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 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- MARKET OVERVIEW -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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 ------- 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 ------- 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 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- 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. Page 65 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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. Page 66 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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. Page 68 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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. Page 70 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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. Page 71 -------------------------------------------------------------------------------- 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, Page 72 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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 Page 73 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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. Page 74 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- MARKET OVERVIEW -------------------------------------------------------------------------------- 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 Page 73 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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%
Page 76 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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. Page 77 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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 Page 78 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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. Page 79 -------------------------------------------------------------------------------- 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 Page 80 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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 Page 81 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND 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. Page 82 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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. Page 83 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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, Page 84 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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 Page 85 This page intentionally left blank. This page intentionally left blank. This page intentionally left blank. FIRST TRUST First Trust Exchange-Traded Fund INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 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.