UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
W. Scott Jardine, Esq.
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
The registrant's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows:
FIRST TRUST
First Trust STOXX(R) European Select Dividend Index Fund (FDD)
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (FFR)
First Trust Dow Jones Global Select Dividend Index Fund (FGD)
First Trust Global Wind Energy ETF (FAN)
First Trust Global Engineering and Construction ETF (FLM)
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (GRID)
First Trust Indxx Global Natural Resources Income ETF (FTRI)
First Trust Indxx Global Agriculture ETF (FTAG)
First Trust BICK Index Fund (BICK)
First Trust Indxx NextG ETF (NXTG)
First Trust NASDAQ Global Auto Index Fund (CARZ)
First Trust Cloud Computing ETF (SKYY)
First Trust International Equity Opportunities ETF (FPXI)
First Trust Nasdaq Cybersecurity ETF (CIBR)
FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL REPORT
SEPTEMBER 30, 2020
Shareholder Letter ......................................................................... 2
Market Overview ............................................................................ 3
Fund Performance Overview
First Trust STOXX(R) European Select Dividend Index Fund (FDD) ....................... 4
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (FFR) .......... 6
First Trust Dow Jones Global Select Dividend Index Fund (FGD) ........................ 8
First Trust Global Wind Energy ETF (FAN) ............................................. 10
First Trust Global Engineering and Construction ETF (FLM) ............................ 12
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (GRID) ...... 14
First Trust Indxx Global Natural Resources Income ETF (FTRI) ......................... 16
First Trust Indxx Global Agriculture ETF (FTAG) ...................................... 18
First Trust BICK Index Fund (BICK) ................................................... 20
First Trust Indxx NextG ETF (NXTG) ................................................... 22
First Trust NASDAQ Global Auto Index Fund (CARZ) ..................................... 24
First Trust Cloud Computing ETF (SKYY) ............................................... 26
First Trust International Equity Opportunities ETF (FPXI) ............................ 28
First Trust Nasdaq Cybersecurity ETF (CIBR) .......................................... 30
Notes to Fund Performance Overview ......................................................... 32
Understanding Your Fund Expenses ........................................................... 33
Portfolio of Investments
First Trust STOXX(R) European Select Dividend Index Fund (FDD) ....................... 35
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (FFR) .......... 37
First Trust Dow Jones Global Select Dividend Index Fund (FGD) ........................ 43
First Trust Global Wind Energy ETF (FAN) ............................................. 46
First Trust Global Engineering and Construction ETF (FLM) ............................ 49
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (GRID) ...... 51
First Trust Indxx Global Natural Resources Income ETF (FTRI) ......................... 53
First Trust Indxx Global Agriculture ETF (FTAG) ...................................... 56
First Trust BICK Index Fund (BICK) ................................................... 58
First Trust Indxx NextG ETF (NXTG) ................................................... 61
First Trust NASDAQ Global Auto Index Fund (CARZ) ..................................... 65
First Trust Cloud Computing ETF (SKYY) ............................................... 67
First Trust International Equity Opportunities ETF (FPXI) ............................ 69
First Trust Nasdaq Cybersecurity ETF (CIBR) .......................................... 72
Statements of Assets and Liabilities ....................................................... 74
Statements of Operations ................................................................... 78
Statements of Changes in Net Assets ........................................................ 82
Financial Highlights ....................................................................... 90
Notes to Financial Statements .............................................................. 97
Report of Independent Registered Public Accounting Firm .................................... 110
Additional Information ..................................................................... 111
Board of Trustees and Officers ............................................................. 120
Privacy Policy ............................................................................. 122
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund II (the "Trust") described in this report (each such series is referred to as a "Fund" and collectively, as the "Funds") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund'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.
FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
SEPTEMBER 30, 2020
Dear Shareholders,
First Trust is pleased to provide you with the annual report for certain series of the First Trust Exchange-Traded Fund II (the "Funds"), which contains detailed information about the Funds for the twelve months ended September 30, 2020.
The coronavirus ("COVID-19") pandemic has been on the attack for over seven months now. Suffice it to say that we are anxiously awaiting a medical breakthrough that will help us better coexist with this virus, because there is a good chance the virus may never go away, according to experts. In late September 2020, Dr. Anthony Fauci, the leading infectious disease expert in the U.S., commented that COVID-19 vaccinations could begin as early as November or December of 2020. As it turns out, Dr. Fauci's timeline may end up being close to spot-on. Pfizer and BioNTech reported on November 9, 2020, that they are the first health care companies to successfully demonstrate that a COVID-19 vaccine can be both effective and safe in Phase 3 clinical trials on humans, according to CNBC. While scientists are seeking a COVID-19 vaccine that is at least 75% effective, their vaccine efficacy rate has eclipsed 90%. Dr. Scott Gottlieb, a former Food & Drug Administration commissioner and member of Pfizer's board, believes the vaccine, which entails two doses, could be available in limited scope by late December but widely available by the third quarter of 2021. The other breaking news in early November is that former Vice President Joe Biden appears to have defeated incumbent Donald Trump in the 2020 presidential election, though it has yet to be declared official as of November 10 due to one or potentially more state ballot recounts requested by the Trump Administration.
The virus does not appear to be going away on its own, as the President has predicted on several occasions. In fact, the medical community is concerned that a second wave may hit the U.S. during the upcoming flu season. Regardless of how things unfold in the months ahead, many pundits agree that the U.S. economy, which has made some positive strides in recent months, is going to require a few years to fully mend from the COVID-19 fallout. In September 2020, the Federal Reserve (the "Fed") stated that it expects to hold short-term interest rates near zero until two things happen: (1) the U.S. unemployment rate is back to normal (around a 4.0% unemployment rate); and (2) inflation is running at or above 2.0%. Brian Wesbury, Chief Economist at First Trust Advisors L.P., notes that the Fed does not expect to achieve both goals until 2024. We believe that one of the Fed's motivations in promoting a multi-year commitment to a near zero interest rate monetary policy is to incentivize risk-taking. By holding interest rates low, the Fed is essentially disincentivizing savings. Historically speaking, the Fed does not usually frontload this much guidance. Fed Chairman Jerome Powell has stated that he believes the economy is also in need of additional fiscal stimulus from Congress. While negotiations are underway, a deal for additional stimulus money has yet to be struck.
The 24/7 news cycle, as it is designed to do, is continuously spewing out a mixed bag of good and bad news. Election seasons only heighten it. Those of us who have worked in this industry for a long time often encourage investors, particularly those with long time horizons, to tune out the noise and stick to their respective plans. Think of it this way -- due to the COVID-19 pandemic, the amount of negative news in 2020 has likely far outpaced the good, in my opinion, and yet the S&P 500(R) Index sits in positive territory. Securities markets also digest the newsfeed and then deliver a response in the form of performance results. Year-to-date through October 9, 2020, the S&P 500(R) Index posted a total return of 9.22%, according to Bloomberg. This is after factoring in its 33.8% virus-induced plunge from February 19, 2020, through March 23, 2020. What a shame if investors got spooked listening to the news and missed out on the upside. As always, we encourage investors to stay the course!
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. |
FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL REPORT
SEPTEMBER 30, 2020
ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of research and analysis of the First Trust product line. Mr. Carey has over 27 years of experience as an Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst ("CFA") designation. He is a graduate of the University of Illinois at Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been quoted by several publications, including The Wall Street Journal, The Wall Street Reporter, Bloomberg News Service and Registered Rep.
STATE OF THE GLOBAL ECONOMY
The International Monetary Fund ("IMF") reported that global gross domestic product growth was more upbeat than expected in both the second and third quarters of 2020, but also stated that the global economy is still a long way from full recovery, according to Business Insider. Kristalina Georgieva, managing director of the IMF, noted that a combined $12 trillion in fiscal stimulus from some major economies enabled the second and third quarters to exceed their growth estimates. The IMF believes that the approval and rollout of a coronavirus ("COVID-19") vaccine and effective containment measures could accelerate a country's recovery. On the flipside, further outbreaks and lockdowns could drive a nation's economy back into a deep recession.
The economic fallout from the ongoing spread of COVID-19 had been a drag on global merger and acquisition activity ("M&A") in the first half of 2020, according to Mergermarket. M&A activity is a useful barometer for gauging the overall business climate as it reflects the risk appetite of CEOs and executives, in our opinion. Mergermarket, however, reported that M&A activity picked up significantly in the third quarter of 2020. The value of deals announced totaled $891.4 billion, up from $372.2 billion in the second quarter of 2020 and up from the $677.4 billion registered in the third quarter of 2019. Year-to-date through September 30, 2020, total deal volume reached $1.86 trillion, down from $2.58 trillion over the same period in 2019.
PERFORMANCE OF GLOBAL STOCKS AND BONDS
With respect to U.S. equities, the S&P 500(R), S&P MidCap 400(R) and S&P SmallCap 600(R) Indices posted total returns of 15.15%, -2.16% and -8.29%, respectively, for the 12-month period ended September 30, 2020. Large-capitalization ("cap") stocks continued to outperform their mid- and small-cap counterparts. Investors appear to be favoring larger, more well-capitalized companies amid the COVID-19 pandemic, in our opinion. Seven of the 11 sectors that comprise the S&P 500(R) Index were up on a total return basis. The top-performer was the Information Technology sector, up 47.23%, while the worst result by far came from the Energy sector, down 45.24%. As it turns out, technology companies were among the best suited to prosper under the work-from-home structure.
A Bloomberg survey of 18 equity strategists found that their average 2020 year-end price target for the S&P 500(R) Index was 3,286 as of September 16, 2020, according to its own release. The highest estimate was 3,650, while the lowest estimate was 2,800. Since the start of the year, the 2020 earnings estimate for the S&P 500(R) Index has been adjusted significantly lower, but the projection for 2021 is up notably. As of December 31, 2019, Bloomberg's 2020 and 2021 consensus earnings growth estimates for the S&P 500(R) Index stood at 9.02% and 10.72%, respectively. As of October 2, 2020, those two estimates were -19.42% and 24.23%, respectively. Analysts are expecting a strong rebound in 2021.
Over the past 12 months, the MSCI World ex USA and the MSCI Emerging Markets Indices posted total returns of 0.16% (USD) and 10.54% (USD), respectively, according to Bloomberg. The Bloomberg Barclays Global Aggregate Index of higher quality debt posted a total return of 6.24% (USD), while the Bloomberg Barclays EM Hard Currency Aggregate Index of emerging markets debt rose by 4.35% (USD), according Bloomberg. Over that same period, the U.S. dollar declined by 5.52% against a basket of major currencies, as measured by the U.S. Dollar Index (DXY). The decline in the dollar likely had a positive influence on the performance of these four foreign stock indices, in our opinion.
In the U.S. bond market, the top-performing major debt group we track was a combination of government and investment-grade corporate bonds. The Bloomberg Barclays U.S. Aggregate Bond Index posted a total return of 6.98% for the 12-month period ended September 30, 2020. The worst-performing U.S. debt group that we track was high yield corporate bonds, though it finished in positive territory. The Bloomberg Barclays U.S. Corporate High Yield Index posted a total return of 3.25%. The yield on the benchmark 10-Year Treasury Note ("T-Note") declined by 98 basis points in the period to close at 0.69% on September 30, 2020, according to Bloomberg. For comparative purposes, the average yield on the 10-Year T-Note was 2.21% for the 10-year period ended September 30, 2020.
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
First Trust STOXX(R) European Select Dividend Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the STOXX(R) Europe Select Dividend 30 Index (the "STOXX Index"). The shares of the Fund are listed and trade on the NYSE Arca, Inc. under the ticker symbol "FDD." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the STOXX Index.
The STOXX Index consists of 30 high dividend-yielding securities selected from the STOXX(R) Europe 600 Index, including secondary lines of those companies (where there are multiple lines of equity capital in a company), which covers 18 European countries: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. In addition, a company must have a non-negative five-year dividend-per-share growth rate and a dividend-to-earnings ratio of 60% or less. The STOXX Index is compiled and maintained by STOXX Limited.
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PERFORMANCE
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AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (8/27/07) Ended Ended (8/27/07)
9/30/20 9/30/20 9/30/20 to 9/30/20 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV -15.64% 1.45% 2.05% -3.48% 7.46% 22.48% -37.13%
Market Price -15.82% 1.40% 2.01% -3.51% 7.22% 22.04% -37.39%
INDEX PERFORMANCE
STOXX(R) Europe Select
Dividend 30 Index -14.85% 1.92% 2.40% -3.03% 9.96% 26.80% -33.17%
STOXX(R) Europe 600 Index 0.95% 4.53% 4.68% 1.50% 24.82% 57.96% 21.57%
MSCI Europe Index -0.79% 4.24% 4.26% 1.15% 23.05% 51.76% 16.22%
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(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of -15.64% during the 12-month period covered by this report. During the same period, the MSCI Europe Index (the "Benchmark") generated a return of -0.79%. The Financials sector was given the highest allocation in the Fund over the period with a 43.0% allocation. The Fund's top contributing sector was the Consumer Discretionary sector with a 3.8% contribution to return, stemming from its 5.1% allocation and 50.9% return. The Fund's least contributing sector was the Financials sector with a -7.4% contribution. The Fund's currency exposure had a 5.6% impact on performance. On a relative basis, the Fund underperformed the Benchmark. The primary cause of the underperformance was attributed to the Fund over allocating among the poorly performing Financials securities by 26.8% versus the Benchmark. The Fund overweighted the Benchmark among the Utilities sector by 10.7%, creating 2.1% of relative outperformance.
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD) (CONTINUED)
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% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
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Financials 41.34%
Consumer Discretionary 10.65
Communication Services 9.07
Materials 8.86
Utilities 8.69
Real Estate 7.32
Energy 6.99
Industrials 4.28
Health Care 2.80
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Total 100.00%
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% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
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Aegon N.V. 5.75%
Standard Life Aberdeen PLC 5.41
Legal & General Group PLC 5.17
NN Group N.V. 4.80
UBS Group AG 4.62
Deutsche Post AG 4.28
Bayerische Motoren Werke AG
(Preference Shares) 4.23
Royal Dutch Shell PLC, Class B 4.00
Telecom Italia S.p.A. 3.93
Ageas S.A./N.V. 3.58
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Total 45.77%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2010 - SEPTEMBER 30, 2020
First Trust STOXX(R) European STOXX(R) Europe Select STOXX(R) Europe MSCI Europe
Select Dividend Index Fund Dividend 30 Index 600 Index Index
----------------------------- ---------------------- --------------- -----------
9/30/10 $10,000 $10,000 $10,000 $10,000
3/31/11 11,069 11,088 11,139 11,125
9/30/11 9,330 9,408 8,817 8,819
3/31/12 10,035 10,064 10,299 10,286
9/30/12 10,051 10,090 10,378 10,346
3/31/13 10,042 10,096 11,444 11,371
9/30/13 11,387 11,483 12,995 12,853
3/31/14 12,739 12,866 14,379 14,158
9/30/14 12,376 12,519 13,768 13,602
3/31/15 12,164 12,342 13,680 13,459
9/30/15 11,398 11,531 12,657 12,332
3/31/16 11,707 11,908 12,661 12,322
9/30/16 11,840 12,039 12,936 12,639
3/31/17 12,431 12,690 13,821 13,525
9/30/17 14,082 14,377 15,824 15,458
3/31/18 14,434 14,754 15,868 15,486
9/30/18 14,186 14,533 15,778 15,412
3/31/19 13,982 14,348 15,245 14,910
9/30/19 14,520 14,890 15,652 15,296
3/31/20 11,019 11,544 12,944 12,598
9/30/20 12,248 12,680 15,796 15,176
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Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
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0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 158 27 2 0 54 12 0 0
10/1/16 - 9/30/17 181 30 0 0 38 2 0 0
10/1/17 - 9/30/18 147 4 0 0 96 4 0 0
10/1/18 - 9/30/19 86 3 1 0 160 0 1 0
10/1/19 - 9/30/20 120 6 1 0 92 23 10 1
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FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the FTSE EPRA/NAREIT Developed Index (the "FTSE Index"). The shares of the Fund are listed and trade on the NYSE Arca, Inc. under the ticker symbol "FFR." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the FTSE Index.
The FTSE Index is compiled and maintained by FTSE International Limited. The FTSE Index is modified market cap weighted based on free float market capitalization and includes the securities of listed real estate companies or real estate investment trusts ("REITs") that are publicly traded on an official stock exchange located in North America, Europe or Asia and provide an audited annual report in English.
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PERFORMANCE
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AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (8/27/07) Ended Ended (8/27/07)
9/30/20 9/30/20 9/30/20 to 9/30/20 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV -18.12% 2.21% 4.81% 1.54% 11.52% 59.95% 22.14%
Market Price -18.62% 2.19% 4.75% 1.51% 11.44% 58.99% 21.70%
INDEX PERFORMANCE
FTSE EPRA/NAREIT
Developed Index -17.50% 2.98% 5.62% 2.37% 15.83% 72.72% 35.90%
S&P Global REIT Index -18.58% 2.20% 5.58% 2.08% 11.52% 72.10% 30.93%
MSCI World REIT Index -11.73% 5.15% 7.22% 2.77% 28.51% 100.87% 43.09%
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(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -18.12% during the 12-month period covered by this report. During the same period, the S&P Global REIT Index (the "Benchmark") generated a return of -18.58%. United States securities were given the highest allocation in the Fund over the period with a 54.2% allocation. These securities returned -20.6% and contributed -10.8% to the Fund's return. German securities were the Fund's most contributing securities with a 1.3% contribution, stemming from its 5.1% allocation and 20.4% return. Germany was the Fund's top performing country, while The Netherlands was the worst performer with a -67.3% return. The Fund's currency exposure had a 1.4% impact on performance. On a relative basis, the Fund outperformed the Benchmark. The primary cause of the outperformance was attributed to the Fund outperforming the Benchmark among German securities, creating 2.0% of relative outperformance. Underperformance of -0.4% was reversed due to the Fund's over allocation to the Benchmark among United States securities.
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
(CONTINUED)
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% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
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Real Estate 99.81%
Health Care 0.12
Consumer Discretionary 0.07
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Total 100.00%
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% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
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Prologis, Inc. 5.40%
Digital Realty Trust, Inc. 2.86
Vonovia SE 2.83
Public Storage 2.45
Welltower, Inc. 1.68
AvalonBay Communities, Inc. 1.53
Realty Income Corp. 1.52
Alexandria Real Estate Equities, Inc. 1.46
Simon Property Group, Inc. 1.43
Equity Residential 1.37
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Total 22.53%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2010 - SEPTEMBER 30, 2020
First Trust FTSE EPRA/ NAREIT Developed FTSE EPRA/NAREIT S&P Global MSCI World
Markets Real EstateIndex Fund Developed Index REIT Index REIT Index
--------------------------------------- ---------------- ---------- ----------
9/30/10 $10,000 $10,000 $10,000 $10,000
3/31/11 10,888 10,938 11,247 11,381
9/30/11 9,183 9,312 9,833 10,017
3/31/12 11,154 11,287 11,896 12,075
9/30/12 11,958 12,161 12,665 12,982
3/31/13 13,425 13,686 14,157 14,209
9/30/13 13,156 13,493 13,512 13,523
3/31/14 13,563 13,967 14,317 14,215
9/30/14 13,928 14,399 14,824 14,887
3/31/15 15,617 16,210 16,849 16,788
9/30/15 14,341 14,913 15,434 15,631
3/31/16 15,698 16,415 17,311 17,661
9/30/16 16,484 17,277 18,045 18,367
3/31/17 15,886 16,721 17,370 17,709
9/30/17 16,595 17,540 17,862 18,324
3/31/18 16,446 17,414 17,328 17,978
9/30/18 17,257 18,349 18,371 18,906
3/31/19 18,663 19,925 19,741 20,963
9/30/19 19,533 20,937 21,141 22,755
3/31/20 14,208 15,299 15,126 17,439
9/30/20 15,993 17,273 17,213 20,084
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 35 0 0 0 184 33 1 0
10/1/16 - 9/30/17 144 4 0 0 102 1 0 0
10/1/17 - 9/30/18 34 0 0 1 209 7 0 0
10/1/18 - 9/30/19 101 1 0 0 148 0 1 0
10/1/19 - 9/30/20 66 7 5 8 114 30 15 8
|
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
First Trust Dow Jones Global Select Dividend Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Dow Jones Global Select Dividend Index (the "Select Dividend Index"). The shares of the Fund are listed and trade on the NYSE Arca, Inc. under the ticker symbol "FGD." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Select Dividend Index.
The Select Dividend Index is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index(SM). Indicated annual dividend yield is a stock's unadjusted indicated annual dividend (not including any special dividends) divided by its unadjusted price.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (11/21/07) Ended Ended (11/21/07)
9/30/20 9/30/20 9/30/20 to 9/30/20 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV -16.33% 1.45% 2.82% 1.05% 7.46% 32.02% 14.44%
Market Price -16.67% 1.44% 2.75% 1.02% 7.41% 31.13% 13.94%
INDEX PERFORMANCE
Dow Jones Global Select
Dividend Index -15.82% 1.74% 2.95% 1.22% 9.03% 33.76% 16.94%
Dow Jones World Developed
Markets Index(SM) 10.12% 10.48% 9.54% 5.88% 64.57% 148.81% 108.35%
MSCI World Index 10.41% 10.48% 9.37% 5.53% 64.56% 145.01% 99.73%
---------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -16.33% during the 12-month period covered by this report. During the same period, the MSCI World Index (the "Benchmark") generated a return of 10.41%. The Fund gave the highest allocation to United States securities with a 13.8% weighting and to United Kingdom securities with a 13.6% weighting. These securities were also the worst contributing securities with a -3.4% contribution, each. The top performing country in the Fund was Portugal with a 28.2% return. The Netherlands securities were the Fund's most contributing securities with 0.6% contribution to the Fund's return. The Fund's currency exposure had a 3.2% impact on performance. On a relative basis, the Fund underperformed the Benchmark. The Fund's holdings within the United States created -9.5% of relative underperformance due to the Fund underperforming the Benchmark by -41.7% among investments in this country. The Fund under allocated United States securities by 51% versus the Benchmark. The Fund over allocated and outperformed the Benchmark among Portugal securities by 0.9% and 25.0%, respectively, creating 0.3% of relative outperformance.
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Financials 54.02%
Communication Services 9.51
Real Estate 6.00
Utilities 5.90
Industrials 5.79
Energy 5.14
Materials 4.52
Consumer Staples 4.14
Consumer Discretionary 3.03
Information Technology 1.95
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Bankia S.A. 2.90%
Yue Yuen Industrial Holdings Ltd. 1.53
Hyundai Motor Co. (Preference Shares) 1.50
CenturyLink, Inc. 1.48
Drax Group PLC 1.40
Navient Corp. 1.40
Ageas S.A./N.V. 1.39
Invesco Ltd. 1.32
Power Corp. of Canada 1.31
UnipolSai Assicurazioni S.p.A. 1.30
------
Total 15.53%
======
|
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2010 - SEPTEMBER 30, 2020
First Trust Dow Jones Global Dow Jones Global Dow Jones World Developed MSCI World
Select Dividend Index Fund Select Dividend Index Markets Index(SM) Index
---------------------------- ----------------------- ------------------------- ----------
9/30/10 $10,000 $10,000 $10,000 $10,000
3/31/11 11,136 11,151 11,480 11,418
9/30/11 9,843 9,917 9,583 9,566
3/31/12 11,133 11,118 11,517 11,482
9/30/12 11,573 11,578 11,659 11,631
3/31/13 12,172 12,172 12,965 12,843
9/30/13 13,238 13,259 14,159 13,982
3/31/14 14,555 14,597 15,523 15,291
9/30/14 14,371 14,407 15,855 15,688
3/31/15 13,950 13,998 16,461 16,214
9/30/15 12,286 12,269 15,119 14,891
3/31/16 13,067 13,135 15,923 15,655
9/30/16 13,966 13,989 16,926 16,582
3/31/17 14,743 14,842 18,356 17,967
9/30/17 15,942 16,047 20,081 19,595
3/31/18 16,089 16,158 20,997 20,396
9/30/18 16,303 16,421 22,330 21,797
3/31/19 15,441 15,552 21,682 21,228
9/30/19 15,779 15,891 22,595 22,196
3/31/20 11,419 11,531 19,251 19,022
9/30/20 13,195 13,377 24,880 24,504
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 65 2 0 0 176 10 0 0
10/1/16 - 9/30/17 184 3 0 0 62 2 0 0
10/1/17 - 9/30/18 171 3 0 0 74 2 1 0
10/1/18 - 9/30/19 184 4 1 0 60 2 0 0
10/1/19 - 9/30/20 112 3 0 0 113 22 3 0
|
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
First Trust Global Wind Energy ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE Clean Edge Global Wind Energy(TM) Index (the "Index"). The shares of the Fund are listed and trade on the NYSE Arca, Inc. under the ticker symbol "FAN." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index.
The Index is developed, maintained and sponsored by Nasdaq, Inc. The Index provides a benchmark for investors interested in tracking public companies throughout the world that are active in the wind energy industry.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (6/16/08) Ended Ended (6/16/08)
9/30/20 9/30/20 9/30/20 to 9/30/20 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV 35.42% 14.40% 7.84% -2.27% 95.91% 112.64% -24.63%
Market Price 35.40% 14.60% 7.90% -2.25% 97.64% 113.95% -24.37%
INDEX PERFORMANCE
ISE Clean Edge Global Wind
Energy(TM) Index 36.58% 15.36% 8.66% -1.48% 104.32% 129.54% -16.76%
Russell 3000(R) Index 15.00% 13.69% 13.48% 9.81% 89.92% 254.26% 215.75%
MSCI World Index 10.41% 10.48% 9.37% 6.10% 64.56% 145.01% 107.04%
---------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 35.42% during the 12-month period covered by this report. During the same period, the MSCI World Index (the "Benchmark") generated a return of 10.41%. The Fund allocated 54.2% to the Utilities industry and 41.4% to the Capital Goods industry. During the period covered by this report, those allocations contributed 16.9% and 20.4%, respectively, to overall Fund performance. Investments in Denmark contributed more than investments in any other country to the Fund's return. Danish securities received an average weight of 17.5% and contributed 12.4% to the Fund's return. Japanese securities were the worst contributor to the Fund's return, causing -1.8% drag in the Fund. The Fund's currency exposure had a 5.9% impact on performance. On a relative basis, the Fund outperformed the Benchmark. The Benchmark is allocated 65.0% to USA securities, while the Fund is spread out across many more countries, with only 13.8% allocated to USA securities. Meanwhile, the Fund invested almost solely in the Capital Goods industry and Utilities industry, while the Benchmark is allocated more evenly across all sectors and industries. With regards to both the country exposure and the industry exposure, the Fund had a negative comparative return with regards to the allocation effect but a much greater positive impact due to the selection effect. One notable example is the investment in the Utilities industry which had a -9.8% allocation effect but a 19.7% selection effect. Similarly, the overweight of securities in Canada caused a -2.4% allocation effect but a 10.0% selection effect for the Fund versus the Benchmark.
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Utilities 57.87%
Industrials 38.66
Materials 3.38
Energy 0.09
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Northland Power, Inc. 8.57%
Vestas Wind Systems A/S 8.43
Siemens Gamesa Renewable Energy S.A. 8.01
Orsted A/S 7.72
Boralex, Inc., Class A 5.64
Innergex Renewable Energy, Inc. 4.15
China Longyuan Power Group Corp., Ltd.,
Class H 3.96
TPI Composites, Inc. 2.23
Duke Energy Corp. 2.19
ABB Ltd. 1.98
------
Total 52.88%
======
|
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2010 - SEPTEMBER 30, 2020
First Trust Global ISE Clean Edge Global Russell 3000(R) MSCI World
Wind Energy ETF Wind Energy(TM) Index Index Index
------------------ ------------------------ --------------- ----------
9/30/10 $10,000 $10,000 $10,000 $10,000
3/31/11 11,459 11,478 11,871 11,418
9/30/11 7,953 8,045 10,055 9,566
3/31/12 7,718 7,796 12,725 11,482
9/30/12 6,669 6,777 13,093 11,631
3/31/13 7,653 7,777 14,579 12,843
9/30/13 10,445 10,677 15,920 13,982
3/31/14 12,165 12,485 17,875 15,291
9/30/14 11,716 12,049 18,747 15,687
3/31/15 11,275 11,654 20,084 16,213
9/30/15 10,852 11,234 18,654 14,890
3/31/16 12,293 12,840 20,016 15,654
9/30/16 14,153 14,806 21,445 16,581
3/31/17 14,055 14,836 23,630 17,966
9/30/17 15,032 15,879 25,454 19,594
3/31/18 15,306 16,143 26,892 20,395
9/30/18 14,593 15,496 29,928 21,796
3/31/19 15,419 16,413 29,249 21,227
9/30/19 15,700 16,805 30,802 22,195
3/31/20 14,692 15,830 26,582 19,021
9/30/20 21,264 22,954 35,426 24,501
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 102 20 5 1 96 27 2 0
10/1/16 - 9/30/17 138 31 0 0 79 3 0 0
10/1/17 - 9/30/18 85 13 0 0 140 12 1 0
10/1/18 - 9/30/19 77 5 0 0 152 17 0 0
10/1/19 - 9/30/20 170 10 1 0 60 11 1 0
|
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
First Trust Global Engineering and Construction ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE Global Engineering and Construction(TM) Index (the "Index"). The shares of the Fund are listed and trade on the NYSE Arca, Inc. under the ticker symbol "FLM." The Fund will normally invest in at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index.
The Index is developed, maintained and sponsored by Nasdaq, Inc. The Index provides a benchmark for investors interested in tracking public companies throughout the world that are active in the engineering and construction industries.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (10/13/08) Ended Ended (10/13/08)
9/30/20 9/30/20 9/30/20 to 9/30/20 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV -7.52% 1.09% 2.48% 4.68% 5.55% 27.82% 72.83%
Market Price -7.72% 1.05% 2.47% 4.65% 5.37% 27.63% 72.29%
INDEX PERFORMANCE
ISE Global Engineering and
Construction(TM) Index -6.01% 2.13% 3.62% 6.19% 11.10% 42.71% 105.05%
Russell 3000(R) Index 15.00% 13.69% 13.48% 12.96% 89.92% 254.26% 329.87%
MSCI World Industrials Index 3.97% 9.79% 8.70% 9.72% 59.53% 130.22% 203.46%
---------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 32.)
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 MSCI World Industrials Index (the "Benchmark") generated a return of 3.97%. Over the period, the Fund allocated 88.9% to the Construction & Engineering industry while the Benchmark allocated 3.3% to this industry group. These investments contributed -7.8% return to the Fund, the worst of any industry. The industry with the greatest contribution to the Fund's return was the Building Products industry, which received a 3.0% allocation and contributed 1.8% to the Fund's return. The Fund's currency exposure caused 2.9% performance during the period. On a relative basis, the Fund underperformed the Benchmark. Most of this underperformance came from the heavily over weighted Construction & Engineering industry, which accounted for -11.3% of underperformance versus the Benchmark. Some outperformance was earned by simply avoiding investments in the Aerospace & Defense industry. This sector received a 16.1% allocation in the Benchmark and caused 6.6% of outperformance for the Fund versus the Benchmark during the time period.
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 96.46%
Information Technology 2.54
Utilities 0.88
Energy 0.12
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Kingspan Group PLC 4.21%
Quanta Services, Inc. 4.13
Jacobs Engineering Group, Inc. 3.56
Bouygues S.A. 3.35
AECOM 3.12
Skanska AB, Class B 3.02
Vinci S.A. 2.97
Taisei Corp. 2.85
EMCOR Group, Inc. 2.81
Kajima Corp. 2.70
------
Total 32.72%
======
|
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2010 - SEPTEMBER 30, 2020
First Trust Global Engineering ISE Global Engineering and Russell 3000(R) MSCI World
and Construction ETF Construction(TM) Index Index Industrials Index
---------------------------------- -------------------------- --------------- -----------------
9/30/10 $10,000 $10,000 $10,000 $10,000
3/31/11 12,383 12,445 11,871 11,918
9/30/11 8,670 8,852 10,055 9,252
3/31/12 10,579 10,742 12,725 11,433
9/30/12 10,224 10,455 13,092 11,188
3/31/13 11,276 11,549 14,578 12,854
9/30/13 12,784 13,209 15,920 14,341
3/31/14 14,005 14,529 17,874 15,636
9/30/14 13,047 13,595 18,747 15,513
3/31/15 12,711 13,445 20,085 16,059
9/30/15 12,109 12,845 18,655 14,432
3/31/16 12,850 13,733 20,017 15,937
9/30/16 13,611 14,573 21,447 17,019
3/31/17 14,606 15,747 23,633 18,576
9/30/17 16,115 17,446 25,457 20,703
3/31/18 16,229 17,535 26,895 21,388
9/30/18 16,385 17,844 29,931 22,229
3/31/19 14,484 15,853 29,252 21,284
9/30/19 13,821 15,182 30,805 22,144
3/31/20 10,668 11,915 26,585 17,560
9/30/20 12,782 14,271 35,426 23,022
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 64 3 1 0 159 24 2 0
10/1/16 - 9/30/17 82 0 0 0 163 6 0 0
10/1/17 - 9/30/18 85 9 0 0 148 9 0 0
10/1/18 - 9/30/19 99 6 0 0 132 13 1 0
10/1/19 - 9/30/20 79 23 9 4 93 36 8 1
|
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ OMX(R) Clean Edge(R) Smart Grid Infrastructure Index(SM) (the "Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol "GRID." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index.
The Index is designed to act as a transparent and liquid benchmark for the grid and electric energy infrastructure sector. The Index includes companies that are primarily engaged and involved in electric grid, electric meters and devices, networks, energy storage and management, and enabling software used by the smart grid infrastructure sector. Clean Edge, Inc. and Nasdaq, Inc. serve as index providers to the Index.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (11/16/09) Ended Ended (11/16/09)
9/30/20 9/30/20 9/30/20 to 9/30/20 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV 28.10% 16.14% 8.80% 8.22% 111.34% 132.36% 135.93%
Market Price 28.37% 16.31% 8.83% 8.23% 112.82% 133.04% 136.15%
INDEX PERFORMANCE
NASDAQ OMX(R) Clean Edge(R) Smart Grid
Infrastructure Index(SM) 29.35% 17.13% 9.68% 9.10% 120.42% 151.93% 157.87%
Russell 3000(R) Index 15.00% 13.69% 13.48% 12.96% 89.92% 254.26% 276.00%
S&P Composite 1500(R) Industrials Index 1.24% 10.97% 11.77% 11.99% 68.27% 204.37% 242.37%
MSCI World Industrials Index 3.97% 9.79% 8.70% 8.92% 59.53% 130.22% 153.17%
---------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 28.10% during the 12-month period covered by this report. During the same period, the S&P Composite 1500(R) Industrials Index (the "Benchmark") generated a return of 1.24%. The heaviest allocated industry in the Fund over the period was the Electrical Equipment industry with a 22.1% weighting. This industry had a 5.1% contribution to the Fund's return, stemming from its 24.2% return. The Semiconductors & Semiconductor Equipment industry was the Fund's top contributing industry with a 18.5% contribution to the Fund's return. The Electronic Equipment Instruments & Components industry was the Fund's least contributing industry with a -1.6% contribution stemming from its 11.9% weighting and -12.7% return. The Fund's currency exposure had a 3.5% impact on performance. On a relative basis, the Fund indisputably outperformed the Benchmark. The primary cause of the outperformance was attributed to the Fund's allocation in the Semiconductors & Semiconductor Equipment industry, which was absent from the Benchmark, creating 19.3% of outperformance. The Fund underperformed the Benchmark in the Machine industry by -17.2%, creating -3.4% of relative drag.
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
(CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Industrials 51.07%
Information Technology 26.52
Consumer Discretionary 12.23
Utilities 10.15
Materials 0.03
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Aptiv PLC 8.52%
Johnson Controls International PLC 8.03
Schneider Electric SE 8.02
Eaton Corp. PLC 8.00
ABB Ltd. 7.98
SolarEdge Technologies, Inc. 4.31
Enphase Energy, Inc. 4.28
Prysmian S.p.A. 4.15
Quanta Services, Inc. 4.13
Red Electrica Corp., S.A. 3.92
------
Total 61.34%
======
|
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2010 - SEPTEMBER 30, 2020
First Trust NASDAQ(R) NASDAQ OMX(R) Russell S&P Composite MSCI World
Clean Edge(R) Smart Grid Clean Edge(R) Smart Grid 3000(R) 1500(R) Industrials Industrials
Infrastructure Index Fund Infrastructure Index(SM) Index Index Index
------------------------- --------------------------- ------- ------------------- -----------
9/30/10 $10,000 $10,000 $10,000 $10,000 $10,000
3/31/11 11,596 11,637 11,871 12,296 11,918
9/30/11 8,037 8,149 10,055 9,550 9,252
3/31/12 9,408 9,517 12,725 12,517 11,433
9/30/12 9,710 9,871 13,092 12,448 11,188
3/31/13 10,829 11,055 14,578 14,554 12,854
9/30/13 11,501 11,805 15,920 16,273 14,341
3/31/14 13,246 13,652 17,875 18,458 15,636
9/30/14 12,213 12,634 18,747 18,757 15,512
3/31/15 12,393 12,865 20,084 19,995 16,058
9/30/15 10,995 11,429 18,654 18,085 14,431
3/31/16 12,115 12,678 20,016 20,425 15,936
9/30/16 13,822 14,486 21,445 21,659 17,018
3/31/17 14,835 15,617 23,630 24,375 18,575
9/30/17 17,516 18,491 25,454 26,637 20,702
3/31/18 17,763 18,770 26,892 27,870 21,387
9/30/18 17,227 18,295 29,928 29,826 22,228
3/31/19 15,851 16,888 29,249 28,651 21,283
9/30/19 18,145 19,477 30,802 30,058 22,143
3/31/20 15,764 17,042 26,582 23,060 17,559
9/30/20 23,242 25,193 35,423 30,430 23,020
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 68 48 2 0 98 37 0 0
10/1/16 - 9/30/17 150 29 4 5 59 4 0 0
10/1/17 - 9/30/18 167 20 0 1 44 19 0 0
10/1/18 - 9/30/19 55 3 0 0 191 2 0 0
10/1/19 - 9/30/20 170 5 1 0 69 7 1 0
|
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
First Trust Indxx Global Natural Resources Income ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Indxx Global Natural Resources Income Index (the "Index"). The shares of the Fund are listed and traded on The Nasdaq Stock Market LLC under the ticker symbol "FTRI." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index.
The Index is owned and is developed, maintained and sponsored by Indxx, LLC. The Index is a free float adjusted market capitalization weighted index designed to measure the market performance of the 50 highest dividend yielding companies involved in the upstream (i.e., generally exploration and production) segment of the natural resources sector.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (3/11/10) Ended Ended (3/11/10)
9/30/20 9/30/20 9/30/20 to 9/30/20 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV -11.80% 1.62% -8.74% -7.30% 8.38% -59.92% -55.08%
Market Price -10.62% 1.73% -8.68% -7.22% 8.97% -59.67% -54.66%
INDEX PERFORMANCE
Indxx Global Natural Resources Income Index* -10.94% 4.34% N/A N/A 23.66% N/A N/A
MSCI ACWI Materials Index 11.71% 11.30% 2.57% 2.85% 70.78% 28.89% 34.57%
MSCI ACWI Index 10.44% 10.30% 8.55% 8.30% 63.27% 127.12% 132.12%
---------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 32.)
* Effective on the close of business December 18, 2015, the Fund's underlying index changed from the ISE Global Copper(TM) Index to the Indxx Global Natural Resources Income Index. Therefore, the Fund's performance and total returns shown for the period prior to December 18, 2015, are not necessarily indicative of the performance the Fund, based on its current index, would have generated. Since the Fund's new underlying index had an inception date of June 1, 2015, it was not in existence for all the periods disclosed.
PERFORMANCE REVIEW
The Fund generated a NAV return of -11.80% during the 12-month period covered by this report. During the same period, the MSCI ACWI Materials Index (the "Benchmark") generated a return of 11.71%. The Metals & Mining industry was given the highest allocation in the Fund over the period with a 31.9% weighting. This industry was also the most contributing industry in the Fund with a 7.4% contribution, stemming from its 14.4% return. The Water Utilities industry was the Fund's top performing industry with a 19.4% return and 0.1% contribution. The industry that contributed least to the Fund's return was the Oil, Gas & Consumable Fuels industry, which contributed -15.6% to Fund performance. The Fund's currency exposure had a -0.6% impact on performance. On a relative basis, the Fund underperformed the Benchmark. The Benchmark had no exposure to the Oil, Gas & Consumable Fuels industry, which performed poorly during the period, causing -18.3% of underperformance for the Fund. A small 1.1% of outperformance was earned for the Fund by having no allocation to the Construction Materials industry.
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Materials 55.23%
Energy 26.49
Consumer Staples 10.97
Utilities 7.31
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Rio Tinto PLC, ADR 10.06%
BHP Group PLC, ADR 9.85
ConocoPhillips 9.05
Anglo American PLC 6.90
Nutrien Ltd. 4.84
Archer-Daniels-Midland Co. 4.73
International Paper Co. 4.46
CNOOC Ltd., ADR 4.24
Fortescue Metals Group Ltd. 4.21
Canadian Natural Resources Ltd. 4.08
------
Total 62.42%
======
|
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2010 - SEPTEMBER 30, 2020
First Trust Indxx Global MSCI ACWI MSCI ACWI
Natural Resources Income ETF Materials Index Index
---------------------------- ----------------- ------------
9/30/10 $10,000 $10,000 $10,000
3/31/11 12,997 11,905 11,354
9/30/11 7,950 8,713 9,399
3/31/12 9,801 10,085 11,270
9/30/12 9,049 9,642 11,371
3/31/13 8,259 9,656 12,457
9/30/13 7,215 9,680 13,387
3/31/14 7,163 10,154 14,522
9/30/14 7,043 9,875 14,902
3/31/15 5,522 9,438 15,309
9/30/15 3,698 7,549 13,910
3/31/16 3,457 8,265 14,644
9/30/16 3,705 9,363 15,572
3/31/17 3,959 10,392 16,846
9/30/17 4,278 11,588 18,477
3/31/18 4,559 12,034 19,334
9/30/18 4,754 12,123 20,283
3/31/19 4,691 11,670 19,851
9/30/19 4,546 11,537 20,564
3/31/20 3,401 9,187 17,618
9/30/20 4,010 12,888 22,711
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 74 21 2 1 114 31 10 0
10/1/16 - 9/30/17 115 7 0 0 129 0 0 0
10/1/17 - 9/30/18 51 19 0 0 93 85 3 0
10/1/18 - 9/30/19 128 27 3 0 52 40 1 0
10/1/19 - 9/30/20 22 148 17 4 27 35 0 0
|
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
First Trust Indxx Global Agriculture ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Indxx Global Agriculture Index (the "Index"). The shares of the Fund are listed and traded on The Nasdaq Stock Market LLC under the ticker symbol "FTAG." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index.
The Index is owned and is developed, maintained and sponsored by Indxx, LLC. The Index is a market capitalization weighted index designed to measure the performance of companies that are directly or indirectly engaged in improving agricultural yields. The Index is composed of farmland companies and firms involved in chemicals and fertilizers, seeds, irrigation equipment, and farm machinery.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (3/11/10) Ended Ended (3/11/10)
9/30/20 9/30/20 9/30/20 to 9/30/20 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV -3.19% -2.45% -16.11% -15.49% -11.68% -82.73% -83.09%
Market Price -3.41% -2.57% -16.15% -15.53% -12.20% -82.82% -83.15%
INDEX PERFORMANCE
Indxx Global Agriculture Index* -2.30% 4.16% N/A N/A 22.59% N/A N/A
MSCI ACWI Index 10.44% 10.30% 8.55% 8.30% 63.27% 127.12% 132.12%
MSCI ACWI Materials Index 11.71% 11.30% 2.57% 2.85% 70.78% 28.89% 34.57%
---------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 32.)
* Effective on the close of business December 18, 2015, the Fund's underlying index changed from the ISE Global Platinum(TM) Index to the Indxx Global Agriculture Index. Therefore, the Fund's performance and total returns shown for the period prior to December 18, 2015, are not necessarily indicative of the performance the Fund, based on its current Index, would have generated. Since the Fund's new underlying index had an inception date of June 1, 2015, it was not in existence for all the periods disclosed.
PERFORMANCE REVIEW
The Fund generated a NAV return of -3.19% during the 12-month period covered by this report. During the same period, the MSCI ACWI Materials Index (the "Benchmark") generated a return of 11.71%. The Chemicals industry was given the highest allocation in the Fund over the period, with a 55.6% weighting. This industry had a -10.8% return, which caused it to be the least contributing industry in the Fund at -7.5%. The industry with the greatest contribution to the Fund's return during the period was the Machine industry, which contributed 3.8% to the Fund's return. The Fund's currency exposure had a 1.9% impact on performance. On a relative basis, the Fund underperformed the Benchmark. The Chemicals industry created -12.7% of relative underperformance as the Fund underperformed the Benchmark by -22.4%. The Fund's holdings among the Construction Materials industry created 1.4% of relative outperformance for the Fund versus the Benchmark.
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Materials 51.21%
Industrials 29.61
Health Care 9.43
Consumer Staples 7.15
Consumer Discretionary 2.60
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Deere & Co. 10.31%
BASF SE 9.45
Bayer AG 9.43
Kubota Corp. 5.33
Nutrien Ltd. 4.71
Wilmar International Ltd. 4.68
Corteva, Inc. 4.57
Industries Qatar QSC 4.16
FMC Corp. 3.47
Evonik Industries AG 3.05
------
Total 59.16%
======
|
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2010 - SEPTEMBER 30, 2020
First Trust Indxx MSCI ACWI MSCI ACWI
Global Agriculture ETF Index Materials Index
---------------------- ------------- ------------------
9/30/10 $10,000 $10,000 $10,000
3/31/11 11,160 11,354 11,905
9/30/11 6,551 9,399 8,713
3/31/12 6,714 11,270 10,085
9/30/12 4,974 11,371 9,642
3/31/13 4,766 12,457 9,656
9/30/13 4,485 13,387 9,680
3/31/14 4,456 14,522 10,154
9/30/14 4,008 14,902 9,875
3/31/15 3,317 15,309 9,438
9/30/15 1,956 13,910 7,549
3/31/16 1,512 14,644 8,265
9/30/16 1,586 15,572 9,363
3/31/17 1,821 16,846 10,392
9/30/17 2,016 18,477 11,588
3/31/18 1,988 19,334 12,034
9/30/18 1,985 20,283 12,123
3/31/19 1,778 19,851 11,670
9/30/19 1,785 20,564 11,538
3/31/20 1,274 17,617 9,188
9/30/20 1,729 22,710 12,890
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 37 20 15 16 72 47 22 24
10/1/16 - 9/30/17 120 0 0 0 122 7 2 0
10/1/17 - 9/30/18 171 5 0 0 72 3 0 0
10/1/18 - 9/30/19 18 0 1 0 221 11 0 0
10/1/19 - 9/30/20 24 1 0 0 184 43 1 0
|
FIRST TRUST BICK INDEX FUND (BICK)
The First Trust BICK Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE BICK(TM) Index (the "Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol "BICK." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index.
The Index is developed, maintained and sponsored by Nasdaq, Inc. The Index is designed to provide a benchmark for investors interested in tracking some of the largest and most liquid public companies that are domiciled in Brazil, India, China (including Hong Kong) and South Korea that are accessible for investment by U.S. investors.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended (4/12/10) Ended Ended (4/12/10)
9/30/20 9/30/20 9/30/20 to 9/30/20 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV 14.07% 10.48% 0.82% 1.17% 64.62% 8.48% 13.00%
Market Price 15.04% 10.62% 0.71% 1.19% 65.61% 7.30% 13.17%
INDEX PERFORMANCE
ISE BICK(TM) Index 15.26% 11.60% 1.69% 2.08% 73.11% 18.22% 23.99%
MSCI ACWI Index 10.44% 10.30% 8.55% 7.94% 63.27% 127.12% 122.57%
MSCI Emerging Markets Index 10.54% 8.97% 2.50% 2.86% 53.64% 28.07% 34.31%
---------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 14.07% during the 12-month period covered by this report. During the same period, the MSCI Emerging Markets Index (the "Benchmark") generated a return of 10.54%. Chinese securities were the Fund's top performing securities with a 58.3% return, while Brazilian securities were the Fund's worst performing securities with a -25.6% return. South Korea was the Fund's most contributing country with a 10.4% contribution, while Brazilian securities were the Fund's least contributing country with a -7.4% contribution. The Fund's currency exposure had a -4.5% impact on performance. On a relative basis, the Fund outperformed the Benchmark. The primary cause of the outperformance is due to the Fund's selection amongst South Korean securities which created 5.0% of relative outperformance. Relative underperformance of -8.0% was created due to the Fund over allocating the Benchmark amongst Brazilian securities by 14.7%, which performed poorly this period.
FIRST TRUST BICK INDEX FUND (BICK) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 22.85%
Financials 19.94
Information Technology 15.65
Health Care 11.10
Communication Services 10.37
Materials 6.90
Energy 4.91
Industrials 4.24
Consumer Staples 3.04
Utilities 1.00
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Dr. Reddy's Laboratories Ltd., ADR 2.40%
Infosys Ltd., ADR 2.20
Wipro Ltd., ADR 2.19
Vedanta Ltd., ADR 2.12
Reliance Industries Ltd., GDR 2.11
HDFC Bank Ltd., ADR 2.02
WNS (Holdings) Ltd., ADR 1.93
Tata Motors Ltd., ADR 1.87
ICICI Bank Ltd., ADR 1.84
MakeMyTrip Ltd. 1.83
------
Total 20.51%
======
|
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 30, 2010 - SEPTEMBER 30, 2020
First Trust BICK ISE BICK(TM) MSCI ACWI MSCI Emerging
Index Fund Index Index Markets Index
---------------- ------------ ------------ -------------
9/30/10 $10,000 $10,000 $10,000 $10,000
3/31/11 10,781 10,785 11,354 10,953
9/30/11 7,282 7,432 9,399 8,385
3/31/12 8,636 8,713 11,270 9,989
9/30/12 7,994 8,119 11,371 9,805
3/31/13 8,139 8,262 12,457 10,162
9/30/13 8,049 8,248 13,387 9,901
3/31/14 8,455 8,702 14,522 10,039
9/30/14 8,688 8,993 14,902 10,327
3/31/15 8,157 8,505 15,309 10,082
9/30/15 6,590 6,830 13,910 8,335
3/31/16 7,088 7,411 14,644 8,869
9/30/16 8,172 8,540 15,572 9,734
3/31/17 8,865 9,309 16,846 10,396
9/30/17 10,390 10,975 18,477 11,920
3/31/18 11,150 11,758 19,334 12,970
9/30/18 9,683 10,360 20,283 11,823
3/31/19 10,069 10,832 19,851 12,025
9/30/19 9,511 10,255 20,563 11,587
3/31/20 7,661 8,346 17,617 9,901
9/30/20 10,848 11,822 22,712 12,807
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 34 0 0 0 113 97 8 1
10/1/16 - 9/30/17 65 26 0 0 51 99 10 0
10/1/17 - 9/30/18 120 37 2 0 76 14 2 0
10/1/18 - 9/30/19 40 4 1 0 148 56 2 0
10/1/19 - 9/30/20 52 14 1 0 113 51 20 2
|
FIRST TRUST INDXX NEXTG ETF (NXTG)
The First Trust Indxx NextG 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 5G & NextG Thematic Index (the "Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol "NXTG." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index.
The Index is owned and is developed, maintained and sponsored by Indxx, LLC. The Index is designed to track the performance of companies that have devoted, or have committed to devote, material resources to the research, development and application of fifth generation (5G) and next generation digital cellular technologies as they emerge.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (2/17/11) Ended (2/17/11)
9/30/20 9/30/20 to 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV 18.97% 12.41% 8.49% 79.46% 118.85%
Market Price 18.88% 12.57% 8.51% 80.78% 119.34%
INDEX PERFORMANCE
Indxx 5G & NextG Thematic Index(1)(2) 19.91% N/A N/A N/A N/A
MSCI World Index 10.41% 10.48% 8.09% 64.56% 111.34%
MSCI ACWI Information Technology Index 44.79% 24.74% 16.46% 202.07% 332.76%
---------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 32.)
(1) On May 30, 2019, the Fund's underlying index changed from the Nasdaq CTA Smartphone Index(SM) to the Indxx 5G & NextG Thematic Index. Therefore, the Fund's performance and historical returns shown for the periods prior to this date are not necessarily indicative of the performance that the Fund, based on its current index, would have generated.
(2) Performance data is not available for all the periods shown in the table for the index because performance data does not exist for some of the entire periods.
PERFORMANCE REVIEW
The Fund generated a NAV return of 18.97% during the 12-month period covered by this report. During the same period, the MSCI ACWI Information Technology Index (the "Benchmark") generated a return of 44.79%. The Fund allocated the most weight to the Semiconductors & Semiconductor Equipment industry, which turned out to be a boon for the Fund, as investments in this industry contributed 13.1% to overall Fund return. Investments in the Telecommunication Services industry, meanwhile, caused the most drag on the Fund during the period covered by this report, with a -2.1% contribution to the Fund's return. The Fund's currency exposure had a 1.5% impact on performance. On a relative basis, the Fund underperformed the Benchmark. The only industry that garnered outperformance for the Fund versus the Benchmark were investments in the Semiconductors & Semiconductor Equipment industry. Investments in this industry caused 0.7% of outperformance for the Fund versus the Benchmark. The greatest underperformance came from investments in the Telecommunication Services industry, which caused -11.6% underperformance for the Fund versus the Benchmark for the period.
FIRST TRUST INDXX NEXTG ETF (NXTG) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 65.14%
Communication Services 20.69
Real Estate 9.66
Consumer Discretionary 3.20
Industrials 1.31
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Xiaomi Corp., Class B 2.15%
Infosys Ltd., ADR 2.05
Advanced Micro Devices, Inc. 2.04
NVIDIA Corp. 2.02
Wipro Ltd., ADR 1.98
Taiwan Semiconductor Manufacturing
Co., Ltd., ADR 1.94
HCL Technologies Ltd. 1.90
Tech Mahindra Ltd. 1.88
QUALCOMM, Inc. 1.84
LG Electronics, Inc. 1.79
------
Total 19.59%
======
|
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 17, 2011 - SEPTEMBER 30, 2020
First Trust Indxx MSCI World MSCI ACWI Information
NextG ETF Index Technology Index
-------------------- ------------- ---------------------
2/17/11 $10,000 $10,000 $10,000
3/31/11 9,399 9,849 9,547
9/30/11 7,503 8,251 8,390
3/31/12 9,238 9,904 10,774
9/30/12 7,805 10,032 10,566
3/31/13 9,021 11,077 10,774
9/30/13 10,975 12,059 11,756
3/31/14 12,117 13,188 13,356
9/30/14 12,748 13,530 14,502
3/31/15 13,920 13,983 15,485
9/30/15 12,194 12,842 14,328
3/31/16 13,098 13,501 15,785
9/30/16 14,585 14,300 17,605
3/31/17 16,474 15,494 19,719
9/30/17 18,041 16,898 22,884
3/31/18 18,932 17,589 25,486
9/30/18 18,076 18,797 28,111
3/31/19 17,816 18,306 27,681
9/30/19 18,397 19,141 29,887
3/31/20 17,123 16,406 29,540
9/30/20 21,885 21,134 43,276
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 19 0 0 0 164 67 3 0
10/1/16 - 9/30/17 59 0 0 0 159 32 1 0
10/1/17 - 9/30/18 61 1 0 0 166 21 2 0
10/1/18 - 9/30/19 110 11 0 0 119 11 0 0
10/1/19 - 9/30/20 199 5 0 0 43 6 0 0
|
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
The First Trust NASDAQ Global Auto Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ OMX Global Automobile Index(SM) (the "Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol "CARZ." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index.
The Index is owned and was developed by Nasdaq, Inc. (the "Index Provider"). The Index is designed to track the performance of the largest and most liquid companies engaged in the manufacturing of automobiles. To be eligible for inclusion in the Index, a security must be issued by a company classified as an "Automobile Manufacturer" by the Industry Classification Benchmark. In addition, a security must be listed on an Index-eligible global stock exchange, as determined by the Index Provider, have a minimum float-adjusted worldwide market capitalization of at least $500 million and a minimum three-month average daily dollar trading volume of $1 million and a minimum free float of 20%.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (5/9/11) Ended (5/9/11)
9/30/20 9/30/20 to 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV 23.33% 5.55% 4.67% 30.98% 53.58%
Market Price 23.25% 5.56% 4.69% 31.07% 53.87%
INDEX PERFORMANCE
NASDAQ OMX Global Automobile Index(SM) 24.71% 6.58% 5.67% 37.51% 67.86%
MSCI World Index 10.41% 10.48% 8.26% 64.56% 110.85%
---------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 23.33% during the 12-month period covered by this report. During the same period, the MSCI World Index (the "Benchmark") generated a return of 10.41%. The Fund's investments were solely within the Consumer Discretionary sector. The Fund allocated 31.6% to investments in Japan, the greatest allocation of any country in the Fund. Japanese investments were a drag on the Fund. While the Fund at large had positive performance, this most heavily weighted country contributed -7.9% to the Fund's performance. The most positively contributing country during the period covered by this report were investments in the United States. US securities received the second-greatest allocation, with an average weight of 24.3%, and they contributed 27.4% to overall Fund return. Notable in the investments in the USA and notable to the Fund, the allocation to Tesla, Inc. ("TSLA") alone, contributed 31.4% to overall Fund return. TSLA was up 790.5% during the period. The Fund's currency exposure had a 3.7% impact on performance. On a relative basis, the Fund outperformed the Benchmark. The Fund's investments were solely within the Consumer Discretionary sector, while the Benchmark invests across all sectors and allocated only 10.7% to the Consumer Discretionary sector. This sector was an above-average performer in the Benchmark, so this allocation resulted in a 15.1% allocation effect for the Fund for this sector, specifically. The Fund's country exposure differed substantially from the Benchmark, as well. The Benchmark allocated 65.0% towards the USA while the Fund allocated only 24.3% to USA securities. Overall, the country allocations resulted in a -1.0% allocation effect for the Fund, however, the greater allocation in the Fund towards TSLA, specifically, earned 30.6% outperformance for the Fund versus the Benchmark.
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 100.00%
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Daimler AG 8.52%
Toyota Motor Corp. 8.10
Volkswagen AG (Preference Shares) 7.78
Honda Motor Co., Ltd. 7.43
Tesla, Inc. 6.94
BYD Co., Ltd., Class H 5.07
Kia Motors Corp. 4.40
Suzuki Motor Corp. 4.20
Hyundai Motor Co. 4.13
Bayerische Motoren Werke AG 4.06
------
Total 60.63%
======
|
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 9, 2011 - SEPTEMBER 30, 2020
First Trust NASDAQ NASDAQ OMX Automobile MSCI World
Global Auto Index Fund Global Index(SM) Index
---------------------- --------------------- ----------
5/9/11 $10,000 $10,000 $10,000
9/30/11 7,545 7,717 8,232
3/31/12 9,324 9,459 9,881
9/30/12 8,282 8,439 10,009
3/31/13 10,210 10,402 11,052
9/30/13 13,205 13,581 12,032
3/31/14 13,593 14,039 13,158
9/30/14 13,085 13,556 13,499
3/31/15 14,034 14,601 13,951
9/30/15 11,727 12,208 12,813
3/31/16 11,826 12,418 13,470
9/30/16 11,990 12,550 14,267
3/31/17 13,091 13,851 15,458
9/30/17 14,803 15,719 16,858
3/31/18 15,201 16,109 17,547
9/30/18 13,682 14,656 18,752
3/31/19 12,488 13,426 18,263
9/30/19 12,453 13,460 19,098
3/31/20 9,395 10,233 16,368
9/30/20 15,358 16,786 21,085
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 78 7 2 0 118 42 5 1
10/1/16 - 9/30/17 91 9 0 0 124 26 1 0
10/1/17 - 9/30/18 120 12 1 0 113 5 0 0
10/1/18 - 9/30/19 114 6 0 0 126 4 1 0
10/1/19 - 9/30/20 129 11 2 0 97 12 2 0
|
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
The First Trust Cloud Computing ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE CTA Cloud Computing(TM) Index (the "Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol "SKYY." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index.
The Index is owned by Nasdaq, Inc. The Index is designed to provide a benchmark for investors interested in tracking companies involved in the cloud computing industry. To be eligible for inclusion in the Index, a security must be issued by a cloud computing company classified by the Consumer Technology Association ("CTA"). A cloud computing company is a company engaged in one or more of the following activities: Infrastructure-as-a-Service, Platform-as-a-Service or Software-as-a-Service. In addition, securities included in the Index must have a minimum capitalization of $500 million.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (7/5/11) Ended (7/5/11)
9/30/20 9/30/20 to 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV 39.54% 23.45% 16.23% 186.68% 301.21%
Market Price 39.49% 23.46% 16.22% 186.78% 301.05%
INDEX PERFORMANCE
ISE CTA Cloud Computing(TM) Index(1) 40.34% 24.07% 16.87% 194.01% 322.04%
S&P 500(R) Index 15.15% 14.15% 12.81% 93.80% 204.62%
S&P Composite 1500 Information Technology Index 44.92% 26.48% 19.92% 223.61% 435.45%
---------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 32.)
(1) On June 24, 2019, the Fund's underlying index changed its methodology and changed its name from "ISE Cloud Computing(TM) Index" to "ISE CTA Cloud Computing(TM) Index."
PERFORMANCE REVIEW
The Fund generated a NAV return of 39.54% 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 15.15%. The Fund invested 81.7% in the Information Technology sector, 57.1% of which was invested in the Software industry. Investments in the Software industry contributed 26.0% to the Fund's return, while investments in the Information Technology sector contributed 33.7% to the Fund's return during the period covered by this report. The only sector with a negative contribution to the Fund's return were investments in the Communication Services sector, which had a -0.1% drag on the Funds' return during the period. On a relative basis, the Fund outperformed the Benchmark. The greatest source of outperformance for the Fund were investments in the Software industry. This industry earned 15.2% of outperformance for the Fund, while the Information Technology sector, as a whole, earned 14.0% of outperformance. The Communication Services sector caused the most underperformance for the Fund. Investments in this sector caused -1.4% of underperformance for the Fund versus the Benchmark.
FIRST TRUST CLOUD COMPUTING ETF (SKYY) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 84.03%
Consumer Discretionary 7.89
Communication Services 6.86
Health Care 1.22
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Oracle Corp. 4.25%
Alibaba Group Holding Ltd. 4.18
VMware, Inc., Class A 4.05
Microsoft Corp. 3.80
Amazon.com, Inc. 3.72
Alphabet, Inc., Class A 3.67
Kingsoft Cloud Holdings Ltd. 3.49
MongoDB, Inc. 3.36
CenturyLink, Inc. 3.19
Arista Networks, Inc. 3.15
------
Total 36.86%
======
|
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 5, 2011 - SEPTEMBER 30, 2020
First Trust Cloud ISE CTA Cloud S&P 500(R) S&P Composite 1500
Computing ETF Computing(TM) Index Index Information Technology Index
--------------------- ----------------------- ---------- ----------------------------
7/5/11 $10,000 $10,000 $10,000 $10,000
9/30/11 7,902 7,909 8,501 8,886
3/31/12 10,604 10,641 10,702 11,739
9/30/12 9,864 9,934 11,068 11,695
3/31/13 10,531 10,640 12,196 11,682
9/30/13 12,214 12,376 13,209 12,718
3/31/14 13,390 13,612 14,861 14,655
9/30/14 13,581 13,852 15,815 16,153
3/31/15 14,551 14,885 16,753 17,253
9/30/15 13,994 14,354 15,718 16,547
3/31/16 14,789 15,247 17,052 18,475
9/30/16 17,114 17,697 18,143 20,324
3/31/17 19,392 19,930 19,979 23,173
9/30/17 21,052 21,701 21,519 26,144
3/31/18 24,370 25,195 22,776 29,394
9/30/18 28,591 29,662 25,375 34,091
3/31/19 29,280 30,490 24,939 33,777
9/30/18 28,753 30,069 26,455 36,949
3/31/20 27,851 29,204 23,199 36,826
9/30/20 40,121 42,204 30,462 53,545
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 146 1 0 0 106 0 0 0
10/1/16 - 9/30/17 188 0 0 0 62 1 0 0
10/1/17 - 9/30/18 176 1 0 0 74 0 0 0
10/1/18 - 9/30/19 168 5 0 0 72 4 2 0
10/1/19 - 9/30/20 171 0 0 0 82 0 0 0
|
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
First Trust International Equity Opportunities ETF (formerly First Trust International IPO ETF) (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an index called the IPOX(R) International Index (the "Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol "FPXI." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index.
The Index is owned and is developed, maintained and sponsored by IPOX(R) Schuster LLC (the "Index Provider"). The Index is a market-cap weighted portfolio measuring the performance of the top 50 companies domiciled outside the United States ranked quarterly by market capitalization in the IPOX(R) Global Composite Index (the "Base Index") and represents, on average, 25% of the total market capitalization of the Base Index, a fully market capitalization-weighted index constructed and managed to provide a broad and objective view of global aftermarket performance of initial public offerings and spin-offs in all world countries (both developed and emerging market countries).
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (11/4/14) Ended (11/4/14)
9/30/20 9/30/20 to 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV 56.24% 18.81% 12.63% 136.74% 101.85%
Market Price 57.00% 18.94% 12.71% 138.07% 102.67%
INDEX PERFORMANCE
IPOX(R) International Index 57.10% 19.83% 13.44% 147.05% 110.54%
MSCI World ex USA Index 0.16% 5.32% 3.05% 29.60% 19.40%
---------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 56.24% during the time period covered by this report. During the same period, the MSCI World ex USA Index (the "Benchmark") generated a return of 0.16%. Over the period, the Consumer Discretionary sector received the greatest allocation. Receiving an average weight of 26.4%, this sector returned 65.2% and contributed 16.6% to the Fund's total return. The greatest contribution to the Fund's return came from investments in the Information Technology sector, driven significantly by the investment in Shopify Inc. This sector contributed 16.6% to the Fund's total return, 5.5% of which is attributable to the investment in Shopify. The most negative contributing sector during the year was the Financials sector. These investments carried a 7.8% weight in the Fund, returned -12.9% and contributed -0.9% to the Fund's return. The Fund's currency exposure caused 4.3% performance during the period. On a relative basis, the Fund outperformed the Benchmark. Investments in the Consumer Discretionary sector contributed the most to the Fund's outperformance, causing 17.5% of outperformance versus the Benchmark. The greatest underperformance versus the Benchmark came from investments in the Materials sector, which cause -1.4% of underperformance versus the Benchmark.
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 23.09%
Information Technology 19.94
Health Care 16.20
Communication Services 13.60
Energy 8.45
Industrials 8.19
Consumer Staples 4.46
Utilities 3.01
Financials 2.06
Materials 0.60
Real Estate 0.40
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Saudi Arabian Oil Co. 8.45%
Adyen N.V. 5.28
Meituan Dianping, Class B 4.67
Sea Ltd., ADR 4.50
Wuxi Biologics Cayman, Inc. 4.21
Prosus N.V. 3.79
Genmab A/S, ADR 3.77
Xiaomi Corp., Class B 3.71
China Feihe Ltd. 3.29
Haidilao International Holding Ltd. 3.27
------
Total 44.94%
======
|
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 4, 2014 - SEPTEMBER 30, 2020
First Trust International IPOX(R) International MSCI World
Equity Opportunities ETF Index ex USA Index
------------------------- ------------------ ------------
11/4/14 $10,000 $10,000 $10,000
3/31/15 9,798 9,813 10,252
9/30/15 8,526 8,522 9,212
3/31/16 8,864 8,954 9,386
9/30/16 9,432 9,523 9,872
3/31/17 9,913 10,072 10,506
9/30/17 11,952 12,204 11,722
3/31/18 12,949 13,217 11,951
9/30/18 12,352 12,713 12,036
3/31/19 12,308 12,716 11,594
9/30/19 12,920 13,403 11,922
3/31/20 13,086 13,684 9,866
9/30/20 20,185 21,054 11,940
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 109 30 0 0 86 28 0 0
10/1/16 - 9/30/17 138 32 0 0 63 17 1 0
10/1/17 - 9/30/18 152 27 1 0 67 4 0 0
10/1/18 - 9/30/19 94 26 10 0 93 24 4 0
10/1/19 - 9/30/20 134 50 7 0 48 6 6 2
|
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
The First Trust Nasdaq Cybersecurity ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Nasdaq CTA Cybersecurity Index(SM) (the "Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol "CIBR." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index.
The Index is owned by Nasdaq, Inc. (the "Index Provider"). The Index Provider and the Consumer Technology Association ("CTA") have jointly developed the eligibility and selection criteria and rules for the Index. The Index includes securities of companies classified as "cybersecurity" companies by the CTA.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (7/6/15) Ended (7/6/15)
9/30/20 9/30/20 to 9/30/20 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV 28.27% 16.05% 11.94% 110.49% 80.50%
Market Price 28.11% 16.08% 11.95% 110.73% 80.60%
INDEX PERFORMANCE
Nasdaq CTA Cybersecurity Index(SM) 29.42% 16.92% 12.77% 118.49% 87.58%
S&P 500(R) Index 15.15% 14.15% 11.97% 93.80% 80.77%
S&P Composite 1500 Information Technology Index 44.92% 26.48% 24.04% 223.61% 208.97%
---------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 32.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 28.27% during the 12-month period covered by this report. During the same period, the S&P Composite 1500 Information Technology Index (the "Benchmark") generated a return of 44.92%. Over the period, Software & Services carried more weight in the Fund than any other industry group. Software & Services received 74.0% allocation in the Fund and contributed 31.6% to the Fund's return, which was the highest contribution to the Fund's performance during the period. The greatest drag on Fund performance came from investments in Capital Goods, which received a weight of 5.8% and contributed -2.6% to the Fund's return. The Fund's currency exposure caused 0.5% performance during the year. On a relative basis, the Fund underperformed the Benchmark. Most of this underperformance came from the selection of investments in the Technology Hardware & Equipment industry. Investments in this industry were a boon in the Benchmark and caused -11.2% of underperformance for the Fund versus the Benchmark. The only industry causing outperformance versus the Benchmark was the Software & Services industry, which earned 3.1% of outperformance.
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Information Technology 95.88%
Industrials 4.12
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Crowdstrike Holdings, Inc., Class A 6.85%
Okta, Inc. 6.23
Zscaler, Inc. 6.16
Accenture PLC, Class A 5.91
Cisco Systems, Inc. 5.85
Cloudflare, Inc., Class A 3.37
VMware, Inc., Class A 3.12
Leidos Holdings, Inc. 3.09
Proofpoint, Inc. 3.02
VeriSign, Inc. 2.99
------
Total 46.59%
======
|
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 6, 2015 - SEPTEMBER 30, 2020
First Trust Nasdaq Nasdaq CTA S&P 500(R) S&P Composite 1500
Cybersecurity ETF Cybersecurity Index(SM) Index Information Technology Index
--------------------- ----------------------- ---------- ----------------------------
7/6/15 $10,000 $10,000 $10,000 $10,000
9/30/15 8,575 8,585 9,328 9,547
3/31/16 8,595 8,645 10,120 10,659
9/30/16 10,018 10,113 10,768 11,726
3/31/17 10,993 11,137 11,858 13,370
9/30/17 11,093 11,276 12,772 15,084
3/31/18 12,713 12,943 13,518 16,959
9/30/18 14,475 14,808 15,060 19,669
3/31/19 14,271 14,642 14,801 19,488
9/30/19 14,074 14,493 15,701 21,318
3/31/20 13,318 13,794 13,767 21,250
9/30/20 18,050 18,758 18,077 30,897
|
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 1, 2015 through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/1/15 - 9/30/16 140 0 0 0 113 0 0 0
10/1/16 - 9/30/17 228 2 0 0 21 0 0 0
10/1/17 - 9/30/18 222 1 0 0 28 0 0 0
10/1/18 - 9/30/19 200 4 0 0 45 2 0 0
10/1/19 - 9/30/20 229 2 0 0 17 2 3 0
|
Total returns for the periods since inception are calculated from the inception date of each Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the periods indicated. "Cumulative Total Returns" represent the total change in value of an investment over the periods indicated. For certain Funds, the total returns would have been lower if certain fees had not been waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund are listed for trading as of the time that the Fund's NAV is calculated. Since shares of each Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in each Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund's past performance is no guarantee of future performance.
FIRST TRUST EXCHANGE-TRADED FUND II
UNDERSTANDING YOUR FUND EXPENSES
SEPTEMBER 30, 2020 (UNAUDITED)
As a shareholder of First Trust STOXX(R) European Select Dividend Index Fund,
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund, First
Trust Dow Jones Global Select Dividend Index Fund, First Trust Global Wind
Energy ETF, First Trust Global Engineering and Construction ETF, First Trust
NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund, First Trust Indxx
Global Natural Resources Income ETF, First Trust Indxx Global Agriculture ETF,
First Trust BICK Index Fund, First Trust Indxx NextG ETF, First Trust NASDAQ
Global Auto Index Fund, First Trust Cloud Computing ETF, First Trust
International Equity Opportunities ETF or First Trust Nasdaq Cybersecurity ETF
(each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1)
transaction costs; and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, if any, and other Fund expenses. This
Example is intended to help you understand your ongoing costs (in U.S. dollars)
of investing in the Funds and to compare these costs with the ongoing costs of
investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended September 30, 2020.
ACTUAL EXPENSES
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
APRIL 1, 2020 SEPTEMBER 30, 2020 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
Actual $1,000.00 $1,111.50 0.61% $3.22
Hypothetical (5% return before expenses) $1,000.00 $1,021.95 0.61% $3.08
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
Actual $1,000.00 $1,125.60 0.60% $3.19
Hypothetical (5% return before expenses) $1,000.00 $1,022.00 0.60% $3.03
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
Actual $1,000.00 $1,156.30 0.58% $3.13
Hypothetical (5% return before expenses) $1,000.00 $1,022.10 0.58% $2.93
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
Actual $1,000.00 $1,447.20 0.60% $3.67
Hypothetical (5% return before expenses) $1,000.00 $1,022.00 0.60% $3.03
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
Actual $1,000.00 $1,198.10 0.70% $3.85
Hypothetical (5% return before expenses) $1,000.00 $1,021.50 0.70% $3.54
|
FIRST TRUST EXCHANGE-TRADED FUND II
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
SEPTEMBER 30, 2020 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
APRIL 1, 2020 SEPTEMBER 30, 2020 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
Actual $1,000.00 $1,474.40 0.70% $4.33
Hypothetical (5% return before expenses) $1,000.00 $1,021.50 0.70% $3.54
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
Actual $1,000.00 $1,179.00 0.70% $3.81
Hypothetical (5% return before expenses) $1,000.00 $1,021.50 0.70% $3.54
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
Actual $1,000.00 $1,356.30 0.70% $4.12
Hypothetical (5% return before expenses) $1,000.00 $1,021.50 0.70% $3.54
FIRST TRUST BICK INDEX FUND (BICK)
Actual $1,000.00 $1,416.30 0.64% $3.87
Hypothetical (5% return before expenses) $1,000.00 $1,021.80 0.64% $3.23
FIRST TRUST INDXX NEXTG ETF (NXTG)
Actual $1,000.00 $1,278.10 0.70% $3.99
Hypothetical (5% return before expenses) $1,000.00 $1,021.50 0.70% $3.54
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
Actual $1,000.00 $1,634.60 0.70% $4.61
Hypothetical (5% return before expenses) $1,000.00 $1,021.50 0.70% $3.54
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
Actual $1,000.00 $1,440.50 0.60% $3.66
Hypothetical (5% return before expenses) $1,000.00 $1,022.00 0.60% $3.03
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
Actual $1,000.00 $1,542.50 0.70% $4.45
Hypothetical (5% return before expenses) $1,000.00 $1,021.50 0.70% $3.54
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
Actual $1,000.00 $1,355.30 0.60% $3.53
Hypothetical (5% return before expenses) $1,000.00 $1,022.00 0.60% $3.03
|
(a) These expense ratios reflect expense caps for certain Funds. See Note 3 in the Notes to Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (April 1, 2020 through September 30, 2020), multiplied by 183/366 (to reflect the six-month period).
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.0%
BELGIUM -- 5.8%
156,050 Ageas S.A./N.V. (b) $ 6,385,464
224,321 Proximus S.A., DP (b) 4,092,315
---------------
10,477,779
---------------
FINLAND -- 5.7%
241,013 Fortum OYJ (b) 4,872,872
192,039 Nokian Renkaat OYJ (b) 5,428,596
---------------
10,301,468
---------------
FRANCE -- 9.7%
43,198 Covivio (b) 3,033,333
287,841 Klepierre S.A. (b) 4,029,216
157,435 Publicis Groupe S.A. (b) 5,074,154
155,555 TOTAL SE (b) 5,342,187
---------------
17,478,890
---------------
GERMANY -- 23.1%
20,521 Allianz SE (b) 3,938,614
98,277 BASF SE (b) 5,984,717
138,200 Bayerische Motoren Werke AG
(Preference Shares) (b) 7,553,002
168,430 Deutsche Post AG (b) 7,642,651
171,163 Evonik Industries AG (b) 4,427,831
101,465 Porsche Automobil Holding SE
(Preference Shares) (b) 6,036,390
198,852 TAG Immobilien AG (b) 5,996,191
---------------
41,579,396
---------------
ITALY -- 9.0%
287,728 Assicurazioni Generali S.p.A. (b) 4,055,382
995,006 Snam S.p.A. (b) 5,117,120
17,381,627 Telecom Italia S.p.A. (b) 7,018,272
---------------
16,190,774
---------------
NETHERLANDS -- 10.4%
3,963,931 Aegon N.V. (b) 10,259,950
228,578 NN Group N.V. (b) 8,568,010
---------------
18,827,960
---------------
SWITZERLAND -- 15.0%
118,475 LafargeHolcim Ltd. (b) 5,392,930
15,750 Swiss Life Holding AG (b) 5,959,667
50,514 Swiss Re AG (b) 3,747,075
738,777 UBS Group AG (b) 8,254,285
10,698 Zurich Insurance Group AG (b) 3,730,556
---------------
27,084,513
---------------
UNITED KINGDOM -- 20.3%
266,896 GlaxoSmithKline PLC (b) 5,003,657
3,784,933 Legal & General Group PLC (b) 9,233,253
588,866 Royal Dutch Shell PLC,
Class B (b) 7,141,242
355,041 SSE PLC (b) 5,525,946
3,312,884 Standard Life Aberdeen PLC (b) 9,647,820
---------------
36,551,918
---------------
TOTAL COMMON STOCKS -- 99.0% 178,492,698
(Cost $189,846,297) ---------------
|
221,628 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional
Class - 0.01% (c) $ 221,628
(Cost $221,628) ---------------
TOTAL INVESTMENTS -- 99.1% 178,714,326
(Cost $190,067,925) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.9% 1,512,941
---------------
NET ASSETS -- 100.0% $ 180,227,267
===============
|
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $178,492,698 or 99.0% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the New York Stock Exchange ("NYSE") close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) Rate shown reflects yield as of September 30, 2020.
(d) Aggregate cost for federal income tax purposes is $191,658,859. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $14,336,929 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $27,281,462. The net unrealized depreciation was $12,944,533.
See Notes to Financial Statements Page 35
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common
Stocks* $ 178,492,698 $ -- $ 178,492,698 $ --
Money Market
Funds 221,628 221,628 -- --
---------------------------------------------------------------
Total
Investments $ 178,714,326 $ 221,628 $ 178,492,698 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
Euro 64.3%
British Pound Sterling 20.4
Swiss Franc 15.2
United States Dollar 0.1
------
Total 100.0%
======
|
Page 36 See Notes to Financial Statements
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.4%
AUSTRALIA -- 3.3%
196,196 BGP Holdings
PLC (b) (c) (d) (e) (f) $ 0
11,552 BWP Trust (b) 33,611
10,238 Charter Hall Long Wale REIT (b) 37,019
11,441 Charter Hall Retail REIT (b) 27,693
36,128 Cromwell Property Group (b) 22,134
25,929 Dexus (b) 166,073
46,287 GPT Group (The) (b) 130,215
93,375 Mirvac Group (b) 146,374
23,199 National Storage REIT (b) 30,322
123,217 Scentre Group (b) 196,180
25,444 Shopping Centres Australasia
Property Group (b) 38,927
56,606 Stockland (b) 154,638
89,067 Vicinity Centres (b) 88,943
---------------
1,072,129
---------------
AUSTRIA -- 0.1%
1,636 CA Immobilien Anlagen AG (b) 48,364
---------------
BELGIUM -- 1.3%
653 Aedifica S.A. (b) 79,752
122 Ascencio 5,979
510 Befimmo S.A. (b) 22,798
642 Cofinimmo S.A. (b) 96,538
543 Intervest Offices & Warehouses
N.V. (b) 14,372
58 Leasinvest Real Estate S.C.A. (b) 5,519
306 Montea C.V.A. (b) 36,237
238 Retail Estates N.V. (b) 15,528
3,174 Warehouses De Pauw C.V.A. (b) 115,506
57 Wereldhave Belgium Comm
VA (b) (c) 2,909
362 Xior Student Housing N.V. (b) (g) 23,562
---------------
418,700
---------------
BERMUDA -- 0.3%
27,522 Hongkong Land Holdings Ltd. (b) 102,537
---------------
CANADA -- 2.8%
2,887 Allied Properties Real Estate
Investment Trust 77,728
2,781 Artis Real Estate Investment
Trust 16,604
896 Boardwalk Real Estate Investment
Trust 18,471
4,019 Canadian Apartment Properties
REIT 140,199
5,090 Chartwell Retirement Residences 38,608
6,061 Choice Properties Real Estate
Investment Trust 58,173
3,983 Cominar Real Estate Investment
Trust 21,956
2,187 Crombie Real Estate Investment
Trust 21,631
3,598 Dream Industrial Real Estate
Investment Trust 30,561
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
CANADA (CONTINUED)
1,012 Dream Office Real Estate
Investment Trust $ 13,794
5,116 First Capital Real Estate
Investment Trust 49,794
1,372 Granite Real Estate Investment
Trust 79,628
6,679 H&R Real Estate Investment Trust 48,504
2,658 InterRent Real Estate Investment
Trust 25,152
2,290 Killam Apartment Real Estate
Investment Trust 29,856
1,381 Northview Apartment Real Estate
Investment Trust 37,358
3,546 NorthWest Healthcare Properties
Real Estate Investment Trust 30,252
7,513 RioCan Real Estate Investment
Trust 79,331
3,087 SmartCentres Real Estate
Investment Trust 46,367
2,952 Summit Industrial Income REIT 28,466
1,262 WPT Industrial Real Estate
Investment Trust 16,027
---------------
908,460
---------------
CAYMAN ISLANDS -- 1.5%
64,004 CK Asset Holdings Ltd. (b) 314,499
39,274 Wharf Real Estate Investment Co.,
Ltd. (b) 160,986
---------------
475,485
---------------
FINLAND -- 0.4%
1,823 Citycon OYJ (b) 14,354
4,629 Kojamo OYJ (b) 99,421
---------------
113,775
---------------
FRANCE -- 1.1%
926 Carmila S.A. (b) 8,400
1,187 Covivio (b) 83,350
1,231 Gecina S.A. (b) 162,279
754 ICADE (b) 42,247
4,442 Klepierre S.A. (b) 62,179
1,457 Mercialys S.A. (b) 8,023
---------------
366,478
---------------
GERMANY -- 5.4%
4,220 alstria office REIT-AG (b) 58,638
1,213 Deutsche EuroShop AG (b) (c) 15,044
8,230 Deutsche Wohnen SE (b) 411,332
1,658 Hamborner REIT AG (b) 16,935
1,640 LEG Immobilien AG (b) 233,765
2,997 TAG Immobilien AG (b) 90,372
315 TLG Immobilien AG (b) 6,480
13,447 Vonovia SE (b) 921,837
---------------
1,754,403
---------------
GUERNSEY -- 0.1%
5,695 BMO Real Estate Investments Ltd. 3,792
8,734 Regional REIT Ltd. (g) (h) 7,382
|
See Notes to Financial Statements Page 37
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
GUERNSEY (CONTINUED)
12,310 Schroder Real Estate Investment
Trust Ltd. (b) $ 5,133
22,660 Sirius Real Estate Ltd. (b) 21,265
9,659 Standard Life Investment Property
Income Trust Ltd. (b) 5,788
---------------
43,360
---------------
HONG KONG -- 4.1%
46,669 Champion REIT (b) 23,219
47,829 Hang Lung Properties Ltd. (b) 121,895
14,172 Hysan Development Co., Ltd. (b) 42,621
48,813 Link REIT (b) 399,993
33,891 New World Development Co.,
Ltd. (b) 165,446
79,054 Sino Land Co., Ltd. (b) 92,549
33,596 Sun Hung Kai Properties Ltd. (b) 432,936
25,066 Swire Properties Ltd. (b) 66,415
---------------
1,345,074
---------------
IRELAND -- 0.1%
16,272 Hibernia REIT PLC (b) 19,006
10,392 Irish Residential Properties REIT
PLC (b) 17,195
---------------
36,201
---------------
ISLE OF MAN -- 0.0%
6,330 RDI REIT PLC (b) 7,193
---------------
ISRAEL -- 0.2%
3,240 Amot Investments Ltd. (b) 14,807
869 Azrieli Group Ltd. (b) 38,797
---------------
53,604
---------------
ITALY -- 0.0%
1,549 Immobiliare Grande Distribuzione
SIIQ S.p.A. (b) 5,388
---------------
JAPAN -- 11.8%
16 Activia Properties, Inc. (b) 60,935
31 Advance Residence Investment
Corp. (b) 91,320
2,827 AEON Mall Co., Ltd. (b) 39,739
37 AEON REIT Investment Corp. (b) 42,619
14 Comforia Residential REIT,
Inc. (b) 40,812
48 Daiwa House REIT Investment
Corp. (b) 122,481
6 Daiwa Office Investment Corp. (b) 34,336
45 Daiwa Securities Living
Investments Corp. (b) 46,501
11 Frontier Real Estate Investment
Corp. (b) 37,471
17 Fukuoka REIT Corp. (b) 22,077
23 Global One Real Estate Investment
Corp. (b) 22,143
89 GLP J-REIT (b) 136,979
8,600 Hulic Co., Ltd. (b) 80,695
27 Hulic REIT, Inc. (b) 35,784
28 Ichigo Office REIT Investment
Corp. (b) 20,355
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
JAPAN (CONTINUED)
45 Industrial & Infrastructure Fund
Investment Corp. (b) $ 77,117
206 Invesco Office J-REIT, Inc. (b) 28,538
116 Invincible Investment Corp. (b) 34,649
29 Japan Excellent, Inc. (b) 33,843
106 Japan Hotel REIT Investment
Corp. (b) 52,375
20 Japan Logistics Fund, Inc. (b) 57,346
21 Japan Prime Realty Investment
Corp. (b) 65,155
31 Japan Real Estate Investment
Corp. (b) 158,489
62 Japan Retail Fund Investment
Corp. (b) 95,915
9 Kenedix Office Investment
Corp. (b) 53,988
22 Kenedix Residential Next
Investment Corp. (b) 38,902
13 Kenedix Retail REIT Corp. (b) 26,237
39 LaSalle Logiport REIT (b) 65,307
39 MCUBS MidCity Investment
Corp. (b) 30,113
27,066 Mitsubishi Estate Co., Ltd. (b) 409,985
7 Mitsubishi Estate Logistics REIT
Investment Corp. (b) 28,875
21,968 Mitsui Fudosan Co., Ltd. (b) 382,280
10 Mitsui Fudosan Logistics Park,
Inc. (b) 47,787
37 Mori Hills REIT Investment
Corp. (b) 48,159
24 Mori Trust Sogo REIT, Inc. (b) 30,357
11 Nippon Accommodations Fund,
Inc. (b) 63,488
30 Nippon Building Fund, Inc. (b) 169,799
51 Nippon Prologis REIT, Inc. (b) 171,986
10 NIPPON REIT Investment
Corp. (b) 34,000
2,700 Nomura Real Estate Holdings,
Inc. (b) 51,384
106 Nomura Real Estate Master Fund,
Inc. (b) 132,794
62 Orix JREIT, Inc. (b) 95,394
30 Premier Investment Corp. (b) 34,922
95 Sekisui House REIT, Inc. (b) 70,121
9,344 Sumitomo Realty & Development
Co., Ltd. (b) 276,612
4,687 Tokyo Tatemono Co., Ltd. (b) 57,587
21 Tokyu REIT, Inc. (b) 29,375
70 United Urban Investment Corp. (b) 77,893
---------------
3,865,019
---------------
JERSEY -- 0.0%
1,967 Phoenix Spree Deutschland Ltd. 8,300
---------------
LUXEMBOURG -- 0.8%
1,512 ADO Properties
S.A. (b) (c) (g) (h) 41,835
28,404 Aroundtown S.A. (b) (c) 142,585
|
Page 38 See Notes to Financial Statements
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
LUXEMBOURG (CONTINUED)
2,695 Grand City Properties S.A. (b) $ 65,082
595 Shurgard Self Storage S.A. (b) 25,955
---------------
275,457
---------------
MULTI-NATIONAL -- 0.4%
3,200 Unibail-Rodamco-Westfield (b) 118,016
---------------
NETHERLANDS -- 0.1%
1,142 Eurocommercial Properties
N.V. (b) 13,228
438 NSI N.V. (b) 15,405
407 Vastned Retail N.V. (b) 10,876
957 Wereldhave N.V. (b) 8,725
---------------
48,234
---------------
NEW ZEALAND -- 0.3%
25,820 Goodman Property Trust (b) 40,266
37,270 Kiwi Property Group Ltd. (b) 26,256
25,071 Precinct Properties New Zealand
Ltd. (b) 28,102
---------------
94,624
---------------
NORWAY -- 0.2%
3,959 Entra ASA (b) (g) (h) 55,636
---------------
SINGAPORE -- 3.6%
69,800 Ascendas Real Estate Investment
Trust (b) 167,027
42,200 Ascott Residence Trust (b) 27,793
64,690 CapitaLand Commercial Trust 77,720
59,430 CapitaLand Ltd. (b) 118,822
56,983 CapitaLand Mall Trust (b) 81,101
18,700 CDL Hospitality Trusts (b) 14,543
11,100 City Developments Ltd. (b) 62,487
31,833 Fortune Real Estate Investment
Trust (b) 26,800
16,800 Frasers Centrepoint Trust (b) 29,701
59,100 Frasers Logistics & Commercial
Trust (b) (g) 60,513
28,833 Keppel DC REIT (b) 61,629
46,600 Keppel REIT (b) 36,767
33,800 Manulife US Real Estate
Investment Trust (b) (g) 25,149
51,921 Mapletree Commercial Trust (b) 74,588
38,800 Mapletree Industrial Trust (b) 91,928
60,453 Mapletree Logistics Trust (b) 91,058
9,200 Parkway Life Real Estate
Investment Trust (b) 28,035
48,897 Suntec Real Estate Investment
Trust (b) 52,427
11,700 UOL Group Ltd. (b) 57,490
---------------
1,185,578
---------------
SPAIN -- 0.4%
7,714 Inmobiliaria Colonial Socimi
S.A. (b) 63,669
1,440 Lar Espana Real Estate Socimi
S.A. (b) 6,642
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
SPAIN (CONTINUED)
7,872 Merlin Properties Socimi S.A. (b) $ 65,661
---------------
135,972
---------------
SWEDEN -- 2.3%
1,090 Atrium Ljungberg AB, Class B (b) 17,780
6,397 Castellum AB (b) 145,303
598 Catena AB (b) 26,479
1,991 Dios Fastigheter AB (b) 14,081
6,261 Fabege AB (b) 86,588
2,301 Fastighets AB Balder,
Class B (b) (c) 116,578
2,598 Hufvudstaden AB, Class A (b) 36,099
12,025 Klovern AB, Class B (b) 22,141
4,479 Kungsleden AB (b) 42,399
4,165 Nyfosa AB (b) (c) 36,871
2,095 Pandox AB (b) (c) 24,018
22,310 Samhallsbyggnadsbolaget i Norden
AB (b) 67,268
3,866 Wallenstam AB, Class B (b) 58,773
3,148 Wihlborgs Fastigheter AB (b) 62,165
---------------
756,543
---------------
SWITZERLAND -- 1.3%
333 Allreal Holding AG (b) 71,746
66 Hiag Immobilien Holding
AG (b) (c) 6,400
26 Intershop Holding AG (b) 16,810
154 Mobimo Holding AG (b) 45,142
1,021 PSP Swiss Property AG (b) 123,338
1,783 Swiss Prime Site AG (b) 161,931
---------------
425,367
---------------
UNITED KINGDOM -- 4.4%
5,513 Aberdeen Standard European
Logistics Income PLC (g) (h) 7,612
62,051 Assura PLC (b) 61,765
3,828 Big Yellow Group PLC (b) 51,312
21,952 British Land (The) Co. PLC (b) 95,698
17,396 Capital & Counties Properties
PLC (b) 25,062
14,769 Civitas Social Housing
PLC (b) (g) 20,117
3,704 CLS Holdings PLC (b) 10,162
9,204 Custodian REIT PLC 10,546
2,387 Derwent London PLC (b) 79,032
13,923 Empiric Student Property PLC 10,959
10,807 GCP Student Living PLC (b) 17,200
15,711 Grainger PLC (b) 60,115
6,015 Great Portland Estates PLC (b) 46,416
90,963 Hammerson PLC (b) (c) 19,153
2,394 Helical PLC 9,128
5,591 Impact Healthcare REIT PLC (g) 7,113
16,917 Land Securities Group PLC (b) 113,892
20,869 LondonMetric Property PLC (b) 59,689
12,371 LXI REIT PLC (b) (g) 17,193
7,174 NewRiver REIT PLC (b) 4,571
30,815 Primary Health Properties PLC (b) 58,974
4,858 Safestore Holdings PLC (b) 48,790
28,234 Segro PLC (b) 339,305
|
See Notes to Financial Statements Page 39
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
UNITED KINGDOM (CONTINUED)
5,284 Shaftesbury PLC (b) $ 33,877
10,858 Target Healthcare REIT PLC 14,711
7,545 Triple Point Social Housing REIT
PLC (g) (h) 10,417
40,511 Tritax Big Box REIT PLC (b) 80,905
10,039 Tritax EuroBox PLC (g) (h) 11,374
7,553 UNITE Group (The) PLC (b) (c) 81,669
3,162 Workspace Group PLC (b) 21,938
---------------
1,428,695
---------------
UNITED STATES -- 53.1%
1,997 Acadia Realty Trust 20,968
1,253 Agree Realty Corp. 79,741
50 Alexander's, Inc. 12,261
2,966 Alexandria Real Estate Equities,
Inc. 474,560
1,185 American Assets Trust, Inc. 28,547
3,241 American Campus Communities,
Inc. 113,176
2,570 American Finance Trust, Inc. 16,114
6,146 American Homes 4 Rent, Class A 175,038
4,820 Americold Realty Trust 172,315
3,505 Apartment Investment &
Management Co., Class A 118,189
4,963 Apple Hospitality REIT, Inc. 47,694
1,354 Armada Hoffler Properties, Inc. 12,538
3,334 AvalonBay Communities, Inc. 497,900
3,684 Boston Properties, Inc. 295,825
3,989 Brandywine Realty Trust 41,246
7,014 Brixmor Property Group, Inc. 81,994
1,084 Brookfield Property REIT, Inc.,
Class A 13,268
2,233 Camden Property Trust 198,692
2,249 CareTrust REIT, Inc. 40,021
11,305 Colony Capital, Inc. 30,863
2,696 Columbia Property Trust, Inc. 29,413
509 Community Healthcare Trust, Inc. 23,801
2,658 Corporate Office Properties Trust 63,048
3,504 Cousins Properties, Inc. 100,179
4,574 CubeSmart 147,786
2,762 CyrusOne, Inc. 193,423
4,702 DiamondRock Hospitality Co. 23,839
6,335 Digital Realty Trust, Inc. 929,725
5,583 Diversified Healthcare Trust 19,652
3,939 Douglas Emmett, Inc. 98,869
8,725 Duke Realty Corp. 321,953
1,884 Easterly Government Properties,
Inc. 42,220
910 EastGroup Properties, Inc. 117,690
3,410 Empire State Realty Trust, Inc.,
Class A 20,869
1,752 EPR Properties 48,180
2,763 Equity Commonwealth 73,579
4,117 Equity LifeStyle Properties, Inc. 252,372
8,707 Equity Residential 446,930
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
UNITED STATES (CONTINUED)
2,175 Essential Properties Realty
Trust, Inc. $ 39,846
1,545 Essex Property Trust, Inc. 310,221
2,986 Extra Space Storage, Inc. 319,472
1,782 Federal Realty Investment Trust 130,870
2,988 First Industrial Realty Trust,
Inc. 118,922
1,656 Four Corners Property Trust, Inc. 42,377
2,445 Franklin Street Properties Corp. 8,949
4,935 Gaming and Leisure Properties,
Inc. 182,250
804 Getty Realty Corp. 20,912
2,122 Global Net Lease, Inc. 33,740
3,181 Healthcare Realty Trust, Inc. 95,812
5,146 Healthcare Trust of America,
Inc., Class A 133,796
12,773 Healthpeak Properties, Inc. 346,787
2,435 Highwoods Properties, Inc. 81,743
16,554 Host Hotels & Resorts, Inc. 178,618
3,556 Hudson Pacific Properties, Inc. 77,983
2,231 Independence Realty Trust, Inc. 25,857
1,528 Industrial Logistics Properties
Trust 33,417
500 Innovative Industrial Properties,
Inc. 62,055
303 Investors Real Estate Trust 19,747
13,289 Invitation Homes, Inc. 371,959
2,884 JBG SMITH Properties 77,118
2,878 Kennedy-Wilson Holdings, Inc. 41,789
2,720 Kilroy Realty Corp. 141,331
9,779 Kimco Realty Corp. 110,112
1,955 Kite Realty Group Trust 22,639
6,438 Lexington Realty Trust 67,277
1,104 Life Storage, Inc. 116,218
915 LTC Properties, Inc. 31,897
3,528 Macerich (The) Co. 23,955
2,044 Mack-Cali Realty Corp. 25,795
12,314 Medical Properties Trust, Inc. 217,096
2,697 Mid-America Apartment
Communities, Inc. 312,717
2,235 Monmouth Real Estate Investment
Corp. 30,955
1,013 National Health Investors, Inc. 61,054
4,055 National Retail Properties, Inc. 139,938
1,474 National Storage Affiliates Trust 48,215
511 NexPoint Residential Trust, Inc. 22,663
1,126 Office Properties Income Trust 23,331
5,327 Omega Healthcare Investors, Inc. 159,490
4,479 Paramount Group, Inc. 31,711
5,565 Park Hotels & Resorts, Inc. 55,594
3,064 Pebblebrook Hotel Trust 38,392
4,913 Physicians Realty Trust 87,992
2,971 Piedmont Office Realty Trust,
Inc., Class A 40,316
17,460 Prologis, Inc. 1,756,825
473 PS Business Parks, Inc. 57,890
3,573 Public Storage 795,779
1,441 QTS Realty Trust, Inc., Class A 90,812
8,148 Realty Income Corp. 494,991
3,990 Regency Centers Corp. 151,700
|
Page 40 See Notes to Financial Statements
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
UNITED STATES (CONTINUED)
2,723 Retail Opportunity Investments
Corp. $ 28,360
5,048 Retail Properties of America,
Inc., Class A 29,329
2,924 Rexford Industrial Realty, Inc. 133,802
3,864 RLJ Lodging Trust 33,462
1,899 RPT Realty 10,331
1,188 Ryman Hospitality Properties,
Inc. 43,718
4,836 Sabra Health Care REIT, Inc. 66,664
407 Safehold, Inc. 25,275
3,860 Service Properties Trust 30,687
7,208 Simon Property Group, Inc. 466,213
3,605 SITE Centers Corp. 25,956
1,728 SL Green Realty Corp. 80,127
2,435 Spirit Realty Capital, Inc. 82,181
3,528 STAG Industrial, Inc. 107,569
5,516 STORE Capital Corp. 151,304
2,434 Summit Hotel Properties, Inc. 12,608
2,289 Sun Communities, Inc. 321,856
5,060 Sunstone Hotel Investors, Inc. 40,176
2,132 Tanger Factory Outlet Centers,
Inc. 12,856
1,420 Taubman Centers, Inc. 47,272
1,570 Terreno Realty Corp. 85,973
6,937 UDR, Inc. 226,216
302 Universal Health Realty Income
Trust 17,211
2,732 Urban Edge Properties 26,555
8,841 Ventas, Inc. 370,968
25,567 VEREIT, Inc. 166,186
12,661 VICI Properties, Inc. 295,888
4,154 Vornado Realty Trust 140,031
1,942 Washington Real Estate Investment
Trust 39,092
2,871 Weingarten Realty Investors 48,692
9,906 Welltower, Inc. 545,722
4,052 WP Carey, Inc. 264,028
2,667 Xenia Hotels & Resorts, Inc. 23,416
---------------
17,335,127
---------------
TOTAL COMMON STOCKS -- 99.4% 32,483,719
(Cost $35,625,148) ---------------
INVESTMENT COMPANIES (a) -- 0.1%
GUERNSEY -- 0.1%
12,499 BMO Commercial Property Trust
Ltd. (b) 10,411
12,941 Picton Property Income Ltd. 10,453
17,474 UK Commercial Property REIT
Ltd. (b) 15,353
---------------
TOTAL INVESTMENT COMPANIES
-- 0.1% 36,217
(Cost $56,386) ---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
RIGHTS (a) -- 0.0%
UNITED KINGDOM -- 0.0%
2,514 Triple Point Social Housing REIT
PLC, expiring 10/26/20 (b) (c) $ 33
(Cost $0) ---------------
MONEY MARKET FUNDS -- 0.2%
68,066 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (i) 68,066
(Cost $68,066) ---------------
TOTAL INVESTMENTS -- 99.7% 32,588,035
(Cost $35,749,600) (j)
NET OTHER ASSETS AND
LIABILITIES -- 0.3% 82,508
---------------
NET ASSETS -- 100.0% $ 32,670,543
===============
|
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $14,080,896 or 43.1% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the NYSE close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) This is a restricted security which cannot be traded as a result of the in-specie distribution. It was acquired on August 6, 2009 at a cost of $0 and has a carrying value per share of $0.
(e) Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be illiquid by First Trust Advisors, L.P., the Fund's advisor.
(f) This security's value was determined using significant unobservable inputs (see Note 2A -- Portfolio Valuation in the Notes to Financial Statements).
(g) This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933, as amended (the "1933 Act").
(h) This security is exempt from registration upon resale under Rule 144A of the 1933 Act and may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security is not restricted on the
See Notes to Financial Statements Page 41
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
foreign exchange where it trades freely without any additional registration. As such, it does not require the additional disclosure required of restricted securities.
(i) Rate shown reflects yield as of September 30, 2020.
(j) Aggregate cost for federal income tax purposes is $36,673,075. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $4,223,513 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $8,308,553. The net unrealized depreciation was $4,085,040.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
Australia $ 1,072,129 $ -- $ 1,072,129 $ --**
Belgium 418,700 5,979 412,721 --
Canada 908,460 908,460 -- --
Guernsey 43,360 11,174 32,186 --
Jersey 8,300 8,300 -- --
Singapore 1,185,578 77,720 1,107,858 --
United
Kingdom 1,428,695 81,860 1,346,835 --
United States 17,335,127 17,335,127 -- --
Other Country
Categories* 10,083,370 -- 10,083,370 --
Investment
Companies:
Guernsey 36,217 10,453 25,764 --
Rights* 33 -- 33 --
Money Market
Funds 68,066 68,066 -- --
---------------------------------------------------------------
Total
Investments $ 32,588,035 $ 18,507,139 $ 14,080,896 $ --**
===============================================================
|
* See Portfolio of Investments for country breakout. ** Investment is valued at $0.
Level 3 Common Stocks are fair valued by the Advisor's Pricing Committee and are footnoted in the Portfolio of Investments.
Level 3 Common Stocks values are based on unobservable and non-quantitative inputs.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 53.8%
Japanese Yen 11.8
Euro 10.2
Hong Kong Dollar 5.7
British Pound Sterling 4.7
Singapore Dollar 3.5
Australian Dollar 3.3
Canadian Dollar 2.7
Swedish Krona 2.3
Swiss Franc 1.3
New Zealand Dollar 0.3
Norwegian Krone 0.2
Israeli Shekel 0.2
------
Total 100.0%
======
|
Page 42 See Notes to Financial Statements
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.1%
AUSTRALIA -- 4.4%
950,353 Bendigo & Adelaide Bank Ltd. (b) $ 4,139,162
71,032 Commonwealth Bank of
Australia (b) 3,268,631
361,040 Fortescue Metals Group Ltd. (b) 4,241,510
561,029 Suncorp Group Ltd. (b) 3,424,816
---------------
15,074,119
---------------
BELGIUM -- 1.4%
116,151 Ageas S.A./N.V. (b) 4,752,823
---------------
BERMUDA -- 6.4%
396,400 Invesco Ltd. 4,522,924
1,414,646 Kerry Properties Ltd. (b) 3,638,241
123,888 Lazard Ltd., Class A 4,094,498
782,078 Pacific Century Premium
Developments Ltd. (b) (c) 206,231
701,511 VTech Holdings Ltd. (b) 4,375,724
3,220,598 Yue Yuen Industrial Holdings
Ltd. (b) 5,219,587
---------------
22,057,205
---------------
CANADA -- 11.3%
76,897 Bank of Nova Scotia (The) 3,194,729
69,240 BCE, Inc. 2,871,415
48,399 Canadian Imperial Bank of
Commerce 3,617,703
138,049 Genworth MI Canada, Inc. 3,579,912
225,446 Great-West Lifeco, Inc. 4,405,471
141,470 IGM Financial, Inc. 3,243,648
126,095 Laurentian Bank of Canada 2,589,988
234,807 Manulife Financial Corp. 3,265,837
227,557 Power Corp. of Canada 4,458,685
151,182 Shaw Communications, Inc.,
Class B 2,758,982
60,653 TC Energy Corp. 2,546,283
144,162 TELUS Corp. 2,536,680
---------------
39,069,333
---------------
CAYMAN ISLANDS -- 0.9%
497,485 CK Hutchison Holdings Ltd. (b) 3,014,637
---------------
FINLAND -- 1.9%
171,396 Fortum OYJ (b) 3,465,335
407,945 Wartsila OYJ Abp (b) 3,203,658
---------------
6,668,993
---------------
FRANCE -- 2.0%
112,815 Nexity S.A. (b) 3,430,799
98,259 TOTAL SE (b) 3,374,485
---------------
6,805,284
---------------
GERMANY -- 1.8%
14,721 Allianz SE (b) 2,825,415
56,930 BASF SE (b) 3,466,833
---------------
6,292,248
---------------
HONG KONG -- 6.8%
1,157,922 BOC Hong Kong Holdings Ltd. (b) 3,069,635
199,176 Hang Seng Bank Ltd. (b) 2,950,749
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
HONG KONG (CONTINUED)
865,959 Henderson Land Development Co.,
Ltd. (b) $ 3,215,409
1,120,403 Hysan Development Co., Ltd. (b) 3,369,512
713,049 New World Development Co.,
Ltd. (b) 3,480,899
6,919,550 PCCW Ltd. (b) 4,139,432
647,139 Swire Pacific Ltd., Class A (b) 3,133,110
---------------
23,358,746
---------------
IRELAND -- 0.7%
46,590 Seagate Technology PLC 2,295,489
---------------
ITALY -- 5.7%
254,973 Assicurazioni Generali S.p.A. (b) 3,593,717
188,424 Azimut Holding S.p.A. (b) 3,402,379
135,102 Banca Generali S.p.A. (b) (c) 4,108,942
531,358 Eni S.p.A. (b) 4,153,155
1,709,118 UnipolSai Assicurazioni
S.p.A. (b) 4,456,800
---------------
19,714,993
---------------
JAPAN -- 3.7%
160,778 Aozora Bank Ltd. (b) 2,669,638
155,400 Idemitsu Kosan Co., Ltd. (b) 3,317,912
184,100 Japan Tobacco, Inc. (b) 3,358,682
1,463,500 Sojitz Corp. (b) 3,321,299
---------------
12,667,531
---------------
JERSEY -- 0.9%
141,683 Janus Henderson Group PLC 3,077,355
---------------
NETHERLANDS -- 1.0%
47,085 LyondellBasell Industries N.V.,
Class A 3,319,022
---------------
NEW ZEALAND -- 1.0%
1,090,841 Spark New Zealand Ltd. (b) 3,403,758
---------------
SINGAPORE -- 1.5%
3,038,300 ComfortDelGro Corp., Ltd. (b) 3,157,622
1,352,340 Singapore Telecommunications
Ltd. (b) 2,116,510
---------------
5,274,132
---------------
SOUTH KOREA -- 6.6%
795,519 BNK Financial Group, Inc. (b) 3,442,012
149,126 Hana Financial Group, Inc. (b) 3,582,465
70,962 Hyundai Motor Co. (Preference
Shares) (b) 5,123,130
546,188 Industrial Bank of Korea (b) 3,731,069
108,430 KB Financial Group, Inc. (b) 3,491,445
488,562 Woori Financial Group, Inc. (b) 3,572,407
---------------
22,942,528
---------------
SPAIN -- 11.4%
162,622 ACS Actividades de Construccion
y Servicios S.A. (b) 3,676,038
6,805,817 Bankia S.A. (b) 9,909,757
799,963 Bankinter S.A. (b) 3,443,824
199,570 Cia de Distribucion Integral
Logista Holdings S.A. (b) 3,406,627
172,260 Enagas S.A. (b) 3,974,601
|
See Notes to Financial Statements Page 43
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SPAIN (CONTINUED)
2,381,149 Mapfre S.A. (b) $ 3,735,716
221,914 Naturgy Energy Group S.A. (b) 4,450,439
184,762 Red Electrica Corp., S.A. (b) 3,465,298
910,244 Telefonica S.A. (b) 3,118,123
---------------
39,180,423
---------------
SWEDEN -- 1.0%
821,939 Telia Co., AB (b) 3,362,664
---------------
SWITZERLAND -- 2.2%
58,675 Swiss Re AG (b) 4,352,449
9,445 Zurich Insurance Group AG (b) 3,293,616
---------------
7,646,065
---------------
UNITED KINGDOM -- 7.9%
87,058 British American Tobacco PLC (b) 3,122,899
1,397,158 Drax Group PLC (b) 4,796,661
1,121,730 Jupiter Fund Management PLC (b) 3,238,369
1,539,792 Legal & General Group PLC (b) 3,756,285
469,459 Phoenix Group Holdings PLC (b) 4,174,935
73,202 Rio Tinto PLC (b) 4,404,767
1,302,490 Standard Life Aberdeen PLC (b) 3,793,127
---------------
27,287,043
---------------
UNITED STATES -- 18.6%
108,197 Altria Group, Inc. 4,180,732
110,281 AT&T, Inc. 3,144,111
499,501 CenturyLink, Inc. 5,039,965
163,059 CIT Group, Inc. 2,887,775
94,139 Comerica, Inc. 3,600,817
244,154 First Financial Bancorp 2,931,069
105,636 Helmerich & Payne, Inc. 1,547,567
341,268 Huntington Bancshares, Inc. 3,129,427
88,591 Marathon Petroleum Corp. 2,599,260
565,100 Navient Corp. 4,775,095
380,348 Northwest Bancshares, Inc. 3,499,202
145,010 PacWest Bancorp 2,476,771
55,917 Prudential Financial, Inc. 3,551,848
157,135 Synovus Financial Corp. 3,326,548
318,150 Umpqua Holdings Corp. 3,378,753
83,132 Universal Corp. 3,481,568
217,779 Unum Group 3,665,220
258,676 Waddell & Reed Financial, Inc.,
Class A 3,841,339
136,412 Wells Fargo & Co. 3,207,046
---------------
64,264,113
---------------
TOTAL COMMON STOCKS -- 99.1% 341,528,504
(Cost $386,924,330) ---------------
MONEY MARKET FUNDS -- 0.1%
190,722 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (d) 190,722
(Cost $190,722) ---------------
TOTAL INVESTMENTS -- 99.2% $ 341,719,226
(Cost $387,115,052) (e)
NET OTHER ASSETS AND
LIABILITIES -- 0.8% 2,769,435
---------------
NET ASSETS -- 100.0% $ 344,488,661
===============
|
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $220,885,770 or 64.1% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the NYSE close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) Rate shown reflects yield as of September 30, 2020.
(e) Aggregate cost for federal income tax purposes is $395,860,126. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $12,269,105 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $66,410,005. The net unrealized depreciation was $54,140,900.
Page 44 See Notes to Financial Statements
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
Bermuda $ 22,057,205 $ 8,617,422 $ 13,439,783 $ --
Canada 39,069,333 39,069,333 -- --
Ireland 2,295,489 2,295,489 -- --
Jersey 3,077,355 3,077,355 -- --
Netherlands 3,319,022 3,319,022 -- --
United States 64,264,113 64,264,113 -- --
Other Country
Categories* 207,445,987 -- 207,445,987 --
Money Market
Funds 190,722 190,722 -- --
---------------------------------------------------------------
Total
Investments $ 341,719,226 $ 120,833,456 $ 220,885,770 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
Euro 24.4%
United States Dollar 23.9
Hong Kong Dollar 11.7
Canadian Dollar 11.4
British Pound Sterling 8.0
South Korean Won 6.7
Australian Dollar 4.4
Japanese Yen 3.7
Swiss Franc 2.2
Singapore Dollar 1.6
New Zealand Dollar 1.0
Swedish Krona 1.0
------
Total 100.0%
======
|
See Notes to Financial Statements Page 45
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.4%
AUSTRALIA -- 1.2%
247,853 AGL Energy Ltd. (b) $ 2,420,119
---------------
CANADA -- 18.5%
397,553 Boralex, Inc., Class A 11,491,731
468,504 Innergex Renewable Energy, Inc. 8,465,477
577,641 Northland Power, Inc. 17,473,906
42,370 TransAlta Renewables, Inc. 532,350
---------------
37,963,464
---------------
CAYMAN ISLANDS -- 0.8%
2,219,069 China High Speed Transmission
Equipment Group Co., Ltd. 1,749,474
---------------
CHINA -- 6.4%
12,159,484 China Datang Corp. Renewable
Power Co., Ltd., Class H (b) 1,671,727
12,836,140 China Longyuan Power Group
Corp., Ltd., Class H (b) 8,064,941
681,180 China Suntien Green Energy Corp.,
Ltd., Class H (b) 177,099
3,558,607 Xinjiang Goldwind Science &
Technology Co., Ltd.,
Class H (b) 3,131,012
---------------
13,044,779
---------------
DENMARK -- 16.1%
114,217 Orsted A/S (d) (e) 15,746,006
106,290 Vestas Wind Systems A/S (b) 17,177,158
---------------
32,923,164
---------------
FRANCE -- 2.2%
290,466 Engie S.A. (b) (c) 3,881,671
12,541 Neoen S.A. (b) (c) (d) (e) 674,866
---------------
4,556,537
---------------
GERMANY -- 6.2%
341,616 E. ON SE (b) 3,765,455
185,035 PNE AG (b) (f) 1,165,582
101,667 RWE AG (b) 3,807,387
29,024 Siemens AG (b) 3,665,436
14,636 Siemens Energy AG (c) 394,682
---------------
12,798,542
---------------
GREECE -- 1.5%
238,169 Terna Energy S.A. 3,183,368
---------------
ITALY -- 5.2%
446,088 Enel S.p.A. (b) 3,870,244
609,271 Falck Renewables S.p.A. (b) 3,844,542
101,319 Prysmian S.p.A. (b) 2,941,071
---------------
10,655,857
---------------
JAPAN -- 4.8%
134,344 Mitsubishi Heavy Industries
Ltd. (b) 2,974,472
224,622 Mitsui & Co., Ltd. (b) 3,859,639
649,230 Toray Industries, Inc. (b) 2,970,232
---------------
9,804,343
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
PORTUGAL -- 1.9%
798,062 EDP - Energias de Portugal
S.A. (b) $ 3,924,041
---------------
SOUTH KOREA -- 2.6%
36,142 CS Wind Corp. (b) 3,063,508
11,361 Dongkuk Structures &
Construction Co., Ltd. (b) 80,483
499,838 Unison Co., Ltd. (b) (c) 2,201,142
---------------
5,345,133
---------------
SPAIN -- 12.0%
8,508 Acciona S.A. (b) 923,340
126,338 Endesa S.A. (b) 3,379,308
320,885 Iberdrola S.A. (b) 3,949,664
603,456 Siemens Gamesa Renewable
Energy S.A. (b) 16,330,890
---------------
24,583,202
---------------
SWEDEN -- 2.5%
112,352 Eolus Vind AB, Class B (b) 1,986,047
149,769 SKF AB, Class B (b) 3,089,820
---------------
5,075,867
---------------
SWITZERLAND -- 4.3%
158,712 ABB Ltd. (b) 4,035,071
7,770 BKW AG (b) 827,456
1,845 Gurit Holding AG (b) 3,928,616
---------------
8,791,143
---------------
UNITED KINGDOM -- 1.8%
240,176 SSE PLC (b) 3,738,159
---------------
UNITED STATES -- 11.4%
74,768 Alliant Energy Corp. 3,861,767
8,157 American Superconductor Corp. (c) 118,113
50,391 Duke Energy Corp. 4,462,627
638,599 General Electric Co. 3,978,472
14,505 NextEra Energy, Inc. 4,026,008
157,036 TPI Composites, Inc. (c) 4,547,763
40,592 Trinity Industries, Inc. 791,544
19,103 Woodward, Inc. 1,531,296
---------------
23,317,590
---------------
TOTAL COMMON STOCKS -- 99.4% 203,874,782
(Cost $170,137,200) ---------------
MONEY MARKET FUNDS -- 0.0%
5,161 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (g) (h) 5,161
65,905 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (g) 65,905
---------------
TOTAL MONEY MARKET FUNDS
-- 0.0% 71,066
(Cost $71,066) ---------------
|
Page 46 See Notes to Financial Statements
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.1%
|
$ 78,786 JPMorgan Chase & Co., 0.05% (g), dated 09/30/20, due 10/01/20, with a maturity value of $78,786. Collateralized by U.S. Treasury Note, interest rate of 1.125%, due 02/28/25.
The value of the collateral
including accrued interest is
$80,337. (h) $ 78,786
(Cost $78,786) ---------------
TOTAL INVESTMENTS -- 99.5% 204,024,634
(Cost $170,287,052) (i)
NET OTHER ASSETS AND
LIABILITIES -- 0.5% 1,050,176
---------------
NET ASSETS -- 100.0% $ 205,074,810
===============
|
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $121,520,198 or 59.3% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the NYSE close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) This security is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the "1933 Act") and may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security is not restricted on the foreign exchange where it trades freely without any additional registration. As such, it does not require the additional disclosure required of restricted securities.
(e) This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act.
(f) All or a portion of this security is on loan (see Note 2E - 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 $80,000 and the total value of the collateral held by the Fund is $83,947.
(g) Rate shown reflects yield as of September 30, 2020.
(h) This security serves as collateral for securities on loan.
(i) Aggregate cost for federal income tax purposes is $172,524,889. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $38,722,898 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $7,223,153. The net unrealized appreciation was $31,499,745.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
Canada $ 37,963,464 $ 37,963,464 $ -- $ --
Cayman
Islands 1,749,474 1,749,474 -- --
Denmark 32,923,164 15,746,006 17,177,158 --
Germany 12,798,542 394,682 12,403,860 --
Greece 3,183,368 3,183,368 -- --
United States 23,317,590 23,317,590 -- --
Other Country
Categories* 91,939,180 -- 91,939,180 --
Money Market
Funds 71,066 71,066 -- --
Repurchase
Agreements 78,786 -- 78,786 --
---------------------------------------------------------------
Total
Investments $ 204,024,634 $ 82,425,650 $ 121,598,984 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
See Notes to Financial Statements Page 47
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
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:
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 80,000
Non-cash Collateral(2) (80,000)
---------------
Net Amount $ --
===============
|
(1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis.
(2) At September 30, 2020, 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:
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 78,786
Non-cash Collateral(4) (78,786)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
|
(4) At September 30, 2020, the value of the collateral received from each seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
Euro 29.3%
Canadian Dollar 18.6
Danish Krone 16.1
United States Dollar 11.5
Hong Kong Dollar 7.3
Japanese Yen 4.8
Swiss Franc 4.3
South Korean Won 2.6
Swedish Krona 2.5
British Pound Sterling 1.8
Australian Dollar 1.2
------
Total 100.0%
======
|
Page 48 See Notes to Financial Statements
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.7%
AUSTRALIA -- 3.4%
6,026 CIMIC Group Ltd. (b) (c) $ 80,717
35,110 Downer EDI Ltd. (b) 111,595
3,406 Monadelphous Group Ltd. (b) 25,029
---------------
217,341
---------------
CANADA -- 4.3%
2,699 Aecon Group, Inc. 27,729
7,312 SNC-Lavalin Group, Inc. 117,240
4,203 Stantec, Inc. 127,616
---------------
272,585
---------------
CAYMAN ISLANDS -- 0.8%
72,745 China State Construction
International Holdings
Ltd. (b) 47,719
---------------
CHINA -- 3.4%
221,769 China Communications
Construction Co., Ltd.,
Class H (b) 116,620
212,427 China Railway Group Ltd.,
Class H (b) 100,354
---------------
216,974
---------------
FINLAND -- 0.5%
4,882 YIT OYJ (b) 29,429
---------------
FRANCE -- 8.9%
6,106 Bouygues S.A. (b) 211,002
1,973 Eiffage S.A. (b) (c) 161,027
2,237 Vinci S.A. (b) 186,917
---------------
558,946
---------------
GERMANY -- 1.8%
1,458 HOCHTIEF AG (b) 113,185
---------------
IRELAND -- 4.2%
2,912 Kingspan Group PLC (b) (c) 265,012
---------------
ITALY -- 0.2%
10,308 Webuild S.p.A. (b) 12,073
---------------
JAPAN -- 32.6%
16,400 Chiyoda Corp. (b) (c) 39,712
5,400 COMSYS Holdings Corp. (b) 150,678
13,300 JGC Holdings Corp. (b) 137,949
14,100 Kajima Corp. (b) 169,880
6,400 Kandenko Co., Ltd. (b) 52,277
7,000 Kinden Corp. (b) 123,629
2,270 Kumagai Gumi Co., Ltd. (b) 58,494
5,700 Kyowa Exeo Corp. (b) 148,844
10,200 Maeda Corp. (b) 74,755
3,700 Maeda Road Construction Co.,
Ltd. (b) 67,765
2,800 Nippo Corp. (b) 77,441
3,820 Nishimatsu Construction Co.,
Ltd. (b) 75,879
18,300 Obayashi Corp. (b) 167,066
1,800 Okumura Corp. (b) 45,192
17,800 Penta-Ocean Construction Co.,
Ltd. (b) 116,702
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
JAPAN (CONTINUED)
2,000 Raito Kogyo Co., Ltd. (b) $ 30,140
19,400 Shimizu Corp. (b) 146,046
2,300 SHO-BOND Holdings Co., Ltd. (b) 114,772
5,300 Taisei Corp. (b) 179,389
11,900 Toda Corp. (b) 81,673
---------------
2,058,283
---------------
NETHERLANDS -- 2.1%
2,184 Arcadis N.V. (b) (c) 47,403
4,428 Boskalis Westminster (b) (c) 87,841
---------------
135,244
---------------
NORWAY -- 0.6%
2,974 Veidekke ASA (b) (c) 38,284
---------------
PHILIPPINES -- 0.9%
9,880 Manila Electric Co. (b) 55,391
---------------
SOUTH KOREA -- 1.9%
10,369 Daewoo Engineering &
Construction Co., Ltd. (b) (c) 24,642
4,714 GS Engineering & Construction
Corp. (b) 97,099
---------------
121,741
---------------
SPAIN -- 3.3%
7,258 ACS Actividades de Construccion
y Servicios S.A. (b) 164,066
19,110 Sacyr S.A. (b) 33,952
690 Tecnicas Reunidas S.A. (b) (c) 7,378
---------------
205,396
---------------
SWEDEN -- 6.2%
4,395 NCC AB, Class B (b) 80,043
11,829 Peab AB, Class B (b) (c) 118,531
9,010 Skanska AB, Class B (b) 190,279
---------------
388,853
---------------
UNITED KINGDOM -- 1.4%
31,052 Balfour Beatty PLC (b) 89,393
---------------
UNITED STATES -- 23.2%
4,687 AECOM (c) 196,104
2,370 Dycom Industries, Inc. (c) 125,184
2,607 EMCOR Group, Inc. 176,520
10,435 Fluor Corp. 91,932
3,948 Granite Construction, Inc. 69,524
2,417 Jacobs Engineering Group, Inc. 224,225
7,141 KBR, Inc. 159,673
3,868 MasTec, Inc. (c) 163,230
4,921 Quanta Services, Inc. 260,124
---------------
1,466,516
---------------
TOTAL INVESTMENTS -- 99.7% 6,292,365
(Cost $7,181,529) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.3% 17,497
---------------
NET ASSETS -- 100.0% $ 6,309,862
===============
|
See Notes to Financial Statements Page 49
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM) PORTFOLIO OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2020 |
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $4,553,264 or 72.2% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the NYSE close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) Aggregate cost for federal income tax purposes is $7,253,177. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $814,626 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $1,775,438. The net unrealized depreciation was $960,812.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
Canada $ 272,585 $ 272,585 $ -- $ --
United States 1,466,516 1,466,516 -- --
Other Country
Categories* 4,553,264 -- 4,553,264 --
---------------------------------------------------------------
Total
Investments $ 6,292,365 $ 1,739,101 $ 4,553,264 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
Japanese Yen 32.7%
United States Dollar 23.3
Euro 21.0
Swedish Krona 6.2
Canadian Dollar 4.3
Hong Kong Dollar 4.2
Australian Dollar 3.5
South Korean Won 1.9
British Pound Sterling 1.4
Philippine Peso 0.9
Norwegian Krone 0.6
------
Total 100.0%
======
|
Page 50 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.5%
CANADA -- 0.3%
3,993 Fortis, Inc. $ 163,252
517 Stella-Jones, Inc. 17,511
---------------
180,763
---------------
CHINA -- 0.2%
5,910 BYD Co., Ltd., Class H (b) 95,306
---------------
FRANCE -- 8.3%
15,908 Engie S.A. (b) (c) 212,588
36,329 Schneider Electric SE (b) 4,515,682
---------------
4,728,270
---------------
GERMANY -- 2.4%
6,429 Siemens AG (b) 811,917
3,214 Siemens Energy AG (c) 86,671
10,151 SMA Solar Technology AG (b) (c) 453,969
---------------
1,352,557
---------------
IRELAND -- 19.0%
44,151 Eaton Corp. PLC 4,504,726
110,675 Johnson Controls International
PLC 4,521,074
96,311 nVent Electric PLC 1,703,742
---------------
10,729,542
---------------
ITALY -- 8.9%
62,040 Enel S.p.A. (b) 538,257
80,402 Prysmian S.p.A. (b) 2,333,896
311,094 Terna Rete Elettrica Nazionale
S.p.A. (b) 2,176,676
---------------
5,048,829
---------------
JAPAN -- 2.9%
600 GS Yuasa Corp. (b) 10,368
8,400 Hitachi Ltd. (b) 284,419
26,000 Meidensha Corp. (b) 400,534
2,200 NEC Corp. (b) 128,686
2,200 NGK Insulators Ltd. (b) 31,413
32,200 Nissin Electric Co., Ltd. (b) 344,545
27,600 Osaki Electric Co., Ltd. (b) 160,694
21,100 Panasonic Corp. (b) 179,731
3,500 Toshiba Corp. (b) 89,284
---------------
1,629,674
---------------
JERSEY -- 8.5%
52,343 Aptiv PLC 4,798,806
---------------
NETHERLANDS -- 0.5%
1,944 NXP Semiconductors N.V. 242,631
564 STMicroelectronics N.V. 17,309
---------------
259,940
---------------
SPAIN -- 3.9%
117,605 Red Electrica Corp., S.A. (b) 2,205,737
---------------
SWITZERLAND -- 9.2%
176,710 ABB Ltd. (b) 4,492,649
13,370 Landis+Gyr Group AG (b) (c) 728,005
---------------
5,220,654
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
TAIWAN -- 0.1%
3,846 Advantech Co., Ltd. (b) $ 38,919
---------------
UNITED KINGDOM -- 0.6%
591 Dialog Semiconductor PLC (b) (c) 25,759
28,137 National Grid PLC (b) 323,187
---------------
348,946
---------------
UNITED STATES -- 34.7%
20,089 Advanced Energy Industries,
Inc. (c) 1,264,402
5,030 AES (The) Corp. 91,093
12,494 American Superconductor Corp. (c) 180,913
3,173 Analog Devices, Inc. 370,416
357 Arcosa, Inc. 15,740
176 AZZ, Inc. 6,005
14,374 Badger Meter, Inc. 939,628
310 Belden, Inc. 9,647
26,692 Cisco Systems, Inc. 1,051,398
192 Digi International, Inc. (c) 3,001
5,136 Emerson Electric Co. 336,768
328 EnerSys 22,015
29,184 Enphase Energy, Inc. (c) 2,410,307
168 ESCO Technologies, Inc. 13,534
68,461 General Electric Co. 426,512
6,032 Honeywell International, Inc. 992,928
429 Hubbell, Inc. 58,704
7,654 International Business Machines
Corp. 931,262
20,156 Itron, Inc. (c) 1,224,276
394 MasTec, Inc. (c) 16,627
7,637 MYR Group, Inc. (c) 283,944
2,106 NVIDIA Corp. 1,139,809
16,616 Oracle Corp. 991,975
43,978 Quanta Services, Inc. 2,324,677
10,191 SolarEdge Technologies, Inc. (c) 2,429,025
330 SPX Corp. (c) 15,305
2,262 Tesla, Inc. (c) 970,421
1,763 Trimble, Inc. (c) 85,858
169 Valmont Industries, Inc. 20,986
57,127 Veoneer, Inc. (c) 839,767
353 WESCO International, Inc. (c) 15,539
6,912 Willdan Group, Inc. (c) 176,325
---------------
19,658,807
---------------
TOTAL INVESTMENTS -- 99.5% 56,296,750
(Cost $47,979,246) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.5% 282,233
---------------
NET ASSETS -- 100.0% $ 56,578,983
===============
|
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
See Notes to Financial Statements Page 51
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $20,582,221 or 36.4% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the NYSE close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) Aggregate cost for federal income tax purposes is $49,699,522. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $8,885,488 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $2,288,260. The net unrealized appreciation was $6,597,228.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
Canada $ 180,763 $ 180,763 $ -- $ --
Germany 1,352,557 86,671 1,265,886 --
Ireland 10,729,542 10,729,542 -- --
Jersey 4,798,806 4,798,806 -- --
Netherlands 259,940 259,940 -- --
United States 19,658,807 19,658,807 -- --
Other Country
Categories* 19,316,335 -- 19,316,335 --
---------------------------------------------------------------
Total
Investments $ 56,296,750 $ 35,714,529 $ 20,582,221 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 62.9%
Euro 23.7
Swiss Franc 9.3
Japanese Yen 2.9
British Pound Sterling 0.6
Canadian Dollar 0.3
Hong Kong Dollar 0.2
New Taiwan Dollar 0.1
------
Total 100.0%
======
|
Page 52 See Notes to Financial Statements
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.4%
AUSTRALIA -- 4.2%
20,432 Fortescue Metals Group Ltd. (b) $ 240,036
---------------
BERMUDA -- 0.2%
11,802 China Water Affairs Group
Ltd. (b) 9,297
---------------
CANADA -- 11.6%
14,530 Canadian Natural Resources Ltd. 232,864
16,313 Cenovus Energy, Inc. 63,583
7,035 Nutrien Ltd. (c) 275,983
559 Premium Brands Holdings Corp. 42,204
4,007 Tourmaline Oil Corp. 48,961
---------------
663,595
---------------
CAYMAN ISLANDS -- 0.1%
22,510 China Zhongwang Holdings Ltd. (b) 3,827
---------------
HONG KONG -- 5.4%
2,518 CNOOC Ltd., ADR 241,854
44,000 Guangdong Investment Ltd. (b) 69,959
---------------
311,813
---------------
INDIA -- 0.1%
5,810 Oil India Ltd. (b) 7,063
---------------
IRELAND -- 0.6%
3,216 Glanbia PLC (b) 33,206
---------------
ISRAEL -- 0.7%
8,421 Delek Drilling, L.P. (b) (d) 7,440
10,047 ICL Group Ltd. 35,064
---------------
42,504
---------------
JAPAN -- 1.7%
12,900 Inpex Corp. (b) 69,224
1,700 Itoham Yonekyu Holdings, Inc. (b) 12,188
500 Japan Petroleum Exploration Co.,
Ltd. (b) 7,774
650 Nippon Light Metal Holdings Co.,
Ltd. (b) 10,309
---------------
99,495
---------------
JERSEY -- 0.8%
18,005 Centamin PLC (b) 47,006
---------------
LUXEMBOURG -- 0.4%
789 APERAM S.A. (b) 22,200
---------------
NORWAY -- 3.1%
1,713 Aker BP ASA (b) 26,778
839 Salmar ASA (b) (e) 47,549
2,714 Yara International ASA (b) 104,434
---------------
178,761
---------------
RUSSIA -- 7.3%
28,164 Magnitogorsk Iron & Steel Works
PJSC (b) 13,979
959 MMC Norilsk Nickel PJSC (b) 231,651
733 PhosAgro PJSC (b) 26,998
24,435 Tatneft PJSC (b) 144,968
---------------
417,596
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
SOUTH AFRICA -- 1.1%
1,146 African Rainbow Minerals Ltd. (b) $ 13,230
1,282 Exxaro Resources Ltd. (b) 9,498
1,477 Kumba Iron Ore Ltd. (b) 43,631
---------------
66,359
---------------
SWEDEN -- 0.9%
2,741 Lundin Energy AB (b) 54,356
---------------
TAIWAN -- 2.8%
182,777 China Steel Corp. (b) 129,453
16,048 TA Chen Stainless Pipe (b) 10,951
11,179 Taiwan Fertilizer Co., Ltd. (b) 19,664
---------------
160,068
---------------
THAILAND -- 1.0%
18,900 PTT Exploration & Production
PCL (b) 47,285
20,900 TTW PCL (b) 8,332
---------------
55,617
---------------
UNITED KINGDOM -- 32.6%
16,282 Anglo American PLC (b) 393,922
13,176 BHP Group PLC, ADR 562,088
4,617 Ferrexpo PLC (b) 10,514
6,710 Pennon Group PLC (b) 89,273
9,501 Rio Tinto PLC, ADR 573,766
3,809 Severn Trent PLC (b) 119,926
10,896 United Utilities Group PLC (b) 120,362
---------------
1,869,851
---------------
UNITED STATES -- 24.8%
5,808 Archer-Daniels-Midland Co. 270,014
3,405 CF Industries Holdings, Inc. 104,567
15,715 ConocoPhillips 516,081
881 Domtar Corp. 23,144
6,271 International Paper Co. 254,226
4,106 Ovintiv, Inc. 33,505
3,708 Tyson Foods, Inc., Class A 220,552
---------------
1,422,089
---------------
TOTAL COMMON STOCKS -- 99.4% 5,704,739
(Cost $5,907,878) ---------------
RIGHTS (a) -- 0.0%
TAIWAN -- 0.0%
2,993 TA Chen Stainless Pipe, expiring
10/27/20 (b) (e) (f) 171
(Cost $0) ---------------
MONEY MARKET FUNDS -- 0.1%
6,735 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class --
0.01% (g) (h) 6,735
(Cost $6,735) ---------------
|
See Notes to Financial Statements Page 53
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 3.4%
$ 197,365 JPMorgan Chase & Co.,
0.05% (g), dated 09/30/20, due
10/01/20, with a maturity
value of $197,365.
Collateralized by U.S.
Treasury Note, interest rate
of 1.125%, due 02/28/25. The
value of the collateral
including accrued interest is
$201,250. (h) $ 197,365
(Cost $197,365) ---------------
TOTAL INVESTMENTS -- 102.9% 5,909,010
(Cost $6,111,978) (i)
NET OTHER ASSETS AND
|
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $2,206,454 or 38.4% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the NYSE close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) All or a portion of this security is on loan (see Note 2E - 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 $203,996 and the total value of the collateral held by the Fund is $204,100.
(d) Security is a Master Limited Partnership ("MLP").
(e) Non-income producing security.
(f) Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be illiquid by First Trust Advisors, L.P., the Fund's advisor.
(g) Rate shown reflects yield as of September 30, 2020.
(h) This security serves as collateral for securities on loan.
(i) Aggregate cost for federal income tax purposes is $6,123,443. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $290,608 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $505,041. The net unrealized depreciation was $214,433.
ADR - American Depositary Receipt
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
Canada $ 663,595 $ 663,595 $ -- $ --
Hong Kong 311,813 241,854 69,959 --
Israel 42,504 35,064 7,440 --
United
Kingdom 1,869,851 1,135,854 733,997 --
United States 1,422,089 1,422,089 -- --
Other Country
Categories* 1,394,887 -- 1,394,887 --
Rights* 171 -- 171 --
Money Market
Funds 6,735 6,735 -- --
Repurchase
Agreements 197,365 -- 197,365 --
---------------------------------------------------------------
Total
Investments $ 5,909,010 $ 3,505,191 $ 2,403,819 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
Page 54 See Notes to Financial Statements
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
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:
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 203,996
Non-cash Collateral(2) (203,996)
---------------
Net Amount $ --
===============
|
(1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis.
(2) At September 30, 2020, 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:
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 197,365
Non-cash Collateral(4) (197,365)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
|
(4) At September 30, 2020, the value of the collateral received from each seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 56.1%
British Pound Sterling 13.2
Russian Ruble 7.1
Canadian Dollar 6.6
Australian Dollar 4.1
Norwegian Krone 3.0
New Taiwan Dollar 2.7
Japanese Yen 1.7
Hong Kong Dollar 1.4
South African Rand 1.1
Thai Baht 1.0
Euro 0.9
Swedish Krona 0.9
Israeli Shekel 0.1
Indian Rupee 0.1
------
Total 100.0%
======
|
See Notes to Financial Statements Page 55
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.6%
AUSTRALIA -- 1.4%
1,753 GrainCorp Ltd., Class A (b) (c) $ 4,747
14,880 Incitec Pivot Ltd. (b) 21,802
2,909 Nufarm Ltd. (b) (c) 8,083
2,292 United Malt Grp Ltd. (b) (c) 6,790
---------------
41,422
---------------
BERMUDA -- 1.6%
1,070 Bunge Ltd. 48,899
---------------
CANADA -- 4.7%
3,637 Nutrien Ltd. 142,607
---------------
CHILE -- 1.0%
922 Sociedad Quimica y Minera de
Chile S.A., ADR 29,891
---------------
GERMANY -- 22.2%
4,700 BASF SE (b) 286,213
4,626 Bayer AG (b) 285,397
3,570 Evonik Industries AG (b) 92,353
1,466 K+S AG (b) 10,090
---------------
674,053
---------------
INDIA -- 6.6%
2,246 Coromandel International Ltd. (b) 23,552
1,033 Escorts Ltd. (b) 18,538
9,530 Mahindra & Mahindra Ltd. (b) 78,791
1,162 PI Industries Ltd. (b) 31,085
1,953 Tata Chemicals Ltd. (b) 7,974
5,853 UPL Ltd. (b) 40,032
---------------
199,972
---------------
ISRAEL -- 1.1%
9,810 ICL Group Ltd. 34,237
---------------
JAPAN -- 10.4%
9,000 Kubota Corp. (b) 161,255
1,600 Mitsui Chemicals, Inc. (b) 38,671
1,100 Nissan Chemical Corp. (b) 58,641
400 Sakata Seed Corp. (b) 14,362
12,700 Sumitomo Chemical Co., Ltd. (b) 42,037
---------------
314,966
---------------
MALAYSIA -- 2.7%
61,301 Petronas Chemicals Group Bhd (b) 83,058
---------------
MEXICO -- 0.9%
16,088 Orbia Advance Corp. SAB de CV 28,070
---------------
NETHERLANDS -- 3.4%
10,453 CNH Industrial N.V. (c) 81,742
1,614 OCI N.V. (b) (c) 20,688
---------------
102,430
---------------
NORWAY -- 2.6%
2,054 Yara International ASA (b) 79,037
---------------
QATAR -- 4.1%
46,350 Industries Qatar QSC (b) 125,927
---------------
RUSSIA -- 1.2%
992 PhosAgro PJSC (b) 36,538
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
SINGAPORE -- 4.7%
43,600 Wilmar International Ltd. (b) $ 141,563
---------------
SWITZERLAND -- 1.0%
79 Bucher Industries AG (b) 30,092
---------------
TAIWAN -- 0.4%
7,508 Taiwan Fertilizer Co., Ltd. (b) 13,207
---------------
TURKEY -- 0.3%
2,559 Gubre Fabrikalari TAS (b) (c) 10,612
---------------
UNITED STATES -- 29.3%
574 AGCO Corp. 42,631
1,639 CF Industries Holdings, Inc. 50,334
4,804 Corteva, Inc. 138,403
1,409 Deere & Co. 312,277
993 FMC Corp. 105,169
83 Lindsay Corp. 8,024
2,904 Mosaic (The) Co. 53,056
275 Raven Industries, Inc. 5,918
427 Scotts Miracle-Gro (The) Co. 65,292
338 SiteOne Landscape Supply,
Inc. (c) 41,219
822 Toro (The) Co. 69,007
---------------
891,330
---------------
TOTAL INVESTMENTS -- 99.6% 3,027,911
(Cost $3,210,294) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.4% 12,090
---------------
NET ASSETS -- 100.0% $ 3,040,001
===============
|
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $1,771,135 or 58.3% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the NYSE close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) Aggregate cost for federal income tax purposes is $3,225,889. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $391,248 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $589,226. The net unrealized depreciation was $197,978.
ADR - American Depositary Receipt
Page 56 See Notes to Financial Statements
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
Bermuda $ 48,899 $ 48,899 $ -- $ --
Canada 142,607 142,607 -- --
Chile 29,891 29,891 -- --
Israel 34,237 34,237 -- --
Mexico 28,070 28,070 -- --
Netherlands 102,430 81,742 20,688 --
United States 891,330 891,330 -- --
Other Country
Categories* 1,750,447 -- 1,750,447 --
---------------------------------------------------------------
Total
Investments $ 3,027,911 $ 1,256,776 $ 1,771,135 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 35.9%
Euro 22.9
Japanese Yen 10.4
Indian Rupee 6.6
Canadian Dollar 4.7
Singapore Dollar 4.7
Qatar Riyal 4.2
Malaysian Ringgit 2.7
Norwegian Krone 2.6
Australian Dollar 1.4
Russian Ruble 1.2
Swiss Franc 1.0
Mexican Peso 0.9
New Taiwan Dollar 0.4
Turkish Lira 0.4
------
Total 100.0%
======
|
See Notes to Financial Statements Page 57
FIRST TRUST BICK INDEX FUND (BICK)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.8%
BRAZIL -- 21.2%
282,102 Ambev S.A., ADR $ 637,550
31,065 B2W Cia Digital (b) 500,224
59,219 B3 S.A. - Brasil Bolsa Balcao 581,234
168,363 Banco Bradesco S.A., ADR 577,485
106,648 Banco do Brasil S.A. 564,014
72,923 Cia de Saneamento Basico do
Estado de Sao Paulo 607,573
610,887 Cogna Educacao 567,822
488,367 IRB Brasil Resseguros S.A. 651,342
148,997 Itau Unibanco Holding S.A., ADR 593,008
369,253 Itausa S.A. (Preference Shares) 581,242
155,172 JBS S.A. 571,682
72,197 Localiza Rent a Car S.A. 730,211
107,904 Lojas Americanas S.A. (Preference
Shares) 542,796
80,103 Lojas Renner S.A. 566,693
37,353 Magazine Luiza S.A. 595,623
70,573 Natura & Co. Holding S.A. 642,407
46,991 Notre Dame Intermedica
Participacoes S.A. 545,309
77,690 Petroleo Brasileiro S.A., ADR 553,153
69,364 Suzano S.A. (b) 560,381
57,703 Vale S.A., ADR 610,498
169,856 Via Varejo S.A. (b) 525,365
53,885 WEG S.A. 627,422
---------------
12,933,034
---------------
CAYMAN ISLANDS -- 21.0%
2,211 Alibaba Group Holding Ltd.,
ADR (b) 649,990
5,095 Baidu, Inc., ADR (b) 644,976
13,433 Bilibili, Inc., ADR (b) 558,813
7,432 GSX Techedu, Inc., ADR (b) (c) 669,697
8,071 JD.com, Inc., ADR (b) 626,390
19,275 Meituan Dianping,
Class B (b) (d) (e) 607,188
1,303 NetEase, Inc., ADR 592,435
4,329 New Oriental Education &
Technology Group, Inc.,
ADR (b) 647,185
33,354 NIO, Inc., ADR (b) 707,772
15,062 Pagseguro Digital Ltd.,
Class A (b) 567,988
7,137 Pinduoduo, Inc., ADR (b) 529,208
197,340 Semiconductor Manufacturing
International Corp. (b) (d) 462,002
12,446 StoneCo., Ltd., Class A (b) 658,269
42,850 Sunny Optical Technology Group
Co., Ltd. (d) 665,560
8,599 TAL Education Group, ADR (b) 653,868
9,243 Tencent Holdings Ltd. (d) 624,304
40,610 Tencent Music Entertainment
Group, ADR (b) 599,810
20,990 Trip.com Group Ltd., ADR (b) 653,629
24,399 Wuxi Biologics Cayman,
Inc. (b) (d) (e) (f) 597,972
209,316 Xiaomi Corp.,
Class B (b) (d) (e) (f) 566,624
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
CAYMAN ISLANDS (CONTINUED)
12,851 XP, Inc., Class A (b) $ 535,758
---------------
12,819,438
---------------
CHINA -- 4.9%
1,936,470 Bank of China Ltd., Class H (d) 602,282
896,069 China Construction Bank Corp.,
Class H (d) 582,241
260,681 China Life Insurance Co., Ltd.,
Class H (d) 590,957
1,133,451 Industrial & Commercial Bank of
China Ltd., Class H (d) 590,410
59,756 Ping An Insurance (Group) Co. of
China Ltd., Class H (d) 620,318
---------------
2,986,208
---------------
HONG KONG -- 0.9%
557,402 CNOOC Ltd. (d) 536,153
---------------
INDIA -- 20.1%
34,677 Axis Bank Ltd., GDR (b) (d) (e) 1,022,033
20,984 Dr. Reddy's Laboratories Ltd.,
ADR 1,459,647
24,610 HDFC Bank Ltd., ADR (b) 1,229,516
113,653 ICICI Bank Ltd., ADR (b) 1,117,209
96,876 Infosys Ltd., ADR 1,337,858
21,082 Reliance Industries Ltd.,
GDR (d) (f) 1,280,329
40,485 State Bank of India,
GDR (b) (d) (e) 1,028,330
125,322 Tata Motors Ltd., ADR (b) 1,139,177
174,127 Vedanta Ltd., ADR 1,286,798
283,868 Wipro Ltd., ADR 1,334,180
---------------
12,235,077
---------------
ISLE OF MAN -- 1.4%
392,486 Eros STX Global Corp. (b) (c) 867,394
---------------
JERSEY -- 1.9%
18,397 WNS (Holdings) Ltd., ADR (b) 1,176,672
---------------
MAURITIUS -- 1.8%
72,312 MakeMyTrip Ltd. (b) 1,110,712
---------------
SOUTH KOREA -- 25.6%
3,608 Alteogen, Inc. (b) (d) 553,621
7,532 Celltrion Healthcare Co.,
Ltd. (d) (g) 564,991
6,787 Celltrion Pharm, Inc. (d) (g) 655,712
2,539 Celltrion, Inc. (d) (g) 558,489
3,366 Hyundai Mobis Co., Ltd. (d) 660,355
4,272 Hyundai Motor Co. (d) 650,712
1,853 Kakao Corp. (d) 576,197
20,461 KB Financial Group, Inc. (d) 658,844
17,762 Kia Motors Corp. (d) 712,291
1,019 LG Chem Ltd. (d) 568,775
2,338 NAVER Corp. (d) 594,135
914 NCSoft Corp. (d) 629,868
4,087 POSCO (d) 684,220
969 Samsung Biologics Co.,
Ltd. (b) (d) (e) (f) 571,262
6,981 Samsung C&T Corp. (d) 626,499
6,056 Samsung Electro-Mechanics Co.,
Ltd. (d) 717,693
|
Page 58 See Notes to Financial Statements
FIRST TRUST BICK INDEX FUND (BICK)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SOUTH KOREA (CONTINUED)
13,963 Samsung Electronics Co., Ltd. (d) $ 693,181
1,666 Samsung SDI Co., Ltd. (d) 615,451
2,867 Seegene, Inc. (d) 646,458
5,524 Shin Poong Pharmaceutical Co.,
Ltd. (b) (d) 595,194
1,916 SK Chemicals Co., Ltd. (d) 486,816
3,523 SK Holdings Co., Ltd. (d) 594,838
10,040 SK Hynix, Inc. (d) 719,695
5,200 SK Innovation Co., Ltd. (d) 616,283
3,040 SK Telecom Co., Ltd. (d) 617,976
---------------
15,569,556
---------------
UNITED STATES -- 1.0%
10,999 Yum China Holdings, Inc. 582,397
---------------
TOTAL COMMON STOCKS -- 99.8% 60,816,641
(Cost $58,859,820) ---------------
MONEY MARKET FUNDS -- 0.1%
63,003 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (h) (i) 63,003
(Cost $63,003) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.3%
|
$ 1,374,003 JPMorgan Chase & Co., 0.05% (h), dated 09/30/20, due 10/01/20, with a maturity value of $1,374,005. Collateralized by U.S. Treasury Note, interest rate of 1.125%, due 02/28/25.
The value of the collateral
including accrued interest
is $1,401,049. (i) 1,374,003 (Cost $1,374,003) --------------- TOTAL INVESTMENTS -- 102.2% 62,253,647 (Cost $60,296,826) (j) NET OTHER ASSETS AND |
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) Non-income producing security.
(c) All or a portion of this security is on loan (see Note 2E - Securities
Lending in the Notes to Financial Statements). The remaining contractual
maturity of all of the securities lending transactions is overnight and
continuous. The aggregate value of such securities is $1,384,415 and the
total value of the collateral held by the Fund is $1,437,006.
(d) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2020, securities noted as such are valued at
$25,946,259 or 42.6% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the NYSE close
exceeding a certain threshold. On days when this threshold is not
exceeded, these securities are typically valued at the last sale price on
the exchange on which they are principally traded.
(e) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the Securities Act of 1933, as
amended (the "1933 Act").
(f) This security is exempt from registration upon resale under Rule 144A of
the 1933 Act, and may be resold in transactions exempt from registration,
normally to qualified institutional buyers. This security is not
restricted on the foreign exchange where it trades freely without any
additional registration. As such, it does not require the additional
disclosure required of restricted securities.
(g) Non-income producing security which makes payment- in-kind ("PIK")
distributions. For the fiscal year ended September 30, 2020, the Fund
received 1,469 and 416 shares of Celltrion Healthcare Co., Ltd. and
Celltrion, Inc., respectively. There were no in-kind distributions
received from Celltrion Pharm, Inc.
(h) Rate shown reflects yield as of September 30, 2020.
(i) This security serves as collateral for securities on loan.
(j) Aggregate cost for federal income tax purposes is $62,207,975. As of
September 30, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$11,771,497 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$11,725,825. The net unrealized appreciation was $45,672.
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
|
See Notes to Financial Statements Page 59
FIRST TRUST BICK INDEX FUND (BICK)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
Brazil $ 12,933,034 $ 12,933,034 $ -- $ --
Cayman
Islands 12,819,438 9,295,788 3,523,650 --
India 12,235,077 8,904,385 3,330,692 --
Isle of Man 867,394 867,394 -- --
Jersey 1,176,672 1,176,672 -- --
Mauritius 1,110,712 1,110,712 -- --
United States 582,397 582,397 -- --
Other Country
Categories* 19,091,917 -- 19,091,917 --
Money Market
Funds 63,003 63,003 -- --
Repurchase
Agreements 1,374,003 -- 1,374,003 --
---------------------------------------------------------------
Total
Investments $ 62,253,647 $ 34,933,385 $ 27,320,262 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
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:
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 1,384,415
Non-cash Collateral(2) (1,384,415)
---------------
Net Amount $ --
===============
|
(1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis.
(2) At September 30, 2020, 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:
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 1,374,003
Non-cash Collateral(4) (1,374,003)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
|
(4) At September 30, 2020, the value of the collateral received from each seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 47.7%
South Korean Won 25.0
Brazilian Real 16.0
Hong Kong Dollar 11.3
------
Total 100.0%
======
|
Page 60 See Notes to Financial Statements
FIRST TRUST INDXX NEXTG ETF (NXTG)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.5%
AUSTRALIA -- 0.4%
1,062,286 Telstra Corp., Ltd. (b) $ 2,126,964
---------------
BERMUDA -- 1.6%
231,862 Marvell Technology Group Ltd. 9,204,921
---------------
BRAZIL -- 0.3%
250,863 Telefonica Brasil S.A., ADR 1,924,119
---------------
CANADA -- 1.2%
55,274 BCE, Inc. 2,292,239
54,763 Rogers Communications, Inc.,
Class B 2,172,342
138,865 TELUS Corp. 2,443,473
---------------
6,908,054
---------------
CAYMAN ISLANDS -- 3.8%
120,795 GDS Holdings Ltd., ADR (c) 9,884,655
4,670,648 Xiaomi Corp.,
Class B (b) (c) (d) (e) 12,643,562
---------------
22,528,217
---------------
CHINA -- 1.9%
7,785,756 China Telecom Corp., Ltd.,
Class H (b) 2,339,213
39,653,983 China Tower Corp., Ltd.,
Class H (b) (d) (e) 6,898,955
863,022 ZTE Corp., Class H (b) 2,074,878
---------------
11,313,046
---------------
FINLAND -- 1.6%
39,210 Elisa OYJ (b) 2,305,215
1,879,807 Nokia OYJ, ADR (c) 7,350,045
---------------
9,655,260
---------------
FRANCE -- 0.4%
199,828 Orange S.A. (b) 2,081,332
---------------
GERMANY -- 2.4%
141,050 Deutsche Telekom AG (b) 2,348,502
345,073 Infineon Technologies AG (b) 9,726,213
789,886 Telefonica Deutschland Holding
AG (b) 2,018,762
---------------
14,093,477
---------------
GUERNSEY -- 1.2%
123,152 Amdocs Ltd. 7,070,156
---------------
HONG KONG -- 2.4%
333,932 China Mobile Ltd. (b) 2,143,605
4,121,775 China Unicom (Hong Kong)
Ltd. (b) 2,705,502
13,861,480 Lenovo Group Ltd. (b) 9,164,697
---------------
14,013,804
---------------
INDIA -- 8.1%
324,219 Bharti Airtel Ltd. (b) 1,853,735
1,012,999 HCL Technologies Ltd. (b) 11,168,423
872,009 Infosys Ltd., ADR 12,042,444
1,023,984 Tech Mahindra Ltd. (b) 11,020,660
2,476,276 Wipro Ltd., ADR 11,638,497
---------------
47,723,759
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
ITALY -- 1.8%
758,483 Infrastrutture Wireless Italiane
S.p.A. (b) (d) (e) $ 8,367,857
6,081,127 Telecom Italia S.p.A. (b) 2,437,356
---------------
10,805,213
---------------
JAPAN -- 10.5%
68,000 Fujitsu Ltd. (b) 9,290,001
79,500 KDDI Corp. (b) 1,999,549
139,300 Kyocera Corp. (b) 7,975,840
566,500 Mitsubishi Electric Corp. (b) 7,686,956
165,200 NEC Corp. (b) 9,663,173
100,100 Nippon Telegraph & Telephone
Corp. (b) 2,043,710
85,770 NTT DOCOMO, Inc. (b) 3,151,715
1,332,400 Renesas Electronics Corp. (b) (c) 9,779,337
182,700 SoftBank Corp. (b) 2,041,552
108,500 Sony Corp. (b) 8,315,661
---------------
61,947,494
---------------
MALAYSIA -- 1.2%
7,457,000 DiGi.Com Bhd (b) 7,248,750
---------------
NETHERLANDS -- 3.1%
75,398 NXP Semiconductors N.V. 9,410,424
295,021 STMicroelectronics N.V. (b) 9,055,894
---------------
18,466,318
---------------
NEW ZEALAND -- 0.4%
815,634 Spark New Zealand Ltd. (b) 2,545,028
---------------
NORWAY -- 0.4%
151,386 Telenor ASA (b) 2,541,585
---------------
PHILIPPINES -- 0.9%
53,370 Globe Telecom, Inc. (b) 2,289,208
99,744 PLDT, Inc., ADR (f) 2,698,075
---------------
4,987,283
---------------
QATAR -- 0.4%
1,277,180 Ooredoo QPSC (b) 2,353,029
---------------
RUSSIA -- 0.4%
263,183 Mobile TeleSystems PJSC, ADR 2,297,588
---------------
SINGAPORE -- 0.3%
1,275,200 Singapore Telecommunications
Ltd. (b) 1,995,780
---------------
SOUTH AFRICA -- 0.8%
792,878 MTN Group Ltd. (b) 2,660,214
315,393 Vodacom Group Ltd. (b) 2,312,871
---------------
4,973,085
---------------
SOUTH KOREA -- 5.6%
231,976 KT Corp., ADR 2,229,289
133,963 LG Electronics, Inc. (b) 10,493,718
221,523 LG Uplus Corp. (b) 2,176,388
170,218 Samsung Electronics Co., Ltd. (b) 8,450,330
49,824 Samsung SDS Co., Ltd. (b) 7,212,886
13,145 SK Telecom Co., Ltd. (b) 2,672,135
---------------
33,234,746
---------------
|
See Notes to Financial Statements Page 61
FIRST TRUST INDXX NEXTG ETF (NXTG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SPAIN -- 0.3%
461,774 Telefonica S.A. (b) $ 1,581,848
---------------
SWEDEN -- 2.5%
180,060 Tele2 AB, Class B (b) (f) 2,538,655
858,417 Telefonaktiebolaget LM Ericsson,
Class B (b) 9,393,862
688,948 Telia Co., AB (b) 2,818,580
---------------
14,751,097
---------------
SWITZERLAND -- 0.4%
4,578 Swisscom AG (b) 2,425,232
---------------
TAIWAN -- 5.5%
3,445,672 ASE Technology Holding Co.,
Ltd. (b) 7,094,227
622,357 Chunghwa Telecom Co., Ltd. (b) 2,300,055
461,516 MediaTek, Inc. (b) 9,779,050
651,283 Taiwan Mobile Co., Ltd. (b) 2,176,776
140,375 Taiwan Semiconductor
Manufacturing Co., Ltd., ADR 11,380,201
---------------
32,730,309
---------------
TURKEY -- 0.4%
1,123,741 Turkcell Iletisim Hizmetleri
AS (b) 2,190,365
---------------
UNITED ARAB EMIRATES -- 0.4%
530,027 Emirates Telecommunications
Group Co. PJSC (b) 2,408,902
---------------
UNITED KINGDOM -- 0.7%
1,637,923 BT Group PLC (b) 2,074,638
1,482,622 Vodafone Group PLC (b) 1,965,122
---------------
4,039,760
---------------
UNITED STATES -- 38.2%
146,237 Advanced Micro Devices, Inc. (c) 11,989,972
30,730 American Tower Corp. 7,428,363
66,804 Analog Devices, Inc. 7,798,699
35,324 Arista Networks, Inc. (c) 7,309,595
78,241 AT&T, Inc. 2,230,651
26,316 Broadcom, Inc. 9,587,445
147,982 Ciena Corp. (c) 5,873,406
176,930 Cisco Systems, Inc. 6,969,273
66,257 CoreSite Realty Corp. 7,876,632
48,061 Crown Castle International Corp. 8,002,156
109,054 CyrusOne, Inc. 7,637,052
57,674 Digital Realty Trust, Inc. 8,464,236
11,680 Equinix, Inc. 8,878,318
56,187 F5 Networks, Inc. (c) 6,898,078
792,410 Hewlett Packard Enterprise Co. 7,424,882
129,412 Intel Corp. 6,700,953
65,459 International Business Machines
Corp. 7,964,397
332,165 Juniper Networks, Inc. 7,141,547
78,985 Keysight Technologies, Inc. (c) 7,802,138
105,201 Lumentum Holdings, Inc. (c) 7,903,751
159,229 Micron Technology, Inc. (c) 7,477,394
21,964 NVIDIA Corp. 11,887,356
71,952 Qorvo, Inc. (c) 9,282,528
91,961 QUALCOMM, Inc. 10,821,970
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
UNITED STATES (CONTINUED)
26,635 SBA Communications Corp. $ 8,482,715
62,617 Skyworks Solutions, Inc. 9,110,774
23,399 T-Mobile US, Inc. (c) 2,675,910
41,817 Verizon Communications, Inc. 2,487,693
17,333 VMware, Inc., Class A (c) (f) 2,490,232
86,080 Xilinx, Inc. 8,972,979
---------------
225,571,095
---------------
TOTAL COMMON STOCKS -- 99.5% 587,737,616
(Cost $527,397,167) ---------------
MONEY MARKET FUNDS -- 0.0%
253,102 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (g) (h) 253,102
(Cost $253,102) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.9%
|
$ 5,179,119 JPMorgan Chase & Co.,
0.05% (g), dated 09/30/20, due
10/01/20, with a maturity
value of $5,179,126.
Collateralized by U.S.
Treasury Note, interest rate
of 1.125%, due 02/28/25. The
value of the collateral
including accrued interest is
$5,281,067 (h) 5,179,119 (Cost $5,179,119) --------------- TOTAL INVESTMENTS -- 100.4% 593,169,837 (Cost $532,829,388) (i) NET OTHER ASSETS AND |
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $268,128,053 or 45.4% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the NYSE close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) Non-income producing security.
Page 62 See Notes to Financial Statements
FIRST TRUST INDXX NEXTG ETF (NXTG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
(d) This security is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the "1933 Act") and may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security is not restricted on the foreign exchange where it trades freely without any additional registration. As such, it does not require the additional disclosure required of restricted securities.
(e) This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act.
(f) All or a portion of this security is on loan (see Note 2E - 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 $5,202,876 and the total value of the collateral held by the Fund is $5,432,221.
(g) Rate shown reflects yield as of September 30, 2020.
(h) This security serves as collateral for securities on loan.
(i) Aggregate cost for federal income tax purposes is $535,145,803. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $84,069,627 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $26,045,593. The net unrealized appreciation was $58,024,034.
ADR - American Depositary Receipt
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
Bermuda $ 9,204,921 $ 9,204,921 $ -- $ --
Brazil 1,924,119 1,924,119 -- --
Canada 6,908,054 6,908,054 -- --
Cayman
Islands 22,528,217 9,884,655 12,643,562 --
Finland 9,655,260 7,350,045 2,305,215 --
Guernsey 7,070,156 7,070,156 -- --
India 47,723,759 23,680,941 24,042,818 --
Netherlands 18,466,318 9,410,424 9,055,894 --
Philippines 4,987,283 2,698,075 2,289,208 --
Russia 2,297,588 2,297,588 -- --
South Korea 33,234,746 2,229,289 31,005,457 --
Taiwan 32,730,309 11,380,201 21,350,108 --
United States 225,571,095 225,571,095 -- --
Other Country
Categories* 165,435,791 -- 165,435,791 --
Money Market
Funds 253,102 253,102 -- --
Repurchase
Agreements 5,179,119 -- 5,179,119 --
---------------------------------------------------------------
Total
Investments $ 593,169,837 $ 319,862,665 $ 273,307,172 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
See Notes to Financial Statements Page 63
FIRST TRUST INDXX NEXTG ETF (NXTG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
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:
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 5,202,876
Non-cash Collateral(2) (5,202,876)
---------------
Net Amount $ --
===============
|
(1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis.
(2) At September 30, 2020, 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:
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 5,179,119
Non-cash Collateral(4) (5,179,119)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
|
(4) At September 30, 2020, the value of the collateral received from each seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 53.6%
Japanese Yen 10.5
Euro 6.7
Hong Kong Dollar 6.4
South Korean Won 5.2
Indian Rupee 4.1
New Taiwan Dollar 3.6
Swedish Krona 2.5
Malaysian Ringgit 1.2
Canadian Dollar 1.2
South African Rand 0.8
British Pound Sterling 0.7
New Zealand Dollar 0.4
Norwegian Krone 0.4
Swiss Franc 0.4
United Arab Emirates Dirham 0.4
Qatar Riyal 0.4
Philippine Peso 0.4
Turkish Lira 0.4
Australian Dollar 0.4
Singapore Dollar 0.3
------
Total 100.0%
======
|
Page 64 See Notes to Financial Statements
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.1%
BERMUDA -- 1.3%
402,304 Brilliance China Automotive
Holdings Ltd. (b) $ 380,202
---------------
CAYMAN ISLANDS -- 4.5%
552,867 Geely Automobile Holdings
Ltd. (b) 1,109,063
131,092 Yadea Group Holdings
Ltd. (b) (c) (d) 193,605
---------------
1,302,668
---------------
CHINA -- 8.7%
210,863 BAIC Motor Corp., Ltd.,
Class H (b) (c) (d) 86,278
91,071 BYD Co., Ltd., Class H (b) 1,468,631
272,231 Dongfeng Motor Group Co., Ltd.,
Class H (b) 170,282
411,929 Great Wall Motor Co., Ltd.,
Class H (b) 525,464
349,688 Guangzhou Automobile Group Co.,
Ltd., Class H (b) 293,349
---------------
2,544,004
---------------
FRANCE -- 2.4%
27,507 Renault S.A. (b) (e) 713,560
---------------
GERMANY -- 24.1%
16,237 Bayerische Motoren Werke AG (b) 1,178,442
45,805 Daimler AG (b) 2,470,970
19,039 Porsche Automobil Holding SE
(Preference Shares) (b) 1,132,675
14,019 Volkswagen AG (Preference
Shares) (b) 2,255,827
---------------
7,037,914
---------------
JAPAN -- 31.8%
90,735 Honda Motor Co., Ltd. (b) 2,154,710
91,300 Isuzu Motors Ltd. (b) 798,489
79,759 Mazda Motor Corp. (b) 467,846
91,100 Mitsubishi Motors Corp. (b) (e) 201,160
287,076 Nissan Motor Co., Ltd. (b) (e) 1,015,272
56,265 Subaru Corp. (b) 1,092,264
28,459 Suzuki Motor Corp. (b) 1,219,123
35,376 Toyota Motor Corp. (b) 2,347,906
---------------
9,296,770
---------------
MALAYSIA -- 0.2%
89,900 DRB-Hicom Bhd (b) 45,394
31,093 UMW Holdings Bhd (b) 18,862
---------------
64,256
---------------
SINGAPORE -- 0.6%
13,100 Jardine Cycle & Carriage Ltd. (b) 173,884
---------------
SOUTH KOREA -- 8.4%
7,861 Hyundai Motor Co. (b) 1,197,389
31,781 Kia Motors Corp. (b) 1,274,480
---------------
2,471,869
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
TAIWAN -- 0.5%
33,840 China Motor Corp. (b) (e) $ 49,289
104,506 Yulon Motor Co., Ltd. (b) (e) 83,511
---------------
132,800
---------------
UNITED KINGDOM -- 0.4%
193,903 Aston Martin Lagonda Global
Holdings PLC (b) (c) (d) (e) 127,002
---------------
UNITED STATES -- 16.2%
171,269 Ford Motor Co. 1,140,652
39,421 General Motors Co. 1,166,467
17,512 Harley-Davidson, Inc. 429,744
4,688 Tesla, Inc. (e) 2,011,199
---------------
4,748,062
---------------
TOTAL INVESTMENTS -- 99.1% 28,992,991
(Cost $30,844,674) (f)
NET OTHER ASSETS AND
LIABILITIES -- 0.9% 253,410
---------------
NET ASSETS -- 100.0% $ 29,246,401
===============
|
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $24,244,929 or 82.9% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the NYSE close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) This security is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the "1933 Act") and may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security is not restricted on the foreign exchange where it trades freely without any additional registration. As such, it does not require the additional disclosure required of restricted securities.
(d) This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act.
(e) Non-income producing security.
(f) Aggregate cost for federal income tax purposes is $31,626,234. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $1,953,162 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $4,586,405. The net unrealized depreciation was $2,633,243.
See Notes to Financial Statements Page 65
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
United States $ 4,748,062 $ 4,748,062 $ -- $ --
Other Country
Categories* 24,244,929 -- 24,244,929 --
---------------------------------------------------------------
Total
Investments $ 28,992,991 $ 4,748,062 $ 24,244,929 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
Japanese Yen 32.1%
Euro 26.7
United States Dollar 16.4
Hong Kong Dollar 14.6
South Korean Won 8.5
Singapore Dollar 0.6
New Taiwan Dollar 0.5
British Pound Sterling 0.4
Malaysian Ringgit 0.2
------
Total 100.0%
======
|
Page 66 See Notes to Financial Statements
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.9%
CANADA -- 2.6%
742,302 Open Text Corp. (b) $ 31,354,837
94,764 Shopify, Inc., Class A (c) 96,940,729
---------------
128,295,566
---------------
CAYMAN ISLANDS -- 7.7%
704,158 Alibaba Group Holding Ltd.,
ADR (c) 207,008,369
5,861,760 Kingsoft Cloud Holdings Ltd.,
ADR (b) (c) 173,097,773
---------------
380,106,142
---------------
GERMANY -- 1.3%
407,298 SAP SE, ADR 63,461,101
---------------
JERSEY -- 0.6%
684,112 Mimecast Ltd. (c) 32,098,535
---------------
NETHERLANDS -- 0.7%
310,235 Elastic N.V. (c) 33,471,254
---------------
UNITED KINGDOM -- 1.9%
527,000 Atlassian Corp. PLC, Class A (c) 95,803,330
---------------
UNITED STATES -- 85.1%
196,846 Adobe, Inc. (c) 96,539,184
1,157,283 Akamai Technologies, Inc. (c) 127,926,063
124,031 Alphabet, Inc., Class A (c) 181,779,834
58,564 Amazon.com, Inc. (c) 184,402,224
549,971 Anaplan, Inc. (c) 34,417,185
200,468 Appfolio, Inc., Class A (c) 28,428,367
1,100,120 Appian Corp. (b) (c) 71,232,770
753,762 Arista Networks, Inc. (c) 155,975,971
254,402 Avalara, Inc. (c) 32,395,551
385,553 Blackline, Inc. (c) 34,557,115
1,716,030 Box, Inc., Class A (c) 29,790,281
15,667,712 CenturyLink, Inc. 158,087,214
3,191,434 Cisco Systems, Inc. 125,710,585
927,982 Citrix Systems, Inc. 127,792,401
5,100,015 Cloudera, Inc. (c) 55,539,163
880,438 Cloudflare, Inc., Class A (c) 36,150,784
955,077 Cornerstone OnDemand, Inc. (c) 34,726,600
102,779 Coupa Software, Inc. (c) 28,186,113
267,922 Crowdstrike Holdings, Inc.,
Class A (c) 36,791,049
403,182 Datadog, Inc., Class A (c) 41,189,073
151,052 DocuSign, Inc. (c) 32,512,432
1,591,195 Dropbox, Inc., Class A (c) 30,646,416
226,669 Everbridge, Inc. (c) 28,499,093
1,088,499 Fastly, Inc., Class A (c) 101,970,586
2,294,658 FireEye, Inc. (c) 28,327,553
792,976 Five9, Inc. (c) 102,833,128
10,450,536 Hewlett Packard Enterprise Co. 97,921,522
337,220 HubSpot, Inc. (c) 98,545,801
819,535 International Business Machines
Corp. 99,712,823
97,528 Intuit, Inc. 31,814,609
896,166 Microsoft Corp. 188,490,595
699,644 MicroStrategy, Inc., Class A (c) 105,338,401
720,388 MongoDB, Inc. (c) 166,777,026
|
2,132,451 NetApp, Inc. $ 93,486,652
548,352 New Relic, Inc. (c) 30,905,119
3,519,918 Nutanix, Inc., Class A (c) 78,071,781
3,532,213 Oracle Corp. 210,873,116
130,859 Palo Alto Networks, Inc. (c) 32,027,740
112,489 Paycom Software, Inc. (c) 35,017,826
6,622,327 Pure Storage, Inc., Class A (c) 101,917,612
346,242 Q2 Holdings, Inc. (c) 31,598,045
370,646 salesforce.com, Inc. (c) 93,150,753
209,655 ServiceNow, Inc. (c) 101,682,675
617,740 Smartsheet, Inc., Class A (c) 30,528,711
460,749 Splunk, Inc. (c) 86,680,709
1,353,379 SVMK, Inc. (c) 29,923,210
665,720 Tabula Rasa HealthCare,
Inc. (b) (c) 27,141,404
374,616 Twilio, Inc., Class A (c) 92,563,867
119,334 Veeva Systems, Inc., Class A (c) 33,555,527
1,399,288 VMware, Inc., Class A (b) (c) 201,035,707
140,525 Workday, Inc., Class A (c) 30,231,143
570,938 Workiva, Inc. (c) 31,835,503
349,505 Zendesk, Inc. (c) 35,971,055
103,617 Zoom Video Communications,
Inc., Class A (c) 48,711,388
235,007 Zscaler, Inc. (c) 33,063,135
---------------
4,224,980,190
---------------
TOTAL COMMON STOCKS
-- 99.9% 4,958,216,118
(Cost $4,155,628,466) ---------------
MONEY MARKET FUNDS -- 0.2%
9,962,964 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class -
0.01% (d) (e) 9,962,964
(Cost $9,962,964) ---------------
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 5.7%
$284,112,229 JPMorgan Chase & Co.,
0.05% (d), dated 09/30/20, due
10/01/20, with a maturity
value of $284,112,623.
Collateralized by U.S.
Treasury Note, interest rate
of 1.125%, due 02/28/25. The
value of the collateral
including accrued interest is
$289,704,801. (e) 284,112,229
(Cost $284,112,229) ---------------
TOTAL INVESTMENTS -- 105.8% 5,252,291,311
(Cost $4,449,703,659) (f)
NET OTHER ASSETS AND
LIABILITIES -- (5.8)% (288,466,733)
---------------
NET ASSETS -- 100.0% $ 4,963,824,578
===============
|
See Notes to Financial Statements Page 67
FIRST TRUST CLOUD COMPUTING ETF (SKYY) PORTFOLIO OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2020 |
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) All or a portion of this security is on loan (see Note 2E - Securities Lending in the Notes to Financial Statements). The remaining contractual maturity of all of the securities lending transactions is overnight and continuous. The aggregate value of such securities is $285,513,447 and the total value of the collateral held by the Fund is $294,075,193.
(c) Non-income producing security.
(d) Rate shown reflects yield as of September 30, 2020.
(e) This security serves as collateral for securities on loan.
(f) Aggregate cost for federal income tax purposes is $4,495,994,293. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $912,795,959 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $156,498,941. The net unrealized appreciation was $756,297,018.
ADR - American Depositary Receipt
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common
Stocks* $ 4,958,216,118 $ 4,958,216,118 $ -- $ --
Money
Market
Funds 9,962,964 9,962,964 -- --
Repurchase
Agreements 284,112,229 -- 284,112,229 --
---------------------------------------------------------------
Total
Investments $ 5,252,291,311 $ 4,968,179,082 $ 284,112,229 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
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:
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 285,513,447
Non-cash Collateral(2) (285,513,447)
---------------
Net Amount $ --
===============
|
(1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis.
(2) At September 30, 2020, 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:
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 284,112,229
Non-cash Collateral(4) (284,112,229)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
|
(4) At September 30, 2020, the value of the collateral received from each seller exceeded the value of the repurchase agreements.
Page 68 See Notes to Financial Statements
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.6%
AUSTRALIA -- 0.8%
266,154 Netwealth Group Ltd. (b) $ 2,930,806
---------------
BELGIUM -- 1.7%
54,447 UCB S.A. (b) 6,183,783
---------------
BRAZIL -- 3.1%
545,800 Magazine Luiza S.A. 8,703,216
715,310 Via Varejo S.A. (c) 2,212,456
---------------
10,915,672
---------------
CAYMAN ISLANDS -- 38.4%
69,631 Bilibili, Inc., ADR (c) 2,896,650
5,004,956 China Feihe Ltd. (b) (d) (e) 11,701,226
1,361,856 Country Garden Services Holdings
Co., Ltd. (b) 8,844,545
1,497,234 Ever Sunshine Lifestyle Services
Group Ltd. (b) (e) 2,980,592
114,171 Farfetch Ltd., Class A (c) 2,872,542
1,605,555 Haidilao International Holding
Ltd. (b) (d) (e) 11,633,406
947,031 Koolearn Technology Holding
Ltd. (b) (c) (d) (e) (f) 4,068,950
526,858 Meituan Dianping,
Class B (b) (c) (e) 16,596,714
91,624 Pinduoduo, Inc., ADR (c) 6,793,920
394,114 Ping An Healthcare and Technology
Co., Ltd. (b) (c) (d) (e) (f) 5,085,197
419,461 Powerlong Commercial
Management Holdings
Ltd. (b) (e) 1,411,753
103,777 Sea Ltd., ADR (c) 15,985,809
207,415 StoneCo., Ltd., Class A (c) 10,970,179
610,437 Wuxi Biologics Cayman,
Inc. (b) (c) (d) (e) 14,960,632
4,863,020 Xiaomi Corp.,
Class B (b) (c) (d) (e) 13,164,318
105,047 XP, Inc., Class A (c) 4,379,409
33,173 Zai Lab Ltd., ADR (c) 2,758,998
---------------
137,104,840
---------------
DENMARK -- 6.9%
51,513 DSV PANALPINA A/S (b) 8,355,572
366,205 Genmab A/S, ADR (c) 13,406,765
33,600 Netcompany Group
A/S (b) (c) (d) (e) 2,786,646
---------------
24,548,983
---------------
FRANCE -- 1.3%
128,316 La Francaise des Jeux
SAEM (b) (d) (e) 4,707,486
---------------
GERMANY -- 4.6%
680,261 E. ON SE (b) 7,498,163
81,769 HelloFresh SE (b) (c) 4,544,245
36,110 Knorr-Bremse AG (b) 4,252,394
---------------
16,294,802
---------------
ITALY -- 2.6%
456,918 Nexi S.p.A. (b) (c) (d) (e) 9,157,707
---------------
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
JAPAN -- 6.9%
2,262 AI inside, Inc. (b) (c) $ 953,561
32,958 Freee KK (b) (c) 2,499,451
34,030 JMDC, Inc. (b) (c) 1,503,767
104,679 Mercari, Inc. (b) (c) 4,837,575
89,490 SG Holdings Co., Ltd. (b) 4,656,493
857,554 SoftBank Corp. (b) 9,582,600
24,773 Sun*, Inc. (c) 644,077
---------------
24,677,524
---------------
JERSEY -- 0.4%
96,684 Delphi Technologies PLC (c) 1,615,590
---------------
MEXICO -- 1.2%
|
10,169 Adyen N.V. (b) (c) (d) (e) 18,756,667
145,861 Prosus N.V. (b) 13,463,443
---------------
32,220,110
---------------
NORWAY -- 2.6%
345,137 Adevinta ASA (b) (c) 5,932,920
138,751 Scatec Solar ASA (b) (d) (e) 3,204,426
---------------
9,137,346
---------------
SAUDI ARABIA -- 10.0%
215,559 Dr. Sulaiman Al Habib Medical
Services Group Co. 5,539,974
3,135,341 Saudi Arabian Oil Co. (b) (d) (e) 30,026,939
---------------
35,566,913
---------------
SPAIN -- 2.6%
152,597 Cellnex Telecom S.A. (b) (d) (e) 9,263,098
---------------
SWEDEN -- 6.9%
250,159 Embracer Group AB (b) (c) 4,646,724
46,201 Sinch AB (b) (c) (d) (e) 3,767,607
335,906 Swedish Orphan Biovitrum
AB (b) (c) 8,103,824
746,689 Telefonaktiebolaget LM
Ericsson, ADR 8,131,443
---------------
24,649,598
---------------
SWITZERLAND -- 0.6%
107,509 SIG Combibloc Group AG (b) 2,149,657
---------------
TOTAL COMMON STOCKS -- 99.6% 355,283,771
(Cost $318,808,338) ---------------
MONEY MARKET FUNDS -- 0.2%
739,864 Goldman Sachs Financial Square
Treasury Obligations Fund -
Institutional Class --
0.01% (g) (h) 739,864
(Cost $739,864) ---------------
|
See Notes to Financial Statements Page 69
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
PRINCIPAL
VALUE DESCRIPTION VALUE
--------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.1%
|
$ 3,995,915 JPMorgan Chase & Co.,
0.05% (g), dated 09/30/20, due
10/01/20, with a maturity
value of $3,995,920.
Collateralized by U.S.
Treasury Note, interest rate
of 1.125%, due 02/28/25. The
value of the collateral
including accrued interest is
$4,074,572. (h) $ 3,995,915 (Cost $3,995,915) --------------- TOTAL INVESTMENTS -- 100.9% 360,019,550 (Cost $323,544,117) (i) NET OTHER ASSETS AND |
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $264,212,887 or 74.0% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the NYSE close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) This security is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the "1933 Act") and may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security is not restricted on the foreign exchange where it trades freely without any additional registration. As such, it does not require the additional disclosure required of restricted securities.
(e) This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act.
(f) All or a portion of this security is on loan (see Note 2E - 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 $4,079,722 and the total value of the collateral held by the Fund is $4,735,779.
(g) Rate shown reflects yield as of September 30, 2020.
(h) This security serves as collateral for securities on loan.
(i) Aggregate cost for federal income tax purposes is $325,861,082. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $38,684,730 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $4,526,262. The net unrealized appreciation was $34,158,468.
ADR - American Depositary Receipt
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
Brazil $ 10,915,672 $ 10,915,672 $ -- $ --
Cayman
Islands 137,104,840 46,657,507 90,447,333 --
Denmark 24,548,983 13,406,765 11,142,218 --
Japan 24,677,524 644,077 24,033,447 --
Jersey 1,615,590 1,615,590 -- --
Mexico 4,159,856 4,159,856 -- --
Saudi Arabia 35,566,913 5,539,974 30,026,939 --
Sweden 24,649,598 8,131,443 16,518,155 --
Other Country
Categories* 92,044,795 -- 92,044,795 --
Money Market
Funds 739,864 739,864 -- --
Repurchase
Agreements 3,995,915 -- 3,995,915 --
---------------------------------------------------------------
Total
Investments $ 360,019,550 $ 91,810,748 $ 268,208,802 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
Page 70 See Notes to Financial Statements
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
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:
Total gross amount presented on the
Statements of Assets and Liabilities(1) $ 4,079,722
Non-cash Collateral(2) (4,079,722)
---------------
Net Amount $ --
===============
|
(1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis.
(2) At September 30, 2020, 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:
Total gross amount presented on the
Statements of Assets and Liabilities(3) $ 3,995,915
Non-cash Collateral(4) (3,995,915)
---------------
Net Amount $ --
===============
(3) The amount is included in "Investments, at value" on the Statements of
Assets and Liabilities.
|
(4) At September 30, 2020, the value of the collateral received from each seller exceeded the value of the repurchase agreements.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
Hong Kong Dollar 25.1%
Euro 21.6
United States Dollar 20.7
Saudi Riyal 9.9
Japanese Yen 6.9
Swedish Krona 4.6
Danish Krone 3.1
Brazilian Real 3.0
Norwegian Krone 2.5
Mexican Peso 1.2
Australian Dollar 0.8
Swiss Franc 0.6
------
Total 100.0%
======
|
See Notes to Financial Statements Page 71
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
--------------------------------------------------------------
COMMON STOCKS (a) -- 99.9%
FRANCE -- 1.5%
446,315 Thales S.A. (b) $ 33,450,490
---------------
IRELAND -- 5.9%
569,397 Accenture PLC, Class A 128,678,028
---------------
ISRAEL -- 5.8%
541,013 Check Point Software Technologies
Ltd. (c) 65,105,505
498,258 CyberArk Software Ltd. (c) 51,529,842
300,697 Radware Ltd. (c) 7,288,895
194,646 Tufin Software Technologies
Ltd. (c) 1,605,830
---------------
125,530,072
---------------
JAPAN -- 2.1%
755,964 Trend Micro, Inc. (b) 46,067,463
---------------
JERSEY -- 1.8%
847,274 Mimecast Ltd. (c) 39,754,096
---------------
SOUTH KOREA -- 0.4%
163,066 Ahnlab, Inc. (b) 9,192,268
---------------
UNITED KINGDOM -- 3.5%
2,980,038 Avast PLC (b) (d) (e) 20,231,885
8,190,616 BAE Systems PLC (b) 50,868,166
204,749 Ultra Electronics Holdings
PLC (b) 5,502,367
---------------
76,602,418
---------------
UNITED STATES -- 78.9%
713,634 A10 Networks, Inc. (c) 4,545,849
586,686 Akamai Technologies, Inc. (c) 64,852,270
775,699 Booz Allen Hamilton Holding
Corp. 64,367,503
3,235,811 Cisco Systems, Inc. 127,458,595
1,785,367 Cloudflare, Inc., Class A (c) 73,307,169
1,086,579 Crowdstrike Holdings, Inc.,
Class A (c) 149,209,028
516,196 F5 Networks, Inc. (c) 63,373,383
4,653,142 FireEye, Inc. (c) 57,443,038
517,467 Fortinet, Inc. (c) 60,962,787
2,732,328 Juniper Networks, Inc. 58,745,052
754,865 Leidos Holdings, Inc. 67,296,215
211,231 ManTech International Corp.,
Class A 14,549,591
1,028,826 MobileIron, Inc. (c) 7,212,070
634,330 Okta, Inc. (c) 135,651,471
735,352 OneSpan, Inc. (c) 15,412,978
265,368 Palo Alto Networks, Inc. (c) 64,948,818
622,851 Proofpoint, Inc. (c) 65,741,923
607,312 Qualys, Inc. (c) 59,522,649
592,976 Rapid7, Inc. (c) 36,313,850
383,638 Ribbon Communications, Inc. (c) 1,484,679
1,264,589 Sailpoint Technologies Holdings,
Inc. (c) 50,039,787
774,453 Science Applications
International Corp. 60,732,604
311,443 Splunk, Inc. (c) 58,591,772
1,124,554 Tenable Holdings, Inc. (c) 42,451,914
|
344,486 Varonis Systems, Inc. (c) $ 39,760,574
318,010 VeriSign, Inc. (c) 65,144,349
472,914 VMware, Inc., Class A (c) 67,943,554
1,269,237 Zix Corp. (c) 7,412,344
953,095 Zscaler, Inc. (c) 134,090,936
---------------
1,718,566,752
---------------
TOTAL INVESTMENTS -- 99.9% 2,177,841,587
(Cost $1,889,807,278) (f)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 1,146,785
---------------
NET ASSETS -- 100.0% $ 2,178,988,372
===============
|
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $165,312,639 or 7.6% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the NYSE close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) This security is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the "1933 Act") and may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security is not restricted on the foreign exchange where it trades freely without any additional registration. As such, it does not require the additional disclosure required of restricted securities.
(e) This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act.
(f) Aggregate cost for federal income tax purposes is $1,941,825,389. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $315,208,706 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $79,192,508. The net unrealized appreciation was $236,016,198.
Page 72 See Notes to Financial Statements
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
---------------------------------------------------------------
Common Stocks:
Ireland $ 128,678,028 $ 128,678,028 $ -- $ --
Israel 125,530,072 125,530,072 -- --
Jersey 39,754,096 39,754,096 -- --
United
States 1,718,566,752 1,718,566,752 -- --
Other Country
Categories* 165,312,639 -- 165,312,639 --
---------------------------------------------------------------
Total
Investments $ 2,177,841,587 $ 2,012,528,948 $ 165,312,639 $ --
===============================================================
|
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
--------------------------------------------------------------
United States Dollar 92.4%
British Pound Sterling 3.5
Japanese Yen 2.1
Euro 1.6
South Korean Won 0.4
------
Total 100.0%
======
|
See Notes to Financial Statements Page 73
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2020
FIRST TRUST
FIRST TRUST FTSE EPRA/NAREIT
STOXX(R) EUROPEAN DEVELOPED MARKETS
SELECT DIVIDEND REAL ESTATE
INDEX FUND INDEX FUND
(FDD) (FFR)
---------------------- ----------------------
ASSETS:
Investments, at value ................................................. $ 178,714,326 $ 32,588,035
Cash .................................................................. -- --
Foreign currency, at value ............................................ 264,959 1,111
Due from authorized participant ....................................... -- --
Receivables:
Reclaims ........................................................... 1,194,531 19,874
Investment securities sold ......................................... -- --
Dividends .......................................................... 304,243 132,110
Securities lending income .......................................... -- --
Capital shares sold ................................................ -- --
From investment advisor ............................................ -- 1,665
Prepaid expenses ...................................................... 1,539 1,476
---------------- ----------------
TOTAL ASSETS ....................................................... 180,479,598 32,744,271
---------------- ----------------
LIABILITIES:
Due to custodian foreign currency ..................................... -- --
Payables:
Capital shares redeemed ............................................ -- --
Investment securities purchased .................................... -- --
Licensing fees ..................................................... 87,544 10,030
Investment advisory fees............................................ 63,610 --
Audit and tax fees ................................................. 22,431 26,007
Shareholder reporting fees ......................................... 20,809 8,263
Trustees' fees ..................................................... 3,657 3,544
Collateral for securities on loan .................................. -- --
Foreign capital gains tax .......................................... -- --
Other liabilities ..................................................... 54,280 25,884
---------------- ----------------
TOTAL LIABILITIES .................................................. 252,331 73,728
---------------- ----------------
NET ASSETS ............................................................ $ 180,227,267 $ 32,670,543
================ ================
NET ASSETS CONSIST OF:
Paid-in capital ....................................................... $ 273,657,374 $ 38,689,759
Par value ............................................................. 175,533 8,416
Accumulated distributable earnings (loss) ............................. (93,605,640) (6,027,632)
---------------- ----------------
NET ASSETS ............................................................ $ 180,227,267 $ 32,670,543
================ ================
NET ASSET VALUE, per share ............................................ $ 10.27 $ 38.82
================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share) ............................. 17,553,334 841,608
================ ================
Investments, at cost .................................................. $ 190,067,925 $ 35,749,600
================ ================
Foreign currency, at cost (proceeds) .................................. $ 265,749 $ 1,113
================ ================
Securities on loan, at value .......................................... $ -- $ --
================ ================
|
Page 74 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
FIRST TRUST FIRST TRUST GLOBAL NASDAQ(R) CLEAN FIRST TRUST
DOW JONES GLOBAL GLOBAL ENGINEERING EDGE(R) SMART GRID INDXX GLOBAL
SELECT DIVIDEND WIND ENERGY AND CONSTRUCTION INFRASTRUCTURE NATURAL RESOURCES
INDEX FUND ETF ETF INDEX FUND INCOME ETF
(FGD) (FAN) (FLM) (GRID) (FTRI)
--------------------- --------------------- --------------------- --------------------- ---------------------
$ 341,719,226 $ 204,024,634 $ 6,292,365 $ 56,296,750 $ 5,909,010
-- -- 31,197 250,953 3,649
433,852 2,828 682 -- 231
-- 1,640,148 -- -- --
781,244 217,540 1,744 56,217 3,495
1,657 1,065,425 -- -- 219
1,888,492 195,461 21,910 49,369 31,255
-- 1,186 668 303 3
-- -- -- -- --
-- -- 2,231 -- --
1,602 1,482 1,464 15 --
--------------- --------------- --------------- --------------- ---------------
344,826,073 207,148,704 6,352,261 56,653,607 5,947,862
--------------- --------------- --------------- --------------- ---------------
-- -- -- -- --
-- -- -- -- --
-- 1,810,617 -- -- --
56,544 39,525 1,595 10,764 --
119,485 53,482 -- 11,961 3,445
26,006 25,256 25,257 25,256 --
34,419 14,970 5,626 7,771 --
3,773 3,561 3,523 3,533 --
-- 83,947 -- -- 204,100
-- -- -- -- --
97,185 42,536 6,398 15,339 --
--------------- --------------- --------------- --------------- ---------------
337,412 2,073,894 42,399 74,624 207,545
--------------- --------------- --------------- --------------- ---------------
$ 344,488,661 $ 205,074,810 $ 6,309,862 $ 56,578,983 $ 5,740,317
=============== =============== =============== =============== ===============
$ 583,443,567 $ 226,013,943 $ 15,405,414 $ 50,384,482 $ 68,132,216
193,000 117,500 1,500 9,000 6,000
(239,147,906) (21,056,633) (9,097,052) 6,185,501 (62,397,899)
--------------- --------------- --------------- --------------- ---------------
$ 344,488,661 $ 205,074,810 $ 6,309,862 $ 56,578,983 $ 5,740,317
=============== =============== =============== =============== ===============
$ 17.85 $ 17.45 $ 42.07 $ 62.87 $ 9.57
=============== =============== =============== =============== ===============
19,300,002 11,750,002 150,002 900,002 600,002
=============== =============== =============== =============== ===============
$ 387,115,052 $ 170,287,052 $ 7,181,529 $ 47,979,246 $ 6,111,978
=============== =============== =============== =============== ===============
$ 436,883 $ 2,828 $ 682 $ -- $ 230
=============== =============== =============== =============== ===============
$ -- $ 80,000 $ -- $ -- $ 203,996
=============== =============== =============== =============== ===============
|
See Notes to Financial Statements Page 75
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
SEPTEMBER 30, 2020
FIRST TRUST FIRST TRUST
INDXX GLOBAL BICK
AGRICULTURE ETF INDEX FUND
(FTAG) (BICK)
---------------------- ----------------------
ASSETS:
Investments, at value ................................................. $ 3,027,911 $ 62,253,647
Cash .................................................................. 2,276 13,272
Foreign currency, at value ............................................ -- 8,358
Due from authorized participant ....................................... -- --
Receivables:
Reclaims ........................................................... 10,768 24,037
Investment securities sold ......................................... -- 13,272
Dividends .......................................................... 4,890 93,778
Securities lending income .......................................... -- 900
Capital shares sold ................................................ -- --
From investment advisor ............................................ -- --
Prepaid expenses ...................................................... -- --
---------------- ----------------
TOTAL ASSETS ....................................................... 3,045,845 62,407,264
---------------- ----------------
LIABILITIES:
Due to custodian foreign currency ..................................... -- --
Payables:
Capital shares redeemed ............................................ -- --
Investment securities purchased .................................... -- --
Licensing fees ..................................................... -- --
Investment advisory fees 1,766 32,923
Audit and tax fees ................................................. -- --
Shareholder reporting fees ......................................... -- --
Trustees' fees ..................................................... -- --
Collateral for securities on loan .................................. -- 1,437,006
Foreign capital gains tax .......................................... 4,078 --
Other liabilities ..................................................... -- --
---------------- ----------------
TOTAL LIABILITIES .................................................. 5,844 1,469,929
---------------- ----------------
NET ASSETS ............................................................ $ 3,040,001 $ 60,937,335
================ ================
NET ASSETS CONSIST OF:
Paid-in capital ....................................................... $ 22,715,392 $ 90,825,211
Par value ............................................................. 1,399 21,000
Accumulated distributable earnings (loss) ............................. (19,676,790) (29,908,876)
---------------- ----------------
NET ASSETS ............................................................ $ 3,040,001 $ 60,937,335
================ ================
NET ASSET VALUE, per share ............................................ $ 21.73 $ 29.02
================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share) ............................. 139,928 2,100,002
================ ================
Investments, at cost .................................................. $ 3,210,294 $ 60,296,826
================ ================
Foreign currency, at cost (proceeds) .................................. $ -- $ 8,359
================ ================
Securities on loan, at value .......................................... $ -- $ 1,384,415
================ ================
|
Page 76 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
FIRST TRUST NASDAQ GLOBAL CLOUD INTERNATIONAL NASDAQ
INDXX NEXTG AUTO COMPUTING EQUITY CYBERSECURITY
ETF INDEX FUND ETF OPPORTUNITIES ETF ETF
(NXTG) (CARZ) (SKYY) (FPXI) (CIBR)
--------------------- --------------------- --------------------- --------------------- ---------------------
$ 593,169,837 $ 28,992,991 $ 5,252,291,311 $ 360,019,550 $ 2,177,841,587
1,972,012 198,906 6,173,332 4,506,371 2,111,659
1 -- -- -- 3
23,803 -- -- 7,023,491 3,735,706
43,252 23,494 348,823 19,701 --
-- -- -- -- --
1,097,961 47,667 1,088,701 325,943 156,167
2,671 -- 433,183 10,820 --
2,952,676 -- -- 14,158,971 68
-- -- -- -- --
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
599,262,213 29,263,058 5,260,335,350 386,064,847 2,183,845,190
--------------- --------------- --------------- --------------- ---------------
-- -- -- 2,751 --
2,895 -- -- 35,847 --
2,960,483 -- -- 24,313,461 3,780,219
-- -- -- -- --
331,407 16,657 2,435,579 173,578 1,076,599
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
5,432,221 -- 294,075,193 4,735,779 --
-- -- -- -- --
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
8,727,006 16,657 296,510,772 29,261,416 4,856,818
--------------- --------------- --------------- --------------- ---------------
$ 590,535,207 $ 29,246,401 $ 4,963,824,578 $ 356,803,431 $ 2,178,988,372
=============== =============== =============== =============== ===============
$ 531,888,868 $ 35,620,168 $ 4,304,785,017 $ 330,086,660 $ 1,988,149,245
100,000 7,500 632,500 63,000 626,500
58,546,339 (6,381,267) 658,407,061 26,653,771 190,212,627
--------------- --------------- --------------- --------------- ---------------
$ 590,535,207 $ 29,246,401 $ 4,963,824,578 $ 356,803,431 $ 2,178,988,372
=============== =============== =============== =============== ===============
$ 59.05 $ 39.00 $ 78.48 $ 56.64 $ 34.78
=============== =============== =============== =============== ===============
10,000,002 750,002 63,250,002 6,300,002 62,650,002
=============== =============== =============== =============== ===============
$ 532,829,388 $ 30,844,674 $ 4,449,703,659 $ 323,544,117 $ 1,889,807,278
=============== =============== =============== =============== ===============
$ 1 $ -- $ -- $ (2,751) $ 3
=============== =============== =============== =============== ===============
$ 5,202,876 $ -- $ 285,513,447 $ 4,079,722 $ --
=============== =============== =============== =============== ===============
|
See Notes to Financial Statements Page 77
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2020
FIRST TRUST
FIRST TRUST FTSE EPRA/NAREIT
STOXX(R) EUROPEAN DEVELOPED MARKETS
SELECT DIVIDEND REAL ESTATE
INDEX FUND INDEX FUND
(FDD) (FFR)
---------------------- ----------------------
INVESTMENT INCOME:
Dividends ............................................................. $ 12,044,265 $ 1,513,266
Securities lending income (net of fees) ............................... -- --
Foreign withholding tax ............................................... (844,298) (78,089)
---------------- ----------------
Total investment income ............................................ 11,199,967 1,435,177
---------------- ----------------
EXPENSES:
Investment advisory fees .............................................. 1,015,859 184,209
Licensing fees ........................................................ 137,279 55,263
Accounting and administration fees .................................... 128,720 28,858
Audit and tax fees .................................................... 51,105 28,511
Shareholder reporting fees ............................................ 40,409 17,785
Custodian fees ........................................................ 30,630 46,589
Legal fees ............................................................ 14,083 6,156
Transfer agent fees ................................................... 12,716 2,306
Listing fees .......................................................... 9,237 8,607
Trustees' fees and expenses ........................................... 7,316 7,090
Registration and filing fees........................................... -- 334
Other expenses......................................................... 6,022 5,253
---------------- ----------------
Total expenses ..................................................... 1,453,376 390,961
Less fees waived and expenses reimbursed by
the investment advisor .......................................... -- (114,648)
---------------- ----------------
Net expenses ....................................................... 1,453,376 276,313
---------------- ----------------
NET INVESTMENT INCOME (LOSS) .......................................... 9,746,591 1,158,864
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ........................................................ (67,983,986) (1,098,961)
In-kind redemptions ................................................ 157,092 813,212
Foreign currency transactions ...................................... (185,953) (3,288)
Foreign capital gains tax .......................................... -- --
---------------- ----------------
Net realized gain (loss)............................................... (68,012,847) (289,037)
---------------- ----------------
Net increase from payment by the advisor............................... -- --
---------------- ----------------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................ 1,959,149 (11,700,512)
Foreign currency translation ....................................... 198,526 2,686
Deferred foreign capital gains tax ................................. -- --
---------------- ----------------
Net change in unrealized appreciation (depreciation) .................. 2,157,675 (11,697,826)
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ............................... (65,855,172) (11,986,863)
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS .................................................... $ (56,108,581) $ (10,827,999)
================ ================
|
(a) Fund is subject to a unitary fee (see Note 3 in the Notes to Financial Statements).
Page 78 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
FIRST TRUST FIRST TRUST GLOBAL NASDAQ(R) CLEAN FIRST TRUST
DOW JONES GLOBAL GLOBAL ENGINEERING EDGE(R) SMART GRID INDXX GLOBAL
SELECT DIVIDEND WIND ENERGY AND CONSTRUCTION INFRASTRUCTURE NATURAL RESOURCES
INDEX FUND ETF ETF INDEX FUND INCOME ETF
(FGD) (FAN) (FLM) (GRID) (FTRI)
--------------------- --------------------- --------------------- --------------------- ---------------------
$ 32,986,659 $ 2,923,954 $ 269,060 $ 784,811 $ 383,792
-- 36,502 5,064 7,676 1,914
(1,287,640) (304,955) (17,082) (71,973) (26,124)
--------------- --------------- --------------- --------------- ---------------
31,699,019 2,655,501 257,042 720,514 359,582
--------------- --------------- --------------- --------------- ---------------
1,884,536 432,394 30,437 143,961 44,603 (a)
272,622 108,097 7,614 32,382 --
238,387 55,687 6,027 19,612 --
65,112 38,960 26,607 29,551 --
75,525 31,303 11,459 16,225 --
58,830 14,646 6,766 7,061 --
23,650 3,713 260 1,288 --
23,590 5,393 381 1,797 --
8,607 9,074 9,074 6,006 --
7,569 7,124 7,045 7,068 --
(781) 8,246 -- 1,816 --
11,276 3,628 2,912 2,916 --
--------------- --------------- --------------- --------------- ---------------
2,668,923 718,265 108,582 269,683 44,603
-- (69,675) (55,317) (17,751) --
--------------- --------------- --------------- --------------- ---------------
2,668,923 648,590 53,265 251,932 44,603
--------------- --------------- --------------- --------------- ---------------
29,030,096 2,006,911 203,777 468,582 314,979
--------------- --------------- --------------- --------------- ---------------
(109,399,140) (2,918,110) (916,494) (769,910) (1,150,039)
(9,428,640) 445,820 551,147 2,286,802 41,418
32,347 47,662 (1,260) (843) (2,484)
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
(118,795,433) (2,424,628) (366,607) 1,516,049 (1,111,105)
--------------- --------------- --------------- --------------- ---------------
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
(17,953,447) 32,807,890 (239,854) 7,525,775 20,586
155,648 19,487 733 4,401 (141)
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
(17,797,799) 32,827,377 (239,121) 7,530,176 20,445
--------------- --------------- --------------- --------------- ---------------
(136,593,232) 30,402,749 (605,728) 9,046,225 (1,090,660)
--------------- --------------- --------------- --------------- ---------------
$ (107,563,136) $ 32,409,660 $ (401,951) $ 9,514,807 $ (775,681)
=============== =============== =============== =============== ===============
|
See Notes to Financial Statements Page 79
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED SEPTEMBER 30, 2020
FIRST TRUST
INDXX GLOBAL FIRST TRUST
AGRICULTURE BICK
ETF INDEX FUND
(FTAG) (BICK)
---------------------- ----------------------
INVESTMENT INCOME:
Dividends ............................................................. $ 92,450 $ 1,271,375
Securities lending income (net of fees) ............................... -- 941
Foreign withholding tax ............................................... (9,057) (114,979)
---------------- ----------------
Total investment income ............................................ 83,393 1,157,337
---------------- ----------------
EXPENSES:
Investment advisory fees .............................................. 20,423 (a) 598,677 (a)
Licensing fees ........................................................ -- --
Accounting and administration fees .................................... -- --
Audit and tax fees .................................................... -- --
Shareholder reporting fees ............................................ -- --
Custodian fees ........................................................ -- --
Legal fees ............................................................ -- --
Transfer agent fees ................................................... -- --
Listing fees .......................................................... -- --
Trustees' fees and expenses ........................................... -- --
Registration and filing fees .......................................... -- --
Other expenses ........................................................ -- --
---------------- ----------------
Total expenses ..................................................... 20,423 598,677
Less fees waived and expenses reimbursed by
the investment advisor .......................................... -- --
---------------- ----------------
Net expenses ....................................................... 20,423 598,677
---------------- ----------------
NET INVESTMENT INCOME (LOSS) .......................................... 62,970 558,660
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ........................................................ (311,014) (4,985,000)
In-kind redemptions ................................................ -- 374,850
Foreign currency transactions ...................................... (128) (95,281)
Foreign capital gains tax .......................................... (48) --
---------------- ----------------
Net realized gain (loss)............................................... (311,190) (4,705,431)
---------------- ----------------
Net increase from payment by the advisor............................... -- --
---------------- ----------------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................ 143,675 4,772,741
Foreign currency translation ....................................... 762 9,183
Deferred foreign capital gains tax ................................. (2,186) --
---------------- ----------------
Net change in unrealized appreciation (depreciation) .................. 142,251 4,781,924
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ............................... (168,939) 76,493
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS .................................................... $ (105,969) $ 635,153
================ ================
|
(a) Fund is subject to a unitary fee (see Note 3 in the Notes to Financial Statements).
Page 80 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
FIRST TRUST NASDAQ GLOBAL CLOUD INTERNATIONAL NASDAQ
INDXX NEXTG AUTO COMPUTING EQUITY CYBERSECURITY
ETF INDEX FUND ETF OPPORTUNITIES ETF ETF
(NXTG) (CARZ) (SKYY) (FPXI) (CIBR)
--------------------- --------------------- --------------------- --------------------- ---------------------
$ 8,725,875 $ 361,251 $ 25,359,646 $ 1,229,702 $ 32,338,618
65,241 6,921 1,654,676 11,014 --
(696,254) (32,934) (138,830) (115,919) (107,438)
--------------- --------------- --------------- --------------- ---------------
8,094,862 335,238 26,875,492 1,124,797 32,231,180
--------------- --------------- --------------- --------------- ---------------
2,550,865 (a) 130,818 (a) 19,142,777 (a) 726,190 (a) 9,031,940 (a)
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
2,550,865 130,818 19,142,777 726,190 9,031,940
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
2,550,865 130,818 19,142,777 726,190 9,031,940
--------------- --------------- --------------- --------------- ---------------
5,543,997 204,420 7,732,715 398,607 23,199,240
--------------- --------------- --------------- --------------- ---------------
(245,580) (162,540) (80,370,568) (7,151,806) (54,411,167)
11,905,844 3,213,898 461,599,122 15,104,264 160,409,681
(94,695) (15,121) -- 14,381 (27,731)
(2,029) -- -- -- --
--------------- --------------- --------------- --------------- ---------------
11,563,540 3,036,237 381,228,554 7,966,839 105,970,783
--------------- --------------- --------------- --------------- ---------------
-- -- -- 806 --
--------------- --------------- --------------- --------------- ---------------
52,847,406 1,128,431 797,519,832 33,897,979 233,901,133
337 1,403 -- 2,278 1,675
-- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
52,847,743 1,129,834 797,519,832 33,900,257 233,902,808
--------------- --------------- --------------- --------------- ---------------
64,411,283 4,166,071 1,178,748,386 41,867,902 339,873,591
--------------- --------------- --------------- --------------- ---------------
$ 69,955,280 $ 4,370,491 $ 1,186,481,101 $ 42,266,509 $ 363,072,831
=============== =============== =============== =============== ===============
|
See Notes to Financial Statements Page 81
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST
STOXX(R) EUROPEAN
SELECT DIVIDEND
INDEX FUND
(FDD)
---------------------------------------
Year Ended Year Ended
9/30/2020 9/30/2019
------------------ ------------------
OPERATIONS:
Net investment income (loss)........................................................ $ 9,746,591 $ 16,522,898
Net realized gain (loss)............................................................ (68,012,847) 4,219,986
Net increase from payment by the advisor............................................ -- --
Net change in unrealized appreciation (depreciation)................................ 2,157,675 (18,930,002)
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations.................................................................. (56,108,581) 1,812,882
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................... (9,499,846) (16,448,343)
Return of capital................................................................... -- --
---------------- ----------------
Total distributions to shareholders................................................. (9,499,846) (16,448,343)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................... 22,397,192 20,079,043
Proceeds from shares acquired through reorganization................................ -- --
Cost of shares redeemed............................................................. (70,479,677) (166,349,357)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.................................................... (48,082,485) (146,270,314)
---------------- ----------------
Total increase (decrease) in net assets............................................. (113,690,912) (160,905,775)
NET ASSETS:
Beginning of period................................................................. 293,918,179 454,823,954
---------------- ----------------
End of period....................................................................... $ 180,227,267 $ 293,918,179
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period............................................. 23,053,334 34,653,334
Shares sold......................................................................... 1,600,000 1,550,000
Shares issued through reorganization................................................ -- --
Shares redeemed..................................................................... (7,100,000) (13,150,000)
---------------- ----------------
Shares outstanding, end of period................................................... 17,553,334 23,053,334
================ ================
|
Page 82 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
FTSE EPRA/NAREIT DOW JONES FIRST TRUST
DEVELOPED MARKETS REAL ESTATE GLOBAL SELECT DIVIDEND GLOBAL WIND ENERGY
INDEX FUND INDEX FUND ETF
(FFR) (FGD) (FAN)
---------------------------------------- --------------------------------------- ---------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/2020 9/30/2019 9/30/2020 9/30/2019 9/30/2020 9/30/2019
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
$ 1,158,864 $ 1,263,898 $ 29,030,096 $ 30,447,876 $ 2,006,911 $ 1,690,007
(289,037) 593,342 (118,795,433) (12,120,254) (2,424,628) (47,761)
-- -- -- -- -- --
(11,697,826) 4,418,478 (17,797,799) (31,405,100) 32,827,377 2,884,357
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(10,827,999) 6,275,718 (107,563,136) (13,077,478) 32,409,660 4,526,603
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(2,248,427) (1,495,051) (29,511,768) (30,379,078) (2,010,555) (1,723,721)
-- -- -- -- -- --
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(2,248,427) (1,495,051) (29,511,768) (30,379,078) (2,010,555) (1,723,721)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
2,470,109 7,018,700 59,303,361 185,018,208 102,329,499 11,212,366
-- 2,028,889 -- -- -- --
(13,159,351) (2,465,739) (110,271,559) (93,309,875) (3,155,559) (17,875,844)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(10,689,242) 6,581,850 (50,968,198) 91,708,333 99,173,940 (6,663,478)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(23,765,668) 11,362,517 (188,043,102) 48,251,777 129,573,045 (3,860,596)
56,436,211 45,073,694 532,531,763 484,279,986 75,501,765 79,362,361
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 32,670,543 $ 56,436,211 $ 344,488,661 $ 532,531,763 $ 205,074,810 $ 75,501,765
================ ================ ================ ================ ================ ================
1,141,608 1,000,002 23,250,002 19,250,002 5,750,002 6,350,002
50,000 150,000 2,450,000 7,900,000 6,250,000 850,000
-- 41,606 -- -- -- --
(350,000) (50,000) (6,400,000) (3,900,000) (250,000) (1,450,000)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
841,608 1,141,608 19,300,002 23,250,002 11,750,002 5,750,002
================ ================ ================ ================ ================ ================
|
See Notes to Financial Statements Page 83
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
GLOBAL ENGINEERING
AND CONSTRUCTION
ETF
(FLM)
---------------------------------------
Year Ended Year Ended
9/30/2020 9/30/2019
------------------ ------------------
OPERATIONS:
Net investment income (loss)........................................................ $ 203,777 $ 185,560
Net realized gain (loss)............................................................ (366,607) (133,129)
Net increase from payment by the advisor............................................ -- --
Net change in unrealized appreciation (depreciation)................................ (239,121) (2,158,038)
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations.................................................................. (401,951) (2,105,607)
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................... (207,908) (185,587)
Return of capital................................................................... -- --
---------------- ----------------
Total distributions to shareholders................................................. (207,908) (185,587)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................... -- --
Proceeds from shares acquired through reorganization................................ -- --
Cost of shares redeemed............................................................. (2,489,438) (2,493,964)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.................................................... (2,489,438) (2,493,964)
---------------- ----------------
Total increase (decrease) in net assets............................................. (3,099,297) (4,785,158)
NET ASSETS:
Beginning of period................................................................. 9,409,159 14,194,317
---------------- ----------------
End of period....................................................................... $ 6,309,862 $ 9,409,159
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period............................................. 200,002 250,002
Shares sold......................................................................... -- --
Shares issued through reorganization................................................ -- --
Shares redeemed..................................................................... (50,000) (50,000)
---------------- ----------------
Shares outstanding, end of period................................................... 150,002 200,002
================ ================
|
Page 84 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
NASDAQ(R) CLEAN EDGE(R) INDXX GLOBAL FIRST TRUST
SMART GRID INFRASTRUCTURE NATURAL RESOURCES INDXX GLOBAL
INDEX FUND INCOME ETF AGRICULTURE ETF
(GRID) (FTRI) (FTAG)
---------------------------------------- --------------------------------------- ---------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/2020 9/30/2019 9/30/2020 9/30/2019 9/30/2020 9/30/2019
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
$ 468,582 $ 387,177 $ 314,979 $ 493,235 $ 62,970 $ 78,703
1,516,049 142,524 (1,111,105) 243,044 (311,190) (205,446)
-- -- -- -- -- --
7,530,176 27,773 20,445 (1,131,308) 142,251 (414,894)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
9,514,807 557,474 (775,681) (395,029) (105,969) (541,637)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(369,941) (360,196) (343,681) (478,011) (54,334) (100,503)
-- -- -- -- -- (6,587)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(369,941) (360,196) (343,681) (478,011) (54,334) (107,090)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
22,728,389 -- -- -- -- --
-- -- -- -- -- --
(2,526,309) (6,298,315) (592,651) (582,416) -- (1,129,832)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
20,202,080 (6,298,315) (592,651) (582,416) -- (1,129,832)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
29,346,946 (6,101,037) (1,712,013) (1,455,456) (160,303) (1,778,559)
27,232,037 33,333,074 7,452,330 8,907,786 3,200,304 4,978,863
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 56,578,983 $ 27,232,037 $ 5,740,317 $ 7,452,330 $ 3,040,001 $ 3,200,304
================ ================ ================ ================ ================ ================
550,002 700,002 650,002 700,002 139,928 189,928
400,000 -- -- -- -- --
-- -- -- -- -- --
(50,000) (150,000) (50,000) (50,000) -- (50,000)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
900,002 550,002 600,002 650,002 139,928 139,928
================ ================ ================ ================ ================ ================
|
See Notes to Financial Statements Page 85
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
BICK
INDEX FUND
(BICK)
---------------------------------------
Year Ended Year Ended
9/30/2020 9/30/2019
------------------ ------------------
OPERATIONS:
Net investment income (loss)........................................................ $ 558,660 $ 1,840,415
Net realized gain (loss)............................................................ (4,705,431) (10,954,662)
Net increase from payment by the advisor............................................ -- --
Net change in unrealized appreciation (depreciation)................................ 4,781,924 2,602,806
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations.................................................................. 635,153 (6,511,441)
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................... (775,621) (2,279,891)
Return of capital................................................................... -- --
---------------- ----------------
Total distributions to shareholders................................................. (775,621) (2,279,891)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................... 7,430,446 17,424,177
Proceeds from shares acquired through reorganization................................ -- --
Cost of shares redeemed............................................................. (62,855,887) (82,778,057)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.................................................... (55,425,441) (65,353,880)
---------------- ----------------
Total increase (decrease) in net assets............................................. (55,565,909) (74,145,212)
NET ASSETS:
Beginning of period................................................................. 116,503,244 190,648,456
---------------- ----------------
End of period....................................................................... $ 60,937,335 $ 116,503,244
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period............................................. 4,550,002 7,200,002
Shares sold......................................................................... 250,000 650,000
Shares issued through reorganization................................................ -- --
Shares redeemed..................................................................... (2,700,000) (3,300,000)
---------------- ----------------
Shares outstanding, end of period................................................... 2,100,002 4,550,002
================ ================
|
Page 86 See Notes to Financial Statements
FIRST TRUST
FIRST TRUST NASDAQ FIRST TRUST
INDXX NEXTG GLOBAL AUTO CLOUD COMPUTING
ETF INDEX FUND ETF
(NXTG) (CARZ) (SKYY)
---------------------------------------- --------------------------------------- ---------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/2020 9/30/2019 9/30/2020 9/30/2019 9/30/2020 9/30/2019
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
$ 5,543,997 $ 1,029,361 $ 204,420 $ 610,100 $ 7,732,715 $ 20,846,125
11,563,540 (589,594) 3,036,237 (1,056,565) 381,228,554 372,621,864
-- -- -- -- -- --
52,847,743 6,528,478 1,129,834 (912,086) 797,519,832 (414,864,808)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
69,955,280 6,968,245 4,370,491 (1,358,551) 1,186,481,101 (21,396,819)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(5,116,621) (721,966) (256,391) (605,577) (8,515,791) (21,035,531)
-- -- -- -- -- --
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(5,116,621) (721,966) (256,391) (605,577) (8,515,791) (21,035,531)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
384,483,696 177,245,669 11,510,144 6,429,028 2,872,076,000 1,872,262,095
-- -- -- -- -- --
(54,802,400) (4,846,339) (4,001,084) (5,009,096) (1,254,414,356) (1,728,771,629)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
329,681,296 172,399,330 7,509,060 1,419,932 1,617,661,644 143,490,466
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
394,519,955 178,645,609 11,623,160 (544,196) 2,795,626,954 101,058,116
196,015,252 17,369,643 17,623,241 18,167,437 2,168,197,624 2,067,139,508
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 590,535,207 $ 196,015,252 $ 29,246,401 $ 17,623,241 $ 4,963,824,578 $ 2,168,197,624
================ ================ ================ ================ ================ ================
3,900,002 350,002 550,002 500,002 38,450,002 36,450,002
7,100,000 3,650,000 300,000 200,000 43,350,000 32,550,000
-- -- -- -- -- --
(1,000,000) (100,000) (100,000) (150,000) (18,550,000) (30,550,000)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
10,000,002 3,900,002 750,002 550,002 63,250,002 38,450,002
================ ================ ================ ================ ================ ================
|
See Notes to Financial Statements Page 87
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
INTERNATIONAL
EQUITY
OPPORTUNITIES ETF
(FPXI)
---------------------------------------
Year Ended Year Ended
9/30/2020 9/30/2019
------------------ ------------------
OPERATIONS:
Net investment income (loss)........................................................ $ 398,607 $ 202,382
Net realized gain (loss)............................................................ 7,966,839 (45,960)
Net increase from payment by the advisor............................................ 806 --
Net change in unrealized appreciation (depreciation)................................ 33,900,257 74,278
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations.................................................................. 42,266,509 230,700
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................................... (374,400) (200,971)
Return of capital................................................................... -- --
---------------- ----------------
Total distributions to shareholders................................................. (374,400) (200,971)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold........................................................... 354,994,527 16,491,543
Proceeds from shares acquired through reorganization................................ -- --
Cost of shares redeemed............................................................. (71,013,884) (11,912,293)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.................................................... 283,980,643 4,579,250
---------------- ----------------
Total increase (decrease) in net assets............................................. 325,872,752 4,608,979
NET ASSETS:
Beginning of period................................................................. 30,930,679 26,321,700
---------------- ----------------
End of period....................................................................... $ 356,803,431 $ 30,930,679
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period............................................. 850,002 750,002
Shares sold......................................................................... 6,850,000 450,000
Shares issued through reorganization................................................ -- --
Shares redeemed..................................................................... (1,400,000) (350,000)
---------------- ----------------
Shares outstanding, end of period................................................... 6,300,002 850,002
================ ================
|
Page 88 See Notes to Financial Statements
FIRST TRUST
NASDAQ
CYBERSECURITY ETF
(CIBR)
----------------------------------------
Year Ended Year Ended
9/30/2020 9/30/2019
------------------ ------------------
$ 23,199,240 $ 1,655,281
105,970,783 22,519,656
-- --
233,902,808 (63,337,740)
---------------- ----------------
363,072,831 (39,162,803)
---------------- ----------------
(23,668,226) (1,844,090)
-- --
---------------- ----------------
(23,668,226) (1,844,090)
---------------- ----------------
1,421,549,328 406,227,662
-- --
(561,615,357) (233,244,459)
---------------- ----------------
859,933,971 172,983,203
---------------- ----------------
1,199,338,576 131,976,310
979,649,796 847,673,486
---------------- ----------------
$ 2,178,988,372 $ 979,649,796
================ ================
35,450,002 29,750,002
44,800,000 14,350,000
-- --
(17,600,000) (8,650,000)
---------------- ----------------
62,650,002 35,450,002
================ ================
|
See Notes to Financial Statements Page 89
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (FDD)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 12.75 $ 13.12 $ 13.61 $ 11.82 $ 11.92
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.52 0.66 0.59 0.42 0.55
Net realized and unrealized gain (loss) (2.50) (0.37) (0.49) 1.79 (0.10)
----------- ----------- ----------- ----------- -----------
Total from investment operations (1.98) 0.29 0.10 2.21 0.45
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.50) (0.66) (0.59) (0.42) (0.55)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 10.27 $ 12.75 $ 13.12 $ 13.61 $ 11.82
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (15.64)% 2.35% 0.74% 18.93% 3.88%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 180,227 $ 293,918 $ 454,824 $ 529,527 $ 165,490
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.57% 0.58% 0.57% 0.60% 0.60%
Ratio of net expenses to average net assets 0.57% 0.58% 0.57% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 3.84% 4.84% 4.25% 3.96% 4.63%
Portfolio turnover rate (b) 98% 24% 35% 21% 34%
|
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (FFR)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 49.44 $ 45.07 $ 44.96 $ 46.18 $ 41.00
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.62 1.25 1.48 0.89 0.90
Net realized and unrealized gain (loss) (9.27) 4.55 0.31 (0.65) 5.20
----------- ----------- ----------- ----------- -----------
Total from investment operations (8.65) 5.80 1.79 0.24 6.10
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.97) (1.43) (1.68) (1.46) (0.92)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 38.82 $ 49.44 $ 45.07 $ 44.96 $ 46.18
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (18.12)% 13.19% 3.99% 0.67% 14.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 32,671 $ 56,436 $ 45,074 $ 51,700 $ 71,576
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.85% 0.89% 0.85% 0.70% 0.72%
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 2.52% 2.61% 3.48% 2.40% 2.53%
Portfolio turnover rate (b) 7% 7% 9% 6% 6%
|
(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 90 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (FGD)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 22.90 $ 25.16 $ 25.73 $ 23.49 $ 21.62
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.30 1.39 1.15 1.03 1.07
Net realized and unrealized gain (loss) (5.04) (2.24) (0.58) 2.23 1.82
----------- ----------- ----------- ----------- -----------
Total from investment operations (3.74) (0.85) 0.57 3.26 2.89
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.31) (1.41) (1.14) (1.02) (1.02)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 17.85 $ 22.90 $ 25.16 $ 25.73 $ 23.49
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (16.33)% (3.21)% 2.26% 14.14% 13.68%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 344,489 $ 532,532 $ 484,280 $ 470,887 $ 344,068
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.57% 0.59% 0.58% 0.58% 0.58%
Ratio of net expenses to average net assets 0.57% 0.59% 0.58% 0.58% 0.58%
Ratio of net investment income (loss) to
average net assets 6.16% 6.20% 4.48% 4.43% 4.63%
Portfolio turnover rate (b) 67% 31% 31% 35% 43%
|
FIRST TRUST GLOBAL WIND ENERGY ETF (FAN)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 13.13 $ 12.50 $ 13.13 $ 13.30 $ 10.38
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.26 0.30 0.28 0.41 0.20
Net realized and unrealized gain (loss) 4.33 0.64 (0.66) 0.32 2.93
----------- ----------- ----------- ----------- -----------
Total from investment operations 4.59 0.94 (0.38) 0.73 3.13
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.27) (0.31) (0.25) (0.90) (0.21)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 17.45 $ 13.13 $ 12.50 $ 13.13 $ 13.30
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 35.42% 7.58% (2.92)% 6.21% 30.42%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 205,075 $ 75,502 $ 79,362 $ 100,467 $ 87,096
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.66% 0.71% 0.68% 0.71% 0.74%
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 1.86% 2.32% 2.21% 2.88% 1.80%
Portfolio turnover rate (b) 42% 30% 22% 78% 26%
|
(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 91
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST GLOBAL ENGINEERING AND CONSTRUCTION ETF (FLM)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 47.05 $ 56.78 $ 56.89 $ 48.63 $ 44.17
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.28 0.87 0.79 0.62 0.96
Net realized and unrealized gain (loss) (4.93) (9.71) 0.16 8.27 4.46
----------- ----------- ----------- ----------- -----------
Total from investment operations (3.65) (8.84) 0.95 8.89 5.42
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.33) (0.89) (1.06) (0.63) (0.96)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 42.07 $ 47.05 $ 56.78 $ 56.89 $ 48.63
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (7.52)% (15.64)% 1.67% 18.39% 12.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 6,310 $ 9,409 $ 14,194 $ 17,066 $ 14,588
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 1.43% 1.21% 0.88% 0.92% 1.03%
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 2.68% 1.64% 1.45% 1.20% 2.01%
Portfolio turnover rate (b) 20% 14% 16% 20% 28%
|
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND (GRID)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 49.51 $ 47.62 $ 49.00 $ 39.19 $ 31.52
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.58 0.67 0.52 0.57 0.42
Net realized and unrealized gain (loss) 13.27 1.84 (1.32) 9.82 7.65
----------- ----------- ----------- ----------- -----------
Total from investment operations 13.85 2.51 (0.80) 10.39 8.07
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.49) (0.62) (0.58) (0.58) (0.40)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 62.87 $ 49.51 $ 47.62 $ 49.00 $ 39.19
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 28.10% 5.32% (1.66)% 26.73% 25.77%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 56,579 $ 27,232 $ 33,333 $ 26,951 $ 13,715
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.75% 0.82% 0.74% 0.84% 1.07%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.30% 1.40% 1.10% 1.44% 1.27%
Portfolio turnover rate (b) 53% 31% 60% 32% 37%
|
(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 92 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST INDXX GLOBAL NATURAL RESOURCES INCOME ETF (FTRI)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 11.47 $ 12.73 $ 11.88 $ 10.66 $ 10.99
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.53 0.72 0.48 0.41 0.33
Net realized and unrealized gain (loss) (1.86) (1.28) 0.83 1.22 (0.32)
----------- ----------- ----------- ----------- -----------
Total from investment operations (1.33) (0.56) 1.31 1.63 0.01
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.57) (0.70) (0.46) (0.41) (0.34)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 9.57 $ 11.47 $ 12.73 $ 11.88 $ 10.66
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (11.80)% (4.42)% 11.12% 15.47% 0.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 5,740 $ 7,452 $ 8,908 $ 8,913 $ 10,663
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 4.94% 5.95% 3.74% 3.39% 3.00%
Portfolio turnover rate (b) 66% 84% 50% 61% 179% (c)
|
FIRST TRUST INDXX GLOBAL AGRICULTURE ETF (FTAG)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 22.87 $ 26.21 $ 26.96 $ 21.55 $ 26.90
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.45 0.51 0.44 0.39 0.20
Net realized and unrealized gain (loss) (1.20) (3.17) (0.83) 5.41 (5.46)
----------- ----------- ----------- ----------- -----------
Total from investment operations (0.75) (2.66) (0.39) 5.80 (5.26)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.39) (0.64) (0.36) (0.39) (0.09)
Return on capital -- (0.04) -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions (0.39) (0.68) (0.36) (0.39) (0.09)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 21.73 $ 22.87 $ 26.21 $ 26.96 $ 21.55
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (3.19)% (10.16)% (1.46)% 27.09% (18.92)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3,040 $ 3,200 $ 4,979 $ 7,816 $ 4,093
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.72% (d)
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.72% (d)
Ratio of net investment income (loss) to
average net assets 2.16% 1.93% 1.56% 1.80% 1.74%
Portfolio turnover rate (b) 17% 20% 30% 38% 137% (c)
|
(a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year.
(b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions.
(c) The variation in the portfolio turnover rate is due to the change in the Fund's underlying index effective on the close of business December 18, 2015, which resulted in a complete rebalance of the Fund's portfolio.
(d) Includes foreign capital gains tax. If this tax expense was not included, the expense ratio would have been 0.70%.
See Notes to Financial Statements Page 93
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST BICK INDEX FUND (BICK)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 25.61 $ 26.48 $ 28.77 $ 22.94 $ 18.76
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.08 0.33 0.40 0.33 0.28
Net realized and unrealized gain (loss) 3.53 (0.80) (2.34) 5.85 4.19
----------- ----------- ----------- ----------- -----------
Total from investment operations 3.61 (0.47) (1.94) 6.18 4.47
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.20) (0.40) (0.35) (0.35) (0.29)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 29.02 $ 25.61 $ 26.48 $ 28.77 $ 22.94
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 14.07% (1.76)% (6.82)% 27.14% 23.99%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 60,937 $ 116,503 $ 190,648 $ 202,863 $ 8,029
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.64% 0.64% 0.64% 0.64% 0.64%
Ratio of net expenses to average net assets 0.64% 0.64% 0.64% 0.64% 0.64%
Ratio of net investment income (loss) to
average net assets 0.60% 1.25% 1.33% 2.15% 1.37%
Portfolio turnover rate (b) 58% 66% 65% 86% 59%
|
FIRST TRUST INDXX NEXTG ETF (NXTG)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 50.26 $ 49.63 $ 50.52 $ 41.29 $ 34.93
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.69 0.37 0.72 0.44 0.47
Net realized and unrealized gain (loss) 8.79 0.50 (0.60) 9.29 6.34
----------- ----------- ----------- ----------- -----------
Total from investment operations 9.48 0.87 0.12 9.73 6.81
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.69) (0.24) (1.01) (0.50) (0.45)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 59.05 $ 50.26 $ 49.63 $ 50.52 $ 41.29
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 18.97% 1.78% 0.20% 23.68% 19.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 590,535 $ 196,015 $ 17,370 $ 17,683 $ 10,324
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.52% 1.73% 1.34% 1.04% 1.14%
Portfolio turnover rate (b) 30% 59% 80% 18% 28%
|
(a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year.
(b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions.
Page 94 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ GLOBAL AUTO INDEX FUND (CARZ)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 32.04 $ 36.33 $ 40.25 $ 33.39 $ 33.46
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.34 1.02 0.98 0.87 0.80
Net realized and unrealized gain (loss) 7.07 (4.28) (3.98) 6.87 (0.09)
----------- ----------- ----------- ----------- -----------
Total from investment operations 7.41 (3.26) (3.00) 7.74 0.71
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.45) (1.03) (0.92) (0.88) (0.78)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 39.00 $ 32.04 $ 36.33 $ 40.25 $ 33.39
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 23.33% (8.97)% (7.57)% 23.46% 2.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 29,246 $ 17,623 $ 18,167 $ 18,112 $ 21,705
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.09% 3.19% 2.44% 2.20% 2.16%
Portfolio turnover rate (b) 36% 24% 16% 17% 17%
|
FIRST TRUST CLOUD COMPUTING ETF (SKYY)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 56.39 $ 56.71 $ 41.88 $ 34.17 $ 28.08
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.16 0.59 0.14 0.13 0.15
Net realized and unrealized gain (loss) 22.10 (0.31) 14.84 7.72 6.09
----------- ----------- ----------- ----------- -----------
Total from investment operations 22.26 0.28 14.98 7.85 6.24
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.17) (0.60) (0.15) (0.14) (0.15)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 78.48 $ 56.39 $ 56.71 $ 41.88 $ 34.17
=========== =========== =========== =========== ===========
TOTAL RETURN (a) 39.54% 0.57% 35.80% 23.00% 22.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 4,963,825 $ 2,168,198 $ 2,067,140 $ 1,088,930 $ 587,642
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.24% 1.02% 0.28% 0.34% 0.49%
Portfolio turnover rate (b) 35% 85% 7% 14% 23%
|
(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 95
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF (FPXI)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 36.39 $ 35.10 $ 34.51 $ 27.47 $ 25.24
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.11 0.30 0.49 0.22 0.51
Net realized and unrealized gain (loss) 20.32 (a) 1.29 0.66 7.07 2.14
----------- ----------- ----------- ----------- -----------
Total from investment operations 20.43 1.59 1.15 7.29 2.65
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.18) (0.30) (0.56) (0.25) (0.42)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 56.64 $ 36.39 $ 35.10 $ 34.51 $ 27.47
=========== =========== =========== =========== ===========
TOTAL RETURN (b) 56.24% (a) 4.60% 3.35% 26.71% 10.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 356,803 $ 30,931 $ 26,322 $ 22,429 $ 2,748
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.71% (c)
Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.71% (c)
Ratio of net investment income (loss) to
average net assets 0.38% 0.86% 1.42% 1.62% 2.25%
Portfolio turnover rate (d) 114% 98% 83% 58% 75%
|
FIRST TRUST NASDAQ CYBERSECURITY ETF (CIBR)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2020 2019 2018 2017 2016
------------- ------------- ------------- ------------- -------------
Net asset value, beginning of period $ 27.63 $ 28.49 $ 21.85 $ 19.77 $ 17.15
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.50 0.06 0.02 0.03 0.23
Net realized and unrealized gain (loss) 7.16 (0.86) 6.64 2.09 2.62
----------- ----------- ----------- ----------- -----------
Total from investment operations 7.66 (0.80) 6.66 2.12 2.85
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.51) (0.06) (0.02) (0.04) (0.23)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 34.78 $ 27.63 $ 28.49 $ 21.85 $ 19.77
=========== =========== =========== =========== ===========
TOTAL RETURN (b) 28.27% (2.78)% 30.49% 10.73% 16.83%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2,178,988 $ 979,650 $ 847,673 $ 313,575 $ 102,815
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.54% 0.20% 0.04% 0.13% 1.37%
Portfolio turnover rate (d) 46% 58% 56% 67% 49%
|
(a) The Fund received a payment from the advisor in the amount of $806, 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.
(c) Includes excise tax. If this excise tax expense was not included, the expense ratio would have been 0.70%.
(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 96 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
1. ORGANIZATION
First Trust Exchange-Traded Fund II (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on July 6, 2006, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of sixteen exchange-traded funds. This report covers the fourteen funds listed below:
First Trust STOXX(R) European Select Dividend Index Fund - (NYSE Arca, Inc. ("NYSE Arca") ticker "FDD") First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund -
(NYSE Arca ticker "FFR")
First Trust Dow Jones Global Select Dividend Index Fund - (NYSE Arca
ticker "FGD")
First Trust Global Wind Energy ETF - (NYSE Arca ticker "FAN")
First Trust Global Engineering and Construction ETF - (NYSE Arca ticker
"FLM")
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index
Fund - (The Nasdaq Stock Market LLC ("Nasdaq") ticker "GRID")
First Trust Indxx Global Natural Resources Income ETF - (Nasdaq ticker
"FTRI")
First Trust Indxx Global Agriculture ETF - (Nasdaq ticker "FTAG")
First Trust BICK Index Fund - (Nasdaq ticker "BICK")
First Trust Indxx NextG ETF - (Nasdaq ticker "NXTG")
First Trust NASDAQ Global Auto Index Fund - (Nasdaq ticker "CARZ")
First Trust Cloud Computing ETF - (Nasdaq ticker "SKYY")
First Trust International Equity Opportunities ETF - (Nasdaq ticker
"FPXI")
First Trust Nasdaq Cybersecurity ETF - (Nasdaq ticker "CIBR")
Each fund represents a separate series of shares of beneficial interest in the Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Each Fund's Creation Units are generally issued and redeemed in-kind for securities in which a Fund invests, and in certain circumstances, for cash, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, each Fund's shares are not redeemable securities. The investment objective of each Fund is to seek investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of the following indices:
FUND INDEX
First Trust STOXX(R) European Select Dividend Index Fund STOXX(R) Europe Select Dividend 30 Index
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund FTSE EPRA/NAREIT Developed Index
First Trust Dow Jones Global Select Dividend Index Fund Dow Jones Global Select Dividend Index
First Trust Global Wind Energy ETF ISE Clean Edge Global Wind Energy(TM) Index
First Trust Global Engineering and Construction ETF ISE Global Engineering and Construction(TM) Index
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund NASDAQ OMX(R) Clean Edge(R) Smart Grid
Infrastructure Index(SM)
First Trust Indxx Global Natural Resources Income ETF Indxx Global Natural Resources Income Index
First Trust Indxx Global Agriculture ETF Indxx Global Agriculture Index
First Trust BICK Index Fund ISE BICK(TM) Index
First Trust Indxx NextG ETF Indxx 5G & NextG Thematic Index(SM)
First Trust NASDAQ Global Auto Index Fund NASDAQ OMX Global Automobile Index(SM)
First Trust Cloud Computing ETF ISE CTA Cloud Computing(TM) Index
First Trust International Equity Opportunities ETF IPOX(R) International Index
First Trust Nasdaq Cybersecurity ETF Nasdaq CTA Cybersecurity Index(SM)
|
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.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. Each Fund's NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows:
Common stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV per share.
Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price.
Overnight repurchase agreements are valued at amortized cost when it represents the best estimate of fair value.
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect the value of the security.
If the securities in question are foreign securities, the following additional information may be considered:
1) the value of similar foreign securities traded on other foreign markets;
2) ADR trading of similar securities;
3) closed-end fund or exchange-traded fund trading of similar securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and 8) whether the effects of the event are isolated or whether they affect entire markets, countries or regions.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
In addition, differences between the prices used to calculate a Fund's NAV and the prices used by such Fund's corresponding index could result in a difference between a Fund's performance and the performance of its underlying index.
Because foreign markets may be open on different days than the days during which investors may transact in the shares of a Fund, the value of the Fund's securities may change on the days when investors are not able to transact in the shares of the Fund. The value of securities denominated in foreign currencies is converted into U.S. dollars using exchange rates determined daily as of the close of regular trading on the NYSE. Any use of a different rate from the rates used by a relevant index may adversely affect the Fund's ability to track the index.
The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly.
o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates).
o Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment.
The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of September 30, 2020, is included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund's understanding of the applicable country's tax rules and rates.
Distributions received from a Fund's investments in real estate investment trusts ("REITs") may be comprised of return of capital, capital gains and income. The actual character of the amounts received during the year is not known until after the REITs' fiscal year end. A Fund records the character of distributions received from the REITs during the year based on estimates available. The characterization of distributions received by a Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude.
C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES
Offsetting Assets and Liabilities require entities to disclose both gross and net information about instruments and transactions eligible for offset on the Statements of Assets and Liabilities, and disclose instruments and transactions subject to master netting or similar agreements. These disclosure requirements are intended to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on a fund's financial position. The transactions subject to offsetting disclosures are derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions.
This disclosure, if applicable, is included within each Fund's Portfolio of Investments under the heading "Offsetting Assets and Liabilities." For financial reporting purposes, the Funds do not offset financial assets and financial liabilities that are subject to master netting arrangements ("MNAs") or similar agreements on the Statements of Assets and Liabilities. MNAs provide the right, in the event of default (including bankruptcy and insolvency), for the non-defaulting counterparty to liquidate the collateral and calculate the net exposure to the defaulting party or request additional collateral.
D. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
"Net change in unrealized appreciation (depreciation) on foreign currency translation" on the Statements of Operations. Unrealized gains and losses on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are shown in "Net change in unrealized appreciation (depreciation) on investments" on the Statements of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received and are included in "Net realized gain (loss) on foreign currency transactions" on the Statements of Operations. The portion of foreign currency gains and losses related to fluctuations in exchange rates between the initial purchase settlement date and subsequent sale trade date is included in "Net realized gain (loss) on investments" on the Statements of Operations.
E. SECURITIES LENDING
The Funds may lend securities representing up to 33 1/3% of the value of their total assets to broker-dealers, banks and other institutions to generate additional income. When a Fund loans its portfolio securities, it will receive, at the inception of each loan, collateral equal to at least 102% (for domestic securities) or 105% (for international securities) of the market value of the loaned securities. The collateral amount is valued at the beginning of each business day and is compared to the market value of the loaned securities from the prior business day to determine if additional collateral is required. If additional collateral is required, a request is sent to the borrower. Securities lending involves the risk that the Fund may lose money because the borrower of the Fund's loaned securities fails to return the securities in a timely manner or at all. The Fund could also lose money in the event of (i) a decline in the value of the collateral provided for the loaned securities, (ii) a decline in the value of any investments made with cash collateral or (iii) an increase in the value of the loaned securities if the borrower does not increase the collateral accordingly and the borrower fails to return the securities. These events could also trigger adverse tax consequences for the Funds.
Under the Funds' Securities Lending Agency Agreement, the securities lending agent will generally bear the risk that a borrower may default on its obligation to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the Funds' securities lending agent and is responsible for executing the lending of the portfolio securities to creditworthy borrowers. The Funds, however, will be responsible for the risks associated with the investment of cash collateral. A Fund may lose money on its investment of cash collateral, which may affect its ability to repay the collateral to the borrower without the use of other Fund assets. Each Fund that engages in securities lending receives compensation (net of any rebate and securities lending agent fees) for lending its securities. Compensation can be in the form of fees received from the securities lending agent or dividends or interest earned from the investment of cash collateral. The fees received from the securities lending agent are accrued daily. The dividend and interest earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At September 30, 2020, only FAN, FTRI, BICK, NXTG, SKYY, and FPXI had securities in the securities lending program. During the fiscal year ended September 30, 2020, FAN, FLM, GRID, FTRI, BICK, NXTG, CARZ, SKYY, and FPXI 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.
F. REPURCHASE AGREEMENTS
Repurchase agreements involve the purchase of securities subject to the seller's agreement to repurchase the securities at a mutually agreed upon date and price, under the terms of a Master Repurchase Agreement ("MRA"). During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of a Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. The underlying securities for all repurchase agreements are held at the Funds' custodian or designated sub-custodians under tri-party repurchase agreements.
MRAs govern transactions between a Fund and select counterparties. The MRAs contain provisions for, among other things, initiation, income payments, events of default, and maintenance of collateral for repurchase agreements.
Repurchase agreements received for lending securities are collateralized by U.S. Treasury securities. The U.S. Treasury securities are held in a joint custody account at BBH on behalf of the Funds participating in the securities lending program. In the event the counterparty defaults on the repurchase agreement, the U.S. Treasury securities can either be maintained as part of a Fund's portfolio or sold for cash. A Fund could suffer a loss to the extent that the proceeds from the sale of the underlying collateral held by the Fund is less than the repurchase price and the Fund's costs associated with the delay and enforcement of the MRA.
While the Funds may invest in repurchase agreements, any repurchase agreements held by the Funds during the fiscal year ended September 30, 2020, were received as collateral for lending securities.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid quarterly, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually.
Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on significantly modified portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
The tax character of distributions paid by each Fund during the fiscal year ended September 30, 2020 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
---------------- -------------- --------------
First Trust STOXX(R) European Select Dividend Index Fund $ 9,499,846 $ -- $ --
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 2,248,427 -- --
First Trust Dow Jones Global Select Dividend Index Fund 29,511,768 -- --
First Trust Global Wind Energy ETF 2,010,555 -- --
First Trust Global Engineering and Construction ETF 207,908 -- --
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 369,941 -- --
First Trust Indxx Global Natural Resources Income ETF 343,681 -- --
First Trust Indxx Global Agriculture ETF 54,334 -- --
First Trust BICK Index Fund 775,621 -- --
First Trust Indxx NextG ETF 5,116,621 -- --
First Trust NASDAQ Global Auto Index Fund 256,391 -- --
First Trust Cloud Computing ETF 8,515,791 -- --
First Trust International Equity Opportunities ETF 374,400 -- --
First Trust Nasdaq Cybersecurity ETF 23,668,226 -- --
|
The tax character of distributions paid by each Fund during the fiscal year ended September 30, 2019 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
---------------- -------------- --------------
First Trust STOXX(R) European Select Dividend Index Fund $ 16,448,343 $ -- $ --
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 1,495,051 -- --
First Trust Dow Jones Global Select Dividend Index Fund 30,379,078 -- --
First Trust Global Wind Energy ETF 1,723,721 -- --
First Trust Global Engineering and Construction ETF 185,587 -- --
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 360,196 -- --
First Trust Indxx Global Natural Resources Income ETF 478,011 -- --
First Trust Indxx Global Agriculture ETF 100,503 -- 6,587
First Trust BICK Index Fund 2,279,891 -- --
First Trust Indxx NextG ETF 721,966 -- --
First Trust NASDAQ Global Auto Index Fund 605,577 -- --
First Trust Cloud Computing ETF 21,035,531 -- --
First Trust International Equity Opportunities ETF 200,971 -- --
First Trust Nasdaq Cybersecurity ETF 1,844,090 -- --
|
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
As of September 30, 2020, the components of distributable earnings on a tax basis for each Fund were as follows:
Accumulated Net
Undistributed Capital and Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
---------------- -------------- --------------
First Trust STOXX(R) European Select Dividend Index Fund $ 380,186 $ (81,101,625) $ (12,884,201)
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (251,577) (1,691,617) (4,084,438)
First Trust Dow Jones Global Select Dividend Index Fund 1,576,766 (186,630,804) (54,093,868)
First Trust Global Wind Energy ETF 429,387 (52,994,765) 31,508,745
First Trust Global Engineering and Construction ETF 32,482 (8,168,805) (960,729)
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 123,852 (539,435) 6,601,084
First Trust Indxx Global Natural Resources Income ETF 16,695 (62,199,679) (214,915)
First Trust Indxx Global Agriculture ETF 8,460 (19,483,636) (201,614)
First Trust BICK Index Fund (64,502) (29,890,192) 45,818
First Trust Indxx NextG ETF 747,042 (224,785) 58,024,082
First Trust NASDAQ Global Auto Index Fund 23,284 (3,770,920) (2,633,631)
First Trust Cloud Computing ETF -- (97,889,957) 756,297,018
First Trust International Equity Opportunities ETF 112,434 (7,618,211) 34,159,548
First Trust Nasdaq Cybersecurity ETF (28,233) (45,776,590) 236,017,450
|
H. INCOME AND OTHER TAXES
Each Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year.
Certain countries assess a capital gains tax on securities sold in their local
markets. This tax is accrued as the securities in these foreign markets
appreciate in value and is paid at the time of sale to the extent a capital gain
is realized. Taxes accrued on securities in an unrealized appreciation position
are included in "Net change in unrealized appreciation (depreciation) on
deferred foreign capital gains tax" on the Statements of Operations. The capital
gains tax paid on securities sold, if any, is included in "Net realized gain
(loss) on foreign capital gains tax" on the Statements of Operations.
India's Finance Bill, 2018 ("Finance Bill, 2018") was enacted into law on March 29, 2018 and amongst other provisions, it introduced a long-term capital gains tax beginning April 1, 2018. Long-term capital gains on the sale of listed shares in excess of INR 0.1 million are taxed at the rate of 10% (plus applicable surcharge and cess (which is a type of tax)) subject to satisfaction of certain conditions. Long-term capital gains accruing as of January 31, 2018 are considered exempt due to a grandfather clause in the provision. The aforesaid exemption from long-term capital gains tax is available with respect 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 the 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
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
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 offset 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. Taxable years ending 2017, 2018, 2019 and 2020 remain open to federal and state audit. As of September 30, 2020, 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 September 30, 2020, for federal income tax purposes, each applicable Fund had a capital loss carryforward available that is shown in the table below, to the extent provided by regulations, to offset future capital gains. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to each applicable Fund's shareholders.
Non-Expiring
Capital Loss
Carryforwards
---------------------
First Trust STOXX(R) European Select Dividend Index Fund $ 81,101,625
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund* 1,691,617
First Trust Dow Jones Global Select Dividend Index Fund 186,630,804
First Trust Global Wind Energy ETF 52,994,765
First Trust Global Engineering and Construction ETF 8,168,805
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 539,435
First Trust Indxx Global Natural Resources Income ETF 62,199,679
First Trust Indxx Global Agriculture ETF 19,483,636
First Trust BICK Index Fund 29,890,192
First Trust Indxx NextG ETF 224,785
First Trust NASDAQ Global Auto Index Fund 3,770,920
First Trust Cloud Computing ETF 97,889,957
First Trust International Equity Opportunities ETF 7,618,211
First Trust Nasdaq Cybersecurity ETF 45,776,590
|
* $75,097 of First Trust FTSE EPRA/NAREIT Developed Markets Real Estate 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 $38,346 per year.
During the taxable year ended September 30, 2020, the following Funds utilized non-expiring capital loss carryforwards in the following amounts:
Capital Loss
Carryforward
Utilized
---------------------
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund $ 858,833
First Trust Indxx NextG ETF 1,521,443
First Trust NASDAQ Global Auto Index Fund 146,570
|
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended September 30, 2020, the following Funds incurred and elected to defer late year ordinary or capital losses as follows:
Qualified Late Year Losses
-------------------------------------
Ordinary Losses Capital Losses
--------------- --------------
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate
Index Fund $ 251,577 $ --
First Trust BICK Index Fund 64,502 --
First Trust Nasdaq Cybersecurity ETF 28,233 --
|
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended September 30, 2020, the adjustments for each Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) on Paid-in
Income (Loss) Investments Capital
---------------- -------------- --------------
First Trust STOXX(R) European Select Dividend Index Fund $ (104,122) $ 5,371,751 $ (5,267,629)
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate
Index Fund 540,703 (381,665) (159,038)
First Trust Dow Jones Global Select Dividend Index Fund 221,223 19,283,688 (19,504,911)
First Trust Global Wind Energy ETF 56,316 (440,373) 384,057
First Trust Global Engineering and Construction ETF 12,439 (530,112) 517,673
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (843) (2,284,973) 2,285,816
First Trust Indxx Global Natural Resources Income ETF 5,728 (41,298) 35,570
First Trust Indxx Global Agriculture ETF (176) 176 --
First Trust BICK Index Fund 70,226 (82,357) 12,131
First Trust Indxx NextG ETF (86,822) (11,569,490) 11,656,312
First Trust NASDAQ Global Auto Index Fund (15,121) (3,182,398) 3,197,519
First Trust Cloud Computing ETF 783,076 (442,760,032) 441,976,956
First Trust International Equity Opportunities ETF 14,413 (14,050,415) 14,036,002
First Trust Nasdaq Cybersecurity ETF 440,753 (146,620,138) 146,179,385
|
I. EXPENSES
Expenses that are directly related to one of the Funds are charged directly to the respective Fund, except for First Trust Indxx Global Natural Resources Income ETF, First Trust Indxx Global Agriculture ETF, First Trust BICK Index Fund, First Trust Indxx NextG ETF, First Trust NASDAQ Global Auto Index Fund, First Trust Cloud Computing ETF, First Trust International Equity Opportunities ETF, and First Trust Nasdaq Cybersecurity ETF (the "Unitary Fee Funds"), for which expenses other than excluded expenses (discussed in Note 3) are paid by the Advisor. General expenses of the Trust are allocated to all the Funds based upon the net assets of each Fund.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
First Trust has entered into licensing agreements with each of the following "Licensors" for the respective Funds:
FUND LICENSOR First Trust STOXX(R) European Select Dividend Index Fund STOXX Limited First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund FTSE International Limited First Trust Dow Jones Global Select Dividend Index Fund S&P Dow Jones Indices LLC First Trust Global Wind Energy ETF Nasdaq, Inc. First Trust Global Engineering and Construction ETF Nasdaq, Inc. First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund Nasdaq, Inc. First Trust Indxx Global Natural Resources Income ETF Indxx, LLC First Trust Indxx Global Agriculture ETF Indxx, LLC First Trust BICK Index Fund Nasdaq, Inc. First Trust Indxx NextG ETF Indxx, LLC First Trust NASDAQ Global Auto Index Fund Nasdaq, Inc. First Trust Cloud Computing ETF Nasdaq, Inc. First Trust International Equity Opportunities ETF IPOX(R) Schuster LLC First Trust Nasdaq Cybersecurity ETF Nasdaq, Inc. |
The respective license agreements allow for the use of each Fund's respective index and of certain trademarks and trade names of the respective Licensors. The Funds are sub-licensees to the applicable license agreements. The Funds, except for the Unitary Fee Funds, are required to pay licensing fees, which are shown on the Statements of Operations. The licensing fees for the Unitary Fee Funds are paid by First Trust from the unitary investment advisory fees it receives from each of these Funds.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in each Fund's portfolio, managing the Funds' business affairs and providing certain administrative services necessary for the management of the Funds.
For the following Unitary Fee Funds, First Trust is paid an annual unitary management fee at the specified rate of such Fund's average daily net assets and is responsible for the expenses of such Fund including the cost of transfer agency, custody, fund administration, legal, audit and other services, and excluding fee payments under the Investment Management Agreement, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, brokerage expense, acquired fund fees and expenses, taxes, interest, and extraordinary expenses.
% of Daily
Net Assets
------------
First Trust Indxx Global Natural Resources Income ETF 0.70%
First Trust Indxx Global Agriculture ETF 0.70%
First Trust BICK Index Fund 0.64%
First Trust Indxx NextG ETF 0.70%
First Trust NASDAQ Global Auto Index Fund 0.70%
First Trust Cloud Computing ETF 0.60%
First Trust International Equity Opportunities ETF 0.70%
First Trust Nasdaq Cybersecurity ETF 0.60%
|
For the First Trust STOXX(R) European Select Dividend Index Fund, First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund, First Trust Dow Jones Global Select Dividend Index Fund, First Trust Global Wind Energy ETF, First Trust Global Engineering and Construction ETF, and First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (such Funds, the "Expense Cap Funds"), First Trust is paid an annual management fee of 0.40% of such Fund's average daily net assets.
For the Expense Cap Funds, the Trust and First Trust have entered into an Expense Reimbursement, Fee Waiver and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to waive fees and/or reimburse Fund expenses to the extent that the operating expenses of each such Fund (excluding interest expense, brokerage commissions and other trading expenses, acquired fund fees and expenses, taxes and extraordinary expenses) exceed the following amount as a percentage of average daily net assets per year (the "Expense Cap") at least through January 31, 2022.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
Expense Cap
-------------
First Trust STOXX(R) European Select Dividend Index Fund 0.60%
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 0.60%
First Trust Dow Jones Global Select Dividend Index Fund 0.60%
First Trust Global Wind Energy ETF 0.60%
First Trust Global Engineering and Construction ETF 0.70%
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 0.70%
|
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement are subject to recovery by First Trust for up to three years from the date the fee or expense was incurred, but no reimbursement payment will be made by a Fund if it results in the Fund exceeding (i) the applicable expense limitation in place for the most recent fiscal year for which such expense limitation was in place, (ii) the applicable expense limitation in place at the time the fees were waived, or (iii) the current expense limitation. These amounts would be included in "Expenses previously waived or reimbursed" on the Statements of Operations.
The advisory fee waivers and expense reimbursements for the fiscal year ended September 30, 2020 and the fees waived or expenses borne by First Trust subject to recovery from the applicable Fund for the periods indicated were as follows:
Fees Waived or Expenses Borne by First Trust
Subject to Recovery
--------------------------------------------
Advisory Expense Year Year Year
Fee Reim- Ended Ended Ended
Waivers bursements 9/30/2018 9/30/2019 9/30/2020 Total
---------- ---------- ---------- ---------- ---------- --------
First Trust FTSE EPRA/NAREIT Developed
Markets Real Estate Index Fund $ 114,648 $ -- $ 117,546 $ 140,904 $ 114,648 $373,098
First Trust Global Wind Energy ETF 69,675 -- 71,385 83,187 69,675 224,247
First Trust Global Engineering and
Construction ETF 30,437 24,880 33,419 57,523 55,317 146,259
First Trust NASDAQ(R) Clean Edge(R) Smart Grid
Infrastructure Index Fund 17,751 -- 13,940 32,068 17,751 63,759
|
For the fiscal year ended September 30, 2020, the First Trust International Equity Opportunities ETF received a payment from the Advisor of $806 in connection with a trade error.
The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
4. REORGANIZATION
On March 11, 2019, the Board of Trustees of FFR approved a reorganization of FFR with the First Trust Heitman Global Prime Real Estate ETF ("PRME"). The merger was completed on September 16, 2019. FFR was the surviving fund.
Under the terms of the reorganization, which was tax-free, the assets of PRME were transferred to, and the liabilities of PRME were assumed by, FFR in exchange for shares of FFR. The cost of the investments received from PRME was carried forward to FFR for
U.S. GAAP and tax purposes. The FFR shares were then distributed to PRME shareholders and the separate existence of PRME ceased. The reorganization was subject to certain conditions, including that the reorganization was approved on August 22, 2019, by the shareholders of PRME. When the reorganization occurred, the transactions were based on the relative NAVs of PRME and FFR.
The following table summarizes the asset transfers and conversion ratios for the reorganization.
Net Assets on Unrealized Accumulated Shares Acquiring Net Assets on
Acquired Shares September 13, Appreciation Net Realized Conversion (Surviving) Shares September 13,
Fund Redeemed 2019 (Depreciation) Gain (Loss) Ratio Fund Issued 2019*
--------------------------------------------------------------------------------------------------------------------------------
PRME 100,002 $ 2,028,889 $ 47,695 $ (65,869) 0.416055 FFR 41,606 $51,202,233
|
* Amount reflects net assets of FFR prior to the reorganization.
The following table summarizes the operations of the Acquired Fund for the period November 1, 2018 to September 13, 2019, and the operations of FFR, the Acquiring (Surviving) Fund, for the fiscal year ended September 30, 2019, as presented in the Statements of Operations and the combined Acquired and Acquiring (Surviving) Funds' pro-forma results of operations for the fiscal year ended September 30, 2019, assuming the acquisition had been completed on October 1, 2018.
Because the combined investment portfolios have been managed as a single integrated portfolio since the reorganization was completed, it is not practicable to separate the amounts of revenue and earnings of PRME that have been included in FFR's Statement of Operations since September 13, 2019.
Net Realized
and Change in
Net Unrealized Net Increase
Investment Gain (Loss) (Decrease) from
Income on Investments Operations
-------------- -------------- ---------------
Acquired Fund for the period November 1, 2018 to September 13, 2019
PRME $ 40,759 $ 197,950 $ 238,709
Acquiring Fund for the fiscal year ended September 30, 2019
FFR 1,263,898 5,011,820 6,275,718
-------------- -------------- ---------------
Combined Totals $ 1,304,657 $ 5,209,770 $ 6,514,427
============== ============== ===============
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5. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended September 30, 2020, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows:
Purchases Sales
---------------- --------------
First Trust STOXX(R) European Select Dividend Index Fund $ 245,209,293 $ 246,058,109
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 3,372,380 4,114,661
First Trust Dow Jones Global Select Dividend Index Fund 308,285,915 310,771,577
First Trust Global Wind Energy ETF 54,683,285 46,732,554
First Trust Global Engineering and Construction ETF 1,520,720 1,537,476
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 19,429,264 19,304,481
First Trust Indxx Global Natural Resources Income ETF 4,164,803 4,162,840
First Trust Indxx Global Agriculture ETF 502,683 493,319
First Trust BICK Index Fund 52,921,795 75,187,717
First Trust Indxx NextG ETF 181,202,901 109,634,155
First Trust NASDAQ Global Auto Index Fund 8,743,082 6,821,246
First Trust Cloud Computing ETF 1,125,794,728 1,132,324,915
First Trust International Equity Opportunities ETF 234,968,150 127,784,530
First Trust Nasdaq Cybersecurity ETF 710,067,341 698,690,020
|
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
For the fiscal year ended September 30, 2020, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
---------------- --------------
First Trust STOXX(R) European Select Dividend Index Fund $ 22,132,334 $ 68,080,254
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 2,329,108 13,168,209
First Trust Dow Jones Global Select Dividend Index Fund 58,960,033 107,436,852
First Trust Global Wind Energy ETF 93,692,238 3,072,457
First Trust Global Engineering and Construction ETF -- 2,449,935
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 22,603,478 2,688,570
First Trust Indxx Global Natural Resources Income ETF -- 584,258
First Trust Indxx Global Agriculture ETF -- --
First Trust BICK Index Fund 2,990,540 36,172,290
First Trust Indxx NextG ETF 311,128,071 54,783,446
First Trust NASDAQ Global Auto Index Fund 9,530,673 4,132,167
First Trust Cloud Computing ETF 2,869,742,455 1,250,003,140
First Trust International Equity Opportunities ETF 246,773,343 70,915,774
First Trust Nasdaq Cybersecurity ETF 1,410,317,584 562,288,200
|
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). In order to purchase Creation Units of a Fund, an Authorized Participant must deposit (i) a designated portfolio of equity securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Creation Transaction Fee may increase or decrease with changes in each Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When a Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Redemption Transaction Fee may increase or decrease with changes in each Fund's portfolio. Each Fund reserves the right to effect redemptions in cash. An Authorized Participant may request a cash redemption in lieu of securities; however, each Fund may, in its discretion, reject any such request.
7. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before January 31, 2022.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
8. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed.
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND
II:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First Trust STOXX(R) European Select Dividend Index Fund, First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund, First Trust Dow Jones Global Select Dividend Index Fund, First Trust Global Wind Energy ETF, First Trust Global Engineering and Construction ETF, First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund, First Trust Indxx Global Natural Resources Income ETF, First Trust Indxx Global Agriculture ETF, First Trust BICK Index Fund, First Trust Indxx NextG ETF, First Trust NASDAQ Global Auto Index Fund, First Trust Cloud Computing ETF, First Trust International Equity Opportunities ETF, and First Trust Nasdaq Cybersecurity ETF (the "Funds"), each a series of the First Trust Exchange-Traded Fund II, including the portfolios of investments, as of September 30, 2020, the related statements of operations for the year then ended, the statement 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 the Funds as of September 30, 2020, 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 September 30, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP Chicago, Illinois November 23, 2020 |
We have served as the auditor of one or more First Trust investment companies since 2001.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable year ended September 30, 2020, the following percentages of income dividend paid by the Funds qualify for the dividends received deduction available to corporations:
Dividends Received
Deduction
---------------------
First Trust STOXX(R) European Select Dividend Index Fund 0.00%
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 0.00%
First Trust Dow Jones Global Select Dividend Index Fund 11.65%
First Trust Global Wind Energy ETF 5.90%
First Trust Global Engineering and Construction ETF 5.70%
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 23.96%
First Trust Indxx Global Natural Resources Income ETF 20.24%
First Trust Indxx Global Agriculture ETF 36.96%
First Trust BICK Index Fund 0.00%
First Trust Indxx NextG ETF 29.39%
First Trust NASDAQ Global Auto Index Fund 33.36%
First Trust Cloud Computing ETF 100.00%
First Trust International Equity Opportunities ETF 0.00%
First Trust Nasdaq Cybersecurity ETF 100.00%
|
For the taxable year ended September 30, 2020, the following percentages of income dividend paid by the Funds are hereby designated as qualified dividend income:
Qualified Dividend Income
-------------------------
First Trust STOXX(R) European Select Dividend Index Fund 100.00%
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 10.10%
First Trust Dow Jones Global Select Dividend Index Fund 100.00%
First Trust Global Wind Energy ETF 100.00%
First Trust Global Engineering and Construction ETF 100.00%
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 100.00%
First Trust Indxx Global Natural Resources Income ETF 90.85%
First Trust Indxx Global Agriculture ETF 100.00%
First Trust BICK Index Fund 91.97%
First Trust Indxx NextG ETF 94.56%
First Trust NASDAQ Global Auto Index Fund 100.00%
First Trust Cloud Computing ETF 100.00%
First Trust International Equity Opportunities ETF 100.00%
First Trust Nasdaq Cybersecurity ETF 100.00%
|
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
A portion of each of the Funds' 2020 ordinary dividends (including short-term capital gains) paid to its shareholders during the fiscal year ended September 30, 2020, 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 Funds meet the requirements of Section 853 of the Internal Revenue Code and elect to pass through to their shareholders credit for foreign taxes paid. For the taxable year ended September 30, 2020, the total amounts of income received by the Funds from sources within foreign countries and possessions of the United States and of taxes paid to such countries are as follows:
Gross Foreign Income Foreign Taxes Paid
--------------------------- ---------------------------
Amount Per Share Amount Per Share
------------- ------------ ------------- ------------
First Trust STOXX(R) European Select Dividend Index Fund $ 12,154,524 $ 0.69 $ 801,455 $ 0.05
First Trust Dow Jones Global Select Dividend Index Fund 29,802,385 1.54 1,286,864 0.07
First Trust Global Wind Energy ETF 2,711,946 0.23 290,790 0.02
First Trust Global Engineering and Construction ETF 221,765 1.48 12,862 0.09
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure
Index Fund 540,699 0.60 51,493 0.06
First Trust Indxx Global Natural Resources Income ETF 286,350 0.48 17,599 0.03
First Trust Indxx Global Agriculture ETF 69,288 0.50 9,090 0.06
First Trust BICK Index Fund 1,264,518 0.60 108,804 0.05
First Trust Indxx NextG ETF 5,799,724 0.58 628,068 0.06
First Trust NASDAQ Global Auto Index Fund 290,836 0.39 31,918 0.04
First Trust International Equity Opportunities ETF 1,222,479 0.19 107,798 0.02
|
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
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. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The COVID-19 pandemic may last for an extended period of time and will continue to impact the economy for the foreseeable future.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT
(NON-UNITARY FEE FUNDS)
The Board of Trustees of First Trust Exchange-Traded Fund II (the "Trust"), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the following six series of the Trust (each a "Fund" and collectively, the "Funds"):
First Trust STOXX(R) European Select Dividend Index Fund (FDD) First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund
(FFR)
First Trust Dow Jones Global Select Dividend Index Fund (FGD) First Trust Global Engineering and Construction ETF (FLM) First Trust Global Wind Energy ETF (FAN) First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (GRID)
The Board approved the continuation of the Agreement for each Fund for a one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The Board determined for each Fund that the continuation of the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment.
To reach this determination for each Fund, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on May 11, 2020 and June 8, 2020, the Board, including the Independent Trustees, reviewed materials provided by the Advisor responding to requests for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services provided by the Advisor to each Fund (including the relevant personnel responsible for these services and their experience); the advisory fee rate payable by each Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the expense ratio of each Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; performance information for each Fund, including comparisons of each Fund's performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the "Performance Universe"), each assembled by Broadridge; the nature of expenses incurred in providing services to each Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Board reviewed initial materials with the Advisor at the meeting held on May 11, 2020, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the May meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
considered at an executive session of the Independent Trustees and their counsel held prior to the June 8, 2020 meeting, as well as at the meeting held that day. The Board considered supplemental information provided by the Advisor on the operations of the Advisor and the performance of the Funds since the onset of the COVID-19 pandemic. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from each Fund's perspective. The Board determined that, given the totality of the information provided with respect to the Agreement, the Board had received sufficient information to renew the Agreement. The Board considered that shareholders chose to invest or remain invested in a Fund knowing that the Advisor manages the Fund and knowing the Fund's advisory fee.
In reviewing the Agreement for each Fund, the Board considered the nature, extent and quality of the services provided by the Advisor under the Agreement. The Board considered that the Advisor is responsible for the overall management and administration of the Trust and each Fund and reviewed all of the services provided by the Advisor to the Funds, as well as the background and experience of the persons responsible for such services. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's and each Fund's compliance with the 1940 Act, as well as each Fund's compliance with its investment objective, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Funds. Finally, as part of the Board's consideration of the Advisor's services, the Advisor, in its written materials and at the May 11, 2020 meeting, described to the Board the scope of its ongoing investment in additional infrastructure and personnel to maintain and improve the quality of services provided to the Funds and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and each Fund by the Advisor under the Agreement have been and are expected to remain satisfactory and that the Advisor has managed each Fund consistent with its investment objective, policies and restrictions.
The Board considered the advisory fee rate payable by each Fund under the
Agreement for the services provided. The Board considered that the Advisor
agreed to extend the current expense cap for each Fund through January 31, 2022.
For each Fund, the Board noted that 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, but no reimbursement payment would be made
by the Fund if it results in the Fund exceeding (i) the applicable expense
limitation in place for the most recent fiscal year for which such expense
limitation was in place, (ii) the applicable expense limitation in place at the
time the fees were waived, or (iii) the current expense limitation. The Board
received and reviewed information showing the advisory or unitary fee rates and
expense ratios of the peer funds in the Expense Groups, as well as advisory and
unitary fee rates charged by the Advisor to other fund (including ETFs) and
non-fund clients, as applicable. Because each Fund's Expense Group included peer
funds that pay a unitary fee, the Board determined that expense ratios were the
most relevant comparative data point. Based on the information provided, the
Board noted that the total (net) expense ratio of FGD was below the median total
(net) expense ratio of the peer funds in its Expense Group, that the total (net)
expense ratio of FAN was equal to the median total (net) expense ratio of the
peer funds in its Expense Group and that the total (net) expense ratio of each
other Fund was above the median total (net) expense ratio of the peer funds in
its respective Expense Group. With respect to the Expense Groups, the Board, at
the May 11, 2020 meeting, discussed with Broadridge its methodology for
assembling peer groups and discussed with the Advisor limitations in creating
peer groups for index ETFs, including differences in underlying indexes and
index-tracking methodologies that can result in greater management complexities
across seemingly comparable ETFs, and different business models that may affect
the pricing of services among ETF sponsors. The Board took these limitations and
differences into account in considering the peer data. With respect to fees
charged to other non-ETF clients, the Board considered differences between the
Funds and other non-ETF clients that limited their comparability. In considering
the advisory fee rates overall, the Board also considered the Advisor's
statement that it seeks to meet investor needs through innovative and
value-added investment solutions and the Advisor's demonstrated long-term
commitment to each Fund and the other funds in the First Trust Fund Complex.
The Board considered performance information for each Fund. The Board noted the process it has established for monitoring each Fund's performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Funds. The Board determined that this process continues to be effective for reviewing each Fund's performance. The Board received and reviewed information for periods ended December 31, 2019 regarding the performance of each Fund's underlying index, the correlation between each Fund's performance and that of its underlying index, each Fund's tracking difference and each Fund's excess return as compared to its benchmark index. Based on the information provided and its ongoing review of performance, the Board concluded that each Fund was correlated to its underlying index and that the tracking difference for each Fund was within a reasonable range. In addition, the Board reviewed data prepared by Broadridge comparing each Fund's performance to that of its respective Performance Universe and to that of a broad-based benchmark index and noted the Advisor's discussion of FLM's performance at the May 11, 2020 meeting. However, given each Fund's objective of seeking investment results that correspond generally to the performance of its underlying index, the Board placed more emphasis on its review of correlation and tracking difference.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
On the basis of all the information provided on the fees, expenses and performance of each Fund and the ongoing oversight by the Board, the Board concluded that the advisory fee for each Fund continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to each Fund under the Agreement.
The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Funds and noted the Advisor's statement that it believes its expenses will likely increase over the next twelve months as the Advisor continues to hire personnel and build infrastructure, including technology, to improve the services to the Funds. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to each Fund for the twelve months ended December 31, 2019 and the estimated profitability level for each Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's profitability level for each Fund was not unreasonable. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Funds. The Board considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Funds, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Funds. The Board concluded that the character and amount of potential fall-out benefits to the Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreement continue to be fair and reasonable and that the continuation of the Agreement is in the best interests of each Fund. No single factor was determinative in the Board's analysis.
BOARD CONSIDERATIONS REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT
(UNITARY FEE FUNDS)
The Board of Trustees of First Trust Exchange-Traded Fund II (the "Trust"), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreements (as applicable to a specific Fund, the "Agreement" and collectively, the "Agreements") with First Trust Advisors L.P. (the "Advisor") on behalf of the following eight series of the Trust (each a "Fund" and collectively, the "Funds"):
First Trust Indxx NextG ETF (NXTG) First Trust BICK Index Fund (BICK) First Trust Indxx Global Natural Resources Income ETF (FTRI) First Trust Indxx Global Agriculture ETF (FTAG) First Trust NASDAQ Global Auto Index Fund (CARZ) First Trust Cloud Computing ETF (SKYY) First Trust International Equity Opportunities ETF (FPXI) First Trust Nasdaq Cybersecurity ETF (CIBR)
The Board approved the continuation of the Agreement for each Fund for a one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The Board determined for each Fund that the continuation of the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment.
To reach this determination for each Fund, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on May 11, 2020 and June 8, 2020, the Board, including the Independent Trustees, reviewed materials provided by the Advisor responding to requests for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services provided by the Advisor to each Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate payable by each Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the expense ratio of each Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; performance information for each Fund, including comparisons of each Fund's performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the "Performance Universe"), each assembled by Broadridge; the nature of expenses incurred in providing services to each Fund and the potential for the Advisor to realize
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
economies of scale, if any; profitability and other financial data for the Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Board reviewed initial materials with the Advisor at the meeting held on May 11, 2020, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the May meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 8, 2020 meeting, as well as at the meeting held that day. The Board considered supplemental information provided by the Advisor on the operations of the Advisor and the performance of the Funds since the onset of the COVID-19 pandemic. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from each Fund's perspective. The Board determined that, given the totality of the information provided with respect to the Agreements, the Board had received sufficient information to renew the Agreements. The Board considered that shareholders chose to invest or remain invested in a Fund knowing that the Advisor manages the Fund and knowing the Fund's unitary fee.
In reviewing the Agreement for each Fund, the Board considered the nature, extent and quality of the services provided by the Advisor under the Agreement. The Board considered that the Advisor is responsible for the overall management and administration of the Trust and each Fund and reviewed all of the services provided by the Advisor to the Funds, as well as the background and experience of the persons responsible for such services. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's and each Fund's compliance with the 1940 Act, as well as each Fund's compliance with its investment objective, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Funds. Finally, as part of the Board's consideration of the Advisor's services, the Advisor, in its written materials and at the May 11, 2020 meeting, described to the Board the scope of its ongoing investment in additional infrastructure and personnel to maintain and improve the quality of services provided to the Funds and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and each Fund by the Advisor under the Agreements have been and are expected to remain satisfactory and that the Advisor has managed each Fund consistent with its investment objective, policies and restrictions.
The Board considered the unitary fee rate payable by each Fund under the applicable Agreement for the services provided. The Board considered that as part of the unitary fee the Advisor is responsible for each Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the applicable Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the advisory or unitary fee rates and expense ratios of the peer funds in the Expense Groups, as well as advisory and unitary fee rates charged by the Advisor to other fund (including ETFs) and non-fund clients, as applicable. Because each Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for CIBR was equal to the median total (net) expense ratio of the peer funds in its Expense Group and that the unitary fee rate for each other Fund was above the median total (net) expense ratio of the peer funds in its respective Expense Group. With respect to the Expense Groups, the Board, at the May 11, 2020 meeting, discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for index ETFs, including differences in underlying indexes and index-tracking methodologies that can result in greater management complexities across seemingly comparable ETFs, and different business models that may affect the pricing of services among ETF sponsors. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Funds and other non-ETF clients that limited their comparability. In considering the unitary fee rates overall, the Board also considered the Advisor's statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor's demonstrated long-term commitment to each Fund and the other funds in the First Trust Fund Complex.
The Board considered performance information for each Fund. The Board noted the process it has established for monitoring each Fund's performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Funds. The Board determined that this process continues to be effective for reviewing each Fund's performance. The Board received and reviewed information for periods ended December 31, 2019 regarding the performance of each Fund's underlying index, the correlation between each Fund's performance and that of its underlying index, each Fund's tracking difference and each Fund's excess return as compared to its benchmark index. With respect to NXTG, the Board noted that during 2019, it approved changes to the Fund's investment objective and, effective May 29, 2019, the Fund changed its name and ticker symbol and began tracking the Indxx 5G & NextG Thematic Index and that the performance information included a blend of the old and new indexes. With respect to FTRI and FTAG, the Board noted that during 2015, shareholders of each Fund approved changes to each Fund's investment objective and, effective December 18, 2015, each Fund changed its name and ticker symbol, FTRI began tracking the Indxx Global Natural Resources Income Index and FTAG began tracking the Indxx Global Agricultural Index, and that the performance information
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
included a blend of the old and new indexes. Based on the information provided and its ongoing review of performance, the Board concluded that each Fund was correlated to its underlying index and that the tracking difference for each Fund was within a reasonable range. In addition, the Board reviewed data prepared by Broadridge comparing each Fund's performance to that of its respective Performance Universe and to that of a broad-based benchmark index and noted the Advisor's discussion of FTRI's, FTAG's and CARZ's performance at the May 11, 2020 meeting. However, given each Fund's objective of seeking investment results that correspond generally to the performance of its underlying index, the Board placed more emphasis on its review of correlation and tracking difference.
On the basis of all the information provided on the unitary fee and performance of each Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for each Fund continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to each Fund under the Agreements.
The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Funds and noted the Advisor's statement that it believes its expenses will likely increase over the next twelve months as the Advisor continues to hire personnel and build infrastructure, including technology, to improve the services to the Funds. The Board noted that any reduction in fixed costs associated with the management of the Funds would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Funds. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to each Fund for the twelve months ended December 31, 2019 and the estimated profitability level for each Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's profitability level for each Fund was not unreasonable. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Funds. The Board considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Funds, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Funds. The Board concluded that the character and amount of potential fall-out benefits to the Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreements continue to be fair and reasonable and that the continuation of the Agreements is in the best interests of each Fund. No single factor was determinative in the Board's analysis.
REMUNERATION
First Trust Advisors L.P. ("First Trust") is authorised and regulated by the U.S. Securities and Exchange Commission and is entitled to market shares of certain First Trust Exchange-Traded Fund II funds it manages (the "Funds") in certain member states in the European Economic Area in accordance with the cooperation arrangements in Article 42 of the Alternative Investment Fund Managers Directive (the "Directive"). First Trust is required under the Directive to make disclosures in respect of remuneration. The following disclosures are made in line with First Trust's interpretation of currently available regulatory guidance on remuneration disclosures.
During the year ended December 31, 2019, the amount of remuneration paid (or to be paid) by First Trust Advisors L.P. in respect of the Funds is $1,703,361. This figure is comprised of $105,756 paid (or to be paid) in fixed compensation and $1,597,605 paid (or to be paid) in variable compensation. There were a total of 15 beneficiaries of the remuneration described above. Those amounts include $994,726 paid (or to be paid) to senior management of First Trust Advisors L.P. and $708,635 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 EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
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.
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the "1940 Act"), the Funds and each other fund in the First Trust Fund Complex, other than the closed-end funds, have adopted and implemented a liquidity risk management program (the "Program") reasonably designed to assess and manage the funds' liquidity risk, i.e., the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors' interests in the fund. The Board of Trustees of the First Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the person designated to administer the Program, and in this capacity the Advisor performs its duties primarily through the activities and efforts of the First Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of each fund's portfolio investments into one of the four liquidity categories specified by Rule 22e-4: highly liquid investments, moderately liquid investments, less liquid investments and illiquid investments. The Liquidity Committee determines certain of the inputs for this classification process, including reasonably anticipated trade sizes and significant investor dilution thresholds. The Liquidity Committee also determines and periodically reviews a highly liquid investment minimum for certain funds, monitors the funds' holdings of assets classified as illiquid investments to seek to ensure they do not exceed 15% of a fund's net assets and establishes policies and procedures regarding redemptions in-kind.
At the May 11, 2020 meeting of the Board of Trustees, as required by Rule 22e-4 and the Program, the Advisor provided the Board with a written report prepared by the Advisor that addressed the operation of the Program during the period from June 1, 2019 (the initial compliance date for certain requirements of Rule 22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020 and assessed the Program's adequacy and effectiveness of implementation during this period, including the operation of the highly liquid investment minimum for each fund, that is required under the Program to have one, and any material changes to the Program. Note that because the Funds primarily holds assets that are highly liquid investments, the Funds have not adopted any highly liquid investment minimums.
As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor concluded that each fund's investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
NAME, YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 187 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed
LLC (April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 187 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM Investor
Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 187 Director of Trust
(1956) and Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 187 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 187 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer
(1966) Officer (January 2016 to Present), Controller (January 2011
o Since January 2016 to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC (Software
Development Company) and Stonebridge Advisors
LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms;
o Information about your transactions with us, our affiliates or others;
o Information we receive from your inquiries by mail, e-mail or telephone; and
o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons:
o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers.
o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors).
March 2019
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FIRST TRUST
First Trust Exchange-Traded Fund II
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
FIRST TRUST
First Trust IPOX(R) Europe Equity Opportunities ETF (FPXE) First Trust Dow Jones International Internet ETF (FDNI)
FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL REPORT
SEPTEMBER 30, 2020
Shareholder Letter ....................................................................... 2
Market Overview .......................................................................... 3
Fund Performance Overview
First Trust IPOX(R) Europe Equity Opportunities ETF (FPXE) ......................... 4
First Trust Dow Jones International Internet ETF (FDNI) ............................ 6
Notes to Fund Performance Overview ....................................................... 8
Understanding Your Fund Expenses ......................................................... 9
Portfolio of Investments
First Trust IPOX(R) Europe Equity Opportunities ETF (FPXE).......................... 10
First Trust Dow Jones International Internet ETF (FDNI) ............................ 13
Statements of Assets and Liabilities ..................................................... 15
Statements of Operations ................................................................. 16
Statements of Changes in Net Assets ...................................................... 17
Financial Highlights ..................................................................... 18
Notes to Financial Statements ............................................................ 19
Report of Independent Registered Public Accounting Firm .................................. 25
Additional Information ................................................................... 26
Board of Trustees and Officers ........................................................... 32
Privacy Policy ........................................................................... 34
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund II (the "Trust") described in this report (each such series is referred to as a "Fund" and collectively, as the "Funds") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund'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.
FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
SEPTEMBER 30, 2020
Dear Shareholders,
First Trust is pleased to provide you with the annual report for certain series of the First Trust Exchange-Traded Fund II (the "Funds"), which contains detailed information about the Funds for the twelve months ended September 30, 2020.
The coronavirus ("COVID-19") pandemic has been on the attack for over seven months now. Suffice it to say that we are anxiously awaiting a medical breakthrough that will help us better coexist with this virus, because there is a good chance the virus may never go away, according to experts. In late September 2020, Dr. Anthony Fauci, the leading infectious disease expert in the U.S., commented that COVID-19 vaccinations could begin as early as November or December of 2020. As it turns out, Dr. Fauci's timeline may end up being close to spot-on. Pfizer and BioNTech reported on November 9, 2020, that they are the first health care companies to successfully demonstrate that a COVID-19 vaccine can be both effective and safe in Phase 3 clinical trials on humans, according to CNBC. While scientists are seeking a COVID-19 vaccine that is at least 75% effective, their vaccine efficacy rate has eclipsed 90%. Dr. Scott Gottlieb, a former Food & Drug Administration commissioner and member of Pfizer's board, believes the vaccine, which entails two doses, could be available in limited scope by late December but widely available by the third quarter of 2021. The other breaking news in early November is that former Vice President Joe Biden appears to have defeated incumbent Donald Trump in the 2020 presidential election, though it has yet to be declared official as of November 10 due to one or potentially more state ballot recounts requested by the Trump Administration.
The virus does not appear to be going away on its own, as the President has predicted on several occasions. In fact, the medical community is concerned that a second wave may hit the U.S. during the upcoming flu season. Regardless of how things unfold in the months ahead, many pundits agree that the U.S. economy, which has made some positive strides in recent months, is going to require a few years to fully mend from the COVID-19 fallout. In September 2020, the Federal Reserve (the "Fed") stated that it expects to hold short-term interest rates near zero until two things happen: (1) the U.S. unemployment rate is back to normal (around a 4.0% unemployment rate); and (2) inflation is running at or above 2.0%. Brian Wesbury, Chief Economist at First Trust Advisors L.P., notes that the Fed does not expect to achieve both goals until 2024. We believe that one of the Fed's motivations in promoting a multi-year commitment to a near zero interest rate monetary policy is to incentivize risk-taking. By holding interest rates low, the Fed is essentially disincentivizing savings. Historically speaking, the Fed does not usually frontload this much guidance. Fed Chairman Jerome Powell has stated that he believes the economy is also in need of additional fiscal stimulus from Congress. While negotiations are underway, a deal for additional stimulus money has yet to be struck.
The 24/7 news cycle, as it is designed to do, is continuously spewing out a mixed bag of good and bad news. Election seasons only heighten it. Those of us who have worked in this industry for a long time often encourage investors, particularly those with long time horizons, to tune out the noise and stick to their respective plans. Think of it this way -- due to the COVID-19 pandemic, the amount of negative news in 2020 has likely far outpaced the good, in my opinion, and yet the S&P 500(R) Index sits in positive territory. Securities markets also digest the newsfeed and then deliver a response in the form of performance results. Year-to-date through October 9, 2020, the S&P 500(R) Index posted a total return of 9.22%, according to Bloomberg. This is after factoring in its 33.8% virus-induced plunge from February 19, 2020, through March 23, 2020. What a shame if investors got spooked listening to the news and missed out on the upside. As always, we encourage investors to stay the course!
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. |
FIRST TRUST EXCHANGE-TRADED FUND II
ANNUAL REPORT
SEPTEMBER 30, 2020
ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of research and analysis of the First Trust product line. Mr. Carey has over 27 years of experience as an Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst ("CFA") designation. He is a graduate of the University of Illinois at Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been quoted by several publications, including The Wall Street Journal, The Wall Street Reporter, Bloomberg News Service and Registered Rep.
STATE OF THE GLOBAL ECONOMY
The International Monetary Fund ("IMF") reported that global gross domestic product growth was more upbeat than expected in both the second and third quarters of 2020, but also stated that the global economy is still a long way from full recovery, according to Business Insider. Kristalina Georgieva, managing director of the IMF, noted that a combined $12 trillion in fiscal stimulus from some major economies enabled the second and third quarters to exceed their growth estimates. The IMF believes that the approval and rollout of a coronavirus ("COVID-19") vaccine and effective containment measures could accelerate a country's recovery. On the flipside, further outbreaks and lockdowns could drive a nation's economy back into a deep recession.
The economic fallout from the ongoing spread of COVID-19 had been a drag on global merger and acquisition activity ("M&A") in the first half of 2020, according to Mergermarket. M&A activity is a useful barometer for gauging the overall business climate as it reflects the risk appetite of CEOs and executives, in our opinion. Mergermarket, however, reported that M&A activity picked up significantly in the third quarter of 2020. The value of deals announced totaled $891.4 billion, up from $372.2 billion in the second quarter of 2020 and up from the $677.4 billion registered in the third quarter of 2019. Year-to-date through September 30, 2020, total deal volume reached $1.86 trillion, down from $2.58 trillion over the same period in 2019.
PERFORMANCE OF GLOBAL STOCKS AND BONDS
With respect to U.S. equities, the S&P 500(R), S&P MidCap 400(R) and S&P SmallCap 600(R) Indices posted total returns of 15.15%, -2.16% and -8.29%, respectively, for the 12-month period ended September 30, 2020. Large-capitalization ("cap") stocks continued to outperform their mid- and small-cap counterparts. Investors appear to be favoring larger, more well-capitalized companies amid the COVID-19 pandemic, in our opinion. Seven of the 11 sectors that comprise the S&P 500(R) Index were up on a total return basis. The top-performer was the Information Technology sector, up 47.23%, while the worst result by far came from the Energy sector, down 45.24%. As it turns out, technology companies were among the best suited to prosper under the work-from-home structure.
A Bloomberg survey of 18 equity strategists found that their average 2020 year-end price target for the S&P 500(R) Index was 3,286 as of September 16, 2020, according to its own release. The highest estimate was 3,650, while the lowest estimate was 2,800. Since the start of the year, the 2020 earnings estimate for the S&P 500(R) Index has been adjusted significantly lower, but the projection for 2021 is up notably. As of December 31, 2019, Bloomberg's 2020 and 2021 consensus earnings growth estimates for the S&P 500(R) Index stood at 9.02% and 10.72%, respectively. As of October 2, 2020, those two estimates were -19.42% and 24.23%, respectively. Analysts are expecting a strong rebound in 2021.
Over the past 12 months, the MSCI World ex USA and the MSCI Emerging Markets Indices posted total returns of 0.16% (USD) and 10.54% (USD), respectively, according to Bloomberg. The Bloomberg Barclays Global Aggregate Index of higher quality debt posted a total return of 6.24% (USD), while the Bloomberg Barclays EM Hard Currency Aggregate Index of emerging markets debt rose by 4.35% (USD), according Bloomberg. Over that same period, the U.S. dollar declined by 5.52% against a basket of major currencies, as measured by the U.S. Dollar Index (DXY). The decline in the dollar likely had a positive influence on the performance of these four foreign stock indices, in our opinion.
In the U.S. bond market, the top-performing major debt group we track was a combination of government and investment-grade corporate bonds. The Bloomberg Barclays U.S. Aggregate Bond Index posted a total return of 6.98% for the 12-month period ended September 30, 2020. The worst-performing U.S. debt group that we track was high yield corporate bonds, though it finished in positive territory. The Bloomberg Barclays U.S. Corporate High Yield Index posted a total return of 3.25%. The yield on the benchmark 10-Year Treasury Note ("T-Note") declined by 98 basis points in the period to close at 0.69% on September 30, 2020, according to Bloomberg. For comparative purposes, the average yield on the 10-Year T-Note was 2.21% for the 10-year period ended September 30, 2020.
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
The First Trust IPOX(R) Europe Equity Opportunities ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the IPOX(R)-100 Europe Index (the "Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol "FPXE." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index. The Index is owned, developed, maintained and sponsored by IPOX(R) Schuster LLC. The Index seeks to measure the performance of the equity securities of the 100 largest and typically most liquid initial public offerings ("IPOs") (including spin-offs and equity carve-outs) of companies that are economically tied to Europe.
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PERFORMANCE
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
Inception Inception
1 Year Ended (10/4/18) (10/4/18)
9/30/20 to 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV 28.33% 14.11% 30.01%
Market Price 28.51% 14.33% 30.53%
INDEX PERFORMANCE
IPOX(R) 100 Europe Index 30.19% 15.64% 33.51%
MSCI Europe Index -0.79% 0.06% 0.11%
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|
(See Notes to Fund Performance Overview on page 8.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of 28.33% during the period covered by this report. During the same period, the MSCI Europe Index (the "Benchmark") generated a return of -0.79%. Over the period, the Fund allocated 28.8% to the Health Care Sector, which was more than the weight given to any other sector. Investments in Health Care returned 21.5% during the period, contributing 7.1% to the Fund's return. Consumer Discretionary sector stocks provided a greater contribution to the Fund's return than any other sector during the period. With an allocation of 18.6%, Consumer Discretionary stocks returned 40.5% and contributed 8.2% to the Fund's total return. Investments in the Energy sector caused the greatest drag on the Fund's portfolio. This sector received a 0.4% allocation during the period and contributed -0.3% to the Fund's total return. The Fund's currency exposure caused 8.0% performance during the period. On a relative basis, the Fund outperformed the Benchmark. The well-performing Consumer Discretionary sector had the greatest contribution to this outperformance, causing 7.2% of outperformance versus the Benchmark. Meanwhile, investments in the Materials sector caused -1.1% of underperformance versus the Benchmark, more than investments in any other sector.
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Health Care 25.82%
Information Technology 21.56
Consumer Discretionary 17.27
Communication Services 10.91
Industrials 7.96
Utilities 6.66
Financials 3.89
Materials 2.20
Consumer Staples 2.15
Real Estate 1.58
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Prosus N.V. 6.44%
Adyen N.V. 5.20
Novartis AG 4.59
Siemens Healthineers AG 4.52
Spotify Technology S.A. 3.98
Genmab A/S 3.81
Sanofi 3.38
Nexi S.p.A. 3.37
E. ON SE 2.73
Dassault Systemes SE 2.64
------
Total 40.66%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
OCTOBER 4, 2018 - SEPTEMBER 30, 2020
First Trust IPOX(R) Europe IPOX(R) 100 MSCI Europe
Equity Opportunities ETF Europe Index Index
-------------------------- ------------ -----------
10/4/18 $10,000 $10,000 $10,000
3/31/19 9,715 9,769 9,836
9/30/19 10,132 10,255 10,091
3/31/20 9,587 9,800 8,311
9/30/20 13,003 13,352 10,011
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Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period October 5, 2018 (commencement of trading) through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
10/5/18 - 9/30/19 187 8 0 0 48 4 0 0
10/1/19 - 9/30/20 162 27 3 0 57 3 0 1
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FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
The First Trust Dow Jones International Internet ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Dow Jones International Internet Index (the "Index"). The shares of the Fund are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol "FDNI." The Fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the Index. The Index is developed, maintained and sponsored by S&P Dow Jones Indices LLC and is designed to measure the performance of securities of non-US issuers whose primary business focus is Internet-related.
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PERFORMANCE
----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
Inception Inception
1 Year Ended (11/5/18) (11/5/18)
9/30/20 to 9/30/20 to 9/30/20
FUND PERFORMANCE
NAV 88.27% 46.00% 105.35%
Market Price 89.40% 46.10% 105.62%
INDEX PERFORMANCE
Dow Jones International Internet Index 89.35% 46.93% 107.86%
MSCI ACWI ex-USA Information Technology Index 34.58% 26.09% 55.39%
MSCI ACWI ex-USA Index 3.00% 4.63% 8.99%
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|
(See Notes to Fund Performance Overview on page 8.)
PERFORMANCE REVIEW
The Fund generated a NAV return of 88.27% during the period covered by this report. During the same period, the MSCI ACWI ex-USA Information Technology Index (the "Benchmark") generated a return of 34.58%. Over the period, the Fund was most heavily weighted towards the Consumer Discretionary sector. This sector received an allocation of 46.0% and contributed 38.1% to the Fund's overall return, which was more than any other sector in the Fund during the period. No sector held by the Fund experienced negative performance during the period. The Fund's currency exposure caused 1.2% performance during the period. On a relative basis, the Fund absolutely crushed the Benchmark during the period. The Benchmark invests solely in Information Technology securities, while the Fund invested 46.0% in the Consumer Discretionary sector, 35.9% in the Communication Services sector, and only 16.0% in the Information Technology sector. The investments in Consumer Discretionary securities caused 20.9% of outperformance for the Fund relative to the Benchmark. The allocation to the Consumer Services sector and the under-allocation to the Information Technology sector also earned outperformance for the Fund, resulting in the significant disparity between the Fund's performance and the Benchmark's performance.
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION LONG-TERM INVESTMENTS
-----------------------------------------------------------
Consumer Discretionary 44.74%
Communication Services 33.87
Information Technology 19.24
Health Care 2.15
------
Total 100.00%
======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS LONG-TERM INVESTMENTS
-----------------------------------------------------------
Alibaba Group Holding Ltd., ADR 10.44%
Meituan Dianping, Class B 10.21
Tencent Holdings Ltd. 10.08
Shopify, Inc., Class A 8.96
Naspers Ltd., Class N 6.26
Adyen N.V. 4.51
JD.com, Inc., ADR 4.43
Sea Ltd., ADR 3.68
Prosus N.V. 3.16
NAVER Corp. 2.97
------
Total 64.70%
======
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 5, 2018 - SEPTEMBER 30, 2020
First Trust Dow Jones Dow Jones International MSCI ACWI ex-USA Information MSCI ACWI
International Internet ETF Internet Index Technology Index ex-USA Index
-------------------------- ----------------------- ---------------------------- ------------
11/5/18 $10,000 $10,000 $10,000 $10,000
3/31/19 11,275 11,318 10,863 10,463
9/30/19 10,907 10,977 11,546 10,581
3/31/20 11,865 12,008 11,000 8,834
9/30/20 20,535 20,785 15,539 10,899
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Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH SEPTEMBER 30, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period November 6, 2018 (commencement of trading) through September 30, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
11/6/18 - 9/30/19 104 17 0 0 88 12 3 1
10/1/19 - 9/30/20 161 28 13 0 39 7 5 0
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Total returns for the periods since inception are calculated from the inception date of each Fund. "Average Annual Total Returns" represent the average 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.
Each Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund are listed for trading as of the time that the Fund's NAV is calculated. Since shares of each Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in each Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund's past performance is no guarantee of future performance.
FIRST TRUST EXCHANGE-TRADED FUND II
UNDERSTANDING YOUR FUND EXPENSES
SEPTEMBER 30, 2020 (UNAUDITED)
As a shareholder of First Trust IPOX(R) Europe Equity Opportunities ETF or First Trust Dow Jones International Internet ETF (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs (in U.S. dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended September 30, 2020.
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.
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ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
APRIL 1, 2020 SEPTEMBER 30, 2020 PERIOD PERIOD (a)
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FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
Actual $1,000.00 $1,356.30 0.70% $4.12
Hypothetical (5% return before expenses) $1,000.00 $1,021.50 0.70% $3.54
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
Actual $1,000.00 $1,730.70 0.65% $4.44
Hypothetical (5% return before expenses) $1,000.00 $1,021.75 0.65% $3.29
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(a) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (April 1, 2020 through September 30, 2020), multiplied by 183/366 (to reflect the six-month period).
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 99.8%
AUSTRIA -- 0.2%
119 BAWAG Group AG (b) (c) (d) (e) $ 4,302
--------------
BELGIUM -- 2.4%
517 UCB S.A. (b) 58,718
--------------
CAYMAN ISLANDS -- 1.1%
1,132 Farfetch Ltd., Class A (e) 28,481
--------------
CYPRUS -- 0.1%
67 HeadHunter Group PLC, ADR 1,640
--------------
DENMARK -- 9.7%
104 Ascendis Pharma A/S, ADR (e) 16,049
306 DSV PANALPINA A/S (b) 49,634
261 Genmab A/S (b) (e) 94,719
199 Netcompany Group
A/S (b) (c) (d) (e) 16,504
419 Orsted A/S (c) (d) 57,764
400 Scandinavian Tobacco Group
A/S (b) (c) (d) 5,924
--------------
240,594
--------------
FINLAND -- 0.8%
823 Kojamo OYJ (b) 17,676
157 Tokmanni Group Corp. (b) 2,767
--------------
20,443
--------------
FRANCE -- 10.5%
336 Amundi S.A. (b) (c) (d) (e) 23,683
352 Dassault Systemes SE (b) 65,677
698 La Francaise des Jeux
SAEM (b) (c) (d) 25,607
227 Neoen S.A. (b) (c) (d) (e) 12,216
837 Sanofi (b) 83,878
610 Worldline S.A. (b) (c) (d) (e) 49,949
--------------
261,010
--------------
GERMANY -- 17.0%
412 BioNTech SE, ADR (e) 28,523
397 Delivery Hero SE (b) (c) (d) (e) 45,552
266 DWS Group GmbH & Co.
KGaA (c) (d) 9,167
6,146 E. ON SE (b) 67,744
347 HelloFresh SE (b) (e) 19,284
375 Knorr-Bremse AG (b) 44,161
219 MorphoSys AG, ADR (e) 6,874
429 Scout24 AG (b) (c) (d) 37,421
2,501 Siemens Healthineers
AG (b) (c) (d) 112,267
332 TeamViewer AG (b) (c) (d) (e) 16,374
666 Traton SE (b) 13,203
161 Varta AG (b) (e) 22,467
--------------
423,037
--------------
ISRAEL -- 1.4%
70 Fiverr International Ltd. (e) 9,729
55 Kornit Digital Ltd. (e) 3,568
149 Nano-X Imaging Ltd. (e) 3,504
73 Wix.com Ltd. (e) 18,604
--------------
35,405
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
ITALY -- 3.8%
233 GVS S.p.A. (c) (d) (e) $ 3,141
1,078 Italgas S.p.A. (b) 6,799
4,174 Nexi S.p.A. (b) (c) (d) (e) 83,657
--------------
93,597
--------------
JERSEY -- 0.4%
230 Delphi Technologies PLC (e) 3,843
137 Wizz Air Holdings
PLC (b) (c) (d) (e) 5,492
--------------
9,335
--------------
LUXEMBOURG -- 4.7%
105 Globant S.A. (e) 18,818
408 Spotify Technology S.A. (e) 98,969
--------------
117,787
--------------
NETHERLANDS -- 17.8%
70 Adyen N.V. (b) (c) (d) (e) 129,115
100 Argenx SE, ADR (e) 26,252
247 Ferrari N.V. (b) 45,329
140 IMCD N.V. (b) 16,651
830 JDE Peet's BV (b) (e) 33,754
257 Just Eat Takeaway.com
N.V. (b) (c) (d) (e) 28,770
1,732 Prosus N.V. (b) (e) 159,869
20 Shop Apotheke Europe
N.V. (b) (c) (d) (e) 3,484
--------------
443,224
--------------
NORWAY -- 2.0%
1,368 Adevinta ASA (b) (e) 23,516
445 Europris ASA (b) (c) (d) 2,281
418 Fjordkraft Holding
ASA (b) (c) (d) 4,059
1,544 Mercell Holding AS (e) 1,937
269 Pexip Holding ASA (b) (e) 2,399
733 Scatec Solar ASA (b) (c) (d) 16,928
--------------
51,120
--------------
RUSSIA -- 1.5%
357 Polyus PJSC, GDR (b) (d) 37,611
--------------
SPAIN -- 1.7%
712 Cellnex Telecom S.A. (b) (c) (d) 43,221
--------------
SWEDEN -- 11.6%
281 AcadeMedia AB (b) (c) (d) 2,318
286 BHG Group AB (b) (e) 4,021
405 Bravida Holding
AB (b) (c) (d) (e) 4,924
99 Cibus Nordic Real Estate AB (b) 1,808
992 Embracer Group AB (b) (e) 18,426
1,281 EQT AB (b) 24,857
422 Evolution Gaming Group
AB (b) (c) (d) 27,883
267 ICA Gruppen AB (b) 13,564
130 Karnov Group AB (b) 781
242 Lifco AB, Class B (b) 18,718
301 Medicover AB, Class B (b) (e) 4,479
70 MIPS AB (b) (d) 3,117
181 Oncopeptides AB (b) (c) (d) (e) 2,660
|
Page 10 See Notes to Financial Statements
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SWEDEN (CONTINUED)
422 Paradox Interactive AB (b) $ 14,308
5,754 Samhallsbyggnadsbolaget i Norden
AB (b) 17,349
235 Sinch AB (b) (c) (d) (e) 19,164
160 Stillfront Group AB (b) (e) 19,986
699 Swedish Orphan Biovitrum
AB (b) (e) 16,864
827 Tele2 AB, Class B (b) 11,660
4,433 Telefonaktiebolaget LM Ericsson,
ADR 48,275
418 Thule Group AB (b) (c) (d) 13,794
--------------
288,956
--------------
SWITZERLAND -- 9.5%
812 Alcon, Inc. (b) (e) 46,037
140 CRISPR Therapeutics AG (e) 11,710
100 Galenica AG (b) (c) (d) 6,954
53 Medacta Group
S.A. (b) (c) (d) (e) 4,962
1,312 Novartis AG (b) 113,913
852 SIG Combibloc Group AG (b) 17,036
739 Softwareone Holding AG (b) 20,594
133 Stadler Rail AG (b) 5,514
50 VAT Group AG (b) (c) (d) 9,538
--------------
236,258
--------------
UNITED KINGDOM -- 2.5%
546 AJ Bell PLC (b) 3,170
1,369 Avast PLC (b) (c) (d) 9,294
1,095 Calisen PLC (b) (e) 2,335
1,242 Civitas Social Housing
PLC (b) (d) 1,692
109 Endava PLC, ADR (e) 6,883
1,532 Finablr PLC (b) (c) (e) (f) 218
1,332 Helios Towers PLC (b) (e) 2,678
1,324 IntegraFin Holdings PLC (b) (d) 8,672
3,463 M&G PLC (b) 7,118
3,687 Ninety One PLC (b) (e) 9,668
3,631 Quilter PLC (b) (c) (d) 6,004
640 Trainline PLC (b) (c) (d) (e) 2,985
584 Triple Point Social Housing REIT
PLC (c) (d) 806
--------------
61,523
--------------
UNITED STATES -- 1.1%
117 SolarEdge Technologies, Inc. (e) 27,887
--------------
TOTAL COMMON STOCKS -- 99.8% 2,484,149
(Cost $1,938,748) --------------
RIGHTS (a) -- 0.0%
UNITED KINGDOM -- 0.0%
194 Triple Point Social Housing REIT
PLC, expiring 10/26/20 (b) (e) 2
(Cost $0) --------------
DESCRIPTION VALUE
-------------------------------------------------------------
TOTAL INVESTMENTS -- 99.8% $ 2,484,151
(Cost $1,938,748) (g)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 4,005
--------------
NET ASSETS -- 100.0% $ 2,488,156
==============
(a) Portfolio securities are categorized based upon their country of
incorporation, which can be different from the country categorization of
the Fund's underlying index. For a breakdown of the portfolio securities
by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At September 30, 2020, securities noted as such are valued at
$2,051,727 or 82.5% of net assets. Certain of these securities are fair
valued using a factor provided by a third-party pricing service due to the
change in value between the foreign markets' close and the New York Stock
Exchange ("NYSE") close exceeding a certain threshold. On days when this
threshold is not exceeded, these securities are typically valued at the
last sale price on the exchange on which they are principally traded.
(c) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(d) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(e) Non-income producing security.
(f) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by First Trust Advisors, L.P.,
the Fund's advisor.
(g) Aggregate cost for federal income tax purposes is $1,957,167. As of
September 30, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$546,051 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$19,067. The net unrealized appreciation was $526,984.
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
|
See Notes to Financial Statements Page 11
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
-------------------------------------------------------
Common Stocks:
Cayman
Islands $ 28,481 $ 28,481 $ -- $ --
Cyprus 1,640 1,640 -- --
Denmark 240,594 73,813 166,781 --
Germany 423,037 44,564 378,473 --
Israel 35,405 35,405 -- --
Italy 93,597 3,141 90,456 --
Jersey 9,335 3,843 5,492 --
Luxembourg 117,787 117,787 -- --
Netherlands 443,224 26,252 416,972 --
Norway 51,120 1,937 49,183 --
Sweden 288,956 48,275 240,681 --
Switzerland 236,258 11,710 224,548 --
United
Kingdom 61,523 7,689 53,834 --
United States 27,887 27,887 -- --
Other Country
Categories* 425,305 -- 425,305 --
Rights* 2 -- 2 --
-------------------------------------------------------
Total
Investments $ 2,484,151 $ 432,424 $ 2,051,727 $ --
=======================================================
|
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
Euro 51.8%
United States Dollar 16.0
Swedish Krona 9.7
Swiss Franc 9.0
Danish Krone 9.0
British Pound Sterling 2.4
Norwegian Krone 2.1
------
Total 100.0%
======
|
Page 12 See Notes to Financial Statements
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2020
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
COMMON STOCKS (a) -- 98.9%
AUSTRALIA -- 1.1%
8,983 Afterpay Ltd. (b) (c) $ 529,500
--------------
CANADA -- 8.9%
4,232 Shopify, Inc., Class A (c) 4,327,793
--------------
CAYMAN ISLANDS -- 48.7%
17,156 Alibaba Group Holding Ltd.,
ADR (c) 5,043,521
2,235 Autohome, Inc., ADR 214,560
10,664 Baidu, Inc., ADR (c) 1,349,956
27,583 JD.com, Inc., ADR (c) 2,140,717
156,579 Meituan Dianping,
Class B (b) (c) (d) 4,932,443
3,135 NetEase, Inc., ADR 1,425,390
7,004 Pagseguro Digital Ltd.,
Class A (c) 264,121
13,223 Pinduoduo, Inc., ADR (c) 980,485
11,543 Sea Ltd., ADR (c) 1,778,084
72,068 Tencent Holdings Ltd. (b) 4,867,717
17,860 Trip.com Group Ltd., ADR (c) 556,160
14,996 Vipshop Holdings Ltd., ADR (c) 234,537
--------------
23,787,691
--------------
GERMANY -- 4.1%
5,596 Delivery Hero SE (b) (c) (d) (e) 642,085
4,208 Scout24 AG (b) (d) (e) 367,053
4,772 TeamViewer AG (b) (c) (d) (e) 235,356
4,477 United Internet AG (b) 171,214
6,464 Zalando SE (b) (c) (d) (e) 603,934
--------------
2,019,642
--------------
ISLE OF MAN -- 0.6%
22,614 GVC Holdings PLC (b) (c) 283,224
--------------
ISRAEL -- 1.1%
2,016 Wix.com Ltd. (c) 513,778
--------------
JAPAN -- 5.4%
16,771 M3, Inc. (b) 1,037,391
17,604 Nexon Co., Ltd. (b) 439,110
31,979 Rakuten, Inc. (b) 344,829
103,750 Z Holdings Corp. (b) 692,991
3,750 ZOZO, Inc. (b) 104,642
--------------
2,618,963
--------------
LUXEMBOURG -- 2.2%
4,509 Spotify Technology S.A. (c) 1,093,748
--------------
NETHERLANDS -- 9.9%
1,180 Adyen N.V. (b) (c) (d) (e) 2,176,504
3,141 Just Eat Takeaway.com
N.V. (b) (c) (d) (e) 351,626
16,521 Prosus N.V. (b) (c) 1,524,942
12,295 Yandex N.V., Class A (c) 802,249
--------------
4,855,321
--------------
NEW ZEALAND -- 0.7%
4,562 Xero Ltd. (b) (c) 332,776
--------------
SOUTH AFRICA -- 6.2%
17,126 Naspers Ltd., Class N (b) 3,024,861
--------------
SHARES DESCRIPTION VALUE
-------------------------------------------------------------
SOUTH KOREA -- 5.3%
2,341 Kakao Corp. (b) $ 727,942
5,653 NAVER Corp. (b) 1,436,547
627 NCSoft Corp. (b) 432,087
--------------
2,596,576
--------------
UNITED KINGDOM -- 4.7%
5,014 Atlassian Corp. PLC, Class A (c) 911,495
37,899 Auto Trader Group PLC (b) (d) (e) 275,163
23,695 Ocado Group PLC (b) (c) 838,079
34,668 Rightmove PLC (b) 280,270
--------------
2,305,007
--------------
TOTAL INVESTMENTS -- 98.9% 48,288,880
(Cost $41,482,288) (f)
NET OTHER ASSETS AND
LIABILITIES -- 1.1% 561,152
--------------
NET ASSETS -- 100.0% $ 48,850,032
==============
|
(a) Portfolio securities are categorized based upon their country of incorporation, which can be different from the country categorization of the Fund's underlying index. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At September 30, 2020, securities noted as such are valued at $26,652,286 or 54.6% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the NYSE close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c) Non-income producing security.
(d) This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933, as amended (the "1933 Act").
(e) This security is exempt from registration upon resale under Rule 144A of the 1933 Act and may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security is not restricted on the foreign exchange where it trades freely without any additional registration. As such, it does not require the additional disclosure required of restricted securities.
(f) Aggregate cost for federal income tax purposes is $41,840,025. As of September 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $6,811,128 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $362,273. The net unrealized appreciation was $6,448,855.
ADR - American Depositary Receipt
See Notes to Financial Statements Page 13
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2020
A summary of the inputs used to value the Fund's investments as of September 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/2020 PRICES INPUTS INPUTS
-------------------------------------------------------
Common Stocks:
Canada $ 4,327,793 $ 4,327,793 $ -- $ --
Cayman
Islands 23,787,691 13,987,531 9,800,160 --
Israel 513,778 513,778 -- --
Luxembourg 1,093,748 1,093,748 -- --
Netherlands 4,855,321 802,249 4,053,072 --
United
Kingdom 2,305,007 911,495 1,393,512 --
Other Country
Categories* 11,405,542 -- 11,405,542 --
-------------------------------------------------------
Total
Investments $ 48,288,880 $ 21,636,594 $ 26,652,286 $ --
=======================================================
|
* See Portfolio of Investments for country breakout.
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
-------------------------------------------------------------
United States Dollar 35.8%
Hong Kong Dollar 20.3
Euro 12.6
Canadian Dollar 8.9
South African Rand 6.3
Japanese Yen 5.4
South Korean Won 5.4
British Pound Sterling 3.5
Australian Dollar 1.8
------
Total 100.0%
======
|
Page 14 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2020
FIRST TRUST FIRST TRUST
IPOX(R) EUROPE DOW JONES
EQUITY INTERNATIONAL
OPPORTUNITIES ETF INTERNET ETF
(FPXE) (FDNI)
---------------------- ----------------------
ASSETS:
Investments, at value ................................................. $ 2,484,151 $ 48,288,880
Cash .................................................................. 1,112 550,795
Foreign currency, at value ............................................ 380 --
Due from authorized participant ....................................... -- 1,416,317
Receivables:
Reclaims ........................................................... 3,885 --
Investment securities sold ......................................... -- 543,223
Dividends .......................................................... 53 461
---------------- ----------------
Total Assets ....................................................... 2,489,581 50,799,676
---------------- ----------------
LIABILITIES:
Payables:
Investment securities purchased .................................... -- 1,925,917
Investment advisory fees ........................................... 1,425 23,727
---------------- ----------------
Total Liabilities .................................................. 1,425 1,949,644
---------------- ----------------
NET ASSETS ............................................................ $ 2,488,156 $ 48,850,032
================ ================
NET ASSETS CONSIST OF:
Paid-in capital ....................................................... $ 2,164,911 $ 42,472,686
Par value ............................................................. 1,000 12,500
Accumulated distributable earnings (loss) ............................. 322,245 6,364,846
---------------- ----------------
NET ASSETS ............................................................ $ 2,488,156 $ 48,850,032
================ ================
NET ASSET VALUE, per share ............................................ $ 24.88 $ 39.08
================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share) ............................. 100,002 1,250,002
================ ================
Investments, at cost .................................................. $ 1,938,748 $ 41,482,288
================ ================
Foreign currency, at cost (proceeds) .................................. $ 382 $ --
================ ================
|
See Notes to Financial Statements Page 15
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2020
FIRST TRUST FIRST TRUST
IPOX(R) EUROPE DOW JONES
EQUITY INTERNATIONAL
OPPORTUNITIES ETF INTERNET ETF
(FPXE) (FDNI)
---------------------- ----------------------
INVESTMENT INCOME:
Dividends.............................................................. $ 33,153 $ 21,261
Foreign withholding tax................................................ (4,660) (814)
---------------- ----------------
Total investment income ............................................ 28,493 20,447
---------------- ----------------
EXPENSES:
Investment advisory fees............................................... 13,889 89,057
---------------- ----------------
Total expenses ..................................................... 13,889 89,057
---------------- ----------------
NET INVESTMENT INCOME (LOSS)........................................... 14,604 (68,610)
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ........................................................ (41,768) (262,962)
In-kind redemptions ................................................ 123,710 772,652
Foreign currency transactions ...................................... (2) (3,101)
---------------- ----------------
Net realized gain (loss)............................................... 81,940 506,589
---------------- ----------------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................ 373,758 6,929,724
Foreign currency translation ....................................... 210 (14)
---------------- ----------------
Net change in unrealized appreciation (depreciation)................... 373,968 6,929,710
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 455,908 7,436,299
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 470,512 $ 7,367,689
================ ================
|
Page 16 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
IPOX(R) EUROPE EQUITY DOW JONES INTERNATIONAL
OPPORTUNITIES ETF INTERNET ETF
(FPXE) (FDNI)
------------------------------- -------------------------------
Year Ended Period Ended Year Ended Period Ended
9/30/2020 9/30/2019 (a) 9/30/2020 9/30/2019 (a)
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss)................................ $ 14,604 $ 33,220 $ (68,610) $ 150,580
Net realized gain (loss).................................... 81,940 (177,869) 506,589 234,978
Net change in unrealized appreciation (depreciation)........ 373,968 171,625 6,929,710 (123,133)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations.......................................... 470,512 26,976 7,367,689 262,425
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations....................................... (23,081) (30,520) (61,741) (91,831)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................... 1,085,057 1,969,757 39,002,716 6,249,885
Cost of shares redeemed..................................... (1,010,545) -- (1,662,339) (2,216,772)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions............................ 74,512 1,969,757 37,340,377 4,033,113
------------- ------------- ------------- -------------
Total increase (decrease) in net assets..................... 521,943 1,966,213 44,646,325 4,203,707
NET ASSETS:
Beginning of period......................................... 1,966,213 -- 4,203,707 --
------------- ------------- ------------- -------------
End of period............................................... $ 2,488,156 $ 1,966,213 $ 48,850,032 $ 4,203,707
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period..................... 100,002 -- 200,002 --
Shares sold................................................. 50,000 100,002 1,100,000 300,002
Shares redeemed............................................. (50,000) -- (50,000) (100,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period........................... 100,002 100,002 1,250,002 200,002
============= ============= ============= =============
|
(a) Inception dates for FPXE and FDNI are October 4, 2018 and November 5, 2018, respectively, which are consistent with the respective Fund's commencement of investment operations and are the dates the initial creation units were established.
See Notes to Financial Statements Page 17
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST IPOX(R) EUROPE EQUITY OPPORTUNITIES ETF (FPXE)
YEAR ENDED PERIOD ENDED
9/30/2020 9/30/2019 (a)
----------- -------------
Net asset value, beginning of period $ 19.66 $ 19.70
--------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.22 0.33
Net realized and unrealized gain (loss) 5.30 (0.06)
--------- -----------
Total from investment operations 5.52 0.27
--------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.30) (0.31)
--------- -----------
Net asset value, end of period $ 24.88 $ 19.66
========= ===========
TOTAL RETURN (b) 28.33% 1.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2,488 $ 1,966
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.70% 0.70% (c)
Ratio of net investment income (loss) to
average net assets 0.74% 1.77% (c)
Portfolio turnover rate (d) 63% 67%
|
FIRST TRUST DOW JONES INTERNATIONAL INTERNET ETF (FDNI)
YEAR ENDED PERIOD ENDED
9/30/2020 9/30/2019 (a)
----------- -------------
Net asset value, beginning of period $ 21.02 $ 19.69
--------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.03) 0.75
Net realized and unrealized gain (loss) 18.40 1.04
--------- -----------
Total from investment operations 18.37 1.79
--------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.31) (0.46)
--------- -----------
Net asset value, end of period $ 39.08 $ 21.02
========= ===========
TOTAL RETURN (b) 88.27% 9.07%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 48,850 $ 4,204
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.65% 0.65% (c)
Ratio of net investment income (loss) to
average net assets (0.50)% 4.42% (c)
Portfolio turnover rate (d) 23% 61%
|
(a) Inception dates for FPXE and FDNI are October 4, 2018 and November 5, 2018, respectively, which are consistent with the respective Fund's commencement of investment operations and are the dates the initial creation units were established.
(b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The 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 18 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
1. ORGANIZATION
First Trust Exchange-Traded Fund II (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on July 6, 2006, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of sixteen exchanged-traded funds. This report covers the two funds listed below:
First Trust IPOX(R) Europe Equity Opportunities ETF - (The Nasdaq Stock Market LLC ("Nasdaq") ticker "FPXE") First Trust Dow Jones International Internet ETF - (Nasdaq ticker "FDNI")
Each fund represents a separate series of shares of beneficial interest in the Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Each Fund's Creation Units are generally issued and redeemed in-kind for securities in which a Fund invests, and in certain circumstances, for cash, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, each Fund's shares are not redeemable securities. The investment objective of each Fund is to seek investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of the following indices:
FUND INDEX First Trust IPOX(R) Europe Equity Opportunities ETF IPOX(R)-100 Europe Index First Trust Dow Jones International Internet ETF Dow Jones International Internet Index |
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. Each Fund's NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows:
Common stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV per share.
Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price.
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 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
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect the value of the security.
If the securities in question are foreign securities, the following additional information may be considered:
1) the value of similar foreign securities traded on other foreign markets;
2) ADR trading of similar securities;
3) closed-end fund or exchange-traded fund trading of similar securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect entire markets, countries or regions.
In addition, differences between the prices used to calculate a Fund's NAV and the prices used by such Fund's corresponding index could result in a difference between a Fund's performance and the performance of its underlying index.
Because foreign markets may be open on different days than the days during which investors may transact in the shares of a Fund, the value of the Fund's securities may change on the days when investors are not able to transact in the shares of the Fund. The value of securities denominated in foreign currencies is converted into U.S. dollars using exchange rates determined daily as of the close of regular trading on the NYSE. Any use of a different rate from the rates used by a relevant index may adversely affect the Fund's ability to track the index.
The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly.
o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates).
o Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment.
The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of September 30, 2020, is included with each Fund's Portfolio of Investments.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund's understanding of the applicable country's tax rules and rates.
C. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in "Net change in unrealized appreciation (depreciation) on foreign currency translation" on the Statements of Operations. Unrealized gains and losses on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are shown in "Net change in unrealized appreciation (depreciation) on investments" on the Statements of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received and are included in "Net realized gain (loss) on foreign currency transactions" on the Statements of Operations. The portion of foreign currency gains and losses related to fluctuations in exchange rates between the initial purchase settlement date and subsequent sale trade date is included in "Net realized gain (loss) on investments" on the Statements of Operations.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid quarterly, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually.
Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on significantly modified portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
The tax character of distributions paid by each Fund during the fiscal year ended September 30, 2020 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
---------------- -------------- --------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 23,081 $ -- $ --
First Trust Dow Jones International Internet ETF 61,741 -- --
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The tax character of distributions paid by each Fund during the fiscal period ended September 30, 2019 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
---------------- -------------- --------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 30,520 $ -- $ --
First Trust Dow Jones International Internet ETF 91,831 -- --
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As of September 30, 2020, the components of distributable earnings on a tax basis for each Fund were as follows:
Accumulated Net
Undistributed Capital and Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
---------------- -------------- --------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 21,077 $ (226,006) $ 527,174
First Trust Dow Jones International Internet ETF (34,327) (49,667) 6,448,840
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
E. 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. Taxable years ending 2019 and 2020 remain open to federal and state audit. As of September 30, 2020, 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 September 30, 2020, for federal income tax purposes, each applicable Fund had a capital loss carryforward available that is shown in the table below, to the extent provided by regulations, to offset future capital gains. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to each applicable Fund's shareholders.
Non-Expiring
Capital Loss
Carryforwards
---------------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 226,006
First Trust Dow Jones International Internet ETF 49,667
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During the taxable year ended September 30, 2020, the following Fund utilized non-expiring capital loss carryforwards in the following amount:
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended September 30, 2020, the following Fund incurred and elected to defer late year ordinary or capital losses as follows:
Qualified Late Year Losses
-------------------------------------
Ordinary Losses Capital Losses
--------------- --------------
First Trust Dow Jones International Internet ETF $ 34,327 $ --
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In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended September 30, 2020, the adjustments for each Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) Paid-in
Income (Loss) on Investments Capital
---------------- -------------- --------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 9,406 $ (131,048) $ 121,642
First Trust Dow Jones International Internet ETF (3,101) (760,291) 763,392
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
F. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3).
First Trust has entered into licensing agreements with each of the following "Licensors" for the respective Funds:
FUND LICENSOR First Trust IPOX(R) Europe Equity Opportunities ETF IPOX(R) Schuster LLC First Trust Dow Jones International Internet ETF S&P Dow Jones Indices LLC |
The respective license agreements allow for the use of each Fund's respective index and of certain trademarks and trade names of the respective Licensors. The Funds are sub-licensees to the applicable license agreements. The Funds' licensing fees are paid by First Trust from the unitary investment advisory fees it receives from each of the Funds.
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.
Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust manages the investment of the Funds' assets and is responsible for the expenses of each Fund including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees (if any), but excluding fee payments under the Investment Management Agreement, interest, taxes, acquired fund fees and expenses, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, which are paid by each respective Fund. FPXE and FDNI have each agreed to pay First Trust an annual unitary management fee equal to 0.70% and 0.65% of its average daily net assets, respectively.
The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended September 30, 2020, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows:
Purchases Sales
---------------- --------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 1,232,790 $ 1,232,390
First Trust Dow Jones International Internet ETF 13,606,697 3,398,511
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For the fiscal year ended September 30, 2020, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
---------------- --------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 1,084,048 $ 1,010,677
First Trust Dow Jones International Internet ETF 28,093,825 1,647,258
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). In order to purchase Creation Units of a Fund, an Authorized Participant must deposit (i) a designated portfolio of equity securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Creation Transaction Fee may increase or decrease with changes in each Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When a Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Redemption Transaction Fee may increase or decrease with changes in each Fund's portfolio. Each Fund reserves the right to effect redemptions in cash. An Authorized Participant may request a cash redemption in lieu of securities; however, each Fund may, in its discretion, reject any such request.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before January 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 were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed.
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND
II:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First Trust IPOX(R) Europe Equity Opportunities ETF and First Trust Dow Jones International Internet ETF (the "Funds"), each a series of the First Trust Exchange-Traded Fund II, including the portfolios of investments, as of September 30, 2020, and the related statements of operations for the year then ended, and the changes in net assets and the financial highlights for the periods indicated in the table below, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Funds as of September 30, 2020, and the results of their operations for the year then ended, and the changes in their net assets and the financial highlights for the periods listed in the table below, in conformity with accounting principles generally accepted in the United States of America.
------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL FUNDS INCLUDED STATEMENTS OF CHANGES IN NET ASSETS
IN THE TRUST AND FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------------
First Trust IPOX(R) Europe Equity For the year ended September 30, 2020 and for the period from October 4, 2018
Opportunities ETF (commencement of operations) through September 30, 2019
------------------------------------------------------------------------------------------------------------------------
First Trust Dow Jones International For the year ended September 30, 2020 and for the period from November 5, 2018
Internet ETF (commencement of operations) through September 30, 2019
------------------------------------------------------------------------------------------------------------------------
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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 September 30, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP Chicago, Illinois November 23, 2020 |
We have served as the auditor of one or more First Trust investment companies since 2001.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable year ended September 30, 2020, the following percentages of income dividend paid by the Funds qualify for the dividends received deduction available to corporations:
Dividends Received Deduction
----------------------------
First Trust IPOX(R) Europe Equity Opportunities ETF 0.00%
First Trust Dow Jones International Internet ETF 0.00%
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For the taxable year ended September 30, 2020, the following percentages of income dividend paid by the Funds are hereby designated as qualified dividend income:
Qualified Dividend Income
----------------------------
First Trust IPOX(R) Europe Equity Opportunities ETF 88.30%
First Trust Dow Jones International Internet ETF 100.00%
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A portion of each of the Funds' 2020 ordinary dividends (including short-term capital gains) paid to its shareholders during the fiscal year ended September 30, 2020, 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 Funds meet the requirements of Section 853 of the Internal Revenue Code and elect to pass through to their shareholders credit for foreign taxes paid. For the taxable year ended September 30, 2020, the total amounts of income received by the Funds from sources within foreign countries and possessions of the United States and of taxes paid to such countries are as follows:
Gross Foreign Income Foreign Taxes Paid
--------------------------- ---------------------------
Amount Per Share Amount Per Share
------------- ------------ ------------- ------------
First Trust IPOX(R) Europe Equity Opportunities ETF $ 33,153 $ 0.33 $ 4,536 $ 0.05
First Trust Dow Jones International Internet ETF 21,259 0.02 814 0.00
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RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (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.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (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. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The COVID-19 pandemic may last for an extended period of time and will continue to impact the economy for the foreseeable future.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT
The Board of Trustees of First Trust Exchange-Traded Fund II (the "Trust"), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreements (as applicable to a specific Fund, the "Agreement" and collectively, the "Agreements") with First Trust Advisors L.P. (the "Advisor") on behalf of the following two series of the Trust (each a "Fund" and collectively, the "Funds"):
First Trust IPOX(R) Europe Equity Opportunities ETF (FPXE) First Trust Dow Jones International Internet ETF (FDNI)
The Board approved the continuation of the Agreement for each Fund for a one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The Board determined for each Fund that the continuation of the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment.
To reach this determination for each Fund, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on May 11, 2020 and June 8, 2020, the Board, including the Independent Trustees, reviewed materials provided by the Advisor responding to requests for information from counsel to the
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services provided by the Advisor to each Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate payable by each Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the expense ratio of each Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; performance information for each Fund, including comparisons of each Fund's performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the "Performance Universe"), each assembled by Broadridge; the nature of expenses incurred in providing services to each Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Board reviewed initial materials with the Advisor at the meeting held on May 11, 2020, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the May meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 8, 2020 meeting, as well as at the meeting held that day. The Board considered supplemental information provided by the Advisor on the operations of the Advisor and the performance of the Funds since the onset of the COVID-19 pandemic. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from each Fund's perspective. The Board determined that, given the totality of the information provided with respect to the Agreements, the Board had received sufficient information to renew the Agreements. The Board considered that shareholders chose to invest or remain invested in a Fund knowing that the Advisor manages the Fund and knowing the Fund's unitary fee.
In reviewing the Agreement for each Fund, the Board considered the nature, extent and quality of the services provided by the Advisor under the Agreement. The Board considered that the Advisor is responsible for the overall management and administration of the Trust and each Fund and reviewed all of the services provided by the Advisor to the Funds, as well as the background and experience of the persons responsible for such services. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's and each Fund's compliance with the 1940 Act, as well as each Fund's compliance with its investment objective, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Funds. Finally, as part of the Board's consideration of the Advisor's services, the Advisor, in its written materials and at the May 11, 2020 meeting, described to the Board the scope of its ongoing investment in additional infrastructure and personnel to maintain and improve the quality of services provided to the Funds and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and each Fund by the Advisor under the Agreements have been and are expected to remain satisfactory and that the Advisor has managed each Fund consistent with its investment objective, policies and restrictions.
The Board considered the unitary fee rate payable by each Fund under the applicable Agreement for the services provided. The Board considered that as part of the unitary fee the Advisor is responsible for each Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the applicable Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the advisory or unitary fee rates and expense ratios of the peer funds in the Expense Groups, as well as advisory and unitary fee rates charged by the Advisor to other fund (including ETFs) and non-fund clients, as applicable. Because each Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for FPXE was above the median total (net) expense ratio of the peer funds in its Expense Group and that the unitary fee rate for FDNI was below the median total (net) expense ratio of the peer funds in its Expense Group. With respect to the Expense Groups, the Board, at the May 11, 2020 meeting, discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for index ETFs, including differences in underlying indexes and index-tracking methodologies that can result in greater management complexities across seemingly comparable ETFs, and different business models that may affect the pricing of services among ETF sponsors. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Funds and other non-ETF clients that limited their comparability. In considering the unitary fee rates overall, the Board also considered the Advisor's statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor's demonstrated long-term commitment to each Fund and the other funds in the First Trust Fund Complex.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
The Board considered performance information for each Fund. The Board noted the process it has established for monitoring each Fund's performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Funds. The Board determined that this process continues to be effective for reviewing each Fund's performance. The Board received and reviewed information for periods ended December 31, 2019 regarding the performance of each Fund's underlying index, the correlation between each Fund's performance and that of its underlying index, each Fund's tracking difference and each Fund's excess return as compared to its benchmark index. Based on the information provided and its ongoing review of performance, the Board concluded that each Fund was correlated to its underlying index and that the tracking difference for each Fund was within a reasonable range. In addition, the Board reviewed data prepared by Broadridge comparing each Fund's performance to that of its respective Performance Universe and to that of a broad-based benchmark index, but given each Fund's objective of seeking investment results that correspond generally to the performance of its underlying index, the Board placed more emphasis on its review of correlation and tracking difference.
On the basis of all the information provided on the unitary fee and performance of each Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for each Fund continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to each Fund under the Agreements.
The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Funds and noted the Advisor's statement that it believes its expenses will likely increase over the next twelve months as the Advisor continues to hire personnel and build infrastructure, including technology, to improve the services to the Funds. The Board noted that any reduction in fixed costs associated with the management of the Funds would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Funds. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to each Fund for the twelve months ended December 31, 2019 and the estimated profitability level for each Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's profitability level for each Fund was not unreasonable. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Funds. The Board considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Funds, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Funds. The Board concluded that the character and amount of potential fall-out benefits to the Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreements continue to be fair and reasonable and that the continuation of the Agreements is in the best interests of each Fund. No single factor was determinative in the Board's analysis.
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the "1940 Act"), the Funds and each other fund in the First Trust Fund Complex, other than the closed-end funds, have adopted and implemented a liquidity risk management program (the "Program") reasonably designed to assess and manage the funds' liquidity risk, i.e., the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors' interests in the fund. The Board of Trustees of the First Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the person designated to administer the Program, and in this capacity the Advisor performs its duties primarily through the activities and efforts of the First Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of each fund's portfolio investments into one of the four liquidity categories specified by Rule 22e-4: highly liquid investments, moderately liquid investments, less liquid investments and illiquid investments. The Liquidity Committee determines certain of the inputs for this classification process, including reasonably anticipated trade sizes and significant investor dilution thresholds. The Liquidity Committee also determines and periodically reviews a highly liquid investment minimum for certain funds, monitors the funds' holdings of assets classified as illiquid investments to seek to ensure they do not exceed 15% of a fund's net assets and establishes policies and procedures regarding redemptions in kind.
At the May 11, 2020 meeting of the Board of Trustees, as required by Rule 22e-4 and the Program, the Advisor provided the Board with a written report prepared by the Advisor that addressed the operation of the Program during the period from June 1, 2019 (the initial compliance date for certain requirements of Rule 22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020 and assessed the Program's adequacy and effectiveness of implementation during
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
this period, including the operation of the highly liquid investment minimum for each fund, that is required under the Program to have one, and any material changes to the Program. Note that because the Funds primarily holds assets that are highly liquid investments, the Funds have not adopted any highly liquid investment minimums.
As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor concluded that each fund's investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
NAME, YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
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INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 187 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed
LLC (April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 187 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM Investor
Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 187 Director of Trust
(1956) and Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 187 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services)
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INTERESTED TRUSTEE
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James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 187 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
|
FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer
(1966) Officer (January 2016 to Present), Controller (January 2011
o Since January 2016 to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC (Software
Development Company) and Stonebridge Advisors
LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
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FIRST TRUST EXCHANGE-TRADED FUND II
SEPTEMBER 30, 2020 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms;
o Information about your transactions with us, our affiliates or others;
o Information we receive from your inquiries by mail, e-mail or telephone; and
o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons:
o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers.
o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors).
March 2019
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FIRST TRUST
First Trust Exchange-Traded Fund II
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.
(c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description.
(d) The registrant, during the period covered by this report, has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item's instructions.
(e) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's Board of Trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as audit committee financial experts serving on its audit committee and that each of them is "independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees (Registrant) -- The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $356,250 for the fiscal year ended September 30, 2019 and $330,400 for the fiscal year ended September 30, 2020.
(b) Audit-Related Fees (Registrant) -- The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended September 30, 2019 and $0 for the fiscal year ended September 30, 2020.
Audit-Related Fees (Investment Adviser and Distributor) -- The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended September 30, 2019 and $0 for the fiscal year ended September 30, 2020.
(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 $140,941 for the fiscal year ended September 30, 2019, and $153,898 for the fiscal year ended September 30, 2020. These fees were for tax return review, multistate tax compliance, tax consultation and/or tax return preparation and professional services rendered for PFIC (Passive Foreign Investment Company) Identification Services.
Tax Fees (Investment Adviser and Distributor) -- The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant's adviser and distributor were $0 for the fiscal year ended September 30, 2019 and $0 for the fiscal year ended September 30, 2020.
(d) All Other Fees (Registrant) -- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended September 30, 2019 and $0 for the fiscal year ended September 30, 2020.
All Other Fees (Investment Adviser and Distributor) -- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant's investment adviser and distributor, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended September 30, 2019 and $0 for the fiscal year ended September 30, 2020.
(e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the "Committee") is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent auditor's engagements for non-audit services with the registrant's adviser (not including a sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant's adviser (other than any sub-adviser whose role is primarily portfolio management and is sub-contracted with or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor's independence.
(e)(2) The percentage of services described in each of paragraphs (b) through (d) for the registrant and the registrant's investment adviser and distributor of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(C) or paragraph(C)(7)(ii) of Rule 2-01 of Regulation S-X are as follows:
Registrant: Adviser and Distributor: ----------- ------------------------ (b) 0% (b) 0% (c) 0% (c) 0% (d) 0% (d) 0% |
(f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than fifty percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for the fiscal year ended September 30, 2019 were $140,941 for the registrant, $28,500 for the registrant's investment adviser and $34,400 for the registrant's distributor and for the fiscal year ended September 30, 2020 were $153,898 for the registrant, $47,170 for the registrant's investment adviser and $70,330 for the registrant's distributor.
(h) The registrant's audit committee of its Board of Trustees has determined that the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence.
ITEMS 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The audit committee of the registrant is comprised of: Richard E. Erickson, Thomas R. Kadlec, Robert F. Keith and Niel B. Nielson.
ITEM 6. INVESTMENTS.
(a) The Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407 (c) (2) (iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22 (b) (15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3 (c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)).
(b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable.
(b) Not applicable.
ITEM 13. EXHIBITS.
(a) (1) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto.
(a) (2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a) (3) Not applicable.
(a) (4) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: December 4, 2020
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: December 4, 2020
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By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: December 4, 2020
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* Print the name and title of each signing officer under his or her signature.
SENIOR FINANCIAL OFFICER
CODE OF CONDUCT
I. INTRODUCTION
This code of conduct is being adopted by the investment companies advised by First Trust Advisors L.P., from time to time, (the "Funds"). The reputation and integrity of the Funds are valuable assets that are vital to the Funds' success. Each officer of the Funds, and officers and employees of the investment adviser to the Funds who work on Fund matters, including each of the Funds' senior financial officers ("SFOs"), is responsible for conducting each Fund's business in a manner that demonstrates a commitment to the highest standards of integrity. SFOs include the Principal Executive Officer (who is the President), the Controller (who is the principal accounting officer), and the Treasurer (who is the principal financial officer), and any person who performs a similar function.
The Funds, First Trust Advisors L.P. and First Trust Portfolios have adopted Codes of Ethics under Rule 17j-1 under the Investment Company Act of 1940 (the "Rule 17j-1 Code"). These Codes of Ethics are designed to prevent certain conflicts of interest that may arise when officers, employees, or directors of the Funds and the foregoing entities know about present or future Fund transactions and/or have the power to influence those transactions, and engage in transactions with respect to those same securities in their personal account(s) or otherwise take advantage of their position and knowledge with respect to those securities. In an effort to prevent these conflicts and in accordance with Rule 17j-1, the Funds adopted their Rule 17j-1 Code to prohibit transactions and conduct that create conflicts of interest, and to establish compliance procedures.
The Sarbanes-Oxley Act of 2002 was designed to address corporate malfeasance and to help assure investors that the companies in which they invest are accurately and completely disclosing financial information. Under Section 406 of the Act, all public companies (including the Funds) must either have a code of ethics for their SFOs, or disclose why they do not. The Act was intended to prevent future situations (such as occurred in well-reported situations involving such companies as Enron and WorldCom) where a company creates an environment in which employees are afraid to express their opinions or to question unethical and potentially illegal business practices.
The Funds have chosen to adopt a senior financial officer Code of Conduct to encourage their SFOs, and other Fund officers and employees of First Trust Advisors or First Trust Portfolios to act ethically and to question potentially unethical or illegal practices, and to strive to ensure that the Funds' financial disclosures are complete, accurate, and understandable.
II. PURPOSES OF THIS CODE OF CONDUCT
The purposes of this Code are:
A. To promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
B. To promote full, fair, accurate, timely, and understandable disclosure in reports and documents that the Funds file with, or submits to, the SEC and in other public communications the Funds make;
C. To promote compliance with applicable governmental laws, rules and regulations;
D. To encourage the prompt internal reporting to an appropriate person of violations of the Code; and
E. To establish accountability for adherence to the Code.
III. QUESTIONS ABOUT THIS CODE
The Funds' Boards of Trustees have designated W. Scott Jardine or other appropriate officer designated by the President of the respective Funds to be the Compliance Coordinator for the implementation and administration of the Code.
IV. HANDLING OF FINANCIAL INFORMATION
The Funds have adopted guidelines under which its SFOs perform their duties. However, the Funds expect that all officers or employees of the adviser or distributor who participate in the preparation of any part of any Fund's financial statements follow these guidelines with respect to each Fund:
A. Act with honesty and integrity and avoid violations of this Code, including actual or apparent conflicts of interest with the Fund in personal and professional relationships.
B. Disclose to the Fund's Compliance Coordinator any material transaction or relationship that reasonably could be expected to give rise to any violations of the Code, including actual or apparent conflicts of interest with the Fund. You should disclose these transactions or relationships whether you are involved or have only observed the transaction or relationship. If it is not possible to disclose the matter to the Compliance Coordinator, it should be disclosed to the Fund's Principal Financial Officer or Principal Executive Officer.
C. Provide information to the Fund's other officers and appropriate employees of service providers (adviser, administrator, outside auditor, outside counsel, custodian, etc.) that is accurate, complete, objective, relevant, timely, and understandable.
D. Endeavor to ensure full, fair, timely, accurate, and understandable disclosure in the Fund's periodic reports.
E. Comply with the federal securities laws and other applicable laws and rules, such as the Internal Revenue Code.
F. Act in good faith, responsibly, and with due care, competence and diligence, without misrepresenting material facts or allowing your independent judgment to be subordinated.
G. Respect the confidentiality of information acquired in the course of your work except when you have Fund approval to disclose it or where disclosure is otherwise legally mandated. You may not use confidential information acquired in the course of your work for personal advantage.
H. Share and maintain skills important and relevant to the Fund's needs.
I. Proactively promote ethical behavior among peers in your work environment.
J. Responsibly use and control all assets and resources employed or entrusted to you.
K. Record or participate in the recording of entries in the Fund's books and records that are accurate to the best of your knowledge.
V. WAIVERS OF THIS CODE
SFOs and other parties subject to this Code may request a waiver of a provision of this Code (or certain provisions of the Fund's Rule 17j-1 Code) by submitting their request in writing to the Compliance Coordinator for appropriate review. An executive officer of the Fund or the Audit Committee will decide whether to grant a waiver. All waivers of this Code must be disclosed to the Fund's shareholders to the extent required by SEC rules. A good faith interpretation of the provisions of this Code, however, shall not constitute a waiver.
VI. ANNUAL CERTIFICATION
Each SFO will be asked to certify on an annual basis that he/she is in full compliance with the Code and any related policy statements.
VII. REPORTING SUSPECTED VIOLATIONS
A. SFOs or other officers of the Funds or employees of the First Trust group who work on Fund matters who observe, learn of, or, in good faith, suspect a violation of the Code must immediately report the violation to the Compliance Coordinator, another member of the Funds' or First Trust's senior management, or to the Audit Committee of the Fund Board. An example of a possible Code violation is the preparation and filing of financial disclosure that omits material facts, or that is accurate but is written in a way that obscures its meaning.
B. Because service providers such as an administrator, outside accounting firm, and custodian provide much of the work relating to the Funds' financial statements, you should be alert for actions by service providers that may be illegal, or that could be viewed as dishonest or unethical conduct. You should report these actions to the Compliance Coordinator even if you know, or think, that the service provider has its own code of ethics for its SFOs or employees.
C. SFOs or other officers or employees who report violations or suspected violations in good faith will not be subject to retaliation of any kind. Reported violations will be investigated and addressed promptly and will be treated confidentially to the extent possible.
VIII. VIOLATIONS OF THE CODE
A. Dishonest, unethical or illegal conduct will constitute a violation of this Code, regardless of whether this Code specifically refers to that particular conduct. A violation of this Code may result in disciplinary action, up to and including termination of employment. A variety of laws apply to the Funds and their operations, including the Securities Act of 1933, the Investment Company Act of 1940, state laws relating to duties owed by Fund directors and officers, and criminal laws. The federal securities laws generally prohibit the Funds from making material misstatements in its prospectus and other documents filed with the SEC, or from omitting to state a material fact. These material misstatements and omissions include financial statements that are misleading or omit materials facts.
B. Examples of criminal violations of the law include stealing, embezzling, misapplying corporate or bank funds, making a payment for an expressed purpose on a Fund's behalf to an individual who intends to use it for a different purpose; or making payments, whether corporate or personal, of cash or other items of value that are intended to influence the judgment or actions of political candidates, government officials or businesses in connection with any of the Funds' activities. The Funds must and will report all suspected criminal violations to the appropriate authorities for possible prosecution, and will investigate, address and report, as appropriate, non-criminal violations.
Amended: June 1, 2009
CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302
OF THE SARBANES-OXLEY ACT
I, James M. Dykas, certify that:
1. I have reviewed this report on Form N-CSR of First Trust Exchange-Traded Fund II;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: December 4, 2020 /s/ James M. Dykas
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James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
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CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302
OF THE SARBANES-OXLEY ACT
I, Donald P. Swade, certify that:
1. I have reviewed this report on Form N-CSR of First Trust Exchange-Traded Fund II;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: December 4, 2020 /s/ Donald P. Swade
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Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
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CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906
OF THE SARBANES-OXLEY ACT
I, James M. Dykas, President and Chief Executive Officer of First Trust Exchange-Traded Fund II (the "Registrant"), certify that:
1. The Form N-CSR of the Registrant (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: December 4, 2020 /s/ James M. Dykas
------------------ ----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
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I, Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer of First Trust Exchange-Traded Fund II (the "Registrant"), certify that:
1. The Form N-CSR of the Registrant (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: December 4, 2020 /s/ Donald P. Swade
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Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
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