIES The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Foreign securities are priced using the data reflecting the earlier closing of the principal markets for those securities. Each Fund's NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures approved by the Trust's Board of Trustees, and in accordance with the 1940 Act and rules thereunder. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows: Page 59
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 Common stocks, real estate investment trusts ("REITs"), master limited partnerships ("MLPs") and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the primary exchange for such securities. Shares of open-end funds are valued based on NAV per share. Securities traded in an over-the-counter market are valued at the mean of their most recent bid and asked price, if available, and otherwise at their last trade price. Overnight repurchase agreements are valued at amortized cost when it represents the most appropriate reflection of fair market value. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Advisor's Pricing Committee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price; 2) the type of security; 3) the size of the holding; 4) the initial cost of the security; 5) transactions in comparable securities; 6) price quotes from dealers and/or third-party pricing services; 7) relationships among various securities; 8) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 9) an analysis of the issuer's financial statements; 10) the existence of merger proposals or tender offers that might affect the value of the security; and 11) other relevant factors. In addition, differences between the prices used to calculate a Fund's NAV and the prices used by such Fund's corresponding index could result in a difference between a Fund's performance and the performance of its underlying index. The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. Page 60
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of December 31, 2022, is included with each Fund's Portfolio of Investments. In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing requirements to determine fair value in good faith for purposes of the 1940 Act. The rule permits fund boards to designate a fund's investment advisor to perform fair value determinations, subject to board oversight and certain other conditions. The rule also defines when market quotations are "readily available" for purposes of the 1940 Act and requires a fund to fair value a portfolio investment when a market quotation is not readily available. The SEC also adopted new Rule 31a-4 under the 1940 Act, which sets forth recordkeeping requirements associated with fair value determinations. The compliance date for Rule 2a-5 and Rule 31a-4 was September 8, 2022. Effective September 8, 2022 and pursuant to the requirements of Rule 2a-5, the Trust's Board of Trustees designated the Advisor as its valuation designee to perform fair value determinations and approved new Advisor Valuation Procedures for the Trust. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis. Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund's understanding of the applicable country's tax rules and rates. Distributions received from a Fund's investments in MLPs generally are comprised of return of capital and investment income. A Fund records estimated return of capital and investment income based on historical information available from each MLP. These estimates may subsequently be revised based on information received from the MLPs after their tax reporting periods are concluded. Distributions received from a Fund's investments in REITs may be comprised of return of capital, capital gains and income. The actual character of the amounts received during the year is not known until after the REITs' fiscal year end. A Fund records the character of distributions received from the REITs during the year based on estimates available. The characterization of distributions received by a Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude. C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES Offsetting Assets and Liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset on the Statements of Assets and Liabilities, and disclose instruments and transactions subject to master netting or similar agreements. These disclosure requirements are intended to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on a fund's financial position. The transactions subject to offsetting disclosures are derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. This disclosure, if applicable, is included within each Fund's Portfolio of Investments under the heading "Offsetting Assets and Liabilities." For financial reporting purposes, the Funds do not offset financial assets and financial liabilities that are subject to master netting arrangements ("MNAs") or similar agreements on the Statements of Assets and Liabilities. MNAs provide the right, in the event of default (including bankruptcy and insolvency), for the non-defaulting counterparty to liquidate the collateral and calculate the net exposure to the defaulting party or request additional collateral. D. SECURITIES LENDING The Funds may lend securities representing up to 33 1/3% of the value of their total assets to broker-dealers, banks and other institutions to generate additional income. When a Fund loans its portfolio securities, it will receive, at the inception of each loan, collateral equal to at least 102% (for domestic securities) or 105% (for international securities) of the market value of the loaned securities. The collateral amount is valued at the beginning of each business day and is compared to the market value of the loaned securities from the prior business day to determine if additional collateral is required. If additional collateral is required, a request is sent to the borrower. Securities lending involves the risk that the Fund may lose money because the borrower of the Fund's loaned securities fails to return the securities in a timely manner or at all. The Fund could also lose money in the event of (i) a decline in the value of the collateral provided for the loaned securities, (ii) a decline in the value of any investments made with cash collateral or (iii) an increase in the value of the loaned securities if the borrower does not increase the collateral accordingly and the borrower fails to return the securities. These events could also trigger adverse tax consequences for the Funds. Page 61
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 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 FNI. The Bank of New York Mellon ("BNYM") acts as FNI'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. During the fiscal year ended December 31, 2022, QQEW, QTEC, QQXT, QCLN, FIW, FCG, FNI, and QABA 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. 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, 2022 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. A Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. Page 62
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 The tax character of distributions paid by each Fund during the fiscal year ended December 31, 2022 was as follows: <TABLE> <CAPTION> Distributions Distributions Distributions paid from paid from paid from Ordinary Income Capital Gains Return of Capital ------------------ ---------------- ----------------- <S> <C> <C> <C> First Trust NASDAQ-100 Equal Weighted Index Fund $ 6,866,581 $ -- $ -- First Trust NASDAQ-100-Technology Sector Index Fund 2,234,346 -- -- First Trust NASDAQ-100 Ex-Technology Sector Index Fund 1,136,087 -- -- First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 5,415,781 -- -- First Trust S&P REIT Index Fund 4,101,541 -- -- First Trust Water ETF 8,373,346 -- -- First Trust Natural Gas ETF 25,396,449 -- -- First Trust Chindia ETF 169,765 -- -- First Trust NASDAQ(R) ABA Community Bank Index Fund 2,513,482 -- -- </TABLE> The tax character of distributions paid by each Fund during the fiscal year ended December 31, 2021 was as follows: <TABLE> <CAPTION> Distributions Distributions Distributions paid from paid from paid from Ordinary Income Capital Gains Return of Capital ------------------ ---------------- ----------------- <S> <C> <C> <C> First Trust NASDAQ-100 Equal Weighted Index Fund $ 3,291,356 $ -- $ -- First Trust NASDAQ-100-Technology Sector Index Fund 661,890 -- -- First Trust NASDAQ-100 Ex-Technology Sector Index Fund 515,676 -- -- First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 275,655 -- -- First Trust S&P REIT Index Fund 2,732,665 -- -- First Trust Water ETF 4,964,311 -- -- First Trust Natural Gas ETF 6,273,849 -- -- First Trust Chindia ETF -- -- -- First Trust NASDAQ(R) ABA Community Bank Index Fund 2,215,667 -- -- </TABLE> As of December 31, 2022, the components of distributable earnings on a tax basis for each Fund were as follows: <TABLE> <CAPTION> Accumulated Undistributed Capital and Net Unrealized Ordinary Other Appreciation Income Gain (Loss) (Depreciation) ------------------ ---------------- ----------------- <S> <C> <C> <C> First Trust NASDAQ-100 Equal Weighted Index Fund $ 68,151 $(129,411,693) $ (46,769,322) First Trust NASDAQ-100-Technology Sector Index Fund 294,156 (411,078,895) (342,545,354) First Trust NASDAQ-100 Ex-Technology Sector Index Fund 9,867 (15,846,180) 8,254,529 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund -- (341,292,950) (562,630,015) First Trust S&P REIT Index Fund 23,162 (225,432) (45,517,281) First Trust Water ETF 194,810 (14,566,866) 34,702,636 First Trust Natural Gas ETF -- (523,424,510) 15,021,065 First Trust Chindia ETF -- (94,187,209) (30,760,400) First Trust NASDAQ(R) ABA Community Bank Index Fund 29,430 (13,902,549) (14,109,612) </TABLE> 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. Page 63
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 Certain countries assess a capital gains tax on securities sold in their local markets. This tax is accrued as the securities in these foreign markets appreciate in value and is paid at the time of sale to the extent a capital gain is realized. Taxes accrued on securities in an unrealized appreciation position, if any, are included in "Net change in unrealized appreciation (depreciation) on deferred foreign capital gains tax" on the Statements of Operations. The capital gains tax paid on securities sold, if any, is included in "Net realized gain (loss) on foreign capital gains tax" on the Statements of Operations. India's Finance Bill, 2018 ("Finance Bill, 2018") was enacted into law on March 29, 2018 and amongst other provisions, it introduced a long-term capital gains tax beginning April 1, 2018. Long-term capital gains on the sale of listed shares in excess of INR 0.1 million are taxed at the rate of 10% (plus applicable surcharge and cess (which is a type of tax)) subject to satisfaction of certain conditions. Long-term capital gains accruing as of January 31, 2018 are considered exempt due to a grandfather clause in the provision. The aforesaid exemption from long-term capital gains tax is available with respect to shares acquired between October 1, 2004 and March 31, 2018 only if on such acquisitions Securities Transaction Tax ("STT") was chargeable. Certain exceptions in this regard, such as acquisition of shares in a public offer, bonus, rights issued, etc. for which the condition of chargeability of STT on acquisition is not applicable, have been notified. In the case of the sale of listed shares held by a Fund for one year or less, the income is classified as short-term capital gains and is taxable at 15% (plus applicable surcharge and cess) provided the shares are sold on the stock exchange and subjected to STT. For above purposes, the applicable rate of surcharge is 2% or 5% (depending on the level of income of the Fund). The Finance Bill, 2018 increases the cess imposed on the sum of tax and surcharge from 3% to 4%. The cess 4% rate is applied to the capital gains tax, resulting in a higher effective rate of capital gains tax. Where the sale of shares is outside the stock exchange and not subject to STT, the long-term capital gains are taxed at 10% (plus applicable surcharge and cess) and short-term capital gains are taxed at 30% (plus applicable surcharge and cess). The Finance Bill, 2018, approves the carry forward of long-term capital losses to be offset against long-term capital gains. Short-term losses can be netted against both short-term gains and long-term gains. Until March 31, 2020, dividends received by a Fund from Indian companies were exempt from tax in India because Indian companies were required to pay dividend distribution tax. The Indian Finance Act, 2020 has amended the dividend taxation framework effective April 1, 2020 and accordingly dividends would now be taxable in the hands of the shareholders at 20%, plus applicable surcharge and cess. Subsequent to the Indian Finance Act, 2020, "The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020" (the "Bill") was enacted into law and is effective retroactively to April 1, 2020. The Bill caps the maximum surcharge at 15% of the tax on dividend income earned by the Fund. The highest effective tax rate proposed for non-corporate entities on dividends will be 23.92%. Note the Fund will not obtain relief under the US-India tax treaty as the treaty rate of 25% is higher than the domestic rate. Any excess taxes withheld can be off-set against capital gains tax liability during the year or claimed as a refund in the annual tax return. Please note that the above description is based on current provisions of Indian law, and any change or modification made by subsequent legislation, regulation, or administrative or judicial decision could increase the Indian tax liability of a Fund and thus reduce the return to a Fund's shareholders. There can be no assurance that the Indian tax authorities and/or regulators will not take a position contrary to the views expressed herein. If the Indian tax authorities and/or regulators take a position contrary to the views expressed herein, adverse unpredictable consequences may follow. The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. The taxable years ended 2019, 2020, 2021, and 2022 remain open to federal and state audit. As of December 31, 2022, management has evaluated the application of these standards to the Funds, and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions. Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At December 31, 2022, for federal income tax purposes, each applicable Fund had a capital loss carryforward available that is shown in the 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. Page 64
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 <TABLE> <CAPTION> Non-Expiring Capital Loss Carryforwards ------------------ <S> <C> First Trust NASDAQ-100 Equal Weighted Index Fund $ 129,411,693 First Trust NASDAQ-100-Technology Sector Index Fund 411,078,895 First Trust NASDAQ-100 Ex-Technology Sector Index Fund 15,846,180 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 341,292,950 First Trust S&P REIT Index Fund 225,432 First Trust Water ETF 14,566,866 First Trust Natural Gas ETF 523,424,510 First Trust Chindia ETF 94,187,209 First Trust NASDAQ(R) ABA Community Bank Index Fund 13,902,549 </TABLE> During the taxable year ended December 31, 2022, the following Fund utilized non-expiring capital loss carryforwards in the following amount: <TABLE> <CAPTION> Capital Loss Carryforward Utilized ------------------ <S> <C> First Trust S&P REIT Index Fund $ 460,089 </TABLE> Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended December 31, 2022, the Funds had no net late year ordinary or capital losses. In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Funds and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended December 31, 2022, the adjustments for each Fund were as follows: <TABLE> <CAPTION> Accumulated Accumulated Net Realized Net Investment Gain (Loss) Paid-in Income (Loss) on Investments Capital ------------------ ------------------ ------------------ <S> <C> <C> <C> First Trust NASDAQ-100 Equal Weighted Index Fund $ -- $ (62,374,936) $ 62,374,936 First Trust NASDAQ-100-Technology Sector Index Fund -- (327,320,439) 327,320,439 First Trust NASDAQ-100 Ex-Technology Sector Index Fund -- (4,718,610) 4,718,610 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 3,901,319 (107,151,779) 103,250,460 First Trust S&P REIT Index Fund 222,570 1,237,861 (1,460,431) First Trust Water ETF -- (77,486,762) 77,486,762 First Trust Natural Gas ETF 3,835,785 (162,337,536) 158,501,751 First Trust Chindia ETF 26,865 563,457 (590,322) First Trust NASDAQ(R) ABA Community Bank Index Fund -- (1,947,822) 1,947,822 </TABLE> Page 65
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 As of December 31, 2022, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows: <TABLE> <CAPTION> Gross Gross Net Unrealized Unrealized Unrealized Appreciation Tax Cost Appreciation (Depreciation) (Depreciation) ----------------- ----------------- ----------------- ----------------- <S> <C> <C> <C> <C> First Trust NASDAQ-100 Equal Weighted Index Fund $ 1,162,744,395 $ 121,701,509 $ (168,470,831) $ (46,769,322) First Trust NASDAQ-100-Technology Sector Index Fund 1,734,993,220 84,537,366 (427,082,720) (342,545,354) First Trust NASDAQ-100 Ex-Technology Sector Index Fund 129,279,804 20,757,906 (12,503,377) 8,254,529 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 2,266,208,365 193,906,991 (756,537,006) 562,630,015 First Trust S&P REIT Index Fund 178,094,914 291,714 (45,808,995) (45,517,281) First Trust Water ETF 1,232,515,273 163,789,904 (129,087,268) 34,702,636 First Trust Natural Gas ETF 932,033,117 81,753,310 (66,732,376) 15,020,934 First Trust Chindia ETF 110,542,935 4,969,767 (35,730,167) (30,760,400) First Trust NASDAQ(R) ABA Community Bank Index Fund 202,237,616 3,296,071 (17,405,683) (14,109,612) </TABLE> 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: <TABLE> <CAPTION> FUND LICENSOR <S> <C> First Trust NASDAQ-100 Equal Weighted Index Fund Nasdaq, Inc. First Trust NASDAQ-100-Technology Sector Index Fund Nasdaq, Inc. First Trust NASDAQ-100 Ex-Technology Sector Index Fund Nasdaq, Inc. First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund Nasdaq, Inc. and Clean Edge(R) First Trust S&P REIT Index Fund S&P Dow Jones Indices LLC First Trust Water ETF International Securities Exchange, LLC First Trust Natural Gas ETF International Securities Exchange, LLC First Trust Chindia ETF International Securities Exchange, LLC First Trust NASDAQ(R) ABA Community Bank Index Fund Nasdaq, Inc. and American Bankers Association </TABLE> 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 66
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 Effective November 1, 2022, the management fee payable by each Fund to First Trust for these services will be reduced at certain levels of each Fund's net assets ("breakpoints") and calculated pursuant to the schedule below: <TABLE> <CAPTION> Breakpoints QQEW QTEC QQXT QCLN FRI FIW FCG QABA --------------------------------------------------- ------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> <C> Fund net assets up to and including $2.5 billion 0.40% 0.40% 0.40% 0.40% 0.3000% 0.40% 0.40% 0.40% Fund net assets greater than $2.5 billion up to and including $5 billion 0.39% 0.39% 0.39% 0.39% 0.2925% 0.39% 0.39% 0.39% Fund net assets greater than $5 billion up to and including $7.5 billion 0.38% 0.38% 0.38% 0.38% 0.2850% 0.38% 0.38% 0.38% Fund net assets greater than $7.5 billion up to and including $10 billion 0.37% 0.37% 0.37% 0.37% 0.2775% 0.37% 0.37% 0.37% Fund net assets greater than $10 billion up to and including $15 billion 0.36% 0.36% 0.36% 0.36% 0.2700% 0.36% 0.36% 0.36% Fund net assets greater than $15 billion 0.34% 0.34% 0.34% 0.34% 0.2550% 0.34% 0.34% 0.34% </TABLE> <TABLE> <CAPTION> Breakpoints FNI --------------------------------------------------- ------- <S> <C> <C> Fund net assets up to and including $2.5 billion 0.40% Fund net assets greater than $2.5 billion up to and including $5 billion 0.39% Fund net assets greater than $5 billion up to and including $7.5 billion 0.38% Fund net assets greater than $7.5 billion up to and including $10 billion 0.37% Fund net assets greater than $10 billion 0.36% </TABLE> Prior to November 1, 2022, First Trust was entitled to receive monthly fees from each Fund calculated at the following annual rates: <TABLE> <CAPTION> % of Average Daily Net Assets ---------------- <S> <C> First Trust NASDAQ-100 Equal Weighted Index Fund 0.40% First Trust NASDAQ-100-Technology Sector Index Fund 0.40% First Trust NASDAQ-100 Ex-Technology Sector Index Fund 0.40% First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 0.40% First Trust S&P REIT Index Fund 0.30% First Trust Water ETF 0.40% First Trust Natural Gas ETF 0.40% First Trust Chindia ETF 0.40% First Trust NASDAQ(R) ABA Community Bank Index Fund 0.40% </TABLE> The Trust and the Advisor have entered into an Expense Reimbursement, Fee Waiver and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to waive fees and/or reimburse Fund expenses to the extent that the operating expenses of each Fund (excluding interest expense, brokerage commissions and other trading expenses, acquired fund fees and expenses, taxes and extraordinary expenses) exceed the below amount as a percentage of average daily net assets per year (the "Expense Cap"). The Expense Cap will be in effect until at least April 30, 2024. <TABLE> <CAPTION> Expense Cap ---------------- <S> <C> First Trust NASDAQ-100 Equal Weighted Index Fund 0.60% First Trust NASDAQ-100-Technology Sector Index Fund 0.60% First Trust NASDAQ-100 Ex-Technology Sector Index Fund 0.60% First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 0.60% First Trust S&P REIT Index Fund 0.50% First Trust Water ETF 0.60% First Trust Natural Gas ETF 0.60% First Trust Chindia ETF 0.60% First Trust NASDAQ(R) ABA Community Bank Index Fund 0.60% </TABLE> Page 67
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 Prior to November 1, 2022, expenses reimbursed and fees waived by First Trust under the Recovery Agreement were subject to recovery by First Trust for up to three years from the date the fee or expense was incurred, but no reimbursement payment would be made by a Fund if it resulted in the Fund exceeding (i) the applicable expense limitation in place for the most recent fiscal year for which such expense limitation was in place, (ii) the applicable expense limitation in place at the time the fees were waived, or (iii) the current expense limitation. These amounts would be included in "Expenses previously waived or reimbursed" on the Statements of Operations. Prior to November 1, 2022, First Trust recovered fees that were previously waived from First Trust Natural Gas ETF of $110,513. Effective November 1, 2022, in connection with the introduction of breakpoints discussed above, First Trust has agreed to remove its ability to recover previous expenses borne and fees waived under the Recovery Agreement. The Trust has multiple service agreements with BNYM. Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund. Additionally, the Lead Independent Trustee and the Chairs of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairs rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES For the fiscal year ended December 31, 2022, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows: <TABLE> <CAPTION> Purchases Sales --------------- --------------- <S> <C> <C> First Trust NASDAQ-100 Equal Weighted Index Fund $ 375,772,660 $ 376,416,371 First Trust NASDAQ-100-Technology Sector Index Fund 609,711,507 611,668,487 First Trust NASDAQ-100 Ex-Technology Sector Index Fund 44,015,633 44,087,795 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 762,857,806 762,026,240 First Trust S&P REIT Index Fund 17,747,873 15,382,751 First Trust Water ETF 169,338,327 169,632,083 First Trust Natural Gas ETF 302,439,544 302,185,667 First Trust Chindia ETF 28,519,601 28,457,018 First Trust NASDAQ(R) ABA Community Bank Index Fund 21,448,739 21,554,697 </TABLE> Page 68
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 For the fiscal year ended December 31, 2022, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows: <TABLE> <CAPTION> Purchases Sales --------------- --------------- <S> <C> <C> First Trust NASDAQ-100 Equal Weighted Index Fund $ 302,918,611 $ 260,864,505 First Trust NASDAQ-100-Technology Sector Index Fund 358,448,265 1,723,383,060 First Trust NASDAQ-100 Ex-Technology Sector Index Fund 31,585,436 14,922,553 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 285,023,253 716,629,723 First Trust S&P REIT Index Fund 79,181,551 113,431,339 First Trust Water ETF 125,351,903 212,913,591 First Trust Natural Gas ETF 841,930,426 509,146,792 First Trust Chindia ETF 49,869,239 53,666,801 First Trust NASDAQ(R) ABA Community Bank Index Fund 136,350,914 48,718,671 </TABLE> 5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES Each Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as "Authorized Participants" have contractual arrangements with a Fund or one of the Fund's service providers to purchase and redeem Fund shares directly with the Fund in large blocks of shares known as "Creation Units." Prior to the start of trading on every business day, a Fund publishes through the National Securities Clearing Corporation ("NSCC") the "basket" of securities, cash or other assets that it will accept in exchange for a Creation Unit of the Fund's shares. An Authorized Participant that wishes to effectuate a creation of a Fund's shares deposits with the Fund the "basket" of securities, cash or other assets identified by the Fund that day, and then receives the Creation Unit of the Fund's shares in return for those assets. After purchasing a Creation Unit, the Authorized Participant may continue to hold the Fund's shares or sell them in the secondary market. The redemption process is the reverse of the purchase process: the Authorized Participant redeems a Creation Unit of a Fund's shares for a basket of securities, cash or other assets. The combination of the creation and redemption process with secondary market trading in a Fund's shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of a Fund's shares at or close to the NAV per share of the Fund. Each Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of a Fund times the number of shares in a Creation Unit, plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the creation basket. Each Fund also imposes fees in connection with the redemption of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price received for each Creation Unit will equal the daily NAV per share of a Fund times the number of shares in a Creation Unit, minus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the redemption basket. Investors who use the services of a broker or other such intermediary in addition to an Authorized Participant to effect a redemption of a Creation Unit may also be assessed an amount to cover the cost of such services. The redemption fee charged by a Fund will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no more than 2% of the value of the shares redeemed. 6. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before April 30, 2024. Page 69
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 7. INDEMNIFICATION The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 8. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there was the following subsequent event: On December 12, 2022, the Board of Trustees of the Trust (the "Board") voted to terminate and liquidate First Trust Chindia ETF ("FNI") pursuant to a Plan of Liquidation and Termination (the "Plan") approved by the Board. The Board has determined that the termination and liquidation of FNI is in the best interests of the Fund. FNI liquidated as a series of the Trust on January 20, 2023. Page 70
-------------------------------------------------------------------------------- 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 NASDAQ-100 Equal Weighted Index Fund, First Trust NASDAQ-100-Technology Sector Index Fund, First Trust NASDAQ-100 Ex-Technology Sector Index Fund, First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund, First Trust S&P REIT Index Fund, First Trust Water ETF, First Trust Natural Gas ETF, First Trust Chindia ETF, and First Trust NASDAQ(R) ABA Community Bank Index Fund (the "Funds"), each a series of First Trust Exchange-Traded Fund, including the portfolios of investments, as of December 31, 2022, the related statements of operations 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, 2022, 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, 2022, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois February 23, 2023 We have served as the auditor of one or more First Trust investment companies since 2001. Page 71
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION For the taxable year ended December 31, 2022, the following percentages of income dividends paid by the Funds qualify for the dividends received deduction available to corporations: <TABLE> <CAPTION> Dividends Received Deduction ---------------------------- <S> <C> First Trust NASDAQ-100 Equal Weighted Index Fund 100.00% First Trust NASDAQ-100-Technology Sector Index Fund 100.00% First Trust NASDAQ-100 Ex-Technology Sector Index Fund 100.00% First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 58.14% First Trust S&P REIT Index Fund 0.00% First Trust Water ETF 100.00% First Trust Natural Gas ETF 91.06% First Trust Chindia ETF 3.26% First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00% </TABLE> For the taxable year ended December 31, 2022, the following percentages of income dividends paid by the Funds are hereby designated as qualified dividend income: <TABLE> <CAPTION> Qualified Dividend Income ---------------------------- <S> <C> First Trust NASDAQ-100 Equal Weighted Index Fund 100.00% First Trust NASDAQ-100-Technology Sector Index Fund 100.00% First Trust NASDAQ-100 Ex-Technology Sector Index Fund 100.00% First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 100.00% First Trust S&P REIT Index Fund 0.00% First Trust Water ETF 100.00% First Trust Natural Gas ETF 92.74% First Trust Chindia ETF 100.00% First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00% </TABLE> A portion of each of the Funds' 2022 ordinary dividends (including short-term capital gains) paid to its shareholders during the fiscal year ended December 31, 2022, may be eligible for the Qualified Business Income Deduction (QBI) under Internal Revenue Code Section 199A for the aggregate dividends each Fund received from the underlying Real Estate Investment Trusts (REITs) these Funds invest in. The following Fund meets the requirements of Section 853 of the Internal Revenue Code and elects to pass through to its shareholders credit for foreign taxes paid. For the taxable year ended December 31, 2022, the total amount of income received by the Fund from sources within foreign countries and possessions of the United States and of taxes paid to such countries is as follows: <TABLE> <CAPTION> Gross Foreign Income Foreign Taxes Paid ---------------------- --------------------- Amount Per Share Amount Per Share ---------------------- --------------------- <S> <C> <C> <C> <C> First Trust Chindia ETF $ 702,594 $ 0.35 $ 48,666 $ 0.02 </TABLE> Page 72
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a significant percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is more broadly diversified. CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor's investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, 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 Page 73
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads. FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities. INDEX OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or more indices or ETF models. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. In addition, index rebalances may potentially result in increased trading activity in a fund's shares. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial Conduct Authority, which regulates LIBOR has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate ("SOFR") will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. MARKET RISK. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments Page 74
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund's portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund's shares and result in increased market volatility. During any such events, a fund's shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund's shares may widen. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. OPERATIONAL RISK. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund's service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund's ability to meet its investment objective. Although the funds and the funds' investment advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company's capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock. VALUATION RISK. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE Page 75
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) ADVISORY AGREEMENT BOARD CONSIDERATIONS REGARDING APPROVAL OF AMENDMENTS TO THE INVESTMENT MANAGEMENT AGREEMENT The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, unanimously approved the amendment (the "Amendment") of the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the following nine series of the Trust (each a "Fund" and collectively, the "Funds"): First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) First Trust NASDAQ-100-Technology Sector Index Fund (QTEC) First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT) First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN) First Trust S&P REIT Index Fund (FRI) First Trust Chindia ETF (FNI) First Trust Natural Gas ETF (FCG) First Trust Water ETF (FIW) First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA) The Board approved the Amendment for each Fund at a meeting held on October 24, 2022. As part of the review process, the Board reviewed information and had preliminary discussions with the Advisor regarding the proposed Amendment at meetings held on April 18, 2022, June 12-13, 2022 and September 18-19, 2022. Following those preliminary discussions, the Board requested and received information from the Advisor regarding the proposed Amendment, and that information was considered at an executive session of the Independent Trustees and their counsel held prior to the October 24, 2022 meeting, as well as at the October meeting. In reviewing the Amendment for each Fund, the Board considered that the purpose of the Amendment is to modify the advisory fee rate for each Fund under the Agreement by introducing a breakpoint schedule pursuant to which the advisory fee rate paid by each Fund to the Advisor will be reduced as assets of such Fund meet certain thresholds. The Board noted the Advisor's representations that the quality and quantity of the services provided to each Fund by the Advisor under the Agreement will not be reduced or modified as a result of the Amendment, and that the obligations of the Advisor under the Agreement will remain the same in all respects. The Board noted that it, including the Independent Trustees, last approved the continuation of the Agreement for each Fund for a one-year period ending June 30, 2023 at a meeting held on June 12-13, 2022. The Board noted that in connection with such approval it had determined for each Fund, based upon the information provided, that the terms of the Agreement were fair and reasonable and that the continuation of the Agreement was in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. The Board noted that the Advisor had previously agreed to waive management fees and reimburse certain expenses for a specified period to prevent each Fund's expense ratio from exceeding a particular expense cap, that the expense cap for each Fund would continue following entry into the Amendment, and that under the current terms of the expense caps, expenses reimbursed and fees waived are subject to recovery by the Advisor for up to three years from the date the fee was waived or expense was incurred under certain conditions. The Board noted that in connection with the Amendment, the Advisor agreed to amend the terms of the expense caps to eliminate its ability to recover any fees waived or expenses reimbursed. Based on all of the information considered, the Board, including the Independent Trustees, unanimously determined that the terms of the Amendment are fair and reasonable and that the Amendment is in the best interests of each Fund. 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, 2022, the amount of remuneration paid (or to be paid) by First Trust Advisors L.P. in respect of the Funds is $3,841,314. This figure is comprised of $148,914 paid (or to be paid) in fixed compensation and $3,692,400 paid (or to be paid) in variable compensation. There were a total of 24 beneficiaries of the remuneration described above. Those amounts include $2,025,920 paid (or to be paid) to senior management of First Trust Advisors L.P. and $1,815,394 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"). Page 76
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) 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 77
-------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891. <TABLE> <CAPTION> 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 ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Richard E. Erickson, Trustee o Indefinite Term Physician, Edward-Elmhurst Medical Group, 222 None (1951) Physician & Officer, Wheaton Orthopedics o Since Inception (1990 to 2021) Thomas R. Kadlec, Trustee o Indefinite Term Retired; President, ADM Investors 222 Director, National Futures (1957) Services, Inc. (Futures Commission Association and ADMIS o Since Inception Merchant) (2010 to July 2022) Singapore Ltd.; Formerly, Director of ADM Investor Services, Inc., ADM Investor Services International, ADMIS Hong Kong Ltd., and Futures Industry Association Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate Aurora 222 Director and Board Chair (1964) Health and President, Advocate Aurora of Advocate Home Health o Since 2021 Continuing Health Division (Integrated Services, Advocate Home Healthcare System) Care Products and Advocate Hospice; Director and Board Chair of Aurora At Home (since 2018); Director of Advocate Physician Partners Accountable Care Organization; Director and Board Chair of RML Long Term Acute Care Hospitals; and Director of Senior Helpers (since 2021) Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 222 Formerly, Director of (1956) and Management Consulting) Trust Company of Illinois o Since Inception Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 222 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 222 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) </TABLE> ----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 78
-------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) <TABLE> <CAPTION> POSITION AND TERM OF OFFICE NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer, (1966) Executive Officer First Trust Advisors L.P. and First Trust Portfolios o Since January 2016 L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1972) Officer and Chief First Trust Portfolios L.P. Accounting Officer o Since January 2016 W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel, o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and First (1970) Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Chief Compliance Officer Since January 2011 o Assistant Secretary Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1966) First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception </TABLE> ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 79
-------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies." For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2022 Page 80
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
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FIRST TRUST First Trust Exchange-Traded Fund Book 3 First Trust Dividend Strength ETF (FTDS) First Trust Dow 30 Equal Weight ETF (EDOW) First Trust Lunt U.S. Factor Rotation ETF (FCTR) First Trust Growth Strength ETF (FTGS) First Trust Indxx Aerospace & Defense ETF (MISL) Annual Report For The Period Ended December 31, 2022
-------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2022 Shareholder Letter.......................................................... 2 Market Overview............................................................. 3 Fund Performance Overview First Trust Dividend Strength ETF (FTDS)................................. 4 First Trust Dow 30 Equal Weight ETF (EDOW)............................... 6 First Trust Lunt U.S. Factor Rotation ETF (FCTR)......................... 8 First Trust Growth Strength ETF (FTGS)................................... 10 First Trust Indxx Aerospace & Defense ETF (MISL)......................... 12 Notes to Fund Performance Overview.......................................... 14 Understanding Your Fund Expenses............................................ 15 Portfolio of Investments First Trust Dividend Strength ETF (FTDS)................................. 16 First Trust Dow 30 Equal Weight ETF (EDOW)............................... 18 First Trust Lunt U.S. Factor Rotation ETF (FCTR)......................... 19 First Trust Growth Strength ETF (FTGS)................................... 23 First Trust Indxx Aerospace & Defense ETF (MISL)......................... 25 Statements of Assets and Liabilities........................................ 26 Statements of Operations.................................................... 27 Statements of Changes in Net Assets......................................... 28 Financial Highlights........................................................ 30 Notes to Financial Statements............................................... 33 Report of Independent Registered Public Accounting Firm..................... 42 Additional Information...................................................... 43 Board of Trustees and Officers.............................................. 51 Privacy Policy.............................................................. 53
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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, 2022 Dear Shareholders: First Trust is pleased to provide you with the annual report for certain funds in the First Trust Exchange-Traded Fund (the "Funds"), which contains detailed information about the Funds for the twelve months ended December 31, 2022. Please note that both the First Trust Growth Strength ETF and the First Trust Indxx Aerospace & Defense ETF were incepted on October 25, 2022 and therefore, any information in this letter or the annual report prior to the Funds' inception date does not apply to those Funds. The past year was filled with challenges, several of which surely tested the resolve of even the most seasoned investors. The year began with the same headwinds that existed at the end of 2021, namely: stubbornly high inflation and rising interest rates. When Russia invaded Ukraine in late February 2022, we added war, geopolitical tension, and potential food and energy shortages to the list. Considering the bleak backdrop at the start of the year, it probably does not surprise you to read that with a total return of -18.11%, 2022 was the worst year for the S&P 500(R) Index since 2008. Even the bond market struggled to provide a haven to weary investors. The Bloomberg U.S. Aggregate Bond Index posted a total return of -13.01% for the year; its worst total return in 45 years. A common topic of discussion in 2022 was whether central banks around the world had tightened monetary policy enough to quell inflation without causing excess damage to their economies. In the U.S., the Federal Reserve (the "Fed") described this as a "soft landing," stating it was their intent to keep the labor market strong but to increase interest rates enough to bring inflation down to 2.0%. True to their word, over the course of seven interest rate hikes, the Fed increased the Federal Funds target rate (upper bound) from 0.25% (where it stood in March 2022) to 4.50% as of December 2022. This is the highest the Federal Funds rate has been since 2008. The economic impact of the Fed's tighter monetary policy quickly became evident. Excluding the economic contraction from COVID-19 in 2020, the U.S. experienced its first decline in the gross domestic product ("GDP") growth rate since March 2014. Data from the U.S. Bureau of Economic Analysis indicates that annualized real GDP growth rates over the first three quarters of 2022 were -1.6%, -0.6%, and 3.2%, respectively. Thankfully, inflation, as measured by the trailing 12-month rate on the Consumer Price Index ("CPI"), appears to be responding to the Fed's tightening. After peaking at 9.1% in June 2022, the CPI rate fell to 6.5% at the end of December 2022. For comparative purposes, the CPI rate has averaged 2.5% over the past 30 years. Job creation has provided a respite from dreary economic data in recent months, but that could quickly change. Nearly 125,000 employees have lost their jobs since June 2022 as more than 120 U.S. companies announced layoffs, according to Forbes. The jury is still out on whether the Fed will be able to pull off a soft landing, but the job market will tell the tale, in my opinion. Since 1928, the S&P 500(R) Index has only fallen for two consecutive years on four occasions: The Great Depression, World War II, the oil crisis of the 1970s and the burst of the dot-com bubble in the early 2000s. As we enter 2023, the U.S. economy has significant obstacles to overcome to avoid a recession and another negative year. We will be watching and reporting on what transpires. Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Funds again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 2
-------------------------------------------------------------------------------- MARKET OVERVIEW -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2022 ROBERT F. CAREY, CFA SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST FIRST TRUST ADVISORS L.P. Mr. Carey is responsible for the overall management of research and analysis of the First Trust product line. Mr. Carey has more than 30 years of experience as an Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst ("CFA") designation. He is a graduate of the University of Illinois at Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been quoted by several publications, including The Wall Street Journal, The Wall Street Reporter, Bloomberg News Service, and Registered Rep. STATE OF THE ECONOMY/INVESTING The Federal Reserve (the "Fed") remained steadfast in its battle with stubbornly high inflation in 2022. The Federal Funds target rate (upper bound), which stood at a mere 0.25% in January 2022 closed the year at 4.50%, its highest level in over a decade. Fortunately, it appears that inflation, as measured by the Consumer Price Index ("CPI") is responding to the Fed's tightening. After peaking at 9.1% on a trailing 12-month basis in June 2022, the CPI fell to 6.5% in December 2022. While we were glad to see a decline in the CPI, it still stands significantly higher than the Fed's stated goal of 2.0%, suggesting that further action by the Fed may be warranted, in my opinion. The global growth forecast from the International Monetary Fund ("IMF") released in October 2022 projected a 2.7% real gross domestic product ("GDP") growth rate for 2023, down from 3.2% in 2022. The IMF is calling for a 1.0% growth rate for the U.S. GDP in 2023, down from its 1.6% estimate for 2022. As has been the case for many years, Emerging Market and Developing Economies are expected to grow faster than Advanced Economies. Their 2023 growth rate estimates are 3.7% and 1.1%, respectively. Investors continued to funnel capital into exchange-traded funds ("ETFs") and related exchange-traded products ("ETPs") in 2022 despite the sharp sell-off in the markets. ETFGI, an independent research and consultancy firm, reported that total assets invested in ETFs/ETPs listed in the U.S. stood at $6.51 trillion as of year-end, down 9.8% from $7.21 trillion at the end of 2021, according to its own release. Net inflows to ETFs/ETPs listed in the U.S. stood at $607.23 billion in 2022, their second highest level on record, surpassed only by the $919.78 billion of inflows in 2021. U.S. STOCKS AND BONDS In 2022, three of the major U.S. stock indices posted substantial double-digit losses. The S&P 500(R) Index, the S&P MidCap 400(R) Index and the S&P SmallCap 600(R) Index posted total returns of -18.11%, -13.06%, and -16.10%, respectively, according to Bloomberg. Of the 11 major sectors that comprise the S&P 500(R) Index, only the Energy and Utilities sectors posted positive total returns, up 65.72% and 1.57%, respectively. The two worst-performing sectors were the Communication Services sector, down 39.89% and the Consumer Discretionary sector, down 37.03%. Bloomberg's consensus year-over-year earnings growth rate estimates for the S&P 500(R) Index for 2023 and 2024 were 1.97% and 9.87%, respectively, as of January 6, 2023. The yield on the benchmark 10-Year Treasury Note ("T-Note") closed trading on December 30, 2022, at 3.88%, according to Bloomberg. The 3.88% yield stood 173 basis points ("bps") above its 2.15% average for the 10-year period ended December 30, 2022. Its yield rose 237 bps in 2022. Most bond investors likely know that as yields increase, prices fall. As indicated by the sizeable increase in the yield on the 10-Year T-Note, bond investors endured a challenging year of declines in 2022. In the U.S. bond market, all the major bond groups posted negative total returns in 2022. The top performing major debt group we track was intermediate Treasuries. The Bloomberg U.S. Treasury Intermediate Index posted a total return of -7.77%. FOREIGN STOCKS AND BONDS The U.S. dollar appreciated by 8.21% against a basket of major currencies in 2022, as measured by the U.S. Dollar Index ("DXY"), according to Bloomberg. The DXY Index closed 2022 at a reading of 103.52, significantly above its 20-year average of 88.53. The stronger U.S. dollar likely had a negative influence on the returns of unhedged foreign securities held by U.S. investors. The Bloomberg EM Hard Currency Aggregate Index of emerging markets debt posted a total return of -16.60% (USD), while the Bloomberg Global Aggregate Index of higher quality debt declined 16.25% (USD). With respect to equities, the MSCI Emerging Markets Index of stocks posted a total return of -20.09% (USD), while the MSCI World ex USA Index declined by 14.29% (USD) on a total return basis, according to Bloomberg. Page 3
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST DIVIDEND STRENGTH ETF (FTDS) The First Trust Dividend Strength ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called The Dividend Strength Index(TM) (the "Index"). The Index is owned, developed, maintained and sponsored by Nasdaq, Inc. (the "Index Provider"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and real estate investment trusts that comprise the Index. The Index is designed to provide exposure to well-capitalized companies with a history of increasing their dividends. The term "well-capitalized" reflects companies that have strong balance sheets with durable cash flow and a record of profitability. According to the Index Provider, the Index screens companies for strong balance sheets, a high degree of liquidity, the ability to increase dividends and a record of dividend growth. To be eligible for inclusion in the Index, according to the Index Provider, a security must: (i) have a minimum market capitalization of $5 billion; (ii) be ranked in the top 1,500 securities in the Nasdaq US Benchmark Index by free-float market capitalization; and (iii) have a minimum three-month average daily dollar trading volume of $5 million. To be included in the Index, according to the Index Provider, a security's issuer must also have: (i) a long-term debt to market cap ratio of less than 40%, (ii) a return on equity of greater than 10%, (iii) a 5-year compounded dividend growth rate greater than 5%, and (iv) a dividend payout ratio of less than 50%. Each eligible security is ranked based upon indicated dividend yield. Securities within each Industry Classification Benchmark industry are ranked by dividend yield relative to their industry peers, with the highest indicated dividend yielding security receiving a rank of 1. The top 15 securities per industry are selected and combined for the final evaluation universe. Each remaining security from the combined evaluation universe is reranked based on indicated dividend yield with a rank of 1 representing the highest indicated dividend yield. The top 50 securities are selected and are equally weighted. The Index is rebalanced and reconstituted quarterly and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. The Fund's shares are listed for trading on The Nasdaq Stock Market LLC. The first day of secondary market trading in shares of the Fund was December 7, 2006. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (12/5/06) Ended Ended (12/5/06) 12/31/22 12/31/22 12/31/22 to 12/31/22 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -13.75% 6.68% 9.46% 6.15% 38.18% 146.94% 160.86% Market Price -13.78% 6.69% 9.48% 6.16% 38.25% 147.40% 161.26% INDEX PERFORMANCE The Dividend Strength Index(TM) (1)(2) N/A N/A N/A N/A N/A N/A N/A Nasdaq AlphaDEX(R) Total US Market Index(1) -12.73% 7.57% N/A N/A 44.05% N/A N/A S&P 500(R) Index(3) -18.11% 9.42% 12.56% 8.58% 56.88% 226.54% 275.53% Russell 3000(R) Index -19.21% 8.79% 12.13% 8.41% 52.37% 214.28% 265.92% Dow Jones U.S. Select Dividend Index 2.31% 8.38% 11.92% 7.78% 49.51% 208.30% 233.57% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (1) On January 9, 2015, the Fund's underlying index changed from the Value Line(R) Equity Allocation Index to the Nasdaq AlphaDEX(R) Total US Market Index. On April 29, 2022, the Fund's underlying index changed again from the Nasdaq AlphaDEX(R) Total US Market Index to The Dividend Strength Index(TM). Therefore, the Fund's performance and total returns shown are not necessarily indicative of the performance the Fund, based on its current index, would have generated. Since the Nasdaq AlphaDEX(R) Total US Market Index had an inception date of September 8, 2014, it was not in existence for all of the periods disclosed. (2) Because the Fund's underlying Index has an inception date of March 7, 2022, performance data for the Index is not available for the periods shown in the table. (3) The S&P 500(R) Index will serve as the Fund's new primary benchmark index. The Fund's portfolio managers believe that the S&P 500(R) Index provides a more appropriate comparison to Fund returns. (See Notes to Fund Performance Overview on page 14.) PERFORMANCE REVIEW The Fund generated a net asset value ("NAV") return of -13.75% during the 12-month period covered by this report. During the same period, the Dow Jones U.S. Select Dividend Index (the "Benchmark") generated a return of 2.31%. Investments in the Financials sector were the largest sector allocation by average weight at 27.3%. The largest contribution to the Fund's return was the Information Technology sector, which contributed -5.6%. The largest positive contribution to the Fund's return came from the Energy sector. This sector contributed 2.3%, while only having an average weight of 5.0% during the period. ----------------------------- Nasdaq(R) and The Dividend Strength Index(TM) are registered trademarks and service marks of Nasdaq, Inc. (together with its affiliates hereinafter referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 4
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DIVIDEND STRENGTH ETF (FTDS) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Financials 30.1% Industrials 26.8 Information Technology 11.2 Consumer Discretionary 9.8 Energy 9.5 Health Care 4.4 Materials 4.1 Consumer Staples 2.1 Real Estate 2.0 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Caterpillar, Inc. 2.4% Best Buy Co., Inc. 2.4 BlackRock, Inc. 2.2 Norfolk Southern Corp. 2.2 Aflac, Inc. 2.2 Merck & Co., Inc. 2.2 Quest Diagnostics, Inc. 2.2 A.O. Smith Corp. 2.2 Hartford Financial Services Group (The), Inc. 2.1 PACCAR, Inc. 2.1 ------- Total 22.2% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2012 - DECEMBER 31, 2022 First Trust Dividend S&P 500(R) Russell 3000(R) Dow Jones U.S. Select Strength ETF Index Index Dividend Index <S> <C> <C> <C> <C> 12/12 $10,000 $10,000 $10,000 $10,000 06/13 11,443 11,382 11,406 11,385 12/13 13,465 13,238 13,355 12,906 06/14 14,144 14,183 14,282 14,179 12/14 13,783 15,051 15,032 14,888 06/15 13,946 15,236 15,324 14,356 12/15 12,959 15,259 15,105 14,645 06/16 13,381 15,845 15,652 16,922 12/16 14,964 17,084 17,028 17,865 06/17 16,094 18,680 18,549 18,953 12/17 17,872 20,813 20,626 20,623 06/18 18,664 21,365 21,290 20,833 12/18 16,062 19,901 19,544 19,396 06/19 18,804 23,591 23,201 22,042 12/19 20,134 26,167 25,607 23,878 06/20 17,575 25,361 24,716 18,701 12/20 22,886 30,981 30,959 22,787 06/21 27,134 35,706 35,637 28,185 12/21 28,634 39,873 38,902 30,135 06/22 23,368 31,914 30,694 29,364 12/22 24,694 32,654 31,428 30,830 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 5
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) The First Trust Dow 30 Equal Weight ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Dow Jones Industrial Average(R) Equal Weight Index (the "Index"). The Index is developed, maintained and sponsored by S&P Dow Jones Indices LLC (the "Index Provider"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks that comprise the Index. The Index is an equal weight version of the Dow Jones Industrial Average(R) (the "DJIA"). The 30 securities comprising the DJIA are issued by blue-chip U.S. companies covering all industries, with the exception of transportation and utilities. According to the Index Provider, inclusion in the DJIA is not governed by quantitative rules but rather is based on the following criteria: (i) the company is not a utility or in the transportation business; (ii) the company has a premier reputation in its field; (iii) the company has a history of successful growth; (iv) there is wide interest in the company among individual and institutional investors; and (v) the company should be incorporated and headquartered in the U.S. Whenever one component is changed, the others are reviewed. For the sake of historical continuity, composition changes are rarely made. According to the Index Provider, in the event that there is a change in the components of the DJIA, the component removed from the DJIA will simultaneously be removed from the Index, and the component that replaces the removed component will be added to the Index at the same weight as the component that was removed. The Index is rebalanced quarterly and reconstituted as needed and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. The Fund's shares are listed for trading on the NYSE Arca, Inc. The first day of secondary market trading in shares of the Fund was August 9, 2017. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year 5 Years Inception 5 Years Inception Ended Ended (8/8/17) Ended (8/8/17) 12/31/22 12/31/22 to 12/31/22 12/31/22 to 12/31/22 <S> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -7.52% 7.54% 9.06% 43.81% 59.66% Market Price -7.55% 7.49% 9.05% 43.49% 59.60% INDEX PERFORMANCE Dow Jones Industrial Average(R) Equal Weight Index -7.14% 8.19% 9.71% 48.21% 64.86% Dow Jones Industrial Average(R) -6.86% 8.38% 10.21% 49.53% 69.01% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 14.) PERFORMANCE REVIEW The Fund generated a NAV return of -7.52% during the 12-month period covered by this report. During the same period, the Dow Jones Industrial Average(R) (the "Benchmark") generated a return of -6.86%. The largest sector allocation by weight in the Fund was the Information Technology sector, with an average portfolio weight of 22.8%. This sector also contributed the most to the Fund's return, contributing -6.1%. The largest positive contribution to the Fund's return came from the Health Care sector, which contributed 2.6% to the Fund's return. ----------------------------- Dow Jones Industrial Average(R) Equal Weight Index ("Index") is a product of S&P Dow Jones Indices LLC or its affiliates ("SPDJI") and has been licensed for use by First Trust. S&P(R) is a registered trademark of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones(R) is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by First Trust. The Fund is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product nor do they have any liability for any errors, omissions, or interruptions of the Index. Page 6
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 22.8% Industrials 13.7 Health Care 13.3 Financials 13.2 Consumer Staples 13.1 Consumer Discretionary 10.2 Communication Services 6.7 Energy 3.6 Materials 3.4 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- NIKE, Inc., Class B 3.6% Chevron Corp. 3.6 Boeing (The) Co. 3.6 Caterpillar, Inc. 3.5 Verizon Communications, Inc. 3.5 Merck & Co., Inc. 3.4 JPMorgan Chase & Co. 3.4 Honeywell International, Inc. 3.4 Salesforce, Inc. 3.4 Travelers (The) Cos., Inc. 3.4 ------- Total 34.8% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT AUGUST 8, 2017 - DECEMBER 31, 2022 Dow Jones Industrial First Trust Dow 30 Average (R) Equal Dow Jones Industrial Equal Weight ETF Weight Index Average(R) <S> <C> <C> <C> 08/17 $10,000 $10,000 $10,000 12/17 11,102 11,124 11,302 06/18 11,024 11,069 11,219 12/18 11,004 11,079 10,908 06/19 12,615 12,739 12,588 12/19 13,676 13,849 13,674 06/20 12,342 12,576 12,521 12/20 14,552 14,874 15,004 06/21 16,500 16,922 17,072 12/21 17,263 17,753 18,146 06/22 14,914 15,372 15,526 12/22 15,966 16,486 16,901 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 7
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) The First Trust Lunt U.S. Factor Rotation ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Lunt Capital Large Cap Factor Rotation Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks that comprise the Index. The Index is owned and was developed by Lunt Capital Management, Inc. (the "Index Provider"). The Index is calculated and maintained by Nasdaq, Inc. The Index is designed to track the performance of U.S. securities exhibiting desirable factor exposure. The Index utilizes the Index Provider's risk-adjusted relative strength methodology to allocate exposure to securities exhibiting either high or low levels of the characteristics associated with one of four primary investing factors: momentum, value, quality and volatility. The Index is rebalanced and reconstituted periodically and the Fund will make corresponding changes to its portfolio after the Index changes are made public. The Fund's shares are listed for trading on CBOE BZX Exchange, Inc. The first day of secondary market trading in shares of the Fund was July 26, 2018. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Inception Inception Ended (7/25/18) (7/25/18) 12/31/22 to 12/31/22 to 12/31/22 <S> <C> <C> <C> FUND PERFORMANCE NAV -20.37% 8.54% 43.81% Market Price -20.37% 8.54% 43.86% INDEX PERFORMANCE The Lunt Capital Large Cap Factor Rotation Index -19.84% 9.34% 48.62% Nasdaq US 500 Large Cap Index(TM) -19.45% 8.72% 44.88% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 14.) PERFORMANCE REVIEW The Fund generated a NAV return of -20.37% during the 12-month period covered by this report. During the same period, the Nasdaq US 500 Large Cap Index(TM) (the "Benchmark") generated a return of -19.45%. The largest sector allocation by weight was the Financials sector, with an average portfolio weight of 17.0%. The Energy and Information Technology sectors were also highly weighted, at 15.5% each. The Information Technology sector contributed most to the Fund's return, contributing -10.2%. The largest positive contribution to the Fund's return came from the Energy sector, contributing 4.3% to the Fund's return. ----------------------------- Lunt Capital Management, Inc. ("Lunt") and the Lunt Capital Large Cap Factor Rotation Index ("Lunt Index") are trademarks of Lunt and have been licensed for use for certain purposes by First Trust. The First Trust Lunt U.S. Factor Rotation ETF is based on the Lunt Index and is not sponsored, endorsed, sold or promoted by Lunt, and Lunt makes no representation regarding the advisability of trading in such fund. Lunt has contracted with Nasdaq, Inc. to calculate and maintain the Lunt Index. The Fund is not sponsored, endorsed, sold or promoted by Nasdaq, Inc. or its affiliates (Nasdaq, with its affiliates, hereinafter referred to as the "Corporations"). The Corporations have not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the Fund. The Corporations make no representation or warranty, express or implied to the owners of the Fund or any member of the public regarding the advisability of investing in securities generally or in the Fund particularly, or the ability of the Lunt Index to track general stock performance. Page 8
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Financials 23.4% Energy 16.6 Health Care 11.7 Industrials 10.2 Consumer Staples 10.1 Information Technology 9.1 Consumer Discretionary 8.4 Materials 4.6 Communication Services 2.7 Utilities 1.6 Real Estate 1.6 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Occidental Petroleum Corp. 2.3% O'Reilly Automotive, Inc. 2.2 Cheniere Energy, Inc. 2.0 Marathon Petroleum Corp. 2.0 LPL Financial Holdings, Inc. 1.8 EQT Corp. 1.7 Texas Pacific Land Corp. 1.5 Hess Corp. 1.4 Marathon Oil Corp. 1.3 W.R. Berkley Corp. 1.2 ------- Total 17.4% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT JULY 25, 2018 - DECEMBER 31, 2022 First Trust Lunt U.S. Lunt Capital Large Cap Nasdaq US 500 Factor Rotation ETF Factor Rotation Index Large Cap Index(TM) <S> <C> <C> <C> 07/18 $10,000 $10,000 $10,000 12/18 8,791 8,813 8,869 06/19 10,828 10,901 10,567 12/19 11,459 11,578 11,711 06/20 11,988 12,168 11,509 12/20 14,899 15,184 14,220 06/21 17,627 18,031 16,261 12/21 18,060 18,540 17,985 06/22 13,895 14,313 14,185 12/22 14,381 14,862 14,488 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 9
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST GROWTH STRENGTH ETF (FTGS) The First Trust Growth Strength ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called The Growth Strength Index(TM) (the "Index"). Under normal market conditions, the Fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in the common stocks and real estate investment trusts ("REITs") that comprise the Index. The Index is developed, maintained and sponsored by Nasdaq, Inc. (the "Index Provider"). The Index seeks to provide exposure to a mix of domestic equities with filters for liquidity, return on equity, long-term debt, revenue and cash flow growth. Companies that do not meet requirements for maximum metrics on those criteria are filtered out of, or excluded from, the Index, according to the Index Provider. The Index is rebalanced and reconstituted quarterly and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. The Fund's shares are listed for trading on The Nasdaq Stock Market LLC. The first day of secondary market trading in shares of the Fund was October 26, 2022. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (10/25/22) to 12/31/22 <S> <C> FUND PERFORMANCE NAV 1.20% Market Price 1.39% INDEX PERFORMANCE The Growth Strength Index(TM) 1.13% S&P 500(R) Index -0.15% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 14.) PERFORMANCE REVIEW The Fund generated a NAV return of 1.20% for the period from the Fund's inception date of October 25, 2022 through December 31, 2022. During the same period, the S&P 500(R) Index (the "Benchmark") generated a return of -0.15%. During the same period, the Fund was most heavily weighted towards investments in the Semiconductors & Semiconductor Equipment industry, which had an average weight of 15.6%. Investments in the Biotechnology industry generated a contribution of 1.5% to the Fund's to return, which was the greatest positive contribution of any industry. The largest negative contribution to the Fund's return was from the Automobiles industry, which contributed -0.9% to the Fund's return during the period. ----------------------------- Nasdaq(R) and The Growth Index(TM) are registered trademarks and service marks of Nasdaq, Inc. (together with its affiliates hereinafter referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 10
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST GROWTH STRENGTH ETF (FTGS) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 30.4% Health Care 26.3 Energy 14.6 Industrials 6.3 Materials 5.5 Real Estate 4.2 Financials 4.0 Communication Services 3.5 Consumer Discretionary 3.4 Consumer Staples 1.8 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Horizon Therapeutics PLC 3.4% KLA Corp. 2.5 Broadcom, Inc. 2.4 Hologic, Inc. 2.3 Etsy, Inc. 2.3 Applied Materials, Inc. 2.3 NVIDIA Corp. 2.3 Abbott Laboratories 2.2 Pfizer, Inc. 2.2 Incyte Corp. 2.2 ------- Total 24.1% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT OCTOBER 25, 2022 - DECEMBER 31, 2022 First Trust Growth The Growth Strength S&P 500(R) Strength ETF Index(TM) Index <S> <C> <C> <C> 10/25/22 $10,000 $10,000 $10,000 12/31/22 10,120 10,113 9,985 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 11
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST INDXX AEROSPACE & DEFENSE ETF (MISL) The First Trust Indxx Aerospace & Defense ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Indxx US Aerospace & Defense Index (the "Index"). Under normal market conditions, the Fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in the common stocks that comprise the Index. The Fund will generally employ a full replication strategy, meaning that it will normally invest in all of the securities comprising the Index in proportion to their weightings in the Index. The Index is developed, maintained and sponsored by Indxx, Inc. (the "Index Provider"). According to the Index Provider, the Index's starting universe consists of U.S. companies engaged in business activities associated with the following aerospace and defense sub-themes, as identified by the Index Provider as Advanced Aerospace & Defense and are (1) Hypersonic: Companies involved in developing Hypersonic warfare weapons technology for defense related applications; (2) Directed Energy: Companies involved in developing weapons like high power microwaves, laser technology products and electromagnetic weapons for defense related applications; (3) Space Technologies: Companies involved in developing rockets, satellites and launch vehicles; (4) Unmanned Aerial Vehicle/Advanced Air Mobility: Companies that develop military aircrafts guided by remote control or programmed autonomously and companies involved in developing an air transportation system that moves cargo and people for defense related applications; or (5) Autonomous, Cybersecurity and C5ISR Systems: Companies involved in providing autonomous, cybersecurity, and C5ISR solutions for improving national security, enhancing public safety and designing better combat results. These sub-themes also include the commercial (non-government/defense) application of such activities. According to the Index Provider, the starting universe also includes Traditional Aerospace & Defense companies that manufacture construction materials, electronics, and telecommunications equipment used in the manufacture of aircraft for both defense and commercial aviation. From the starting universe, only companies that derive at least 50% of revenues from aerospace and defense activities in one or more of the sub-themes identified above will be eligible for inclusion in the Index, according to the Index Provider. These companies have their principal business strategies and/or growth prospects inextricably linked to aerospace and defense. The top 50 securities are selected and weighted. The Index is rebalanced quarterly and reconstituted semi-annually, and the Fund will make corresponding changes to its portfolio shortly after the Index changes are made public. The Fund's shares are listed for trading on the NYSE Arca, Inc. The first day of secondary market trading in shares of the Fund was October 26, 2022. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (10/25/22) to 12/31/22 <S> <C> FUND PERFORMANCE NAV 7.34% Market Price 7.44% INDEX PERFORMANCE Indxx US Aerospace & Defense Index 7.40% S&P 500(R) Index -0.15% S&P Composite 1500 Aerospace & Defense Index 9.23% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 14.) PERFORMANCE REVIEW The Fund generated a NAV return of 7.34% for the period from the Fund's inception date of October 25, 2022 through December 31, 2022. During the same period, the S&P 500(R) Index (the "Benchmark") generated a return of -0.15%. During the same period, the Fund was most heavily weighted towards investments in the Aerospace & Defense sub-industry. This sub-industry also contributed the most to the Fund's return, at 7.3%. The largest, and only negative, contribution to the Fund's return came from the Alternative Carriers sub-industry. This sub-industry had an average weight of 0.5% and contributed a relatively negligible -0.1% to the Fund's total return. ----------------------------- Indxx and Indxx US Aerospace & Defense Index ("Index") are trademarks of Indxx, Inc. ("Indxx") and have been licensed for use for certain purposes by First Trust. The Fund is not sponsored, endorsed, sold or promoted by Indxx and Indxx makes no representation regarding the advisability of trading in such product. The Index is determined, composed and calculated by Indxx without regard to First Trust or the Fund. Page 12
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST INDXX AEROSPACE & DEFENSE ETF (MISL) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Industrials 99.6% Communication Services 0.4 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Boeing (The) Co. 9.6% Lockheed Martin Corp. 8.4 Raytheon Technologies Corp. 8.2 Northrop Grumman Corp. 7.9 General Dynamics Corp. 7.5 TransDigm Group, Inc. 4.1 Howmet Aerospace, Inc. 4.1 Leidos Holdings, Inc. 4.0 Textron, Inc. 4.0 HEICO Corp. 3.7 ------- Total 61.5% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT OCTOBER 25, 2022 - DECEMBER 31, 2022 First Trust Indxx Indxx Aerospace & S&P 500(R) S&P Composite 1500 Aerospace & Defense ETF Defense Index Index Aerospace & Defense Index <S> <C> <C> <C> <C> 10/25/22 $10,000 $10,000 $10,000 $10,000 12/31/22 10,734 10,740 9,985 10,923 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 13
-------------------------------------------------------------------------------- NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- Total returns for the periods since inception are calculated from the inception date of each Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the periods indicated. "Cumulative Total Returns" represent the total change in value of an investment over the periods indicated. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the Advisor. Each Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint of the national best bid and offer price ("NBBO") as of the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund's NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund's NAV was calculated. Since shares of each Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in each Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund's past performance is no guarantee of future performance. Page 14
FIRST TRUST EXCHANGE-TRADED FUND UNDERSTANDING YOUR FUND EXPENSES DECEMBER 31, 2022 (UNAUDITED) As a shareholder of First Trust Dividend Strength ETF, First Trust Dow 30 Equal Weight ETF, First Trust Lunt U.S. Factor Rotation ETF, First Trust Growth Strength ETF, or First Trust Indxx Aerospace & Defense ETF (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds. The Example is based on an investment of $1,000 invested at the beginning of the period (or since inception) and held through the six-month (or shorter) period ended December 31, 2022. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during this six-month (or shorter) period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. <TABLE> <CAPTION> ----------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2022 DECEMBER 31, 2022 PERIOD PERIOD (b) ----------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST DIVIDEND STRENGTH ETF (FTDS) Actual $1,000.00 $1,056.90 0.70% (a) $3.63 Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% (a) $3.57 FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) Actual $1,000.00 $1,070.50 0.50% $2.61 Hypothetical (5% return before expenses) $1,000.00 $1,022.68 0.50% $2.55 FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) Actual $1,000.00 $1,034.90 0.65% $3.33 Hypothetical (5% return before expenses) $1,000.00 $1,021.93 0.65% $3.31 </TABLE> <TABLE> <CAPTION> ----------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSES PAID EXPENSE RATIO DURING THE PERIOD BEGINNING ENDING BASED ON THE OCTOBER 25, 2022 (c) ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO OCTOBER 25, 2022 (c) DECEMBER 31, 2022 IN THE PERIOD DECEMBER 31, 2022 (d) ----------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST GROWTH STRENGTH ETF (FTGS) Actual $1,000.00 $1,012.00 0.60% $1.12 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 FIRST TRUST INDXX AEROSPACE & DEFENSE ETF (MISL) Actual $1,000.00 $1,073.40 0.60% $1.16 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 </TABLE> (a) These expense ratios reflect an expense cap. See Note 3 in Notes to Financial Statements. (b) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (July 1, 2022 through December 31, 2022), multiplied by 184/365 (to reflect the six-month period). (c) Inception date. (d) Actual expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (October 25, 2022 through December 31, 2022), multiplied by 68/365. Hypothetical expenses are assumed for the most recent six-month period. Page 15
FIRST TRUST DIVIDEND STRENGTH ETF (FTDS) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% AEROSPACE & DEFENSE -- 3.7% 1,492 General Dynamics Corp. $ 370,180 1,448 Huntington Ingalls Industries, Inc. 334,025 -------------- 704,205 -------------- AIR FREIGHT & LOGISTICS -- 2.0% 2,186 United Parcel Service, Inc., Class B 380,014 -------------- BANKS -- 13.3% 5,539 Comerica, Inc. 370,282 2,547 Cullen/Frost Bankers, Inc. 340,534 5,426 East West Bancorp, Inc. 357,573 5,000 Popular, Inc. 331,600 18,542 Regions Financial Corp. 399,766 10,096 Synovus Financial Corp. 379,105 7,569 Zions Bancorp N.A. 372,092 -------------- 2,550,952 -------------- BUILDING PRODUCTS -- 2.2% 7,220 A.O. Smith Corp. 413,273 -------------- CAPITAL MARKETS -- 6.3% 606 BlackRock, Inc. 429,430 4,543 Northern Trust Corp. 402,010 3,530 T. Rowe Price Group, Inc. 384,982 -------------- 1,216,422 -------------- CHEMICALS -- 2.0% 3,824 Celanese Corp. 390,966 -------------- CONTAINERS & PACKAGING -- 2.1% 3,095 Packaging Corp. of America 395,881 -------------- DISTRIBUTORS -- 2.0% 2,229 Genuine Parts Co. 386,754 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 3.8% 11,244 Corning, Inc. 359,133 3,150 TE Connectivity Ltd. 361,620 -------------- 720,753 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 2.0% 8,141 First Industrial Realty Trust, Inc. 392,885 -------------- FOOD PRODUCTS -- 2.1% 3,986 Bunge Ltd. 397,683 -------------- HEALTH CARE PROVIDERS & SERVICES -- 2.2% 2,647 Quest Diagnostics, Inc. 414,097 -------------- HOTELS, RESTAURANTS & LEISURE -- 1.8% 3,791 Texas Roadhouse, Inc. 344,791 -------------- INSURANCE -- 10.4% 5,936 Aflac, Inc. 427,036 10,265 Fidelity National Financial, Inc. 386,169 5,387 Hartford Financial Services Group (The), Inc. 408,496 SHARES DESCRIPTION VALUE ------------------------------------------------------------- INSURANCE (CONTINUED) 4,591 Principal Financial Group, Inc. $ 385,277 2,054 Travelers (The) Cos., Inc. 385,105 -------------- 1,992,083 -------------- MACHINERY -- 10.6% 1,903 Caterpillar, Inc. 455,883 1,555 Cummins, Inc. 376,761 4,126 PACCAR, Inc. 408,350 1,344 Parker-Hannifin Corp. 391,104 1,742 Snap-on, Inc. 398,029 -------------- 2,030,127 -------------- MULTILINE RETAIL -- 1.8% 2,274 Target Corp. 338,917 -------------- OIL, GAS & CONSUMABLE FUELS -- 9.5% 2,090 Chevron Corp. 375,134 2,907 ConocoPhillips 343,026 7,097 Ovintiv, Inc. 359,889 3,604 Phillips 66 375,104 2,833 Valero Energy Corp. 359,395 -------------- 1,812,548 -------------- PHARMACEUTICALS -- 2.2% 3,783 Merck & Co., Inc. 419,724 -------------- PROFESSIONAL SERVICES -- 1.9% 4,957 Robert Half International, Inc. 365,975 -------------- ROAD & RAIL -- 6.4% 2,469 Landstar System, Inc. 402,200 1,740 Norfolk Southern Corp. 428,771 1,900 Union Pacific Corp. 393,433 -------------- 1,224,404 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 5.7% 13,420 Intel Corp. 354,691 3,127 QUALCOMM, Inc. 343,782 4,302 Skyworks Solutions, Inc. 392,041 -------------- 1,090,514 -------------- SPECIALTY RETAIL -- 4.2% 5,676 Best Buy Co., Inc. 455,272 3,077 Williams-Sonoma, Inc. 353,609 -------------- 808,881 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.7% 5,517 NetApp, Inc. 331,351 -------------- TOTAL COMMON STOCKS -- 99.9% 19,123,200 (Cost $19,161,319) -------------- MONEY MARKET FUNDS -- 0.1% 13,124 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 4.10% (a) 13,124 (Cost $13,124) -------------- Page 16 See Notes to Financial Statements
FIRST TRUST DIVIDEND STRENGTH ETF (FTDS) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 DESCRIPTION VALUE ------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 19,136,324 (Cost $19,174,443) NET OTHER ASSETS AND LIABILITIES -- (0.0)% (9,023) -------------- NET ASSETS -- 100.0% $ 19,127,301 ============== (a) Rate shown reflects yield as of December 31, 2022. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*............................... $ 19,123,200 $ 19,123,200 $ -- $ -- Money Market Funds........................... 13,124 13,124 -- -- ------------------------------------------------------------- Total Investments............................ $ 19,136,324 $ 19,136,324 $ -- $ -- ============================================================= </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 17
FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% AEROSPACE & DEFENSE -- 3.6% 29,639 Boeing (The) Co. (a) $ 5,645,933 -------------- BANKS -- 3.4% 40,263 JPMorgan Chase & Co. 5,399,268 -------------- BEVERAGES -- 3.4% 84,275 Coca-Cola (The) Co. 5,360,733 -------------- BIOTECHNOLOGY -- 3.2% 19,097 Amgen, Inc. 5,015,636 -------------- CAPITAL MARKETS -- 3.2% 14,817 Goldman Sachs Group (The), Inc. 5,087,862 -------------- CHEMICALS -- 3.4% 106,000 Dow, Inc. 5,341,340 -------------- COMMUNICATIONS EQUIPMENT -- 3.3% 109,806 Cisco Systems, Inc. 5,231,158 -------------- CONSUMER FINANCE -- 3.2% 34,575 American Express Co. 5,108,456 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.5% 142,278 Verizon Communications, Inc. 5,605,753 -------------- ENTERTAINMENT -- 3.1% 56,984 Walt Disney (The) Co. (a) 4,950,770 -------------- FOOD & STAPLES RETAILING -- 6.4% 131,615 Walgreens Boots Alliance, Inc. 4,917,136 36,619 Walmart, Inc. 5,192,208 -------------- 10,109,344 -------------- HEALTH CARE PROVIDERS & SERVICES -- 3.3% 9,869 UnitedHealth Group, Inc. 5,232,347 -------------- HOTELS, RESTAURANTS & LEISURE -- 3.3% 19,561 McDonald's Corp. 5,154,910 -------------- HOUSEHOLD PRODUCTS -- 3.4% 35,259 Procter & Gamble (The) Co. 5,343,854 -------------- INDUSTRIAL CONGLOMERATES -- 6.6% 42,313 3M Co. 5,074,175 25,144 Honeywell International, Inc. 5,388,359 -------------- 10,462,534 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- INSURANCE -- 3.4% 28,663 Travelers (The) Cos., Inc. $ 5,374,026 -------------- IT SERVICES -- 6.6% 36,186 International Business Machines Corp. 5,098,245 25,497 Visa, Inc., Class A 5,297,257 -------------- 10,395,502 -------------- MACHINERY -- 3.5% 23,412 Caterpillar, Inc. 5,608,579 -------------- OIL, GAS & CONSUMABLE FUELS -- 3.6% 31,674 Chevron Corp. 5,685,166 -------------- PHARMACEUTICALS -- 6.8% 30,278 Johnson & Johnson 5,348,609 48,917 Merck & Co., Inc. 5,427,341 -------------- 10,775,950 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.1% 188,428 Intel Corp. 4,980,152 -------------- SOFTWARE -- 6.7% 21,682 Microsoft Corp. 5,199,777 40,585 Salesforce, Inc. (a) 5,381,165 -------------- 10,580,942 -------------- SPECIALTY RETAIL -- 3.3% 16,604 Home Depot (The), Inc. 5,244,540 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 3.1% 37,430 Apple, Inc. 4,863,280 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 3.6% 48,630 NIKE, Inc., Class B 5,690,196 -------------- TOTAL INVESTMENTS -- 100.0% 158,248,231 (Cost $162,019,452) NET OTHER ASSETS AND LIABILITIES -- 0.0% 25,807 -------------- NET ASSETS -- 100.0% $ 158,274,038 ============== (a) Non-income producing security. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*............................... $ 158,248,231 $ 158,248,231 $ -- $ -- ============================================================= </TABLE> * See Portfolio of Investments for industry breakout. Page 18 See Notes to Financial Statements
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% AEROSPACE & DEFENSE -- 1.0% 3,013 Lockheed Martin Corp. $ 1,465,795 2,094 Northrop Grumman Corp. 1,142,507 -------------- 2,608,302 -------------- AIR FREIGHT & LOGISTICS -- 1.5% 16,867 Expeditors International of Washington, Inc. 1,752,819 4,547 FedEx Corp. 787,540 8,160 United Parcel Service, Inc., Class B 1,418,534 -------------- 3,958,893 -------------- AIRLINES -- 0.3% 23,200 Southwest Airlines Co. (a) 781,144 -------------- AUTOMOBILES -- 1.1% 118,572 Ford Motor Co. 1,378,992 45,970 General Motors Co. 1,546,431 -------------- 2,925,423 -------------- BANKS -- 1.9% 31,313 Citigroup, Inc. 1,416,287 27,959 Citizens Financial Group, Inc. 1,100,746 87,389 Regions Financial Corp. 1,884,107 16,821 Wells Fargo & Co. 694,539 -------------- 5,095,679 -------------- BEVERAGES -- 1.2% 12,313 Coca-Cola (The) Co. 783,230 5,448 Constellation Brands, Inc., Class A 1,262,574 11,964 Monster Beverage Corp. (a) 1,214,705 -------------- 3,260,509 -------------- BIOTECHNOLOGY -- 1.7% 18,737 AbbVie, Inc. 3,028,087 4,178 Moderna, Inc. (a) 750,452 1,104 Regeneron Pharmaceuticals, Inc. (a) 796,525 -------------- 4,575,064 -------------- BUILDING PRODUCTS -- 1.0% 10,300 Carlisle Cos., Inc. 2,427,195 784 Trane Technologies PLC 131,783 -------------- 2,558,978 -------------- CAPITAL MARKETS -- 6.8% 1,018 BlackRock, Inc. 721,385 5,974 Blackstone, Inc. 443,211 64,450 Carlyle Group (The), Inc. 1,923,188 9,681 Cboe Global Markets, Inc. 1,214,675 6,283 CME Group, Inc. 1,056,549 1,791 FactSet Research Systems, Inc. 718,567 44,444 Franklin Resources, Inc. 1,172,433 22,232 Intercontinental Exchange, Inc. 2,280,781 22,276 LPL Financial Holdings, Inc. 4,815,403 5,316 Moody's Corp. 1,481,144 13,457 State Street Corp. 1,043,859 11,778 T. Rowe Price Group, Inc. 1,284,509 -------------- 18,155,704 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- CHEMICALS -- 3.9% 10,454 Albemarle Corp. $ 2,267,055 8,528 Celanese Corp. 871,903 30,031 CF Industries Holdings, Inc. 2,558,641 27,353 Dow, Inc. 1,378,318 14,553 DuPont de Nemours, Inc. 998,772 17,227 LyondellBasell Industries N.V., Class A 1,430,358 21,712 Mosaic (The) Co. 952,505 -------------- 10,457,552 -------------- COMMERCIAL SERVICES & SUPPLIES -- 1.1% 295 Cintas Corp. 133,228 9,584 Republic Services, Inc. 1,236,240 3,328 Rollins, Inc. 121,605 8,421 Waste Management, Inc. 1,321,087 -------------- 2,812,160 -------------- COMMUNICATIONS EQUIPMENT -- 0.4% 4,417 Motorola Solutions, Inc. 1,138,305 -------------- CONSTRUCTION & ENGINEERING -- 0.4% 7,325 Quanta Services, Inc. 1,043,812 -------------- CONSUMER FINANCE -- 1.2% 17,205 Capital One Financial Corp. 1,599,377 50,235 Synchrony Financial 1,650,722 -------------- 3,250,099 -------------- CONTAINERS & PACKAGING -- 0.4% 31,012 International Paper Co. 1,073,946 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.0% 143,559 AT&T, Inc. 2,642,921 -------------- ELECTRIC UTILITIES -- 0.7% 26,741 Evergy, Inc. 1,682,811 1,403 NextEra Energy, Inc. 117,291 -------------- 1,800,102 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.4% 1,681 Amphenol Corp., Class A 127,992 723 CDW Corp. 129,113 5,459 Keysight Technologies, Inc. (a) 933,871 -------------- 1,190,976 -------------- ENTERTAINMENT -- 0.2% 62,138 Warner Bros Discovery, Inc. (a) 589,068 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 1.6% 16,607 Equity LifeStyle Properties, Inc. 1,072,812 9,662 Extra Space Storage, Inc. 1,422,053 2,094 Public Storage 586,718 35,496 VICI Properties, Inc. 1,150,071 -------------- 4,231,654 -------------- See Notes to Financial Statements Page 19
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) FOOD & STAPLES RETAILING -- 1.9% 54,721 Albertsons Cos., Inc., Class A $ 1,134,914 249 Costco Wholesale Corp. 113,668 19,214 Kroger (The) Co. 856,560 53,457 Walgreens Boots Alliance, Inc. 1,997,153 7,845 Walmart, Inc. 1,112,343 -------------- 5,214,638 -------------- FOOD PRODUCTS -- 4.2% 20,958 Archer-Daniels-Midland Co. 1,945,950 34,007 Conagra Brands, Inc. 1,316,071 9,810 Hershey (The) Co. 2,271,702 8,470 J.M. Smucker (The) Co. 1,342,156 55,231 Kraft Heinz (The) Co. 2,248,454 35,739 Tyson Foods, Inc., Class A 2,224,753 -------------- 11,349,086 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 1.3% 14,871 Abbott Laboratories 1,632,687 16,007 Edwards Lifesciences Corp. (a) 1,194,282 1,390 IDEXX Laboratories, Inc. (a) 567,065 -------------- 3,394,034 -------------- HEALTH CARE PROVIDERS & SERVICES -- 4.1% 5,122 AmerisourceBergen Corp. 848,767 16,119 Cardinal Health, Inc. 1,239,068 11,347 Centene Corp. (a) 930,567 7,327 Cigna Corp. 2,427,728 22,343 CVS Health Corp. 2,082,144 1,586 Elevance Health, Inc. 813,570 5,155 UnitedHealth Group, Inc. 2,733,078 -------------- 11,074,922 -------------- HOTELS, RESTAURANTS & LEISURE -- 1.2% 75 Chipotle Mexican Grill, Inc. (a) 104,062 5,991 McDonald's Corp. 1,578,808 23,134 MGM Resorts International 775,683 8,618 Starbucks Corp. 854,906 -------------- 3,313,459 -------------- HOUSEHOLD DURABLES -- 1.5% 22,799 D.R. Horton, Inc. 2,032,303 22,052 Lennar Corp., Class A 1,995,706 -------------- 4,028,009 -------------- HOUSEHOLD PRODUCTS -- 1.7% 10,195 Colgate-Palmolive Co. 803,264 11,051 Kimberly-Clark Corp. 1,500,173 14,305 Procter & Gamble (The) Co. 2,168,066 -------------- 4,471,503 -------------- INSURANCE -- 13.5% 35,357 Aflac, Inc. 2,543,583 5,462 Allstate (The) Corp. 740,647 40,981 American International Group, Inc. 2,591,638 4,344 Aon PLC, Class A 1,303,808 15,498 Arch Capital Group Ltd. (a) 972,964 SHARES DESCRIPTION VALUE ------------------------------------------------------------- INSURANCE (CONTINUED) 10,982 Arthur J. Gallagher & Co. $ 2,070,546 28,144 Brown & Brown, Inc. 1,603,364 10,458 Chubb Ltd. 2,307,035 22,277 Cincinnati Financial Corp. 2,280,942 33,605 Hartford Financial Services Group (The), Inc. 2,548,267 22,752 Loews Corp. 1,327,124 1,599 Markel Corp. (a) 2,106,667 18,295 Marsh & McLennan Cos., Inc. 3,027,457 33,271 MetLife, Inc. 2,407,822 18,370 Principal Financial Group, Inc. 1,541,610 11,183 Prudential Financial, Inc. 1,112,261 13,247 Travelers (The) Cos., Inc. 2,483,680 45,571 W.R. Berkley Corp. 3,307,088 -------------- 36,276,503 -------------- INTERACTIVE MEDIA & SERVICES -- 0.4% 12,377 Alphabet, Inc., Class A (a) 1,092,023 -------------- IT SERVICES -- 3.8% 5,386 Accenture PLC, Class A 1,437,200 4,498 Automatic Data Processing, Inc. 1,074,392 6,583 Broadridge Financial Solutions, Inc. 882,978 317 EPAM Systems, Inc. (a) 103,894 1,182 Fiserv, Inc. (a) 119,465 2,535 Gartner, Inc. (a) 852,115 9,816 International Business Machines Corp. 1,382,976 6,426 Jack Henry & Associates, Inc. 1,128,149 5,015 Mastercard, Inc., Class A 1,743,866 13,717 Paychex, Inc. 1,585,136 -------------- 10,310,171 -------------- LIFE SCIENCES TOOLS & SERVICES -- 2.1% 3,057 Danaher Corp. 811,389 7,799 IQVIA Holdings, Inc. (a) 1,597,937 2,178 Mettler-Toledo International, Inc. (a) 3,148,190 223 Thermo Fisher Scientific, Inc. 122,804 -------------- 5,680,320 -------------- MACHINERY -- 2.6% 5,063 Cummins, Inc. 1,226,714 4,775 Dover Corp. 646,583 6,238 IDEX Corp. 1,424,323 8,316 Illinois Tool Works, Inc. 1,832,015 16,106 Otis Worldwide Corp. 1,261,261 8,379 Stanley Black & Decker, Inc. 629,430 -------------- 7,020,326 -------------- MEDIA -- 0.9% 21,435 Fox Corp., Class A 650,981 104,589 Paramount Global, Class B 1,765,462 -------------- 2,416,443 -------------- METALS & MINING -- 0.3% 6,895 Steel Dynamics, Inc. 673,641 -------------- Page 20 See Notes to Financial Statements
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) MULTI-UTILITIES -- 0.4% 18,902 Dominion Energy, Inc. $ 1,159,071 -------------- OIL, GAS & CONSUMABLE FUELS -- 16.6% 49,271 APA Corp. 2,299,970 36,300 Cheniere Energy, Inc. 5,443,548 27,999 ConocoPhillips 3,303,882 48,822 Devon Energy Corp. 3,003,041 1,005 Diamondback Energy, Inc. 137,464 17,034 EOG Resources, Inc. 2,206,244 136,526 EQT Corp. 4,618,675 26,787 Hess Corp. 3,798,932 128,608 Marathon Oil Corp. 3,481,418 46,516 Marathon Petroleum Corp. 5,413,997 95,913 Occidental Petroleum Corp. 6,041,560 14,860 Ovintiv, Inc. 753,551 1,717 Texas Pacific Land Corp. 4,025,043 -------------- 44,527,325 -------------- PERSONAL PRODUCTS -- 1.0% 10,854 Estee Lauder (The) Cos., Inc., Class A 2,692,986 -------------- PHARMACEUTICALS -- 2.5% 8,354 Eli Lilly & Co. 3,056,227 14,516 Merck & Co., Inc. 1,610,550 37,265 Pfizer, Inc. 1,909,459 -------------- 6,576,236 -------------- PROFESSIONAL SERVICES -- 2.1% 29,022 Booz Allen Hamilton Holding Corp. 3,033,380 1,662 CoStar Group, Inc. (a) 128,439 13,332 Leidos Holdings, Inc. 1,402,393 6,345 Verisk Analytics, Inc. 1,119,385 -------------- 5,683,597 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.9% 33,937 Intel Corp. 896,955 2,051 KLA Corp. 773,288 22,064 Micron Technology, Inc. 1,102,759 37,767 ON Semiconductor Corp. (a) 2,355,528 -------------- 5,128,530 -------------- SOFTWARE -- 0.3% 718 Cadence Design Systems, Inc. (a) 115,339 2,469 Microsoft Corp. 592,116 382 Synopsys, Inc. (a) 121,969 -------------- 829,424 -------------- SPECIALTY RETAIL -- 3.6% 13,612 Best Buy Co., Inc. 1,091,818 5,548 Home Depot (The), Inc. 1,752,391 3,425 Lowe's Cos., Inc. 682,397 6,987 O'Reilly Automotive, Inc. (a) 5,897,238 1,888 TJX (The) Cos., Inc. 150,285 -------------- 9,574,129 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 2.2% 18,023 Apple, Inc. $ 2,341,729 147,195 Hewlett Packard Enterprise Co. 2,349,232 37,049 Western Digital Corp. (a) 1,168,896 -------------- 5,859,857 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.0% 22,741 NIKE, Inc., Class B 2,660,924 -------------- TRADING COMPANIES & DISTRIBUTORS -- 0.3% 1,469 W.W. Grainger, Inc. 817,131 -------------- WATER UTILITIES -- 0.5% 26,765 Essential Utilities, Inc. 1,277,493 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.2% 3,528 T-Mobile US, Inc. (a) 493,920 -------------- TOTAL COMMON STOCKS -- 99.9% 267,745,992 (Cost $267,182,275) -------------- MONEY MARKET FUNDS -- 0.1% 148,861 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 4.10% (b) 148,861 (Cost $148,861) -------------- TOTAL INVESTMENTS -- 100.0% 267,894,853 (Cost $267,331,136) NET OTHER ASSETS AND LIABILITIES -- 0.0% 129,647 -------------- NET ASSETS -- 100.0% $ 268,024,500 ============== (a) Non-income producing security. (b) Rate shown reflects yield as of December 31, 2022. See Notes to Financial Statements Page 21
FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*............................... $ 267,745,992 $ 267,745,992 $ -- $ -- Money Market Funds........................... 148,861 148,861 -- -- ------------------------------------------------------------- Total Investments............................ $ 267,894,853 $ 267,894,853 $ -- $ -- ============================================================= </TABLE> * See Portfolio of Investments for industry breakout. Page 22 See Notes to Financial Statements
FIRST TRUST GROWTH STRENGTH ETF (FTGS) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% AIR FREIGHT & LOGISTICS -- 4.2% 213 Expeditors International of Washington, Inc. $ 22,135 119 United Parcel Service, Inc., Class B 20,687 -------------- 42,822 -------------- AUTOMOBILES -- 1.1% 92 Tesla, Inc. (a) 11,333 -------------- BIOTECHNOLOGY -- 11.6% 134 AbbVie, Inc. 21,656 310 Horizon Therapeutics PLC (a) 35,278 280 Incyte Corp. (a) 22,489 28 Regeneron Pharmaceuticals, Inc. (a) 20,202 66 Vertex Pharmaceuticals, Inc. (a) 19,059 -------------- 118,684 -------------- CAPITAL MARKETS -- 2.1% 196 Raymond James Financial, Inc. 20,943 -------------- CHEMICALS -- 1.5% 184 CF Industries Holdings, Inc. 15,677 -------------- COMMERCIAL SERVICES & SUPPLIES -- 2.1% 360 Copart, Inc. (a) 21,920 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 2.0% 660 Weyerhaeuser Co. 20,460 -------------- FOOD & STAPLES RETAILING -- 1.8% 41 Costco Wholesale Corp. 18,716 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 4.5% 208 Abbott Laboratories 22,836 316 Hologic, Inc. (a) 23,640 -------------- 46,476 -------------- HEALTH CARE PROVIDERS & SERVICES -- 3.9% 39 Elevance Health, Inc. 20,006 39 Humana, Inc. 19,975 -------------- 39,981 -------------- INSURANCE -- 2.0% 277 W.R. Berkley Corp. 20,102 -------------- INTERACTIVE MEDIA & SERVICES -- 3.5% 196 Alphabet, Inc., Class A (a) 17,293 152 Meta Platforms, Inc., Class A (a) 18,292 -------------- 35,585 -------------- INTERNET & DIRECT MARKETING RETAIL -- 2.3% 196 Etsy, Inc. (a) 23,477 -------------- IT SERVICES -- 1.9% 73 Accenture PLC, Class A 19,479 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES -- 2.2% 40 Thermo Fisher Scientific, Inc. $ 22,028 -------------- METALS & MINING -- 3.9% 146 Nucor Corp. 19,244 213 Steel Dynamics, Inc. 20,810 -------------- 40,054 -------------- OIL, GAS & CONSUMABLE FUELS -- 14.6% 114 Chevron Corp. 20,462 159 ConocoPhillips 18,762 666 Coterra Energy, Inc. 16,364 266 Devon Energy Corp. 16,362 146 EOG Resources, Inc. 18,910 187 Exxon Mobil Corp. 20,626 678 Marathon Oil Corp. 18,353 155 Valero Energy Corp. 19,663 -------------- 149,502 -------------- PHARMACEUTICALS -- 4.1% 274 Bristol-Myers Squibb Co. 19,714 440 Pfizer, Inc. 22,546 -------------- 42,260 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 2.1% 285 CBRE Group, Inc., Class A (a) 21,934 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 15.1% 240 Applied Materials, Inc. 23,371 44 Broadcom, Inc. 24,602 78 Enphase Energy, Inc. (a) 20,667 68 KLA Corp. 25,638 159 NVIDIA Corp. 23,236 301 ON Semiconductor Corp. (a) 18,773 171 QUALCOMM, Inc. 18,800 -------------- 155,087 -------------- SOFTWARE -- 11.7% 65 Adobe, Inc. (a) 21,875 98 Autodesk, Inc. (a) 18,313 125 Cadence Design Systems, Inc. (a) 20,080 368 Fortinet, Inc. (a) 17,992 82 Microsoft Corp. 19,665 67 Synopsys, Inc. (a) 21,392 -------------- 119,317 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.7% 134 Apple, Inc. 17,411 -------------- TOTAL INVESTMENTS -- 99.9% 1,023,248 (Cost $1,015,794) NET OTHER ASSETS AND LIABILITIES -- 0.1% 1,223 -------------- NET ASSETS -- 100.0% $ 1,024,471 ============== (a) Non-income producing security. See Notes to Financial Statements Page 23
FIRST TRUST GROWTH STRENGTH ETF (FTGS) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*............................... $ 1,023,248 $ 1,023,248 $ -- $ -- ============================================================= </TABLE> * See Portfolio of Investments for industry breakout. Page 24 See Notes to Financial Statements
FIRST TRUST INDXX AEROSPACE & DEFENSE ETF (MISL) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% AEROSPACE & DEFENSE -- 86.3% 356 AAR Corp. (a) $ 15,984 816 Aerojet Rocketdyne Holdings, Inc. (a) 45,639 254 AeroVironment, Inc. (a) 21,758 1,126 Boeing (The) Co. (a) 214,492 390 Curtiss-Wright Corp. 65,126 122 Ducommun, Inc. (a) 6,095 678 General Dynamics Corp. 168,219 536 HEICO Corp. 82,351 852 Hexcel Corp. 50,140 2,322 Howmet Aerospace, Inc. 91,510 336 Huntington Ingalls Industries, Inc. 77,508 284 Kaman Corp. 6,333 1,278 Kratos Defense & Security Solutions, Inc. (a) 13,189 344 L3Harris Technologies, Inc. 71,624 384 Lockheed Martin Corp. 186,812 752 Maxar Technologies, Inc. 38,908 586 Mercury Systems, Inc. (a) 26,218 326 Moog, Inc., Class A 28,610 322 Northrop Grumman Corp. 175,686 1,050 Parsons Corp. (a) 48,562 1,816 Raytheon Technologies Corp. 183,271 4,756 Rocket Lab USA, Inc. (a) 17,930 1,066 Spirit AeroSystems Holdings, Inc., Class A 31,554 SHARES DESCRIPTION VALUE ------------------------------------------------------------- AEROSPACE & DEFENSE (CONTINUED) 1,252 Textron, Inc. $ 88,642 146 TransDigm Group, Inc. 91,929 658 Triumph Group, Inc. (a) 6,922 2,624 Virgin Galactic Holdings, Inc. (a) 9,132 614 Woodward, Inc. 59,319 -------------- 1,923,463 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4% 1,856 AST SpaceMobile, Inc. (a) 8,946 -------------- PROFESSIONAL SERVICES -- 13.3% 238 CACI International, Inc., Class A (a) 71,540 1,410 KBR, Inc. 74,448 844 Leidos Holdings, Inc. 88,780 560 Science Applications International Corp. 62,121 -------------- 296,889 -------------- TOTAL INVESTMENTS -- 100.0% 2,229,298 (Cost $2,138,941) NET OTHER ASSETS AND LIABILITIES -- 0.0% 823 -------------- NET ASSETS -- 100.0% $ 2,230,121 ============== (a) Non-income producing security. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS ------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*............................... $ 2,229,298 $ 2,229,298 $ -- $ -- ============================================================= </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 25
FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2022 <TABLE> <CAPTION> FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST DIVIDEND DOW 30 LUNT U.S. GROWTH INDXX AEROSPACE STRENGTH EQUAL WEIGHT FACTOR ROTATION STRENGTH & DEFENSE ETF ETF ETF ETF ETF (FTDS) (EDOW) (FCTR) (FTGS) (MISL) ---------------- ---------------- ---------------- ---------------- ---------------- <S> <C> <C> <C> <C> <C> ASSETS: Investments, at value..................... $ 19,136,324 $ 158,248,231 $ 267,894,853 $ 1,023,248 $ 2,229,298 Cash...................................... -- 30,635 -- 1,379 1,571 Receivables: Dividends.............................. 43,940 61,077 292,792 383 251 Investment securities sold............. -- -- 2,785,589 -- 125 Prepaid expenses.......................... 3,763 -- -- -- -- -------------- -------------- -------------- -------------- ------------ Total Assets........................... 19,184,027 158,339,943 270,973,234 1,025,010 2,231,245 -------------- -------------- -------------- -------------- ------------ LIABILITIES: Payables: Audit and tax fees..................... 28,515 -- -- -- -- Licensing fees......................... 15,013 -- -- -- -- Shareholder reporting fees............. 1,876 -- -- -- -- Investment advisory fees............... 396 65,905 156,912 539 1,124 Trustees' fees......................... 40 -- -- -- -- Capital shares redeemed................ -- -- 2,791,822 -- -- Other liabilities......................... 10,886 -- -- -- -- -------------- -------------- -------------- -------------- ------------ Total Liabilities...................... 56,726 65,905 2,948,734 539 1,124 -------------- -------------- -------------- -------------- ------------ NET ASSETS................................ $ 19,127,301 $ 158,274,038 $ 268,024,500 $ 1,024,471 $ 2,230,121 ============== ============== ============== ============== ============ NET ASSETS CONSIST OF: Paid-in capital........................... $ 23,113,674 $ 170,102,886 $ 417,365,220 $ 1,013,856 $ 2,138,654 Par value................................. 4,500 54,978 96,000 500 1,000 Accumulated distributable earnings (loss)................................. (3,990,873) (11,883,826) (149,436,720) 10,115 90,467 -------------- -------------- -------------- -------------- ------------ NET ASSETS................................ $ 19,127,301 $ 158,274,038 $ 268,024,500 $ 1,024,471 $ 2,230,121 ============== ============== ============== ============== ============ NET ASSET VALUE, per share................ $ 42.50 $ 28.79 $ 27.92 $ 20.49 $ 22.30 ============== ============== ============== ============== ============ Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)....................... 450,002 5,497,756 9,600,002 50,002 100,002 ============== ============== ============== ============== ============ Investments, at cost...................... $ 19,174,443 $ 162,019,452 $ 267,331,136 $ 1,015,794 $ 2,138,941 ============== ============== ============== ============== ============ </TABLE> Page 26 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED DECEMBER 31, 2022 <TABLE> <CAPTION> FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST DIVIDEND DOW 30 LUNT U.S. GROWTH INDXX AEROSPACE STRENGTH EQUAL WEIGHT FACTOR ROTATION STRENGTH & DEFENSE ETF ETF ETF ETF ETF (FTDS) (EDOW) (FCTR) (FTGS) (a) (MISL) (a) ---------------- ---------------- ---------------- ---------------- ---------------- <S> <C> <C> <C> <C> <C> INVESTMENT INCOME: Dividends................................. $ 517,487 $ 3,295,350 $ 7,316,341 $ 3,302 $ 3,607 Securities lending income (net of fees)... 248 -- -- -- -- Foreign withholding tax................... (785) -- (1,218) -- -- -------------- -------------- -------------- -------------- ------------ Total investment income................ 516,950 3,295,350 7,315,123 3,302 3,607 -------------- -------------- -------------- -------------- ------------ EXPENSES: Investment advisory fees.................. 95,572 671,705 (b) 2,667,939 (b) 1,156 (b) 1,908(b) Audit and tax fees........................ 27,960 -- -- -- -- Shareholder reporting fees................ 20,532 -- -- -- -- Custodian fees............................ 14,332 -- -- -- -- Accounting and administration fees........ 13,145 -- -- -- -- Licensing fees............................ 11,298 -- -- -- -- Trustees' fees and expenses............... 7,150 -- -- -- -- Listing fees.............................. 6,530 -- -- -- -- Transfer agent fees....................... 956 -- -- -- -- Legal fees................................ 438 -- -- -- -- Registration and filing fees.............. 83 -- -- -- -- Other expenses............................ 1,237 -- -- -- -- -------------- -------------- -------------- -------------- ------------ Total expenses......................... 199,233 671,705 2,667,939 1,156 1,908 Less fees waived and expenses reimbursed by the investment advisor........... (65,440) -- -- -- -- -------------- -------------- -------------- -------------- ------------ Net expenses........................... 133,793 671,705 2,667,939 1,156 1,908 -------------- -------------- -------------- -------------- ------------ NET INVESTMENT INCOME (LOSS).............. 383,157 2,623,645 4,647,184 2,146 1,699 -------------- -------------- -------------- -------------- ------------ REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments............................ (856,569) (3,348,953) (127,589,041) 2,655 101 In-kind redemptions.................... 921,741 5,976,848 11,316,423 -- -- -------------- -------------- -------------- -------------- ------------ Net realized gain (loss).................. 65,172 2,627,895 (116,272,618) 2,655 101 -------------- -------------- -------------- -------------- ------------ Net change in unrealized appreciation (depreciation) on investments.......... (3,516,779) (16,343,947) (18,358,590) 7,454 90,357 -------------- -------------- -------------- -------------- ------------ NET REALIZED AND UNREALIZED GAIN (LOSS)............................ (3,451,607) (13,716,052) (134,631,208) 10,109 90,458 -------------- -------------- -------------- -------------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.............. $ (3,068,450) $ (11,092,407) $ (129,984,024) $ 12,255 $ 92,157 ============== ============== ============== ============== ============ </TABLE> (a) Inception date is October 25, 2022, which is consistent with the commencement of investment operations and is the date the initial creation units were established. (b) Fund is subject to a Unitary Fee (see Note 3 in the Notes to Financial Statements). See Notes to Financial Statements Page 27
FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> FIRST TRUST FIRST TRUST DIVIDEND DOW 30 STRENGTH EQUAL WEIGHT ETF ETF (FTDS) (EDOW) ------------------------------- ------------------------------- Year Ended Year Ended Year Ended Year Ended 12/31/2022 12/31/2021 12/31/2022 12/31/2021 -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> OPERATIONS: Net investment income (loss)................................ $ 383,157 $ 176,263 $ 2,623,645 $ 1,722,405 Net realized gain (loss).................................... 65,172 4,384,304 2,627,895 4,385,378 Net change in unrealized appreciation (depreciation)........ (3,516,779) (272,120) (16,343,947) 8,652,152 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... (3,068,450) 4,288,447 (11,092,407) 14,759,935 -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (419,147) (162,991) (2,633,200) (1,719,752) -------------- -------------- -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 2,147,136 18,455,594 72,258,682 75,916,321 Cost of shares redeemed..................................... (4,755,506) (13,606,364) (38,301,275) (22,908,579) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ (2,608,370) 4,849,230 33,957,407 53,007,742 -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... (6,095,967) 8,974,686 20,231,800 66,047,925 NET ASSETS: Beginning of period......................................... 25,223,268 16,248,582 138,042,238 71,994,313 -------------- -------------- -------------- -------------- End of period............................................... $ 19,127,301 $ 25,223,268 $ 158,274,038 $ 138,042,238 ============== ============== ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 500,002 400,002 4,347,756 2,647,756 Shares sold................................................. 50,000 400,000 2,450,000 2,500,000 Shares redeemed............................................. (100,000) (300,000) (1,300,000) (800,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 450,002 500,002 5,497,756 4,347,756 ============== ============== ============== ============== </TABLE> (a) Inception date is October 25, 2022, which is consistent with the commencement of investment operations and is the date the initial creation units were established. Page 28 See Notes to Financial Statements
<TABLE> <CAPTION> FIRST TRUST FIRST TRUST FIRST TRUST LUNT U.S. GROWTH INDXX FACTOR ROTATION STRENGTH AEROSPACE & ETF ETF DEFENSE ETF (FCTR) (FTGS) (MISL) ------------------------------- ------------------------------- Year Ended Year Ended Period Ended Period Ended 12/31/2022 12/31/2021 12/31/2022 (a) 12/31/2022 (a) -------------- -------------- -------------- -------------- <S> <C> <C> <C> $ 4,647,184 $ 1,848,939 $ 2,146 $ 1,699 (116,272,618) 32,626,101 2,655 101 (18,358,590) 2,900,642 7,454 90,357 -------------- -------------- -------------- -------------- (129,984,024) 37,375,682 12,255 92,157 -------------- -------------- -------------- -------------- (4,905,611) (1,580,945) (2,140) (1,690) -------------- -------------- -------------- -------------- 197,817,866 1,095,761,531 1,014,356 2,139,654 (457,908,923) (599,707,580) -- -- -------------- -------------- -------------- -------------- (260,091,057) 496,053,951 1,014,356 2,139,654 -------------- -------------- -------------- -------------- (394,980,692) 531,848,688 1,024,471 2,230,121 663,005,192 131,156,504 -- -- -------------- -------------- -------------- -------------- $ 268,024,500 $ 663,005,192 $ 1,024,471 $ 2,230,121 ============== ============== ============== ============== 18,650,002 4,450,002 -- -- 6,050,000 31,600,000 50,002 100,002 (15,100,000) (17,400,000) -- -- -------------- -------------- -------------- -------------- 9,600,002 18,650,002 50,002 100,002 ============== ============== ============== ============== </TABLE> See Notes to Financial Statements Page 29
FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> FIRST TRUST DIVIDEND STRENGTH ETF (FTDS) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 50.45 $ 40.62 $ 36.20 $ 29.22 $ 32.85 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.90 0.39 0.35 0.40 0.34 Net realized and unrealized gain (loss) (7.87) 9.80 4.47 6.99 (3.64) ---------- ---------- ---------- ---------- ---------- Total from investment operations (6.97) 10.19 4.82 7.39 (3.30) ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.98) (0.36) (0.40) (0.41) (0.33) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 42.50 $ 50.45 $ 40.62 $ 36.20 $ 29.22 ========== ========== ========== ========== ========== TOTAL RETURN (a) (13.75)% 25.12% 13.65% 25.36% (10.13)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 19,127 $ 25,223 $ 16,249 $ 18,100 $ 13,151 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 1.04% 1.08% 1.16% 1.02% 1.57% Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70% Ratio of net investment income (loss) to average net assets 2.00% 0.84% 1.04% 1.20% 1.03% Portfolio turnover rate (b) 225% (c) 98% 125% 119% 110% FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 31.75 $ 27.19 $ 26.11 $ 21.43 $ 22.00 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.55 0.48 0.50 0.47 0.40 Net realized and unrealized gain (loss) (2.96) 4.56 1.08 4.70 (0.58) ---------- ---------- ---------- ---------- ---------- Total from investment operations (2.41) 5.04 1.58 5.17 (0.18) ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.55) (0.48) (0.50) (0.49) (0.39) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 28.79 $ 31.75 $ 27.19 $ 26.11 $ 21.43 ========== ========== ========== ========== ========== TOTAL RETURN (a) (7.52)% 18.63% 6.41% 24.27% (0.88)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 158,274 $ 138,042 $ 71,994 $ 43,077 $ 12,859 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50% Ratio of net expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50% Ratio of net investment income (loss) to average net assets 1.95% 1.70% 2.11% 1.99% 2.33% Portfolio turnover rate (b) 17% 14% 31% 13% 16% </TABLE> (a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns for First Trust Dividend Strength ETF would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. (c) The variation in the portfolio turnover rate is due to the change in the Fund's underlying index effective April 29, 2022, which resulted in a complete rebalance of the Fund's portfolio. Page 30 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) YEAR ENDED DECEMBER 31, --------------------------------------------------------- PERIOD ENDED 2022 2021 2020 2019 12/31/2018 (a) ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 35.55 $ 29.47 $ 22.80 $ 17.67 $ 20.23 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.38 0.17 0.12 0.23 0.12 Net realized and unrealized gain (loss) (7.62) 6.07 6.68 5.12 (2.56) ---------- ---------- ---------- ---------- ---------- Total from investment operations (7.24) 6.24 6.80 5.35 (2.44) ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.39) (0.16) (0.13) (0.22) (0.12) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 27.92 $ 35.55 $ 29.47 $ 22.80 $ 17.67 ========== ========== ========== ========== ========== TOTAL RETURN (b) (20.37)% 21.22% 30.02% 30.35% (12.09)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 268,025 $ 663,005 $ 131,157 $ 62,696 $ 28,269 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.65% 0.65% 0.65% 0.65% 0.65% (c) Ratio of net expenses to average net assets 0.65% 0.65% 0.65% 0.65% 0.65% (c) Ratio of net investment income (loss) to average net assets 1.13% 0.52% 0.42% 1.17% 1.48% (c) Portfolio turnover rate (d) 379% 307% 460% 246% 183% FIRST TRUST GROWTH STRENGTH ETF (FTGS) PERIOD ENDED 12/31/2022 (a) ------------ <S> <C> Net asset value, beginning of period $ 20.29 ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.04 Net realized and unrealized gain (loss) 0.20 ---------- Total from investment operations 0.24 ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.04) ---------- Net asset value, end of period $ 20.49 ========== TOTAL RETURN (b) 1.20% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,024 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.60% (c) Ratio of net expenses to average net assets 0.60% (c) Ratio of net investment income (loss) to average net assets 1.11% (c) Portfolio turnover rate (d) 25% </TABLE> (a) Inception dates for FCTR and FTGS are July 25, 2018 and October 25, 2022, respectively, which are consistent with the respective Fund's commencement of investment operations and are the dates the initial creation units were established. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (c) Annualized. (d) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. See Notes to Financial Statements Page 31
FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD <TABLE> <CAPTION> FIRST TRUST INDXX AEROSPACE & DEFENSE ETF (MISL) PERIOD ENDED 12/31/2022 (a) ------------ <S> <C> Net asset value, beginning of period $ 20.79 ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.02 Net realized and unrealized gain (loss) 1.51 ---------- Total from investment operations 1.53 ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.02) ---------- Net asset value, end of period $ 22.30 ========== TOTAL RETURN (b) 7.34% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 2,230 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.60% (c) Ratio of net expenses to average net assets 0.60% (c) Ratio of net investment income (loss) to average net assets 0.53% (c) Portfolio turnover rate (d) 2% </TABLE> (a) Inception date is October 25, 2022, which is consistent with the commencement of investment operations and is the date the initial creation units were established. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The return presented does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (c) Annualized. (d) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 32 See Notes to Financial Statements
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 1. ORGANIZATION First Trust Exchange-Traded Fund (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on August 8, 2003, and is registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of twenty-three exchange-traded funds. This report covers the five funds (each a "Fund" and collectively, the "Funds") listed below: First Trust Dividend Strength ETF - (The Nasdaq Stock Market LLC ("Nasdaq") ticker "FTDS")(1) First Trust Dow 30 Equal Weight ETF - (NYSE Arca, Inc. ("NYSE Arca") ticker "EDOW") First Trust Lunt U.S. Factor Rotation ETF - (Cboe BZX Exchange, Inc. ticker "FCTR") First Trust Growth Strength ETF (Nasdaq ticker "FTGS")(2) First Trust Indxx Aerospace & Defense ETF (NYSE Arca ticker "MISL")(2) (1) Effective on April 29, 2022, First Trust Total US Market AlphaDEX(R) ETF (Nasdaq ticker "TUSA") changed its name and ticker to First Trust Dividend Strength ETF (Nasdaq ticker "FTDS"). (2) Commenced investment operations on October 25, 2022. Each Fund represents a separate series of beneficial interest in the Trust. Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large blocks of shares known as "Creation Units." The investment objective of each Fund is to seek investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of the following indices: <TABLE> <CAPTION> FUND INDEX <S> <C> First Trust Dividend Strength ETF The Dividend Strength Index(TM)(3) First Trust Dow 30 Equal Weight ETF Dow Jones Industrial Average(R) Equal Weight Index First Trust Lunt U.S. Factor Rotation ETF Lunt Capital Large Cap Factor Rotation Index First Trust Growth Strength ETF The Growth Strength Index(TM) First Trust Indxx Aerospace & Defense ETF Indxx US Aerospace & Defense Index </TABLE> (3) Prior to April 29, 2022, the index was Nasdaq AlphaDEX(R) Total US Market Index. 2. SIGNIFICANT ACCOUNTING POLICIES The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Each Fund's NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows: Page 33
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 Common stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the primary exchange for such securities. Shares of open-end funds are valued based on NAV per share. Securities traded in an over-the-counter market are valued at the mean of their most recent bid and asked price, if available, and otherwise at their last trade price. Overnight repurchase agreements are valued at amortized cost when it represents the most appropriate reflection of fair market value. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Advisor's Pricing Committee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price; 2) the type of security; 3) the size of the holding; 4) the initial cost of the security; 5) transactions in comparable securities; 6) price quotes from dealers and/or third-party pricing services; 7) relationships among various securities; 8) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 9) an analysis of the issuer's financial statements; 10) the existence of merger proposals or tender offers that might affect the value of the security; and 11) other relevant factors. In addition, differences between the prices used to calculate a Fund's NAV and the prices used by such Fund's corresponding index could result in a difference between a Fund's performance and the performance of its underlying index. The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. Page 34
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of December 31, 2022, is included with each Fund's Portfolio of Investments. In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing requirements to determine fair value in good faith for purposes of the 1940 Act. The rule permits fund boards to designate a fund's investment advisor to perform fair value determinations, subject to board oversight and certain other conditions. The rule also defines when market quotations are "readily available" for purposes of the 1940 Act and requires a fund to fair value a portfolio investment when a market quotation is not readily available. The SEC also adopted new Rule 31a-4 under the 1940 Act, which sets forth recordkeeping requirements associated with fair value determinations. The compliance date for Rule 2a-5 and Rule 31a-4 was September 8, 2022. Effective September 8, 2022 and pursuant to the requirements of Rule 2a-5, the Trust's Board of Trustees designated the Advisor as its valuation designee to perform fair value determinations and approved new Advisor Valuation Procedures for the Trust. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis. Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund's understanding of the applicable country's tax rules and rates. Distributions received from a Fund's investments in real estate investment trusts ("REITs") may be comprised of return of capital, capital gains and income. The actual character of the amounts received during the year is not known until after the REITs' fiscal year end. A Fund records the character of distributions received from the REITs during the year based on estimates available. The characterization of distributions received by a Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude. C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES Offsetting Assets and Liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset on the Statements of Assets and Liabilities, and disclose instruments and transactions subject to master netting or similar agreements. These disclosure requirements are intended to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on a fund's financial position. The transactions subject to offsetting disclosures are derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. This disclosure, if applicable, is included within each Fund's Portfolio of Investments under the heading "Offsetting Assets and Liabilities." For financial reporting purposes, the Funds do not offset financial assets and financial liabilities that are subject to master netting arrangements ("MNAs") or similar agreements on the Statements of Assets and Liabilities. MNAs provide the right, in the event of default (including bankruptcy and insolvency), for the non-defaulting counterparty to liquidate the collateral and calculate the net exposure to the defaulting party or request additional collateral. D. SECURITIES LENDING The Funds may lend securities representing up to 33 1/3% of the value of their total assets to broker-dealers, banks and other institutions to generate additional income. When a Fund loans its portfolio securities, it will receive, at the inception of each loan, collateral equal to at least 102% (for domestic securities) or 105% (for international securities) of the market value of the loaned securities. The collateral amount is valued at the beginning of each business day and is compared to the market value of the loaned securities from the prior business day to determine if additional collateral is required. If additional collateral is required, a request is sent to the borrower. Securities lending involves the risk that the Fund may lose money because the borrower of the Fund's loaned securities fails to return the securities in a timely manner or at all. The Fund could also lose money in the event of (i) a decline in the value of the collateral provided for the loaned securities, (ii) a decline in the value of any investments made with cash collateral or (iii) an increase in the value of the loaned securities if the borrower does not increase the collateral accordingly and the borrower fails to return the securities. These events could also trigger adverse tax consequences for the Funds. Under the Funds' Securities Lending Agency Agreement, the securities lending agent will generally bear the risk that a borrower may default on its obligation to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the Funds' securities lending agent and is responsible for executing the lending of the portfolio securities to creditworthy borrowers. The Funds, however, will be responsible for the risks associated with the investment of cash collateral. A Fund may lose money on its investment of cash collateral, which may affect its ability to repay the collateral to the borrower without the use of other Fund assets. Each Fund that engages in securities lending receives compensation (net Page 35
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 of any rebate and securities lending agent fees) for lending its securities. Compensation can be in the form of fees received from the securities lending agent or dividends or interest earned from the investment of cash collateral. The fees received from the securities lending agent are accrued daily. The dividend and interest earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At December 31, 2022, none of the Funds had securities in the securities lending program. During the fiscal period ended December 31, 2022, only FTDS participated in the securities lending program. In the event of a default by a borrower with respect to any loan, BBH will exercise any and all remedies provided under the applicable borrower agreement to make the Funds whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If, despite such efforts by BBH to exercise these remedies, a Fund sustains losses as a result of a borrower's default, BBH will indemnify the Fund by purchasing replacement securities at its own expense, or paying the Fund an amount equal to the market value of the replacement securities, subject to certain limitations which are set forth in detail in the Securities Lending Agency Agreement between the Trust on behalf of the Funds and BBH. E. REPURCHASE AGREEMENTS Repurchase agreements involve the purchase of securities subject to the seller's agreement to repurchase the securities at a mutually agreed upon date and price, under the terms of a Master Repurchase Agreement ("MRA"). During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of a Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. The underlying securities for all repurchase agreements are held at the Funds' custodian or designated sub-custodians under tri-party repurchase agreements. MRAs govern transactions between a Fund and select counterparties. The MRAs contain provisions for, among other things, initiation, income payments, events of default, and maintenance of collateral for repurchase agreements. Repurchase agreements received for lending securities are collateralized by U.S. Treasury securities. The U.S. Treasury securities are held in a joint custody account at BBH on behalf of the Funds participating in the securities lending program. In the event the counterparty defaults on the repurchase agreement, the U.S. Treasury securities can either be maintained as part of a Fund's portfolio or sold for cash. A Fund could suffer a loss to the extent that the proceeds from the sale of the underlying collateral held by the Fund is less than the repurchase price and the Fund's costs associated with the delay and enforcement of the MRA. While the Funds may invest in repurchase agreements, any repurchase agreements held by the Funds during the fiscal period ended December 31, 2022 were received as collateral for lending securities. There were no repurchase agreements held by the Funds as of December 31, 2022. F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income of each Fund, if any, are declared and paid quarterly, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually. A Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. The tax character of distributions paid by each Fund during the fiscal period ended December 31, 2022 was as follows: <TABLE> <CAPTION> Distributions Distributions Distributions paid paid paid from Ordinary from Capital from Return Income Gains of Capital ------------------ ---------------- ----------------- <S> <C> <C> <C> First Trust Dividend Strength ETF $ 419,147 $ -- $ -- First Trust Dow 30 Equal Weight ETF 2,633,200 -- -- First Trust Lunt U.S. Factor Rotation ETF 4,905,611 -- -- First Trust Growth Strength ETF 2,140 -- -- First Trust Indxx Aerospace & Defense ETF 1,690 -- -- </TABLE> Page 36
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 The tax character of distributions paid by each Fund during the fiscal year ended December 31, 2021 was as follows: <TABLE> <CAPTION> Distributions Distributions Distributions paid paid paid from Ordinary from Capital from Return Income Gains of Capital ------------------ ---------------- ----------------- <S> <C> <C> <C> First Trust Dividend Strength ETF $ 162,991 $ -- $ -- First Trust Dow 30 Equal Weight ETF 1,719,752 -- -- First Trust Lunt U.S. Factor Rotation ETF 1,580,945 -- -- </TABLE> As of December 31, 2022, the components of distributable earnings on a tax basis for each Fund were as follows: <TABLE> <CAPTION> Accumulated Undistributed Capital and Net Unrealized Ordinary Other Appreciation Income Gain (Loss) (Depreciation) ------------------ ---------------- ----------------- <S> <C> <C> <C> First Trust Dividend Strength ETF $ -- $ (3,921,145) $ (69,728) First Trust Dow 30 Equal Weight ETF -- (5,157,811) (6,726,015) First Trust Lunt U.S. Factor Rotation ETF 9,593 (144,354,832) (5,091,481) First Trust Growth Strength ETF 2,542 119 7,454 First Trust Indxx Aerospace & Defense ETF 212 -- 90,255 </TABLE> G. INCOME TAXES Each Fund intends to qualify or continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. For FTDS, EDOW, and FCTR, the taxable years ended 2019, 2020, 2021, and 2022 remain open to federal and state audit. For FTGS and MISL, the taxable period ended 2022 remains open to federal and state audit. As of December 31, 2022, management has evaluated the application of these standards to the Funds, and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions. Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At December 31, 2022, for federal income tax purposes, each applicable Fund had a capital loss carryforward available that is shown in the following table, to the extent provided by regulations, to offset future capital gains. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to each applicable Fund's shareholders. <TABLE> <CAPTION> Non-Expiring Capital Loss Carryforward ------------------ <S> <C> First Trust Dividend Strength ETF $ 3,921,145 First Trust Dow 30 Equal Weight ETF* 5,157,811 First Trust Lunt U.S. Factor Rotation ETF 144,354,832 First Trust Growth Strength ETF -- First Trust Indxx Aerospace & Defense ETF -- </TABLE> * $3,196,504 of First Trust Dow 30 Equal Weight ETF's non-expiring net capital losses is subject to loss limitation resulting from reorganization activity. This limitation generally reduces the utilization of these losses to a maximum of $212,620 per year. Page 37
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal period ended December 31, 2022, the Funds had no net late year ordinary or capital losses. In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Funds and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal period ended December 31, 2022, the adjustments for each Fund were as follows: <TABLE> <CAPTION> Accumulated Accumulated Net Realized Net Investment Gain (Loss) Paid-in Income (Loss) on Investments Capital ------------------ ---------------- ----------------- <S> <C> <C> <C> First Trust Dividend Strength ETF $ 20,502 $ (842,201) $ 821,699 First Trust Dow 30 Equal Weight ETF 6,902 (5,578,257) 5,571,355 First Trust Lunt U.S. Factor Rotation ETF -- 12,232,440 (12,232,440) First Trust Growth Strength ETF -- -- -- First Trust Indxx Aerospace & Defense ETF -- -- -- </TABLE> As of December 31, 2022, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows: <TABLE> <CAPTION> Gross Gross Net Unrealized Unrealized Unrealized Appreciation Tax Cost Appreciation (Depreciation) (Depreciation) ------------------ ------------------ ---------------- ----------------- <S> <C> <C> <C> <C> First Trust Dividend Strength ETF $ 19,206,052 $ 999,018 $ (1,068,746) $ (69,728) First Trust Dow 30 Equal Weight ETF 164,974,246 11,325,952 (18,051,967) (6,726,015) First Trust Lunt U.S. Factor Rotation ETF 272,986,334 10,779,753 (15,871,234) (5,091,481) First Trust Growth Strength ETF 1,015,794 56,768 (49,314) 7,454 First Trust Indxx Aerospace & Defense ETF 2,139,043 131,377 (41,122) 90,255 </TABLE> H. EXPENSES Expenses that are directly related to First Trust Dividend Strength ETF are charged directly to the Fund. Expenses for First Trust Dow 30 Equal Weight ETF, First Trust Lunt U.S. Factor Rotation ETF, First Trust Growth Strength ETF, and First Trust Indxx Aerospace & Defense ETF (the "Unitary Fee Funds"), other than excluded expenses (discussed in Note 3), are paid by the Advisor. General expenses of the Trust are allocated to all the Funds based upon the net assets of each Fund. First Trust has entered into licensing agreements with each of the following "Licensors" for the respective Funds: <TABLE> <CAPTION> FUND LICENSOR <S> <C> First Trust Dividend Strength ETF Nasdaq, Inc. First Trust Dow 30 Equal Weight ETF S&P Dow Jones Indices LLC First Trust Lunt U.S. Factor Rotation ETF Lunt Capital Management, Inc. First Trust Growth Strength ETF Nasdaq, Inc. First Trust Indxx Aerospace & Defense ETF Indxx, Inc. </TABLE> The respective license agreements allow for the use by First Trust of certain trademarks and trade names of the respective Licensors. The Funds are sub-licensees to the applicable license agreement. The First Trust Dividend Strength ETF is required to pay licensing fees, which are shown on the Statements of Operations. Page 38
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in each Fund's portfolio, managing the Funds' business affairs and providing certain administrative services necessary for the management of the Funds. Effective November 1, 2022, the management fee payable by First Trust Dividend Strength ETF to First Trust for these services will be reduced at certain levels of First Trust Dividend Strength ETF's net assets ("breakpoints") and calculated pursuant to the schedule below: <TABLE> <CAPTION> Breakpoints ------------------------------------------------------------------------- <S> <C> Fund net assets up to and including $2.5 billion 0.5000% Fund net assets greater than $2.5 billion up to and including $5 billion 0.4875% Fund net assets greater than $5 billion up to and including $7.5 billion 0.4750% Fund net assets greater than $7.5 billion up to and including $10 billion 0.4625% Fund net assets greater than $10 billion up to and including $15 billion 0.4500% Fund net assets greater than $15 billion 0.4250% </TABLE> Prior to November 1, 2022, First Trust Dividend Strength ETF paid First Trust an annual management fee of 0.50% of the Fund's average daily net assets. For the First Trust Dividend Strength ETF, the Trust and the Advisor have entered into an Expense Reimbursement, Fee Waiver and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to waive fees and/or reimburse Fund expenses to the extent that the operating expenses of the Fund (excluding interest expense, brokerage commissions and other trading expenses, acquired fund fees and expenses, taxes and extraordinary expenses) exceed 0.70% of average daily net assets per year (the "Expense Cap"). The Expense Cap will be in effect until at least April 30, 2024. Prior to November 1, 2022, expenses reimbursed and fees waived by First Trust under the Recovery Agreement were subject to recovery by First Trust for up to three years from the date the fee or expense was incurred, but no reimbursement payment would be made by a Fund if it resulted in the Fund exceeding (i) the applicable expense limitation in place for the most recent fiscal year for which such expense limitation was in place, (ii) the applicable expense limitation in place at the time the fees were waived, or (iii) the current expense limitation. These amounts would be included in "Expenses previously waived or reimbursed" on the Statements of Operations. Effective November 1, 2022, in connection with the introduction of breakpoints discussed above, First Trust has agreed to remove its ability to recover previous expenses borne and fees waived under the Recovery Agreement. For First Trust Dow 30 Equal Weight ETF, First Trust Lunt U.S. Factor Rotation ETF, First Trust Growth Strength ETF, and First Trust Indxx Aerospace & Defense ETF, First Trust is paid an annual unitary management fee of such Fund's average daily net assets and is responsible for the expenses of such Fund including the cost of transfer agency, custody, fund administration, legal, audit, licensing and other services, but excluding fee payments under the Investment Management Agreement, distribution and service fees pursuant to a Rule 12b-1 plan, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, acquired fund fees and expenses, taxes, interest, and extraordinary expenses. Effective November 1, 2022, the annual unitary management fee payable by each Fund to First Trust for these services will be reduced at certain levels of each Fund's net assets ("breakpoints") and calculated pursuant to the schedule below: <TABLE> <CAPTION> Breakpoints EDOW FCTR FTGS MISL ------------------------------------------------------------------------- --------------------------------- <S> <C> <C> <C> <C> Fund net assets up to and including $2.5 billion 0.5000% 0.65000% 0.600% 0.600% Fund net assets greater than $2.5 billion up to and including $5 billion 0.4875% 0.63375% 0.585% 0.585% Fund net assets greater than $5 billion up to and including $7.5 billion 0.4750% 0.61750% 0.570% 0.570% Fund net assets greater than $7.5 billion up to and including $10 billion 0.4625% 0.60125% 0.555% 0.555% Fund net assets greater than $10 billion up to and including $15 billion 0.4500% 0.58500% 0.540% 0.540% Fund net assets greater than $15 billion 0.4250% 0.55250% 0.510% 0.510% </TABLE> Prior to November 1, 2022, for the First Trust Dow 30 Equal Weight ETF, First Trust Lunt U.S. Factor Rotation ETF, First Trust Growth Strength ETF, and First Trust Indxx Aerospace & Defense ETF, First Trust was paid an annual unitary management fee of 0.50%, 0.65%, 0.60%, and 0.60%, respectively, of such Fund's average daily net assets. Page 39
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund. Additionally, the Lead Independent Trustee and the Chairs of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairs rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES For the fiscal period ended December 31, 2022 the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows: <TABLE> <CAPTION> Purchases Sales --------------- --------------- <S> <C> <C> First Trust Dividend Strength ETF $ 43,463,888 $ 43,485,643 First Trust Dow 30 Equal Weight ETF 23,442,783 23,243,481 First Trust Lunt U.S. Factor Rotation ETF 1,572,700,297 1,573,476,988 First Trust Growth Strength ETF 261,708 261,027 First Trust Indxx Aerospace & Defense ETF 32,225 32,465 </TABLE> For the fiscal period ended December 31, 2022, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows: <TABLE> <CAPTION> Purchases Sales --------------- --------------- <S> <C> <C> First Trust Dividend Strength ETF $ 2,141,151 $ 4,725,952 First Trust Dow 30 Equal Weight ETF 71,953,500 38,181,126 First Trust Lunt U.S. Factor Rotation ETF 198,179,002 457,525,110 First Trust Growth Strength ETF 1,012,577 -- First Trust Indxx Aerospace & Defense ETF 2,139,080 -- </TABLE> 5. CREATION, REDEMPTION AND TRANSACTION FEES Each Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as "Authorized Participants" have contractual arrangements with a Fund or one of the Fund's service providers to purchase and redeem Fund shares directly with the Fund in large blocks of shares known as "Creation Units." Prior to the start of trading on every business day, a Fund publishes through the National Securities Clearing Corporation ("NSCC") the "basket" of securities, cash or other assets that it will accept in exchange for a Creation Unit of the Fund's shares. An Authorized Participant that wishes to effectuate a creation of a Fund's shares deposits with the Fund the "basket" of securities, cash or other assets identified by the Fund that day, and then receives the Creation Unit of the Fund's shares in return for those assets. After purchasing a Creation Unit, the Authorized Participant may continue to hold the Fund's shares or sell them in the secondary market. The redemption process is the reverse of the purchase process: the Authorized Participant redeems a Creation Unit of a Fund's shares for a basket of securities, cash or other assets. The combination of the creation and redemption process with secondary market trading in a Fund's shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of a Fund's shares at or close to the NAV per share of the Fund. Page 40
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 Each Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of a Fund times the number of shares in a Creation Unit, plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the creation basket. Each Fund also imposes fees in connection with the redemption of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price received for each Creation Unit will equal the daily NAV per share of a Fund times the number of shares in a Creation Unit, minus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the redemption basket. Investors who use the services of a broker or other such intermediary in addition to an Authorized Participant to effect a redemption of a Creation Unit may also be assessed an amount to cover the cost of such services. The redemption fee charged by a Fund will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no more than 2% of the value of the shares redeemed. 6. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before April 30, 2024 for FTDS, EDOW, and FCTR, and October 20, 2024 for FTGS and MISL. 7. INDEMNIFICATION The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 8. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 41
-------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statements of assets and liabilities of First Trust Dividend Strength ETF, First Trust Dow 30 Equal Weight ETF, First Trust Lunt U.S. Factor Rotation ETF, First Trust Growth Strength ETF, and First Trust Indxx Aerospace & Defense ETF (the "Funds"), each a series of First Trust Exchange-Traded Fund, including the portfolios of investments, as of December 31, 2022, the related statements of operations, the statements of the changes in net assets, and the financial highlights for the periods indicated in the table below for the Funds, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the Funds as of December 31, 2022, and the results of their operations, the changes in their net assets, and the financial highlights for the periods listed in the table below in conformity with accounting principles generally accepted in the United States of America. <TABLE> <CAPTION> --------------------------------------------------------------------------------------------------------------------- INDIVIDUAL FUNDS STATEMENTS OF CHANGES IN INCLUDED IN THE TRUST STATEMENTS OF OPERATIONS NET ASSETS FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> First Trust Dividend Strength ETF For the year ended For the years ended For the years ended December 31, 2022 December 31, 2022 and 2021 December 31, 2022, 2021, First Trust Dow 30 Equal Weight 2020, 2019, and 2018 ETF First Trust Lunt U.S. Factor For the year ended For the years ended For the years ended Rotation ETF December 31, 2022 December 31, 2022 and 2021 December 31, 2022, 2021, 2020, 2019, and the period from July 25, 2018 (commencement of operations) through December 31, 2018 First Trust Growth Strength ETF For the period from October 25, 2022 (commencement of operations) through December 31, 2022 First Trust Indxx Aerospace & Defense ETF --------------------------------------------------------------------------------------------------------------------- </TABLE> BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2022, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois February 23, 2023 We have served as the auditor of one or more First Trust investment companies since 2001. Page 42
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION For the taxable year ended December 31, 2022, the following percentages of income dividends paid by the Funds qualify for the dividends received deduction available to corporations: <TABLE> <CAPTION> Dividends Received Deduction ---------------------------- <S> <C> First Trust Dividend Strength ETF 100.00% First Trust Dow 30 Equal Weight ETF 100.00% First Trust Lunt U.S. Factor Rotation ETF 100.00% First Trust Growth Strength ETF 70.53% First Trust Indxx Aerospace & Defense ETF 100.00% </TABLE> For the taxable year ended December 31, 2022, the following percentages of income dividends paid by the Funds are hereby designated as qualified dividend income: <TABLE> <CAPTION> Qualified Dividend Income ---------------------------- <S> <C> First Trust Dividend Strength ETF 100.00% First Trust Dow 30 Equal Weight ETF 100.00% First Trust Lunt U.S. Factor Rotation ETF 100.00% First Trust Growth Strength ETF 70.53% First Trust Indxx Aerospace & Defense ETF 100.00% </TABLE> A portion of each of the Funds' 2022 ordinary dividends (including short-term capital gains) paid to its shareholders during the fiscal year ended December 31, 2022, may be eligible for the Qualified Business Income Deduction (QBI) under Internal Revenue Code Section 199A for the aggregate dividends each Fund received from the underlying Real Estate Investment Trusts (REITs) these Funds invest in. RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a significant percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is more broadly diversified. Page 43
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor's investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund's share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market. ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads. FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities. Page 44
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) INDEX OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or more indices or ETF models. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. In addition, index rebalances may potentially result in increased trading activity in a fund's shares. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial Conduct Authority, which regulates LIBOR has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate ("SOFR") will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. MARKET RISK. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund's portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund's shares and result in increased market volatility. During any such events, a fund's shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund's shares may widen. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in Page 45
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. OPERATIONAL RISK. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund's service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund's ability to meet its investment objective. Although the funds and the funds' investment advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company's capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock. VALUATION RISK. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AGREEMENTS BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENTS FIRST TRUST GROWTH STRENGTH ETF The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, approved the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor"), on behalf of First Trust Growth Strength ETF (the "Fund"), for an initial two-year term at a meeting held on September 19, 2022. The Board determined that the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services expected to be provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. To assist the Board in its evaluation of the Agreement for the Fund, the Independent Trustees received a report from the Advisor in advance of the Board meeting responding to a request for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services to be provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the proposed unitary fee rate payable by the Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other exchange-traded funds ("ETFs") managed by the Advisor; the estimated expense ratio of the Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; the nature of expenses to be incurred in providing services to the Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any indirect benefits to the Advisor and its affiliate, Page 46
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Independent Trustees and their counsel also met separately to discuss the information provided by the Advisor. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor is a reasonable business arrangement from the Fund's perspective. In evaluating whether to approve the Agreement for the Fund, the Board considered the nature, extent and quality of the services to be provided by the Advisor under the Agreement and considered that employees of the Advisor provide management services to other ETFs and to other funds in the First Trust Fund Complex with diligence and care. The Board considered that the Advisor will be responsible for the overall management and administration of the Fund and reviewed all of the services to be provided by the Advisor to the Fund. The Board also considered the background and experience of the persons who will be responsible for the day-to-day management of the Fund's investments. In reviewing the services to be provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's and the Fund's compliance with the 1940 Act, as well as the Fund's compliance with its investment objective, policies and restrictions. Because the Fund had yet to commence investment operations, the Board could not consider the historical investment performance of the Fund. Because the Fund is an index ETF that is designed to track the performance of an underlying index, the Board considered reports it receives on a quarterly basis showing the correlation and tracking error between other ETFs for which the Advisor serves as investment advisor and their applicable underlying indexes. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services to be provided to the Fund by the Advisor under the Agreement are expected to be satisfactory. The Board considered the proposed unitary fee rate payable by the Fund under the Agreement for the services to be provided. The Board noted that, under the unitary fee arrangement, the Fund would pay the Advisor a unitary fee equal to an annual rate of 0.60% of its average daily net assets. The Board noted that the Advisor would be responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, acquired fund fees and expenses, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the fee rates and expense ratios of the peer funds in the Expense Group, as well as advisory and unitary fee rates charged by the Advisor to other ETFs. Because the Fund will pay a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for the Fund was above the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board discussed with representatives of the Advisor how the Expense Group was assembled and how the Fund compared and differed from the peer funds. The Board took this information into account in considering the peer data. With respect to fees charged to other ETFs managed by the Advisor, the Board considered the Advisor's statement that the Fund will be most comparable to two other index ETFs managed by the Advisor, each of which pays an advisory fee equal to an annual rate of 0.50% of its average daily net assets and is subject to an expense cap of 0.65% or 0.70% of its average daily net assets. In light of the information considered and the nature, extent and quality of the services expected to be provided to the Fund under the Agreement, the Board determined that the proposed unitary fee was fair and reasonable. The Board noted that the proposed unitary fee for the Fund was not structured to pass on to shareholders the benefits of any economies of scale as the Fund's assets grow. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Fund. The Board noted that the Advisor has continued to build infrastructure and add new staff to improve the services to the funds in the First Trust Fund Complex. The Board took into consideration the types of costs to be borne by the Advisor in connection with its services to be performed for the Fund under the Agreement. The Board considered the Advisor's estimate of the asset level for the Fund at which the Advisor expects the Agreement to be profitable to the Advisor and the Advisor's estimate of the profitability of the Agreement if the Fund's assets reach $100 million. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's estimated profitability level for the Fund was not unreasonable. The Board considered indirect benefits described by the Advisor that may be realized from its relationship with the Fund. The Board considered that the Advisor had identified as an indirect benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP. The Board also noted that the Advisor will not utilize soft dollars in connection with the Fund. The Board concluded that the character and amount of potential indirect benefits to the Advisor were not unreasonable. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, determined that the terms of the Agreement are fair and reasonable and that the approval of the Agreement is in the best interests of the Fund. No single factor was determinative in the Board's analysis. Page 47
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) FIRST TRUST INDXX AEROSPACE & DEFENSE ETF The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, approved the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor"), on behalf of First Trust Indxx Aerospace & Defense ETF (the "Fund"), for an initial two-year term at a meeting held on September 19, 2022. The Board determined that the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services expected to be provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. To assist the Board in its evaluation of the Agreement for the Fund, the Independent Trustees received a report from the Advisor in advance of the Board meeting responding to a request for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services to be provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the proposed unitary fee rate payable by the Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other exchange-traded funds ("ETFs") managed by the Advisor; the estimated expense ratio of the Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; the nature of expenses to be incurred in providing services to the Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any indirect benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Independent Trustees and their counsel also met separately to discuss the information provided by the Advisor. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor is a reasonable business arrangement from the Fund's perspective. In evaluating whether to approve the Agreement for the Fund, the Board considered the nature, extent and quality of the services to be provided by the Advisor under the Agreement and considered that employees of the Advisor provide management services to other ETFs and to other funds in the First Trust Fund Complex with diligence and care. The Board considered that the Advisor will be responsible for the overall management and administration of the Fund and reviewed all of the services to be provided by the Advisor to the Fund. The Board also considered the background and experience of the persons who will be responsible for the day-to-day management of the Fund's investments. In reviewing the services to be provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's and the Fund's compliance with the 1940 Act, as well as the Fund's compliance with its investment objective, policies and restrictions. Because the Fund had yet to commence investment operations, the Board could not consider the historical investment performance of the Fund. Because the Fund is an index ETF that is designed to track the performance of an underlying index, the Board considered reports it receives on a quarterly basis showing the correlation and tracking error between other ETFs for which the Advisor serves as investment advisor and their applicable underlying indexes. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services to be provided to the Fund by the Advisor under the Agreement are expected to be satisfactory. The Board considered the proposed unitary fee rate payable by the Fund under the Agreement for the services to be provided. The Board noted that, under the unitary fee arrangement, the Fund would pay the Advisor a unitary fee equal to an annual rate of 0.60% of its average daily net assets. The Board noted that the Advisor would be responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, acquired fund fees and expenses, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the fee rates and expense ratios of the peer funds in the Expense Group, as well as advisory and unitary fee rates charged by the Advisor to other ETFs. Because the Fund will pay a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for the Fund was equal to the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board discussed with representatives of the Advisor how the Expense Group was assembled and how the Fund compared and differed from the peer funds. The Board took this information into account in considering the peer data. With respect to fees charged to other ETFs managed by the Advisor, the Board considered the Advisor's statement that the Fund will be distinct compared to other funds in the First Trust Fund Complex, but similar to another index ETF managed by the Advisor that pays a unitary fee equal to an annual rate of 0.60% of its average daily net assets given each strategy's focus on U.S. listed stocks within a thematic segment of the market. In light of the information considered and the nature, extent and quality of the services expected to be provided to the Fund under the Agreement, the Board determined that the proposed unitary fee was fair and reasonable. Page 48
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) The Board noted that the proposed unitary fee for the Fund was not structured to pass on to shareholders the benefits of any economies of scale as the Fund's assets grow. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Fund. The Board noted that the Advisor has continued to build infrastructure and add new staff to improve the services to the funds in the First Trust Fund Complex. The Board took into consideration the types of costs to be borne by the Advisor in connection with its services to be performed for the Fund under the Agreement. The Board considered the Advisor's estimate of the asset level for the Fund at which the Advisor expects the Agreement to be profitable to the Advisor and the Advisor's estimate of the profitability of the Agreement if the Fund's assets reach $100 million. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's estimated profitability level for the Fund was not unreasonable. The Board considered indirect benefits described by the Advisor that may be realized from its relationship with the Fund. The Board considered that the Advisor had identified as an indirect benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP. The Board also noted that the Advisor will not utilize soft dollars in connection with the Fund. The Board concluded that the character and amount of potential indirect benefits to the Advisor were not unreasonable. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, determined that the terms of the Agreement are fair and reasonable and that the approval of the Agreement is in the best interests of the Fund. No single factor was determinative in the Board's analysis. BOARD CONSIDERATIONS REGARDING APPROVAL OF AMENDMENTS TO THE INVESTMENT MANAGEMENT AGREEMENTS The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, unanimously approved the amendment (as applicable to a specific Fund, the "Amendment" and collectively, the "Amendments") of the Investment Management Agreements (as applicable to a specific Fund, the "Agreement" and collectively, the "Agreements") with First Trust Advisors L.P. (the "Advisor") on behalf of the following three series of the Trust (each a "Fund" and collectively, the "Funds"): First Trust Dividend Strength ETF (FTDS) First Trust Dow 30 Equal Weight ETF (EDOW) First Trust Lunt U.S. Factor Rotation ETF (FCTR) The Board approved the Amendment for each Fund at a meeting held on October 24, 2022. As part of the review process, the Board reviewed information and had preliminary discussions with the Advisor regarding the proposed Amendments at meetings held on April 18, 2022, June 12-13, 2022 and September 18-19, 2022. Following those preliminary discussions, the Board requested and received information from the Advisor regarding the proposed Amendments, and that information was considered at an executive session of the Independent Trustees and their counsel held prior to the October 24, 2022 meeting, as well as at the October meeting. In reviewing the Amendment for each Fund, the Board considered that the purpose of the Amendments is to modify the advisory fee rate for FTDS and the unitary fee rate for each of EDOW and FCTR under the applicable Agreement by introducing a breakpoint schedule pursuant to which the advisory fee rate paid by FTDS and the unitary fee rate paid by each of EDOW and FCTR to the Advisor will be reduced as assets of such Fund meet certain thresholds. The Board noted the Advisor's representations that the quality and quantity of the services provided to each Fund by the Advisor under the applicable Agreement will not be reduced or modified as a result of the applicable Amendment, and that the obligations of the Advisor under each Agreement will remain the same in all respects. The Board noted that it, including the Independent Trustees, last approved the continuation of the applicable Agreement for each Fund for a one-year period ending June 30, 2023 at a meeting held on June 12-13, 2022. The Board noted that in connection with such approval it had determined for each Fund, based upon the information provided, that the terms of the applicable Agreement were fair and reasonable and that the continuation of the applicable Agreement was in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. The Board noted that with respect to FTDS, the Advisor had previously agreed to waive management fees and reimburse certain expenses for a specified period to prevent the Fund's expense ratio from exceeding a particular expense cap, that the expense cap for the Fund would continue following entry into the Amendment, and that under the current terms of the expense cap, expenses reimbursed and fees waived are subject to recovery by the Advisor for up to three years from the date the fee was waived or expense was incurred under certain conditions. The Board noted that in connection with the Amendment, the Advisor agreed to amend the terms of the expense cap to eliminate its ability to recover any fees waived or expenses reimbursed. Based on all of the information considered, the Board, including the Independent Trustees, unanimously determined that the terms of the Amendments are fair and reasonable and that the Amendments are in the best interests of each Fund. Page 49
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, unanimously approved the amendment (the "Amendment") of the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the First Trust Growth Strength ETF (the "Fund"). The Board approved the Amendment at a meeting held on October 24, 2022. As part of the review process, the Board reviewed information and had preliminary discussions with the Advisor regarding the proposed Amendment at meetings held on June 12-13, 2022 and September 18-19, 2022. Following those preliminary discussions, the Board requested and received information from the Advisor regarding the proposed Amendment, and that information was considered at an executive session of the Independent Trustees and their counsel held prior to the October 24, 2022 meeting, as well as at the October meeting. In reviewing the Amendment, the Board considered that the purpose of the Amendment is to modify the unitary fee rate for the Fund under the Agreement by introducing a breakpoint schedule pursuant to which the unitary fee rate paid by the Fund to the Advisor will be reduced as assets of the Fund meet certain thresholds. The Board noted the Advisor's representations that the quality and quantity of the services provided to the Fund by the Advisor under the Agreement will not be reduced or modified as a result of the Amendment, and that the obligations of the Advisor under the Agreement will remain the same in all respects. The Board noted that it, including the Independent Trustees, approved the Agreement for an initial two-year period ending October 20, 2024 at a meeting held on September 19, 2022. The Board noted that in connection with such approval it had determined, based upon the information provided, that the terms of the Agreement were fair and reasonable and that the approval of the Agreement was in the best interests of the Fund in light of the nature, extent and quality of the services expected to be provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. Based on all of the information considered, the Board, including the Independent Trustees, unanimously determined that the terms of the Amendment are fair and reasonable and that the Amendment is in the best interests of the Fund. The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, unanimously approved the amendment (the "Amendment") of the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the First Trust Indxx Aerospace & Defense ETF (the "Fund"). The Board approved the Amendment at a meeting held on October 24, 2022. As part of the review process, the Board reviewed information and had preliminary discussions with the Advisor regarding the proposed Amendment at meetings held on June 12-13, 2022 and September 18-19, 2022. Following those preliminary discussions, the Board requested and received information from the Advisor regarding the proposed Amendment, and that information was considered at an executive session of the Independent Trustees and their counsel held prior to the October 24, 2022 meeting, as well as at the October meeting. In reviewing the Amendment, the Board considered that the purpose of the Amendment is to modify the unitary fee rate for the Fund under the Agreement by introducing a breakpoint schedule pursuant to which the unitary fee rate paid by the Fund to the Advisor will be reduced as assets of the Fund meet certain thresholds. The Board noted the Advisor's representations that the quality and quantity of the services provided to the Fund by the Advisor under the Agreement will not be reduced or modified as a result of the Amendment, and that the obligations of the Advisor under the Agreement will remain the same in all respects. The Board noted that it, including the Independent Trustees, approved the Agreement for an initial two-year period ending October 20, 2024 at a meeting held on September 19, 2022. The Board noted that in connection with such approval it had determined, based upon the information provided, that the terms of the Agreement were fair and reasonable and that the approval of the Agreement was in the best interests of the Fund in light of the nature, extent and quality of the services expected to be provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. Based on all of the information considered, the Board, including the Independent Trustees, unanimously determined that the terms of the Amendment are fair and reasonable and that the Amendment is in the best interests of the Fund. Page 50
-------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891. <TABLE> <CAPTION> 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 ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Richard E. Erickson, Trustee o Indefinite Term Physician, Edward-Elmhurst Medical Group, 222 None (1951) Physician & Officer, Wheaton Orthopedics o Since Inception (1990 to 2021) Thomas R. Kadlec, Trustee o Indefinite Term Retired; President, ADM Investors 222 Director, National Futures (1957) Services, Inc. (Futures Commission Association and ADMIS o Since Inception Merchant) (2010 to July 2022) Singapore Ltd.; Formerly, Director of ADM Investor Services, Inc., ADM Investor Services International, ADMIS Hong Kong Ltd., and Futures Industry Association Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate Aurora 222 Director and Board Chair (1964) Health and President, Advocate Aurora of Advocate Home Health o Since 2021 Continuing Health Division (Integrated Services, Advocate Home Healthcare System) Care Products and Advocate Hospice; Director and Board Chair of Aurora At Home (since 2018); Director of Advocate Physician Partners Accountable Care Organization; Director and Board Chair of RML Long Term Acute Care Hospitals; and Director of Senior Helpers (since 2021) Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 222 Formerly, Director of (1956) and Management Consulting) Trust Company of Illinois o Since Inception Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 222 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 222 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) </TABLE> ----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 51
-------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) <TABLE> <CAPTION> POSITION AND TERM OF OFFICE NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer, (1966) Executive Officer First Trust Advisors L.P. and First Trust Portfolios o Since January 2016 L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1972) Officer and Chief First Trust Portfolios L.P. Accounting Officer o Since January 2016 W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel, o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and First (1970) Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Chief Compliance Officer Since January 2011 o Assistant Secretary Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1966) First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception </TABLE> ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 52
-------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2022 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies." For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2022 Page 53
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FIRST TRUST FIRST TRUST EXCHANGE-TRADED FUND INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 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
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FIRST TRUST First Trust Exchange-Traded Fund -------------------------------------------------------------------------------- FT Cboe Vest Gold Strategy Quarterly Buffer ETF (BGLD) ------------------ Annual Report For the Year Ended December 31, 2022 ------------------
-------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) ANNUAL REPORT DECEMBER 31, 2022 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Commentary......................................................... 4 Understanding Your Fund Expenses............................................. 6 Consolidated Portfolio of Investments........................................ 7 Consolidated Statement of Assets and Liabilities............................. 9 Consolidated Statement of Operations......................................... 10 Consolidated Statements of Changes in Net Assets............................. 11 Consolidated Financial Highlights............................................ 12 Notes to Consolidated Financial Statements................................... 13 Report of Independent Registered Public Accounting Firm ..................... 19 Additional Information....................................................... 20 Board of Trustees and Officers .............................................. 25 Privacy Policy............................................................... 27 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/or Cboe Vest(SM) Financial LLC ("Cboe Vest" or the "Sub-Advisor") and their respective 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 the series of First Trust Exchange-Traded Fund (the "Trust") described in this report (FT Cboe Vest Gold Strategy Quarterly Buffer ETF; hereinafter referred to as the "Fund") 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/or Sub-Advisor and their respective 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 the Fund will achieve its investment objective. The 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 investing in the Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of certain other risks of investing in the Fund. 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 the Fund's webpage at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund's performance and investment approach. By reading the portfolio commentary from the portfolio management team of the Fund, you may obtain an understanding of how the market environment affected the Fund's performance. The statistical information that follows may help you understand the 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 and/or Sub-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 the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings.
-------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) ANNUAL LETTER FROM THE CHAIRMAN AND CEO DECEMBER 31, 2022 Dear Shareholders: First Trust is pleased to provide you with the annual report for the FT Cboe Vest Gold Strategy Quarterly Buffer ETF (the "Fund"), which contains detailed information about the Fund for the twelve months ended December 31, 2022. The past year was filled with challenges, several of which surely tested the resolve of even the most seasoned investors. The year began with the same headwinds that existed at the end of 2021, namely: stubbornly high inflation and rising interest rates. When Russia invaded Ukraine in late February 2022, we added war, geopolitical tension, and potential food and energy shortages to the list. Considering the bleak backdrop at the start of the year, it probably does not surprise you to read that with a total return of -18.11%, 2022 was the worst year for the S&P 500(R) Index since 2008. Even the bond market struggled to provide a haven to weary investors. The Bloomberg U.S. Aggregate Bond Index posted a total return of -13.01% for the year; its worst total return in 45 years. A common topic of discussion in 2022 was whether central banks around the world had tightened monetary policy enough to quell inflation without causing excess damage to their economies. In the U.S., the Federal Reserve (the "Fed") described this as a "soft landing," stating it was their intent to keep the labor market strong but to increase interest rates enough to bring inflation down to 2.0%. True to their word, over the course of seven interest rate hikes, the Fed increased the Federal Funds target rate (upper bound) from 0.25% (where it stood in March 2022) to 4.50% as of December 2022. This is the highest the Federal Funds rate has been since 2008. The economic impact of the Fed's tighter monetary policy quickly became evident. Excluding the economic contraction from COVID-19 in 2020, the U.S. experienced its first decline in the gross domestic product ("GDP") growth rate since March 2014. Data from the U.S. Bureau of Economic Analysis indicates that annualized real GDP growth rates over the first three quarters of 2022 were -1.6%, -0.6%, and 3.2%, respectively. Thankfully, inflation, as measured by the trailing 12-month rate on the Consumer Price Index ("CPI"), appears to be responding to the Fed's tightening. After peaking at 9.1% in June 2022, the CPI rate fell to 6.5% at the end of December 2022. For comparative purposes, the CPI rate has averaged 2.5% over the past 30 years. Job creation has provided a respite from dreary economic data in recent months, but that could quickly change. Nearly 125,000 employees have lost their jobs since June 2022 as more than 120 U.S. companies announced layoffs, according to Forbes. The jury is still out on whether the Fed will be able to pull off a soft landing, but the job market will tell the tale, in my opinion. Since 1928, the S&P 500(R) Index has only fallen for two consecutive years on four occasions: The Great Depression, World War II, the oil crisis of the 1970s and the burst of the dot-com bubble in the early 2000s. As we enter 2023, the U.S. economy has significant obstacles to overcome to avoid a recession and another negative year. We will be watching and reporting on what transpires. Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Fund 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 1
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) The investment objective of the FT Cboe Vest Gold Strategy Quarterly Buffer ETF (the "Fund") is to seek to provide investors with returns (before fees, expenses and taxes) that match the price return of the SPDR(R) Gold Trust (the "Underlying ETF"), up to a predetermined upside cap of 6.31% (before fees, expenses and taxes) and 6.09% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against Underlying ETF losses between -5% and -15% (before fees, expenses and taxes) over the period from December 1, 2022 to February 28, 2023 (the "Target Outcome Period"). Under normal market conditions, the Fund will invest substantially all of its assets in U.S. Treasury securities, cash and cash equivalents, and in the shares of a wholly-owned subsidiary (the "Subsidiary") that holds FLexible EXchange(R) Options ("FLEX Options") that reference the price performance of the Underlying ETF. The Fund does not invest directly in FLEX Options on the Underlying ETF. The Fund gains exposure to these investments exclusively by investing in the Subsidiary. The Fund will invest up to approximately 25% of its total assets in the Subsidiary. Subsequent Target Outcome Periods will begin on the day the prior Target Outcome Period ends and will end on the approximate three-month anniversary of that new Target Outcome Period. On the first day of each new Target Outcome Period, the Fund resets by investing in a new set of FLEX Options that are designed to provide a new cap for the new Target Outcome Period. This means that the cap will change for each Target Outcome Period based upon prevailing market conditions at the beginning of each Target Outcome Period. The Fund will be perpetually offered and not terminate after the current or any subsequent Target Outcome Period. An investor that purchases Fund shares other than on the first day of a Target Outcome Period and/or sells Fund shares prior to the end of a Target Outcome Period may experience results that are very different from the target outcomes sought by the Fund for that Target Outcome Period. The Fund is classified as non-diversified under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol "BGLD." <TABLE> <CAPTION> ---------------------------------------------------------------------------------------------------------------- PERFORMANCE ---------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL CUMULATIVE 1 Year TOTAL RETURNS TOTAL RETURNS Ended Inception (1/20/21) Inception (1/20/21) 12/31/22 to 12/31/22 to 12/31/22 <S> <C> <C> <C> FUND PERFORMANCE NAV -2.41% -3.97% -7.58% Market Price -2.46% -4.02% -7.68% INDEX PERFORMANCE LBMA Gold Price -0.43% -1.18% -2.28% S&P 500(R) Index - Price Return -19.44% -0.16% -0.32% ---------------------------------------------------------------------------------------------------------------- </TABLE> Total returns for the period since inception are calculated from the inception date of the Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the period indicated. "Cumulative Total Returns" represent the total change in value of an investment over the period indicated. The 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. Since shares of the Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike 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. 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 the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future performance. Page 2
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) (CONTINUED) -------------------------------------------------------- FUND ALLOCATION % OF NET ASSETS -------------------------------------------------------- U.S. Treasury Bills 92.1% Money Market Funds 0.2 Purchased Options 8.8 Written Options (1.5) Net Other Assets and Liabilities 0.4 ------- Total 100.0% ======= <TABLE> <CAPTION> Performance of a $10,000 Initial Investment January 20, 2021 - December 31, 2022 FT Cboe Vest Gold Strategy S&P 500(R) Index - Quarterly Buffer ETF LBMA Gold Price Price Return <S> <C> <C> <C> 1/20/21 $10,000 $10,000 $10,000 6/30/21 9,645 9,478 11,157 12/31/21 9,469 9,814 12,374 6/30/22 9,174 9,778 9,828 12/31/22 9,242 9,772 9,968 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 3
-------------------------------------------------------------------------------- PORTFOLIO COMMENTARY -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) ANNUAL REPORT DECEMBER 31, 2022 (UNAUDITED) ADVISOR First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment advisor to the FT Cboe Vest Gold Strategy Quarterly Buffer ETF ("BGLD" or the "Fund"). First Trust is responsible for the ongoing monitoring of the Fund's investment portfolio, managing the Fund's business affairs and providing certain administrative services necessary for the management of the Fund. SUB-ADVISOR Cboe Vest(SM) Financial LLC ("Cboe Vest" or the "Sub-Advisor") serves as the investment sub-advisor to the Fund. In this capacity, Cboe Vest is responsible for the selection and ongoing monitoring of the securities in the Fund's investment portfolio. Cboe Vest, with principal offices at 8350 Broad St., Suite 240, McLean, Virginia 22102, was founded in 2012. Cboe Vest had approximately $10 billion under management or committed to management as of December 31, 2022. PORTFOLIO MANAGEMENT TEAM KARAN SOOD, MANAGING DIRECTOR OF CBOE VEST HOWARD RUBIN, MANAGING DIRECTOR OF CBOE VEST The portfolio managers are primarily and jointly responsible for the day-to-day management of the Fund. Each portfolio manager has served as part of the portfolio management team of the Fund since 2021. MARKET RECAP For the Fund's fiscal year ended December 31, 2022 (the "period"), global stock markets fell sharply, as inflation rates soared to levels not seen in decades and central bankers began hiking interest rates to combat it. The S&P 500(R) Index, the well-known measure of U.S. large-cap stocks, ended the period down 18.1%. Mid- and small-cap stocks, as measured by the S&P Midcap 400(R) Index and the Russell 2000(R) Small Cap Index lost 13.1% and 20.5%, respectively. The Nasdaq 100 Index, a tech-heavy market measure, fell 32.4%. International stock markets were down as well during the period, as exemplified by drops in the major foreign market indices: the MSCI EAFE Index (a broad measure of international stocks in developed markets, excluding the U.S.) declined by 14.5%, while the MSCI Emerging Markets Index fell 20.0%. During the period, gold, as measured by the price return of SPDR(R) Gold Shares ETF (ticker "GLD"), declined 0.8%. U.S. economic data suggested a softening economy. Gross domestic product ("GDP") growth in the three most recent quarterly reports (first quarter 2022 through third quarter 2022) came in at seasonally adjusted annualized rates of -1.6%, -0.6%, and 3.2%, sequentially. A current Bloomberg survey of economists shows a consensus projection of 0.4% GDP growth in 2023 (versus 2022). The U.S. unemployment rate continues to linger around 50-year lows. Throughout the current period, the unemployment rate trended lower. The rate was 3.9% in December 2021 but had declined to 3.5% by December 2022. In an effort to reduce higher-than-target inflation rates, the Federal Reserve (the "Fed") aggressively increased the Federal Funds target rate in 2022, increasing the target range by 4.25% (from a range of 0%-0.25% to a range of 4.25%-4.50%). U.S. inflation levels, which had accelerated dramatically in 2021, began to fall in the latter half of 2022. As the year began, inflation (as measured by the Consumer Price Index (CPI - Year-over-Year)) was running at 7.0%. By June 2022, inflation reached 9.1%, before falling to 6.5% by December 2022. The overheated housing market also began to respond to the Fed's aggressive interest rate hikes, with the four most recent monthly price reports (July through October 2022) each showing declining home prices (as measured by the S&P Case-Shiller U.S. National Home Price Index). Over the period, implied volatilities in U.S. equity markets rose, illustrated by an increase in the Cboe Volatility Index ("VIX") from 17.2% to 21.7%. For the period, the VIX averaged 25.6%. PERFORMANCE ANALYSIS The following table provides information pertaining to the caps and performance for each of the quarterly Target Outcome Periods during the year ended December 31, 2022. The Fund's cap is reset quarterly, at the end of February, May, August, and November. The table shows the caps that went into effect on each of the quarterly start dates. Caps are shown both pre and post expenses. Page 4
-------------------------------------------------------------------------------- PORTFOLIO COMMENTARY (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) ANNUAL REPORT DECEMBER 31, 2022 (UNAUDITED) For each quarterly target outcome period the Fund's performance is generally impacted by a number of factors. These factors include GLD performance, the Cap and Buffer levels, and expenses. <TABLE> <CAPTION> TARGET BGLD ACTUAL OUTCOME PERIODS CAPS CAPS GLD BGLD ACTUAL BGLD TARGET VS. TARGET START END BEFORE EXPENSES EXPENSES AFTER EXPENSES PERFORMANCE PERFORMANCE PERFORMANCE (VARIANCE) ------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> <C> 11/30/2021 2/28/2022 3.90% 0.22% 3.68% 7.78% 3.71% 3.68% 0.03% 2/28/2022 5/31/2022 7.01% 0.23% 6.78% -4.06% -4.19% -4.29% 0.10% 5/31/2022 8/31/2022 9.00% 0.23% 8.77% -6.94% -5.14% -5.23% 0.09% 8/31/2022 11/30/2022 6.92% 0.23% 6.69% 3.48% 3.36% 3.25% 0.11% 11/30/2022 2/28/2023 6.31% 0.22% 6.09% 6.09%** 1.84%** N/A* N/A* </TABLE> * The target outcome period beginning November 30, 2022, had not been completed as of December 31, 2022. This target outcome period will end on February 28, 2023. ** Performance from 11/30/22 through 12/31/22. MARKET AND FUND OUTLOOK The Fed still has work to do to bring down inflation rates to acceptable levels. The Fed has been signaling to the market that there will be additional interest rate hikes in 2023. The Fed's December 2022 "dot plot" that shows where they think the Federal Funds target rate will be in the future, shows that they expect the target range to be 5.00-5.25% by the end of 2023, or 0.75% higher than the current target range. This may be a headwind for equities and fixed income securities in the coming year. Many fixed income investments still provide investors with negative real yields (i.e., nominal yield less inflation.) This continues to bode poorly for future fixed income returns, in our opinion. In response, investors may be looking to reallocate away from fixed income. Gold, historically thought of as the predominant inflation hedge, now competes with cryptocurrencies such as Bitcoin for that honor. While gold prices were relatively flat in 2022, it was certainly a better asset class than equities, on a total return basis, and as such, did provide some inflation protection. The Fund is an alternative that investors should consider. The Fund is designed to protect investors against certain downside movements in gold prices as measured by GLD, while limiting the investor's participation in larger upside moves in GLD. In the current market environment, which includes elevated inflation rates, the continuing Fed tightening cycle, and negative real yields, the Fund, in appropriate allocations, could be a suitable alternative to either equity and/or fixed income investments. Page 5
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) UNDERSTANDING YOUR FUND EXPENSES DECEMBER 31, 2022 (UNAUDITED) As a shareholder of FT Cboe Vest Gold Strategy Quarterly Buffer ETF (the "Fund"), 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 Fund 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, 2022. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the 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 the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the 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 Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. <TABLE> <CAPTION> ----------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2022 DECEMBER 31, 2022 PERIOD PERIOD (a) ----------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) Actual $1,000.00 $1,007.30 0.90% $4.55 Hypothetical (5% return before expenses) $1,000.00 $1,020.67 0.90% $4.58 </TABLE> (a) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (July 1, 2022 through December 31, 2022), multiplied by 184/365 (to reflect the six-month period). Page 6
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) CONSOLIDATED PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ------------- ------------------------------------------------------------------ ------------ ------------ ------------ U.S. TREASURY BILLS -- 92.1% <S> <C> <C> <C> <C> $ 11,938,600 U.S. Treasury Bill (a)............................................ (b) 02/23/23 $ 11,866,836 (Cost $11,866,169) ------------ </TABLE> <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ------------- ------------------------------------------------------------------------------------------------ ------------ MONEY MARKET FUNDS -- 0.2% <S> <C> <C> 20,173 Dreyfus Government Cash Management Fund, Institutional Shares - 4.19% (c)....................... 20,173 (Cost $20,173) ------------ TOTAL INVESTMENTS -- 92.3%...................................................................... 11,887,009 (Cost $11,886,342) ------------ </TABLE> <TABLE> <CAPTION> NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE ------------- --------------------------------------------------- ------------ ------------ ------------ ------------ CALL OPTIONS PURCHASED -- 8.8% <S> <C> <C> <C> <C> <C> 767 SPDR(R) Gold Shares................................ $ 13,011,388 $ 156.57 02/28/23 1,130,182 (Cost $899,404) ------------ WRITTEN OPTIONS -- (1.5)% CALL OPTIONS WRITTEN -- (1.5)% (767) SPDR(R) Gold Shares................................ (13,011,388) 175.21 02/28/23 (192,083) (Premiums received $140,072) ------------ PUT OPTIONS WRITTEN -- (0.0)% (767) SPDR(R) Gold Shares................................ (13,011,388) 140.09 02/28/23 (4,602) (Premiums received $17,673) ------------ TOTAL WRITTEN OPTIONS........................................................................... (196,685) (Premiums received $157,745) ------------ NET OTHER ASSETS AND LIABILITIES -- 0.4%........................................................ 58,097 ------------ NET ASSETS -- 100.0%............................................................................ $ 12,878,603 ============ </TABLE> (a) This security or a portion of this security is segregated as collateral for written options contracts. At December 31, 2022, the segregated value of this security amounts to $1,682,867. (b) Zero coupon security. (c) Rate shown reflects yield as of December 31, 2022. See Notes to Financial Statements Page 7
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) CONSOLIDATED PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Consolidated Financial Statements): <TABLE> <CAPTION> ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> U.S. Treasury Bills.................................. $ 11,866,836 $ -- $ 11,866,836 $ -- Money Market Funds................................... 20,173 20,173 -- -- -------------- -------------- -------------- -------------- Total Investments.................................... 11,887,009 20,173 11,866,836 -- Call Options Purchased............................... 1,130,182 -- 1,130,182 -- -------------- -------------- -------------- -------------- Total................................................ $ 13,017,191 $ 20,173 $ 12,997,018 $ -- ============== ============== ============== ============== LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS -------------- -------------- -------------- -------------- Call Options Written................................. $ (192,083) $ -- $ (192,083) $ -- Put Options Written.................................. (4,602) -- (4,602) -- -------------- -------------- -------------- -------------- Total................................................ $ (196,685) $ -- $ (196,685) $ -- ============== ============== ============== ============== </TABLE> Page 8 See Notes to Financial Statements
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2022 <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value.................................................. $ 11,887,009 Options contracts purchased, at value.................................. 1,130,182 Cash................................................................... 67,456 Dividends receivables.................................................. 109 --------------- Total Assets........................................................ 13,084,756 --------------- LIABILITIES: Options contracts written, at value.................................... 196,685 Investment advisory fees payables...................................... 9,468 --------------- Total Liabilities................................................... 206,153 --------------- NET ASSETS............................................................. $ 12,878,603 =============== NET ASSETS CONSIST OF: Paid-in capital........................................................ $ 12,670,633 Par value.............................................................. 7,000 Accumulated distributable earnings (loss).............................. 200,970 --------------- NET ASSETS............................................................. $ 12,878,603 =============== NET ASSET VALUE, per share............................................. $ 18.40 =============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share).............................. 700,002 =============== Investments, at cost................................................... $ 11,886,342 =============== Premiums paid on options contracts purchased........................... $ 899,404 =============== Premiums received on options contracts written......................... $ 157,745 =============== </TABLE> See Notes to Financial Statements Page 9
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022 <TABLE> <CAPTION> INVESTMENT INCOME: <S> <C> Dividends.............................................................. $ 14,684 Interest............................................................... 172,118 --------------- Total investment income............................................. 186,802 --------------- EXPENSES: Investment advisory fees............................................... 132,159 --------------- Total expenses...................................................... 132,159 --------------- NET INVESTMENT INCOME (LOSS)........................................... 54,643 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments......................................................... (366) Purchased options contracts......................................... (900,187) Written options contracts........................................... 486,203 --------------- Net realized gain (loss)............................................... (414,350) --------------- Net change in unrealized appreciation (depreciation) on: Investments......................................................... 195 Purchased options contracts......................................... (105,038) Written options contracts........................................... (969) --------------- Net change in unrealized appreciation (depreciation)................... (105,812) --------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (520,162) --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $ (465,519) =============== </TABLE> Page 10 See Notes to Financial Statements
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> YEAR PERIOD ENDED ENDED 12/31/2022 12/31/2021 (a) --------------- --------------- <S> <C> <C> OPERATIONS: Net investment income (loss)........................................... $ 54,643 $ (72,171) Net realized gain (loss)............................................... (414,350) (702,490) Net change in unrealized appreciation (depreciation)................... (105,812) 298,317 --------------- --------------- Net increase (decrease) in net assets resulting from operations........ (465,519) (476,344) --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations.................................................. (31,758) -- Return of capital...................................................... (16,277) -- --------------- --------------- Total distributions to shareholders.................................... (48,035) -- --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold.............................................. 14,891,168 23,206,989 Cost of shares redeemed................................................ (19,479,127) (4,750,529) --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions............................................ (4,587,959) 18,456,460 --------------- --------------- Total increase (decrease) in net assets................................ (5,101,513) 17,980,116 NET ASSETS: Beginning of period.................................................... 17,980,116 -- --------------- --------------- End of period.......................................................... $ 12,878,603 $ 17,980,116 =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................ 950,002 -- Shares sold............................................................ 800,000 1,200,002 Shares redeemed........................................................ (1,050,000) (250,000) --------------- --------------- Shares outstanding, end of period...................................... 700,002 950,002 =============== =============== </TABLE> (a) Inception date is January 20, 2021, which is consistent with the commencement of investment operations and is the date the initial creation units were established. See Notes to Financial Statements Page 11
FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) CONSOLIDATED FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> YEAR PERIOD ENDED ENDED 12/31/2022 12/31/2021 (a) --------------- --------------- <S> <C> <C> Net asset value, beginning of period........................... $ 18.93 $ 19.99 --------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... 0.08 (0.08) Net realized and unrealized gain (loss)........................ (0.54) (0.98) --------- --------- Total from investment operations............................... (0.46) (1.06) --------- --------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................................... (0.05) -- Return of capital.............................................. (0.02) -- --------- --------- Total distributions............................................ (0.07) -- --------- --------- Net asset value, end of period................................. $ 18.40 $ 18.93 ========= ========= TOTAL RETURN (b)............................................... (2.41)% (5.30)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 12,879 $ 17,980 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.90% 0.90% (c) Ratio of net investment income (loss) to average net assets.... 0.37% (0.87)% (c) Portfolio turnover rate (d).................................... 0% 0% </TABLE> (a) Inception date is January 20, 2021, which is consistent with the commencement of investment operations and is the date the initial creation units were established. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (c) Annualized. (d) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 12 See Notes to Financial Statements
-------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 1. ORGANIZATION First Trust Exchange-Traded Fund (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on August 8, 2003, and is registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of twenty-three exchange-traded funds. This report covers the FT Cboe Vest Gold Strategy Quarterly Buffer ETF (the "Fund"), which trades under the ticker "BGLD" on the Cboe BZX Exchange, Inc. The Fund represents a separate series of shares of beneficial interest in the Trust. Unlike conventional mutual funds, the 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 Fund is an actively managed exchange-traded fund. The Fund's investment objective is to seek to provide investors with returns (before fees, expenses and taxes) that match the price return of the SPDR(R) Gold Trust (the "Underlying ETF"), up to a predetermined upside cap of 6.31% (before fees, expenses and taxes) and 6.09% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against Underlying ETF losses between -5% and -15% (before fees, expenses and taxes) over the period from December 1, 2022 to February 28, 2023 (the "Target Outcome Period"). Prior to December 1, 2022, the Fund's investment objective included an upside cap of 3.90%, 7.01%, 9.00% and 6.92% (before fees, expenses and taxes) and 3.68%, 6.78%, 8.77 and 6.69% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee) and a Target Outcome Period of December 1, 2021 to February 28, 2022, March 1, 2022 to May 31, 2022, June 1, 2022 to August 31, 2022 and September 1, 2022 to November 30, 2022, respectively. Under normal market conditions, the Fund will invest substantially all of its assets in U.S. Treasury securities, cash and cash equivalents, and in the shares of a wholly-owned subsidiary (the "Subsidiary") that holds FLexible EXchange(R) Options ("FLEX Options") that reference the price performance of the Underlying ETF. The Subsidiary is wholly-owned by the Fund and is organized under the laws of the Cayman Islands. The Fund does not invest directly in FLEX Options on the Underlying ETF. The Fund gains exposure to these investments exclusively by investing in the Subsidiary. The Fund will invest up to approximately 25% of its total assets in the Subsidiary. As of December 31, 2022, the Fund invested 20.87% of the Fund's total assets in the Subsidiary. There can be no assurance that the Fund will achieve its investment objective. The Fund may not be appropriate for all investors. 2. SIGNIFICANT ACCOUNTING POLICIES The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The consolidated financial statements include the accounts on a consolidated basis of the Subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the consolidated financial statements. The preparation of the consolidated 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 consolidated financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION The 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. The Fund's NAV is calculated 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 shares outstanding. The Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Fund's investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor") in accordance with valuation procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Consolidated Portfolio of Investments. The Fund's investments are valued as follows: Exchange-traded options contracts (other than FLEX Option contracts) are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded options contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Over-the-counter options contracts are valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. FLEX Option contracts are normally valued using a model-based price provided by a third-party pricing vendor. On days when a trade in a FLEX Option contract occurs, the trade price will be used to value such FLEX Option contracts in lieu of the model price. Page 13
-------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 U.S. Treasuries are valued on the basis of valuations provided by a third-party pricing service approved by the Trust's Board of Trustees. Shares of open-end funds are valued based on NAV per share. If the Fund's investments are not able to be priced by pre-established pricing methods, such investments may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. A variety of factors may be considered in determining the fair value of such investments. Valuing the Fund's holdings using fair value pricing will result in using prices for those holdings that may differ from current market valuations. The Subsidiary's holdings will be valued in the same manner as the Fund's holdings. The Fund is 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 the Fund's investments as of December 31, 2022, is included with the Fund's Consolidated Portfolio of Investments. In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing requirements to determine fair value in good faith for purposes of the 1940 Act. The rule permits fund boards to designate a fund's investment advisor to perform fair value determinations, subject to board oversight and certain other conditions. The rule also defines when market quotations are "readily available" for purposes of the 1940 Act and requires a fund to fair value a portfolio investment when a market quotation is not readily available. The SEC also adopted new Rule 31a-4 under the 1940 Act, which sets forth recordkeeping requirements associated with fair value determinations. The compliance date for Rule 2a-5 and Rule 31a-4 was September 8, 2022. Effective September 8, 2022 and pursuant to the requirements of Rule 2a-5, the Trust's Board of Trustees designated the Advisor as its valuation designee to perform fair value determinations and approved new Advisor Valuation Procedures for the Trust. B. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME Investment transactions are recorded as of the trade date. Realized gains and losses from investment transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method. C. FLEX OPTIONS FLEX Options are customized equity or index option contracts that trade on an exchange, but provide investors with the ability to customize key contract terms like exercise prices, styles and expiration dates. FLEX Options are guaranteed for settlement by the Options Clearing Corporation. The Fund, through the Subsidiary, purchases and sells call and put FLEX Options based on the performance of the Underlying ETF. The FLEX Options that the Subsidiary holds that reference the Underlying ETF will give the Subsidiary the right to receive or deliver shares of the Underlying ETF on the option expiration date at a strike price, depending on whether the option is a put or call option and whether the Subsidiary purchases or sells the option. The FLEX Options held by the Subsidiary are European style options, which are exercisable at the strike price only on the FLEX Option expiration date. Page 14
-------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 When the Subsidiary writes (sells) an option, an amount equal to the premium received by the Subsidiary is included in "Options contracts written, at value" on the Consolidated Statement of Assets and Liabilities. Gain or loss on written options is presented separately as "Net realized gain (loss) on written options contracts" on the Consolidated Statement of Operations. When the Subsidiary purchases a call or put option, the premium paid represents the cost of the call or put option, which is included in "Options contracts purchased, at value" on the Consolidated Statement of Assets and Liabilities. Gain or loss on purchased options is included in "Net realized gain (loss) on purchased options contracts" on the Consolidated Statement of Operations. D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income, if any, are declared and paid annually by the Fund, or as the Board of Trustees may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the consolidated financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on significantly modified portfolio securities held by the Fund 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 consolidated financial statement and tax purposes, will reverse at some time in the future. The tax character of distributions paid during the fiscal year ended December 31, 2022 and the fiscal period ended December 31, 2021 was as follows: Distributions paid from: 2022 2021 Ordinary income $ 31,758 $ -- Capital gains -- -- Return of capital 16,277 -- As of December 31, 2022, the components of distributable earnings on a tax basis for the Fund were as follows: Undistributed ordinary income $ -- Accumulated capital and other gain (loss) (2,991) Net unrealized appreciation (depreciation) 195,286 E. INCOME TAXES The 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 (the "Code"), 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, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Subsidiary is classified as a controlled foreign corporation under Subchapter N of the Code. Therefore, the Fund is required to increase its taxable income by its share of the Subsidiary's income, whether or not such earnings are distributed by the Subsidiary to the Fund. Net investment losses of the Subsidiary cannot be deducted by the Fund in the current period nor carried forward to offset taxable income in future periods. The Fund is 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 2021 and 2022 remain open to federal and state audit. As of December 31, 2022, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund's consolidated financial statements for uncertain tax positions. The 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. The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At December 31, 2022, for federal income tax purposes, the Fund had $210 of non- expiring capital loss carryforwards that may be carried forward indefinitely. 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, 2022, the Fund had no net late year ordinary or capital losses. Page 15
-------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 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) and net unrealized appreciation (depreciation)) on the Consolidated Statement 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). These adjustments are primarily due to the difference between book and tax treatments of net investment income from the Subsidiary. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended December 31, 2022, the adjustments for the Fund were as follows: Accumulated Accumulated Net Investment Net Realized Paid-in Income (Loss) Gain (Loss) Capital -------------- -------------- -------------- $ (19,959) $ 414,140 $ (394,181) As of December 31, 2022, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows: <TABLE> <CAPTION> Gross Gross Net Unrealized Unrealized Unrealized Appreciation Tax Cost Appreciation (Depreciation) (Depreciation) -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> $ 11,886,342 $ 234,226 $ (38,940) $ 195,286 </TABLE> F. EXPENSES Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3). 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Fund, 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 ongoing monitoring of the Fund's and the Subsidiary's investment portfolios, managing the Fund's business affairs and providing certain administrative services necessary for the management of the Fund. First Trust is responsible for the expenses of the Fund and the Subsidiary including the cost of transfer agency, sub-advisory, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, acquired fund fees and expenses, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. Effective November 1, 2022, the annual unitary management fee payable by the Fund to First Trust for these services will be reduced at certain levels of the Fund's net assets ("breakpoints") and calculated pursuant to the schedule below. <TABLE> <CAPTION> Breakpoints ------------------------------------------------------------------------- <S> <C> Fund net assets up to and including $2.5 billion 0.9000% Fund net assets greater than $2.5 billion up to and including $5 billion 0.8775% Fund net assets greater than $5 billion up to and including $7.5 billion 0.8550% Fund net assets greater than $7.5 billion up to and including $10 billion 0.8325% Fund net assets greater than $10 billion 0.8100% </TABLE> Prior to November 1, 2022, the Fund paid First Trust an annual unitary management fee equal to 0.9000% of its average daily net assets. The Subsidiary does not pay First Trust a separate management fee. Cboe Vest(SM) Financial LLC ("Cboe Vest"), an affiliate of First Trust, serves as the Fund's sub-advisor and manages the Fund's portfolio subject to First Trust's supervision. Pursuant to the Investment Management Agreement, between the Trust, on behalf of the Fund, and the Advisor, and the Investment Sub-Advisory Agreement among the Trust, on behalf of the Fund, the Advisor and Cboe Vest, First Trust will supervise Cboe Vest and its management of the investment of the Fund's assets and will pay Cboe Vest for its services as the Fund's sub-advisor a sub-advisory fee equal to 50% of any remaining monthly unitary management fee paid to the Advisor after the average Fund's expenses accrued during the most recent twelve months are subtracted from the unitary management fee for that month. Page 16
-------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund. Additionally, the Lead Independent Trustee and the Chairs of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairs rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES The cost of purchases and proceeds from sales of securities, excluding short-term investments, derivatives, and in-kind transactions, for the fiscal year ended December 31, 2022, were $0 and $0, respectively. For the fiscal year ended December 31, 2022, the Fund did not have any in-kind purchases or sales. 5. DERIVATIVE TRANSACTIONS The following table presents the types of derivatives held by the Subsidiary at December 31, 2022, the primary underlying risk exposure and the location of these instruments as presented on the Consolidated Statement of Assets and Liabilities. <TABLE> <CAPTION> ASSET DERIVATIVES LIABILITY DERIVATIVES ---------------------------------------- ---------------------------------------- CONSOLIDATED CONSOLIDATED DERIVATIVES STATEMENT OF ASSETS AND STATEMENT OF ASSETS AND INSTRUMENT RISK EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE ----------------- ----------------- ------------------------ ------------- ------------------------ ------------- <S> <C> <C> <C> <C> <C> Commodity Options contracts Options contracts Options Risk purchased, at value $ 1,130,182 written, at value $ 196,685 </TABLE> The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the fiscal year ended December 31, 2022, on derivative instruments, as well as the primary underlying risk exposure associated with the instruments. CONSOLIDATED STATEMENT OF OPERATIONS LOCATION ----------------------------------------------------------------------------- COMMODITY RISK EXPOSURE Net realized gain (loss) on: Purchased options contracts $ (900,187) Written options contracts 486,203 Net change in unrealized appreciation (depreciation) on: Purchased options contracts (105,038) Written options contracts (969) During the fiscal year ended December 31, 2022, the premiums for purchased options contracts opened were $4,142,564 and the premiums for purchased options contracts closed, exercised and expired were $4,439,126. During the fiscal year ended December 31, 2022, the premiums for written options contracts opened were $937,375 and the premiums for written options contracts closed, exercised and expired were $1,100,817. The Fund does not have the right to offset financial assets and liabilities related to options contracts on the Consolidated Statement of Assets and Liabilities. Page 17
-------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES The 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 the 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, the 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 the 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 the 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 the Fund's shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of the Fund's shares at or close to the NAV per share of the Fund. The Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of the 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. The 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 the 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 the 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. 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 Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Fund, 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 Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before April 30, 2024. 8. INDEMNIFICATION The Trust, on behalf of the Fund, 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 Fund through the date the consolidated financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the consolidated financial statements that have not already been disclosed. Page 18
-------------------------------------------------------------------------------- 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 consolidated statement of assets and liabilities of FT Cboe Vest Gold Strategy Quarterly Buffer ETF (the "Fund"), a series of the First Trust Exchange-Traded Fund, including the consolidated portfolio of investments, as of December 31, 2022, the related consolidated statement of operations for the year then ended, the consolidated statements of changes in net assets and the consolidated financial highlights for the year ended December 31, 2022, and the period from January 20, 2021 (commencement of operations) through December 31, 2021, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2022, and the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year ended December 31, 2022, and the period from January 20, 2021 (commencement of operations) through December 31, 2021 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 Fund's management. Our responsibility is to express an opinion on the Fund's 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 Fund 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 Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2022, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois February 24, 2023 We have served as the auditor of one or more First Trust investment companies since 2001. Page 19
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS The 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. The 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 the Fund is available to investors within 60 days after the period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION For the taxable year ended December 31, 2022, the following percentages of ordinary income (including the short-term capital gain) distribution paid by the Fund qualify for the dividends received deduction available to corporations and are hereby designated as qualified dividend income: Dividend Received Deduction Qualified Dividend Income --------------------------- ------------------------- 0.00% 0.00% Distributions paid to foreign shareholders during the Fund's fiscal year ended December 31, 2022 that were properly designated by the Fund as "interest-related dividends" or "short-term capital gain dividends," may not be subject to federal income tax provided that the income was earned directly by such foreign shareholders. RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a significant percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is more broadly diversified. CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor's investment period. Additionally, the fund will not participate in gains of the underlying ETF above Page 20
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 (UNAUDITED) the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund's share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market. ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads. FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities. INDEX OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or more indices or ETF models. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a 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. Page 21
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 (UNAUDITED) LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial Conduct Authority, which regulates LIBOR has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate ("SOFR") will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. MARKET RISK. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund's portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund's shares and result in increased market volatility. During any such events, a fund's shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund's shares may widen. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. OPERATIONAL RISK. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund's service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund's ability to meet its investment objective. Although the funds and the funds' investment advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company's capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock. VALUATION RISK. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions Page 22
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 (UNAUDITED) (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund. DISCLAIMER The Fund is not sponsored, endorsed, sold or promoted by SPDR(R) Gold Shares, SPDR, or Standard & Poor's(R) (together with their affiliates hereinafter referred to as the "Corporations"). The Corporations have not passed on the legality or suitability of, or the accuracy or adequacy of, descriptions and disclosures relating to the Fund or the FLEX Options. The Corporations make no representations or warranties, express or implied, regarding the advisability of investing in the Fund or the FLEX Options or results to be obtained by the Fund or the FLEX Options, shareholders or any other person or entity from use of the SPDR(R) Gold Shares. The Corporations have no liability in connection with the management, administration, marketing or trading of the Fund or the FLEX Options. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AND SUB-ADVISORY AGREEMENTS BOARD CONSIDERATIONS REGARDING APPROVAL OF AMENDMENTS TO THE INVESTMENT MANAGEMENT AGREEMENT AND INVESTMENT SUB-ADVISORY AGREEMENT The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, unanimously approved the amendment (the "Advisory Agreement Amendment") of the Investment Management Agreement (the "Advisory Agreement") with First Trust Advisors L.P. (the "Advisor") and the amendment (the "Sub-Advisory Agreement Amendment" and together with the Advisory Agreement Amendment, the "Amendments") of the Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement" and together with the Advisory Agreement, the "Agreements") among the Trust, the Advisor and Cboe Vest Financial LLC (the "Sub-Advisor") on behalf of the FT Cboe Vest Gold Strategy Quarterly ETF (the "Fund"). The Board approved the Amendments at a meeting held on October 24, 2022. As part of the review process, the Board reviewed information and had preliminary discussions with the Advisor regarding the proposed Amendments at meetings held on April 18, 2022, June 12-13, 2022 and September 18-19, 2022. Following those preliminary discussions, the Board requested and received information from the Advisor regarding the proposed Amendments, and that information was considered at an executive session of the Independent Trustees and their counsel held prior to the October 24, 2022 meeting, as well as at the October meeting. In reviewing the Advisory Agreement Amendment, the Board considered that the purpose of the Advisory Agreement Amendment is to modify the unitary fee rate for the Fund under the Advisory Agreement by introducing a breakpoint schedule pursuant to which the unitary fee rate paid by the Fund to the Advisor will be reduced as assets of the Fund meet certain thresholds. In reviewing the Sub-Advisory Agreement Amendment, the Board considered that the purpose of the Sub-Advisory Agreement Amendment is to modify the sub-advisory fee rate for the Fund under the Sub-Advisory Agreement to reflect the modification of the unitary fee rate schedule under the Advisory Agreement Amendment. The Board noted the Advisor's representations that the quality and quantity of the services provided to the Fund by the Advisor under the Advisory Agreement and by the Sub-Advisor under the Sub-Advisory Agreement will not be reduced or modified as a result of the Advisory Agreement Amendment and the Sub-Advisory Agreement Amendment, and that the obligations of the Advisor under the Advisory Agreement and the obligations of the Sub-Advisor under the Sub-Advisory Agreement will remain the same in all respects. The Board noted that it, including the Independent Trustees, last approved the continuation of the Agreements for a one-year period ending June 30, 2023 at a meeting held on June 12-13, 2022. The Board noted that in connection with such approval it had determined, based upon the information provided, that the terms of the Agreements were fair and reasonable and that the continuation of the Agreements was in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. Based on all of the information considered, the Board, including the Independent Trustees, unanimously determined that the terms of the Amendments are fair and reasonable and that the Amendments are in the best interests of the Fund. 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 funds it manages, including FT Cboe Vest Gold Strategy Quarterly Buffer ETF (the "Fund"), in certain member states in the European Economic Area in accordance with the cooperation arrangements in Article 42 of the Alternative Page 23
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 (UNAUDITED) 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, 2022, the amount of remuneration paid (or to be paid) by First Trust Advisors L.P. in respect of the Fund is $7,203. This figure is comprised of $279 paid (or to be paid) in fixed compensation and $6,924 paid (or to be paid) in variable compensation. There were a total of 24 beneficiaries of the remuneration described above. Those amounts include $3,799 paid (or to be paid) to senior management of First Trust Advisors L.P. and $3,404 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 24
-------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891. <TABLE> <CAPTION> 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 ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Richard E. Erickson, Trustee o Indefinite Term Physician, Edward-Elmhurst Medical Group, 222 None (1951) Physician & Officer, Wheaton Orthopedics o Since Inception (1990 to 2021) Thomas R. Kadlec, Trustee o Indefinite Term Retired; President, ADM Investors 222 Director, National Futures (1957) Services, Inc. (Futures Commission Association and ADMIS o Since Inception Merchant) (2010 to July 2022) Singapore Ltd.; Formerly, Director of ADM Investor Services, Inc., ADM Investor Services International, ADMIS Hong Kong Ltd., and Futures Industry Association Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate Aurora 222 Director and Board Chair (1964) Health and President, Advocate Aurora of Advocate Home Health o Since 2021 Continuing Health Division (Integrated Services, Advocate Home Healthcare System) Care Products and Advocate Hospice; Director and Board Chair of Aurora At Home (since 2018); Director of Advocate Physician Partners Accountable Care Organization; Director and Board Chair of RML Long Term Acute Care Hospitals; and Director of Senior Helpers (since 2021) Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 222 Formerly, Director of (1956) and Management Consulting) Trust Company of Illinois o Since Inception Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 222 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 222 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) </TABLE> ----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 25
-------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 (UNAUDITED) <TABLE> <CAPTION> POSITION AND TERM OF OFFICE NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer, (1966) Executive Officer First Trust Advisors L.P. and First Trust Portfolios o Since January 2016 L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1972) Officer and Chief First Trust Portfolios L.P. Accounting Officer o Since January 2016 W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel, o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and First (1970) Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Chief Compliance Officer Since January 2011 o Assistant Secretary Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1966) First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception </TABLE> ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 26
-------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY QUARTERLY BUFFER ETF (BGLD) DECEMBER 31, 2022 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies." For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2022 Page 27
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FIRST TRUST First Trust Exchange-Traded Fund INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 INVESTMENT SUB-ADVISOR Cboe Vest(SM) Financial LLC 8350 Broad Street, Suite 240 McLean, VA 22102 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
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FIRST TRUST First Trust Exchange-Traded Fund -------------------------------------------------------------------------------- FT Cboe Vest Gold Strategy Target Income ETF(R) (IGLD) ------------------ Annual Report For the Year Ended December 31, 2022 ------------------
-------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) ANNUAL REPORT DECEMBER 31, 2022 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Commentary......................................................... 4 Understanding Your Fund Expenses............................................. 6 Consolidated Portfolio of Investments........................................ 7 Consolidated Statement of Assets and Liabilities............................. 9 Consolidated Statement of Operations......................................... 10 Consolidated Statements of Changes in Net Assets............................. 11 Consolidated Financial Highlights............................................ 12 Notes to Consolidated Financial Statements................................... 13 Report of Independent Registered Public Accounting Firm...................... 19 Additional Information....................................................... 20 Board of Trustees and Officers............................................... 25 Privacy Policy............................................................... 27 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/or Cboe Vest(SM) Financial LLC ("Cboe Vest" or the "Sub-Advisor") and their respective 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 the series of First Trust Exchange-Traded Fund (the "Trust") described in this report (FT Cboe Vest Gold Strategy Target Income ETF(R); hereinafter referred to as the "Fund") 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/or Sub-Advisor and their respective 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 the Fund will achieve its investment objective. The 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 investing in the Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of certain other risks of investing in the Fund. 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 the Fund's webpage at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund's performance and investment approach. By reading the portfolio commentary from the portfolio management team of the Fund, you may obtain an understanding of how the market environment affected the Fund's performance. The statistical information that follows may help you understand the 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 and/or Sub-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 the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings.
-------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) ANNUAL LETTER FROM THE CHAIRMAN AND CEO DECEMBER 31, 2022 Dear Shareholders: First Trust is pleased to provide you with the annual report for the FT Cboe Vest Gold Strategy Target Income ETF(R) (the "Fund"), which contains detailed information about the Fund for the twelve months ended December 31, 2022. The past year was filled with challenges, several of which surely tested the resolve of even the most seasoned investors. The year began with the same headwinds that existed at the end of 2021, namely: stubbornly high inflation and rising interest rates. When Russia invaded Ukraine in late February 2022, we added war, geopolitical tension, and potential food and energy shortages to the list. Considering the bleak backdrop at the start of the year, it probably does not surprise you to read that with a total return of -18.11%, 2022 was the worst year for the S&P 500(R) Index since 2008. Even the bond market struggled to provide a haven to weary investors. The Bloomberg U.S. Aggregate Bond Index posted a total return of -13.01% for the year; its worst total return in 45 years. A common topic of discussion in 2022 was whether central banks around the world had tightened monetary policy enough to quell inflation without causing excess damage to their economies. In the U.S., the Federal Reserve (the "Fed") described this as a "soft landing," stating it was their intent to keep the labor market strong but to increase interest rates enough to bring inflation down to 2.0%. True to their word, over the course of seven interest rate hikes, the Fed increased the Federal Funds target rate (upper bound) from 0.25% (where it stood in March 2022) to 4.50% as of December 2022. This is the highest the Federal Funds rate has been since 2008. The economic impact of the Fed's tighter monetary policy quickly became evident. Excluding the economic contraction from COVID-19 in 2020, the U.S. experienced its first decline in the gross domestic product ("GDP") growth rate since March 2014. Data from the U.S. Bureau of Economic Analysis indicates that annualized real GDP growth rates over the first three quarters of 2022 were -1.6%, -0.6%, and 3.2%, respectively. Thankfully, inflation, as measured by the trailing 12-month rate on the Consumer Price Index ("CPI"), appears to be responding to the Fed's tightening. After peaking at 9.1% in June 2022, the CPI rate fell to 6.5% at the end of December 2022. For comparative purposes, the CPI rate has averaged 2.5% over the past 30 years. Job creation has provided a respite from dreary economic data in recent months, but that could quickly change. Nearly 125,000 employees have lost their jobs since June 2022 as more than 120 U.S. companies announced layoffs, according to Forbes. The jury is still out on whether the Fed will be able to pull off a soft landing, but the job market will tell the tale, in my opinion. Since 1928, the S&P 500(R) Index has only fallen for two consecutive years on four occasions: The Great Depression, World War II, the oil crisis of the 1970s and the burst of the dot-com bubble in the early 2000s. As we enter 2023, the U.S. economy has significant obstacles to overcome to avoid a recession and another negative year. We will be watching and reporting on what transpires. Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Fund 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 1
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) The FT Cboe Vest Gold Strategy Target Income ETF(R) (the "Fund") seeks to deliver participation in the price returns of the SPDR(R) Gold Trust (the "Underlying ETF") while providing a consistent level of income. The Fund's investments principally include short-term U.S. Treasury securities, cash and cash equivalents, and the shares of a wholly-owned subsidiary ("Subsidiary") that holds FLexible EXchange(R) Options ("FLEX Options") that reference the price performance of the Underlying ETF. In seeking to achieve its objective, the Fund, through the Subsidiary, will generally purchase or sell FLEX Options. FLEX Options are customized equity or index option contracts that trade on an exchange but provide investors with the ability to customize key contract terms like exercise prices, styles and expiration dates. In combination, the purchased call and sold put options generally provide exposure to price returns of the Underlying ETF both on the upside and downside. The Fund's investment sub-advisor is Cboe Vest Financial LLC. Additionally, as a means to generate income, the Fund will employ a "partial covered call strategy" that seeks to sell call options having a strike price roughly equal to the value of the Underlying ETF at the inception of the Fund or each subsequent roll of the strategy (such options are said to be "at-the-money") on only a portion of the notional value of the call options purchased by the Fund. To execute this strategy, the Fund will sell call options with an expiration date less than or equal to approximately one month in the future (the "Target Income Period"). The amount of call options sold by the Fund is based on a calculation designed to result in the Fund generating income over the Target Income Period on the average assets of the Fund from premiums from writing call options that is approximately 3.85% higher annually than the annual yield from one-month U.S. Treasury securities, before Fund fees and expenses. The Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. Shares of the Fund are listed on the Cboe BZX Exchange, Inc. under the ticker symbol "IGLD." <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Ended Inception (3/2/21) Inception (3/2/21) 12/31/22 to 12/31/22 to 12/31/21 <S> <C> <C> <C> FUND PERFORMANCE NAV -3.26% -0.12% -0.22% Market Price -2.40% 0.52% 0.96% INDEX PERFORMANCE LBMA Gold Price -0.43% 2.62% 4.85% S&P 500(R) Index - Price Return -19.44% -0.43% -0.80% ------------------------------------------------------------------------------------------------------------------ </TABLE> Total returns for the period since inception are calculated from the inception date of the Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the period indicated. "Cumulative Total Returns" represent the total change in value of an investment over the period indicated. The 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. Since shares of the Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike 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. 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 the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future performance. Page 2
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) -------------------------------------------------------- FUND ALLOCATION % OF NET ASSETS -------------------------------------------------------- U.S. Treasury Bills 137.9% Money Market Funds 1.5 Purchased Options 1.0 Written Options (42.0) Net Other Assets and Liabilities 1.6 ------- Total 100.0% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT MARCH 2, 2021 - DECEMBER 31, 2022 FT Cboe Vest Gold Strategy S&P 500(R) Index - Target Income ETF(R) LBMA Gold Price Price Return <S> <C> <C> <C> 3/2/21 $10,000 $10,000 $10,000 6/30/21 10,029 10,170 11,104 12/31/21 10,314 10,530 12,315 6/30/22 10,231 10,492 9,781 12/31/22 9,978 10,485 9,920 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 3
-------------------------------------------------------------------------------- PORTFOLIO COMMENTARY -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) ANNUAL REPORT DECEMBER 31, 2022 (UNAUDITED) ADVISOR First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment advisor to the FT Cboe Vest Gold Strategy Target Income ETF(R) ("IGLD" or the "Fund"). First Trust is responsible for the ongoing monitoring of the Fund's investment portfolio, managing the Fund's business affairs and providing certain administrative services necessary for the management of the Fund. SUB-ADVISOR Cboe Vest(SM) Financial LLC ("Cboe Vest" or the "Sub-Advisor") serves as the investment sub-advisor to the Fund. In this capacity, Cboe Vest is responsible for the selection and ongoing monitoring of the securities in the Fund's investment portfolio. Cboe Vest, with principal offices at 8350 Broad Street, Suite 240, McLean, Virginia 22102, was founded in 2012. Cboe Vest had approximately $10 billion under management or committed to management as of December 31, 2022. PORTFOLIO MANAGEMENT TEAM KARAN SOOD, MANAGING DIRECTOR OF CBOE VEST HOWARD RUBIN, MANAGING DIRECTOR OF CBOE VEST The portfolio managers are primarily and jointly responsible for the day-to-day management of the Fund. Each portfolio manager has served as a part of the portfolio management team of the Fund since 2021. MARKET RECAP For the Fund's fiscal year ended December 31, 2022 (the "period"), global stock markets fell sharply, as inflation rates soared to levels not seen in decades and central bankers began hiking interest rates to combat it. The S&P 500(R) Index, the well-known measure of U.S. large-cap stocks, ended the period down 18.11%. Mid- and small-cap stocks, as measured by the S&P Midcap 400(R) Index and the Russell 2000(R) Small Cap Index, lost 13.1% and 20.5%, respectively. The Nasdaq 100 Index, a tech-heavy market measure, fell 32.4%. International stock markets were down as well, as exemplified by drops in the major foreign market indices: the MSCI EAFE Index (a broad measure of international stocks in developed markets, excluding the U.S.) declined by 14.5%, while the MSCI Emerging Markets Index fell 20.0%. During the period, gold, as measured by the price return of SPDR(R) Gold Shares ETF ("GLD," the "Underlying ETF"), declined 0.8%. U.S. economic data suggested a softening economy. Gross domestic product ("GDP") growth in the three most recent quarterly reports (first quarter 2022 through third quarter 2022) came in at seasonally adjusted annualized rates of -1.6%, -0.6%, and 3.2%, sequentially. A current Bloomberg survey of economists shows a consensus projection of 0.4% GDP growth in 2023 (versus 2022). The U.S. unemployment rate continues to linger around 50-year lows. Throughout the current period, the unemployment rate trended lower. The rate was 3.9% in December 2021 but had declined to 3.5% by December 2022. In an effort to reduce higher-than-target inflation rates, the Federal Reserve (the "Fed") aggressively increased the Federal Funds target rate in 2022, increasing the target range by 4.25% (from a range of 0%-0.25% to a range of 4.25%-4.50%). U.S. inflation levels, which had accelerated dramatically in 2021, began to fall in the latter half of 2022. As the year began, inflation (as measured by the Consumer Price Index (CPI - Year over Year)) was running at 7.0%. By June 2022, inflation reached 9.1%, before falling to 6.5% by December 2022. The overheated housing market also began to respond to the Fed's aggressive interest rate hikes, with the four most recent monthly price reports (July through October 2022) each showing declining home prices (as measured by the S&P Case-Shiller U.S. National Home Price Index). Over the period, implied volatilities in U.S. equity markets rose, illustrated by an increase in the Cboe Volatility Index ("VIX") from 17.2% to 21.7%. For the period, the VIX averaged 25.6%. PERFORMANCE ANALYSIS Generally, the Fund holds securities with the economic equivalent to a long position in GLD. In addition, the Fund generally sells (writes) a certain amount of one-month at-the-money covered call options on GLD each month to generate income. The size of the covered call position may be expressed as a percentage of the long GLD position. This percentage is referred to as the IGLD Overwrite Percentage. At each month-end this percentage is determined such that the targeted amount of premium collected from writing the options is approximately 3.85% over the 1-month treasury yield, divided by twelve. Thus, each month's Page 4
-------------------------------------------------------------------------------- PORTFOLIO COMMENTARY (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) ANNUAL REPORT DECEMBER 31, 2022 (UNAUDITED) IGLD Overwrite Percentage is impacted by the market price of the options at the time the options are sold. The higher the price of the options, the fewer options that are needed to be sold to raise the targeted premium amount. Should the short calls end the month in-the-money, the Fund will be negatively impacted by the amount the calls are in-the-money. The net effect of the long GLD position and the partial overwrite of options allows the Fund to participate in GLD rallies at a rate of 100% less the IGLD Overwrite Percentage. For example, if the IGLD Overwrite Percentage is 20%, the Fund generally participates in 80% of the GLD rally for the month. The following table provides information pertaining to the Fund's covered call overwrite percentage and performance for each of the monthly reset periods during the period. The Fund's overwrite percentage is reset at the end of each month. The table shows the overwrite percentages that went into effect on each of the monthly start dates. For each monthly reset period the Fund's performance is generally impacted by a number of factors. These factors include GLD performance, implied volatility of GLD, the overwrite percentage, and expenses. <TABLE> <CAPTION> MONTHLY PERIODS GLD IGLD IGLD OVERWRITE START END EXPENSES PERFORMANCE PERFORMANCE PERCENTAGE ------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> 12/31/2021 1/31/2022 0.08% -1.68% -1.18% 23.78% 1/31/2022 2/28/2022 0.07% 6.12% 4.20% 20.79% 2/28/2022 3/31/2022 0.08% 1.27% 2.41% 16.62% 3/31/2022 4/30/2022 0.07% -2.07% -1.77% 16.68% 4/30/2022 5/31/2022 0.08% -3.26% -2.99% 19.08% 5/31/2022 6/30/2022 0.07% -1.57% -1.30% 22.26% 6/30/2022 7/31/2022 0.07% -2.59% -2.29% 20.39% 7/31/2022 8/31/2022 0.08% -2.94% -2.48% 30.51% 8/31/2022 9/30/2022 0.07% -2.89% -2.23% 27.79% 9/30/2022 10/31/2022 0.08% -1.78% -1.42% 26.22% 10/31/2022 11/30/2022 0.07% 8.49% 5.86% 30.93% 11/30/2022 12/31/2022 0.07% 2.93% 0.31% 38.80% </TABLE> MARKET AND FUND OUTLOOK The Fed still has work to do to bring down inflation rates to acceptable levels. The Fed has been signaling to the market that there will be additional interest rate hikes in 2023. The Fed's December 2022 "dot plot" that shows where they think the Federal Funds target rate will be in the future, shows that they expect the target range to be 5.00-5.25% by the end of 2023, or 0.75% higher than the current target range. This may be a headwind for equities and fixed income securities in the coming year. Many fixed income investments still provide investors with negative real yields (i.e., nominal yield less inflation.) This continues to bode poorly for future fixed income returns, in our opinion. In response, some investors may be looking to reallocate away from fixed income. Gold, historically thought of as the predominant inflation hedge, now competes with cryptocurrencies such as Bitcoin for that honor. While gold prices were relatively flat in 2022, it was certainly a better asset class than equities, on a total return basis, and as such, did provide some inflation protection. We believe the Fund is an alternative that investors should consider. The Fund seeks to deliver participation in the price returns of the SPDR Gold Trust while providing a consistent level of income. The Fund has implemented a distribution policy pursuant to which the Fund intends to declare and pay monthly dividends to shareholders that are consistent with the premiums received from covered calls written pursuant the Fund's investment strategy. The policy has no impact on the Fund's investment strategy and may reduce the Fund's net asset value. The policy may be amended at any time, or the Fund may cease distributions entirely, at any time. Under the distribution policy, to the extent that sufficient investment income is not available on a monthly basis, the Fund's distributions could consist of return of capital in order to maintain the distribution rate. For the fiscal period ended December 31, 2022, 100% of the Fund's distributions were characterized as return of capital. The final determination of the source and tax status of all 2022 distributions will be made after the end of 2022 and will be provided on Form 1099-DIV. The foregoing is not to be construed as tax advice. Please consult your tax advisor for further information regarding tax matters. In the current market environment, which includes elevated inflation rates, a continuing Fed tightening cycle, and negative real yields, the Fund, in appropriate allocations, may be a suitable alternative in an investor's portfolio to either equity and/or fixed income investments. Page 5
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) UNDERSTANDING YOUR FUND EXPENSES DECEMBER 31, 2022 (UNAUDITED) As a shareholder of FT Cboe Vest Gold Strategy Target Income ETF(R) (the "Fund"), 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 Fund 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, 2022. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the 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 the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the 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 Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. <TABLE> <CAPTION> ----------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2022 DECEMBER 31, 2022 PERIOD PERIOD (a) ----------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) Actual $1,000.00 $ 975.30 0.85% $4.23 Hypothetical (5% return before expenses) $1,000.00 $1,020.92 0.85% $4.33 </TABLE> (a) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (July 1, 2022 through December 31, 2022), multiplied by 184/365 (to reflect the six-month period). Page 6
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) CONSOLIDATED PORTFOLIO OF INVESTMENTS DECEMBER 31, 2022 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ------------- ------------------------------------------------------------------ ------------ ------------ ------------ U.S. TREASURY BILLS -- 137.9% <S> <C> <C> <C> <C> $ 55,462,400 U.S. Treasury Bill (a)............................................ (b) 11/30/23 $ 53,180,391 (Cost $53,166,790) ------------ </TABLE> <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ------------- ------------------------------------------------------------------------------------------------ ------------ MONEY MARKET FUNDS -- 1.5% <S> <C> <C> 576,012 Dreyfus Government Cash Management Fund, Institutional Shares - 4.19% (c)....................... 576,012 (Cost $576,012) ------------ TOTAL INVESTMENTS -- 139.4%..................................................................... 53,756,403 (Cost $53,742,802) ------------ </TABLE> <TABLE> <CAPTION> NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE ------------- --------------------------------------------------- ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> CALL OPTIONS PURCHASED -- 1.0% 2,300 SPDR(R) Gold Shares................................ $ 39,017,200 $ 244.50 11/30/23 391,000 (Cost $389,249) ------------ WRITTEN OPTIONS -- (42.0)% CALL OPTIONS WRITTEN -- (0.7)% (749) SPDR(R) Gold Shares................................ (12,706,036) 169.64 01/31/23 (253,162) (Premiums received $252,192) ------------ PUT OPTIONS WRITTEN -- (41.3)% (2,300) SPDR(R) Gold Shares................................ (39,017,200) 244.50 11/30/23 (15,948,200) (Premiums received $16,032,270) ------------ TOTAL WRITTEN OPTIONS........................................................................... (16,201,362) (Premiums received $16,284,462) ------------ NET OTHER ASSETS AND LIABILITIES -- 1.6%........................................................ 623,723 ------------ NET ASSETS -- 100.0%............................................................................ $ 38,569,764 ============ </TABLE> (a) This security or a portion of this security is segregated as collateral for written options contracts. At December 31, 2022, the segregated value of this security amounts to $24,917,464. (b) Zero coupon security. (c) Rate shown reflects yield as of December 31, 2022. See Notes to Financial Statements Page 7
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) CONSOLIDATED PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2022 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Consolidated Financial Statements): <TABLE> <CAPTION> ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> U.S. Treasury Bills.................................. $ 53,180,391 $ -- $ 53,180,391 $ -- Money Market Funds................................... 576,012 576,012 -- -- -------------- -------------- -------------- -------------- Total Investments.................................... 53,756,403 576,012 53,180,391 -- Call Options Purchased............................... 391,000 -- 391,000 -- -------------- -------------- -------------- -------------- Total................................................ $ 54,147,403 $ 576,012 $ 53,571,391 $ -- ============== ============== ============== ============== LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2022 PRICES INPUTS INPUTS -------------- -------------- -------------- -------------- Call Options Written................................. $ (253,162) $ -- $ (253,162) $ -- Put Options Written.................................. (15,948,200) -- (15,948,200) -- -------------- -------------- -------------- -------------- Total................................................ $ (16,201,362) $ -- $ (16,201,362) $ -- ============== ============== ============== ============== </TABLE> Page 8 See Notes to Financial Statements
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2022 <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value.................................................. $ 53,756,403 Options contracts purchased, at value.................................. 391,000 Cash................................................................... 765 Receivables: Investment securities sold.......................................... 3,980,931 Dividends........................................................... 4,049 Capital shares sold................................................. 379 --------------- Total Assets........................................................ 58,133,527 --------------- LIABILITIES: Options contracts written, at value.................................... 16,201,362 Payables: Capital shares redeemed............................................. 1,881,630 Investment securities purchased..................................... 1,451,556 Investment advisory fees............................................ 29,215 --------------- Total Liabilities................................................... 19,563,763 --------------- NET ASSETS............................................................. $ 38,569,764 =============== NET ASSETS CONSIST OF: Paid-in capital........................................................ $ 38,546,357 Par value.............................................................. 20,500 Accumulated distributable earnings (loss).............................. 2,907 --------------- NET ASSETS............................................................. $ 38,569,764 =============== NET ASSET VALUE, per share............................................. $ 18.81 =============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share).............................. 2,050,002 =============== Investments, at cost................................................... $ 53,742,802 =============== Premiums paid on options contracts purchased........................... $ 389,249 =============== Premiums received on options contracts written......................... $ 16,284,462 =============== </TABLE> See Notes to Financial Statements Page 9
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022 <TABLE> <CAPTION> INVESTMENT INCOME: <S> <C> Interest............................................................... $ 583,719 Dividends.............................................................. 21,811 --------------- Total investment income............................................. 605,530 --------------- EXPENSES: Investment advisory fees............................................... 335,205 --------------- Total expenses...................................................... 335,205 --------------- NET INVESTMENT INCOME (LOSS)........................................... 270,325 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments......................................................... (53,433) Purchased options contracts......................................... (336,354) Written options contracts........................................... (1,041,575) --------------- Net realized gain (loss)............................................... (1,431,362) --------------- Net change in unrealized appreciation (depreciation) on: Investments......................................................... 28,311 Purchased options contracts......................................... 83,890 Written options contracts........................................... (832,493) --------------- Net change in unrealized appreciation (depreciation)................... (720,292) --------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (2,151,654) --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $ (1,881,329) =============== </TABLE> Page 10 See Notes to Financial Statements
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> YEAR PERIOD ENDED ENDED 12/31/2022 12/31/2021 (a) --------------- --------------- <S> <C> <C> OPERATIONS: Net investment income (loss)........................................... $ 270,325 $ (128,375) Net realized gain (loss)............................................... (1,431,362) (300,603) Net change in unrealized appreciation (depreciation)................... (720,292) 818,744 --------------- --------------- Net increase (decrease) in net assets resulting from operations........ (1,881,329) 389,766 --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations.................................................. -- -- Return of capital...................................................... (1,725,727) (446,336) --------------- --------------- Total distributions to shareholders.................................... (1,725,727) (446,336) --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold.............................................. 21,210,170 36,504,705 Cost of shares redeemed................................................ (10,509,533) (4,971,952) --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions............................................ 10,700,637 31,532,753 --------------- --------------- Total increase (decrease) in net assets................................ 7,093,581 31,476,183 NET ASSETS: Beginning of period.................................................... 31,476,183 -- --------------- --------------- End of period.......................................................... $ 38,569,764 $ 31,476,183 =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................ 1,550,002 -- Shares sold............................................................ 1,050,000 1,800,002 Shares redeemed........................................................ (550,000) (250,000) --------------- --------------- Shares outstanding, end of period...................................... 2,050,002 1,550,002 =============== =============== </TABLE> (a) Inception date is March 2, 2021, which is consistent with the commencement of investment operations and is the date the initial creation units were established. See Notes to Financial Statements Page 11
FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) CONSOLIDATED FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> YEAR PERIOD ENDED ENDED 12/31/2022 12/31/2021 (a) --------------- --------------- <S> <C> <C> Net asset value, beginning of period........................... $ 20.31 $ 20.14 --------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... 0.14 (0.08) Net realized and unrealized gain (loss)........................ (0.79) 0.71 --------- --------- Total from investment operations............................... (0.65) 0.63 --------- --------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Return of capital.............................................. (0.85) (0.46) --------- --------- Total distributions............................................ (0.85) (0.46) --------- --------- Net asset value, end of period................................. $ 18.81 $ 20.31 ========= ========= TOTAL RETURN (b)............................................... (3.26)% 3.14% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 38,570 $ 31,476 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.85% 0.85% (c) Ratio of net investment income (loss) to average net assets.... 0.69% (0.76)% (c) Portfolio turnover rate (d).................................... 0% 0% </TABLE> (a) Inception date is March 2, 2021, which is consistent with the commencement of investment operations and is the date the initial creation units were established. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (c) Annualized. (d) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 12 See Notes to Financial Statements
-------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 1. ORGANIZATION First Trust Exchange-Traded Fund (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on August 8, 2003, and is registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of twenty-three exchange-traded funds. This report covers the FT Cboe Vest Gold Strategy Target Income ETF(R) (the "Fund"), which trades under the ticker "IGLD" on the Cboe BZX Exchange, Inc. ("Cboe BZX"). The Fund represents a separate series of shares of beneficial interest in the Trust. Unlike conventional mutual funds, the 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 Fund is an actively managed exchange-traded fund. The Fund's investment objective is to seek to deliver participation in the price returns of the SPDR(R) Gold Trust (the "Underlying ETF") while providing a consistent level of income. The Fund's investments principally include short-term U.S. Treasury securities, cash and cash equivalents, and the shares of a wholly-owned subsidiary (the "Subsidiary") that holds FLexible EXchange(R) Options ("FLEX Options") that reference the price performance of the Underlying ETF. In seeking to achieve its objective, the Fund, through the Subsidiary, will generally purchase or sell FLEX Options. In combination, the purchased call and sold put options generally provide exposure to price returns of the Underlying ETF both on the upside and downside. The Subsidiary is wholly-owned by the Fund and is organized under the laws of the Cayman Islands. The Fund may invest up to 25% of its total assets in the Subsidiary. As of December 31, 2022, the Fund invested 19.60% of the Fund's total assets in the Subsidiary. There can be no assurance that the Fund will achieve its investment objective. The Fund may not be appropriate for all investors. 2. SIGNIFICANT ACCOUNTING POLICIES The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The consolidated financial statements include the accounts on a consolidated basis of the Subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the consolidated financial statements. The preparation of the consolidated 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 consolidated financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION The 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. The Fund's NAV is calculated 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 shares outstanding. The Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Fund's investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor") in accordance with valuation procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Consolidated Portfolio of Investments. The Fund's investments are valued as follows: Exchange-traded options contracts (other than FLEX Option contracts) are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded options contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Over-the-counter options contracts are valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. FLEX Option contracts are normally valued using a model-based price provided by a third-party pricing vendor. On days when a trade in a FLEX Option contract occurs, the trade price will be used to value such FLEX Option contracts in lieu of the model price. U.S. Treasuries are valued on the basis of valuations provided by a third-party pricing service approved by the Trust's Board of Trustees. Shares of open-end funds are valued based on NAV per share. Page 13
-------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 If the Fund's investments are not able to be priced by pre-established pricing methods, such investments may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. A variety of factors may be considered in determining the fair value of such investments. Valuing the Fund's holdings using fair value pricing will result in using prices for those holdings that may differ from current market valuations. The Subsidiary's holdings will be valued in the same manner as the Fund's holdings. The Fund is 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 the Fund's investments as of December 31, 2022, is included with the Fund's Consolidated Portfolio of Investments. In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing requirements to determine fair value in good faith for purposes of the 1940 Act. The rule permits fund boards to designate a fund's investment advisor to perform fair value determinations, subject to board oversight and certain other conditions. The rule also defines when market quotations are "readily available" for purposes of the 1940 Act and requires a fund to fair value a portfolio investment when a market quotation is not readily available. The SEC also adopted new Rule 31a-4 under the 1940 Act, which sets forth recordkeeping requirements associated with fair value determinations. The compliance date for Rule 2a-5 and Rule 31a-4 was September 8, 2022. Effective September 8, 2022 and pursuant to the requirements of Rule 2a-5, the Trust's Board of Trustees designated the Advisor as its valuation designee to perform fair value determinations and approved new Advisor Valuation Procedures for the Trust. B. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME Investment transactions are recorded as of the trade date. Realized gains and losses from investment transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method. C. FLEX OPTIONS FLEX Options are customized equity or index option contracts that trade on an exchange, but provide investors with the ability to customize key contract terms like exercise prices, styles and expiration dates. FLEX Options are guaranteed for settlement by the Options Clearing Corporation. The Fund, through the Subsidiary, purchases and sells call and put FLEX Options based on the performance of the Underlying ETF. The FLEX Options that the Subsidiary holds that reference the Underlying ETF will give the Subsidiary the right to receive or deliver shares of the Underlying ETF on the option expiration date at a strike price, depending on whether the option is a put or call option and whether the Subsidiary purchases or sells the option. The FLEX Options held by the Subsidiary are European style options, which are exercisable at the strike price only on the FLEX Option expiration date. When the Subsidiary writes (sells) an option, an amount equal to the premium received by the Subsidiary is included in "Options contracts written, at value" on the Consolidated Statement of Assets and Liabilities. Gain or loss on written options is presented separately as "Net realized gain (loss) on written options contracts" on the Consolidated Statement of Operations. When the Subsidiary Page 14
-------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 purchases a call or put option, the premium paid represents the cost of the call or put option, which is included in "Options contracts purchased, at value" on the Consolidated Statement of Assets and Liabilities. Gain or loss on purchased options is included in "Net realized gain (loss) on purchased options contracts" on the Consolidated Statement of Operations. D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income, if any, are declared and paid monthly by the Fund, or as the Board of Trustees may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the consolidated financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on significantly modified portfolio securities held by the Fund 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 consolidated financial statement and tax purposes, will reverse at some time in the future. The tax character of distributions paid during the fiscal year ended December 31, 2022 and the fiscal period ended December 31, 2021 was as follows: Distributions paid from: 2022 2021 Ordinary income $ -- $ -- Capital gains -- -- Return of capital 1,725,727 446,336 As of December 31, 2022, the components of distributable earnings on a tax basis for the Fund were as follows: Undistributed ordinary income $ -- Accumulated capital and other gain (loss) (42,405) Net unrealized appreciation (depreciation) 114,456 E. INCOME TAXES The 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 (the "Code"), 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, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Subsidiary is classified as a controlled foreign corporation under Subchapter N of the Code. Therefore, the Fund is required to increase its taxable income by its share of the Subsidiary's income, whether or not such earnings are distributed by the Subsidiary to the Fund. Net investment losses of the Subsidiary cannot be deducted by the Fund in the current period nor carried forward to offset taxable income in future periods. The Fund is 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 2021 and 2022 remain open to federal and state audit. As of December 31, 2022, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund's consolidated financial statements for uncertain tax positions. The 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. The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At December 31, 2022, for federal income tax purposes, the Fund had $24,837 of non-expiring capital loss carryforwards that may be carried forward indefinitely. 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. 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) and net unrealized appreciation (depreciation)) on the Consolidated Statement 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). These adjustments are primarily due to the difference between book and Page 15
-------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 tax treatments of income and gains on various investment securities held by the Fund. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended December 31, 2022, the adjustments for the Fund were as follows: Accumulated Accumulated Net Investment Net Realized Paid-in Income (Loss) Gain (Loss) Capital -------------- -------------- -------------- $ (265,796) $ 1,405,043 $ (1,139,247) As of December 31, 2022, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows: <TABLE> <CAPTION> Gross Gross Net Unrealized Unrealized Unrealized Appreciation Tax Cost Appreciation (Depreciation) (Depreciation) -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> $ 53,742,802 $ 114,456 $ -- $ 114,456 </TABLE> F. EXPENSES Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3). 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Fund, 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 ongoing monitoring of the Fund's and the Subsidiary's investment portfolios, managing the Fund's business affairs and providing certain administrative services necessary for the management of the Fund. First Trust is responsible for the expenses of the Fund and the Subsidiary including the cost of transfer agency, sub-advisory, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, acquired fund fees and expenses, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. Effective November 1, 2022, the annual unitary management fee payable by the Fund to First Trust for these services will be reduced at certain levels of the Fund's net assets ("breakpoints") and calculated pursuant to the schedule below: <TABLE> <CAPTION> Breakpoints ------------------------------------------------------------------------- <S> <C> Fund net assets up to and including $2.5 billion 0.85000% Fund net assets greater than $2.5 billion up to and including $5 billion 0.82875% Fund net assets greater than $5 billion up to and including $7.5 billion 0.80750% Fund net assets greater than $7.5 billion up to and including $10 billion 0.78625% Fund net assets greater than $10 billion 0.76500% </TABLE> Prior to November 1, 2022, the Fund paid First Trust an annual unitary management fee equal to 0.85% of its average daily net assets. The Subsidiary does not pay First Trust a separate management fee. Cboe Vest(SM) Financial LLC ("Cboe Vest"), an affiliate of First Trust, serves as the Fund's sub-advisor and manages the Fund's portfolio subject to First Trust's supervision. Pursuant to the Investment Management Agreement, between the Trust, on behalf of the Fund, and the Advisor, and the Investment Sub-Advisory Agreement among the Trust, on behalf of the Fund, the Advisor and Cboe Vest, First Trust will supervise Cboe Vest and its management of the investment of the Fund's assets and will pay Cboe Vest for its services as the Fund's sub-advisor a sub-advisory fee equal to 50% of any remaining monthly unitary management fee paid to the Advisor after the average Fund's expenses accrued during the most recent twelve months are subtracted from the unitary management fee for that month. Effective November 1, 2022, during any period in which the Advisor's unitary management fee is reduced in accordance with the breakpoints described above, the sub-advisory fee (which is based on the Advisor's management fee) paid to Cboe Vest will be reduced to reflect the reduction in the Advisor's management fee. Page 16
-------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund. Additionally, the Lead Independent Trustee and the Chairs of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairs rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES The cost of purchases and proceeds from sales of securities, excluding short-term investments, derivatives, and in-kind transactions, for the fiscal year ended December 31, 2022, were $0 and $0, respectively. For the fiscal year ended December 31, 2022, the Fund did not have any in-kind purchases or sales. 5. DERIVATIVE TRANSACTIONS The following table presents the types of derivatives held by the Subsidiary at December 31, 2022, the primary underlying risk exposure and the location of these instruments as presented on the Consolidated Statement of Assets and Liabilities. <TABLE> <CAPTION> ASSET DERIVATIVES LIABILITY DERIVATIVES ----------------------------------------- ---------------------------------------- CONSOLIDATED CONSOLIDATED DERIVATIVES STATEMENT OF ASSETS AND STATEMENT OF ASSETS AND INSTRUMENT RISK EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE ----------------- ----------------- ------------------------ ------------- ------------------------ ------------- <S> <C> <C> <C> <C> <C> Commodity Options contracts Options contracts Options Risk purchased, at value $ 391,000 written, at value $ 16,201,362 </TABLE> The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the fiscal year ended December 31, 2022, on derivative instruments, as well as the primary underlying risk exposure associated with the instruments. CONSOLIDATED STATEMENT OF OPERATIONS LOCATION ----------------------------------------------------------------------------- COMMODITY RISK EXPOSURE Net realized gain (loss) on: Purchased options contracts $ (336,354) Written options contracts (1,041,575) Net change in unrealized appreciation (depreciation) on: Purchased options contracts 83,890 Written options contracts (832,493) During the fiscal year ended December 31, 2022, the premiums for purchased options contracts opened were $561,026 and the premiums for purchased options contracts closed, exercised and expired were $392,066. During the fiscal year ended December 31, 2022, the premiums for written options contracts opened were $28,925,330 and the premiums for written options contracts closed, exercised and expired were $27,974,887. The Fund does not have the right to offset financial assets and liabilities related to options contracts on the Consolidated Statement of Assets and Liabilities. Page 17
-------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES The 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 the 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, the 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 the 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 the 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 the Fund's shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of the Fund's shares at or close to the NAV per share of the Fund. The Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of the 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. The 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 the 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 the 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. 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 Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Fund, 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 Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before April 30, 2024. 8. INDEMNIFICATION The Trust, on behalf of the Fund, 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 Fund through the date the consolidated financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the consolidated financial statements that have not already been disclosed. Page 18
-------------------------------------------------------------------------------- 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 consolidated statement of assets and liabilities of FT Cboe Vest Gold Strategy Target Income ETF(R) (the "Fund"), a series of the First Trust Exchange-Traded Fund, including the consolidated portfolio of investments, as of December 31, 2022, the related consolidated statement of operations for the year then ended, the consolidated statements of changes in net assets and the consolidated financial highlights for the year ended December 31, 2022, and the period from March 2, 2021 (commencement of operations) through December 31, 2021, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2022, and the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year ended December 31, 2022, and the period from March 2, 2021 (commencement of operations) through December 31, 2021 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 Fund's management. Our responsibility is to express an opinion on the Fund's 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 Fund 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 Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2022, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois February 24, 2023 We have served as the auditor of one or more First Trust investment companies since 2001. Page 19
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS The 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. The 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 the Fund is available to investors within 60 days after the period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION For the taxable year ended December 31, 2022, the following percentages of ordinary income (including the short-term capital gain) distributions paid by the Fund qualify for the dividends received deduction available to corporations and are hereby designated as qualified dividend income: Dividend Received Deduction Qualified Dividend Income --------------------------- ------------------------- 0.00% 0.00% Distributions paid to foreign shareholders during the Fund's fiscal year ended December 31, 2022 that were properly designated by the Fund as "interest-related dividends" or "short-term capital gain dividends," may not be subject to federal income tax provided that the income was earned directly by such foreign shareholders. RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a significant percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is more broadly diversified. CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor's investment period. Additionally, the fund will not participate in gains of the underlying ETF above Page 20
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 (UNAUDITED) the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund's share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market. ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads. FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities. INDEX OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or more indices or ETF models. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a 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. Page 21
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 (UNAUDITED) LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial Conduct Authority, which regulates LIBOR has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate ("SOFR") will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. MARKET RISK. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund's portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund's shares and result in increased market volatility. During any such events, a fund's shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund's shares may widen. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. OPERATIONAL RISK. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund's service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund's ability to meet its investment objective. Although the funds and the funds' investment advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company's capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock. Page 22
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 (UNAUDITED) VALUATION RISK. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund. DISCLAIMER The Fund is not sponsored, endorsed, sold or promoted by SPDR(R) Gold Shares, SPDR, or Standard & Poor's(R) (together with their affiliates hereinafter referred to as the "Corporations"). The Corporations have not passed on the legality or suitability of, or the accuracy or adequacy of, descriptions and disclosures relating to the Fund or the FLEX Options. The Corporations make no representations or warranties, express or implied, regarding the advisability of investing in the Fund or the FLEX Options or results to be obtained by the Fund or the FLEX Options, shareholders or any other person or entity from use of the SPDR(R) Gold Shares. The Corporations have no liability in connection with the management, administration, marketing or trading of the Fund or the FLEX Options. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AND SUB-ADVISORY AGREEMENTS BOARD CONSIDERATIONS REGARDING APPROVAL OF AMENDMENTS TO THE INVESTMENT MANAGEMENT AGREEMENT AND INVESTMENT SUB-ADVISORY AGREEMENT The Board of Trustees of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, unanimously approved the amendment (the "Advisory Agreement Amendment") of the Investment Management Agreement (the "Advisory Agreement") with First Trust Advisors L.P. (the "Advisor") and the amendment (the "Sub-Advisory Agreement Amendment" and together with the Advisory Agreement Amendment, the "Amendments") of the Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement" and together with the Advisory Agreement, the "Agreements") among the Trust, the Advisor and Cboe Vest Financial LLC (the "Sub-Advisor") on behalf of the FT Cboe Vest Gold Strategy Target Income ETF (the "Fund"). The Board approved the Amendments at a meeting held on October 24, 2022. As part of the review process, the Board reviewed information and had preliminary discussions with the Advisor regarding the proposed Amendments at meetings held on April 18, 2022, June 12-13, 2022 and September 18-19, 2022. Following those preliminary discussions, the Board requested and received information from the Advisor regarding the proposed Amendments, and that information was considered at an executive session of the Independent Trustees and their counsel held prior to the October 24, 2022 meeting, as well as at the October meeting. In reviewing the Advisory Agreement Amendment, the Board considered that the purpose of the Advisory Agreement Amendment is to modify the unitary fee rate for the Fund under the Advisory Agreement by introducing a breakpoint schedule pursuant to which the unitary fee rate paid by the Fund to the Advisor will be reduced as assets of the Fund meet certain thresholds. In reviewing the Sub-Advisory Agreement Amendment, the Board considered that the purpose of the Sub-Advisory Agreement Amendment is to modify the sub-advisory fee rate for the Fund under the Sub-Advisory Agreement to reflect the modification of the unitary fee rate schedule under the Advisory Agreement Amendment. The Board noted the Advisor's representations that the quality and quantity of the services provided to the Fund by the Advisor under the Advisory Agreement and by the Sub-Advisor under the Sub-Advisory Agreement will not be reduced or modified as a result of the Advisory Agreement Amendment and the Sub-Advisory Agreement Amendment, and that the obligations of the Advisor under the Advisory Agreement and the obligations of the Sub-Advisor under the Sub-Advisory Agreement will remain the same in all respects. The Board noted that it, including the Independent Trustees, last approved the continuation of the Agreements for a one-year period ending June 30, 2023 at a meeting held on June 12-13, 2022. The Board noted that in connection with such approval it had determined, based upon the information provided, that the terms of the Agreements were fair and reasonable and that the continuation of the Agreements was in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment. Based on all of the information considered, the Board, including the Independent Trustees, unanimously determined that the terms of the Amendments are fair and reasonable and that the Amendments are in the best interests of the Fund. Page 23
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 (UNAUDITED) 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 funds it manages, including FT Cboe Vest Gold Strategy Target Income ETF(R) (the "Fund"), 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, 2022, the amount of remuneration paid (or to be paid) by First Trust Advisors L.P. in respect of the Fund is $19,336. This figure is comprised of $750 paid (or to be paid) in fixed compensation and $18,586 paid (or to be paid) in variable compensation. There were a total of 24 beneficiaries of the remuneration described above. Those amounts include $10,198 paid (or to be paid) to senior management of First Trust Advisors L.P. and $9,138 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 24
-------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891. <TABLE> <CAPTION> 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 ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Richard E. Erickson, Trustee o Indefinite Term Physician, Edward-Elmhurst Medical Group, 222 None (1951) Physician & Officer, Wheaton Orthopedics o Since Inception (1990 to 2021) Thomas R. Kadlec, Trustee o Indefinite Term Retired; President, ADM Investors 222 Director, National Futures (1957) Services, Inc. (Futures Commission Association and ADMIS o Since Inception Merchant) (2010 to July 2022) Singapore Ltd.; Formerly, Director of ADM Investor Services, Inc., ADM Investor Services International, ADMIS Hong Kong Ltd., and Futures Industry Association Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate Aurora 222 Director and Board Chair (1964) Health and President, Advocate Aurora of Advocate Home Health o Since 2021 Continuing Health Division (Integrated Services, Advocate Home Healthcare System) Care Products and Advocate Hospice; Director and Board Chair of Aurora At Home (since 2018); Director of Advocate Physician Partners Accountable Care Organization; Director and Board Chair of RML Long Term Acute Care Hospitals; and Director of Senior Helpers (since 2021) Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 222 Formerly, Director of (1956) and Management Consulting) Trust Company of Illinois o Since Inception Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 222 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 222 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) </TABLE> ----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 25
-------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 (UNAUDITED) <TABLE> <CAPTION> POSITION AND TERM OF OFFICE NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer, (1966) Executive Officer First Trust Advisors L.P. and First Trust Portfolios o Since January 2016 L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1972) Officer and Chief First Trust Portfolios L.P. Accounting Officer o Since January 2016 W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel, o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and First (1970) Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Chief Compliance Officer Since January 2011 o Assistant Secretary Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1966) First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception </TABLE> ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 26
-------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FT CBOE VEST GOLD STRATEGY TARGET INCOME ETF(R) (IGLD) DECEMBER 31, 2022 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies." For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2022 Page 27
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FIRST TRUST First Trust Exchange-Traded Fund INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 INVESTMENT SUB-ADVISOR Cboe Vest(SM) Financial LLC 8350 Broad Street, Suite 240 McLean, VA 22102 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
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| (b) | Not applicable. |
Item 2. Code of Ethics.
| (a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
| (c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
| (d) | The registrant, during the period covered by this report, has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
| (e) | Not applicable. |
| (f) | A copy of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller is filed as an exhibit pursuant to Item 13(a)(1). |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant's board of trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as audit committee financial experts serving on its audit committee and that each of them is "independent," as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
| (a) | Audit Fees — The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $397,000 for 2021 and $440,000 for 2022. |
| (b) | Audit-Related Fees (Registrant) — The aggregate fees billed in each of the last two fiscal years, for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2021 and $0 for 2022. |
Audit-Related Fees (Investment Advisor and Distributor) — The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2021 and $0 for 2022.
| (c) | Tax Fees (Registrant) — The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant were $65,296 for 2021 and $257,000 for 2022. The tax fees were for review of regulated investment company status. These fees were for tax consultation and/or tax return preparation and professional services rendered for PFIC (Passive Foreign Investment Company) Identification Services. |
Tax Fees (Investment Advisor and Distributor) — The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant’s advisor and distributor were $0 for 2021 and $0 for 2022.
| (d) | All Other Fees (Registrant) — The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for 2021 and $0 for 2022. |
All Other Fees (Investment Advisor and Distributor) — The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant’s investment advisor and distributor, other than the services reported in paragraphs (a) through (c) of this Item were $0 for 2021 and $0 for 2022.
| (e)(1) | Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. |
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the registrant’s advisor (not including a sub-advisor whose role is primarily portfolio management and is sub-contracted or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant’s advisor (other than any sub-advisor whose role is primarily portfolio management and is sub-contracted with or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor’s independence.
| (e)(2) | The percentage of services described in each of paragraphs (b) through (d) for the registrant and the registrant’s investment advisor of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows: |
(b) 0%
(c) 0%
(d) 0%
| (f) | The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than fifty percent. |
| (g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant for the fiscal year ended December 31, 2021 were $65,296 for the registrant, $16,500 for the registrant’s investment advisor and $29,500 for the registrant’s distributor and for the fiscal year ended December 31, 2022 were $257,000 for the registrant, $0 for the registrant’s investment advisor and $0 for the registrant’s distributor. |
| (h) | The registrant’s audit committee of its Board of Trustees has determined that the provision of non-audit services that were rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
| (i) | Not applicable. |
| (j) | Not applicable. |
Items 5. Audit Committee of Listed Registrants.
The registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 consisting of all the independent directors of the registrant. The audit committee of the registrant is comprised of: Richard E. Erickson, Thomas R. Kadlec, Denise M. Keefe, Robert F. Keith and Niel B. Nielson.
Item 6. Investments.
| (a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
| (b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407 (c) (2) (iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22 (b) (15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
| (a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3 (c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)). |
| (b) | There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
| (a) | Not applicable. |
| (b) | Not applicable. |
Item 13. Exhibits.
| (a)(1) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
| (a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| (a)(3) | Not applicable. |
| (a)(4) | Not applicable. |
| (b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (registrant) | First Trust Exchange-Traded Fund |
| By (Signature and Title)* | /s/ James M. Dykas | |
| James M. Dykas, President and Chief Executive Officer (principal executive officer) |
| Date: | March 13, 2023 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* | /s/ James M. Dykas | |
| James M. Dykas, President and Chief Executive Officer (principal executive officer) |
| Date: | March 13, 2023 |
| By (Signature and Title)* | /s/ Donald P. Swade | |
| Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
| Date: | March 13, 2023 |
* Print the name and title of each signing officer under his or her signature.
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 1/02/24 First Trust Exchange-Traded Fund 497 1/02/24 13:2.3M Fitzgerald Marke… LLC/FA 1/02/24 First Trust Exchange-Traded Fund 497 1/02/24 13:3.4M Fitzgerald Marke… LLC/FA 4/28/23 First Trust Exchange-Traded Fund 485BPOS 5/01/23 36:22M Fitzgerald Marke… LLC/FA |
