FIRST TRUST
First Trust Exchange-Traded Fund
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 NASDAQ-100 Equal Weighted Index(SM) Fund
First Trust NASDAQ-100-Technology Sector Index(SM) Fund
First Trust NYSE Arca Biotechnology Index Fund
First Trust Dow Jones Internet Index(SM) Fund
First Trust Strategic Value Index Fund
First Trust Value Line(R) Equity Allocation Index Fund
First Trust Value Line(R) Dividend Index 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 Value Line(R) 100 Exchange-Traded Fund
First Trust NASDAQ(R) ABA Community Bank Index Fund
Semi-Annual Report
June 30, 2012
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012
Shareholder Letter.......................................................... 2
Market Overview............................................................. 3
Fund Performance Overview
First Trust Dow Jones Select MicroCap Index(SM) Fund..................... 4
First Trust Morningstar Dividend Leaders(SM) Index Fund.................. 6
First Trust US IPO Index Fund............................................ 8
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund .................... 10
First Trust NASDAQ-100-Technology Sector Index(SM) Fund ................. 12
First Trust NYSE Arca Biotechnology Index Fund .......................... 14
First Trust Dow Jones Internet Index(SM) Fund ........................... 16
First Trust Strategic Value Index Fund .................................. 18
First Trust Value Line(R) Equity Allocation Index Fund .................. 20
First Trust Value Line(R) Dividend Index Fund ........................... 22
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund .............. 24
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund ............. 26
First Trust S&P REIT Index Fund ......................................... 28
First Trust ISE Water Index Fund ........................................ 30
First Trust ISE-Revere Natural Gas Index Fund ........................... 32
First Trust ISE Chindia Index Fund ...................................... 34
First Trust Value Line(R) 100 Exchange-Traded Fund ...................... 36
First Trust NASDAQ(R) ABA Community Bank Index Fund...................... 38
Notes to Fund Performance Overview.......................................... 40
Understanding Your Fund Expenses............................................ 41
Portfolio of Investments
First Trust Dow Jones Select MicroCap Index(SM) Fund..................... 43
First Trust Morningstar Dividend Leaders(SM) Index Fund.................. 47
First Trust US IPO Index Fund............................................ 49
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund .................... 52
First Trust NASDAQ-100-Technology Sector Index(SM) Fund ................. 55
First Trust NYSE Arca Biotechnology Index Fund .......................... 56
First Trust Dow Jones Internet Index(SM) Fund ........................... 57
First Trust Strategic Value Index Fund .................................. 58
First Trust Value Line(R) Equity Allocation Index Fund .................. 60
First Trust Value Line(R) Dividend Index Fund ........................... 63
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund .............. 66
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund ............. 68
First Trust S&P REIT Index Fund ......................................... 70
First Trust ISE Water Index Fund ........................................ 72
First Trust ISE-Revere Natural Gas Index Fund ........................... 73
First Trust ISE Chindia Index Fund ...................................... 74
First Trust Value Line(R) 100 Exchange-Traded Fund ...................... 76
First Trust NASDAQ(R) ABA Community Bank Index Fund...................... 79
Statements of Assets and Liabilities........................................ 82
Statements of Operations.................................................... 86
Statements of Changes in Net Assets......................................... 90
Financial Highlights........................................................ 96
Notes to Financial Statements............................................... 107
Additional Information ..................................................... 117
Risk Considerations......................................................... 121
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" at the end 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
of the Advisor, you may obtain an understanding of how the market environment
affected the performance of each Fund. The statistical information that follows
may help you understand each Fund's performance compared to that of relevant
market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The risks of investing in each Fund are
spelled out in its prospectus, statement of additional information, this report
and other Fund regulatory filings.
Page 1
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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
JUNE 30, 2012
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 the portfolios in First
Trust Exchange-Traded Fund over the six months ended June 30, 2012. 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.
First Trust remains committed to being a long-term investor and investment
manager and to bringing you quality financial solutions regardless of market ups
and downs. We have always believed, as I have written previously, that there are
two ways to attain success in reaching your financial goals: staying invested in
quality products and having a long-term investment horizon. We are committed to
this approach in the products we manage or supervise and offer to investors.
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 2012 and to the next edition of your Fund's report.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees of First Trust Exchange-Traded Fund
Chief Executive Officer of First Trust Advisors L.P.
Page 2
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MARKET OVERVIEW
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FIRST TRUST EXCHANGE-TRADED FUND
SEMI-ANNUAL REPORT
JUNE 30, 2012
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 22 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
U.S. and global economic activity decelerated from Q1'12 to Q2'12. While the GDP
growth rate in the U.S. was a modest 2.0% (annualized) in Q1'12 (average was
2.6% over past 20 years), the outlook for job creation was encouraging as
nonfarm payrolls grew by an average of 225,667 jobs per month. It appears,
however, that the intentional tempering of growth in China and the recessionary
climate in parts of Europe, stemming from the sovereign debt crisis
predominantly in Greece, Spain and Italy, provided a drag on growth in Q2'12.
GDP growth in the U.S. in Q2'12 fell to 1.5% (annualized) and growth in nonfarm
payrolls declined to just 75,000 per month. We believe, and have written about
this on a number of occasions over the past year, that policymakers in the U.S.
and in the European Union have held the markets and economic activity hostage by
playing politics with their respective burgeoning debt problems. In other words,
policymakers have been too slow to act, in our opinion. With this being an
election year in the U.S., investors may not get the guidance they are seeking
until after the first week of November. That being said, we do believe that the
debt problems, at least for the near-term, can be remedied.
The Blue Chip Economic Indicators survey in June revealed a 2012 U.S. Gross
Domestic Product (GDP) forecast of 2.1%. Economists see GDP growth accelerating
to 2.6% in 2013. Brian Wesbury, Chief Economist at First Trust Advisors, has a
more bullish target of 2.5% for 2012 and 3.2% for 2013. The International
Monetary Fund (IMF) continues to forecast better economic times for emerging
nations than developed nations. In July, the IMF estimated that the GDP growth
rate for the "Emerging & Developing Economies" would be 5.6% in 2012 and 5.9% in
2013, compared to 1.4% (2012) and 1.9% (2013) for "Advanced Economies."
U.S. STOCKS AND BONDS
All of the major U.S. stock indices posted solid returns in the first half of
2012. The S&P 500 Index, S&P MidCap 400 Index and S&P SmallCap 600 Index were up
9.49%, 7.90%, and 7.97%, respectively, according to Bloomberg. The only major
sector that did not post a gain was energy, down 2.35%, as measured by the S&P
500 Energy Index. The top-performing sector was telecommunications, up 16.51%,
as measured by the S&P 500 Telecommunications Services Index. The year-over-year
estimated earnings growth rate for the companies in the S&P 500 Index is
expected to be 6.27% in 2012, according to Standard & Poor's. S&P is forecasting
12.75% earnings growth in 2013, more than double the estimate for 2012. Equity
investors should begin to shift their focus to next year's earnings outlook now
that we have reached the midpoint of 2012.
Those investors unwilling to allocate capital to U.S. equities out of fear of
volatility should know that pronounced market swings have been a part of the
experience since at least 1928, according to Kiplinger. The S&P 500 has returned
an annualized 9.8% (including dividends), since 1926, according to Ibbotson
Associates/Morningstar. Since 1928, the S&P 500 has experienced an average
intra-year decline of 13.5% (peak to trough), according to the Leuthold Group.
The S&P 500 posted intra-year declines of 27.6% in 2009 and 16.0% in 2010, yet
the index posted a cumulative total return of 45.5% over that two-year period.
In the U.S. bond market, the top-performing major debt group in the first half
of 2012 was high yield corporate bonds. The Barclays Capital U.S. Corporate High
Yield Index posted a total return of 7.27%. The next closest domestic category
was municipal bonds, up 6.56%, as measured by the Barclays Capital Municipal
Bond: Long Bond (22+) Index. The Barclays Capital U.S. Treasury: Intermediate
Index posted the weakest return, up 1.08%.
FOREIGN STOCKS AND BONDS
Riskier asset classes outperformed overseas in the first half of the year. The
Barclays Capital Global Emerging Markets Index of debt securities rose 6.82%
(USD), compared to 1.50% (USD) for the Barclays Capital Global Aggregate Index
of higher-quality debt. The MSCI Emerging Markets Index posted a total return of
3.93% (USD), compared to 2.43% (USD) for the MSCI World Index (excluding the
U.S.) The U.S. dollar provided a slight drag on returns from investments
overseas for U.S. investors by appreciating 1.8% against a basket of major
currencies, as measured by the U.S. Dollar Index (DXY).
Page 3
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FUND PERFORMANCE OVERVIEW
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FDM - FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
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
09/30/05.
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PERFORMANCE AS OF JUNE 30, 2012
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (09/27/05) Ended (09/27/05)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 6.44% -5.97% -2.71% 1.57% -12.86% 11.08%
Market Value 7.23% -5.79% -2.68% 1.57% -12.71% 11.13%
INDEX PERFORMANCE
Dow Jones Select MicroCap Index(SM) 6.79% -5.44% -2.04% 2.28% -9.77% 16.49%
Russell 2000(R) Index 8.53% -2.08% 0.54% 4.28% 2.73% 32.69%
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(See Notes to Fund Performance Overview on page 40.)
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PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
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% OF LONG-TERM
SECTOR INVESTMENTS
Financials 24.98%
Industrials 20.32
Consumer Discretionary 16.16
Information Technology 13.25
Health Care 12.06
Materials 6.01
Energy 2.95
Utilities 1.75
Telecommunication Services 1.67
Consumer Staples 0.85
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Total 100.00%
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TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
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% OF LONG-TERM
SECURITY INVESTMENTS
Newcastle Investment Corp. 1.22%
Wright Medical Group, Inc. 1.06
Medidata Solutions, Inc. 1.04
Standard Microsystems Corp. 1.04
Sturm, Ruger & Co., Inc. 0.97
Western Alliance Bancorp 0.96
BBCN Bancorp, Inc. 0.95
Shuffle Master, Inc. 0.94
Boston Private Financial Holdings, Inc. 0.88
Kenexa Corp. 0.87
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Total 9.93%
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Dow Jones and Dow Jones Select MicroCap Index(SM) are products of Dow Jones
Indexes, a licensed trademark of CME Group Index Services LLC ("CME") and have
been licensed for use by First Trust on behalf of the Fund. The Fund, based on
the Dow Jones Select MicroCap Index(SM), is not sponsored, endorsed, sold or
promoted by CME, Dow Jones or their respective affiliates, and CME, Dow Jones
and their respective affiliates make no representation regarding the
advisability of trading in the Fund.
Page 4
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FDM - FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 27, 2005 - JUNE 30, 2012
First Trust Dow Jones Select Dow Jones Select Russell 2000(R)
MicroCap Index(SM) Fund MicroCap Index(SM) Index
09/05 $10,000 $10,000 $10,000
12/05 10,374 10,397 10,252
06/06 10,968 11,033 11,094
12/06 12,001 12,115 12,134
06/07 12,746 12,910 12,917
12/07 11,278 11,474 11,944
06/08 9,896 10,100 10,825
12/08 7,520 7,707 7,909
06/09 7,362 7,568 8,118
12/09 9,087 9,393 10,058
06/10 8,833 9,153 9,862
12/10 11,427 11,876 12,759
06/11 11,811 12,319 13,551
12/11 10,435 10,907 12,227
06/12 11,107 11,648 13,270
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, 2012
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, 2007 through June
30, 2012. 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.
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NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
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FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/07 - 12/31/07 125 12 5 0
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 - 06/30/12 39 0 0 0
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NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
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FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/07 - 12/31/07 100 4 5 0
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 - 06/30/12 86 0 0 0
Page 5
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FDL - FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND
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 03/15/06.
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PERFORMANCE AS OF JUNE 30, 2012
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (03/09/06) Ended (03/09/06)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 8.27% 14.91% -0.46% 3.08% -2.30% 21.07%
Market Value 8.33% 14.98% -0.44% 3.08% -2.19% 21.10%
INDEX PERFORMANCE
Morningstar(R) Dividend Leaders(SM) Index 8.64% 15.58% 0.04% 3.58% 0.21% 24.88%
S&P 500(R) Index 9.49% 5.45% 0.22% 3.25% 1.09% 22.37%
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(See Notes to Fund Performance Overview on page 40.)
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PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Health Care 26.58%
Utilities 26.03
Telecommunication Services 19.51
Energy 6.74
Industrials 6.11
Consumer Staples 4.53
Materials 3.35
Financials 2.73
Information Technology 2.59
Consumer Discretionary 1.83
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Total 100.00%
=======
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TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Johnson & Johnson 10.06%
AT&T, Inc. 9.86
Verizon Communications, Inc. 9.64
Merck & Co., Inc. 9.15
ConocoPhillips 5.49
Bristol-Myers Squibb Co. 4.04
Eli Lilly & Co. 3.27
Southern (The) Co. 2.71
Duke Energy Corp. 2.18
Kimberly-Clark Corp. 1.97
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Total 58.37%
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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
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FDL - FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MARCH 9, 2006 - JUNE 30, 2012
First Trust
Morningstar Dividend Morningstar(R) Dividend S&P 500(R)
Leaders(SM) Index Fund Leaders(SM) Index Index
03/06 $10,000 $10,000 $10,000
12/06 12,077 12,110 11,317
06/07 12,392 12,462 12,104
12/07 10,793 10,870 11,939
06/08 7,995 8,069 10,516
12/08 7,371 7,462 7,522
06/09 6,961 7,067 7,760
12/09 8,420 8,567 9,512
06/10 8,039 8,197 8,879
12/10 9,771 9,995 10,945
06/11 10,535 10,806 11,603
12/11 11,182 11,498 11,175
06/12 12,107 12,491 12,236
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, 2012
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, 2007 through June
30, 2012. 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%
01/01/07 - 12/31/07 122 6 5 0
01/01/08 - 12/31/08 148 8 4 2
01/01/09 - 12/31/09 135 4 3 0
01/01/10 - 12/31/10 185 0 0 0
01/01/11 - 12/31/11 219 0 0 0
01/01/12 - 06/30/12 85 0 0 0
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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%
01/01/07 - 12/31/07 107 10 1 0
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 - 06/30/12 40 0 0 0
Page 7
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FPX - FIRST TRUST US IPO INDEX FUND
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 04/13/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (04/12/06) Ended (04/12/06)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 13.54% 6.51% 2.94% 5.94% 15.59% 43.16%
Market Value 13.42% 6.40% 2.91% 5.92% 15.43% 42.96%
INDEX PERFORMANCE
IPOX(R)-100 U.S. Index 13.88% 7.17% 3.58% 6.61% 19.25% 48.83%
Russell 3000(R) Index 9.32% 3.84% 0.39% 3.10% 1.99% 20.87%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Consumer Discretionary 25.09%
Information Technology 23.67
Energy 19.62
Industrials 10.09
Consumer Staples 9.18
Financials 5.59
Health Care 4.65
Utilities 1.19
Materials 0.92
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Visa, Inc., Class A 10.31%
Kinder Morgan, Inc. 6.55
General Motors Co. 6.09
Phillips 66 4.10
Dollar General Corp. 3.63
Lorillard, Inc. 3.40
Mead Johnson Nutrition Co. 3.24
Marathon Petroleum Corp. 3.02
HCA Holdings, Inc. 2.63
Teradata Corp. 2.40
-------
Total 45.37%
=======
---------------
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 (CONTINUED)
--------------------------------------------------------------------------------
FPX - FIRST TRUST US IPO INDEX FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 12, 2006 - JUNE 30, 2012
First Trust US IPO IPOX(R)-100 U.S. Russell 3000(R)
Index Fund Index Index
04/06 $10,000 $10,000 $10,000
12/06 11,100 11,154 11,064
06/07 12,385 12,481 11,851
12/07 12,712 12,844 11,633
06/08 11,784 11,941 10,348
12/08 7,134 7,245 7,293
06/09 8,087 8,248 7,599
12/09 10,339 10,575 9,360
06/10 9,726 9,980 8,794
12/10 12,228 12,594 10,945
06/11 13,439 13,889 11,640
12/11 12,607 13,071 11,057
06/12 14,314 14,885 12,088
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, 2012
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, 2007 through June
30, 2012. 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%
01/01/07 - 12/31/07 96 9 4 1
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 - 06/30/12 72 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%
01/01/07 - 12/31/07 135 5 1 0
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 - 06/30/12 50 2 0 0
Page 9
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QQEW - FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
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 04/25/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (04/19/06) Ended (04/19/06)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 9.18% -1.27% 2.83% 3.94% 14.98% 27.05%
Market Value 9.18% -1.35% 2.82% 3.93% 14.93% 27.00%
INDEX PERFORMANCE
NASDAQ-100 Equal Weighted Index(SM) 9.45% -0.64% 3.50% 4.58% 18.75% 32.01%
NASDAQ-100 Index(R) 15.43% 13.73% 7.02% 7.61% 40.41% 57.51%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Information Technology 48.88%
Consumer Discretionary 24.07
Health Care 15.09
Industrials 4.97
Consumer Staples 4.00
Materials 1.98
Telecommunication Services 1.01
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Sears Holdings Corp. 1.15%
NVIDIA Corp. 1.11
News Corp., Class A 1.10
Green Mountain Coffee Roasters, Inc. 1.08
Apollo Group, Inc., Class A 1.08
Nuance Communications, Inc. 1.08
DIRECTV, Class A 1.07
Liberty Interactive Corp., Class A 1.07
Virgin Media, Inc. 1.07
Oracle Corp. 1.06
-------
Total 10.87%
=======
---------------
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 10
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QQEW - FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 19, 2006 - JUNE 30, 2012
First Trust NASDAQ-100 Equal NASDAQ-100 Equal NASDAQ-100
Weighted Index(SM) Fund Weighted Index(SM) Index(R)
04/06 $10,000 $10,000 $10,000
12/06 10,060 10,097 10,168
06/07 11,050 11,117 11,217
12/07 11,040 11,142 12,124
06/08 9,673 9,785 10,708
12/08 6,187 6,292 7,084
06/09 7,653 7,803 8,671
12/09 9,871 10,100 10,954
06/10 9,314 9,561 10,278
12/10 11,968 12,321 13,161
06/11 12,867 13,288 13,849
12/11 11,636 12,063 13,645
06/12 12,704 13,203 15,750
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, 2012
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, 2007 through June
30, 2012. 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%
01/01/07 - 12/31/07 151 0 3 0
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 - 06/30/12 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%
01/01/07 - 12/31/07 97 0 0 0
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 - 06/30/12 39 0 0 0
Page 11
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QTEC - FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND
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
04/25/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (04/19/06) Ended (04/19/06)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 4.56% -2.21% 3.09% 3.96% 16.43% 27.20%
Market Value 4.64% -2.17% 3.08% 3.96% 16.37% 27.25%
INDEX PERFORMANCE
NASDAQ-100 Technology Sector Index(SM) 4.89% -1.58% 3.77% 4.61% 20.33% 32.23%
S&P 500 Information Technology Index 13.34% 13.74% 4.58% 5.68% 25.12% 40.84%
S&P 500(R) Index 9.49% 5.45% 0.22% 2.80% 1.09% 18.67%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Information Technology 95.47%
Consumer Discretionary 2.28
Health Care 2.25
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
NVIDIA Corp. 2.53%
Nuance Communications, Inc. 2.45
Oracle Corp. 2.41
Micron Technology, Inc. 2.41
Avago Technologies Ltd. 2.37
Seagate Technology PLC 2.36
Linear Technology Corp. 2.36
Autodesk, Inc. 2.36
Citrix Systems, Inc. 2.35
Applied Materials, Inc. 2.34
-------
Total 23.94%
=======
---------------
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 12
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QTEC - FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 19, 2006 - JUNE 30, 2012
First Trust NASDAQ-100 S&P 500
NASDAQ-100-Technology Technology Information S&P 500(R)
Sector Index(SM) Fund Sector Index(SM) Technology Index Index
04/06 $10,000 $10,000 $10,000 $10,000
12/06 9,985 10,020 10,296 10,975
06/07 10,925 10,989 11,256 11,739
12/07 10,750 10,847 11,975 11,579
06/08 9,755 9,872 10,409 10,199
12/08 5,885 5,983 6,809 7,295
06/09 7,890 8,048 8,502 7,526
12/09 10,587 10,838 11,011 8,225
06/10 9,782 10,041 9,847 8,612
12/10 12,907 13,293 12,133 10,616
06/11 13,006 13,435 12,383 11,254
12/11 12,165 12,606 12,426 10,839
06/12 12,720 13,222 14,084 11,868
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, 2012
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, 2007 through June
30, 2012. 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%
01/01/07 - 12/31/07 153 0 0 0
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 - 06/30/12 76 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%
01/01/07 - 12/31/07 98 0 0 0
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 - 06/30/12 49 0 0 0
Page 13
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FBT - FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND
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 06/23/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (06/19/06) Ended (06/19/06)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 34.18% 0.02% 12.88% 14.13% 83.29% 121.87%
Market Value 34.19% -0.09% 12.88% 14.12% 83.25% 121.82%
INDEX PERFORMANCE
NYSE Arca Biotechnology Index(SM) 34.61% 0.59% 13.57% 14.82% 88.97% 130.14%
NASDAQ(R) Biotechnology Index 24.82% 22.35% 11.43% 11.43% 71.80% 92.02%
S&P 500(R) Index 9.49% 5.45% 0.22% 3.76% 1.09% 24.93%
S&P Composite 1500 Health Care Index 11.49% 9.23% 4.15% 6.49% 22.55% 46.08%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
INDUSTRY INVESTMENTS
Biotechnology 71.18%
Life Sciences Tools & Services 23.54
Health Care 5.28
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Vertex Pharmaceuticals, Inc. 7.51%
Amylin Pharmaceuticals, Inc. 6.05
United Therapeutics Corp. 5.76
Incyte Corp. 5.74
Biogen Idec, Inc. 5.57
Affymetrix, Inc. 5.38
Nektar Therapeutics 5.28
Amgen, Inc. 4.95
Alexion Pharmaceuticals, Inc. 4.94
Gilead Sciences, Inc. 4.94
-------
Total 56.12%
=======
---------------
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 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FBT - FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 19, 2006 - JUNE 30, 2012
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 $10,000 $10,000 $10,000 $10,000 $10,000
12/06 11,775 11,815 11,114 11,554 11,194
06/07 12,105 12,179 11,177 12,358 11,919
12/07 12,205 12,320 11,630 12,189 12,092
06/08 11,410 11,557 11,086 10,736 10,593
12/08 9,968 10,138 10,200 7,679 9,218
06/09 10,722 10,921 10,491 7,922 9,305
12/09 14,441 14,758 11,828 9,711 11,132
06/10 15,629 16,026 11,227 9,065 10,324
12/10 19,768 20,327 13,726 11,174 11,712
06/11 22,182 22,880 15,694 11,847 13,374
12/11 16,534 17,096 15,385 11,410 13,104
06/12 22,185 23,013 19,204 12,493 14,610
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, 2012
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, 2007 through June
30, 2012. 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%
01/01/07 - 12/31/07 162 8 1 0
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 - 06/30/12 60 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%
01/01/07 - 12/31/07 76 3 1 0
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 - 06/30/12 65 0 0 0
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FDN - FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND
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 06/23/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (06/19/06) Ended (06/19/06)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 9.45% -2.45% 6.46% 9.97% 36.74% 77.41%
Market Value 9.32% -2.59% 6.43% 9.95% 36.58% 77.21%
INDEX PERFORMANCE
Dow Jones Internet Composite Index(SM) 9.78% -1.74% 7.05% 10.58% 40.57% 83.36%
S&P 500(R) Index 9.49% 5.45% 0.22% 3.76% 1.09% 24.93%
S&P Composite 1500 Information
Technology Index 12.72% 11.25% 4.31% 7.77% 23.49% 57.03%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Information Technology 74.06%
Consumer Discretionary 20.42
Financials 3.85
Health Care 1.67
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Google, Inc., Class A 9.67%
Amazon.com, Inc. 7.82
eBay, Inc. 6.23
priceline.com, Inc. 5.46
Yahoo!, Inc. 4.29
Salesforce.com, Inc. 4.17
Equinix, Inc. 3.22
Juniper Networks, Inc. 3.11
VeriSign, Inc. 3.02
LinkedIn Corp., Class A 2.99
-------
Total 49.98%
=======
---------------
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 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FDN - FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 19, 2006 - JUNE 30, 2012
First Trust S&P Composite 1500
Dow Jones Internet Dow Jones Internet S&P 500(R) Information Technology
Index(SM) Fund Composite Index(SM) Index Index
06/06 $10,000 $10,000 $10,000 $10,000
12/06 11,285 11,315 11,554 11,574
06/07 12,975 13,044 12,358 12,716
12/07 12,545 12,651 12,189 13,360
06/08 11,203 11,327 10,736 11,638
12/08 7,023 7,114 7,679 7,629
06/09 9,374 9,524 7,922 9,506
12/09 12,587 12,825 9,711 12,286
06/10 11,980 12,222 9,065 11,055
12/10 17,197 17,603 11,174 13,776
06/11 18,186 18,661 11,847 14,115
12/11 16,209 16,702 11,410 13,930
06/12 17,741 18,335 12,493 15,702
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, 2012
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, 2007 through June
30, 2012. 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%
01/01/07 - 12/31/07 130 7 6 0
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 - 06/30/12 58 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%
01/01/07 - 12/31/07 101 5 2 0
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 - 06/30/12 67 0 0 0
Page 17
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FDV - FIRST TRUST STRATEGIC VALUE INDEX FUND
The 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 Credit Suisse U.S. Value Index, Powered
by HOLT(TM) (the "Index"). The Index is an equally-weighted index which measures
the performance of fifty stocks which have the highest HOLT valuation score and
meet liquidity and tradeability requirements. The HOLT valuation scoring model
aims to convert accounting data into cash as measured by HOLT's proprietary
CFROI(R) metric. The Fund will normally invest at least 90% of its assets in
common stocks that comprise 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 07/11/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (07/06/06) Ended (07/06/06)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 5.43% -5.13% 0.04% 3.76% 0.22% 24.72%
Market Value 5.53% -5.09% 0.02% 3.76% 0.10% 24.72%
INDEX PERFORMANCE
Credit Suisse U.S. Value Index, Powered
by HOLT(TM)* 5.78% -4.40% N/A N/A N/A N/A
S&P 500 Value Index 8.92% 3.00% -2.68% 0.95% -12.72% 5.85%
S&P 500(R) Index 9.49% 5.45% 0.22% 3.30% 1.09% 21.48%
---------------------------------------------------------------------------------------------------------------------------
* On June 19, 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). The inception date of the Index was June 14, 2010. Returns for the
Index are only disclosed for those periods in which the Index was in existence
for the entire period.
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Financials 25.58%
Energy 18.25
Health Care 16.62
Information Technology 15.21
Industrials 11.54
Materials 6.34
Consumer Discretionary 4.32
Telecommunication Services 2.14
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
News Corp., Class A 2.43%
Marathon Petroleum Corp. 2.36
Merck & Co., Inc. 2.24
CF Industries Holdings, Inc. 2.20
Valero Energy Corp. 2.20
St. Jude Medical, Inc. 2.19
Newmont Mining Corp. 2.19
McKesson Corp. 2.18
Eli Lilly & Co. 2.17
CenturyLink, Inc. 2.14
-------
Total 22.30%
=======
---------------
"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.
Page 18
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FDV - FIRST TRUST STRATEGIC VALUE INDEX FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 6, 2006 - JUNE 30, 2012
First Trust Strategic Value S&P 500 S&P 500(R)
Index Fund Value Index Index
07/06 $10,000 $10,000 $10,000
12/06 11,074 11,294 11,235
06/07 12,444 12,126 12,016
12/07 12,210 11,519 11,852
06/08 11,253 9,671 10,440
12/08 7,665 7,002 7,467
06/09 8,640 6,903 7,703
12/09 10,686 8,484 9,443
06/10 9,880 8,034 8,815
12/10 12,185 9,765 10,866
06/11 13,144 10,276 11,520
12/11 11,827 9,718 11,095
06/12 12,469 10,585 12,148
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, 2012
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, 2007 through June
30, 2012. 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%
01/01/07 - 12/31/07 121 15 4 0
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 - 06/30/12 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%
01/01/07 - 12/31/07 100 8 2 1
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 - 06/30/12 47 0 0 0
Page 19
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FVI - FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
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 12/07/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (12/05/06) Ended (12/05/06)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 1.74% -9.96% -1.41% -0.21% -6.85% -1.17%
Market Value 2.07% -9.62% -1.34% -0.14% -6.53% -0.78%
INDEX PERFORMANCE
Value Line(R) Equity Allocation Index(TM) 2.15% -9.25% -0.52% 0.62% -2.56% 3.52%
Russell 3000(R) Index 9.32% 3.84% 0.39% 1.62% 1.99% 9.33%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Consumer Discretionary 22.71%
Industrials 18.21
Financials 12.82
Information Technology 11.41
Health Care 9.66
Materials 8.46
Energy 8.01
Consumer Staples 5.73
Utilities 2.59
Telecommunication Services 0.40
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Gap (The), Inc. 1.59%
TJX (The) Cos., Inc. 1.56
Anheuser-Busch InBev NV, ADR 1.55
Discover Financial Services 1.54
Ross Stores, Inc. 1.51
Apple, Inc. 1.50
Allstate (The) Corp. 1.42
Sony Corp., ADR 1.41
Ingersoll-Rand PLC 1.39
Wells Fargo & Co. 1.38
-------
Total 14.85%
=======
---------------
"Value Line(R)" and "Value Line(R) Equity Allocation Index" 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, 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 (CONTINUED)
--------------------------------------------------------------------------------
FVI - FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 5, 2006 - JUNE 30, 2012
First Trust Value Line(R)
Equity Allocation Value Line(R) Equity Russell 3000(R)
Index Fund Allocation Index(TM) Index
12/5/06 $10,000 $10,000 $10,000
12/06 9,890 9,897 10,008
06/07 10,610 10,623 10,720
12/07 10,350 10,398 10,522
06/08 9,470 9,551 9,360
12/08 6,681 6,772 6,597
06/09 7,037 7,177 6,874
12/09 8,962 9,192 8,466
06/10 8,831 9,104 7,954
12/10 10,741 11,125 9,900
06/11 10,976 11,405 10,529
12/11 9,714 10,132 10,001
06/12 9,883 10,350 10,933
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, 2012
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, 2007 through June
30, 2012. 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%
01/01/07 - 12/31/07 80 6 2 0
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 - 06/30/12 79 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%
01/01/07 - 12/31/07 157 5 1 0
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 - 06/30/12 46 0 0 0
Page 21
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FVD - FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
The First Trust Value Line(R) Dividend Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Value Line(R) Dividend Index (the
"Index"). The Fund will normally invest at least 90% of its 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 AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (08/19/03) Ended (08/19/03)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 6.33% 7.22% 2.81% 7.52% 14.85% 90.20%
Market Value 6.27% 7.02% 2.81% 7.51% 14.85% 90.09%
INDEX PERFORMANCE
Value Line(R) Dividend Index(TM) 6.85% 8.14% 3.61% N/A 19.42% N/A
S&P 500(R) Index 9.49% 5.45% 0.22% 5.64% 1.09% 62.63%
Dow Jones U.S. Select Dividend Index(SM) 6.54% 10.50% -0.21% N/A -1.05% 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 (12/15/06) through period end (06/30/12)
were 17.59% for both NAV and Market Value. That compares to an Index return of
22.77% for the same period. The average annual total returns for the period
from the reorganization date (12/15/06) through period end (06/30/12) were
2.97% for both NAV and Market Value. That compares to an Index return of 3.80%
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 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Utilities 22.75%
Consumer Staples 16.45
Industrials 11.58
Financials 11.50
Health Care 9.97
Information Technology 9.78
Consumer Discretionary 6.93
Energy 5.93
Materials 2.84
Telecommunication Services 2.27
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Lincare Holdings, Inc. 0.75%
Murphy Oil Corp. 0.64
Hillshire Brands Co. 0.63
Occidental Petroleum Corp. 0.62
Deere & Co. 0.61
Leggett & Platt, Inc. 0.60
Marathon Oil Corp. 0.60
Eaton Corp. 0.59
Staples, Inc. 0.59
Chevron Corp. 0.59
-------
Total 6.22%
=======
---------------
"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 22
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FVD - FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 19, 2003 - JUNE 30, 2012
First Trust Value Line(R) S&P 500(R)
Dividend Index Fund Index
08/03 $10,000 $10,000
12/03 10,612 11,166
06/04 11,244 11,551
12/04 12,605 12,381
06/05 12,987 12,281
12/05 13,435 12,989
06/06 14,208 13,341
12/06 16,137 15,041
06/07 16,571 16,088
12/07 15,586 15,867
06/08 14,067 13,977
12/08 11,818 9,997
06/09 11,676 10,313
12/09 14,132 12,642
06/10 13,725 11,801
12/10 16,404 14,547
06/11 17,738 15,423
12/11 17,885 14,854
06/12 19,017 16,264
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, 2012
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, 2007 through June
30, 2012. 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%
01/01/07 - 12/31/07 56 6 3 0
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 - 06/30/12 108 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%
01/01/07 - 12/31/07 176 9 1 0
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 - 06/30/12 17 0 0 0
Page 23
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QQXT - FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
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 02/15/07.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (02/08/07) Ended (02/08/07)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 12.77% -0.46% 2.63% 3.29% 13.88% 19.07%
Market Value 11.86% -1.31% 2.46% 3.13% 12.91% 18.05%
INDEX PERFORMANCE
NASDAQ-100 Ex-Tech Sector Index(SM) 13.06% 0.18% 3.28% 3.94% 17.52% 23.17%
Russell 1000(R) Index 9.38% 4.37% 0.39% 1.13% 1.95% 6.22%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR (1) INVESTMENTS
Consumer Discretionary 41.13%
Health Care 25.14
Information Technology 12.41
Industrials 8.87
Consumer Staples 7.13
Materials 3.52
Telecommunication Services 1.80
-------
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, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Sears Holdings Corp. 2.06%
News Corp., Class A 1.95
Green Mountain Coffee Roasters, Inc. 1.93
Apollo Group, Inc., Class A 1.92
DIRECTV, Class A 1.91
Liberty Interactive Corp., Class A 1.91
Virgin Media, Inc. 1.91
Alexion Pharmaceuticals, Inc. 1.87
Perrigo Co. 1.86
Life Technologies Corp. 1.85
-------
Total 19.17%
=======
---------------
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 24
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QQXT - FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 8, 2007 - JUNE 30, 2012
First Trust
NASDAQ-100 Ex-Technology NASDAQ-100 Ex-Tech Russell 1000(R)
Sector Index(SM) Fund Sector Index(SM) Index
02/07 $10,000 $10,000 $10,000
12/07 10,595 10,653 10,282
06/08 9,057 9,126 9,131
12/08 6,029 6,102 6,417
06/09 7,060 7,165 6,694
12/09 8,848 9,009 8,241
06/10 8,454 8,633 7,714
12/10 10,674 10,935 9,568
06/11 11,961 12,294 10,177
12/11 10,558 10,894 9,711
06/12 11,906 12,317 10,622
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, 2012
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 February 15, 2007
(commencement of trading) through June 30, 2012. 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%
02/15/07 - 12/31/07 110 0 0 3
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 - 06/30/12 73 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%
02/15/07 - 12/31/07 103 1 2 3
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 - 06/30/12 49 3 0 0
Page 25
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QCLN - FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND
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 02/14/07.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (02/08/07) Ended (02/08/07)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV -3.21% -38.87% -16.84% -13.18% -60.24% -53.30%
Market Value -3.12% -39.05% -16.84% -13.21% -60.24% -53.40%
INDEX PERFORMANCE
NASDAQ(R) Clean Edge(R) Green Energy Index -3.41% -38.80% -16.36% -12.66% -59.07% -51.78%
Russell 2000(R) Index 8.53% -2.08% 0.54% 0.98% 2.73% 5.41%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Information Technology 72.79%
Industrials 12.47
Consumer Discretionary 7.88
Energy 3.59
Utilities 2.48
Materials 0.79
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Linear Technology Corp. 8.02%
Tesla Motors, Inc. 7.88
ON Semiconductor Corp. 7.82
Cree, Inc. 7.38
Hexcel Corp. 6.35
Universal Display Corp. 4.26
Itron, Inc. 4.21
Fairchild Semiconductor International, Inc. 3.96
Microsemi Corp. 3.89
AVX Corp. 3.65
-------
Total 57.42%
=======
---------------
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 26
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QCLN - FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 8, 2007 - JUNE 30, 2012
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 $10,000 $10,000 $10,000
12/07 15,430 15,522 9,489
06/08 12,350 12,472 8,599
12/08 5,595 5,675 6,283
06/09 6,920 7,038 6,449
12/09 8,045 8,213 7,990
06/10 6,665 6,824 7,834
12/10 8,210 8,434 10,136
06/11 7,640 7,879 10,765
12/11 4,825 4,992 9,713
06/12 4,670 4,822 10,542
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, 2012
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 February 14, 2007
(commencement of trading) through June 30, 2012. 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%
02/14/07 - 12/31/07 39 0 4 3
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 - 06/30/12 11 0 1 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%
02/14/07 - 12/31/07 176 0 0 0
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 - 06/30/12 93 20 0 0
Page 27
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FRI - FIRST TRUST S&P REIT INDEX FUND
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 05/10/07.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (05/08/07) Ended (05/08/07)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 14.64% 12.45% 1.75% 0.01% 9.05% 0.05%
Market Value 14.45% 12.19% 1.67% -0.02% 8.63% -0.11%
INDEX PERFORMANCE
S&P United States REIT Index* 14.93% 13.05% N/A N/A N/A N/A
FTSE EPRA/NAREIT North America Index 14.62% 12.15% 2.27% 0.53% 11.87% 2.76%
Russell 3000(R) Index 9.32% 3.84% 0.39% 0.36% 1.99% 1.87%
---------------------------------------------------------------------------------------------------------------------------
* 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. 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 40.)
--------------------------------------------------------
PORTFOLIO REIT CLASS ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
REIT CLASS INVESTMENTS
Retail 27.89%
Specialized 26.91
Residential 17.89
Office 15.03
Diversified 7.43
Industrial 4.85
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Simon Property Group, Inc. 10.95%
Public Storage 4.77
Equity Residential 4.35
HCP, Inc. 4.30
Ventas, Inc. 4.23
Boston Properties, Inc. 3.77
Vornado Realty Trust 3.62
Prologis, Inc. 3.55
AvalonBay Communities, Inc. 3.13
Health Care REIT, Inc. 2.89
-------
Total 45.56%
=======
---------------
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 28
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FRI - FIRST TRUST S&P REIT INDEX FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - JUNE 30, 2012
First Trust S&P FTSE EPRA/NAREIT Russell 3000(R)
REIT Index Fund North America Index Index
05/07 $10,000 $10,000 $10,000
12/07 8,093 8,206 9,811
06/08 7,739 7,843 8,728
12/08 4,947 4,872 6,151
06/09 4,319 4,381 6,405
12/09 6,333 6,442 7,889
06/10 6,679 6,772 7,412
12/10 8,090 8,287 9,225
06/11 8,899 9,163 9,811
12/11 8,729 8,965 9,319
06/12 10,007 10,276 10,188
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, 2012
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 May 10, 2007 (commencement of
trading) through June 30, 2012. 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%
05/10/07 - 12/31/07 46 13 4 1
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 - 06/30/12 77 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%
05/10/07 - 12/31/07 85 9 5 0
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 - 06/30/12 48 0 0 0
Page 29
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FIW - FIRST TRUST ISE WATER INDEX FUND
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 05/11/07.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (05/08/07) Ended (05/08/07)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 9.92% -0.90% 1.63% 3.27% 8.44% 18.03%
Market Value 11.25% 0.11% 1.87% 3.47% 9.69% 19.18%
INDEX PERFORMANCE
ISE Water Index(TM) 10.37% -0.14% 2.33% 3.98% 12.20% 22.25%
Russell 3000(R) Index 9.32% 3.84% 0.39% 0.36% 1.99% 1.87%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Industrials 60.48%
Utilities 24.22
Materials 5.64
Information Technology 5.42
Health Care 4.24
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Lindsay Corp. 4.31%
Energy Recovery, Inc. 4.28
Cia de Saneamento Basico do Estado de
Sao Paulo, ADR 4.11
Badger Meter, Inc. 4.04
Aqua America, Inc. 4.02
California Water Service Group 4.01
Veolia Environment, ADR 3.93
American Water Works Co., Inc. 3.87
Watts Water Technologies, Inc., Class A 3.87
Pentair, Inc. 3.72
-------
Total 40.16%
=======
---------------
"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 30
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FIW - FIRST TRUST ISE WATER INDEX FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - JUNE 30, 2012
First Trust
ISE Water Index Fund ISE Water Index(TM) Russell 3000(R) Index
05/07 $1,0000 $10,000 $10,000
12/07 11,212 11,260 9,811
06/08 10,992 11,056 8,728
12/08 7,915 7,987 6,151
06/09 8,168 8,276 6,405
12/09 9,522 9,681 7,889
06/10 8,989 9,168 7,412
12/10 11,378 11,653 9,225
06/11 11,910 12,243 9,811
12/11 10,738 11,076 9,319
06/12 11,803 12,225 10,188
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, 2012
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 May 11, 2007 (commencement of
trading) through June 30, 2012. 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%
05/11/07 - 12/31/07 51 0 0 1
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 - 06/30/12 48 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%
05/11/07 - 12/31/07 109 0 1 0
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 - 06/30/12 76 0 0 0
Page 31
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FCG - FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND
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 05/11/07.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (05/08/07) Ended (05/08/07)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV -9.48% -23.48% -3.66% -3.28% -16.99% -15.75%
Market Value -9.37% -23.44% -3.62% -3.26% -16.85% -15.69%
INDEX PERFORMANCE
ISE-REVERE Natural Gas Index(TM) -9.20% -22.98% -2.98% -2.59% -14.02% -12.64%
Russell 3000(R) Index 9.32% 3.84% 0.39% 0.36% 1.99% 1.87%
S&P Composite 1500 Energy Index -2.94% -9.53% 0.90% 2.10% 4.60% 11.31%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO SUB-INDUSTRY ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SUB-INDUSTRY INVESTMENTS
Oil & Gas Exploration & Production 90.60%
Integrated Oil & Gas 6.26
Gas Utilities 3.14
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Quicksilver Resources, Inc. 4.61%
Penn Virginia Corp. 4.15
Ultra Petroleum Corp. 3.77
Bill Barrett Corp. 3.75
Cabot Oil & Gas Corp. 3.64
Southwestern Energy Co. 3.59
EXCO Resources, Inc. 3.56
EQT Corp. 3.54
QEP Resources, Inc. 3.47
Comstock Resources, Inc. 3.46
-------
Total 37.54%
=======
---------------
"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 32
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FCG - FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - JUNE 30, 2012
First Trust ISE-Revere ISE-REVERE Russell 3000(R) S&P Composite 1500
Natural Gas Index Fund Natural Gas Index(TM) Index Energy Index
05/07 $10,000 $10,000 $10,000 $10,000
12/07 11,166 11,213 9,804 12,170
06/08 15,755 15,942 8,721 13,578
12/08 5,967 6,016 6,147 7,810
06/09 6,454 6,518 6,405 7,740
12/09 8,903 9,017 7,889 9,092
06/10 7,752 7,891 7,412 8,016
12/10 9,992 10,254 9,225 11,036
06/11 11,012 11,342 9,811 12,304
12/11 9,308 9,620 9,319 11,469
06/11 8,426 8,735 10,188 11,132
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, 2012
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 May 11, 2007 (commencement of
trading) through June 30, 2012. 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%
05/11/07 - 12/31/07 49 0 0 2
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 - 06/30/12 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%
05/11/07 - 12/31/07 109 2 0 0
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 - 06/30/12 51 0 0 0
Page 33
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ISE CHINDIA INDEX FUND
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 05/11/07.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (05/08/07) Ended (05/08/07)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 6.02% -22.83% -1.66% 0.13% -8.05% 0.68%
Market Value 6.42% -22.52% -1.63% 0.16% -7.87% 0.84%
INDEX PERFORMANCE
ISE ChIndia Index(TM) 6.18% -22.95% -1.09% 0.72% -5.35% 3.74%
Russell 3000(R) Index 9.32% 3.84% 0.39% 0.36% 1.99% 1.87%
MSCI Emerging Markets Index 3.93% -15.95% -0.09% 1.28% -0.44% 6.76%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Information Technology 34.45%
Consumer Discretionary 20.81
Financials 15.40
Energy 9.57
Telecommunication Services 8.71
Materials 4.78
Health Care 3.37
Industrials 1.45
Utilities 0.76
Consumer Staples 0.70
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Michael Kors Holdings Ltd. 7.39%
China Mobile Ltd., ADR 7.35
HDFC Bank Ltd., ADR 7.31
ICICI Bank Ltd., ADR 7.28
Infosys Ltd., ADR 7.00
Baidu, Inc., ADR 6.43
CNOOC Ltd., ADR 4.32
Sterlite Industries (India) Ltd., ADR 4.03
Wipro Ltd., ADR 4.00
Tata Motors Ltd., ADR 3.93
-------
Total 59.04%
=======
---------------
"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 34
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FNI - FIRST TRUST ISE CHINDIA INDEX FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - JUNE 30, 2012
First Trust ISE Chindia ISE ChIndia Russell 3000(R) MSCI Emerging
Index Fund Index(TM) Index Markets Index
05/07 $10,000 $10,000 $10,000 $10,000
12/07 13,873 13,952 9,804 12,715
06/08 9,985 10,059 8,721 11,220
12/08 5,968 6,031 6,147 5,934
06/09 8,329 8,451 6,405 8,071
12/09 10,836 11,031 7,889 10,593
06/10 10,540 10,767 7,412 9,939
12/10 12,836 13,175 9,225 12,592
06/11 13,047 13,466 9,811 12,703
12/11 9,497 9,771 9,319 10,273
06/12 10,069 10,375 10,188 10,677
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, 2012
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 May 11, 2007 (commencement of
trading) through June 30, 2012. 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%
05/11/07 - 12/31/07 82 2 0 2
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 - 06/30/12 30 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%
05/11/07 - 12/31/07 76 0 0 0
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 - 06/30/12 85 10 0 0
Page 35
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FVL - FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
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 AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (06/12/03) Ended (06/12/03)
06/30/12 06/30/12 06/30/12 to 06/30/12 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 2.79% -10.43% -5.16% 2.54% -23.28% 25.49%
Market Value 2.71% -10.75% -5.17% 2.53% -23.29% 25.39%
INDEX PERFORMANCE
Value Line(R) 100 Index(TM) 3.20% -9.87% -4.38% N/A -20.08% N/A
Russell 3000(R) Index 9.32% 3.84% 0.39% 6.09% 1.99% 70.70%
---------------------------------------------------------------------------------------------------------------------------
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 (06/15/07) through period end (06/30/12) were -23.83% for
both NAV and Market Value. That compares to an Index return of -20.65% for
that same period. The average annual total returns for the period from the
reorganization date (06/15/07) through period end (06/30/12) were -5.26% for
both NAV and Market Value. That compares to an Index return of -4.52% 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 40.)
--------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Industrials 29.51%
Consumer Discretionary 23.82
Health Care 11.20
Materials 11.02
Information Technology 10.12
Energy 5.37
Financials 3.05
Telecommunication Services 2.00
Consumer Staples 1.96
Utilities 1.95
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Berry Petroleum Co., Class A 1.18%
AGCO Corp. 1.10
Community Health Systems, Inc. 1.09
Titan International, Inc. 1.08
Cambrex Corp. 1.08
Denbury Resources, Inc. 1.07
Insight Enterprises, Inc. 1.07
UniFirst Corp. 1.07
Universal Health Services, Inc., Class B 1.06
NCR Corp. 1.06
-------
Total 10.86%
=======
---------------
"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 36
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FVL - FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 12, 2003 - JUNE 30, 2012
First Trust Value Line(R) 100 Russell 3000(R)
Exchange-Traded Fund Index
06/03 $10,000 $10,000
12/03 11,073 11,367
06/04 11,427 11,775
12/04 12,519 12,725
06/05 12,649 12,724
12/05 14,003 13,504
06/06 14,305 13,940
12/06 14,647 15,626
06/07 16,357 16,737
12/07 17,563 16,429
06/08 16,063 14,614
12/08 9,081 10,300
06/09 8,728 10,732
12/09 10,238 13,219
06/10 10,150 12,419
12/10 13,259 15,457
06/11 14,011 16,439
12/11 12,209 15,615
06/12 12,550 17,070
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, 2012
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 June 18, 2007 (commencement
of trading as an exchange-traded fund) through June 30, 2012. 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%
06/18/07 - 12/31/07 39 9 4 0
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 - 06/30/12 49 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%
06/18/07 - 12/31/07 74 9 2 0
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 - 06/30/12 76 0 0 0
Page 37
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QABA - FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND
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
07/01/09.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF JUNE 30, 2012
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (06/29/09) Inception (06/29/09)
06/30/12 06/30/12 to 06/30/12 to 06/30/12
FUND PERFORMANCE
NAV 9.94% 4.47% 9.35% 30.79%
Market Value 10.40% 4.23% 9.26% 30.48%
INDEX PERFORMANCE
NASDAQ OMX(R) ABA Community Bank Index(SM) 10.32% 5.18% 10.09% 33.45%
S&P Composite 1500 Financials Sector Index 13.42% -1.43% 9.76% 32.28%
Russell 3000(R) Index 9.32% 3.84% 16.42% 57.86%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
--------------------------------------------------------
PORTFOLIO INDUSTRY ALLOCATION AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
INDUSTRY INVESTMENTS
Commercial Banks 84.95%
Thrifts & Mortgage Finance 14.62
IT Services 0.43
-------
Total 100.00%
=======
--------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 2012
--------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
BOK Financial Corp. 4.08%
Zions Bancorporation 3.68
East West Bancorp, Inc. 3.49
Commerce Bancshares, Inc. 3.45
TFS Financial Corp. 3.04
Signature Bank 2.93
SVB Financial Group 2.67
Hancock Holding Co. 2.66
Associated Banc-Corp. 2.36
UMB Financial Corp. 2.14
-------
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 38
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QABA - FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 29, 2009 - JUNE 30, 2012
First Trust NASDAQ(R) ABA NASDAQ OMX(R) ABA Russell 3000(R) S&P Composite 1500
Community Bank Index Fund Community Bank Index(SM) Index Financials Sector Index
06/09 $10,000 $10,000 $10,000 $10,000
12/09 11,280 11,318 12,224 12,112
06/10 11,438 11,505 11,484 11,744
12/10 12,721 12,846 14,293 13,722
06/11 12,520 12,688 15,201 13,420
12/11 11,898 12,095 14,439 11,662
06/12 13,081 13,343 15,785 13,227
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, 2012
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, 2012. 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 - 06/30/12 58 5 1 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 - 06/30/12 57 4 0 0
Page 39
--------------------------------------------------------------------------------
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 40
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
JUNE 30, 2012 (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 NASDAQ-100 Equal Weighted Index(SM) Fund, First Trust
NASDAQ-100-Technology Sector Index(SM) Fund, First Trust NYSE Arca
Biotechnology Index Fund, First Trust Dow Jones Internet Index(SM) Fund, First
Trust Strategic Value Index Fund, First Trust Value Line(R) Equity Allocation
Index Fund, First Trust Value Line(R) Dividend Index 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 Value Line(R) 100 Exchange-Traded Fund, or
First Trust NASDAQ(R) ABA Community Bank Index Fund (each a "Fund" and
collectively, the "Funds"), you incur two types of costs: (1) transaction costs;
and (2) ongoing costs, including management fees, distribution and/or service
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, 2012
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
------------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JANUARY 1, 2012 JUNE 30, 2012 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
Actual $1,000.00 $1,064.40 0.60% $3.08
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND
Actual $1,000.00 $1,082.70 0.45% $2.33
Hypothetical (5% return before expenses) $1,000.00 $1,022.63 0.45% $2.26
FIRST TRUST US IPO INDEX FUND
Actual $1,000.00 $1,135.40 0.60% $3.19
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
Actual $1,000.00 $1,091.80 0.60% $3.12
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND
Actual $1,000.00 $1,045.60 0.60% $3.05
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND
Actual $1,000.00 $1,341.80 0.60% $3.49
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND
Actual $1,000.00 $1,094.49 0.60% $3.12
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
Page 41
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JANUARY 1, 2012 JUNE 30, 2012 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST STRATEGIC VALUE INDEX FUND
Actual $1,000.00 $1,054.30 0.65% $3.32
Hypothetical (5% return before expenses) $1,000.00 $1,021.63 0.65% $3.27
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
Actual $1,000.00 $1,071.40 0.70% $3.51
Hypothetical (5% return before expenses) $1,000.00 $1,021.38 0.70% $3.52
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
Actual $1,000.00 $1,063.30 0.70% $3.59
Hypothetical (5% return before expenses) $1,000.00 $1,021.38 0.70% $3.52
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
Actual $1,000.00 $1,127.70 0.60% $3.17
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND
Actual $1,000.00 $ 967.90 0.60% $2.94
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST S&P REIT INDEX FUND
Actual $1,000.00 $1,146.40 0.50% $2.67
Hypothetical (5% return before expenses) $1,000.00 $1,022.38 0.50% $2.51
FIRST TRUST ISE WATER INDEX FUND
Actual $1,000.00 $1,099.20 0.60% $3.13
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND
Actual $1,000.00 $ 905.20 0.60% $2.84
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST ISE CHINDIA INDEX FUND
Actual $1,000.00 $1,060.20 0.60% $3.07
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
Actual $1,000.00 $1,027.90 0.70% $3.53
Hypothetical (5% return before expenses) $1,000.00 $1,021.38 0.70% $3.52
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND
Actual $1,000.00 $1,099.40 0.60% $3.13
Hypothetical (5% return before expenses) $1,000.00 $1,021.88 0.60% $3.02
<FN>
(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,
2012 through June 30, 2012), multiplied by 182/366 (to reflect the one-half
year period).
</FN>
Page 42
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 1.0%
5,053 Astronics Corp. (a) $ 142,697
5,920 Ducommun, Inc. (a) 58,075
5,603 LMI Aerospace, Inc. (a) 97,380
31,498 Taser International, Inc. (a) 165,050
------------
463,202
------------
AIR FREIGHT & LOGISTICS -- 0.2%
4,949 Park-Ohio Holdings Corp. (a) 94,179
------------
AUTO COMPONENTS -- 1.8%
10,988 Drew Industries, Inc. (a) 306,016
11,777 Standard Motor Products, Inc. 165,820
15,873 Stoneridge, Inc. (a) 108,095
13,412 Superior Industries International,
Inc. 219,555
------------
799,486
------------
BIOTECHNOLOGY -- 1.1%
52,578 Astex Pharmaceuticals, Inc. (a) 109,888
40,362 Rigel Pharmaceuticals, Inc. (a) 375,367
------------
485,255
------------
BUILDING PRODUCTS -- 0.5%
11,629 AAON, Inc. 219,207
------------
CAPITAL MARKETS -- 1.6%
11,408 Calamos Asset Management, Inc.,
Class A 130,622
1,642 Diamond Hill Investment Group, Inc. 128,552
9,433 INTL FCStone, Inc. (a) 182,529
10,915 Safeguard Scientifics, Inc. (a) 168,964
18,453 SWS Group, Inc. (a) 98,354
------------
709,021
------------
CHEMICALS -- 3.1%
13,775 American Vanguard Corp. 366,277
28,203 Flotek Industries, Inc. (a) 263,416
4,922 Hawkins, Inc. 187,922
4,566 KMG Chemicals, Inc. 88,032
7,266 Quaker Chemical Corp. 335,762
12,442 Zep, Inc. 170,829
------------
1,412,238
------------
COMMERCIAL BANKS -- 16.1%
10,315 Banner Corp. 226,002
39,075 BBCN Bancorp, Inc. (a) 425,527
44,219 Boston Private Financial Holdings,
Inc. 394,876
6,240 Bryn Mawr Bank Corp. 131,477
16,279 Cardinal Financial Corp. 199,906
14,186 Chemical Financial Corp. 304,999
22,804 Citizens Republic Bancorp, Inc. (a) 390,632
8,391 City Holding Co. 282,693
7,876 Community Trust Bancorp, Inc. 263,767
7,824 Financial Institutions, Inc. 132,069
46,125 First Busey Corp. 222,784
6,226 First Financial Corp. 180,554
8,175 First Interstate BancSystem, Inc. 116,412
10,122 Hudson Valley Holding Corp. 183,208
12,166 Independent Bank Corp. 355,369
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMERCIAL BANKS -- (CONTINUED)
8,353 Lakeland Financial Corp. $ 224,111
23,057 Oriental Financial Group, Inc. 255,471
5,700 Republic Bancorp, Inc., Class A 126,825
16,383 S&T Bancorp, Inc. 302,594
13,729 Sandy Spring Bancorp, Inc. 247,122
8,887 Simmons First National Corp.,
Class A 206,623
9,773 Southside Bancshares, Inc. 219,697
17,914 State Bank Financial Corp. (a) 271,576
5,610 Tompkins Financial Corp. 211,385
17,137 TowneBank 239,918
8,079 Washington Trust Bancorp, Inc. 196,966
14,099 WesBanco, Inc. 299,745
10,040 West Coast Bancorp (a) 197,286
46,193 Western Alliance Bancorp (a) 432,366
------------
7,241,960
------------
COMMERCIAL SERVICES &
SUPPLIES -- 4.4%
5,139 A.T. Cross Co., Class A (a) 50,722
33,097 Cenveo, Inc. (a) 63,877
46,538 EnergySolutions, Inc. (a) 78,649
14,648 Ennis, Inc. 225,286
16,956 InnerWorkings, Inc. (a) 229,415
5,580 Intersections, Inc. 88,443
23,391 Metalico, Inc. (a) 51,460
7,595 Multi-Color Corp. 168,913
6,021 Schawk, Inc. 76,467
8,841 Standard Parking Corp. (a) 190,258
11,059 Team, Inc. (a) 344,820
10,372 US Ecology, Inc. 183,999
11,641 Viad Corp. 232,820
------------
1,985,129
------------
COMMUNICATIONS EQUIPMENT
-- 1.6%
8,565 Anaren, Inc. (a) 167,874
10,021 Black Box Corp. 287,603
12,708 Globecomm Systems, Inc. (a) 128,859
23,585 Symmetricom, Inc. (a) 141,274
------------
725,610
------------
COMPUTERS & PERIPHERALS -- 1.0%
30,732 China Digital TV Holding Co.
Ltd., ADR 90,352
8,955 Datalink Corp. (a) 85,520
16,925 Super Micro Computer, Inc. (a) 268,431
------------
444,303
------------
CONSTRUCTION & ENGINEERING
-- 1.2%
21,033 Furmanite Corp. (a) 102,220
11,024 Layne Christensen Co. (a) 228,087
11,561 MYR Group, Inc. (a) 197,231
------------
527,538
------------
DISTRIBUTORS -- 0.2%
10,621 Voxx International Corp. (a) 98,988
------------
See Notes to Financial Statements Page 43
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED CONSUMER SERVICES
-- 0.6%
12,705 Lincoln Educational Services Corp. $ 82,582
12,462 Universal Technical Institute, Inc. 168,362
------------
250,944
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.3%
25,596 Alaska Communications Systems
Group, Inc. 53,752
20,001 Consolidated Communications
Holdings, Inc. 296,015
28,406 Premiere Global Services, Inc. (a) 238,326
------------
588,093
------------
ELECTRIC UTILITIES -- 0.4%
7,585 Unitil Corp. 201,003
------------
ELECTRICAL EQUIPMENT -- 1.2%
8,444 Coleman Cable, Inc. 73,378
10,777 Encore Wire Corp. 288,608
1,923 Preformed Line Products Co. 111,361
11,420 Vicor Corp. 79,255
------------
552,602
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 3.8%
8,222 Badger Meter, Inc. 308,736
19,453 CTS Corp. 183,247
10,114 Electro Rent Corp. 164,150
16,504 Maxwell Technologies, Inc. (a) 108,266
8,140 Measurement Specialties, Inc. (a) 264,631
21,231 Newport Corp. (a) 255,197
10,654 Park Electrochemical Corp. 275,726
2,564 Viasystems Group, Inc. (a) 43,588
6,959 Vishay Precision Group, Inc. (a) 97,078
------------
1,700,619
------------
ENERGY EQUIPMENT & SERVICES
-- 1.7%
4,481 Dawson Geophysical Co. (a) 106,737
12,198 Global Geophysical Services, Inc.
(a) 74,652
89,214 Hercules Offshore, Inc. (a) 315,818
7,037 Mitcham Industries, Inc. (a) 119,418
6,921 Natural Gas Services Group, Inc. (a) 102,569
7,294 Union Drilling, Inc. (a) 32,677
------------
751,871
------------
FOOD PRODUCTS -- 0.2%
10,981 Omega Protein Corp. (a) 80,820
------------
GAS UTILITIES -- 0.5%
5,420 Chesapeake Utilities Corp. 236,962
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 4.7%
14,288 AngioDynamics, Inc. (a) 171,599
933 Atrion Corp. 191,246
12,850 Cantel Medical Corp. 350,163
13,162 Greatbatch, Inc. (a) 298,909
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- (CONTINUED)
23,749 Merit Medical Systems, Inc. (a) $ 327,974
31,255 RTI Biologics, Inc. (a) 117,519
20,775 Symmetry Medical, Inc. (a) 178,249
22,331 Wright Medical Group, Inc. (a) 476,767
------------
2,112,426
------------
HEALTH CARE PROVIDERS &
SERVICES -- 3.1%
11,318 Assisted Living Concepts, Inc.,
Class A 160,942
13,685 Bio-Reference Laboratories, Inc. (a) 359,642
3,845 CorVel Corp. (a) 188,405
9,865 Ensign Group (The), Inc. 278,883
22,725 Metropolitan Health Networks,
Inc. (a) 217,478
6,739 U.S. Physical Therapy, Inc. 171,373
------------
1,376,723
------------
HEALTH CARE TECHNOLOGY -- 1.3%
14,296 Medidata Solutions, Inc. (a) 467,050
34,461 Merge Healthcare, Inc. (a) 98,559
------------
565,609
------------
HOTELS, RESTAURANTS & LEISURE
-- 3.8%
14,030 AFC Enterprises, Inc. (a) 324,654
690 Biglari Holdings, Inc. (a) 266,609
10,147 Bravo Brio Restaurant Group,
Inc. (a) 180,921
11,750 Caribou Coffee Co., Inc. (a) 151,693
55,152 Denny's Corp. (a) 244,875
14,593 Ruth's Hospitality Group, Inc. (a) 96,314
30,398 Shuffle Master, Inc. (a) 419,492
------------
1,684,558
------------
HOUSEHOLD DURABLES -- 1.4%
29,354 La-Z-Boy, Inc. (a) 360,761
11,626 Libbey, Inc. (a) 178,692
8,474 Universal Electronics, Inc. (a) 111,602
------------
651,055
------------
HOUSEHOLD PRODUCTS -- 0.5%
19,642 Central Garden & Pet Co.,
Class A (a) 213,901
------------
INDUSTRIAL CONGLOMERATES -- 0.7%
7,164 Standex International Corp. 304,971
------------
INSURANCE -- 1.7%
9,185 Crawford & Co., Class A 35,454
10,436 eHealth, Inc. (a) 168,124
28,931 Meadowbrook Insurance Group,
Inc. 254,303
23,444 National Financial Partners
Corp. (a) 314,150
------------
772,031
------------
Page 44 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
INTERNET SOFTWARE & SERVICES
-- 1.4%
20,693 Move, Inc. (a) $ 188,513
8,395 Stamps.com, Inc. (a) 207,105
51,340 United Online, Inc. 216,655
------------
612,273
------------
IT SERVICES -- 1.1%
5,240 Cass Information Systems, Inc. 210,910
8,412 Computer Task Group, Inc. (a) 126,096
11,506 Virtusa Corp. (a) 153,605
------------
490,611
------------
LEISURE EQUIPMENT & PRODUCTS
-- 2.2%
14,724 JAKKS Pacific, Inc. 235,731
36,615 Smith & Wesson Holding Corp. (a) 304,271
10,791 Sturm, Ruger & Co., Inc. 433,259
------------
973,261
------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.4%
35,803 Affymetrix, Inc. (a) 167,916
------------
MACHINERY -- 4.6%
5,115 Alamo Group, Inc. 160,458
15,106 Altra Holdings, Inc. 238,373
5,124 American Railcar Industries, Inc.
(a) 138,860
4,895 Cascade Corp. 230,310
10,930 Columbus McKinnon Corp. (a) 164,934
12,462 Douglas Dynamics, Inc. 177,583
5,594 Graham Corp. 104,160
16,231 John Bean Technologies Corp. 220,255
6,756 Kadant, Inc. (a) 158,428
5,697 L.B. Foster Co., Class A 162,991
5,970 Miller Industries, Inc. 95,102
9,601 NN, Inc. (a) 98,026
5,273 Twin Disc, Inc. 97,498
7,035 Xerium Technologies, Inc. (a) 20,401
------------
2,067,379
------------
MEDIA -- 1.4%
3,168 Fisher Communications, Inc. (a) 94,755
10,656 Global Sources Ltd. (a) 70,330
23,091 Journal Communications, Inc.,
Class A (a) 119,149
18,611 Knology, Inc. (a) 366,078
------------
650,312
------------
METALS & MINING -- 1.7%
37,191 General Moly, Inc. (a) 116,780
3,274 Handy & Harman Ltd. (a) 44,134
24,551 Horsehead Holding Corp. (a) 244,528
7,551 Metals USA Holdings Corp. (a) 120,136
5,400 Olympic Steel, Inc. 88,668
3,871 Universal Stainless & Alloy
Products, Inc. (a) 159,098
------------
773,344
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
MULTILINE RETAIL -- 0.8%
19,607 Fred's, Inc., Class A $ 299,791
4,814 Gordmans Stores, Inc. (a) 79,431
------------
379,222
------------
OIL, GAS & CONSUMABLE FUELS
-- 1.3%
87,912 Hyperdynamics Corp. (a) 73,679
6,635 TransMontaigne Partners L.P. (b) 220,680
32,070 VAALCO Energy, Inc. (a) 276,764
------------
571,123
------------
PAPER & FOREST PRODUCTS -- 1.1%
8,970 Neenah Paper, Inc. 239,409
27,926 Wausau Paper Corp. 271,720
------------
511,129
------------
PERSONAL PRODUCTS -- 0.2%
5,801 Nature's Sunshine Products, Inc. 87,595
------------
PHARMACEUTICALS -- 1.6%
36,158 Corcept Therapeutics, Inc. (a) 162,350
5,811 Hi-Tech Pharmacal Co., Inc. (a) 188,276
10,478 Obagi Medical Products, Inc. (a) 159,999
26,989 SciClone Pharmaceuticals, Inc. (a) 189,193
------------
699,818
------------
PROFESSIONAL SERVICES -- 2.7%
24,400 CBIZ, Inc. (a) 144,936
7,542 CDI Corp. 123,689
5,885 CRA International, Inc. (a) 86,451
11,200 ICF International, Inc. (a) 267,008
9,025 Mistras Group, Inc. (a) 237,177
29,604 Navigant Consulting, Inc. (a) 374,194
------------
1,233,455
------------
REAL ESTATE INVESTMENT TRUSTS
-- 1.8%
81,702 Newcastle Investment Corp. 547,403
48,018 Resource Capital Corp. 255,936
------------
803,339
------------
ROAD & RAIL -- 1.4%
12,757 Celadon Group, Inc. 208,960
8,650 Marten Transport Ltd. 183,899
11,768 Quality Distribution, Inc. (a) 130,507
7,164 Roadrunner Transportation
Systems, Inc. (a) 121,000
------------
644,366
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.1%
18,119 AXT, Inc. (a) 71,570
12,752 Cohu, Inc. 129,560
14,286 IXYS Corp. (a) 159,575
12,375 Nanometrics, Inc. (a) 190,080
34,108 Photronics, Inc. (a) 208,059
17,935 Rudolph Technologies, Inc. (a) 156,393
12,597 Standard Microsystems Corp. (a) 464,703
------------
1,379,940
------------
See Notes to Financial Statements Page 45
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
SOFTWARE -- 1.3%
13,506 Kenexa Corp. (a) $ 392,079
11,924 TeleNav, Inc. (a) 73,094
15,526 VASCO Data Security International,
Inc. (a) 127,003
------------
592,176
------------
SPECIALTY RETAIL -- 3.3%
5,441 America's Car-Mart, Inc. (a) 211,383
7,606 Body Central Corp. (a) 68,454
24,242 Casual Male Retail Group, Inc. (a) 87,998
7,490 Destination Maternity Corp. 161,784
22,744 Hot Topic, Inc. 220,389
12,552 Lithia Motors, Inc., Class A 289,324
8,400 Shoe Carnival, Inc. 180,516
15,407 Stein Mart, Inc. (a) 122,486
51,275 Wet Seal, Inc., Class A (a) 162,029
------------
1,504,363
------------
TEXTILES, APPAREL & LUXURY
GOODS -- 0.6%
10,229 Movado Group, Inc. 255,930
------------
THRIFTS & MORTGAGE FINANCE
-- 3.7%
12,560 Berkshire Hills Bancorp, Inc. 276,320
17,958 Dime Community Bancshares, Inc. 238,662
72,136 Doral Financial Corp. (a) 108,204
4,960 Federal Agricultural Mortgage
Corp., Class C 130,101
17,861 Flushing Financial Corp. 243,445
6,963 Rockville Financial, Inc. 80,562
20,450 ViewPoint Financial Group, Inc. 319,838
6,538 Walker & Dunlop, Inc. (a) 84,013
4,868 WSFS Financial Corp. 196,716
------------
1,677,861
------------
TRADING COMPANIES &
DISTRIBUTORS -- 2.3%
7,205 CAI International, Inc. (a) 143,235
5,316 DXP Enterprises, Inc. (a) 220,561
17,297 H&E Equipment Services, Inc. (a) 259,974
9,345 Houston Wire & Cable Co. 102,141
9,688 Titan Machinery, Inc. (a) 294,225
------------
1,020,136
------------
WATER UTILITIES -- 0.8%
8,791 Middlesex Water Co. 167,029
7,433 SJW Corp. 178,466
------------
345,495
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.4%
12,522 USA Mobility, Inc. 161,033
------------
DESCRIPTION VALUE
-----------------------------------------------------------
TOTAL INVESTMENTS -- 99.9% $ 44,852,381
(Cost $40,380,717) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 33,675
------------
NET ASSETS -- 100.0% $ 44,886,056
============
(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, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $7,609,627 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $3,137,963.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $ 44,852,381 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
Page 46 See Notes to Financial Statements
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 3.9%
115,844 Lockheed Martin Corp. $ 10,087,695
83,763 Northrop Grumman Corp. 5,343,242
123,912 Raytheon Co. 7,012,180
------------
22,443,117
------------
CAPITAL MARKETS -- 0.3%
45,118 Federated Investors, Inc., Class B 985,828
14,684 Greenhill & Co., Inc. 523,485
------------
1,509,313
------------
CHEMICALS -- 0.1%
26,494 Olin Corp. 553,460
------------
COMMERCIAL BANKS -- 0.5%
17,350 Bank of Hawaii Corp. 797,232
14,424 Community Bank System, Inc. 391,179
7,401 Park National Corp. 516,220
20,720 Trustmark Corp. 507,226
23,532 United Bankshares, Inc. 609,008
------------
2,820,865
------------
COMMERCIAL SERVICES &
SUPPLIES -- 1.9%
20,446 Deluxe Corp. 509,923
14,162 HNI Corp. 364,672
183,427 Pitney Bowes, Inc. 2,745,902
166,609 R.R. Donnelley & Sons Co. 1,960,988
164,592 Waste Management, Inc. 5,497,373
------------
11,078,858
------------
COMPUTERS & PERIPHERALS -- 0.7%
163,257 Seagate Technology PLC 4,037,346
------------
CONTAINERS & PACKAGING -- 0.4%
9,027 Greif, Inc., Class A 370,107
33,765 Packaging Corp. of America 953,524
36,562 Sonoco Products Co. 1,102,344
------------
2,425,975
------------
DIVERSIFIED CONSUMER SERVICES
-- 0.5%
145,288 H&R Block, Inc. 2,321,702
5,133 Strayer Education, Inc. 559,600
------------
2,881,302
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 19.5%
1,572,840 AT&T, Inc. 56,087,474
1,234,270 Verizon Communications, Inc. 54,850,959
------------
110,938,433
------------
ELECTRIC UTILITIES -- 17.9%
13,809 ALLETE, Inc. 577,216
213,942 American Electric Power Co., Inc. 8,536,286
538,434 Duke Energy Corp. 12,416,288
83,067 Entergy Corp. 5,639,419
248,957 Exelon Corp. 9,365,762
180,697 FirstEnergy Corp. 8,888,485
39,414 Hawaiian Electric Industries, Inc. 1,124,087
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
ELECTRIC UTILITIES -- (CONTINUED)
141,573 NextEra Energy, Inc. $ 9,741,638
60,229 Northeast Utilities 2,337,488
118,049 Pepco Holdings, Inc. 2,310,219
41,637 Pinnacle West Capital Corp. 2,154,298
28,530 Portland General Electric Co. 760,610
282,481 PPL Corp. 7,855,797
114,098 Progress Energy, Inc. 6,865,277
333,094 Southern (The) Co. 15,422,252
23,527 UIL Holdings Corp. 843,678
15,753 UNS Energy Corp. 605,073
49,239 Westar Energy, Inc. 1,474,708
166,044 Xcel Energy, Inc. 4,717,310
------------
101,635,891
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.1%
28,658 Molex, Inc., Class A 579,751
------------
FOOD & STAPLES RETAILING -- 1.1%
208,593 Sysco Corp. 6,218,157
------------
FOOD PRODUCTS -- 0.7%
5,157 Cal-Maine Foods, Inc. 201,639
149,246 ConAgra Foods, Inc. 3,869,949
------------
4,071,588
------------
GAS UTILITIES -- 1.0%
52,543 AGL Resources, Inc. 2,036,041
34,389 Atmos Energy Corp. 1,206,022
8,418 Laclede Group (The), Inc. 335,121
9,444 Northwest Natural Gas Co. 449,534
25,313 Piedmont Natural Gas Co., Inc. 814,825
19,094 WGL Holdings, Inc. 758,987
------------
5,600,530
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 0.0%
15,342 Meridian Bioscience, Inc. 313,897
------------
HOUSEHOLD DURABLES -- 0.3%
69,964 Leggett & Platt, Inc. 1,478,339
------------
HOUSEHOLD PRODUCTS -- 2.0%
133,754 Kimberly-Clark Corp. 11,204,573
------------
INSURANCE -- 0.5%
5,877 American National Insurance Co. 418,854
41,539 Arthur J. Gallagher & Co. 1,456,773
14,005 Mercury General Corp. 583,588
14,109 OneBeacon Insurance Group Ltd.,
Class A 183,699
12,721 Tower Group, Inc. 265,487
------------
2,908,401
------------
IT SERVICES -- 0.7%
125,164 Paychex, Inc. 3,931,401
------------
LEISURE EQUIPMENT & PRODUCTS
-- 1.0%
45,562 Hasbro, Inc. 1,543,185
122,593 Mattel, Inc. 3,976,917
------------
5,520,102
------------
See Notes to Financial Statements Page 47
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
MACHINERY -- 0.1%
31,401 Harsco Corp. $ 639,952
------------
MEDIA -- 0.1%
17,475 Meredith Corp. 558,152
------------
METALS & MINING -- 2.8%
69,492 Cliffs Natural Resources, Inc. 3,425,261
44,360 Commercial Metals Co. 560,710
328,531 Freeport-McMoRan Copper &
Gold, Inc. 11,193,051
78,626 Steel Dynamics, Inc. 923,856
------------
16,102,878
------------
MULTI-UTILITIES -- 7.2%
41,278 Alliant Energy Corp. 1,881,038
24,181 Avista Corp. 645,633
16,857 Black Hills Corp. 542,290
147,655 CenterPoint Energy, Inc. 3,052,029
96,968 CMS Energy Corp. 2,278,748
106,002 Consolidated Edison, Inc. 6,592,264
63,271 DTE Energy Co. 3,753,868
35,701 Integrys Energy Group, Inc. 2,030,316
95,203 NiSource, Inc. 2,356,274
13,874 NorthWestern Corp. 509,176
156,870 PG&E Corp. 7,101,505
45,136 SCANA Corp. 2,159,306
75,007 Sempra Energy 5,166,482
93,212 TECO Energy, Inc. 1,683,409
35,882 Vectren Corp. 1,059,237
------------
40,811,575
------------
OIL, GAS & CONSUMABLE FUELS
-- 6.7%
558,824 ConocoPhillips 31,227,085
243,598 Spectra Energy Corp. 7,078,958
------------
38,306,043
------------
PERSONAL PRODUCTS -- 0.7%
235,105 Avon Products, Inc. 3,811,052
------------
PHARMACEUTICALS -- 26.5%
639,496 Bristol-Myers Squibb Co. 22,989,881
433,251 Eli Lilly & Co. 18,590,801
846,997 Johnson & Johnson 57,223,117
1,246,015 Merck & Co., Inc. 52,021,126
------------
150,824,925
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.4%
77,537 Microchip Technology, Inc. 2,564,924
------------
SOFTWARE -- 0.6%
134,224 CA, Inc. 3,636,128
------------
THRIFTS & MORTGAGE FINANCE
-- 1.5%
246,790 Hudson City Bancorp, Inc. 1,572,052
337,645 New York Community Bancorp, Inc. 4,230,692
188,483 People's United Financial, Inc. 2,188,288
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
THRIFTS & MORTGAGE FINANCE
-- (CONTINUED)
19,385 Provident Financial Services, Inc. $ 297,560
------------
8,288,592
------------
TOBACCO -- 0.1%
9,478 Universal Corp. 439,116
------------
TRADING COMPANIES &
DISTRIBUTORS -- 0.1%
17,392 Tal International Group, Inc. 582,458
------------
TOTAL INVESTMENTS -- 99.9% 568,717,094
(Cost $523,963,353) (a)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 397,238
------------
NET ASSETS -- 100.0% $569,114,332
============
(a) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $47,241,222 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $2,487,481.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $568,717,094 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
Page 48 See Notes to Financial Statements
FIRST TRUST US IPO INDEX FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 0.4%
1,720 Huntington Ingalls Industries, Inc.
(a) $ 69,213
------------
AIRLINES -- 0.3%
2,517 Spirit Airlines, Inc. (a) 48,981
------------
AUTO COMPONENTS -- 2.3%
6,309 Allison Transmission Holdings, Inc. 110,786
11,418 Delphi Automotive PLC (a) 291,159
------------
401,945
------------
AUTOMOBILES -- 6.7%
54,469 General Motors Co. (a) 1,074,128
3,658 Tesla Motors, Inc. (a) 114,459
------------
1,188,587
------------
BEVERAGES -- 1.8%
7,369 Dr. Pepper Snapple Group, Inc. 322,394
------------
BIOTECHNOLOGY -- 0.3%
3,730 Ironwood Pharmaceuticals, Inc.,
Class A (a) 51,399
------------
BUILDING PRODUCTS -- 0.7%
5,553 Fortune Brands Home & Security,
Inc. (a) 123,665
------------
CAPITAL MARKETS -- 1.2%
4,394 Apollo Global Management LLC,
Class A 54,486
1,611 Financial Engines, Inc. (a) 34,556
3,837 LPL Financial Holdings, Inc. 129,575
------------
218,617
------------
CHEMICALS -- 0.3%
4,835 PetroLogistics LP (a) 52,025
------------
COMMERCIAL BANKS -- 0.9%
4,524 First Republic Bank (a) 152,006
------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.5%
4,745 KAR Auction Services, Inc. (a) 81,567
------------
COMMUNICATIONS EQUIPMENT
-- 0.3%
3,196 Ubiquiti Networks, Inc. (a) 45,543
------------
COMPUTERS & PERIPHERALS -- 0.4%
3,245 Fusion-io, Inc. (a) 67,788
------------
DIVERSIFIED CONSUMER SERVICES
-- 0.2%
4,353 Education Management Corp. (a) 30,253
------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.5%
3,042 CBOE Holdings, Inc. 84,203
------------
ELECTRICAL EQUIPMENT -- 1.8%
4,122 Babcock & Wilcox (The) Co. (a) 100,989
2,364 Generac Holdings, Inc. 56,878
6,168 Sensata Technologies Holding N.V.
(a) 165,179
------------
323,046
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
FOOD & STAPLES RETAILING -- 0.5%
1,672 Fresh Market (The), Inc. (a) $ 89,669
------------
FOOD PRODUCTS -- 3.4%
7,092 Mead Johnson Nutrition Co. 570,977
1,197 Post Holdings, Inc. (a) 36,808
------------
607,785
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 1.1%
7,719 CareFusion Corp. (a) 198,224
------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.2%
15,264 HCA Holdings, Inc. 464,484
4,976 Select Medical Holdings Corp. (a) 50,307
2,288 Team Health Holdings, Inc. (a) 55,118
------------
569,909
------------
HOTELS, RESTAURANTS & LEISURE
-- 2.5%
4,349 Caesars Entertainment Corp. (a) 49,579
4,185 Dunkin' Brands Group, Inc. 143,713
5,758 Hyatt Hotels Corp., Class A (a) 213,967
1,192 Marriott Vacations Worldwide
Corp. (a) 36,928
------------
444,187
------------
INSURANCE -- 1.0%
3,693 First American Financial Corp. 62,633
2,082 Primerica, Inc. 55,652
4,142 Symetra Financial Corp. 52,272
------------
170,557
------------
INTERNET & CATALOG RETAIL -- 3.4%
22,464 Groupon, Inc. (a) 238,792
2,859 HomeAway, Inc. (a) 62,155
2,005 HSN, Inc. 80,902
4,668 TripAdvisor, Inc. (a) 208,613
------------
590,462
------------
INTERNET SOFTWARE & SERVICES
-- 2.5%
1,482 Ancestry.com, Inc. (a) 40,799
3,253 AOL, Inc. (a) 91,344
3,478 Bankrate, Inc. (a) 63,960
1,729 Cornerstone OnDemand, Inc. (a) 41,168
4,702 Rackspace Hosting, Inc. (a) 206,606
------------
443,877
------------
IT SERVICES -- 14.7%
4,943 Booz Allen Hamilton Holding Corp. 75,529
2,887 FleetCor Technologies, Inc. (a) 101,160
5,868 Teradata Corp. (a) 422,555
7,423 Vantiv, Inc., Class A (a) 172,882
14,703 Visa, Inc., Class A 1,817,732
------------
2,589,858
------------
MACHINERY -- 1.4%
807 Proto Labs, Inc. (a) 23,209
3,149 Rexnord Corp. (a) 63,106
See Notes to Financial Statements Page 49
FIRST TRUST US IPO INDEX FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
MACHINERY --(CONTINUED)
6,450 Xylem, Inc. $ 162,347
------------
248,662
------------
MEDIA -- 3.1%
2,495 AMC Networks, Inc., Class A (a) 88,697
2,597 Madison Square Garden (The) Co.,
Class A (a) 97,232
5,787 Pandora Media, Inc. (a) 62,905
5,286 Scripps Networks Interactive,
Class A 300,562
------------
549,396
------------
METALS & MINING -- 0.6%
3,494 Molycorp, Inc. (a) 75,295
2,435 SunCoke Energy, Inc. (a) 35,673
------------
110,968
------------
MULTILINE RETAIL -- 3.6%
11,772 Dollar General Corp. (a) 640,279
------------
OIL, GAS & CONSUMABLE FUELS
-- 19.6%
2,123 Cloud Peak Energy, Inc. (a) 35,900
14,118 Cobalt International Energy, Inc.
(a) 331,773
35,850 Kinder Morgan, Inc. 1,155,087
13,574 Kosmos Energy Ltd. (a) 149,993
4,458 Laredo Petroleum Holdings, Inc. (a) 92,726
11,852 Marathon Petroleum Corp. 532,392
3,238 Oasis Petroleum, Inc. (a) 78,295
21,750 Phillips 66 (a) 722,970
6,205 QEP Resources, Inc. 185,964
1,473 Targa Resources Corp. 62,897
6,912 WPX Energy, Inc. (a) 111,836
------------
3,459,833
------------
PROFESSIONAL SERVICES -- 3.5%
12,550 Nielsen Holdings N.V. (a) 329,061
5,777 Verisk Analytics, Inc., Class A (a) 284,575
------------
613,636
------------
REAL ESTATE INVESTMENT TRUSTS
-- 0.3%
4,040 CYS Investments, Inc. 55,631
------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 0.7%
1,320 Howard Hughes (The) Corp. (a) 81,365
1,003 Zillow, Inc., Class A (a) 38,746
------------
120,111
------------
ROAD & RAIL -- 0.5%
1,754 RailAmerica, Inc. (a) 42,447
4,854 Swift Transportation Co. (a) 45,870
------------
88,317
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.7%
8,581 Freescale Semiconductor Holdings I
Ltd. (a) $ 87,955
8,757 NXP Semiconductors N.V. (a) 203,600
------------
291,555
------------
SOFTWARE -- 4.2%
5,469 Fortinet, Inc. (a) 126,990
2,442 NetSuite, Inc. (a) 133,748
2,957 QLIK Technologies, Inc. (a) 65,409
2,573 Solarwinds, Inc. (a) 112,080
3,219 Splunk, Inc. (a) 90,454
2,665 SS&C Technologies Holdings, Inc. (a) 66,625
25,625 Zynga, Inc., Class A (a) 139,400
------------
734,706
------------
SPECIALTY RETAIL -- 1.7%
3,096 Express, Inc. (a) 56,254
1,518 Francesca's Holdings Corp. (a) 41,001
3,705 GNC Holdings, Inc., Class A 145,236
1,024 Vitamin Shoppe, Inc. (a) 56,249
------------
298,740
------------
TEXTILES, APPAREL & LUXURY
GOODS -- 1.6%
6,702 Michael Kors Holdings Ltd. (a) 280,412
------------
THRIFTS & MORTGAGE FINANCE
-- 1.0%
3,269 BankUnited, Inc. 77,083
3,937 EverBank Financial Corp. (a) 42,795
3,015 Nationstar Mortgage Holdings,
Inc. (a) 64,883
------------
184,761
------------
TOBACCO -- 3.4%
4,540 Lorillard, Inc. 599,053
------------
TRADING COMPANIES &
DISTRIBUTORS -- 0.8%
3,505 Air Lease Corp. (a) 67,962
3,530 MRC Global, Inc. (a) 75,118
------------
143,080
------------
TRANSPORTATION INFRASTRUCTURE
-- 0.2%
3,020 Wesco Aircraft Holdings, Inc. (a) 38,445
------------
WATER UTILITIES -- 1.2%
6,130 American Water Works Co., Inc. 210,136
------------
TOTAL INVESTMENTS -- 100.0% 17,633,481
(Cost $16,200,078) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 1,269
------------
NET ASSETS -- 100.0% $ 17,634,750
============
Page 50 See Notes to Financial Statements
FIRST TRUST US IPO INDEX FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
(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, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $2,487,046 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $1,053,643.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $17,633,481 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
See Notes to Financial Statements Page 51
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
AIR FREIGHT & LOGISTICS -- 2.0%
14,338 C.H. Robinson Worldwide, Inc. $ 839,203
21,267 Expeditors International of
Washington, Inc. 824,096
------------
1,663,299
------------
BEVERAGES -- 0.9%
10,677 Monster Beverage Corp. (a) 760,202
------------
BIOTECHNOLOGY -- 6.0%
8,999 Alexion Pharmaceuticals, Inc. (a) 893,601
11,778 Amgen, Inc. 860,265
5,997 Biogen Idec, Inc. (a) 865,847
12,691 Celgene Corp. (a) 814,254
16,696 Gilead Sciences, Inc. (a) 856,171
14,843 Vertex Pharmaceuticals, Inc. (a) 830,021
------------
5,120,159
------------
CHEMICALS -- 1.0%
11,711 Sigma-Aldrich Corp. 865,794
------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.0%
9,566 Stericycle, Inc. (a) 876,915
------------
COMMUNICATIONS EQUIPMENT
-- 3.6%
49,102 Cisco Systems, Inc. 843,081
8,219 F5 Networks, Inc. (a) 818,284
14,861 QUALCOMM, Inc. 827,461
77,103 Research In Motion Ltd. (a) (b) 569,791
------------
3,058,617
------------
COMPUTERS & PERIPHERALS -- 5.0%
1,459 Apple, Inc. (a) 852,056
68,264 Dell, Inc. (a) 854,665
27,323 NetApp, Inc. (a) 869,418
22,786 SanDisk Corp. (a) 831,233
35,623 Seagate Technology PLC 880,957
------------
4,288,329
------------
DIVERSIFIED CONSUMER SERVICES
-- 1.1%
25,355 Apollo Group, Inc., Class A (a) 917,597
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.0%
131,195 Flextronics International Ltd. (a) 813,409
------------
FOOD & STAPLES RETAILING -- 2.0%
9,183 Costco Wholesale Corp. 872,385
8,888 Whole Foods Market, Inc. 847,204
------------
1,719,589
------------
FOOD PRODUCTS -- 1.1%
42,364 Green Mountain Coffee Roasters,
Inc. (a) (b) 922,688
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.0%
22,230 DENTSPLY International, Inc. 840,516
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- (CONTINUED)
1,580 Intuitive Surgical, Inc. (a) $ 874,988
------------
1,715,504
------------
HEALTH CARE PROVIDERS &
SERVICES -- 2.0%
15,453 Express Scripts Holding Co. (a) 862,741
10,789 Henry Schein, Inc. (a) 846,829
------------
1,709,570
------------
HEALTH CARE TECHNOLOGY -- 1.0%
10,161 Cerner Corp. (a) 839,908
------------
HOTELS, RESTAURANTS & LEISURE
-- 3.0%
49,016 Ctrip.com International Ltd.,
ADR (a) 821,508
15,981 Starbucks Corp. 852,107
8,436 Wynn Resorts Ltd. 874,982
------------
2,548,597
------------
HOUSEHOLD DURABLES -- 1.0%
22,225 Garmin Ltd. 850,995
------------
INTERNET & CATALOG RETAIL -- 5.1%
3,845 Amazon.com, Inc. (a) 878,006
16,776 Expedia, Inc. 806,422
51,292 Liberty Interactive Corp., Class A
(a) 912,485
12,762 Netflix, Inc. (a) 873,814
1,273 priceline.com, Inc. (a) 845,934
------------
4,316,661
------------
INTERNET SOFTWARE & SERVICES
-- 6.0%
26,960 Akamai Technologies, Inc. (a) 855,980
7,034 Baidu, Inc., ADR (a) 808,769
20,645 eBay, Inc. (a) 867,297
1,487 Google, Inc., Class A (a) 862,564
19,835 VeriSign, Inc. (a) 864,211
54,664 Yahoo!, Inc. (a) 865,331
------------
5,124,152
------------
IT SERVICES -- 4.9%
15,256 Automatic Data Processing, Inc. 849,149
13,879 Cognizant Technology Solutions
Corp., Class A (a) 832,740
11,848 Fiserv, Inc. (a) 855,663
18,659 Infosys Ltd., ADR 840,775
26,211 Paychex, Inc. 823,287
------------
4,201,614
------------
LEISURE EQUIPMENT & PRODUCTS
-- 1.0%
25,911 Mattel, Inc. 840,553
------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.1%
19,673 Life Technologies Corp. (a) 885,088
------------
Page 52 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
MACHINERY -- 1.0%
21,311 PACCAR, Inc. $ 835,178
------------
MEDIA -- 6.2%
27,007 Comcast Corp., Class A 863,414
18,709 DIRECTV, Class A (a) 913,373
41,836 News Corp., Class A 932,525
449,010 Sirius XM Radio, Inc. (a) 830,669
17,614 Viacom, Inc., Class B 828,210
37,285 Virgin Media, Inc. 909,381
------------
5,277,572
------------
METALS & MINING -- 1.0%
9,058 Randgold Resources Ltd., ADR 815,311
------------
MULTILINE RETAIL -- 2.1%
15,220 Dollar Tree, Inc. (a) 818,836
16,438 Sears Holdings Corp. (a) (b) 981,349
------------
1,800,185
------------
PHARMACEUTICALS -- 3.0%
39,606 Mylan, Inc. (a) 846,380
7,522 Perrigo Co. 887,070
46,621 Warner Chilcott PLC, Class A (a) 835,448
------------
2,568,898
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 15.2%
25,401 Altera Corp. 859,570
76,401 Applied Materials, Inc. 875,555
24,645 Avago Technologies Ltd. 884,756
24,494 Broadcom Corp., Class A 827,897
30,711 Intel Corp. 818,448
17,380 KLA-Tencor Corp. 855,965
22,236 Lam Research Corp. (a) 839,187
28,110 Linear Technology Corp. 880,686
72,886 Marvell Technology Group Ltd. 822,154
32,557 Maxim Integrated Products, Inc. 834,761
25,851 Microchip Technology, Inc. 855,151
142,555 Micron Technology, Inc. (a) 899,522
68,319 NVIDIA Corp. (a) 944,169
30,138 Texas Instruments, Inc. 864,659
25,796 Xilinx, Inc. 865,972
------------
12,928,452
------------
SOFTWARE -- 13.1%
73,396 Activision Blizzard, Inc. 880,018
25,923 Adobe Systems, Inc. (a) 839,128
25,162 Autodesk, Inc. (a) 880,418
19,188 BMC Software, Inc. (a) 818,944
31,914 CA, Inc. 864,550
16,663 Check Point Software Technologies
Ltd. (a) 826,318
10,480 Citrix Systems, Inc. (a) 879,691
67,495 Electronic Arts, Inc. (a) 833,563
14,397 Intuit, Inc. 854,462
27,970 Microsoft Corp. 855,602
38,428 Nuance Communications, Inc. (a) 915,355
30,312 Oracle Corp. 900,267
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
SOFTWARE -- (CONTINUED)
56,886 Symantec Corp. (a) $ 831,105
------------
11,179,421
------------
SPECIALTY RETAIL -- 3.6%
11,554 Bed Bath & Beyond, Inc. (a) 714,037
8,477 O'Reilly Automotive, Inc. (a) 710,118
12,607 Ross Stores, Inc. 787,559
66,270 Staples, Inc. 864,824
------------
3,076,538
------------
TEXTILES, APPAREL & LUXURY
GOODS -- 1.0%
11,122 Fossil, Inc. (a) 851,278
------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.0%
21,203 Fastenal Co. 854,693
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 1.0%
30,489 Vodafone Group PLC, ADR 859,180
------------
TOTAL COMMON STOCKS -- 100.0% 85,085,946
(Cost $89,105,595) ------------
INVESTMENTS OF COLLATERAL FOR
SECURITIES LOANED -- 2.1%
MONEY MARKET FUND -- 1.1%
892,170 Goldman Sachs Financial Square
Government Fund, 0.05% (c) 892,170
(Cost $892,170) ------------
PRINCIPAL
VALUE
---------
REPURCHASE AGREEMENT -- 1.0%
$ 884,950 JP Morgan Chase & Co., 0.03%
(c), dated 06/29/12, due 07/02/12,
with a maturity value of $884,950.
Collateralized by U.S. Treasury
Bill, interest rate of 0.00%, due
02/07/13. The market value of the
collateral including accrued
interest was $921,614. 884,950
(Cost $884,950) ------------
TOTAL INVESTMENTS OF COLLATERAL FOR
SECURITIES LOANED - 2.1% 1,777,120
(Cost $1,777,120) ------------
TOTAL INVESTMENTS -- 102.1% 86,863,066
(Cost $90,882,715) (d)
NET OTHER ASSETS AND
LIABILITIES -- (2.1)% (1,773,468)
------------
NET ASSETS -- 100.0% $ 85,089,598
============
See Notes to Financial Statements Page 53
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
(a) Non-income producing security.
(b) All or a portion of this security is on loan. (See Note 2C - Securities
Lending in the Notes to Financial Statements). The aggregate market value
of such securities is $1,739,918 and the total market value of the
collateral held by the Fund is $1,777,120.
(c) Interest rate shown reflects yield as of June 30, 2012.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $5,667,434 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $9,687,083.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $ 85,085,946 $ -- $ --
Money Market Fund 892,170 -- --
Repurchase Agreement 884,950 -- --
--------------------------------------
Total Investments $86,863,066 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
Page 54 See Notes to Financial Statements
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
COMMUNICATIONS EQUIPMENT -- 8.2%
180,812 Cisco Systems, Inc. $ 3,104,542
30,265 F5 Networks, Inc. (a) 3,013,184
54,724 QUALCOMM, Inc. 3,047,032
283,920 Research In Motion Ltd. (a) 2,098,169
------------
11,262,927
------------
COMPUTERS & PERIPHERALS -- 11.5%
5,385 Apple, Inc. (a) 3,144,840
251,373 Dell, Inc. (a) 3,147,190
100,615 NetApp, Inc. (a) 3,201,569
83,905 SanDisk Corp. (a) 3,060,854
131,179 Seagate Technology PLC 3,244,057
------------
15,798,510
------------
HEALTH CARE TECHNOLOGY -- 2.2%
37,414 Cerner Corp. (a) 3,092,641
------------
HOUSEHOLD DURABLES -- 2.3%
81,839 Garmin Ltd. 3,133,615
------------
INTERNET SOFTWARE & SERVICES
-- 11.4%
99,290 Akamai Technologies, Inc. (a) 3,152,458
25,900 Baidu, Inc., ADR (a) 2,977,982
5,477 Google, Inc., Class A (a) 3,177,043
73,042 VeriSign, Inc. (a) 3,182,440
201,295 Yahoo!, Inc. (a) 3,186,500
------------
15,676,423
------------
IT SERVICES -- 4.5%
51,106 Cognizant Technology Solutions
Corp., Class A (a) 3,066,360
68,709 Infosys Ltd., ADR 3,096,028
------------
6,162,388
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 34.6%
93,523 Altera Corp. 3,164,818
281,336 Applied Materials, Inc. 3,224,111
90,751 Avago Technologies Ltd. 3,257,961
90,195 Broadcom Corp., Class A 3,048,591
113,090 Intel Corp. 3,013,848
64,001 KLA-Tencor Corp. 3,152,049
81,883 Lam Research Corp. (a) 3,090,264
103,511 Linear Technology Corp. 3,243,000
268,393 Marvell Technology Group Ltd. 3,027,473
119,887 Maxim Integrated Products, Inc. 3,073,903
95,193 Microchip Technology, Inc. 3,148,984
524,938 Micron Technology, Inc. (a) 3,312,359
251,577 NVIDIA Corp. (a) 3,476,794
110,979 Texas Instruments, Inc. 3,183,988
94,989 Xilinx, Inc. 3,188,781
------------
47,606,924
------------
SOFTWARE -- 25.3%
95,458 Adobe Systems, Inc. (a) 3,089,975
92,655 Autodesk, Inc. (a) 3,241,998
70,655 BMC Software, Inc. (a) 3,015,555
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
SOFTWARE -- (CONTINUED)
117,517 CA, Inc. $ 3,183,536
61,359 Check Point Software Technologies
Ltd. (a) 3,042,793
38,591 Citrix Systems, Inc. (a) 3,239,329
53,016 Intuit, Inc. 3,146,500
102,994 Microsoft Corp. 3,150,586
141,505 Nuance Communications, Inc. (a) 3,370,649
111,620 Oracle Corp. 3,315,114
209,477 Symantec Corp. (a) 3,060,459
------------
34,856,494
------------
TOTAL INVESTMENTS -- 100.0% 137,589,922
(Cost $155,850,058) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% (19,130)
------------
NET ASSETS -- 100.0% $137,570,792
============
(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, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $8,686,825 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $26,946,961.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $137,589,922 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
See Notes to Financial Statements Page 55
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.2%
BIOTECHNOLOGY -- 70.6%
123,436 Alexion Pharmaceuticals, Inc. (a) $ 12,257,195
168,153 Amgen, Inc. 12,281,895
531,238 Amylin Pharmaceuticals, Inc. (a) 14,996,849
95,593 Biogen Idec, Inc. (a) 13,801,717
153,854 Celgene Corp. (a) 9,871,273
1,176,380 Dendreon Corp. (a) 8,705,212
238,748 Gilead Sciences, Inc. (a) 12,242,997
847,984 Human Genome Sciences, Inc. (a) 11,134,030
626,595 Incyte Corp. (a) 14,223,706
992,325 InterMune, Inc. (a) 11,858,284
470,838 Myriad Genetics, Inc. (a) 11,191,819
96,307 Regeneron Pharmaceuticals, Inc. (a) 11,000,186
289,398 United Therapeutics Corp. (a) 14,290,473
332,916 Vertex Pharmaceuticals, Inc. (a) 18,616,663
------------
176,472,299
------------
LIFE SCIENCES TOOLS & SERVICES
-- 23.4%
2,844,999 Affymetrix, Inc. (a) 13,343,045
274,418 Illumina, Inc. (a) 11,083,743
263,003 Life Technologies Corp. (a) 11,832,505
732,925 QIAGEN N.V. (a) 12,239,848
2,430,520 Sequenom, Inc. (a) 9,867,911
------------
58,367,052
------------
PHARMACEUTICALS -- 5.2%
1,621,297 Nektar Therapeutics (a) 13,083,867
------------
TOTAL INVESTMENTS -- 99.2% 247,923,218
(Cost $270,480,345) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.8% 2,031,346
------------
NET ASSETS -- 100.0% $249,954,564
============
(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, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $27,063,524 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $49,620,651.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $247,923,218 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
Page 56 See Notes to Financial Statements
FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
CAPITAL MARKETS -- 3.8%
905,013 E*TRADE Financial Corp. (a) $ 7,276,305
561,286 TD Ameritrade Holding Corp. 9,541,862
------------
16,818,167
------------
COMMUNICATIONS EQUIPMENT
-- 5.4%
832,314 Juniper Networks, Inc. (a) 13,575,041
181,982 NETGEAR, Inc. (a) 6,280,199
1,650,067 Sonus Networks, Inc. (a) 3,547,644
------------
23,402,884
------------
HEALTH CARE TECHNOLOGY -- 1.7%
666,918 Allscripts Healthcare Solutions,
Inc. (a) 7,289,414
------------
INTERNET & CATALOG RETAIL
-- 20.4%
149,442 Amazon.com, Inc. (a) 34,125,081
222,576 Expedia, Inc. 10,699,228
143,236 Netflix, Inc. (a) 9,807,369
35,853 priceline.com, Inc. (a) 23,825,035
238,088 TripAdvisor, Inc. (a) 10,640,153
------------
89,096,866
------------
INTERNET SOFTWARE & SERVICES
-- 48.0%
377,301 Akamai Technologies, Inc. (a) 11,979,307
212,567 Constant Contact, Inc. (a) 3,800,698
214,116 DealerTrack Holdings, Inc. (a) 6,447,033
273,665 Digital River, Inc. (a) 4,548,312
635,705 EarthLink, Inc. 4,729,645
647,482 eBay, Inc. (a) 27,200,719
79,994 Equinix, Inc. (a) 14,050,946
72,742 Google, Inc., Class A (a) 42,195,452
194,539 IAC/InterActiveCorp 8,870,978
232,340 j2 Global, Inc. 6,138,423
122,815 LinkedIn Corp., Class A (a) 13,051,550
654,878 Monster Worldwide, Inc. (a) 5,566,463
241,439 Rackspace Hosting, Inc. (a) 10,608,830
859,331 United Online, Inc. 3,626,377
363,269 ValueClick, Inc. (a) 5,953,979
302,274 VeriSign, Inc. (a) 13,170,078
209,956 Vocus, Inc. (a) 3,905,181
235,289 WebMD Health Corp. (a) 4,825,777
1,181,290 Yahoo!, Inc. (a) 18,699,821
------------
209,369,569
------------
IT SERVICES -- 1.2%
525,030 Sapient Corp. 5,287,052
------------
SOFTWARE -- 19.5%
229,426 Ariba, Inc. (a) 10,269,108
260,239 Check Point Software Technologies
Ltd. (a) 12,905,252
133,220 Concur Technologies, Inc. (a) 9,072,282
239,387 Ebix, Inc. 4,775,771
257,834 Quest Software, Inc. (a) 7,180,677
131,626 Salesforce.com, Inc. (a) 18,198,611
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
SOFTWARE -- (CONTINUED)
382,626 TIBCO Software, Inc. (a) $ 11,448,170
186,658 Virnetx Holding Corp. (a) 6,579,694
250,467 Websense, Inc. (a) 4,691,247
------------
85,120,812
------------
TOTAL COMMON STOCKS -- 100.0% 436,384,764
(Cost $453,032,456)
MONEY MARKET FUND -- 0.1%
178,240 Morgan Stanley Institutional
Treasury Money Market Fund -
0.03% (b) 178,240
(Cost $178,240) ------------
TOTAL INVESTMENTS -- 100.1% 436,563,004
(Cost $453,210,696) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (274,505)
------------
NET ASSETS -- 100.0% $436,288,499
============
(a) Non-income producing security.
(b) Interest rate shown reflects yield as of June 30, 2012.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $41,706,697 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $58,354,389.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $436,384,764 $ -- $ --
Money Market Fund 178,240 -- --
--------------------------------------
Total Investments $436,563,004 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
See Notes to Financial Statements Page 57
FIRST TRUST STRATEGIC VALUE INDEX FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 2.1%
9,593 General Dynamics Corp. $ 632,754
------------
BIOTECHNOLOGY -- 1.9%
9,213 Celgene Corp. (a) 591,106
------------
CAPITAL MARKETS -- 3.7%
5,901 Goldman Sachs Group (The), Inc. 565,670
40,200 Morgan Stanley 586,518
------------
1,152,188
------------
CHEMICALS -- 2.2%
3,497 CF Industries Holdings, Inc. 677,509
------------
COMMERCIAL BANKS -- 2.0%
45,975 Fifth Third Bancorp 616,065
------------
COMPUTERS & PERIPHERALS -- 5.1%
40,683 Dell, Inc. (a) 509,351
26,502 Hewlett-Packard Co. 532,955
21,137 Seagate Technology PLC 522,718
------------
1,565,024
------------
DIVERSIFIED FINANCIAL SERVICES
-- 3.6%
20,354 Citigroup, Inc. 557,903
15,406 JPMorgan Chase & Co. 550,457
------------
1,108,360
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.1%
16,719 CenturyLink, Inc. 660,233
------------
ENERGY EQUIPMENT & SERVICES
-- 3.7%
19,772 Halliburton Co. 561,327
9,043 National Oilwell Varco, Inc. 582,731
------------
1,144,058
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.2%
16,948 St. Jude Medical, Inc. 676,395
------------
HEALTH CARE PROVIDERS &
SERVICES -- 8.1%
14,909 Aetna, Inc. 578,022
14,211 Cigna Corp. 625,284
7,180 McKesson Corp. 673,125
9,707 WellPoint, Inc. 619,210
------------
2,495,641
------------
INSURANCE -- 14.1%
8,414 ACE Ltd. 623,730
14,793 Aflac, Inc. 630,034
18,807 Allstate (The) Corp. 659,938
19,592 American International Group,
Inc. (a) 628,707
18,785 MetLife, Inc. 579,517
12,161 Prudential Financial, Inc. 588,957
9,972 Travelers (The) Cos., Inc. 636,613
------------
4,347,496
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
MACHINERY -- 9.5%
6,534 Caterpillar, Inc. $ 554,802
6,005 Cummins, Inc. 581,945
7,971 Deere & Co. 644,615
14,177 Eaton Corp. 561,834
7,555 Parker Hannifin Corp. 580,828
------------
2,924,024
------------
MEDIA -- 2.4%
33,535 News Corp., Class A 747,495
------------
METALS & MINING -- 4.1%
17,670 Freeport-McMoRan Copper &
Gold, Inc. 602,017
13,934 Newmont Mining Corp. 675,938
------------
1,277,955
------------
MULTILINE RETAIL -- 1.9%
12,851 Kohl's Corp. 584,592
------------
OIL, GAS & CONSUMABLE FUELS
-- 14.5%
7,222 Apache Corp. 634,742
6,201 Chevron Corp. 654,205
12,626 Hess Corp. 548,600
24,000 Marathon Oil Corp. 613,680
16,185 Marathon Petroleum Corp. 727,030
7,319 Occidental Petroleum Corp. 627,751
28,026 Valero Energy Corp. 676,828
------------
4,482,836
------------
PHARMACEUTICALS -- 4.4%
15,581 Eli Lilly & Co. 668,581
16,560 Merck & Co., Inc. 691,380
------------
1,359,961
------------
REAL ESTATE INVESTMENT TRUSTS
-- 2.1%
39,339 Annaly Capital Management, Inc. 660,108
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 6.2%
57,021 Applied Materials, Inc. 653,461
18,573 Broadcom Corp., Class A 627,767
23,054 Intel Corp. 614,389
------------
1,895,617
------------
SOFTWARE -- 4.0%
20,762 Microsoft Corp. 635,109
40,657 Symantec Corp. (a) 593,999
------------
1,229,108
------------
TOTAL INVESTMENTS -- 99.9% 30,828,525
(Cost $31,127,622) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 26,988
------------
NET ASSETS -- 100.0% $ 30,855,513
============
Page 58 See Notes to Financial Statements
FIRST TRUST STRATEGIC VALUE INDEX FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
(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, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $2,040,143 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $2,339,240.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $30,828,525 $ -- $ --
======================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
See Notes to Financial Statements Page 59
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 1.6%
553 AAR Corp. $ 7,455
355 Curtiss-Wright Corp. 11,023
181 Esterline Technologies Corp. (a) 11,285
546 Textron, Inc. 13,579
283 Triumph Group, Inc. 15,924
------------
59,266
------------
AIR FREIGHT & LOGISTICS -- 1.3%
599 United Parcel Service, Inc., Class B 47,177
------------
AIRLINES -- 2.3%
4,221 Delta Air Lines, Inc. (a) 46,220
2,093 JetBlue Airways Corp. (a) 11,093
1,054 SkyWest, Inc. 6,882
1,387 US Airways Group, Inc. (a) 18,489
------------
82,684
------------
AUTO COMPONENTS -- 1.0%
711 Federal-Mogul Corp. (a) 7,821
489 Tenneco, Inc. (a) 13,115
314 WABCO Holdings, Inc. (a) 16,620
------------
37,556
------------
BEVERAGES -- 2.1%
715 Anheuser-Busch InBev NV, ADR 56,950
223 Brown-Forman Corp., Class B 21,597
------------
78,547
------------
BIOTECHNOLOGY -- 1.2%
855 Gilead Sciences, Inc. (a) 43,844
------------
CAPITAL MARKETS -- 2.2%
576 AllianceBernstein Holding L.P. (b) 7,309
849 Ameriprise Financial, Inc. 44,369
1,419 Janus Capital Group, Inc. 11,096
949 SEI Investments Co. 18,876
------------
81,650
------------
CHEMICALS -- 3.0%
283 Albemarle Corp. 16,878
1,325 Dow Chemical (The) Co. 41,737
421 H.B. Fuller Co. 12,925
1,374 Huntsman Corp. 17,780
784 Kronos Worldwide, Inc. 12,379
423 OM Group, Inc. (a) 8,037
------------
109,736
------------
COMMERCIAL BANKS -- 2.5%
1,928 First Niagara Financial Group, Inc. 14,749
1,317 Susquehanna Bancshares, Inc. 13,565
6,385 Synovus Financial Corp. 12,642
1,518 Wells Fargo & Co. 50,762
------------
91,718
------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.3%
488 Cintas Corp. 18,842
486 Deluxe Corp. 12,121
1,526 Republic Services, Inc. 40,378
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES
-- (CONTINUED)
1,288 Steelcase, Inc., Class A $ 11,630
------------
82,971
------------
COMPUTERS & PERIPHERALS -- 3.0%
94 Apple, Inc. (a) 54,896
721 Electronics For Imaging, Inc. (a) 11,716
1,754 Seagate Technology PLC 43,377
------------
109,989
------------
CONSTRUCTION & ENGINEERING
-- 0.8%
402 Jacobs Engineering Group, Inc. (a) 15,220
433 URS Corp. 15,103
------------
30,323
------------
CONSUMER FINANCE -- 1.8%
1,631 Discover Financial Services 56,400
385 EZCORP, Inc., Class A (a) 9,032
------------
65,432
------------
CONTAINERS & PACKAGING -- 0.4%
795 Owens-Illinois, Inc. (a) 15,240
------------
DIVERSIFIED CONSUMER SERVICES
-- 0.7%
218 Coinstar, Inc. (a) 14,968
165 ITT Educational Services, Inc. (a) 10,024
------------
24,992
------------
DIVERSIFIED FINANCIAL SERVICES
-- 1.3%
5,699 Bank of America Corp. 46,618
------------
ELECTRIC UTILITIES -- 1.2%
1,961 Duke Energy Corp. 45,221
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.7%
326 Dolby Laboratories, Inc., Class A (a) 13,464
513 Insight Enterprises, Inc. (a) 8,634
744 Jabil Circuit, Inc. 15,125
987 Sanmina-SCI Corp. (a) 8,083
363 Tech Data Corp. (a) 17,486
------------
62,792
------------
ENERGY EQUIPMENT & SERVICES
-- 1.0%
786 Helix Energy Solutions Group,
Inc. (a) 12,898
1,955 RPC, Inc. 23,245
------------
36,143
------------
FOOD & STAPLES RETAILING -- 0.4%
845 Safeway, Inc. 15,337
------------
FOOD PRODUCTS -- 0.5%
808 Smithfield Foods, Inc. (a) 17,477
------------
Page 60 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
HEALTH CARE EQUIPMENT &
SUPPLIES -- 0.7%
495 Greatbatch, Inc. (a) $ 11,241
889 Hologic, Inc. (a) 16,038
------------
27,279
------------
HEALTH CARE PROVIDERS &
SERVICES -- 1.5%
1,007 Aetna, Inc. 39,042
3,214 Tenet Healthcare Corp. (a) 16,841
------------
55,883
------------
HOTELS, RESTAURANTS & LEISURE
-- 3.0%
278 Bally Technologies, Inc. (a) 12,971
678 Brinker International, Inc. 21,608
231 Cracker Barrel Old Country Store,
Inc. 14,507
443 Penn National Gaming, Inc. (a) 19,753
596 Royal Caribbean Cruises Ltd. 15,514
461 Wyndham Worldwide Corp. 24,313
------------
108,666
------------
HOUSEHOLD DURABLES -- 2.2%
890 La-Z-Boy, Inc. (a) 10,938
282 Mohawk Industries, Inc. (a) 19,692
3,640 Sony Corp., ADR 51,834
------------
82,464
------------
INSURANCE -- 5.0%
1,485 Allstate (The) Corp. 52,109
2,105 Genworth Financial, Inc., Class A (a) 11,914
239 Hanover Insurance Group (The), Inc. 9,352
763 Lincoln National Corp. 16,687
689 Protective Life Corp. 20,263
779 Prudential Financial, Inc. 37,727
331 Reinsurance Group of America, Inc. 17,613
391 Torchmark Corp. 19,765
------------
185,430
------------
INTERNET SOFTWARE & SERVICES
-- 0.3%
625 ValueClick, Inc. (a) 10,244
------------
LEISURE EQUIPMENT & PRODUCTS
-- 0.3%
294 Sturm, Ruger & Co., Inc. 11,804
------------
LIFE SCIENCES TOOLS & SERVICES
-- 2.3%
1,043 Agilent Technologies, Inc. 40,927
828 Thermo Fisher Scientific, Inc. 42,982
------------
83,909
------------
MACHINERY -- 7.9%
449 Actuant Corp., Class A 12,195
358 AGCO Corp. (a) 16,371
568 Altra Holdings, Inc. 8,963
381 Cummins, Inc. 36,923
826 Illinois Tool Works, Inc. 43,687
1,210 Ingersoll-Rand PLC 51,038
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
MACHINERY -- (CONTINUED)
815 ITT Corp. $ 14,344
403 Navistar International Corp. (a) 11,433
357 Sauer-Danfoss, Inc. 12,470
613 Stanley Black & Decker, Inc. 39,452
817 Terex Corp. (a) 14,567
353 Timken (The) Co. 16,164
161 Toro (The) Co. 11,800
------------
289,407
------------
MEDIA -- 6.7%
1,539 CBS Corp., Class B 50,448
646 DISH Network Corp., Class A 18,443
1,144 Live Nation Entertainment, Inc. (a) 10,502
395 Scholastic Corp. 11,123
429 Time Warner Cable, Inc. 35,221
1,227 Time Warner, Inc. 47,240
530 Valassis Communications, Inc. (a) 11,528
918 Viacom, Inc., Class B 43,164
47 Washington Post (The) Co., Class B 17,570
------------
245,239
------------
METALS & MINING -- 3.9%
4,469 Alcoa, Inc. 39,104
769 Commercial Metals Co. 9,720
1,035 Nucor Corp. 39,227
1,365 Southern Copper Corp. 43,011
627 United States Steel Corp. 12,916
------------
143,978
------------
MULTILINE RETAIL -- 0.8%
417 Big Lots, Inc. (a) 17,009
833 Fred's, Inc., Class A 12,737
------------
29,746
------------
MULTI-UTILITIES -- 1.4%
724 Sempra Energy 49,869
------------
OIL, GAS & CONSUMABLE FUELS
-- 7.0%
252 Alliance Resource Partners L.P. (b) 14,142
992 BP PLC, ADR 40,216
975 Imperial Oil Ltd. 40,677
1,386 Marathon Oil Corp. 35,440
894 Murphy Oil Corp. 44,959
637 Royal Dutch Shell PLC, ADR 42,953
1,361 Suncor Energy, Inc. 39,401
------------
257,788
------------
PAPER & FOREST PRODUCTS -- 1.1%
1,443 International Paper Co. 41,717
------------
PHARMACEUTICALS -- 3.9%
974 AstraZeneca PLC, ADR 43,586
1,171 Eli Lilly & Co. 50,248
343 Novo Nordisk A/S, ADR 49,852
------------
143,686
------------
See Notes to Financial Statements Page 61
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
PROFESSIONAL SERVICES -- 0.6%
750 Kelly Services, Inc., Class A $ 9,682
421 Stantec, Inc. 12,041
------------
21,723
------------
ROAD & RAIL -- 1.1%
823 Heartland Express, Inc. 11,777
1,252 Hertz Global Holdings, Inc. (a) 16,026
482 Werner Enterprises, Inc. 11,515
------------
39,318
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 5.2%
2,609 Advanced Micro Devices, Inc. (a) 14,950
1,165 Analog Devices, Inc. 43,885
594 Cirrus Logic, Inc. (a) 17,749
1,294 GT Advanced Technologies, Inc. (a) 6,832
2,832 Integrated Device Technology,
Inc. (a) 15,916
1,724 Intel Corp. 45,945
2,274 MEMC Electronic Materials, Inc. (a) 4,935
1,379 Texas Instruments, Inc. 39,563
------------
189,775
------------
SOFTWARE -- 1.3%
1,507 Microsoft Corp. 46,099
------------
SPECIALTY RETAIL -- 8.0%
231 Advance Auto Parts, Inc. 15,759
1,021 Ascena Retail Group, Inc. (a) 19,011
241 DSW, Inc., Class A 13,110
682 Foot Locker, Inc. 20,856
2,131 Gap (The), Inc. 58,304
328 Men's Wearhouse (The), Inc. 9,230
4,101 Office Depot, Inc. (a) 8,858
342 PetSmart, Inc. 23,318
734 Pier 1 Imports, Inc. 12,060
885 Ross Stores, Inc. 55,286
1,337 TJX (The) Cos., Inc. 57,397
------------
293,189
------------
TOBACCO -- 2.7%
374 Lorillard, Inc. 49,349
571 Philip Morris International, Inc. 49,826
------------
99,175
------------
TRADING COMPANIES &
DISTRIBUTORS -- 0.4%
457 United Rentals, Inc. (a) 15,556
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.4%
684 Telephone & Data Systems, Inc. 14,562
------------
TOTAL COMMON STOCKS -- 100.0% 3,671,219
(Cost $3,784,455)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
MONEY MARKET FUND -- 1.2%
45,167 Morgan Stanley Institutional
Treasury Money Market Fund -
0.03% (c) $ 45,167
(Cost $45,167) ------------
TOTAL INVESTMENTS -- 101.2% 3,716,386
(Cost $3,829,622) (d)
NET OTHER ASSETS AND
LIABILITIES -- (1.2)% (43,730)
------------
NET ASSETS -- 100.0% $ 3,672,656
============
(a) Non-income producing security.
(b) Master Limited Partnership ("MLP").
(c) Interest rate shown reflects yield as of June 30, 2012.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $213,708 and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over value was $326,944.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $3,671,219 $ -- $ --
Money Market Fund 45,167 -- --
-------------------------------------
Total Investments $3,716,386 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
Page 62 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 5.2%
36,057 Boeing (The) Co. $ 2,679,035
41,173 General Dynamics Corp. 2,715,771
47,688 Honeywell International, Inc. 2,662,898
35,665 L-3 Communications Holdings, Inc. 2,639,567
30,407 Lockheed Martin Corp. 2,647,841
41,669 Northrop Grumman Corp. 2,658,065
47,257 Raytheon Co. 2,674,274
53,808 Rockwell Collins, Inc. 2,655,425
34,736 United Technologies Corp. 2,623,610
------------
23,956,486
------------
AIR FREIGHT & LOGISTICS -- 1.1%
45,471 C.H. Robinson Worldwide, Inc. 2,661,417
33,514 United Parcel Service, Inc., Class B 2,639,563
------------
5,300,980
------------
BEVERAGES -- 2.3%
34,262 Coca-Cola (The) Co. 2,678,946
25,971 Diageo PLC, ADR 2,676,831
65,469 Molson Coors Brewing Co., Class B 2,724,165
37,339 PepsiCo, Inc. 2,638,374
------------
10,718,316
------------
CAPITAL MARKETS -- 0.6%
206,263 KKR & Co. L.P. (a) 2,658,730
------------
CHEMICALS -- 1.7%
33,323 Air Products and Chemicals, Inc. 2,690,166
51,975 E.I. du Pont de Nemours & Co. 2,628,375
25,282 PPG Industries, Inc. 2,682,926
------------
8,001,467
------------
COMMERCIAL BANKS -- 4.6%
48,109 Bank of Montreal 2,658,503
50,271 Bank of Nova Scotia 2,603,535
46,125 BOK Financial Corp. 2,684,475
36,681 Canadian Imperial Bank of
Commerce 2,580,142
69,331 Commerce Bancshares, Inc. 2,627,645
46,209 Cullen/Frost Bankers, Inc. 2,656,555
51,691 Royal Bank of Canada 2,647,613
33,824 Toronto-Dominion (The) Bank 2,646,052
------------
21,104,520
------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.1%
96,490 Avery Dennison Corp. 2,638,037
79,658 Waste Management, Inc. 2,660,577
------------
5,298,614
------------
COMMUNICATIONS EQUIPMENT
-- 0.6%
62,928 Harris Corp. 2,633,537
------------
COMPUTERS & PERIPHERALS -- 1.1%
70,905 Diebold, Inc. 2,617,103
131,106 Hewlett-Packard Co. 2,636,542
------------
5,253,645
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
CONTAINERS & PACKAGING -- 1.1%
81,353 Bemis Co., Inc. $ 2,549,603
84,381 Sonoco Products Co. 2,544,087
------------
5,093,690
------------
DISTRIBUTORS -- 0.6%
42,442 Genuine Parts Co. 2,557,131
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.7%
73,299 AT&T, Inc. 2,613,842
67,150 CenturyLink, Inc. 2,651,754
58,690 Verizon Communications, Inc. 2,608,184
------------
7,873,780
------------
ELECTRIC UTILITIES -- 9.6%
62,897 ALLETE, Inc. 2,629,095
62,483 Cleco Corp. 2,613,664
111,722 Duke Energy Corp. 2,576,309
77,559 El Paso Electric Co. 2,571,856
38,546 Entergy Corp. 2,616,888
70,032 Exelon Corp. 2,634,604
53,527 FirstEnergy Corp. 2,632,993
55,403 MGE Energy, Inc. 2,620,562
38,287 NextEra Energy, Inc. 2,634,528
68,151 Northeast Utilities 2,644,940
50,748 OGE Energy Corp. 2,628,239
50,589 Pinnacle West Capital Corp. 2,617,475
98,078 Portland General Electric Co. 2,614,760
78 Progress Energy, Inc. 4,693
55,390 Southern (The) Co. 2,564,557
73,090 UIL Holdings Corp. 2,621,007
87,225 Westar Energy, Inc. 2,612,389
91,985 Xcel Energy, Inc. 2,613,294
------------
44,451,853
------------
ELECTRICAL EQUIPMENT -- 0.6%
57,556 Emerson Electric Co. 2,680,959
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.6%
108,551 Molex, Inc. 2,598,711
------------
FOOD & STAPLES RETAILING -- 2.9%
149,203 Safeway, Inc. 2,708,035
88,952 Sysco Corp. 2,651,659
88,368 Walgreen Co. 2,613,926
37,574 Wal-Mart Stores, Inc. 2,619,659
58,987 Weis Markets, Inc. 2,626,101
------------
13,219,380
------------
FOOD PRODUCTS -- 6.1%
88,982 Archer-Daniels-Midland Co. 2,626,749
80,057 Campbell Soup Co. 2,672,303
101,618 ConAgra Foods, Inc. 2,634,955
135,441 DE Master Blenders 1753 N.V. (b) 1,527,182
66,661 General Mills, Inc. 2,569,115
48,127 H. J. Heinz Co. 2,617,146
100,150 Hillshire Brands Co. 2,903,354
34,553 J.M. Smucker (The) Co. 2,609,442
52,572 Kellogg Co. 2,593,377
See Notes to Financial Statements Page 63
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
FOOD PRODUCTS -- (CONTINUED)
66,351 Kraft Foods, Inc., Class A $ 2,562,476
79,387 Unilever PLC, ADR 2,677,723
------------
27,993,822
------------
GAS UTILITIES -- 5.7%
67,327 AGL Resources, Inc. 2,608,921
76,017 Atmos Energy Corp. 2,665,916
57,986 National Fuel Gas Co. 2,724,182
60,707 New Jersey Resources Corp. 2,647,432
53,560 Northwest Natural Gas Co. 2,549,456
79,534 Piedmont Natural Gas Co., Inc. 2,560,200
125,825 Questar Corp. 2,624,710
51,103 South Jersey Industries, Inc. 2,604,720
90,747 UGI Corp. 2,670,684
64,399 WGL Holdings, Inc. 2,559,860
------------
26,216,081
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.3%
49,850 Baxter International, Inc. 2,649,528
35,074 Becton, Dickinson & Co. 2,621,781
68,718 Medtronic, Inc. 2,661,448
67,398 St. Jude Medical, Inc. 2,689,854
------------
10,622,611
------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.9%
62,990 Cardinal Health, Inc. 2,645,580
102,023 Lincare Holdings, Inc. 3,470,822
86,606 Owens & Minor, Inc. 2,652,742
------------
8,769,144
------------
HOTELS, RESTAURANTS & LEISURE
-- 0.6%
29,072 McDonald's Corp. 2,573,744
------------
HOUSEHOLD DURABLES -- 0.6%
131,441 Leggett & Platt, Inc. 2,777,348
------------
HOUSEHOLD PRODUCTS -- 2.3%
36,302 Clorox (The) Co. 2,630,443
25,794 Colgate-Palmolive Co. 2,685,155
31,627 Kimberly-Clark Corp. 2,649,394
43,194 Procter & Gamble (The) Co. 2,645,633
------------
10,610,625
------------
INDUSTRIAL CONGLOMERATES -- 0.6%
29,840 3M Co. 2,673,664
------------
INSURANCE -- 5.7%
36,219 ACE Ltd. 2,684,914
76,608 Allstate (The) Corp. 2,688,175
74,710 Arthur J. Gallagher & Co. 2,620,079
75,369 Assurant, Inc. 2,625,856
36,550 Chubb (The) Corp. 2,661,571
70,013 Cincinnati Financial Corp. 2,665,395
36,828 Erie Indemnity Co., Class A 2,637,253
68,921 Hanover Insurance Group (The), Inc. 2,696,879
61,670 Mercury General Corp. 2,569,789
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
INSURANCE -- (CONTINUED)
41,220 Travelers (The) Cos., Inc. $ 2,631,485
------------
26,481,396
------------
IT SERVICES -- 2.9%
45,382 Accenture PLC, Class A 2,727,004
47,529 Automatic Data Processing, Inc. 2,645,464
109,807 Computer Sciences Corp. 2,725,410
80,712 Paychex, Inc. 2,535,164
218,584 SAIC, Inc. 2,649,238
------------
13,282,280
------------
LEISURE EQUIPMENT & PRODUCTS
-- 1.1%
77,256 Hasbro, Inc. 2,616,661
80,967 Mattel, Inc. 2,626,569
------------
5,243,230
------------
MACHINERY -- 2.3%
34,429 Deere & Co. 2,784,273
48,964 Dover Corp. 2,624,960
69,070 Eaton Corp. 2,737,244
49,020 Illinois Tool Works, Inc. 2,592,668
------------
10,739,145
------------
MEDIA -- 1.7%
55,378 Omnicom Group, Inc. 2,691,371
93,633 Thomson Reuters Corp. 2,663,859
7,059 Washington Post (The) Co., Class B 2,638,795
------------
7,994,025
------------
MULTILINE RETAIL -- 1.2%
59,397 Kohl's Corp. 2,701,970
44,763 Target Corp. 2,604,759
------------
5,306,729
------------
MULTI-UTILITIES -- 6.8%
57,414 Alliant Energy Corp. 2,616,356
98,342 Avista Corp. 2,625,731
41,832 Consolidated Edison, Inc. 2,601,532
48,027 Dominion Resources, Inc. 2,593,458
45,944 Integrys Energy Group, Inc. 2,612,835
123,104 MDU Resources Group, Inc. 2,660,278
81,044 Public Service Enterprise Group, Inc. 2,633,930
55,212 SCANA Corp. 2,641,342
38,460 Sempra Energy 2,649,125
144,083 TECO Energy, Inc. 2,602,139
87,763 Vectren Corp. 2,590,764
66,179 Wisconsin Energy Corp. 2,618,703
------------
31,446,193
------------
OFFICE ELECTRONICS -- 0.6%
65,269 CANON, Inc., ADR 2,606,844
------------
OIL, GAS & CONSUMABLE FUELS
-- 5.9%
25,856 Chevron Corp. 2,727,808
48,372 ConocoPhillips 2,703,027
65,924 Enbridge, Inc. 2,631,686
31,533 Exxon Mobil Corp. 2,698,279
Page 64 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
OIL, GAS & CONSUMABLE FUELS
-- (CONTINUED)
108,139 Marathon Oil Corp. $ 2,765,114
58,276 Murphy Oil Corp. 2,930,700
33,128 Occidental Petroleum Corp. 2,841,389
39,540 Royal Dutch Shell PLC, ADR 2,666,182
60,477 Total S.A., ADR 2,718,441
62,621 TransCanada Corp. 2,623,820
------------
27,306,446
------------
PHARMACEUTICALS -- 5.7%
41,240 Abbott Laboratories 2,658,743
59,981 AstraZeneca PLC, ADR 2,684,150
75,060 Bristol-Myers Squibb Co. 2,698,407
61,774 Eli Lilly & Co. 2,650,722
55,862 GlaxoSmithKline PLC, ADR 2,545,631
38,523 Johnson & Johnson 2,602,614
64,351 Merck & Co., Inc. 2,686,654
47,318 Novartis AG, ADR 2,645,076
114,010 Pfizer, Inc. 2,622,230
71,598 Sanofi, ADR 2,704,973
------------
26,499,200
------------
REAL ESTATE INVESTMENT TRUSTS
-- 0.6%
18,597 Public Storage 2,685,593
------------
ROAD & RAIL -- 0.6%
37,268 Norfolk Southern Corp. 2,674,724
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.9%
69,313 Analog Devices, Inc. 2,611,021
234,597 Applied Materials, Inc. 2,688,482
98,379 Intel Corp. 2,621,800
95,022 Texas Instruments, Inc. 2,726,181
81,172 Xilinx, Inc. 2,724,944
------------
13,372,428
------------
SOFTWARE -- 1.1%
98,797 CA, Inc. 2,676,411
85,851 Microsoft Corp. 2,626,182
------------
5,302,593
------------
SPECIALTY RETAIL -- 1.2%
95,128 Lowe's Cos., Inc. 2,705,440
209,298 Staples, Inc. 2,731,339
------------
5,436,779
------------
TOBACCO -- 2.9%
75,972 Altria Group, Inc. 2,624,833
25,892 British American Tobacco PLC, ADR 2,644,091
19,902 Lorillard, Inc. 2,626,069
30,502 Philip Morris International, Inc. 2,661,604
59,164 Reynolds American, Inc. 2,654,689
------------
13,211,286
------------
WATER UTILITIES -- 0.6%
105,208 Aqua America, Inc. 2,625,992
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.6%
91,952 Vodafone Group PLC, ADR $ 2,591,207
------------
TOTAL INVESTMENTS -- 99.9% 460,444,928
(Cost $420,389,364) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 579,198
------------
NET ASSETS -- 100.0% $461,024,126
============
(a) Master Limited Partnership ("MLP").
(b) Non-income producing security.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $44,957,576 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $4,902,012.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $460,444,928 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
See Notes to Financial Statements Page 65
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (a) -- 100.0%
AIR FREIGHT & LOGISTICS -- 3.5%
11,606 C.H. Robinson Worldwide, Inc. $ 679,299
17,215 Expeditors International of
Washington, Inc. 667,081
------------
1,346,380
------------
BEVERAGES -- 1.6%
8,642 Monster Beverage Corp. (b) 615,310
------------
BIOTECHNOLOGY -- 10.7%
7,285 Alexion Pharmaceuticals, Inc. (b) 723,401
9,533 Amgen, Inc. 696,290
4,853 Biogen Idec, Inc. (b) 700,676
10,269 Celgene Corp. (b) 658,859
13,509 Gilead Sciences, Inc. (b) 692,742
12,012 Vertex Pharmaceuticals, Inc. (b) 671,711
------------
4,143,679
------------
CHEMICALS -- 1.8%
9,476 Sigma-Aldrich Corp. 700,561
------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.8%
7,745 Stericycle, Inc. (b) 709,984
------------
DIVERSIFIED CONSUMER SERVICES
-- 1.9%
20,521 Apollo Group, Inc., Class A (b) 742,655
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.7%
106,172 Flextronics International Ltd. (b) 658,266
------------
FOOD & STAPLES RETAILING -- 3.6%
7,430 Costco Wholesale Corp. 705,850
7,193 Whole Foods Market, Inc. 685,637
------------
1,391,487
------------
FOOD PRODUCTS -- 1.9%
34,285 Green Mountain Coffee Roasters,
Inc. (b) (c) 746,727
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 3.6%
17,990 DENTSPLY International, Inc. 680,202
1,280 Intuitive Surgical, Inc. (b) 708,851
------------
1,389,053
------------
HEALTH CARE PROVIDERS &
SERVICES -- 3.6%
12,506 Express Scripts Holding Co. (b) 698,210
8,735 Henry Schein, Inc. (b) 685,610
------------
1,383,820
------------
HOTELS, RESTAURANTS & LEISURE
-- 5.3%
39,668 Ctrip.com International Ltd.,
ADR (b) 664,836
12,934 Starbucks Corp. 689,641
6,828 Wynn Resorts Ltd. 708,200
------------
2,062,677
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
INTERNET & CATALOG RETAIL -- 9.0%
3,110 Amazon.com, Inc. (b) $ 710,168
13,574 Expedia, Inc. 652,502
41,511 Liberty Interactive Corp.,
Class A (b) 738,481
10,329 Netflix, Inc. (b) 707,227
1,029 priceline.com, Inc. (b) 683,791
------------
3,492,169
------------
INTERNET SOFTWARE & SERVICES
-- 1.8%
16,706 eBay, Inc. (b) 701,819
------------
IT SERVICES -- 5.3%
12,345 Automatic Data Processing, Inc. 687,123
9,591 Fiserv, Inc. (b) 692,662
21,216 Paychex, Inc. 666,394
------------
2,046,179
------------
LEISURE EQUIPMENT & PRODUCTS
-- 1.8%
20,966 Mattel, Inc. 680,137
------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.9%
15,918 Life Technologies Corp. (b) 716,151
------------
MACHINERY -- 1.8%
17,249 PACCAR, Inc. 675,988
------------
MEDIA -- 11.1%
21,854 Comcast Corp., Class A 698,672
15,142 DIRECTV, Class A (b) 739,232
33,858 News Corp., Class A 754,695
363,376 Sirius XM Radio, Inc. (b) 672,246
14,255 Viacom, Inc., Class B 670,270
30,171 Virgin Media, Inc. 735,871
------------
4,270,986
------------
METALS & MINING -- 1.7%
7,329 Randgold Resources Ltd., ADR 659,683
------------
MULTILINE RETAIL -- 3.8%
12,322 Dollar Tree, Inc. (b) 662,924
13,302 Sears Holdings Corp. (b) (c) 794,129
------------
1,457,053
------------
PHARMACEUTICALS -- 5.4%
32,051 Mylan, Inc. (b) 684,930
6,084 Perrigo Co. 717,486
37,728 Warner Chilcott PLC, Class A (b) 676,086
------------
2,078,502
------------
SOFTWARE -- 3.6%
59,399 Activision Blizzard, Inc. 712,194
54,622 Electronic Arts, Inc. (b) 674,582
------------
1,386,776
------------
SPECIALTY RETAIL -- 6.4%
9,348 Bed Bath & Beyond, Inc. (b) 577,706
6,861 O'Reilly Automotive, Inc. (b) 574,746
10,201 Ross Stores, Inc. 637,256
Page 66 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (CONTINUED)
SPECIALTY RETAIL -- (CONTINUED)
53,631 Staples, Inc. $ 699,885
------------
2,489,593
------------
TEXTILES, APPAREL & LUXURY
GOODS -- 1.8%
9,003 Fossil, Inc. (b) 689,090
------------
TRADING COMPANIES &
DISTRIBUTORS -- 1.8%
17,160 Fastenal Co. 691,720
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 1.8%
24,676 Vodafone Group PLC, ADR 695,370
------------
TOTAL COMMON STOCKS -- 100.0% 38,621,815
(Cost $36,951,595) ------------
MONEY MARKET FUND -- 0.1%
57,101 Morgan Stanley Institutional
Treasury Money Market Fund -
0.03% (d) 57,101
(Cost $57,101) ------------
INVESTMENTS OF COLLATERAL FOR
SECURITIES LOANED -- 2.6%
MONEY MARKET FUND -- 1.3%
489,058 Goldman Sachs Financial Square
Government Fund, 0.05% (d) 489,058
(Cost $489,058) ------------
PRINCIPAL
VALUE
---------
REPURCHASE AGREEMENT -- 1.3%
$ 485,100 JP Morgan Chase & Co., 0.03% (d),
dated 06/29/12, due 07/02/12,
with a maturity value of $485,100.
Collateralized by U.S. Treasury
Bill, interest rate of 0.00%, due
02/07/13. The market value of the
collateral including accrued
interest was $505,198. 485,100
(Cost $485,100) ------------
TOTAL INVESTMENTS OF COLLATERAL FOR
SECURITIES LOANED - 2.6% 974,158
(Cost $974,158) ------------
TOTAL INVESTMENTS -- 102.7% 39,653,074
(Cost $37,982,854) (e)
NET OTHER ASSETS AND
LIABILITIES -- (2.7)% (1,025,621)
------------
NET ASSETS -- 100.0% $ 38,627,453
============
(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 2C - Securities
Lending in the Notes to Financial Statements). The aggregate market value
of such securities is $954,674 and the total market value of the
collateral held by the Fund is $974,158.
(d) Interest rate shown reflects yield as of June 30, 2012.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $3,800,625 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $2,130,405.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $38,621,815 $ -- $ --
Money Market Fund 546,159 -- --
Repurchase Agreement 485,100 -- --
-------------------------------------
Total Investments $39,653,074 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
See Notes to Financial Statements Page 67
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 6.3%
39,072 Hexcel Corp. (a) $ 1,007,667
------------
AUTOMOBILES -- 7.9%
39,921 Tesla Motors, Inc. (a) (b) 1,249,128
------------
BUILDING PRODUCTS -- 0.8%
10,736 Ameresco, Inc., Class A (a) 128,081
------------
CHEMICALS -- 0.8%
13,923 Zoltek Cos., Inc. (a) (b) 125,725
------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.5%
11,575 EnerNOC, Inc. (a) 83,803
------------
ELECTRICAL EQUIPMENT -- 2.3%
59,518 A123 Systems, Inc. (a) (b) 74,993
21,044 American Superconductor
Corp. (a) (b) 98,907
112,155 Capstone Turbine Corp. (a) 113,276
75,545 FuelCell Energy, Inc. (a) 76,300
------------
363,476
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 16.6%
54,120 AVX Corp. 578,543
17,266 Echelon Corp. (a) 60,086
17,521 Elster Group, SE, ADR (a) 355,676
16,194 Itron, Inc. (a) 667,840
11,804 Maxwell Technologies, Inc. (a) 77,434
49,427 Power-One, Inc. (a) 223,410
18,806 Universal Display Corp. (a) (b) 675,888
------------
2,638,877
------------
INDEPENDENT POWER PRODUCERS &
ENERGY TRADERS -- 2.5%
18,411 Ormat Technologies, Inc. 393,811
------------
MACHINERY -- 2.5%
10,830 ESCO Technologies, Inc. 394,645
------------
OIL, GAS & CONSUMABLE FUELS
-- 3.6%
22,824 Amyris, Inc. (a) (b) 101,110
10,844 Gevo, Inc. (a) (b) 53,895
11,989 Green Plains Renewable Energy,
Inc. (a) 74,812
24,468 Solazyme, Inc. (a) (b) 340,105
------------
569,922
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 56.1%
16,101 Advanced Energy Industries, Inc. (a) 216,075
17,537 Canadian Solar, Inc. (a) 63,133
45,576 Cree, Inc. (a) (b) 1,169,936
44,575 Fairchild Semiconductor
International, Inc. (a) 628,507
35,165 First Solar, Inc. (a) (b) 529,585
47,959 GT Advanced Technologies, Inc. (a) 253,223
28,039 International Rectifier Corp. (a) 560,500
12,666 IXYS Corp. (a) 141,479
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- (CONTINUED)
54,192 JA Solar Holdings Co., Ltd.,
ADR (a) (b) $ 55,818
36,316 LDK Solar Co., Ltd., ADR (a) (b) 69,363
40,581 Linear Technology Corp. 1,271,403
93,542 MEMC Electronic Materials, Inc. (a) 202,986
33,342 Microsemi Corp. (a) 616,494
13,458 O2Micro International Ltd., ADR (a) 59,350
174,728 ON Semiconductor Corp. (a) 1,240,569
11,502 Power Integrations, Inc. 429,025
35,070 Renesola Ltd., ADR (a) (b) 44,188
9,132 Rubicon Technology, Inc. (a) (b) 93,146
16,868 STR Holdings, Inc. (a) (b) 76,918
47,959 SunPower Corp., Class A (a) (b) 230,683
52,509 Suntech Power Holdings Co., Ltd.,
ADR (a) (b) 98,717
29,774 Trina Solar Ltd., ADR (a) (b) 189,363
15,748 Veeco Instruments, Inc. (a) 541,101
44,147 Yingli Green Energy Holding Co.,
Ltd., ADR (a) (b) 122,729
------------
8,904,291
------------
TOTAL COMMON STOCKS -- 99.9% 15,859,426
(Cost $25,365,641) ------------
INVESTMENTS OF COLLATERAL FOR
SECURITIES LOANED -- 19.2%
MONEY MARKET FUND -- 9.6%
1,530,938 Goldman Sachs Financial Square
Government Fund, 0.05% (c) 1,530,938
(Cost $1,530,938) ------------
PRINCIPAL
VALUE
---------
REPURCHASE AGREEMENT -- 9.6%
$1,518,549 JP Morgan Chase & Co., 0.03% (c),
dated 06/29/12, due 07/02/12,
with a maturity value of
$1,518,550. Collateralized by
U.S. Treasury Bill, interest rate
of 0.00%, due 02/07/13. The
market value of the collateral
including accrued interest was
$1,581,463. 1,518,549
------------
(Cost $1,518,549)
TOTAL INVESTMENTS OF COLLATERAL FOR
SECURITIES LOANED - 19.2% 3,049,487
(Cost $3,049,487) ------------
TOTAL INVESTMENTS -- 119.1% 18,908,913
(Cost $28,415,128) (d)
NET OTHER ASSETS AND
LIABILITIES -- (19.1)% (3,036,320)
------------
NET ASSETS -- 100.0% $ 15,872,593
============
Page 68 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
(a) Non-income producing security.
(b) All or a portion of this security is on loan. (See Note 2C - Securities
Lending in the Notes to Financial Statements). The aggregate market value
of such securities is $2,959,436 and the total market value of the
collateral held by the Fund is $3,049,487.
(c) Interest rate shown reflects yield as of June 30, 2012.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $1,711,174 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $11,217,389.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $15,859,426 $ -- $ --
Money Market Fund 1,530,938 -- --
Repurchase Agreement 1,518,549 -- --
-------------------------------------
Total Investments $18,908,913 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
See Notes to Financial Statements Page 69
FIRST TRUST S&P REIT INDEX FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (a) -- 99.8%
DIVERSIFIED REITS -- 7.4%
30,013 American Assets Trust, Inc. $ 727,815
142,432 American Realty Capital Trust, Inc. 1,555,358
60,008 CapLease, Inc. 249,033
93,594 Cousins Properties, Inc. 725,354
239,474 Duke Realty Corp. 3,505,899
9,837 Gladstone Commercial Corp. 163,884
77,447 Investors Real Estate Trust 611,831
105,459 Liberty Property Trust 3,885,110
9,968 One Liberty Properties, Inc. 187,697
16,771 PS Business Parks, Inc. 1,135,732
166,849 Vornado Realty Trust 14,011,979
59,596 Washington Real Estate Investment
Trust 1,695,506
26,440 Winthrop Realty Trust 321,510
------------
28,776,708
------------
INDUSTRIAL REITS -- 4.8%
221,362 DCT Industrial Trust, Inc. 1,394,581
25,403 EastGroup Properties, Inc. 1,353,980
79,663 First Industrial Realty Trust, Inc.
(b) 1,005,347
45,808 First Potomac Realty Trust 539,160
36,164 Monmouth Real Estate Investment
Corp., Class A 423,842
413,791 Prologis, Inc. 13,750,275
12,365 STAG Industrial, Inc. 180,282
9,765 Terreno Realty Corp. 147,549
------------
18,795,016
------------
OFFICE REITS -- 15.0%
55,800 Alexandria Real Estate Equities, Inc. 4,057,776
138,554 BioMed Realty Trust, Inc. 2,588,189
134,649 Boston Properties, Inc. 14,591,912
128,742 Brandywine Realty Trust 1,588,676
75,247 CommonWealth REIT 1,438,723
18,866 Coresite Realty Corp. 487,120
64,748 Corporate Office Properties Trust 1,522,226
98,076 Digital Realty Trust, Inc. 7,362,565
125,496 Douglas Emmett, Inc. 2,898,958
56,832 DuPont Fabros Technology, Inc. 1,623,122
64,851 Franklin Street Properties Corp. 686,124
31,717 Government Properties Income Trust 717,439
66,441 Highwoods Properties, Inc. 2,235,740
30,262 Hudson Pacific Properties, Inc. 526,861
61,331 Kilroy Realty Corp. 2,969,034
121,741 Lexington Realty Trust 1,031,146
78,928 Mack-Cali Realty Corp. 2,294,437
18,132 Mission West Properties, Inc. 156,298
38,318 MPG Office Trust, Inc. (b) 77,019
18,169 Parkway Properties, Inc. 207,853
155,154 Piedmont Office Realty Trust, Inc.,
Class A 2,670,200
80,560 SL Green Realty Corp. 6,464,134
------------
58,195,552
------------
RESIDENTIAL REITS -- 17.9%
67,138 American Campus Communities, Inc. 3,019,867
127,043 Apartment Investment &
Management Co., Class A 3,433,972
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
RESIDENTIAL REITS -- (CONTINUED)
38,175 Associated Estates Realty Corp. $ 570,716
85,699 AvalonBay Communities, Inc. 12,124,695
68,934 BRE Properties, Inc. 3,448,079
72,160 Camden Property Trust 4,883,067
27,529 Campus Crest Communities, Inc. 286,026
79,022 Colonial Properties Trust 1,749,547
85,168 Education Realty Trust, Inc. 943,661
37,117 Equity Lifestyle Properties, Inc. 2,559,960
270,191 Equity Residential 16,849,111
31,650 Essex Property Trust, Inc. 4,871,568
43,736 Home Properties, Inc. 2,683,641
36,793 Mid-America Apartment
Communities, Inc. 2,510,754
48,266 Post Properties, Inc. 2,362,621
23,788 Sun Communities, Inc. 1,052,381
225,095 UDR, Inc. 5,816,455
12,224 UMH Properties, Inc. 131,164
------------
69,297,285
------------
RETAIL REITS -- 27.8%
39,442 Acadia Realty Trust 914,266
10,278 Agree Realty Corp. 227,452
1,836 Alexander's, Inc. 791,518
133,531 CBL & Associates Properties, Inc. 2,609,196
51,076 Cedar Realty Trust, Inc. 257,934
200,414 DDR Corp. 2,934,061
53,637 Equity One, Inc. 1,137,104
30,128 Excel Trust, Inc. 360,331
57,444 Federal Realty Investment Trust 5,979,346
531,052 General Growth Properties, Inc. 9,606,731
24,312 Getty Realty Corp. 465,575
125,338 Glimcher Realty Trust 1,280,954
69,646 Inland Real Estate Corp. 583,634
365,734 Kimco Realty Corp. 6,959,918
57,512 Kite Realty Group Trust 286,985
119,142 Macerich (The) Co. 7,035,335
96,183 National Retail Properties, Inc. 2,721,017
50,289 Pennsylvania Real Estate
Investment Trust 753,329
41,297 Ramco-Gershenson Properties Trust 519,103
119,903 Realty Income Corp. 5,008,348
80,826 Regency Centers Corp. 3,844,893
45,249 Retail Opportunity Investments Corp. 545,703
20,496 Rouse Properties, Inc. (b) 277,721
10,691 Saul Centers, Inc. 458,323
272,414 Simon Property Group, Inc. 42,403,963
83,252 Tanger Factory Outlet Centers, Inc. 2,668,227
52,821 Taubman Centers, Inc. 4,075,668
20,897 Urstadt Biddle Properties, Inc.,
Class A 413,134
108,925 Weingarten Realty Investors 2,869,085
------------
107,988,854
------------
SPECIALIZED REITS -- 26.9%
61,283 Ashford Hospitality Trust 516,616
12,501 Chatham Lodging Trust 178,514
28,874 Chesapeake Lodging Trust 497,210
110,708 CubeSmart 1,291,962
150,919 DiamondRock Hospitality Co. 1,539,374
Page 70 See Notes to Financial Statements
FIRST TRUST S&P REIT INDEX FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
SPECIALIZED REITS -- (CONTINUED)
42,083 Entertainment Properties Trust $ 1,730,032
93,346 Extra Space Storage, Inc. 2,856,388
111,651 FelCor Lodging Trust, Inc. (b) 524,760
377,036 HCP, Inc. 16,646,139
192,173 Health Care REIT, Inc. 11,203,686
70,070 Healthcare Realty Trust, Inc. 1,670,469
158,654 Hersha Hospitality Trust 837,693
111,047 Hospitality Properties Trust 2,750,634
645,671 Host Hotels & Resorts, Inc. 10,214,515
76,967 LaSalle Hotel Properties 2,242,818
27,333 LTC Properties, Inc. 991,641
121,849 Medical Properties Trust, Inc. 1,172,187
24,970 National Health Investors, Inc. 1,271,472
95,091 OMEGA Healthcare Investors, Inc. 2,139,548
47,171 Pebblebrook Hotel Trust 1,099,556
127,928 Public Storage 18,474,083
25,879 RLJ Lodging Trust 469,186
146,200 Senior Housing Properties Trust 3,263,184
26,062 Sovran Self Storage, Inc. 1,305,446
161,559 Strategic Hotels & Resorts, Inc. (b) 1,043,671
27,452 Summit Hotel Properties, Inc. 229,773
107,050 Sunstone Hotel Investors, Inc. (b) 1,176,480
11,388 Universal Health Realty Income
Trust 472,944
259,770 Ventas, Inc. 16,396,682
------------
104,206,663
------------
TOTAL COMMON STOCKS -- 99.8% 387,260,078
(Cost $363,730,970)
MONEY MARKET FUND -- 1.1%
4,101,997 Morgan Stanley Institutional
Treasury Money Market Fund -
0.03% (c) 4,101,997
(Cost $4,101,997) ------------
TOTAL INVESTMENTS -- 100.9% 391,362,075
(Cost $367,832,967) (d)
NET OTHER ASSETS AND
LIABILITIES -- (0.9)% (3,305,193)
------------
NET ASSETS -- 100.0% $388,056,882
============
(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, 2012.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $29,797,594 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $6,268,486.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $387,260,078 $ -- $ --
Money Market Fund 4,101,997 -- --
-------------------------------------
Total Investments $391,362,075 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
See Notes to Financial Statements Page 71
FIRST TRUST ISE WATER INDEX FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.8%
CHEMICALS -- 5.6%
32,160 Ashland, Inc. $ 2,229,009
89,012 Calgon Carbon Corp. (a) 1,265,751
------------
3,494,760
------------
COMMERCIAL SERVICES & SUPPLIES
-- 3.5%
83,486 Tetra Tech, Inc. (a) 2,177,315
------------
CONSTRUCTION & ENGINEERING
-- 9.7%
74,122 AECOM Technology Corp. (a) 1,219,307
46,614 Aegion Corp. (a) 833,924
62,378 Layne Christensen Co. (a) 1,290,601
81,871 Northwest Pipe Co. (a) 1,986,190
20,835 URS Corp. 726,725
------------
6,056,747
------------
ELECTRICAL EQUIPMENT -- 5.8%
25,718 Emerson Electric Co. 1,197,944
24,248 Franklin Electric Co., Inc. 1,239,800
11,989 Roper Industries, Inc. 1,181,876
------------
3,619,620
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 5.4%
66,784 Badger Meter, Inc. 2,507,739
20,755 Itron, Inc. (a) 855,936
------------
3,363,675
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 1.4%
8,765 IDEXX Laboratories, Inc. (a) 842,580
------------
INDUSTRIAL CONGLOMERATES -- 3.4%
40,795 Danaher Corp. 2,124,604
------------
LIFE SCIENCES TOOLS & SERVICES
-- 2.9%
45,484 Agilent Technologies, Inc. 1,784,792
------------
MACHINERY -- 37.9%
31,385 Crane Co. 1,141,786
1,106,704 Energy Recovery, Inc. (a) 2,656,090
724,605 Flow International Corp. (a) 2,282,506
7,140 Flowserve Corp. 819,315
45,936 IDEX Corp. 1,790,585
59,503 ITT Corp. 1,047,253
41,186 Lindsay Corp. 2,672,971
28,062 Mueller Industries, Inc. 1,195,161
600,387 Mueller Water Products, Inc.,
Class A 2,077,339
33,997 Pall Corp. 1,863,376
60,325 Pentair, Inc. 2,309,241
10,461 Valmont Industries, Inc. 1,265,467
71,881 Watts Water Technologies, Inc.,
Class A 2,396,512
------------
23,517,602
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
MULTI-UTILITIES -- 3.9%
193,051 Veolia Environment, ADR $ 2,436,304
------------
WATER UTILITIES -- 20.3%
19,933 American States Water Co. 788,948
69,975 American Water Works Co., Inc. 2,398,743
99,815 Aqua America, Inc. 2,491,383
134,541 California Water Service Group 2,484,972
33,569 Cia de Saneamento Basico do
Estado de Sao Paulo, ADR 2,546,544
225,427 Consolidated Water Co., Ltd. 1,868,790
------------
12,579,380
------------
TOTAL COMMON STOCKS -- 99.8% 61,997,379
(Cost $58,447,780)
MONEY MARKET FUND -- 0.7%
421,584 Morgan Stanley Institutional
Treasury Money Market Fund -
0.03% (b) 421,584
(Cost $421,584) ------------
TOTAL INVESTMENTS -- 100.5% 62,418,963
(Cost $58,869,364) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.5)% (325,734)
------------
NET ASSETS -- 100.0% $ 62,093,229
============
(a) Non-income producing security.
(b) Interest rate shown reflects yield as of June 30, 2012.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $6,416,161 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $2,866,562.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $61,997,379 $ -- $ --
Money Market Fund 421,584 -- --
-------------------------------------
Total Investments $62,418,963 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
Page 72 See Notes to Financial Statements
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.9%
GAS UTILITIES -- 3.1%
592,588 Questar Corp. $ 12,361,386
------------
OIL, GAS & CONSUMABLE FUELS
-- 96.8%
187,968 Anadarko Petroleum Corp. 12,443,481
144,628 Apache Corp. 12,711,355
689,648 Bill Barrett Corp. (a) 14,772,260
363,744 Cabot Oil & Gas Corp. 14,331,513
378,904 Cenovus Energy, Inc. 12,049,147
653,588 Chesapeake Energy Corp. 12,156,737
242,815 Cimarex Energy Co. 13,383,963
830,442 Comstock Resources, Inc. (a) 13,635,857
204,393 Devon Energy Corp. 11,852,750
591,419 EnCana Corp. 12,319,258
127,822 EOG Resources, Inc. 11,518,040
259,963 EQT Corp. 13,941,816
1,846,135 EXCO Resources, Inc. 14,012,165
1,524,762 Forest Oil Corp. (a) 11,176,505
2,884,587 Magnum Hunter Resources Corp. (a) 12,057,574
410,954 Newfield Exploration Co. (a) 12,045,062
141,374 Noble Energy, Inc. 11,991,343
2,226,324 Penn Virginia Corp. 16,341,218
2,316,579 PetroQuest Energy, Inc. (a) 11,582,895
456,442 QEP Resources, Inc. 13,679,567
3,351,923 Quicksilver Resources, Inc. (a) 18,167,423
212,012 Range Resources Corp. 13,117,182
1,892,726 SandRidge Energy, Inc. (a) 12,662,337
243,406 SM Energy Co. 11,953,669
442,965 Southwestern Energy Co. (a) 14,143,872
527,236 Statoil ASA, ADR 12,579,851
506,538 Stone Energy Corp. (a) 12,835,673
1,138,508 Talisman Energy, Inc. 13,047,302
643,771 Ultra Petroleum Corp. (a) 14,851,797
------------
381,361,612
------------
TOTAL COMMON STOCKS -- 99.9% 393,722,998
(Cost $481,162,810)
MONEY MARKET FUND -- 0.4%
1,395,506 Morgan Stanley Institutional
Treasury Money Market Fund -
0.03% (b) 1,395,506
(Cost $1,395,506) ------------
TOTAL INVESTMENTS -- 100.3% 395,118,504
(Cost $482,558,316) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.3)% (1,236,682)
------------
NET ASSETS -- 100.0% $393,881,822
============
(a) Non-income producing security.
(b) Interest rate shown reflects yield as of June 30, 2012.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $14,510,101 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $101,949,913.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $393,722,998 $ -- $ --
Money Market Fund 1,395,506 -- --
-------------------------------------
Total Investments $395,118,504 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
See Notes to Financial Statements Page 73
FIRST TRUST ISE CHINDIA INDEX FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 99.4%
AUTOMOBILES -- 3.9%
120,549 Tata Motors Ltd., ADR $ 2,647,256
------------
COMMERCIAL BANKS -- 14.5%
151,175 HDFC Bank Ltd., ADR 4,928,305
151,475 ICICI Bank Ltd., ADR 4,909,305
------------
9,837,610
------------
DIVERSIFIED CONSUMER SERVICES
-- 0.6%
17,278 New Oriental Education &
Technology Group, Inc., ADR (a) 423,311
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.3%
10,797 China Telecom Corp., Ltd., ADR 475,284
35,053 China Unicom (Hong Kong) Ltd.,
ADR 439,915
------------
915,199
------------
FOOD PRODUCTS -- 0.7%
51,403 Zhongpin, Inc. (a) 473,422
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 0.7%
15,717 Mindray Medical International Ltd.,
ADR 476,068
------------
HOTELS, RESTAURANTS & LEISURE
-- 5.1%
25,454 Ctrip.com International Ltd.,
ADR (a) 426,609
21,678 Home Inns & Hotels Management,
Inc., ADR (a) (b) 491,224
218,420 Melco Crown Entertainment Ltd.,
ADR (a) 2,516,198
------------
3,434,031
------------
INDEPENDENT POWER PRODUCERS &
ENERGY TRADERS -- 0.8%
17,141 Huaneng Power International, Inc.,
ADR (b) 510,802
------------
INSURANCE -- 0.8%
13,775 China Life Insurance Co., Ltd., ADR 543,975
------------
INTERNET & CATALOG RETAIL -- 2.9%
86,357 E-Commerce China Dangdang,
Inc., ADR (a) (b) 575,137
86,500 MakeMyTrip Ltd. (a) 1,421,195
------------
1,996,332
------------
INTERNET SOFTWARE & SERVICES
-- 16.0%
47,544 21Vianet Group, Inc., ADR (a) (b) 544,379
37,685 Baidu, Inc., ADR (a) 4,333,021
20,858 NetEase, Inc., ADR (a) 1,227,493
24,751 Qihoo 360 Technology Co. Ltd.,
ADR (a) (b) 427,945
105,783 Renren, Inc., ADR (a) (b) 477,082
24,305 SINA Corp. (a) (b) 1,259,242
10,480 Sohu.com, Inc. (a) 467,827
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
INTERNET SOFTWARE & SERVICES
-- (CONTINUED)
29,229 SouFun Holdings Ltd., ADR (b) $ 462,111
13,387 Tudou Holdings Ltd. ADR (a) 448,732
55,065 Youku, Inc., ADR (a) (b) 1,193,809
------------
10,841,641
------------
IT SERVICES -- 10.9%
104,803 Infosys Ltd., ADR (b) 4,722,423
293,517 Wipro Ltd., ADR (b) 2,694,486
------------
7,416,909
------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.7%
33,052 WuXi PharmaTech Cayman, Inc.,
ADR (a) 466,694
------------
MARINE -- 0.7%
29,014 Seaspan Corp. (b) 503,393
------------
MEDIA -- 0.8%
23,158 Focus Media Holding Ltd., ADR (b) 543,750
------------
METALS & MINING -- 4.8%
46,611 Aluminum Corp. of China Ltd.,
ADR (a) (b) 508,060
358,340 Sterlite Industries (India) Ltd.,
ADR 2,716,217
------------
3,224,277
------------
OIL, GAS & CONSUMABLE FUELS
-- 9.5%
5,208 China Petroleum & Chemical Corp.,
ADR 464,501
14,468 CNOOC Ltd., ADR 2,911,685
20,169 PetroChina Co., Ltd., ADR 2,604,625
30,862 Yanzhou Coal Mining Co., Ltd.,
ADR (b) 472,497
------------
6,453,308
------------
PHARMACEUTICALS -- 2.0%
44,854 Dr. Reddy's Laboratories Ltd., ADR 1,331,267
------------
PROFESSIONAL SERVICES -- 0.7%
10,395 51job, Inc., ADR (a) 473,492
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.9%
24,932 Spreadtrum Communications, Inc.,
ADR (b) 440,050
293,188 Suntech Power Holdings Co., Ltd.,
ADR (a) (b) 551,193
74,797 Trina Solar Ltd., ADR (a) (b) 475,709
179,911 Yingli Green Energy Holding Co.,
Ltd., ADR (a) (b) 500,153
------------
1,967,105
------------
SOFTWARE -- 4.4%
44,893 AsiaInfo-Linkage, Inc. (a) (b) 529,288
22,425 Changyou.com Ltd., ADR (a) 473,392
103,478 Giant Interactive Group, Inc.,
ADR (b) 499,799
65,967 NQ Mobile, Inc. ADR (a) (b) 540,270
Page 74 See Notes to Financial Statements
FIRST TRUST ISE CHINDIA INDEX FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
SOFTWARE -- (CONTINUED)
48,915 Perfect World Co. Ltd., ADR $ 490,128
117,565 Shanda Games Ltd., ADR 470,260
------------
3,003,137
------------
TEXTILES, APPAREL & LUXURY
GOODS -- 7.4%
119,143 Michael Kors Holdings Ltd. (a) 4,984,943
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 7.3%
90,597 China Mobile Ltd., ADR 4,952,938
------------
TOTAL COMMON STOCKS -- 99.4% 67,420,860
(Cost $75,804,098) ------------
INVESTMENTS OF COLLATERAL FOR
SECURITIES LOANED -- 17.1%
MONEY MARKET FUND -- 8.6%
5,820,869 Goldman Sachs Financial Square
Government Fund, 0.05% (c) 5,820,869
(Cost $5,820,869) ------------
PRINCIPAL
VALUE
---------
REPURCHASE AGREEMENT -- 8.5%
$5,773,763 JP Morgan Chase & Co., 0.03% (c),
dated 06/29/12, due 07/02/12, with
a maturity value of $5,773,768.
Collateralized by U.S. Treasury
Bill, interest rate of 0.00%, due
02/07/13. The market value of the
collateral including accrued
interest was $6,012,971. 5,773,763
(Cost $5,773,763) ------------
TOTAL INVESTMENTS OF COLLATERAL FOR
SECURITIES LOANED - 17.1% 11,594,632
(Cost $11,594,632) ------------
TOTAL INVESTMENTS -- 116.5% 79,015,492
(Cost $87,398,730) (d)
NET OTHER ASSETS AND
LIABILITIES -- (16.5)% (11,212,206)
------------
NET ASSETS -- 100.0% $ 67,803,286
============
(a) Non-income producing security.
(b) All or a portion of this security is on loan. (See Note 2C - Securities
Lending in the Notes to Financial Statements). The aggregate market value
of such securities is $11,252,327 and the total market value of the
collateral held by the Fund is $11,594,632.
(c) Interest rate shown reflects yield as of June 30, 2012.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $6,222,206 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $14,605,444.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $67,420,860 $ -- $ --
Money Market Fund 5,820,869 -- --
Repurchase Agreement 5,773,763 -- --
-------------------------------------
Total Investments $79,015,492 $ -- $ --
=====================================
COUNTRY ALLOCATIONS AS A PERCENTAGE OF COMMON STOCKS**:
-----------------------------------------------------------
China 41.7%
India 37.6
Hong Kong 20.7
------
100.0%
======
* See Portfolio of Investments for industry breakout.
** Portfolio securities are categorized based on their country of incorporation.
There were no transfers between levels at June 30, 2012.
See Notes to Financial Statements Page 75
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.1%
AEROSPACE & DEFENSE -- 1.0%
8,675 Triumph Group, Inc. $ 488,142
------------
AIR FREIGHT & LOGISTICS -- 1.0%
26,757 Park-Ohio Holdings Corp. (a) 509,186
------------
AIRLINES -- 4.0%
44,843 Delta Air Lines, Inc. (a) 491,031
74,407 Hawaiian Holdings, Inc. (a) 484,390
91,066 JetBlue Airways Corp. (a) 482,650
37,292 US Airways Group, Inc. (a) 497,102
------------
1,955,173
------------
AUTO COMPONENTS -- 1.9%
37,830 Dana Holding Corp. 484,602
12,087 Magna International, Inc. 476,953
------------
961,555
------------
AUTOMOBILES -- 1.0%
6,198 Toyota Motor Corp., ADR 498,815
------------
BIOTECHNOLOGY -- 1.9%
6,607 Amgen, Inc. 482,575
72,351 PDL BioPharma, Inc. 479,687
------------
962,262
------------
CHEMICALS -- 3.0%
6,981 Ashland, Inc. 483,853
2,568 CF Industries Holdings, Inc. 497,524
37,950 Huntsman Corp. 491,073
------------
1,472,450
------------
COMMERCIAL SERVICES &
SUPPLIES -- 2.1%
19,697 Deluxe Corp. 491,243
8,247 UniFirst Corp. 525,746
------------
1,016,989
------------
COMPUTERS & PERIPHERALS -- 4.0%
825 Apple, Inc. (a) 481,800
13,056 Diebold, Inc. 481,897
22,944 NCR Corp. (a) 521,517
20,280 Seagate Technology PLC 501,524
------------
1,986,738
------------
CONSTRUCTION & ENGINEERING
-- 1.0%
27,458 Dycom Industries, Inc. (a) 510,993
------------
CONSUMER FINANCE -- 1.0%
11,368 Cash America International, Inc. 500,647
------------
CONTAINERS & PACKAGING -- 2.0%
28,437 Myers Industries, Inc. 487,979
25,819 Owens-Illinois, Inc. (a) 494,950
------------
982,929
------------
DIVERSIFIED CONSUMER SERVICES
-- 1.0%
7,213 Coinstar, Inc. (a) 495,245
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.0%
15,153 BT Group PLC, ADR $ 502,777
18,773 tw telecom, Inc. (a) 481,715
------------
984,492
------------
ELECTRICAL EQUIPMENT -- 1.0%
7,817 Regal-Beloit Corp. 486,686
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 2.1%
31,322 Insight Enterprises, Inc. (a) 527,149
10,198 Tech Data Corp. (a) 491,238
------------
1,018,387
------------
ENERGY EQUIPMENT & SERVICES
-- 3.1%
30,753 Helix Energy Solutions Group,
Inc. (a) 504,657
11,992 Helmerich & Payne, Inc. 521,412
7,698 Oil States International, Inc. (a) 509,607
------------
1,535,676
------------
FOOD & STAPLES RETAILING -- 1.0%
20,791 Kroger (The) Co. 482,143
------------
FOOD PRODUCTS -- 1.0%
28,437 Dean Foods Co. (a) 484,282
------------
GAS UTILITIES -- 1.0%
10,871 Southwest Gas Corp. 474,519
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.0%
26,473 Alere, Inc. (a) 514,635
16,064 Hill-Rom Holdings, Inc. 495,575
------------
1,010,210
------------
HEALTH CARE PROVIDERS & SERVICES
-- 2.2%
19,190 Community Health Systems, Inc. (a) 537,896
12,143 Universal Health Services, Inc.,
Class B 524,092
------------
1,061,988
------------
HOTELS, RESTAURANTS & LEISURE
-- 4.0%
7,871 Cracker Barrel Old Country
Store, Inc. 494,299
28,451 Einstein Noah Restaurant Group, Inc. 499,599
10,617 Penn National Gaming, Inc. (a) 473,412
50,942 Pinnacle Entertainment, Inc. (a) 490,062
------------
1,957,372
------------
HOUSEHOLD DURABLES -- 2.0%
14,743 Helen of Troy Ltd. (a) 499,640
11,771 Jarden Corp. 494,618
------------
994,258
------------
INDUSTRIAL CONGLOMERATES -- 1.0%
9,528 Carlisle Cos., Inc. 505,175
------------
Page 76 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
INSURANCE -- 2.0%
11,891 Aflac, Inc. $ 506,437
14,108 Allstate (The) Corp. 495,050
------------
1,001,487
------------
INTERNET & CATALOG RETAIL -- 1.0%
137,130 Orbitz Worldwide, Inc. (a) 500,525
------------
IT SERVICES -- 1.0%
8,978 CACI International, Inc., Class A
(a) 493,970
------------
LIFE SCIENCES TOOLS & SERVICES
-- 3.1%
56,563 Cambrex Corp. (a) 532,258
19,007 PerkinElmer, Inc. 490,381
9,465 Thermo Fisher Scientific, Inc. 491,328
------------
1,513,967
------------
MACHINERY -- 10.4%
11,863 AGCO Corp. (a) 542,495
5,692 Caterpillar, Inc. 483,308
13,086 CNH Global N.V. (a) 508,522
59,262 Commercial Vehicle Group, Inc. (a) 510,838
6,342 Deere & Co. 512,878
50,996 NN, Inc. (a) 520,669
6,339 Parker Hannifin Corp. 487,342
11,200 Timken (The) Co. 512,848
21,719 Titan International, Inc. 532,767
20,690 Trinity Industries, Inc. 516,836
------------
5,128,503
------------
MEDIA -- 7.1%
21,629 Cinemark Holdings, Inc. 494,223
15,553 Comcast Corp., Class A 497,229
10,071 DIRECTV, Class A (a) 491,666
17,470 DISH Network Corp., Class A 498,768
35,150 Regal Entertainment Group, Class A 483,664
56,495 Sinclair Broadcast Group, Inc.,
Class A 511,845
6,129 Time Warner Cable, Inc. 503,191
------------
3,480,586
------------
METALS & MINING -- 2.1%
40,950 Commercial Metals Co. 517,608
10,172 Reliance Steel & Aluminum Co. 513,686
------------
1,031,294
------------
MULTILINE RETAIL -- 2.9%
7,301 Dillard's, Inc., Class A 464,928
31,723 Fred's, Inc., Class A 485,045
13,949 Macy's, Inc. 479,148
------------
1,429,121
------------
OIL, GAS & CONSUMABLE FUELS
-- 2.3%
14,695 Berry Petroleum Co., Class A 582,804
35,049 Denbury Resources, Inc. (a) 529,590
------------
1,112,394
------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
PAPER & FOREST PRODUCTS -- 3.9%
18,594 Neenah Paper, Inc. $ 496,274
29,820 P.H. Glatfelter Co. 488,153
6,953 Schweitzer-Mauduit International,
Inc. 473,778
50,132 Wausau Paper Corp. 487,784
------------
1,945,989
------------
PHARMACEUTICALS -- 2.0%
7,592 Abbott Laboratories 489,456
6,575 Watson Pharmaceuticals, Inc. (a) 486,485
------------
975,941
------------
ROAD & RAIL -- 6.0%
5,697 Canadian National Railway Co. 480,713
13,415 Con-way, Inc. 484,416
22,146 CSX Corp. 495,185
6,863 Norfolk Southern Corp. 492,557
13,736 Ryder System, Inc. 494,633
20,395 Werner Enterprises, Inc. 487,237
------------
2,934,741
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.0%
77,079 LSI Corp. (a) 490,993
------------
SOFTWARE -- 2.0%
18,192 CA, Inc. 492,821
17,091 Oracle Corp. 507,603
------------
1,000,424
------------
SPECIALTY RETAIL -- 2.9%
19,348 ANN, Inc. (a) 493,180
22,146 Penske Automotive Group, Inc. 470,381
18,483 rue21, Inc. (a) 466,511
------------
1,430,072
------------
TRADING COMPANIES &
DISTRIBUTORS -- 2.1%
13,128 GATX Corp. 505,428
14,942 United Rentals, Inc. (a) 508,626
------------
1,014,054
------------
WATER UTILITIES -- 1.0%
14,226 American Water Works Co., Inc. 487,667
------------
TOTAL INVESTMENTS -- 100.1% 49,308,040
(Cost $48,533,989) (b)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (26,131)
------------
NET ASSETS -- 100.0% $ 49,281,909
============
See Notes to Financial Statements Page 77
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
(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, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $2,867,810 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $2,093,759.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $49,308,040 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
Page 78 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2012 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS -- 100.0%
COMMERCIAL BANKS -- 84.9%
2,819 1st Source Corp. $ 63,709
2,768 Ameris Bancorp (a) 34,877
1,367 Arrow Financial Corp. 33,040
20,215 Associated Banc-Corp. 266,636
1,762 BancFirst Corp. 73,845
3,847 Bancorp (The), Inc. (a) 36,354
4,018 Bank of the Ozarks, Inc. 120,861
2,116 Banner Corp. 46,362
9,065 BBCN Bancorp, Inc. (a) 98,718
7,916 BOK Financial Corp. 460,711
9,084 Boston Private Financial Holdings,
Inc. 81,120
1,540 Bryn Mawr Bank Corp. 32,448
3,396 Cardinal Financial Corp. 41,703
9,147 Cathay General Bancorp 151,017
3,195 Chemical Financial Corp. 68,692
4,653 Citizens Republic Bancorp, Inc. (a) 79,706
1,708 City Holding Co. 57,543
4,614 CoBiz Financial, Inc. 28,884
4,611 Columbia Banking System, Inc. 86,779
10,280 Commerce Bancshares, Inc. 389,612
1,806 Community Trust Bancorp, Inc. 60,483
12,171 CVB Financial Corp. 141,792
2,350 Eagle Bancorp, Inc. (a) 37,013
16,803 East West Bancorp, Inc. 394,198
1,605 Financial Institutions, Inc. 27,092
10,067 First Busey Corp. 48,624
1,005 First Citizens BancShares, Inc.,
Class A 167,483
2,074 First Community Bancshares, Inc. 29,928
6,800 First Financial Bancorp 108,664
3,658 First Financial Bankshares, Inc. 126,420
1,538 First Financial Corp. 44,602
1,948 First Interstate BancSystem, Inc. 27,740
3,327 First Merchants Corp. 41,454
8,705 First Midwest Bancorp, Inc. 95,581
12,744 FirstMerit Corp. 210,531
23,335 Fulton Financial Corp. 233,117
8,360 Glacier Bancorp, Inc. 129,496
9,852 Hancock Holding Co. 299,895
3,660 Hanmi Financial Corp. (a) 38,357
3,266 Home BancShares, Inc. 99,874
3,431 IBERIABANK Corp. 173,094
2,513 Independent Bank Corp. 73,405
7,816 International Bancshares Corp. 152,568
13,006 Investors Bancorp, Inc. (a) 196,261
1,897 Lakeland Financial Corp. 50,897
6,354 MB Financial, Inc. 136,865
17,707 National Penn Bancshares, Inc. 169,456
3,862 NBT Bancorp, Inc. 83,381
1,301 OmniAmerican Bancorp, Inc. (a) 27,880
4,335 PacWest Bancorp 102,609
4,020 Pinnacle Financial Partners, Inc. (a) 78,430
8,003 PrivateBancorp, Inc. 118,124
2,918 Renasant Corp. 45,842
2,169 Republic Bancorp, Inc., Class A 48,260
3,360 S&T Bancorp, Inc. 62,059
1,612 S.Y. Bancorp, Inc. 38,607
2,806 Sandy Spring Bancorp, Inc. 50,508
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMERCIAL BANKS -- (CONTINUED)
1,752 SCBT Financial Corp. $ 61,758
5,417 Signature Bank (a) 330,274
1,989 Simmons First National Corp.,
Class A 46,244
2,015 Southside Bancshares, Inc. 45,297
3,687 State Bank Financial Corp. (a) 55,895
2,682 StellarOne Corp. 33,471
7,220 Sterling Financial Corp. (a) 136,386
21,832 Susquehanna Bancshares, Inc. 224,870
5,139 SVB Financial Group (a) 301,762
3,303 Taylor Capital Group, Inc. (a) 54,136
4,404 Texas Capital Bancshares, Inc. (a) 177,878
3,489 TowneBank 48,846
1,857 TriCo Bancshares 28,598
7,527 Trustmark Corp. 184,261
4,714 UMB Financial Corp. 241,498
13,004 Umpqua Holdings Corp. 171,133
3,015 Union First Market Bankshares
Corp. 43,567
5,843 United Bankshares, Inc. 151,217
4,846 United Community Banks, Inc. (a) 41,530
1,950 Univest Corp. of Pennsylvania 32,234
3,697 Virginia Commerce Bancorp,
Inc. (a) 31,166
1,901 Washington Trust Bancorp, Inc. 46,346
3,095 WesBanco, Inc. 65,800
2,240 West Coast Bancorp (a) 44,016
3,238 Westamerica Bancorporation 152,801
8,284 Wilshire Bancorp, Inc. (a) 45,396
4,221 Wintrust Financial Corp. 149,846
21,407 Zions Bancorporation 415,724
------------
9,585,157
------------
IT SERVICES -- 0.5%
1,207 Cass Information Systems, Inc. 48,582
------------
THRIFTS & MORTGAGE FINANCE
-- 14.6%
9,305 Beneficial Mutual Bancorp, Inc. (a) 80,302
2,576 Berkshire Hills Bancorp, Inc. 56,672
1,329 Bofi Holding, Inc. (a) 26,261
8,140 Brookline Bancorp, Inc. 72,039
19,060 Capitol Federal Financial, Inc. 226,433
4,105 Dime Community Bancshares, Inc. 54,555
3,594 Flushing Financial Corp. 48,986
1,662 Franklin Financial Corp. (a) 27,340
11,343 Northwest Bancshares, Inc. 132,826
2,158 OceanFirst Financial Corp. 30,989
5,282 Oritani Financial Corp. 76,008
3,322 Rockville Financial, Inc. 38,436
1,282 Territorial Bancorp, Inc. 29,191
35,901 TFS Financial Corp. (a) 342,855
10,887 TrustCo Bank Corp. NY 59,443
1,804 United Financial Bancorp, Inc. 25,941
4,559 ViewPoint Financial Group, Inc. 71,303
12,421 Washington Federal, Inc. 209,791
1,012 WSFS Financial Corp. 40,895
------------
1,650,266
------------
See Notes to Financial Statements Page 79
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
DESCRIPTION VALUE
-----------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 11,284,005
(Cost $11,129,466) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 4,010
------------
NET ASSETS -- 100.0% $ 11,288,015
============
(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, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $512,911 and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over value was $358,372.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2012
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* $11,284,005 $ -- $ --
=====================================
* See Portfolio of Investments for industry breakout.
There were no transfers between levels at June 30, 2012.
Page 80 See Notes to Financial Statements
This page intentionally left blank.
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2012 (UNAUDITED)
FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR FIRST TRUST
MICROCAP DIVIDEND LEADERS(SM) US IPO
INDEX(SM)FUND INDEX FUND INDEX FUND
-------------- ------------------ ---------------
ASSETS:
Investments at value................................................... $ 44,852,381 $ 568,717,094 $ 17,633,481
Cash................................................................... -- -- 9,740
Receivables:
Capital shares sold.............................................. -- 21,196,302 --
Investment securities sold....................................... 350,214 459,509 --
Dividends........................................................ 69,388 1,086,706 7,402
Interest......................................................... -- -- --
From investment advisor.......................................... -- -- --
Reclaims......................................................... -- -- --
Securities lending income........................................ -- -- --
Prepaid expenses....................................................... 13,576 8,662 4,567
-------------- --------------- ---------------
TOTAL ASSETS..................................................... 45,285,559 591,468,273 17,655,190
-------------- --------------- ---------------
LIABILITIES:
Due to custodian....................................................... 5,961 768,910 --
Payables:
Investment securities purchased.................................. 352,500 21,199,769 --
Audit and tax fees............................................... 15,060 15,060 15,060
Investment advisory fees......................................... 8,151 109,148 367
Printing fees.................................................... 3,931 49,441 746
Capital shares purchased......................................... 3,379 -- --
Licensing fees................................................... -- 112,168 --
Collateral for securities on loan................................ -- -- --
Other liabilities...................................................... 10,521 99,445 4,267
-------------- --------------- ---------------
TOTAL LIABILITIES................................................ 399,503 22,353,941 20,440
-------------- --------------- ---------------
NET ASSETS............................................................. $ 44,886,056 $ 569,114,332 $ 17,634,750
============== =============== ===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 61,226,383 $ 542,081,753 $ 20,870,190
Par value.............................................................. 21,050 304,500 6,500
Accumulated net investment income (loss)............................... (6,801) 64,772 2,788
Accumulated net realized gain (loss) on investments.................... (20,826,240) (18,090,434) (4,678,131)
Net unrealized appreciation (depreciation) on investments.............. 4,471,664 44,753,741 1,433,403
-------------- --------------- ---------------
NET ASSETS............................................................. $ 44,886,056 $ 569,114,332 $ 17,634,750
============== =============== ===============
NET ASSET VALUE, per share............................................. $ 21.32 $ 18.69 $ 27.13
============== =============== ===============
Number of shares outstanding
(unlimited number of shares has been authorized, par value $0.01
per share)............................................................. 2,105,000 30,450,002 650,002
============== =============== ===============
Investments at cost.................................................... $ 40,380,717 $ 523,963,353 $ 16,200,078
============== =============== ===============
Securities on loan, at value........................................... $ -- $ -- $ --
============== =============== ===============
Page 82 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NASDAQ-100 NASDAQ-100- NYSE ARCA DOW JONES STRATEGIC VALUE LINE(R) EQUITY
EQUAL WEIGHTED TECHNOLOGY SECTOR BIOTECHNOLOGY INTERNET VALUE ALLOCATION
INDEX(SM) FUND INDEX(SM) FUND INDEX FUND INDEX(SM) FUND INDEX FUND INDEX FUND
--------------- --------------- --------------- --------------- --------------- ---------------
$ 86,863,066 $ 137,589,922 $ 247,923,218 $ 436,563,004 $ 30,828,525 $ 3,716,386
8,235 100,182 67,341 -- 10,291 --
-- -- -- -- -- --
-- -- 2,159,678 -- -- --
69,476 16,161 -- -- 52,950 5,731
-- -- -- 5 -- --
-- -- -- -- -- 1,568
-- -- -- -- -- 376
4,505 -- -- -- -- --
7,652 9,458 8,549 8,466 4,332 8,164
--------------- --------------- --------------- -------------- --------------- ---------------
86,952,934 137,715,723 250,158,786 436,571,475 30,896,098 3,732,225
--------------- --------------- --------------- -------------- --------------- ---------------
-- -- -- -- -- 40,565
-- -- -- -- -- --
15,060 15,060 15,060 15,060 15,060 15,060
25,762 52,500 70,346 70,317 10,727 --
7,094 12,772 22,986 42,451 2,028 --
-- -- -- -- -- --
22,375 38,361 48,732 70,054 7,964 2,373
1,777,120 -- -- -- -- --
15,925 26,238 47,098 85,094 4,806 1,571
--------------- --------------- --------------- -------------- --------------- ---------------
1,863,336 144,931 204,222 282,976 40,585 59,569
--------------- --------------- --------------- -------------- --------------- ---------------
$ 85,089,598 $ 137,570,792 $ 249,954,564 $ 436,288,499 $ 30,855,513 $ 3,672,656
=============== =============== =============== ============== =============== ===============
$ 95,928,435 $ 164,143,388 $ 296,186,878 $ 470,854,072 $ 55,852,575 $ 9,388,276
34,000 54,500 57,000 123,500 13,500 2,000
1,667 417,436 (574,191) (859,497) 26,148 (185)
(6,854,855) (8,784,396) (23,157,996) (17,181,884) (24,737,613) (5,604,199)
(4,019,649) (18,260,136) (22,557,127) (16,647,692) (299,097) (113,236)
--------------- --------------- --------------- -------------- --------------- ---------------
$ 85,089,598 $ 137,570,792 $ 249,954,564 $ 436,288,499 $ 30,855,513 $ 3,672,656
=============== =============== =============== ============== =============== ===============
$ 25.03 $ 25.24 $ 43.85 $ 35.33 $ 22.86 $ 18.36
=============== =============== =============== ============== =============== ===============
3,400,002 5,450,002 5,700,002 12,350,002 1,350,002 200,002
=============== =============== =============== ============== =============== ===============
$ 90,882,715 $ 155,850,058 $ 270,480,345 $ 453,210,696 $ 31,127,622 $ 3,829,622
=============== =============== =============== ============== =============== ===============
$ 1,739,918 $ -- $ -- $ -- $ -- $ --
=============== =============== =============== ============== =============== ===============
See Notes to Financial Statements Page 83
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 2012 (UNAUDITED)
FIRST TRUST FIRST TRUST
FIRST TRUST NASDAQ-100 NASDAQ(R)
VALUE LINE(R) EX-TECHNOLOGY CLEAN EDGE(R)
DIVIDEND SECTOR GREEN ENERGY
INDEX FUND INDEX(SM) FUND INDEX FUND
--------------- --------------- ---------------
ASSETS:
Investments at value................................................... $ 460,444,928 $ 39,653,074 $ 18,908,913
Cash................................................................... -- -- 18,869
Receivables:
Capital shares sold.............................................. 3,683 -- --
Investment securities sold....................................... 23,908,217 -- --
Dividends........................................................ 1,559,307 39,903 --
Interest......................................................... -- -- --
From investment advisor.......................................... -- -- --
Reclaims......................................................... 65,173 -- --
Securities lending income........................................ -- 2,762 17,210
Prepaid expenses....................................................... 11,385 5,971 6,269
-------------- ------------- -------------
TOTAL ASSETS..................................................... 485,992,693 39,701,710 18,951,261
-------------- ------------- -------------
LIABILITIES:
Due to custodian....................................................... 536,787 59,670 --
Payables:
Investment securities purchased.................................. 23,948,375 -- 5,939
Audit and tax fees............................................... 15,060 15,060 15,060
Investment advisory fees......................................... 164,863 9,236 997
Printing fees.................................................... 43,815 1,740 268
Capital shares purchased......................................... -- -- --
Licensing fees................................................... 168,095 8,562 4,303
Collateral for securities on loan................................ -- 974,158 3,049,487
Other liabilities...................................................... 91,572 5,831 2,614
-------------- ------------- -------------
TOTAL LIABILITIES................................................ 24,968,567 1,074,257 3,078,668
-------------- ------------- -------------
NET ASSETS............................................................. $ 461,024,126 $ 38,627,453 $ 15,872,593
============== ============= =============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 460,736,035 $ 38,010,167 $ 53,521,450
Par value.............................................................. 274,380 16,500 17,000
Accumulated net investment income (loss)............................... 686,780 2,423 71,431
Accumulated net realized gain (loss) on investments.................... (40,728,633) (1,071,857) (28,231,073)
Net unrealized appreciation (depreciation) on investments.............. 40,055,564 1,670,220 (9,506,215)
-------------- ------------- -------------
NET ASSETS............................................................. $ 461,024,126 $ 38,627,453 $ 15,872,593
============== ============= =============
NET ASSET VALUE, per share............................................. $ 16.80 $ 23.41 $ 9.34
============== ============= =============
Number of shares outstanding
(unlimited number of shares has been authorized, par value $0.01
per share) 27,437,986 1,650,002 1,700,002
============== ============= =============
Investments at cost.................................................... $ 420,389,364 $ 37,982,854 $ 28,415,128
============== ============= =============
Securities on loan, at value........................................... $ -- $ 954,674 $ 2,959,436
============== ============= =============
Page 84 See Notes to Financial Statements
FIRST TRUST
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST NASDAQ(R) ABA
S&P ISE ISE-REVERE ISE VALUE LINE(R) 100 COMMUNITY
REIT WATER NATURAL GAS CHINDIA EXCHANGE-TRADED BANK
INDEX FUND INDEX FUND INDEX FUND INDEX FUND FUND INDEX FUND
--------------- --------------- --------------- --------------- --------------- ---------------
$ 391,362,075 $ 62,418,963 $ 395,118,504 $ 79,015,492 $ 49,308,040 $ 11,284,005
-- -- -- -- 23,886 8,040
-- -- -- -- -- --
1,763,901 131,287 267,430 305,217 11,914,095 -
928,393 129,784 161,452 301,120 27,289 16,572
23 3 12 -- -- --
-- -- -- -- -- --
-- -- 1,642,431 - 502 --
-- -- -- 29,289 -- --
7,217 4,490 7,986 5,956 13,579 435
-------------- -------------- --------------- --------------- --------------- ---------------
394,061,609 62,684,527 397,197,815 79,657,074 61,287,391 11,309,052
-------------- -------------- --------------- --------------- --------------- ---------------
3,863,080 530,874 1,357,620 181,051 -- --
1,774,311 -- 34,178 -- 9,403,976 --
15,060 15,060 15,060 15,060 15,060 15,060
100,269 19,843 130,602 19,118 17,718 1,072
36,985 5,046 34,831 5,818 4,014 101
-- -- 1,583,489 -- 2,533,735 --
140,628 7,939 89,335 15,681 21,023 2,304
-- -- -- 11,594,632 -- --
74,394 12,536 70,878 22,428 9,956 2,500
-------------- -------------- --------------- --------------- --------------- ---------------
6,004,727 591,298 3,315,993 11,853,788 12,005,482 21,037
-------------- -------------- --------------- --------------- --------------- ---------------
$ 388,056,882 $ 62,093,229 $ 393,881,822 $ 67,803,286 $ 49,281,909 $ 11,288,015
============== ============== =============== =============== =============== ===============
$ 361,200,601 $ 70,129,977 $ 584,474,421 $ 120,405,487 $ 137,896,766 $ 11,573,167
221,000 27,500 240,000 35,500 38,900 4,500
2,380,304 (40,415) (82,554) 83,664 (80,307) 3,282
725,869 (11,573,432) (103,310,233) (44,338,127) (89,347,501) (447,473)
23,529,108 3,549,599 (87,439,812) (8,383,238) 774,051 154,539
-------------- --------------- --------------- --------------- --------------- ---------------
$ 388,056,882 $ 62,093,229 $ 393,881,822 $ 67,803,286 $ 49,281,909 $ 11,288,015
============== ============== =============== =============== =============== ===============
$ 17.56 $ 22.58 $ 16.41 $ 19.10 $ 12.67 $ 25.08
============== ============== =============== =============== =============== ===============
22,100,002 2,750,002 24,000,002 3,550,002 3,889,982 450,002
============== ============== =============== =============== =============== ===============
$ 367,832,967 $ 58,869,364 $ 482,558,316 $ 87,398,730 $ 48,533,989 $ 11,129,466
============== ============== =============== =============== =============== ===============
$ -- $ -- $ -- $ 11,252,327 $ -- $ --
============== ============== =============== =============== =============== ===============
See Notes to Financial Statements Page 85
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2012 (UNAUDITED)
FIRST TRUST
FIRST TRUST MORNINGSTAR
DOW JONES SELECT DIVIDEND FIRST TRUST
MICROCAP LEADERS(SM) US IPO
INDEX(SM) FUND INDEX FUND INDEX FUND
---------------- ---------------- -----------------
INVESTMENT INCOME:
Dividends........................................................ $ 366,465 $ 10,318,441 $ 123,367
Foreign tax withholding.......................................... (337) -- --
Interest......................................................... -- -- --
Securities lending income (net of fees).......................... -- -- --
------------ ------------ ------------
Total investment income....................................... 366,128 10,318,441 123,367
------------ ------------ ------------
EXPENSES:
Investment advisory fees......................................... 137,216 724,623 33,889
Accounting and administration fees............................... 16,511 121,869 5,340
Licensing fees................................................... 15,597 214,551 24,870
Audit and tax fees............................................... 12,077 12,077 12,077
Printing fees.................................................... 5,580 51,131 2,358
Listing fees..................................................... 4,032 4,877 3,920
Legal fees....................................................... 3,880 51,089 1,571
Custodian fees................................................... 3,431 30,193 1,059
Trustees' fees and expenses...................................... 3,421 13,641 2,390
Transfer agent fees.............................................. 1,372 12,077 424
Registration and filing fees..................................... -- (9,667) (23)
Expenses previously waived or reimbursed......................... -- -- --
Other expenses................................................... 1,443 6,637 462
------------ ------------ ------------
Total expenses................................................ 204,560 1,233,098 88,337
Less fees waived and expenses reimbursed by the investment advisor (39,901) (146,164) (37,503)
------------ ------------ ------------
Net expenses.................................................. 164,659 1,086,934 50,834
------------ ------------ ------------
NET INVESTMENT INCOME (LOSS)..................................... 201,469 9,231,507 72,533
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Investments................................................... 631,177 (992,158) (273,084)
In-kind redemptions........................................... 1,393,306 17,934,062 1,519,995
------------ ------------ ------------
Net realized gain (loss)......................................... 2,024,483 16,941,904 1,246,911
Net change in unrealized appreciation (depreciation) on investments 986,213 15,210,042 683,958
------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS).......................... 3,010,696 32,151,946 1,930,869
------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................................... $ 3,212,165 $ 41,383,453 $ 2,003,402
============ ============ ============
Page 86 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NASDAQ-100 NASDAQ-100- NYSE ARCA DOW JONES STRATEGIC VALUE LINE(R)
EQUAL WEIGHTED TECHNOLOGY SECTOR BIOTECHNOLOGY INTERNET VALUE EQUITY ALLOCATION
INDEX(SM) FUND INDEX(SM) FUND INDEX FUND INDEX(SM) FUND INDEX FUND INDEX FUND
---------------- ----------------- ---------------- ---------------- ---------------- -----------------
$ 441,310 $ 897,240 $ 120,485 $ 650,031 $ 330,633 $ 64,137
(2,657) -- -- -- (561) (1,264)
-- -- -- 12 -- 1
30,662 -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
469,315 897,240 120,485 650,043 330,072 62,874
------------ ------------ ------------ ------------ ------------ ------------
176,755 319,869 463,117 1,004,195 82,484 16,261
23,683 40,841 58,546 126,601 9,107 3,065
44,189 79,967 92,624 118,500 16,497 5,042
12,077 12,077 12,077 12,077 12,077 12,077
8,548 13,926 28,388 47,903 2,642 709
7,948 9,057 4,032 4,032 3,920 11,338
7,962 10,744 24,803 34,995 2,323 532
5,524 9,996 14,473 31,449 2,062 406
4,265 6,334 7,773 15,190 2,786 2,156
2,209 3,998 5,789 14,745 825 163
(350) -- (7,595) -- -- --
-- -- -- 89,155 -- --
1,982 4,003 9,630 10,698 860 181
------------ ------------ ------------ ------------ ------------ ------------
294,792 510,812 713,657 1,509,540 135,583 51,930
(29,659) (31,008) (18,981) -- (28,354) (29,165)
------------ ------------ ------------ ------------ ------------ ------------
265,133 479,804 694,676 1,509,540 107,229 22,765
------------ ------------ ------------ ------------ ------------ ------------
204,182 417,436 (574,191) (859,497) 222,843 40,109
------------ ------------ ------------ ------------ ------------ ------------
(1,886,812) (1,226,200) (15,220,378) (12,085,174) (219,709) (166,579)
4,531,684 3,617,073 11,682,972 21,262,492 1,485,094 466,730
------------ ------------ ------------ ------------ ------------ ------------
2,644,872 2,390,873 (3,537,406) 9,177,318 1,265,385 300,151
3,156,644 3,428,717 64,870,382 33,868,709 102,090 (322,124)
------------ ------------ ------------ ------------ ------------ ------------
5,801,516 5,819,590 61,332,976 43,046,027 1,367,475 (21,973)
------------ ------------ ------------ ------------ ------------ ------------
$ 6,005,698 $ 6,237,026 $ 60,758,785 $ 42,186,530 $ 1,590,318 $ 18,136
============ ============ ============ ============ ============ ============
See Notes to Financial Statements Page 87
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2012 (UNAUDITED)
FIRST TRUST
FIRST TRUST FIRST TRUST NASDAQ(R)
VALUE LINE(R) NASDAQ-100 CLEAN EDGE(R)
DIVIDEND EX-TECHNOLOGY SECTOR GREEN ENERGY
INDEX FUND INDEX(SM) FUND INDEX FUND
---------------- -------------------- -----------------
INVESTMENT INCOME:
Dividends........................................................ $ 8,247,984 $ 148,986 $ 37,886
Foreign tax withholding.......................................... (145,157) (1,806) (38)
Interest......................................................... -- 2 --
Securities lending income (net of fees).......................... -- 17,880 89,598
------------ ------------ ------------
Total investment income....................................... 8,102,827 165,062 127,446
------------ ------------ ------------
EXPENSES:
Investment advisory fees......................................... 1,058,212 68,646 37,344
Accounting and administration fees............................... 107,289 9,728 10,654
Licensing fees................................................... 320,784 17,162 9,336
Audit and tax fees............................................... 12,077 12,077 12,077
Printing fees.................................................... 44,116 4,071 2,776
Listing fees..................................................... 11,338 6,750 7,077
Legal fees....................................................... 44,234 2,708 935
Custodian fees................................................... 26,455 2,145 1,167
Trustees' fees and expenses...................................... 12,251 2,927 2,497
Transfer agent fees.............................................. 10,582 858 467
Registration and filing fees..................................... (6,712) (645) (78)
Expenses previously waived or reimbursed......................... -- -- --
Other expenses................................................... 9,816 752 536
------------ ------------ ------------
Total expenses................................................ 1,650,442 127,179 84,788
Less fees waived and expenses reimbursed by the investment advisor (168,945) (24,210) (28,773)
------------ ------------ ------------
Net expenses.................................................. 1,481,497 102,969 56,015
------------ ------------ ------------
NET INVESTMENT INCOME (LOSS)..................................... 6,621,330 62,093 71,431
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Investments................................................... (2,673,674) (955,334) (1,092,022)
In-kind redemptions........................................... 19,924,581 2,396,384 89,630
------------ ------------ ------------
Net realized gain (loss)......................................... 17,250,907 1,441,050 (1,002,392)
Net change in unrealized appreciation (depreciation) on investments 1,834,449 2,377,614 338,717
------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS).......................... 19,085,356 3,818,664 (663,675)
------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................................... $ 25,706,686 $ 3,880,757 $ (592,244)
============ ============ ============
Page 88 See Notes to Financial Statements
FIRST TRUST
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST NASDAQ(R) ABA
S&P ISE ISE-REVERE ISE VALUE LINE(R) 100 COMMUNITY
REIT WATER NATURAL GAS CHINDIA EXCHANGE-TRADED BANK
INDEX FUND INDEX FUND INDEX FUND INDEX FUND FUND INDEX FUND
---------------- ----------------- ---------------- ---------------- ----------------- -----------------
$ 7,239,463 $ 667,061 $ 2,413,301 $ 1,026,206 $ 332,602 $ 111,839
-- (53,749) (164,598) (44,218) (4,897) --
35 8 90 -- -- --
-- -- -- 180,883 -- --
------------ ------------ ------------ ------------ ------------ ------------
7,239,498 613,320 2,248,793 1,162,871 327,705 111,839
------------ ------------ ------------ ------------ ------------ ------------
597,668 128,119 704,996 172,031 142,235 21,186
100,810 16,766 88,833 64,221 16,319 3,831
159,446 16,015 176,249 34,406 44,305 4,767
12,077 12,077 12,077 12,077 12,077 12,077
44,704 7,950 30,092 8,715 5,106 1,207
3,920 3,920 4,032 4,032 9,885 6,336
37,114 5,367 25,985 5,203 4,030 724
24,903 4,004 22,031 5,376 3,556 662
11,748 4,374 10,971 3,419 3,468 2,173
9,961 1,601 8,813 2,150 1,422 265
(18,322) (557) (2,984) 21 (1,184) (867)
7,000 -- -- -- -- --
5,085 1,695 11,219 2,246 1,422 311
------------ ------------ ------------ ------------ ------------ ------------
996,114 201,331 1,092,314 313,897 242,641 52,672
-- (9,153) (34,820) (55,850) (43,513) (20,893)
------------ ------------ ------------ ------------ ------------ ------------
996,114 192,178 1,057,494 258,047 199,128 31,779
------------ ------------ ------------ ------------ ------------ ------------
6,243,384 421,142 1,191,299 904,824 128,577 80,060
------------ ------------ ------------ ------------ ------------ ------------
(708,913) (560,965) (19,332,057) (4,163,820) (2,787,925) (51,221)
5,968,388 359,123 9,991,800 3,566,470 5,339,750 552,549
------------ ------------ ------------ ------------ ------------ ------------
5,259,475 (201,842) (9,340,257) (597,350) 2,551,825 501,328
38,793,907 5,408,391 (27,390,895) 5,280,980 (918,584) 573,378
------------ ------------ ------------ ------------ ------------ ------------
44,053,382 5,206,549 (36,731,152) 4,683,630 1,633,241 1,074,706
------------ ------------ ------------ ------------ ------------ ------------
$ 50,296,766 $ 5,627,691 $(35,539,853) $ 5,588,454 $ 1,761,818 $ 1,154,766
============ ============ ============ ============ ============ ============
See Notes to Financial Statements Page 89
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
----------------------------- -----------------------------
For the Six For the Year For the Six For the Year
Months Ended Ended Months Ended Ended
June 30, 2012 December 31, June 30, 2012 December 31,
(Unaudited) 2011 (Unaudited) 2011
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss)................................ $ 201,469 $ 447,228 $ 9,231,507 $ 8,555,207
Net realized gain (loss).................................... 2,024,483 3,527,218 16,941,904 12,160,954
Net change in unrealized appreciation (depreciation) ....... 986,213 (15,388,722) 15,210,042 17,878,265
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations.......................................... 3,212,165 (11,414,276) 41,383,453 38,594,426
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................... (151,515) (610,163) (9,166,735) (8,577,026)
------------- ------------- ------------- -------------
Total distributions to shareholders......................... (151,515) (610,163) (9,166,735) (8,577,026)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................... -- 7,892,863 242,269,860 357,088,401
Cost of shares redeemed..................................... (10,502,477) (96,590,691) (152,401,780) (83,370,049)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions............................ (10,502,477) (88,697,828) 89,868,080 273,718,352
------------- ------------- ------------- -------------
Total increase (decrease) in net assets..................... (7,441,827) (100,722,267) 122,084,798 303,735,752
NET ASSETS:
Beginning of period......................................... 52,327,883 153,050,150 447,029,534 143,293,782
------------- ------------- ------------- -------------
End of period............................................... $ 44,886,056 $ 52,327,883 $ 569,114,332 $ 447,029,534
============= ============= ============= =============
Accumulated net investment income (loss)
at end of period......................................... $ (6,801) $ (56,755) $ 64,772 $ --
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period..................... 2,605,000 6,905,000 25,450,002 9,000,002
Shares sold................................................. -- 350,000 13,450,000 21,500,000
Shares redeemed............................................. (500,000) (4,650,000) (8,450,000) (5,050,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period........................... 2,105,000 2,605,000 30,450,002 25,450,002
============= ============= ============= =============
Page 90 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
FIRST TRUST NASDAQ-100 NASDAQ-100- NYSE ARCA
US IPO EQUAL WEIGHTED TECHNOLOGY SECTOR BIOTECHNOLOGY
INDEX FUND INDEX(SM) FUND INDEX(SM) FUND INDEX FUND
----------------------------- ----------------------------- ----------------------------- -----------------------------
For the Six For the Year For the Six For the Year For the Six For the Year For the Six For the Year
Months Ended Ended Months Ended Ended Months Ended Ended Months Ended Ended
June 30, 2012 December 31, June 30, 2012 December 31, June 30, 2012 December 31, June 30, 2012 December 31,
(Unaudited) 2011 (Unaudited) 2011 (Unaudited) 2011 (Unaudited) 2011
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 72,533 $ 125,086 $ 204,182 $ 193,294 $ 417,436 $ (63,396) $ (574,191) $ (1,701,516)
1,246,911 1,116,567 2,644,872 6,943,739 2,390,873 36,034,195 (3,537,406) (9,067,198)
683,958 (1,032,399) 3,156,644 (14,365,617) 3,428,717 (68,573,256) 64,870,382 (114,433,625)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
2,003,402 209,254 6,005,698 (7,228,584) 6,237,026 (32,602,457) 60,758,785 (125,202,339)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(69,745) (175,526) (202,515) (367,180) -- (1,713,900) -- --
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(69,745) (175,526) (202,515) (367,180) -- (1,713,900) -- --
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
5,497,079 8,666,281 36,799,034 79,966,639 16,558,485 196,450,901 72,782,952 640,051,793
(5,389,821) (8,388,699) (31,051,971) (74,786,704) (34,884,784) (465,889,979) (66,617,136) (533,039,358)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
107,258 277,582 5,747,063 5,179,935 (18,326,299) (269,439,078) 6,165,816 107,012,435
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
2,040,915 311,310 11,550,246 (2,415,829) (12,089,273) (303,755,435) 66,924,601 (18,189,904)
15,593,835 15,282,525 73,539,352 75,955,181 149,660,065 453,415,500 183,029,963 201,219,867
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 17,634,750 $ 15,593,835 $ 85,089,598 $ 73,539,352 $ 137,570,792 $ 149,660,065 $ 249,954,564 $ 183,029,963
============= ============= ============= ============= ============= ============= ============= =============
$ 2,788 $ -- $ 1,667 $ -- $ 417,436 $ -- $ (574,191) $ --
============= ============= ============= ============= ============= ============= ============= =============
650,002 650,002 3,200,002 3,200,002 6,200,002 17,650,002 5,600,002 5,150,002
200,000 350,000 1,450,000 3,200,000 600,000 7,300,000 1,750,000 15,400,000
(200,000) (350,000) (1,250,000) (3,200,000) (1,350,000) (18,750,000) (1,650,000) (14,950,000)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
650,002 650,002 3,400,002 3,200,002 5,450,002 6,200,002 5,700,002 5,600,002
============= ============= ============= ============= ============= ============= ============= =============
See Notes to Financial Statements Page 91
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST FIRST TRUST
DOW JONES INTERNET STRATEGIC VALUE
INDEX(SM) FUND INDEX FUND
----------------------------- -----------------------------
For the Six For the Year For the Six For the Year
Months Ended Ended Months Ended Ended
June 30, 2012 December 31, June 30, 2012 December 31,
(Unaudited) 2011 (Unaudited) 2011
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss)................................ $ (859,497) $ (1,558,228) $ 222,843 $ 554,376
Net realized gain (loss).................................... 9,177,318 62,801,316 1,265,385 2,204,042
Net change in unrealized appreciation (depreciation) ....... 33,868,709 (129,043,201) 102,090 (3,710,370)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations.......................................... 42,186,530 (67,800,113) 1,590,318 (951,952)
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................... -- (412,275) (196,695) (660,711)
------------- ------------- ------------- -------------
Total distributions to shareholders......................... -- (412,275) (196,695) (660,711)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................... 61,631,844 519,933,101 8,689,927 13,640,278
Cost of shares redeemed..................................... (187,213,256) (521,516,911) (10,870,558) (17,017,824)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions............................ (125,581,412) (1,583,810) (2,180,631) (3,377,546)
------------- ------------- ------------- -------------
Total increase (decrease) in net assets..................... (83,394,882) (69,796,198) (787,008) (4,990,209)
NET ASSETS:
Beginning of period......................................... 519,683,381 589,479,579 31,642,521 36,632,730
------------- ------------- ------------- -------------
End of period............................................... $ 436,288,499 $ 519,683,381 $ 30,855,513 $ 31,642,521
============= ============= ============= =============
Accumulated net investment income (loss)
at end of period......................................... $ (859,497) $ -- $ 26,148 $ --
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period..................... 16,100,002 17,200,002 1,450,002 1,600,002
Shares sold................................................. 1,800,000 14,900,000 350,000 550,000
Shares redeemed............................................. (5,550,000) (16,000,000) (450,000) (700,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period........................... 12,350,002 16,100,002 1,350,002 1,450,002
============= ============= ============= =============
Page 92 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
VALUE LINE(R) FIRST TRUST NASDAQ-100 NASDAQ(R)
EQUITY ALLOCATION VALUE LINE(R) DIVIDEND EX-TECHNOLOGY SECTOR CLEAN EDGE(R) GREEN ENERGY
INDEX FUND INDEX FUND INDEX(SM) FUND INDEX FUND
----------------------------- ----------------------------- ----------------------------- -----------------------------
For the Six For the Year For the Six For the Year For the Six For the Year For the Six For the Year
Months Ended Ended Months Ended Ended Months Ended Ended Months Ended Ended
June 30, 2012 December 31, June 30, 2012 December 31, June 30, 2012 December 31, June 30, 2012 December 31,
(Unaudited) 2011 (Unaudited) 2011 (Unaudited) 2011 (Unaudited) 2011
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 40,109 $ 72,064 $ 6,621,330 $ 7,902,272 $ 62,093 $ 86,782 $ 71,431 $ (57,380)
300,151 128,844 17,250,907 12,636,031 1,441,050 1,142,380 (1,002,392) (1,932,700)
(322,124) (835,358) 1,834,449 3,716,675 2,377,614 (2,777,822) 338,717 (13,448,678)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
18,136 (634,450) 25,706,686 24,254,978 3,880,757 (1,548,660) (592,244) (15,438,758)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(40,565) (72,485) (5,934,550) (7,975,414) (59,670) (104,225) -- --
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(40,565) (72,485) (5,934,550) (7,975,414) (59,670) (104,225) -- --
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
4,818,770 5,352,158 175,428,620 225,622,376 13,707,768 21,526,159 -- 7,115,097
(7,480,560) (5,394,000) (100,575,187) (94,012,975) (9,058,297) (11,867,696) (4,274,790) (7,056,700)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(2,661,790) (41,842) 74,853,433 131,609,401 4,649,471 9,658,463 (4,274,790) 58,397
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(2,684,219) (748,777) 94,625,569 147,888,965 8,470,558 8,005,578 (4,867,034) (15,380,361)
6,356,875 7,105,652 366,398,557 218,509,592 30,156,895 22,151,317 20,739,627 36,119,988
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 3,672,656 $ 6,356,875 $ 461,024,126 $ 366,398,557 $ 38,627,453 $ 30,156,895 $ 15,872,593 $ 20,739,627
============= ============= ============= ============= ============= ============= ============= =============
$ (185) $ 271 $ 686,780 $ -- $ 2,423 $ -- $ 71,431 $ --
============= ============= ============= ============= ============= ============= ============= =============
350,002 350,002 22,887,986 14,487,986 1,450,002 1,050,002 2,150,002 2,200,002
250,000 250,000 10,600,000 14,500,000 600,000 950,000 -- 450,000
(400,000) (250,000) (6,050,000) (6,100,000) (400,000) (550,000) (450,000) (500,000)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
200,002 350,002 27,437,986 22,887,986 1,650,002 1,450,002 1,700,002 2,150,002
============= ============= ============= ============= ============= ============= ============= =============
See Notes to Financial Statements Page 93
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
S&P FIRST TRUST
REIT ISE WATER
INDEX FUND INDEX FUND
---------------------------------- -------------------------------------
For the For the
Six Months Ended For the Year Six Months Ended For the Year
June 30, 2012 Ended June 30, 2012 Ended
(Unaudited) December 31, 2011 (Unaudited) December 31, 2011
---------------- --------------- ----------------- -----------------
OPERATIONS:
Net investment income (loss).................. $ 6,243,384 $ 3,603,572 $ 421,142 $ 481,476
Net realized gain (loss)...................... 5,259,475 (3,997,767) (201,842) 2,261,282
Net change in unrealized appreciation
(depreciation) ................................ 38,793,907 (21,892,948) 5,408,391 (6,845,222)
---------------- --------------- ----------------- -----------------
Net increase (decrease) in net assets resulting
from operations............................ 50,296,766 (22,287,143) 5,627,691 (4,102,464)
---------------- --------------- ----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................... (3,863,080) (4,049,501) (477,125) (554,561)
---------------- --------------- ----------------- -----------------
Total distributions to shareholders........... (3,863,080) (4,049,501) (477,125) (554,561)
---------------- --------------- ----------------- -----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold..................... 81,042,579 453,173,259 1,082,215 34,659,837
Cost of shares redeemed....................... (64,380,181) (172,941,669) (2,125,578) (25,127,425)
---------------- --------------- ----------------- -----------------
Net increase (decrease) in net assets resulting
from shareholder transactions.............. 16,662,398 280,231,590 (1,043,363) 9,532,412
---------------- --------------- ----------------- -----------------
Total increase (decrease) in net assets....... 63,096,084 253,894,946 4,107,203 4,875,387
NET ASSETS:
Beginning of period........................... 324,960,798 71,065,852 57,986,026 53,110,639
---------------- --------------- ----------------- -----------------
End of period................................. $ 388,056,882 $ 324,960,798 $ 62,093,229 $ 57,986,026
================ =============== ================= =================
Accumulated net investment income (loss)
at end of period........................... $ 2,380,304 $ -- $ (40,415) $ 15,568
================ =============== ================= =================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period....... 21,000,002 4,850,002 2,800,002 2,400,002
Shares sold................................... 5,000,000 28,200,000 50,000 1,600,000
Shares redeemed............................... (3,900,000) (12,050,000) (100,000) (1,200,000)
---------------- --------------- ----------------- -----------------
Shares outstanding, end of period............. 22,100,002 21,000,002 2,750,002 2,800,002
================ =============== ================= ================
Page 94 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
ISE-REVERE FIRST TRUST FIRST TRUST NASDAQ(R) ABA
NATURAL GAS ISE CHINDIA VALUE LINE(R) 100 COMMUNITY BANK
INDEX FUND INDEX FUND EXCHANGE-TRADED FUND INDEX FUND
------------------------------- ---------------------------- ------------------------------ -----------------------------
For the For the For the For the For the For the For the For the
Six Months Year Six Months Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended Ended Ended
June 30, 2012 December 31, June 30, 2012 December 31, June 30, 2012 December 31, June 30, 2012 December 31,
(Unaudited) 2011 (Unaudited) 2011 (Unaudited) 2011 (Unaudited) 2011
--------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 1,191,299 $ 1,929,769 $ 904,824 $ 1,374,217 $ 128,577 $ 392,155 $ 80,060 $ 203,793
(9,340,257) 53,827,977 (597,350) 4,404,156 2,551,825 (1,350,721) 501,328 (354,412)
(27,390,895) (112,055,233) 5,280,980 (39,977,843) (918,584) (4,336,999) 573,378 (788,265)
--------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(35,539,853) (56,297,487) 5,588,454 (34,199,470) 1,761,818 (5,295,565) 1,154,766 (938,884)
--------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(1,357,620) (1,845,855) (821,160) (1,488,951) (184,049) (420,210) (77,895) (204,876)
--------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(1,357,620) (1,845,855) (821,160) (1,488,951) (184,049) (420,210) (77,895) (204,876)
--------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
187,229,216 444,624,390 2,017,518 -- 30,989,354 85,357,150 3,781,127 6,285,743
(103,006,309) (436,818,095) (18,268,868) (61,376,060) (38,827,894) (112,529,279) (6,204,160) (2,486,580)
--------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
84,222,907 7,806,295 (16,251,350) (61,376,060) (7,838,540) (27,172,129) (2,423,033) 3,799,163
--------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
47,325,434 (50,337,047) (11,484,056) (97,064,481) (6,260,771) (32,887,904) (1,346,162) 2,655,403
346,556,388 396,893,435 79,287,342 176,351,823 55,542,680 88,430,584 12,634,177 9,978,774
--------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 393,881,822 $ 346,556,388 $ 67,803,286 $ 79,287,342 $ 49,281,909 $ 55,542,680 $ 11,288,015 $ 12,634,177
=============== ============= ============= ============= ============= ============= ============= =============
$ (82,554) $ 83,767 $ 83,664 $ -- $ (80,307) $ (24,835) $ 3,282 $ 1,117
=============== ============= ============= ============= ============= ============= ============= =============
19,050,002 20,250,002 4,350,002 7,050,002 4,489,982 6,539,982 550,002 400,002
10,850,000 20,550,000 100,000 -- 2,250,000 6,100,000 150,000 250,000
(5,900,000) (21,750,000) (900,000) (2,700,000) (2,850,000) (8,150,000) (250,000) (100,000)
--------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
24,000,002 19,050,002 3,550,002 4,350,002 3,889,982 4,489,982 450,002 550,002
=============== ============= ============= ============= ============= ============= ============= =============
See Notes to Financial Statements Page 95
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
For the Six For the For the For the For the For the
Months Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 20.09 $ 22.17 $ 17.70 $ 14.74 $ 22.35 $ 23.92
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.08 0.10 0.09 0.09 0.17 0.16
Net realized and unrealized gain (loss) 1.21 (2.02) 4.46 2.97 (7.60) (1.60)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.29 (1.92) 4.55 3.06 (7.43) (1.44)
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.06) (0.16) (0.08) (0.10) (0.17) (0.13)
Return of capital -- -- -- (0.00) (a) (0.01) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.06) (0.16) (0.08) (0.10) (0.18) (0.13)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 21.32 $ 20.09 $ 22.17 $ 17.70 $ 14.74 $ 22.35
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 6.44% (8.69)% 25.77% 20.85% (33.33)% (6.02)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 44,886 $ 52,328 $ 153,050 $ 18,679 $ 14,077 $ 17,993
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.75%(c) 0.71% 0.86% 0.94% 1.05% 1.35%
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 0.73%(c) 0.40% 0.94% 0.69% 0.79% 0.58%
Portfolio turnover rate (d) 7% 59% 86% 86% 85% 11%
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND
For the Six For the For the For the For the For the
Months Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 17.57 $ 15.92 $ 14.27 $ 13.09 $ 20.20 $ 23.51
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.32 0.61 0.57 0.56 0.83 0.92
Net realized and unrealized gain (loss) 1.12 1.65 1.66 1.19 (7.13) (3.35)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.44 2.26 2.23 1.75 (6.30) (2.43)
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.32) (0.61) (0.58) (0.57) (0.81) (0.88)
Return of capital -- -- (0.00) (a) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.32) (0.61) (0.58) (0.57) (0.81) (0.88)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 18.69 $ 17.57 $ 15.92 $ 14.27 $ 13.09 $ 20.20
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 8.27% 14.44% 16.05% 14.24% (31.71)% (10.64)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 569,114 $ 447,030 $ 143,294 $ 48,505 $ 43,196 $ 64,650
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.51% (c) 0.56% 0.66% 0.79% 0.72% 0.68%
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 3.82% (c) 3.98% 4.22% 4.64% 5.07% 3.87%
Portfolio turnover rate (d) 22% 27% 30% 81% 56% 9%
<FN>
(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 calculated for a period of less than one year is not annualized. 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.
</FN>
Page 96 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
For the Six For the For the For the For the For the
Months Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 23.99 $ 23.51 $ 20.08 $ 14.09 $ 25.36 $ 22.20
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.11 0.18 0.20 0.59 0.15 0.05
Net realized and unrealized gain (loss) 3.14 0.55 3.45 5.72 (11.27) 3.17
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 3.25 0.73 3.65 6.31 (11.12) 3.22
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.11) (0.25) (0.22) (0.32) (0.14) (0.06)
Return of capital -- -- -- -- (0.01) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.11) (0.25) (0.22) (0.32) (0.15) (0.06)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 27.13 $ 23.99 $ 23.51 $ 20.08 $ 14.09 $ 25.36
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 13.54% 3.11% 18.28% 44.93% (43.88)% 14.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 17,635 $ 15,594 $ 15,283 $ 11,043 $ 8,454 $ 26,633
Ratios to average net assets:
Ratio of total expenses to average net
assets 1.04% (b) 1.01% 1.32% 1.34% 1.02% 1.06%
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 0.86% (b) 0.70% 1.28% 3.59% 0.50% 0.24%
Portfolio turnover rate (c) 27% 44% 43% 30% 62% 11%
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
For the Six For the For the For the For the For the
Months Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 22.98 $ 23.74 $ 19.69 $ 12.37 $ 22.08 $ 20.12
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.06 0.05 0.15 0.05 0.00 (d) (0.02)
Net realized and unrealized gain (loss) 2.05 (0.70) 4.02 7.32 (9.70) 1.98
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.11 (0.65) 4.17 7.37 (9.70) 1.96
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.06) (0.11) (0.12) (0.05) (0.00) (d) --
Return of capital -- -- -- -- (0.01) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.06) (0.11) (0.12) (0.05) (0.01) --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 25.03 $ 22.98 $ 23.74 $ 19.69 $ 12.37 $ 22.08
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 9.18% (2.77)% 21.25% 59.54% (43.96)% 9.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 85,090 $ 73,539 $ 75,955 $ 40,369 $ 14,848 $ 30,911
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.67% (b) 0.68% 0.75% 0.67% 0.88% 0.95%
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 0.46% (b) 0.23% 0.79% 0.35% 0.01% (0.08)%
Portfolio turnover rate (c) 12% 27% 24% 36% 39% 15%
<FN>
(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 calculated for a period of less than one year is not annualized. 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) Amount represents less than $0.01 per share.
</FN>
See Notes to Financial Statements Page 97
First Trust Exchange-Traded Fund
Financial Highlights
For a Share outstanding throughout each period
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND
For the Six For the For the For the For the For the
Months Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 24.14 $ 25.69 $ 21.16 $ 11.77 $ 21.50 $ 19.97
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.08 0.00 (a) (b) 0.10 0.01 -- (0.03)
Net realized and unrealized gain (loss) 1.02 (1.47) 4.53 9.39 (9.73) 1.56
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.10 (1.47) 4.63 9.40 (9.73) 1.53
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income -- (0.08) (0.10) (0.01) -- --
Return of capital -- -- -- (0.00) (b) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions -- (0.08) (0.10) (0.01) -- --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 25.24 $ 24.14 $ 25.69 $ 21.16 $ 11.77 $ 21.50
========== ========== ========== ========== ========== ==========
TOTAL RETURN (c) 4.56% (5.75)% 21.92% 79.89% (45.26)% 7.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 137,571 $149,660 $ 453,416 $ 86,766 $ 9,414 $ 23,652
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.64% (d) 0.63% 0.70% 0.67% 0.88% 0.92%
Ratio of net expenses to average net assets 0.60% (d) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.52% (d) (0.02)% 0.71% 0.16% (0.01)% (0.16)%
Portfolio turnover rate (e) 8% 21% 26% 35% 33% 10%
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND
For the Six
Months Ended For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 32.68 $ 39.07 $ 28.54 $ 19.70 $ 24.41 $ 23.55
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.10) (0.30) (0.17) (0.16) 0.18 (0.10)
Net realized and unrealized gain (loss) 11.27 (6.09) 10.70 9.00 (4.62) 0.96
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 11.17 (6.39) 10.53 8.84 (4.44) 0.86
---------- ---------- ---------- ---------- ---------- ----------
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 $ 43.85 $ 32.68 $ 39.07 $ 28.54 $ 19.70 $ 24.41
========== ========== ========== ========== ========== ==========
TOTAL RETURN (c) 34.18% (16.36)% 36.90% 44.87% (18.33)% 3.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 249,955 $ 183,030 $ 201,220 $ 67,068 $ 59,097 $ 73,241
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.62% (d) 0.61% 0.66% 0.72% 0.72% 0.73%
Ratio of net expenses to average net assets 0.60% (d) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets (0.50)% (d) (0.54%) (0.60)% (0.60)% 0.67% (0.60)%
Portfolio turnover rate (e) 13% 44% 35% 44% 38% 11%
<FN>
(a) Per share amounts have been calculated using the average share method.
(b) Amount represents less than $0.01 per share
(c) 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 calculated for a period of less than one year are not annualized. The
total returns would have been lower if certain fees had not been waived and expenses
reimbursed by the investment advisor.
(d) Annualized.
(e) Portfolio turnover is not annualized and does not include securities received or
delivered from processing creations or redemptions and in-kind transactions.
</FN>
Page 98 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND
For the Six For the For the For the For the For the
Months Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 32.28 $ 34.27 $ 25.11 $ 14.01 $ 25.09 $ 22.57
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.07) (0.10) 0.04 (0.05) 0.05 (0.16)
Net realized and unrealized gain (loss) 3.12 (1.87) 9.16 11.15 (11.08) 2.68
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 3.05 (1.97) 9.20 11.10 (11.03) 2.52
---------- ---------- ---------- ---------- ---------- ----------
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 $ 35.33 $ 32.28 $ 34.27 $ 25.11 $ 14.01 $ 25.09
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 9.45% (5.74)% 36.63% 79.23% (44.02)% 11.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 436,288 $ 519,683 $ 589,480 $ 86,615 $ 14,708 $ 36,386
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.60% (c) 0.60% 0.66% 0.73% 0.82% 0.70%
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 (0.34)% (c) (0.25)% 0.26% (0.46)% 0.21% (0.42)%
Portfolio turnover rate (d) 14% 18% 16% 35% 44% 6%
FIRST TRUST STRATEGIC VALUE INDEX FUND
For the Six For the For the For the For the For the
Months Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 21.82 $ 22.90 $ 20.47 $ 14.90 $ 24.12 $ 22.06
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.17 0.35 0.39 0.28 0.28 0.20
Net realized and unrealized gain (loss) 1.02 (1.01) 2.44 5.57 (9.22) 2.07
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.19 (0.66) 2.83 5.85 (8.94) 2.27
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.15) (0.42) (0.40) (0.28) (0.28) (0.21)
Return of capital -- -- (0.00) (a) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.15) (0.42) (0.40) (0.28) (0.28) (0.21)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 22.86 $ 21.82 $ 22.90 $ 20.47 $ 14.90 $ 24.12
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 5.43% (2.94)% 14.04% 39.43% (37.23)% 10.26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 30,856 $ 31,643 $ 36,633 $ 51,164 $ 35,762 $ 61,518
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.82% (c) 0.82% 0.86% 0.87% 0.72% 1.12%
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 1.35% (c) 1.51% 1.58% 1.57% 1.31% 1.09%
Portfolio turnover rate (d) 47% 114% 197% 171% 157% 10%
<FN>
(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 returns calculated for a period of less than one year are not annualized. 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.
</FN>
See Notes to Financial Statements Page 99
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
For the Six For the For the For the For the For the
Months Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 18.16 $ 20.30 $ 17.21 $ 12.98 $ 20.45 $ 19.78
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.11 0.21 0.29 0.18 0.25 0.24
Net realized and unrealized gain (loss) 0.21 (2.14) 3.09 4.23 (7.47) 0.68
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.32 (1.93) 3.38 4.41 (7.22) 0.92
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.12) (0.21) (0.29) (0.18) (0.25) (0.25)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 18.36 $ 18.16 $ 20.30 $ 17.21 $ 12.98 $ 20.45
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 1.74% (9.56)% 19.85% 34.15% (35.45)% 4.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3,673 $ 6,357 $ 7,106 $ 6,885 $ 5,841 $ 13,291
Ratios to average net assets:
Ratio of total expenses to average net
assets 1.60% (b) 1.39% 1.35% 1.24% 1.14% 1.36%
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 1.23% (b) 1.05% 1.29% 1.24% 1.29% 1.04%
Portfolio turnover rate (c) 104% 184% 205% 191% 120% 43%
<FN>
(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 returns calculated for a period of less than one year are not annualized. The
total return 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.
</FN>
Page 100 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
For the Six For the For the For the For the For the
Months Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 2012 December 31 December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 16.01 $ 15.08 $ 13.37 $ 11.55 $ 15.75 $ 16.77
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.25 0.42 0.41 (a) 0.38 0.45 0.44
Net realized and unrealized gain (loss) 0.76 0.93 1.71 1.82 (4.20) (0.99)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.01 1.35 2.12 2.20 (3.75) (0.55)
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.22) (0.42) (0.40) (0.38) (0.45) (0.47)
Return of capital -- -- (0.01) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.22) (0.42) (0.41) (0.38) (0.45) (0.47)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 16.80 $ 16.01 $ 15.08 $ 13.37 $ 11.55 $ 15.75
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 6.33% 9.03% 16.08% 19.58% (24.17)% (3.42)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 461,024 $ 366,399 $ 218,510 $ 153,618 $ 115,403 $ 180,153
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.78% (c) 0.79% 0.84% 0.80% 0.84% 0.85%
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 3.13% (c) 2.84% 2.94% 3.30% 3.20% 2.37%
Portfolio turnover rate (d) 27% 53% 55% 101% 109% 5%
<FN>
(a) Per share amounts have been calculated using the average share method.
(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 returns calculated for a period of less than one year are not annualized. 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.
</FN>
See Notes to Financial Statements Page 101
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
For the Period
For the Six For the For the For the For the February 8, 2007 (a)
Months Ended Year Ended Year Ended Year Ended Year Ended through
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 20.80 $ 21.10 $ 17.63 $ 12.05 $ 21.19 $ 20.00
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.05 0.06 0.17 0.05 0.01 (0.01)
Net realized and unrealized gain (loss) 2.61 (0.28) 3.46 5.58 (9.14) 1.20
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.66 (0.22) 3.63 5.63 (9.13) 1.19
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.05) (0.08) (0.16) (0.05) (0.01) --
Return of capital -- -- -- (0.00) (b) (0.00) (b) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.05) (0.08) (0.16) (0.05) (0.01) --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 23.41 $ 20.80 $ 21.10 $ 17.63 $ 12.05 $ 21.19
========== ========== ========== ========== ========== ==========
TOTAL RETURN (c) 12.77% (1.08)% 20.64% 46.74% (43.09)% 5.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 38,627 $ 30,157 $ 22,151 $ 10,579 $ 7,232 $ 2,119
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.74% (d) 0.78% 0.94% 1.28% 1.86% 2.61% (d)
Ratio of net expenses to average net assets 0.60% (d) 0.60% 0.60% 0.60% 0.60% 0.60% (d)
Ratio of net investment income (loss) to
average net assets 0.36% (d) 0.31% 1.02% 0.48% 0.03% (0.04)% (d)
Portfolio turnover rate (e) 14% 37% 19% 43% 67% 27%
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND
For the Period
For the Six For the For the For the For the February 8, 2007 (a)
Months Ended Year Ended Year Ended Year Ended Year Ended through
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 9.65 $ 16.42 $ 16.09 $ 11.19 $ 30.86 $ 20.00
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.04 (0.03) (0.01) (0.02) (0.04) (0.04)
Net realized and unrealized gain (loss) (0.35) (6.74) 0.34 4.92 (19.63) 10.90
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.31 (6.77) 0.33 4.90 (19.67) 10.86
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 9.34 $ 9.65 $ 16.42 $ 16.09 $ 11.19 $ 30.86
========== ========== ========== ========== ========== ==========
TOTAL RETURN (c) (3.21)% (41.23)% 2.05% 43.79% (63.74)% 54.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 15,873 $ 20,740 $ 36,120 $ 43,449 $ 23,504 $ 50,913
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.91% (d) 0.77% 0.78% 0.81% 0.83% 1.00% (d)
Ratio of net expenses to average net assets 0.60% (d) 0.60% 0.60% 0.60% 0.60% 0.60% (d)
Ratio of net investment income (loss) to
average net assets 0.77% (d) (0.18)% (0.07)% (0.12)% (0.21)% (0.33)% (d)
Portfolio turnover rate (e) 7% 22% 22% 40% 32% 4%
<FN>
(a) Inception date.
(b) Amount represents less than $0.01 per share.
(c) 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 returns calculated for a period of less than one year are not annualized. The
total returns would have been lower if certain fees had not been waived and expenses
reimbursed by the investment advisor.
(d) Annualized.
(e) Portfolio turnover is not annualized and does not include securities received or
delivered from processing creations or redemptions and in-kind transactions.
</FN>
Page 102 See Notes to Financial Statements
First Trust Exchange-Traded Fund
Financial Highlights
For a Share outstanding throughout each period
FIRST TRUST S&P REIT INDEX FUND
For the Period
For the Six For the For the For the For the May 8, 2007 (a)
Months Ended Year Ended Year Ended Year Ended Year Ended through
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 15.47 $ 14.65 $ 11.72 $ 9.43 $ 15.81 $ 20.00
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.28 0.28 0.29 0.25 0.31 0.32(b)
Net realized and unrealized gain (loss) 1.98 0.88 2.94 2.31 (6.38) (4.13)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.26 1.16 3.23 2.56 (6.07) (3.81)
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.17) (0.34) (0.30) (0.25) (0.31) (0.38)
Return of capital -- -- -- (0.02) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.17) (0.34) (0.30) (0.27) (0.31) (0.38)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 17.56 $ 15.47 $ 14.65 $ 11.72 $ 9.43 $ 15.81
========== ========== ========== ========== ========== ==========
TOTAL RETURN (c) 14.64% 7.90% 27.73% 28.00% (38.87)% (19.08)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 388,057 $ 324,961 $ 71,066 $ 21,087 $ 5,187 $ 1,581
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.50% (d) 0.57% 0.69% 1.95% 5.30% 8.41% (d)
Ratio of net expenses to average net assets 0.50% (d) 0.50% 0.50% 0.50% 0.50% 0.50% (d)
Ratio of net investment income (loss) to
average net assets 3.13% (d) 2.03% 2.60% 3.39% 3.40% 2.73% (d)
Portfolio turnover rate (e) 3% 9% 16% 13% 20% 25%
FIRST TRUST ISE WATER INDEX FUND
For the Period
For the Six For the For the For the For the May 8, 2007 (a)
Months Ended Year Ended Year Ended Year Ended Year Ended through
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 20.71 $ 22.13 $ 18.66 $ 15.69 $ 22.38 $ 20.00
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.15 0.16 0.18 0.19 0.12 0.04
Net realized and unrealized gain (loss) 1.89 (1.39) 3.43 2.97 (6.69) 2.38
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.04 (1.23) 3.61 3.16 (6.57) 2.42
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from::
Net investment income (0.17) (0.19) (0.14) (0.19) (0.12) (0.04)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 22.58 $ 20.71 $ 22.13 $ 18.66 $ 15.69 $ 22.38
========== ========== ========== ========== ========== ==========
TOTAL RETURN (c) 9.92% (5.62)% 19.49% 20.29% (29.40)% 12.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 62,093 $ 57,986 $ 53,111 $ 37,314 $ 32,157 $ 12,310
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.63% (d) 0.64% 0.69% 0.72% 0.77% 1.68% (d)
Ratio of net expenses to average net assets 0.60% (d) 0.60% 0.60% 0.60% 0.60% 0.60% (d)
Ratio of net investment income (loss) to
average net assets 1.31% (d) 0.79% 0.96% 1.20% 0.76% 0.46% (d)
Portfolio turnover rate (e) 9% 31% 38% 44% 45% 3%
<FN>
(a) Inception date.
(b) Per share amounts have been calculated using the average share method.
(c) 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 returns calculated for a period of less than one year are not annualized. The
total returns would have been lower if certain fees had not been waived and expenses
reimbursed by the investment advisor.
(d) Annualized.
(e) Portfolio turnover is not annualized and does not include securities received or
delivered from processing creations or redemptions and in-kind transactions.
</FN>
See Notes to Financial Statements Page 103
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND
For the Period
For the Six For the For the For the For the May 8, 2007 (a)
Months Ended Year Ended Year Ended Year Ended Year Ended through
June 30, 2012 December 31, December 31, December 31, December 31, December 31, 2007
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 18.19 $ 19.60 $ 17.52 $ 11.80 $ 22.31 $ 20.00
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.06 (b) 0.08 0.03 0.07 0.14 0.03
Net realized and unrealized gain (loss) (1.78) (1.41) 2.10 5.72 (10.51) 2.30
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (1.72) (1.33) 2.13 5.79 (10.37) 2.33
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.06) (0.08) (0.05) (0.07) (0.14) (0.02)
Return of capital -- -- (0.00) (c) (0.00) (c) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.06) (0.08) (0.05) (0.07) (0.14) (0.02)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 16.41 $ 18.19 $ 19.60 $ 17.52 $ 11.80 $ 22.31
========== ========== ========== ========== ========== ==========
TOTAL RETURN (d) (9.48)% (6.85)% 12.22% 49.21% (46.57)% 11.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 393,882 $ 346,556 $ 396,893 $ 464,339 $ 37,179 $ 11,157
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.62% (e) 0.63% 0.65% 0.72% 0.77% 2.36% (e)
Ratio of net expenses to average net assets 0.60% (e) 0.60% 0.60% 0.60% 0.60% 0.60% (e)
Ratio of net investment income (loss) to
average net assets 0.68% (e) 0.39% 0.19% 0.53% 0.77% 0.32% (e)
Portfolio turnover rate (f) 27% 43% 93% 71% 116% 5%
FIRST TRUST ISE CHINDIA INDEX FUND
For the Period
For the Six For the For the For the For the May 8, 2007 (a)
Months Ended Year Ended Year Ended Year Ended Year Ended through
June 30, 2012 December 31, December 31, December 31, December 31, December 31, 2007
(Unaudited) 2011 2010 2009 2008 2007
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 18.23 $ 25.01 $ 21.28 $ 11.78 $ 27.73 $ 20.00
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.25 0.27 0.17 0.09 0.17 0.02
Net realized and unrealized gain (loss) 0.85 (6.75) 3.73 9.50 (15.92) 7.73
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.10 (6.48) 3.90 9.59 (15.75) 7.75
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.23) (0.30) (0.17) (0.09) (0.20) (0.02)
Return of capital -- -- -- (0.00) (c) (0.00) (c) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.23) (0.30) (0.17) (0.09) (0.20) (0.02)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 19.10 $ 18.23 $ 25.01 $ 21.28 $ 11.78 $ 27.73
========== ========== ========== ========== ========== ==========
TOTAL RETURN (d) 6.02% (26.02)% 18.46% 81.58% (56.98)% 38.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 67,803 $ 79,287 $ 176,352 $ 120,240 $ 35,937 $ 104,004
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.73% (e) 0.66% 0.66% 0.73% 0.73% 0.82% (e)
Ratio of net expenses to average net assets 0.60% (e) 0.60% 0.60% 0.60% 0.60% 0.60% (e)
Ratio of net investment income (loss) to
average net assets 2.10% (e) 1.00% 0.74% 0.58% 0.90% 0.17% (e)
Portfolio turnover rate (f) 16% 23% 34% 47% 39% 2%
<FN>
(a) Inception date.
(b) Per share amounts have been calculated using the average share method.
(c) Amount represents less than $0.01 per share.
(d) 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 returns calculated for a period of less than one year are not annualized. The
total returns would have been lower if certain fees had not been waived and expenses
reimbursed by the investment advisor.
(e) Annualized.
(f) Portfolio turnover is not annualized and does not include securities received or
delivered from processing creations or redemptions and in-kind transactions.
</FN>
Page 104 See Notes to Financial Statements
First Trust Exchange-Traded Fund
Financial Highlights
For a Share outstanding throughout each period
First Trust Value Line(R) 100 Exchange-Traded Fund
For the Six For the For the For the For the For the
Months Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 2012 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2011 2010 2009 2008 2007 (a)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period $ 12.37 $ 13.52 $ 10.44 $ 9.26 $ 17.91 $ 15.89
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.03 0.08 0.00 (b) (0.01) (0.02) 1.02
Net realized and unrealized gain (loss) 0.32 (1.15) 3.08 1.19 (8.63) 2.06
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.35 (1.07) 3.08 1.18 (8.65) 3.08
---------- ---------- ---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.05) (0.08) -- -- -- --
Net realized gains -- -- -- -- -- (1.06)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.05) (0.08) -- -- -- (1.06)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 12.67 $ 12.37 $ 13.52 $ 10.44 $ 9.26 $ 17.91
========== ========== ========== ========== ========== ==========
TOTAL RETURN, BASED ON
NET ASSET VALUE (c) 2.79% (7.92)% 29.50% 12.74% (48.30)% 19.91% (d)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 49,282 $ 55,543 $ 88,431 $ 60,433 $ 75,825 $ 204,913
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.85% (e) 0.82% 0.87% 0.85% 0.86% 0.89%
Ratio of net expenses to average net assets 0.70% (e) 0.70% 0.70% 0.70% 0.70% 0.83% (f)
Ratio of net investment income (loss) to
average net assets 0.45% (e) 0.47% 0.01% (0.08)% (0.11)% (0.21)%
Portfolio turnover rate (g) 116% 202% 266% 235% 251% 111%
<FN>
(a) The Fund commenced operations on June 12, 2003. Results for periods prior to June 18,
2007 are of First Trust Value Line(R) 100 Fund. See Reorganization History below.
(b) Amount represents less than $0.01 per share.
(c) 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 returns calculated
for a period of less than one year are not annualized. The total returns would have been
lower if certain fees had not been waived or expenses reimbursed by the investment
advisor.
(d) Prior to June 18, 2007, total return based on net asset value assumed that all dividend
distributions were reinvested at prices obtained by the Dividend Reinvestment Plan of
First Trust Value Line(R) 100 Fund. See Reorganization History below.
(e) Annualized.
(f) The annualized expense ratio is capped at 0.70%. This ratio of 0.83% includes expenses
for a portion of the period prior to the reorganization of the First Trust Value Line(R)
100 Fund.
(g) Portfolio turnover is not annualized and does not include securities received or
delivered from processing creations or redemptions and in-kind transactions.
</FN>
Reorganization History:
First Trust Value Line(R) 100 Fund (the "Predecessor FVL Fund"), a
closed-end fund organized as a Massachusetts business trust on April 18,
2003, reorganized with and into First Trust Value Line(R) 100
Exchange-Traded Fund ("FVL"), an exchange-traded fund and newly created
series of the Trust effective Friday, June 15, 2007. The Predecessor FVL
Fund ceased trading on the AMEX (now known as NYSE Amex) on Friday, June
15, 2007 and FVL began trading on the AMEX on Monday, June 18, 2007
(effective November 6, 2008, FVL began trading on NYSE Arca), under the
ticker symbol "FVL," the same ticker symbol used by the Predecessor FVL
Fund. The assets of the Predecessor FVL Fund were transferred to, and
the liabilities of the Predecessor FVL Fund were assumed by, FVL in
exchange for shares of FVL on a one share for one share basis based upon
the net asset value ("NAV") of the Predecessor FVL Fund on Friday, June
15, 2007. FVL shares have been distributed to the Predecessor FVL Fund
shareholders, on a tax-free basis for federal income tax purposes, and
the Predecessor FVL Fund has been terminated. The historical results of
the Predecessor FVL Fund survive for financial reporting purposes.
See Notes to Financial Statements Page 105
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND
For the Period
For the Six For the For the June 29, 2009 (a)
Months Ended Year Ended Year Ended through
June 30, 2012 December 31, December 31, December 31,
(Unaudited) 2011 2010 2009
------------ ------------ ------------ ------------
Net asset value, beginning of period $ 22.97 $ 24.95 $ 22.41 $ 20.00
---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.18 0.37 0.30 0.16
Net realized and unrealized gain (loss) 2.10 (1.98) 2.55 2.40
---------- ---------- ---------- ----------
Total from investment operations 2.28 (1.61) 2.85 2.56
---------- ---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.17) (0.37) (0.31) (0.15)
---------- ---------- ---------- ----------
Net asset value, end of period $ 25.08 $ 22.97 $ 24.95 $ 22.41
========== ========== ========== ==========
TOTAL RETURN (b) 9.94% (6.48)% 12.77% 12.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 11,288 $ 12,634 $ 9,979 $ 5,604
Ratios to average net assets:
Ratio of total expenses to average net
assets 0.99% (c) 0.96% 1.16% 2.67% (c)
Ratio of net expenses to average net
assets 0.60% (c) 0.60% 0.60% 0.60% (c)
Ratio of net investment income (loss) to
average net assets 1.51% (c) 1.62% 1.40% 1.92% (c)
Portfolio turnover rate (d) 9% 29% 26% 15%
<FN>
(a) Inception date.
(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 returns calculated for a
period of less than one year are not annualized. 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.
</FN>
Page 106 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (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 eighteen exchange-traded funds:
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 NASDAQ-100 Equal Weighted Index(SM) Fund - (The NASDAQ Stock
Market, Inc. ("NASDAQ") ticker "QQEW")
First Trust NASDAQ-100-Technology Sector Index(SM) Fund - (NASDAQ ticker
"QTEC")
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 Strategic Value Index Fund - (NYSE Arca ticker "FDV")
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 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 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 Value Line(R) 100 Exchange-Traded Fund -(NYSE Arca ticker
"FVL")
First Trust NASDAQ(R) ABA Community Bank Index Fund - NASDAQ ticker "QABA")
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Each Fund's shares
currently are listed and traded on either the NYSE Arca or the NASDAQ, as
indicated above. 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 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 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 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 Strategic Value Index Fund Credit Suisse U.S. Value Index, Powered by HOLT(TM)
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 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 United States REIT 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 Value Line(R) 100 Exchange-Traded Fund Value Line(R) 100 Index(TM)
First Trust NASDAQ(R) ABA Community Bank Index Fund NASDAQ OMX(R) ABA Community Bank 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.
Page 107
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
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:
Portfolio securities listed on any exchange other than NASDAQ or the
London Stock Exchange Alternative Investment Market ("AIM") are valued at
the last sale price on the business day as of which such value is being
determined. If there has been no sale on such day, the securities are
valued at the mean of the most recent bid and ask prices on such day.
Portfolio securities traded on one or more securities exchange are valued
at the last sale price or official closing price, as applicable, on the
business day as of which such value is being determined at the close of
the exchange representing the principal market for such securities.
Securities listed on the NASDAQ or the AIM are valued at the official
closing price on the business day as of which such value is being
determined. If there is no official closing price on the valuation day,
the securities are valued at the mean of the most recent bid and ask
prices on such day.
Portfolio securities traded in the over-the-counter market, but excluding
securities trading on the NASDAQ or the AIM, 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. In
addition, the use of fair value prices and certain current market quotations or
official closing prices could result in a difference between the prices used to
calculate a Fund's NAV and the prices used by such Fund's corresponding index,
which, in turn, could result in a difference between a Fund's performance and
the performance of its underlying index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices
are not current, or price quotations vary substantially
either over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted
intervals, volatilities, prepayment speeds, loss severities,
credit risks,and default rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodology 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, 2012, is
included with each Fund's Portfolio of Investments.
Page 108
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
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.
Distributions received from a Fund's investments in publicly-traded master
limited partnerships ("MLPs") generally are comprised of return of capital from
the MLP to the extent of the cost basis of such MLP investments. Cumulative
distributions received in excess of the Fund's cost basis in an MLP generally
are recorded as capital gain.
Distributions received from a Fund's investments in real estate investment
trusts ("REITs") are comprised of return of capital, capital gains and income.
The actual character of the amounts received during the year are not known until
the fiscal year end. A Fund records the character of distributions received from
the REITs during the year based on estimates available. A Fund's
characterization may be subsequently revised based on information received from
the REITs after their tax reporting periods conclude.
C. SECURITIES LENDING
Currently, FNI, QQEW, QQXT and QCLN lend securities representing up to 20% of
the value of their total assets to broker-dealers, banks, and other institutions
to generate additional income. In the future, the remaining Funds may also
engage in this practice. 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. 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 Fund. 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. 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.
D. 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 Fund and have no impact on net assets or NAV per share.
Temporary differences, which arise from recognizing certain items of income,
expense and gain/loss in different periods for financial statement and tax
purposes, will reverse at some time in the future.
Page 109
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
The tax character of distributions paid by each Fund during the year ended
December 31, 2011 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 $ 610,163 $ -- $ --
First Trust Morningstar Dividend Leaders(SM) Index Fund 8,577,026 -- --
First Trust US IPO Index Fund 175,526 -- --
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 367,180 -- --
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 1,713,900 -- --
First Trust NYSE Arca Biotechnology Index Fund -- -- --
First Trust Dow Jones Internet Index(SM) Fund 412,275 -- --
First Trust Strategic Value Index Fund 660,711 -- --
First Trust Value Line(R) Equity Allocation Index Fund 72,485 -- --
First Trust Value Line(R) Dividend Index Fund 7,975,414 -- --
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 104,225 -- --
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund -- -- --
First Trust S&P REIT Index Fund 4,049,501 -- --
First Trust ISE Water Index Fund 554,561 -- --
First Trust ISE-Revere Natural Gas Index Fund 1,845,855 -- --
First Trust ISE Chindia Index Fund 1,488,951 -- --
First Trust Value Line(R) 100 Exchange-Traded Fund 420,210 -- --
First Trust NASDAQ(R) ABA Community Bank Index Fund 204,876 -- --
As of December 31, 2011, 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 $ -- $ (22,749,366) $ 3,327,339
First Trust Morningstar Dividend Leaders(SM) Index Fund -- (33,027,124) 27,538,485
First Trust US IPO Index Fund -- (5,789,831) 614,234
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund -- (8,642,605) (8,033,415)
First Trust NASDAQ-100-Technology Sector Index(SM) Fund -- (8,355,292) (24,508,830)
First Trust NYSE Arca Biotechnology Index Fund -- (9,399,572) (97,648,527)
First Trust Dow Jones Internet Index(SM) Fund -- (15,150,090) (61,725,513)
First Trust Strategic Value Index Fund -- (25,725,165) (679,020)
First Trust Value Line(R) Equity Allocation Index Fund 1,170 (5,891,659) 195,298
First Trust Value Line(R) Dividend Index Fund -- (47,056,297) 27,297,872
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -- (2,159,299) (1,061,002)
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund -- (22,413,411) (14,660,202)
First Trust S&P REIT Index Fund -- -- (19,798,405)
First Trust ISE Water Index Fund 15,568 (9,424,196) (3,806,186)
First Trust ISE-Revere Natural Gas Index Fund 83,767 (86,812,204) (67,206,689)
First Trust ISE Chindia Index Fund -- (41,812,406) (15,592,589)
First Trust Value Line(R) 100 Exchange-Traded Fund 14,386 (91,553,928) 1,308,016
First Trust NASDAQ(R) ABA Community Bank Index Fund 1,117 (635,712) (731,928)
Page 110
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
E. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98.2% of its 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 ended 2008, 2009,
2010 and 2011 remain open to federal and state audit. As of June 30, 2012,
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 recognized after December 31, 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 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, 2011, the Fund had pre-enactment and post-enactment net
capital losses for federal income tax purposes as shown in the table below. 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 Effective - 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 $11,007,426 $22,749,366
First Trust Morningstar Dividend
Leaders(SM) Index Fund 52,755 202,279 198,670 14,962,284 16,831,977 473,435 305,724 33,027,124
First Trust US IPO Index Fund -- 303,759 740,683 2,682,788 1,127,563 65,058 869,980 5,789,831
First Trust NASDAQ-100 Equal
Weighted Index(SM) Fund -- -- 54,385 1,957,170 4,681,103 -- 1,949,947 8,642,605
First Trust NASDAQ-100-Technology
Sector Index(SM) Fund -- -- 311,155 1,421,664 2,016,911 -- 4,605,562 8,355,292
First Trust NYSE Arca
Biotechnology Index Fund -- -- -- 2,061,136 5,787,577 1,039,054 511,805 9,399,572
First Trust Dow Jones
Internet Index(SM) Fund -- -- -- 6,295,170 1,163,966 -- 7,690,954 15,150,090
First Trust Strategic Value
Index Fund -- 45,432 831,336 11,401,861 11,336,270 1,367,556 742,710 25,725,165
First Trust Value Line(R) Equity
Allocation Index Fund -- -- 1,392,919 1,168,041 2,421,122 -- 909,577 5,891,659
First Trust Value Line(R)
Dividend Index Fund -- -- 4,488,019 21,855,796 19,646,203 437,987 628,292 47,056,297
First Trust NASDAQ-100 Ex-
Technology Sector Index(SM)
Fund -- -- 7,779 143,597 1,051,894 80,899 875,130 2,159,299
First Trust NASDAQ(R) Clean
Edge(R) Green Energy Index
Fund -- -- 141,332 4,246,707 7,483,633 5,884,801 4,656,938 22,413,411
First Trust S&P REIT Index Fund -- -- -- -- -- -- -- --
First Trust ISE Water Index Fund -- -- 592 318,246 5,768,328 2,198,674 1,138,356 9,424,196
First Trust ISE-Revere Natural
Gas Index Fund -- -- 5,274 7,264,703 32,569,413 40,089,981 6,882,833 86,812,204
First Trust ISE Chindia Index
Fund -- -- -- 11,116,593 11,686,955 7,245,147 11,763,711 41,812,406
First Trust Value Line(R) 100
Exchange-Traded Fund -- -- 1,905,072 47,805,834 29,477,928 -- 12,365,094 91,553,928
First Trust NASDAQ(R) ABA
Community Bank Index Fund -- -- -- -- 4,787 116,604 514,321 635,712
Page 111
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
F. 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 LICENSOR
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 NASDAQ-100 Equal Weighted Index(SM) Fund The NASDAQ Stock Market, Inc.
First Trust NASDAQ-100-Technology Sector Index(SM) Fund The NASDAQ Stock Market, Inc.
First Trust NYSE Arca Biotechnology Index Fund NYSE Euronext
First Trust Dow Jones Internet Index(SM) Fund Dow Jones & Company, Inc.
First Trust Strategic Value Index Fund Credit Suisse Securities (USA) LLC and Credit Suisse Group AG
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 NASDAQ-100 Ex-Technology Sector Index(SM) Fund The NASDAQ Stock Market, Inc.
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund The NASDAQ Stock Market, Inc. /Clean Edge(R), Inc.
First Trust S&P REIT Index Fund Standard & Poor's
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 Value Line(R) 100 Exchange-Traded Fund Value Line Publishing, Inc.(R)
First Trust NASDAQ(R) ABA Community Bank Index Fund The NASDAQ Stock Market, Inc.
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The respective Funds are
required to pay licensing fees, which are shown on the Statements of Operations.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. 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 other 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 NASDAQ-100 Equal Weighted Index(SM) Fund 0.40%
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 0.40%
First Trust NYSE Arca Biotechnology Index Fund 0.40%
First Trust Dow Jones Internet Index(SM) Fund 0.40%
First Trust Strategic Value Index Fund 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 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 Value Line(R) 100 Exchange-Traded Fund 0.50%
First Trust NASDAQ(R) ABA Community Bank Index Fund 0.40%
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
The Trust and the Advisor have entered into an Expense Reimbursement, Fee Waiver
and 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, 2013.
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 NASDAQ-100 Equal Weighted Index(SM) Fund 0.60%
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 0.60%
First Trust NYSE Arca Biotechnology Index Fund 0.60%
First Trust Dow Jones Internet Index(SM) Fund 0.60%
First Trust Strategic Value Index Fund 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 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 Value Line(R) 100 Exchange-Traded Fund 0.70%
First Trust NASDAQ(R) ABA Community Bank Index Fund 0.60%
Expenses reimbursed and fees waived by First Trust under the Expense
Reimbursement, Fee Waiver and Recovery Agreement are subject to recovery by
First Trust for up to three years from the date the fee or expense was incurred,
but no reimbursement payment will be made by 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, 2012 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
---------------------------------------------------------
Period Period Year Period
Advisory Expense Ended Ended Ended Ended
Fee Reim- December December December June
Waivers bursement 31, 2009 31, 2010 31, 2011 30, 2012 Total
--------- --------- --------- --------- --------- -------- ---------
First Trust Dow Jones Select MicroCap
Index(SM) Fund $ 39,901 $ -- $ 11,619 $ 127,967 $ 117,235 $ 39,901 $ 296,722
First Trust Morningstar Dividend Leaders(SM)
Index Fund 146,164 -- 59,508 147,279 226,674 146,164 579,625
First Trust US IPO Index Fund 33,889 3,614 21,903 83,357 73,773 37,503 216,536
First Trust NASDAQ-100 Equal Weighted
Index(SM) Fund 29,659 -- 10,103 79,793 65,568 29,659 185,123
First Trust NASDAQ-100-Technology Sector
Index(SM) Fund 31,008 -- 21,212 206,140 114,729 31,008 373,089
First Trust NYSE Arca Biotechnology Index Fund 18,981 -- 16,691 95,610 43,660 18,981 174,942
First Trust Dow Jones Internet Index(SM) Fund -- -- -- 19,967 -- -- 19,967
First Trust Strategic Value Index Fund 28,354 -- 30,727 83,712 61,430 28,354 204,223
First Trust Value Line(R) Equity Allocation
Index Fund 16,261 12,904 11,245 50,388 47,073 29,165 137,871
First Trust Value Line(R) Dividend Index Fund 168,945 -- 65,213 228,962 249,861 168,945 712,981
First Trust NASDAQ-100 Ex-Technology Sector
Index(SM) Fund 24,210 -- 26,515 57,769 50,938 24,210 159,432
First Trust NASDAQ(R) Clean Edge(R) Green
Energy Index Fund 28,773 -- 39,305 66,287 54,545 28,773 188,910
First Trust S&P REIT Index Fund -- -- 42,321 99,014 130,777 -- 272,112
First Trust ISE Water Index Fund 9,153 -- 10,531 39,351 25,829 9,153 84,864
First Trust ISE-Revere Natural Gas Index Fund 34,820 -- 153,102 212,049 139,394 34,820 539,365
(continued on next page)
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
Expenses Borne by Advisor Subject to Recovery
---------------------------------------------------------
Period Period Year Period
Advisory Expense Ended Ended Ended Ended
Fee Reim- December December December June
Waivers bursement 31, 2009 31, 2010 31, 2011 30, 2012 Total
--------- --------- --------- --------- --------- -------- ---------
First Trust ISE Chindia Index Fund $ 55,850 $ -- $ 40,449 $ 83,567 $ 76,490 $ 55,850 $256,356
First Trust Value Line(R) 100 Exchange
Traded Fund 43,513 -- 22,901 107,626 99,646 43,513 273,686
First Trust NASDAQ(R) ABA Community Bank
Index Fund 20,893 -- 44,294 44,800 45,663 20,893 155,650
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 performing transfer agency services for the Trust. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Effective January 23, 2012, James A. Bowen resigned from his position as the
President and Chief Executive Officer of the Trust. He will continue as a
Trustee, the Chairman of the Board of Trustees and a member of the Executive
Committee. The Board elected Mark R. Bradley to serve as the President and Chief
Executive Officer of the Trust and James M. Dykas to serve as the Treasurer,
Chief Financial Officer and Chief Accounting Officer of the Trust.
Effective January 1, 2012, 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. Prior to January 1, 2012, each Independent Trustee received an annual
retainer of $10,000 per trust for the first 14 trusts of the First Trust Fund
Complex and an annual retainer of $7,500 per trust for each additional trust in
the First Trust Fund Complex. The annual retainer is allocated equally among
each of the trusts.
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 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. Prior to January 1, 2012, the annual amounts paid were $10,000, $5,000
and $2,500, respectively. 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 before rotating to serve as
chairman of another committee or as Lead Independent Trustee. The officers and
"Interested" Trustee receive no compensation from the Trust for serving in such
capacities.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2012, 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 $ 3,817,742 $ 3,780,764
First Trust Morningstar Dividend Leaders(SM) Index Fund 105,632,439 105,504,986
First Trust US IPO Index Fund 4,519,432 4,513,958
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 10,403,376 10,322,255
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 13,590,692 13,179,050
First Trust NYSE Arca Biotechnology Index Fund 31,468,620 30,756,099
First Trust Dow Jones Internet Index(SM) Fund 73,208,061 74,047,037
First Trust Strategic Value Index Fund 15,367,266 15,201,931
First Trust Value Line(R) Equity Allocation Index Fund 6,435,107 6,443,001
First Trust Value Line(R) Dividend Index Fund 114,987,238 114,363,560
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 4,806,775 4,790,974
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 1,382,761 1,330,482
First Trust S&P REIT Index Fund 12,397,775 10,068,421
First Trust ISE Water Index Fund 5,707,618 5,858,243
First Trust ISE-Revere Natural Gas Index Fund 97,787,202 98,178,566
First Trust ISE Chindia Index Fund 13,130,200 13,563,486
First Trust Value Line(R) 100 Exchange-Traded Fund 65,053,241 64,992,808
First Trust NASDAQ(R) ABA Community Bank Index Fund 965,437 962,574
Page 114
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
For the six months ended June 30, 2012, 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 $ -- $ 10,498,247
First Trust Morningstar Dividend Leaders(SM) Index Fund 241,819,784 152,199,023
First Trust US IPO Index Fund 5,490,009 5,373,856
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 36,788,909 31,066,755
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 16,551,771 34,846,985
First Trust NYSE Arca Biotechnology Index Fund 72,802,490 66,425,529
First Trust Dow Jones Internet Index(SM) Fund 61,663,351 187,285,703
First Trust Strategic Value Index Fund 8,516,649 10,831,536
First Trust Value Line(R) Equity Allocation Index Fund 4,818,326 7,475,504
First Trust Value Line(R) Dividend Index Fund 175,175,998 100,605,935
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 13,702,964 9,069,223
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund -- 4,274,174
First Trust S&P REIT Index Fund 80,912,398 64,350,499
First Trust ISE Water Index Fund 1,082,118 2,116,534
First Trust ISE-Revere Natural Gas Index Fund 187,199,170 102,984,107
First Trust ISE Chindia Index Fund 2,019,027 18,226,901
First Trust Value Line(R) 100 Exchange-Traded Fund 30,975,955 38,872,610
First Trust NASDAQ(R) ABA Community Bank Index Fund 3,776,775 6,198,842
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.
Page 115
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
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, the Funds will not pay 12b-1 fees any time before April 30, 2013.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Funds use to determine how
to vote proxies and information on how each Fund voted proxies relating to its
portfolio securities during the period ended June 30, 2012 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 a 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 Form N-Q is 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.
ADVISORY AGREEMENT
Board Considerations regarding Approval of Continuation of Advisory Contract
The Board of Trustees of the First Trust Exchange-Traded Fund (the "Trust"),
including the Independent Trustees, 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, 2013, for each Fund at a meeting held on March 11-12, 2012. 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 services,
expenses 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 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
exchange-traded funds ("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, 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. The Board also considered that the Agreement was approved by
shareholders of each Fund at meetings held in December 2010 and January 2011.
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
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, quality and extent 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, 2013. For each Fund, the Board noted that
expenses borne 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 by the Advisor. The Board considered the fees charged by
the Advisor to other ETFs and other advisory clients with investment objectives
and policies similar to the Funds', noting that those fees generally were
similar to the fees charged to the Funds. In addition, the Board received data
prepared by Lipper showing the management fees and expense ratios of each Fund
as compared to the Fund's Lipper Expense Group. Because each Fund's Lipper
Expense Group included peer funds that pay a unitary fee, the Board determined
that the Funds' expense ratios were the more relevant data point. Based on the
information provided, the Board noted that the total (net) expense ratios of
FPX, QQEW, FCG, QQXT, FNI, QCLN and FIW were at or below the median of each
Fund's respective Lipper Expense Group and that the total (net) expense ratios
of FDL, QTEC, FDN, FVD, FBT, QABA, FDV, FRI, FVL, FVI and FDM were above the
median of each Fund's respective Lipper Expense Group. The Board discussed with
representatives of the Advisor the limitations in creating a relevant peer group
for each Fund, including that (i) many of the Funds are unique in their
composition, which makes assembling peers with similar strategies and asset mix
difficult and (ii) many of the peer funds are larger than the Funds, which
causes the Funds' fixed expenses to be higher on a percentage basis as compared
to the larger peer funds. The Board took these limitations into account in
considering the Lipper data. The Board also considered information regarding
First Trust ETFs from a February 2012 report from Cogent Research on ETF
investors.
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. In addition, the Board received
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, quality and extent
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 concluded that the advisory fee for
each Fund reflects an appropriate level of sharing of any economies of scale at
current 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, 2011, 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
2011 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 Trust and each Fund. No single factor
was determinative in the Board's analysis.
LICENSING INFORMATION
Dow Jones, Dow Jones Internet Composite Index(SM) 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. "Dow Jones(R)", "Dow
Jones Internet Composite Index(SM)", "Dow Jones Select MicroCap Index(SM)" and
"Dow Jones Indexes" are service marks of Dow Jones Trademark Holdings, LLC ("Dow
Jones") and have been licensed to CME and have been sublicensed for use for
certain purposes by First Trust on behalf of the Funds. The First Trust Dow
Jones Select MicroCap Index(SM) Fund, based on the Dow Jones Select MicroCap
Index(SM) and
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
the First Trust Dow Jones Internet Index(SM) Fund, based on the Dow Jones
Internet Composite Index(SM), are 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 such Funds.
Morningstar is a service mark of Morningstar, Inc. and has been licensed for
use. 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. MORNINGSTAR MAKES NO WARRANTIES AND BEARS NO LIABILITIES WITH RESPECT
TO THE FUND.
The First Trust US IPO Index 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. IPOX(R)'s only relationship to First Trust is the licensing
of certain trademarks and trade names of IPOX(R) and of the U.S. IPOX(R) 100
Index, which is determined, composed and calculated by IPOX(R) without regard to
First Trust or the Fund. IPOX(R) IS A REGISTERED INTERNATIONAL TRADEMARK OF
IPOX(R) SCHUSTER LLC AND IPOX(R) SCHUSTER, IPOX(R)-100 AND IPOX(R)-30 ARE
TRADEMARKS AND SERVICE MARKS OF IPOX(R) SCHUSTER LLC (WWW.IPOXSCHUSTER.COM) AND
HAVE BEEN LICENSED FOR CERTAIN PURPOSES FROM IPOX(R) SCHUSTER LLC TO FIRST TRUST
PURSUANT TO THE PRODUCT LICENSE AGREEMENT. A PATENT WITH RESPECT TO THE IPOX(R)
INDEX METHODOLOGY HAS BEEN ISSUED (U.S. PAT. NO. 7,698,197).
NASDAQ(R), NASDAQ-100(R), NASDAQ-100 Index(R), NASDAQ-100 Technology Sector
Index(SM), NASDAQ-100 Equal-Weighted Index(SM), and NASDAQ-100 Ex-Tech Sector
Index(SM), are trademarks of The NASDAQ OMX Group, Inc. ("NASDAQ OMX") or its
affiliates (NASDAQ OMX with its affiliates are referred to as the
"Corporations") and are licensed for use by First Trust Advisors L.P. First
Trust NASDAQ-100 Equal Weighted Index(SM) Fund, First Trust NASDAQ-100
Ex-Technology Sector Index(SM) Fund and the First Trust NASDAQ-100-Technology
Sector Index(SM) Fund have not been passed on by the Corporations as to their
legality or suitability. These Funds are not issued, endorsed, sold, or promoted
by the Corporations and should not be construed in anyway as investment advice
by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY
WITH RESPECT TO THESE FUNDS.
NASDAQ(R) and Clean Edge(R) are the registered trademarks (the "Marks") of The
NASDAQ OMX Group, Inc. ("NASDAQ OMX"), Clean Edge(R) or their affiliates (NASDAQ
OMX and Clean Edge(R), collectively with their affiliates, are referred to
herein as the "Corporations"). The Marks are licensed for use by First Trust
Advisors L.P. The Fund has not been passed on by the Corporations as to its
legality or suitability. The First Trust NASDAQ(R) Clean Edge(R) Green Energy
Index Fund is not issued, endorsed, sold, or promoted by the Corporations and
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.
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"), American Bankers
Association ("ABA") or their affiliates (NASDAQ OMX and ABA, collectively with
their affiliates, are referred to as the "Corporations") and are licensed for
use by First Trust Advisors L.P. The First Trust NASDAQ(R) ABA Community Bank
Index 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.
The NYSE Arca Biotechnology Index(SM) is a trademark of the NYSE Euronext or its
affiliates ("NYSE Euronext") and is licensed for use by First Trust Advisors
L.P. The First Trust NYSE Arca Biotechnology Index Fund is not sponsored or
endorsed by the 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. NYSE
EURONEXT MAKES NO WARRANTIES AND BEARS NO LIABILITIES WITH REPSECT TO THE FUND.
"Credit Suisse", "HOLT" and "Credit Suisse U.S. Value Index, Powered by
HOLT(TM)," are trademarks of Credit Suisse Group, 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. THE FIRST TRUST STRATEGIC
VALUE INDEX FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY CREDIT SUISSE
OR THE INDEX CALCULATION AGENT, AND CREDIT SUISSE AND THE INDEX CALCULATION
AGENT MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, REGARDING THE
ADVISABILITY OF INVESTING OR TRADING IN SUCH PRODUCT(S) OR IN SECURITIES
GENERALLY, THE RESULTS TO BE OBTAINED FROM THE USE OF THE CREDIT SUISSE US VALUE
INDEX, POWERED BY HOLT, THE FIGURE AT WHICH THE SAID INDEX STANDS AT ANY
PARTICULAR TIME ON ANY PARTICULAR DAY OR OTHERWISE. CREDIT SUISSE MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
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FIRST TRUST EXCHANGE-TRADED FUND
JUNE 30, 2012 (UNAUDITED)
OR USE WITH RESPECT TO THE CREDIT SUISSE US VALUE INDEX, POWERED BY HOLT(TM) OR
ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL CREDIT SUISSE OR THE INDEX CALCULATION AGENT HAVE ANY LIABILITY FOR ANY
LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING
LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. THERE ARE NO
THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN CREDIT
SUISSE AND FIRST TRUST.
"Value Line(R)", "Value Line(R) Equity Allocation Index(TM)", "Value Line(R)
Dividend Index(TM)" 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
Advisors L.P. on behalf of the Funds. The First Trust Value Line(R) Equity
Allocation Index Fund, based on the Value Line(R) Equity Allocation Index(TM),
the First Trust Value Line(R) Dividend Index Fund, based on the Value Line(R)
Dividend Index(TM) and the First Trust Value Line(R) 100 Exchange-Traded Fund,
based on the Value Line(R) 100 Index(TM), are 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 Funds.
Standard & Poor's(R) and S&P(R) are registered trademarks of Standard & Poor's
Financial Services LLC ("S&P") and have been licensed for use by First Trust
Advisors L.P. The First Trust S&P REIT Index 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.
"International Securities Exchange(TM)", "ISE(TM)", "ISE Water Index(TM)", "ISE
ChIndia Index(TM)" and the "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 Advisors L.P. Each of the First Trust ISE
Chindia Index Fund, First Trust ISE-Revere Natural Gas Index Fund and First
Trust ISE Water Index Fund, based on its corresponding index, 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 Funds.
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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.
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.
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The First Trust NASDAQ-100 Equal Weighted Index(SM) Fund, the First Trust
NASDAQ-100-Technology Sector Index(SM) Fund and the First Trust Dow Jones
Internet 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.
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 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.
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 Morningstar Dividend Leaders(SM) Index Fund, First Trust S&P
REIT Index Fund, First Trust Value Line(R) Dividend 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 US IPO Fund, the First Trust Dow Jones Internet Index(SM) Fund,
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 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 Strategic Value Index Fund and the First Trust NASDAQ-100
Ex-Technology Sector 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.
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With the exception of First Trust Strategic Value Index Fund 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 ISE Chindia Index Fund, the First Trust ISE-Revere Natural Gas Index
Fund, the First Trust ISE Water Index Fund and the First Trust Value Line(R) 100
Exchange-Traded 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.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
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FIRST TRUST
First Trust Exchange-Traded Fund
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
101 Barclay Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
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