First Trust New Constructs Core Earnings Leaders ETF (FTCE US) – Portfolio Construction Methodology

The underlying Bloomberg New Constructs Core Earnings Leaders Index targets US large- and mid-cap stocks with high earnings quality. The universe is the Bloomberg US 1000 Index, with additional investability screens requiring free-float market cap of at least USD 500 million and 90-day average daily traded value of at least USD 2 million, with only the most liquid line per issuer eligible. For each BICS sector, constituents are ranked by Earnings Capture, defined as total earnings distortion (Core Earnings minus reported earnings) divided by total assets, and the top 30% advance. From these, the largest three issuers per sector by free-float size are selected, then remaining names by issuer free-float size until 100 stocks are reached. The index is sector-neutral and uses free-float market-cap weighting scaled to parent-sector weights, with a 4.5% single-stock cap. It is reconstituted and rebalanced quarterly in January, April, July, and October.

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