0001445546-13-004179.txt : 20130906
0001445546-13-004179.hdr.sgml : 20130906
20130906105641
ACCESSION NUMBER: 0001445546-13-004179
CONFORMED SUBMISSION TYPE: N-CSRS
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 20130630
FILED AS OF DATE: 20130906
DATE AS OF CHANGE: 20130906
EFFECTIVENESS DATE: 20130906
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FIRST TRUST EXCHANGE-TRADED FUND
CENTRAL INDEX KEY: 0001329377
IRS NUMBER: 000000000
FILING VALUES:
FORM TYPE: N-CSRS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-21774
FILM NUMBER: 131082037
BUSINESS ADDRESS:
STREET 1: 120 EAST LIBERTY DRIVE, SUITE 400
CITY: WHEATON
STATE: IL
ZIP: 60187
BUSINESS PHONE: 630-765-8000
MAIL ADDRESS:
STREET 1: 120 EAST LIBERTY DRIVE, SUITE 400
CITY: WHEATON
STATE: IL
ZIP: 60187
0001329377
S000010772
First Trust Dow Select MicroCap Index Fund
C000029773
First Trust Dow Select MicroCap Index Fund
FDM
0001329377
S000010976
First Trust Morningstar Dividend Leaders Index Fund
C000030350
First Trust Morningstar Dividend Leaders Index Fund
FDL
0001329377
S000010977
First Trust US IPO Index Fund
C000030351
First Trust US IPO Index Fund
FPX
0001329377
S000011047
First Trust NASDAQ-100 Equal Weighted Index Fund
C000030477
First Trust NASDAQ-100 Equal Weighted Index Fund
QQEW
0001329377
S000011048
First Trust NASDAQ-100-Technology Sector Index Fund
C000030478
First Trust NASDAQ-100-Technology Sector Index Fund
QTEC
0001329377
S000012478
First Trust NYSE Arca Biotechnology Index Fund
C000033929
First Trust NYSE Arca Biotechnology Index Fund
FBT
0001329377
S000012479
First Trust Dow Jones Internet Index Fund
C000033930
First Trust Dow Jones Internet Index Fund
FDN
0001329377
S000012555
First Trust Capital Strength ETF
C000034137
First Trust Capital Strength ETF
FTCS
0001329377
S000013259
First Trust Nasdaq-100 Ex-Technology Sector Index Fund
C000035622
First Trust Nasdaq-100 Ex-Technology Sector Index Fund
QQXT
0001329377
S000013797
First Trust Value Line Equity Allocation Index Fund
C000037851
First Trust Value Line Equity Allocation Index Fund
FVI
0001329377
S000013817
First Trust Value Line Dividend Index Fund
C000037913
First Trust Value Line Dividend Index Fund
FVD
0001329377
S000015169
First Trust Nasdaq Clean Edge Green Energy Index Fund
C000041643
First Trust Nasdaq Clean Edge Green Energy Index Fund
QCLN
0001329377
S000017115
First Trust Value Line 100 Exchange-Traded Fund
C000047485
First Trust Value Line 100 Exchange-Traded Fund
FVL
0001329377
S000017163
First Trust S&P REIT Index Fund
C000047557
First Trust S&P REIT Index Fund
FRI
0001329377
S000017177
First Trust ISE-Revere Natural Gas Index Fund
C000047627
First Trust ISE-Revere Natural Gas Index Fund
FCG
0001329377
S000017178
First Trust ISE Water Index Fund
C000047628
First Trust ISE Water Index Fund
FIW
0001329377
S000017179
First Trust ISE Chindia Index Fund
C000047629
First Trust ISE Chindia Index Fund
FNI
0001329377
S000026211
First Trust NASDAQ ABA Community Bank Index Fund
C000078718
First Trust NASDAQ ABA Community Bank Index Fund
QABA
0001329377
S000035456
First Trust CBOE S&P 500 VIX Tail Hedge Fund
C000108867
First Trust CBOE S&P 500 VIX Tail Hedge Fund
VIXH
N-CSRS
1
etf1_ncsrs.txt
SEMI-ANNUAL REPORT TO SHAREHOLDERS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21774
-----------
First Trust Exchange-Traded Fund
--------------------------------------------------------------
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
--------------------------------------------------------------
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
--------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 765-8000
--------------
Date of fiscal year end: December 31
-------------
Date of reporting period: June 30, 2013
---------------
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 semi-annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
FIRST TRUST
First Trust Exchange-Traded Fund
Book 1
First Trust Dow Jones Select MicroCap Index(SM) Fund - FDM
First Trust Morningstar Dividend Leaders(SM) Index Fund - FDL
First Trust US IPO Index Fund - FPX
First Trust NYSE Arca Biotechnology Index Fund - FBT
First Trust Dow Jones Internet Index(SM) Fund - FDN
First Trust Capital Strength ETF - FTCS
First Trust Value Line(R) Equity Allocation Index Fund - FVI
First Trust Value Line(R) Dividend Index Fund - FVD
First Trust Value Line(R) 100 Exchange-Traded Fund - FVL
Semi-Annual Report
June 30, 2013
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013
Shareholder Letter............................................................ 2
Market Overview............................................................... 3
Fund Performance Overview
First Trust Dow Jones Select MicroCap Index(SM) Fund - FDM................. 4
First Trust Morningstar Dividend Leaders(SM) Index Fund - FDL.............. 6
First Trust US IPO Index Fund - FPX........................................ 8
First Trust NYSE Arca Biotechnology Index Fund - FBT.......................10
First Trust Dow Jones Internet Index(SM) Fund - FDN........................12
First Trust Capital Strength ETF - FTCS*...................................14
First Trust Value Line(R) Equity Allocation Index Fund - FVI...............16
First Trust Value Line(R) Dividend Index Fund - FVD........................18
First Trust Value Line(R) 100 Exchange-Traded Fund - FVL...................20
Notes to Fund Performance Overview............................................22
Understanding Your Fund Expenses..............................................23
Portfolio of Investments
First Trust Dow Jones Select MicroCap Index(SM) Fund - FDM.................25
First Trust Morningstar Dividend Leaders(SM) Index Fund - FDL..............30
First Trust US IPO Index Fund - FPX....................................... 32
First Trust NYSE Arca Biotechnology Index Fund - FBT.......................35
First Trust Dow Jones Internet Index(SM) Fund - FDN........................37
First Trust Capital Strength ETF - FTCS*...................................38
First Trust Value Line(R) Equity Allocation Index Fund - FVI...............40
First Trust Value Line(R) Dividend Index Fund - FVD........................44
First Trust Value Line(R) 100 Exchange-Traded Fund - FVL...................47
Statements of Assets and Liabilities..........................................50
Statements of Operations .....................................................52
Statements of Changes in Net Assets...........................................54
Financial Highlights..........................................................58
Notes to Financial Statements.................................................63
Additional Information........................................................72
* Formerly known as First Trust Strategic Value Index Fund - FDV
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (each such series is referred to as a "Fund" and collectively, as the
"Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund shares may therefore be less than what you paid
for them. Accordingly, you can lose money 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
http://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.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund's portfolio and presents data and analysis that
provide insight into each Fund's performance and investment approach.
By reading the portfolio commentary by Robert F. Carey, Chief Market Strategist,
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 risks of investing in each Fund are
spelled out in its prospectus, statement of additional information, this report
and other Fund regulatory filings.
Page 1
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SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
JUNE 30, 2013
Dear Shareholders:
I am pleased to present you with the semi-annual report for your investment in
First Trust Exchange-Traded Fund.
The report you hold contains detailed information about portfolios in First
Trust Exchange-Traded Fund over the six months ended June 30, 2013. It contains
a market overview and a performance analysis for the period. I encourage you to
read this document and discuss it with your financial advisor. A successful
investor is also typically a knowledgeable one, as we have found to be the case
at First Trust Advisors L.P. ("First Trust").
The six months covered by this report have been more positive for the U.S.
markets. In fact, the S&P 500(R) Index, as measured on a total return basis,
rose 13.82% during the period, and many economists and investors have felt
positive about the current market environment. Of course, past performance can
never be an indicator of future performance, but First Trust believes that
staying invested in quality products through up and down markets and having a
long-term horizon can help investors reach their financial goals.
As you know, First Trust offers a variety of products that we believe could fit
many financial plans to help investors seeking long-term investment success. We
encourage you to talk to your advisor about the other investments First Trust
offers that might also fit your financial goals and to discuss those goals with
your advisor regularly so that he or she can help keep you on track.
First Trust will continue to make available up-to-date information about your
investments so you and your financial advisor are current on any First Trust
investments you own. We value our relationship with you, and thank you for the
opportunity to assist you in achieving your financial goals. I look forward to
the remainder of 2013 and to the next edition of your Fund's report.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees and
Chief Executive Officer of First Trust Advisors L.P.
Page 2
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MARKET OVERVIEW
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FIRST TRUST EXCHANGE-TRADED FUND
SEMI-ANNUAL REPORT
JUNE 30, 2013
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 23 years of experience as an Equity
and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst
("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE ECONOMY/INVESTING
The Federal Reserve has maintained an easy monetary policy since September 2007,
when it began lowering the federal funds target rate from 5.25% to 0.25%. The
target rate has stood at 0.25% since December 2008. In addition to lowering the
benchmark lending rate to nearly zero, the Federal Reserve also increased the
size of its balance sheet of securities from approximately $800 billion in 2008
to $3.46 trillion on July 10, 2013. That is a tremendous amount of stimulus.
While economic growth has been modest in this recovery relative to previous
recoveries that produced GDP growth rates ranging from 4% to 6% for extended
periods of time, on a calendar quarter basis, U.S. GDP growth has exceeded 2.0%
(annualized) in 9 out of the past 15 quarters through Q1'13, according to data
from the Bureau of Economic Analysis. The growth rate reached the 4.0%
(annualized) level on two occasions. In our opinion, this recovery has lacked
consistency due to a multitude of challenges, including too much government
spending and an excessive regulatory climate, especially for small businesses.
One silver lining is that CEOs seem ready to act. A recent global survey of
chief executives from PricewaterhouseCoopers LLP revealed that 97% of the 246
CEOs polled see innovation as the top priority for their companies today.
Thirty-seven percent of CEOs think that they need to be directly involved in
driving innovation within their businesses, while 34% think their role also
includes being a "visionary." The findings from this survey are vastly different
than three years ago when only 12% of CEOs were spearheading an innovation
strategy. We believe this change in sentiment could bode well for equity
investors moving forward.
U.S. STOCKS AND BONDS
All of the major U.S. stock indices posted double-digit total returns in the
first half of 2013. The S&P 500(R) Index, S&P MidCap 400 Index and S&P SmallCap
600 Index were up 13.82%, 14.59%, and 16.23%, respectively, according to
Bloomberg. All 10 major sectors in the S&P 500 posted gains, and six posted
double-digit gains. The top-performing sector was health care, up 20.26%, as
measured by the S&P 500 Health Care Index. The sector with the poorest showing
was materials, up 3.12%, as measured by the S&P 500 Materials Index. Materials
and commodities, in general, have been out of favor with investors since the
economic slowdown in Europe stemming from its sovereign debt crisis and the
tempering of growth in China, which tends to be one of the most aggressive
consumers of commodities.
The following insight is as of July 18, 2013, so it was released after 6/28/13.
It is too good not to note, in our opinion. The S&P 500 is up 149.7%
(price-only) from its closing low on 3/9/09 (1,592 days). The current bull
market now ranks as the fifth strongest of all time, according to Bespoke
Investment Group. The strongest bull market for the S&P 500 was the 582.1% gain
posted from 12/4/87 to 3/24/00 (4,494 days). The S&P 500 closed July 17's
trading session at an all-time high of 1689.37. The index level would need to
rise from 1689.37 to 1743.30 without a 20% decline (closing basis) to move from
fifth to fourth in the strongest bull rankings, according to Bespoke.
In the U.S. bond market, the top-performing major debt group in the first half
of 201-3 was, once again, high-yield corporate bonds. The Barclays U.S.
Corporate High Yield Index posted a total return of 1.42%. The next closest
domestic category was intermediate Treasuries, down 1.28%, as measured by the
Barclays U.S. Treasury: Intermediate Index. The Barclays Municipal Bond: Long
Bond (22+) Index posted the weakest return, down 4.07%.
FOREIGN STOCKS AND BONDS
Securities markets based in developed nations outperformed those in emerging
nations in the first half of 2013. The Barclays Global Aggregate Index of
higher-quality debt posted a total return of -4.83% (USD), compared to a decline
of 6.04% (USD) for the Barclays Global Emerging Markets Index of debt
securities. The MSCI World Index (ex U.S.) posted a total return of 3.43% (USD),
compared to -9.51% for the MSCI Emerging Markets Index. The U.S. dollar provided
some drag on returns from investments overseas for U.S. investors by
appreciating 4.2% against a basket of major currencies, as measured by the U.S.
Dollar Index (DXY).
Page 3
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FUND PERFORMANCE OVERVIEW
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND - FDM
The First Trust Dow Jones Select MicroCap Index(SM) Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Dow Jones Select
MicroCap Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its assets in common stocks that comprise the Index. The Index measures the
performance of selected U.S. micro-capitalization companies chosen from all
common stocks traded on the New York Stock Exchange ("NYSE(R)"), NYSE Amex and
The NASDAQ Stock Market, Inc. ("NASDAQ(R)") that are comparatively liquid and
have strong fundamentals relative to the micro-capitalization segment as a
whole. The Fund's shares are listed for trading on the NYSE Arca, Inc. ("NYSE
Arca"). The first day of secondary market trading in shares of the Fund was
September 30, 2005.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (9/27/2005) Ended (9/27/2005)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 16.24% 26.53% 7.27% 4.49% 42.02% 40.55%
Market Value 15.95% 26.05% 7.15% 4.44% 41.26% 40.08%
INDEX PERFORMANCE
Dow Jones Select MicroCap Index(SM) 16.59% 27.40% 8.00% 5.22% 46.93% 48.40%
Russell 2000(R) Index 15.86% 24.21% 8.77% 6.65% 52.25% 64.81%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Financials 28.17%
Industrials 19.97
Consumer Discretionary 16.05
Information Technology 11.72
Health Care 7.47
Materials 5.16
Telecommunication Services 3.70
Energy 3.39
Consumer Staples 2.75
Utilities 1.62
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Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Krispy Kreme Doughnuts, Inc. 1.20%
OfficeMax, Inc. 0.93
OFG Bancorp 0.86
Flotek Industries, Inc. 0.83
Multimedia Games Holding Co., Inc. 0.79
CapLease, Inc. 0.78
Altra Holdings, Inc. 0.77
Measurement Specialties, Inc. 0.76
ACCO Brands Corp. 0.76
Saia, Inc. 0.76
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Total 8.44%
=======
-----------------------------
Dow Jones and Dow Jones Select MicroCap Index(SM) are products of Dow Jones
Indexes, a licensed trademark of CME Group Index Services LLC ("CME") and have
been licensed for use by First Trust on behalf of the Fund. The Fund, based on
the Dow Jones Select MicroCap Index(SM), is not sponsored, endorsed, sold or
promoted by CME, Dow Jones or their respective affiliates, and CME, Dow Jones
and their respective affiliates make no representation regarding the
advisability of trading in the Fund.
Page 4
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND - FDM (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 27, 2005 - JUNE 30, 2013
First Trust Dow Jones Select Dow Jones Select Russell 2000(R)
MicroCap Index(SM) Fund MicroCap Index(SM) Index
09/05 $10000 $10000 $10000
12/05 10374 10397 10252
06/06 10968 11033 11094
12/06 12001 12115 12134
06/07 12746 12910 12917
12/07 11278 11474 11944
06/08 9896 10100 10825
12/08 7520 7707 7909
06/09 7362 7568 8118
12/09 9087 9393 10058
06/10 8833 9153 9862
12/10 11427 11876 12759
06/11 11811 12319 13551
12/11 10435 10907 12227
06/12 11107 11648 13270
12/12 12091 12728 14225
06/13 14055 14840 16481
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through June
30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 139 9 1 0
01/01/09 - 12/31/09 121 6 0 0
01/01/10 - 12/31/10 169 0 0 0
01/01/11 - 12/31/11 87 2 0 0
01/01/12 - 12/31/12 70 0 0 0
01/01/13 - 06/30/13 69 1 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 99 5 0 0
01/01/09 - 12/31/09 120 5 0 0
01/01/10 - 12/31/10 83 0 0 0
01/01/11 - 12/31/11 161 2 0 0
01/01/12 - 12/31/12 179 1 0 0
01/01/13 - 06/30/13 53 1 0 0
Page 5
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND - FDL
The First Trust Morningstar Dividend Leaders(SM) Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Morningstar(R) Dividend
Leaders(SM) Index (the "Index"). The Fund will normally invest at least 90% of
its assets in common stocks that comprise the Index. The Index offers investors
a benchmark for dividend portfolios as well as a means to invest in a portfolio
of stocks that have a consistent record of growing dividends as well as the
ability to sustain them. The Index consists of the top 100 stocks, based on
dividend yield, of the securities listed on one of the three major exchanges
(NYSE(R), NYSE Amex or NASDAQ(R)) that have been selected through the
application of Morningstar, Inc.'s proprietary multi-step screening process. The
Index is rebalanced four times annually in March, June, September and December.
The Fund's shares are listed for trading on the NYSE Arca. The first day of
secondary market trading in shares of the Fund was March 15, 2006.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (3/9/2006) Ended (3/9/2006)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 13.96% 14.87% 11.71% 4.62% 73.95% 39.07%
Market Value 13.85% 14.70% 11.70% 4.60% 73.87% 38.90%
INDEX PERFORMANCE
Morningstar(R) Dividend Leaders(SM) Index 14.27% 15.45% 12.31% 5.13% 78.67% 44.18%
S&P 500(R) Index 13.82% 20.60% 7.01% 5.47% 40.33% 47.57%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Utilities 26.80%
Telecommunication Services 20.66
Energy 15.25
Health Care 10.35
Information Technology 9.37
Materials 5.75
Industrials 4.46
Consumer Staples 3.02
Financials 2.98
Consumer Discretionary 1.36
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
AT&T, Inc. 9.90%
Chevron Corp. 9.24
Verizon Communications, Inc. 8.81
Merck & Co., Inc. 7.58
Intel Corp. 6.53
ConocoPhillips 4.77
Duke Energy Corp. 3.25
Eli Lilly & Co. 2.77
Southern (The) Co. 2.63
E.I. du Pont de Nemours & Co. 2.43
-------
Total 57.91%
=======
-----------------------------
Morningstar(R) is a service mark of Morningstar, Inc. and has been licensed for
use by First Trust on behalf of the Fund. The First Trust Morningstar Dividend
Leaders(SM) Index Fund is not sponsored, endorsed, issued, sold or promoted by
Morningstar, Inc., nor does this company make any representation regarding the
advisability of investing in the Fund.
Page 6
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND - FDL (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MARCH 9, 2006 - JUNE 30, 2013
First Trust
Morningstar Dividend Morningstar(R) Dividend S&P 500(R)
Leaders(SM) Index Fund Leaders(SM) Index Index
03/06 $10000 $10000 $10000
12/06 12077 12110 11317
06/07 12392 12462 12104
12/07 10793 10870 11939
06/08 7995 8069 10516
12/08 7371 7462 7522
06/09 6961 7067 7760
12/09 8420 8567 9512
06/10 8039 8197 8879
12/10 9771 9995 10945
06/11 10535 10806 11604
12/11 11182 11498 11176
06/12 12107 12491 12236
12/12 12204 12620 12964
06/13 13907 14418 14757
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through
June 30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 148 8 4 0
01/01/09 - 12/31/09 135 4 3 2
01/01/10 - 12/31/10 185 0 0 0
01/01/11 - 12/31/11 219 0 0 0
01/01/12 - 12/31/12 171 0 0 0
01/01/13 - 06/30/13 82 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 84 4 2 1
01/01/09 - 12/31/09 106 3 1 0
01/01/10 - 12/31/10 66 1 0 0
01/01/11 - 12/31/11 33 0 0 0
01/01/12 - 12/31/12 79 0 0 0
01/01/13 - 06/30/13 42 0 0 0
Page 7
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST US IPO INDEX FUND - FPX
The First Trust US IPO 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 IPOX(R)-100 U.S. Index (the "Index").
The Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index is a modified value-weighted price index measuring
the performance of the top 100 U.S. companies ranked quarterly by market
capitalization in the IPOX Global Composite Index. The Index utilizes a 10%
capping on all constituents and includes the 100 largest, typically best
performing and most liquid initial public offerings ("IPOs") of the U.S.
companies in the IPOX Global Composite Index. The IPOX Global Composite Index is
reconstituted regularly with IPOs being added to the IPOX Global Composite Index
at their seventh trading day upon "going public" and automatically exiting after
1,000 trading days or approximately four years thereafter. The Index is
reconstituted quarterly to reflect changes in the stock market values of the
IPOX Global Composite Index constituents and IPO activity during the past
quarter, with potential new companies entering the Index while other companies
reach 1,000 days in the Index and automatically drop out. The Fund's shares are
listed for trading on the NYSE Arca. The first day of secondary market trading
in shares of the Fund was April 13, 2006.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (4/12/2006) Ended (4/12/2006)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 16.79% 33.73% 10.19% 9.42% 62.46% 91.45%
Market Value 16.28% 33.93% 10.18% 9.42% 62.40% 91.46%
INDEX PERFORMANCE
IPOX(R)-100 U.S. Index 17.08% 34.44% 10.88% 10.09% 67.57% 100.10%
Russell 3000(R) Index 14.06% 21.46% 7.25% 5.47% 41.88% 46.81%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Consumer Discretionary 25.94%
Energy 18.71
Health Care 16.79
Information Technology 16.08
Industrials 8.32
Financials 7.35
Consumer Staples 6.46
Materials 0.35
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
AbbVie, Inc. 9.10%
Facebook, Inc., Class A 7.39
General Motors Co. 7.25
Kinder Morgan, Inc. 5.49
Phillips 66 5.08
Kraft Foods Group, Inc. 4.62
Marathon Petroleum Corp. 3.21
Dollar General Corp. 2.29
HCA Holdings, Inc. 2.24
Delphi Automotive PLC 2.20
-------
Total 48.87%
=======
-----------------------------
The Fund is not sponsored, endorsed, sold or promoted by IPOX(R). IPOX(R) makes
no representation or warranty, express or implied, to the owners of the Fund or
any member of the public regarding the advisability of trading in the Fund.
Page 8
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST US IPO INDEX FUND - FPX (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 12, 2006 - JUNE 30, 2013
First Trust US IPO IPOX(R)-100 U.S. Russell 3000(R)
Index Fund Index Index
04/06 $10000 $10000 $10000
12/06 11100 11154 11064
06/07 12385 12481 11851
12/07 12712 12844 11633
06/08 11784 11941 10348
12/08 7134 7245 7293
06/09 8087 8248 7599
12/09 10339 10575 9360
06/10 9726 9980 8794
12/10 12228 12594 10945
06/11 13439 13889 11640
12/11 12607 13071 11057
06/12 14314 14885 12088
12/12 16391 17092 12873
06/13 19145 20010 14681
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through
June 30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 133 3 6 0
01/01/09 - 12/31/09 109 3 0 0
01/01/10 - 12/31/10 149 0 0 0
01/01/11 - 12/31/11 135 0 0 0
01/01/12 - 12/31/12 149 2 0 0
01/01/13 - 06/30/13 102 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 108 2 1 0
01/01/09 - 12/31/09 135 5 0 0
01/01/10 - 12/31/10 103 0 0 0
01/01/11 - 12/31/11 116 1 0 0
01/01/12 - 12/31/12 97 2 0 0
01/01/13 - 06/30/13 22 0 0 0
Page 9
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND - FBT
The First Trust NYSE Arca Biotechnology Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the NYSE Arca Biotechnology Index(SM)
(the "Index"). The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Index is an equal dollar-weighted
index designed to measure the performance of a cross section of companies in the
biotechnology industry that are primarily involved in the use of biological
processes to develop products or provide services. Such processes include, but
are not limited to, recombinant DNA technology, molecular biology, genetic
engineering, monoclonal antibody-based technology, lipid/liposome technology and
genomics. This Index is rebalanced quarterly based on closing prices on the
third Friday in January, April, July and October to ensure that each component
stock continues to represent approximately equal weight in the Index. The Fund's
shares are listed for trading on the NYSE Arca. The first day of secondary
market trading in shares of the Fund was June 23, 2006.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (6/19/2006) Ended (6/19/2006)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 26.23% 32.57% 20.85% 16.59% 157.78% 194.13%
Market Value 26.52% 32.66% 20.86% 16.59% 157.92% 194.28%
INDEX PERFORMANCE
NYSE Arca Biotechnology Index(SM) 26.51% 33.28% 21.58% 17.30% 165.69% 207.05%
NASDAQ(R) Biotechnology Index 26.91% 34.51% 18.43% 14.45% 132.99% 158.29%
S&P 500(R) Index 13.82% 20.60% 7.01% 6.00% 40.33% 50.66%
S&P Composite 1500 Health Care Index 20.61% 28.04% 12.04% 9.31% 76.56% 87.03%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
----------------------------------------------------------
PORTFOLIO INDUSTRY ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
INDUSTRY LONG-TERM INVESTMENTS
Biotechnology 67.60%
Life Sciences Tools & Services 27.23
Pharmaceuticals 5.17
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Illumina, Inc. 6.57%
Affymetrix, Inc. 5.73
ImmunoGen, Inc. 5.45
United Therapeutics Corp. 5.38
Sequenom, Inc. 5.22
Biogen Idec, Inc. 5.22
Nektar Therapeutics 5.17
InterMune, Inc. 5.15
Life Technologies Corp. 4.94
Regeneron Pharmaceuticals, Inc. 4.91
-------
Total 53.74%
=======
-----------------------------
The NYSE Arca Biotechnology Index(SM) is a trademark of NYSE Euronext or its
affiliates ("NYSE Euronext") and is licensed for use by First Trust on behalf of
the Fund. The Fund is not sponsored or endorsed by NYSE Euronext. NYSE Euronext
makes no representation or warranty, express or implied, to the owners of the
Fund or any member of the public regarding the advisability of investing in the
Fund or the ability of the Fund to track the performance of the various sectors
represented in the stock market. NYSE Euronext has no obligation to take the
needs of the owners of the Fund into consideration in determining, composing or
calculating the Index. NYSE Euronext is not responsible for and has not
participated in any determination or calculation made with respect to issuance
or redemption of the Fund.
Page 10
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND - FBT (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 19, 2006 - JUNE 30, 2013
First Trust NYSE Arca NYSE Arca NASDAQ(R) S&P 500(R) S&P Composite 1500
Biotechnology Index Fund Biotechnology Index(SM) Biotechnology Index Index Health Care Index
06/06 $10000 $10000 $10000 $10000 $10000
12/06 11775 11815 11114 11554 11194
06/07 12105 12179 11177 12358 11919
12/07 12205 12320 11630 12189 12092
06/08 11410 11557 11086 10736 10593
12/08 9968 10138 10200 7679 9218
06/09 10722 10921 10491 7922 9305
12/09 14441 14758 11828 9711 11132
06/10 15629 16026 11227 9065 10324
12/10 19768 20327 13726 11174 11712
06/11 22182 22880 15694 11847 13374
12/11 16534 17096 15385 11410 13104
06/12 22185 23013 19204 12493 14610
12/12 23299 24233 20352 13236 15510
06/13 29413 30705 25829 15066 18703
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through June
30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 170 9 0 0
01/01/09 - 12/31/09 93 3 0 0
01/01/10 - 12/31/10 165 1 0 1
01/01/11 - 12/31/11 151 1 0 0
01/01/12 - 12/31/12 121 0 0 0
01/01/13 - 06/30/13 95 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 72 1 1 0
01/01/09 - 12/31/09 152 4 0 0
01/01/10 - 12/31/10 83 1 0 1
01/01/11 - 12/31/11 100 0 0 0
01/01/12 - 12/31/12 128 1 0 0
01/01/13 - 06/30/13 29 0 0 0
Page 11
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND - FDN
The First Trust Dow Jones Internet Index(SM) Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Dow Jones Internet Composite
Index(SM) (the "Index"). The Fund will normally invest at least 90% of its
assets in common stocks that comprise the Index. The Index represents companies
that generate the majority of their revenues via the Internet. The Index was
designed and is maintained according to a set of rules that were devised with
the goal of providing clear and accurate views of the growing Internet market
segment. The Index aims to consistently represent 80% of the float-adjusted
Internet equity universe. The Index contains two sub-indexes, the Dow Jones
Internet Commerce Index and the Dow Jones Internet Services Index. For its stock
to be eligible for the "universe," a company must generate at least 50% of
annual sales/revenues from the Internet, and be currently included in the Dow
Jones U.S. Index. The Fund's shares are listed for trading on the NYSE Arca.
The first day of secondary market trading in shares of the Fund was
June 23, 2006.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (6/19/2006) Ended (6/19/2006)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 16.28% 28.39% 15.25% 12.42% 103.32% 127.78%
Market Value 16.37% 28.62% 15.25% 12.43% 103.36% 127.93%
INDEX PERFORMANCE
Dow Jones Internet Composite Index(SM) 16.60% 29.19% 15.90% 13.05% 109.12% 136.89%
S&P 500(R) Index 13.82% 20.60% 7.01% 6.00% 40.33% 50.66%
S&P Composite 1500 Information
Technology Index 6.73% 8.65% 7.95% 7.89% 46.59% 70.61%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Information Technology 70.70%
Consumer Discretionary 23.10
Financials 4.55
Health Care 1.65
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Google, Inc., Class A 10.04%
Amazon.com, Inc. 7.54
eBay, Inc. 6.21
priceline.com, Inc. 5.45
Yahoo!, Inc. 4.21
Salesforce.com, Inc. 4.11
Facebook, Inc., Class A 3.60
LinkedIn Corp., Class A 3.41
Netflix, Inc. 3.24
Juniper Networks, Inc. 3.04
-------
Total 50.85%
=======
-----------------------------
Dow Jones and Dow Jones Internet Composite Index(SM) are products of Dow Jones
Indexes, a licensed trademark of CME Group Index Services LLC ("CME") and have
been licensed for use by First Trust on behalf of the Fund. The Fund, based on
the Dow Jones Internet Composite Index(SM), is not sponsored, endorsed, sold or
promoted by CME, Dow Jones or their respective affiliates and CME, Dow Jones and
their respective affiliates make no representation regarding the advisability of
trading in the Fund.
Page 12
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND - FDN (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 19, 2006 - JUNE 30, 2013
First Trust Dow Jones Dow Jones Internet S&P 500(R) S&P Composite 1500
Internet Index(SM) Fund Composite Index(SM) Index Information Technology Index
06/06 $10000 $10000 $10000 $10000
12/06 11285 11315 11554 11574
06/07 12975 13044 12358 12716
12/07 12545 12651 12189 13360
06/08 11203 11327 10736 11638
12/08 7023 7114 7679 7629
06/09 9374 9524 7922 9506
12/09 12587 12825 9711 12286
06/10 11980 12222 9065 11055
12/10 17197 17603 11174 13776
06/11 18186 18661 11847 14115
12/11 16209 16702 11410 13930
06/12 17741 18335 12493 15702
12/12 19590 20315 13236 15985
06/13 22779 23687 15066 17061
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through June
30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 140 4 1 0
01/01/09 - 12/31/09 134 2 1 0
01/01/10 - 12/31/10 189 0 0 0
01/01/11 - 12/31/11 151 0 0 0
01/01/12 - 12/31/12 122 0 0 0
01/01/13 - 06/30/13 86 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 105 2 1 0
01/01/09 - 12/31/09 112 3 0 0
01/01/10 - 12/31/10 63 0 0 0
01/01/11 - 12/31/11 101 0 0 0
01/01/12 - 12/31/12 128 0 0 0
01/01/13 - 06/30/13 38 0 0 0
Page 13
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CAPITAL STRENGTH ETF - FTCS
The First Trust Capital Strength ETF (formerly known as First Trust Strategic
Value 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 Capital Strength Index(SM) (the "Index"). The Index is
initially equally-weighted and is made up of the top 50 stocks out of the
universe of the largest 500 U.S. companies included in the NASDAQ US Benchmark
Index, ranked by one and three-year daily volatility. Companies with less than
$1 billion in cash and short term investments, companies with long-term debt
divided by market capitalization greater than 30% and companies with return on
equity less than 15% are excluded from the Index. The Index is reconstituted and
rebalanced on a quarterly basis. The Fund's shares are listed for trading on the
NASDAQ. The first day of secondary market trading in shares of the Fund was
07/11/06.
-----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (7/6/2006) Ended (7/6/2006)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 16.65% 29.95% 7.57% 7.16% 44.01% 62.06%
Market Value 16.62% 29.86% 7.55% 7.15% 43.92% 61.96%
INDEX PERFORMANCE
Credit Suisse U.S. Value Index,
Powered by HOLT(TM) 16.32% 30.07% N/A N/A N/A N/A
The Capital Strength Index(SM)* N/A N/A N/A N/A N/A N/A
S&P 500 Value Index 15.73% 25.04% 6.47% 4.10% 36.84% 32.35%
S&P 500(R) Index 13.82% 20.60% 7.01% 5.62% 40.33% 46.50%
-----------------------------------------------------------------------------------------------------------------------------
* On June 3, 2013, the Fund's underlying index changed from the Credit
Suisse U.S. Value Index, Powered by HOLT(TM) to The Capital Strength
Index. On June 18, 2010, the Fund's underlying index changed from the
Deutsche Bank CROCI(R) US+ Index(TM) to the Credit Suisse U.S. Value
Index, Powered by HOLT(TM). Since the Fund's new underlying index had an
inception date of March 20, 2013, it was not in existence for any full
periods disclosed.
(See Notes to Fund Performance Overview on page 22.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Health Care 21.40%
Industrials 18.94
Information Technology 18.46
Consumer Staples 17.09
Consumer Discretionary 10.11
Financials 6.10
Energy 3.98
Materials 3.92
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
CA, Inc. 2.28%
Northrop Grumman Corp. 2.26
Microsoft Corp. 2.25
Raytheon Co. 2.24
IntercontinentalExchange, Inc. 2.23
Illinois Tool Works, Inc. 2.21
Waters Corp. 2.19
Lockheed Martin Corp. 2.18
Medtronic, Inc. 2.17
Cigna Corp. 2.16
-------
Total 22.17%
=======
-----------------------------
"Credit Suisse," "HOLT" and "Credit Suisse U.S. Value Index, Powered by
HOLT(TM)," are trademarks of Credit Suisse Group AG, Credit Suisse Securities
(USA) LLC or one of their affiliates (collectively, "Credit Suisse"), and have
been licensed for use for certain purposes by First Trust on behalf of the Fund.
THE FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY CREDIT SUISSE, AND
CREDIT SUISSE MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
REGARDING THE ADVISABILITY OF INVESTING OR TRADING IN THE FUND.
NASDAQ(R) and The Capital Strength Index(SM) are trademarks (the "Marks") of The
NASDAQ OMX Group, Inc. (collectively, with its affiliates "NASDAQ OMX"). The
Marks are licensed for use by First Trust Portfolios L.P. for use with the Fund.
The Fund has not been passed on by NASDAQ OMX as to its legality or suitability.
The Fund is not issued, endorsed, sold or promoted by NASDAQ OMX. The Fund
should not be construed in any way as investment advice by NASDAQ OMX. NASDAQ
OMX MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE FUND.
Page 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CAPITAL STRENGTH ETF - FTCS (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 6, 2006 - JUNE 30, 2013
First Trust Capital S&P 500 Value S&P 500(R)
Strength ETF Index Index
07/06 $10000 $10000 $10000
12/06 11074 11294 11235
06/07 12444 12126 12016
12/07 12210 11519 11852
06/08 11253 9671 10440
12/08 7665 7002 7467
06/09 8640 6903 7703
12/09 10686 8484 9443
06/10 9880 8034 8815
12/10 12185 9765 10866
06/11 13144 10276 11520
12/11 11827 9718 11095
06/12 12469 10585 12148
12/12 13890 11436 12871
06/13 16203 13235 14650
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through
June 30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 115 3 2 0
01/01/09 - 12/31/09 139 3 0 0
01/01/10 - 12/31/10 152 0 0 0
01/01/11 - 12/31/11 129 0 0 0
01/01/12 - 12/31/12 147 0 0 0
01/01/13 - 06/30/13 67 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 126 7 0 0
01/01/09 - 12/31/09 107 3 0 0
01/01/10 - 12/31/10 100 0 0 0
01/01/11 - 12/31/11 123 0 0 0
01/01/12 - 12/31/12 103 0 0 0
01/01/13 - 06/30/13 56 1 0 0
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND - FVI
The First Trust Value Line(R) Equity Allocation Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Value Line(R) Equity
Allocation Index(TM) (the "Index"). The Fund will normally invest at least 90%
of its assets in common stocks that comprise the Index. The Index is designed to
objectively identify and select those stocks from the 1,700-stock Value Line(R)
universe across market capitalizations and investment styles for growth and
value that appear to have the greatest potential for capital appreciation. The
Index is rebalanced on a semi-annual basis in February and August. The Fund's
shares are listed for trading on the NYSE Arca. The first day of secondary
market trading in shares of the Fund was December 7, 2006.
-----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (12/5/2006) Ended (12/5/2006)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 14.43% 22.31% 5.00% 2.93% 27.64% 20.88%
Market Value 14.49% 21.85% 4.99% 2.93% 27.59% 20.90%
INDEX PERFORMANCE
Value Line(R) Equity Allocation Index(TM) 14.90% 23.33% 5.98% 3.79% 33.67% 27.67%
Russell 3000(R) Index 14.06% 21.46% 7.25% 4.41% 41.88% 32.80%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Financials 23.48%
Consumer Discretionary 22.68
Industrials 17.54
Information Technology 16.47
Health Care 6.97
Consumer Staples 6.21
Energy 3.50
Materials 2.36
Utilities 0.79
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Sony Corp., ADR 1.68%
Magna International, Inc. 1.53
Ford Motor Co. 1.38
Toyota Motor Corp., ADR 1.37
NIKE, Inc., Class B 1.36
Life Technologies Corp. 1.36
Celgene Corp. 1.35
Principal Financial Group, Inc. 1.35
SunTrust Banks, Inc. 1.33
Cisco Systems, Inc. 1.32
-------
Total 14.03%
=======
-----------------------------
"Value Line(R)" and "Value Line(R) Equity Allocation Index(TM)" are trademarks
of Value Line(R), Inc. and have been licensed for use for certain purposes by
First Trust on behalf of the Fund. The Fund, based on the Value Line(R) Equity
Allocation Index(TM), is not sponsored, endorsed, sold, or promoted by Value
Line(R), Inc., and Value Line(R) makes no representation regarding the
advisability of investing in the Fund.
Page 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND - FVI (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 5, 2006 - JUNE 30, 2013
First Trust Value Line(R) Value Line(R) Equity Russell 3000(R)
Equity Allocation Index Fund Allocation Index(TM) Index
12/06 $10000 $10000 $10000
06/07 10610 10623 10720
12/07 10350 10398 10522
06/08 9470 9551 9360
12/08 6681 6772 6597
06/09 7037 7177 6874
12/09 8962 9192 8466
06/10 8831 9104 7954
12/10 10741 11125 9900
06/11 10976 11405 10529
12/11 9714 10132 10001
06/12 9883 10350 10933
12/12 10563 11109 11643
06/13 12087 12764 13280
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through
June 30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 110 5 0 1
01/01/09 - 12/31/09 110 3 0 0
01/01/10 - 12/31/10 156 0 0 0
01/01/11 - 12/31/11 146 1 0 0
01/01/12 - 12/31/12 124 1 0 0
01/01/13 - 06/30/13 62 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 131 4 2 0
01/01/09 - 12/31/09 138 1 0 0
01/01/10 - 12/31/10 95 1 0 0
01/01/11 - 12/31/11 105 0 0 0
01/01/12 - 12/31/12 122 3 0 0
01/01/13 - 06/30/13 54 8 0 0
Page 17
-------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
-------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND - FVD
The First Trust Value Line(R) Dividend Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Value Line(R) Dividend Index(TM)
(the "Index"). The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Index is designed to objectively
identify and select those stocks from the universe of stocks which Value Line,
Inc.(R) gives a Safety(TM) Ranking of #1 or #2 in the Value Line(R) Safety(TM)
Ranking System and have the potential to pay above-average dividends and achieve
capital appreciation. The Index is rebalanced on a monthly basis. The Fund's
shares are listed for trading on the NYSE Arca.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (8/19/2003) Ended (8/19/2003)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 13.89% 19.08% 9.99% 8.64% 61.00% 126.48%
Market Value 13.92% 19.15% 9.99% 8.64% 61.01% 126.49%
INDEX PERFORMANCE
Value Line(R) Dividend Index (TM) 14.39% 20.00% 10.87% N/A 67.53% N/A
S&P 500(R) Index 13.82% 20.60% 7.01% 7.07% 40.33% 96.13%
Dow Jones U.S. Select Dividend Index (SM) 13.85% 18.45% 10.38% N/A 63.82% N/A
---------------------------------------------------------------------------------------------------------------------------
On December 15, 2006, the Fund acquired the assets and adopted the financial
and performance history of First Trust Value Line(R) Dividend Fund (the
"Predecessor FVD Fund," a closed-end fund), which had an inception date of
August 19, 2003. The inception date total returns at NAV include the sales
load of $0.675 per share on the initial offering. The investment goals,
strategies and policies of the Fund are substantially similar to those of the
Predecessor FVD Fund. The inception date of the Index was July 3, 2006.
Returns for the Index are only disclosed for those periods in which the Index
was in existence for the entire period. The cumulative total returns for the
period from the reorganization date (12/15/2006) through period end
(6/30/2013) were 40.02% for both NAV and Market Value. That compares to an
Index return of 47.32% for the same period. The average annual total returns
for the period from the reorganization date (12/15/2006) through period end
(6/30/2013) were 5.28% for both NAV and Market Value. That compares to an
Index return of 6.63% for the same period.
NAV and Market Value returns assume that all dividend distributions have been
reinvested in the Fund at NAV and Market Value, respectively. Prior to
December 15, 2006, NAV and Market Value returns assumed that all dividend
distributions were reinvested at prices obtained by the Dividend Reinvestment
Plan of the Predecessor FVD Fund and the price used to calculate Market Value
return was the AMEX (now known as the NYSE Amex) closing market price of the
Predecessor FVD Fund.
(See Notes to Fund Performance Overview on page 22.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Utilities 27.96%
Consumer Staples 15.32
Financials 10.45
Industrials 10.35
Information Technology 10.30
Health Care 8.28
Consumer Discretionary 6.47
Energy 5.79
Telecommunication Services 2.54
Materials 2.54
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
KKR & Co. L.P. 0.70%
Erie Indemnity Co., Class A 0.69
SAIC, Inc. 0.68
Atmos Energy Corp. 0.67
Diebold, Inc. 0.67
Eaton Corp. PLC 0.67
Pinnacle West Capital Corp. 0.67
ConAgra Foods, Inc. 0.66
UGI Corp. 0.66
Vodafone Group PLC, ADR 0.66
------
Total 6.73%
======
-----------------------------
"Value Line(R)" and "Value Line(R) Dividend Index(TM)" are trademarks of Value
Line(R), Inc. and have been licensed for use for certain purposes by First
Trust on behalf of the Fund. The Fund, based on the Value Line(R) Dividend
Index (TM), is not sponsored, endorsed, sold, or promoted by Value Line(R),
Inc., and Value Line(R) makes no representation regarding the advisability of
investing in the Fund.
Page 18
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND - FVD (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 19, 2003 - JUNE 30, 2013
First Trust Value Line(R) S&P 500(R)
Dividend Index Fund Index
08/03 $10000 $10000
12/03 10612 11166
06/04 11244 11551
12/04 12605 12381
06/05 12987 12281
12/05 13435 12989
06/06 14208 13341
12/06 16137 15041
06/07 16571 16088
12/07 15586 15867
06/08 14067 13977
12/08 11818 9997
06/09 11676 10313
12/09 14132 12642
06/10 13725 11801
12/10 16404 14547
06/11 17738 15423
12/11 17885 14854
06/12 19017 16264
12/12 19882 17232
06/13 22644 19613
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the index does not actually hold a portfolio of securities and
therefore does not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2013
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 January 1, 2008 through
June 30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 126 6 3 0
01/01/09 - 12/31/09 136 6 0 0
01/01/10 - 12/31/10 180 0 0 0
01/01/11 - 12/31/11 218 1 0 0
01/01/12 - 12/31/12 205 0 0 0
01/01/13 - 06/30/13 114 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 105 11 2 0
01/01/09 - 12/31/09 107 3 0 0
01/01/10 - 12/31/10 72 0 0 0
01/01/11 - 12/31/11 33 0 0 0
01/01/12 - 12/31/12 44 1 0 0
01/01/13 - 06/30/13 10 0 0 0
Page 19
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND - FVL
The First Trust Value Line(R) 100 Exchange-Traded Fund seeks investment results
that correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the Value Line(R) 100 Index(TM) (the
"Index"). The Fund will normally invest at least 90% of its assets in common
stocks that comprise the Index. The Index is an equal-dollar weighted index that
is designed to objectively identify and select 100 stocks from the universe of
stocks to which Value Line(R) assigns a #1 ranking in the Value Line(R)
Timeliness(TM) Ranking System (the "Ranking System"). At any one time only 100
stocks are assigned a #1 ranking in the Ranking System. The Index is rebalanced
quarterly. The Fund's shares are listed for trading on the NYSE Arca.
-----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (6/12/2003) Ended (6/12/2003)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 14.90% 21.31% -1.07% 4.27% -5.22% 52.23%
Market Value 14.80% 21.17% -1.11% 4.25% -5.41% 51.94%
INDEX PERFORMANCE
Value Line(R) 100 Index(TM) 15.50% 22.42% -0.16% N/A -0.78% N/A
Russell 3000(R) Index 14.06% 21.46% 7.25% 7.53% 41.88% 107.34%
-----------------------------------------------------------------------------------------------------------------------------
On June 15, 2007, the Fund acquired the assets and adopted the financial and
performance history of First Trust Value Line(R) 100 Fund (the "Predecessor
FVL Fund," a closed-end fund), which had an inception date of June 12, 2003.
The inception date total returns at NAV include the sales load of $0.675 per
share on the initial offering. The investment goals, strategies and policies
of the Fund are substantially similar to those of the Predecessor FVL Fund.
The inception date of the Index was January 16, 2007. Returns for the Index
are only disclosed for those periods in which the Index was in existence for
the entire period. The cumulative total returns for the period from the
reorganization date (6/15/2007) through period end (6/30/2013) were -7.59% for
both NAV and Market Value. That compares to an Index return of -2.86% for that
same period. The average annual total returns for the period from the
reorganization date (6/15/2007) through period end (6/30/2013) were -1.30% for
both NAV and Market Value. That compares to an Index return of -0.48% for the
same period.
NAV and Market Value returns assume that all dividend distributions have been
reinvested in the Fund at NAV and Market Value, respectively. Prior to June
15, 2007, NAV and Market Value returns assumed that all dividend distributions
were reinvested at prices obtained by the Dividend Reinvestment Plan of the
Predecessor FVL Fund and the price used to calculate Market Value return was
the AMEX (now known as the NYSE Amex) closing market price of the Predecessor
FVL Fund.
(See Notes to Fund Performance Overview on page 22.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Consumer Discretionary 23.04%
Financials 19.39
Industrials 16.84
Health Care 11.35
Information Technology 7.13
Energy 6.22
Consumer Staples 5.98
Materials 5.25
Utilities 3.82
Telecommunication Services 0.98
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Penford Corp. 1.37%
Big 5 Sporting Goods Corp. 1.35
Nautilus, Inc. 1.27
AMN Healthcare Services, Inc. 1.25
Pilgrim's Pride Corp. 1.20
TETRA Technologies, Inc. 1.16
Harman International Industries, Inc. 1.13
Genworth Financial, Inc., Class A 1.12
Rite Aid Corp. 1.12
Zale Corp. 1.11
-------
Total 12.08%
=======
"Value Line(R)" and "Value Line(R) 100 Index(TM)" are trademarks of Value
Line(R), Inc. and have been licensed for use for certain purposes by First
Trust on behalf of the Fund. The Fund, based on the Value Line(R) 100
Index(TM), is not sponsored, endorsed, sold, or promoted by Value Line(R),
Inc., and Value Line(R) makes no representation regarding the advisability
of investing in the Fund.
Page 20
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND - FVL (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 12, 2003 - JUNE 30, 2013
First Trust Value Line(R) 100 Russell 3000(R)
Exchange-Traded Fund Index
06/03 $10000 $10000
12/03 11073 11367
06/04 11427 11775
12/04 12519 12725
06/05 12649 12724
12/05 14003 13504
06/06 14305 13940
12/06 14647 15626
06/07 16357 16737
12/07 17563 16429
06/08 16063 14614
12/08 9081 10300
06/09 8728 10732
12/09 10238 13219
06/10 10150 12419
12/10 13259 15457
06/11 14011 16439
12/11 12209 15615
06/12 12550 17070
12/12 13250 18178
06/13 15224 20734
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the index does not actually hold a portfolio of securities and
therefore does not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF JUNE 30, 2013
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 January 1, 2008 through June
30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 115 4 4 0
01/01/09 - 12/31/09 67 5 0 0
01/01/10 - 12/31/10 149 0 0 0
01/01/11 - 12/31/11 137 2 0 0
01/01/12 - 12/31/12 73 0 0 0
01/01/13 - 06/30/13 21 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 122 4 4 0
01/01/09 - 12/31/09 176 4 0 0
01/01/10 - 12/31/10 103 0 0 0
01/01/11 - 12/31/11 111 2 0 0
01/01/12 - 12/31/12 177 0 0 0
01/01/13 - 06/30/13 103 0 0 0
Page 21
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average annual total returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative total
returns" represent the total change in value of an investment over the periods
indicated. The total returns would have been lower if certain fees had not been
waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Value") 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 the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
the Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and Market Value returns assume that all dividend
distributions have been reinvested in the Fund at NAV and Market Value,
respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike a Fund, an index does not actually hold a portfolio of securities
and therefore does 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 results.
Page 22
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
JUNE 30, 2013 (UNAUDITED)
As a shareholder of First Trust Dow Jones Select MicroCap Index(SM) Fund, First
Trust Morningstar Dividend Leaders(SM) Index Fund, First Trust US IPO Index
Fund, First Trust NYSE Arca Biotechnology Index Fund, First Trust Dow Jones
Internet Index(SM) Fund, First Trust Capital Strength ETF, First Trust Value
Line(R) Equity Allocation Index Fund, First Trust Value Line(R) Dividend Index
Fund and First Trust Value Line(R) 100 Exchange-Traded Fund (each a "Fund" and
collectively, the "Funds"), you incur two types of costs: (1) transaction costs;
and (2) ongoing costs, including management fees, distribution and/or service
fees, and other Fund expenses. This Example is intended to help you understand
your ongoing costs of investing in the Funds and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended June 30, 2013.
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 EXPENSE PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JANUARY 1, 2013 JUNE 30, 2013 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND - FDM
Actual $1,000.00 $1,162.40 0.60% $3.22
Hypothetical (5% return before expenses) $1,000.00 $1,021.82 0.60% $3.01
FIRST TRUST MORNINGSTAR DIVIDEND LEADERSSM INDEX FUND - FDL
Actual $1,000.00 $1,139.60 0.45% $2.39
Hypothetical (5% return before expenses) $1,000.00 $1,022.56 0.45% $2.26
FIRST TRUST US IPO INDEX FUND - FPX
Actual $1,000.00 $1,167.90 0.60% $3.23
Hypothetical (5% return before expenses) $1,000.00 $1,021.82 0.60% $3.01
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND - FBT
Actual $1,000.00 $1,262.30 0.60% $3.37
Hypothetical (5% return before expenses) $1,000.00 $1,021.82 0.60% $3.01
FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND - FDN
Actual $1,000.00 $1,162.80 0.57% $3.06
Hypothetical (5% return before expenses) $1,000.00 $1,021.97 0.57% $2.86
FIRST TRUST CAPITAL STRENGTH ETF - FTCS
Actual $1,000.00 $1,166.50 0.65% $3.49
Hypothetical (5% return before expenses) $1,000.00 $1,021.57 0.65% $3.26
Page 23
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSE PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JANUARY 1, 2013 JUNE 30, 2013 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND - FVI
Actual $1,000.00 $1,144.30 0.70% $3.72
Hypothetical (5% return before expenses) $1,000.00 $1,021.32 0.70% $3.51
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND - FVD
Actual $1,000.00 $1,138.90 0.70% $3.71
Hypothetical (5% return before expenses) $1,000.00 $1,021.32 0.70% $3.51
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND - FVL
Actual $1,000.00 $1,149.00 0.70% $3.73
Hypothetical (5% return before expenses) $1,000.00 $1,021.32 0.70% $3.51
(a) These expense ratios reflect expense caps.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (January 1,
2013 through June 30, 2013), multiplied by 181/365 (to reflect the
one-half year period).
Page 24
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND - FDM
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 1.0%
13,912 Astronics Corp. (a) $ 568,583
65,781 Kratos Defense & Security
Solutions, Inc. (a) 426,261
12,807 LMI Aerospace, Inc. (a) 240,003
------------
1,234,847
------------
AIR FREIGHT & LOGISTICS -- 0.7%
66,821 Air Transport Services Group,
Inc. (a) 441,687
11,095 Park-Ohio Holdings Corp. (a) 365,913
------------
807,600
------------
AIRLINES -- 0.8%
65,511 Hawaiian Holdings, Inc. (a) 400,272
50,644 Republic Airways Holdings,
Inc. (a) 573,797
------------
974,069
------------
AUTO COMPONENTS -- 0.6%
39,596 Spartan Motors, Inc. 242,328
29,302 Superior Industries International,
Inc. 504,287
------------
746,615
------------
BUILDING PRODUCTS -- 1.5%
23,484 AAON, Inc. 776,851
12,423 American Woodmark Corp. (a) 431,078
56,715 Griffon Corp. 638,044
------------
1,845,973
------------
CAPITAL MARKETS -- 2.5%
25,832 Calamos Asset Management, Inc.,
Class A 271,236
3,321 Diamond Hill Investment Group,
Inc. 282,451
34,142 FXCM, Inc., Class A 560,270
41,355 HFF, Inc., Class A 734,878
17,139 Manning & Napier, Inc. 304,389
20,034 Piper Jaffray Cos., Inc. (a) 633,275
35,741 SWS Group, Inc. (a) 194,788
------------
2,981,287
------------
CHEMICALS -- 2.9%
22,202 Arabian American Development
Co. (a) 193,157
55,490 Flotek Industries, Inc. (a) 995,491
11,590 Hawkins, Inc. 456,530
32,716 Landec Corp. (a) 432,178
59,375 Omnova Solutions, Inc. (a) 475,594
28,568 Zep, Inc. 452,232
34,708 Zoltek Cos., Inc. (a) 448,080
------------
3,453,262
------------
COMMERCIAL BANKS -- 17.0%
9,921 American National Bankshares,
Inc. 230,564
30,134 Ameris Bancorp (a) 507,758
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMERCIAL BANKS (CONTINUED)
15,276 Arrow Financial Corp. $ 378,081
43,449 Bancorp (The), Inc. (a) 651,300
22,061 Banner Corp. 745,441
14,292 Bryn Mawr Bank Corp. 342,008
38,183 Cardinal Financial Corp. 558,999
19,759 City Holding Co. 769,613
43,758 CoBiz Financial, Inc. 363,191
26,444 Eagle Bancorp, Inc. (b) 591,817
21,017 Enterprise Financial Services Corp. 335,431
16,198 Financial Institutions, Inc. 298,205
95,162 First Busey Corp. 428,229
19,164 First Community Bancshares, Inc. 300,491
14,439 First Financial Corp. 447,465
20,873 First Financial Holdings, Inc. 442,716
36,462 Flushing Financial Corp. 599,800
12,890 FNB United Corp. (a) 104,538
18,514 Heartland Financial USA, Inc. 508,950
20,569 Hudson Valley Holding Corp. 349,262
40,320 Lakeland Bancorp, Inc. 420,538
20,723 Lakeland Financial Corp. 575,063
9,116 Mercantile Bank Corp. 163,814
21,028 MetroCorp Bancshares, Inc. 205,233
57,569 OFG Bancorp 1,042,575
12,945 Peoples Bancorp, Inc. 272,881
31,822 Renasant Corp. 774,547
13,900 Republic Bancorp, Inc., Class A 304,688
37,499 S&T Bancorp, Inc. 734,980
16,556 S.Y. Bancorp, Inc. 406,119
31,496 Sandy Spring Bancorp, Inc. 680,944
20,831 Simmons First National Corp.,
Class A 543,481
20,467 Southside Bancshares, Inc. 488,752
23,355 Southwest Bancorp, Inc. (a) 308,286
28,477 StellarOne Corp. 559,573
39,058 Sterling Bancorp 453,854
14,591 Tompkins Financial Corp. 659,367
39,304 TowneBank 578,555
16,761 TriCo Bancshares 357,512
24,462 Union First Market Bankshares
Corp. 503,673
32,888 Virginia Commerce Bancorp,
Inc. (a) 459,116
17,615 Washington Trust Bancorp, Inc. 502,380
78,264 Wilshire Bancorp, Inc. 518,108
------------
20,467,898
------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.3%
143,231 ACCO Brands Corp. (a) 910,949
11,358 Intersections, Inc. 99,610
15,509 Multi-Color Corp. 470,543
19,333 Standard Parking Corp. (a) 414,886
18,336 TMS International Corp., Class A 271,923
21,370 US Ecology, Inc. 586,393
------------
2,754,304
------------
See Notes to Financial Statements Page 25
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND - FDM
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMMUNICATIONS EQUIPMENT --
2.1%
15,184 Anaren, Inc. (a) $ 348,321
20,356 Black Box Corp. 515,414
40,688 CalAmp Corp. (a) 594,045
32,615 Digi International, Inc. (a) 305,603
111,463 Extreme Networks, Inc. (a) 384,547
51,709 Symmetricom, Inc. (a) 232,173
6,713 TESSCO Technologies, Inc. 177,223
------------
2,557,326
------------
CONSTRUCTION & ENGINEERING --
1.5%
12,166 Argan, Inc. 189,790
25,005 Layne Christensen Co. (a) 487,847
10,735 Michael Baker Corp. 291,026
26,473 MYR Group, Inc. (a) 514,900
11,907 Northwest Pipe Co. (a) 332,205
------------
1,815,768
------------
CONSTRUCTION MATERIALS -- 0.7%
92,214 Headwaters, Inc. (a) 815,172
------------
CONTAINERS & PACKAGING -- 0.3%
5,169 AEP Industries, Inc. (a) 384,522
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.8%
38,328 Cbeyond, Inc. (a) 300,491
46,563 Consolidated Communications
Holdings, Inc. 810,662
9,259 Hawaiian Telcom Holdco, Inc. (a) 232,956
19,894 IDT Corp., Class B 371,819
63,290 inContact, Inc. (a) 520,244
38,584 Inteliguent, Inc. 221,858
55,865 Premiere Global Services, Inc. (a) 674,291
14,613 Primus Telecommunications
Group, Inc. 174,479
------------
3,306,800
------------
ELECTRIC UTILITIES -- 0.4%
16,383 Unitil Corp. 473,141
------------
ELECTRICAL EQUIPMENT -- 0.3%
21,236 Global Power Equipment Group,
Inc. 342,324
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 3.0%
17,876 Agilysys, Inc. (a) 201,820
18,122 Badger Meter, Inc. 807,335
24,827 Electro Rent Corp. 416,845
37,252 GSI Group, Inc. (a) 299,506
19,731 Measurement Specialties, Inc. (a) 918,084
40,787 Mercury Systems, Inc. (a) 376,056
14,952 Richardson Electronics Ltd. 175,537
23,367 Zygo Corp. (a) 369,432
------------
3,564,615
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
ENERGY EQUIPMENT & SERVICES --
2.0%
32,895 Matrix Service Co. (a) $ 512,504
15,226 Mitcham Industries, Inc. (a) 255,492
15,604 Natural Gas Services Group,
Inc. (a) 366,538
78,269 Pioneer Energy Services Corp. (a) 518,141
11,044 RigNet, Inc. (a) 281,401
39,806 Tesco Corp. (a) 527,430
------------
2,461,506
------------
FOOD & STAPLES RETAILING -- 1.4%
12,559 Chefs' Warehouse (The), Inc. (a) 216,015
17,448 Ingles Markets, Inc., Class A 440,562
35,095 Roundy's, Inc. 292,341
27,626 Spartan Stores, Inc. 509,424
7,135 Village Super Market, Inc.,
Class A 236,097
------------
1,694,439
------------
FOOD PRODUCTS -- 0.5%
15,956 Calavo Growers, Inc. 433,844
10,259 John B. Sanfilippo & Son, Inc. 206,821
------------
640,665
------------
GAS UTILITIES -- 0.5%
12,132 Chesapeake Utilities Corp. 624,677
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.1%
44,224 AngioDynamics, Inc. (a) 498,847
14,481 Anika Therapeutics, Inc. (a) 246,177
36,749 Invacare Corp. 527,715
38,340 Natus Medical, Inc. (a) 523,341
14,870 PhotoMedex, Inc. (a) 237,028
66,739 RTI Biologics, Inc. (a) 250,939
18,121 Vascular Solutions, Inc. (a) 266,560
------------
2,550,607
------------
HEALTH CARE PROVIDERS &
SERVICES -- 4.2%
10,506 Almost Family, Inc. 199,614
24,869 Assisted Living Concepts, Inc.,
Class A (a) 297,433
36,741 Gentiva Health Services, Inc. (a) 365,940
43,149 Healthways, Inc. (a) 749,930
68,182 Kindred Healthcare, Inc. (a) 895,230
18,644 LHC Group, Inc. (a) 365,050
37,469 PharMerica Corp. (a) 519,320
16,457 Providence Service Corp. (a) 478,734
25,752 Skilled Healthcare Group, Inc.,
Class A (a) 172,023
29,261 Triple-S Management Corp.,
Class B (a) 628,234
15,228 U.S. Physical Therapy, Inc. 420,902
------------
5,092,410
------------
Page 26 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND - FDM
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOTELS, RESTAURANTS & LEISURE --
6.0%
1,520 Biglari Holdings, Inc. (a) $ 623,808
22,481 Bravo Brio Restaurant Group,
Inc. (a) 400,611
115,795 Denny's Corp. (a) 650,768
7,646 Einstein Noah Restaurant Group,
Inc. 108,573
21,060 Jamba, Inc. (a) 314,426
82,614 Krispy Kreme Doughnuts, Inc. (a) 1,441,614
23,598 Marcus (The) Corp. 300,167
36,424 Multimedia Games Holding Co.,
Inc. (a) 949,574
16,256 Red Robin Gourmet Burgers,
Inc. (a) 897,006
72,191 Ruby Tuesday, Inc. (a) 666,323
45,206 Ruth's Hospitality Group, Inc. 545,636
27,578 Town Sports International
Holdings, Inc. 297,015
------------
7,195,521
------------
HOUSEHOLD DURABLES -- 2.4%
40,251 American Greetings Corp., Class A 733,373
8,088 Cavco Industries, Inc. (a) 408,040
7,258 Flexsteel Industries, Inc. 176,950
128,155 Hovnanian Enterprises, Inc.,
Class A (a) 718,950
26,394 Libbey, Inc. (a) 632,664
19,227 Skullcandy, Inc. (a) 104,979
29,483 Zagg, Inc. (a) 157,734
------------
2,932,690
------------
INSURANCE -- 1.3%
11,112 American Safety Insurance
Holdings Ltd. (a) 321,692
23,202 AMERISAFE, Inc. 751,513
2,844 National Western Life Insurance
Co., Class A 539,934
------------
1,613,139
------------
INTERNET & CATALOG RETAIL -- 1.2%
36,121 Nutrisystem, Inc. 425,506
27,942 Orbitz Worldwide, Inc. (a) 224,374
17,904 Overstock.com, Inc. (a) 504,893
25,372 PetMed Express, Inc. 319,687
------------
1,474,460
------------
INTERNET SOFTWARE & SERVICES --
1.9%
63,456 Dice Holdings, Inc. (a) 584,430
42,263 Perficient, Inc. (a) 563,788
9,110 Travelzoo, Inc. (a) 248,338
116,722 United Online, Inc. 884,753
------------
2,281,309
------------
IT SERVICES -- 1.4%
18,050 Computer Task Group, Inc. 414,609
83,865 Global Cash Access Holdings,
Inc. (a) 524,995
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
IT SERVICES (CONTINUED)
35,297 Hackett Group (The), Inc. $ 183,191
25,799 Virtusa Corp. (a) 571,706
------------
1,694,501
------------
LEISURE EQUIPMENT & PRODUCTS --
0.5%
89,694 Callaway Golf Co. 590,186
------------
LIFE SCIENCES TOOLS & SERVICES --
0.4%
37,893 Cambrex Corp. (a) 529,365
------------
MACHINERY -- 5.0%
11,577 Alamo Group, Inc. 472,573
34,067 Altra Holdings, Inc. 932,754
24,603 Columbus McKinnon Corp. (a) 524,536
16,401 Dynamic Materials Corp. 270,780
78,777 Federal Signal Corp. (a) 689,299
56,820 Flow International Corp. (a) 209,666
15,172 FreightCar America, Inc. 257,772
12,620 Graham Corp. 378,979
36,500 John Bean Technologies Corp. 766,865
14,139 Kadant, Inc. 426,574
12,232 L.B. Foster Co., Class A 528,055
21,496 Lydall, Inc. (a) 313,842
21,587 NN, Inc. 246,308
------------
6,018,003
------------
MEDIA -- 0.8%
22,512 Carmike Cinemas, Inc. (a) 435,832
24,738 Global Sources Ltd. (a) 165,992
44,924 Journal Communications, Inc.,
Class A (a) 336,481
------------
938,305
------------
METALS & MINING -- 0.2%
8,797 Universal Stainless & Alloy
Products, Inc. (a) 259,335
------------
MULTILINE RETAIL -- 0.1%
11,165 Gordmans Stores, Inc. (a) 151,956
------------
OIL, GAS & CONSUMABLE FUELS --
1.4%
2,661 Adams Resources & Energy, Inc. 183,317
27,060 Crimson Exploration, Inc. (a) 76,309
69,127 Penn Virginia Corp. (a) 324,897
77,603 Resolute Energy Corp. (a) 619,272
73,067 VAALCO Energy, Inc. (a) 417,943
------------
1,621,738
------------
PAPER & FOREST PRODUCTS -- 1.1%
20,163 Neenah Paper, Inc. 640,578
58,595 Wausau Paper Corp. 667,983
------------
1,308,561
------------
PERSONAL PRODUCTS -- 0.5%
15,333 Medifast, Inc. (a) 394,978
See Notes to Financial Statements Page 27
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND - FDM
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
Personal Products (Continued)
11,617 Nature's Sunshine Products, Inc. $ 189,938
------------
584,916
------------
PHARMACEUTICALS -- 0.7%
14,212 Hi-Tech Pharmacal Co., Inc. 471,838
14,708 Pernix Therapeutics Holdings (a) 53,096
63,375 SciClone Pharmaceuticals, Inc. (a) 314,340
------------
839,274
------------
PROFESSIONAL SERVICES -- 2.5%
7,996 Barrett Business Services, Inc. 417,471
63,786 CBIZ, Inc. (a) 428,004
17,637 CDI Corp. 249,740
24,049 GP Strategies Corp. (a) 572,847
24,879 ICF International, Inc. (a) 783,937
51,473 Resources Connection, Inc. 597,087
------------
3,049,086
------------
REAL ESTATE INVESTMENT TRUSTS --
2.5%
112,100 CapLease, Inc. 946,124
108,488 Kite Realty Group Trust 654,183
88,271 RAIT Financial Trust 663,798
83,189 Summit Hotel Properties, Inc. 786,136
------------
3,050,241
------------
ROAD & RAIL -- 2.7%
30,169 Arkansas Best Corp. 692,379
26,626 Celadon Group, Inc. 485,924
29,292 Marten Transport Ltd. 459,006
26,891 Quality Distribution, Inc. (a) 237,716
30,364 Saia, Inc. (a) 910,009
84,828 Student Transportation, Inc. 518,299
------------
3,303,333
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.0%
46,065 Advanced Energy Industries,
Inc. (a) 801,992
35,478 Integrated Silicon Solution,
Inc. (a) 388,839
19,733 Intermolecular, Inc. (a) 143,459
76,685 Photronics, Inc. (a) 618,081
41,207 Rudolph Technologies, Inc. (a) 461,518
------------
2,413,889
------------
SOFTWARE -- 1.4%
59,690 Actuate Corp. (a) 396,341
30,240 American Software, Inc., Class A 262,786
40,719 EPIQ Systems, Inc. 548,485
20,519 Telenav, Inc. (a) 107,314
36,873 VASCO Data Security
International, Inc. (a) 306,415
------------
1,621,341
------------
SPECIALTY RETAIL -- 3.7%
10,132 America's Car-Mart, Inc. (a) 438,108
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
SPECIALTY RETAIL (CONTINUED)
21,545 Big 5 Sporting Goods Corp. $ 472,913
19,103 Citi Trends, Inc. (a) 277,566
15,525 Destination Maternity Corp. 381,915
52,785 Destination XL Group, Inc. (a) 334,657
30,457 MarineMax, Inc. (a) 345,078
35,058 New York & Co., Inc. (a) 222,618
109,778 OfficeMax, Inc. 1,123,029
18,081 Shoe Carnival, Inc. 434,125
35,052 Stein Mart, Inc. 478,460
------------
4,508,469
------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.7%
29,380 Maidenform Brands, Inc. (a) 509,156
14,827 Perry Ellis International, Inc. 301,136
------------
810,292
------------
THRIFTS & MORTGAGE FINANCE --
4.9%
31,424 Berkshire Hills Bancorp, Inc. 872,330
14,478 BofI Holding, Inc. (a) 663,382
36,826 Dime Community Bancshares, Inc. 564,174
13,569 Federal Agricultural Mortgage
Corp., Class C 391,873
24,747 Flagstar Bancorp, Inc. (a) 345,468
14,719 HomeStreet, Inc. 315,723
21,168 OceanFirst Financial Corp. 329,162
51,485 Provident New York Bancorp 480,870
118,861 TrustCo Bank Corp. 646,604
21,897 United Financial Bancorp, Inc. 331,740
21,618 Walker & Dunlop, Inc. (a) 378,315
10,096 WSFS Financial Corp. 528,929
------------
5,848,570
------------
TOBACCO -- 0.3%
103,945 Alliance One International,
Inc. (a) 394,991
------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.6%
32,489 Aceto Corp. 452,572
18,440 CAI International, Inc. (a) 434,631
36,140 H&E Equipment Services, Inc. 761,470
20,565 Houston Wire & Cable Co. 284,619
------------
1,933,292
------------
WATER UTILITIES -- 0.7%
19,961 Middlesex Water Co. 397,623
17,429 SJW Corp. 456,640
------------
854,263
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 1.0%
19,212 NTELOS Holdings Corp. 316,229
28,148 Shenandoah Telecommunications
Co. 469,509
Page 28 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND - FDM
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
WIRELESS TELECOMMUNICATION
SERVICES (CONTINUED)
27,310 USA Mobility, Inc. $ 370,597
------------
1,156,335
------------
TOTAL INVESTMENTS -- 100.0% 120,567,188
(Cost $108,006,927) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% (4,788)
------------
NET ASSETS -- 100.0% $120,562,400
============
(a) Non-income producing security.
(b) Non-income producing security which pays in-kind distributions.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $14,382,260 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $1,821,999.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $ 120,567,188 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed
to be transferred on the last day of the period at their current
value. There were no transfers between Levels at June 30, 2013.
See Notes to Financial Statements Page 29
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND - FDL
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.8%
AEROSPACE & DEFENSE -- 2.9%
101,395 Lockheed Martin Corp. $ 10,997,302
94,450 Raytheon Co. 6,245,034
------------
17,242,336
------------
CAPITAL MARKETS -- 0.2%
29,072 Federated Investors, Inc., Class B 796,863
8,893 Greenhill & Co., Inc. 406,766
------------
1,203,629
------------
CHEMICALS -- 2.4%
275,202 E.I. du Pont de Nemours & Co. 14,448,105
------------
COMMERCIAL BANKS -- 0.7%
14,572 Bank of Hawaii Corp. 733,263
13,173 Community Bank System, Inc. 406,387
25,529 Hancock Holding Co. 767,657
6,105 Park National Corp. 419,963
9,479 Sterling Financial Corp. 225,411
22,388 Trustmark Corp. 550,297
19,869 United Bankshares, Inc. 525,535
7,693 Westamerica Bancorporation 351,493
------------
3,980,006
------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.3%
127,420 R.R. Donnelley & Sons Co. 1,785,154
143,977 Waste Management, Inc. 5,806,593
------------
7,591,747
------------
COMPUTERS & PERIPHERALS -- 0.8%
20,317 Diebold, Inc. 684,480
98,679 Seagate Technology PLC 4,423,779
------------
5,108,259
------------
CONTAINERS & PACKAGING -- 0.3%
8,455 Greif, Inc., Class A 445,325
31,835 Sonoco Products Co. 1,100,536
------------
1,545,861
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 20.6%
1,664,054 AT&T, Inc. 58,907,512
327,678 CenturyLink, Inc. 11,583,417
1,041,616 Verizon Communications, Inc. 52,434,949
------------
122,925,878
------------
ELECTRIC UTILITIES -- 16.1%
12,594 ALLETE, Inc. 627,811
185,666 American Electric Power Co., Inc. 8,314,124
286,365 Duke Energy Corp. 19,329,638
76,861 Entergy Corp. 5,355,674
213,429 FirstEnergy Corp. 7,969,439
44,183 Hawaiian Electric Industries, Inc. 1,118,272
126,787 NextEra Energy, Inc. 10,330,605
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
ELECTRIC UTILITIES (Continued)
98,713 Northeast Utilities $ 4,147,920
67,916 NV Energy, Inc. 1,593,309
13,663 Otter Tail Corp. SO 388,029
118,358 Pepco Holdings, Inc. 2,386,097
37,423 Pinnacle West Capital Corp. 2,075,854
23,957 Portland General Electric Co. 732,845
268,805 PPL Corp. 8,134,039
354,153 Southern (The) Co. 15,628,772
20,179 UIL Holdings Corp. 771,847
13,858 UNS Energy Corp. 619,868
48,904 Westar Energy, Inc. 1,562,972
164,139 Xcel Energy, Inc. 4,651,699
------------
95,738,814
------------
FOOD & STAPLES RETAILING -- 1.0%
172,177 Sysco Corp. 5,881,566
------------
FOOD PRODUCTS -- 0.1%
16,981 B&G Foods, Inc. 578,203
------------
GAS UTILITIES -- 1.0%
46,479 AGL Resources, Inc. 1,992,090
27,761 Atmos Energy Corp. 1,139,867
10,032 Laclede Group (The), Inc. 458,061
13,330 New Jersey Resources Corp. 553,595
10,197 Northwest Natural Gas Co. 433,168
24,723 Piedmont Natural Gas Co., Inc. 834,154
17,772 WGL Holdings, Inc. 768,106
------------
6,179,041
------------
HOTELS, RESTAURANTS & LEISURE
-- 0.4%
43,609 Darden Restaurants, Inc. 2,201,382
6,045 DineEquity, Inc. 416,319
------------
2,617,701
------------
HOUSEHOLD DURABLES -- 0.5%
50,976 Garmin Ltd. 1,843,292
45,941 Leggett & Platt, Inc. 1,428,306
------------
3,271,598
------------
HOUSEHOLD PRODUCTS -- 1.9%
114,298 Kimberly-Clark Corp. 11,102,908
------------
INSURANCE -- 1.0%
46,176 Cincinnati Financial Corp. 2,119,478
18,587 Mercury General Corp. 817,084
119,200 Old Republic International Corp. 1,534,104
11,268 OneBeacon Insurance Group Ltd.,
Class A 163,161
13,186 Tower Group International, Ltd. 270,445
28,696 Validus Holdings Ltd. 1,036,500
------------
5,940,772
------------
IT SERVICES -- 0.6%
103,101 Paychex, Inc. 3,765,249
------------
Page 30 See Notes to Financial Statements
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND - FDL
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
LEISURE EQUIPMENT & PRODUCTS --
0.3%
37,200 Hasbro, Inc. $ 1,667,676
------------
MACHINERY -- 0.1%
25,658 Harsco Corp. 595,009
------------
MEDIA -- 0.1%
11,725 Meredith Corp. 559,282
------------
METALS & MINING -- 3.1%
43,959 Cliffs Natural Resources, Inc. 714,334
390,920 Freeport-McMoRan Copper &
Gold, Inc. 10,793,301
224,739 Newmont Mining Corp. 6,730,933
------------
18,238,568
------------
MULTI-UTILITIES -- 9.6%
37,816 Alliant Energy Corp. 1,906,683
24,205 Avista Corp. 654,019
6,174 Black Hills Corp. 300,983
134,763 CenterPoint Energy, Inc. 3,165,583
89,184 CMS Energy Corp. 2,423,129
112,027 Consolidated Edison, Inc. 6,532,294
206,246 Dominion Resources, Inc. 11,718,898
57,591 DTE Energy Co. 3,859,173
33,560 Integrys Energy Group, Inc. 1,964,267
93,053 NiSource, Inc. 2,665,038
12,688 NorthWestern Corp. 506,251
160,514 PG&E Corp. 7,340,305
200,142 Public Service Enterprise Group,
Inc. 6,536,638
51,241 SCANA Corp. 2,515,933
92,837 TECO Energy, Inc. 1,595,868
30,970 Vectren Corp. 1,047,715
67,584 Wisconsin Energy Corp. 2,770,268
------------
57,503,045
------------
OIL, GAS & CONSUMABLE FUELS --
15.2%
464,485 Chevron Corp. 54,967,155
468,568 ConocoPhillips 28,348,364
214,395 Spectra Energy Corp. 7,388,052
------------
90,703,571
------------
PHARMACEUTICALS -- 10.3%
335,383 Eli Lilly & Co. 16,474,013
970,381 Merck & Co., Inc. 45,074,197
------------
61,548,210
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 7.4%
1,604,770 Intel Corp. 38,867,529
91,038 Maxim Integrated Products, Inc. 2,529,036
66,970 Microchip Technology, Inc. 2,494,633
------------
43,891,198
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
SOFTWARE -- 0.5%
103,937 CA, Inc. $ 2,975,716
------------
THRIFTS & MORTGAGE FINANCE -- 1.1%
298,221 New York Community Bancorp,
Inc. 4,175,094
142,501 People's United Financial, Inc. 2,123,265
17,685 Provident Financial Services, Inc. 279,069
------------
6,577,428
------------
TOBACCO -- 0.1%
6,918 Universal Corp. 400,206
------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.2%
18,957 TAL International Group, Inc. 825,956
7,324 Textainer Group Holdings Ltd. 281,535
------------
1,107,491
------------
TOTAL INVESTMENTS -- 99.8% 594,889,073
(Cost $551,613,195) (a)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 1,141,815
------------
NET ASSETS -- 100.0% $596,030,888
============
(a) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $47,715,603 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $4,439,725.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $ 594,889,073 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed
to be transferred on the last day of the period at their current
value. There were no transfers between Levels at June 30, 2013.
See Notes to Financial Statements Page 31
FIRST TRUST US IPO INDEX FUND - FPX
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 0.8%
21,571 Exelis, Inc. $ 297,464
5,750 Huntington Ingalls Industries, Inc. 324,760
------------
622,224
------------
AIRLINES -- 0.3%
8,328 Spirit Airlines, Inc. (a) 264,581
------------
AUTO COMPONENTS -- 2.8%
21,294 Allison Transmission Holdings,
Inc. 491,466
35,847 Delphi Automotive PLC 1,817,084
------------
2,308,550
------------
AUTOMOBILES -- 9.0%
179,555 General Motors Co. (a) 5,980,977
13,652 Tesla Motors, Inc. (a) (b) 1,466,634
------------
7,447,611
------------
BIOTECHNOLOGY -- 1.3%
3,305 Aegerion Pharmaceuticals, Inc. (a) 209,339
3,389 Clovis Oncology, Inc. (a) 226,995
14,780 Quintiles Transnational Holdings,
Inc. (a) 629,037
------------
1,065,371
------------
BUILDING PRODUCTS -- 0.9%
18,920 Fortune Brands Home & Security,
Inc. 732,961
------------
CAPITAL MARKETS -- 1.5%
16,043 Apollo Global Management LLC,
Class A (c) 386,636
5,287 Carlyle Group L.P. (The) (c) 135,876
5,608 Financial Engines, Inc. 255,669
12,218 LPL Financial Holdings, Inc. 461,352
------------
1,239,533
------------
COMMERCIAL BANKS -- 1.1%
11,519 BankUnited, Inc. 299,609
15,086 First Republic Bank 580,509
------------
880,118
------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.7%
15,790 KAR Auction Services, Inc. 361,117
9,568 West Corp. 211,836
------------
572,953
------------
COMMUNICATIONS EQUIPMENT
-- 0.4%
8,156 Palo Alto Networks, Inc. (a) 343,857
------------
CONTAINERS & PACKAGING -- 0.3%
13,048 Berry Plastics Group, Inc. (a) 287,969
------------
DIVERSIFIED CONSUMER SERVICES
-- 0.3%
7,419 Bright Horizons Family Solutions,
Inc. (a) 257,513
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES --
1.5%
10,007 CBOE Holdings, Inc. $ 466,726
29,899 ING US, Inc. (a) 809,067
------------
1,275,793
------------
ELECTRICAL EQUIPMENT -- 0.8%
12,866 Babcock & Wilcox (The) Co. 386,366
7,841 Generac Holdings, Inc. 290,195
------------
676,561
------------
ENERGY EQUIPMENT & SERVICES --
0.4%
10,554 Forum Energy Technologies,
Inc. (a) 321,158
------------
FOOD & STAPLES RETAILING -- 0.3%
5,536 Fresh Market (The), Inc. (a) 275,250
------------
FOOD PRODUCTS -- 5.2%
68,161 Kraft Foods Group, Inc. 3,808,155
13,445 Pinnacle Foods, Inc. 324,697
3,745 Post Holdings, Inc. (a) 163,507
------------
4,296,359
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 1.3%
25,203 CareFusion Corp. (a) 928,731
10,532 Globus Medical,
Inc., Class A (a) (b) 177,569
------------
1,106,300
------------
HEALTH CARE PROVIDERS &
SERVICES -- 2.6%
51,146 HCA Holdings, Inc. 1,844,325
7,770 Team Health Holdings, Inc. (a) 319,114
------------
2,163,439
------------
HEALTH CARE TECHNOLOGY -- 0.3%
3,043 Medidata Solutions, Inc. (a) 235,680
------------
HOTELS, RESTAURANTS & LEISURE
-- 4.7%
14,109 Bloomin' Brands, Inc. (a) 351,032
40,218 Burger King Worldwide, Inc. (b) 784,653
14,372 Caesars Entertainment Corp. (a) (b) 196,896
12,223 Dunkin' Brands Group, Inc. 523,389
18,510 Hyatt Hotels Corp., Class A (a) 747,064
4,052 Marriott Vacations Worldwide
Corp. (a) 175,208
23,389 Norwegian Cruise Line Holdings
Ltd. (a) 708,921
10,699 SeaWorld Entertainment, Inc. 375,535
------------
3,862,698
------------
INSURANCE -- 0.9%
12,404 First American Financial Corp. 273,384
6,534 Primerica, Inc. 244,633
13,624 Symetra Financial Corp. 217,848
------------
735,865
------------
Page 32 See Notes to Financial Statements
FIRST TRUST US IPO INDEX FUND - FPX
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
Internet & Catalog Retail -- 2.3%
75,232 Groupon, Inc. (a) (b) $ 639,472
9,739 HomeAway, Inc. (a) 314,959
14,970 TripAdvisor, Inc. (a) 911,224
------------
1,865,655
------------
INTERNET SOFTWARE & SERVICES --
8.7%
8,880 AOL, Inc. 323,942
5,851 Cornerstone OnDemand, Inc. (a) 253,290
245,146 Facebook, Inc., Class A (a) 6,094,330
20,043 Pandora Media, Inc. (a) (b) 368,791
3,126 Zillow, Inc., Class A (a) (b) 175,994
------------
7,216,347
------------
IT SERVICES -- 2.5%
15,634 Booz Allen Hamilton Holding
Corp. 271,719
9,151 EVERTEC, Inc. (a) 201,048
9,334 FleetCor Technologies, Inc. (a) 758,854
7,845 InterXion Holding NV (a) 204,990
22,362 Vantiv, Inc., Class A (a) 617,191
------------
2,053,802
------------
MACHINERY -- 0.9%
11,154 Rexnord Corp. (a) 187,945
21,245 Xylem, Inc. 572,340
------------
760,285
------------
MEDIA -- 1.1%
6,927 AMC Networks, Inc., Class A (a) 453,095
7,254 Madison Square Garden (The) Co.,
Class A (a) 429,800
------------
882,895
------------
MULTILINE RETAIL -- 2.3%
37,538 Dollar General Corp. (a) 1,893,041
------------
OIL, GAS & CONSUMABLE FUELS --
18.3%
47,142 Cobalt International Energy,
Inc. (a) 1,252,563
118,746 Kinder Morgan, Inc. 4,530,160
44,555 Kosmos Energy Ltd. (a) 452,679
14,832 Laredo Petroleum Holdings, Inc. (a) 304,946
37,240 Marathon Petroleum Corp. 2,646,274
10,729 Oasis Petroleum, Inc. (a) 417,036
71,107 Phillips 66 4,188,913
20,554 QEP Resources, Inc. 570,990
4,852 Targa Resources Corp. 312,129
22,958 WPX Energy, Inc. (a) 434,825
------------
15,110,515
------------
PERSONAL PRODUCTS -- 0.9%
43,894 Coty, Inc., Class A (a) (b) 754,099
------------
PHARMACEUTICALS -- 11.2%
181,587 AbbVie, Inc. 7,506,806
57,328 Zoetis, Inc. 1,770,862
------------
9,277,668
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
PROFESSIONAL SERVICES -- 3.1%
43,088 Nielsen Holdings N.V. $ 1,447,326
19,308 Verisk Analytics, Inc.,
Class A (a) 1,152,688
------------
2,600,014
------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 1.6%
4,528 Howard Hughes (The) Corp. (a) 507,544
16,709 Realogy Holdings Corp. (a) 802,700
------------
1,310,244
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.6%
29,140 Freescale Semiconductor Ltd. (a) 394,847
28,864 NXP Semiconductors N.V. (a) 894,207
------------
1,289,054
------------
SOFTWARE -- 2.9%
18,600 Fortinet, Inc. (a) 325,500
6,582 Guidewire Software, Inc. (a) 276,773
9,978 QLIK Technologies, Inc. (a) 282,078
15,399 ServiceNow, Inc. (a) 621,966
11,903 Splunk, Inc. (a) 551,823
9,286 SS&C Technologies Holdings,
Inc. (a) 305,509
------------
2,363,649
------------
SPECIALTY RETAIL -- 1.5%
9,793 Express, Inc. (a) 205,359
6,195 Five Below, Inc. (a) 227,728
11,273 GNC Holdings, Inc., Class A 498,380
4,458 Restoration Hardware Holdings,
Inc. (a) 334,350
------------
1,265,817
------------
TEXTILES, APPAREL & LUXURY GOODS
-- 2.0%
23,103 Michael Kors Holdings Ltd. (a) 1,432,848
7,781 Tumi Holdings, Inc. (a) 186,744
------------
1,619,592
------------
THRIFTS & MORTGAGE FINANCE --
0.8%
14,016 EverBank Financial Corp. 232,105
10,385 Nationstar Mortgage Holdings,
Inc. (a) (b) 388,814
------------
620,919
------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.8%
11,403 Air Lease Corp. 314,609
11,658 MRC Global, Inc. (a) 321,994
------------
636,603
------------
See Notes to Financial Statements Page 33
FIRST TRUST US IPO INDEX FUND - FPX
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
TOTAL COMMON STOCKS -- 99.9% $ 82,492,543
(Cost $72,554,317) ------------
COLLATERAL FOR SECURITIES ON LOAN
-- 4.1%
MONEY MARKET FUND -- 0.9%
721,145 Goldman Sachs Financial
Square Treasury Instruments
Fund - Institutional Class -
0.001% (d) 721,145
(Cost $721,145)
PRINCIPAL
VALUE
-----------
REPURCHASE AGREEMENT -- 3.2%
$ 2,647,568 JPMorgan Chase & Co., 0.08% (d),
dated 06/28/13, due 07/01/13,
with a maturity value of
$2,647,586. Collateralized by
U.S. Treasury Bills, interest
rate of 0.000%, due 9/26/13 to
10/03/13. The value of the
collateral including accrued
interest is $2,700,499. 2,647,568
(Cost $2,647,568) ------------
TOTAL COLLATERAL FOR SECURITIES
ON LOAN - 4.1% 3,368,713
(Cost $3,368,713) ------------
TOTAL INVESTMENTS -- 104.0% 85,861,256
(Cost $75,923,030) (e)
NET OTHER ASSETS AND
LIABILITIES -- (4.0)% (3,340,790)
------------
NET ASSETS -- 100.0% $ 82,520,466
============
(a) Non-income producing security.
(b) All or a portion of this security is on loan. (See Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $3,287,512 and the total value of the collateral held by the
Fund is $3,368,713, which includes LinnCo. LLC in the amount of $102,424.
This security was sold on June 21, 2013.
(c) Master Limited Partnership ("MLP").
(d) Interest rate shown reflects yield as of June 30, 2013.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $10,952,000 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $1,013,774.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $ 82,492,543 $ -- $ --
Money Market Fund 721,145 -- --
Repurchase
Agreement -- 2,647,568 --
--------------------------------------
Total Investments $ 83,213,688 $ 2,647,568 $ --
======================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
-----------------------------
OFFSETTING ASSETS AND LIABILITIES
The Fund's loaned securities were all subject to enforceable Securities Lending
Agreements. Securities Lending Agreements on a gross basis were as follows:
SECURITIES LENDING AGREEMENTS
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 3,287,512
Non-cash Collateral offsetting(1) (3,287,512)
------------
Net Amount $ --
============
(1) At June 30, 2013, the value of the cash collateral received from each
borrower exceeded the value of the related securities loaned.
The Fund's investments in repurchase agreements were all subject to enforceable
Master Repurchase Agreements. Repurchase Agreements on a gross basis were as
follows:
REPURCHASE AGREEMENT
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 2,647,568
Non-cash Collateral offsetting(1) (2,647,568)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the collateral received from the seller
exceeded the value of the repurchase agreement.
Page 34 See Notes to Financial Statements
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND - FBT
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.6%
BIOTECHNOLOGY -- 67.4%
265,046 Alexion Pharmaceuticals, Inc. (a) $ 24,447,843
220,372 Amgen, Inc. 21,741,902
120,737 Biogen Idec, Inc. (a) 25,982,603
375,084 BioMarin Pharmaceutical, Inc. (a) 20,925,936
200,386 Celgene Corp. (a) 23,427,127
5,369,453 Dendreon Corp. (a) (b) 22,122,146
461,141 Gilead Sciences, Inc. (a) 23,615,031
1,635,948 ImmunoGen, Inc. (a) 27,140,377
1,109,254 Incyte Corp. (a) (b) 24,403,588
2,664,330 InterMune, Inc. (a) 25,630,855
858,328 Myriad Genetics, Inc. (a) 23,063,273
108,831 Regeneron Pharmaceuticals,
Inc. (a) 24,473,915
407,180 United Therapeutics Corp. (a) 26,800,588
287,559 Vertex Pharmaceuticals, Inc. (a) 22,967,337
------------
336,742,521
------------
LIFE SCIENCES TOOLS & SERVICES --
27.1%
6,423,523 Affymetrix, Inc. (a) (b) 28,520,442
437,569 Illumina, Inc. (a) 32,747,664
332,469 Life Technologies Corp. (a) 24,606,031
1,191,618 QIAGEN N.V. (a) 23,725,114
6,180,638 Sequenom, Inc. (a) (b) 26,020,486
------------
135,619,737
------------
PHARMACEUTICALS -- 5.1%
2,230,699 Nektar Therapeutics (a) 25,764,574
------------
TOTAL COMMON STOCKS -- 99.6% 498,126,832
(Cost $455,629,328) ------------
COLLATERAL FOR SECURITIES
ON LOAN -- 7.6%
MONEY MARKET FUND -- 1.6%
8,114,489 Goldman Sachs Financial
Square Treasury Instruments
Fund - Institutional Class -
0.001% (c) 8,114,489
(Cost $8,114,489)
PRINCIPAL
VALUE
-----------
REPURCHASE AGREEMENT -- 6.0%
$29,791,036 JPMorgan Chase & Co., 0.08% (c),
dated 06/28/13, due 07/01/13,
with a maturity value of
$29,791,235. Collateralized by
U.S. Treasury Bills, interest
rate of 0.000%, due 09/26/13 to
10/03/13. The value of the
collateral including accrued
interest is $30,386,624. 29,791,036
(Cost $29,791,036) ------------
DESCRIPTION VALUE
-----------------------------------------------------------
TOTAL COLLATERAL FOR SECURITIES
ON LOAN - 7.6% $ 37,905,525
(Cost $37,905,525) ------------
TOTAL INVESTMENTS -- 107.2% 536,032,357
(Cost $493,534,853) (d)
NET OTHER ASSETS AND
LIABILITIES -- (7.2)% (36,110,041)
------------
NET ASSETS -- 100.0% $499,922,316
============
(a) Non-income producing security.
(b) All or a portion of this security is on loan. (See Note 2D - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $36,874,565 and the total value of the collateral held by
the Fund is $37,905,525.
(c) Interest rate shown reflects yield as of June 30, 2013.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $62,871,136 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $20,373,632.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $498,126,832 $ -- $ --
Money Market Fund 8,114,489 -- --
Repurchase Agreement -- 29,791,036 --
-------------------------------------
Total Investments $506,241,321 $ 29,791,036 $ --
=====================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
See Notes to Financial Statements Page 35
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND - FBT
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
-----------------------------
OFFSETTING ASSETS AND LIABILITIES
The Fund's loaned securities were all subject to enforceable Securities Lending
Agreements. Securities Lending Agreements on a gross basis were as follows:
SECURITIES LENDING AGREEMENTS
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 36,874,565
Non-cash Collateral offsetting(1) (36,874,565)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the cash collateral received from each
borrower exceeded the value of the related securities loaned.
The Fund's investments in repurchase agreements were all subject to enforceable
Master Repurchase Agreements. Repurchase Agreements on a gross basis were as
follows:
REPURCHASE AGREEMENT
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 29,791,036
Non-cash Collateral offsetting(1) (29,791,036)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the collateral received from the seller
exceeded the value of the repurchase agreement.
Page 36 See Notes to Financial Statements
FIRST TRUST DOW JONES INTERNET INDEX(SM) INDEX FUND - FDN
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
CAPITAL MARKETS -- 4.6%
1,759,677 E*TRADE Financial Corp. (a) $ 22,277,511
1,055,515 TD Ameritrade Holding Corp. 25,638,459
------------
47,915,970
------------
COMMUNICATIONS EQUIPMENT --
5.3%
1,654,424 Juniper Networks, Inc. (a) 31,946,927
417,757 NETGEAR, Inc. (a) 12,758,299
3,630,903 Sonus Networks, Inc. (a) 10,929,018
------------
55,634,244
------------
HEALTH CARE TECHNOLOGY -- 1.6%
1,342,862 Allscripts Healthcare
Solutions, Inc. (a) 17,376,634
------------
INTERNET & CATALOG RETAIL -- 23.1%
285,910 Amazon.com, Inc. (a) 79,394,348
429,482 Expedia, Inc. 25,833,342
2,358,377 Groupon, Inc. (a) 20,046,205
161,730 Netflix, Inc. (a) 34,139,586
69,319 priceline.com, Inc. (a) 57,335,824
433,565 TripAdvisor, Inc. (a) 26,391,102
------------
243,140,407
------------
INTERNET SOFTWARE & SERVICES --
52.6%
673,625 Akamai Technologies, Inc. (a) 28,662,744
331,618 Cornerstone OnDemand, Inc. (a) 14,355,743
438,527 Dealertrack Technologies, Inc. (a) 15,537,012
577,099 Digital River, Inc. (a) 10,832,148
1,696,779 EarthLink, Inc. 10,536,998
1,263,410 eBay, Inc. (a) 65,343,565
164,227 Equinix, Inc. (a) 30,336,011
1,523,783 Facebook, Inc., Class A (a) 37,881,245
119,973 Google, Inc., Class A (a) 105,620,630
438,041 IAC/InterActiveCorp 20,833,230
377,911 j2 Global, Inc. 16,064,997
201,557 LinkedIn Corp., Class A (a) 35,937,613
978,494 LivePerson, Inc. (a) 8,762,414
1,890,024 Monster Worldwide, Inc. (a) 9,280,018
221,912 OpenTable, Inc. (a) 14,191,272
629,941 Rackspace Hosting, Inc. (a) 23,868,465
1,477,546 United Online, Inc. 11,199,799
636,074 ValueClick, Inc. (a) 15,698,306
605,722 Verisign, Inc. (a) 27,051,545
697,975 Vocus, Inc. (a) 7,342,697
1,765,267 Yahoo!, Inc. (a) 44,325,854
------------
553,662,306
------------
IT SERVICES -- 1.4%
1,109,220 Sapient Corp. (a) 14,486,413
------------
SOFTWARE -- 11.4%
269,009 Concur Technologies, Inc. (a) 21,891,952
528,943 Ebix, Inc. 4,898,012
211,115 NetSuite, Inc. (a) 19,367,690
1,133,121 Salesforce.com, Inc. (a) 43,262,560
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
SOFTWARE (Continued)
963,185 TIBCO Software, Inc. (a) $ 20,612,159
512,746 Virnetx Holding Corp. (a) 10,249,793
--------------
120,282,166
--------------
TOTAL COMMON STOCKS -- 100.0% 1,052,498,140
(Cost $918,619,203)
MONEY MARKET FUND -- 0.1%
854,873 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.03% (b) 854,873
(Cost $854,873) --------------
TOTAL INVESTMENTS -- 100.1% 1,053,353,013
(Cost $919,474,076) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (935,506)
--------------
NET ASSETS -- 100.0% $1,052,417,507
==============
(a) Non-income producing security.
(b) Interest rate shown reflects yield as of June 30, 2013.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $175,518,358 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $41,639,421.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $1,052,498,140 $ -- $ --
Money Market
Fund 854,873 -- --
-------------------------------------
Total Investments $1,053,353,013 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
See Notes to Financial Statements Page 37
FIRST TRUST CAPITAL STRENGTH ETF - FTCS
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 10.7%
10,279 Honeywell International, Inc. $ 815,536
7,919 Lockheed Martin Corp. 858,895
10,742 Northrop Grumman Corp. 889,437
13,341 Raytheon Co. 882,107
8,179 United Technologies Corp. 760,156
------------
4,206,131
------------
BEVERAGES -- 3.7%
17,873 Coca-Cola (The) Co. 716,886
9,212 PepsiCo, Inc. 753,450
------------
1,470,336
------------
CAPITAL MARKETS -- 1.8%
5,192 Franklin Resources, Inc. 706,216
------------
CHEMICALS -- 3.9%
15,500 E.I. du Pont de Nemours & Co. 813,750
7,388 Monsanto Co. 729,934
------------
1,543,684
------------
COMMUNICATIONS EQUIPMENT
-- 1.8%
12,355 Motorola Solutions, Inc. 713,254
------------
DIVERSIFIED FINANCIAL SERVICES --
2.2%
4,939 IntercontinentalExchange, Inc. (a) 877,957
------------
ELECTRICAL EQUIPMENT -- 2.0%
14,257 Emerson Electric Co. 777,577
------------
FOOD & STAPLES RETAILING -- 3.9%
7,298 Costco Wholesale Corp. 806,940
9,740 Wal-Mart Stores, Inc. 725,532
------------
1,532,472
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 9.9%
11,036 Baxter International, Inc. 764,464
8,064 Becton, Dickinson & Co. 796,965
11,456 Covidien PLC 719,895
16,566 Medtronic, Inc. 852,652
11,789 Stryker Corp. 762,512
------------
3,896,488
------------
HEALTH CARE PROVIDERS & SERVICES
-- 4.2%
11,702 Cigna Corp. 848,278
7,177 McKesson Corp. 821,766
------------
1,670,044
------------
HOTELS, RESTAURANTS & LEISURE --
1.9%
7,632 McDonald's Corp. 755,568
------------
HOUSEHOLD PRODUCTS -- 5.5%
12,738 Colgate-Palmolive Co. 729,760
7,186 Kimberly-Clark Corp. 698,048
9,364 Procter & Gamble (The) Co. 720,934
------------
2,148,742
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 2.0%
7,213 3M Co. $ 788,742
------------
INSURANCE -- 2.1%
20,459 Marsh & McLennan Cos., Inc. 816,723
------------
IT SERVICES -- 8.0%
10,202 Accenture PLC, Class A 734,136
11,694 Automatic Data Processing, Inc. 805,249
4,014 International Business Machines
Corp. 767,116
1,461 MasterCard, Inc., Class A 839,344
------------
3,145,845
------------
LEISURE EQUIPMENT & PRODUCTS --
2.0%
17,326 Mattel, Inc. 785,041
------------
LIFE SCIENCES TOOLS & SERVICES --
2.2%
8,620 Waters Corp. (a) 862,431
------------
MACHINERY -- 2.2%
12,603 Illinois Tool Works, Inc. 871,750
------------
MEDIA -- 2.1%
13,140 Omnicom Group, Inc. 826,112
------------
OIL, GAS & CONSUMABLE FUELS --
4.0%
6,579 Chevron Corp. 778,559
8,719 Exxon Mobil Corp. 787,762
------------
1,566,321
------------
PHARMACEUTICALS -- 5.1%
6,703 Allergan, Inc. 564,661
13,279 Eli Lilly & Co. 652,264
9,024 Johnson & Johnson 774,801
------------
1,991,726
------------
ROAD & RAIL -- 2.1%
5,229 Union Pacific Corp. 806,730
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 4.1%
18,000 Analog Devices, Inc. 811,080
22,030 Linear Technology Corp. 811,585
------------
1,622,665
------------
SOFTWARE -- 4.5%
31,299 CA, Inc. 896,090
25,613 Microsoft Corp. 884,417
------------
1,780,507
------------
SPECIALTY RETAIL -- 4.1%
10,304 Home Depot (The), Inc. 798,251
16,223 TJX (The) Cos., Inc. 812,123
------------
1,610,374
------------
TOBACCO -- 4.0%
21,772 Altria Group, Inc. 761,803
16,798 Reynolds American, Inc. 812,519
------------
1,574,322
------------
Page 38 See Notes to Financial Statements
FIRST TRUST CAPITAL STRENGTH ETF - FTCS
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
DESCRIPTION VALUE
-----------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 39,347,758
(Cost $39,108,873) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% (8,378)
------------
NET ASSETS -- 100.0% $ 39,339,380
============
(a) Non-income producing security.
(b) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $837,101 and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over value was $598,216.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of
June 30, 2013 is as follows (see Note 2A - Portfolio Valuation in the
Notes to Financial Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $ 39,347,758 $ -- $ --
=======================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
See Notes to Financial Statements Page 39
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND - FVI
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.1%
Aerospace & Defense -- 0.3%
290 HEICO Corp. $ 14,607
------------
AIR FREIGHT & LOGISTICS -- 2.6%
477 FedEx Corp. 47,023
365 Forward Air Corp. 13,972
605 United Parcel Service, Inc.,
Class B 52,320
------------
113,315
------------
AIRLINES -- 0.7%
166 Allegiant Travel Co. 17,594
994 SkyWest, Inc. 13,459
------------
31,053
------------
AUTO COMPONENTS -- 2.6%
267 BorgWarner, Inc. (a) 23,002
944 Magna International, Inc. 67,232
538 Tenneco, Inc. (a) 24,360
------------
114,594
------------
AUTOMOBILES -- 3.9%
3,944 Ford Motor Co. 61,013
1,359 Honda Motor Co., Ltd., ADR 50,623
500 Toyota Motor Corp., ADR 60,330
------------
171,966
------------
BEVERAGES -- 3.1%
550 Anheuser-Busch InBev N.V., ADR 49,643
87 Boston Beer (The) Co., Inc.,
Class A (a) 14,846
1,404 Coca-Cola Enterprises, Inc. 49,365
396 Constellation Brands, Inc.,
Class A (a) 20,639
------------
134,493
------------
BIOTECHNOLOGY -- 1.4%
510 Celgene Corp. (a) 59,624
------------
CAPITAL MARKETS -- 5.4%
210 BlackRock, Inc. 53,939
1,070 Blackstone Group (The) L.P. 22,534
502 Eaton Vance Corp. 18,870
2,107 Morgan Stanley 51,474
724 SEI Investments Co. 20,583
890 State Street Corp. 58,037
349 Stifel Financial Corp. (a) 12,449
------------
237,886
------------
CHEMICALS -- 2.0%
698 Eastman Chemical Co. 48,867
1,166 Kronos Worldwide, Inc. 18,936
221 Westlake Chemical Corp. 21,306
------------
89,109
------------
COMMERCIAL BANKS -- 5.5%
1,394 Associated Banc-Corp. 21,677
1,687 BB&T Corp. 57,156
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMERCIAL BANKS (Continued)
1,589 CapitalSource, Inc. $ 14,905
884 FirstMerit Corp. 17,706
708 Popular, Inc. (a) 21,474
755 PrivateBancorp, Inc. 16,014
1,850 SunTrust Banks, Inc. 58,404
1,730 Susquehanna Bancshares, Inc. 22,230
575 Webster Financial Corp. 14,766
------------
244,332
------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.6%
1,732 ACCO Brands Corp. (a) 11,015
571 Copart, Inc. (a) 17,587
547 Herman Miller, Inc. 14,807
273 Mine Safety Appliances Co. 12,708
984 Steelcase, Inc., Class A 14,347
------------
70,464
------------
COMMUNICATIONS EQUIPMENT --
2.8%
13,395 Alcatel-Lucent, ADR (a) 24,379
2,388 Cisco Systems, Inc. 58,052
1,955 Emulex Corp. (a) 12,747
326 Plantronics, Inc. 14,318
1,448 Research In Motion Ltd. (a) 15,160
------------
124,656
------------
COMPUTERS & PERIPHERALS -- 1.4%
111 Apple, Inc. 43,965
588 Electronics for Imaging, Inc. (a) 16,634
------------
60,599
------------
CONSTRUCTION & ENGINEERING --
1.4%
374 Chicago Bridge & Iron Co. N.V. 22,313
391 EMCOR Group, Inc. 15,894
715 MasTec, Inc. (a) 23,524
------------
61,731
------------
CONSUMER FINANCE -- 0.3%
244 First Cash Financial Services,
Inc. (a) 12,007
------------
DIVERSIFIED FINANCIAL SERVICES --
1.2%
1,036 JPMorgan Chase & Co. 54,690
------------
ELECTRICAL EQUIPMENT -- 0.5%
208 Hubbell, Inc., Class B 20,592
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.4%
1,435 Celestica, Inc. (a) 13,561
421 Dolby Laboratories, Inc., Class A 14,082
1,032 Ingram Micro, Inc., Class A (a) 19,598
903 Vishay Intertechnology, Inc. (a) 12,543
------------
59,784
------------
Page 40 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND - FVI
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
ENERGY EQUIPMENT & SERVICES --
2.1%
152 CARBO Ceramics, Inc. $ 10,249
783 Ensco PLC, Class A 45,508
289 Oceaneering International, Inc. 20,866
1,420 TETRA Technologies, Inc. (a) 14,569
------------
91,192
------------
FOOD & STAPLES RETAILING -- 1.2%
923 CVS Caremark Corp. 52,777
------------
FOOD PRODUCTS -- 2.0%
1,548 Archer-Daniels-Midland Co. 52,493
452 Green Mountain Coffee Roasters,
Inc. (a) 33,927
------------
86,420
------------
GAS UTILITIES -- 0.5%
865 Questar Corp. 20,630
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 1.8%
578 Becton, Dickinson & Co. 57,124
620 CareFusion Corp. (a) 22,847
------------
79,971
------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.1%
522 Omnicare, Inc. 24,905
504 Tenet Healthcare Corp. (a) 23,234
------------
48,139
------------
HEALTH CARE TECHNOLOGY -- 0.3%
705 Quality Systems, Inc. 13,191
------------
HOTELS, RESTAURANTS & LEISURE --
2.3%
1,235 International Game Technology 20,637
506 McDonald's Corp. 50,094
244 Papa John's International, Inc. (a) 15,950
2,530 Wendy's (The) Co. 14,750
------------
101,431
------------
HOUSEHOLD DURABLES -- 2.9%
880 D.R. Horton, Inc. 18,726
3,497 Sony Corp., ADR 74,102
1,674 Standard Pacific Corp. (a) 13,945
260 Tupperware Brands Corp. 20,199
------------
126,972
------------
INDUSTRIAL CONGLOMERATES -- 1.2%
492 3M Co. 53,800
------------
INSURANCE -- 11.0%
589 ACE Ltd. 52,704
54 Alleghany Corp. (a) 20,699
1,096 Allstate (The) Corp. 52,740
486 Assurant, Inc. 24,742
1,037 Assured Guaranty Ltd. 22,876
630 Chubb (The) Corp. 53,329
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
INSURANCE (CONTINUED)
404 Cincinnati Financial Corp. $ 18,544
167 Everest Re Group, Ltd. 21,419
2,250 Genworth Financial, Inc.,
Class A (a) 25,673
320 Hanover Insurance Group, (The),
Inc. 15,658
666 Lincoln National Corp. 24,289
1,731 Old Republic International Corp. 22,278
1,587 Principal Financial Group, Inc. 59,433
293 Reinsurance Group of America, Inc. 20,249
636 Travelers (The) Cos., Inc. 50,829
------------
485,462
------------
INTERNET & CATALOG RETAIL -- 1.3%
261 Netflix, Inc. (a) 55,094
------------
INTERNET SOFTWARE & SERVICES --
2.6%
904 eBay, Inc. (a) 46,755
64 Google, Inc., Class A (a) 56,343
507 ValueClick, Inc. (a) 12,513
------------
115,611
------------
IT SERVICES -- 4.0%
680 Accenture PLC, Class A 48,933
465 Computer Sciences Corp. 20,353
298 DST Systems, Inc. 19,468
981 Infosys Ltd., ADR 40,408
256 International Business Machines
Corp. 48,924
------------
178,086
------------
LEISURE EQUIPMENT & PRODUCTS --
1.6%
1,244 Mattel, Inc. 56,366
299 Sturm, Ruger & Co., Inc. 14,364
------------
70,730
------------
LIFE SCIENCES TOOLS & SERVICES --
1.4%
809 Life Technologies Corp. (a) 59,874
------------
MACHINERY -- 3.4%
536 Caterpillar, Inc. 44,214
362 Lincoln Electric Holdings, Inc. 20,732
1,200 Manitowoc (The) Co., Inc. 21,492
245 Mueller Industries, Inc. 12,355
479 Trinity Industries, Inc. 18,413
130 Valmont Industries, Inc. 18,602
1,321 Wabash National Corp. (a) 13,448
------------
149,256
------------
MEDIA -- 1.3%
1,142 CBS Corp., Class B 55,810
------------
METALS & MINING -- 0.3%
470 Worthington Industries, Inc. 14,904
------------
MULTILINE RETAIL -- 0.5%
441 Dollar Tree, Inc. (a) 22,420
------------
See Notes to Financial Statements Page 41
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND - FVI
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
OIL, GAS & CONSUMABLE FUELS --
1.4%
2,451 Alpha Natural Resources, Inc. (a) $ 12,843
751 Hess Corp. 49,934
------------
62,777
------------
PHARMACEUTICALS -- 1.1%
946 Eli Lilly & Co. 46,468
------------
PROFESSIONAL SERVICES -- 1.2%
385 FTI Consulting, Inc. (a) 12,663
365 Manpowergroup, Inc. 20,002
558 Robert Half International, Inc. 18,542
------------
51,207
------------
ROAD & RAIL -- 2.0%
511 Canadian National Railway Co. 49,705
856 Heartland Express, Inc. 11,873
1,045 Hertz Global Holdings, Inc. (a) 25,916
------------
87,494
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.7%
1,314 Brooks Automation, Inc. 12,785
1,431 Intersil Corp., Class A 11,190
1,511 Kulicke & Soffa Industries,
Inc. (a) 16,712
1,020 SunPower Corp., Class A (a) 21,114
672 Tessera Technologies, Inc. 13,978
------------
75,779
------------
SOFTWARE -- 2.5%
231 Manhattan Associates, Inc. (a) 17,824
1,447 Oracle Corp. 44,452
2,167 Symantec Corp. 48,692
------------
110,968
------------
SPECIALTY RETAIL -- 3.2%
382 Asbury Automotive Group, Inc. (a) 15,318
711 Express, Inc. (a) 14,910
2,722 Office Depot, Inc. (a) 10,534
1,171 OfficeMax, Inc. 11,979
899 Pier 1 Imports, Inc. 21,118
882 Ross Stores, Inc. 57,163
574 Sonic Automotive, Inc., Class A 12,134
------------
143,156
------------
TEXTILES, APPAREL & LUXURY GOODS
-- 3.1%
372 Movado Group, Inc. 12,585
941 NIKE, Inc., Class B 59,923
289 Ralph Lauren Corp. 50,211
600 Skechers U.S.A., Inc., Class A (a) 14,406
------------
137,125
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS
-- 2.7%
963 Fastenal Co. $ 44,154
237 MSC Industrial Direct Co., Inc.,
Class A 18,358
224 W.W. Grainger, Inc. 56,488
------------
119,000
------------
WATER UTILITIES -- 0.3%
261 American States Water Co. 14,008
------------
TOTAL COMMON STOCKS -- 100.1% 4,405,254
(Cost $4,011,647)
MONEY MARKET FUND -- 0.0%
1,627 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional Class -
0.03% (b) 1,627
(Cost $1,627) ------------
TOTAL INVESTMENTS -- 100.1% 4,406,881
(Cost $4,013,274) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (3,658)
------------
NET ASSETS -- 100.0% $ 4,403,223
============
(a) Non-income producing security.
(b) Interest rate shown reflects yield as of June 30, 2013.
(c) Aggregate cost for financial reporting purposes, which
approximates the aggregate cost for federal income tax
purposes. As of June 30, 2013, the aggregate gross
unrealized appreciation for all securities in which
there was an excess of value over tax cost was $464,757
and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost
over value was $71,150.
ADR - American Depositary Receipt
Page 42 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND - FVI
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of
June 30, 2013 is as follows (see Note 2A - Portfolio
Valuation in the Notes to Financial Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $ 4,405,254 $ -- $ --
Money Market
Fund 1,627 -- --
---------------------------------------
Total Investments $ 4,406,881 $ -- $ --
=======================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
See Notes to Financial Statements Page 43
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND - FVD
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 3.9%
54,344 General Dynamics Corp. $ 4,256,766
50,142 L-3 Communications Holdings,
Inc. 4,299,175
40,029 Lockheed Martin Corp. 4,341,545
51,270 Northrop Grumman Corp. 4,245,156
63,447 Raytheon Co. 4,195,116
45,429 United Technologies Corp. 4,222,171
------------
25,559,929
------------
AIR FREIGHT & LOGISTICS -- 1.3%
76,516 C.H. Robinson Worldwide, Inc. 4,308,616
48,743 United Parcel Service, Inc.,
Class B 4,215,295
------------
8,523,911
------------
AUTOMOBILES -- 0.7%
117,276 Honda Motor Co., Ltd., ADR 4,368,531
------------
BEVERAGES -- 2.6%
105,142 Coca-Cola (The) Co. 4,217,246
36,584 Diageo PLC, ADR 4,205,331
86,770 Molson Coors Brewing Co.,
Class B 4,152,812
51,872 PepsiCo, Inc. 4,242,611
------------
16,818,000
------------
CAPITAL MARKETS -- 0.7%
233,501 KKR & Co. L.P. (a) 4,590,630
------------
CHEMICALS -- 1.2%
44,430 Air Products & Chemicals, Inc. 4,068,455
78,924 E.I. du Pont de Nemours & Co. 4,143,510
------------
8,211,965
------------
COMMERCIAL BANKS -- 4.5%
73,508 Bank of Montreal 4,265,669
78,334 Bank of Nova Scotia 4,194,786
66,363 BOK Financial Corp. 4,250,550
57,749 Canadian Imperial Bank of
Commerce 4,099,024
64,019 Cullen/Frost Bankers, Inc. 4,274,549
73,379 Royal Bank of Canada 4,278,730
53,636 Toronto-Dominion (The) Bank 4,310,725
------------
29,674,033
------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.7%
106,462 Waste Management, Inc. 4,293,612
------------
COMMUNICATIONS EQUIPMENT --
1.9%
172,890 Cisco Systems, Inc. 4,202,956
86,914 Harris Corp. 4,280,514
69,408 QUALCOMM, Inc. 4,239,441
------------
12,722,911
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMPUTERS & PERIPHERALS -- 1.3%
10,331 Apple, Inc. $ 4,091,902
130,865 Diebold, Inc. 4,408,842
------------
8,500,744
------------
CONTAINERS & PACKAGING -- 1.3%
108,773 Bemis Co., Inc. 4,257,375
122,569 Sonoco Products Co. 4,237,211
------------
8,494,586
------------
DISTRIBUTORS -- 0.6%
54,718 Genuine Parts Co. 4,271,834
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.9%
120,612 AT&T, Inc. 4,269,665
131,864 TELUS Corp. 3,849,110
84,616 Verizon Communications, Inc. 4,259,569
------------
12,378,344
------------
ELECTRIC UTILITIES -- 10.4%
86,371 ALLETE, Inc. 4,305,594
92,960 Cleco Corp. 4,316,133
63,495 Duke Energy Corp. 4,285,913
90,003 Edison International 4,334,545
117,507 El Paso Electric Co. 4,149,172
170,338 Hawaiian Electric Industries, Inc. 4,311,255
78,037 MGE Energy, Inc. 4,273,306
53,026 NextEra Energy, Inc. 4,320,558
103,546 Northeast Utilities 4,351,003
62,993 OGE Energy Corp. 4,296,123
79,198 Pinnacle West Capital Corp. 4,393,113
139,992 Portland General Electric Co. 4,282,355
96,794 Southern (The) Co. 4,271,519
113,434 UIL Holdings Corp. 4,338,851
134,597 Westar Energy, Inc. 4,301,720
148,333 Xcel Energy, Inc. 4,203,757
------------
68,734,917
------------
ELECTRICAL EQUIPMENT -- 1.3%
66,834 Eaton Corp. PLC 4,398,345
76,970 Emerson Electric Co. 4,197,944
------------
8,596,289
------------
FOOD & STAPLES RETAILING -- 2.5%
123,478 Sysco Corp. 4,218,009
86,501 Walgreen Co. 3,823,344
56,017 Wal-Mart Stores, Inc. 4,172,706
93,442 Weis Markets, Inc. 4,211,431
------------
16,425,490
------------
FOOD PRODUCTS -- 4.5%
126,215 Archer-Daniels-Midland Co. 4,279,951
95,329 Campbell Soup Co. 4,269,786
125,491 ConAgra Foods, Inc. 4,383,401
86,016 General Mills, Inc. 4,174,356
65,702 Kellogg Co. 4,220,039
77,226 Kraft Foods Group, Inc. 4,314,617
106,570 Unilever PLC, ADR 4,310,756
------------
29,952,906
------------
Page 44 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND - FVD
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
GAS UTILITIES -- 7.1%
99,481 AGL Resources, Inc. $ 4,263,756
107,704 Atmos Energy Corp. 4,422,326
92,381 Laclede Group (The), Inc. 4,218,116
71,133 National Fuel Gas Co. 4,122,157
100,248 New Jersey Resources Corp. 4,163,299
100,687 Northwest Natural Gas Co. 4,277,184
126,985 Piedmont Natural Gas Co., Inc. 4,284,474
178,153 Questar Corp. 4,248,949
74,275 South Jersey Industries, Inc. 4,264,128
111,968 UGI Corp. 4,379,069
99,264 WGL Holdings, Inc. 4,290,190
------------
46,933,648
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 0.6%
59,827 Baxter International, Inc. 4,144,216
------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.3%
89,230 Cardinal Health, Inc. 4,211,656
123,994 Owens & Minor, Inc. 4,194,717
------------
8,406,373
------------
HOTELS, RESTAURANTS & LEISURE --
0.6%
42,720 McDonald's Corp. 4,229,280
------------
HOUSEHOLD DURABLES -- 0.7%
138,130 Leggett & Platt, Inc. 4,294,462
------------
HOUSEHOLD PRODUCTS -- 2.6%
50,743 Clorox (The) Co. 4,218,773
74,020 Colgate-Palmolive Co. 4,240,606
43,706 Kimberly-Clark Corp. 4,245,601
54,274 Procter & Gamble (The) Co. 4,178,555
------------
16,883,535
------------
INDUSTRIAL CONGLOMERATES -- 0.6%
38,663 3M Co. 4,227,799
------------
INSURANCE -- 4.6%
48,445 ACE Ltd. 4,334,859
97,384 Arthur J. Gallagher & Co. 4,254,707
92,836 Cincinnati Financial Corp. 4,261,172
57,177 Erie Indemnity Co., Class A 4,556,435
88,941 Hanover Insurance Group (The),
Inc. 4,351,883
98,466 Mercury General Corp. 4,328,565
53,390 Travelers (The) Cos., Inc. 4,266,929
------------
30,354,550
------------
IT SERVICES -- 1.9%
60,793 Automatic Data Processing, Inc. 4,186,206
111,610 Paychex, Inc. 4,075,997
321,696 SAIC, Inc. 4,481,226
------------
12,743,429
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS --
1.3%
94,785 Hasbro, Inc. $ 4,249,211
94,635 Mattel, Inc. 4,287,912
------------
8,537,123
------------
MACHINERY -- 1.9%
51,313 Deere & Co. 4,169,181
61,894 Illinois Tool Works, Inc. 4,281,208
55,382 Stanley Black & Decker, Inc. 4,281,029
------------
12,731,418
------------
MEDIA -- 1.3%
67,879 Omnicom Group, Inc. 4,267,553
131,111 Thomson Reuters Corp. 4,270,285
------------
8,537,838
------------
MULTILINE RETAIL -- 1.3%
83,409 Kohl's Corp. 4,212,989
60,863 Target Corp. 4,191,026
------------
8,404,015
------------
MULTI-UTILITIES -- 9.1%
86,572 Alliant Energy Corp. 4,364,960
157,256 Avista Corp. 4,249,057
183,743 CenterPoint Energy, Inc. 4,316,123
73,837 Consolidated Edison, Inc. 4,305,435
75,295 Dominion Resources, Inc. 4,278,262
64,627 DTE Energy Co. 4,330,655
73,047 Integrys Energy Group, Inc. 4,275,441
167,932 MDU Resources Group, Inc. 4,351,118
130,498 Public Service Enterprise Group,
Inc. 4,262,065
86,662 SCANA Corp. 4,255,104
51,802 Sempra Energy 4,235,332
248,283 TECO Energy, Inc. 4,267,985
126,985 Vectren Corp. 4,295,903
104,377 Wisconsin Energy Corp. 4,278,413
------------
60,065,853
------------
OFFICE ELECTRONICS -- 0.6%
125,911 CANON, Inc., ADR 4,138,695
------------
OIL, GAS & CONSUMABLE FUELS --
5.8%
35,576 Chevron Corp. 4,210,064
70,029 ConocoPhillips 4,236,754
102,172 Enbridge, Inc. 4,298,376
46,973 Exxon Mobil Corp. 4,244,010
113,685 Kinder Morgan, Inc. 4,337,083
46,894 Occidental Petroleum Corp. 4,184,352
65,527 Royal Dutch Shell PLC, ADR 4,180,623
88,187 Total S.A., ADR 4,294,707
97,198 TransCanada Corp. 4,190,206
------------
38,176,175
------------
See Notes to Financial Statements Page 45
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND - FVD
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS -- 6.4%
88,020 AstraZeneca PLC, ADR $ 4,163,346
91,408 Bristol-Myers Squibb Co. 4,085,024
84,719 Eli Lilly & Co. 4,161,397
84,719 GlaxoSmithKline PLC, ADR 4,233,408
49,121 Johnson & Johnson 4,217,529
89,555 Merck & Co., Inc. 4,159,830
60,748 Novartis AG, ADR 4,295,491
149,991 Pfizer, Inc. 4,201,248
82,859 Sanofi, ADR 4,268,067
108,575 Teva Pharmaceutical Industries
Ltd., ADR 4,256,140
------------
42,041,480
------------
REAL ESTATE INVESTMENT TRUSTS --
0.6%
27,857 Public Storage 4,271,314
------------
ROAD & RAIL -- 0.7%
58,988 Norfolk Southern Corp. 4,285,478
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.2%
94,395 Analog Devices, Inc. 4,253,439
277,454 Applied Materials, Inc. 4,136,839
176,411 Intel Corp. 4,272,674
121,562 Texas Instruments, Inc. 4,238,867
107,649 Xilinx, Inc. 4,263,977
------------
21,165,796
------------
SOFTWARE -- 1.3%
152,635 CA, Inc. 4,369,940
123,295 Microsoft Corp. 4,257,376
------------
8,627,316
------------
TOBACCO -- 3.2%
120,019 Altria Group, Inc. 4,199,465
40,609 British American Tobacco PLC,
ADR 4,180,290
95,787 Lorillard, Inc. 4,183,976
47,858 Philip Morris International, Inc. 4,145,460
87,354 Reynolds American, Inc. 4,225,313
------------
20,934,504
------------
WATER UTILITIES -- 1.3%
79,559 American States Water Co. 4,269,931
137,264 Aqua America, Inc. 4,294,991
------------
8,564,922
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.7%
152,192 Vodafone Group PLC, ADR 4,373,998
------------
TOTAL INVESTMENTS -- 100.0% 659,191,849
(Cost $578,556,501) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 97,714
------------
NET ASSETS -- 100.0% $659,289,563
============
(a) Master Limited Partnership ("MLP").
(b) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $84,401,869 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $3,766,521.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $ 659,191,849 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
Page 46 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND - FVL
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 1.0%
22,389 Spirit AeroSystems Holdings,
Inc., Class A (a) $ 480,916
------------
AIRLINES -- 2.8%
24,134 Delta Air Lines, Inc. (a) 451,547
31,677 SkyWest, Inc. 428,907
33,746 Southwest Airlines Co. 434,986
------------
1,315,440
------------
AUTO COMPONENTS -- 2.2%
32,767 Goodyear Tire & Rubber (The)
Co. (a) 501,007
10,909 Tenneco, Inc. (a) 493,960
------------
994,967
------------
AUTOMOBILES -- 1.1%
4,145 Toyota Motor Corp., ADR 500,136
------------
BIOTECHNOLOGY -- 1.1%
62,969 PDL BioPharma, Inc. 486,121
------------
CAPITAL MARKETS -- 3.9%
20,026 AllianceBernstein Holding LP 416,942
70,211 Fortress Investment Group LLC,
Class A 460,584
33,343 Investment Technology Group,
Inc. (a) 466,135
7,200 State Street Corp. 469,512
------------
1,813,173
------------
CHEMICALS -- 2.1%
47,296 Penford Corp. (a) 633,294
14,006 Tredegar Corp. 359,954
------------
993,248
------------
COMMERCIAL BANKS -- 4.2%
15,044 Popular, Inc. (a) 456,285
23,566 PrivateBancorp, Inc. 499,835
15,339 SunTrust Banks, Inc. 484,252
38,530 Susquehanna Bancshares, Inc. 495,110
------------
1,935,482
------------
COMMERCIAL SERVICES & SUPPLIES
-- 5.2%
10,869 Avery Dennison Corp. 464,758
10,747 Consolidated Graphics, Inc. (a) 505,217
9,498 G&K Services, Inc., Class A 452,105
18,426 Herman Miller, Inc. 498,792
13,645 HNI Corp. 492,175
------------
2,413,047
------------
CONSTRUCTION & ENGINEERING --
2.1%
15,545 AECOM Technology Corp. (a) 494,176
21,037 Dycom Industries, Inc. (a) 486,796
------------
980,972
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
CONSUMER FINANCE -- 1.0%
21,171 SLM Corp. $ 483,969
------------
CONTAINERS & PACKAGING -- 2.1%
12,212 Bemis Co., Inc. 477,977
20,585 Sealed Air Corp. 493,011
------------
970,988
------------
DIVERSIFIED CONSUMER SERVICES --
1.0%
16,033 H&R Block, Inc. 444,916
------------
DIVERSIFIED FINANCIAL SERVICES --
2.1%
9,843 Citigroup, Inc. 472,168
9,163 JPMorgan Chase & Co. 483,715
------------
955,883
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.0%
9,609 BT Group PLC, ADR 451,527
------------
ELECTRIC UTILITIES -- 0.9%
14,477 Otter Tail Corp. 411,147
------------
ELECTRICAL EQUIPMENT -- 1.0%
15,936 Babcock & Wilcox (The) Co. 478,558
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 3.2%
35,828 Checkpoint Systems, Inc. (a) 508,399
35,003 CTS Corp. 477,441
34,410 Sanmina Corp. (a) 493,784
------------
1,479,624
------------
ENERGY EQUIPMENT & SERVICES --
3.2%
8,320 Ensco PLC, Class A 483,559
52,163 TETRA Technologies, Inc. (a) 535,192
8,468 Tidewater, Inc. 482,422
------------
1,501,173
------------
FOOD & STAPLES RETAILING -- 3.8%
13,080 Kroger (The) Co. 451,783
181,401 Rite Aid Corp. (a) 518,807
16,244 Safeway, Inc. 384,333
8,939 Walgreen Co. 395,104
------------
1,750,027
------------
FOOD PRODUCTS -- 2.2%
37,120 Pilgrim's Pride Corp. (a) 554,573
7,087 TreeHouse Foods, Inc. (a) 464,482
------------
1,019,055
------------
GAS UTILITIES -- 1.9%
7,267 National Fuel Gas Co. 421,123
11,409 UGI Corp. 446,206
------------
867,329
------------
See Notes to Financial Statements Page 47
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND - FVL
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.9%
15,491 Greatbatch, Inc. (a) $ 507,950
9,046 Medtronic, Inc. 465,597
18,379 SurModics, Inc. (a) 367,764
------------
1,341,311
------------
HEALTH CARE PROVIDERS & SERVICES
-- 6.3%
40,508 AMN Healthcare Services, Inc. (a) 580,075
14,203 Health Net, Inc. (a) 451,939
9,658 Omnicare, Inc. 460,783
35,975 PharMerica Corp. (a) 498,613
9,687 Tenet Healthcare Corp. (a) 446,571
5,834 WellPoint, Inc. 477,455
------------
2,915,436
------------
HOTELS, RESTAURANTS & LEISURE --
4.0%
25,700 International Game Technology 429,447
29,587 MGM Resorts International (a) 437,296
35,245 Sonic Corp. (a) 513,167
82,292 Wendy's (The) Co. 479,762
------------
1,859,672
------------
HOUSEHOLD DURABLES -- 2.1%
9,662 Harman International Industries,
Inc. 523,680
21,858 Sony Corp., ADR 463,171
------------
986,851
------------
INSURANCE -- 7.3%
22,221 Assured Guaranty Ltd. 490,195
45,479 Genworth Financial, Inc.,
Class A (a) 518,916
10,612 MetLife, Inc. 485,605
12,879 Principal Financial Group, Inc. 482,319
6,641 Prudential Financial, Inc. 484,992
7,066 Reinsurance Group of America,
Inc. 488,331
14,216 XL Group PLC 431,029
------------
3,381,387
------------
INTERNET & CATALOG RETAIL -- 2.1%
16,802 Overstock.com, Inc. (a) 473,816
95,316 ValueVision Media, Inc.,
Class A (a) 487,065
------------
960,881
------------
IT SERVICES -- 1.8%
8,823 Computer Sciences Corp. 386,183
19,940 TeleTech Holdings, Inc. (a) 467,194
------------
853,377
------------
LEISURE EQUIPMENT & PRODUCTS --
2.0%
11,129 Brunswick Corp. 355,571
67,698 Nautilus, Inc. (a) 588,296
------------
943,867
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES --
1.1%
42,945 Albany Molecular Research,
Inc. (a) $ 509,757
------------
MACHINERY -- 1.8%
20,835 Manitowoc (The) Co., Inc. 373,155
66,588 Mueller Water Products, Inc.,
Class A 460,123
------------
833,278
------------
MEDIA -- 1.9%
9,656 Lamar Advertising Co., Class A (a) 419,070
937 Washington Post (The) Co., Class B 453,293
------------
872,363
------------
METALS & MINING -- 1.0%
59,897 Alcoa, Inc. 468,394
------------
MULTI-UTILITIES -- 1.1%
18,852 MDU Resources Group, Inc. 488,455
------------
OIL, GAS & CONSUMABLE FUELS --
3.0%
6,504 Buckeye Partners L.P. (b) 456,320
23,806 Chesapeake Energy Corp. 485,166
6,594 Hess Corp. 438,435
------------
1,379,921
------------
PROFESSIONAL SERVICES -- 1.9%
7,857 Manpowergroup, Inc. 430,564
35,892 Navigant Consulting, Inc. (a) 430,704
------------
861,268
------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.9%
17,348 CBRE Group, Inc., Class A (a) 405,249
------------
ROAD & RAIL -- 0.9%
7,123 Ryder System, Inc. 433,007
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.1%
115,781 Amkor Technology, Inc. (a) 487,438
25,736 OmniVision Technologies, Inc. (a) 479,976
------------
967,414
------------
SPECIALTY RETAIL -- 6.7%
28,544 Big 5 Sporting Goods Corp. 626,541
23,237 Brown Shoe Co., Inc. 500,293
76,366 New York & Co., Inc. (a) 484,924
23,202 Sonic Automotive, Inc., Class A 490,490
35,618 Stein Mart, Inc. 486,186
56,626 Zale Corp. (a) 515,296
------------
3,103,730
------------
TOTAL INVESTMENTS -- 100.0% 46,293,316
(Cost $44,517,569) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% (4,899)
------------
NET ASSETS -- 100.0% $ 46,288,417
============
Page 48 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND - FVL
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
(a) Non-income producing security.
(b) Master Limited Partnership ("MLP").
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $2,351,102 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $575,355.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $ 42,293,316 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
See Notes to Financial Statements Page 49
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2013 (UNAUDITED)
FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR FIRST TRUST
MICROCAP DIVIDEND LEADERS(SM) US IPO
INDEX(SM) FUND INDEX FUND INDEX FUND
(FDM) (FDL) (FPX)
---------------- ------------------- -------------
ASSETS:
Investments, at value.................................................. $ 120,567,188 $ 594,889,073 $ 85,861,256
Cash................................................................... -- 433,033 --
Receivables:
Capital shares sold.............................................. 7,059 -- --
Investment securities sold....................................... 54,747 -- 145,807
Dividends........................................................ 257,254 1,332,180 40,532
Interest......................................................... -- -- --
From investment advisor.......................................... -- -- --
Reclaims......................................................... -- -- --
Securities lending income........................................ -- 10,661
Prepaid expenses....................................................... 4,143 8,113 2,890
--------------- --------------- ------------
TOTAL ASSETS..................................................... 120,890,391 596,662,399 86,061,146
=============== =============== ============
LIABILITIES:
Due to custodian....................................................... 222,653 -- 103,382
Payables:
Capital shares purchased......................................... -- -- --
Investment securities purchased.................................. 7,775 -- --
Investment advisory fees......................................... 42,389 143,021 24,032
Audit and tax fees............................................... 14,618 14,618 14,618
Printing fees.................................................... 3,650 33,114 3,652
Due to authorized participant.................................... 1,758 -- --
Licensing fees................................................... -- 141,749 --
Trustees' fees................................................... -- 4,639 --
Collateral for securities on loan................................ -- -- 3,368,713
Other liabilities...................................................... 35,148 294,370 26,283
TOTAL LIABILITIES................................................ 327,991 631,511 3,540,680
--------------- --------------- ------------
NET ASSETS............................................................. $ 120,562,400 $ 596,030,888 $ 82,520,466
=============== =============== ============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 131,263,254 $ 553,967,524 $ 79,590,705
Par value.............................................................. 45,550 288,500 23,000
Accumulated net investment income (loss)............................... (45,276) (1,395,698) 11,084
Accumulated net realized gain (loss) on investments.................... (23,261,389) (105,316) (7,042,549)
Net unrealized appreciation (depreciation) on investments.............. 12,560,261 43,275,878 9,938,226
--------------- --------------- ------------
NET ASSETS............................................................. $ 120,562,400 $ 596,030,888 $ 82,520,466
=============== =============== ============
NET ASSET VALUE, per share............................................. $ 26.47 $ 20.66 $ 35.88
=============== =============== ============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)....................................... 4,555,000 28,850,002 2,300,002
--------------- --------------- ------------
Investments, at cost................................................... $ 108,006,927 $ 551,613,195 $ 75,923,030
=============== =============== ============
Securities on loan, at value........................................... $ -- $ -- $ 3,287,512
=============== =============== ============
Page 50 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NYSE ARCA DOW JONES CAPITAL VALUE LINE(R) EQUITY VALUE LINE(R) VALUE LINE(R) 100
BIOTECHNOLOGY INTERNET STRENGTH ALLOCATION DIVIDEND EXCHANGE-TRADED
INDEX FUND INDEX(SM) FUND ETF INDEX FUND INDEX FUND FUND
(FBT) (FDN) (FTCS)* (FVI) (FVD) (FVL)
--------------- --------------- --------------- ------------------- ---------------- -----------------
$ 536,032,357 $1,053,353,013 $ 39,347,758 $ 4,406,881 $ 659,191,849 $ 46,293,316
110,740 -- -- 21,096 -- 29,679
159,603,053 4,536,282 -- -- 4,864,135 --
2,037,243 -- -- -- 31,118,950 18,366,627
-- -- 60,548 4,484 1,619,956 27,286
-- 24 -- -- -- --
-- -- -- 3,514 -- --
-- -- -- 496 45,629 502
82,747 -- -- -- -- --
5,819 6,975 2,831 6,318 7,557 3,013
--------------- -------------- --------------- -------------- --------------- -------------
697,871,959 1,057,896,294 39,411,137 4,442,789 696,848,076 64,720,423
--------------- -------------- --------------- -------------- --------------- -------------
-- 236 19,519 -- 458,917 --
-- -- -- -- 12,580,721 --
159,674,283 4,536,710 -- 21,097 23,685,116 18,366,918
130,478 340,123 11,656 -- 251,089 15,716
14,618 14,618 14,618 14,618 14,618 14,618
18,098 42,390 1,529 43 34,689 4,103
-- -- -- -- -- --
66,608 147,256 9,226 1,652 245,186 18,598
-- 874 -- -- 3,297 --
37,905,525 -- -- -- -- --
140,033 396,580 15,209 2,156 284,880 12,053
--------------- -------------- --------------- -------------- --------------- -------------
197,949,643 5,478,787 71,757 39,566 37,558,513 18,432,006
--------------- -------------- --------------- -------------- --------------- -------------
$ 499,922,316 $1,052,417,507 $ 39,339,380 $ 4,403,223 $ 659,289,563 $ 46,288,417
=============== ============== =============== ============== =============== =============
$ 493,451,718 $ 942,497,174 $ 59,126,073 $ 9,806,194 $ 608,910,364 $ 134,936,116
86,000 232,000 13,500 2,000 338,880 30,400
(345,425) (1,414,379) 7,642 (1,278) 323,592 (16,568)
(35,767,481) (22,776,225) (20,046,720) (5,797,300) (30,918,621) (90,437,278)
42,497,504 133,878,937 238,885 393,607 80,635,348 1,775,747
--------------- --------------- --------------- -------------- --------------- -------------
$ 499,922,316 $1,052,417,507 $ 9,339,380 $ 4,403,223 $ 659,289,563 $ 46,288,417
=============== ============== =============== ============== =============== =============
$ 58.13 $ 45.36 $ 29.14 $ 22.02 $ 19.45 $ 15.23
=============== ============== =============== ============== =============== =============
8,600,002 23,200,002 1,350,002 200,002 33,887,986 3,039,982
--------------- -------------- --------------- -------------- --------------- -------------
$ 493,534,853 $ 919,474,076 $ 39,108,873 $ 4,013,274 $ 578,556,501 $ 44,517,569
=============== ============== =============== ============== =============== =============
$ 36,874,565 $ -- $ -- $ -- $ -- $ --
=============== ============== =============== ============== =============== =============
* Formerly First Trust Strategic Value Index Fund
See Notes to Financial Statements Page 51
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2013 (UNAUDITED)
FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR FIRST TRUST
MICROCAP DIVIDEND LEADERS(SM) US IPO
INDEX(SM) FUND INDEX FUND INDEX FUND
(FDM) (FDL) (FPX)
---------------- ------------------- --------------
INVESTMENT INCOME:
Dividends........................................................ $ 684,373 $ 12,151,768 $ 396,760
Foreign tax withholding.......................................... (2,862) -- (1,863)
Interest......................................................... -- -- --
Securities lending income (net of fees).......................... -- -- 49,287
-------------- -------------- ------------
Total investment income...................................... 681,511 12,151,768 444,184
-------------- -------------- ------------
EXPENSES:
Investment advisory fees........................................ 188,131 879,983 126,341
Licensing fees.................................................. 23,761 265,960 24,796
Accounting and administration fees.............................. 21,199 148,479 17,194
Audit and tax fees.............................................. 11,368 11,368 11,368
Custodian fees.................................................. 4,703 36,666 3,947
Legal fees...................................................... 4,251 55,357 2,429
Registration and filing fees.................................... 4,251 (5,690) 2,757
Listing fees.................................................... 4,043 5,282 3,870
Printing fees................................................... 2,491 31,964 5,987
Trustees' fees and expenses..................................... 2,139 16,476 3,102
Transfer agent fees............................................. 1,881 14,666 1,579
Expenses previously waived or reimbursed........................ -- -- --
Other expenses.................................................. 1,282 13,850 660
-------------- -------------- ------------
Total expenses............................................... 269,500 1,474,361 204,030
Less fees waived and expenses reimbursed by the investment advisor (43,742) (154,386) (14,520)
-------------- -------------- ------------
Net expenses................................................. 225,758 1,319,975 189,510
-------------- -------------- ------------
NET INVESTMENT INCOME (LOSS).................................... 455,753 10,831,793 254,674
-------------- -------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.................................................. 420,327 (9,351,282) (343,737)
In-kind redemptions........................................... -- 45,893,200 --
-------------- -------------- ------------
Net realized gain (loss)........................................ 420,327 36,541,918 (343,737)
Net change in unrealized appreciation (depreciation) on investments 9,346,823 26,866,058 7,593,697
-------------- -------------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)......................... 9,767,150 63,407,976 7,249,960
-------------- -------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................................. $ 10,222,903 $ 74,239,769 $ 7,504,634
============== ============== ============
Page 52 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NYSE ARCA DOW JONES CAPITAL VALUE LINE(R) VALUE LINE(R) VALUE LINE(R) 100
BIOTECHNOLOGY INTERNET STRENGTH EQUITY ALLOCATION DIVIDEND EXCHANGE-TRADED
INDEX FUND INDEX(SM) FUND ETF INDEX FUND INDEX FUND FUND
(FBT) (FDN) (FTCS)* (FVI) (FVD) (FVL)
--------------- --------------- --------------- ------------------- ---------------- ----------------
$ 142,803 $ 1,135,979 $ 369,445 $ 36,710 $ 10,372,969 $ 200,580
-- -- -- (546) (161,273) (2,010)
-- 74 -- 1 1 --
396,133 -- -- -- -- --
--------------- -------------- --------------- --------------- -------------- -------------
538,936 1,136,053 369,445 36,165 10,211,697 198,570
--------------- -------------- --------------- --------------- -------------- -------------
589,575 1,800,839 86,904 10,571 1,495,327 116,760
117,915 280,842 17,381 3,266 455,597 37,028
74,620 226,138 9,717 2,705 151,558 12,952
11,368 11,368 11,368 11,368 11,368 11,368
18,424 56,276 2,173 264 37,383 2,919
23,415 54,936 3,086 338 49,379 4,386
2,146 18,361 -- -- (4,266) --
4,043 4,043 3,870 11,309 12,548 11,301
15,396 43,781 2,472 231 35,659 2,643
6,545 19,080 2,606 2,006 15,589 2,082
7,370 22,510 869 106 14,953 1,168
6,947 -- -- -- -- --
6,597 12,258 2,542 211 11,639 1,396
--------------- -------------- --------------- --------------- -------------- -------------
884,361 2,550,432 142,988 42,375 2,286,734 204,003
-- -- (30,013) (27,575) (193,276) (40,539)
--------------- -------------- --------------- --------------- -------------- -------------
884,361 2,550,432 112,975 14,800 2,093,458 163,464
--------------- -------------- --------------- --------------- -------------- -------------
(345,425) (1,414,379) 256,470 21,365 8,118,239 35,106
--------------- -------------- --------------- --------------- -------------- -------------
(10,422,521) (10,143,496) 1,768,670 340,611 1,162,175 3,665,213
15,588,952 31,301,502 4,444,965 -- 27,940,743 2,511,594
--------------- -------------- --------------- --------------- -------------- -------------
5,166,431 21,158,006 6,213,635 340,611 29,102,918 6,176,807
60,570,753 96,839,122 (1,641,342) 194,815 35,325,922 479,412
--------------- -------------- --------------- --------------- -------------- -------------
65,737,184 117,997,128 4,572,293 535,426 64,428,840 6,656,219
--------------- -------------- --------------- --------------- -------------- -------------
$ 65,391,759 $ 116,582,749 $ 4,828,763 $ 556,791 $ 72,547,079 $ 6,691,325
=============== ============== =============== =============== ============== =============
* Formerly First Trust Strategic Value Index Fund
See Notes to Financial Statements Page 53
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR
MICROCAP DIVIDEND LEADERS(SM)
INDEX(SM) FUND INDEX FUND
(FDM) (FDL)
---------------------------------- ----------------------------------
For the For the
Six Months Ended For the Year Six Months Ended For the Year
6/30/2013 Ended 6/30/2013 Ended
(Unaudited) 12/31/2012 (Unaudited) 12/31/2012
----------------- --------------- ---------------- --------------
OPERATIONS:
Net investment income (loss)................... $ 455,753 $ 686,521 $ 10,831,793 $ 21,556,084
Net realized gain (loss)....................... 420,327 7,014,919 36,541,918 36,567,636
Net change in unrealized appreciation
(depreciation) 9,346,823 (272,013) 26,866,058 (13,133,879)
------------ -------------- -------------- --------------
Net increase (decrease) in net assets resulting
resulting from operations................. 10,222,903 7,429,427 74,239,769 44,989,841
------------ -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.......................... (440,466) (763,985) (12,227,491) (21,586,886)
------------ -------------- -------------- --------------
Total distributions to shareholders............ (440,466) (763,985) (12,227,491) (21,586,886)
------------ -------------- -------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold...................... 69,498,589 21,606,716 224,715,073 391,010,969
Cost of shares redeemed........................ -- (39,318,667) (236,213,408) (315,926,513)
------------ -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions............. 69,498,589 (17,711,951) (11,498,335) 75,084,456
------------ -------------- -------------- --------------
Total increase (decrease) in net assets........ 79,281,026 (11,046,509) 50,513,943 98,487,411
NET ASSETS:
Beginning of period............................ 41,281,374 52,327,883 545,516,945 447,029,534
------------ -------------- -------------- --------------
End of period.................................. $120,562,400 $ 41,281,374 $ 596,030,888 $ 545,516,945
============ ============== ============== ==============
Accumulated net investment income (loss)
at end of period........................... $ (45,276) $ (60,563) $ (1,395,698) $ --
============ ============== ============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period........ 1,805,000 2,605,000 29,550,002 25,450,002
Shares sold.................................... 2,750,000 1,000,000 10,950,000 21,300,000
Shares redeemed................................ -- (1,800,000) (11,650,000) (17,200,000)
------------ -------------- -------------- --------------
Shares outstanding, end of period.............. 4,555,000 1,805,000 28,850,002 29,550,002
============ ============== ============== ==============
Page 54 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
FIRST TRUST NYSE ARCA DOW JONES
US IPO BIOTECHNOLOGY INTERNET
INDEX FUND INDEX FUND INDEX(SM) FUND
(FPX) (FBT) (FDN)
------------------------------- ----------------------------- -------------------------------
For the For the For the
Six Months For the Six Months For the Six Months
Ended Year Ended Year Ended For the Year
6/30/2013 Ended 6/30/2013 Ended 6/30/2013 Ended
(Unaudited) 12/31/2012 (Unaudited) 12/31/2012 (Unaudited) 12/31/2012
------------------------------- ----------------------------- -------------------------------
$ 254,674 $ 235,387 $ (345,425) $ (1,138,584) $ (1,414,379) $ (1,147,910)
(343,737) 2,888,044 5,166,431 3,450,148 21,158,006 2,210,382
7,593,697 1,595,084 60,570,753 69,354,260 96,839,122 87,556,216
------------ ------------ ------------ ------------ ------------ -------------
7,504,634 4,718,515 65,391,759 71,665,824 116,582,749 88,618,688
------------ ------------ ------------ ------------ ------------ -------------
(243,590) (267,146) -- -- -- --
------------ ------------ ------------ ------------ ------------ -------------
(243,590) (267,146) -- -- -- --
------------ ------------ ------------ ------------ ------------ -------------
50,600,041 17,551,471 236,237,890 128,745,653 467,591,485 160,053,757
-- (12,937,294) (41,152,514) (143,996,259) (89,638,271) (210,474,282)
------------ ------------ ------------ ------------ ------------ -------------
50,600,041 4,614,177 195,085,376 (15,250,606) 377,953,214 (50,420,525)
------------ ------------ ------------ ------------ ------------ -------------
57,861,085 9,065,546 260,477,135 56,415,218 494,535,963 38,198,163
24,659,381 15,593,835 239,445,181 183,029,963 557,881,544 519,683,381
------------ ------------ ------------ ------------ -------------- -------------
$ 82,520,466 $ 24,659,381 $499,922,316 $239,445,181 $1,052,417,507 $ 557,881,544
============ ============ ============ ============ ============== =============
$ 11,084 $ -- $ (345,425) $ -- $ (1,414,379) $ --
============ ============ ============ ============ ============== =============
800,002 650,002 5,200,002 5,600,002 14,300,002 16,100,002
1,500,000 600,000 4,150,000 3,000,000 10,950,000 4,400,000
-- (450,000) (750,000) (3,400,000) (2,050,000) (6,200,000)
------------ ------------ ------------ ------------ -------------- -------------
2,300,002 800,002 8,600,002 5,200,002 23,200,002 14,300,002
============ ============ ============ ============ ============== =============
See Notes to Financial Statements Page 55
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST FIRST TRUST
CAPITAL STRENGTH VALUE LINE(R) EQUITY ALLOCATION
ETF INDEX FUND
(FTCS)* (FVI)
---------------------------------- ----------------------------------
For the For the
Six Months Ended For the Year Six Months Ended For the Year
6/30/2013 Ended 6/30/2013 Ended
(Unaudited) 12/31/2012 (Unaudited) 12/31/2012
----------------- --------------- ---------------- --------------
OPERATIONS:
Net investment income (loss)................... $ 256,470 $ 599,178 $ 21,365 $ 85,054
Net realized gain (loss)....................... 6,213,635 2,196,767 340,611 195,615
Net change in unrealized appreciation
(depreciation) (1,641,342) 2,281,414 194,815 (10,096)
------------ -------------- -------------- --------------
Net increase (decrease) in net assets
resulting from operations................. 4,828,763 5,077,359 556,791 270,573
------------ -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.......................... (256,875) (591,636) (21,900) (97,326)
------------ -------------- -------------- --------------
Total distributions to shareholders............ (256,875) (591,636) (21,900) (97,326)
------------ -------------- -------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold...................... 31,277,124 14,561,038 -- 4,818,770
Cost of shares redeemed........................ (29,216,822) (17,982,092) -- (7,480,560)
------------ -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions............. 2,060,302 (3,421,054) -- (2,661,790)
------------ -------------- -------------- --------------
Total increase (decrease) in net assets....... 6,632,190 1,064,669 534,891 (2,488,543)
NET ASSETS:
Beginning of period............................ 32,707,190 31,642,521 3,868,332 6,356,875
------------ -------------- -------------- --------------
End of period.................................. $ 39,339,380 $ 32,707,190 $ 4,403,223 $ 3,868,332
============ ============== ============== ==============
Accumulated net investment income (loss)
at end of period.......................... $ 7,642 $ 8,047 $ (1,278) $ (743)
============ ============== ============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period........ 1,300,002 1,450,002 200,002 350,002
Shares sold.................................... 1,050,000 600,000 -- 250,000
Shares redeemed................................ (1,000,000) (750,000) -- (400,000)
------------ -------------- -------------- --------------
Shares outstanding, end of period.............. 1,350,002 1,300,002 200,002 200,002
============ ============== ============== ==============
* Formerly First Trust Strategic Value Index Fund
Page 56 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
VALUE LINE(R) DIVIDEND VALUE LINE(R) 100
INDEX FUND EXCHANGE-TRADED FUND
(FVD) (FVL)
------------------------------- -------------------------------
For the For the
Six Months Ended For the Year Six Months Ended For the Year
6/30/2013 Ended 6/30/2013 Ended
(Unaudited) 12/31/2012 (Unaudited) 12/31/2012
---------------- ------------- ---------------- -------------
$ 8,118,239 $ 13,995,661 $ 35,106 $ 545,050
29,102,918 26,191,709 6,176,807 4,001,661
35,325,922 7,088,311 479,412 (396,300)
-------------- ------------- -------------- -------------
72,547,079 47,275,681 6,691,325 4,150,411
-------------- ------------- -------------- -------------
(7,830,492) (13,920,854) (51,984) (559,524)
-------------- ------------- -------------- -------------
(7,830,492) (13,920,854) (51,984) (559,524)
-------------- ------------- -------------- -------------
272,024,369 304,870,331 11,052,883 61,932,673
(185,554,634) (196,520,474) (17,038,685) (75,431,362)
-------------- ------------- -------------- -------------
86,469,735 108,349,857 (5,985,802) (13,498,689)
-------------- ------------- -------------- -------------
151,186,322 141,704,684 653,539 (9,907,802)
508,103,241 366,398,557 45,634,878 55,542,680
-------------- ------------- -------------- -------------
$ 659,289,563 $ 508,103,241 $ 46,288,417 $ 45,634,878
============== ============= ============== =============
$ 323,592 $ 35,845 $ (16,568) $ 310
============== ============= ============== =============
29,387,986 22,887,986 3,439,982 4,489,982
14,200,000 18,150,000 750,000 4,600,000
(9,700,000) (11,650,000) (1,150,000) (5,650,000)
-------------- ------------- -------------- -------------
33,887,986 29,387,986 3,039,982 3,439,982
============= ============= ============== =============
See Notes to Financial Statements Page 57
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND - FDM
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
---------------- ---------- ---------- ---------- ---------- -----------
Net asset value, beginning of period $ 22.87 $ 20.09 $ 22.17 $ 17.70 $ 14.74 $ 22.35
----------- ---------- ---------- ---------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.14 0.35 0.10 0.09 0.09 0.17
Net realized and unrealized gain (loss) 3.57 2.83 (2.02) 4.46 2.97 (7.60)
----------- ---------- ---------- ---------- -------- ---------
Total from investment operations 3.71 3.18 (1.92) 4.55 3.06 (7.43)
----------- ---------- ---------- ---------- -------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.11) (0.40) (0.16) (0.08) (0.10) (0.17)
Return of capital -- -- -- -- (0.00)(a) (0.01)
----------- ---------- ---------- ---------- -------- ---------
Total distributions (0.11) (0.40) (0.16) (0.08) (0.10) (0.18)
----------- ---------- ---------- ---------- -------- ---------
Net asset value, end of period $ 26.47 $ 22.87 $ 20.09 $ 22.17 $ 17.70 $ 14.74
=========== ========== ========== ========== ========= =========
TOTAL RETURN (b) 16.24% 15.86% (8.69)% 25.77% 20.85% (33.33)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 120,562 $ 41,281 $ 52,328 $ 153,050 $ 18,679 $ 14,077
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.72%(c) 0.76% 0.71% 0.86% 0.94% 1.05%
Ratio of net expenses to average net
assets 0.60%(c) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 1.21%(c) 1.38% 0.40% 0.94% 0.69% 0.79%
Portfolio turnover rate (d) 6% 71% 59% 86% 86% 85%
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND - FDL
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
---------------- ---------- ---------- ---------- ---------- -----------
Net asset value, beginning of period $ 18.46 $ 17.57 $ 15.92 $ 14.27 $ 13.09 $ 20.20
----------- ---------- ---------- ---------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.33 0.71 0.61 0.57 0.56 0.83
Net realized and unrealized gain (loss) 2.24 0.89 1.65 1.66 1.19 (7.13)
----------- ---------- ---------- ---------- -------- ---------
Total from investment operations 2.57 1.60 2.26 2.23 1.75 (6.30)
----------- ---------- ---------- ---------- -------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.37) (0.71) (0.61) (0.58) (0.57) (0.81)
Return of capital -- -- -- (0.00)(a) -- --
----------- ---------- ---------- ---------- -------- ---------
Total distributions (0.37) (0.71) (0.61) (0.58) (0.57) (0.81)
----------- ---------- ---------- ---------- -------- ---------
Net asset value, end of period $ 20.66 $ 18.46 $ 17.57 $ 15.92 $ 14.27 $ 13.09
=========== ========== ========== ========== ======== =========
TOTAL RETURN (b) 13.96% 9.14% 14.44% 16.05% 14.24% (31.71)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 596,031 $ 545,517 $ 447,030 $ 143,294 $ 48,505 $ 43,196
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.50%(c) 0.51% 0.56% 0.66% 0.79% 0.72%
Ratio of net expenses to average net
assets 0.45%(c) 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of net investment income (loss) to
average net assets 3.69%(c) 3.88% 3.98% 4.22% 4.64% 5.07%
Portfolio turnover rate (d) 32% 31% 27% 30% 81% 56%
(a) Amount represents less than $0.01 per share.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 58 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST US IPO INDEX FUND - FPX
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
---------------- ---------- ---------- ---------- ---------- -----------
Net asset value, beginning of period $ 30.82 $ 23.99 $ 23.51 $ 20.08 $ 14.09 $ 25.36
----------- ---------- ---------- ---------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.12 0.31 0.18 0.20 0.59 0.15
Net realized and unrealized gain (loss) 5.05 6.87 0.55 3.45 5.72 (11.27)
----------- ---------- ---------- ---------- -------- ---------
Total from investment operations 5.17 7.18 0.73 3.65 6.31 (11.12)
----------- ---------- ---------- ---------- -------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.11) (0.35) (0.25) (0.22) (0.32) (0.14)
Return of capital -- -- -- -- -- (0.01)
----------- ---------- ---------- ---------- -------- ---------
Total distributions (0.11) (0.35) (0.25) (0.22) (0.32) (0.15)
----------- ---------- ---------- ---------- -------- ---------
Net asset value, end of period $ 35.88 $ 30.82 $ 23.99 $ 23.51 $ 20.08 $ 14.09
=========== ========== ========== ========== ======== =========
TOTAL RETURN (a) 16.79% 30.01% 3.11% 18.28% 44.93% (43.88)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 82,520 $ 24,659 $ 15,594 $ 15,283 $ 11,043 $ 8,454
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.65%(b) 1.01% 1.01% 1.32% 1.34% 1.02%
Ratio of net expenses to average net
assets 0.60%(b) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.81%(b) 1.27% 0.70% 1.28% 3.59% 0.50%
Portfolio turnover rate (c) 22% 48% 44% 43% 30% 62%
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND - FBT
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
---------------- ---------- ---------- ---------- ---------- -----------
Net asset value, beginning of period $ 46.05 $ 32.68 $ 39.07 $ 28.54 $ 19.70 $ 24.41
----------- ---------- ---------- ---------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.04) (0.22) (0.30) (0.17) (0.16) 0.18
Net realized and unrealized gain (loss) 12.12 13.59 (6.09) 10.70 9.00 (4.62)
----------- ---------- ---------- ---------- -------- ---------
Total from investment operations 12.08 13.37 (6.39) 10.53 8.84 (4.44)
----------- ---------- ---------- ---------- -------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- -- -- -- -- (0.18)
Return of capital -- -- -- -- -- (0.09)
----------- ---------- ---------- ---------- -------- ---------
Total distributions -- -- -- -- -- (0.27)
----------- ---------- ---------- ---------- -------- ---------
Net asset value, end of period $ 58.13 $ 46.05 $ 32.68 $ 39.07 $ 28.54 $ 19.70
=========== ========== ========== ========== ======== =========
TOTAL RETURN (A) 26.23% 40.91% (16.36)% 36.90% 44.87% (18.33)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 499,922 $ 239,445 $ 183,030 $ 201,220 $ 67,068 $ 59,097
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.60%(b) 0.61% 0.61% 0.66% 0.72% 0.72%
Ratio of net expenses to average net
assets 0.60%(b) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets (0.23)%(b) (0.48)% (0.54)% (0.60)% (0.60)% 0.67%
Portfolio turnover rate (c) 12% 39% 44% 35% 44% 38%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
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) Annualized.
(c) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 59
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND - FDN
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
---------------- ---------- ---------- ---------- ---------- -----------
Net asset value, beginning of period $ 39.01 $ 32.28 $ 34.27 $ 25.11 $ 14.01 $ 25.09
----------- ---------- ---------- ---------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.06) (0.08) (0.10) 0.04 (0.05) 0.05
Net realized and unrealized gain (loss) 6.41 6.81 (1.87) 9.16 11.15 (11.08)
----------- ---------- ---------- ---------- -------- ---------
Total from investment operations 6.35 6.73 (1.97) 9.20 11.10 (11.03)
----------- ---------- ---------- ---------- -------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- -- (0.02) (0.04) -- (0.05)
Return of capital -- -- -- -- -- (0.00)(a)
----------- ---------- ---------- ---------- -------- ---------
Total distributions -- -- (0.02) (0.04) -- (0.05)
----------- ---------- ---------- ---------- -------- ---------
Net asset value, end of period $ 45.36 $ 39.01 $ 32.28 $ 34.27 $ 25.11 $ 14.01
=========== ========== ========== ========== ======== =========
TOTAL RETURN (b) 16.28% 20.85% (5.74)% 36.63% 79.23% (44.02)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,052,418 $ 557,882 $ 519,683 $ 589,480 $ 86,615 $ 14,708
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.57%(c) 0.60% 0.60% 0.66% 0.73% 0.82%
Ratio of net expenses to average net
assets 0.57%(c) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets (0.31)%(c) (0.23)% (0.25)% 0.26% (0.46)% 0.21%
Portfolio turnover rate (d) 8% 33% 18% 16% 35% 44%
FIRST TRUST CAPITAL STRENGTH ETF - FTCS*
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
---------------- ---------- ---------- ---------- ---------- -----------
Net asset value, beginning of period $ 25.16 $ 21.82 $ 22.90 $ 20.47 $ 14.90 $ 24.12
----------- ---------- ---------- ---------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.20 0.45 0.35 0.39 0.28 0.28
Net realized and unrealized gain (loss) 3.99 3.34 (1.01) 2.44 5.57 (9.22)
----------- ---------- ---------- ---------- -------- ---------
Total from investment operations 4.19 3.79 (0.66) 2.83 5.85 (8.94)
----------- ---------- ---------- ---------- -------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.21) (0.45) (0.42) (0.40) (0.28) (0.28)
Return of capital -- -- -- (0.00)(a) -- --
----------- ---------- ---------- ---------- -------- ---------
Total distributions (0.21) (0.45) (0.42) (0.40) (0.28) (0.28)
----------- ---------- ---------- ---------- -------- ---------
Net asset value, end of period $ 29.14 $ 25.16 $ 21.82 $ 22.90 $ 20.47 $ 14.90
=========== ========== ========== ========== ======== =========
TOTAL RETURN (b) 16.65% 17.45% (2.94)% 14.04% 39.43% (37.23)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 39,339 $ 32,707 $ 31,643 $ 36,633 $ 51,164 $ 35,762
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.82% (c) 0.83% 0.82% 0.86% 0.87% 0.72%
Ratio of net expenses to average net
assets 0.65% (c) 0.65% 0.65% 0.65% 0.65% 0.65%
Ratio of net investment income (loss) to
average net assets 1.48%(c) 1.84% 1.51% 1.58% 1.57% 1.31%
Portfolio turnover rate (d) 146% 84% 114% 197% 171% 157%
* Formerly First Trust Strategic Value Index Fund
(a) Amount represents less than $0.01 per share.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 60 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND - FVI
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
---------------- ---------- ---------- ---------- ---------- -----------
Net asset value, beginning of period $ 19.34 $ 18.16 $ 20.30 $ 17.21 $ 12.98 $ 20.45
----------- ---------- ---------- ---------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.11 0.34 0.21 0.29 0.18 0.25
Net realized and unrealized gain (loss) 2.68 1.24 (2.14) 3.09 4.23 (7.47)
----------- ---------- ---------- ---------- -------- ---------
Total from investment operations 2.79 1.58 (1.93) 3.38 4.41 (7.22)
----------- ---------- ---------- ---------- -------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.11) (0.40) (0.21) (0.29) (0.18) (0.25)
----------- ---------- ---------- ---------- -------- ---------
Net asset value, end of period $ 22.02 $ 19.34 $ 18.16 $ 20.30 $ 17.21 $ 12.98
=========== ========== ========== ========== ======== =========
TOTAL RETURN (a) 14.43% 8.74% (9.56)% 19.85% 34.15% (35.45)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 4,403 $ 3,868 $ 6,357 $ 7,106 $ 6,885 $ 5,841
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 2.00%(b) 1.85% 1.39% 1.35% 1.24% 1.14%
Ratio of net expenses to average net
assets 0.70%(b) 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.01%(b) 1.64% 1.05% 1.29% 1.24% 1.29%
Portfolio turnover rate (c) 98% 203% 184% 205% 191% 120%
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND - FVD
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
---------------- ----------- ----------- ---------- ---------- -----------
Net asset value, beginning of period $ 17.29 $ 16.01 $ 15.08 $ 13.37 $ 11.55 $ 15.75
----------- ----------- ----------- ----------- --------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.25 0.50 0.42 0.41 (d) 0.38 0.45
Net realized and unrealized gain (loss) 2.15 1.28 0.93 1.71 1.82 (4.20)
----------- ----------- ----------- ----------- --------- -----------
Total from investment operations 2.40 1.78 1.35 2.12 2.20 (3.75)
----------- ----------- ----------- ----------- --------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.24) (0.50) (0.42) (0.40) (0.38) (0.45)
Return of capital -- -- -- (0.01) -- --
----------- ----------- ----------- ----------- --------- -----------
Total distributions to shareholders (0.24) (0.50) (0.42) (0.41) (0.38) (0.45)
----------- ----------- ----------- ----------- --------- -----------
Net asset value, end of period $ 19.45 $ 17.29 $ 16.01 $ 15.08 $ 13.37 $ 11.55
=========== =========== =========== =========== ========= ===========
TOTAL RETURN (a) 13.89% 11.17% 9.03% 16.08% 19.58% (24.17)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 6 59,290 $ 508,103 $ 366,399 $ 218,510 $ 153,618 $ 115,403
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.76% (b) 0.78% 0.79% 0.84% 0.80% 0.84%
Ratio of net expenses to average net
assets 0.70% (b) 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 2.71% (b) 3.03% 2.84% 2.94% 3.30% 3.20%
Portfolio turnover rate (c) 47% 54% 53% 55% 101% 109%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
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) Annualized.
(c) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(d) Per share amounts have been calculated using the average share method.
See Notes to Financial Statements Page 61
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND -- FVL
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
---------------- ----------- ----------- ---------- ---------- -----------
Net asset value, beginning of period $ 13.27 $ 12.37 $ 13.52 $ 10.44 $ 9.26 $ 17.91
----------- ----------- ----------- ----------- ------------ -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.01 0.15 0.08 0.00 (a) (0.01) (0.02)
Net realized and unrealized gain (loss) 1.97 0.90 (1.15) 3.08 1.19 (8.63)
----------- ----------- ----------- ----------- ------------ -----------
Total from investment operations 1.98 1.05 (1.07) 3.08 1.18 (8.65)
----------- ----------- ----------- ----------- ------------ -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.02) (0.15) (0.08) -- -- --
----------- ----------- ----------- ----------- ------------ -----------
Net asset value, end of period $ 15.23 $ 13.27 $ 12.37 $ 13.52 $ 10.44 $ 9.26
=========== =========== =========== =========== ============ ===========
TOTAL RETURN (b) 14.90% 8.53% (7.92)% 29.50% 12.74% (48.30)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 46,288 $ 45,635 $ 55,543 $ 88,431 $ 60,433 $ 75,825
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.87% (c) 0.87% 0.82% 0.87% 0.85% 0.86%
Ratio of net expenses to average net
assets 0.70% (c) 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 0.15% (c) 1.03% 0.47% 0.01% (0.08)% (0.11)%
Portfolio turnover rate (d) 176% 304% 202% 266% 235% 251%
(a) Amount represents less than $0.01 per share.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
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 or expenses reimbursed by the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 62 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on August 8,
2003, and is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of nineteen exchange-traded funds. This report
covers the nine funds listed below:
First Trust Dow Jones Select MicroCap Index(SM) Fund - (NYSE Arca, Inc.
("NYSE Arca") ticker "FDM")
First Trust Morningstar Dividend Leaders(SM) Index Fund - (NYSE Arca
ticker "FDL")
First Trust US IPO Index Fund - (NYSE Arca ticker "FPX")
First Trust NYSE Arca Biotechnology Index Fund - (NYSE Arca ticker "FBT")
First Trust Dow Jones Internet Index(SM) Fund - (NYSE Arca ticker "FDN")
First Trust Capital Strength ETF(1) - (The NASDAQ(R)- Stock Market, LLC
("NASDAQ") ticker "FTCS")(2)
First Trust Value Line(R) Equity Allocation Index Fund - (NYSE Arca ticker
"FVI")
First Trust Value Line(R) Dividend Index Fund - (NYSE Arca ticker "FVD")
First Trust Value Line(R) 100 Exchange-Traded Fund - (NYSE Arca ticker
"FVL")
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." Creation Units are issued and redeemed principally in-kind
for securities included in a Fund's relevant index. Except when aggregated in
Creation Units, shares are not redeemable securities of a Fund. 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:
(1) Formerly First Trust Strategic Value Index Fund.
(2) Formerly NYSE Arca ticker "FDV."
FUND INDEX
First Trust Dow Jones Select MicroCap Index(SM) Fund Dow Jones Select MicroCap Index(SM)
First Trust Morningstar Dividend Leaders(SM) Index Fund Morningstar(R) Dividend Leaders(SM) Index
First Trust US IPO Index Fund IPOX(R)-100 U.S. Index
First Trust NYSE Arca Biotechnology Index Fund NYSE Arca Biotechnology Index(SM)
First Trust Dow Jones Internet Index(SM) Fund Dow Jones Internet Composite Index(SM)
First Trust Capital Strength ETF The Capital Strength Index (3)
First Trust Value Line(R) Equity Allocation Index Fund Value Line(R) Equity Allocation
Index(TM) First Trust Value Line(R) Dividend Index Fund Value Line(R) Dividend
Index(TM) First Trust Value Line(R) 100 Exchange-Traded Fund Value Line(R) 100 Index(TM)
(3) Effective June 3, 2013, the Fund's underlying index was changed from
Credit Suisse U.S. Value Index, Powered by HOLT(TM).
2. SIGNIFICANT ACCOUNTING POLICIES
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. The NAV is calculated by dividing the value of all
assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses and dividends declared but unpaid), by
the total number of shares outstanding.
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 in
accordance with valuation procedures adopted by the Trust's Board of Trustees
and in accordance with the 1940 Act. Each Fund's securities will be 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
Page 63
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
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.
Securities traded in an over-the-counter market are valued at the closing
bid prices.
Short-term investments that mature in less than 60 days when purchased are
valued at amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Board of Trustees or its delegate
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 pricing
service is unable to provide a market price; securities whose trading has been
formally suspended; a security whose market 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 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. The use of fair value prices by a Fund
generally results in prices used by the Fund that may differ from current market
quotations or official closing prices on the applicable exchange. 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 pricing
services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
In addition, differences between the prices used to calculate a Fund's NAV and
the prices used by such Fund's corresponding index could result in a difference
between the Fund's performance and the performance of its underlying index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets that
are non-active. A non-active market is a market where there are few
transactions for the investment, the prices are not current, or
price quotations vary substantially either over time or among market
makers, or in which little information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves observable
at commonly quoted intervals, volatilities, prepayment speeds, loss
severities, credit risks, and default rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs
may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of June 30, 2013, is
included with each Fund's Portfolio of Investments.
B. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Page 64
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
C. Offsetting on the Statements of Assets and Liabilities
In December 2011, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update No. 2011-11 "Disclosures about Offsetting Assets and
Liabilities" ("ASU 2011-11"). This disclosure requirement is 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. ASU
2011-11 requires entities to disclose both gross and net information about both
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. In addition, in January 2013, FASB issued Accounting
Standards Update No. 2013-1 "Clarifying the Scope of Offsetting Assets and
Liabilities" ("ASU 2013-1"), specifying exactly which transactions are subject
to offsetting disclosures. The scope of the disclosure requirements is limited
to derivative instruments, repurchase agreements and reverse repurchase
agreements, and securities borrowing and securities lending transactions. ASU
2011-11 and ASU 2013-1 are effective for financial statements with fiscal years
beginning on or after January 1, 2013, and interim periods within those fiscal
years.
The Funds adopted the disclosure requirement on netting for the current
reporting period. 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 or similar
agreements on the Statements of Assets and Liabilities.
D. Securities Lending
The Funds may lend securities representing up to 33 1/3% of the value of their
total assets to broker-dealers, banks and other institutions to generate
additional income. When a Fund loans its portfolio securities, it will receive,
at the inception of each loan, collateral equal to at least 102% (for domestic
securities) or 105% (for international securities) of the market value of the
loaned securities. The collateral amount is valued at the beginning of each
business day and is compared to the market value of the loaned securities from
the prior business day to determine if additional collateral is required. If
additional collateral is required, a request is sent to the borrower. Securities
lending involves the risk that the Fund may lose money because the borrower of
the Fund's loaned securities fails to return the securities in a timely manner
or at all. The Fund could also lose money in the event of (i) a decline in the
value of the collateral provided for the loaned securities, (ii) a decline in
the value of any investments made with cash collateral or (iii) an increase in
the value of the loaned securities if the borrower does not increase the
collateral accordingly and the borrower fails to return the securities. These
events could also trigger adverse tax consequences for the Funds.
Under the Funds' securities lending 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 in
the form of fees or interest on the investment of any cash received as
collateral. The dividend and interest earned on the securities loaned is
accounted for in the same manner as other dividend and interest income. At June
30, 2013, only FPX and FBT have securities 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, the Funds sustain losses as a result of a borrower's
default, BBH indemnifies the Funds by purchasing replacement securities at its
expense, or paying the Funds an amount equal to the market value of the
replacement securities, subject to certain limitations which are set forth in
detail in the Securities Lending Agency Agreement between the Trust on behalf of
the Funds and BBH.
E. Repurchase Agreements
Repurchase agreements involve the purchase of securities subject to the seller's
agreement to repurchase the securities at a mutually agreed upon date and price,
under the terms of a Master Repurchase Agreement ("MRA"). During the term of a
repurchase agreement, the value of the underlying securities held as collateral
on behalf of a Fund, including accrued interest, is required to exceed the value
of the repurchase agreement, including accrued interest. The underlying
securities for all repurchase agreements are held at the Funds' custodian or
designated sub-custodians under tri-party repurchase agreements.
MRAs govern transactions between a Fund and select counterparties. The MRAs
maintain provisions for, among other things, initiation, income payments, events
of default, and maintenance of collateral for repurchase agreements.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
If the seller defaults, a Fund could suffer a loss to the extent that the
proceeds from the sale of the underlying securities and other collateral held by
the Fund are less than the repurchase price and the Fund's costs associated with
delay and enforcement of the repurchase agreement. In addition, in the event of
bankruptcy of the seller, a Fund could suffer additional losses if a court
determines that the Fund's interest in the collateral is not enforceable.
F. Dividends and Distribution 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 income and capital gains are determined in accordance with
income tax regulations, which may differ from U.S. GAAP. Certain capital
accounts in the financial statements are periodically adjusted for permanent
differences in order to reflect their tax character. These permanent differences
are primarily due to the varying treatment of income and gain/loss on portfolio
securities held by the Funds and have no impact on net assets or NAV per share.
Temporary differences, which arise from recognizing certain items of income,
expense and gain/loss in different periods for financial statement and tax
purposes, will reverse at some time in the future.
The tax character of distributions paid by each Fund during the year ended
December 31, 2012 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
----------------- ---------------- ----------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 763,985 $ -- $ --
First Trust Morningstar Dividend Leaders(SM) Index Fund 21,586,886 -- --
First Trust US IPO Index Fund 267,146 -- --
First Trust NYSE Arca Biotechnology Index Fund -- -- --
First Trust Dow Jones Internet Index(SM) Fund -- -- --
First Trust Capital Strength ETF 591,636 -- --
First Trust Value Line(R) Equity Allocation Index Fund 97,326 -- --
First Trust Value Line(R) Dividend Index Fund 13,920,854 -- --
First Trust Value Line(R) 100 Exchange-Traded Fund 559,524 -- --
As of December 31, 2012, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
----------------- ---------------- ----------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 5,570 $ (23,253,529) $ 2,719,118
First Trust Morningstar Dividend Leaders(SM) Index Fund -- (34,346,105) 14,108,691
First Trust US IPO Index Fund -- (6,060,873) 1,706,590
First Trust NYSE Arca Biotechnology Index Fund -- (17,159,694) (41,847,467)
First Trust Dow Jones Internet Index(SM) Fund -- (31,001,109) 24,106,693
First Trust Capital Strength ETF 8,047 (25,834,381) 1,454,253
First Trust Value Line(R) Equity Allocation Index Fund -- (6,133,166) 193,304
First Trust Value Line(R) Dividend Index Fund 35,845 (47,822,658) 33,110,545
First Trust Value Line(R)100 Exchange-Traded Fund 310 (96,572,464) 1,254,714
G. Income Taxes
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
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 2010, 2011
and 2012 remain open to federal and state audit. As of June 30, 2013, 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.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses arising in taxable years after December 22, 2010, may be
carried forward indefinitely, and their character is retained as short-term
and/or long-term losses. Previously, net capital losses were carried forward for
up to eight years and treated as short-term losses. As a transition rule, the
Act requires that post-enactment net capital losses be used before pre-enactment
net capital losses. At December 31, 2012, the Funds had pre-enactment and
post-enactment net capital losses for federal income tax purposes as shown in
the following table. 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 Fund shareholders. The Funds are 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.
Capital Capital Capital Capital Capital Capital
Loss Loss Loss Loss Loss Loss Post- Total
Available Available Available Available Available Available Enactment - Capital
Through Through Through Through Through Through No Loss
2013 2014 2015 2016 2017 2018 Expiration Available
--------- ----------- ---------- ----------- ---------- --------- ----------- -----------
First Trust Dow Jones Select
MicroCap Index(SM) Fund $ -- $1,604,481 $ 910,503 $ 902,807 $ 3,227,616 $ 5,096,533 $11,511,589 $23,253,529
First Trust Morningstar Dividend
Leaders(SM) Index Fund 52,755 202,279 198,670 14,962,284 16,831,977 473,435 1,624,705 34,346,105
First Trust US IPO Index Fund -- 303,759 740,683 2,682,788 1,127,563 65,058 1,141,022 6,060,873
First Trust NYSE Arca
Biotechnology Index Fund -- -- -- 2,061,136 5,787,577 1,039,054 8,271,927 17,159,694
First Trust Dow Jones
Internet Index(SM) Fund -- -- -- 6,295,170 1,163,966 -- 23,541,973 31,001,109
First Trust Capital Strength ETF -- 45,432 831,336 11,401,861 11,336,270 1,367,556 851,926 25,834,381
First Trust Value Line(R) Equity
Allocation Index Fund -- -- 1,392,919 1,168,041 2,421,122 -- 1,151,084 6,133,166
First Trust Value Line(R)
Dividend Index Fund -- -- 4,488,019 21,855,796 19,646,203 437,987 1,394,653 47,822,658
First Trust Value Line(R) 100
Exchange-Traded Fund -- -- 1,905,072 47,805,834 29,477,928 -- 17,383,630 96,572,464
H. Expenses
Expenses that are directly related to one of the Funds are charged directly to
the respective Fund. General expenses of the Trust are allocated to all the
Funds based upon the net assets of each Fund. First Trust Advisors L.P. ("First
Trust" or the "Advisor") has entered into licensing agreements with each of the
following "Licensors" for the respective Funds:
FUND INDEX
First Trust Dow Jones Select MicroCap Index(SM) Fund Dow Jones & Company, Inc.
First Trust Morningstar Dividend Leaders(SM) Index Fund Morningstar, Inc. First
Trust US IPO Index Fund IPOX Schuster LLC
First Trust NYSE Arca Biotechnology Index Fund NYSE Euronext
First Trust Dow Jones Internet Index(SM) Fund Dow Jones & Company, Inc.
First Trust Capital Strength ETF The NASDAQ OMX Group, Inc. (4)
First Trust Value Line(R) Equity Allocation Index Fund Value Line Publishing, Inc.(R)
First Trust Value Line(R) Dividend Index Fund Value Line Publishing, Inc.(R)
First Trust Value Line(R) 100 Exchange-Traded Fund Value Line Publishing, Inc.(R)
(4) Prior to June 3, 2013, the Capital Strength ETF's index provider was
Credit Suisse Securities (USA) LLC and Credit Suisse Group AG.
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The respective Funds are
required to pay licensing fees, which are shown on the Statements of Operations.
Page 67
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
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 these services, First Trust is entitled to receive monthly fees from each
Fund calculated at the following annual rates:
% of Average
Daily Net Assets
________________
First Trust Dow Jones Select MicroCap Index(SM) Fund 0.50%
First Trust Morningstar Dividend Leaders(SM) Index Fund 0.30%
First Trust US IPO Index Fund 0.40%
First Trust NYSE Arca Biotechnology Index Fund 0.40%
First Trust Dow Jones Internet Index(SM) Fund 0.40%
First Trust Capital Strength ETF 0.50%
First Trust Value Line(R) Equity Allocation Index Fund 0.50%
First Trust Value Line(R) Dividend Index Fund 0.50%
First Trust Value Line(R) 100 Exchange-Traded Fund 0.50%
The Trust and the Advisor have entered into an Expense Reimbursement, Fee Waiver
and Recovery Agreement ("Recovery Agreement") in which the Advisor has agreed to
waive fees and/or reimburse Fund expenses to the extent that the operating
expenses of each Fund (excluding interest expense, brokerage commissions and
other trading expenses, taxes and extraordinary expenses) exceed the below
amount as a percentage of average daily net assets per year (the "Expense Cap").
The Expense Cap will be in effect until at least April 30, 2014.
Expense Cap
________________
First Trust Dow Jones Select MicroCap Index(SM) Fund 0.60%
First Trust Morningstar Dividend Leaders(SM) Index Fund 0.45%
First Trust US IPO Index Fund 0.60%
First Trust NYSE Arca Biotechnology Index Fund 0.60%
First Trust Dow Jones Internet Index(SM) Fund 0.60%
First Trust Capital Strength ETF 0.65%
First Trust Value Line(R) Equity Allocation Index Fund 0.70%
First Trust Value Line(R) Dividend Index Fund 0.70%
First Trust Value Line(R) 100 Exchange-Traded 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 was waived or expense was reimbursed, but no reimbursement payment will be
made by the Fund if it results in the Fund exceeding an expense ratio equal to
the Expense Cap in place at the time the expenses were reimbursed or fees were
waived by First Trust. These amounts would be included in "Expenses previously
waived or reimbursed" on the Statements of Operations.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
The advisory fee waivers and expense reimbursements for the six months ended
June 30, 2013 and the expenses borne by the Advisor subject to recovery from
each applicable Fund for the periods indicated were as follows:
Expenses Borne by Advisor Subject to Recovery
---------------------------------------------
Advisory Year Year Year Period
Fee Expense Ended Ended Ended Ended
Waivers Reimbursement 12/31/2010 12/31/2011 12/31/2012 6/30/2013 Total
--------- ------------- ---------- ---------- ---------- ---------- --------
First Trust Dow Jones Select
MicroCap Index(SM) Fund $ 43,742 $ -- $ 77,943 $ 117,235 $ 79,603 $ 43,742 $ 318,523
First Trust Morningstar Dividend
Leaders(SM) Index Fund 154,386 -- 75,384 226,674 322,632 154,386 779,076
First Trust US IPO Index Fund 14,520 -- 41,465 73,773 76,150 14,520 205,908
First Trust NYSE Arca
Biotechnology Index Fund -- -- 41,318 43,660 32,040 -- 117,018
First Trust Dow Jones Internet
Index(SM) Fund -- -- -- -- -- -- --
First Trust Capital Strength ETF 30,013 -- 37,845 61,430 59,498 30,013 188,786
First Trust Value Line(R) Equity
Allocation Index Fund 10,571 17,004 24,155 47,073 59,245 27,575 158,048
First Trust Value Line(R) Dividend
Index Fund 193,276 -- 120,860 249,861 350,127 193,276 914,124
First Trust Value Line(R) 100
Exchange -Traded Fund 40,539 -- 51,366 99,646 88,774 40,539 280,325
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the servicing agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Trust. As custodian, BNYM is responsible for custody of the Trust's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of the Trust's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Trust. 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 of $125,000 per year and an annual per fund fee of $4,000 for each
closed-end fund or other actively managed fund and $1,000 for each index fund in
the First Trust Fund Complex. The fixed annual retainer is allocated pro rata
among each fund in the First Trust Fund Complex based on net assets.
Additionally, the Lead Independent Trustee is paid $15,000 annually, the
Chairman of the Audit Committee is paid $10,000 annually, and each of the
Chairmen of the Nominating and Governance Committee and the Valuation Committee
is paid $5,000 annually to serve in such capacities, with such compensation
allocated pro rata among each fund in the First Trust Fund Complex based on net
assets. Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and each Committee
Chairman will serve two-year terms until December 31, 2013, before rotating to
serve as Chairman of another Committee or as Lead Independent Trustee. After
December 31, 2013, the Lead Independent Trustee and Committee Chairmen will
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 six months ended June 30, 2013, the cost of purchases and proceeds from
sales of investment securities for each Fund, excluding short-term investments
and in-kind transactions, were as follows:
Purchases Sales
------------------ ------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 4,612,552 $ 4,564,643
First Trust Morningstar Dividend Leaders(SM) Index Fund 188,367,661 188,643,708
First Trust US IPO Index Fund 13,740,507 13,602,260
First Trust NYSE Arca Biotechnology Index Fund 37,406,671 38,483,078
First Trust Dow Jones Internet Index(SM) Fund 69,794,971 70,366,409
First Trust Capital Strength ETF 50,987,994 50,881,172
First Trust Value Line(R) Equity Allocation Index Fund 4,170,735 4,166,236
First Trust Value Line(R) Dividend Index Fund 280,568,087 280,126,994
First Trust Value Line(R) 100 Exchange-Traded Fund 82,395,098 82,378,204
Page 69
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
For the six months ended June 30, 2013, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
------------------ ------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 69,485,519 $ --
First Trust Morningstar Dividend Leaders(SM) Index Fund 224,278,987 237,501,013
First Trust US IPO Index Fund 50,543,252 --
First Trust NYSE Arca Biotechnology Index Fund 236,341,611 40,850,972
First Trust Dow Jones Internet Index(SM) Fund 466,911,616 89,338,949
First Trust Capital Strength ETF 31,209,367 29,200,524
First Trust Value Line(R) Equity Allocation Index Fund -- --
First Trust Value Line(R) Dividend Index Fund 271,461,521 184,806,660
First Trust Value Line(R) 100 Exchange-Traded Fund 11,053,325 17,029,810
5. CREATION, REDEMPTION & TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares. Such transactions are generally permitted on an
in-kind basis, with a balancing cash component to equate the transaction to the
daily NAV per Share of each Fund on the transaction date times the number of
Shares in a Creation Unit. Purchasers of Creation Units must pay to BNYM, as
transfer agent, a standard creation transaction fee (the "Creation Transaction
Fee"), which is based on the number of different securities in a Creation Unit
of each Fund according to the fee schedule set forth below:
Number of Securities Creation
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $500
101-200 $1,000
201-300 $1,500
301-400 $2,000
401-500 $2,500
501-600 $3,000
601-700 $3,500
The Creation Transaction Fee is applicable to each purchase transaction
regardless of the number of Creation Units purchased in the transaction. An
additional variable fee of up to three times the Creation Transaction Fee may be
charged to approximate additional expenses incurred by a Fund with respect to
transactions effected outside of the clearing process (i.e., through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. The price for each Creation Unit will equal the daily
NAV per Share of a Fund on the transaction date times the number of Shares in a
Creation Unit plus the fees described above and, if applicable, any transfer
taxes.
Parties redeeming Creation Units must pay to BNYM, as transfer agent, a standard
redemption transaction fee (the "Redemption Transaction Fee"), which is based on
the number of different securities in a Creation Unit of each Fund according to
the fee schedule set forth below:
Number of Securities Redemption
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $500
101-200 $1,000
201-300 $1,500
301-400 $2,000
401-500 $2,500
501-600 $3,000
601-700 $3,500
The Redemption Transaction Fee is applicable to each redemption transaction
regardless of the number of Creation Units redeemed in the transaction. An
additional variable fee of up to three times the Redemption Transaction Fee may
be charged to approximate additional expenses incurred by a Fund with respect to
redemptions effected outside of the clearing process or to the extent that
redemptions are for cash. Each Fund reserves the right to effect redemptions in
cash. A shareholder may request cash redemption in lieu of securities; however,
a Fund may, in its discretion, reject any such request.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before April 30, 2014.
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. INVESTMENT OBJECTIVE CHANGE
Effective on or about June 3, 2013, the First Trust Strategic Value Index Fund
(FDV) changed its name to First Trust Capital Strength ETF (FTCS or the "Fund")
pursuant to the approval of its Board of Trustees. The Fund seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of the equity index called The Capital Strength Index(TM).
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.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (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 12-months ended June 30, 2013 is available
(1) without charge, upon request, by calling (800) 988-5891; (2) on the Trust's
website located at http://www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files its complete schedule of each Fund's portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters of
each fiscal year on Form N-Q. The Trust's Forms N-Q are available (1) by calling
(800) 988-5891; (2) on the Trust's website located at
http://www.ftportfolios.com;
(3) on the SEC's website at http://www.sec.gov; and (4) for review and copying
at the SEC's Public Reference Room ("PRR") in Washington, DC. Information
regarding the operation of the PRR may be obtained by calling (800) SEC-0330.
BOARD CONSIDERATIONS
The Board of Trustees of the First Trust Exchange-Traded Fund (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 eighteen series of the Trust (each a
"Fund" and collectively, the "Funds"):
First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)
First Trust Value Line(R) Dividend Index Fund (FVD)
First Trust Dow Jones Select MicroCap Index(SM) Fund (FDM)
First Trust Morningstar Dividend Leaders(SM) Index Fund (FDL)
First Trust US IPO Index Fund (FPX)
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund (QQEW)
First Trust NASDAQ-100-Technology Sector Index(SM) Fund (QTEC)
First Trust NYSE Arca Biotechnology Index Fund (FBT)
First Trust Dow Jones Internet Index(SM) Fund (FDN)
First Trust Strategic Value Index Fund (FDV)
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund (QQXT)
First Trust Value Line(R) Equity Allocation Index Fund (FVI)
First Trust ISE Chindia Index Fund (FNI)
First Trust ISE Water Index Fund (FIW)
First Trust ISE-Revere Natural Gas Index Fund (FCG)
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)
First Trust S&P REIT Index Fund (FRI)
First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)
The Board approved the continuation of the Agreement for a one-year period
ending March 31, 2014, for each Fund at a meeting held on March 10-11, 2013. The
Board of Trustees determined for each Fund that the continuation of the
Agreement is in the best interests of the Fund in light of the extent and
quality of 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. To assist the Board in its evaluation of the Agreement for
each Fund, the Independent Trustees received a report in advance of the Board
meeting responding to a request for information from counsel to the Independent
Trustees. The report, 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 for each Fund as compared to
fees charged to a peer group of funds (all of which were exchange-traded funds
or "ETFs") compiled by Lipper Inc. ("Lipper"), an independent source (the
"Lipper Expense Group"), and as compared to fees charged to other clients of the
Advisor with similar investment objectives and to other ETFs managed by the
Advisor; expenses of each Fund compared to expense ratios of the funds in the
Fund's Lipper Expense Group; the nature of expenses incurred in providing
services to each Fund and the potential for economies of scale, if any;
financial data on the Advisor; fall-out benefits to the Advisor and its
affiliate, First Trust Portfolios L.P.; and a summary of the Advisor's
compliance program. Following receipt of this information, counsel to the
Independent Trustees posed follow-up questions to the Advisor, and the
Independent Trustees and their counsel then met separately to discuss the
information provided by the Advisor,
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
including the supplemental responses. The Board applied its business
judgment to determine whether the arrangement between the Trust and the
Advisor is a reasonable business arrangement from each Fund's perspective as
well as from the perspective of shareholders. 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 investment advisory fee.
In reviewing the Agreement for each Fund, the Board considered the nature,
extent and quality of services provided 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 the services provided
by the Advisor to the Funds. The Board also considered the background and
experience of the persons responsible for the day-to-day management of the
Funds. The Board considered the compliance program that had been developed by
the Advisor and the procedures in place to monitor each Fund's investment
program. In light of the information presented and the considerations made, the
Board concluded that the nature, extent and quality of 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 and policies.
The Board considered the advisory fees payable by each Fund under the Agreement.
The Board considered that the Advisor agreed to extend the current expense cap
for each Fund through April 30, 2014. For each Fund, the Board noted that
expenses borne or fees waived by the Advisor are to be subject to reimbursement
by the Fund 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 would
result in the Fund exceeding an expense ratio equal to the expense cap in place
at the time the expenses were borne or fees waived by the Advisor. The Board
considered the advisory fees charged by the Advisor to other First Trust ETFs
not paying a unitary fee and other advisory clients with investment objectives
and policies similar to the Funds', noting that those fees generally were
similar to the advisory fees charged to the Funds. The Board also reviewed data
prepared by Lipper showing the advisory fees and expense ratios of each Fund as
compared to each Fund's Lipper Expense Group. Because each Fund's Lipper Expense
Group included peer funds that pay a unitary fee, the Board determined that
expense ratios were the more relevant data point. Based on the information
provided, the Board noted that the total (net) expense ratios of QTEC, FDN,
QCLN, FIW, FCG and FNI were at or below the median total expense ratio of the
peer funds in each Fund's respective Lipper Expense Group and that the total
(net) expense ratios of FDL, FVD, FBT, QABA, FDV, FRI, FVL, FVI, FDM, FPX, QQEW
and QQXT were above the median total expense ratio of the peer funds in each
Fund's respective Lipper Expense Group. The Independent Trustees discussed with
representatives of the Advisor the Advisor's philosophy regarding expense ratios
of ETFs it manages, and the limitations in creating a relevant peer group for
each Fund, including that (i) some of the Funds are unique in their composition,
which makes assembling peers with similar strategies and asset mix difficult and
(ii) differences in the net assets of the peer funds as compared to the Funds
caused the Funds' fixed expenses to differ on a percentage basis as compared to
the peer funds and in some instances caused otherwise relevant peer funds to be
omitted from a Fund's peer group. The Board took these limitations into account
in considering the Lipper data.
The Board considered performance information for each Fund, noting that the
performance information included each Fund's quarterly performance report, which
is part of the process that the Board has established for monitoring each Fund's
performance on an ongoing basis. The Board determined that this process
continues to be effective for reviewing each Fund's performance. The Board also
considered information regarding the performance of each Fund's underlying
index, the correlation between each Fund's performance and that of its
underlying index, the Fund's tracking error and the Fund's excess return as
compared to a 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 error for each Fund was consistent with
the target set forth in the Fund's prospectus. With respect to FDV, the Board
noted that the Advisor was proposing at the March 10-11, 2013 meeting that the
Board approve a change in the Fund's underlying index from the Credit Suisse
U.S. Value Index to the NASDAQ Capital Strength Index. The Board considered
performance information with respect to the NASDAQ Capital Strength Index and
estimated expense information for the Fund with a new index, and noted, among
other things, the lower licensing fee for the NASDAQ Capital Strength Index
versus the current licensing fee for the Credit Suisse U.S. Value Index. In
addition, the Board reviewed data prepared by Lipper comparing each Fund's
performance to a peer group selected by Lipper (the "Lipper Performance Group")
and to a broad-based benchmark. In reviewing each Fund's performance as compared
to the performance of the Fund's Lipper Performance Group, the Board took into
account the limitations described above with respect to creating relevant peer
groups for the Funds.
On the basis of all the information provided on the fees, expenses and
performance of each Fund, the Board concluded that the advisory fees for each
Fund were reasonable and appropriate in light of the nature, extent and quality
of services provided by the Advisor to each Fund under the Agreement.
The Board noted that the Advisor has continued to invest in personnel and
infrastructure and considered whether fee levels reflect any economies of scale
for the benefit of shareholders. The Board considered the Advisor's statement
that no material economies of scale exist at current Fund asset levels. The
Board also considered the costs of the services provided and profits realized by
the Advisor from serving as investment advisor to each Fund for the twelve
months ended December 31, 2012, as set forth in the materials provided to the
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
Board. Based on the information provided, the Board concluded that the pre-tax
profits (if any) estimated to have been realized by the Advisor in connection
with the management of each Fund for calendar year 2012 were not unreasonable.
The Board considered that the Advisor had identified as a fall-out benefit to
the Advisor and First Trust Portfolios L.P. their exposure to investors and
brokers who, in the absence of the Funds, may have had no dealings with the
Advisor, and noted that the Advisor does not utilize soft dollars in connection
with its management of the Funds' portfolios.
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 the Trust and each Fund. No single
factor was determinative in the Board's analysis.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. YOU SHOULD CONSIDER EACH FUND'S INVESTMENT
OBJECTIVE, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. YOU CAN
DOWNLOAD EACH FUND'S PROSPECTUS AT HTTP://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. FOR ADDITIONAL INFORMATION ABOUT THE
RISKS ASSOCIATED WITH INVESTING IN THE FUNDS, PLEASE SEE THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION, AS WELL AS OTHER REGULATORY FILINGS. READ THESE
DOCUMENTS CAREFULLY BEFORE YOU INVEST. FIRST TRUST PORTFOLIOS L.P. IS --THE
DISTRIBUTOR OF THE FIRST TRUST EXCHANGE-TRADED FUND.
The following summarizes some of the risks that should be considered for the
Funds.
Each Fund's shares will change in value, and you could lose money by investing
in a Fund. Shares are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates and perceived trends in stock prices. Overall stock values could decline
generally or could underperform other investments. Overall stock market values
could decline generally or could underperform other investments.
An investment in a Fund involves risks similar to those of investing in any fund
of equity securities traded on an exchange. Investors buying or selling Fund
shares on the secondary market may incur brokerage commissions. In addition,
investors who sell Fund shares may receive less than the Fund shares' net asset
value. Unlike shares of open-end funds, investors are generally not able to
purchase exchange-traded fund ("ETF") shares directly from a Fund and individual
ETF shares are not redeemable. However, specified large blocks of ETF shares
called creation units can be purchased from, or redeemed to, a Fund.
Each Fund is subject to index tracking risk. You should anticipate that the
value of Fund shares will decline, more or less, in correlation with any decline
in the value of the index that the Fund seeks to track.
Each Fund's return may not match the return of the index it seeks to track for a
number of reasons. While First Trust seeks to have a correlation of 0.95 or
better, before expenses, between a Fund's performance and the performance of its
corresponding index, there can be no assurance that a Fund will be able to
achieve such a correlation. Accordingly, each Fund's performance may correlate
to a lesser extent and may possibly vary substantially from the performance of
its corresponding index.
Each Fund is also exposed to additional market risk due to a policy of investing
principally in the securities included in its corresponding index. As a result
of such policies, securities held by each Fund will generally not be bought or
sold in response to market fluctuations and the securities may be issued by
companies concentrated in a particular industry. As a result, each Fund will
generally not sell a stock because the stock's issuer is in financial trouble,
unless that stock is removed or is anticipated to be removed from the index the
Fund seeks to track.
Each Fund relies on a license from an index provider that permits the Fund to
use its corresponding index and associated trade names and trademarks in
connection with the name and investment strategies of the Fund. Such licenses
may be terminated by the respective index provider and, as a result, each Fund
may lose its ability to use such intellectual property. There is also no
guarantee that the index provider has all rights to license the respective
intellectual property to First Trust, on behalf of the Fund. Accordingly, in the
event the license is terminated or the index provider does not have rights to
license the particular intellectual property, it may have a significant effect
on the operation of the related Fund.
Each Fund is subject to issuer specific changes risk. The value of an individual
security or a particular type of security can be more volatile than the market
as a whole and can perform differently from the value of the market as a whole.
Each Fund will be concentrated in the securities of companies of a given
industry if the Fund's corresponding index is concentrated in such industry. A
concentration makes a Fund more susceptible to any single occurrence affecting
the related industry and may subject a Fund to greater market risk than less
concentrated funds.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
With the exception of First Trust Dow Jones Select MicroCap Index(SM) Fund,
First Trust Value Line(R) Dividend Index Fund, First Trust Value Line(R) Equity
Allocation Index Fund and First Trust Value Line(R) 100 Exchange-Traded Fund,
each Fund is considered to be non-diversified. As a result, those Funds are
exposed to additional market risk. A non-diversified fund may invest a
relatively high percentage of its assets in a limited number of issuers. As a
result, changes in the market value of a single portfolio security could cause
greater fluctuations in share price than would occur in a diversified fund.
Furthermore, non-diversified funds are more susceptible to any single political,
regulatory or economic occurrence.
The Funds are not actively managed. The Funds may be affected by a general
decline in certain market segments relating to their corresponding index. The
Funds invests in securities included in or representative of their corresponding
index regardless of their investment merit. The Funds generally will not attempt
to take defensive positions in declining markets.
The First Trust Dow Jones Select MicroCap Index(SM) Fund invests in
micro-capitalization companies. Such companies may be more vulnerable to adverse
general market or economic developments, may be less liquid, and may experience
greater price volatility than larger, more established companies.
The First Trust Dow Jones Internet Index(SM) Fund invests in stocks of companies
in the technology sector. You should be aware that an investment in a portfolio
which invests in a particular sector involves additional risks, including
limited diversification. The companies engaged in the technology sector are
subject to fierce competition and high research and development costs, and their
products and services may be subject to rapid obsolescence.
The First Trust NYSE Arca Biotechnology Index Fund is concentrated in stocks of
companies in the biotechnology sector.
You should be aware that an investment in a portfolio which is concentrated in a
particular sector involves additional risks, including limited diversification.
The companies engaged in the biotechnology sector are subject to fierce
competition, substantial research and development costs, governmental
regulations and pricing constraints, and their products and services may be
subject to rapid obsolescence.
The First Trust NYSE Arca Biotechnology Index Fund and First Trust Capital
Strength ETF invest in the securities of companies in the health care sector.
Because companies in the health care sector are involved in medical services or
health care including biotechnology research and production, drugs and
pharmaceuticals and health care facilities and services, general problems of
these companies include extensive competition, generic drug sales or the loss of
patent protection, product liability litigation and increased government
regulations.
The First Trust US IPO Fund invests in companies that have recently conducted an
initial public offering. The stocks of such companies are often subject to
extreme price volatility and speculative trading.
The First Trust Value Line(R) Equity Allocation Index Fund and First Trust Dow
Jones Select Micro Cap Index(SM) Fund invest in securities of companies in the
financials sector. Banks, thrifts and their holding companies are especially
subject to the adverse effects of economic recession; volatile interest rates;
portfolio concentrations in geographic markets and in commercial and residential
real estate loans; and competition from new entrants in their fields of
business. Although recently enacted legislation repealed most of the barriers
which separated the banking, insurance and securities industries, these
industries are still extensively regulated at both the federal and state level
and may be adversely affected by increased regulations. The downturn in the U.S.
and world economies has adversely affected banks, thrifts and other companies in
the financials sector.
The First Trust Dow Jones Internet Index(SM) Fund invests in securities of
companies in the information technology industry. Information technology
companies are generally subject to the risks of rapidly changing technologies;
short product life cycles; fierce competition; and aggressive pricing and
reduced profit margins.
The First Trust US IPO Fund, First Trust Value Line(R) 100 Exchange Traded Fund
and First Trust Dow Jones Internet Index(SM) Fund invest in the securities of
companies in the consumer discretionary sector. Because companies in the
consumer discretionary sector manufacture products and provide discretionary
services directly to the consumer, the success of these companies is tied
closely to the performance of the overall domestic and international economy,
interest rates, competition and consumer confidence. Success depends heavily on
disposable household income and consumer spending. Changes in demographics and
consumer tastes can also affect the demand for, and success of, consumer
discretionary products in the marketplace.
The First Trust Morningstar Dividend Leaders(SM) Index Fund and First Trust
Value Line(R) Dividend Index Fund invest in the securities of utilities
companies. Utilities companies are subject to the imposition of rate caps,
increased competition due to deregulation, the difficulty in obtaining an
adequate return on invested capital or in financing large construction projects,
the limitations on operations and increased
Page 75
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
costs and delays attributable to environmental considerations, and the
capital market's ability to absorb utility debt. In addition, taxes,
government regulation, international politics, price and supply fluctuations,
volatile interest rates and energy conservation may cause difficulties for
utilities. Utilities issuers have been experiencing certain of these problems
to varying degrees.
The First Trust Dow Jones Internet Index(SM) Fund invests in the securities of
Internet companies. Internet companies are subject to rapid changes in
technology, worldwide competition, rapid obsolescence of products and services,
loss of patent protections, cyclical market patterns, evolving industry
standards and frequent new product introductions. The Fund's investment in
Internet companies may also be subject to the risk of owning small
capitalization companies that have recently begun operations.
With the exception of First Trust Capital Strength ETF and First Trust Dow Jones
Select MicroCap Index(SM) Fund, the Funds may invest in small capitalization and
mid-capitalization companies. Such companies' securities may be less liquid and
may experience greater price volatility than securities of larger, more
established companies.
Because a Fund's corresponding index may include American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs") and/or stocks of non-U.S.
companies, the investments of certain Funds, including but not limited to, the
First Trust Value Line(R) 100 Exchange-Traded Fund, involves risks of investing
in non-U.S. securities that are in addition to the risk associated with domestic
securities. Non-U.S. companies, in general, are not subject to the regulatory
requirements of U.S. companies and, as such, there may be less publicly
available information about these companies. Moreover, non-U.S. accounting,
auditing and financial reporting standards generally are different from those
applicable to U.S. companies. In addition, non-U.S. companies are exposed to
additional economic, political, social or diplomatic events. ADRs and ADSs also
involve substantially identical risks to those associated with investments in
non-U.S. securities. In addition, the issuers of certain depositary receipts,
particularly unsponsored or unregistered depositary receipts, are under no
obligation to distribute shareholder communications to the holders of such
receipts, or to pass through to them any voting rights with respect to the
deposited securities.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 76
FIRST TRUST
First Trust Exchange-Traded Fund
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
101 Barclay 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 Exchange-Traded Fund
Book 2
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund - QQEW
First Trust NASDAQ-100-Technology Sector Index(SM) Fund - QTEC
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund - QQXT
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund - QCLN
First Trust S&P REIT Index Fund - FRI
First Trust ISE Water Index Fund - FIW
First Trust ISE-Revere Natural Gas Index Fund - FCG
First Trust ISE Chindia Index Fund - FNI
First Trust NASDAQ(R) ABA Community Bank Index Fund - QABA
First Trust CBOE S&P 500 VIX Tail Hedge Fund - VIXH
Semi-Annual Report
June 30, 2013
--------------------------------------------------------------------------------
TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013
Shareholder Letter........................................................... 2
Market Overview.............................................................. 3
Fund Performance Overview
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund - QQEW............... 4
First Trust NASDAQ-100-Technology Sector Index(SM) Fund - QTEC............ 6
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund - QQXT......... 8
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund - QCLN........ 10
First Trust S&P REIT Index Fund - FRI..................................... 12
First Trust ISE Water Index Fund - FIW.................................... 14
First Trust ISE-Revere Natural Gas Index Fund - FCG....................... 16
First Trust ISE Chindia Index Fund - FNI.................................. 18
First Trust NASDAQ(R) ABA Community Bank Index Fund - QABA................ 20
First Trust CBOE S&P 500 VIX Tail Hedge Fund - VIXH....................... 22
Notes to Fund Performance Overview........................................... 24
Understanding Your Fund Expenses............................................. 25
Portfolio of Investments
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund - QQEW............... 27
First Trust NASDAQ-100-Technology Sector Index(SM) Fund - QTEC............ 30
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund - QQXT......... 31
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund - QCLN........ 34
First Trust S&P REIT Index Fund - FRI..................................... 36
First Trust ISE Water Index Fund - FIW.................................... 38
First Trust ISE-Revere Natural Gas Index Fund - FCG....................... 39
First Trust ISE Chindia Index Fund - FNI.................................. 41
First Trust NASDAQ(R) ABA Community Bank Index Fund - QABA................ 44
First Trust CBOE S&P 500 VIX Tail Hedge Fund - VIXH....................... 46
Statements of Assets and Liabilities......................................... 54
Statements of Operations..................................................... 58
Statements of Changes in Net Assets.......................................... 62
Financial Highlights......................................................... 66
Notes to Financial Statements................................................ 71
Additional Information ...................................................... 80
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund (the "Trust") described in this
report (each such series is referred to as a "Fund" and collectively, as the
"Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund shares may therefore be less than what you paid
for them. Accordingly, you can lose money 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
http://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.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund's portfolio and presents data and analysis that
provide insight into each Fund's performance and investment approach.
By reading the portfolio commentary by Robert F. Carey, Chief Market Strategist,
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 risks of investing in each Fund are
spelled out in its prospectus, statement of additional information, this report
and other Fund regulatory filings.
Page 1
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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
JUNE 30, 2013
Dear Shareholders:
I am pleased to present you with the semi-annual report for your investment in
First Trust Exchange-Traded Fund.
The report you hold contains detailed information about portfolios in First
Trust Exchange-Traded Fund over the six months ended June 30, 2013. It contains
a market overview and a performance analysis for the period. I encourage you to
read this document and discuss it with your financial advisor. A successful
investor is also typically a knowledgeable one, as we have found to be the case
at First Trust Advisors L.P. ("First Trust").
The six months covered by this report have been more positive for the U.S.
markets. In fact, the S&P 500(R) Index, as measured on a total return basis,
rose 13.82% during the period, and many economists and investors have felt
positive about the current market environment. Of course, past performance can
never be an indicator of future performance, but First Trust believes that
staying invested in quality products through up and down markets and having a
long-term horizon can help investors reach their financial goals.
As you know, First Trust offers a variety of products that we believe could fit
many financial plans to help investors seeking long-term investment success. We
encourage you to talk to your advisor about the other investments First Trust
offers that might also fit your financial goals and to discuss those goals with
your advisor regularly so that he or she can help keep you on track.
First Trust will continue to make available up-to-date information about your
investments so you and your financial advisor are current on any First Trust
investments you own. We value our relationship with you, and thank you for the
opportunity to assist you in achieving your financial goals. I look forward to
the remainder of 2013 and to the next edition of your Fund's report.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees and
Chief Executive Officer of First Trust Advisors L.P.
Page 2
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MARKET OVERVIEW
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FIRST TRUST EXCHANGE-TRADED FUND
SEMI-ANNUAL REPORT
JUNE 30, 2013
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 23 years of experience as an Equity
and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst
("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE ECONOMY/INVESTING
The Federal Reserve has maintained an easy monetary policy since September 2007,
when it began lowering the federal funds target rate from 5.25% to 0.25%. The
target rate has stood at 0.25% since December 2008. In addition to lowering the
benchmark lending rate to nearly zero, the Federal Reserve also increased the
size of its balance sheet of securities from approximately $800 billion in 2008
to $3.46 trillion on July 10, 2013. That is a tremendous amount of stimulus.
While economic growth has been modest in this recovery relative to previous
recoveries that produced GDP growth rates ranging from 4% to 6% for extended
periods of time, on a calendar quarter basis, U.S. GDP growth has exceeded 2.0%
(annualized) in 9 out of the past 15 quarters through Q1'13, according to data
from the Bureau of Economic Analysis. The growth rate reached the 4.0%
(annualized) level on two occasions. In our opinion, this recovery has lacked
consistency due to a multitude of challenges, including too much government
spending and an excessive regulatory climate, especially for small businesses.
One silver lining is that CEOs seem ready to act. A recent global survey of
chief executives from PricewaterhouseCoopers LLP revealed that 97% of the 246
CEOs polled see innovation as the top priority for their companies today.
Thirty-seven percent of CEOs think that they need to be directly involved in
driving innovation within their businesses, while 34% think their role also
includes being a "visionary." The findings from this survey are vastly different
than three years ago when only 12% of CEOs were spearheading an innovation
strategy. We believe this change in sentiment could bode well for equity
investors moving forward.
U.S. STOCKS AND BONDS
All of the major U.S. stock indices posted double-digit total returns in the
first half of 2013. The S&P 500(R) Index ("S&P 500"), S&P MidCap 400 Index and
S&P SmallCap 600 Index were up 13.82%, 14.59%, and 16.23%, respectively,
according to Bloomberg. All 10 major sectors in the S&P 500 posted gains, and
six posted double-digit gains. The top-performing sector was health care, up
20.26%, as measured by the S&P 500 Health Care Index. The sector with the
poorest showing was materials, up 3.12%, as measured by the S&P 500 Materials
Index. Materials and commodities, in general, have been out of favor with
investors since the economic slowdown in Europe stemming from its sovereign debt
crisis and the tempering of growth in China, which tends to be one of the most
aggressive consumers of commodities.
The following insight is as of July 18, 2013, so it was released after 6/28/13.
It is too good not to note, in our opinion. The S&P 500 is up 149.7%
(price-only) from its closing low on 3/9/09 (1,592 days). The current bull
market now ranks as the fifth strongest of all time, according to Bespoke
Investment Group. The strongest bull market for the S&P 500 was the 582.1% gain
posted from 12/4/87 to 3/24/00 (4,494 days). The S&P 500 closed July 17's
trading session at an all-time high of 1689.37. The index level would need to
rise from 1689.37 to 1743.30 without a 20% decline (closing basis) to move from
fifth to fourth in the strongest bull rankings, according to Bespoke.
In the U.S. bond market, the top-performing major debt group in the first half
of 2013 was, once again, high-yield corporate bonds. The Barclays U.S. Corporate
High Yield Index posted a total return of 1.42%. The next closest domestic
category was intermediate Treasuries, down 1.28%, as measured by the Barclays
U.S. Treasury: Intermediate Index. The Barclays Municipal Bond: Long Bond (22+)
Index posted the weakest return, down 4.07%.
FOREIGN STOCKS AND BONDS
Securities markets based in developed nations outperformed those in emerging
nations in the first half of 2013. The Barclays Global Aggregate Index of
higher-quality debt posted a total return of -4.83% (USD), compared to a decline
of 6.04% (USD) for the Barclays Global Emerging Markets Index of debt
securities. The MSCI World Index (ex U.S.) posted a total return of 3.43% (USD),
compared to -9.51% for the MSCI Emerging Markets Index. The U.S. dollar provided
some drag on returns from investments overseas for U.S. investors by
appreciating 4.2% against a basket of major currencies, as measured by the U.S.
Dollar Index (DXY).
Page 3
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND - QQEW
The First Trust NASDAQ-100 Equal Weighted Index(SM) Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Equal
Weighted Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its assets in common stocks that comprise the Index. The Index is the
equal-weighted version of the NASDAQ-100 Index(R) which includes 100 of the
largest non-financial securities listed on NASDAQ(R) based on market
capitalization. The Index contains the same securities as the NASDAQ-100
Index(R), but each of the securities is initially set at a weight of 1.00% of
the Index and is rebalanced quarterly. The Fund's shares are listed for trading
on the NASDAQ(R). The first day of secondary market trading in shares of the
Fund was April 25, 2006.
------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (04/19/2006) Ended (04/19/2006)
06/30/2013 06/30/2013 06/30/2013 to 06/30/2013 06/30/2013 to 06/30/2013
FUND PERFORMANCE
NAV 15.60% 21.61% 9.82% 6.23% 59.72% 54.51%
Market Value 15.46% 21.54% 9.78% 6.22% 59.48% 54.35%
INDEX PERFORMANCE
NASDAQ-100 Equal Weighted Index(SM) 16.12% 22.48% 10.57% 6.90% 65.24% 61.69%
S&P 500(R) Index 13.82% 20.60% 7.01% 5.11% 40.33% 43.12%
NASDAQ-100 Index(R) 10.09% 12.86% 10.67% 8.32% 66.01% 77.77%
------------------------------------------------------------------------------------------------------------------------------
See Notes to Fund Performance Overview on page 24.)
---------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
---------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Information Technology 45.74%
Consumer Discretionary 24.10
Health Care 15.07
Industrials 6.06
Consumer Staples 5.06
Telecommunication Services 2.05
Materials 1.92
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
---------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Biogen Idec, Inc. 1.06%
Monster Beverage Corp. 1.06
Seagate Technology PLC 1.04
Sirius XM Radio, Inc. 1.04
Liberty Global PLC, Class A 1.04
Intuit, Inc. 1.04
Comcast Corp., Class A 1.04
Vodafone Group PLC, 1.04
Activision Blizzard, Inc. 1.04
Vertex Pharmaceuticals, Inc. 1.03
------
Total 10.43%
======
NASDAQ(R), NASDAQ-100(R), NASDAQ-100 Index(R), and NASDAQ-100 Equal Weighted
Index(SM) are trademarks of The NASDAQ OMX Group, Inc. (which with its
affiliates is referred to as the Corporations)and are licensed for use by First
Trust on behalf of the Fund. The Fund has not been passed on by the
Corporations as to its legality or suitability. The Fund is not issued,
endorsed, sold, or promoted by the Corporations. THE CORPORATIONS
MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 4
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND - QQEW (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 19, 2006 - JUNE 30, 2013
First Trust NASDAQ-100 Equal NASDAQ-100 Equal S&P 500(R) NASDAQ-100
Weighted Index(SM) Fund Weighted Index(SM) Index Index(R)
04/06 $10000 $10000 $10000 $10000
12/06 10060 10097 10975 10168
06/07 11050 11117 11739 11217
12/07 11040 11142 11579 12124
06/08 9673 9785 10199 10708
12/08 6187 6292 7295 7084
06/09 7653 7803 7526 8671
12/09 9871 10100 9224 10954
06/10 9314 9561 8611 10278
12/10 11968 12321 10615 13161
06/11 12867 13288 11253 13849
12/11 11636 12063 10839 13645
06/12 12704 13203 11868 15750
12/12 13365 13927 12574 16145
06/13 15450 16169 14312 17777
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through June
30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 152 4 1 1
01/01/09 - 12/31/09 144 0 0 0
01/01/10 - 12/31/10 155 1 0 0
01/01/11 - 12/31/11 151 0 0 0
01/01/12 - 12/31/12 157 0 0 0
01/01/13 - 06/30/13 101 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 94 1 0 0
01/01/09 - 12/31/09 104 3 1 0
01/01/10 - 12/31/10 95 1 0 0
01/01/11 - 12/31/11 101 0 0 0
01/01/12 - 12/31/12 92 1 0 0
01/01/13 - 06/30/13 23 0 0 0
Page 5
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND - QTEC
The First Trust NASDAQ-100-Technology Sector Index(SM) Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Technology
Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its assets in common stocks that comprise the Index. The Index is an
equal-weighted index based on the securities of the NASDAQ-100 Index(R) that are
classified as "technology" according to the Industry Classification Benchmark
classification system. The NASDAQ-100 Index(R) includes 100 of the largest
domestic and international non-financial companies listed on NASDAQ(R) based on
market capitalization. The Fund's shares are listed for trading on the
NASDAQ(R). The first day of secondary market trading in shares of the Fund was
April 25, 2006.
----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (4/19/2006) Ended (4/19/2006)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 11.72% 15.42% 8.52% 5.48% 50.49% 46.81%
Market Value 12.09% 15.73% 8.59% 5.53% 50.96% 47.27%
INDEX PERFORMANCE
NASDAQ-100 Technology Sector Index(SM) 12.08% 16.15% 9.24% 6.14% 55.59% 53.59%
S&P 500 Information Technology Index 6.35% 7.74% 7.83% 5.97% 45.78% 51.74%
S&P 500(R) Index 13.82% 20.60% 7.01% 5.11% 40.33% 43.12%
----------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Information Technology 93.18%
Health Care 4.48
Consumer Discretionary 2.34
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Seagate Technology PLC 2.39%
Intuit, Inc. 2.37
Akamai Technologies, Inc. 2.35
Garmin Ltd. 2.34
CA, Inc. 2.34
Microsoft Corp. 2.34
SanDisk Corp. 2.33
Equinix, Inc. 2.33
Western Digital Corp. 2.32
Micron Technology, Inc. 2.32
------
Total 23.43%
======
---------------
NASDAQ(R), NASDAQ-100(R), NASDAQ-100 Index(R), and NASDAQ-100 Technology Sector
Index(SM) are trademarks of The NASDAQ OMX Group, Inc. (which with its
affiliates is referred to as the Corporations) and are licensed for use by
First Trust on behalf of the Fund. The Fund has not been passed on by the
Corporations as to its legality or suitability. The Fund is not issued,
endorsed, sold, or promoted by the Corporations. THE CORPORATIONS
MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 6
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND - QTEC (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 19, 2006 - JUNE 30, 2013
First Trust NASDAQ-100-Technology NASDAQ-100 Technology S&P 500 Information S&P 500(R)
Sector Index(SM) Fund Sector Index(SM) Technology Index Index
04/06 $10000 $10000 $10000 $10000
12/06 9985 10020 10296 10975
06/07 10925 10989 11256 11739
12/07 10750 10847 11975 11579
06/08 9755 9872 10409 10199
12/08 5885 5983 6809 7295
06/09 7890 8048 8502 7526
12/09 10587 10838 11011 9224
06/10 9782 10041 9847 8611
12/10 12907 13293 12133 10615
06/11 13006 13435 12383 11253
12/11 12165 12606 12426 10839
06/12 12720 13222 14084 11868
12/12 13141 13702 14269 12574
06/13 14681 15359 15174 14312
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through June
30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 138 6 1 1
01/01/09 - 12/31/09 151 4 0 0
01/01/10 - 12/31/10 188 0 0 0
01/01/11 - 12/31/11 161 0 0 0
01/01/12 - 12/31/12 132 0 0 0
01/01/13 - 06/30/13 74 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 104 2 1 0
01/01/09 - 12/31/09 94 3 0 0
01/01/10 - 12/31/10 63 1 0 0
01/01/11 - 12/31/11 91 0 0 0
01/01/12 - 12/31/12 117 1 0 0
01/01/13 - 06/30/13 50 0 0 0
Page 7
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND - QQXT
The First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund (the "Fund")
seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the NASDAQ-100
Ex-Tech Sector Index(SM) (the "Index"). The Fund will normally invest at least
90% of its assets in common stocks that comprise the Index. The Index contains
securities of the NASDAQ-100 Index(R) that are not classified as "technology"
according to the Industry Classification Benchmark classification system and, as
a result, is a subset of the NASDAQ-100 Index(R). The NASDAQ-100 Index(R)
includes 100 of the largest domestic and international non-financial companies
listed on NASDAQ(R) based on market capitalization. The Index is
equally-weighted and is rebalanced four times annually in March, June, September
and December. The Fund's shares are listed for trading on the NASDAQ(R). The
first day of secondary market trading in shares of the Fund was February 15,
2007.
----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (2/8/2007) Ended (2/8/2007)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 18.78% 26.73% 10.75% 6.65% 66.61% 50.89%
Market Value 18.80% 28.00% 10.77% 6.67% 66.75% 51.10%
INDEX PERFORMANCE
NASDAQ-100 Ex-Tech Sector Index(SM) 19.35% 27.64% 11.49% 7.34% 72.28% 57.22%
Russell 1000(R) Index 13.91% 21.24% 7.12% 4.04% 41.04% 28.78%
----------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Consumer Discretionary 41.02%
Health Care 23.32
Industrials 10.76
Consumer Staples 8.98
Information Technology 8.85
Telecommunication Services 3.65
Materials 3.42
-------
Total 100.00%
=======
(1) The above sector allocation is based on Standard & Poor's Global Industry
Classification Standard ("GICS"), and is different than the industry
sector classification system used by the Index to select securities, which
is the Industry Classification Benchmark ("ICB") system, the joint
classification system of Dow Jones Indexes and FTSE Group.
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Biogen Idec, Inc. 1.89%
Monster Beverage Corp. 1.89
Sirius XM Radio, Inc. 1.85
Liberty Global PLC, Class A 1.85
Comcast Corp., Class A 1.84
Vodafone Group PLC, ADR 1.84
Activision Blizzard, Inc. 1.84
Vertex Pharmaceuticals, Inc. 1.84
Gilead Sciences, Inc. 1.83
Kraft Foods Group, Inc. 1.83
------
Total 18.50%
======
NASDAQ(R), NASDAQ-100(R), NASDAQ-100 Index(R), and NASDAQ-100 Ex-Tech Sector
Index(SM) are trademarks of The NASDAQ OMX Group, Inc. (which with its
affiliates is referred to as the Corporations) and are licensed for use by
First Trust on behalf of the Fund. The Fund has not been passed on by the
Corporations as to its legality or suitability. The Fund is not issued,
endorsed, sold, or promoted by the Corporations. THE CORPORATIONS
MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 8
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND - QQXT (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 8, 2007 - JUNE 30, 2013
First Trust NASDAQ-100
Ex-Technology NASDAQ-100 Ex-Tech Russell 1000(R)
Sector Index(SM) Fund Sector Index(SM) Index
02/07 $10000 $10000 $10000
12/07 10595 10653 10282
06/08 9057 9126 9131
12/08 6029 6102 6417
06/09 7060 7165 6694
12/09 8848 9009 8241
06/10 8454 8633 7714
12/10 10674 10935 9568
06/11 11961 12294 10177
12/11 10558 10894 9711
06/12 11906 12317 10622
12/12 12703 13172 11306
06/13 15089 15722 12878
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through June
30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 136 2 0 3
01/01/09 - 12/31/09 137 1 3 1
01/01/10 - 12/31/10 156 0 0 0
01/01/11 - 12/31/11 159 0 0 0
01/01/12 - 12/31/12 127 1 0 0
01/01/13 - 06/30/13 71 1 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 110 2 0 0
01/01/09 - 12/31/09 109 1 0 0
01/01/10 - 12/31/10 94 2 0 0
01/01/11 - 12/31/11 93 0 0 0
01/01/12 - 12/31/12 111 11 0 0
01/01/13 - 06/30/13 48 4 0 0
Page 9
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND - QCLN
The First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (the "Fund")
seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the NASDAQ(R)
Clean Edge(R) Green Energy Index (the "Index"). The Fund will normally invest at
least 90% of its assets in common stocks that comprise the Index. The Index is
an equity index designed to track the performance of clean energy companies that
are publicly traded in the United States and includes companies engaged in
manufacturing, development, distribution and installation of emerging
clean-energy technologies including, but not limited to, solar photovoltaics,
biofuels and advanced batteries. The Index is a modified market capitalization
weighted index in which larger companies receive a larger Index weighting. The
Index weighting methodology also includes caps to prevent high concentrations
among larger alternative energy stocks. The Index is reconstituted semi-annually
in March and September and rebalanced quarterly. The Fund's shares are listed
for trading on the NASDAQ(R). The first day of secondary market trading in
shares of the Fund was February 14, 2007.
----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (2/8/2007) Ended (2/8/2007)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 49.49% 53.69% -10.29% -5.06% -41.89% -28.23%
Market Value 48.91% 52.62% -10.46% -5.19% -42.44% -28.88%
INDEX PERFORMANCE
NASDAQ(R) Clean Edge(R) Green Energy Index 49.09% 52.33% -10.05% -4.71% -41.10% -26.55%
Russell 2000(R) Index 15.86% 24.21% 8.77% 4.31% 52.25% 30.92%
----------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Information Technology 76.54%
Consumer Discretionary 8.95
Industrials 8.59
Energy 4.88
Materials 1.04
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Tesla Motors, Inc. 8.95%
Cree, Inc. 8.35
Linear Technology Corp. 8.00
ON Semiconductor Corp. 7.60
First Solar, Inc. 6.70
SunPower Corp. 4.37
Microsemi Corp. 4.23
SunEdison, Inc. 4.12
AVX Corp. 4.00
Hexcel Corp. 3.99
------
Total 60.31%
======
NASDAQ(R) and Clean Edge(R) are the registered trademarks (the "Marks") of The
NASDAQ OMX Group, Inc. ("NASDAQ OMX") and Clean Edge, Inc. ("Clean Edge(R)")
respectively. NASDAQ OMX and Clean Edge(R) are, collectively with their
affiliates, the "Corporations." The Marks are licensed for use by First Trust on
behalf of the Fund. The Fund has not been passed on by the Corporations as to
its legality or suitability. The Fund is not issued, endorsed, sold, or promoted
by the Corporations. The Fund should not be construed in any way as investment
advice by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO
LIABILITY WITH RESPECT TO THE FUND.
Page 10
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND - QCLN (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 8, 2007 - JUNE 30, 2013
First Trust NASDAQ(R)
Clean Edge(R) NASDAQ(R) Clean Edge(R) Russell 2000(R)
Green Energy Index Fund Green Energy Index Index
02/07 $10000 $10000 $10000
12/07 15430 15522 9489
06/08 12350 12472 8599
12/08 5595 5675 6283
06/09 6920 7038 6449
12/09 8045 8213 7990
06/10 6665 6824 7834
12/10 8210 8434 10136
06/11 7640 7879 10765
12/11 4825 4992 9713
06/12 4670 4822 10542
12/12 4801 4927 11301
06/13 7177 7345 13092
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through June
30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 87 1 2 0
01/01/09 - 12/31/09 92 4 0 0
01/01/10 - 12/31/10 79 0 0 0
01/01/11 - 12/31/11 125 5 0 0
01/01/12 - 12/31/12 37 6 1 0
01/01/13 - 06/30/13 83 3 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 156 3 4 0
01/01/09 - 12/31/09 152 3 1 0
01/01/10 - 12/31/10 173 0 0 0
01/01/11 - 12/31/11 116 6 0 0
01/01/12 - 12/31/12 153 52 1 0
01/01/13 - 06/30/13 34 4 0 0
Page 11
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST S&P REIT INDEX FUND - FRI
The First Trust S&P REIT Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the S&P United States REIT Index (the
"Index"). The Fund will normally invest at least 90% of its assets in common
stocks that comprise the Index. The Index measures the securitized U.S. real
estate investment trust ("REIT") market and maintains a constituency that
reflects the composition of the overall REIT market. The Index contains
securities selected for market representation according to geography and
property type. All securities in the Index satisfy the Index's liquidity, price
and market capitalization requirements. The Standard & Poor's Index Committee, a
team of Standard & Poor's economists and index analysts, maintains the Index.
The S&P Index Committee makes constituent changes on an as-needed basis. Share
adjustments that exceed 5% are made at the time of the change. Share adjustments
of less than 5% are made on a quarterly basis. The Fund's shares are listed for
trading on the NYSE Arca. The first day of secondary market trading in shares of
the Fund was May 10, 2007.
-----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (5/8/2007) Ended (5/8/2007)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 6.09% 8.63% 7.03% 1.36% 40.43% 8.68%
Market Value 6.09% 8.81% 7.01% 1.37% 40.34% 8.69%
INDEX PERFORMANCE
S&P United States REIT Index* 6.43% 9.26% 7.57% N/A 44.05% N/A
FTSE EPRA/NAREIT North America Index 4.70% 7.92% 7.17% 1.70% 41.40% 10.90%
Russell 3000(R) Index 14.06% 21.46% 7.25% 3.53% 41.88% 23.73%
-----------------------------------------------------------------------------------------------------------------------------
* On November 6, 2008, the Fund's underlying index changed from the S&P REIT
Composite Index to the S&P United States REIT Index. Effective December 31,
2008, the S&P REIT Composite Index was discontinued. Therefore, the Fund's
performance and historical returns shown for the periods prior to November 6,
2008 are not necessarily indicative of the performance that the Fund, based
on its current Index, would have generated. The inception date of the Index
was June 30, 2008. Returns for the Index are only disclosed for those periods
in which the Index was in existence for the whole period.
(See Notes to Fund Performance Overview on page 24.)
----------------------------------------------------------
PORTFOLIO REIT CLASS ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
REIT CLASS LONG-TERM INVESTMENTS
Specialized 30.19%
Retail 26.03
Residential 16.78
Office 13.75
Diversified 8.16
Industrial 5.09
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Simon Property Group, Inc. 9.75%
Public Storage 4.40
HCP, Inc. 4.10
Ventas, Inc. 4.05
Health Care REIT, Inc. 3.79
Prologis, Inc. 3.73
Equity Residential 3.70
AvalonBay Communities, Inc. 3.26
Boston Properties, Inc. 3.18
Vornado Realty Trust 2.80
------
Total 42.76%
======
----------------
Standard & Poor's(R), S&P(R) and S&P United States REIT Index are registered
trademarks of Standard & Poor's Financial Services LLC ("S&P") and have been
licensed for use by First Trust on behalf of the Fund. The Fund is not
sponsored, endorsed, sold or promoted by S&P or its affiliates, and S&P and its
affiliates make no representation, warranty or condition regarding the
advisability of buying, selling or holding shares of the Fund.
Page 12
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST S&P REIT INDEX FUND - FRI (CONTINUED)
PERFORMANCE OF A $10,000INITIAL INVESTMENT
MAY 8, 2007 - JUNE 30, 2013
First Trust S&P FTSE EPRA/NAREIT Russell 3000(R)
REIT Index Fund North America Index Index
05/07 $10000 $10000 $10000
12/07 8093 8206 9811
06/08 7739 7843 8728
12/08 4947 4872 6151
06/09 4319 4381 6405
12/09 6333 6442 7889
06/10 6679 6772 7412
12/10 8090 8287 9225
06/11 8899 9163 9811
12/11 8729 8965 9319
06/12 10007 10276 10188
12/12 10247 10593 10849
06/13 10868 11090 12373
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through June
30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%S
01/01/08 - 12/31/08 91 15 9 11
01/01/09 - 12/31/09 136 16 1 0
01/01/10 - 12/31/10 185 0 0 0
01/01/11 - 12/31/11 149 1 0 0
01/01/12 - 12/31/12 37 6 1 0
01/01/13 - 06/30/13 88 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 109 12 4 2
01/01/09 - 12/31/09 84 14 1 0
01/01/10 - 12/31/10 67 0 0 0
01/01/11 - 12/31/11 102 0 0 0
01/01/12 - 12/31/12 153 52 1 0
01/01/13 - 06/30/13 36 0 0 0
Page 13
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE WATER INDEX FUND - FIW
The First Trust ISE Water 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 Water Index(TM) (the "Index"). The
Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index is a modified market capitalization weighted index
comprised of 36 stocks that derive a substantial portion of their revenues from
the potable and wastewater industries. The Index is rebalanced on a semi-annual
basis. The Fund's shares are listed for trading on the NYSE Arca. The first day
of secondary market trading in shares of the Fund was May 11, 2007.
-----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (5/8/2007) Ended (5/8/2007)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 7.09% 23.56% 5.82% 6.33% 32.68% 45.84%
Market Value 6.93% 22.28% 5.79% 6.32% 32.52% 45.73%
INDEX PERFORMANCE
ISE Water IndexTM 7.54% 24.49% 6.60% 7.07% 37.65% 52.19%
Russell 3000(R) Index 14.06% 21.46% 7.25% 3.53% 41.88% 23.73%
-----------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Industrials 64.26%
Utilities 23.19
Health Care 4.97
Information Technology 4.16
Materials 3.42
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Badger Meter, Inc. 4.16%
American Water Works Co., Inc. 4.06
Aqua America, Inc. 4.03
Xylem, Inc. 4.01
California Water Service Group 3.96
Pentair Ltd. 3.90
Gorman-Rupp (The) Co. 3.86
Lindsay Corp. 3.86
Watts Water Technologies, Inc., Class A 3.85
Rexnord Corp. 3.80
------
Total 39.49%
======
"International Securities Exchange(TM)", "ISE(TM)" and "ISE Water Index(TM)" are
trademarks of the International Securities Exchange, LLC and have been licensed
for use for certain purposes by First Trust on behalf of the Fund. The Fund,
based on the ISE Water Index(TM), is not sponsored, endorsed, sold or promoted
by the International Securities Exchange, LLC and the International Securities
Exchange, LLC makes no representation regarding the advisability of trading in
such product.
Page 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE WATER INDEX FUND - FIW (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - JUNE 30, 2013
First Trust ISE Russell 3000(R)
Water Index Fund ISE Water Index(TM) Index
05/07 $10000 $10000 $10000
12/07 11212 11260 9811
06/08 10992 11056 8728
12/08 7915 7987 6151
06/09 8168 8276 6405
12/09 9522 9681 7889
06/10 8989 9168 7412
12/10 11378 11653 9225
06/11 11910 12243 9811
12/11 10738 11076 9319
06/12 11803 12225 10188
12/12 13619 14153 10849
06/13 14584 15219 12373
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through June
30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 129 3 3 1
01/01/09 - 12/31/09 103 4 0 0
01/01/10 - 12/31/10 146 0 0 0
01/01/11 - 12/31/11 131 0 0 0
01/01/12 - 12/31/12 121 1 0 0
01/01/13 - 06/30/13 98 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 106 8 3 0
01/01/09 - 12/31/09 131 13 1 0
01/01/10 - 12/31/10 105 1 0 0
01/01/11 - 12/31/11 121 0 0 0
01/01/12 - 12/31/12 127 1 0 0
01/01/13 - 06/30/13 26 0 0 0
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND - FCG
The First Trust ISE-Revere Natural Gas 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-REVERE Natural Gas Index(TM)
(the "Index"). The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Index is an equal-weighted index
comprised of exchange-listed companies that derive a substantial portion of
their revenues from the exploration and production of natural gas. The Index is
constructed by establishing the universe of stocks listed in the U.S. of
companies involved in the natural gas exploration and production industries and
then eliminates stocks whose natural gas proven reserves do not meet certain
requirements. The Index then ranks all candidate stocks using four different
methods and, often averaging the rankings, selects the top 30 stocks based on
the final rank. The Index is rebalanced on a quarterly basis. The Fund's shares
are listed for trading on the NYSE Arca. The first day of secondary market
trading in shares of the Fund was May 11, 2007.
----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (5/8/2007) Ended (5/8/2007)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 2.97% -1.62% -12.06% -3.01% -47.39% -17.11%
Market Value 2.84% -1.74% -12.06% -3.02% -47.40% -17.16%
INDEX PERFORMANCE
ISE-REVERE Natural Gas Index(TM) 3.15% -1.10% -11.53% -2.35% -45.80% -13.60%
Russell 3000(R) Index 14.06% 21.46% 7.25% 3.53% 41.88% 23.73%
S&P Composite 1500 Energy Index 9.72% 17.94% -0.67% 4.53% -3.31% 31.29%
----------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
-------------------------------------------------------------
PORTFOLIO SUB-INDUSTRY ALLOCATION AS OF JUNE 30, 2013
-------------------------------------------------------------
% OF TOTAL
SUB-INDUSTRY LONG-TERM INVESTMENTS
Oil & Gas Exploration & Production 91.84%
Gas Utilities 4.20
Integrated Oil & Gas 3.96
-------
Total 100.00%
=======
-------------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
-------------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Goodrich Petroleum Corp. 4.51%
Newfield Exploration Co. 4.49
Range Resources Corp. 4.46
Noble Energy, Inc. 4.38
Penn Virginia Corp. 4.36
Cabot Oil & Gas Corp. 4.32
EXCO Resources, Inc. 4.24
Southwestern Energy Co. 4.23
Anadarko Petroleum Corp. 4.22
Talisman Energy, Inc. 4.21
------
Total 43.42%
======
"International Securities Exchange(TM)", "ISE(TM)" and "ISE-REVERE Natural Gas
Index(TM)" are trademarks of the International Securities Exchange, LLC and have
been licensed for use for certain purposes by First Trust on behalf of the Fund.
The Fund, based on the ISE-REVERE Natural Gas Index(TM), is not sponsored,
endorsed, sold or promoted by the International Securities Exchange, LLC and the
International Securities Exchange, LLC makes no representation regarding the
advisability of trading in such product.
Page 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND - FCG (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - JUNE 30, 2013
First Trust ISE-Revere ISE-REVERE Natural Russell 3000(R) S&P Composite 1500
Natural Gas Index Fund Gas Index(TM) Index Energy Index
05/07 $10000 $10000 $10000 $10000
12/07 11166 11213 9804 12170
06/08 15755 15942 8721 13578
12/08 5967 6016 6147 7810
06/09 6454 6518 6405 7740
12/09 8903 9017 7889 9092
06/10 7752 7891 7412 8016
12/10 9992 10254 9225 11036
06/11 11012 11342 9811 12304
12/11 9308 9620 9319 11469
06/12 8426 8735 10188 11132
12/12 8051 8375 10849 11967
06/13 8289 8640 12373 13129
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through June
30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 131 6 1 2
01/01/09 - 12/31/09 174 1 0 0
01/01/10 - 12/31/10 124 0 0 0
01/01/11 - 12/31/11 151 0 0 0
01/01/12 - 12/31/12 151 0 0 0
01/01/13 - 06/30/13 78 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 101 8 4 0
01/01/09 - 12/31/09 77 0 0 0
01/01/10 - 12/31/10 127 1 0 0
01/01/11 - 12/31/11 101 0 0 0
01/01/12 - 12/31/12 99 0 0 0
01/01/13 - 06/30/13 46 0 0 0
Page 17
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE CHINDIA INDEX FUND - FNI
The First Trust ISE Chindia 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 ChIndia Index(TM) (the "Index"). The
Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index is a non-market capitalization weighted portfolio
of 50 American Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs")
and/or stocks selected from a universe of all listed ADRs, ADSs, and/or stocks
of companies from China and India currently trading on a U.S. exchange. The
Index is rebalanced on a semi-annual basis. The Fund's shares are listed for
trading on the NYSE Arca. The first day of secondary market trading in shares of
the Fund was May 11, 2007.
----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (5/8/2007) Ended (5/8/2007)
6/30/2013 6/30/2013 6/30/2013 to 6/30/2013 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 1.23% 11.81% 2.43% 1.95% 12.74% 12.58%
Market Value 1.04% 11.27% 2.37% 1.89% 12.42% 12.20%
INDEX PERFORMANCE
ISE ChIndia Index(TM) 1.53% 12.38% 3.00% 2.53% 15.90% 16.58%
Russell 3000(R) Index 14.06% 21.46% 7.25% 3.53% 41.88% 23.73%
MSCI Emerging Markets Index -9.57% 2.87% -0.43% 1.54% -2.12% 9.82%
----------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
--------------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
--------------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Information Technology 36.74%
Consumer Discretionary 20.20
Financials 14.10
Energy 9.64
Telecommunication Services 8.89
Health Care 5.43
Materials 2.74
Industrials 1.49
Utilities 0.77
-------
Total 100.00%
=======
--------------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
--------------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
China Mobile Ltd., ADR 7.44%
Michael Kors Holdings Ltd. 7.23
Infosys Ltd., ADR 6.94
Baidu, Inc., ADR 6.83
HDFC Bank Ltd., ADR 6.79
ICICI Bank Ltd., ADR 6.60
PetroChina Co., Ltd., ADR 4.24
CNOOC Ltd., ADR 4.06
Wipro Ltd., ADR 4.04
Dr. Reddy's Laboratories Ltd., ADR 4.00
------
Total 58.17%
======
--------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE ChIndia Index(TM)"
are trademarks of the International Securities Exchange, LLC and have been
licensed for use for certain purposes by First Trust on behalf of the Fund. The
Fund, based on the ISE ChIndia Index(TM), is not sponsored, endorsed, sold or
promoted by the International Securities Exchange, LLC and the International
Securities Exchange, LLC makes no representation regarding the advisability of
trading in such product.
Page 18
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE CHINDIA INDEX FUND - FNI (CONTINUED)
PERFORMANCE OF A $10,000INITIAL INVESTMENT
MAY 8, 2007 - JUNE 30, 2013
First Trust ISE Chindia ISE ChIndia Russell 3000(R) MSCI Emerging
Index Fund Index(TM) Index Markets Index
05/07 $10000 $10000 $10000 $10000
12/07 13873 13952 9804 12715
06/08 9985 10059 8721 11220
12/08 5968 6031 6147 5934
06/09 8329 8451 6405 8071
12/09 10836 11031 7889 10593
06/10 10540 10767 7412 9939
12/10 12836 13175 9225 12592
06/11 13047 13466 9811 12703
12/11 9497 9771 9319 10273
06/12 10069 10375 10188 10677
12/12 11121 11483 10849 12145
06/13 11258 11658 12373 10982
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 January 1, 2008 through June
30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
QUARTER ENDED 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 87 8 2 0
01/01/09 - 12/31/09 131 15 10 1
01/01/10 - 12/31/10 151 2 0 0
01/01/11 - 12/31/11 65 1 0 0
01/01/12 - 12/31/12 63 1 0 0
01/01/13 - 06/30/13 7 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
QUARTER ENDED 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/08 - 12/31/08 138 11 5 2
01/01/09 - 12/31/09 95 0 0 0
01/01/10 - 12/31/10 99 0 0 0
01/01/11 - 12/31/11 186 0 0 0
01/01/12 - 12/31/12 175 11 0 0
01/01/13 - 06/30/13 116 1 0 0
Page 19
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND - QABA
The First Trust NASDAQ(R) ABA Community Bank Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ OMX(R) ABA
Community Bank Index(SM) (the "Index"). The Fund will normally invest at least
90% of its assets in common stocks that comprise the Index. The Index includes a
subset of banks and thrifts or their holding companies listed on NASDAQ(R). The
Index is jointly owned and was developed by NASDAQ OMX(R) and the American
Bankers Association ("ABA"). For the purposes of the Index, a "community bank"
is considered to be all U.S. banks and thrifts or their holding companies listed
on NASDAQ(R) excluding the 50 largest U.S. banks by asset size. Also excluded
are banks that have an international specialization and those banks that have a
credit-card specialization, as screened by the ABA based on the most recent data
from the FDIC. Banks with an international specialization are those institutions
with assets greater than $10 billion and more than 25% of total assets in
foreign offices. Banks with a credit-card specialization are those institutions
with credit-card loans plus securitized receivables in excess of 50% of total
assets plus securitized receivables. Securities in the Index must have a market
capitalization of at least $200 million and a three-month average daily trading
volume of at least $500 thousand. The Index is rebalanced quarterly and
reconstituted semi-annually. The Fund's shares are listed for trading on the
NASDAQ(R). The first day of secondary market trading in shares of the Fund was
July 1, 2009.
--------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (6/29/2009) Inception (6/29/2009)
6/30/2013 6/30/2013 to 6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 18.50% 22.36% 12.46% 60.03%
Market Value 19.56% 22.98% 12.54% 60.47%
INDEX PERFORMANCE
NASDAQ OMX(R) ABA Community Bank Index(SM) 18.89% 23.11% 13.21% 64.30%
S&P Composite 1500 Financials Sector Index 18.76% 32.94% 15.14% 75.84%
Russell 3000(R) Index 14.06% 21.46% 17.66% 91.74%
--------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
--------------------------------------------------------------
PORTFOLIO INDUSTRY ALLOCATION AS OF JUNE 30, 2013
--------------------------------------------------------------
% OF TOTAL
INDUSTRY LONG-TERM INVESTMENTS
Commercial Banks 86.99%
Thrifts & Mortgage Finance 12.58
IT Services 0.43
-------
Total 100.00%
=======
--------------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
--------------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Zions Bancorporation 4.31%
BOK Financial Corp. 3.57
Commerce Bancshares, Inc. 3.20
Signature Bank 3.18
SVB Financial Group 3.05
East West Bancorp, Inc. 3.04
TFS Financial Corp. 2.81
FirstMerit Corp. 2.69
Popular, Inc. 2.54
Associated Banc-Corp. 2.11
------
Total 30.50%
======
NASDAQ(R), OMX(R), NASDAQ OMX(R), and NASDAQ OMX(R) ABA Community Bank Index(SM)
are trademarks of The NASDAQ OMX Group, Inc. ("NASDAQ OMX") and American Bankers
Association ("ABA") (NASDAQ OMX and ABA, collectively with their affiliates, are
referred to as the "Corporations") and are licensed for use by First Trust on
behalf of the Fund. The Fund has not been passed on by the Corporations as to
its legality or suitability. The Fund is not issued, endorsed, sold, or promoted
by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY
WITH RESPECT TO THE FUND.
Page 20
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND - QABA (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 29, 2009 - JUNE 30, 2013
First Trust NASDAQ(R) ABA NASDAQ OMX(R) ABA S&P Composite 1500 Russell 3000(R)
Community Bank Index Fund Community Bank Index(SM) Financials Sector Index Index
06/09 $10000 $10000 $10000 $10000
12/09 11280 11318 12112 12224
06/10 11438 11505 11744 11484
12/10 12721 12846 13722 14293
06/11 12520 12688 13420 15201
12/11 11898 12095 11662 14439
06/12 13081 13343 13227 15785
12/12 13507 13817 14806 16809
06/13 16003 16430 17584 19174
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 July 1, 2009 (commencement of
trading) through June 30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
07/01/09 - 12/31/09 60 3 1 0
01/01/10 - 12/31/10 151 1 0 0
01/01/11 - 12/31/11 135 2 0 0
01/01/12 - 12/31/12 100 17 1 0
01/01/13 - 06/30/13 51 9 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
07/01/09 - 12/31/09 62 2 0 0
01/01/10 - 12/31/10 98 1 0 1
01/01/11 - 12/31/11 111 4 0 0
01/01/12 - 12/31/12 114 18 0 0
01/01/13 - 06/30/13 53 11 0 0
Page 21
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CBOE S&P 500 VIX TAIL HEDGE FUND - VIXH
The First Trust CBOE S&P 500 VIX Tail Hedge 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 CBOE VIX Tail Hedge Index(SM) (the
"Index"). The Fund will normally invest at least 90% of its assets in common
stocks and call options included in the Index. The Index is composed of each of
the equity securities comprising the S&P 500 and an out-of-the-money call option
position on the Chicago Board Options Exchange Market Volatility Index (the "VIX
Index"). The VIX Index is quoted in percentage points, is calculated and
disseminated in real-time by CBOE and is a way of measuring the market's
expectation of volatility in the S&P 500 over the next 30-day period. The Index,
and in turn the Fund, tracks the performance of an S&P 500 stock portfolio (with
dividends reinvested), and call options on the VIX Index. The amount of the
Index allocated to call options on the VIX Index is reevaluated and rebalanced
each month, depending on the level of forward expected volatility in the S&P
500, as measured by the closest to maturity VIX Index futures. The Index is
designed to help cope with extreme downward movements in the market by hedging
its portfolio through purchasing call options on the VIX Index, or "tail
hedging." The Index is reconstituted and rebalanced monthly. The Fund's shares
are listed for trading on the NYSE Arca. The first day of secondary market
trading in shares of the Fund was August 30, 2012.
-------------------------------------------------------------------------------------------------------
PERFORMANCE
-------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
6 Months Ended Inception (8/29/2012)
6/30/2013 to 6/30/2013
FUND PERFORMANCE
NAV 8.34% 6.86%
Market Value 8.86% 7.32%
INDEX PERFORMANCE
CBOE VIX Tail Hedge Index(SM) 8.49% 7.19%
S&P 500(R) Index 13.82% 16.02%
-------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
----------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Information Technology 17.80%
Financials 16.65
Health Care 12.73
Consumer Discretionary 12.21
Energy 10.53
Consumer Staples 10.49
Industrials 10.16
Utilities 3.31
Materials 3.28
Telecommunication Services 2.84
-------
Total 100.00%
=======
----------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2013
----------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Exxon Mobil Corp. 2.78%
Apple, Inc. 2.58
Microsoft Corp. 1.80
Johnson & Johnson 1.67
General Electric Co. 1.66
Google, Inc., Class A 1.64
Chevron Corp. 1.59
Procter & Gamble (The) Co. 1.46
Berkshire Hathaway, Inc., Class B 1.41
Wells Fargo & Co. 1.41
-------
Total 18.00%
=======
Page 22
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST CBOE S&P 500 VIX TAIL HEDGE FUND - VIXH (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 29, 2012 - JUNE 30, 2013
First Trust CBOE S&P 500 CBOE VIX S&P 500(R)
VIX Tail Hedge Fund Tail Hedge Index(SM) Index
08/12 $10000 $10000 $10000
12/12 9863 9880 10193
06/13 10686 10719 11602
Performance figures assume reinvestment of all dividend 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 AS OF JUNE 30, 2013
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 August 30, 2012 (commencement
of trading) through June 30, 2013. 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 AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
08/30/12 - 12/31/12 57 3 0 0
01/01/13 - 06/30/13 70 2 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
08/30/12 - 12/31/12 21 1 1 0
01/01/13 - 06/30/13 52 0 0 0
Page 23
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average annual total returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative total
returns" represent the total change in value of an investment over the periods
indicated. The total returns would have been lower if certain fees had not been
waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Value") 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 the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
the Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and Market Value returns assume that all dividend
distributions have been reinvested in the Fund at NAV and Market Value,
respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike a Fund, an index does not actually hold a portfolio of securities
and therefore does 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 results.
Page 24
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
JUNE 30, 2013 (UNAUDITED)
As a shareholder of First Trust NASDAQ-100 Equal Weighted Index(SM) Fund, First
Trust NASDAQ-100-Technology Sector Index(SM) Fund, First Trust NASDAQ-100
Ex-Technology Sector Index(SM) Fund, First Trust NASDAQ(R) Clean Edge(R) Green
Energy Index Fund, First Trust S&P REIT Index Fund, First Trust ISE Water Index
Fund, First Trust ISE-Revere Natural Gas Index Fund, First Trust ISE Chindia
Index Fund, First Trust NASDAQ(R) ABA Community Bank Index Fund, or CBOE S&P 500
VIX Tail Hedge Fund (each a "Fund" and collectively, the "Funds"), you incur two
types of costs: (1) transaction costs; and (2) ongoing costs, including
management fees, distribution and/or service fees, and other Fund expenses. This
Example is intended to help you understand your ongoing costs of investing in
the Funds and to compare these costs with the ongoing costs of investing in
other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended June 30, 2013.
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 EXPENSE PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JANUARY 1, 2013 JUNE 30, 2013 PERIOD (a) PERIOD (b)
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND - QQEW
Actual $1,000.00 $1,156.00 0.60% $3.21
Hypothetical (5% return before expenses) $1,000.00 $1,021.82 0.60% $3.01
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND - QTEC
Actual $1,000.00 $1,117.20 0.60% $3.15
Hypothetical (5% return before expenses) $1,000.00 $1,021.82 0.60% $3.01
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND - QQXT
Actual $1,000.00 $1,187.80 0.60% $3.25
Hypothetical (5% return before expenses) $1,000.00 $1,021.82 0.60% $3.01
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND - QCLN
Actual $1,000.00 $1,494.90 0.60% $3.71
Hypothetical (5% return before expenses) $1,000.00 $1,021.82 0.60% $3.01
FIRST TRUST S&P REIT INDEX FUND - FRI
Actual $1,000.00 $1,060.90 0.50% $2.55
Hypothetical (5% return before expenses) $1,000.00 $1,022.32 0.50% $2.51
FIRST TRUST ISE WATER INDEX FUND - FIW
Actual $1,000.00 $1,070.90 0.60% $3.08
Hypothetical (5% return before expenses) $1,000.00 $1,021.82 0.60% $3.01
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND - FCG
Actual $1,000.00 $1,029.70 0.60% $3.02
Hypothetical (5% return before expenses) $1,000.00 $1,021.82 0.60% $3.01
Page 25
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
ANNUALIZED
EXPENSE RATIO EXPENSE PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JANUARY 1, 2013 JUNE 30, 2013 PERIOD (a) PERIOD (b)
FIRST TRUST ISE CHINDIA INDEX FUND - FNI
Actual $1,000.00 $1,012.30 0.60% $2.99
Hypothetical (5% return before expenses) $1,000.00 $1,021.82 0.60% $3.01
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND - QABA
Actual $1,000.00 $1,185.00 0.60% $3.25
Hypothetical (5% return before expenses) $1,000.00 $1,021.82 0.60% $3.01
FIRST TRUST CBOE S&P 500 VIX TAIL HEDGE FUND - VIXH
Actual $1,000.00 $1,083.40 0.60% $3.10
Hypothetical (5% return before expenses) $1,000.00 $1,021.82 0.60% $3.01
(a) These expense ratios reflect expense caps for all Funds other than VIXH.
See Note 3 in Notes to Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (January 1,
2013 through June 30, 2013), multiplied by 181/365 (to reflect the
one-half year period).
Page 26
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND - QQEW
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
AIR FREIGHT & LOGISTICS -- 2.0%
25,422 C.H. Robinson Worldwide, Inc. $ 1,431,513
37,547 Expeditors International of
Washington, Inc. 1,427,161
------------
2,858,674
------------
BEVERAGES -- 1.1%
24,766 Monster Beverage Corp. (a) 1,505,030
------------
BIOTECHNOLOGY -- 7.2%
15,708 Alexion Pharmaceuticals, Inc. (a) 1,448,906
14,158 Amgen, Inc. 1,396,828
6,995 Biogen Idec, Inc. (a) 1,505,324
12,216 Celgene Corp. (a) 1,428,172
28,504 Gilead Sciences, Inc. (a) 1,459,690
6,460 Regeneron Pharmaceuticals, Inc. (a) 1,452,725
18,331 Vertex Pharmaceuticals, Inc. (a) 1,464,097
------------
10,155,742
------------
CHEMICALS -- 1.0%
17,234 Sigma-Aldrich Corp. 1,384,924
------------
COMMERCIAL SERVICES & SUPPLIES --
1.0%
12,947 Stericycle, Inc. (a) 1,429,737
------------
COMMUNICATIONS EQUIPMENT -- 2.9%
56,857 Cisco Systems, Inc. 1,382,193
19,626 F5 Networks, Inc. (a) 1,350,269
22,938 QUALCOMM, Inc. 1,401,053
------------
4,133,515
------------
COMPUTERS & PERIPHERALS -- 6.0%
3,365 Apple, Inc. 1,332,809
104,260 Dell, Inc. 1,391,871
36,657 NetApp, Inc. (a) 1,384,901
23,648 SanDisk Corp. (a) 1,444,893
32,935 Seagate Technology PLC 1,476,476
23,121 Western Digital Corp. 1,435,583
------------
8,466,533
------------
FOOD & STAPLES RETAILING -- 2.0%
12,810 Costco Wholesale Corp. 1,416,402
27,217 Whole Foods Market, Inc. 1,401,131
------------
2,817,533
------------
FOOD PRODUCTS -- 2.0%
26,016 Kraft Foods Group, Inc. 1,453,514
48,261 Mondelez International, Inc.,
Class A 1,376,886
------------
2,830,400
------------
HEALTH CARE EQUIPMENT & SUPPLIES --
2.0%
34,056 DENTSPLY International, Inc. 1,394,934
2,767 Intuitive Surgical, Inc. (a) 1,401,707
------------
2,796,641
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES --
2.9%
27,843 Catamaran Corp. (a) $ 1,356,511
22,464 Express Scripts Holding Co. (a) 1,385,804
14,847 Henry Schein, Inc. (a) 1,421,600
------------
4,163,915
------------
HEALTH CARE TECHNOLOGY -- 1.0%
14,715 Cerner Corp. (a) 1,413,964
------------
HOTELS, RESTAURANTS & LEISURE --
2.0%
21,516 Starbucks Corp. 1,409,083
10,732 Wynn Resorts Ltd. 1,373,696
------------
2,782,779
------------
HOUSEHOLD DURABLES -- 1.0%
40,112 Garmin Ltd. 1,450,450
------------
INTERNET & CATALOG RETAIL -- 5.0%
5,093 Amazon.com, Inc. (a) 1,414,275
23,644 Expedia, Inc. 1,422,187
62,923 Liberty Interactive Corp.,
Class A (a) 1,447,858
6,414 Netflix, Inc. (a) 1,353,931
1,712 priceline.com, Inc. (a) 1,416,047
------------
7,054,298
------------
INTERNET SOFTWARE & SERVICES --
7.0%
34,148 Akamai Technologies, Inc. (a) 1,452,997
14,891 Baidu, Inc., ADR (a) 1,407,646
27,223 eBay, Inc. (a) 1,407,974
7,810 Equinix, Inc. (a) 1,442,663
56,695 Facebook, Inc., Class A (a) 1,409,438
1,580 Google, Inc., Class A (a) 1,390,985
55,211 Yahoo!, Inc. (a) 1,386,348
------------
9,898,051
------------
IT SERVICES -- 3.9%
20,266 Automatic Data Processing, Inc. 1,395,517
22,342 Cognizant Technology Solutions
Corp., Class A (a) 1,398,833
16,091 Fiserv, Inc. (a) 1,406,514
37,446 Paychex, Inc. 1,367,528
------------
5,568,392
------------
LEISURE EQUIPMENT & PRODUCTS --
1.0%
31,548 Mattel, Inc. 1,429,440
------------
LIFE SCIENCES TOOLS & SERVICES --
1.0%
18,791 Life Technologies Corp. (a) 1,390,722
------------
MACHINERY -- 1.0%
26,583 PACCAR, Inc. 1,426,444
------------
MEDIA -- 8.2%
34,998 Comcast Corp., Class A 1,465,716
22,562 DIRECTV (a) 1,390,271
See Notes to Financial Statements Page 27
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND - QQEW
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDIA (CONTINUED)
18,445 Discovery Communications, Inc.,
Class A (a) $ 1,424,139
19,841 Liberty Global PLC, Class A (a) 1,469,821
11,289 Liberty Media Corp., Class A (a) 1,430,994
44,312 News Corp., Class A (a) 1,444,571
440,464 Sirius XM Radio, Inc. 1,475,554
21,178 Viacom, Inc., Class B 1,441,163
------------
11,542,229
------------
METALS & MINING -- 0.9%
20,861 Randgold Resources Ltd., ADR 1,336,147
------------
MULTILINE RETAIL -- 2.0%
28,164 Dollar Tree, Inc. (a) 1,431,858
31,626 Sears Holdings Corp. (a) (b) 1,330,822
------------
2,762,680
------------
PHARMACEUTICALS -- 1.0%
45,441 Mylan, Inc. (a) 1,410,034
------------
PROFESSIONAL SERVICES -- 1.0%
24,101 Verisk Analytics, Inc., Class A (a) 1,438,830
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 13.9%
43,496 Altera Corp. 1,434,933
30,807 Analog Devices, Inc. 1,388,163
92,361 Applied Materials, Inc. 1,377,103
37,265 Avago Technologies Ltd. 1,392,966
41,873 Broadcom Corp., Class A 1,413,632
57,515 Intel Corp. 1,393,013
25,413 KLA-Tencor Corp. 1,416,266
38,290 Linear Technology Corp. 1,410,604
49,888 Maxim Integrated Products, Inc. 1,385,889
37,874 Microchip Technology, Inc. 1,410,807
100,134 Micron Technology, Inc. (a) 1,434,920
96,524 NVIDIA Corp. 1,354,232
39,814 Texas Instruments, Inc. 1,388,314
35,707 Xilinx, Inc. 1,414,354
------------
19,615,196
------------
SOFTWARE -- 12.0%
102,721 Activision Blizzard, Inc. 1,464,801
31,090 Adobe Systems, Inc. (a) 1,416,460
40,674 Autodesk, Inc. (a) 1,380,475
31,027 BMC Software, Inc. (a) 1,400,559
50,577 CA, Inc. 1,448,019
28,301 Check Point Software Technologies
Ltd. (a) 1,405,994
23,202 Citrix Systems, Inc. (a) 1,399,777
24,044 Intuit, Inc. 1,467,405
41,873 Microsoft Corp. 1,445,875
75,236 Nuance Communications, Inc. (a) 1,382,838
46,180 Oracle Corp. 1,418,650
62,612 Symantec Corp. 1,406,892
------------
17,037,745
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
SPECIALTY RETAIL -- 4.0%
19,875 Bed Bath & Beyond, Inc. (a) $ 1,409,138
12,541 O'Reilly Automotive, Inc. (a) 1,412,367
21,809 Ross Stores, Inc. 1,413,441
89,222 Staples, Inc. 1,415,061
------------
5,650,007
------------
TEXTILES, APPAREL & LUXURY GOODS --
1.0%
13,902 Fossil Group, Inc. (a) 1,436,216
------------
TRADING COMPANIES & DISTRIBUTORS --
1.0%
30,883 Fastenal Co. 1,415,986
------------
WIRELESS TELECOMMUNICATION SERVICES
-- 2.0%
19,398 SBA Communications Corp.,
Class A (a) 1,437,780
50,984 Vodafone Group PLC, ADR 1,465,280
------------
2,903,060
------------
TOTAL COMMON STOCKS -- 100.0% 141,505,314
(Cost $126,180,862) ------------
COLLATERAL FOR SECURITIES ON LOAN
-- 0.7%
MONEY MARKET FUND -- 0.1%
216,427 Goldman Sachs Financial Square
Treasury Instruments Fund -
Institutional Class - 0.001% (c) 216,427
(Cost $216,427)
PRINCIPAL
VALUE
-----------
REPURCHASE AGREEMENT -- 0.6%
$ 794,578 JPMorgan Chase & Co., 0.08% (c),
dated 06/28/13, due 07/01/13,
with a maturity value of
$794,583. Collateralized by U.S.
Treasury Bills, interest rate of
0.000%, due 09/26/13 to
10/03/13. The value of the
collateral including accrued
interest is $810,463. 794,578
(Cost $794,578) ------------
TOTAL COLLATERAL FOR SECURITIES
ON LOAN - 0.7% 1,011,005
(Cost $1,011,005) ------------
TOTAL INVESTMENTS -- 100.7% 142,516,319
(Cost $127,191,867) (d)
NET OTHER ASSETS AND
LIABILITIES -- (0.7)% (1,034,747)
------------
NET ASSETS -- 100.0% $141,481,572
============
Page 28 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND - QQEW
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
(a) Non-income producing security.
(b) All or a portion of this security is on loan. (See Note 2E - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $990,211 and the total value of the collateral held by the
Fund is $1,011,005.
(c) Interest rate shown reflects yield as of June 30, 2013.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $19,225,232 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $3,900,780.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $141,505,314 $ -- $ --
Money Market Fund 216,427 -- --
Repurchase
Agreement -- 794,578 --
--------------------------------------
Total Investments $ 141,721,741 $ 794,578 $ --
======================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
-----------------------------
OFFSETTING ASSETS AND LIABILITIES
The Fund's loaned securities were all subject to enforceable Securities Lending
Agreements. Securities Lending Agreements on a gross basis were as follows:
SECURITIES LENDING AGREEMENTS
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 990,211
Non-cash Collateral offsetting(1) (990,211)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the cash collateral received from each
borrower exceeded the value of the related securities loaned.
The Fund's investments in repurchase agreements were all subject to enforceable
Master Repurchase Agreements. Repurchase Agreements on a gross basis were as
follows:
REPURCHASE AGREEMENT
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 794,578
Non-cash Collateral offsetting(1) (794,578)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the collateral received from the seller
exceeded the value of the repurchase agreement.
See Notes to Financial Statements Page 29
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND - QTEC
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
COMMUNICATIONS EQUIPMENT -- 6.7%
115,018 Cisco Systems, Inc. $ 2,796,087
39,692 F5 Networks, Inc. (a) 2,730,810
46,398 QUALCOMM, Inc. 2,833,990
------------
8,360,887
------------
COMPUTERS & PERIPHERALS -- 13.7%
6,806 Apple, Inc. 2,695,721
210,892 Dell, Inc. 2,815,408
74,161 NetApp, Inc. (a) 2,801,803
47,839 SanDisk Corp. (a) 2,922,963
66,628 Seagate Technology PLC 2,986,933
46,771 Western Digital Corp. 2,904,011
------------
17,126,839
------------
HEALTH CARE PROVIDERS & SERVICES --
2.2%
56,324 Catamaran Corp. (a) 2,744,105
------------
HEALTH CARE TECHNOLOGY -- 2.3%
29,763 Cerner Corp. (a) 2,859,927
------------
HOUSEHOLD DURABLES -- 2.3%
81,144 Garmin Ltd. 2,934,167
------------
INTERNET SOFTWARE & SERVICES --
13.7%
69,078 Akamai Technologies, Inc. (a) 2,939,269
30,123 Baidu, Inc., ADR (a) 2,847,527
15,800 Equinix, Inc. (a) 2,918,576
114,705 Facebook, Inc., Class A (a) 2,851,566
3,197 Google, Inc., Class A (a) 2,814,543
111,682 Yahoo!, Inc. (a) 2,804,335
------------
17,175,816
------------
IT SERVICES -- 2.3%
45,189 Cognizant Technology Solutions
Corp., Class A (a) 2,829,283
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 31.7%
87,988 Altera Corp. 2,902,724
62,321 Analog Devices, Inc. 2,808,184
186,833 Applied Materials, Inc. 2,785,680
75,386 Avago Technologies Ltd. 2,817,929
84,697 Broadcom Corp., Class A 2,859,371
116,354 Intel Corp. 2,818,094
51,410 KLA-Tencor Corp. 2,865,079
77,462 Linear Technology Corp. 2,853,700
100,923 Maxim Integrated Products, Inc. 2,803,641
76,616 Microchip Technology, Inc. 2,853,946
202,625 Micron Technology, Inc. (a) 2,903,616
195,304 NVIDIA Corp. 2,740,115
80,541 Texas Instruments, Inc. 2,808,465
72,242 Xilinx, Inc. 2,861,506
------------
39,682,050
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
SOFTWARE -- 25.1%
62,899 Adobe Systems, Inc. (a) $ 2,865,679
82,294 Autodesk, Inc. (a) 2,793,058
62,767 BMC Software, Inc. (a) 2,833,302
102,328 CA, Inc. 2,929,651
57,255 Check Point Software Technologies
Ltd. (a) 2,844,428
46,933 Citrix Systems, Inc. (a) 2,831,468
48,640 Intuit, Inc. 2,968,499
84,709 Microsoft Corp. 2,925,002
152,183 Nuance Communications, Inc. (a) 2,797,124
93,399 Oracle Corp. 2,869,217
126,668 Symantec Corp. 2,846,230
------------
31,503,658
------------
TOTAL INVESTMENTS -- 100.0% 125,216,732
(Cost $119,082,986) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 22,136
------------
NET ASSETS -- 100.0% $125,238,868
============
(a) Non-income producing security.
(b) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $13,512,594 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $7,378,848.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $125,216,732 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
Page 30 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND - QQXT
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (a) -- 100.0%
AIR FREIGHT & LOGISTICS -- 3.6%
19,175 C.H. Robinson Worldwide, Inc. $ 1,079,744
28,321 Expeditors International of
Washington, Inc. 1,076,481
------------
2,156,225
------------
BEVERAGES -- 1.9%
18,680 Monster Beverage Corp. (b) 1,135,184
------------
BIOTECHNOLOGY -- 12.8%
11,848 Alexion Pharmaceuticals, Inc. (b) 1,092,860
10,679 Amgen, Inc. 1,053,590
5,276 Biogen Idec, Inc. (b) 1,135,395
9,214 Celgene Corp. (b) 1,077,209
21,501 Gilead Sciences, Inc. (b) 1,101,066
4,873 Regeneron Pharmaceuticals, Inc. (b) 1,095,840
13,827 Vertex Pharmaceuticals, Inc. (b) 1,104,362
------------
7,660,322
------------
CHEMICALS -- 1.7%
13,000 Sigma-Aldrich Corp. 1,044,680
------------
COMMERCIAL SERVICES & SUPPLIES --
1.8%
9,765 Stericycle, Inc. (b) 1,078,349
------------
FOOD & STAPLES RETAILING -- 3.5%
9,662 Costco Wholesale Corp. 1,068,327
20,529 Whole Foods Market, Inc. 1,056,833
------------
2,125,160
------------
FOOD PRODUCTS -- 3.6%
19,623 Kraft Foods Group, Inc. 1,096,337
36,403 Mondelez International, Inc.,
Class A 1,038,578
------------
2,134,915
------------
HEALTH CARE EQUIPMENT & SUPPLIES --
3.5%
25,687 DENTSPLY International, Inc. 1,052,139
2,088 Intuitive Surgical, Inc. (b) 1,057,739
------------
2,109,878
------------
HEALTH CARE PROVIDERS & SERVICES --
3.5%
16,944 Express Scripts Holding Co. (b) 1,045,276
11,199 Henry Schein, Inc. (b) 1,072,304
------------
2,117,580
------------
HOTELS, RESTAURANTS & LEISURE --
3.5%
16,229 Starbucks Corp. 1,062,837
8,096 Wynn Resorts Ltd. 1,036,288
------------
2,099,125
------------
INTERNET & CATALOG RETAIL -- 8.9%
3,842 Amazon.com, Inc. (b) 1,066,885
17,833 Expedia, Inc. 1,072,655
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
INTERNET & CATALOG RETAIL
(CONTINUED)
47,461 Liberty Interactive Corp.,
Class A (b) $ 1,092,078
4,838 Netflix, Inc. (b) 1,021,253
1,292 priceline.com, Inc. (b) 1,068,652
------------
5,321,523
------------
INTERNET SOFTWARE & SERVICES --
1.8%
20,533 eBay, Inc. (b) 1,061,967
------------
IT SERVICES -- 5.2%
15,286 Automatic Data Processing, Inc. 1,052,594
12,137 Fiserv, Inc. (b) 1,060,895
28,245 Paychex, Inc. 1,031,507
------------
3,144,996
------------
LEISURE EQUIPMENT & PRODUCTS --
1.8%
23,796 Mattel, Inc. 1,078,197
------------
LIFE SCIENCES TOOLS & SERVICES --
1.7%
14,174 Life Technologies Corp. (b) 1,049,018
------------
MACHINERY -- 1.8%
20,051 PACCAR, Inc. 1,075,937
------------
MEDIA -- 14.5%
26,398 Comcast Corp., Class A 1,105,548
17,018 DIRECTV (b) 1,048,649
13,913 Discovery Communications, Inc.,
Class A (b) 1,074,223
14,966 Liberty Global PLC, Class A (b) 1,108,681
8,515 Liberty Media Corp., Class A (b) 1,079,361
33,424 News Corp., Class A (b) 1,089,622
332,233 Sirius XM Radio, Inc. 1,112,981
15,974 Viacom, Inc., Class B 1,087,031
------------
8,706,096
------------
METALS & MINING -- 1.7%
15,735 Randgold Resources Ltd., ADR 1,007,827
------------
MULTILINE RETAIL -- 3.5%
21,244 Dollar Tree, Inc. (b) 1,080,045
23,855 Sears Holdings Corp. (b) (c) 1,003,818
------------
2,083,863
------------
PHARMACEUTICALS -- 1.8%
34,275 Mylan, Inc. (b) 1,063,553
------------
PROFESSIONAL SERVICES -- 1.8%
18,180 Verisk Analytics, Inc., Class A (b) 1,085,346
------------
SOFTWARE -- 1.8%
77,480 Activision Blizzard, Inc. 1,104,865
------------
SPECIALTY RETAIL -- 7.1%
14,991 Bed Bath & Beyond, Inc. (b) 1,062,862
9,460 O'Reilly Automotive, Inc. (b) 1,065,385
16,450 Ross Stores, Inc. 1,066,125
See Notes to Financial Statements Page 31
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND - QQXT
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
SPECIALTY RETAIL (CONTINUED)
67,299 Staples, Inc. $ 1,067,362
------------
4,261,734
------------
TEXTILES, APPAREL & LUXURY GOODS --
1.8%
10,486 Fossil Group, Inc. (b) 1,083,309
------------
TRADING COMPANIES & DISTRIBUTORS --
1.8%
23,294 Fastenal Co. 1,068,030
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 3.6%
14,632 SBA Communications Corp.,
Class A (b) 1,084,524
38,456 Vodafone Group PLC, ADR 1,105,225
------------
2,189,749
------------
TOTAL COMMON STOCKS -- 100.0% 60,047,428
(Cost $49,576,717) ------------
COLLATERAL FOR SECURITIES ON LOAN
-- 1.3%
MONEY MARKET FUND -- 0.3%
165,910 Goldman Sachs Financial Square
Treasury Instruments Fund -
Institutional Class - 0.001% (d) 165,910
(Cost $165,910)
PRINCIPAL
VALUE
-----------
REPURCHASE AGREEMENT -- 1.0%
$ 609,110 JPMorgan Chase & Co., 0.08% (d),
dated 06/28/13, due 07/01/13,
with a maturity value of
$609,115. Collateralized by U.S.
Treasury Bills, interest rate of
0.000%, due 09/26/13 to
10/03/13. The value of the
collateral including accrued
interest is $621,288. 609,110
(Cost $609,110) ------------
TOTAL COLLATERAL FOR SECURITIES ON
LOAN - 1.3% 775,020
(Cost $775,020) ------------
TOTAL INVESTMENTS -- 101.3% 60,822,448
(Cost $50,351,737) (e)
NET OTHER ASSETS AND
LIABILITIES -- (1.3)% (778,744)
------------
NET ASSETS -- 100.0% $ 60,043,704
============
(a) The industry allocation is based on Standard & Poor's Global Industry
Classification Standard (GICS), and is different than the industry sector
classification system used by the Index to select securities, which is the
Industry Classification Benchmark (ICB) system, the joint classification
system of Dow Jones Indexes and FTSE Group.
(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 aggregate value of such
securities is $759,082 and the total value of the collateral held by the
Fund is $775,020.
(d) Interest rate shown reflects yield as of June 30, 2013.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013,
the aggregate gross unrealized appreciation for all securities in which
there was an excess of value over tax cost was $11,292,028 and the
aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $821,317.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $60,047,428 $ -- $ --
Money Market Fund 165,910 -- --
Repurchase
Agreement -- 609,110 --
--------------------------------------
Total Investments $60,213,338 $ 609,110 $ --
======================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value.There were no
transfers between Levels at June 30, 2013.
Page 32 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND - QQXT
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
-----------------------------
OFFSETTING ASSETS AND LIABILITIES
The Fund's loaned securities were all subject to enforceable Securities Lending
Agreements. Securities Lending Agreements on a gross basis were as follows:
SECURITIES LENDING AGREEMENTS
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 759,082
Non-cash Collateral offsetting(1) (759,082)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the cash collateral received from each
borrower exceeded the value of the related securities loaned.
The Fund's investments in repurchase agreements were all subject to enforceable
Master Repurchase Agreements. Repurchase Agreements on a gross basis were as
follows:
REPURCHASE AGREEMENT
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 609,110
Non-cash Collateral offsetting(1) (609,110)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the collateral received from the seller
exceeded the value of the repurchase agreement.
See Notes to Financial Statements Page 33
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND - QCLN
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 4.0%
59,562 Hexcel Corp. (a) $ 2,028,086
------------
AUTOMOBILES -- 9.0%
42,368 Tesla Motors, Inc. (a) 4,551,594
------------
CHEMICALS -- 1.0%
40,834 Zoltek Cos., Inc. (a) (b) 527,167
------------
COMMERCIAL SERVICES & SUPPLIES --
0.9%
35,919 EnerNOC, Inc. (a) 476,286
------------
COMMUNICATIONS EQUIPMENT -- 0.2%
31,724 EMCORE Corp. (a) (b) 114,206
------------
ELECTRICAL EQUIPMENT -- 1.7%
68,332 American Superconductor
Corp. (a) (b) 180,396
49,425 Enphase Energy, Inc. (a) (b) 382,055
225,013 FuelCell Energy, Inc. (a) (b) 285,767
------------
848,218
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 13.2%
172,871 AVX Corp. 2,031,234
46,947 Itron, Inc. (a) 1,991,961
34,656 Maxwell Technologies, Inc. (a) 247,791
145,508 Power-One, Inc. (a) 919,611
54,803 Universal Display Corp. (a) (b) 1,540,512
------------
6,731,109
------------
MACHINERY -- 2.0%
31,395 ESCO Technologies, Inc. 1,016,570
------------
OIL, GAS & CONSUMABLE FUELS -- 4.9%
89,971 Amyris, Inc. (a) (b) 260,016
35,764 Green Plains Renewable Energy,
Inc. (a) 476,376
63,839 KiOR, Inc., Class A (a) (b) 364,521
36,398 Renewable Energy Group, Inc. (a) 517,944
73,424 Solazyme, Inc. (a) (b) 860,529
------------
2,479,386
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 63.1%
46,621 Advanced Energy Industries,
Inc. (a) 811,672
51,865 Canadian Solar, Inc. (a) (b) 569,996
66,432 Cree, Inc. (a) 4,242,347
142,728 Fairchild Semiconductor
International, Inc. (a) 1,969,646
76,168 First Solar, Inc. (a) 3,406,995
141,801 GT Advanced Technologies,
Inc. (a) (b) 588,474
82,474 International Rectifier Corp. (a) 1,727,006
110,453 Linear Technology Corp. 4,069,089
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (CONTINUED)
94,437 Microsemi Corp. (a) $ 2,148,442
478,213 ON Semiconductor Corp. (a) 3,863,961
34,418 Power Integrations, Inc. 1,395,994
102,767 ReneSola Ltd., ADR (a) (b) 219,921
256,628 SunEdison, Inc. (a) 2,096,651
107,305 SunPower Corp. (a) (b) 2,221,213
158,024 Suntech Power Holdings Co., Ltd.,
ADR (a) (b) 162,765
87,434 Trina Solar Ltd., ADR (a) (b) 521,107
46,501 Veeco Instruments, Inc. (a) 1,647,065
122,565 Yingli Green Energy Holding Co.,
Ltd., ADR (a) (b) 397,111
------------
32,059,455
------------
TOTAL COMMON STOCKS -- 100.0% 50,832,077
(Cost $46,790,991) ------------
COLLATERAL FOR SECURITIES ON LOAN
-- 13.0%
MONEY MARKET FUND -- 2.8%
1,411,791 Goldman Sachs Financial Square
Treasury Instruments Fund -
Institutional Class - 0.001% (c) 1,411,791
(Cost $1,411,791)
PRINCIPAL
VALUE
-----------
REPURCHASE AGREEMENT -- 10.2%
$ 5,183,163 JPMorgan Chase & Co., 0.08% (c),
dated 06/28/13, due 07/01/13,
with a maturity value of
$5,183,197. Collateralized by
U.S. Treasury Bills, interest
rate of 0.000%, due 09/26/13 to
10/03/13. The value of the
collateral including accrued
interest is $5,286,785. 5,183,163
(Cost $5,183,163) ------------
TOTAL COLLATERAL FOR SECURITIES ON
LOAN - 13.0% 6,594,954
(Cost $6,594,954) ------------
TOTAL INVESTMENTS -- 113.0% 57,427,031
(Cost $53,385,945) (d)
NET OTHER ASSETS AND
LIABILITIES -- (13.0)% (6,596,974)
------------
NET ASSETS -- 100.0% $ 50,830,057
============
Page 34 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND - QCLN
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
(a) Non-income producing security.
(b) All or a portion of this security is on loan. (See Note 2E - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $6,413,438 and the total value of the collateral held by the
Fund is $6,594,954.
(c) Interest rate shown reflects yield as of June 30, 2013.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $6,179,506 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $2,138,420.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $50,832,077 $ -- $ --
Money Market Fund 1,411,791 -- --
Repurchase
Agreement -- 5,183,163 --
-------------------------------------
Total Investments $52,243,868 $5,183,163 $ --
=====================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
-----------------------------
OFFSETTING ASSETS AND LIABILITIES
The Fund's loaned securities were all subject to enforceable Securities Lending
Agreements. Securities Lending Agreements on a gross basis were as follows:
SECURITIES LENDING AGREEMENTS
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 6,413,438
Non-cash Collateral offsetting(1) (6,413,438)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the cash collateral received from each
borrower exceeded the value of the related securities loaned.
The Fund's investments in repurchase agreements were all subject to enforceable
Master Repurchase Agreements. Repurchase Agreements on a gross basis were as
follows:
REPURCHASE AGREEMENT
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 5,183,163
Non-cash Collateral offsetting(1) (5,183,163)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the collateral received from the seller
exceeded the value of the repurchase agreement.
See Notes to Financial Statements Page 35
FIRST TRUST S&P REIT INDEX FUND - FRI
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (a) -- 99.8%
DIVERSIFIED REITS -- 8.1%
21,789 American Assets Trust, Inc. $ 672,409
99,988 American Realty Capital
Properties, Inc. 1,525,817
57,365 CapLease, Inc. 484,161
67,724 Cousins Properties, Inc. 684,012
207,493 Duke Realty Corp. 3,234,816
36,929 First Potomac Realty Trust 482,293
8,948 Gladstone Commercial Corp. 166,791
811 Gyrodyne Co. of America, Inc. 57,987
64,913 Investors Real Estate Trust 558,252
118,812 Lexington Realty Trust 1,387,724
77,634 Liberty Property Trust 2,869,353
7,389 One Liberty Properties, Inc. 162,262
11,666 PS Business Parks, Inc. 841,935
10,632 Select Income REIT 298,121
109,745 Vornado Realty Trust 9,092,373
42,897 Washington Real Estate
Investment Trust 1,154,358
10,979 Whitestone REIT 173,029
18,802 Winthrop Realty Trust 226,188
36,476 WP Carey, Inc. 2,413,617
------------
26,485,498
------------
INDUSTRIAL REITS -- 5.1%
187,934 DCT Industrial Trust, Inc. 1,343,728
19,511 EastGroup Properties, Inc. 1,097,884
63,082 First Industrial Realty Trust, Inc. 956,954
27,052 Monmouth Real Estate Investment
Corp., Class A 267,003
321,473 Prologis, Inc. 12,125,962
27,254 STAG Industrial, Inc. 543,717
10,780 Terreno Realty Corp. 199,753
------------
16,535,001
------------
OFFICE REITS -- 13.7%
45,482 Alexandria Real Estate Equities,
Inc. 2,989,077
120,228 BioMed Realty Trust, Inc. 2,432,212
97,889 Boston Properties, Inc. 10,324,353
101,033 Brandywine Realty Trust 1,365,966
77,126 CommonWealth REIT 1,783,153
13,778 Coresite Realty Corp. 438,278
55,323 Corporate Office Properties Trust 1,410,737
82,867 Digital Realty Trust, Inc. 5,054,887
85,571 Douglas Emmett, Inc. 2,134,996
41,531 DuPont Fabros Technology, Inc. 1,002,974
56,261 Franklin Street Properties Corp. 742,645
35,279 Government Properties Income
Trust 889,736
52,976 Highwoods Properties, Inc. 1,886,475
27,748 Hudson Pacific Properties, Inc. 590,477
48,665 Kilroy Realty Corp. 2,579,732
53,909 Mack-Cali Realty Corp. 1,320,231
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
OFFICE REITS -- (CONTINUED)
33,679 MPG Office Trust, Inc. (b) $ 105,752
27,050 Parkway Properties, Inc. 453,358
108,070 Piedmont Office Realty Trust, Inc.,
Class A 1,932,292
59,155 SL Green Realty Corp. 5,216,879
------------
44,654,210
------------
RESIDENTIAL REITS -- 16.8%
67,556 American Campus Communities,
Inc. 2,746,827
94,098 Apartment Investment &
Management Co., Class A 2,826,704
32,517 Associated Estates Realty Corp. 522,873
78,443 AvalonBay Communities, Inc. 10,582,745
49,745 BRE Properties, Inc. 2,488,245
54,713 Camden Property Trust 3,782,857
41,705 Campus Crest Communities, Inc. 481,276
53,549 Colonial Properties Trust 1,291,602
73,534 Education Realty Trust, Inc. 752,253
25,291 Equity Lifestyle Properties, Inc. 1,987,620
206,803 Equity Residential 12,006,982
24,557 Essex Property Trust, Inc. 3,902,598
33,690 Home Properties, Inc. 2,202,315
27,563 Mid-America Apartment
Communities, Inc. 1,867,944
35,206 Post Properties, Inc. 1,742,345
21,288 Sun Communities, Inc. 1,059,291
161,765 UDR, Inc. 4,123,390
10,306 UMH Properties, Inc. 105,843
------------
54,473,710
------------
RETAIL REITS -- 26.0%
35,506 Acadia Realty Trust 876,643
8,158 Agree Realty Corp. 240,824
1,330 Alexander's, Inc. 390,634
105,429 CBL & Associates Properties, Inc. 2,258,289
35,442 Cedar Realty Trust, Inc. 183,590
159,655 DDR Corp. 2,658,256
39,974 Equity One, Inc. 904,612
30,880 Excel Trust, Inc. 395,573
42,040 Federal Realty Investment Trust 4,358,707
290,798 General Growth Properties, Inc. 5,778,156
17,297 Getty Realty Corp. 357,183
93,255 Glimcher Realty Trust 1,018,345
55,812 Inland Real Estate Corp. 570,399
263,680 Kimco Realty Corp. 5,650,662
55,470 Kite Realty Group Trust 334,484
88,748 Macerich (The) Co. 5,410,966
76,342 National Retail Properties, Inc. 2,626,165
40,320 Pennsylvania Real Estate
Investment Trust 761,242
38,563 Ramco-Gershenson Properties
Trust 598,883
126,577 Realty Income Corp. 5,306,108
59,156 Regency Centers Corp. 3,005,716
Page 36 See Notes to Financial Statements
FIRST TRUST S&P REIT INDEX FUND - FRI
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (a) (CONTINUED)
RETAIL REITS (CONTINUED)
37,265 Retail Opportunity Investments
Corp. $ 517,984
20,786 Retail Properties of America, Inc.,
Class A 296,824
14,768 Rouse Properties, Inc. 289,748
8,265 Saul Centers, Inc. 367,462
200,502 Simon Property Group, Inc. 31,663,276
60,903 Tanger Factory Outlet Centers, Inc. 2,037,814
41,126 Taubman Centers, Inc. 3,090,619
16,578 Urstadt Biddle Properties, Inc.,
Class A 334,378
72,338 Weingarten Realty Investors 2,225,840
------------
84,509,382
------------
SPECIALIZED REITS -- 30.1%
46,644 Ashford Hospitality Trust 534,074
14,281 Chatham Lodging Trust 245,348
30,899 Chesapeake Lodging Trust 642,390
74,337 Corrections Corp. of America 2,517,794
79,386 CubeSmart 1,268,588
126,160 DiamondRock Hospitality Co. 1,175,811
30,345 EPR Properties 1,525,443
66,841 Extra Space Storage, Inc. 2,802,643
71,308 FelCor Lodging Trust, Inc. (b) 421,430
46,248 Geo Group (The), Inc. 1,570,120
293,275 HCP, Inc. 13,326,416
183,493 Health Care REIT, Inc. 12,299,536
58,349 Healthcare Realty Trust, Inc. 1,487,900
34,716 Healthcare Trust of America, Inc.,
Class A 389,861
113,667 Hersha Hospitality Trust 641,082
90,214 Hospitality Properties Trust 2,370,824
480,472 Host Hotels & Resorts, Inc. 8,105,563
61,586 LaSalle Hotel Properties 1,521,174
22,115 LTC Properties, Inc. 863,591
96,841 Medical Properties Trust, Inc. 1,386,763
15,621 National Health Investors, Inc. 935,073
74,902 OMEGA Healthcare Investors, Inc. 2,323,460
39,607 Pebblebrook Hotel Trust 1,023,841
93,125 Public Storage 14,278,856
79,174 RLJ Lodging Trust 1,780,623
33,343 Ryman Hospitality Properties 1,300,710
24,092 Sabra Health Care REIT, Inc. 629,042
121,301 Senior Housing Properties Trust 3,145,335
20,273 Sovran Self Storage, Inc. 1,313,488
114,778 Strategic Hotels & Resorts,
Inc. (b) 1,016,933
42,522 Summit Hotel Properties, Inc. 401,833
105,058 Sunstone Hotel Investors, Inc. (b) 1,269,101
8,204 Universal Health Realty Income
Trust 353,839
189,151 Ventas, Inc. 13,138,428
------------
98,006,913
------------
TOTAL COMMON STOCKS -- 99.8% 324,664,714
(Cost $307,115,295) ------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
MONEY MARKET FUND -- 0.1%
227,868 Morgan Stanley Institutional
Liquidity Fund - Treasury
Portfolio - Institutional
Class - 0.03% (c) $ 227,868
(Cost $227,868) ------------
TOTAL INVESTMENTS -- 99.9% 324,892,582
(Cost $307,343,163) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 379,609
------------
NET ASSETS -- 100.0% $325,272,191
============
(a) The industry classification is based upon Standard & Poor's Global
Industry Classification Standard ("GICS") Sub-Industry.
(b) Non-income producing security.
(c) Interest rate shown reflects yield as of June 30, 2013.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $24,428,545 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $6,879,126.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $324,664,714 $ -- $ --
Money Market
Fund 227,868 -- --
--------------------------------------
Total Investments $324,892,582 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
See Notes to Financial Statements Page 37
FIRST TRUST ISE WATER INDEX FUND - FIW
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 97.0%
CHEMICALS -- 3.3%
49,549 Ashland, Inc. $ 4,137,342
------------
COMMERCIAL SERVICES & SUPPLIES --
2.6%
139,657 Tetra Tech, Inc. (a) 3,283,336
------------
CONSTRUCTION & ENGINEERING -- 6.0%
49,912 AECOM Technology Corp. (a) 1,586,702
76,441 Layne Christensen Co. (a) 1,491,364
157,585 Northwest Pipe Co. (a) 4,396,622
------------
7,474,688
------------
ELECTRICAL EQUIPMENT -- 6.8%
43,484 Emerson Electric Co. 2,371,617
71,027 Franklin Electric Co., Inc. 2,390,059
30,396 Roper Industries, Inc. 3,775,791
------------
8,537,467
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 4.0%
112,888 Badger Meter, Inc. 5,029,160
------------
HEALTH CARE EQUIPMENT & SUPPLIES --
2.0%
27,352 IDEXX Laboratories, Inc. (a) 2,455,663
------------
INDUSTRIAL CONGLOMERATES -- 3.5%
68,332 Danaher Corp. 4,325,416
------------
LIFE SCIENCES TOOLS & SERVICES --
2.9%
83,223 Agilent Technologies, Inc. 3,558,615
------------
MACHINERY -- 43.4%
41,216 Crane Co. 2,469,663
924,700 Energy Recovery, Inc. (a) 3,819,011
1,220,607 Flow International Corp. (a) 4,504,040
44,211 Flowserve Corp. 2,387,836
146,757 Gorman-Rupp (The) Co. 4,672,743
45,266 IDEX Corp. 2,435,763
51,320 ITT Corp. 1,509,321
62,260 Lindsay Corp. 4,668,255
29,592 Mueller Industries, Inc. 1,492,324
360,060 Mueller Water Products, Inc.,
Class A 2,488,015
35,753 Pall Corp. 2,375,072
81,755 Pentair Ltd. 4,716,446
272,466 Rexnord Corp. (a) 4,591,052
17,332 Valmont Industries, Inc. 2,480,036
102,701 Watts Water Technologies, Inc.,
Class A 4,656,463
180,030 Xylem, Inc. 4,850,008
------------
54,116,048
------------
MULTI-UTILITIES -- 1.1%
124,247 Veolia Environnment, ADR 1,417,658
------------
WATER UTILITIES -- 21.4%
45,931 American States Water Co. 2,465,117
119,054 American Water Works Co., Inc. 4,908,596
155,789 Aqua America, Inc. 4,874,638
245,594 California Water Service Group 4,791,539
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
WATER UTILITIES (CONTINUED)
420,535 Cia de Saneamento Basico do
Estado de Sao Paulo, ADR $ 4,377,769
324,629 Consolidated Water Co., Ltd. 3,710,510
57,554 SJW Corp. 1,507,915
------------
26,636,084
------------
TOTAL COMMON STOCKS -- 97.0% 120,971,477
(Cost $106,926,245)
MONEY MARKET FUND -- 3.4%
4,166,898 Morgan Stanley Institutional
Liquidity Fund - Treasury
Portfolio - Institutional
Class - 0.03% (b) 4,166,898
(Cost $4,166,898) ------------
TOTAL INVESTMENTS -- 100.4% 125,138,375
(Cost $111,093,143) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.4)% (465,886)
------------
NET ASSETS -- 100.0% $124,672,489
============
(a) Non-income producing security.
(b) Interest rate shown reflects yield as of June 30, 2013.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $15,404,961 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $1,359,729.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $120,971,477 $ -- $ --
Money Market
Fund 4,166,898 -- --
--------------------------------------
Total Investments $125,138,375 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value.There were no
transfers between Levels at June 30, 2013.
Page 38 See Notes to Financial Statements
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND - FCG
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
GAS UTILITIES -- 4.2%
747,503 Questar Corp. $ 17,827,947
------------
OIL, GAS & CONSUMABLE FUELS --
95.8%
208,426 Anadarko Petroleum Corp. 17,910,046
211,421 Apache Corp. 17,723,422
812,474 Bill Barrett Corp. (a) (b) 16,428,224
258,090 Cabot Oil & Gas Corp. 18,329,552
867,870 Chesapeake Energy Corp. (a) 17,687,191
1,081,829 Comstock Resources, Inc. 17,017,170
330,404 Devon Energy Corp. 17,141,360
1,027,335 EnCana Corp. 17,403,055
225,217 EQT Corp. 17,875,473
2,355,321 EXCO Resources, Inc. (a) 17,994,652
4,193,352 Forest Oil Corp. (a) (b) 17,150,810
1,496,876 Goodrich Petroleum Corp. (a) (b) 19,160,013
4,798,809 Magnum Hunter Resources
Corp. (a) (b) 17,515,653
797,669 Newfield Exploration Co. (b) 19,056,312
309,921 Noble Energy, Inc. 18,607,657
3,935,866 Penn Virginia Corp. (b) 18,498,570
613,172 QEP Resources, Inc. 17,033,918
9,203,870 Quicksilver Resources, Inc. (a) (b) 15,462,502
244,617 Range Resources Corp. 18,913,786
491,175 Southwestern Energy Co. (b) 17,942,623
813,210 Statoil ASA, ADR 16,825,315
1,564,738 Talisman Energy, Inc. 17,884,955
859,557 Ultra Petroleum Corp. (a) (b) 17,036,420
------------
406,598,679
------------
TOTAL COMMON STOCKS -- 100.0% 424,426,626
(Cost $509,261,871) ------------
COLLATERAL FOR SECURITIES ON
LOAN -- 16.5%
MONEY MARKET FUND -- 3.5%
14,944,416 Goldman Sachs Financial Square
Treasury Instruments Fund -
Institutional Class - 0.001% (c) 14,944,416
(Cost $14,944,416)
PRINCIPAL
VALUE
-----------
REPURCHASE AGREEMENT -- 13.0%
$54,866,013 JPMorgan Chase & Co., 0.08% (c),
dated 06/28/13, due 07/01/13,
with a maturity value of
$54,866,378. Collateralized by
U.S. Treasury Bills, interest
rate of 0.000%, due 09/26/13 to
10/03/13. The value of the
collateral including accrued
interest is $55,962,903. 54,866,013
(Cost $54,866,013) ------------
DESCRIPTION VALUE
-----------------------------------------------------------
TOTAL COLLATERAL FOR SECURITIES ON
LOAN - 16.5% $ 69,810,429
(Cost $69,810,429) ------------
TOTAL INVESTMENTS -- 116.5% 494,237,055
(Cost $579,072,300) (d)
NET OTHER ASSETS AND
LIABILITIES -- (16.5)% (69,845,076)
------------
NET ASSETS -- 100.0% $424,391,979
============
(a) All or a portion of this security is on loan. (See Note 2E - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $68,217,353 and the total value of the collateral held by
the Fund is $69,810,429.
(b) Non-income producing security.
(c) Interest rate shown reflects yield as of June 30, 2013. (d) Aggregate cost
for financial reporting purposes, which approximates the aggregate cost
for federal income
tax purposes. As of June 30, 2013, the aggregate gross unrealized appreciation
for all securities in which there was an excess of value over tax cost was
$29,128,538 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$113,963,783.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $424,426,626 $ -- $ --
Money Market
Fund 14,944,416 -- --
Repurchase
Agreement -- 54,866,013 --
--------------------------------------
Total Investments $439,371,042 $54,866,013 $ --
======================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
See Notes to Financial Statements Page 39
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND - FCG
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
-----------------------------
OFFSETTING ASSETS AND LIABILITIES
The Fund's loaned securities were all subject to enforceable Securities Lending
Agreements. Securities Lending Agreements on a gross basis were as follows:
SECURITIES LENDING AGREEMENTS
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 68,217,353
Non-cash Collateral offsetting(1) (68,217,353)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the cash collateral received from each
borrower exceeded the value of the related securities loaned.
The Fund's investments in repurchase agreements were all subject to enforceable
Master Repurchase Agreements. Repurchase Agreements on a gross basis were as
follows:
REPURCHASE AGREEMENT
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 54,866,013
Non-cash Collateral offsetting(1) (54,866,013)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the collateral received from the seller
exceeded the value of the repurchase agreement.
Page 40 See Notes to Financial Statements
FIRST TRUST ISE CHINDIA INDEX FUND - FNI
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.3%
AUTOMOBILES -- 3.8%
87,795 Tata Motors Ltd., ADR $ 2,057,915
------------
COMMERCIAL BANKS -- 13.4%
102,997 HDFC Bank Ltd., ADR 3,732,611
94,987 ICICI Bank Ltd., ADR 3,633,253
------------
7,365,864
------------
DIVERSIFIED CONSUMER SERVICES --
0.7%
18,342 New Oriental Education &
Technology Group, Inc., ADR 406,275
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.5%
8,441 China Telecom Corp., Ltd., ADR 400,947
30,506 China Unicom (Hong Kong) Ltd.,
ADR 400,849
------------
801,796
------------
HEALTH CARE EQUIPMENT & SUPPLIES --
0.7%
10,238 Mindray Medical International Ltd.,
ADR 383,413
------------
HOTELS, RESTAURANTS & LEISURE --
5.2%
27,297 China Lodging Group Ltd., ADR (a) 436,752
14,003 Home Inns & Hotels Management,
Inc., ADR (a) (b) 374,020
92,386 Melco Crown Entertainment Ltd.,
ADR (a) 2,065,751
------------
2,876,523
------------
INDEPENDENT POWER PRODUCERS &
ENERGY TRADERS -- 0.8%
11,048 Huaneng Power International, Inc.,
ADR 424,796
------------
INSURANCE -- 0.7%
11,146 China Life Insurance Co., Ltd.,
ADR (b) 388,772
------------
INTERNET & CATALOG RETAIL -- 3.3%
32,839 Ctrip.com International Ltd.,
ADR (a) 1,071,537
51,900 E-Commerce China Dangdang, Inc.,
ADR (a) (b) 360,186
12,483 Vipshop Holdings Ltd., ADR (a) (b) 364,004
------------
1,795,727
------------
INTERNET SOFTWARE & SERVICES --
15.2%
39,759 Baidu, Inc., ADR (a) 3,758,418
6,636 NetEase, Inc., ADR 419,196
25,504 Qihoo 360 Technology Co. Ltd.,
ADR (a) 1,177,520
126,111 Renren, Inc., ADR (a) (b) 377,072
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
INTERNET SOFTWARE & SERVICES
(CONTINUED)
19,620 SINA Corp. (a) $ 1,093,422
6,239 Sohu.com, Inc. (a) 384,447
15,745 SouFun Holdings Ltd., ADR (b) 390,791
19,932 Youku Tudou, Inc., ADR (a) 382,495
14,214 YY, Inc., ADR (a) 381,362
------------
8,364,723
------------
IT SERVICES -- 13.1%
92,660 Infosys Ltd., ADR (b) 3,816,665
304,999 Wipro Ltd., ADR (b) 2,220,393
68,130 WNS Holdings Ltd., ADR (a) 1,137,090
------------
7,174,148
------------
LIFE SCIENCES TOOLS & SERVICES --
0.7%
18,961 WuXi PharmaTech Cayman, Inc.,
ADR (a) 398,181
------------
MARINE -- 0.7%
17,888 Seaspan Corp. (b) 371,176
------------
METALS & MINING -- 2.7%
48,365 Aluminum Corp. of China Ltd.,
ADR (a) (b) 380,149
192,603 Sterlite Industries (India) Ltd.,
ADR 1,124,801
------------
1,504,950
------------
OIL, GAS & CONSUMABLE FUELS -- 9.7%
4,396 China Petroleum & Chemical Corp.,
ADR 402,234
13,337 CNOOC Ltd., ADR 2,233,681
21,054 PetroChina Co., Ltd., ADR (b) 2,330,046
47,625 Yanzhou Coal Mining Co., Ltd.,
ADR (b) 338,614
------------
5,304,575
------------
PHARMACEUTICALS -- 4.0%
58,239 Dr. Reddy's Laboratories Ltd.,
ADR (a) 2,202,599
------------
PROFESSIONAL SERVICES -- 0.8%
6,670 51job, Inc., ADR (a) 450,292
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.3%
58,925 JA Solar Holdings Co., Ltd.,
ADR (a) 424,260
19,131 Spreadtrum Communications, Inc.,
ADR 502,189
68,266 Trina Solar Ltd., ADR (a) (b) 406,865
141,051 Yingli Green Energy Holding Co.,
Ltd., ADR (a) (b) 457,005
------------
1,790,319
------------
See Notes to Financial Statements Page 41
FIRST TRUST ISE CHINDIA INDEX FUND - FNI
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
SOFTWARE -- 5.3%
34,868 AsiaInfo-Linkage, Inc. (a) $ 402,377
32,594 AutoNavi Holdings Ltd.,
ADR (a) (b) 393,410
13,054 Changyou.com Ltd., ADR 397,364
53,265 Giant Interactive Group, Inc.,
ADR (b) 426,653
50,288 NQ Mobile, Inc., ADR (a) (b) 406,327
25,444 Perfect World Co., Ltd., ADR 443,234
104,875 Shanda Games Ltd., ADR (a) 414,256
------------
2,883,621
------------
TEXTILES, APPAREL & LUXURY GOODS --
7.2%
64,085 Michael Kors Holdings Ltd. (a) 3,974,552
------------
WIRELESS TELECOMMUNICATION SERVICES
-- 7.5%
79,018 China Mobile Ltd., ADR 4,090,762
------------
TOTAL COMMON STOCKS -- 100.3% 55,010,979
(Cost $56,119,842) ------------
COLLATERAL FOR SECURITIES ON
LOAN -- 16.6%
MONEY MARKET FUND -- 3.5%
1,952,316 Goldman Sachs Financial Square
Treasury Instruments Fund -
Institutional Class - 0.001% (c) 1,952,316
(Cost $1,952,316)
PRINCIPAL
VALUE
-----------
REPURCHASE AGREEMENT -- 13.1%
$ 7,167,613 JPMorgan Chase & Co., 0.08% (c),
dated 06/28/13, due 07/01/13,
with a maturity value of
$7,167,661. Collateralized by
U.S. Treasury Bills, interest
rate of 0.000%, due 09/26/13 to
10/03/13. The value of the
collateral including accrued
interest is $7,310,909. 7,167,613
(Cost $7,167,613) ------------
TOTAL COLLATERAL FOR SECURITIES ON
LOAN - 16.6% 9,119,929
(Cost $9,119,929) ------------
TOTAL INVESTMENTS -- 116.9% 64,130,908
(Cost $65,239,771) (d)
NET OTHER ASSETS AND
LIABILITIES -- (16.9)% (9,266,050)
------------
NET ASSETS -- 100.0% $ 54,864,858
============
(a) All or a portion of this security is on loan. (See Note 2E - Securities
Lending in the Notes to Financial Statements). The aggregate value of such
securities is $8,914,181 and the total value of the collateral held by the
Fund is $9,119,929.
(b) Non-income producing security.
(c) Interest rate shown reflects yield as of June 30, 2013.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $7,280,600 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $8,389,463.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1 - Quoted Prices
Level 2 - Other Significant Observable Inputs
Level 3 - Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $55,010,979 $ -- $ --
Money Market Fund 1,952,316 -- --
Repurchase
Agreement -- 7,167,613 --
--------------------------------------
Total Investments $56,963,295 $7,167,613 $ --
======================================
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
COUNTRY ALLOCATIONS AS A PERCENTAGE OF NET ASSETS**:
-----------------------------------------------------------
China 44.1%
India 36.3
Hong Kong 19.9
Net Other Assets and Liabilities (0.3)
------
100.0%
======
* See Portfolio of Investments for industry breakout.
** Portfolio securities are categorized based on their country of incorporation.
Page 42 See Notes to Financial Statements
FIRST TRUST ISE CHINDIA INDEX FUND - FNI
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
-----------------------------
OFFSETTING ASSETS AND LIABILITIES
The Fund's loaned securities were all subject to enforceable Securities Lending
Agreements. Securities Lending Agreements on a gross basis were as follows:
SECURITIES LENDING AGREEMENTS
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 8,914,181
Non-cash Collateral offsetting(1) (8,914,181)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the cash collateral received from each
borrower exceeded the value of the related securities loaned.
The Fund's investments in repurchase agreements were all subject to enforceable
Master Repurchase Agreements. Repurchase Agreements on a gross basis were as
follows:
REPURCHASE AGREEMENT
-----------------------------------------------------------
Total gross amount presented in Statements of
Assets and Liabilities $ 7,167,613
Non-cash Collateral offsetting(1) (7,167,613)
------------
Net Amount $ --
============
(1) At June 30, 2013 the value of the collateral received from the seller
exceeded the value of the repurchase agreement.
See Notes to Financial Statements Page 43
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND - QABA
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.1%
COMMERCIAL BANKS -- 87.1%
3,575 1st Source Corp. $ 84,942
3,503 Ameris Bancorp (a) 59,026
1,776 Arrow Financial Corp. 43,956
24,608 Associated Banc-Corp. 382,654
2,234 BancFirst Corp. 103,993
5,477 Bancorp (The), Inc. (a) 82,100
5,189 Bank of the Ozarks, Inc. 224,839
2,856 Banner Corp. 96,504
11,589 BBCN Bancorp, Inc. 164,796
10,078 BOK Financial Corp. 645,496
11,695 Boston Private Financial Holdings,
Inc. 124,435
1,982 Bryn Mawr Bank Corp. 47,429
4,724 Capital Bank Financial Corp.,
Class A (a) 89,709
4,441 Cardinal Financial Corp. 65,016
11,571 Cathay General Bancorp 235,470
4,040 Chemical Financial Corp. 105,000
2,297 City Holding Co. 89,468
5,899 CoBiz Financial, Inc. 48,962
7,487 Columbia Banking System, Inc. 178,265
13,305 Commerce Bancshares, Inc. 579,566
2,297 Community Trust Bancorp, Inc. 81,819
15,399 CVB Financial Corp. 181,092
3,775 Eagle Bancorp, Inc. (b) 84,485
19,980 East West Bancorp, Inc. 549,450
12,720 First Busey Corp. 57,240
1,260 First Citizens BancShares, Inc.,
Class A 241,983
2,932 First Community Bancshares, Inc. 45,974
2,492 First Connecticut Bancorp, Inc. 34,689
8,488 First Financial Bancorp 126,471
4,627 First Financial Bankshares, Inc. 257,539
1,953 First Financial Corp. 60,523
2,703 First Interstate BancSystem, Inc. 56,033
4,223 First Merchants Corp. 72,424
11,015 First Midwest Bancorp, Inc. 151,126
1,332 First of Long Island (The) Corp. 44,209
24,317 FirstMerit Corp. 487,070
4,524 Flushing Financial Corp. 74,420
28,633 Fulton Financial Corp. 328,707
10,568 Glacier Bancorp, Inc. 234,504
1,999 Great Southern Bancorp, Inc. 53,893
12,455 Hancock Holding Co. 374,522
4,635 Hanmi Financial Corp. (a) 81,900
2,482 Heartland Financial USA, Inc. 68,230
8,251 Home BancShares, Inc. 214,278
3,056 HomeTrust Bancshares, Inc. (a) 51,830
4,356 IBERIABANK Corp. 233,525
3,358 Independent Bank Corp. 115,851
9,859 International Bancshares Corp. 222,616
16,412 Investors Bancorp, Inc. 345,965
4,382 Lakeland Bancorp, Inc. 45,704
2,410 Lakeland Financial Corp. 66,878
8,040 MB Financial, Inc. 215,472
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMERCIAL BANKS (CONTINUED)
21,359 National Penn Bancshares, Inc. $ 217,007
6,425 NBT Bancorp, Inc. 136,017
1,679 OmniAmerican Bancorp, Inc. (a) 36,988
5,263 PacWest Bancorp 161,311
5,139 Pinnacle Financial Partners,
Inc. (a) 132,124
15,149 Popular, Inc. (a) 459,469
10,871 PrivateBancorp, Inc. 230,574
3,700 Renasant Corp. 90,058
2,717 Republic Bancorp, Inc., Class A 59,557
4,360 S&T Bancorp, Inc. 85,456
2,048 S.Y. Bancorp, Inc. 50,237
3,662 Sandy Spring Bancorp, Inc. 79,172
2,498 SCBT Financial Corp. 125,874
6,934 Signature Bank (a) 575,661
2,423 Simmons First National Corp.,
Class A 63,216
2,749 Southside Bancshares, Inc. 65,646
2,890 Southwest Bancorp, Inc. (a) 38,148
4,683 State Bank Financial Corp. 70,386
3,333 StellarOne Corp. 65,493
9,141 Sterling Financial Corp. 217,373
27,359 Susquehanna Bancshares, Inc. 351,563
6,614 SVB Financial Group (a) 551,079
4,268 Taylor Capital Group, Inc. (a) 72,087
5,984 Texas Capital Bancshares, Inc. (a) 265,450
4,630 TowneBank 68,154
2,350 TriCo Bancshares 50,126
9,854 Trustmark Corp. 242,211
5,949 UMB Financial Corp. 331,181
16,428 Umpqua Holdings Corp. 246,584
3,647 Union First Market Bankshares Corp. 75,092
7,387 United Bankshares, Inc. 195,386
6,320 United Community Banks, Inc. (a) 78,494
5,861 ViewPoint Financial Group, Inc. 121,967
2,413 Washington Trust Bancorp, Inc. 68,819
4,286 WesBanco, Inc. 113,279
3,959 Westamerica Bancorporation 180,887
10,461 Wilshire Bancorp, Inc. 69,252
5,435 Wintrust Financial Corp. 208,052
27,034 Zions Bancorporation 780,742
------------
15,742,220
------------
IT SERVICES -- 0.4%
1,685 Cass Information Systems, Inc. 77,678
------------
THRIFTS & MORTGAGE FINANCE -- 12.6%
6,811 Bank Mutual Corp. 38,414
11,577 Beneficial Mutual Bancorp, Inc. (a) 97,247
2,004 Bofi Holding, Inc. (a) 91,823
10,285 Brookline Bancorp, Inc. 89,274
21,856 Capitol Federal Financial, Inc. 265,332
3,338 Charter Financial Corp. 33,647
5,287 Dime Community Bancshares, Inc. 80,997
1,433 First Defiance Financial Corp. 32,314
2,113 HomeStreet, Inc. 45,324
Page 44 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND - QABA
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
THRIFTS & MORTGAGE FINANCE
(CONTINUED)
8,540 Northfield Bancorp, Inc. $ 100,089
13,753 Northwest Bancshares, Inc. 185,803
2,591 OceanFirst Financial Corp. 40,290
6,657 Oritani Financial Corp. 104,382
4,024 Rockville Financial, Inc. 52,634
1,559 Territorial Bancorp, Inc. 35,249
45,355 TFS Financial Corp. (a) 507,976
13,822 TrustCo Bank Corp. 75,192
2,887 United Financial Bancorp, Inc. 43,738
15,287 Washington Federal, Inc. 288,618
1,291 WSFS Financial Corp. 67,635
------------
2,275,978
------------
TOTAL INVESTMENTS -- 100.1% 18,095,876
(Cost $16,293,031) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (19,527)
------------
NET ASSETS -- 100.0% $ 18,076,349
============
(a) Non-income producing security.
(b) Non-income producing security which pays in-kind distributions.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $1,899,270 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $96,425.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1- Quoted Prices
Level 2- Other Significant Observable Inputs
Level 3- Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $18,095,876 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
See Notes to Financial Statements Page 45
FIRST TRUST CBOE S&P 500 VIX TAIL HEDGE FUND - VIXH
PORTFOLIO OF INVESTMENTS
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.1%
AEROSPACE & DEFENSE -- 2.5%
298 Boeing (The) Co. $ 30,527
145 General Dynamics Corp. 11,358
343 Honeywell International, Inc. 27,214
39 L-3 Communications Holdings, Inc. 3,344
116 Lockheed Martin Corp. 12,581
103 Northrop Grumman Corp. 8,528
64 Precision Castparts Corp. 14,465
142 Raytheon Co. 9,389
59 Rockwell Collins, Inc. 3,741
121 Textron, Inc. 3,152
369 United Technologies Corp. 34,295
------------
158,594
------------
AIR FREIGHT & LOGISTICS -- 0.7%
70 C.H. Robinson Worldwide, Inc. 3,941
90 Expeditors International of
Washington, Inc. 3,421
129 FedEx Corp. 12,717
310 United Parcel Service, Inc.,
Class B 26,809
------------
46,888
------------
AIRLINES -- 0.1%
315 Southwest Airlines Co. 4,060
------------
AUTO COMPONENTS -- 0.4%
50 BorgWarner, Inc. (a) 4,307
127 Delphi Automotive PLC 6,438
107 Goodyear Tire & Rubber (The)
Co. (a) 1,636
299 Johnson Controls, Inc. 10,701
------------
23,082
------------
AUTOMOBILES -- 0.7%
1,715 Ford Motor Co. 26,531
336 General Motors Co. (a) 11,192
98 Harley-Davidson, Inc. 5,373
------------
43,096
------------
BEVERAGES -- 2.4%
70 Beam, Inc. 4,418
66 Brown-Forman Corp., Class B 4,458
1,671 Coca-Cola (The) Co. 67,024
112 Coca-Cola Enterprises, Inc. 3,938
67 Constellation Brands, Inc.,
Class A (a) 3,492
89 Dr. Pepper Snapple Group, Inc. 4,088
69 Molson Coors Brewing Co., Class B 3,302
63 Monster Beverage Corp. (a) 3,829
675 PepsiCo, Inc. 55,208
------------
149,757
------------
BIOTECHNOLOGY -- 2.0%
85 Alexion Pharmaceuticals, Inc. (a) 7,840
327 Amgen, Inc. 32,262
104 Biogen Idec, Inc. (a) 22,381
182 Celgene Corp. (a) 21,278
666 Gilead Sciences, Inc. (a) 34,106
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
BIOTECHNOLOGY (CONTINUED)
33 Regeneron Pharmaceuticals,
Inc. (a) $ 7,421
------------
125,288
------------
BUILDING PRODUCTS -- 0.0%
156 Masco Corp. 3,040
------------
CAPITAL MARKETS -- 2.1%
88 Ameriprise Financial, Inc. 7,117
506 Bank of New York Mellon (The)
Corp. 14,193
54 BlackRock, Inc. 13,870
480 Charles Schwab (The) Corp. 10,190
125 E*TRADE Financial Corp. (a) 1,583
60 Franklin Resources, Inc. 8,161
188 Goldman Sachs Group (The), Inc. 28,435
194 Invesco Ltd. 6,169
49 Legg Mason, Inc. 1,519
599 Morgan Stanley 14,634
95 Northern Trust Corp. 5,501
199 State Street Corp. 12,977
113 T. Rowe Price Group, Inc. 8,266
------------
132,615
------------
CHEMICALS -- 2.4%
91 Air Products and Chemicals, Inc. 8,333
29 Airgas, Inc. 2,768
26 CF Industries Holdings, Inc. 4,459
528 Dow Chemical (The) Co. 16,986
402 E.I. du Pont de Nemours & Co. 21,105
68 Eastman Chemical Co. 4,761
116 Ecolab, Inc. 9,882
59 FMC Corp. 3,603
36 International Flavors & Fragrances,
Inc. 2,706
166 LyondellBasell Industries N.V.,
Class A 10,999
233 Monsanto Co. 23,020
121 Mosaic (The) Co. 6,511
62 PPG Industries, Inc. 9,077
129 Praxair, Inc. 14,856
37 Sherwin-Williams (The) Co. 6,534
53 Sigma-Aldrich Corp. 4,259
------------
149,859
------------
COMMERCIAL BANKS -- 2.9%
306 BB&T Corp. 10,367
81 Comerica, Inc. 3,226
382 Fifth Third Bancorp 6,895
366 Huntington Bancshares, Inc. 2,884
402 KeyCorp 4,438
53 M&T Bank Corp. 5,923
231 PNC Financial Services Group, Inc. 16,845
617 Regions Financial Corp. 5,880
235 SunTrust Banks, Inc. 7,419
807 U.S. Bancorp 29,173
2,149 Wells Fargo & Co. 88,689
Page 46 See Notes to Financial Statements
FIRST TRUST CBOE S&P 500 VIX TAIL HEDGE FUND - VIXH
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMMERCIAL BANKS (CONTINUED)
80 Zions Bancorporation $ 2,311
------------
184,050
------------
COMMERCIAL SERVICES & SUPPLIES --
0.5%
95 ADT (The) Corp. 3,786
43 Avery Dennison Corp. 1,839
45 Cintas Corp. 2,049
73 Iron Mountain, Inc. 1,943
88 Pitney Bowes, Inc. 1,292
129 Republic Services, Inc. 4,378
38 Stericycle, Inc. (a) 4,196
202 Tyco International Ltd. 6,656
192 Waste Management, Inc. 7,743
------------
33,882
------------
COMMUNICATIONS EQUIPMENT -- 1.9%
2,332 Cisco Systems, Inc. 56,691
34 F5 Networks, Inc. (a) 2,339
48 Harris Corp. 2,364
103 JDS Uniphase Corp. (a) 1,481
221 Juniper Networks, Inc. (a) 4,268
119 Motorola Solutions, Inc. 6,870
754 QUALCOMM, Inc. 46,054
------------
120,067
------------
COMPUTERS & PERIPHERALS -- 3.8%
410 Apple, Inc. 162,393
640 Dell, Inc. 8,544
917 EMC Corp. 21,660
841 Hewlett-Packard Co. 20,857
157 NetApp, Inc. (a) 5,931
106 SanDisk Corp. (a) 6,477
139 Seagate Technology PLC 6,231
93 Western Digital Corp. 5,774
------------
237,867
------------
CONSTRUCTION & ENGINEERING -- 0.2%
71 Fluor Corp. 4,211
57 Jacobs Engineering Group, Inc. (a) 3,142
93 Quanta Services, Inc. (a) 2,461
------------
9,814
------------
CONSTRUCTION MATERIALS -- 0.0%
57 Vulcan Materials Co. 2,759
------------
CONSUMER FINANCE -- 1.0%
417 American Express Co. 31,175
255 Capital One Financial Corp. 16,016
214 Discover Financial Services 10,195
194 SLM Corp. 4,435
------------
61,821
------------
CONTAINERS & PACKAGING -- 0.2%
65 Ball Corp. 2,700
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
CONTAINERS & PACKAGING (CONTINUED)
45 Bemis Co., Inc. $ 1,761
77 MeadWestvaco Corp. 2,626
72 Owens-Illinois, Inc. (a) 2,001
85 Sealed Air Corp. 2,036
------------
11,124
------------
DISTRIBUTORS -- 0.1%
68 Genuine Parts Co. 5,309
------------
DIVERSIFIED CONSUMER SERVICES --
0.0%
119 H&R Block, Inc. 3,302
------------
DIVERSIFIED FINANCIAL SERVICES --
3.9%
4,704 Bank of America Corp. 60,494
1,328 Citigroup, Inc. 63,704
134 CME Group, Inc. 10,181
32 IntercontinentalExchange, Inc. (a) 5,688
1,649 JPMorgan Chase & Co. 87,051
129 Leucadia National Corp. 3,382
120 McGraw Hill Financial, Inc. 6,383
85 Moody's Corp. 5,179
51 NASDAQ OMX Group (The), Inc. 1,672
106 NYSE Euronext 4,389
------------
248,123
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.5%
2,347 AT&T, Inc. 83,084
266 CenturyLink, Inc. 9,403
435 Frontier Communications Corp. 1,762
1,248 Verizon Communications, Inc. 62,824
259 Windstream Corp. 1,997
------------
159,070
------------
ELECTRIC UTILITIES -- 1.9%
212 American Electric Power Co., Inc. 9,493
308 Duke Energy Corp. 20,790
142 Edison International 6,839
78 Entergy Corp. 5,435
373 Exelon Corp. 11,518
182 FirstEnergy Corp. 6,796
185 NextEra Energy, Inc. 15,074
137 Northeast Utilities 5,757
108 Pepco Holdings, Inc. 2,177
48 Pinnacle West Capital Corp. 2,663
258 PPL Corp. 7,807
380 Southern (The) Co. 16,769
217 Xcel Energy, Inc. 6,150
------------
117,268
------------
ELECTRICAL EQUIPMENT -- 0.7%
206 Eaton Corp. PLC 13,557
See Notes to Financial Statements Page 47
FIRST TRUST CBOE S&P 500 VIX TAIL HEDGE FUND - VIXH
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRICAL EQUIPMENT (CONTINUED)
314 Emerson Electric Co. $ 17,126
61 Rockwell Automation, Inc. 5,071
43 Roper Industries, Inc. 5,341
------------
41,095
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.4%
70 Amphenol Corp., Class A 5,456
644 Corning, Inc. 9,164
62 FLIR Systems, Inc. 1,672
80 Jabil Circuit, Inc. 1,631
60 Molex, Inc. 1,760
181 TE Connectivity Ltd. 8,243
------------
27,926
------------
ENERGY EQUIPMENT & SERVICES -- 1.8%
193 Baker Hughes, Inc. 8,903
108 Cameron International Corp. (a) 6,605
30 Diamond Offshore Drilling, Inc. 2,064
102 Ensco PLC, Class A 5,928
103 FMC Technologies, Inc. (a) 5,735
407 Halliburton Co. 16,980
46 Helmerich & Payne, Inc. 2,873
129 Nabors Industries Ltd. 1,975
186 National Oilwell Varco, Inc. 12,815
111 Noble Corp. 4,171
54 Rowan Cos. PLC, Class A (a) 1,840
580 Schlumberger Ltd. 41,563
------------
111,452
------------
FOOD & STAPLES RETAILING -- 2.4%
191 Costco Wholesale Corp. 21,119
534 CVS Caremark Corp. 30,534
227 Kroger (The) Co. 7,841
105 Safeway, Inc. 2,484
259 Sysco Corp. 8,848
376 Walgreen Co. 16,619
715 Wal-Mart Stores, Inc. 53,260
150 Whole Foods Market, Inc. 7,722
------------
148,427
------------
FOOD PRODUCTS -- 1.7%
288 Archer-Daniels-Midland Co. 9,766
78 Campbell Soup Co. 3,494
182 ConAgra Foods, Inc. 6,357
281 General Mills, Inc. 13,637
65 Hershey (The) Co. 5,803
59 Hormel Foods Corp. 2,276
47 J.M. Smucker (The) Co. 4,848
111 Kellogg Co. 7,130
259 Kraft Foods Group, Inc. 14,470
58 McCormick & Co., Inc. 4,081
88 Mead Johnson Nutrition Co. 6,972
779 Mondelez International, Inc.,
Class A 22,225
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
FOOD PRODUCTS (CONTINUED)
124 Tyson Foods, Inc., Class A $ 3,184
------------
104,243
------------
GAS UTILITIES -- 0.1%
52 AGL Resources, Inc. 2,229
90 ONEOK, Inc. 3,718
------------
5,947
------------
HEALTH CARE EQUIPMENT & SUPPLIES --
2.1%
680 Abbott Laboratories 23,718
236 Baxter International, Inc. 16,348
85 Becton, Dickinson & Co. 8,401
589 Boston Scientific Corp. (a) 5,460
33 C. R. Bard, Inc. 3,586
96 CareFusion Corp. (a) 3,538
205 Covidien PLC 12,882
63 DENTSPLY International, Inc. 2,581
49 Edwards Lifesciences Corp. (a) 3,293
18 Intuitive Surgical, Inc. (a) 9,118
441 Medtronic, Inc. 22,698
124 St. Jude Medical, Inc. 5,658
125 Stryker Corp. 8,085
47 Varian Medical Systems, Inc. (a) 3,170
73 Zimmer Holdings, Inc. 5,471
------------
134,007
------------
HEALTH CARE PROVIDERS & SERVICES --
2.0%
165 Aetna, Inc. 10,484
101 AmerisourceBergen Corp. 5,639
149 Cardinal Health, Inc. 7,033
124 Cigna Corp. 8,989
37 DaVita HealthCare Partners,
Inc. (a) 4,470
356 Express Scripts Holding Co. (a) 21,962
69 Humana, Inc. 5,822
41 Laboratory Corp. of America
Holdings (a) 4,104
99 McKesson Corp. 11,335
36 Patterson Cos., Inc. 1,354
69 Quest Diagnostics, Inc. 4,183
45 Tenet Healthcare Corp. (a) 2,074
445 UnitedHealth Group, Inc. 29,139
131 WellPoint, Inc. 10,721
------------
127,309
------------
HEALTH CARE TECHNOLOGY -- 0.1%
64 Cerner Corp. (a) 6,150
------------
HOTELS, RESTAURANTS & LEISURE --
1.8%
194 Carnival Corp. 6,652
13 Chipotle Mexican Grill, Inc. (a) 4,737
57 Darden Restaurants, Inc. 2,877
114 International Game Technology 1,905
105 Marriott International, Inc.,
Class A 4,239
Page 48 See Notes to Financial Statements
FIRST TRUST CBOE S&P 500 VIX TAIL HEDGE FUND - VIXH
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOTELS, RESTAURANTS & LEISURE
(CONTINUED)
437 McDonald's Corp. $ 43,263
327 Starbucks Corp. 21,415
85 Starwood Hotels & Resorts
Worldwide, Inc. 5,371
59 Wyndham Worldwide Corp. 3,377
35 Wynn Resorts Ltd. 4,480
196 Yum! Brands, Inc. 13,591
------------
111,907
------------
HOUSEHOLD DURABLES -- 0.3%
122 D.R. Horton, Inc. 2,596
48 Garmin Ltd. 1,736
30 Harman International Industries,
Inc. 1,626
62 Leggett & Platt, Inc. 1,928
72 Lennar Corp., Class A 2,595
126 Newell Rubbermaid, Inc. 3,307
149 PulteGroup, Inc. (a) 2,826
35 Whirlpool Corp. 4,003
------------
20,617
------------
HOUSEHOLD PRODUCTS -- 2.1%
57 Clorox (The) Co. 4,739
383 Colgate-Palmolive Co. 21,942
168 Kimberly-Clark Corp. 16,320
1,196 Procter & Gamble (The) Co. 92,080
------------
135,081
------------
INDEPENDENT POWER PRODUCERS &
ENERGY TRADERS -- 0.1%
270 AES (The) Corp. 3,237
141 NRG Energy, Inc. 3,765
------------
7,002
------------
INDUSTRIAL CONGLOMERATES -- 2.4%
277 3M Co. 30,290
254 Danaher Corp. 16,078
4,512 General Electric Co. 104,633
------------
151,001
------------
INSURANCE -- 4.4%
148 ACE Ltd. 13,243
203 Aflac, Inc. 11,798
204 Allstate (The) Corp. 9,817
644 American International Group,
Inc. (a) 28,787
135 Aon PLC 8,687
34 Assurant, Inc. 1,731
796 Berkshire Hathaway, Inc.,
Class B (a) 89,088
113 Chubb (The) Corp. 9,565
64 Cincinnati Financial Corp. 2,938
215 Genworth Financial, Inc.,
Class A (a) 2,453
199 Hartford Financial Services Group
(The), Inc. 6,153
117 Lincoln National Corp. 4,267
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
INSURANCE (CONTINUED)
134 Loews Corp. $ 5,950
240 Marsh & McLennan Cos., Inc. 9,581
478 MetLife, Inc. 21,873
120 Principal Financial Group, Inc. 4,494
242 Progressive (The) Corp. 6,152
203 Prudential Financial, Inc. 14,825
40 Torchmark Corp. 2,606
164 Travelers (The) Cos., Inc. 13,107
116 Unum Group 3,407
126 XL Group PLC 3,820
------------
274,342
------------
INTERNET & CATALOG RETAIL -- 1.2%
159 Amazon.com, Inc. (a) 44,153
41 Expedia, Inc. 2,466
24 Netflix, Inc. (a) 5,066
23 priceline.com, Inc. (a) 19,024
48 TripAdvisor, Inc. (a) 2,922
------------
73,631
------------
INTERNET SOFTWARE & SERVICES --
2.3%
78 Akamai Technologies, Inc. (a) 3,319
510 eBay, Inc. (a) 26,377
117 Google, Inc., Class A (a) 103,003
66 Verisign, Inc. (a) 2,948
416 Yahoo!, Inc. (a) 10,446
------------
146,093
------------
IT SERVICES -- 3.6%
284 Accenture PLC, Class A 20,437
212 Automatic Data Processing, Inc. 14,598
132 Cognizant Technology Solutions
Corp., Class A (a) 8,264
66 Computer Sciences Corp. 2,889
128 Fidelity National Information
Services, Inc. 5,484
58 Fiserv, Inc. (a) 5,070
455 International Business Machines
Corp. 86,955
46 MasterCard, Inc., Class A 26,427
141 Paychex, Inc. 5,149
124 SAIC, Inc. 1,727
71 Teradata Corp. (a) 3,566
70 Total System Services, Inc. 1,714
221 Visa, Inc., Class A 40,388
243 Western Union Co. 4,158
------------
226,826
------------
LEISURE EQUIPMENT & PRODUCTS --
0.1%
50 Hasbro, Inc. 2,241
151 Mattel, Inc. 6,842
------------
9,083
------------
LIFE SCIENCES TOOLS & SERVICES --
0.5%
150 Agilent Technologies, Inc. 6,414
See Notes to Financial Statements Page 49
FIRST TRUST CBOE S&P 500 VIX TAIL HEDGE FUND - VIXH
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
LIFE SCIENCES TOOLS & SERVICES
(CONTINUED)
75 Life Technologies Corp. (a) $ 5,551
49 PerkinElmer, Inc. 1,592
157 Thermo Fisher Scientific, Inc. 13,287
37 Waters Corp. (a) 3,702
------------
30,546
------------
MACHINERY -- 1.7%
287 Caterpillar, Inc. 23,675
77 Cummins, Inc. 8,351
169 Deere & Co. 13,731
75 Dover Corp. 5,825
63 Flowserve Corp. 3,403
181 Illinois Tool Works, Inc. 12,520
121 Ingersoll-Rand PLC 6,718
46 Joy Global, Inc. 2,232
154 PACCAR, Inc. 8,264
49 Pall Corp. 3,255
65 Parker Hannifin Corp. 6,201
89 Pentair Ltd. 5,134
25 Snap-on, Inc. 2,235
71 Stanley Black & Decker, Inc. 5,488
81 Xylem, Inc. 2,182
------------
109,214
------------
MEDIA -- 3.6%
94 Cablevision Systems Corp., Class A 1,581
249 CBS Corp., Class B 12,169
1,149 Comcast Corp., Class A 48,120
244 DIRECTV (a) 15,035
107 Discovery Communications, Inc.,
Class A (a) 8,261
100 Gannett Co., Inc. 2,446
187 Interpublic Group of Cos. (The),
Inc. 2,721
868 News Corp., Class A (a) 28,297
113 Omnicom Group, Inc. 7,104
37 Scripps Networks Interactive,
Class A 2,470
127 Time Warner Cable, Inc. 14,285
407 Time Warner, Inc. 23,533
195 Viacom, Inc., Class B 13,270
786 Walt Disney (The) Co. 49,636
2 Washington Post (The) Co., Class B 968
------------
229,896
------------
METALS & MINING -- 0.5%
467 Alcoa, Inc. 3,652
47 Allegheny Technologies, Inc. 1,237
67 Cliffs Natural Resources, Inc. 1,089
453 Freeport-McMoRan Copper &
Gold, Inc. 12,507
217 Newmont Mining Corp. 6,499
139 Nucor Corp. 6,022
63 United States Steel Corp. 1,104
------------
32,110
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
MULTILINE RETAIL -- 0.8%
131 Dollar General Corp. (a) $ 6,606
98 Dollar Tree, Inc. (a) 4,982
42 Family Dollar Stores, Inc. 2,617
62 J. C. Penney Co., Inc. (a) 1,059
89 Kohl's Corp. 4,496
167 Macy's, Inc. 8,016
65 Nordstrom, Inc. 3,896
280 Target Corp. 19,281
------------
50,953
------------
MULTI-UTILITIES -- 1.2%
106 Ameren Corp. 3,651
187 CenterPoint Energy, Inc. 4,392
116 CMS Energy Corp. 3,152
128 Consolidated Edison, Inc. 7,464
252 Dominion Resources, Inc. 14,319
76 DTE Energy Co. 5,093
35 Integrys Energy Group, Inc. 2,048
136 NiSource, Inc. 3,895
193 PG&E Corp. 8,826
221 Public Service Enterprise Group,
Inc. 7,218
61 SCANA Corp. 2,995
98 Sempra Energy 8,012
89 TECO Energy, Inc. 1,530
100 Wisconsin Energy Corp. 4,099
------------
76,694
------------
OFFICE ELECTRONICS -- 0.1%
536 Xerox Corp. 4,861
------------
OIL, GAS & CONSUMABLE FUELS -- 8.7%
219 Anadarko Petroleum Corp. 18,819
171 Apache Corp. 14,335
92 Cabot Oil & Gas Corp. 6,534
226 Chesapeake Energy Corp. 4,606
846 Chevron Corp. 100,116
533 ConocoPhillips 32,246
100 CONSOL Energy, Inc. 2,710
163 Denbury Resources, Inc. (a) 2,823
165 Devon Energy Corp. 8,560
119 EOG Resources, Inc. 15,670
66 EQT Corp. 5,238
1,940 Exxon Mobil Corp. 175,279
130 Hess Corp. 8,644
276 Kinder Morgan, Inc. 10,529
309 Marathon Oil Corp. 10,685
142 Marathon Petroleum Corp. 10,091
79 Murphy Oil Corp. 4,810
59 Newfield Exploration Co. (a) 1,409
157 Noble Energy, Inc. 9,426
352 Occidental Petroleum Corp. 31,409
118 Peabody Energy Corp. 1,728
270 Phillips 66 15,906
60 Pioneer Natural Resources Co. 8,685
78 QEP Resources, Inc. 2,167
71 Range Resources Corp. 5,490
Page 50 See Notes to Financial Statements
FIRST TRUST CBOE S&P 500 VIX TAIL HEDGE FUND - VIXH
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
OIL, GAS & CONSUMABLE FUELS
(CONTINUED)
153 Southwestern Energy Co. (a) $ 5,589
292 Spectra Energy Corp. 10,062
59 Tesoro Corp. 3,087
238 Valero Energy Corp. 8,275
298 Williams (The) Cos., Inc. 9,676
87 WPX Energy, Inc. (a) 1,648
------------
546,252
------------
PAPER & FOREST PRODUCTS -- 0.1%
194 International Paper Co. 8,596
------------
PERSONAL PRODUCTS -- 0.2%
189 Avon Products, Inc. 3,974
105 Estee Lauder (The) Cos., Inc.,
Class A 6,906
------------
10,880
------------
PHARMACEUTICALS -- 5.9%
691 AbbVie, Inc. 28,566
56 Actavis, Inc. (a) 7,068
129 Allergan, Inc. 10,867
717 Bristol-Myers Squibb Co. 32,043
433 Eli Lilly & Co. 21,269
102 Forest Laboratories, Inc. (a) 4,182
72 Hospira, Inc. (a) 2,758
1,226 Johnson & Johnson 105,264
1,317 Merck & Co., Inc. 61,175
166 Mylan, Inc. (a) 5,151
39 Perrigo Co. 4,719
2,912 Pfizer, Inc. 81,565
218 Zoetis, Inc. 6,734
------------
371,361
------------
PROFESSIONAL SERVICES -- 0.1%
17 Dun & Bradstreet (The) Corp. 1,657
53 Equifax, Inc. 3,123
61 Robert Half International, Inc. 2,027
------------
6,807
------------
REAL ESTATE INVESTMENT TRUSTS --
2.1%
173 American Tower Corp. 12,658
64 Apartment Investment &
Management Co., Class A 1,923
53 AvalonBay Communities, Inc. 7,150
66 Boston Properties, Inc. 6,961
140 Equity Residential 8,128
198 HCP, Inc. 8,997
124 Health Care REIT, Inc. 8,312
325 Host Hotels & Resorts, Inc. 5,483
178 Kimco Realty Corp. 3,815
60 Macerich (The) Co. 3,658
71 Plum Creek Timber Co., Inc. 3,314
217 Prologis, Inc. 8,185
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS
(CONTINUED)
63 Public Storage $ 9,660
136 Simon Property Group, Inc. 21,477
128 Ventas, Inc. 8,891
74 Vornado Realty Trust 6,131
239 Weyerhaeuser Co. 6,809
------------
131,552
------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.0%
132 CBRE Group, Inc., Class A (a) 3,083
------------
ROAD & RAIL -- 0.9%
446 CSX Corp. 10,343
48 Kansas City Southern 5,086
137 Norfolk Southern Corp. 9,953
23 Ryder System, Inc. 1,398
204 Union Pacific Corp. 31,473
------------
58,253
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.1%
265 Advanced Micro Devices, Inc. (a) 1,081
140 Altera Corp. 4,619
134 Analog Devices, Inc. 6,038
524 Applied Materials, Inc. 7,813
229 Broadcom Corp., Class A 7,731
29 First Solar, Inc. (a) 1,297
2,169 Intel Corp. 52,533
72 KLA-Tencor Corp. 4,012
71 Lam Research Corp. (a) 3,148
102 Linear Technology Corp. 3,758
240 LSI Corp. (a) 1,714
86 Microchip Technology, Inc. 3,203
449 Micron Technology, Inc. (a) 6,434
252 NVIDIA Corp. 3,536
83 Teradyne, Inc. (a) 1,458
484 Texas Instruments, Inc. 16,877
115 Xilinx, Inc. 4,555
------------
129,807
------------
SOFTWARE -- 3.5%
219 Adobe Systems, Inc. (a) 9,978
98 Autodesk, Inc. (a) 3,326
58 BMC Software, Inc. (a) 2,618
145 CA, Inc. 4,151
82 Citrix Systems, Inc. (a) 4,947
132 Electronic Arts, Inc. (a) 3,032
122 Intuit, Inc. 7,446
3,279 Microsoft Corp. 113,224
1,603 Oracle Corp. 49,244
83 Red Hat, Inc. (a) 3,969
237 Salesforce.com, Inc. (a) 9,049
304 Symantec Corp. 6,831
------------
217,815
------------
See Notes to Financial Statements Page 51
FIRST TRUST CBOE S&P 500 VIX TAIL HEDGE FUND - VIXH
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
SPECIALTY RETAIL -- 2.3%
34 Abercrombie & Fitch Co., Class A $ 1,538
17 AutoNation, Inc. (a) 738
16 AutoZone, Inc. (a) 6,779
95 Bed Bath & Beyond, Inc. (a) 6,735
117 Best Buy Co., Inc. 3,198
98 CarMax, Inc. (a) 4,524
52 GameStop Corp., Class A 2,186
127 Gap (The), Inc. 5,300
637 Home Depot (The), Inc. 49,348
105 L Brands, Inc. 5,171
468 Lowe's Cos., Inc. 19,141
48 O'Reilly Automotive, Inc. (a) 5,406
45 PetSmart, Inc. 3,014
96 Ross Stores, Inc. 6,222
290 Staples, Inc. 4,599
52 Tiffany & Co. 3,788
314 TJX (The) Cos., Inc. 15,719
48 Urban Outfitters, Inc. (a) 1,931
------------
145,337
------------
TEXTILES, APPAREL & LUXURY GOODS --
0.7%
123 Coach, Inc. 7,022
23 Fossil Group, Inc. (a) 2,376
316 NIKE, Inc., Class B 20,123
35 PVH Corp. 4,377
27 Ralph Lauren Corp. 4,691
38 VF Corp. 7,336
------------
45,925
------------
THRIFTS & MORTGAGE FINANCE -- 0.1%
207 Hudson City Bancorp, Inc. 1,896
148 People's United Financial, Inc. 2,205
------------
4,101
------------
TOBACCO -- 1.7%
876 Altria Group, Inc. 30,651
165 Lorillard, Inc. 7,207
714 Philip Morris International, Inc. 61,847
139 Reynolds American, Inc. 6,724
------------
106,429
------------
TRADING COMPANIES & DISTRIBUTORS --
0.2%
118 Fastenal Co. 5,410
26 W.W. Grainger, Inc. 6,557
------------
11,967
------------
WIRELESS TELECOMMUNICATION SERVICES
-- 0.3%
128 Crown Castle International
Corp. (a) 9,266
1,317 Sprint Nextel Corp. (a) 9,245
------------
18,511
------------
CONTRACTS DESCRIPTION VALUE
-----------------------------------------------------------
TOTAL COMMON STOCKS -- 99.1% $ 6,243,824
(Cost $5,582,795)
OPTION PURCHASED -- 0.9%
CALL OPTION
813 VIX US, expiring 07/17/2013,
Strike Price $22 (a) 52,845
(Cost $61,819) ------------
TOTAL INVESTMENTS -- 100.0% 6,296,669
(Cost $5,644,614) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 1,655
------------
NET ASSETS -- 100.0% $ 6,298,324
============
(a) Non-income producing security.
(b) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2013, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $769,322 and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over value was $117,267.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2013
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
Level 1- Quoted Prices
Level 2- Other Significant Observable Inputs
Level 3- Significant Unobservable Inputs
INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------
Common Stocks* $6,243,824 $ -- $ --
Option Purchased 52,845 -- --
-------------------------------------
Total Investments $6,296,669 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2013.
Page 52 See Notes to Financial Statements
This page intentionally left blank.
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2013 (UNAUDITED)
FIRST TRUST FIRST TRUST FIRST TRUST
NASDAQ-100 NASDAQ-100- NASDAQ-100
EQUAL WEIGHTED TECHNOLOGY SECTOR EX-TECHNOLOGY SECTOR
INDEX(SM) FUND INDEX(SM) FUND INDEX(SM) FUND
(QQEW) (QTEC) (QQXT)
-------------- ----------------- -------------------
ASSETS:
Investments, at value................................................. $ 142,516,319 $ 125,216,732 $ 60,822,448
Repurchase agreement, at value........................................ -- -- --
Cash.................................................................. 22,219 153,321 --
Receivables:
Capital shares sold............................................. 1,506,765 -- --
Investment securities sold...................................... -- -- --
Dividends....................................................... 110,103 28,564 74,383
Securities lending income....................................... 1,570 -- 905
Reclaims........................................................ -- -- --
Interest........................................................ -- -- 1
Due from authorized participant................................. -- 143 --
Prepaid expenses...................................................... 2,359 3,184 1,062
-------------- --------------- ---------------
TOTAL ASSETS.................................................... 144,159,335 125,401,944 60,898,799
-------------- --------------- ---------------
LIABILITIES:
Due to custodian...................................................... -- -- 1,282
Payables:
Capital shares purchased........................................ -- -- --
Investment securities purchased................................. 1,506,494 -- --
Collateral for securities on loan............................... 1,011,005 -- 775,020
Investment advisory fees........................................ 43,629 46,621 17,103
Licensing fees.................................................. 33,591 29,079 14,730
Audit and tax fees.............................................. 14,618 14,618 14,618
Printing fees................................................... 6,948 12,326 3,738
Trustees' fees.................................................. -- -- --
Due to authorized participant................................... -- -- --
Other liabilities..................................................... 61,478 60,432 28,604
-------------- --------------- ---------------
TOTAL LIABILITIES............................................... 2,677,763 163,076 855,095
-------------- --------------- ---------------
NET ASSETS............................................................ $ 141,481,572 $ 125,238,868 $ 60,043,704
============== =============== ===============
NET ASSETS CONSIST OF:
Paid-in capital....................................................... $ 138,596,174 $ 140,710,101 $ 52,235,416
Par value............................................................. 47,000 43,500 20,500
Accumulated net investment income (loss).............................. 15,244 12,785 8,693
Accumulated net realized gain (loss) on investments................... (12,501,298) (21,661,264) (2,691,616)
Net unrealized appreciation (depreciation) on investments............. 15,324,452 6,133,746 10,470,711
-------------- --------------- ---------------
NET ASSETS............................................................ $ 141,481,572 $ 125,238,868 $ 60,043,704
============== =============== ===============
NET ASSET VALUE, per share............................................ $ 30.10 $ 28.79 $ 29.29
============== =============== ===============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)......................................... 4,700,002 4,350,002 2,050,002
-------------- --------------- ---------------
Investments, at cost.................................................. $ 127,191,867 $ 119,082,986 $ 50,351,737
============== =============== ===============
Repurchase agreement, at cost......................................... $ -- $ -- $ --
============== =============== ===============
Securities on loan, at value.......................................... $ 990,211 $ -- $ 759,082
============== =============== ===============
Page 54 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
NASDAQ(R) FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST NASDAQ(R) ABA
CLEAN EDGE(R) S&P ISE ISE-REVERE ISE COMMUNITY
GREEN ENERGY REIT WATER NATURAL GAS CHINDIA BANK
INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND
(QCLN) (FRI) (FIW) (FCG) (FNI) (QABA)
--------------- --------------- --------------- --------------- --------------- ---------------
$ 57,427,031 $ 324,892,582 $ 125,138,375 $ 439,371,042 $ 56,963,295 $ 18,095,876
-- -- -- 54,866,013 7,167,613 --
-- -- -- -- -- 17,038
705,972 -- -- -- -- 1,486,516
125,977 137,592,870 76,061 1,589,903 -- --
-- 1,275,269 141,968 218,251 276,037 23,994
24,154 -- -- 33,393 8,761 --
-- -- 70,242 58,479 -- --
-- 7 12 13 -- --
-- -- -- -- -- --
830 5,478 3,078 6,507 3,511 264
--------------- --------------- --------------- --------------- --------------- ---------------
58,283,964 463,766,206 125,429,736 496,143,601 64,419,217 19,623,688
--------------- --------------- --------------- --------------- --------------- ---------------
88,159 110 29 1,415,932 318,145 --
-- 137,864,322 -- -- -- --
710,563 140,674 630,501 -- -- 1,520,990
6,594,954 -- -- 69,810,429 9,119,929 --
13,486 126,404 46,628 154,029 47,335 698
9,540 86,587 14,722 106,422 11,925 3,501
14,618 14,618 14,618 14,618 14,618 14,618
2,534 36,859 4,004 18,627 4,412 833
-- 2,022 -- 2,916 -- --
-- 14 -- 26,114 -- --
20,053 222,405 46,745 202,535 37,995 6,699
--------------- --------------- --------------- --------------- --------------- ---------------
7,453,907 138,494,015 757,247 71,751,622 9,554,359 1,547,339
--------------- --------------- --------------- --------------- --------------- ---------------
$ 50,830,057 $ 325,272,191 $ 124,672,489 $ 424,391,979 $ 54,864,858 $ 18,076,349
=============== =============== =============== =============== =============== ===============
$ 76,858,304 $ 286,823,615 $ 123,016,761 $ 632,376,137 $ 104,684,550 $ 16,822,871
36,000 174,500 45,000 264,000 26,000 6,000
(19,838) 3,100,620 12,337 (80,877) 15,839 8,564
(30,085,495) 17,624,037 (12,446,841) (123,332,036) (48,752,668) (563,931)
4,041,086 17,549,419 14,045,232 (84,835,245) (1,108,863) 1,802,845
--------------- --------------- --------------- --------------- --------------- ---------------
$ 50,830,057 $ 325,272,191 $ 124,672,489 $ 424,391,979 $ 54,864,858 $ 18,076,349
=============== =============== =============== =============== =============== ===============
$ 14.12 $ 18.64 $ 27.70 $ 16.08 $ 21.10 $ 30.13
=============== =============== =============== =============== =============== ===============
3,600,002 17,450,002 4,500,002 26,400,002 2,600,002 600,002
--------------- --------------- --------------- --------------- --------------- ---------------
$ 53,385,945 $ 307,343,163 $ 111,093,143 $ 524,206,287 $ 58,072,158 $ 16,293,031
=============== =============== =============== =============== =============== ===============
$ -- $ -- $ -- $ 54,866,013 $ 7,167,613 $ --
=============== =============== =============== =============== =============== ===============
$ 6,413,438 $ -- $ -- $ 68,217,353 $ 8,914,181 $ --
=============== =============== =============== =============== =============== ===============
See Notes to Financial Statements Page 55
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 2013 (UNAUDITED)
FIRST TRUST
CBOE
S&P 500
VIX
TAIL HEDGE FUND
(VIXH)
---------------
ASSETS:
Investments, at value................................................. $ 6,296,669
Repurchase agreement, at value........................................ --
Cash.................................................................. --
Receivables:
Capital shares sold............................................. --
Investment securities sold...................................... 779
Dividends....................................................... 7,725
Securities lending income....................................... --
Reclaims........................................................ --
Interest........................................................ --
Due from authorized participant................................. --
Prepaid expenses...................................................... --
---------------
TOTAL ASSETS.................................................... 6,305,173
---------------
LIABILITIES:
Due to custodian...................................................... 3,683
Payables:
Capital shares purchased........................................ --
Investment securities purchased................................. --
Collateral for securities on loan............................... --
Investment advisory fees........................................ 3,166
Licensing fees.................................................. --
Audit and tax fees.............................................. --
Printing fees................................................... --
Trustees' fees.................................................. --
Due to authorized participant................................... --
Other liabilities..................................................... --
---------------
TOTAL LIABILITIES............................................... 6,849
---------------
NET ASSETS............................................................ $ 6,298,324
===============
NET ASSETS CONSIST OF:
Paid-in capital....................................................... $ 5,915,956
Par value............................................................. 3,000
Accumulated net investment income (loss).............................. 2,477
Accumulated net realized gain (loss) on investments................... (275,164)
Net unrealized appreciation (depreciation) on investments............. 652,055
---------------
NET ASSETS............................................................ $ 6,298,324
===============
NET ASSET VALUE, per share............................................ $ 20.99
===============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)......................................... 300,002
---------------
Investments, at cost.................................................. $ 5,644,614
===============
Repurchase agreement, at cost......................................... $ --
===============
Securities on loan, at value.......................................... $ --
===============
Page 56 See Notes to Financial Statements
This page intentionally left blank.
Page 57
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2013 (UNAUDITED)
FIRST TRUST FIRST TRUST FIRST TRUST
NASDAQ-100 NASDAQ-100- NASDAQ-100
EQUAL WEIGHTED TECHNOLOGY SECTOR EX-TECHNOLOGY SECTOR
INDEX(SM) FUND INDEX(SM) FUND INDEX(SM) FUND
(QQEW) (QTEC) (QQXT)
---------------- ------------------ -----------------
INVESTMENT INCOME:
Dividends............................................................. $ 677,258 $ 772,976 $ 242,838
Securities lending income (net of fees)............................... 17,915 -- 6,395
Foreign tax withholding............................................... -- -- --
Interest.............................................................. -- -- 5
--------------- --------------- --------------
Total investment income......................................... 695,173 772,976 249,238
--------------- --------------- --------------
EXPENSES:
Investment advisory fees.............................................. 240,663 226,724 108,256
Licensing fees........................................................ 60,166 56,681 27,065
Accounting and administration fees.................................... 33,194 29,279 15,781
Audit and tax fees.................................................... 11,368 11,368 11,368
Printing fees......................................................... 8,680 7,600 5,270
Legal fees............................................................ 8,256 10,789 4,024
Custodian fees........................................................ 7,521 7,085 3,383
Listing fees.......................................................... 4,365 4,552 3,542
Trustees' fees and expenses........................................... 4,137 3,904 2,088
Transfer agent fees................................................... 3,008 2,834 1,353
Registration and filing fees.......................................... 1,727 -- 24
Expenses previously waived or reimbursed.............................. -- -- --
Other expenses........................................................ 2,172 3,258 1,110
--------------- --------------- --------------
Total expenses.................................................. 385,257 364,074 183,264
Less fees waived and expenses reimbursed by the investment
advisor (24,263) (23,988) (20,839)
--------------- --------------- --------------
Net expenses.................................................... 360,994 340,086 162,425
--------------- --------------- --------------
NET INVESTMENT INCOME (LOSS).......................................... 334,179 432,890 86,813
--------------- --------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 1,078,925 446,794 399,665
Options......................................................... -- -- --
In-kind redemptions............................................. 1,347,542 1,467,148 1,300,236
--------------- --------------- --------------
Net realized gain (loss).............................................. 2,426,467 1,913,942 1,699,901
--------------- --------------- --------------
Net change in unrealized appreciation (depreciation) on:
Investments..................................................... 12,792,959 9,954,562 6,818,987
Options......................................................... -- -- --
--------------- --------------- --------------
Net change in unrealized appreciation (depreciation).................. 12,792,959 9,954,562 6,818,987
--------------- --------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................... 15,219,426 11,868,504 8,518,888
--------------- --------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................................... $ 15,553,605 $ 12,301,394 $ 8,605,701
=============== =============== =============
Page 58 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
NASDAQ(R) FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST NASDAQ(R) ABA
CLEAN EDGE(R) S&P ISE ISE-REVERE ISE COMMUNITY
GREEN ENERGY REIT WATER NATURAL GAS CHINDIA BANK
INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND
(QCLN) (FRI) (FIW) (FCG) (FNI) (QABA)
--------------- --------------- --------------- --------------- --------------- ---------------
$ 36,294 $ 8,826,311 $ 944,836 $ 2,434,459 $ 513,766 $ 130,950
192,589 -- -- 317,795 54,394 --
-- -- (44,975) (195,856) (20,641) --
-- 43 25 50 -- --
------------- ------------- ------------- ------------- ------------- -------------
228,883 8,826,354 899,886 2,556,448 547,519 130,950
------------- ------------- ------------- ------------- ------------- -------------
56,819 699,400 207,440 838,287 125,619 26,397
14,205 186,507 25,930 209,572 25,123 5,939
10,875 118,096 26,876 105,979 5,290 4,694
11,368 11,368 11,368 11,368 11,368 11,368
2,737 41,898 6,511 23,295 1,947 1,148
1,494 38,283 6,582 34,105 5,476 776
1,776 29,142 6,482 26,196 3,926 825
3,391 3,870 3,870 4,043 4,043 4,142
2,418 12,291 3,088 12,081 2,716 2,186
710 11,656 2,593 10,479 1,570 330
1,024 2,452 2,208 (13,289) -- 371
-- 1,506 6,417 -- -- --
909 9,197 1,794 10,412 2,097 539
------------- ------------- ------------- ------------- ------------- -------------
107,726 1,165,666 311,159 1,272,528 189,175 58,715
(22,497) -- -- (15,097) (746) (19,119)
------------- ------------- ------------- ------------- ------------- -------------
85,229 1,165,666 311,159 1,257,431 188,429 39,596
------------- ------------- ------------- ------------- ------------- -------------
143,654 7,660,688 588,727 1,299,017 359,090 91,354
------------- ------------- ------------- ------------- ------------- -------------
(1,873,083) (1,275,358) (1,368,106) (15,656,498) (14,677) (15,796)
-- -- -- -- -- --
4,085,628 23,841,008 1,562,628 7,982,838 2,405,451 284,278
------------- ------------- ------------- ------------- ------------- -------------
2,212,545 22,565,650 194,522 (7,673,660) 2,390,774 268,482
------------- ------------- ------------- ------------- ------------- -------------
8,822,186 (8,207,674) 4,199,290 15,026,765 (1,813,242) 1,795,082
-- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
8,822,186 (8,207,674) 4,199,290 15,026,765 (1,813,242) 1,795,082
------------- ------------- ------------- ------------- ------------- -------------
11,034,731 14,357,976 4,393,812 7,353,105 577,532 2,063,564
------------- ------------- ------------- ------------- ------------- -------------
$ 11,178,385 $ 22,018,664 $ 4,982,539 $ 8,652,122 $ 936,622 $ 2,154,918
============= ============= ============= ============= ============= =============
See Notes to Financial Statements Page 59
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2013 (UNAUDITED)
FIRST TRUST
CBOE
S&P 500
VIX
TAIL HEDGE FUND
(VIXH)
---------------
INVESTMENT INCOME:
Dividends............................................................. $ 64,425
Securities lending income (net of fees)............................... --
Foreign tax withholding............................................... (23)
Interest.............................................................. --
---------------
Total investment income......................................... 64,402
---------------
EXPENSES:
Investment advisory fees.............................................. 17,825
Licensing fees........................................................ --
Accounting and administration fees.................................... --
Audit and tax fees.................................................... --
Printing fees......................................................... --
Legal fees............................................................ --
Custodian fees........................................................ --
Listing fees.......................................................... --
Trustees' fees and expenses........................................... --
Transfer agent fees................................................... --
Registration and filing fees.......................................... --
Expenses previously waived or reimbursed.............................. --
Other expenses........................................................ --
---------------
Total expenses.................................................. 17,825
Less fees waived and expenses reimbursed by the investment
advisor --
---------------
Net expenses.................................................... 17,825
---------------
NET INVESTMENT INCOME (LOSS).......................................... 46,577
---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 16,160
Options......................................................... (208,340)
In-kind redemptions............................................. --
---------------
Net realized gain (loss).............................................. (192,180)
---------------
Net change in unrealized appreciation (depreciation) on:
Investments..................................................... 614,082
Options......................................................... (26,289)
---------------
Net change in unrealized appreciation (depreciation).................. 587,793
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................... 395,613
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................................... $ 442,190
===============
Page 60 See Notes to Financial Statements
This page intentionally left blank.
Page 61
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
NASDAQ-100 NASDAQ-100-
EQUAL WEIGHTED TECHNOLOGY SECTOR
INDEX(SM) FUND INDEX(SM) FUND
(QQEW) (QTEC)
--------------------------------- ---------------------------------
For the For the
Six Months Ended For the Year Six Months Ended For the Year
6/30/2013 Ended 6/30/2013 Ended
(Unaudited) 12/31/2012 (Unaudited) 12/31/2012
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss)............................ $ 334,179 $ 862,757 $ 432,890 $ 895,040
Net realized gain (loss)................................ 2,426,467 (534,059) 1,913,942 (8,492,271)
Net change in unrealized appreciation (depreciation) ... 12,792,959 9,707,786 9,954,562 17,868,037
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations.......................................... 15,553,605 10,036,484 12,301,394 10,270,806
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................... (318,935) (930,480) (420,105) (991,450)
Net realized gain ...................................... -- -- -- --
------------- ------------- ------------- -------------
Total distributions to shareholders..................... (318,935) (930,480) (420,105) (991,450)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold............................... 47,326,015 40,706,241 18,660,224 17,786,464
Cost of shares redeemed................................. (5,893,917) (38,536,793) (11,310,626) (70,717,904)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................... 41,432,098 2,169,448 7,349,598 (52,931,440)
------------- ------------- ------------- -------------
Total increase (decrease) in net assets................. 56,666,768 11,275,452 19,230,887 (43,652,084)
NET ASSETS:
Beginning of period..................................... 84,814,804 73,539,352 106,007,981 149,660,065
------------- ------------- ------------- -------------
End of period........................................... $ 141,481,572 $ 84,814,804 $ 125,238,868 $ 106,007,981
============= ============= ============= =============
Accumulated net investment income (loss)
at end of period.................................... $ 15,244 $ -- $ 12,785 $ --
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................. 3,250,002 3,200,002 4,100,002 6,200,002
Shares sold............................................. 1,650,000 1,600,000 650,000 650,000
Shares redeemed......................................... (200,000) (1,550,000) (400,000) (2,750,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period....................... 4,700,002 3,250,002 4,350,002 4,100,002
============= ============= ============= =============
Page 62 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
NASDAQ-100 NASDAQ(R) S&P FIRST TRUST
EX-TECHNOLOGY SECTOR CLEAN EDGE(R) GREEN ENERGY REIT ISE WATER
INDEX(SM) FUND INDEX FUND INDEX FUND INDEX FUND
(QQXT) (QCLN) (FRI) (FIW)
------------------------------ ------------------------------ ------------------------------ ------------------------------
For the For the For the For the
Six Months Ended For the Year Six Months Ended For the Year Six Months Ended For the Year Six Months Ended For the Year
6/30/2013 Ended 6/30/2013 Ended 6/30/2013 Ended 6/30/2013 Ended
(Unaudited) 12/31/2012 (Unaudited) 12/31/2012 (Unaudited) 12/31/2012 (Unaudited) 12/31/2012
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 86,813 $ 492,647 $ 143,654 $ 199,848 $ 7,660,688 $ 8,527,048 $ 588,727 $ 668,604
1,699,901 1,456,905 2,212,545 (5,438,105) 22,565,650 9,469,758 194,522 2,743,835
6,818,987 4,359,118 8,822,186 5,063,832 (8,207,674) 41,021,892 4,199,290 11,704,734
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,605,701 6,308,670 11,178,385 (174,425) 22,018,664 59,018,698 4,982,539 15,117,173
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(78,120) (530,821) (177,130) (186,210) (4,822,815) (8,264,301) (576,390) (716,105)
-- -- -- -- -- (771,210) -- --
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(78,120) (530,821) (177,130) (186,210) (4,822,815) (9,035,511) (576,390) (716,105)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
13,715,065 19,895,486 32,197,720 -- 77,466,459 116,759,773 51,838,260 19,286,737
(4,180,667) (13,848,505) (6,109,033) (6,638,877) (172,278,388) (88,815,487) (4,341,307) (18,904,444)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
9,534,398 6,046,981 26,088,687 (6,638,877) (94,811,929) 27,944,286 47,496,953 382,293
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
18,061,979 11,824,830 37,089,942 (6,999,512) (77,616,080) 77,927,473 51,903,102 14,783,361
41,981,725 30,156,895 13,740,115 20,739,627 402,888,271 324,960,798 72,769,387 57,986,026
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 60,043,704 $ 41,981,725 $ 50,830,057 $ 13,740,115 $ 325,272,191 $ 402,888,271 $ 124,672,489 $ 72,769,387
============= ============= ============= ============= ============= ============= ============= =============
$ 8,693 $ -- $ (19,838) $ 13,638 $ 3,100,620 $ 262,747 $ 12,337 $ --
============= ============= ============= ============= ============= ============= ============= =============
1,700,002 1,450,002 1,450,002 2,150,002 22,700,002 21,000,002 2,800,002 2,800,002
500,000 850,000 2,600,000 -- 4,050,000 7,000,000 1,850,000 750,000
(150,000) (600,000) (450,000) (700,000) (9,300,000) (5,300,000) (150,000) (750,000)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
2,050,002 1,700,002 3,600,002 1,450,002 17,450,002 22,700,002 4,500,002 2,800,002
============= ============= ============= ============= ============= ============= ============= =============
See Notes to Financial Statements Page 63
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
ISE-REVERE FIRST TRUST
NATURAL GAS ISE CHINDIA
INDEX FUND INDEX FUND
(FCG) (FNI)
---------------------------------- -------------------------------------
For the For the
Six Months Ended For the Year Six Months Ended For the Year
6/30/2013 Ended 6/30/2013 Ended
(Unaudited) 12/31/2012 (Unaudited) 12/31/2012
---------------- --------------- ----------------- -----------------
OPERATIONS:
Net investment income (loss)................... $ 1,299,017 $ 1,574,437 $ 359,090 $ 1,217,729
Net realized gain (loss)....................... (7,673,660) (16,189,085) 2,390,774 (3,470,292)
Net change in unrealized appreciation (depreciation) 15,026,765 (39,813,093) (1,813,242) 14,368,597
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting
from operations............................ 8,652,122 (54,427,741) 936,622 12,116,034
---------------- ---------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.......................... (1,437,975) (1,601,915) (334,100) (1,226,880)
Net realized gain ............................. -- -- -- --
---------------- ---------------- ---------------- ----------------
Total distributions to shareholders............ (1,437,975) (1,601,915) (334,100) (1,226,880)
---------------- ---------------- ---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold...................... 111,442,952 297,966,521 -- 2,017,518
Cost of shares redeemed........................ (82,164,422) (200,593,951) (11,804,010) (26,127,668)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.............. 29,278,530 97,372,570 (11,804,010) (24,110,150)
---------------- ---------------- ---------------- ----------------
Total increase (decrease) in net assets........ 36,492,677 41,342,914 (11,201,488) (13,220,996)
NET ASSETS:
Beginning of period............................ 387,899,302 346,556,388 66,066,346 79,287,342
---------------- ---------------- ---------------- ----------------
End of period.................................. $ 424,391,979 $ 387,899,302 $ 54,864,858 $ 66,066,346
================ ================ ================ ================
Accumulated net investment income (loss)
at end of period........................... $ (80,877) $ 58,081 $ 15,839 $ (9,151)
================ ================ ================ ================
CHANGES IN SHARES OUSTANDING:
Shares outstanding, beginning of period........ 24,750,002 19,050,002 3,150,002 4,350,002
Shares sold.................................... 6,700,000 17,550,000 -- 100,000
Shares redeemed................................ (5,050,000) (11,850,000) (550,000) (1,300,000)
---------------- ---------------- ---------------- ----------------
Shares outstanding, end of period.............. 26,400,002 24,750,002 2,600,002 3,150,002
================ ================ ================ ================
(a) Inception date is August 29, 2012, which is consistent with the
commencement of investment operations and is the date the intial creation
units were established.
Page 64 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
NASDAQ(R) ABA CBOE S&P 500
COMMUNITY BANK VIX TAIL
INDEX FUND HEDGE FUND
(QABA) (VIXH)
----------------------------------- ----------------------------------
For the For the For the Period
Six Months Ended For the Year Six Months Ended 8/29/2012 (a)
6/30/2013 Ended 6/30/2013 through
(Unaudited) 12/31/2012 (Unaudited) 12/31/2012
---------------- ---------------- ---------------- ----------------
$ 91,354 $ 204,704 $ 46,577 $ 15,302
268,482 764,258 (192,180) (82,984)
1,795,082 426,602 587,793 64,262
-------------- -------------- ------------- -------------
2,154,918 1,395,564 442,190 (3,420)
-------------- -------------- ------------- -------------
(82,790) (217,066) (44,100 (15,480)
-- -- -- --
-------------- -------------- ------------- -------------
(82,790) (217,066) (44,100 (15,480)
-------------- -------------- ------------- -------------
8,522,597 5,084,903 2,973,493 2,945,641
(1,463,445) (9,952,509) -- --
-------------- -------------- ------------- -------------
7,059,152 (4,867,606) 2,973,493 2,945,641
-------------- -------------- ------------- -------------
9,131,280 (3,689,108) 3,371,583 2,926,741
8,945,069 12,634,177 2,926,741 --
-------------- -------------- ------------- -------------
$ 18,076,349 $ 8,945,069 $ 6,298,324 $ 2,926,741
============== ============== ============= =============
$ 8,564 $ -- $ 2,477 $ --
============== ============== ============= =============
350,002 550,002 150,002 --
300,000 200,000 150,000 150,002
(50,000) (400,000) -- --
-------------- -------------- ------------- -------------
600,002 350,002 300,002 150,002
============== ============== ============= =============
See Notes to Financial Statements Page 65
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND - QQEW
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 26.10 $ 22.98 $ 23.74 $ 19.69 $ 12.37 $ 22.08
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.07 0.27 0.05 0.15 0.05 0.00 (a)
Net realized and unrealized gain (loss) 4.00 3.14 (0.70) 4.02 7.32 (9.70)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 4.07 3.41 (0.65) 4.17 7.37 (9.70)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.07) (0.29) (0.11) (0.12) (0.05) (0.00) (a)
Return of capital -- -- -- -- -- (0.01)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.07) (0.29) (0.11) (0.12) (0.05) (0.01)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 30.10 $ 26.10 $ 22.98 $ 23.74 $ 19.69 $ 12.37
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 15.60% 14.86% (2.77)% 21.25% 59.54% (43.96)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 141,482 $ 84,815 $ 73,539 $ 75,955 $ 40,369 $ 14,848
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.64% (c) 0.68% 0.68% 0.75% 0.67% 0.88%
Ratio of net expenses to average
net assets 0.60% (c) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss)
to average net assets 0.56% (c) 1.01% 0.23% 0.79% 0.35% 0.01%
Portfolio turnover rate (d) 13% 34% 27% 24% 36% 39%
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND - QTEC
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 25.86 $ 24.14 $ 25.69 $ 21.16 $ 11.77 $ 21.50
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.10 0.19 0.00 (a) (e) 0.10 0.01 --
Net realized and unrealized gain (loss) 2.93 1.74 (1.47) 4.53 9.39 (9.73)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 3.03 1.93 (1.47) 4.63 9.40 (9.73)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.10) (0.21) (0.08) (0.10) (0.01) --
Return of capital -- 0.00 -- -- (0.00) (a) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.10) (0.21) (0.08) (0.10) (0.01) --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 28.79 $ 25.86 $ 24.14 $ 25.69 $ 21.16 $ 11.77
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 11.72% 8.02% (5.75)% 21.92% 79.89% (45.26)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 125,239 $ 106,008 $ 149,660 $ 453,416 $ 86,766 $ 9,414
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.64% (c) 0.65% 0.63% 0.70% 0.67% 0.88%
Ratio of net expenses to average
net assets 0.60% (c) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss)
to average net assets 0.76% (c) 0.63% (0.02)% 0.71% 0.16% (0.01)%
Portfolio turnover rate (d) 10% 26% 21% 26% 35% 33%
(a) Amount represents less than $0.01 per share.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(e) Per share amounts have been calculated using the average share method.
Page 66 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND - QQXT
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 24.70 $ 20.80 $ 21.10 $ 17.63 $ 12.05 $ 21.19
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.04 0.31 0.06 0.17 0.05 0.01
Net realized and unrealized gain (loss) 4.59 3.92 (0.28) 3.46 5.58 (9.14)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 4.63 4.23 (0.22) 3.63 5.63 (9.13)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.04) (0.33) (0.08) (0.16) (0.05) (0.01)
Return of capital -- -- -- -- (0.00) (a) (0.00) (a)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.04) (0.33) (0.08) (0.16) (0.05) (0.01)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 29.29 $ 24.70 $ 20.80 $ 21.10 $ 17.63 $ 12.05
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 18.78% 20.31% (1.08)% 20.64% 46.74% (43.09)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 60,044 $ 41,982 $ 30,157 $ 22,151 $ 10,579 $ 7,232
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.68% (c) 0.76% 0.78% 0.94% 1.28% 1.86%
Ratio of net expenses to average
net assets 0.60% (c) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss)
to average net assets 0.32% (c) 1.34% 0.31% 1.02% 0.48% 0.03%
Portfolio turnover rate (d) 13% 40% 37% 19% 43% 67%
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND - QCLN
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 9.48 $ 9.65 $ 16.42 $ 16.09 $ 11.19 $ 30.86
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.03 0.13 (0.03) (0.01) (0.02) (0.04)
Net realized and unrealized gain (loss) 4.66 (0.18) (6.74) 0.34 4.92 (19.63)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 4.69 (0.05) (6.77) 0.33 4.90 (19.67)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.05) (0.12) -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 14.12 $ 9.48 $ 9.65 $ 16.42 $ 16.09 $ 11.19
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 49.49% (0.50)% (41.23)% 2.05% 43.79% (63.74)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 50,830 $ 13,740 $ 20,740 $ 36,120 $ 43,449 $ 23,504
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.76% (c) 0.98% 0.77% 0.78% 0.81% 0.83%
Ratio of net expenses to average
net assets 0.60% (c) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss)
to average net assets 1.01% (c) 1.19% (0.18)% (0.07)% (0.12)% (0.21)%
Portfolio turnover rate (d) 16% 24% 22% 22% 40% 32%
(a) Amount represents less than $0.01 per share.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 67
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST S&P REIT INDEX FUND - FRI
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 17.75 $ 15.47 $ 14.65 $ 11.72 $ 9.43 $ 15.81
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.36 0.38 0.28 0.29 0.25 0.31
Net realized and unrealized gain (loss) 0.72 2.30 0.88 2.94 2.31 (6.38)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.08 2.68 1.16 3.23 2.56 (6.07)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.19) (0.37) (0.34) (0.30) (0.25) (0.31)
Net realized gain -- (0.03) -- -- -- --
Return of capital -- -- -- -- (0.02) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.19) (0.40) (0.34) (0.30) (0.27) (0.31)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 18.64 $ 17.75 $ 15.47 $ 14.65 $ 11.72 $ 9.43
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 6.09% 17.39% 7.90% 27.73% 28.00% (38.87)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 325,272 $ 402,888 $ 324,961 $ 71,066 $ 21,087 $ 5,187
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.50% (b) 0.50% 0.57% 0.69% 1.95% 5.30%
Ratio of net expenses to average
net assets 0.50% (b) 0.50% 0.50% 0.50% 0.50% 0.50%
Ratio of net investment income (loss)
to average net assets 3.29% (b) 2.15% 2.03% 2.60% 3.39% 3.40%
Portfolio turnover rate (c) 5% 8% 9% 16% 13% 20%
FIRST TRUST ISE WATER INDEX FUND - FIW
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 25.99 $ 20.71 $ 22.13 $ 18.66 $ 15.69 $ 22.38
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.14 0.23 0.16 0.18 0.19 0.12
Net realized and unrealized gain (loss) 1.70 5.30 (1.39) 3.43 2.97 (6.69)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.84 5.53 (1.23) 3.61 3.16 (6.57)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.13) (0.25) (0.19) (0.14) (0.19) (0.12)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 27.70 $ 25.99 $ 20.71 $ 22.13 $ 18.66 $ 15.69
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 7.09% 26.83% (5.62)% 19.49% 20.29% (29.40)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 124,672 $ 72,769 $ 57,986 $ 53,111 $ 37,314 $ 32,157
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.60% (b) 0.63% 0.64% 0.69% 0.72% 0.77%
Ratio of net expenses to average
net assets 0.60% (b) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss)
to average net assets 1.14% (b) 1.02% 0.79% 0.96% 1.20% 0.76%
Portfolio turnover rate (c) 32% 31% 31% 38% 44% 45%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
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) Annualized.
(c) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 68 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND - FCG
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 15.67 $ 18.19 $ 19.60 $ 17.52 $ 11.80 $ 22.31
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.05 0.07 0.08 0.03 0.07 0.14
Net realized and unrealized gain (loss) 0.42 (2.52) (1.41) 2.10 5.72 (10.51)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.47 (2.45) (1.33) 2.13 5.79 (10.37)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.06) (0.07) (0.08) (0.05) (0.07) (0.14)
Return of capital -- -- -- (0.00) (a) (0.00) (a) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.06) (0.07) (0.08) (0.05) (0.07) (0.14)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 16.08 $ 15.67 $ 18.19 $ 19.60 $ 17.52 $ 11.80
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 2.97% (13.51)% (6.85)% 12.22% 49.21% (46.57)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 424,392 $ 387,899 $ 346,556 $ 396,893 $ 464,339 $ 37,179
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.61% (c) 0.63% 0.63% 0.65% 0.72% 0.77%
Ratio of net expenses to average
net assets 0.60% (c) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss)
to average net assets 0.62% (c) 0.40% 0.39% 0.19% 0.53% 0.77%
Portfolio turnover rate (d) 30% 41% 43% 93% 71% 116%
FIRST TRUST ISE CHINDIA INDEX FUND - FNI
FOR THE
SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 20.97 $ 18.23 $ 25.01 $ 21.28 $ 11.78 $ 27.73
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.14 0.35 0.27 0.17 0.09 0.17
Net realized and unrealized gain (loss) 0.12 2.74 (6.75) 3.73 9.50 (15.92)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.26 3.09 (6.48) 3.90 9.59 (15.75)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.13) (0.35) (0.30) (0.17) (0.09) (0.20)
Return of capital -- -- -- -- (0.00) (a) (0.00)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.13) (0.35) (0.30) (0.17) (0.09) (0.20)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 21.10 $ 20.97 $ 18.23 $ 25.01 $ 21.28 $ 11.78
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 1.23% 17.11% (26.02)% 18.46% 81.58% (56.98)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 54,865 $ 66,066 $ 79,287 $ 176,352 $ 120,240 $ 35,937
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.60% (c) 0.73% 0.66% 0.66% 0.73% 0.73%
Ratio of net expenses to average
net assets 0.60% (c) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss)
to average net assets 1.14% (c) 1.60% 1.00% 0.74% 0.58% 0.90%
Portfolio turnover rate (d) 14% 29% 23% 34% 47% 39%
(a) Amount represents less than $0.01 share.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived and expenses reimbursed by the investment
advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 69
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND - QABA
FOR THE FOR THE PERIOD
SIX MONTHS ENDED FOR THE FOR THE FOR THE 6/29/2009 (a)
6/30/2013 YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
(UNAUDITED) 12/31/2012 12/31/2011 12/31/2010 12/31/2009
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 25.56 $ 22.97 $ 24.95 $ 22.41 $ 20.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.17 0.48 0.37 0.30 0.16
Net realized and unrealized gain (loss) 4.56 2.62 (1.98) 2.55 2.40
---------- ---------- ---------- ---------- ----------
Total from investment operations 4.73 3.10 (1.61) 2.85 2.56
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.16) (0.51) (0.37) (0.31) (0.15)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 30.13 $ 25.56 $ 22.97 $ 24.95 $ 22.41
========== ========== ========== ========== ==========
TOTAL RETURN (b) 18.50% 13.52% (6.48)% 12.77% 12.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 18,076 $ 8,945 $ 12,634 $ 9,979 $ 5,604
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.89% (c) 1.04% 0.96% 1.16% 2.67% (c)
Ratio of net expenses to average
net assets 0.60% (c) 0.60% 0.60% 0.60% 0.60% (c)
Ratio of net investment income (loss)
to average net assets 1.38% (c) 1.90% 1.62% 1.40% 1.92% (c)
Portfolio turnover rate (d) 8% 17% 29% 26% 15%
FIRST TRUST CBOE S&P 500 VIX TAIL HEDGE FUND - VIXH
FOR THE FOR THE PERIOD
SIX MONTHS ENDED 8/29/2012 (a)
6/30/2013 THROUGH
(UNAUDITED) 12/31/2012
------------ ------------
Net asset value, beginning of period $ 19.51 $ 19.89
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.16 0.11
Net realized and unrealized gain (loss) 1.47 (0.38)
---------- ----------
Total from investment operations 1.63 (0.27)
---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.15) (0.11)
---------- ----------
Net asset value, end of period $ 20.99 $ 19.51
========== ==========
TOTAL RETURN (b) 8.34% (1.37)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 6,298 $ 2,927
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.60% (c) 0.60% (c)
Ratio of net expenses to average
net assets 0.60% (c) 0.60% (c)
Ratio of net investment income (loss)
to average net assets 1.57% (c) 1.97% (c)
Portfolio turnover rate (d) 2% 2%
(a) Inception date is consistent with the commencement of investment
operations and is the date the initial creation units were established.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns for First Trust NASDAQ(R) ABA
Community Bank Index Fund would have been lower if certain fees had not
been waived and expenses reimbursed by the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 70 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on August 8,
2003, and is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of nineteen exchange-traded funds. This report
covers the ten funds listed below:
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund - (The NASDAQ(R)
Stock Market, LLC ("NASDAQ") ticker "QQEW")
First Trust NASDAQ-100-Technology Sector Index(SM) Fund - (NASDAQ ticker "QTEC")
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -
(NASDAQ ticker "QQXT")
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund - (NASDAQ
ticker "QCLN")
First Trust S&P REIT Index Fund - (NYSE Arca, Inc. ("NYSE Arca") ticker "FRI")
First Trust ISE Water Index Fund - (NYSE Arca ticker "FIW")
First Trust ISE-Revere Natural Gas Index Fund - (NYSE Arca ticker "FCG")
First Trust ISE Chindia Index Fund - (NYSE Arca ticker "FNI")
First Trust NASDAQ(R) ABA Community Bank Index Fund - (NASDAQ ticker "QABA")
First Trust CBOE S&P 500 VIX Tail Hedge Fund - (NYSE Arca ticker "VIXH")
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." Creation Units are issued and redeemed principally in-kind
for securities included in a Fund's relevant index. Except when aggregated in
Creation Units, shares are not redeemable securities of a Fund. 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 NASDAQ-100 Equal Weighted Index(SM) Fund NASDAQ-100 Equal Weighted Index(SM)
First Trust NASDAQ-100-Technology Sector Index(SM) Fund NASDAQ-100 Technology Sector Index(SM)
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund NASDAQ-100 Ex-Tech Sector Index(SM)
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund NASDAQ(R) Clean Edge(R) Green Energy Index
First Trust S&P REIT Index Fund S&P REIT United States Index
First Trust ISE Water Index Fund ISE Water Index(TM)
First Trust ISE-Revere Natural Gas Index Fund ISE-REVERE Natural Gas Index(TM)
First Trust ISE Chindia Index Fund ISE ChIndia Index(TM)
First Trust NASDAQ(R) ABA Community Bank Index Fund NASDAQ OMX(R) ABA Community Bank Index(SM)
First Trust CBOE S&P 500 VIX Tail Hedge Fund CBOE VIX Tail Hedge Index(SM)
2. SIGNIFICANT ACCOUNTING POLICIES
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. The NAV is calculated by dividing the value of all
assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses and dividends declared but unpaid), by
the total number of shares outstanding.
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 in
accordance with valuation procedures adopted by the Trust's Board of Trustees
and in accordance with the 1940 Act. Each Fund's securities will be valued as
follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding NASDAQ and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for NASDAQ and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Page 71
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
Securities traded in an over-the-counter market are valued at the closing
bid prices.
Exchange-traded options and futures contracts are valued at the closing
price in the market where such contracts are principally traded. If no
closing price is available, exchange-traded options and futures contracts
are valued at the mean between the most recent bid and asked prices.
Over-the-counter options and futures contracts are valued at their closing
bid prices.
Short-term investments that mature in less than 60 days when purchased are
valued at amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Board of Trustees or its delegate
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 pricing
service is unable to provide a market price; securities whose trading has been
formally suspended; a security whose market 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 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. The use of fair value prices by a Fund
generally results in prices used by the Fund that may differ from current market
quotations or official closing prices on the applicable exchange. 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 pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts,or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
In addition, differences between the prices used to calculate a Fund's NAV and
the prices used by such Fund's corresponding index could result in a difference
between the Fund's performance and the performance of its underlying index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in market
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 June 30, 2013, is
included with each Fund's Portfolio of Investments.
Page 72
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
B. Call Options
The First Trust CBOE S&P 500 VIX Tail Hedge Fund is subject to equity price risk
in the normal course of pursuing its investment objective and may purchase
out-of-the-money call options on the Chicago Board Options Exchange Market
Volatility Index (the "VIX Index") to hedge against changes in the value of
equities. Also, the Fund may sell call options on the VIX Index in order to
close out existing positions. The purchase of call options involves the risk of
loss of all or a part of the cash paid for the call options (the premium). The
market risk associated with purchasing options on the VIX Index is limited to
the premium paid. When the Fund purchases a call option, the premium paid
represents the cost of the call option. Options are marked-to-market daily and
their value will be affected by changes in the market value of the stocks
included in the stock index.
If the Fund elects to exercise a call option on the VIX Index, settlement does
not occur by the delivery of the securities comprising the VIX Index. The Fund,
as holder of the stock index option, receives an amount of cash if the closing
level of the stock index upon which the option is based is greater than, in the
case of a call, or less than in the case of a put, the exercise price of the
option. This amount of cash is equal to the difference between the closing price
of the stock index and the exercise price of the option expressed in dollars
times a specified multiple. If the Fund elects to allow a call option to expire,
then the equity price risk for purchased options is limited to the premium
initially paid. Gain or loss on options is presented separately as "Net realized
gain (loss) on options" on the Statements of Operations.
C. 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.
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.
D. Offsetting on the Statements of Assets and Liabilities
In December 2011, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update No. 2011-11 "Disclosures about Offsetting Assets and
Liabilities" ("ASU 2011-11"). This disclosure requirement is 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. ASU
2011-11 requires entities to disclose both gross and net information about both
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. In addition, in January 2013, FASB issued Accounting
Standards Update No. 2013-1 "Clarifying the Scope of Offsetting Assets and
Liabilities" ("ASU 2013-1"), specifying exactly which transactions are subject
to offsetting disclosures. The scope of the disclosure requirements is limited
to derivative instruments, repurchase agreements and reverse repurchase
agreements, and securities borrowing and securities lending transactions. ASU
2011-11 and ASU 2013-1 are effective for financial statements with fiscal years
beginning on or after January 1, 2013, and interim periods within those fiscal
years.
The Funds adopted the disclosure requirement on netting for the current
reporting period. 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 or similar
agreements on the Statements of Assets and Liabilities.
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 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
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
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 in the
form of fees or interest on the investment of any cash received as collateral.
Thedividend and interest earned on the securities loaned is accounted for in
the same manner as other dividend and interest income. At June 30, 2013, QQEW,
QQXT, QCLN, FCG and FNI have securities 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, the Funds sustain losses as a result of a borrower's
default, BBH indemnifies the Funds by purchasing replacement securities at its
expense, or paying the Funds 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
maintain provisions for, among other things, initiation, income payments, events
of default, and maintenance of collateral for Repurchase Agreements.
If the seller defaults, a Fund could suffer a loss to the extent that the
proceeds from the sale of the underlying securities and other collateral held by
the Fund are less than the repurchase price and the Fund's costs associated with
delay and enforcement of the repurchase agreement. In addition, in the event of
bankruptcy of the seller, a Fund could suffer additional losses if a court
determines that the Fund's interest in the collateral is not enforceable.
G. Dividends and Distribution 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 income and capital gains are determined in accordance with
income tax regulations, which may differ from U.S. GAAP. Certain capital
accounts in the financial statements are periodically adjusted for permanent
differences in order to reflect their tax character. These permanent differences
are primarily due to the varying treatment of income and gain/loss on portfolio
securities held by the Funds and have no impact on net assets or NAV per share.
Temporary differences, which arise from recognizing certain items of income,
expense and gain/loss in different periods for financial statement and tax
purposes, will reverse at some time in the future.
The tax character of distributions paid by each Fund during the year ended
December 31, 2012 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
----------------- ---------------- ----------------
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund $ 930,480 $ -- $ --
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 991,450 -- --
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 530,821 -- --
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 186,210 -- --
First Trust S&P REIT Index Fund 8,264,301 771,210 --
First Trust ISE Water Index Fund 716,105 -- --
First Trust ISE-Revere Natural Gas Index Fund 1,601,915 -- --
First Trust ISE Chindia Index Fund 1,226,880 -- --
First Trust NASDAQ(R) ABA Community Bank Index Fund 217,066 -- --
First Trust CBOE S&P 500 VIX Tail Hedge Fund 15,480 -- --
Page 74
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
As of December 31, 2012, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------- ---------------- ----------------
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund $ -- $ (14,173,859) $ 1,777,587
First Trust NASDAQ-100-Technology Sector Index(SM) Fund -- (22,139,253) (5,256,769)
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -- (4,062,166) 3,322,373
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 13,638 (30,115,977) (6,963,163)
First Trust S&P REIT Index Fund 262,747 -- 20,815,480
First Trust ISE Water Index Fund -- (10,667,406) 7,871,985
First Trust ISE-Revere Natural Gas Index Fund 58,081 (105,595,762) (109,924,624)
First Trust ISE Chindia Index Fund 2,356 (49,891,896) (547,167)
First Trust NASDAQ(R) ABA Community Bank Index Fund -- (697,260) (127,390)
First Trust CBOE S&P 500 VIX Tail Hedge Fund -- (62,831) 44,109
H. 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 the 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 2010, 2011
and 2012 remain open to federal and state audit. As of June 30, 2013, 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.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses arising in taxable years after December 22, 2010, may be
carried forward indefinitely, and their character is retained as short-term
and/or long-term losses. Previously, net capital losses were carried forward for
up to eight years and treated as short-term losses. As a transition rule, the
Act requires that post-enactment net capital losses be used before pre-enactment
net capital losses. At December 31, 2012, the Funds, except for First Trust S&P
REIT Index Fund, had pre-enactment and post-enactment net capital losses for
federal income tax purposes as shown in the following table. 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 Fund shareholders.
The Funds are 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.
Capital Capital Capital Capital
Loss Loss Loss Loss Post- Total
Available Available Available Available Enactment - Capital
Through Through Through Through No Loss
2015 2016 2017 2018 Expiration Available
----------- ----------- ---------- --------- ------------- -----------
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund $ 54,385 $ 1,957,170 $ 4,681,103 $ -- $ 7,481,201 $14,173,859
First Trust NASDAQ-100-Technology Sector
Index(SM) Fund 311,155 1,421,664 2,016,911 -- 18,389,523 22,139,253
First Trust NASDAQ-100 Ex-Technology Secto
Index(SM) Fund 7,779 143,597 1,051,894 80,899 2,777,997 4,062,166
First Trust NASDAQ(R) Clean Edge(R) Green Energy
Index Fund 141,332 4,246,707 7,483,633 5,884,801 12,359,504 30,115,977
First Trust S&P REIT Index Fund -- -- -- -- -- --
First Trust ISE Water Index Fund 592 318,246 5,768,328 2,198,674 2,381,566 10,667,406
First Trust ISE-Revere Natural Gas Index Fund 5,274 7,364,703 32,569,413 40,089,981 25,666,391 105,695,762
First Trust ISE Chindia Index Fund -- 11,116,593 11,686,955 7,245,147 19,843,201 49,891,896
First Trust NASDAQ(R) ABA Community Bank Index Fund -- -- 4,787 116,604 575,869 697,260
First Trust CBOE S&P 500 VIX Tail Hedge Fund -- -- -- -- 62,831 62,831
Page 75
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
I. Expenses
Expenses that are directly related to one of the Funds are charged directly to
the respective Fund, except for First Trust CBOE S&P 500 VIX Tail Hedge Fund
(the "Unitary Fee Fund"), for which expenses other than excluded expenses
(discussed in Note 3) are paid by First Trust Advisors L.P. ("First Trust" or
the "Advisor"). General expenses of the Trust are allocated to all the Funds
based upon the net assets of each Fund.
The Advisor has entered into licensing agreements with each of the following
"Licensors" for the respective Funds:
FUND LICENSOR
First Trust NASDAQ-100 Equal Weighted Index(SM)Fund The NASDAQ Stock Market, LLC
First Trust NASDAQ-100-Technology Sector Index(SM) Fund The NASDAQ Stock Market, LLC
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund The NASDAQ Stock Market, LLC
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund The NASDAQ Stock Market, LLC /Clean Edge(R), Inc.
First Trust S&P REIT Index Fund Standard & Poor's Financial Services, LLC
First Trust ISE Water Index Fund International Securities Exchange, LLC
First Trust ISE-Revere Natural Gas Index Fund International Securities Exchange, LLC
First Trust ISE Chindia Index Fund International Securities Exchange, LLC
First Trust NASDAQ(R)ABA Community Bank Index Fund The NASDAQ Stock Market, LLC First Trust
CBOE S&P 500 VIX Tail Hedge Fund Standard & Poor's Financial Services, LLC
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. With the exception of the
First Trust CBOE S&P 500 VIX Tail Hedge Fund, the respective Funds are required
to pay licensing fees, which are shown on the Statements of Operations.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
For the First Trust CBOE S&P 500 VIX Tail Hedge Fund, First Trust is paid an
annual unitary management fee of 0.60% 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 distribution and service fees pursuant to a Rule 12b-1 plan, if any,
brokerage expenses, taxes, interest, and extraordinary expenses.
First Trust is entitled to receive monthly fees from the remaining Funds
calculated at the following annual rates:
% of Average
Daily Net Assets
----------------
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 0.40%
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 0.40%
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 0.40%
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 0.40%
First Trust S&P REIT Index Fund 0.30%
First Trust ISE Water Index Fund 0.40%
First Trust ISE-Revere Natural Gas Index Fund 0.40%
First Trust ISE Chindia Index Fund 0.40%
First Trust NASDAQ(R) ABA Community Bank Index Fund 0.40%
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
For such funds, the Trust and the Advisor have entered into an Expense
Reimbursement, Fee Waiver and Recovery Agreement ("Recovery Agreement") in which
the Advisor has agreed to waive fees and/or reimburse Fund expenses to the
extent that the operating expenses of each Fund (excluding interest expense,
brokerage commissions and other trading expenses, taxes and extraordinary
expenses) exceed the below amount as a percentage of average daily net assets
per year (the "Expense Cap"). The Expense Cap will be in effect until at least
April 30, 2014.
Expense Cap
----------------
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 0.60%
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 0.60%
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 0.60%
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 0.60%
First Trust S&P REIT Index Fund 0.50%
First Trust ISE Water Index Fund 0.60%
First Trust ISE-Revere Natural Gas Index Fund 0.60%
First Trust ISE Chindia Index Fund 0.60%
First Trust NASDAQ(R)ABA Community Bank Index Fund 0.60%
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 was waived or expense was incurred, but no reimbursement payment will be
made by the Fund if it results in the Fund exceeding an expense ratio equal to
the Expense Cap in place at the time the expenses were reimbursed or fees were
waived by First Trust. 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 six months ended
June 30, 2013 and the expenses borne by the Advisor subject to recovery from
each applicable Fund for the periods indicated were as follows:
Expenses Borne by Advisor Subject to Recovery
---------------------------------------------------------
Advisory Expense Year Year Year Period
Fee Reim- Ended Ended Ended Ended
Waivers bursement 12/31/2010 12/31/2011 12/31/2012 12/31/2013 Total
--------- --------- --------- --------- --------- -------- ---------
First Trust NASDAQ-100 Equal Weighted
Index(SM) Fund $ 24,263 $ -- $ 36,307 $ 65,568 $ 66,409 $ 24,263 $ 192,547
First Trust NASDAQ-100-Technology Sector
Index(SM) Fund 23,988 -- 124,554 114,729 71,070 23,988 334,341
First Trust NASDAQ-100 Ex-Technology Sector
Index(SM) Fund 20,839 -- 28,635 50,938 58,392 20,839 158,804
First Trust NASDAQ(R) Clean Edge(R) Green
Energy Index Fund 22,497 -- 27,753 54,545 63,185 22,497 167,980
First Trust S&P REIT Index Fund -- -- 42,397 130,777 4,444 -- 177,618
First Trust ISE Water Index Fund -- -- 11,011 25,829 19,978 -- 56,818
First Trust ISE-Revere Natural Gas Index Fund 15,097 -- 59,731 139,394 100,098 15,097 314,320
First Trust ISE Chindia Index Fund 746 -- 33,603 76,490 97,245 746 208,084
First Trust NASDAQ(R) ABA Community Bank
Index Fund 19,119 -- 19,431 45,663 46,863 19,119 131,076
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the servicing agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Trust. As custodian, BNYM is responsible for custody of the Trust's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of the Trust's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Trust. 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 of $125,000 per year and an annual per fund fee of $4,000 for each
closed-end fund or other actively managed fund and $1,000 for each index fund in
the First Trust Fund Complex. The fixed annual retainer is allocated pro rata
among each fund in the First Trust Fund Complex based on net assets.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
Additionally, the Lead Independent Trustee is paid $15,000 annually, the
Chairman of the Audit Committee is paid $10,000 annually, and each of the
Chairmen of the Nominating and Governance Committee and the Valuation Committee
is paid $5,000 annually to serve in such capacities, with such compensation
allocated pro rata among each fund in the First Trust Fund Complex based on net
assets. Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and each Committee
Chairman will serve two-year terms until December 31, 2013, before rotating to
serve as Chairman of another Committee or as Lead Independent Trustee. After
December 31, 2013, the Lead Independent Trustee and Committee Chairmen will
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 six months ended June 30, 2013, the cost of purchases and proceeds from
sales of investment securities for each Fund, excluding short-term investments
and in-kind transactions, were as follows:
Purchases Sales
------------------ ------------------
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund $ 15,872,344 $ 15,801,293
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 11,084,302 11,071,930
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 7,182,092 7,150,278
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 4,625,642 4,656,838
First Trust S&P REIT Index Fund 27,111,403 23,739,236
First Trust ISE Water Index Fund 33,221,611 36,548,859
First Trust ISE-Revere Natural Gas Index Fund 126,189,688 126,161,391
First Trust ISE Chindia Index Fund 8,747,570 8,589,307
First Trust NASDAQ(R) ABA Community Bank Index Fund 1,093,555 1,059,407
First Trust CBOE S&P 500 VIX Tail Hedge Fund 95,496 327,484
For the six months ended June 30, 2013, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
------------------ ------------------
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund $ 47,300,969 $ 5,894,527
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 18,637,239 11,304,123
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 13,715,298 4,192,922
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 32,153,288 6,066,610
First Trust S&P REIT Index Fund 77,339,787 171,992,319
First Trust ISE Water Index Fund 51,750,632 4,324,551
First Trust ISE-Revere Natural Gas Index Fund 111,389,169 82,143,822
First Trust ISE Chindia Index Fund -- 11,791,014
First Trust NASDAQ(R) ABA Community Bank Index Fund 8,515,700 1,462,215
First Trust CBOE S&P 500 VIX Tail Hedge Fund 2,969,757 --
5. CREATION, REDEMPTION & TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares. Such transactions are generally permitted on an
in-kind basis, with a balancing cash component to equate the transaction to the
daily NAV per Share of each Fund on the transaction date times the number of
Shares in a Creation Unit. Purchasers of Creation Units must pay to BNYM, as
transfer agent, a standard creation transaction fee (the "Creation Transaction
Fee"), which is based on the number of different securities in a Creation Unit
of each Fund according to the fee schedule set forth below:
Number of Securities Creation
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $500
101-200 $1,000
201-300 $1,500
301-400 $2,000
401-500 $2,500
501-600 $3,000
601-700 $3,500
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
The Creation Transaction Fee is applicable to each purchase transaction
regardless of the number of Creation Units purchased in the transaction. An
additional variable fee of up to three times the Creation Transaction Fee may be
charged to approximate additional expenses incurred by a Fund with respect to
transactions effected outside of the clearing process (i.e., through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. The price for each Creation Unit will equal the daily
NAV per Share of a Fund on the transaction date times the number of Shares in a
Creation Unit plus the fees described above and, if applicable, any transfer
taxes.
Parties redeeming Creation Units must pay to BNYM, as transfer agent, a standard
redemption transaction fee (the "Redemption Transaction Fee"), which is based on
the number of different securities in a Creation Unit of each Fund according to
the fee schedule set forth below:
Number of Securities Redemption
in a Creation Unit Transaction Fee
-------------------- ---------------
1-100 $500
101-200 $1,000
201-300 $1,500
301-400 $2,000
401-500 $2,500
501-600 $3,000
601-700 $3,500
The Redemption Transaction Fee is applicable to each redemption transaction
regardless of the number of Creation Units redeemed in the transaction. An
additional variable fee of up to three times the Redemption Transaction Fee may
be charged to approximate additional expenses incurred by a Fund with respect to
redemptions effected outside of the clearing process or to the extent that
redemptions are for cash. Each Fund reserves the right to effect redemptions in
cash. A shareholder may request cash redemption in lieu of securities; however,
a 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 April 30, 2014.
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.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (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 12-months ended June 30, 2013 is available
(1) without charge, upon request, by calling (800) 988-5891; (2) on the Trust's
website located at http://www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files its complete schedule of each Fund's portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters of
each fiscal year on Form N-Q. The Trust's Forms N-Q are available (1) by calling
(800) 988-5891; (2) on the Trust's website located at
http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov; and
(4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling (800) SEC-0330.
BOARD CONSIDERATIONS
The Board of Trustees of the First Trust Exchange-Traded Fund (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 eighteen series of the Trust (each a
"Fund" and collectively, the "Funds"):
First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)
First Trust Value Line(R) Dividend Index Fund (FVD)
First Trust Dow Jones Select MicroCap Index(SM) Fund (FDM)
First Trust Morningstar Dividend Leaders(SM) Index Fund (FDL)
First Trust US IPO Index Fund (FPX)
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund (QQEW)
First Trust NASDAQ-100-Technology Sector Index(SM) Fund (QTEC)
First Trust NYSE Arca Biotechnology Index Fund (FBT)
First Trust Dow Jones Internet Index(SM) Fund (FDN)
First Trust Strategic Value Index Fund (FDV)
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund (QQXT)
First Trust Value Line(R) Equity Allocation Index Fund (FVI)
First Trust ISE Chindia Index Fund (FNI)
First Trust ISE Water Index Fund (FIW)
First Trust ISE-Revere Natural Gas Index Fund (FCG)
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)
First Trust S&P REIT Index Fund (FRI)
First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)
The Board approved the continuation of the Agreement for a one-year period
ending March 31, 2014, for each Fund at a meeting held on March 10-11, 2013. The
Board of Trustees determined for each Fund that the continuation of the
Agreement is in the best interests of the Fund in light of the extent and
quality of 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. To assist the Board in its evaluation of the Agreement for
each Fund, the Independent Trustees received a report in advance of the Board
meeting responding to a request for information from counsel to the Independent
Trustees. The report, 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 for each Fund as compared to
fees charged to a peer group of funds (all of which were exchange-traded funds
or "ETFs") compiled by Lipper Inc. ("Lipper"), an independent source (the
"Lipper Expense Group"), and as compared to fees charged to other clients of the
Advisor with similar investment objectives and to other ETFs managed by the
Advisor; expenses of each Fund compared to expense ratios of the funds in the
Fund's Lipper Expense Group; the nature of expenses incurred in providing
services to each Fund and the potential for economies of scale, if any;
financial data on the Advisor; fall-out benefits to the Advisor and its
affiliate, First Trust Portfolios L.P.; and a summary of the Advisor's
compliance program. Following receipt of this information, counsel to the
Independent Trustees posed follow-up questions
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
to the Advisor, and the Independent Trustees and their counsel then met
separately to discuss the information provided by the Advisor, including the
supplemental responses. The Board applied its business judgment to determine
whether the arrangement between the Trust and the Advisor is a reasonable
business arrangement from each Fund's perspective as well as from the
perspective of shareholders. 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 investment advisory fee.
In reviewing the Agreement for each Fund, the Board considered the nature,
extent and quality of services provided 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 the services provided
by the Advisor to the Funds. The Board also considered the background and
experience of the persons responsible for the day-to-day management of the
Funds. The Board considered the compliance program that had been developed by
the Advisor and the procedures in place to monitor each Fund's investment
program. In light of the information presented and the considerations made, the
Board concluded that the nature, extent and quality of 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 and policies.
The Board considered the advisory fees payable by each Fund under the Agreement.
The Board considered that the Advisor agreed to extend the current expense cap
for each Fund through April 30, 2014. For each Fund, the Board noted that
expenses borne or fees waived by the Advisor are to be subject to reimbursement
by the Fund 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 would
result in the Fund exceeding an expense ratio equal to the expense cap in place
at the time the expenses were borne or fees waived by the Advisor. The Board
considered the advisory fees charged by the Advisor to other First Trust ETFs
not paying a unitary fee and other advisory clients with investment objectives
and policies similar to the Funds', noting that those fees generally were
similar to the advisory fees charged to the Funds. The Board also reviewed data
prepared by Lipper showing the advisory fees and expense ratios of each Fund as
compared to each Fund's Lipper Expense Group. Because each Fund's Lipper Expense
Group included peer funds that pay a unitary fee, the Board determined that
expense ratios were the more relevant data point. Based on the information
provided, the Board noted that the total (net) expense ratios of QTEC, FDN,
QCLN, FIW, FCG and FNI were at or below the median total expense ratio of the
peer funds in each Fund's respective Lipper Expense Group and that the total
(net) expense ratios of FDL, FVD, FBT, QABA, FDV, FRI, FVL, FVI, FDM, FPX, QQEW
and QQXT were above the median total expense ratio of the peer funds in each
Fund's respective Lipper Expense Group. The Independent Trustees discussed with
representatives of the Advisor the Advisor's philosophy regarding expense ratios
of ETFs it manages, and the limitations in creating a relevant peer group for
each Fund, including that (i) some of the Funds are unique in their composition,
which makes assembling peers with similar strategies and asset mix difficult and
(ii) differences in the net assets of the peer funds as compared to the Funds
caused the Funds' fixed expenses to differ on a percentage basis as compared to
the peer funds and in some instances caused otherwise relevant peer funds to be
omitted from a Fund's peer group. The Board took these limitations into account
in considering the Lipper data.
The Board considered performance information for each Fund, noting that the
performance information included each Fund's quarterly performance report, which
is part of the process that the Board has established for monitoring each Fund's
performance on an ongoing basis. The Board determined that this process
continues to be effective for reviewing each Fund's performance. The Board also
considered information regarding the performance of each Fund's underlying
index, the correlation between each Fund's performance and that of its
underlying index, the Fund's tracking error and the Fund's excess return as
compared to a 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 error for each Fund was consistent with
the target set forth in the Fund's prospectus. With respect to FDV, the Board
noted that the Advisor was proposing at the March 10-11, 2013 meeting that the
Board approve a change in the Fund's underlying index from the Credit Suisse
U.S. Value Index to the NASDAQ Capital Strength Index. The Board considered
performance information with respect to the NASDAQ Capital Strength Index and
estimated expense information for the Fund with a new index, and noted, among
other things, the lower licensing fee for the NASDAQ Capital Strength Index
versus the current licensing fee for the Credit Suisse U.S. Value Index. In
addition, the Board reviewed data prepared by Lipper comparing each Fund's
performance to a peer group selected by Lipper (the "Lipper Performance Group")
and to a broad-based benchmark. In reviewing each Fund's performance as compared
to the performance of the Fund's Lipper Performance Group, the Board took into
account the limitations described above with respect to creating relevant peer
groups for the Funds.
On the basis of all the information provided on the fees, expenses and
performance of each Fund, the Board concluded that the advisory fees for each
Fund were reasonable and appropriate in light of the nature, extent and quality
of services provided by the Advisor to each Fund under the Agreement.
The Board noted that the Advisor has continued to invest in personnel and
infrastructure and considered whether fee levels reflect any economies of scale
for the benefit of shareholders. The Board considered the Advisor's statement
that no material economies of scale exist at current Fund asset levels. The
Board also considered the costs of the services provided and profits realized by
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JUNE 30, 2013 (UNAUDITED)
the Advisor from serving as investment advisor to each Fund for the twelve
months ended December 31, 2012, as set forth in the materials provided to the
Board. Based on the information provided, the Board concluded that the pre-tax
profits (if any) estimated to have been realized by the Advisor in connection
with the management of each Fund for calendar year 2012 were not unreasonable.
The Board considered that the Advisor had identified as a fall-out benefit to
the Advisor and First Trust Portfolios L.P. their exposure to investors and
brokers who, in the absence of the Funds, may have had no dealings with the
Advisor, and noted that the Advisor does not utilize soft dollars in connection
with its management of the Funds' portfolios.
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 the Trust and each Fund. No single
factor was determinative in the Board's analysis.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. YOU SHOULD CONSIDER EACH FUND'S INVESTMENT
OBJECTIVE, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. YOU CAN
DOWNLOAD EACH FUND'S PROSPECTUS AT HTTP://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. FOR ADDITIONAL INFORMATION ABOUT THE
RISKS ASSOCIATED WITH INVESTING IN THE FUNDS, PLEASE SEE THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION, AS WELL AS OTHER REGULATORY FILINGS. READ THESE
DOCUMENTS CAREFULLY BEFORE YOU INVEST. FIRST TRUST PORTFOLIOS L.P. IS THE
DISTRIBUTOR OF THE FIRST TRUST EXCHANGE-TRADED FUND.
The following summarizes some of the risks that should be considered for the
Funds.
Each Fund's shares will change in value, and you could lose money by investing
in a Fund. Shares are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates and perceived trends in stock prices. Overall stock values could decline
generally or could underperform other investments. Overall stock market values
could decline generally or could underperform other investments.
An investment in a Fund involves risks similar to those of investing in any fund
of equity securities traded on an exchange. Investors buying or selling Fund
shares on the secondary market may incur brokerage commissions. In addition,
investors who sell Fund shares may receive less than the Fund shares' net asset
value. Unlike shares of open-end funds, investors are generally not able to
purchase exchange-traded fund ("ETF") shares directly from a Fund and individual
ETF shares are not redeemable. However, specified large blocks of ETF shares
called creation units can be purchased from, or redeemed to, a Fund.
Each Fund is subject to index tracking risk. You should anticipate that the
value of Fund shares will decline, more or less, in correlation with any decline
in the value of the index that the Fund seeks to track.
Each Fund's return may not match the return of the index it seeks to track for a
number of reasons. While First Trust seeks to have a correlation of 0.95 or
better, before expenses, between a Fund's performance and the performance of its
corresponding index, there can be no assurance that a Fund will be able to
achieve such a correlation. Accordingly, each Fund's performance may correlate
to a lesser extent and may possibly vary substantially from the performance of
its corresponding index.
Each Fund is also exposed to additional market risk due to a policy of investing
principally in the securities included in its corresponding index. As a result
of such policies, securities held by each Fund will generally not be bought or
sold in response to market fluctuations and the securities may be issued by
companies concentrated in a particular industry. As a result, each Fund will
generally not sell a stock because the stock's issuer is in financial trouble,
unless that stock is removed or is anticipated to be removed from the index the
Fund seeks to track.
Each Fund relies on a license from an index provider that permits the Fund to
use its corresponding index and associated trade names and trademarks in
connection with the name and investment strategies of the Fund. Such licenses
may be terminated by the respective index provider and, as a result, each Fund
may lose its ability to use such intellectual property. There is also no
guarantee that the index provider has all rights to license the respective
intellectual property to First Trust, on behalf of the Fund. Accordingly, in the
event the license is terminated or the index provider does not have rights to
license the particular intellectual property, it may have a significant effect
on the operation of the related Fund.
Each Fund is subject to issuer specific changes risk. The value of an individual
security or a particular type of security can be more volatile than the market
as a whole and can perform differently from the value of the market as a whole.
Each Fund will be concentrated in the securities of companies of a given
industry if the Fund's corresponding index is concentrated in such industry. A
concentration makes a Fund more susceptible to any single occurrence affecting
the related industry and may subject a Fund to greater market risk than less
concentrated funds.
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
Each Fund is considered to be non-diversified. As a result, those Funds are
exposed to additional market risk. A non-diversified fund may invest a
relatively high percentage of its assets in a limited number of issuers. As a
result, changes in the market value of a single portfolio security could cause
greater fluctuations in share price than would occur in a diversified fund.
Furthermore, non-diversified funds are more susceptible to any single political,
regulatory or economic occurrence.
The Funds are not actively managed. The Funds may be affected by a general
decline in certain market segments relating to their corresponding index. The
Funds invests in securities included in or representative of their corresponding
index regardless of their investment merit. The Funds generally will not attempt
to take defensive positions in declining markets.
The First Trust NASDAQ-100 Equal Weighted Index(SM) Fund and the First Trust
NASDAQ-100-Technology Sector Index(SM) Fund invest in stocks of companies in the
technology sector. You should be aware that an investment in a portfolio which
invests in a particular sector involves additional risks, including limited
diversification. The companies engaged in the technology sector are subject to
fierce competition and high research and development costs, and their products
and services may be subject to rapid obsolescence.
First Trust S&P REIT Index Fund and First Trust NASDAQ(R) ABA Community Bank
Index Fund invest in securities of companies in the financials sector. Banks,
thrifts and their holding companies are especially subject to the adverse
effects of economic recession; volatile interest rates; portfolio concentrations
in geographic markets and in commercial and residential real estate loans; and
competition from new entrants in their fields of business. Although recently
enacted legislation repealed most of the barriers which separated the banking,
insurance and securities industries, these industries are still extensively
regulated at both the federal and state level and may be adversely affected by
increased regulations. The downturn in the U.S. and world economies has
adversely affected banks, thrifts and other companies in the financials sector.
The First Trust ISE Chindia Index Fund, the First Trust NASDAQ-100 Equal
Weighted Index(SM) Fund, the First Trust NASDAQ-100-Technology Sector Index(SM)
Fund, the First Trust CBOE S&P 500 VIX Tail Hedge Fund and the First Trust
NASDAQ(R) Clean Edge(R) Green Energy Index Fund invest in securities of
companies in the information technology industry. Information technology
companies are generally subject to the risks of rapidly changing technologies;
short product life cycles; fierce competition; and aggressive pricing and
reduced profit margins.
The First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund and First Trust
NASDAQ-100 Equal Weighted Index(SM) Fund invest in the securities of companies
in the consumer discretionary sector. Because companies in the consumer
discretionary sector manufacture products and provide discretionary services
directly to the consumer, the success of these companies is tied closely to the
performance of the overall domestic and international economy, interest rates,
competition and consumer confidence. Success depends heavily on disposable
household income and consumer spending. Changes in demographics and consumer
tastes can also affect the demand for, and success of, consumer discretionary
products in the marketplace.
The First Trust ISE-Revere Natural Gas Index Fund invests in the securities of
companies in the energy sector. General problems of issuers in the energy sector
include volatile fluctuations in price and supply of energy fuels, international
politics, terrorist attacks, reduced demand as a result of increases in energy
efficiency and energy conservation, the success of exploration projects,
clean-up and litigation costs relating to oil spills and environmental damage,
and tax and other regulatory policies of various governments. In addition,
recent oil prices have been at historic highs and extremely volatile.
The First Trust ISE Water Index Fund and the First Trust NASDAQ(R) Clean Edge(R)
Green Energy Index Fund invest in the securities of companies in the industrials
sector. General risks of these companies include the general state of the
economy, intense competition, consolidation, domestic and international
politics, excess capacity and consumer demand and spending trends. In addition,
they may also be significantly affected by overall capital spending levels,
economic cycles, technical obsolescence, delays in modernization, labor
relations, government regulations and e-commerce initiatives.
The First Trust S&P REIT Index Fund invests in companies in the real estate
industry, including real estate investment trusts ("REITs") and is subject to
the risks associated with investing in real estate (any of which could cause the
value of a REIT's stock price to decline), which may include, but are not
limited to, possible declines in the value of real estate, adverse general and
local economic conditions, possible lack of availability of mortgage funds,
overbuilding in a REIT's market, changes in interest rates and environmental
problems. Furthermore, increases in interest rates typically lower the present
value of a REIT's future earnings stream, and may make financing property
purchases and improvements more costly.
The First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund invests in the
securities of companies in the health care sector. Because companies in the
health care sector are involved in medical services or health care including
biotechnology research and production, drugs and pharmaceuticals and health care
facilities and services, general problems of these companies include extensive
competition, generic drug sales or the loss of patent protection, product
liability litigation and increased government regulations.
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
The First Trust ISE Water Index Fund invests in the securities of utilities
companies. Utilities companies are subject to the imposition of rate caps,
increased competition due to deregulation, the difficulty in obtaining an
adequate return on invested capital or in financing large construction projects,
the limitations on operations and increased costs and delays attributable to
environmental considerations, and the capital market's ability to absorb utility
debt. In addition, taxes, government regulation, international politics, price
and supply fluctuations, volatile interest rates and energy conservation may
cause difficulties for utilities. Utilities issuers have been experiencing
certain of these problems to varying degrees.
The Funds may invest in small capitalization and mid-capitalization companies.
Such companies' securities may be less liquid and may experience greater price
volatility than securities of larger, more established companies.
Because a Fund's corresponding index may include American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs") and/or stocks of non-U.S.
companies, the investments of certain Funds, including but not limited to, the
First Trust ISE Chindia Index Fund, the First Trust ISE-Revere Natural Gas Index
Fund and the First Trust ISE Water Index Fund involve risks of investing in
non-U.S. securities that are in addition to the risk associated with domestic
securities. Non-U.S. companies, in general, are not subject to the regulatory
requirements of U.S. companies and, as such, there may be less publicly
available information about these companies. Moreover, non-U.S. accounting,
auditing and financial reporting standards generally are different from those
applicable to U.S. companies. In addition, non-U.S. companies are exposed to
additional economic, political, social or diplomatic events. ADRs and ADSs also
involve substantially identical risks to those associated with investments in
non-U.S. securities. In addition, the issuers of certain depositary receipts,
particularly unsponsored or unregistered depositary receipts, are under no
obligation to distribute shareholder communications to the holders of such
receipts, or to pass through to them any voting rights with respect to the
deposited securities.
The First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund invests in
renewable and alternative energy companies. You should be aware that share
prices of renewable and alternative energy companies have been significantly
more volatile than shares of companies operating in other more established
industries and the securities included in the First Trust NASDAQ(R) Clean
Edge(R) Green Energy Index Fund may be subject to sharp price declines. This
industry is relatively nascent and under-researched in comparison to more
established and mature sectors, and should therefore be regarded as having
greater investment risk.
The First Trust ISE Water Index Fund invests in companies in the potable water
and wastewater industries. You should be aware that adverse developments in
these industries may significantly affect the value of the shares of the First
Trust ISE Water Index Fund. Companies involved in the potable water and
wastewater industries are subject to environmental considerations, taxes,
government regulation, price and supply fluctuations, competition and
conservation.
The First Trust ISE-Revere Natural Gas Index Fund invests in companies in the
natural gas industry. You should be aware that one of the natural gas industry's
primary risks is the competitive risk associated with the prices of alternative
fuels, such as coal and oil. Additionally, the natural gas industry is sensitive
to increased interest rates because of the industry's capital intensive nature.
Furthermore, there are additional risks and hazards that are inherent in the
natural gas industry that may cause the price of natural gas to widely
fluctuate.
The First Trust ISE Chindia Index Fund invests in the securities of Chinese and
Indian companies. You should be aware that investments in such companies are
subject to additional risks, which are associated with possible adverse
economic, political and social developments in those countries.
The First Trust NASDAQ(R) ABA Community Bank Index Fund is concentrated in the
securities of NASDAQ(R) listed community banks as defined by its corresponding
index which involves additional risks, including limited diversification. These
companies are subject to certain risks, including the adverse effects of
volatile interest rates, economic recession, increased competition from new
entrants in the field, and potential increased regulation. The financial
performance of these companies may also be highly dependent upon the business
environment in certain geographic regions of the United States and may be
adversely impacted by any downturn or unfavorable economic or employment
developments in their local markets and the United States as a whole. These
companies may also be subject to interest rate risks and changes in monetary
policy as their earnings are largely dependent upon their net interest income
and lending risks that could further increase because of increases in interest
rates and/or continuing economic weakness.
The First Trust CBOE S&P 500 VIX Tail Hedge Fund's use of options and other
derivatives can lead to 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 derivatives. These risks are heightened when the First Trust
CBOE S&P 500 VIX Tail Hedge 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.
The option positions employed, as dictated by the attempt to replicate the
Index, may present additional risk. The value of an option may be adversely
affected if the market for the option becomes less liquid or smaller,
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2013 (UNAUDITED)
and will be affected by changes in the value and dividend rates of the stock
subject to the option, an increase in interest rates, a change in the actual
and perceived volatility of the stock market and the common stock and the
remaining time to expiration. Additionally, the value of an option does not
increase or decrease at the same rate as the underlying stock (although they
generally move in the same direction).
Unlike most exchange-traded funds, the First Trust CBOE S&P 500 VIX Tail Hedge
Fund may effect a portion of creations and redemptions for cash, rather than
in-kind securities. Particularly, the call option portion of the Fund's
portfolio, if applicable, may be redeemed for cash. As a result, an investment
in the Fund may be less tax-efficient than an investment in a more conventional
exchange-traded fund. Because the Fund may effect a portion of redemptions for
cash, rather than in-kind distributions, it may be required to sell portfolio
securities in order to obtain the cash needed to distribute redemption proceeds.
A sale of shares may result in capital gains or losses, and may also result in
higher brokerage costs.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
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FIRST TRUST
First Trust Exchange-Traded Fund
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
101 Barclay 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.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEMS 6. SCHEDULE OF INVESTMENTS.
Schedules of Investments in securities of unaffiliated issuers as of the close
of the reporting period are included as part of the report to shareholders filed
under Item 1 of this form.
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 registrant's last fiscal quarter
that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) First Trust Exchange-Traded Fund
---------------------------------------------------
By (Signature and Title)* /s/ Mark R. Bradley
----------------------------------------
Mark R. Bradley, President and
Chief Executive Officer
(principal executive officer)
Date: August 9, 2013
-----------------
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/ Mark R. Bradley
----------------------------------------
Mark R. Bradley, President and
Chief Executive Officer
(principal executive officer)
Date: August 9, 2013
-----------------
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: August 9, 2013
-----------------
* Print the name and title of each signing officer under his or her signature.
EX-99.CERT
2
certs_302.txt
SECTION 302 CERTIFICATION
CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302
OF THE SARBANES-OXLEY ACT
I, Mark R. Bradley, certify that:
1. I have reviewed this report on Form N-CSR of First Trust Exchange-Traded
Fund;
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 second
fiscal quarter of 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: August 9, 2013 /s/ Mark R. Bradley
---------------------- ----------------------------------------
Mark R. Bradley, President and
Chief Executive Officer
(principal executive officer)
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;
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 second
fiscal quarter of 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: August 9, 2013 /s/ James M. Dykas
---------------------- ----------------------------------------
James M. Dykas, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
EX-99.906 CERT
3
certs_906.txt
SECTION 906 CERTIFICATION
CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906
OF THE SARBANES-OXLEY ACT
I, Mark R. Bradley, Chairman of the Board, President and Chief Executive Officer
of First Trust Exchange-Traded Fund (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: August 9, 2013 /s/ Mark R. Bradley
---------------------- ----------------------------------------
Mark R. Bradley, President and
Chief Executive Officer
(principal executive officer)
I, Mark R. Bradley, Treasurer, Chief Financial Officer and Chief Accounting
Officer of First Trust Exchange-Traded Fund (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: August 9, 2013 /s/ Mark R. Bradley
---------------------- ----------------------------------------
James M. Dykas, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)