UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-21944
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First Trust Exchange-Traded Fund II
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 765-8000
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Date of fiscal year end: September 30
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Date of reporting period: March 31, 2011
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
The registrant's semi-annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
First Trust
First Trust Exchange-Traded Fund II
First Trust STOXX(R) European Select Dividend Index Fund
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund
First Trust Dow Jones Global Select Dividend Index Fund
First Trust ISE Global Wind Energy Index Fund
First Trust ISE Global Engineering and Construction Index Fund
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund
First Trust ISE Global Copper Index Fund
First Trust ISE Global Platinum Index Fund
First Trust BICK Index Fund
First Trust NASDAQ CEA Smartphone Index Fund
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Semi-Annual Report
March 31, 2011
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Front Cover
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TABLE OF CONTENTS
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First Trust Exchange-Traded Fund II
March 31, 2011
Shareholder Letter ........................................................... 2
Market Overview .............................................................. 3
Fund Performance Overview
First Trust STOXX(R) European Select Dividend Index Fund. .............. 4
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund... 6
First Trust Dow Jones Global Select Dividend Index Fund ................ 8
First Trust ISE Global Wind Energy Index Fund ..........................10
First Trust ISE Global Engineering and Construction Index Fund .........12
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index
Fund.................................................................14
First Trust ISE Global Copper Index Fund ...............................16
First Trust ISE Global Platinum Index Fund .............................18
First Trust BICK Index Fund ............................................20
First Trust NASDAQ CEA Smartphone Index Fund ...........................22
Notes to Fund Performance Overview ...........................................24
Understanding Your Fund Expenses .............................................25
Portfolio of Investments
First Trust STOXX(R) European Select Dividend Index Fund ...............27
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund ..29
First Trust Dow Jones Global Select Dividend Index Fund ................34
First Trust ISE Global Wind Energy Index Fund ..........................37
First Trust ISE Global Engineering and Construction Index Fund .........39
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index
Fund.................................................................41
First Trust ISE Global Copper Index Fund ...............................42
First Trust ISE Global Platinum Index Fund .............................43
First Trust BICK Index Fund ............................................44
First Trust NASDAQ CEA Smartphone Index Fund ...........................46
Statements of Assets and Liabilities .........................................48
Statements of Operations .....................................................52
Statements of Changes in Net Assets ..........................................56
Financial Highlights .........................................................62
Notes to Financial Statements ................................................67
Additional Information .......................................................76
Risk Considerations...........................................................78
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
First Trust Exchange-Traded Fund II (the "Trust") 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 series of the Trust described in this report
(each such series is referred to as a "Fund" and collectively, the "Funds") 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 Investment Officer
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 II
MESSAGE FROM THE PRESIDENT
MARCH 31, 2011
Dear Shareholders:
I'm pleased to present you with the semi-annual report for your investment in
First Trust Exchange-Traded Fund II.
First Trust Advisors L.P. ("First Trust") has always believed that staying
invested in quality products and having a long-term horizon can help investors
reach their financial goals. Successful investors understand that the success
they have achieved is typically because of their long-term investment
perspective through all kinds of markets. While the past two years were
challenging, during 2010 the markets were recovering from their lows of
2008-2009, and the market continued this trend in the first quarter of this
year.
The report you hold gives detailed information for the past six months about the
Funds that comprise the First Trust Exchange-Traded Fund II. It contains each
Fund's performance review and financial statements for the period. I encourage
you to read this document and discuss it with your financial advisor.
First Trust has been through many types of markets. That's why we remain
committed to being a long-term investor and investment manager and to bringing
you quality investment solutions regardless of the inevitable volatility the
market experiences. We offer a variety of products that may fit many financial
plans to help those investors seeking long-term investment success. You may want
to talk to your advisor about the investments First Trust offers that might also
fit your financial goals.
First Trust is committed to making available up-to-date information about your
investments so you and your financial advisor have current information on your
portfolio. We continue to value our relationship with you, and we thank you for
the opportunity to assist you in achieving your financial goals. I look forward
to the remainder of 2011 and to the next edition of the Fund's report.
Sincerely,
/s/ James A. Bowen
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James A. Bowen
President of First Trust Exchange-Traded Fund II
Page 2
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MARKET OVERVIEW
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FIRST TRUST EXCHANGE-TRADED FUND II
SEMI-ANNUAL REPORT
MARCH 31, 2011
ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of research and analysis of
the First Trust product line. Mr. Carey has 23 years of experience as an Equity
and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst
("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE GLOBAL ECONOMY
The International Monetary Fund (IMF) expects the global economy to expand at a
rate of approximately 4.5% in both 2011 and 2012, according to its World
Economic Outlook released in April. The IMF sees emerging and developing
economies growing at 6.5%, compared to only 2.5% for advanced economies. This
outlook is fairly consistent with the climate that existed prior to the start of
the subprime mortgage meltdown/credit crisis, which commenced in the second half
of 2007. The Blue Chip Economic Indicators survey of 53 economists in April
revealed a U.S. GDP forecast growth rate of 2.9% for 2011 and 3.2% for 2012. The
average GDP growth rate in the U.S. over the past 20 years (3/91-3/11) was 2.6%,
according to Bloomberg.
The U.S., as usual, is playing an integral role in shaping the global growth
story. The Federal Reserve's monetary policy remains a hot-button issue,
particularly with other central bankers and governments. The Fed has kept the
federal funds target rate at 0-0.25% for over 27 months in an effort to
stimulate growth in the U.S. While inflation has yet to rise in a meaningful way
(still under the long-term average of 3.0%) it has spiked in some key emerging
economies, including Brazil, India and China. The central banks in each of these
three countries have raised their benchmark rates multiple times to try and curb
rising inflation. Investors have taken notice as well, and have funneled
substantial amounts of capital into such hard assets as gold, silver and various
metals and mining companies. The extremely low level of interest rates in the
U.S. has devalued the dollar. Commodities and precious metals are traditional
hedges against a weak dollar. The dollar declined 3.8% against a basket of major
currencies for the 6-month period ended March 31, 2011, and was down 18.0% since
the end of the bear market on March 9, 2009.
The weakness in the dollar has wreaked havoc with the price of oil, which, like
most commodities, is priced in dollars. The price of a barrel of crude oil
surged 33.5% from $79.97 on September 30, 2010 to $106.72 on March 31, 2011.
OPEC has stated that it believes $100 oil will not derail the global economy. It
could, however, stimulate more interest in alternative forms of energy, such as
wind and solar.
GLOBAL MARKETS
Investors poured a net $33.8 billion into International/Global Equity/Hybrid
funds, including ETFs, in the first quarter of 2011, according to Strategic
Insight, LLC. At that pace, net inflows would surpass the $110.6 billion total
for 2010.
For the 6-month period ended March 31, 2011, the MSCI World (ex U.S.) Index and
MSCI Emerging Markets Index were up 11.5% (USD) and 9.5% (USD), respectively.
The S&P 500 Index outperformed both with a gain of 17.3%.
With respect to the debt markets, the Barclays Capital Global Aggregate Index
and Barclays Capital Global Emerging Markets Index returned -0.1% (USD) and 1.2%
(USD), respectively. The top performing U.S. bond group was the Barclays Capital
U.S. Corporate High Yield Index, up 7.2%.
Page 3
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FUND PERFORMANCE OVERVIEW
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FDD - FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND
First Trust STOXX(R) European Select Dividend Index Fund, formerly known as
First Trust Dow Jones STOXX(R) European Select Dividend Index Fund (the "Fund"),
seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the STOXX(R)
Europe Select Dividend 30 Index (the "STOXX Index"). The shares of the Fund are
listed and trade on the NYSE Arca, Inc. under the ticker symbol "FDD." The Fund
will normally invest at least 90% of its assets in non-U.S. common stocks that
comprise the STOXX Index or in depositary receipts that may include American
Depositary Receipts, Global Depositary Receipts, European Depositary Receipts or
other depositary receipts (collectively, the "Depositary Receipts") representing
securities in the STOXX Index.
The STOXX Index consists of 30 high dividend-yielding securities selected from
the STOXX(R) Europe 600 Index, including secondary lines of those companies
(where there are multiple lines of equity capital in a company), which covers 18
European countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece,
Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain,
Sweden, Switzerland and the United Kingdom. The STOXX Index is compiled and
maintained by STOXX Limited. Only dividend-paying companies in the STOXX(R)
Europe 600 Index (including secondary lines of those companies) are considered
for inclusion in the STOXX Index. In addition, a company must have a
non-negative five-year dividend-per-share growth rate and a dividend-to-earnings
ratio of 60% or less.
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PERFORMANCE AS OF MARCH 31, 2011
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Average Annual Cumulative
Total Returns Total Returns
6 Months Ended 1 Year Ended Inception (08/27/07) Inception (08/27/07)
03/31/11 03/31/11 to 03/31/11 to 03/31/11
FUND PERFORMANCE
NAV 10.69% 12.44% -14.55% -43.18%
Market Price 11.45% 13.45% -14.40% -42.82%
INDEX PERFORMANCE
STOXX(R) Europe Select Dividend 30 Index(1) 10.88% 12.89% -13.89% -41.56%
STOXX(R) Europe 600 Index(2) 11.39% 12.81% -4.20% -14.27%
MSCI Europe Index 11.25% 12.62% -4.36% -14.80%
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(1) Formerly known as the Dow Jones STOXX(R) Select Dividend 30 Index.
(2) Formerly known as the Dow Jones STOXX(R) 600 Index.
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund's six-month net asset value ("NAV") return of +10.69% underperformed
the benchmark MSCI Europe Index return of +11.25% by -0.56%. During the period
covered, the U.S. dollar weakened relative to the currencies held in the
portfolio. The dollar lost -3.7% versus the Euro, while giving up -2.0% against
the British Pound Sterling. Since the Fund invests in foreign securities in
their local currency, this U.S. dollar weakness contributed +3.8% to the Fund's
total return during the period. In addition to the strong currency return,
financial stocks also fared well on a local basis. Two of the largest positions
in the Fund, Provident Financial PLC and Man Group PLC were top contributors to
the Fund's total return. The companies, which both returned more than 14%
(local), represent significant exposure to the European lending market and asset
management business. The Fund's exposure to weak-performing drug makers
AstraZeneca PLC and GlaxoSmithKline PLC caused the Health Care sector to be the
only sector in negative territory during the period.
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"STOXX," "STOXX(R) Europe 600 Index" and "STOXX(R) Europe Select Dividend 30
Index" are trademarks of STOXX(R) Limited ("STOXX") and have been licensed for
use for certain purposes by First Trust and the Fund. The Fund, based on the
STOXX(R) Europe Select Dividend 30 Index, is not sponsored, endorsed, sold or
promoted by STOXX and STOXX does not make any representation regarding the
advisability of trading or investing in such product.
Page 4
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FDD - FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND (CONTINUED)
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PORTFOLIO SECTOR ALLOCATION AS OF MARCH 31, 2011
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% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Financials 41.59%
Telecommunication Services 21.74
Utilities 20.27
Health Care 6.83
Industrials 2.88
Materials 2.29
Consumer Discretionary 2.21
Energy 2.19
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Total 100.00%
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TOP TEN PORTFOLIO HOLDINGS AS OF MARCH 31, 2011
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% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Man Group PLC 4.97%
Banco Santander S.A. 4.69
France Telecom S.A. 4.55
Provident Financial PLC 4.30
Zurich Financial Services AG 4.21
Catlin Group Ltd. 4.16
Belgacom S.A. 4.09
RSA Insurance Group PLC 4.02
Scottish & Southern Energy PLC 3.99
Koninklijke (Royal) KPN N.V. 3.80
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Total 42.78%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 27, 2007 - MARCH 31, 2011
FUND/INDEX 8/27/07 9/30/07 3/31/08 9/30/08 3/31/09 9/30/09 3/31/10 9/30/10 3/31/11
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First Trust STOXX(R) European Select Dividend
Index Fund $10,000 $10,323 $ 8,841 $ 5,562 $ 3,201 $ 5,182 $ 5,053 $ 5,133 $ 5,682
STOXX(R) Europe Select Dividend 30 Index 10,000 10,304 9,039 5,539 3,263 5,275 5,178 5,271 5,844
STOXX(R) Europe 600 Index 10,000 10,622 9,670 7,333 4,836 7,484 7,600 7,697 8,573
MSCI Europe Index 10,000 10,636 9,675 7,347 4,846 7,462 7,565 7,658 8,520
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 THROUGH MARCH 31, 2011
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period August 30, 2007 (commencement
of trading) through March 31, 2011. 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%
8/30/07 - 9/30/07 7 9 4 0
10/1/07 - 9/30/08 38 55 74 30
10/1/08 - 9/30/09 34 27 43 84
10/1/09 - 9/30/10 49 28 14 11
10/1/10 - 3/31/11 49 37 3 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%
8/30/07 - 9/30/07 1 0 0 0
10/1/07 - 9/30/08 25 12 10 9
10/1/08 - 9/30/09 19 18 15 12
10/1/09 - 9/30/10 57 46 36 11
10/1/10 - 3/31/11 30 7 0 0
Page 5
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FFR - FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund, formerly
known as the First Trust FTSE EPRA/NAREIT Global Real Estate Index Fund (the
"Fund"), seeks investment results that correspond generally to the price and
yield (before the Fund's fees and expenses) of an equity index called the FTSE
EPRA/NAREIT Developed Index, which was formerly known as the FTSE EPRA/NAREIT
Global Real Estate Index (the "FTSE Index"). The shares of the Fund are listed
and trade on the NYSE Arca, Inc. under the ticker symbol "FFR." The Fund will
normally invest at least 90% of its assets in common stocks that comprise the
FTSE Index or in Depositary Receipts representing securities in the FTSE Index.
The FTSE Index is compiled and maintained by FTSE International Limited. The
FTSE Index is modified market cap weighted based on free float market
capitalization and tracks the performance of listed real estate companies or
real estate investment trusts ("REITs") in North America, Europe and Asia. The
FTSE Index is comprised of the FTSE EPRA/NAREIT North America Series, the FTSE
EPRA/NAREIT Europe Series and the FTSE EPRA/NAREIT Asia Series.
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PERFORMANCE AS OF MARCH 31, 2011
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Average Annual Cumulative
Total Returns Total Returns
6 Months Ended 1 Year Ended Inception (08/27/07) Inception (08/27/07)
03/31/11 03/31/11 to 03/31/11 to 03/31/11
FUND PERFORMANCE
NAV 8.88% 18.41% -5.01% -16.85%
Market Price 9.10% 18.43% -4.89% -16.49%
INDEX PERFORMANCE
FTSE EPRA/NAREIT Developed Index 9.38% 19.34% -4.09% -13.94%
S&P Global REIT Index 13.03% 23.79% -3.09% -10.66%
MSCI World REIT Index 13.81% 23.24% -5.68% -18.93%
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(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund's six-month NAV return of +8.88% underperformed the benchmark S&P
Global REIT Index return of +13.03% by -4.15%. During the period covered, the
U.S. dollar weakened relative to the currencies held in the portfolio. The
dollar lost -3.7% versus the Euro, while giving up -2.0% against the British
Pound Sterling. Since the Fund invests in foreign securities in their local
currency, this U.S. dollar weakness contributed +1.7% to the Fund's total return
during the period. The Fund's largest U.S. holding, Simon Property Group, Inc.
returned +17.3% to the Fund, as the company rallied on the heels of 8 months of
consecutive increases in U.S. retail sales numbers. Elsewhere, the Fund's
largest holding, Sun Hung Kai Properties Ltd. (based in Hong Kong), struggled
returning -6.0% (local) to the Fund.
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The FTSE EPRA/NAREIT Developed Index is calculated by FTSE International Limited
("FTSE"). FTSE does not sponsor, endorse or promote the First Trust FTSE
EPRA/NAREIT Developed Markets Real Estate Index Fund. All copyright in the index
values and constituent list vests in FTSE and/or its licensors. First Trust and
the Fund have obtained full license from FTSE to use such copyright in the
creation of the First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index
Fund. "FTSE(R)", "FT-SE(R)" and "Footsie(R)" are trademarks jointly owned by the
London Stock Exchange Plc and the Financial Times Limited and are used by FTSE
under license. "NAREIT(R)" is the trademark of the National Association of Real
Estate Investment Trusts and "EPRA(R)" is the trademark of the European Public
Real Estate Association and are used by FTSE under license. FFR - FIRST TRUST
FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND (CONTINUED)
Page 6
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FFR - First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index
Fund (Continued)
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PORTFOLIO SECTOR ALLOCATION AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Financials 99.85%
Consumer Discretionary 0.15
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Total 100.00%
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TOP TEN PORTFOLIO HOLDINGS AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Simon Property Group, Inc. 3.80%
Sun Hung Kai Properties Ltd. 3.69
Westfield Group 2.70
Unibail-Rodamco S.A. 2.40
Mitsubishi Estate Co., Ltd. 2.12
Equity Residential 2.01
Vornado Realty Trust 1.93
Mitsui Fudosan Co., Ltd. 1.77
Public Storage 1.72
HCP, Inc. 1.70
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Total 23.84%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 27, 2007 - MARCH 31, 2011
FUND/INDEX 8/27/07 9/30/07 3/31/08 9/30/08 3/31/09 9/30/09 3/31/10 9/30/10 3/31/11
---------- ------- ------- ------- ------- ------- ------- ------- ------- -------
First Trust FTSE EPRA/NAREIT Developed Markets
Real Estate Index Fund $10,000 $10,686 $ 9,012 $ 7,443 $ 3,849 $ 6,500 $ 7,022 $ 7,636 $ 8,315
FTSE EPRA/NAREIT Developed Index 10,000 10,693 9,057 7,420 3,909 6,645 7,212 7,868 8,606
S&P Global REIT Index 10,000 10,590 9,162 7,992 3,833 6,541 7,216 7,903 8,934
MSCI World REIT Index 10,000 10,656 9,061 7,901 3,678 6,086 6,578 7,124 8,107
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 THROUGH MARCH 31, 2011
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period August 30, 2007 (commencement
of trading) through March 31, 2011. 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%
8/30/07 - 9/30/07 9 10 1 0
10/1/07 - 9/30/08 58 63 48 11
10/1/08 - 9/30/09 44 48 40 49
10/1/09 - 9/30/10 109 64 14 9
10/1/10 - 3/31/11 96 24 1 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%
8/30/07 - 9/30/07 1 0 0 0
10/1/07 - 9/30/08 35 21 12 5
10/1/08 - 9/30/09 16 17 12 26
10/1/09 - 9/30/10 32 22 2 0
10/1/10 - 3/31/11 5 0 0 0
Page 7
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FGD - FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND
First Trust Dow Jones Global Select Dividend Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Dow Jones Global Select
Dividend Index(SM) (the "Select Dividend Index"). The shares of the Fund are
listed and trade on the NYSE Arca, Inc. under the ticker symbol "FGD." The Fund
will normally invest at least 90% of its assets in common stocks that comprise
the Select Dividend Index or in Depositary Receipts representing securities in
the Select Dividend Index.
The Select Dividend Index is an indicated annual dividend yield weighted index
of 100 stocks selected from the developed-market portion of the Dow Jones World
Index(SM). Indicated annual dividend yield is a stock's unadjusted indicated
annual dividend (not including any special dividends) divided by its unadjusted
price.
--------------------------------------------------------------------------------
PERFORMANCE AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
Total Returns Total Returns
6 Months Ended 1 Year Ended Inception (11/21/07) Inception (11/21/07)
03/31/11 03/31/11 to 03/31/11 to 03/31/11
FUND PERFORMANCE
NAV 11.36% 18.31% -1.04% -3.46%
Market Price 11.77% 18.94% -0.87% -2.88%
INDEX PERFORMANCE
Dow Jones Global Select Dividend Index(SM) 11.51% 18.44% -0.87% -2.88%
Dow Jones World Developed Markets Index(SM) 14.80% 14.68% -1.17% -3.88%
MSCI World Index 14.18% 13.45% -2.12% -6.92%
------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund's six-month NAV return of +11.36% underperformed the benchmark MSCI
World Index return of +14.18% by -2.82%. During the period covered, the U.S.
dollar weakened relative to the currencies held in the portfolio. The dollar
lost -3.7% versus the Euro, while giving up -2.0% against the British Pound
Sterling. Since the Fund invests in foreign securities in their local currency,
this U.S. dollar weakness contributed +4.1% to the Fund's total return during
the period. In addition to the strong currency return, financial stocks also
fared well on a local basis, contributing the most to the Fund's total local
return. One of the largest positions in the Fund, Provident Financial PLC, the
U.K.'s biggest subprime lender, returned +20.4% (local) during the period. The
Industrials sector was the strongest sector in the Fund, in terms of total
return (+19.2% local), as several component securities announced strong revenue
increases, in addition to enhanced margins. Russel Metals, Inc. (+31.6% local),
a Canadian-based steel company, was one of the Fund's top-performing stocks
during the period.
-------------------
Dow Jones and Dow Jones Global Select Dividend Index(SM) are trademarks of Dow
Jones & Company, Inc. ("Dow Jones") and have been licensed for use for certain
purposes by First Trust and the Fund. The Fund, based on the Dow Jones Global
Select Dividend Index(SM), is not sponsored, endorsed, sold or promoted by Dow
Jones and Dow Jones makes no representation regarding the advisability of
trading or investing in such product.
Page 8
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FGD - FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND (CONTINUED)
--------------------------------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Telecommunication Services 24.09%
Financials 19.01
Utilities 18.02
Industrials 9.71
Energy 6.25
Consumer Staples 6.10
Consumer Discretionary 5.63
Materials 4.41
Health Care 3.96
Information Technology 2.82
--------
Total 100.00%
========
--------------------------------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Cable & Wireless Communications
PLC 1.93%
Bell Aliant, Inc. 1.85
Telstra Corp. Ltd. 1.77
Telecom Corp. of New Zealand Ltd. 1.69
Canadian Oil Sands Ltd. 1.68
Deutsche Telekom AG 1.51
France Telecom S.A. 1.49
Colruyt S.A. 1.48
Provident Financial PLC 1.46
Mobistar S.A. 1.42
-------
Total 16.28%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 21, 2007 -MARCH 31, 2011
FUND/INDEX 11/21/07 3/31/08 9/30/08 3/31/09 9/30/09 3/31/10 9/30/10 3/31/11
---------- -------- ------- ------- ------- ------- ------- ------- -------
First Trust Dow Jones Global Select Dividend
Index Fund $10,000 $ 9,345 $ 7,028 $ 4,375 $ 7,857 $ 8,160 $ 8,669 $ 9,654
Dow Jones Global Select Dividend Index(SM) 10,000 9,362 6,925 4,380 7,873 8,200 8,709 9,712
Dow Jones World Developed Markets Index(SM) 10,000 9,379 7,816 5,416 7,765 8,381 8,372 9,612
MSCI World Index 10,000 9,378 7,815 5,385 7,636 8,204 8,152 9,308
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 THROUGH MARCH 31, 2011
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period November 27, 2007
(commencement of trading) through March 31, 2011. 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%
11/27/07 - 9/30/08 21 22 54 69
10/1/08 - 9/30/09 22 33 59 71
10/1/09 - 9/30/10 129 53 8 3
10/1/10 - 3/31/11 56 68 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%
11/27/07 - 9/30/08 17 6 12 12
10/1/08 - 9/30/09 17 12 22 16
10/1/09 - 9/30/10 47 11 1 0
10/1/10 - 3/31/11 2 0 0 0
Page 9
-------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
-------------------------------------------------------------------------------
FAN - FIRST TRUST ISE GLOBAL WIND ENERGY INDEX FUND
First Trust ISE Global Wind 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 ISE Global Wind Energy Index (the
"ISE Index"). The shares of the Fund are listed and trade on the NYSE Arca, Inc.
under the ticker symbol "FAN." The Fund will normally invest at least 90% of its
assets in common stocks that comprise the ISE Index or in Depositary Receipts
representing securities in the ISE Index. The ISE Index was developed and is
owned by the International Securities Exchange, LLC, in consultation with
Standard & Poor's, a Division of The McGraw-Hill Companies, Inc., which
calculates and maintains the ISE Index. The ISE Index provides a benchmark for
investors interested in tracking public companies throughout the world that are
active in the wind energy industry based on analysis of the products and
services offered by those companies.
--------------------------------------------------------------------------------
PERFORMANCE AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
Average Annual Cumulative
Total Returns Total Returns
6 Months Ended 1 Year Ended Inception (06/16/08) Inception (06/16/08)
03/31/11 03/31/11 to 03/31/11 to 03/31/11
FUND PERFORMANCE
NAV 14.59% -11.20% -27.60% -59.38%
Market Price 15.71% -10.12% -27.43% -59.10%
INDEX PERFORMANCE
ISE Global Wind Energy Index 14.78% -10.41% -26.97% -58.38%
Russell 3000(R) Index 18.71% 17.41% 2.04% 5.81%
MSCI World Index 14.18% 13.45% -1.28% -3.52%
--------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund's six-month NAV return of +14.59% outperformed the benchmark MSCI World
Index return of +14.18% by +0.41%. During the period covered, the U.S. dollar
weakened relative to the currencies held in the portfolio. The dollar lost -3.7%
versus the Euro, while giving up -2.0% against the British Pound Sterling. Since
the Fund invests in foreign securities in their local currency, this U.S. dollar
weakness contributed +3.1% to the Fund's total return during the period. From a
local perspective, component securities had one of the best 6 month periods of
performance in recent history. As European credit conditions have relaxed, in
addition to fiscal policy becoming more accommodating towards wind energy, many
of the Fund's holdings have rallied off of their lows. Gamesa Corp. Technologies
S.A., (+42.9% local), the Spanish maker of wind turbines, is one example of a
company benefitting from a stronger equity environment in Europe, in addition to
stronger footing for the wind energy industry. The stock was the top-performing
Spanish holding, and overall one of the Fund's top performers.
-------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE Global Wind Energy
Index" are trademarks of the International Securities Exchange(TM) and have been
licensed for use for certain purposes by First Trust. The Fund, based on the ISE
Global Wind Energy Index, is not sponsored, endorsed, sold or promoted by the
International Securities Exchange(TM) and the International Securities
Exchange(TM) makes no representation regarding the advisability of trading in
such product.
Page 10
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FAN - FIRST TRUST ISE GLOBAL WIND ENERGY INDEX FUND (CONTINUED)
--------------------------------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Utilities 51.04%
Industrials 40.86
Energy 6.12
Materials 1.41
Consumer Discretionary 0.57
-------
Total 100.00%
=======
--------------------------------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Vestas Wind Systems A/S 9.03%
Iberdrola Renovables S.A. 8.03
EDP Renovaveis S.A. 7.96
Gamesa Corp. Tecnologica S.A. 7.37
Repower Systems AG 6.11
China Longyuan Power Group Corp.,
Class H 5.93
China WindPower Group Ltd. 4.09
Nordex AG 3.81
Fersa Energias Renovables S.A. 3.38
Hansen Transmissions International 3.03
------
Total 58.74%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 16, 2008 -MARCH 31, 2011
FUND/INDEX 6/16/08 9/30/08 3/31/09 9/30/09 3/31/10 9/30/10 3/31/11
---------- ------- ------- ------- ------- ------- ------- -------
First Trust ISE Global Wind Energy Index Fund $10,000 $ 6,370 $ 3,502 $ 5,461 $ 4,574 $ 3,544 $ 4,062
ISE Global Wind Energy Index 10,000 6,314 3,515 5,512 4,646 3,626 4,162
Russell 3000(R) Index 10,000 8,583 5,912 8,032 9,011 8,912 10,581
MSCI World Index 10,000 8,101 5,582 7,916 8,505 8,451 9,648
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 THROUGH MARCH 31, 2011 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, 2008 (commencement of trading) through March 31,
2011. 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%
6/18/08 - 9/30/08 24 17 13 2
10/1/08 - 9/30/09 57 52 40 11
10/1/09 - 9/30/10 77 18 1 0
10/1/10 - 3/31/11 44 11 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%
6/18/08 - 9/30/08 6 1 8 2
10/1/08 - 9/30/09 41 30 17 4
10/1/09 - 9/30/10 108 41 7 0
10/1/10 - 3/31/11 59 12 0 0
Page 11
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FLM - FIRST TRUST ISE GLOBAL ENGINEERING AND CONSTRUCTION INDEX FUND
First Trust ISE Global Engineering and Construction Index Fund (the "Fund")
seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of the ISE Global Engineering and
Construction(TM) Index (the "Index"). The shares of the Fund are listed and
trade on the NYSE Arca, Inc. under the ticker symbol "FLM." The Fund will
normally invest in all of the securities (including applicable Depositary
Receipts) comprising the Index in proportion to their weightings in the Index.
The Index was developed and is owned by the International Securities Exchange,
LLC, in consultation with Standard & Poor's, a Division of The McGraw-Hill
Companies, Inc., which calculates and maintains the Index. The Index provides a
benchmark for investors interested in tracking public companies throughout the
world that are active in the engineering and construction industries, based on
analysis of the products and services offered by those companies.
--------------------------------------------------------------------------------
PERFORMANCE AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
Average Annual Cumulative
Total Returns Total Returns
6 Months Ended 1 Year Ended Inception (10/13/08) Inception (10/13/08)
03/31/11 03/31/11 to 03/31/11 to 03/31/11
FUND PERFORMANCE
NAV 23.83% 24.30% 23.28% 67.44%
Market Price 24.36% 23.99% 23.40% 67.86%
INDEX PERFORMANCE
ISE Global Engineering and Construction(TM) Index 24.46% 25.38% 26.62% 78.82%
Russell 3000(R) Index 18.71% 17.41% 15.97% 44.05%
MSCI World Industrials Index 19.18% 21.20% 20.13% 57.10%
------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund's six-month NAV return of +23.83% outperformed the benchmark MSCI World
Industrials Index return of +19.18% by +4.65%. During the period covered, the
U.S. dollar weakened relative to the currencies held in the portfolio. The
dollar lost -3.7% versus the Euro, while giving up -2.0% against the British
Pound Sterling. Since the Fund invests in foreign securities in their local
currency, this U.S. dollar weakness contributed +2.5% to the Fund's total return
during the period. Amidst a backdrop of increasing global production during the
period, construction and engineering companies benefitted, returning +21.1% on a
local basis during the six-month period. McDermott International, Inc. was the
Fund's second-best performer, returning +71.8%, as the company announced several
energy-related construction projects that were awarded to the Houston, Texas
based construction company. Sacyr Vallehermoso S.A. was the Fund's
top-performing security, returning +94.1% (local); the Spanish company, and
leader of the Panama Canal expansion project, announced the project had passed
its 10% completion goal during the period. U.S.-based stocks Chicago Bridge &
Iron Co. N.V. (+66.5%), Foster Wheeler AG (+53.8%) and KBR, Inc. (+53.8%), were
other companies representing the top 5 performing stocks in the Fund.
-------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE Global Engineering
and Construction(TM) Index" are trademarks of the International Securities
Exchange(TM) and have been licensed for use for certain purposes by First Trust.
The Fund, based on the ISE Global Engineering and Construction(TM) Index, is not
sponsored, endorsed, sold or promoted by the International Securities
Exchange(TM) and the International Securities Exchange(TM) makes no
representation regarding the advisability of trading in such product.
Page 12
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FLM - FIRST TRUST ISE GLOBAL ENGINEERING AND CONSTRUCTION INDEX FUND (CONTINUED)
--------------------------------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Industrials 89.59%
Energy 10.41
-------
Total 100.00%
=======
--------------------------------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Vinci S.A. 3.21%
Fluor Corp. 3.19
Aker Solutions ASA 3.13
Hochtief AG 3.11
McDermott International, Inc. 3.04
Jacobs Engineering Group, Inc. 3.03
Bouygues S.A. 3.02
KBR, Inc. 2.89
Skanska AB 2.80
JGC Corp. 2.70
------
Total 30.12%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
OCTOBER 13, 2008 - MARCH 31, 2011
FUND/INDEX 10/13/08 3/31/09 9/30/09 3/31/10 9/30/10 3/31/11
---------- -------- ------- ------- ------- ------- -------
First Trust ISE Global Engineering and Construction
Index Fund $10,000 $ 8,987 $13,384 $13,471 $13,522 $16,744
ISE Global Engineering and Construction(TM) Index 10,000 9,388 14,103 14,263 14,368 17,882
Russell 3000(R) Index 10,000 8,048 10,935 12,268 12,133 14,405
MSCI World Industrials Index 10,000 7,741 11,514 12,962 13,181 15,710
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 THROUGH MARCH 31, 2011
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period October 15, 2008
(commencement of trading) through March 31, 2011. 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%
10/15/08 - 9/30/09 79 44 32 26
10/1/09 - 9/30/10 112 28 2 0
10/1/10 - 3/31/11 85 9 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%
10/15/08 - 9/30/09 36 12 8 5
10/1/09 - 9/30/10 88 18 4 0
10/1/10 - 3/31/11 30 1 0 0
Page 13
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
GRID - FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund (the
"Fund") seeks investment results that correspond generally to the price and
yield (before the Fund's fees and expenses) of an equity index called the NASDAQ
OMX(R) Clean Edge(R) Smart Grid Infrastructure Index(SM) (the "Index"). The
shares of the Fund are listed and trade on The NASDAQ(R) Stock Market, Inc.
under the ticker symbol "GRID." The Fund will normally invest at least 90% of
its net assets in common stocks that comprise the Index or in Depositary
Receipts representing securities in the Index.
The Index is designed to act as a transparent and liquid benchmark for the grid
and electric energy infrastructure sector. The Index includes companies that are
primarily engaged and involved in electric grid, electric meters and devices,
networks, energy storage and management, and enabling software used by the smart
grid infrastructure sector.
--------------------------------------------------------------------------------
PERFORMANCE AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
Average Annual Cumulative
Total Returns Total Returns
6 Months Ended 1 Year Ended Inception (11/16/09) Inception (11/16/09)
03/31/11 03/31/11 to 03/31/11 to 03/31/11
FUND PERFORMANCE
NAV 15.96% 14.79% 12.66% 17.74%
Market Price 16.09% 14.58% 12.59% 17.64%
INDEX PERFORMANCE
NASDAQ OMX(R) Clean Edge(R) Smart Grid
Infrastructure Index(SM) 16.37% 15.68% 13.62% 19.11%
Russell 3000(R) Index 18.71% 17.41% 18.38% 26.00%
S&P 1500 Industrials Index 22.96% 23.44% 26.72% 38.32%
MSCI World Industrials Index 19.18% 21.20% 21.83% 31.06%
-----------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund's six-month NAV return of +15.96% underperformed the benchmark S&P
Composite 1500 Industrials Index return of +22.96% by -7.00%. During the period
covered, the U.S. dollar weakened relative to the currencies held in the
portfolio. The dollar lost -3.7% versus the Euro, while giving up -2.0% against
the British Pound Sterling. Since the Fund invests partially in foreign
securities in their local currency, this U.S. dollar weakness contributed +1.5%
to the Fund's total return during the period. The Florida-based constructor of
renewable energy infrastructure, MasTec, Inc., was the top-performing stock in
the Fund, more than doubling in price during the period, returning +101.5%. In
addition to strong earnings news during the period, holdings in the Fund
generally benefitted from increasing investor risk appetite and interest in
renewable energy companies, along with the smart grid companies that support
them. General Cable Corp. (+59.7%) and Wesco International, Inc. (+59.1%) were
the second and third top-performing stocks in the portfolio during the period.
-------------------
NASDAQ(R) and Clean Edge(R) are the registered trademarks (the "Marks") of The
NASDAQ(R) Stock Market, Inc. ("NASDAQ(R)") and Clean Edge, Inc. ("Clean
Edge(R)") respectively. NASDAQ(R) and Clean Edge(R) are, collectively with their
affiliates, the "Corporations." The Index and Marks are licensed for use by
First Trust. 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 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
GRID - FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND
(CONTINUED)
--------------------------------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Industrials 66.58%
Information Technology 19.57
Utilities 13.85
-------
Total 100.00%
=======
TOP TEN PORTFOLIO HOLDINGS AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
NGK Insulators Ltd. 8.19%
Schneider Electric S.A. 8.18
Red Electrica Corp. S.A. 7.96
Prysmian S.p.A 7.92
Quanta Services, Inc. 7.78
SMA Solar Technology AG 4.73
Itron, Inc. 4.09
ITC Holdings Corp. 3.92
Elster Group SE, ADR 3.90
General Cable Corp. 3.89
------
Total 60.56%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 16, 2009 -MARCH 31, 2011
FUND/INDEX 11/16/09 3/31/10 9/30/10 3/31/11
---------- -------- ------- ------- -------
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure
Index Fund $10,000 $10,257 $10,154 $11,774
NASDAQ OMX(R) Clean Edge(R) Smart Grid Infrastructure Index(SM) 10,000 10,297 10,236 11,911
Russell 3000(R) Index 10,000 10,731 10,614 12,600
S&P 1500 Industrials Index 10,000 11,205 11,249 13,832
MSCI World Industrials Index 10,000 10,814 10,997 13,106
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 THROUGH MARCH 31, 2011
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period November 17, 2009
(commencement of trading) through March 31, 2011. 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%
11/17/09 - 9/30/10 146 5 4 1
10/1/10 - 3/31/11 20 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%
11/17/09 - 9/30/10 57 4 1 1
10/1/10 - 3/31/11 101 5 0 0
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
CU - FIRST TRUST ISE GLOBAL COPPER INDEX FUND
First Trust ISE Global Copper 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 Global Copper(TM) Index (the
"Index"). The shares of the Fund are listed and trade on The NASDAQ(R) Stock
Market, Inc. under the ticker symbol "CU." The Fund will normally invest at
least 90% of its net assets in securities that comprise the Index or in
Depositary Receipts representing securities in the Index.
The Index is designed to provide a benchmark for investors interested in
tracking public companies that are active in the copper mining business based on
analysis of revenue derived from the sale of copper. Issuers of component
securities must be actively engaged in some aspect of the copper mining business
such as copper mining, refining or exploration. The Index has been created to
provide investors with a product allowing them to quickly take advantage of both
event-driven news and long-term trends as the need for copper continues to
evolve.
--------------------------------------------------------------------------------
PERFORMANCE AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
Average Annual Cumulative
Total Returns Total Returns
6 Months Ended 1 Year Ended Inception (03/11/10) Inception (03/11/10)
03/31/11 03/31/11 to 03/31/11 to 03/31/11
FUND PERFORMANCE
NAV 29.97% 41.48% 42.85% 45.67%
Market Price 30.32% 41.73% 43.63% 46.51%
INDEX PERFORMANCE
ISE Global Copper(TM) Index 30.36% 42.88% 44.73% 47.70%
MSCI All Country World Materials Index 19.05% 20.78% 22.89% 24.29%
MSCI All Country World Index 13.54% 14.08% 15.15% 16.04%
------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund's six-month NAV return of +29.97% outperformed the benchmark MSCI All
Country World Materials Index return of +19.05% by +10.92%. Increasing commodity
prices, especially copper (+18.3%), was a primary contributor to the Fund's
strong performance. Since the companies held in the Fund are primarily involved
in the exploration and mining of copper metal, the strong commodity return is a
chief contributor to the strong average component return of +34.5%. Copper
miners Copper Mountain Mining Corp. (+92.3% local) and Anvil Mining Ltd.
(+84.7%), were the Fund's top 2 performers during the six-month period. In
addition to the strong local returns, the U.S. dollar weakened relative to the
currencies held in the portfolio. The dollar lost -5.7% versus the Canadian
dollar, while giving up -2.0% against the British Pound Sterling. Since the Fund
invests primarily in foreign securities in their local currency, this U.S.
dollar weakness contributed +3.5% to the Fund's total return during the period.
-------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE Global Copper(TM)
Index" are trademarks of the International Securities Exchange(TM) and have been
licensed for use for certain purposes by First Trust. The Fund, based on the ISE
Global Copper(TM) Index, is not sponsored, endorsed, sold or promoted by the
International Securities Exchange(TM) and the International Securities
Exchange(TM) makes no representation regarding the advisability of trading in
such product.
Page 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
CU - FIRST TRUST ISE GLOBAL COPPER INDEX FUND (CONTINUED)
--------------------------------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Materials 100.00%
-------
Total 100.00%
=======
--------------------------------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Freeport-McMoRan Copper & Gold,
Inc. 6.01%
Rio Tinto PLC, ADR 5.90
Ivanhoe Mines Ltd. 5.82
KGHM Polska Miedz S.A. 5.80
Xstrata PLC 5.79
Antofagasta PLC 5.46
Southern Copper Corp. 5.40
Katanga Mining Ltd. 4.79
First Quantum Minerals Ltd. 4.56
MMC Norilsk Nickel, ADR 4.54
------
Total 54.07%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MARCH 11, 2010 -MARCH 31, 2011
FUND/INDEX 3/11/10 3/31/10 9/30/10 3/31/11
---------- ------- ------- ------- -------
First Trust ISE Global Copper Index Fund $10,000 $10,297 $11,208 $14,567
ISE Global Copper(TM) Index 10,000 10,337 11,329 14,770
MSCI All Country World Index 10,000 10,172 10,220 11,604
MSCI All Country World Materials Index 10,000 10,291 10,440 12,429
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 THROUGH MARCH 31, 2011
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 March 12, 2010 (commencement
of trading) through March 31, 2011. 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%
3/12/10 - 9/30/10 71 43 7 0
10/1/10 - 3/31/11 61 50 1 1
--------------------------------------------------------------------------------
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%
3/12/10 - 9/30/10 18 1 1 0
10/1/10 - 3/31/11 12 1 0 0
Page 17
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
PLTM - FIRST TRUST ISE GLOBAL PLATINUM INDEX FUND
First Trust ISE Global Platinum 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 Global Platinum(TM) Index (the
"Index"). The shares of the Fund are listed and trade on The NASDAQ(R) Stock
Market, Inc. under the ticker symbol "PLTM." The Fund will normally invest at
least 90% of its net assets in securities that comprise the Index or in
Depositary Receipts representing securities in the Index.
The Index is designed to provide a benchmark for investors interested in
tracking public companies that are active in platinum group metals ("PGM")
mining based on revenue analysis of those companies. PGMs collectively refer to
six elements, platinum, palladium, osmium, iridium, ruthenium and rhodium, which
have similar physical and chemical properties and tend to occur together in the
same mineral deposits. Issuers of component securities must be actively engaged
in some aspect of PGM mining such as mining, refining or exploration. The Index
has been created to provide investors with a product allowing them to quickly
take advantage of both event-driven news and long-term trends as the need for
PGMs continues to evolve.
--------------------------------------------------------------------------------
PERFORMANCE AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
Average Annual Cumulative
Total Returns Total Returns
6 Months Ended 1 Year Ended Inception (03/11/10) Inception (03/11/10)
03/31/11 03/31/11 to 03/31/11 to 03/31/11
FUND PERFORMANCE
NAV 11.60% 5.74% 8.80% 9.30%
Market Price 12.27% 5.60% 9.52% 10.07%
INDEX PERFORMANCE
ISE Global Platinum(TM) Index 11.56% 6.73% 10.23% 10.82%
MSCI All Country World Index 13.54% 14.08% 15.15% 16.04%
MSCI All Country World Materials Index 19.05% 20.78% 22.89% 24.29%
-------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund's six-month NAV return of +11.60% underperformed the benchmark MSCI All
Country World Materials Index return of +19.05% by -7.45%. During the period
covered, the U.S. dollar weakened relative to the currencies held in the
portfolio. The dollar lost -5.7% versus the Canadian dollar, while giving up
-2.0% against the British Pound Sterling. Since the Fund invests primarily in
foreign securities in their local currency, this U.S. dollar weakness
contributed +2.9% to the Fund's total return during the period. Palladium and
platinum miners benefitted during the period from increasing demand from the
auto and truck industries, which are significant users of the metals. In
addition, concerns about supply of the metals from typical stockpiles also
pushed up the price of miners. North American Palladium Ltd. was the Fund's
top-performing stock, returning +56.7%, while Nkwe Platinum Ltd. was the Fund's
weakest performing security, at -40.9% (local).
-------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE Global Platinum(TM)
Index" are trademarks of the International Securities Exchange(TM) and have been
licensed for use for certain purposes by First Trust. The Fund, based on the ISE
Global Platinum(TM) Index, is not sponsored, endorsed, sold or promoted by the
International Securities Exchange(TM) and the International Securities
Exchange(TM) makes no representation regarding the advisability of trading in
such product.
Page 18
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
PLTM - FIRST TRUST ISE GLOBAL PLATINUM INDEX FUND (CONTINUED)
--------------------------------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Materials 96.63%
Information Technology 3.37
-------
Total 100.00%
=======
--------------------------------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
MMC Norilsk Nickel, ADR 7.79%
Anglo Platinum Ltd. 7.39
Johnson Matthey PLC 7.15
Impala Platinum Holdings Ltd. 7.06
Aquarius Platinum Ltd. 6.91
Lonmin PLC 6.91
African Rainbow Minerals Ltd. 4.85
Xstrata PLC 4.70
Northam Platinum Ltd. 4.60
Stillwater Mining Co. 4.54
------
Total 61.90%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MARCH 11, 2010 - MARCH 31, 2011
FUND/INDEX 3/11/10 3/31/10 9/30/10 3/31/11
---------- ------- ------- ------- -------
First Trust ISE Global Platinum Index Fund $10,000 $10,337 $ 9,794 $10,930
ISE Global Platinum(TM) Index 10,000 10,383 9,934 11,082
MSCI All Country World Index 10,000 10,172 10,220 11,604
MSCI All Country World Materials Index 10,000 10,291 10,440 12,429
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 THROUGH MARCH 31, 2011
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 March 12, 2010 (commencement
of trading) through March 31, 2011. 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%
3/12/10 - 9/30/10 80 43 3 1
10/1/10 - 3/31/11 45 51 16 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%
3/12/10 - 9/30/10 14 0 0 0
10/1/10 - 3/31/11 14 0 0 0
Page 19
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
BICK - FIRST TRUST BICK INDEX FUND
The First Trust BICK Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield, before the Fund's fees and
expenses, of an equity index call the ISE BICK(TM) (Brazil, India, China, South
Korea) Index (the "Index"). The shares of the Fund are listed and trade on The
NASDAQ(R) Stock Market, Inc. under the ticker symbol "BICK." The Fund will
normally invest at least 90% of its net assets in securities that comprise the
Index or in Depositary Receipts representing securities in the Index.
The Index is developed and owned by International Securities Exchange, LLC
("ISE" or the "Index Provider"). The Index is designed to provide a benchmark
for investors interested in tracking some of the largest and most liquid public
companies that are domiciled in Brazil, India, China (including Hong Kong) and
South Korea that are accessible for investment by U.S. investors. The Index has
been created to provide investors an opportunity to take advantage of both
event-driven news and long-term economic trends as the economies of these
countries continue to evolve.
--------------------------------------------------------------------------------
PERFORMANCE AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
Cumulative
Total Returns
6 Months Ended Inception (04/12/10)
03/31/11 to 03/31/11
FUND PERFORMANCE
NAV 7.81% 12.31%
Market Price 6.45% 12.27%
INDEX PERFORMANCE
ISE BICK(TM) Index 7.85% 13.11%
MSCI All Country World Index 13.54% 11.26%
MSCI Emerging Markets Index 9.53% 14.87%
--------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund's six-month NAV return of +7.81% underperformed the benchmark MSCI
Emerging Markets Index return of +9.53% by -1.72%. During the period covered,
the U.S. dollar weakened relative to the currencies held in the portfolio. The
dollar lost -3.8% versus the South Korean Won, while giving up -3.3% against the
Brazilian Real. Since the Fund invests in foreign securities in their local
currency, this U.S. dollar weakness contributed +1.6% to the Fund's total return
during the period. By country, South Korea was the top performing, returning
+20.5% (local), with strong performances from Kia Motors Corp. (+89.3% local)
and Hyundai Heavy Industries Co. Ltd. (+60.7% local) leading the strong
performance.
-------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE
BICK(TM) Index" are trademarks of the International Securities Exchange(TM) and
have been licensed for use for certain purposes by First Trust. The Fund, based
on the ISE BICK(TM) Index, is not sponsored, endorsed, sold or promoted by the
International Securities Exchange(TM) and the International Securities
Exchange(TM) makes no representation regarding the advisability of trading in
such product.
Page 20
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
BICK - FIRST TRUST BICK INDEX FUND (CONTINUED)
--------------------------------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Financials 26.00%
Materials 15.92
Information Technology 12.35
Industrials 11.73
Consumer Discretionary 11.64
Energy 11.51
Consumer Staples 5.06
Telecommunication Services 3.02
Health Care 1.77
Utilities 1.00
-------
Total 100.00%
=======
--------------------------------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Axis Bank Ltd., GDR 1.89%
State Bank of India, GDR 1.85
ICICI Bank Ltd., ADR 1.84
Makemytrip Ltd. 1.83
HDFC Bank Ltd., ADR 1.82
Mahindra & Mahindra Ltd., GDR 1.82
Larsen & Toubro Ltd., GDR 1.81
Sterlite Industries (India) Ltd., ADR 1.81
Wipro Ltd., ADR 1.80
Reliance Industries Ltd., GDR 1.79
------
Total 18.26%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 12, 2010 -MARCH 31, 2011
FUND/INDEX 4/12/10 9/30/10 3/31/11
---------- ------- ------- -------
First Trust BICK Index Fund $10,000 $10,417 $11,231
ISE BICK(TM) Index 10,000 10,488 11,311
MSCI All Country World Index 10,000 9,800 11,126
MSCI Emerging Markets Index 10,000 10,487 11,487
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 THROUGH MARCH 31, 2011
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 April 13, 2010 (commencement
of trading) through March 31, 2011. 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%
4/13/10 - 9/30/10 20 46 47 1
10/1/10 - 3/31/11 30 48 16 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%
4/13/10 - 9/30/10 3 2 0 0
10/1/10 - 3/31/11 28 4 0 0
Page 21
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FONE - FIRST TRUST NASDAQ CEA SMARTPHONE INDEX FUND
The First Trust NASDAQ CEA Smartphone 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 call the NASDAQ OMX CEA Smartphone Index(SM)
(the "Index"). The shares of the Fund are listed and trade on The NASDAQ(R)
Stock Market, Inc. under the ticker symbol "FONE." The Fund will normally invest
at least 90% of its net assets in securities that comprise the Index or in
Depositary Receipts representing securities in the Index.
The Index is designed to track the performance of companies engaged in the
Smartphone segment of the telecom and technology sectors. To be eligible for the
index, issuers of the securities must be identified as being engaged in the
smartphone industry by the Consumer Electronics Association. Component
securities must be listed on an index-eligible global stock exchange, as
determined by the NASDAQ OMX, have a minimum float-adjusted market
capitalization of $250 million and a minimum three-month average daily dollar
trading volume of $1 million.
--------------------------------------------------------------------------------
PERFORMANCE AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
Cumulative
Total Returns
Inception (2/17/11)
to 3/31/11
FUND PERFORMANCE
NAV -5.67%
Market Price -5.47%
INDEX PERFORMANCE
NASDAQ OMX CEA Smartphone Index(SM) -5.97%
MSCI World Index -1.51%
MSCI All Country World Information Technology -4.53%
--------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 24.)
PERFORMANCE REVIEW
The Fund's since inception (02/17/2011) NAV return of -5.67% underperformed the
benchmark MSCI All Country (AC) World Information Technology Index return of
-4.53% over the same period by -1.16%. During the short reporting period,
OmniVision Technologies, Inc., the maker of camera image sensors for smart
phones and tablet computers, was the strongest-performing stock, returning
+27.5%. Sanmina-SCI Corp. was the weakest-performing stock during the period,
returning -33.8%, with the bulk of the drawdown coming on the heels of the
departure of 17 year veteran president of the company, Hari Pillai.
-------------------
NASDAQ(R), OMX(R), NASDAQ OMX(R), and NASDAQ OMX CEA Smartphone Index(SM) are
registered 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
Advisors L.P. The Product(s) have not been passed on by the Corporations as to
their legality or suitability. The Product(s) are not issued, endorsed, sold, or
promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO
LIABILITY WITH RESPECT TO THE PRODUCT(S).
Page 22
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FONE - FIRST TRUST NASDAQ CEA SMARTPHONE INDEX FUND (CONTINUED)
--------------------------------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECTOR LONG-TERM INVESTMENTS
Information Technology 79.15%
Telecommunication Services 3.01
Consumer Discretionary 6.72
Health Care 1.12
-------
Total 100.00%
=======
--------------------------------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF MARCH 31, 2011
--------------------------------------------------------------------------------
% OF TOTAL
SECURITY LONG-TERM INVESTMENTS
Samsung Electronics Co., Ltd. 2.89%
Benchmark Electronics, Inc. 2.80
HTC Corp. 2.77
Nokia Corp., ADR 2.68
Apple, Inc. 2.68
Kyocera Corp. 2.66
Flextronics International Ltd. 2.66
LG Electronics, Inc. 2.65
Inventec Co. Ltd. 2.60
Celestica, Inc. 2.55
------
Total 26.94%
======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 17, 2011 -MARCH 31, 2011
FUND/INDEX 2/17/11 3/31/11
---------- ------- -------
First Trust NASDAQ CEA Smartphone Index Fund $10,000 $ 9,433
NASDAQ OMX CEA Smartphone Index(SM) 10,000 9,403
MSCI World Index 10,000 9,849
MSCI All Country World Information Technology 10,000 9,547
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 THROUGH MARCH 31, 2011
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 18, 2011
(commencement of trading) through March 31, 2011. 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%
2/18/11 - 3/31/11 24 3 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
2/18/11 - 3/31/11 2 0 0 0
Page 23
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average annual total returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative total
returns" represent the total change in value of an investment over the periods
indicated. The total returns would have been lower if certain fees had not been
waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of each Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
each Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all dividend distributions
have been reinvested in each Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the 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 the Fund will vary with changes in market conditions. Shares of the
Fund may be worth more or less than their original cost when they are redeemed
or sold in the market. Each Fund's past performance is no guarantee of future
performance.
Page 24
FIRST TRUST EXCHANGE-TRADED FUND II
UNDERSTANDING YOUR FUND EXPENSES
MARCH 31, 2011 (UNAUDITED)
As a shareholder of First Trust STOXX(R) European Select Dividend Index Fund,
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund, First
Trust Dow Jones Global Select Dividend Index Fund, First Trust ISE Global Wind
Energy Index Fund, First Trust ISE Global Engineering and Construction Index
Fund, First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund,
First Trust ISE Global Copper Index Fund, First Trust ISE Global Platinum Index
Fund, First Trust BICK Index Fund, or the First Trust NASDAQ CEA Smartphone
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 (in U.S. dollars) of
investing in the Funds and to compare these costs with the ongoing costs of
investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period (or since inception) and held through the six-month period (or shorter)
ended March 31, 2011.
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
OCTOBER 1, 2010 MARCH 31, 2011 PERIOD (a) PERIOD (b)
-----------------------------------------------------------------------------------------------------------------------------
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND
Actual $1,000.00 $1,106.90 0.60% $3.15
Hypothetical (5% return before expenses) $1,000.00 $1,021.94 0.60% $3.02
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND
Actual $1,000.00 $1,088.80 0.60% $3.12
Hypothetical (5% return before expenses) $1,000.00 $1,021.94 0.60% $3.02
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND
Actual $1,000.00 $1,113.60 0.60% $3.16
Hypothetical (5% return before expenses) $1,000.00 $1,021.94 0.60% $3.02
FIRST TRUST ISE GLOBAL WIND ENERGY INDEX FUND
Actual $1,000.00 $1,145.90 0.60% $3.21
Hypothetical (5% return before expenses) $1,000.00 $1,021.94 0.60% $3.02
Page 25
FIRST TRUST EXCHANGE-TRADED FUND II
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
OCTOBER 1, 2010 MARCH 31, 2011 PERIOD (a) PERIOD (b)
-----------------------------------------------------------------------------------------------------------------------------
FIRST TRUST ISE GLOBAL ENGINEERING AND CONSTRUCTION INDEX FUND
Actual $1,000.00 $1,238.30 0.70% $3.91
Hypothetical (5% return before expenses) $1,000.00 $1,021.44 0.70% $3.53
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND
Actual $1,000.00 $1,159.60 0.70% $3.76
Hypothetical (5% return before expenses) $1,000.00 $1,021.44 0.70% $3.53
FIRST TRUST ISE GLOBAL COPPER INDEX FUND
Actual $1,000.00 $1,299.70 0.70% $4.01
Hypothetical (5% return before expenses) $1,000.00 $1,021.44 0.70% $3.53
FIRST TRUST ISE GLOBAL PLATINUM INDEX FUND
Actual $1,000.00 $1,116.00 0.70% $3.69
Hypothetical (5% return before expenses) $1,000.00 $1,021.44 0.70% $3.53
FIRST TRUST BICK INDEX FUND
Actual $1,000.00 $1,078.13 0.64% $3.32
Hypothetical (5% return before expenses) $1,000.00 $1,021.74 0.64% $3.23
-----------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE FEBRUARY 17, 2011
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
FEBRUARY 17, 2011 (c) MARCH 31, 2010 IN THE PERIOD MARCH 31, 2011 (d)
-----------------------------------------------------------------------------------------------------------------------------
FIRST TRUST NASDAQ CEA SMARTPHONE INDEX FUND
Actual $1,000.00 $943.30 0.70% $0.78
Hypothetical (5% return before expenses) $1,000.00 $1,021.44 0.70% $3.53
-------
(a) These expense ratios reflect expense caps for certain Funds See Note 3.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (October 1,
2010 through March 31, 2011), multiplied by 182/365 (to reflect the
one-half year period).
(c) Inception date.
(d) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period
(February 17, 2011 through March 31, 2011), multiplied by 42/365.
Hypothetical expenses are assumed for the most recent half-year period.
Page 26
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) -- 99.6%
BELGIUM -- 4.1%
11,355 Belgacom S.A. $ 439,881
--------------
BERMUDA -- 4.1%
77,327 Catlin Group Ltd. 447,692
--------------
FRANCE -- 9.9%
21,825 France Telecom S.A. 489,007
9,172 SCOR SE 249,766
1,543 Unibail-Rodamco SE 334,242
--------------
1,073,015
--------------
GERMANY -- 12.5%
24,928 Deutsche Telekom AG 384,013
10,665 E. ON AG 325,715
1,702 Muenchener Rueckversicherungs-
Gesellschaft AG 267,739
6,232 RWE AG 378,449
--------------
1,355,916
--------------
IRELAND -- 2.3%
10,763 CRH PLC 246,798
--------------
ITALY -- 6.0%
52,766 Enel S.p.A 332,620
55,261 Snam Rete Gas S.p.A 310,599
--------------
643,219
--------------
NETHERLANDS -- 6.0%
23,989 Koninklijke (Royal) KPN N.V. 408,644
10,156 Wolters Kluwer N.V. 237,485
--------------
646,129
--------------
NORWAY -- 2.2%
8,483 StatoilHydro ASA 235,151
--------------
SPAIN -- 4.7%
43,423 Banco Santander S.A. 504,126
--------------
SWEDEN -- 2.0%
5,585 Ratos AB 220,501
--------------
SWITZERLAND -- 8.7%
1,971 Baloise Holding AG 195,276
649 Swisscom AG 289,347
1,618 Zurich Financial Services AG 452,899
--------------
937,522
--------------
UNITED KINGDOM -- 37.1%
60,657 Amlin PLC 371,419
7,676 AstraZeneca PLC 352,547
50,730 Carillion PLC 309,250
19,989 GlaxoSmithKline PLC 381,432
135,397 Man Group PLC 534,107
30,035 Provident Financial PLC 462,551
204,811 RSA Insurance Group PLC 432,056
21,218 Scottish & Southern Energy PLC 429,221
42,522 United Utilities PLC 403,487
115,491 Vodafone Group PLC 327,005
--------------
4,003,075
--------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
TOTAL COMMON STOCKS -- 99.6% $ 10,753,025
(Cost $10,161,658)
MONEY MARKET FUND -- 1.8%
197,122 Morgan Stanley Institutional
Treasury Money
Market Fund - 0.01% (c) 197,122
(Cost $197,122) --------------
TOTAL INVESTMENTS -- 101.4% 10,950,147
(Cost $10,358,780) (d)
NET OTHER ASSETS AND
LIABILITIES -- (1.4)% (146,230)
--------------
NET ASSETS -- 100.0% $ 10,803,917
==============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Portfolio securities are categorized based upon their country of
incorporation.
(c) Represents annualized 7-day yield at March 31, 2011.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of March 31, 2011, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $721,126 and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over value was $129,759.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of March 31,
2011 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* $10,753,025 $ -- $ --
Money Market Fund 197,122 -- --
-------------------------------------
Total Investments $10,950,147 $ -- $ --
=====================================
* See Portfolio of Investments for country breakout.
See Notes to Financial Statements Page 27
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
% OF
INDUSTRY NET ASSETS
-----------------------------------------------------------
Insurance 22.3%
Diversified Telecommunication Services 18.6
Electric Utilities 10.1
Multi-Utilities 7.2
Capital Markets 7.0
Pharmaceuticals 6.8
Commercial Banks 4.7
Consumer Finance 4.3
Real Estate Investment Trusts 3.1
Wireless Telecommunication Services 3.0
Construction & Engineering 2.9
Gas Utilities 2.9
Construction Materials 2.3
Media 2.2
Oil, Gas & Consumable Fuels 2.2
Money Market Fund 1.8
-----------------------------------------------------------
TOTAL INVESTMENTS 101.4
NET OTHER ASSETS AND LIABILITIES (1.4)
--------------
TOTAL 100.0%
==============
Page 28 See Notes to Financial Statements
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) -- 99.6%
AUSTRALIA -- 8.7%
38,741 Bunnings Warehouse Property
Trust $ 68,723
191,906 CFS Retail Property Trust 365,237
222,235 Commonwealth Property Office
Fund 197,687
439,014 Dexus Property Group 385,980
79,884 FKP Property Group 70,234
577,885 Goodman Group 409,449
168,339 GPT Group 546,742
196,196 GPT Group, In Specie (c) (d) (e) 0
220,327 ING Industrial Fund 121,924
247,591 ING Office Fund 158,779
27,745 Macquarie CountryWide Trust 89,538
44,757 Macquarie Office Trust 153,235
309,893 Mirvac Group 399,070
216,199 Stockland 829,651
209,369 Westfield Group 2,022,680
277,084 Westfield Retail Trust 750,897
--------------
6,569,826
--------------
AUSTRIA -- 0.4%
7,812 CA Immobilien Anlagen AG (d) 143,924
7,356 Conwert Immobilien Invest AG 121,554
--------------
265,478
--------------
BELGIUM -- 0.6%
1,522 Befimmo S.C.A 132,955
1,241 Cofinimmo S.A. 181,590
630 Intervest Offices N.V. 22,535
144 Leasinvest Real Estate S.C.A 14,130
852 Warehouses de Pauw S.C.A 48,298
195 Wereldhave Belgium S.C.A 20,387
--------------
419,895
--------------
BERMUDA -- 2.1%
156,922 Hongkong Land Holdings Ltd. 1,098,454
63,493 Hopson Development Holdings
Ltd. (d) 71,994
64,706 Kerry Properties Ltd. 323,590
9,295 Orient-Express Hotels Ltd.,
Class A (d) 114,979
--------------
1,609,017
--------------
CANADA -- 4.8%
3,810 Allied Properties Real Estate
Investment Trust 86,457
6,796 Artis Real Estate Investment
Trust 99,679
4,340 Boardwalk Real Estate Investment
Trust 215,366
34,061 Brookfield Properties Corp. 602,874
8,856 Calloway Real Estate Investment
Trust 235,673
6,984 Canadian Apartment Properties
Real Estate Investment Trust 140,184
6,001 Canadian Real Estate Investment
Trust 214,476
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
CANADA (CONTINUED)
12,946 Chartwell Seniors Housing Real
Estate Investment Trust $ 123,651
5,696 Cominar Real Estate Investment
Trust 133,367
3,211 Crombie Real Estate Investment
Trust 42,692
4,594 Dundee Real Estate Investment
Trust 156,845
7,179 Extendicare Real Estate
Investment Trust 94,041
5,910 First Capital Realty, Inc. 97,779
13,269 H&R Real Estate Investment Trust 301,102
8,072 InnVest Real Estate Investment
Trust 57,699
4,058 Killam Properties, Inc. 43,489
3,867 Morguard Real Estate Investment
Trust 58,155
2,492 Northern Property Real Estate
Investment Trust 78,397
6,198 Primaris Retail Real Estate
Investment Trust 136,171
23,494 RioCan Real Estate Investment
Trust 616,975
3,211 Transglobe Apartment Real Estate
Investment Trust 38,519
--------------
3,573,591
--------------
CAYMAN ISLANDS -- 1.7%
127,077 Agile Property Holdings Ltd. 200,290
195,052 China Resources Land Ltd. 365,101
302,686 Country Garden Holdings Co., Ltd. 132,304
105,033 KWG Property Holding Ltd. 84,933
157,616 New World China Land Ltd. 59,370
128,619 Shimao Property Holdings Ltd. 182,217
236,205 Shui On Land Ltd. 108,711
188,292 Soho China Ltd. 161,458
--------------
1,294,384
--------------
FINLAND -- 0.3%
16,640 Citycon Oyj 76,170
25,129 Sponda Oyj 142,807
5,751 Technopolis PLC 30,808
--------------
249,785
--------------
FRANCE -- 4.3%
324 Affine Group 10,588
2,491 Fonciere des Regions Group 265,438
1,657 Gecina S.A. 228,536
1,858 Icade 229,294
8,603 Klepierre LLC 349,182
4,171 Mercialys 166,250
499 Societe de la Tour Eiffel 45,967
1,180 Societe Immobiliere de Location
pour l'Industrie et le
Commerce 165,389
8,283 Unibail-Rodamco SE 1,794,247
--------------
3,254,891
--------------
See Notes to Financial Statements Page 29
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) (CONTINUED)
GERMANY -- 0.6%
2,796 Alstria Office AG $ 38,872
1,388 Colonia Real Estate AG (d) 10,661
4,686 Deutsche Euroshop AG 178,974
7,425 Deutsche Wohnen AG (d) 107,121
2,968 DIC Asset AG 38,891
2,364 Patrizia Immobilien AG (d) 16,477
5,315 TAG Immobilien AG (d) 51,815
--------------
442,811
--------------
GREECE -- 0.0%
1,662 Eurobank Properties Real Estate
Investment Co. 15,192
1,191 Lamda Development S.A. (d) 6,330
--------------
21,522
--------------
GUERNSEY -- 0.3%
46,307 FCPT Ltd. 76,589
31,243 ING UK Real Estate Income Trust
Ltd. 26,564
32,291 Invista Foundation Property Trust
Ltd. 20,203
7,519 IRP Property Investments Ltd. 10,102
10,378 Standard Life Investment Property
Income Trust PLC 10,988
32,589 UK Commercial Property Trust Ltd. 42,346
--------------
186,792
--------------
HONG KONG -- 10.7%
223,879 Champion Real Estate Investment
Trust 129,805
370,814 China Overseas Land & Investment
Ltd. 754,161
203,031 Hang Lung Properties Ltd. 888,752
98,833 Henderson Land Development Co.,
Ltd. 684,845
71,913 Hysan Development Co., Ltd. 295,841
201,295 Link (The) REIT 630,135
270,443 New World Development Co., Ltd. 477,709
240,958 Shenzhen Investment Ltd. 80,231
237,762 Sino Land Co., Ltd. 422,427
174,299 Sun Hung Kai Properties Ltd. 2,760,622
138,556 Wharf (The) Holdings Ltd. 955,645
--------------
8,080,173
--------------
ISRAEL -- 0.1%
3,159 Azrieli Group (d) 93,220
--------------
ITALY -- 0.2%
86,901 Beni Stabili S.p.A 90,335
10,825 Immobiliare Grande Distribuzione 23,809
--------------
114,144
--------------
JAPAN -- 8.8%
8,216 AEON Mall Co., Ltd. 176,410
66 Japan Prime Realty Investment
Corp. 178,211
44 Japan Real Estate Investment Corp. 416,302
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
JAPAN (CONTINUED)
154 Japan Retail Fund Investment
Corp. $ 241,053
23 Kenedix Realty Investment Corp.,
Class A 94,566
93,930 Mitsubishi Estate Co., Ltd. 1,588,837
80,081 Mitsui Fudosan Co., Ltd. 1,321,847
10 MORI TRUST Sogo Reit, Inc. 97,620
52 Nippon Building Fund, Inc. 506,372
7,000 Nomura Real Estate Holdings, Inc. 106,119
29 Nomura Real Estate Office Fund,
Inc. 196,285
120 NTT Urban Development Corp. 100,553
24 ORIX JREIT, Inc., Class A 131,859
12 Premier Investment Co. 54,388
42,744 Sumitomo Realty & Development
Co., Ltd. 855,085
30,375 Tokyo Tatemono Co., Ltd. 113,568
36,297 Tokyu Land Corp. 157,965
11 TOKYU REIT, Inc. 67,973
13 Top REIT, Inc., Class A 78,066
131 United Urban Investment Corp.,
Class A 165,522
--------------
6,648,601
--------------
LUXEMBOURG -- 0.2%
8,164 Gagfah S.A. 69,049
12,840 ProLogis European Properties (d) 90,893
--------------
159,942
--------------
NETHERLANDS -- 1.6%
8,257 Corio N.V. 577,599
3,656 Eurocommercial Properties N.V. 181,137
3,929 Nieuwe Steen Investments Funds
N.V. 81,574
1,718 VastNed Offices/Industrial N.V. 29,899
1,678 Vastned Retail N.V. 122,826
1,930 Wereldhave N.V. 206,123
--------------
1,199,158
--------------
NEW ZEALAND -- 0.1%
88,236 Kiwi Income Property Trust 67,324
--------------
NORWAY -- 0.1%
45,234 Norwegian Property ASA (d) 83,021
--------------
SINGAPORE -- 4.6%
72,000 Allgreen Properties Ltd. 61,690
169,400 Ascendas Real Estate Investment
Trust 274,158
192,890 CapitaCommercial Trust 212,707
288,530 Capitaland Ltd. 755,374
214,883 CapitaMall Trust 320,492
140,000 CapitaMalls Asia Ltd. 197,699
66,000 CDL Hospitality Trusts 105,244
60,000 City Developments Ltd. 548,354
164,000 Global Logistic Properties
Ltd. (d) 243,300
67,521 Keppel Land Ltd. 240,515
165,453 Mapletree Logistics Trust 118,790
201,197 Suntec Real Estate Investment
Trust 245,810
53,087 Wing Tai Holdings Ltd. 64,437
Page 30 See Notes to Financial Statements
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) (CONTINUED)
SINGAPORE (CONTINUED)
52,000 Yanlord Land Group Ltd. $ 62,293
--------------
3,450,863
--------------
SPAIN -- 0.0%
307,295 Inmobiliaria Colonial S.A. (d) 34,840
--------------
SWEDEN -- 1.1%
15,606 Castellum AB 226,973
14,559 Fabege AB 157,425
13,473 Hufvudstaden AB 160,411
10,946 Klovern AB 59,829
12,385 Kungsleden AB 121,654
3,396 Wihlborgs Fastigheter AB 101,150
--------------
827,442
--------------
SWITZERLAND -- 1.0%
620 Allreal Holding AG 95,987
4,198 PSP Swiss Property AG (d) 345,758
3,699 Swiss Prime Site AG (d) 291,772
3,993 Zueblin Immobilien Holding AG (d) 16,650
--------------
750,167
--------------
UNITED KINGDOM -- 5.5%
2,178 A.J. Mucklow Group PLC 10,499
11,848 Big Yellow Group PLC 62,855
80,268 British Land Co., PLC 711,436
56,414 Capital Shopping Centers Group
PLC 152,492
2,111 CLS Holdings PLC (d) 22,520
445 Daejan Holdings PLC 18,811
9,123 Derwent London PLC 240,456
11,099 Development Securities PLC 39,794
28,234 Grainger PLC 48,600
28,365 Great Portland Estates PLC 175,552
64,192 Hammerson PLC 460,206
40,780 Hansteen Holdings PLC 55,607
10,717 Helical Bar PLC 46,557
69,302 Land Securities Group PLC 815,468
58,453 Liberty International PLC 359,142
49,517 London & Stamford Property PLC 99,295
14,622 Minerva PLC (d) 21,698
5,676 Primary Health Properties PLC 29,229
46,949 Quintain Estates & Development
PLC (d) 33,139
16,972 Safestore Holdings PLC 41,657
66,613 Segro PLC 343,559
22,678 Shaftesbury PLC 172,115
13,634 St. Modwen Properties PLC 39,325
14,442 UNITE Group PLC (d) 50,043
104,114 Workspace Group PLC 45,513
--------------
4,095,568
--------------
UNITED STATES -- 41.8%
3,640 Acadia Realty Trust 68,869
885 Agree Realty Corp. 19,868
183 Alexander's, Inc. 74,472
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
UNITED STATES (CONTINUED)
5,005 Alexandria Real Estate Equities,
Inc. $ 390,240
15,252 AMB Property Corp. 548,614
3,505 American Assets Trust, Inc. 74,551
6,050 American Campus Communities,
Inc. 199,650
10,717 Apartment Investment &
Management Co., Class A 272,962
5,319 Ashford Hospitality Trust 58,615
3,752 Associated Estates Realty Corp. 59,582
7,810 AvalonBay Communities, Inc. 937,825
11,870 BioMed Realty Trust, Inc. 225,767
12,869 Boston Properties, Inc. 1,220,625
12,197 Brandywine Realty Trust 148,072
5,874 BRE Properties, Inc. 277,135
6,332 Camden Property Trust 359,784
2,783 Campus Crest Communities, Inc. 32,923
5,189 CapLease, Inc. 28,436
12,505 CBL & Associates Properties, Inc. 217,837
5,771 Cedar Shopping Centers, Inc. 34,799
4,602 Cogdell Spencer, Inc. 27,336
7,048 Colonial Properties Trust 135,674
6,542 CommonWealth REIT 169,896
6,065 Corporate Office Properties Trust 219,189
9,403 Cousins Properties, Inc. 78,515
22,259 DCT Industrial Trust, Inc. 123,537
23,239 Developers Diversified Realty
Corp. 325,346
15,151 DiamondRock Hospitality Co. 169,237
8,290 Digital Realty Trust, Inc. 481,981
8,351 Douglas Emmett, Inc. 156,581
22,810 Duke Realty Corp. 319,568
5,518 DuPont Fabros Technology, Inc. 133,812
2,433 EastGroup Properties, Inc. 106,979
6,548 Education Realty Trust, Inc. 52,580
4,217 Entertainment Properties Trust 197,440
2,823 Equity Lifestyle Properties, Inc. 162,746
4,885 Equity One, Inc. 91,691
26,671 Equity Residential 1,504,511
2,843 Essex Property Trust, Inc. 352,532
7,934 Extra Space Storage, Inc. 164,313
5,583 Federal Realty Investment Trust 455,349
8,806 FelCor Lodging Trust, Inc. (d) 53,981
7,049 First Industrial Realty Trust,
Inc. (d) 83,813
4,531 First Potomac Realty Trust 71,363
12,304 Forest City Enterprises, Inc.,
Class A (d) 231,684
7,389 Franklin Street Properties Corp. 103,963
43,442 General Growth Properties,
Inc. (d) 672,482
2,240 Getty Realty Corp. 51,251
9,062 Glimcher Realty Trust 83,824
2,755 Government Properties Income
Trust 73,999
33,648 HCP, Inc. 1,276,605
15,614 Health Care REIT, Inc. 818,798
6,097 Healthcare Realty Trust, Inc. 138,402
15,343 Hersha Hospitality Trust 91,137
6,496 Highwoods Properties, Inc. 227,425
See Notes to Financial Statements Page 31
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) (CONTINUED)
UNITED STATES (CONTINUED)
3,445 Home Properties, Inc. $ 203,083
11,195 Hospitality Properties Trust 259,164
61,731 Host Hotels & Resorts, Inc. 1,087,083
7,900 Inland Real Estate Corp. 75,366
7,206 Investors Real Estate Trust 68,457
4,744 Kilroy Realty Corp. 184,210
36,820 Kimco Realty Corp. 675,279
5,712 Kite Realty Group Trust 30,331
6,873 LaSalle Hotel Properties 185,571
13,324 Lexington Realty Trust 124,579
10,362 Liberty Property Trust 340,910
2,390 LTC Properties, Inc. 67,733
11,800 Macerich (The) Co. 584,454
7,879 Mack-Cali Realty Corp. 267,098
10,089 Medical Properties Trust, Inc. 116,730
3,240 Mid-America Apartment
Communities, Inc. 208,008
2,519 National Health Investors, Inc. 120,711
7,558 National Retail Properties, Inc. 197,491
11,455 Nationwide Health Properties,
Inc. 487,181
8,936 OMEGA Healthcare Investors, Inc. 199,630
1,988 Parkway Properties, Inc. 33,796
5,016 Pennsylvania Real Estate
Investment Trust 71,578
15,664 Piedmont Office Realty Trust,
Inc., Class A 304,038
4,411 Post Properties, Inc. 173,132
51,622 ProLogis 824,920
1,679 PS Business Parks, Inc. 97,281
11,580 Public Storage 1,284,338
3,442 Ramco-Gershenson Properties
Trust 43,128
10,624 Realty Income Corp. 371,309
7,399 Regency Centers Corp. 321,709
3,792 Retail Opportunity Investments
Corp. 41,485
1,257 Saul Centers, Inc. 55,999
12,868 Senior Housing Properties Trust 296,479
26,573 Simon Property Group, Inc. 2,847,563
7,060 SL Green Realty Corp. 530,912
2,493 Sovran Self Storage, Inc. 98,598
13,725 Strategic Hotels & Resorts,
Inc. (d) 88,526
1,890 Sun Communities, Inc. 67,379
10,707 Sunstone Hotel Investors,
Inc. (d) 109,104
7,306 Tanger Factory Outlet Centers,
Inc. 191,709
3,795 Taubman Centers, Inc. 203,336
16,503 UDR, Inc. 402,178
1,133 Universal Health Realty Income
Trust 45,921
1,889 Urstadt Biddle Properties, Inc.,
Class A 35,929
8,699 U-Store-It Trust 91,513
14,781 Ventas, Inc. 802,608
16,504 Vornado Realty Trust 1,444,100
5,977 Washington Real Estate Investment
Trust 185,825
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
UNITED STATES (CONTINUED)
10,850 Weingarten Realty Investors $ 271,901
1,840 Winthrop Realty Trust, Inc. 22,540
--------------
31,500,069
--------------
TOTAL COMMON STOCKS -- 99.6% 74,992,524
(Cost $64,087,313)
MONEY MARKET FUND -- 0.3%
193,124 Morgan Stanley Institutional
Treasury Money Market
Fund - 0.01% (f) 193,124
(Cost $193,124) --------------
TOTAL INVESTMENTS -- 99.9% 75,185,648
(Cost $64,280,437) (g)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 103,888
--------------
NET ASSETS -- 100.0% $ 75,289,536
==============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Portfolio securities are categorized based upon their country of
incorporation.
(c) This security is fair valued in accordance with procedures adopted by the
Trust's Board of Trustees.
(d) Non-income producing security.
(e) This is a restricted security which cannot be traded as a result of the
in-specie distribution. It was acquired on August 6, 2009 at a cost of $0
and has a carrying value per share of $0.
(f) Represents annualized 7-day yield at March 31, 2011.
(g) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of March 31, 2011, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $11,177,319 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $272,108.
REIT - Real Estate Investment Trust
Page 32 See Notes to Financial Statements
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of March 31,
2011 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* $74,992,524 $ -- $ --
Money Market Fund 193,124 -- --
-------------------------------------
Total Investments $75,185,648 $ -- $ --
=====================================
* See Portfolio of Investments for country breakout.
% OF
INDUSTRY NET ASSETS
-----------------------------------------------------------
Real Estate Investment Trusts 71.1%
Real Estate Management & Development 28.2
Money Market Fund 0.3
Capital Markets 0.2
Hotels, Restaurants & Leisure 0.1
-----------------------------------------------------------
TOTAL INVESTMENTS 99.9
NET OTHER ASSETS AND LIABILITIES 0.1
--------------
TOTAL 100.0%
==============
See Notes to Financial Statements Page 33
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) -- 100.1%
AUSTRALIA -- 17.5%
291,530 Adelaide Brighton Ltd. $ 970,972
44,590 Australia & New Zealand Banking
Group Ltd. 1,098,158
90,586 Billabong International Ltd. 707,418
22,357 Commonwealth Bank of Australia 1,211,749
1,484,554 Commonwealth Property Office
Fund 1,320,573
285,227 David Jones Ltd. 1,401,368
378,380 MAp Group 1,189,788
277,198 Metcash Ltd. 1,192,755
50,359 National Australia Bank Ltd. 1,346,497
27,698 Orica Ltd. 755,486
299,368 Stockland 1,148,807
79,518 Suncorp Group Ltd. 697,476
680,484 Telstra Corp. Ltd. 1,984,883
56,503 United Group Ltd. 916,985
22,585 Wesfarmers Ltd. 742,407
98,027 Westfield Group 947,023
54,337 Westpac Banking Corp. 1,367,431
20,348 WorleyParsons Ltd. 652,035
--------------
19,651,811
--------------
AUSTRIA -- 1.9%
18,392 OMV AG 831,213
89,622 Telekom Austria AG 1,310,761
--------------
2,141,974
--------------
BELGIUM -- 4.0%
32,499 Belgacom S.A. 1,258,978
31,518 Colruyt S.A. 1,659,829
22,952 Mobistar S.A. 1,591,242
--------------
4,510,049
--------------
BERMUDA -- 3.0%
242,454 Catlin Group Ltd. 1,403,710
123,418 VTech Holdings Ltd. 1,400,214
164,905 Yue Yuen Industrial Holdings Ltd. 524,699
--------------
3,328,623
--------------
CANADA -- 9.2%
74,996 Bell Aliant, Inc. 2,076,217
55,718 Canadian Oil Sands Ltd. 1,877,573
29,046 Crescent Point Energy Corp. 1,409,607
23,997 Emera, Inc. 784,389
37,553 Manitoba Telecom Services, Inc. 1,163,969
40,728 Russel Metals, Inc. 1,147,274
17,969 Telus Corp. 918,744
21,865 TransCanada Corp. 886,553
--------------
10,264,326
--------------
FINLAND -- 1.5%
31,020 Fortum Oyj 1,053,314
13,448 KCI Konecranes Oyj 622,638
--------------
1,675,952
--------------
FRANCE -- 5.6%
21,752 Bouygues S.A. 1,044,566
57,250 CNP Assurances 1,215,392
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
FRANCE (CONTINUED)
74,767 France Telecom S.A. $ 1,675,217
11,180 Neopost S.A. 979,331
47,574 Vivendi 1,358,544
--------------
6,273,050
--------------
GERMANY -- 3.2%
6,670 BASF SE 576,897
109,565 Deutsche Telekom AG 1,687,837
20,189 RWE AG 1,285,954
--------------
3,550,688
--------------
HONG KONG -- 2.2%
87,513 CLP Holdings Ltd. 707,660
120,557 Hongkong Electric Holdings 805,930
153,239 Television Broadcasts Ltd. 900,299
--------------
2,413,889
--------------
ITALY -- 2.2%
54,678 ENI S.p.A 1,342,890
12,441 Milano Assicurazioni S.p.A 16,080
727,365 Telecom Italia S.p.A 1,118,436
--------------
2,477,406
--------------
JAPAN -- 1.7%
27,100 Eisai Co. Ltd. 972,186
19,600 Ono Pharmaceutical Co., Ltd. 963,741
--------------
1,935,927
--------------
JERSEY -- 0.6%
66,347 United Business Media Ltd. 637,010
--------------
NETHERLANDS -- 1.9%
80,989 Koninklijke (Royal) KPN N.V. 1,379,621
14,451 Koninklijke Boskalis Westminster
N.V. 764,206
--------------
2,143,827
--------------
NEW ZEALAND -- 2.6%
137,188 Fletcher Building Ltd. 977,656
1,233,999 Telecom Corp. of New Zealand Ltd. 1,892,492
--------------
2,870,148
--------------
PORTUGAL -- 1.9%
112,841 CIMPOR Cimentos de Portugal
SGPS S.A. 817,818
322,749 EDP-Energias de Portugal S.A. 1,256,929
--------------
2,074,747
--------------
SINGAPORE -- 2.0%
82,000 Keppel Corp. Ltd. 800,158
674,000 StarHub Ltd. 1,443,713
--------------
2,243,871
--------------
SPAIN -- 4.6%
101,580 Banco Santander S.A. 1,179,308
71,902 Gas Natural SDG S.A. 1,350,672
382,598 Mapfre S.A. 1,441,751
49,428 Telefonica S.A. 1,237,416
--------------
5,209,147
--------------
Page 34 See Notes to Financial Statements
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) (CONTINUED)
SWEDEN -- 3.3%
38,496 NCC AB, Class B $ 1,103,301
118,367 Peab AB 1,054,856
22,607 Svenska Handelsbanken AB 741,401
96,353 TeliaSonera AB 832,722
--------------
3,732,280
--------------
SWITZERLAND -- 2.1%
2,088 Swisscom AG 930,905
5,097 Zurich Financial Services AG 1,426,716
--------------
2,357,621
--------------
UNITED KINGDOM -- 11.6%
160,635 Amlin PLC 983,611
32,070 AstraZeneca PLC 1,472,928
2,961,423 Cable & Wireless Communications
PLC 2,164,438
139,644 Halfords Group PLC, ADR 780,032
511,864 Hays PLC 954,982
70,876 Jardine Lloyd Thompson Group
PLC 786,804
106,186 Provident Financial PLC 1,635,308
633,233 RSA Insurance Group PLC 1,335,827
40,756 Severn Trent PLC 955,219
95,358 Tate & Lyle PLC 883,426
111,228 United Utilities PLC 1,055,431
--------------
13,008,006
--------------
UNITED STATES -- 17.5%
46,105 Altria Group, Inc. 1,200,113
26,466 American Electric Power Co., Inc. 930,015
37,959 AT&T, Inc. 1,161,545
56,968 CenterPoint Energy, Inc. 1,000,358
28,215 CenturyLink, Inc. 1,172,333
18,529 Consolidated Edison, Inc. 939,791
19,808 DTE Energy Co. 969,800
29,189 Eli Lilly & Co. 1,026,577
32,034 FirstEnergy Corp. 1,188,141
20,513 Integrys Energy Group, Inc. 1,036,112
12,170 Lorillard, Inc. 1,156,272
27,688 MeadWestvaco Corp. 839,777
20,709 Microchip Technology, Inc. 787,149
58,942 Pepco Holdings, Inc. 1,099,268
23,628 Progress Energy, Inc. 1,090,196
67,880 R.R. Donnelley & Sons Co. 1,284,290
21,090 SCANA Corp. 830,313
23,131 Southern Co. 881,523
52,055 TECO Energy, Inc. 976,552
--------------
19,570,125
--------------
TOTAL INVESTMENTS -- 100.1% 112,070,477
(Cost $104,910,079) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (77,559)
--------------
NET ASSETS -- 100.0% $ 111,992,918
==============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Portfolio securities are categorized based upon their country of
incorporation.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of March 31, 2011, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $7,953,898 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $793,500.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of March 31,
2011 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* $112,070,477 $ -- $ --
=====================================
* See Portfolio of Investments for country breakout.
See Notes to Financial Statements Page 35
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
% OF
INDUSTRY NET ASSETS
-----------------------------------------------------------
Diversified Telecommunication Services 21.4%
Electric Utilities 8.8
Insurance 8.3
Multi-Utilities 7.2
Commercial Banks 6.2
Oil, Gas & Consumable Fuels 5.7
Construction & Engineering 4.3
Pharmaceuticals 4.0
Food & Staples Retailing 3.2
Real Estate Investment Trusts 3.0
Wireless Telecommunication Services 2.7
Media 2.6
Construction Materials 2.5
Tobacco 2.1
Consumer Finance 1.5
Chemicals 1.2
Communications Equipment 1.2
Gas Utilities 1.2
Multiline Retail 1.2
Commercial Services & Supplies 1.1
Textiles, Apparel & Luxury Goods 1.1
Transportation Infrastructure 1.1
Trading Companies & Distributors 1.0
Office Electronics 0.9
Water Utilities 0.9
Food Products 0.8
Paper & Forest Products 0.8
Professional Services 0.8
Industrial Conglomerates 0.7
Semiconductors & Semiconductor Equipment 0.7
Specialty Retail 0.7
Energy Equipment & Services 0.6
Machinery 0.6
-----------------------------------------------------------
TOTAL INVESTMENTS 100.1
NET OTHER ASSETS AND LIABILITIES (0.1)
--------------
TOTAL 100.0%
==============
Page 36 See Notes to Financial Statements
FIRST TRUST ISE GLOBAL WIND ENERGY INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) -- 99.9%
AUSTRALIA -- 3.5%
31,229 AGL Energy Ltd. $ 462,238
5,142,004 Infigen Energy 1,967,895
--------------
2,430,133
--------------
BELGIUM -- 3.0%
2,707,298 Hansen Transmissions
International (c) 2,084,675
--------------
BERMUDA -- 4.1%
26,356,605 China WindPower Group Ltd. (c) 2,812,347
--------------
BRAZIL -- 1.1%
49,136 Centrais Eletricas Brasileiras
S.A., ADR 762,099
--------------
CANADA -- 0.8%
15,680 Boralex, Inc. (c) 136,664
15,948 Brookfield Renewable Power Fund 389,694
--------------
526,358
--------------
CAYMAN ISLANDS -- 0.7%
276,848 China High Speed Transmission
Equipment Group Co., Ltd. 443,467
--------------
CHINA -- 6.4%
3,795,956 China Longyuan Power Group
Corp., Class H (c) 4,079,705
435,568 China Suntien Green Energy Corp.,
Class H (c) 140,550
200,817 Harbin Power Equipment Co. Ltd. 207,825
--------------
4,428,080
--------------
DENMARK -- 10.1%
224,157 Greentech Energy Systems A/S (c) 737,078
143,320 Vestas Wind Systems A/S (c) 6,216,381
--------------
6,953,459
--------------
FRANCE -- 3.3%
13,931 Alstom S.A. 823,774
11,853 EDF Energies Nouvelles S.A. 624,885
414,435 Theolia S.A. (c) 787,028
--------------
2,235,687
--------------
GERMANY -- 15.4%
186,464 Conergy AG (c) 105,438
27,260 E. ON AG 832,534
239,988 Nordex AG (c) 2,625,645
312,345 PNE Wind AG (c) 1,137,619
20,590 Repower Systems AG 4,203,381
12,491 RWE AG 795,624
6,790 Siemens AG, ADR 932,538
--------------
10,632,779
--------------
GREECE -- 0.2%
32,879 Terna Energy S.A. 159,358
--------------
ITALY -- 1.2%
308,246 Enel Green Power SpA (c) 855,341
--------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
JAPAN -- 2.4%
813 Japan Wind Development
Co. Ltd. (c) $ 778,009
50,100 Mitsui & Co. Ltd. 898,042
--------------
1,676,051
--------------
JERSEY -- 0.2%
184,519 Renewable Energy Generation Ltd. 167,614
--------------
PORTUGAL -- 1.1%
185,200 EDP-Energias de Portugal S.A. 721,252
--------------
SOUTH KOREA -- 0.2%
20,461 Dongkuk Structure & Construction
Co., Ltd. 125,159
--------------
SPAIN -- 29.3%
6,679 Acciona S.A. 725,810
763,033 EDP Renovaveis S.A. (c) 5,480,359
33,912 Endesa S.A. 1,050,829
1,169,534 Fersa Energias Renovables S.A. 2,328,725
487,810 Gamesa Corp. Tecnologica S.A. (c) 5,069,458
1,280,822 Iberdrola Renovables S.A. 5,527,200
--------------
20,182,381
--------------
SWEDEN -- 1.0%
24,017 SKF AB 699,365
--------------
SWITZERLAND -- 1.0%
7,099 BKW FMB Energie AG 501,993
238 Gurit Holding AG 169,204
--------------
671,197
--------------
UNITED KINGDOM -- 2.5%
18,848 BP PLC, ADR 831,951
12,536 Royal Dutch Shell PLC, ADR 913,373
--------------
1,745,324
--------------
UNITED STATES -- 12.4%
57,242 AES (The) Corp. (c) 744,146
9,155 Allegheny Technologies, Inc. 619,977
13,380 Alliant Energy Corp. 520,883
9,732 American Superconductor Corp. (c) 242,035
1,632 Ameron International Corp. 113,897
882,624 Broadwind Energy, Inc. (c) 1,156,237
141,755 Capstone Turbine Corp. (c) 256,576
37,197 Duke Energy Corp. 675,126
15,756 Federal Mogul Corp. (c) 392,324
45,994 General Electric Co. 922,180
8,356 Kaydon Corp. 327,472
12,536 NextEra Energy, Inc. 690,984
26,159 NRG Energy, Inc. (c) 563,465
14,842 Otter Tail Corp. 337,359
13,140 Trinity Industries, Inc. 481,844
8,555 Woodward Governor Co. 295,661
13,191 Zoltek Cos., Inc. (c) 177,155
--------------
8,517,321
--------------
See Notes to Financial Statements Page 37
FIRST TRUST ISE GLOBAL WIND ENERGY INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
TOTAL COMMON STOCKS -- 99.9% $ 68,829,447
(Cost $89,564,250)
WARRANTS -- 0.0%
UNITED STATES -- 0.0%
959 GreenHunter Energy, Inc.,
expiring 09/15/11 @ $0 (c) (d) 0
(Cost $0) --------------
TOTAL INVESTMENTS -- 99.9% 68,829,447
(Cost $89,564,250) (e)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 81,311
--------------
NET ASSETS -- 100.0% $ 68,910,758
==============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Portfolio securities are categorized based upon their country of
incorporation.
(c) Non-income producing security.
(d) This security is fair valued in accordance with procedures adopted by the
Trust's Board of Trustees.
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of March 31, 2011, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $4,467,357 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $25,202,160.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of March 31,
2011 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* $68,829,447 $ -- $ --
=====================================
* See Portfolio of Investments for country breakout.
% OF
INDUSTRY NET ASSETS
-----------------------------------------------------------
Independent Power Producers & Energy Traders 38.1%
Electrical Equipment 31.2
Electric Utilities 10.3
Oil, Gas & Consumable Fuels 6.1
Machinery 5.2
Industrial Conglomerates 2.7
Multi-Utilities 2.6
Trading Companies & Distributors 1.3
Metals & Mining 0.9
Auto Components 0.6
Chemicals 0.5
Building Products 0.2
Construction & Engineering 0.2
-----------------------------------------------------------
TOTAL INVESTMENTS 99.9
NET OTHER ASSETS AND LIABILITIES 0.1
--------------
TOTAL 100.0%
==============
Page 38 See Notes to Financial Statements
FIRST TRUST ISE GLOBAL ENGINEERING AND CONSTRUCTION INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) -- 99.7%
AUSTRALIA -- 2.7%
48,879 Leighton Holdings Ltd. $ 1,490,956
80,863 NRW Holdings Ltd. 241,722
--------------
1,732,678
--------------
CANADA -- 3.4%
27,822 Aecon Group, Inc. 284,390
24,576 SNC-Lavalin Group, Inc. 1,400,287
15,965 Stantec, Inc. (c) 477,880
--------------
2,162,557
--------------
CAYMAN ISLANDS -- 1.3%
868,641 China State Construction
International Holdings Ltd. 792,866
--------------
CHINA -- 3.6%
1,415,472 China Communications
Construction Co., Ltd. 1,350,226
1,417,184 China Railway Group Ltd. 914,601
--------------
2,264,827
--------------
EGYPT -- 1.6%
23,783 Orascom Construction Industries,
GDR 998,648
--------------
FINLAND -- 1.6%
34,910 YIT Oyj 1,035,001
--------------
FRANCE -- 8.1%
39,752 Bouygues S.A. 1,908,954
20,072 Eiffage S.A. 1,205,822
32,546 Vinci S.A. 2,033,837
--------------
5,148,613
--------------
GERMANY -- 3.1%
18,277 Hochtief AG 1,965,965
--------------
ITALY -- 2.7%
18,175 Astaldi S.p.A 150,166
211,795 Impregilo S.p.A (c) 707,164
122,278 Marie Tecnimont S.p.A 503,239
23,790 Trevi Finanziaria S.p.A 318,775
--------------
1,679,344
--------------
JAPAN -- 14.3%
102,000 Chiyoda Corp. 934,407
62,100 COMSYS Holdings Corp. 627,869
73,000 JGC Corp. 1,708,716
334,000 Kajima Corp. 935,585
54,000 Kandenko Co., Ltd. 305,121
59,000 Kinden Corp. 536,944
20,900 Kyowa Exeo Corp. 209,302
26,000 Maeda Corp. 85,646
233,000 Obayashi Corp. 1,036,427
213,000 Shimizu Corp. 947,463
7,100 SHO-BOND Holdings Co., Ltd. 189,407
319,000 Taisei Corp. 786,187
59,000 Toda Corp. 233,361
28,000 Toshiba Plant Systems & Services
Corp. 316,759
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
JAPAN (CONTINUED)
60,000 Toyo Engineering Corp. $ 230,825
--------------
9,084,019
--------------
NETHERLANDS -- 8.4%
18,442 Arcadis N.V. 445,748
34,972 Chicago Bridge & Iron Co. N.V. 1,421,962
27,382 Imtech N.V. 1,016,318
116,656 Koninklijke BAM Groep N.V. 899,198
28,934 Koninklijke Boskalis Westminster
N.V. 1,530,104
--------------
5,313,330
--------------
NORWAY -- 3.1%
86,214 Aker Solutions ASA 1,981,429
--------------
PANAMA -- 3.0%
75,861 McDermott International, Inc. (c) 1,926,111
--------------
PORTUGAL -- 0.1%
21,949 Mota-Engil SGPS S.A. 56,613
--------------
SPAIN -- 8.8%
34,806 ACS Actividades de Construccion
y Servicios S.A. 1,631,732
36,978 Obrascon Huarte Lain S.A. 1,335,803
121,498 Sacyr Vallehermoso S.A. (c) 1,411,926
20,095 Tecnicas Reunidas S.A. 1,208,058
--------------
5,587,519
--------------
SWEDEN -- 5.5%
32,995 NCC AB, Class B 945,642
84,969 Peab AB 757,221
84,287 Skanska AB 1,774,702
--------------
3,477,565
--------------
SWITZERLAND -- 2.6%
44,520 Foster Wheeler AG (c) 1,674,842
--------------
UNITED KINGDOM -- 4.6%
76,886 AMEC PLC 1,471,461
207,117 Balfour Beatty PLC 1,142,307
28,961 WS Atkins PLC 325,681
--------------
2,939,449
--------------
UNITED STATES -- 21.2%
41,524 Aecom Technology Corp. (c) 1,151,461
26,965 EMCOR Group, Inc. (c) 835,106
27,407 Fluor Corp. 2,018,800
18,587 Granite Construction, Inc. 522,295
17,479 Insituform Technologies, Inc.,
Class A (c) 467,563
37,279 Jacobs Engineering Group,
Inc. (c) 1,917,259
48,437 KBR, Inc. 1,829,465
70,616 Quanta Services, Inc. (c) 1,583,917
34,431 Shaw Group (The), Inc. (c) 1,219,202
23,298 Tutor Perini Corp. 567,539
29,410 URS Corp. (c) 1,354,330
--------------
13,466,937
--------------
See Notes to Financial Statements Page 39
FIRST TRUST ISE GLOBAL ENGINEERING AND CONSTRUCTION INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
DESCRIPTION VALUE
-----------------------------------------------------------
TOTAL INVESTMENTS -- 99.7% $ 63,288,313
(Cost $53,623,092) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.3% 202,347
--------------
NET ASSETS -- 100.0% $ 63,490,660
==============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Portfolio securities are categorized based upon their country of
incorporation.
(c) Non-income producing security.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of March 31, 2011, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $10,072,994 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $407,773.
GDR - Global Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of March 31,
2011 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* $63,288,313 $ -- $ --
=====================================
* See Portfolio of Investments for country breakout
% OF
INDUSTRY NET ASSETS
-----------------------------------------------------------
Construction & Engineering 88.0%
Energy Equipment & Services 10.4
Professional Services 1.3
-----------------------------------------------------------
TOTAL INVESTMENTS 99.7
NET OTHER ASSETS AND LIABILITIES 0.3
--------------
TOTAL 100.0%
==============
Page 40 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) -- 100.0%
CAYMAN ISLANDS -- 1.4%
791,303 Wasion Group Holdings Ltd. $ 425,227
--------------
FRANCE -- 8.2%
14,308 Schneider Electric S.A. 2,445,431
--------------
GERMANY -- 10.7%
71,850 Elster Group SE, ADR (c) 1,167,562
4,450 Siemens AG 609,903
11,287 SMA Solar Technology AG 1,414,674
--------------
3,192,139
--------------
IRELAND -- 2.0%
9,118 Cooper Industries PLC 591,758
--------------
ITALY -- 7.9%
110,385 Prysmian S.p.A 2,368,455
--------------
JAPAN -- 8.2%
137,000 NGK Insulators Ltd. 2,449,134
--------------
SPAIN -- 8.6%
41,885 Red Electrica Corp. S.A. 2,380,302
6,256 Telvent GIT S.A. (c) 182,112
--------------
2,562,414
--------------
SWITZERLAND -- 1.9%
24,312 ABB Ltd. (c) 583,911
--------------
UNITED KINGDOM -- 2.0%
62,010 National Grid PLC 590,894
--------------
UNITED STATES -- 48.6%
19,474 A123 Systems, Inc. (c) 123,660
8,060 Advanced Energy Industries,
Inc. (c) 131,781
43,199 American Superconductor Corp. (c) 1,074,359
10,649 AZZ, Inc. 485,594
21,568 Comverge, Inc. (c) 100,507
4,674 Digi International, Inc. (c) 49,358
35,649 Echelon Corp. (c) 361,124
21,240 EnerNOC, Inc. (c) 405,896
22,631 ESCO Technologies, Inc. 863,373
26,842 General Cable Corp. (c) 1,162,259
28,228 General Electric Co. 565,972
8,434 Hubbell, Inc., Class B 599,067
16,751 ITC Holdings Corp. 1,170,895
21,673 Itron, Inc. (c) 1,223,224
14,514 MasTec, Inc. (c) 301,891
17,017 MYR Group, Inc. (c) 407,047
28,627 Pike Electric Corp. (c) 272,529
90,887 Power-One, Inc. (c) 795,261
15,934 PowerSecure International, Inc. (c) 137,032
103,666 Quanta Services, Inc. (c) 2,325,228
100,463 Satcon Technology Corp. (c) 387,787
9,688 Thomas & Betts Corp. (c) 576,145
4,882 Valmont Industries, Inc. 509,534
7,985 WESCO International, Inc. (c) 499,063
--------------
14,528,586
--------------
VIRGIN ISLANDS (US) -- 0.5%
13,994 Jinpan International Ltd. 164,010
--------------
DESCRIPTION VALUE
-----------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 29,901,959
(Cost $26,288,255) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% (7,998)
--------------
NET ASSETS -- 100.0% $ 29,893,961
==============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Portfolio securities are categorized based upon their country of
incorporation.
(c) Non-income producing security.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of March 31, 2011, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $4,993,939 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $1,380,235.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of March 31,
2011 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* $29,901,959 $ -- $ --
=====================================
* See Portfolio of Investments for country breakout.
% OF
INDUSTRY NET ASSETS
-----------------------------------------------------------
Electrical Equipment 35.8%
Electronic Equipment, Instruments &
Components 13.6
Machinery 12.8
Electric Utilities 11.9
Construction & Engineering 11.1
Semiconductors & Semiconductor Equipment 5.1
Industrial Conglomerates 3.9
Multi-Utilities 2.0
Trading Companies & Distributors 1.7
Commercial Services & Supplies 1.3
IT Services 0.6
Communications Equipment 0.2
-----------------------------------------------------------
TOTAL INVESTMENTS 100.0
NET OTHER ASSETS AND LIABILITIES 0.0
--------------
TOTAL 100.0%
==============
See Notes to Financial Statements Page 41
FIRST TRUST ISE GLOBAL COPPER INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) -- 100.0%
BERMUDA -- 4.8%
11,729,836 Katanga Mining Ltd. (c) $ 20,931,012
--------------
CANADA -- 43.0%
2,176,724 Anvil Mining Ltd. (c) 14,212,133
1,165,392 Capstone Mining Corp. (c) 5,301,061
814,871 Copper Mountain Mining Corp. (c) 6,253,368
3,309,569 Equinox Minerals Ltd. (c) 19,594,560
154,024 First Quantum Minerals Ltd. 19,925,415
730,142 HudBay Minerals, Inc. 11,891,637
252,447 Imperial Metals Corp. (c) 5,780,633
184,539 Inmet Mining Corp. 12,971,978
928,724 Ivanhoe Mines Ltd. (c) 25,471,657
2,333,268 Lundin Mining Corp. (c) 19,373,705
1,472,245 Mercator Minerals Ltd. (c) 5,102,365
537,964 New Gold, Inc. (c) 6,331,273
770,846 Northern Dynasty Minerals Ltd. (c) 11,593,524
876,941 Quadra Mining Ltd. (c) 12,220,189
2,058,703 Taseko Mines Ltd. (c) 12,208,109
--------------
188,231,607
--------------
PERU -- 0.5%
48,951 Sociedad Minera Cerro Verde
S.A.A. 2,217,481
--------------
POLAND -- 5.8%
399,735 KGHM Polska Miedz S.A. 25,367,040
--------------
RUSSIA -- 4.6%
751,170 MMC Norilsk Nickel, ADR 19,860,935
--------------
SOUTH AFRICA -- 2.8%
6,697,531 Metorex Ltd. (c) 6,405,473
288,261 Palabora Mining Co., Ltd. 5,956,968
--------------
12,362,441
--------------
TURKEY -- 1.3%
2,206,748 Park Elektrik Madencilik Tekstil
Sanayi ve Ticaret A.S. (c) 5,802,530
--------------
UNITED KINGDOM -- 25.8%
1,092,629 Antofagasta PLC 23,855,686
825,760 Kazakhmys PLC 18,466,206
363,027 Rio Tinto PLC, ADR 25,818,480
502,456 Vedanta Resources PLC 19,175,803
1,083,727 Xstrata PLC 25,330,311
--------------
112,646,486
--------------
UNITED STATES -- 11.4%
473,517 Freeport-McMoRan Copper &
Gold, Inc. 26,303,869
586,917 Southern Copper Corp. 23,635,148
--------------
49,939,017
--------------
DESCRIPTION VALUE
-----------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 437,358,549
(Cost $420,502,541) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% (24,287)
--------------
NET ASSETS -- 100.0% $ 437,334,262
==============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Portfolio securities are categorized based upon their country of
incorporation.
(c) Non-income producing security.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of March 31, 2011, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $19,869,966 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $3,013,958.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of March 31,
2011 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* $437,358,549 $ -- $ --
=====================================
* See Portfolio of Investments for country breakout.
% OF
INDUSTRY NET ASSETS
-----------------------------------------------------------
Metals & Mining 100.0%
-----------------------------------------------------------
TOTAL INVESTMENTS 100.0
NET OTHER ASSETS AND LIABILITIES 0.0
--------------
TOTAL 100.0%
==============
Page 42 See Notes to Financial Statements
FIRST TRUST ISE GLOBAL PLATINUM INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) -- 100.1%
AUSTRALIA -- 2.5%
1,502,928 Platinum Australia Ltd. (c) $ 917,187
--------------
BERMUDA -- 9.3%
448,124 Aquarius Platinum Ltd. 2,484,466
1,130,572 Sylvania Platinum Ltd. (c) 870,563
--------------
3,355,029
--------------
CANADA -- 22.0%
1,178,445 Anooraq Resources Corp. (c) 1,366,996
1,073,818 Eastern Platinum Ltd. (c) 1,439,880
1,010,496 Noront Resources Ltd. (c) 979,749
246,246 North American Palladium Ltd. (c) 1,598,136
625,296 Platinum Group Metals Ltd. (c) 1,225,438
556,559 Platmin Ltd. (c) 459,254
417,820 PolyMet Mining Corp. (c) 827,284
--------------
7,896,737
--------------
CHINA -- 2.6%
1,507,483 Xinjiang Xinxin Mining Industry
Co., Ltd., Class H 918,612
--------------
HONG KONG -- 4.4%
1,932,585 Minmetals Resources Ltd. (c) 1,567,723
--------------
JAPAN -- 3.4%
21,000 Furuya Metal Co., Ltd. 1,211,830
--------------
RUSSIA -- 7.8%
105,876 MMC Norilsk Nickel, ADR 2,799,362
--------------
SOUTH AFRICA -- 24.8%
52,850 African Rainbow Minerals Ltd. 1,742,136
25,766 Anglo Platinum Ltd. 2,654,679
87,632 Impala Platinum Holdings Ltd. 2,535,564
254,219 Northam Platinum Ltd. 1,653,457
914,201 Wesizwe Platinum Ltd. (c) 309,463
--------------
8,895,299
--------------
UNITED KINGDOM -- 18.8%
86,170 Johnson Matthey PLC 2,571,166
90,856 Lonmin PLC 2,482,158
72,212 Xstrata PLC 1,687,835
--------------
6,741,159
--------------
UNITED STATES -- 4.5%
71,223 Stillwater Mining Co. (c) 1,633,143
--------------
TOTAL INVESTMENTS -- 100.1% 35,936,081
(Cost $34,546,091) (d)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (21,625)
--------------
NET ASSETS -- 100.0% $ 35,914,456
==============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Portfolio securities are categorized based upon their country of
incorporation.
(c) Non-income producing security.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of March 31, 2011, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $2,232,473 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $842,483.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of March 31,
2011 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* $35,936,081 $ -- $ --
=====================================
* See Portfolio of Investments for country breakout.
% OF
INDUSTRY NET ASSETS
-----------------------------------------------------------
Metals & Mining 89.5%
Chemicals 7.2
Semiconductors & Semiconductor Equipment 3.4
-----------------------------------------------------------
TOTAL INVESTMENTS 100.1
NET OTHER ASSETS AND LIABILITIES (0.1)
--------------
TOTAL 100.0%
==============
See Notes to Financial Statements Page 43
FIRST TRUST BICK INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) -- 99.9%
BRAZIL -- 24.3%
98,522 Banco Bradesco S.A., ADR $ 2,044,331
107,771 Banco do Brasil S.A. 1,943,990
157,060 Banco Santander Brasil S.A., ADR 1,925,556
273,604 BM&F BOVESPA S.A. 1,985,856
105,452 BRF- Brasil Foods S.A. 1,976,438
215,848 Cielo S.A. 1,832,391
48,198 Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar 1,979,405
65,776 Companhia de Bebidas das
Americas, ADR 1,862,119
63,803 Companhia de Concessoes
Rodoviarias 1,862,916
101,479 Companhia Energetica de Minas
Gerais, ADR 1,955,500
116,123 Companhia Siderurgica Nacional
S.A., ADR 1,934,609
187,469 Cyrela Brazil Realty S.A.
Empreendimentos e
Participacoes 1,774,046
54,788 Embraer S.A., ADR 1,846,356
141,927 Gerdau S.A., ADR 1,774,087
1,500 HRT Participacoes em Petroleo
S.A. (c) 1,567,390
168,722 Hypermarcas S.A. (c) 2,221,862
84,800 Itau Unibanco Holding S.A., ADR 2,039,440
67,191 Natura Cosmeticos S.A. 1,892,698
160,773 OGX Petroleo e Gas Participacoes
S.A. (c) 1,927,129
325,858 PDG Realty S.A. Empreendimentos
e Participacoes 1,812,263
46,325 Petroleo Brasileiro S.A., ADR (c) 1,872,920
115,536 Tele Norte Leste Participacoes
S.A., ADR 2,025,346
144,071 Usinas Siderurgicas de Minas
Gerais S.A. 1,741,047
56,780 Vale S.A., ADR 1,893,613
49,115 Vivo Participacoes S.A., ADR 1,983,264
--------------
47,674,572
--------------
CAYMAN ISLANDS -- 3.9%
14,617 Baidu, Inc., ADR (c) 2,014,369
47,150 Ctrip.com International Ltd.,
ADR (c) 1,956,253
19,243 SINA Corp. (c) 2,059,771
65,639 Tencent Holdings Ltd. 1,599,089
--------------
7,629,482
--------------
CHINA -- 20.5%
3,521,700 Agricultural Bank of China Ltd.,
Class H (c) 1,996,606
1,935,173 Aluminum Corp. of China Ltd.,
Class H (c) 1,840,996
349,051 Anhui Conch Cement Co., Ltd.,
Class H 2,183,097
3,427,793 Bank of China Ltd., Class H 1,908,112
1,800,362 Bank of Communications Co., Ltd.,
Class H 1,981,230
1,241,020 China Coal Energy Co., Class H 1,691,165
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
CHINA (CONTINUED)
2,018,333 China Construction Bank Corp.,
Class H $ 1,891,567
1,717,951 China COSCO Holdings Co., Ltd.,
Class H (c) 1,758,026
473,962 China Life Insurance Co., Ltd.,
Class H 1,779,212
714,014 China Merchants Bank Co., Ltd.,
Class H 1,978,133
451,543 China Pacific Insurance Group
Co., Ltd., Class H 1,898,227
1,830,310 China Petroleum & Chemical
Corp., Class H 1,835,357
18,028 China Petroleum & Chemical
Corp., ADR 1,813,256
425,393 China Shenhua Energy Co., Ltd.,
Class H 2,004,314
3,134,233 China Telecom Corp., Ltd.,
Class H 1,913,931
1,053,547 Dongfeng Motor Group Co., Ltd.,
Class H 1,793,260
2,331,883 Industrial & Commercial Bank of
China, Class H 1,936,603
615,736 Jiangxi Copper Co., Ltd., Class H 2,054,155
1,319,767 PetroChina Co., Ltd., Class H 1,998,683
173,985 Ping An Insurance (Group) Co. of
China Ltd., Class H 1,763,660
611,435 Yanzhou Coal Mining Co., Ltd.,
Class H 2,224,529
--------------
40,244,119
--------------
INDIA -- 23.5%
116,436 Axis Bank Ltd., GDR 3,701,500
93,220 Dr. Reddy's Laboratories Ltd., ADR 3,477,106
21,070 HDFC Bank Ltd., ADR 3,580,636
72,324 ICICI Bank Ltd., ADR 3,603,905
48,286 Infosys Technologies Ltd., ADR 3,462,106
95,505 Larsen & Toubro Ltd., GDR 3,556,606
224,225 Mahindra & Mahindra Ltd., GDR 3,571,904
74,290 Reliance Industries Ltd., GDR 3,522,832
28,065 State Bank of India, GDR 3,620,385
229,541 Sterlite Industries (India) Ltd., ADR 3,544,113
126,720 Tata Motors Ltd., ADR 3,521,549
248,813 Tata Steel Ltd., GDR 3,446,060
240,544 Wipro Ltd., ADR 3,523,970
--------------
46,132,672
--------------
MAURITIUS -- 1.8%
122,786 Makemytrip Ltd. (c) 3,598,858
--------------
SOUTH KOREA -- 25.9%
44,500 Hana Financial Group, Inc. 1,924,905
5,926 Honam Petrochemical Corp. 2,093,373
74,150 Hynix Semiconductor, Inc. 2,115,771
26,603 Hyundai Engineering &
Construction Co., Ltd. 1,920,742
4,722 Hyundai Heavy Industries Co., Ltd. 2,229,815
7,577 Hyundai Mobis 2,262,152
11,253 Hyundai Motor Co. 2,082,464
16,629 Hyundai Steel Co. 2,122,303
Page 44 See Notes to Financial Statements
FIRST TRUST BICK INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) (CONTINUED)
SOUTH KOREA (CONTINUED)
36,606 KB Financial Group, Inc. $ 1,918,816
33,887 Kia Motors Corp. 2,131,549
5,287 LG Chem Ltd. 2,217,075
28,133 LG Corp. 2,097,889
58,680 LG Display Co., Ltd. 1,840,186
19,373 LG Electronics, Inc. 1,854,383
5,078 OCI Co., Ltd. 2,286,824
4,558 POSCO 2,098,355
31,258 Samsung C&T Corp. 2,045,968
17,403 Samsung Electro-Mechanics Co.,
Ltd. 1,864,126
2,384 Samsung Electronics Co., Ltd. 2,025,514
59,350 Samsung Heavy Industries Co. Ltd. 2,158,772
19,282 Samsung Life Insurance Co., Ltd. 1,810,516
12,371 Samsung SDI Co., Ltd. 1,894,642
41,990 Shinhan Financial Group Co., Ltd. 1,908,201
11,042 SK Innovation Co., Ltd. 2,123,945
140,670 Woori Finance Holdings Co., Ltd. 1,865,854
--------------
50,894,140
--------------
TOTAL INVESTMENTS -- 99.9% 196,173,843
(Cost $185,418,860) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 104,958
--------------
NET ASSETS -- 100.0% $ 196,278,801
==============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Portfolio securities are categorized based upon their country of
incorporation.
(c) Non-income producing security.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of March 31, 2011, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $16,729,640 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $5,974,657.
ADR - American Depositary Receipt GDR - Global Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of March 31,
2011 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* $196,173,843 $ -- $ --
=====================================
* See Portfolio of Investments for country breakout.
% OF
INDUSTRY NET ASSETS
-----------------------------------------------------------
Commercial Banks 21.3%
Oil, Gas & Consumable Fuels 11.5
Metals & Mining 11.4
Automobiles 4.9
IT Services 4.5
Machinery 4.0
Insurance 3.7
Chemicals 3.4
Internet Software & Services 2.9
Construction & Engineering 2.8
Electronic Equipment, Instruments &
Components 2.8
Household Durables 2.8
Personal Products 2.1
Semiconductors & Semiconductor Equipment 2.1
Diversified Telecommunication Services 2.0
Internet & Catalog Retail 1.8
Pharmaceuticals 1.8
Auto Components 1.1
Construction Materials 1.1
Industrial Conglomerates 1.1
Beverages 1.0
Diversified Financial Services 1.0
Electric Utilities 1.0
Food & Staples Retailing 1.0
Food Products 1.0
Hotels, Restaurants & Leisure 1.0
Trading Companies & Distributors 1.0
Transportation Infrastructure 1.0
Wireless Telecommunication Services 1.0
Aerospace & Defense 0.9
Marine 0.9
-----------------------------------------------------------
TOTAL INVESTMENTS 99.9
NET OTHER ASSETS AND LIABILITIES 0.1
--------------
TOTAL 100.0%
==============
See Notes to Financial Statements Page 45
FIRST TRUST NASDAQ CEA SMARTPHONE INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) -- 99.5%
BERMUDA -- 1.1%
10,048 Marvell Technology Group
Ltd. (c) $ 156,246
--------------
CANADA -- 4.9%
33,544 Celestica, Inc. (c) 359,592
5,891 Research In Motion Ltd. (c) 333,254
--------------
692,846
--------------
CAYMAN ISLANDS -- 2.3%
541,222 Foxconn International Holdings
Ltd. (c) 324,933
--------------
CHINA -- 2.1%
34,630 BYD Co., Ltd., Class H 132,669
35,930 ZTE Corp., Class H 167,212
--------------
299,881
--------------
FINLAND -- 2.7%
44,426 Nokia Corp., ADR 378,065
--------------
FRANCE -- 2.6%
30,522 Alcatel-Lucent, ADR (c) 177,333
4,153 France Telecom S.A. 93,051
3,229 Vivendi 92,209
--------------
362,593
--------------
GERMANY -- 0.7%
6,416 Deutsche Telekom AG 98,838
--------------
GUERNSEY -- 1.1%
5,477 Amdocs Ltd. (c) 158,011
--------------
HONG KONG -- 1.2%
9,440 China Mobile Ltd. 86,954
52,070 China Unicom (Hong Kong) Ltd. 86,487
--------------
173,441
--------------
ITALY -- 0.6%
56,645 Telecom Italia S.p.A 87,101
--------------
JAPAN -- 8.9%
11,200 Elpida Memory, Inc. (c) 144,208
13 KDDI Corp. 80,488
3,700 Kyocera Corp. 374,982
47 NTT DoCoMo, Inc. 82,609
2,200 Softbank Corp. 87,810
10,900 Sony Corp. 349,093
26,000 Toshiba Corp. 127,218
--------------
1,246,408
--------------
NETHERLANDS -- 2.2%
3,217 Gemalto N.V. 158,224
12,308 STMicroelectronics N.V. 152,450
--------------
310,674
--------------
RUSSIA -- 0.7%
4,394 Mobile TeleSystems, ADR 93,285
--------------
SINGAPORE -- 3.7%
5,238 Avago Technologies Ltd. 162,902
50,140 Flextronics International
Ltd. (c) 374,546
--------------
537,448
--------------
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
SOUTH KOREA -- 6.1%
4,657 KT Corp., ADR $ 90,951
3,893 LG Electronics, Inc. 372,638
479 Samsung Electronics Co., Ltd. 406,972
--------------
870,561
--------------
SPAIN -- 0.6%
3,572 Telefonica S.A. 89,424
--------------
SWEDEN -- 1.2%
12,798 Telefonaktiebolaget LM Ericsson,
Class B 165,047
--------------
TAIWAN -- 10.1%
367,937 Compal Communications, Inc. 335,324
9,975 HTC Corp. 390,093
717,065 Inventec Corp. 365,769
208,589 Wistron Corp. 330,547
--------------
1,421,733
--------------
UNITED KINGDOM -- 1.8%
5,892 ARM Holdings PLC, ADR 165,978
30,876 Vodafone Group PLC 87,423
--------------
253,401
--------------
UNITED STATES -- 44.9%
3,526 Agilent Technologies, Inc. (c) 157,894
4,039 Altera Corp. 177,797
3,111 American Tower Corp., Class A (c) 161,212
4,217 Analog Devices, Inc. 166,065
1,084 Apple, Inc. (c) 377,720
3,133 AT&T, Inc. 95,870
12,970 Atmel Corp. (c) 176,781
20,776 Benchmark Electronics, Inc. (c) 394,121
3,986 Broadcom Corp., Class A (c) 156,969
7,249 CEVA, Inc. (c) 193,766
6,674 Ciena Corp. (c) 173,257
4,048 Crown Castle International
Corp. (c) 172,242
14,108 CTS Corp. 152,366
274 Google, Inc., Class A (c) 160,622
26,489 LSI Corp. (c) 180,125
6,304 Maxim Integrated Products, Inc. 161,382
15,734 Micron Technology, Inc. (c) 180,312
14,283 Motorola Mobility Holdings,
Inc. (c) 348,505
3,935 Motorola Solutions, Inc. (c) 175,855
11,222 National Semiconductor Corp. 160,923
5,135 OmniVision Technologies, Inc. (c) 182,447
15,750 ON Semiconductor Corp. (c) 155,453
25,815 RF Micro Devices, Inc. (c) 165,474
26,169 Sanmina-SCI Corp. (c) 293,354
3,912 SBA Communications Corp.,
Class A (c) 155,228
5,073 Skyworks Solutions, Inc. (c) 164,467
19,194 Sprint Nextel Corp. (c) 89,060
5,868 Synaptics, Inc. (c) 158,553
20,502 Tekelec (c) 166,476
30,988 Tellabs, Inc. 162,377
4,674 Texas Instruments, Inc. 161,533
Page 46 See Notes to Financial Statements
FIRST TRUST NASDAQ CEA SMARTPHONE INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
-----------------------------------------------------------
COMMON STOCKS (b) (CONTINUED)
UNITED STATES (CONTINUED)
12,726 TriQuint Semiconductor, Inc. (c) $ 164,293
2,461 Verizon Communications, Inc. 94,847
5,068 Xilinx, Inc. 166,230
--------------
6,365,434
--------------
TOTAL INVESTMENTS -- 99.5% 14,085,370
(Cost $14,615,781) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.5% 64,640
--------------
NET ASSETS -- 100.0% $ 14,150,010
==============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Portfolio securities are categorized based upon their country of
incorporation.
(c) Non-income producing security.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of March 31, 2011, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $277,173 and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over value was $807,584.
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of March 31,
2011 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* $14,085,370 $ -- $ --
=====================================
* See Portfolio of Investments for country breakout
% OF
INDUSTRY NET ASSETS
-----------------------------------------------------------
Semiconductors & Semiconductor Equipment 27.6%
Communications Equipment 22.2
Electronic Equipment, Instruments &
Components 16.1
Computers & Peripherals 10.7
Wireless Telecommunication Services 7.7
Diversified Telecommunication Services 5.2
Household Durables 5.1
Internet Software & Services 1.1
IT Services 1.1
Life Sciences Tools & Services 1.1
Automobiles 0.9
Media 0.7
-----------------------------------------------------------
TOTAL INVESTMENTS 99.5
NET OTHER ASSETS AND LIABILITIES 0.5
--------------
TOTAL 100.0%
==============
See Notes to Financial Statements Page 47
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 2011 (UNAUDITED)
FIRST TRUST
FIRST TRUST FTSE EPRA/NAREIT
STOXX(R) EUROPEAN DEVELOPED MARKETS
SELECT DIVIDEND REAL ESTATE
INDEX FUND INDEX FUND
------------------------ ------------------------
ASSETS:
Investments at value ................................................ $ 10,950,147 $ 75,185,648
Cash ................................................................ -- --
Foreign currency at value ........................................... 987 2,369
Receivables:
Capital shares sold .............................................. -- 5,290,686
Investment securities sold........................................ -- 5,633
Reclaims ......................................................... 57,920 7,303
Dividends ........................................................ 46,450 195,431
From investment advisor .......................................... 7,531 --
Interest ......................................................... -- 1
Other assets ........................................................ 60,503 5,129
-------------- --------------
TOTAL ASSETS ..................................................... 11,123,538 80,692,200
-------------- --------------
LIABILITIES:
Due to Custodian .................................................... 294,616 69,497
Payables:
Investment securities purchased .................................. -- 5,255,372
Audit and tax fees ............................................... 16,915 19,535
Printing fees .................................................... 2,487 15,504
Licensing fees ................................................... -- 19,086
Investment advisory fees ......................................... -- 9,830
Other liabilities ................................................... 5,603 13,840
-------------- --------------
TOTAL LIABILITIES................................................. 319,621 5,402,664
-------------- --------------
NET ASSETS........................................................... $ 10,803,917 $ 75,289,536
============== ==============
NET ASSETS CONSIST OF:
Paid-in capital ..................................................... $ 21,285,482 $ 69,299,717
Par value ........................................................... 7,533 21,000
Accumulated net investment income (loss) ............................ 13,780 (1,279,077)
Accumulated net realized gain (loss) on investments and
foreign currency transactions .................................... (11,097,065) (3,657,571)
Net unrealized appreciation (depreciation) on investments and
foreign currency translation ..................................... 594,187 10,905,467
-------------- --------------
NET ASSETS .......................................................... $ 10,803,917 $ 75,289,536
============== ==============
NET ASSET VALUE, per share........................................... $ 14.34 $ 35.85
============== ==============
Number of shares outstanding
(unlimited number of shares authorized, par value $0.01 per share) .. 753,334 2,100,002
============== ==============
Investments at cost.................................................. $ 10,358,780 $ 64,280,437
============== ==============
Foreign currency at cost ............................................ $ 950 $ 2,397
============== ==============
Page 48 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
FIRST TRUST FIRST TRUST ISE GLOBAL NASDAQ(R) CLEAN
DOW JONES GLOBAL ISE GLOBAL ENGINEERING EDGE(R) SMART GRID
SELECT DIVIDEND WIND ENERGY AND CONSTRUCTION INFRASTRUCTURE
INDEX FUND INDEX FUND INDEX FUND INDEX FUND
------------------------ ------------------------ ------------------------ ------------------------
$ 112,070,477 $ 68,829,447 $ 63,288,313 $ 29,901,959
-- -- 70,471 9,771
65,863 -- 23,118 --
8,614,839 7,646,726 4,835,995 --
-- -- -- --
14,507 60,562 24,178 9,347
288,959 220,419 118,563 26,647
-- -- -- --
-- -- -- --
23,797 15,487 14,772 1,487
-------------- -------------- -------------- --------------
121,078,442 76,772,641 68,375,410 29,949,211
-------------- -------------- -------------- --------------
389,468 158,756 -- 101
8,617,028 7,630,560 4,817,276 --
19,536 18,411 18,411 16,091
15,461 12,501 11,418 7,684
-- 13,201 10,210 6,375
29,944 11,594 17,161 10,085
14,087 16,860 10,274 14,914
-------------- -------------- -------------- --------------
9,085,524 7,861,883 4,884,750 55,250
-------------- -------------- -------------- --------------
$ 111,992,918 $ 68,910,758 $ 63,490,660 $ 29,893,961
============== ============== ============== ==============
$ 106,479,877 $ 126,197,691 $ 52,856,876 $ 26,367,696
45,500 58,500 13,000 8,500
(35,846) (482,219) 69,678 18,210
(1,659,481) (36,132,146) 884,210 (114,829)
7,162,868 (20,731,068) 9,666,896 3,614,384
-------------- -------------- -------------- --------------
$ 111,992,918 $ 68,910,758 $ 63,490,660 $ 29,893,961
============== ============== ============== ==============
$ 24.61 $ 11.78 $ 48.84 $ 35.17
============== ============== ============== ==============
4,550,002 5,850,002 1,300,002 850,002
============== ============== ============== ==============
$ 104,910,079 $ 89,564,250 $ 53,623,092 $ 26,288,255
============== ============== ============== ==============
$ 65,492 $ -- $ 23,125 $ --
============== ============== ============== ==============
See Notes to Financial Statements Page 49
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
MARCH 31, 2011 (UNAUDITED)
FIRST TRUST FIRST TRUST
ISE GLOBAL ISE GLOBAL
COPPER PLATINUM
INDEX FUND INDEX FUND
------------------------ ------------------------
ASSETS:
Investments at value ................................................ $ 437,358,549 $ 35,936,081
Cash................................................................. -- --
Foreign currency at value ........................................... 15,386 --
Receivables:
Capital shares sold .............................................. 45,099,685 3,235,966
Investment securities sold........................................ 613,685 382,575
Reclaims ......................................................... -- --
Dividends ........................................................ -- --
From investment advisor .......................................... -- --
Interest ......................................................... -- --
Other assets ........................................................ -- --
-------------- --------------
Total Assets ..................................................... 483,087,305 39,554,622
-------------- --------------
LIABILITIES:
Due to Custodian .................................................... 426,378 99,761
Payables:
Investment securities purchased .................................. 45,217,823 3,521,046
Audit and tax fees ............................................... -- --
Printing fees .................................................... -- --
Licensing fees ................................................... -- --
Investment advisory fees ......................................... 108,842 19,359
Other liabilities ................................................... -- --
-------------- --------------
Total Liabilities ................................................ 45,753,043 3,640,166
-------------- --------------
NET ASSETS .......................................................... $ 437,334,262 $ 35,914,456
============== ==============
NET ASSETS consist of:
Paid-in capital ..................................................... $ 419,756,957 $ 35,397,765
Par value ........................................................... 101,000 11,000
Accumulated net investment income (loss) ............................ (472,054) (48,624)
Accumulated net realized gain (loss) on investments and
foreign currency transactions .................................... 1,092,344 (835,659)
Net unrealized appreciation (depreciation) on investments and
foreign currency translation...................................... 16,856,015 1,389,974
-------------- --------------
NET ASSETS .......................................................... $ 437,334,262 $ 35,914,456
============== ==============
NET ASSET VALUE, per share .......................................... $ 43.30 $ 32.65
============== ==============
Number of shares outstanding
(unlimited number of shares authorized, par value $0.01 per share) .. 10,100,002 1,100,002
============== ==============
Investments at cost ................................................. $ 420,502,541 $ 34,546,091
============== ==============
Foreign currency at cost ............................................ $ 15,379 $ --
============== ==============
Page 50 See Notes to Financial Statements
FIRST TRUST
FIRST TRUST NASDAQ CEA
BICK SMARTPHONE
INDEX FUND INDEX FUND
------------------------ ------------------------
$ 196,173,843 $ 14,085,370
-- 59,031
-- 4,904
-- --
-- --
-- --
467,700 8,740
-- --
-- --
-- --
-------------- --------------
196,641,543 14,158,045
-------------- --------------
259,799 --
-- --
-- --
-- --
-- --
102,943 8,035
-- --
-------------- --------------
362,742 8,035
-------------- --------------
$ 196,278,801 $ 14,150,010
============== ==============
$ 187,374,100 $ 14,819,747
58,500 5,000
221,696 1,459
(2,138,511) (145,732)
10,763,016 (530,464)
-------------- --------------
$ 196,278,801 $ 14,150,010
============== ==============
$ 33.55 $ 28.30
============== ==============
5,850,002 500,002
============== ==============
$ 185,418,860 $ 14,615,781
============== ==============
$ -- $ 4,891
============== ==============
See Notes to Financial Statements Page 51
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF OPERATIONS
FIRST TRUST
FIRST TRUST FTSE EPRA/NAREIT
STOXX(R) EUROPEAN DEVELOPED MARKETS
SELECT DIVIDEND REAL ESTATE
INDEX FUND INDEX FUND
------------------------ ------------------------
For the For the
Six Months Ended Six Months Ended
March 31, 2011 March 31, 2011
(Unaudited) (Unaudited)
------------------------ ------------------------
INVESTMENT INCOME:
Dividends ........................................................... $ 154,461 $ 914,225
Foreign tax withholding ............................................. (4,714) (36,441)
Interest ............................................................ -- 16
-------------- --------------
Total investment income .......................................... 149,747 877,800
-------------- --------------
EXPENSES:
Licensing fees ...................................................... 37,397 35,109
Investment advisory fees ............................................ 19,058 117,031
Listing fees ........................................................ 16,769 14,269
Audit and tax fees .................................................. 13,033 14,903
Accounting and administration fees .................................. 4,427 25,170
Printing fees ....................................................... 2,726 12,856
Legal fees .......................................................... 767 2,691
Custodian fees ...................................................... 761 14,779
Trustees' fees and expenses ......................................... 422 2,723
Transfer agent fees ................................................. 238 1,463
Registration and filing fees ........................................ 112 454
Other expenses ...................................................... 2,439 8,687
-------------- --------------
Total expenses ................................................... 98,149 250,135
Less fees waived and expenses reimbursed by the investment advisor (69,563) (74,588)
-------------- --------------
Net expenses ..................................................... 28,586 175,547
-------------- --------------
NET INVESTMENT INCOME (LOSS) ........................................ 121,161 702,253
-------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ...................................................... 65,336 (329,432)
In-kind redemptions .............................................. -- --
Foreign currency transactions .................................... (952) (15)
-------------- --------------
Net realized gain (loss) ............................................ 64,384 (329,447)
-------------- --------------
Net change in unrealized appreciation (depreciation) on: ............
Investments ...................................................... 679,195 4,405,078
Foreign currency translations .................................... 3,099 (820)
-------------- --------------
Net change in unrealized appreciation (depreciation) ................ 682,294 4,404,258
-------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ............................. 746,678 4,074,811
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS .................................................. $ 867,839 $ 4,777,064
============== ==============
Page 52 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
FIRST TRUST FIRST TRUST ISE GLOBAL NASDAQ(R) CLEAN
DOW JONES GLOBAL ISE GLOBAL ENGINEERING EDGE(R) SMART GRID
SELECT DIVIDEND WIND ENERGY AND CONSTRUCTION INFRASTRUCTURE
INDEX FUND INDEX FUND INDEX FUND INDEX FUND
------------------------ ------------------------ ------------------------ ------------------------
For the For the For the For the
Six Months Ended Six Months Ended Six Months Ended Six Months Ended
March 31, 2011 March 31, 2011 March 31, 2011 March 31, 2011
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------------------ ------------------------ ------------------------ ------------------------
$ 1,255,705 $ 283,701 $ 231,106 $ 133,935
(60,915) (21,103) (11,647) (9,334)
10 -- -- --
-------------- -------------- -------------- --------------
1,194,800 262,598 219,459 124,601
-------------- -------------- -------------- --------------
12,465 26,666 18,892 13,679
125,246 106,663 75,568 60,795
14,269 9,607 9,607 14,733
14,903 14,529 14,529 12,782
22,759 16,699 13,405 8,760
11,898 8,713 8,314 3,818
4,592 4 3,226 1,167
8,970 14,415 8,434 10,491
2,586 2,732 1,793 1,607
1,566 1,333 945 760
1,533 -- 232 245
5,842 4,740 4,177 2,767
-------------- -------------- -------------- --------------
226,629 206,101 159,122 131,604
(38,760) (46,107) (26,877) (25,213)
-------------- -------------- -------------- --------------
187,869 159,994 132,245 106,391
-------------- -------------- -------------- --------------
1,006,931 102,604 87,214 18,210
-------------- -------------- -------------- --------------
(2,002,622) (3,705,143) (562,794) (85,758)
2,534,670 (1,680,681) 2,240,754 1,245,960
6,830 (591) (715) (41)
-------------- -------------- -------------- --------------
538,878 (5,386,415) 1,677,245 1,160,161
-------------- -------------- -------------- --------------
5,039,394 12,899,201 6,463,566 3,219,640
(862) 1,812 356 177
-------------- -------------- -------------- --------------
5,038,532 12,901,013 6,463,922 3,219,817
-------------- -------------- -------------- --------------
5,577,410 7,514,598 8,141,167 4,379,978
-------------- -------------- -------------- --------------
$ 6,584,341 $ 7,617,202 $ 8,228,381 $ 4,398,188
============== ============== ============== ==============
See Notes to Financial Statements Page 53
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF OPERATIONS (CONTINUED)
FIRST TRUST FIRST TRUST
ISE GLOBAL ISE GLOBAL
COPPER PLATINUM
INDEX FUND INDEX FUND
------------------------ ------------------------
For the For the
Six Months Ended Six Months Ended
March 31, 2011 March 31, 2011
(Unaudited) (Unaudited)
------------------------ ------------------------
INVESTMENT INCOME:
Dividends ........................................................... $ 421,813 $ 77,326
Foreign tax withholding ............................................. (5,214) --
Interest ............................................................ -- --
-------------- --------------
Total investment income .......................................... 416,599 77,326
-------------- --------------
EXPENSES:
Licensing fees ...................................................... -- --
Investment advisory fees ............................................ 326,346 (b) 92,902 (b)
Listing fees ........................................................ -- --
Audit and tax fees .................................................. -- --
Accounting and administration fees .................................. -- --
Printing fees ....................................................... -- --
Legal fees .......................................................... -- --
Custodian fees ...................................................... -- --
Trustees' fees and expenses ......................................... -- --
Transfer agent fees ................................................. -- --
Registration and filing fees ........................................ -- --
Other expenses ...................................................... -- --
-------------- --------------
Total expenses ................................................... 326,346 92,902
Less fees waived and expenses reimbursed by the investment advisor -- --
-------------- --------------
Net expenses ..................................................... 326,346 92,902
-------------- --------------
NET INVESTMENT INCOME (LOSS) 90,253 (15,576)
-------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ...................................................... (1,310,721) (907,688)
In-kind redemptions .............................................. 2,638,936 470,257
Foreign currency transactions .................................... 648 (36)
-------------- --------------
Net realized gain (loss) ............................................ 1,328,863 (437,467)
-------------- --------------
Net change in unrealized appreciation (depreciation) on:
Investments ...................................................... 15,275,340 1,604,293
Foreign currency translations .................................... (15) (14)
-------------- --------------
Net change in unrealized appreciation (depreciation) ................ 15,275,325 1,604,279
-------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ............................. 16,604,188 1,166,812
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS .................................................. $ 16,694,441 $ 1,151,236
============== ==============
(a) Inception date.
(b) Fund is subject to a unitary fee (see Note 3 in Notes to Financial
Statements).
Page 54 See Notes to Financial Statements
FIRST TRUST
FIRST TRUST NASDAQ CEA
BICK SMARTPHONE
INDEX FUND INDEX FUND
------------------------ ------------------------
For the Period
For the February 17, 2011 (a)
Six Months Ended through
March 31, 2011 March 31, 2011
(Unaudited) (Unaudited)
------------------------ ------------------------
$ 1,114,838 $ 11,068
(84,859) (587)
-- --
-------------- --------------
1,029,979 10,481
-------------- --------------
-- --
587,138 (b) 9,022 (b)
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-------------- --------------
587,138 9,022
-- --
-------------- --------------
587,138 9,022
-------------- --------------
442,841 1,459
-------------- --------------
(3,014,849) (145,672)
981,304 --
5,901 (60)
-------------- --------------
(2,027,644) (145,732)
-------------- --------------
9,273,640 (530,411)
7,940 (53)
-------------- --------------
9,281,580 (530,464)
-------------- --------------
7,253,936 (676,196)
-------------- --------------
$ 7,696,777 $ (674,737)
============== ==============
See Notes to Financial Statements Page 55
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST
STOXX(R) EUROPEAN
SELECT DIVIDEND
INDEX FUND
----------------------------------------
For the
Six Months Ended For the
March 31, 2011 Year Ended
(Unaudited) September 30, 2010
------------------ ------------------
OPERATIONS:
Net investment income (loss) .................................................. $ 121,161 $ 301,259
Net realized gain (loss) ...................................................... 64,384 1,002,212
Net change in unrealized appreciation (depreciation) .......................... 682,294 (1,480,101)
-------------- --------------
Net increase (decrease) in net assets resulting from operations ............... 867,839 (176,630)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ......................................................... (105,739) (297,865)
Net realized gain.............................................................. -- --
Return of capital.............................................................. -- --
-------------- --------------
Total distributions to shareholders ........................................... (105,739) (297,865)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold ..................................................... 3,453,274 4,114,864
Cost of shares redeemed ....................................................... -- (5,381,800)
-------------- --------------
Net increase (decrease) in net assets resulting from shareholder
transactions................................................................ 3,453,274 (1,266,936)
-------------- --------------
Total increase (decrease) in net assets ....................................... 4,215,374 (1,741,431)
NET ASSETS:
Beginning of period............................................................ 6,588,543 8,329,974
-------------- --------------
End of period ................................................................. $ 10,803,917 $ 6,588,543
============== ==============
Accumulated net investment income (loss) at end of period ..................... $ 13,780 $ (1,642)
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period ....................................... 503,334 603,334
Shares sold.................................................................... 250,000 300,000
Shares redeemed ............................................................... -- (400,000)
-------------- --------------
Shares outstanding, end of period ............................................. 753,334 503,334
============== ==============
Page 56 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
FTSE EPRA/NAREIT DOW JONES ISE
DEVELOPED MARKETS REAL ESTATE GLOBAL SELECT DIVIDEND GLOBAL WIND ENERGY
INDEX FUND INDEX FUND INDEX FUND
---------------------------------------- ---------------------------------------- ----------------------------------------
For the For the For the
Six Months Ended For the Six Months Ended For the Six Months Ended For the
March 31, 2011 Year Ended March 31, 2011 Year Ended March 31, 2011 Year Ended
(Unaudited) September 30, 2010 (Unaudited) September 30, 2010 (Unaudited) September 30, 2010
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
$ 702,253 $ 853,894 $ 1,006,931 $ 1,392,793 $ 102,604 $ 601,395
(329,447) (1,433,480) 538,878 3,013,572 (5,386,415) (12,592,626)
4,404,258 6,454,801 5,038,532 (1,624,297) 12,901,013 (20,171,205)
-------------- -------------- -------------- -------------- -------------- --------------
4,777,064 5,875,215 6,584,341 2,782,068 7,617,202 (32,162,436)
-------------- -------------- -------------- -------------- -------------- --------------
(1,565,762) (1,357,853) (1,106,961) (1,487,682) -- (2,090,442)
-- -- -- -- -- --
-- -- -- -- -- (50,059)
-------------- -------------- -------------- -------------- -------------- --------------
(1,565,762) (1,357,853) (1,106,961) (1,487,682) -- (2,140,501)
-------------- -------------- -------------- -------------- -------------- --------------
26,385,646 25,937,080 81,122,156 34,335,550 9,365,244 10,810,160
-- -- (11,614,121) (27,411,967) (2,576,497) (22,852,132)
-------------- -------------- -------------- -------------- -------------- --------------
26,385,646 25,937,080 69,508,035 6,923,583 6,788,747 (12,041,972)
-------------- -------------- -------------- -------------- -------------- --------------
29,596,948 30,454,442 74,985,415 8,217,969 14,405,949 (46,344,909)
45,692,588 15,238,146 37,007,503 28,789,534 54,504,809 100,849,718
-------------- -------------- -------------- -------------- -------------- --------------
$ 75,289,536 $ 45,692,588 $ 111,992,918 $ 37,007,503 $ 68,910,758 $ 54,504,809
============== ============== ============== ============== ============== ==============
$ (1,279,077) $ (415,568) $ (35,846) $ (64,184) $ (482,219) $ (584,823)
============== ============== ============== ============== ============== ==============
1,350,002 500,002 1,650,002 1,350,002 5,300,002 6,200,002
750,000 850,000 3,400,000 1,600,000 800,000 750,000
-- -- (500,000) (1,300,000) (250,000) (1,650,000)
-------------- -------------- -------------- -------------- -------------- --------------
2,100,002 1,350,002 4,550,002 1,650,002 5,850,002 5,300,002
============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 57
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
ISE GLOBAL
ENGINEERING AND CONSTRUCTION
INDEX FUND
----------------------------------------
For the
Six Months Ended For the
March 31, 2011 Year Ended
(Unaudited) September 30, 2010
------------------ ------------------
OPERATIONS:
Net investment income (loss) .................................................. $ 87,214 $ 458,166
Net realized gain (loss) ...................................................... 1,677,245 2,170,890
Net change in unrealized appreciation (depreciation) .......................... 6,463,922 (3,545,220)
-------------- --------------
Net increase (decrease) in net assets resulting from operations ............... 8,228,381 (916,164)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ......................................................... (114,750) (427,401)
Net realized gain ............................................................. -- --
Return of capital ............................................................. -- --
-------------- --------------
Total distributions to shareholders (114,750) (427,401)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold ..................................................... 28,114,268 9,983,909
Cost of shares redeemed ....................................................... (4,381,727) (12,780,107)
-------------- --------------
Net increase (decrease) in net assets resulting from shareholder
transactions................................................................ 23,732,541 (2,796,198)
-------------- --------------
Total increase (decrease) in net assets ....................................... 31,846,172 (4,139,763)
NET ASSETS:
Beginning of period ........................................................... 31,644,488 35,784,251
-------------- --------------
End of period ................................................................. $ 63,490,660 $ 31,644,488
============== ==============
Accumulated net investment income (loss) at end of period ..................... $ 69,678 $ 97,214
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period ....................................... 800,002 900,002
Shares sold.................................................................... 600,000 250,000
Shares redeemed ............................................................... (100,000) (350,000)
-------------- --------------
Shares outstanding, end of period ............................................. 1,300,002 800,002
============== ==============
(a) Inception date.
Page 58 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
NASDAQ(R) CLEAN EDGE(R) ISE GLOBAL ISE GLOBAL
SMART GRID INFRASTRUCTURE COPPER PLATINUM
INDEX FUND INDEX FUND INDEX FUND
---------------------------------------- ---------------------------------------- ----------------------------------------
For the For the Period For the For the Period For the For the Period
Six Months Ended November, 16, 2009 (a) Six Months Ended March, 11, 2010 (a) Six Months Ended March, 11, 2010 (a)
March 31, 2011 through March 31, 2011 through March 31, 2011 through
(Unaudited) September 30, 2010 (Unaudited) September 30, 2010 (Unaudited) September 30, 2010
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
$ 18,210 $ 113,157 $ 90,253 $ 17,661 $ (15,576) $ 22,023
1,160,161 (775,109) 1,328,863 (18,184) (437,492) (397,438)
3,219,817 394,567 15,275,325 1,580,690 1,604,304 (214,305)
-------------- -------------- -------------- -------------- -------------- --------------
4,398,188 (267,385) 16,694,441 1,580,167 1,151,236 (589,720)
-------------- -------------- -------------- -------------- -------------- --------------
-- 111,073 (568,231) (11,640) (36,900) (18,925)
-- -- -- -- -- --
-- (7,907) -- -- -- --
-------------- -------------- -------------- -------------- -------------- --------------
-- (118,980) (568,231) (11,640) (36,900) (18,925)
-------------- -------------- -------------- -------------- -------------- --------------
1,582,877 36,778,649 404,124,443 25,139,240 29,072,698 7,930,484
(7,934,735) (4,544,653) (8,071,930) (1,552,228) (1,594,417) --
-------------- -------------- -------------- -------------- -------------- --------------
(6,351,858) 32,233,996 396,052,513 23,587,012 27,478,281 7,930,484
-------------- -------------- -------------- -------------- -------------- --------------
(1,953,670) 31,847,631 412,178,723 25,155,539 28,592,617 7,321,839
31,847,631 -- 25,155,539 -- 7,321,839 --
-------------- -------------- -------------- -------------- -------------- --------------
$ 29,893,961 $ 31,847,631 $ 437,334,262 $ 25,155,539 $ 35,914,456 $ 7,321,839
============== ============== ============== ============== ============== ==============
$ 18,210 $ -- $ (472,054) $ 5,924 $ (48,624) $ 3,852
============== ============== ============== ============== ============== ==============
1,050,002 -- 750,002 -- 250,002 --
50,000 1,200,002 9,550,000 800,002 900,000 250,002
(250,000) (150,000) (200,000) (50,000) (50,000) --
-------------- -------------- -------------- -------------- -------------- --------------
850,002 1,050,002 10,100,002 750,002 1,100,002 250,002
============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 59
FIRST TRUST EXCHANGE-TRADED FUND II
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
BICK
INDEX FUND
----------------------------------------
For the For the Period
Six Months Ended April 12, 2010 (a)
March 31, 2011 through
(Unaudited) September 30, 2010
------------------ ------------------
OPERATIONS:
Net investment income (loss) .................................................. $ 442,841 $ 96,212
Net realized gain (loss) ...................................................... (2,027,644) (12,203)
Net change in unrealized appreciation (depreciation) .......................... 9,281,580 1,481,436
-------------- --------------
Net increase (decrease) in net assets resulting from operations ............... 7,696,777 1,565,445
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ......................................................... (257,400) (27,090)
Net realized gain ............................................................. -- --
Return of capital ............................................................. -- --
-------------- --------------
Total distributions to shareholders ........................................... (257,400) (27,090)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold ..................................................... 178,328,746 28,018,739
Cost of shares redeemed........................................................ (17,532,030) (1,514,386)
-------------- --------------
Net increase (decrease) in net assets resulting from shareholder
transactions................................................................ 160,796,716 26,504,353
-------------- --------------
Total increase (decrease) in net assets ....................................... 168,236,093 28,042,708
NET ASSETS:
Beginning of period ........................................................... 28,042,708 --
-------------- --------------
End of period ................................................................. $ 196,278,801 $ 28,042,708
============== ==============
Accumulated net investment income (loss) at end of period ..................... $ 221,696 $ 36,255
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period ....................................... 900,002 --
Shares sold ................................................................... 5,500,000 950,002
Shares redeemed ............................................................... (550,000) (50,000)
-------------- --------------
Shares outstanding, end of period ............................................. 5,850,002 900,002
============== ==============
(a) Inception date.
Page 60 See Notes to Financial Statements
FIRST TRUST
NASDAQ
CEA SMARTPHONE
INDEX FUND
----------------------
For the Period
February 17, 2011 (a)
through
March 31, 2011
(Unaudited)
--------------
$ 1,459
(145,732)
(530,464)
--------------
(674,737)
--------------
--
--
--
--------------
--
--------------
14,828,180
(3,433)
--------------
14,824,747
--------------
14,150,010
--
--------------
$ 14,150,010
==============
$ 1,459
==============
--
500,002
--
--------------
500,002
==============
See Notes to Financial Statements Page 61
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST STOXX(R) EUROPEAN SELECT DIVIDEND INDEX FUND
FOR THE
FOR THE PERIOD
SIX MONTHS FOR THE FOR THE FOR THE AUGUST 27,
ENDED YEAR YEAR YEAR 2007 (a)
MARCH 31, 2011 ENDED ENDED ENDED THROUGH
2011 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2010 2009 2008 2007
-------------- -------------- -------------- -------------- --------------
Net asset value, beginning of period $ 13.09 $ 13.81 $ 15.62 $ 30.97 $ 30.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.17 0.56 0.61 1.26 0.03 (b)
Net realized and unrealized gain (loss) 1.23 (0.73) (1.83) (15.32) 0.94
-------- -------- -------- -------- --------
Total from investment operations 1.40 (0.17) (1.22) (14.06) 0.97
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.15) (0.55) (0.59) (1.29) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.34 $ 13.09 $ 13.81 $ 15.62 $ 30.97
======== ======== ======== ======== ========
TOTAL RETURN (c) 0.69% (0.95)% (6.83)% (46.12)% 3.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 10,804 $ 6,589 $ 8,330 $ 12,545 $ 3,200
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 2.06% (d) 2.35% 3.48% 1.95% 19.64% (d)
Ratio of net expenses to average net assets 0.60% (d) 0.60% 0.60% 0.60% 0.60% (d)
Ratio of net investment income (loss) to average
net assets 2.54% (d) 3.98% 5.30% 6.43% 1.18% (d)
Portfolio turnover rate (e) 26% 54% 82% 80% 0%
FIRST TRUST FTSE EPRA/NAREIT DEVELOPED MARKETS REAL ESTATE INDEX FUND
FOR THE
FOR THE PERIOD
SIX MONTHS FOR THE FOR THE FOR THE AUGUST 27,
ENDED YEAR YEAR YEAR 2007 (a)
MARCH 31, 2011 ENDED ENDED ENDED THROUGH
2011 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 2010 2009 2008 2007
-------------- -------------- -------------- -------------- --------------
Net asset value, beginning of period $ 33.85 $ 30.48 $ 36.24 $ 53.43 $ 50.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.68 1.24 0.90 1.25 0.14 (b)
Net realized and unrealized gain (loss) 2.30 3.84 (5.74) (17.25) 3.29
-------- -------- -------- -------- --------
Total from investment operations 2.98 5.08 (4.84) (16.00) 3.43
-------- -------- -------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.98) (1.71) (0.91) (1.19) --
Net realized gain -- -- (0.01) -- --
-------- -------- -------- -------- --------
Total distributions (0.98) (1.71) (0.92) (1.19) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 35.85 $ 33.85 $ 30.48 $ 36.24 $ 53.43
======== ======== ======== ======== ========
TOTAL RETURN (c) 8.88% 17.48% (12.66)% (30.35)% 6.86%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 75,290 $ 45,693 $ 15,238 $ 7,249 $ 5,343
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.85% (d) 1.10% 2.09% 2.68% 11.51% (d)
Ratio of net expenses to average net assets 0.60% (d) 0.60% 0.60% 0.60% 0.60% (d)
Ratio of net investment income (loss) to average
net assets 2.40% (d) 2.81% 4.08% 3.07% 3.22% (d)
Portfolio turnover rate (e) 6% 11% 19% 7% 1%
(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 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.
(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.
Page 62 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES GLOBAL SELECT DIVIDEND INDEX FUND
FOR THE FOR THE PERIOD
SIX MONTHS ENDED FOR THE FOR THE NOVEMBER 21, 2007 (a)
MARCH 31, 2011 YEAR ENDED YEAR ENDED THROUGH
(UNAUDITED) SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 SEPTEMBER 30, 2008
---------------- ------------------ ------------------ ---------------------
Net asset value, beginning of period $ 22.43 $ 21.33 $ 19.95 $ 30.00
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.31 0.94 0.70 (b) 1.38
Net realized and unrealized gain (loss) 2.23 1.17 1.37 (10.10)
-------- -------- -------- --------
Total from investment operations 2.54 2.11 2.07 (8.72)
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.36) (1.01) (0.69) (1.33)
-------- -------- -------- --------
Net asset value, end of period $ 24.61 $ 22.43 $ 21.33 $ 19.95
======== ======== ======== ========
TOTAL RETURN (c) 11.36% 10.33% 11.80% (29.72)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $111,993 $ 37,008 $ 28,790 $ 3,990
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.72% (d) 0.97% 2.39% 4.79% (d)
Ratio of net expenses to average net assets 0.60% (d) 0.60% 0.60% 0.60% (d)
Ratio of net investment income (loss) to average net
assets 3.22% (d) 4.37% 4.61% 6.33% (d)
Portfolio turnover rate (e) 24% 51% 65% 42%
FIRST TRUST ISE GLOBAL WIND ENERGY INDEX FUND
FOR THE FOR THE PERIOD
SIX MONTHS ENDED FOR THE FOR THE JUNE 16, 2008 (a)
MARCH 31, 2011 YEAR ENDED YEAR ENDED THROUGH
(UNAUDITED) SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 SEPTEMBER 30, 2008
---------------- ------------------ ------------------ ---------------------
Net asset value, beginning of period $ 10.28 $ 16.27 $ 19.11 $ 30.00
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.03 0.08 0.14 0.01
Net realized and unrealized gain (loss) 1.47 (5.71) (2.88) (10.90)
-------- -------- -------- --------
Total from investment operations 1.50 (5.63) (2.74) (10.89)
-------- -------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- (0.35) (0.10) --
Return of capital -- (0.01) -- --
-------- -------- -------- --------
Total distributions -- (0.36) (0.10) --
-------- -------- -------- --------
Net asset value, end of period $ 11.78 $ 10.28 $ 16.27 $ 19.11
======== ======== ======== ========
TOTAL RETURN (c) 14.59% (35.10)% (14.26)% (36.30)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 68,911 $ 54,505 $100,850 $ 63,067
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.77% (d) 0.81% 0.95% 0.98% (d)
Ratio of net expenses to average net assets 0.60% (d) 0.60% 0.60% 0.60% (d)
Ratio of net investment income (loss) to average net
assets 0.38% (d) 0.80% 1.16% 0.24% (d)
Portfolio turnover rate (e) 11% 24% 30% 13%
(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 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.
(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.
See Notes to Financial Statements Page 63
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST ISE GLOBAL ENGINEERING AND CONSTRUCTION INDEX FUND
FOR THE FOR THE PERIOD
SIX MONTHS ENDED FOR THE OCTOBER 13, 2008 (a)
MARCH 31, 2011 YEAR ENDED THROUGH
(UNAUDITED) SEPTEMBER 30, 2010 SEPTEMBER 30, 2009
------------------ ------------------ ---------------------
Net asset value, beginning of period $ 39.56 $ 39.76 $ 30.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.07 0.57 0.42
Net realized and unrealized gain (loss) 9.35 (0.25) 9.68
-------- -------- --------
Total from investment operations 9.42 0.32 10.10
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.14) (0.52) (0.34)
-------- -------- --------
Net asset value, end of period $ 48.84 $ 39.56 $ 39.76
======== ======== ========
TOTAL RETURN (b) 23.83% 1.03% 33.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 63,491 $ 31,644 $ 35,784
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.84% (c) 0.92% 1.16% (c)
Ratio of net expenses to average net assets 0.70% (c) 0.70% 0.70% (c)
Ratio of net investment income (loss) to average net assets 0.46% (c) 1.33% 1.84% (c)
Portfolio turnover rate (d) 10% 26% 19%
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) SMART GRID INFRASTRUCTURE INDEX FUND
FOR THE FOR THE PERIOD
SIX MONTHS ENDED NOVEMBER 16, 2009 (a)
MARCH 31, 2011 THROUGH
(UNAUDITED) SEPTEMBER 30, 2010
------------------ ------------------
Net asset value, beginning of period $ 30.33 $ 30.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.02 0.11
Net realized and unrealized gain (loss) 4.82 0.34
-------- --------
Total from investment operations 4.84 0.45
-------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- (0.11)
Return of capital -- (0.01)
-------- --------
Total distributions -- (0.12)
-------- --------
Net asset value, end of period $ 35.17 $ 30.33
======== ========
TOTAL RETURN (b) 15.96% 1.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 29,894 $ 31,848
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.87% (c) 0.99% (c)
Ratio of net expenses to average net assets 0.70% (c) 0.70% (c)
Ratio of net investment income (loss) to average net assets 0.12% (c) 0.47% (c)
Portfolio turnover rate (d) 13% 50%
(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 return presented does 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
return would have been lower if certain fees had not been waived and
expenses reimbursed by the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 64 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FIRST TRUST ISE GLOBAL COPPER INDEX FUND
FOR THE FOR THE PERIOD
SIX MONTHS ENDED MARCH 11, 2010 (a)
MARCH 31, 2011 THROUGH
(UNAUDITED) SEPTEMBER 30, 2010
------------------ ------------------
Net asset value, beginning of period $ 33.54 $ 30.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.24 0.07
Net realized and unrealized gain (loss) 9.81 3.53
-------- --------
Total from investment operations 10.05 3.60
-------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.29) (0.06)
-------- --------
Net asset value, end of period $ 43.30 $ 33.54
======== ========
TOTAL RETURN (b) 29.97% 12.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $437,334 $ 25,156
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% (c) 0.70% (c)
Ratio of net expenses to average net assets 0.70% (c) 0.70% (c)
Ratio of net investment income (loss) to average net assets 0.19% (c) 0.58% (c)
Portfolio turnover rate (d) 13% 22%
FIRST TRUST ISE GLOBAL PLATINUM INDEX FUND
FOR THE FOR THE PERIOD
SIX MONTHS ENDED MARCH 11, 2010 (a)
MARCH 31, 2011 THROUGH
(UNAUDITED) SEPTEMBER 30, 2010
------------------ ------------------
Net asset value, beginning of period $ 29.29 $ 30.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.02) 0.09
Net realized and unrealized gain (loss) 3.42 (0.72)
-------- --------
Total from investment operations 3.40 (0.63)
-------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.04) (0.08)
-------- --------
Net asset value, end of period $ 32.65 $ 29.29
======== ========
TOTAL RETURN (b) 11.60% (2.06)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 35,914 $ 7,322
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% (c) 0.70% (c)
Ratio of net expenses to average net assets 0.70% (c) 0.70% (c)
Ratio of net investment income (loss) to average net assets (0.12%) (c) 0.66%
(c)
Portfolio turnover rate (d) 23% 29%
(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 return presented does 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.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 65
FIRST TRUST EXCHANGE-TRADED FUND II
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FIRST TRUST BICK INDEX FUND
FOR THE FOR THE PERIOD
SIX MONTHS ENDED APRIL 12, 2010 (a)
MARCH 31, 2011 THROUGH
(UNAUDITED) SEPTEMBER 30, 2010
------------------ ------------------
Net asset value, beginning of period $ 31.16 $ 30.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.04 0.15
Net realized and unrealized gain (loss) 2.39 1.09
-------- --------
Total from investment operations 2.43 1.24
-------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.04) (0.08)
-------- --------
Net asset value, end of period $ 33.55 $ 31.16
======== ========
TOTAL RETURN (b) 7.81% 4.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $196,279 $ 28,043
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.64% (c) 0.70% (c)
Ratio of net expenses to average net assets 0.64% (c) 0.70% (c)
Ratio of net investment income (loss) to average net assets 0.48% (c) 1.71% (c)
Portfolio turnover rate (d) 35% 32%
FIRST TRUST NASDAQ CEA SMARTPHONE INDEX FUND
FOR THE PERIOD
FEBRUARY 17, 2011 (a)
THROUGH
MARCH 31, 2011
------------------
Net asset value, beginning of period $ 30.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.00 (e)
Net realized and unrealized gain (loss) (1.70)
--------
Total from investment operations (1.70)
--------
Net asset value, end of period $ 28.30
========
TOTAL RETURN (b) (5.67)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 14,150
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.70% (c)
Ratio of net expenses to average net assets 0.70% (c)
Ratio of net investment income (loss) to average net assets 0.11% (c)
Portfolio turnover rate (d) 12%
(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 return
calculated for a period of less than one year is not annualized.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions. (e) Amount represents less than $0.01 per share.
Page 66 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund II (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on July 6, 2006,
and is registered with the Securities and Exchange Commission ("SEC") under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of ten funds:
First Trust STOXX(R) European Select Dividend Index Fund - (NYSE Arca ticker "FDD")
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund - (NYSE Arca ticker "FFR")
First Trust Dow Jones Global Select Dividend Index Fund - (NYSE Arca ticker "FGD")
First Trust ISE Global Wind Energy Index Fund - (NYSE Arca ticker "FAN")
First Trust ISE Global Engineering and Construction Index Fund - (NYSE Arca ticker "FLM")
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund - (NASDAQ ticker "GRID")
First Trust ISE Global Copper Index Fund - (NASDAQ ticker "CU")
First Trust ISE Global Platinum Index Fund - (NASDAQ ticker "PLTM")
First Trust BICK Index Fund - (NASDAQ ticker "BICK")
First Trust NASDAQ CEA Smartphone Index Fund - (NASDAQ ticker "FONE")
Subsequent to March 31, 2011, the date of this semi-annual report, the First
Trust NASDAQ Global Auto Index Fund, an additional series of the Trust, began
trading under the ticker symbol "CARZ" on The NASDAQ(R) Stock Market, Inc.
("NASDAQ").
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 the NYSE Arca, Inc. ("NYSE Arca") except for
the First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund,
the First Trust ISE Global Copper Index Fund, the First Trust ISE Global
Platinum Index Fund, the First Trust BICK Index Fund and the First Trust NASDAQ
CEA Smartphone Index Fund, which are listed and traded on NASDAQ. 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 STOXX(R) European Select Dividend Index Fund STOXX(R) Europe Select Dividend 30 Index
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund FTSE EPRA/NAREIT Developed Index
First Trust Dow Jones Global Select Dividend Index Fund Dow Jones Global Select Dividend Index(SM)
First Trust ISE Global Wind Energy Index Fund ISE Global Wind Energy Index
First Trust ISE Global Engineering and Construction Index Fund ISE Global Engineering and Construction Index
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund NASDAQ OMX(R) Clean Edge(R) Smart Grid
Infrastructure Index(SM)
First Trust ISE Global Copper Index Fund ISE Global Copper(TM) Index
First Trust ISE Global Platinum Index Fund ISE Global Platinum(TM) Index
First Trust BICK Index Fund ISE BICK(TM) Index
First Trust NASDAQ CEA Smartphone Index Fund NASDAQ OMX CEA Smartphone 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 requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. The NAV is calculated by dividing the value of all
assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses and dividends declared but unpaid), by
the total number of shares outstanding.
Page 67
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
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. Portfolio securities listed on any exchange
other than the 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. 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 has been no sale on such day, or no official closing
price in the case of securities traded on the NASDAQ or the AIM, the securities
are valued at the mean of the most recent bid and ask prices on such day.
Portfolio securities traded on more than one 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. 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. The use of fair value pricing by each Fund is governed by
valuation procedures adopted by the Board of Trustees and is in accordance with
the provisions of the 1940 Act. 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.
Because foreign markets may be open on different days than the days during which
investors may purchase the shares of a Fund, the value of the Fund's securities
may change on the days when investors are not able to purchase the shares of the
Fund. The value of securities denominated in foreign currencies is converted
into U.S. dollars using exchange rates determined daily as of the close of
regular trading on the NYSE. Any use of a different rate from the rates used by
a relevant index may adversely affect the Fund's ability to track the index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical securities. An active market is a market in which
transactions for the security 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 securities in active markets.
o Quoted prices for identical or similar securities in markets
that are non-active. A non-active market is a market where
there are few transactions for the security, 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
security (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
security.
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. A summary
of the inputs used to value each Fund's investments as of March 31, 2011, is
included with each Fund's Portfolio of Investments.
Page 68
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (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 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
after 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. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investment securities and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statements of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statements of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received. The portion of foreign
currency gains and losses related to fluctuations in exchange rates between the
initial purchase trade date and subsequent sale trade date is included in "Net
realized gain (loss) on foreign currency transactions" on the Statements of
Operations.
D. DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly by the First Trust STOXX(R) European Select Dividend Index Fund and
the First Trust Dow Jones Global Select Dividend Index Fund and semi-annually by
the First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund, the
First Trust ISE Global Wind Energy Index Fund, the First Trust ISE Global
Engineering and Construction Index Fund, the First Trust NASDAQ(R) Clean Edge(R)
Smart Grid Infrastructure Index Fund, the First Trust ISE Global Copper Index
Fund, the First Trust ISE Global Platinum Index Fund, the First Trust BICK Index
Fund and the First Trust NASDAQ CEA Smartphone Index Fund or as the Board of
Trustees may determine from time to time. Distributions of net realized capital
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 accounting principles generally
accepted in the United States of America. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by a Fund, timing differences and differing characterization of distributions
made by a Fund.
The tax character of distributions paid by each Fund during the period ended
September 30, 2010 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
------------- ------------- -------------
First Trust STOXX(R) European Select Dividend Index Fund $ 297,865 $ -- $ --
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 1,357,853 -- --
First Trust Dow Jones Global Select Dividend Index Fund 1,487,682 -- --
First Trust ISE Global Wind Energy Index Fund 2,090,442 -- 50,059
First Trust ISE Global Engineering and Construction Index Fund 427,401 -- --
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 111,073 -- 7,907
First Trust ISE Global Copper Index Fund 11,640 -- --
First Trust ISE Global Platinum Index Fund 18,925 -- --
First Trust BICK Index Fund 27,090 -- --
Page 69
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
As of September 30, 2010, the components of distributable earnings on a tax
basis for each Fund were as follows:
Accumulated Net
Undistributed Capital and Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------- ------------- -------------
First Trust STOXX(R) European Select Dividend Index Fund $ 1,697 $ (11,002,223) $ (250,672)
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 1,001,390 (824,031) 2,580,158
First Trust Dow Jones Global Select Dividend Index Fund 198,197 (1,937,810) 1,729,774
First Trust ISE Global Wind Energy Index Fund -- (18,680,722) (46,281,913)
First Trust ISE Global Engineering and Construction Index Fund 103,237 (621,101) 3,025,017
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund -- (928,889) 48,466
First Trust ISE Global Copper Index Fund 113,384 (74,393) 1,311,104
First Trust ISE Global Platinum Index Fund 36,376 (344,595) (300,426)
First Trust BICK Index Fund 85,853 (53,184) 1,374,155
E. INCOME TAXES
Each Fund intends to qualify or 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.
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 2007, 2008,
2009, and 2010 remain open to federal and state audit. As of March 31, 2011,
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.
At September 30, 2010 for federal income tax purposes, each Fund has capital
loss carryforwards available that are shown in the table below, to the extent
provided by regulations, to offset future capital gains through the years
indicated. 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 Loss Capital Loss Capital Loss Total
Available through Available through Available through Capital Loss
September 30, 2016 September 30, 2017 September 30, 2018 Available
------------------ ------------------ ------------------ ------------
First Trust STOXX(R) European Select Dividend Index Fund $ -- $ 5,960,236 $ 4,853,444 $ 10,813,680
First Trust FTSE EPRA/NAREIT Developed Markets
Real Estate Index Fund -- 68,465 745,145 813,610
First Trust Dow Jones Global Select Dividend Index Fund 131,352 208,741 1,274,694 1,614,787
First Trust ISE Global Wind Energy Index Fund 174,186 30,175 8,357,650 8,562,011
First Trust ISE Global Engineering and Construction
Index Fund -- 1,914 -- 1,914
First Trust NASDAQ(R) Clean Edge(R) Smart Grid
Infrastructure Index Fund -- -- 928,889 928,889
First Trust ISE Global Copper Index Fund -- -- 74,393 74,393
First Trust ISE Global Platinum Index Fund -- -- 344,595 344,595
First Trust BICK Index Fund -- -- 53,184 53,184
During the taxable year ended September 30, 2010, First Trust ISE Global
Engineering and Construction Index Fund utilized capital loss carryforwards in
the amount of $97.
Capital losses incurred after October 31 ("Post-October Losses") within the
taxable year can be deemed to arise on the first business day of each Fund's
next taxable year.
Page 70
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
During the taxable year ended September 30, 2010, the Funds listed below
incurred and elected to defer net capital, currency losses and Passive Foreign
Investment Company ("PFIC") losses as follows:
Post-October Losses
---------------------------------------------
Capital Currency PFIC
Losses Losses Losses
------------- ------------- -------------
First Trust STOXX(R) European Select Dividend Index Fund $ 185,204 $ 3,339 $ --
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 7,985 2,436 --
First Trust Dow Jones Global Select Dividend Index Fund 323,023 -- --
First Trust ISE Global Wind Energy Index Fund 9,549,964 5 568,742
First Trust ISE Global Engineering and Construction Index Fund 615,538 3,649 --
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund -- -- --
First Trust ISE Global Copper Index Fund -- -- --
First Trust ISE Global Platinum Index Fund -- -- --
First Trust BICK Index Fund -- -- --
On December 22, 2010, President Obama signed into law the Regulated Investment
Company Modernization Act of 2010 effective for tax years beginning after
December 22, 2010. Management is currently evaluating the impact, if any, that
the Act will have on future financial statement disclosures.
F. EXPENSES
Expenses that are directly related to one of the Funds are charged directly to
the respective Fund, except for the First Trust ISE Global Copper Index Fund,
the First Trust ISE Global Platinum Index Fund, the First Trust BICK Index Fund
and the First Trust NASDAQ CEA Smartphone Index Fund, for which expenses are
paid by First Trust Advisors L.P. ("First Trust" or the "Advisor"). General
expenses of the Trust are allocated to all the Funds based upon the net assets
of each Fund. The Advisor has entered into licensing agreements with each of the
following "Licensors" for the respective Funds:
FUNDS LICENSOR
First Trust STOXX(R) European Select Dividend Index Fund STOXX Limited
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund FTSE International Limited
First Trust Dow Jones Global Select Dividend Index Fund Dow Jones & Company, Inc.
First Trust ISE Global Wind Energy Index Fund International Securities Exchange, LLC
First Trust ISE Global Engineering and Construction Index Fund International Securities Exchange, LLC
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund The NASDAQ(R) OMX Group, Inc. and Clean Edge, Inc.
First Trust ISE Global Copper Index Fund International Securities Exchange, LLC
First Trust ISE Global Platinum Index Fund International Securities Exchange, LLC
First Trust BICK Index Fund International Securities Exchange, LLC
First Trust NASDAQ CEA Smartphone Index Fund The NASDAQ(R) OMX Group, Inc.
The respective license agreements allow for the use of each Fund's respective
index and of certain trademarks and trade names of the respective Licensors. The
Funds are sub-licensees to the applicable license agreements. The licensing fees
paid by those Funds which are required to pay licensing fees 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 administrative services necessary for the
management of the Funds.
For the First Trust ISE Global Copper Index Fund, the First Trust ISE Global
Platinum Index Fund, the First Trust BICK Index Fund and the First Trust NASDAQ
CEA Smartphone Index Fund (such Funds, the "Unitary Fee Funds"), First Trust is
paid an annual unitary management fee of 0.70%, except for the First Trust BICK
Index Fund which pays 0.64%, of such Fund's average daily net assets and is
responsible for the expenses of such Fund including the cost of transfer agency,
custody, fund administration, legal, audit and other services, and excluding
distribution fees, if any, brokerage expense, taxes, interest, and other
extraordinary expenses.
Page 71
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
For the First Trust STOXX(R) European Select Dividend Index Fund, the First
Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund, the First Trust
Dow Jones Global Select Dividend Index Fund, the First Trust ISE Global Wind
Energy Index Fund, the First Trust ISE Global Engineering and Construction Index
Fund and the First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index
Fund, First Trust is paid an annual management fee of 0.40% of such Fund's
average daily net assets. The Trust and the Advisor have entered into an Expense
Reimbursement, Fee Waiver and Recovery Agreement ("Recovery Agreement") in which
the Advisor has agreed to waive fees and/or reimburse Fund expenses to the
extent that the operating expenses of each such 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") at least through the Expense Cap
termination date listed.
Expense Cap
Expense Cap Termination Date
----------- ------------------
First Trust STOXX(R) European Select Dividend Index Fund 0.60% December 20, 2012
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 0.60% December 6, 2012
First Trust Dow Jones Global Select Dividend Index Fund 0.60% December 20, 2012
First Trust ISE Global Wind Energy Index Fund 0.60% January 20, 2013
First Trust ISE Global Engineering and Construction Index Fund 0.70% December 6, 2012
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 0.70% January 20, 2013
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 or fees were reimbursed or waived by First Trust. These amounts would
be included in "Expenses previously waived or reimbursed" on the Statement of
Operations.
The advisory fee waivers and expense reimbursements for the period ended March
31, 2011 and the expenses borne by the Advisor subject to recovery from each
applicable Fund for the periods indicated were as follows:
Expenses Borne by Advisor Subject to Recovery
------------------------------------------------------------------------------------------
Advisory Expense Period Ended Period Ended Period Ended Period Ended
Fee Reim- September 30, September 30, September 30, March 31,
Waivers bursement 2008 2009 2010 2011 Total
--------- --------- ------------- ------------- ------------- ------------ ---------
First Trust STOXX(R) European
Select Dividend Index Fund $ 19,058 $50,505 $ 113,939 $ 146,295 $ 132,551 $ 69,563 $ 462,348
First Trust FTSE EPRA/NAREIT
Developed Markets Real
Estate Index Fund 74,588 -- 66,716 116,416 150,784 74,588 408,504
First Trust Dow Jones Global
Select Dividend Index Fund 38,760 -- 74,607 114,202 117,932 38,760 345,501
First Trust ISE Global Wind Energy
Index Fund 46,107 -- 67,700 237,567 155,579 46,107 506,953
First Trust ISE Global Engineering
and Construction Index Fund 26,877 -- -- 81,714 76,726 26,877 185,317
First Trust NASDAQ(R) Clean
Edge(R) Smart Grid
Infrastructure Index Fund 25,213 -- -- -- 68,049 25,213 93,262
Page 72
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
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.
James A. Bowen, the Chief Executive Officer of First Trust, on October 12, 2010,
acquired 100% of the voting stock of The Charger Corporation, the general
partner of First Trust (the "Transaction"). First Trust is a limited partnership
with one limited partner and one general partner (The Charger Corporation). The
consummation of the Transaction was deemed to be an "assignment" (as defined in
the 1940 Act) of the investment management agreement and distribution agreement
for each Fund and resulted in the automatic termination of the agreements. In
addition, the former expense reimbursement, fee waiver and recovery agreement
terminated pursuant to its terms upon the termination of the investment
management agreement.
The Trust's Board of Trustees approved an interim investment management
agreement with First Trust which was entered into effective upon the closing of
the Transaction and would be in effect for a maximum period of 150 days. A new
investment management agreement with First Trust was approved by the Board of
Trustees for each Fund and was submitted to shareholders of each Fund as of the
record date (September 30, 2010) for approval to take effect upon such
shareholder approval. Special meetings of the shareholders of the Funds were
held on December 6, 2010, December 20, 2010 and January 20, 2011. The new
investment management agreement between the Trust and First Trust relating to
the Transaction was approved by shareholders of each Fund. See Submission of
Matters to a Vote of Shareholders, in the Additional Information section of this
report, for the results. The Trust's Board of Trustees also approved a new
Distribution Agreement and Expense Reimbursement, Fee Waiver and Recovery
Agreement for the applicable Funds which were entered into effective upon the
closing of the Transaction.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid 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. No additional meeting fees are paid in connection with Board or
Committee meetings.
Additionally, the Lead Independent Trustee is paid $10,000 annually, the
Chairman of the Audit Committee is paid $5,000 annually and each of the Chairmen
of the Nominating and Governance Committee and Valuation Committee is paid
$2,500 annually to serve in such capacities, with such compensation paid by the
trusts in the First Trust Fund Complex and allocated equally among those trusts.
Trustees are also reimbursed by the trusts in the First Trust Fund Complex 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
trusts for serving in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the period ended March 31, 2011, 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 STOXX(R) European Select Dividend Index Fund $ 2,383,063 $ 2,383,162
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 3,557,640 4,507,372
First Trust Dow Jones Global Select Dividend Index Fund 15,994,474 15,747,769
First Trust ISE Global Wind Energy Index Fund 6,376,809 6,160,637
First Trust ISE Global Engineering and Construction Index Fund 3,801,184 3,817,056
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 3,896,635 3,894,757
First Trust ISE Global Copper Index Fund 16,511,271 16,680,443
First Trust ISE Global Platinum Index Fund 6,230,114 6,041,690
First Trust BICK Index Fund 118,465,279 57,972,744
First Trust NASDAQ CEA Smartphone Index Fund 3,736,021 1,350,888
Page 73
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
For the period ended March 31, 2011, the cost of in-kind purchases and proceeds
from in-kind sales or each
Fund were as follows:
Purchases Sales
------------- -------------
First Trust STOXX(R) European Select Dividend Index Fund $ 3,430,215 $ --
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 26,180,393 --
First Trust Dow Jones Global Select Dividend Index Fund 81,039,469 11,665,674
First Trust ISE Global Wind Energy Index Fund 9,344,948 2,565,269
First Trust ISE Global Engineering and Construction Index Fund 28,023,918 4,425,738
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 1,577,959 7,919,469
First Trust ISE Global Copper Index Fund 403,882,251 8,080,237
First Trust ISE Global Platinum Index Fund 28,826,321 1,575,533
First Trust BICK Index Fund 111,021,312 10,474,912
First Trust NASDAQ CEA Smartphone Index Fund 12,376,320 --
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares. In order to purchase Creation Units of a Fund, an
investor must deposit (i) cash in lieu of all or a portion of the Deposit
Securities, as defined below, and/or (ii) a designated portfolio of equity
securities determined by First Trust (the "Deposit Securities") and generally
make a cash payment referred to as the "Cash Component." Purchasers of Creation
Units must pay to BNYM, as transfer agent, a creation fee (the "Creation
Transaction Fee") regardless of the number of Creation Units purchased in the
transaction. The Creation Transaction Fee may vary and is based on the
composition of the securities included in each Fund's portfolio and the
countries in which the transactions are settled. The Creation Transaction Fee
may increase or decrease as each Fund's portfolio is adjusted to conform to
changes in the composition of its corresponding Index. The price for each
Creation Unit will equal the daily NAV per share times the number of shares in a
Creation Unit plus the fees described above and, if applicable, any operational
processing and brokerage costs, transfer fees or stamp taxes. When a Fund
permits an Authorized Participant to substitute cash or a different security in
lieu of depositing one or more of the requisite Deposit Securities, the
Authorized Participant may also be assessed an amount to cover the cost of
purchasing the Deposit Securities and/or disposing of the substituted
securities, including operational processing and brokerage costs, transfer fees,
stamp taxes, and part or all of the spread between the expected bid and offer
side of the market related to such Deposit Securities and/or substitute
securities.
Parties redeeming Creation Units must pay to BNYM, as transfer agent, a
redemption transaction fee (the "Redemption Transaction Fee"), regardless of the
number of Creation Units redeemed in the transaction. The Redemption Transaction
Fee may vary and is based on the composition of the securities included in each
Fund's portfolio and the countries in which the transactions are settled. The
Redemption Transaction Fee may increase or decrease as each Fund's portfolio is
adjusted to conform to changes in the composition of its corresponding Index.
Each Fund reserves the right to effect redemptions in cash. A shareholder may
request a cash redemption in lieu of securities; however, each Fund may, in its
discretion, reject any such request.
The Creation Transaction Fees and the Redemption Transaction Fees are as
follows:
Redemption Creation
Transaction Transaction
Fees Fees
------------- -------------
First Trust STOXX(R) European Select Dividend Index Fund $ 500 $ 500
First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 4,000 4,000
First Trust Dow Jones Global Select Dividend Index Fund 1,000 1,000
First Trust ISE Global Wind Energy Index Fund 1,000 1,000
First Trust ISE Global Engineering and Construction Index Fund 1,000 1,000
First Trust NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund 500 500
First Trust ISE Global Copper Index Fund 500 500
First Trust ISE Global Platinum Index Fund 500 500
First Trust BICK Index Fund 2,500 2,500
First Trust NASDAQ CEA Smartphone Index Fund 1,000 1,000
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual
arrangement, the Funds will not pay 12b-1 fees any time before May 15, 2012.
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 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
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the 12 months ended June 30, 2010 is available
(1) without charge, upon request, by calling (800) 988-5891; (2) on the Trust's
website located at http://www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files its complete schedule of each Fund's portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters of
each fiscal year on Form N-Q. The Trust's Forms N-Q are available (1) by calling
(800) 988-5891; (2) on the Trust's website located at
http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov; and
(4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling (800) SEC-0330.
SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
Special meetings of the shareholders of the Funds were held on December 6, 2010,
December 20, 2010 and January 20, 2011. New investment management agreements
between the Trust and First Trust for the Funds relating to the change in
control of First Trust Advisors L.P. were approved at certain of such meetings
as detailed below. The terms of the new investment management agreements are
substantially similar to the terms of the previous agreements.
Ticker Symbol Date of Vote % of Voted Voted For Voted Against Abstained
------------- ------------ ------------ ----------- --------------- -----------
FFR 12/6/2010 52.72% 703,309 3,054 5,348
FLM 12/6/2010 58.35% 463,005 2,335 1,438
CU 12/6/2010 71.06% 455,974 3,006 2,913
BICK 12/6/2010 51.80% 433,657 4,069 28,435
FDD 12/20/2010 67.66% 329,959 400 10,187
FGD 12/20/2010 52.05% 830,047 8,839 19,998
PLTM 12/20/2010 50.28% 118,804 3,497 3,392
FAN 1/20/2011 50.35% 2,171,750 99,108 447,922
GRID 1/20/2011 50.41% 365,128 14,992 149,179
ADVISORY AGREEMENT
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT
FIRST TRUST NASDAQ CEA SMARTPHONE INDEX FUND
The Board of Trustees of the First Trust Exchange-Traded Fund II (the "Trust"),
including the Independent Trustees, approved the Investment Management Agreement
(the "Agreement") with First Trust Advisors L.P. ("First Trust" or the
"Advisor") for First Trust NASDAQ CEA Smartphone Index Fund (the "Fund") at
meetings held on July 21, 2010 and September 20, 2010. The Board initially
approved the Agreement in connection with the organization of the Fund on July
21, 2010, but on August 24, 2010, prior to the commencement of operations of the
Fund and before the approval of the Agreement by the initial shareholder of the
Fund, James A. Bowen, the President of the Advisor and a Trustee and Chairman of
the Board of the Trust, entered into an agreement to acquire 100% of the common
stock of The Charger Corporation, the general partner of the Advisor (the
"Transaction"), the consummation of which would constitute a "change of control"
of the Advisor. On August 25, 2010, the Independent Trustees were informed about
the Transaction, and on August 31, 2010, counsel to the Independent Trustees
forwarded to Mr. Bowen and the Advisor a request for information regarding the
Transaction. At its meeting held on September 20, 2010, the Board considered the
information provided by Mr. Bowen and the Advisor in response to the Independent
Trustees' request for information and also reviewed its prior approval of the
Agreement. The Board of Trustees determined that 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, 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, the
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
Independent Trustees received a report in advance of the July 21, 2010 Board
meeting responding to a request for information from counsel to the Independent
Trustees. The report, among other things, outlined the services to be provided
by First Trust to the Fund (including the relevant personnel responsible for
these services and their experience); the proposed unitary fee structure for the
Fund as compared to fees charged by investment advisors to comparable
exchange-traded funds ("ETFs"), and as compared to fees charged to other First
Trust clients with similar investment objectives, and to other ETFs managed by
First Trust; the estimated expenses to be incurred in providing services to the
Fund and the potential for economies of scale, if any; financial data on First
Trust; fall out benefits to First Trust and First Trust Portfolios L.P.; and a
summary of First Trust's compliance program. The Independent Trustees also met
separately with their independent legal counsel to discuss the information
provided by First Trust. In connection with the September 20, 2010 Board
meeting, the Advisor represented to the Board that there had been no material
changes to the information provided in July 2010 and that the Board could
continue to rely on such information. The Board applied its business judgment to
determine whether the arrangement between the Trust and First Trust is a
reasonable business arrangement from the Fund's perspective as well as from the
perspective of shareholders.
In evaluating whether to approve the Agreement, the Board considered the nature,
extent and quality of services to be provided by First Trust under the
Agreement, and noted that First Trust employees provide management services to
other ETFs and to other investment companies in the First Trust complex with
diligence and care. The Board also considered the compliance program that had
been developed by First Trust and the skills of its employees who would be
working with the Fund. It also considered the efforts expended by First Trust in
organizing the Trust and making arrangements for entities to provide services to
the Fund. Since the Fund had yet to commence investment operations, the Board
did not consider the investment performance of the Fund, but the Board did
consider the hypothetical performance of the applicable index. In light of the
information presented and the considerations made, the Board concluded that the
nature, quality and extent of services to be provided to the Fund by First Trust
under the Agreement are expected to be satisfactory.
The Board reviewed information regarding the proposed unitary fee structure for
the Fund. The Board noted that under the unitary fee arrangement, the Fund would
pay First Trust a fee equal to an annual rate of 0.70% of its average daily net
assets and that First Trust would be responsible for the Fund's expenses,
including the cost of transfer agency, custody, fund administration, legal,
audit, licensing and other services, but excluding interest, taxes, brokerage
commissions and other expenses connected with the execution of portfolio
transactions, service fees and distribution fees pursuant to a Rule 12b-1 plan,
if any, and extraordinary expenses. The Board also considered that at the July
2010 meeting, it had reviewed information provided by First Trust and Lipper,
Inc. ("Lipper") for the Fund on the advisory fees and other expenses paid by
other comparable ETFs. The Board noted that the unitary fee for the Fund was
above the median total expense ratio of the peer funds in each of the First
Trust and Lipper peer groups for the Fund. The Board noted that it had
considered the limitations on the comparability of the funds in each of the
First Trust and Lipper peer groups, including that not all peer funds charged a
unitary fee. The Board considered that it had reviewed the total expense ratios
(after fee waivers) of other First Trust ETFs with investment objectives and
policies similar to the Fund's investment objective and policies, and noted that
they were generally the same as the unitary fee proposed to be charged to the
Fund. In light of the nature, extent and quality of services to be provided
under the Agreement, the Board determined that the proposed unitary fee for the
Fund was fair and reasonable.
The Board noted that it had considered First Trust's representation that the
proposed unitary fee for the Fund was not structured to pass the benefits of any
economies of scale on to shareholders as the Fund's assets grow, but that First
Trust did not believe this was material to the Board's consideration of the
proposed unitary fees due to the anticipated asset levels for the Fund. The
Trustees noted that any reduction in fixed costs associated with the management
of the Fund would benefit First Trust, but that a unitary fee structure provides
certainty in expenses for the Fund. The Board noted that First Trust has
continued to invest in personnel and infrastructure for the First Trust complex.
The Board took the costs to be borne by First Trust in connection with its
services to be performed under the Agreement into consideration and noted that
First Trust was unable to estimate the profitability of the Agreement to First
Trust. The Board considered that First Trust had identified as a fall out
benefit to First Trust and First Trust Portfolios L.P. their exposure to
investors and brokers who, in the absence of the Fund, may have had no dealings
with First Trust. The Board also noted that First Trust would not utilize soft
dollars in connection with its management of the Fund's portfolio.
After discussion, the Board of Trustees, including the Independent Trustees,
concluded that First Trust had the capabilities, resources and personnel
necessary to manage the Fund. Based upon such information as it considered
necessary to the exercise of its reasonable business judgment, the Board of
Trustees concluded that it was in the best interests of the Fund to approve the
Agreement. No single factor was determinative in the Board's analysis.
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RISK CONSIDERATIONS
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
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 II.
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. 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 an exchange may incur brokerage commissions. In addition,
investors who sell Fund shares may receive less than the shares' net asset
value. Unlike shares of open-end funds, investors are generally not able to
purchase shares directly from a Fund and individual shares are not redeemable.
However, specified large blocks of shares called creation units can be purchased
from, or redeemed to, the Fund.
Each Fund's shares are subject to market fluctuations caused by such factors as
economic, political, regulatory or market develop-ments, changes in interest
rates and perceived trends in stock prices. Overall stock values could decline
generally or could underperform other investments. The value of an individual
security or 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.
You should anticipate that the value of each Fund's shares will decline, more or
less, in correlation with any decline in the value of that Fund's corresponding
index.
Each Fund's return may not match the return of its corresponding index for a
number of reasons. For example, the Funds incur operating expenses not
applicable to their corresponding indexes, and may incur costs in buying and
selling securities, especially when rebalancing the Fund's portfolio holdings to
reflect changes in the composition of its corresponding index. In addition, each
Fund's portfolio holdings may not exactly replicate the securities included in
its corresponding index or the ratios between the securities included in such
index.
Each Fund is exposed to additional market risk due to its policy of investing
principally in the securities included in its corresponding index. As a result
of this policy, 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. Therefore, the Funds 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 a Fund's
corresponding index.
Each Fund relies on a license and related sublicense that permits it to use its
corresponding index and associated trade names, trademarks and service marks in
connection with the name and investment strategies of the Fund. Such license and
related sublicense may be terminated by the index provider and, as a result, a
Fund may lose its ability to use such intellectual property. There is also no
guarantee that an index provider has all rights to lease intellectual property
on behalf of a Fund. Accordingly, in the event the license is terminated or the
index provider does not have rights to license such intellectual property, it
may have a significant impact on the operation of the effected Fund.
Each Fund will be concentrated in the securities of a given industry if the
Fund's corresponding index is concentrated in such individual industry. A
concentration makes a Fund more susceptible to any single occurrence affecting
the industry and may subject a Fund to greater market risk than less controlled
funds.
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 invest in securities included in or representative of its index regardless
of their investment merit. The Funds generally will not attempt to take
defensive positions in declining markets.
Each Fund is classified as "non-diversified" under the Investment Company Act of
1940, as amended. As a result, each Fund is only limited as to the percentage of
its assets which may be invested in the securities of any one issuer by the
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended. Because the Funds may invest a relatively high percentage of their
assets in a limited number of issuers, the Funds may be more susceptible to any
single economic, political or regulatory occurrence affecting one or more of
these and to the issuers, experience increased volatility and be highly
concentrated in certain issues.
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RISK CONSIDERATIONS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
Each Fund invests in securities of non-U.S. issuers. Investing in securities of
non-U.S. issuers, which are generally denominated in non-U.S. currencies, may
involve certain risks not typically associated with investing in securities of
U.S. issuers. Some of these risks may include, but are not limited to, the
following: (i) there may be less publicly available information about non-U.S.
issuers or markets due to less rigorous disclosure or accounting standards or
regulatory practices; (ii) non-U.S. markets may be smaller, less liquid and more
volatile than the U.S. market; (iii) potential adverse effects of fluctuations
in currency exchange rates or controls on the value of a Fund's investments;
(iv) the economies of non-U.S. countries may grow at slower rates than expected
or may experience a downturn or recession; (v) the impact of economic,
political, social or diplomatic events; (vi) certain non-U.S. countries may
impose restrictions on the ability of non-U.S. issuers to make distribution
payments to investors located in the United States due to blockage of non-U.S.
currency exchanges or otherwise; and (vii) withholding and other non-U.S. taxes
may decrease a Fund's return. These risks may be more pronounced to the extent
that a Fund invests a significant amount of its assets in companies located in
one country.
Because each Fund's NAV is determined on the basis of U.S. dollars, you may lose
money if the local currency of a foreign market depreciates against the U.S.
dollar, even if the local currency value of a Fund's holdings goes up.
Certain Funds may hold securities of certain non-U.S. and non-Canadian companies
in the form of Depositary Receipts. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. The issuers of unsponsored Depositary Receipts are not
obligated to disclose material information in the United States; therefore,
there may be less information available regarding such issuers and there may not
be a correlation between such information and the market value of the Depositary
Receipts.
Certain Funds may invest in small and/or mid capitalization companies. Such
companies may be more vulnerable to adverse general market or economic
developments, and their securities may be less liquid and may experience greater
price volatility than larger, more established companies as a result of several
factors, including limited trading volumes, products or financial resources,
management inexperience and less publicly available information. Accordingly,
such companies are generally subject to greater market risk than larger, more
established companies.
Each Fund may invest in companies that are considered to be PFICs, which are
generally certain non-U.S. corporations that receive at least 75% of their
annual gross income from passive sources (such as interest, dividends, certain
rents and royalties or capital gains) or that hold at least 50% of their assets
in investments producing such passive income. Therefore, such Funds could be
subject to U.S. federal income tax and additional interest charges on gains and
certain distributions with respect to those equity interests, even if all the
income or gain is distributed to its shareholders in a timely manner. Such Fund
will not be able to pass through to its shareholders any credit or deduction for
such taxes.
Certain Funds may invest in securities issued by companies headquartered in
Europe. Such Funds are therefore subject to certain risks associated
specifically with Europe. A significant number of countries in Europe are member
states in the EU, and the member states no longer control their own monetary
policies by directing independent interest rates for their currencies. In these
member states, the authority to direct monetary policies, including money supply
and official interest rates for the Euro, is exercised by the European Central
Bank. In addition, European corporations, and other entities with significant
markets or operations in Europe (whether or not in the participating countries),
face strategic challenges as these entities adapt to a single transnational
currency. The Euro conversion may have a material impact on revenues, expenses
or income from operations; increase competition due to the increased price
transparency of EU markets; affect issuers' currency exchange rate risk and
derivatives exposure; disrupt current contracts; cause issuers to increase
spending on information technology updates required for the conversion; and
result in potential adverse tax consequences.
The First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund
invests in securities issued by companies headquartered in Asia and is therefore
subject to certain risks associated specifically with Asia. For example, some of
the currencies of these countries have experienced devaluations relative to the
U.S. dollar, and adjustments have been made periodically in certain of such
currencies. Certain countries, such as Indonesia, face serious exchange
constraints. Jurisdictional disputes also exist, for example, between South
Korea and North Korea. The Tokyo stock market, as measured by the Tokyo Stock
Price Index, has been volatile. Declines in the Tokyo stock market have made the
country's banks and financial institutions vulnerable because of their large
share portfolios. Japanese banks have been left with large numbers of
nonperforming loans. The Japanese economy labors under a heavy government budget
deficit and historically low interest rates. As a result of these factors,
several high-profile bankruptcies of Japanese banks, brokerage firms and
insurance companies have occurred.
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RISK CONSIDERATIONS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
The First Trust Dow Jones Global Select Dividend Index Fund and the First Trust
STOXX(R) European Select Dividend Index Fund invest in the 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. These industries are generally extensively regulated and may
be adversely affected by increased regulations.
The First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund
invests in companies in the real estate industry, including REITs and therefore,
the Fund is subject to the risks associated with investing in real estate, 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. The Fund may also be impacted by the
downturn in the subprime mortgage lending market in the United States. Subprime
loans have higher defaults and losses than prime loans. Subprime loans also have
higher serious delinquency rates than prime loans. Because the Fund invests in
REITs it is subject to certain other risks related to REIT structure and focus,
which include, but are not limited to, dependency upon management skills,
limited diversification, the risks of locating and managing financing for
projects, heavy cash flow dependency, possible default by borrowers, the costs
and potential losses of selfliquidation of one or more holdings, and, in many
cases, relatively small market capitalization, which may result in less market
liquidity and greater price volatility.
The First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund is
also subject to interest rate risk. 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. Because the market price of
REIT stocks may change based upon investors' collective perceptions of future
earnings, the value of the Fund will generally decline when investors anticipate
or experience rising interest rates.
The First Trust ISE Global Wind Energy Index Fund invests in wind energy
companies. Wind energy companies can be significantly affected by obsolescence
of existing technology, short product cycles, falling prices and profits,
competition from new market entrants and general economic conditions. This can
be significantly affected by fluctuations in energy prices and supply and demand
of alternative energy fuels, energy conservation, the success of exploration
projects and tax and other government regulations. Wind energy companies could
be adversely affected by commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources,
technological developments and labor relations. In addition, the Fund may
include companies affected by industry consolidation, domestic and international
politics, excess capacity and consumer demand and spending trends. They may also
be significantly affected by overall capital spending levels, economic cycles,
delays in modernization, labor relations, government regulations and e-commerce
initiatives.
The First Trust ISE Global Wind Energy Index Fund invests in the securities of
companies in the utilities sector. General problems of issuers in the utilities
sector include the imposition of rate caps, increased competition due to
deregulation, the difficulty in obtaining an adequate return on invested capital
or in financing large construction projects, the limitations on operations and
increased costs and delays attributable to environmental considerations and the
capital market's ability to absorb utility debt. In addition, taxes, government
regulation, international politics, price and supply fluctuations, volatile
interest rates and energy conservation may cause difficulties for utilities. All
of such issuers have been experiencing certain of these problems in varying
degrees.
The First Trust ISE Global Engineering and Construction Index Fund invests in
the securities of engineering and construction companies. 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 NASDAQ(R) Clean Edge(R) Smart Grid Infrastructure Index Fund
invests in the securities of smart grid companies. Smart grid companies can be
negatively affected by high costs of research and development, high capital
requirements for implementation, uncertain government regulations and input,
limited ability of industrial and utility companies to quickly transform their
businesses in order to implement new technologies and uncertainty of the ability
of new products to penetrate established industries. Smart grid companies are
often reliant upon contracts with government and commercial customers which may
expire from time to time. Such companies are also affected by the general
business conditions within the industrial, utility, information technology and
telecommunications sectors and the overall global economy.
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RISK CONSIDERATIONS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
The First Trust ISE Global Copper Index Fund and the First Trust ISE Global
Platinum Index Fund invest in the securities of companies in the materials
sector. General risks of the materials sector include the general state of the
economy, consolidation, domestic and international politics and excess capacity.
In addition, basic materials companies may also be significantly affected by
volatility of commodity prices, import controls, worldwide competition,
liability for environmental damage, depletion of resources and mandated
expenditures for safety and pollution control devices.
The First Trust ISE Global Copper Index Fund may be adversely affected by a
decrease in the worldwide demand and price of copper. Various factors may lead
to a decreased demand and price of copper. As an industrial metal, the demand
for and price of copper may be negatively impacted by a decreased level of
industrial activity using copper. Other factors include the availability of
substitutes such as man-made or synthetic substitutes, disruptions in the supply
chain, from mining to storage to smelting or refining, adjustments to inventory,
variations in production costs, including storage, labor and energy costs, costs
associated with regulatory compliance, including environmental regulations and
changes in industrial, government and consumer demand, both in individual
consuming nations and internationally.
The First Trust ISE Global Copper Index Fund may be significantly impacted by
the risks associated with the copper mining companies including competitive
pressures in the copper mining business and the price of copper. Because more
than half of the world's copper production occurs in the United States, Chile,
Canada, Russia and Zambia, the Fund's Share price may be particularly sensitive
to any adverse political or economic developments affecting these countries. The
Fund's Share price may experience volatility because the price of copper may
fluctuate substantially over short periods of time. Moreover, the Index tracks
companies involved in the copper mining business and not the price of copper.
The securities of companies involved in the copper mining business may under- or
over-perform the price of copper over the short term or the long term.
The First Trust ISE Global Copper Index Fund invests in the securities of
companies that are domiciled in Canada. The Fund is particularly sensitive to
political, economic and social conditions in that country. Canada is a major
producer of metals and energy-related products. The Canadian economy is very
dependent on the demand for, and supply and price of, natural resources, and the
Canadian market is relatively concentrated in issuers involved in the production
and distribution of natural resources. Any adverse events that affect Canada's
major industries may have a negative impact on the overall Canadian economy and
the Shares of the Fund.
The First Trust ISE Global Copper Index Fund invests in the securities of
companies that are domiciled in the United Kingdom, the Fund is particularly
sensitive to political, economic and social conditions in that country. The Fund
may be affected unfavorably by political developments, social instability,
changes in government policies and other political and economic developments in
the United Kingdom.
The First Trust ISE Global Platinum Index Fund may be adversely affected by a
decrease in the worldwide demand and price of platinum group metals ("PGMs").
Various factors may lead to a decreased demand and price of PGMs. An increase in
the level of hedge activity of PGM-producing companies could cause a decline in
world PGM prices. A significant negative change in the attitude of speculators
and investors towards PGMs could cause a decline in world PGM prices. A widening
of interest rate differentials between the cost of money and the cost of PGMs
could also negatively affect the price of PGMs which, in turn, could negatively
affect the price of the Shares. In addition, automobile components that use PGMs
account for a significant percentage of the global demand for PGMs. Because of
the decline in demand and reduction in sales experienced by the global
automotive industry, the price of PGMs may be negatively affected. PGM companies
are also subject to risks associated with the exploration, development and
production of PGMs, including competition for land, difficulties in obtaining
required governmental approval to mine land, inability to raise adequate
capital, increases in production costs and political unrest in nations where
sources of PGMs are located, particularly Russia and South Africa.
The First Trust ISE Global Platinum Index Fund may be significantly impacted by
the risks associated with the PGM companies including competitive pressures in
the PGM mining business and the price of PGMs. Because a vast majority of the
world's PGM production occurs in Russia and South Africa, the Fund's Share price
may be particularly sensitive to any adverse political or economic developments
affecting these countries. The Fund's Share price may experience volatility
because the price of PGMs may fluctuate substantially over short periods of
time. Moreover, the Index tracks companies involved in the PGM mining business
and not the price of PGMs. The securities of companies involved in the PGM
mining business may under- or over-perform the price of PGMs over the short term
or the long term.
Because a significant percentage of the world's PGM mining takes place in
Russia, the First Trust ISE Global Platinum Index Fund is particularly sensitive
to political and economic conditions in that country. The Fund may be affected
unfavorably by political developments, social instability, changes in government
policies and other political and economic developments in Russia.
Page 81
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RISK CONSIDERATIONS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
Because a significant percentage of the world's PGM mining takes place in South
Africa, the First Trust ISE Global Platinum Index Fund is particularly sensitive
to political and economic conditions in that country. South Africa has
historically experienced acts of terrorism and strained international relations
related to border disputes, historical animosities, racial tensions and other
domestic concerns. These situations may cause uncertainty in the South African
market and may adversely affect the performance of the South African economy.
The First Trust BICK Index Fund invests in the securities of companies in the
financials sector which may include banks, thrifts, brokerage firms,
broker/dealers, investment banks, finance companies and companies involved in
the insurance industry. Banks, thrifts and their holding companies are
especially subject to the adverse effects of economic recession; government
regulation; decreases in the availability of capital; 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.
The First Trust BICK Index Fund invests in common stock and depositary receipts
of companies that are domiciled in Brazil. If a holder of depositary receipts
exchanges its interest in the depositary receipts for the underlying shares, it
may risk losing the ability to remit foreign currency abroad and certain
Brazilian tax advantages. Brazil has experienced substantial economic
instability resulting from, among other things, periods of very high inflation,
persistent structural public sector deficits and significant devaluations of its
currency leading also to a high degree of price volatility in both the Brazilian
equity and foreign currency markets. Brazilian companies may also be adversely
affected by high interest and unemployment rates, and are particularly sensitive
to fluctuations in commodity prices.
The First Trust BICK Index Fund invests in depositary receipts of companies that
are domiciled in India. Investment restrictions in India may limit the ability
to convert equity shares into depositary receipts and vice versa. These
restrictions may cause equity shares of the underlying issuer to trade at a
premium or discount to the market price of the depositary receipt. Investing in
securities of Indian companies involves additional risks, including, but not
limited to: greater price volatility; substantially less liquidity and
significantly smaller market capitalization of securities markets; more
substantial governmental involvement in the economy; higher rates of inflation;
and greater political, economic and social uncertainty. Government controls have
been reduced on imports and foreign investment, and privatization of domestic
output has proceeded slowly. The rapid economic growth of the last few years has
put heavy stress on India's infrastructural facilities. Furthermore, although
the Indian government is well aware of the need for reform and is pushing ahead
in this area, businesses still have to deal with an inefficient and sometimes
slow-moving bureaucracy.
The First Trust BICK Index Fund invests in H shares, depositary receipts and
U.S.-listed common stock of companies that are domiciled in China, including
Hong Kong. Some Chinese companies are listed on both the Hong Kong Stock
Exchange with H shares and the Shanghai Stock Exchange with A shares. Price
differentials between H shares and A shares of the same company may be
significant. Also, price fluctuations of A shares are limited to either 5% or
10% per trading day, while no such limitations exist for H shares. Investing in
securities of companies in China involves additional risks, including, but not
limited to: the economy of China differs, often unfavorably, from the U.S.
economy in such respects as structure, general development, government
involvement, wealth distribution, rate of inflation, growth rate, allocation of
resources and capital reinvestment, among others; the central government has
historically exercised substantial control over virtually every sector of the
Chinese economy through administrative regulation and/or state ownership; and
actions of the Chinese central and local government authorities continue to have
a substantial effect on economic conditions in China. Furthermore, China's
economy is dependent on the economies of other Asian countries and can be
significantly affected by currency fluctuations and increasing competition from
Asia's other low-cost emerging economies.
The First Trust BICK Index Fund invests in common stock of companies that are
domiciled in South Korea. The South Korean economy is dependent on the economies
of Asia and the United States as key trading partners. Reduction in spending by
these economies on South Korean products and services or negative changes in any
of these economies, mainly in China or Southeast Asia, may cause an adverse
impact on the South Korean economy. Furthermore, South Korea's economy is also
dependent on the economies of other Asian countries and can be significantly
affected by currency fluctuations and increasing competition from Asia's other
low cost emerging economies. Also, the political tensions with North Korea could
escalate and lead to further uncertainty in the political and economic climate
on the Korean peninsula.
Page 82
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RISK CONSIDERATIONS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND II
MARCH 31, 2011 (UNAUDITED)
The First Trust NASDAQ CEA Smartphone Index Fund invests in securities of
companies in the smartphone industry. The smartphone industry is characterized
by intense competition and new market entrants, which could negatively impact
profit margins and overall revenues of the companies involved in the industry.
Smartphone companies are generally subject to the risks of rapidly changing
technologies, short product life cycles, fierce competition, aggressive pricing
and reduced profit margins, the loss of patent, copyright and trademark
protections, cyclical market patterns, evolving industry standards, and frequent
new product introductions. Smartphone companies are affected by high and
continuing costs of research and development due to quickly evolving
technologies. Smartphone companies are often reliant upon the relationships with
third-parties, which can be unpredictable. Additionally, the smartphone industry
is in the early stages of development and can be extremely volatile.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
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First Trust Exchange-Traded Fund II
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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
--------------------------------------------------------------------------------
Inside Back Cover
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEMS 6. SCHEDULE OF INVESTMENTS.
Schedules of Investments in securities of unaffiliated issuers as of the close
of the reporting period are included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3 (c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this
paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as
amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal quarter
that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) First Trust Exchange-Traded Fund II
----------------------------------------------
By: /s/ James A. Bowen
--------------------------------
Name: James A. Bowen
Title: Chairman of the Board, President and Chief Executive Officer
Date: May 26, 2011
----------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ James A. Bowen
--------------------------------
Name: James A. Bowen
Title: Chairman of the Board, President and Chief Executive Officer
Date: May 26, 2011
----------------------
By: /s/ Mark R. Bradley
--------------------------------
Name: Mark R. Bradley
Title: Treasurer, Chief Financial Officer and Chief Accounting Officer
Date: May 26, 2011
----------------------