UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21774
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First Trust Exchange-Traded Fund
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(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: December 31
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Date of reporting period: December 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, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
The registrant's 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
First Trust Dow Jones Select MicroCap Index(SM) Fund
First Trust Morningstar Dividend Leaders(SM) Index Fund
First Trust US IPO Index Fund
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund
First Trust NASDAQ-100-Technology Sector Index(SM) Fund
First Trust NYSE Arca Biotechnology Index Fund
First Trust Dow Jones Internet Index(SM) Fund
First Trust Strategic Value Index Fund
First Trust Value Line(R) Equity Allocation Index Fund
First Trust Value Line(R) Dividend Index Fund
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund
First Trust S&P REIT Index Fund
First Trust ISE Water Index Fund
First Trust ISE-Revere Natural Gas Index Fund
First Trust ISE Chindia Index Fund
First Trust Value Line(R) 100 Exchange-Traded Fund
First Trust NASDAQ(R) ABA Community Bank Index Fund
Annual Report
December 31, 2011
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
Shareholder Letter.......................................................... 2
Market Overview............................................................. 3
Fund Performance Overview
First Trust Dow Jones Select MicroCap Index(SM) Fund..................... 4
First Trust Morningstar Dividend Leaders(SM) Index Fund.................. 6
First Trust US IPO Index Fund............................................ 8
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund .................... 10
First Trust NASDAQ-100-Technology Sector Index(SM) Fund ................. 12
First Trust NYSE Arca Biotechnology Index Fund .......................... 14
First Trust Dow Jones Internet Index(SM) Fund ........................... 16
First Trust Strategic Value Index Fund .................................. 18
First Trust Value Line(R) Equity Allocation Index Fund .................. 20
First Trust Value Line(R) Dividend Index Fund ........................... 22
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund .............. 24
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund .............. 26
First Trust S&P REIT Index Fund ......................................... 28
First Trust ISE Water Index Fund ........................................ 30
First Trust ISE-Revere Natural Gas Index Fund ........................... 32
First Trust ISE Chindia Index Fund ...................................... 34
First Trust Value Line(R) 100 Exchange-Traded Fund ...................... 36
First Trust NASDAQ(R) ABA Community Bank Index Fund...................... 38
Notes to Fund Performance Overview.......................................... 40
Understanding Your Fund Expenses............................................ 41
Portfolio of Investments
First Trust Dow Jones Select MicroCap Index(SM) Fund..................... 43
First Trust Morningstar Dividend Leaders(SM) Index Fund.................. 47
First Trust US IPO Index Fund............................................ 49
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund .................... 52
First Trust NASDAQ-100-Technology Sector Index(SM) Fund ................. 55
First Trust NYSE Arca Biotechnology Index Fund .......................... 56
First Trust Dow Jones Internet Index(SM) Fund ........................... 57
First Trust Strategic Value Index Fund .................................. 58
First Trust Value Line(R) Equity Allocation Index Fund .................. 60
First Trust Value Line(R) Dividend Index Fund ........................... 63
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund .............. 66
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund .............. 68
First Trust S&P REIT Index Fund ......................................... 70
First Trust ISE Water Index Fund ........................................ 72
First Trust ISE-Revere Natural Gas Index Fund ........................... 73
First Trust ISE Chindia Index Fund ...................................... 74
First Trust Value Line(R) 100 Exchange-Traded Fund ...................... 76
First Trust NASDAQ(R) ABA Community Bank Index Fund...................... 79
Statements of Assets and Liabilities........................................ 82
Statements of Operations.................................................... 86
Statements of Changes in Net Assets......................................... 90
Financial Highlights........................................................ 96
Notes to Financial Statements............................................... 107
Report of Independent Registered Public Accounting Firm..................... 119
Additional Information ..................................................... 120
Board of Trustees and Officers.............................................. 124
Risk Considerations......................................................... 126
Privacy Policy.............................................................. 129
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 (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
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2011
Dear Shareholders:
I am pleased to present you with the annual report for your investment in First
Trust Exchange-Traded Fund.
First Trust Advisors L.P. ("First Trust"), now in our 21st year, has always
believed that staying invested in quality products and having a long-term
horizon can help investors reach their financial goals. Like many successful
investors, we understand that success in the markets doesn't just happen--it
requires a long-term investment perspective through all kinds of markets.
Although the markets have been somewhat choppy over the past six months, the
equity market is well above the lows it sank to during the recent recession.
The report you hold contains detailed information for the period covered by the
report about the Funds that comprise the First Trust Exchange-Traded Fund. 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. A successful investor is also typically a knowledgeable one, as we have
found to be the case at First Trust.
First Trust remains committed to being a long-term investor and investment
manager and to bringing you quality investment solutions regardless of market
ups and downs. We offer a variety of products that could fit many financial
plans to help those investors seeking long-term investment success. You may want
to talk to your advisor about the other investments First Trust offers that
might also fit your financial goals.
First Trust will continue to make available up-to-date information about your
investments so you and your financial advisor are current on any First Trust
investments you own. We value our relationship with you, and thank you for the
opportunity to assist you in achieving your financial goals. I look forward to
2012 and to the next edition of your Fund's report.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees of First Trust Exchange-Traded Fund
Chief Executive Officer of First Trust Advisors L.P.
Page 2
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MARKET OVERVIEW
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FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 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 22 years of experience as an Equity
and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst
("CFA") designation. He is a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment
Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been
quoted by several publications, including The Wall Street Journal, The Wall
Street Reporter, Bloomberg News Service, and Registered Rep.
STATE OF THE ECONOMY
The U.S. economy expanded in each of the past ten calendar quarters. While
economic activity was sluggish in the first half of 2011, it did accelerate
above the 2.0% level by year-end. GDP ranged from an annualized 0.4% in the
first quarter of 2011 to an annualized 2.8% in the fourth quarter of 2011. That
is still significant when you consider that the size of the U.S. economy
(nominal dollars) has grown from $5.99 trillion in 1991 to $15.09 trillion in
2011. Over that same 20-year period, GDP averaged 2.6%, according to data from
the Bureau of Economic Analysis. The Blue Chip Economic Indicators survey in
December 2011 revealed a consensus GDP estimate of 2.2% for 2012. Estimates have
been ratcheted down in recent months due to the ongoing debt crisis negotiations
in Europe. The austerity measures forthcoming, as well as those already
implemented, are expected to dampen economic activity in the European Union. If
so, it would likely temper global growth as well, in our opinion.
One of the most important and talked about economic indicators in 2011 was job
growth. It is likely to be in 2012 as well. The U.S. has increased its nonfarm
payrolls by 3.16 million since February 2010, yet the unemployment rate closed
2011 at 8.5%. While 8.5% is still high, it is down from 10.0% in October 2009.
This issue will be a big point of contention in the upcoming general election.
Since 1936, no incumbent in the White House has won a second term when the
unemployment rate has been above 7.2%. A secondary issue is the rising number of
people out-of-work for an extended period of time.
The U.S. economic recovery, while not robust, is actually one of the better
stories around the globe. Progress has been made on several fronts. The number
of bank failures in the U.S. in 2011 fell by nearly 44% from 2010's total. The
default rate on U.S. speculative-grade debt stood at 1.8% in December 2011, well
below its historical average of 5.0%, according to Moody's. The companies in the
REIT sector raised a record amount of capital in the public markets in 2011,
including a record amount of equity, in an ongoing effort to strengthen their
balance sheets, according to REIT.com. REITs raised $51.3 billion in public
equity and debt in 2011, surpassing the previous record of $49.0 billion raised
in 2006. RealtyTrac reported that foreclosures and repossessions declined 33% in
2011 to 2.7 million, their lowest level since 2007. S&P 500 Index earnings
reached a record high in the third quarter of 2011. So we believe there is much
to be encouraged about heading into 2012.
U.S. STOCKS AND BONDS
The major U.S. stock indices were mixed in 2011. The S&P 500 Index, S&P MidCap
400 Index and S&P SmallCap 600 Index returned 2.11%, -1.74%, and 1.00%,
respectively, according to Bloomberg. Six of the 10 major sectors in the S&P 500
posted positive total returns. The top-performing sector was Utilities, up
19.88%, while the poorest showing came from Financials, down 17.03%. The
year-over-year estimated earnings growth rate for the companies in the S&P 500
Index is expected be 9.00% in 2011, according to Standard & Poor's.
A survey of 214 institutional investors just released by Bank of America Merrill
Lynch revealed that more investors are willing to assume risk and fewer are
predicting a global slowdown. Only a net 3% of institutional investors believe
the global economy will weaken in the next 12 months, down from 27% in December.
That is the biggest one-month improvement in sentiment since May 2009. While
most continue to shy away from European equities, it appears that investors are
favoring energy and technology stocks. In addition, portfolio managers in the
U.S. are once again investing in banks.
In the U.S. bond market, despite warnings from a high-profile analyst calling
for a surge in defaults, the top-performing major debt group was municipal
bonds. The Barclays Capital Municipal Bond: Long Bond (22+) Index posted a total
return of 14.88%. The next closest domestic category was GNMAs, up 7.97%, as
measured by the Barclays Capital GNMA 30 Index. All of the major debt groups in
the U.S. posted positive returns.
FOREIGN STOCKS AND BONDS
The Barclays Capital Global Emerging Markets Index of debt securities rose 5.77%
(USD) in 2011, while the MSCI Emerging Markets Index of stocks declined 18.42%
(USD). The Barclays Capital Global Aggregate Index of higher quality debt rose
5.64% (USD), while the MSCI World Index (excluding the U.S.) of stocks from
developed countries declined 13.71% (USD). The U.S. Dollar Index (DXY) rose
1.06% against a basket of major currencies in 2011.
Page 3
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FUND PERFORMANCE OVERVIEW
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FDM - FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
The First Trust Dow Jones Select MicroCap Index(SM) Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Dow Jones Select
MicroCap Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its assets in common stocks that comprise the Index. The Index measures the
performance of selected U.S. micro-capitalization companies chosen from all
common stocks traded on the New York Stock Exchange ("NYSE(R)"), NYSE Amex and
The NASDAQ Stock Market, Inc. ("NASDAQ(R)") that are comparatively liquid and
have strong fundamentals relative to the micro-capitalization segment as a
whole. The Fund's shares are listed for trading on the NYSE Arca, Inc. ("NYSE
Arca"). The first day of secondary market trading in shares of the Fund was
09/30/05.
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PERFORMANCE AS OF DECEMBER 31, 2011
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (09/27/05) Ended (09/27/05)
12/31/11 12/31/11 to 12/31/11 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -8.69% -2.76% 0.68% -13.04% 4.36%
Market Value -9.32% -2.91% 0.57% -13.71% 3.64%
INDEX PERFORMANCE
Dow Jones Select MicroCap Index(SM) -8.16% -2.08% 1.40% -9.96% 9.08%
Russell 2000(R) Index -4.18% 0.15% 3.26% 0.75% 22.26%
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(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a net asset value ("NAV") return of -8.69% during the
12-month period covered by this report. During the same period, the benchmark
Russell 2000(R) Index generated a return of -4.18%. The Materials (+1.09%) and
Utilities (-0.15%) sectors were two of the top-performing sectors, while the
Telecommunication Services (-40.11%) and Information Technology (-15.62%)
sectors were two of the worst-performing sectors. Synovis Life Technologies,
Inc. (+93.80%) and Charming Shoppes, Inc. (+84.91%) were two of the
top-performing stocks during the period covered by this report. Alaska
Communications Systems Group, Inc. (-70.25%) and Suffolk Bancorp (-66.77%) were
two of the worst-performing stocks during the period covered by this report.
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Dow Jones and Dow Jones Select MicroCap Index(SM) are products of Dow Jones
Indexes, a licensed trademark of CME Group Index Services LLC ("CME") and have
been licensed for use by First Trust on behalf of the Fund. The Fund, based on
the Dow Jones Select MicroCap Index(SM), is not sponsored, endorsed, sold or
promoted by CME, Dow Jones or their respective affiliates, and CME, Dow Jones
and their respective affiliates make no representation regarding the
advisability of trading in the Fund.
Page 4
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FDM - FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND (CONTINUED)
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PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
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% OF LONG-TERM
SECTOR INVESTMENTS
Financials 24.07%
Industrials 20.56
Consumer Discretionary 15.58
Information Technology 14.19
Health Care 12.00
Materials 5.33
Energy 3.49
Utilities 2.26
Telecommunication Services 1.76
Consumer Staples 0.76
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Total 100.00%
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TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
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% OF LONG-TERM
SECURITY INVESTMENTS
BBCN Bancorp, Inc. 0.94%
Wright Medical Group, Inc. 0.85
Kenexa Corp. 0.83
Sturm, Ruger & Co., Inc. 0.83
Shuffle Master, Inc. 0.82
Boston Private Financial Holdings, Inc. 0.81
La-Z-Boy, Inc. 0.80
Hercules Offshore, Inc. 0.79
Standard Microsystems Corp. 0.78
Navigant Consulting, Inc. 0.77
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Total 8.22%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 27, 2005 - DECEMBER 31, 2011
First Trust Dow Jones Select Dow Jones Select Russell 2000(R)
MicroCap Index(SM) Fund MicroCap Index(SM) Index
9/05 $10,000 $10,000 $10,000
12/05 10,374 10,397 10,252
06/06 10,968 11,033 11,094
12/06 12,001 12,115 12,134
06/07 12,746 12,910 12,917
12/07 11,278 11,474 11,944
06/08 9,896 10,100 10,825
12/08 7,520 7,707 7,909
06/09 7,362 7,568 8,118
12/09 9,087 9,393 10,058
06/10 8,833 9,153 9,862
12/10 11,427 11,876 12,759
6/11 11,811 12,319 13,551
12/11 10,435 10,907 12,227
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 January 1, 2007 through
December 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%
01/01/07 - 12/31/07 125 12 5 0
01/01/08 - 12/31/08 139 9 1 0
01/01/09 - 12/31/09 121 6 0 0
01/01/10 - 12/31/10 169 0 0 0
01/01/11 - 12/31/11 87 2 0 0
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NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
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FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/07 - 12/31/07 100 4 5 0
01/01/08 - 12/31/08 99 5 0 0
01/01/09 - 12/31/09 120 5 0 0
01/01/10 - 12/31/10 83 0 0 0
01/01/11 - 12/31/11 161 2 0 0
Page 5
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FDL - FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND
The First Trust Morningstar Dividend Leaders(SM) Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Morningstar(R) Dividend
Leaders(SM) Index (the "Index"). The Fund will normally invest at least 90% of
its assets in common stocks that comprise the Index. The Index offers investors
a benchmark for dividend portfolios as well as a means to invest in a portfolio
of stocks that have a consistent record of growing dividends as well as the
ability to sustain them. The Index consists of the top 100 stocks, based on
dividend yield, of the securities listed on one of the three major exchanges
(NYSE(R), NYSE Amex or NASDAQ(R)) that have been selected through the
application of Morningstar, Inc.'s proprietary multi-step screening process. The
Index is rebalanced four times annually in March, June, September and December.
The Fund's shares are listed for trading on the NYSE Arca. The first day of
secondary market trading in shares of the Fund was 03/15/06.
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PERFORMANCE AS OF DECEMBER 31, 2011
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (03/09/06) Ended (03/09/06)
12/31/11 12/31/11 to 12/31/11 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV 14.44% -1.53% 1.94% -7.41% 11.82%
Market Value 14.22% -1.53% 1.94% -7.40% 11.79%
INDEX PERFORMANCE
Morningstar(R) Dividend Leaders(SM) Index 15.02% -1.04% 2.43% -5.07% 14.96%
S&P 500(R) Index 2.11% -0.25% 1.93% -1.24% 11.76%
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(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of +14.44% during the 12-month period covered by
this report. During the same period, the benchmark S&P 500(R) Index generated a
return of +2.11%. The Utilities (+20.21%) and Health Care (+14.47%) sectors were
two of the top-performing sectors, while the Financials (-18.12%) and
Industrials (-0.63%) sectors were two of the worst-performing sectors. The poor
performance in the Financials sector was mitigated by the low average weight of
the sector in the Fund (3.0%). Harleysville Group, Inc. (+59.79%) and H&R Block,
Inc. (+43.24%) were two of the top-performing stocks during the period covered
by this report. Federated Investors, Inc. (-36.38%) and First Niagara Financial
Group, Inc. (-34.80%) were two of the worst-performing stocks during the period
covered by this report.
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Morningstar(R) is a service mark of Morningstar, Inc. and has been licensed for
use by First Trust on behalf of the Fund. The First Trust Morningstar Dividend
Leaders(SM) Index Fund is not sponsored, endorsed, issued, sold or promoted by
Morningstar, Inc., nor does this company make any representation regarding the
advisability of investing in the Fund.
Page 6
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FDL - FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND (CONTINUED)
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PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
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% OF LONG-TERM
SECTOR INVESTMENTS
Health Care 28.61%
Utilities 26.77
Telecommunication Services 19.17
Consumer Staples 8.02
Energy 5.28
Industrials 4.46
Financials 2.84
Materials 1.83
Consumer Discretionary 1.71
Information Technology 1.31
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Total 100.00%
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TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
AT&T, Inc. 9.97%
Verizon Communications, Inc. 9.20
Johnson & Johnson 9.18
Merck & Co., Inc. 7.81
ConocoPhillips 5.28
Abbott Laboratories 4.80
Bristol-Myers Squibb Co. 3.70
Eli Lilly & Co. 3.13
Kraft Foods, Inc., Class A 3.03
Southern (The) Co. 2.63
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Total 58.73%
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GROWTH OF A $10,000 INITIAL INVESTMENT
MARCH 9, 2006 - DECEMBER 31, 2011
First Trust Morningstar Morningstar(R) Dividend S&P 500(R)
Dividend Leaders(SM) Index Fund Leaders(SM) Index Index
03/06 $10,000 $10,000 $10,000
12/06 12,077 12,110 11,317
06/07 12,392 12,462 12,104
12/07 10,793 10,870 11,939
06/08 7,995 8,069 10,516
12/08 7,371 7,462 7,522
06/09 6,961 7,067 7,760
12/09 8,420 8,567 9,512
06/10 8,039 8,197 8,879
12/10 9,771 9,995 10,945
06/11 10,535 10,806 11,604
12/11 11,182 11,498 11,176
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 January 1, 2007 through
December 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%
01/01/07 - 12/31/07 122 6 5 0
01/01/08 - 12/31/08 148 8 4 2
01/01/09 - 12/31/09 135 4 3 0
01/01/10 - 12/31/10 185 0 0 0
01/01/11 - 12/31/11 219 0 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/07 - 12/31/07 107 10 1 0
01/01/08 - 12/31/08 84 4 2 1
01/01/09 - 12/31/09 106 3 1 0
01/01/10 - 12/31/10 66 1 0 0
01/01/11 - 12/31/11 33 0 0 0
Page 7
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FPX - FIRST TRUST US IPO INDEX FUND
The First Trust US IPO Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the IPOX(R)-100 U.S. Index (the "Index").
The Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index is a modified value-weighted price index measuring
the performance of the top 100 U.S. companies ranked quarterly by market
capitalization in the IPOX Global Composite Index. The Index utilizes a 10%
capping on all constituents and includes the 100 largest, typically best
performing and most liquid initial public offerings ("IPOs") of the U.S.
companies in the IPOX Global Composite Index. The IPOX Global Composite Index is
reconstituted regularly with IPOs being added to the IPOX Global Composite Index
at their seventh trading day upon "going public" and automatically exiting after
1,000 trading days or approximately four years thereafter. The Index is
reconstituted quarterly to reflect changes in the stock market values of the
IPOX Global Composite Index constituents and IPO activity during the past
quarter, with potential new companies entering the Index while other companies
reach 1,000 days in the Index and automatically drop out. The Fund's shares are
listed for trading on the NYSE Arca. The first day of secondary market trading
in shares of the Fund was 04/13/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (04/12/06) Ended (04/12/06)
12/31/11 12/31/11 to 12/31/11 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV 3.11% 2.58% 4.14% 13.60% 26.09%
Market Value 2.98% 2.59% 4.13% 13.66% 26.05%
INDEX PERFORMANCE
IPOX(R)-100 U.S. Index 3.78% 3.22% 4.79% 17.17% 30.69%
Russell 3000(R) Index 1.03% -0.01% 1.77% -0.07% 10.57%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of +3.11% during the 12-month period covered by
this report. During the same period, the benchmark Russell 3000(R) Index
generated a return of +1.03%. The Consumer Staples (+31.19%) and Utilities
(+30.04%) sectors were two of the top-performing sectors, while the Consumer
Discretionary (-22.39%) and Financials (-7.08%) sectors were two of the
worst-performing sectors. Pharmasset (+312.88%) and Generac Holdings, Inc.
(+73.35%) were two of the top-performing stocks during the period covered by
this report. IntraLinks Holdings, Inc. (-67.31%) and Amyris, Inc. (-66.94%) were
two of the worst-performing stocks during the period covered by this report.
-------------------
The Fund is not sponsored, endorsed, sold or promoted by IPOX(R). IPOX(R) makes
no representation or warranty, express or implied, to the owners of the Fund or
any member of the public regarding the advisability of trading in the Fund.
Page 8
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FPX - FIRST TRUST US IPO INDEX FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Information Technology 24.93%
Consumer Discretionary 19.59
Consumer Staples 18.64
Energy 13.51
Financials 8.00
Industrials 7.86
Health Care 5.72
Utilities 1.17
Materials 0.58
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Visa, Inc., Class A 10.34%
Philip Morris International, Inc. 10.16
General Motors Co. 6.64
Kinder Morgan, Inc. 4.76
Lorillard, Inc. 3.22
Dollar General Corp. 2.94
Mead Johnson Nutrition Co. 2.93
Discover Financial Services 2.76
Marathon Petroleum Corp. 2.49
Motorola Mobility Holdings, Inc. 2.43
-------
Total 48.67%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 12, 2006 - DECEMBER 31, 2011
First Trust US IPO IPOX(R)-100 U.S. Russell 3000(R)
Index Fund Index Index
04/06 $10,000 $10,000 $10,000
12/06 11,100 11,154 11,064
06/07 12,385 12,481 11,851
12/07 12,712 12,844 11,633
06/08 11,784 11,941 10,348
12/08 7,134 7,245 7,293
06/09 8,087 8,248 7,599
12/09 10,339 10,575 9,360
06/10 9,726 9,980 8,794
12/10 12,228 12,594 10,945
06/11 13,439 13,889 11,640
12/11 12,607 13,071 11,057
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 January 1, 2007 through
December 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%
01/01/07 - 12/31/07 96 9 4 1
01/01/08 - 12/31/08 133 3 6 0
01/01/09 - 12/31/09 109 3 0 0
01/01/10 - 12/31/10 149 0 0 0
01/01/11 - 12/31/11 135 0 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/07 - 12/31/07 135 5 1 0
01/01/08 - 12/31/08 108 2 1 0
01/01/09 - 12/31/09 135 5 0 0
01/01/10 - 12/31/10 103 0 0 0
01/01/11 - 12/31/11 116 1 0 0
Page 9
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QQEW - FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
The First Trust NASDAQ-100 Equal Weighted Index(SM) Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Equal
Weighted Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its assets in common stocks that comprise the Index. The Index is the
equal-weighted version of the NASDAQ-100 Index(R) which includes 100 of the
largest non-financial securities listed on NASDAQ(R) based on market
capitalization. The Index contains the same securities as the NASDAQ-100
Index(R), but each of the securities is initially set at a weight of 1.00% of
the Index and is rebalanced quarterly. The Fund's shares are listed for trading
on the NASDAQ(R). The first day of secondary market trading in shares of the
Fund was 04/25/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (04/19/06) Ended (04/19/06)
12/31/11 12/31/11 to 12/31/11 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -2.77% 2.96% 2.69% 15.68% 16.37%
Market Value -2.82% 2.97% 2.69% 15.74% 16.32%
INDEX PERFORMANCE
NASDAQ-100 Equal Weighted Index(SM) -2.10% 3.62% 3.34% 19.45% 20.61%
NASDAQ-100 Index(R) 3.68% 6.06% 5.60% 34.20% 36.45%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -2.77% during the 12-month period covered by
this report. During the same period, the benchmark NASDAQ-100 Index(R) generated
a return of +3.68%. The Consumer Staples (+7.84%) and Health Care (+4.43%)
sectors were two of the top-performing sectors, while the Telecommunication
Services (-20.27%) and Information Technology (-6.77%) sectors were two of the
worst-performing sectors. Intuitive Surgical, Inc. (+79.64%) and Biogen Idec,
Inc. (+64.13%) were two of the top-performing stocks during the period covered
by this report. Research In Motion Ltd. (-75.06%) and First Solar, Inc.
(-74.06%) were two of the worst-performing stocks during the period covered by
this report.
-------------------
NASDAQ(R), NASDAQ-100(R), NASDAQ-100 Index(R), and NASDAQ-100 Equal Weighted
Index(SM) are trademarks of The NASDAQ OMX Group, Inc. (which with its
affiliates is referred to as the Corporations) and are licensed for use by First
Trust on behalf of the Fund. The Fund has not been passed on by the Corporations
as to its legality or suitability. The Fund is not issued, endorsed, sold, or
promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO
LIABILITY WITH RESPECT TO THE FUND.
Page 10
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QQEW - FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Information Technology 49.20%
Consumer Discretionary 22.63
Health Care 16.22
Industrials 5.06
Consumer Staples 3.93
Materials 1.95
Telecommunication Services 1.01
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Akamai Technologies, Inc. 1.19%
Micron Technology, Inc. 1.08
Expedia, Inc. 1.08
Gilead Sciences, Inc. 1.08
Altera Corp. 1.07
Cerner Corp. 1.06
Research In Motion Ltd. 1.06
Warner Chilcott PLC, Class A 1.06
Yahoo!, Inc. 1.06
Alexion Pharmaceuticals, Inc. 1.05
-------
Total 10.79%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 19, 2006 - DECEMBER 31, 2011
First Trust NASDAQ-100 Equal NASDAQ-100 Equal NASDAQ-100
Weighted Index(SM) Fund Weighted Index(SM) Index(R)
04/06 $10,000 $10,000 $10,000
12/06 10,060 10,097 10,168
06/07 11,050 11,117 11,217
12/07 11,040 11,142 12,124
06/08 9,673 9,785 10,708
12/08 6,187 6,292 7,084
06/09 7,653 7,803 8,671
12/09 9,871 10,100 10,954
06/10 9,314 9,561 10,278
12/10 11,968 12,321 13,161
06/11 12,867 13,288 13,849
12/11 11,636 12,063 13,645
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 January 1, 2007 through
December 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%
01/01/07 - 12/31/07 151 0 3 0
01/01/08 - 12/31/08 152 4 1 1
01/01/09 - 12/31/09 144 0 0 0
01/01/10 - 12/31/10 155 1 0 0
01/01/11 - 12/31/11 151 0 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/07 - 12/31/07 97 0 0 0
01/01/08 - 12/31/08 94 1 0 0
01/01/09 - 12/31/09 104 3 1 0
01/01/10 - 12/31/10 95 1 0 0
01/01/11 - 12/31/11 101 0 0 0
Page 11
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QTEC - FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND
The First Trust NASDAQ-100-Technology Sector Index(SM) Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Technology
Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its assets in common stocks that comprise the Index. The Index is an
equal-weighted index based on the securities of the NASDAQ-100 Index(R) that are
classified as "technology" according to the Industry Classification Benchmark
classification system. The NASDAQ-100 Index(R) includes 100 of the largest
domestic and international non-financial companies listed on NASDAQ(R) based on
market capitalization. The Fund's shares are listed for trading on the
NASDAQ(R). The first day of secondary market trading in shares of the Fund was
04/25/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (04/19/06) Ended (04/19/06)
12/31/11 12/31/11 to 12/31/11 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -5.75% 4.03% 3.50% 21.84% 21.65%
Market Value -5.90% 4.04% 3.49% 21.91% 21.60%
INDEX PERFORMANCE
NASDAQ-100 Technology Sector Index(SM) -5.16% 4.70% 4.15% 25.82% 26.07%
S&P 500 Information Technology Index 2.41% 3.83% 3.88% 20.69% 24.26%
S&P 500(R) Index 2.11% -0.25% 1.42% -1.24% 8.39%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -5.75% during the 12-month period covered by
this report. During the same period, the benchmark S&P 500 Information
Technology Index generated a return of +2.41%. Cerner Corp. (+29.30%) and
KLA-Tencor Corp. (+28.40%) were two of the top-performing stocks during the
period covered by this report. Research In Motion Ltd. (-75.06%) and NetApp,
Inc. (-34.01%) were two of the worst-performing stocks during the period covered
by this report.
-------------------
NASDAQ(R), NASDAQ-100(R), NASDAQ-100 Index(R), and NASDAQ-100 Technology Sector
Index(SM) are trademarks of The NASDAQ OMX Group, Inc. (which with its
affiliates is referred to as the Corporations) and are licensed for use by First
Trust on behalf of the Fund. The Fund has not been passed on by the Corporations
as to its legality or suitability. The Fund is not issued, endorsed, sold, or
promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO
LIABILITY WITH RESPECT TO THE FUND.
Page 12
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QTEC - FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO INDUSTRY ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Information Technology 95.17%
Health Care 2.46
Consumer Discretionary 2.37
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Akamai Technologies, Inc. 2.74%
Micron Technology, Inc. 2.51
Altera Corp. 2.46
Cerner Corp. 2.46
Research In Motion Ltd. 2.44
Yahoo!, Inc. 2.44
Apple, Inc. 2.41
Seagate Technology PLC 2.41
Microchip Technology, Inc. 2.40
KLA-Tencor Corp. 2.37
-------
Total 24.64%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 19, 2006 - DECEMBER 31, 2011
First Trust NASDAQ-100-Technology NASDAQ-100 Technology S&P 500 Information S&P 500(R)
Sector Index(SM) Fund Sector Index(SM) Technology Index Index
04/06 $10,000 $10,000 $10,000 $10,000
12/06 9,985 10,020 10,296 10,975
06/07 10,925 10,989 11,256 11,739
12/07 10,750 10,847 11,975 11,579
06/08 9,755 9,872 10,409 10,199
12/08 5,885 5,983 6,809 7,295
06/09 7,890 8,048 8,502 7,526
12/09 10,587 10,838 11,011 9,224
06/10 9,782 10,041 9,847 8,611
12/10 12,907 13,293 12,133 10,615
06/11 13,006 13,435 12,383 11,253
12/11 12,165 12,606 12,426 10,839
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 January 1, 2007 through
December 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%
01/01/07 - 12/31/07 153 0 0 0
01/01/08 - 12/31/08 138 6 1 1
01/01/09 - 12/31/09 151 4 0 0
01/01/10 - 12/31/10 188 0 0 0
01/01/11 - 12/31/11 161 0 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/07 - 12/31/07 98 0 0 0
01/01/08 - 12/31/08 104 2 1 0
01/01/09 - 12/31/09 94 3 0 0
01/01/10 - 12/31/10 63 1 0 0
01/01/11 - 12/31/11 91 0 0 0
Page 13
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FBT - FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND
The First Trust NYSE Arca Biotechnology Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the NYSE Arca Biotechnology Index(SM)
(the "Index"). The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Index is an equal dollar-weighted
index designed to measure the performance of a cross section of companies in the
biotechnology industry that are primarily involved in the use of biological
processes to develop products or provide services. Such processes include, but
are not limited to, recombinant DNA technology, molecular biology, genetic
engineering, monoclonal antibody-based technology, lipid/liposome technology and
genomics. This Index is rebalanced quarterly based on closing prices on the
third Friday in January, April, July and October to ensure that each component
stock continues to represent approximately equal weight in the Index. The Fund's
shares are listed for trading on the NYSE Arca. The first day of secondary
market trading in shares of the Fund was 06/23/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (06/19/06) Ended (06/19/06)
12/31/11 12/31/11 to 12/31/11 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -16.36% 7.03% 9.51% 40.43% 65.35%
Market Value -16.47% 6.99% 9.51% 40.21% 65.30%
INDEX PERFORMANCE
NYSE Arca Biotechnology Index(SM) -15.89% 7.67% 10.18% 44.70% 70.96%
NASDAQ(R) Biotechnology Index 12.09% 6.72% 8.09% 38.42% 53.84%
S&P 500(R) Index 2.11% -0.25% 2.41% -1.24% 14.10%
S&P Composite 1500 Health Care Index 11.88% 3.20% 5.00% 17.04% 31.03%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -16.36% during the 12-month period covered by
this report. During the same period, the benchmark S&P Composite 1500 Health
Care Index generated a return of +11.88%. Alexion Pharmaceuticals, Inc.
(+77.53%) and Biogen Idec, Inc. (+64.13%) were two of the top-performing stocks
during the period covered by this report. Dendreon Corp. (-78.24%) and Human
Genome Sciences, Inc. (-69.07%) were two of the worst-performing stocks during
the period covered by this report.
-------------------
The NYSE Arca Biotechnology Index(SM) is a trademark of NYSE Euronext or its
affiliates ("NYSE Euronext") and is licensed for use by First Trust on behalf of
the Fund. The Fund is not sponsored or endorsed by NYSE Euronext. NYSE Euronext
makes no representation or warranty, express or implied, to the owners of the
Fund or any member of the public regarding the advisability of investing in the
Fund or the ability of the Fund to track the performance of the various sectors
represented in the stock market. NYSE Euronext has no obligation to take the
needs of the owners of the Fund into consideration in determining, composing or
calculating the Index. NYSE Euronext is not responsible for and has not
participated in any determination or calculation made with respect to issuance
or redemption of the Fund.
Page 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FBT - FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO INDUSTRY ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
INDUSTRY INVESTMENTS
Biotechnology 68.23%
Life Sciences Tools & Services 25.73
Pharmaceuticals 6.04
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
United Therapeutics Corp. 6.28%
Nektar Therapeutics 6.04
Illumina, Inc. 6.03
Amgen, Inc. 5.92
Incyte Corp. 5.75
Alexion Pharmaceuticals, Inc. 5.64
Myriad Genetics, Inc. 5.63
QIAGEN N.V. 5.57
Gilead Sciences, Inc. 4.99
Celgene Corp. 4.97
-------
Total 56.82%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 19, 2006 -DECEMBER 31, 2011
First Trust NYSE Arca NYSE Arca NASDAQ(R) S&P 500(R) S&P Composite 1500
Biotechnology Index Fund Biotechnology Index(SM) Biotechnology Index Index Health Care Index
06/06 $10,000 $10,000 $10,000 $10,000 $10,000
12/06 11,775 11,815 11,114 11,554 11,194
06/07 12,105 12,179 11,177 12,358 11,919
12/07 12,205 12,320 11,630 12,189 12,092
06/08 11,410 11,557 11,086 10,736 10,593
12/08 9,968 10,138 10,200 7,679 9,218
06/09 10,722 10,921 10,491 7,922 9,305
12/09 14,441 14,758 11,828 9,711 11,132
06/10 15,629 16,026 11,227 9,065 10,324
12/10 19,768 20,327 13,726 11,174 11,712
06/11 22,182 22,880 15,694 11,847 13,374
12/11 16,534 17,096 15,385 11,410 13,104
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 January 1, 2007 through
December 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%
01/01/07 - 12/31/07 162 8 1 0
01/01/08 - 12/31/08 170 9 0 0
01/01/09 - 12/31/09 93 3 0 0
01/01/10 - 12/31/10 165 1 0 1
01/01/11 - 12/31/11 151 1 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/07 - 12/31/07 76 3 1 0
01/01/08 - 12/31/08 72 1 1 0
01/01/09 - 12/31/09 152 4 0 0
01/01/10 - 12/31/10 83 1 0 1
01/01/11 - 12/31/11 100 0 0 0
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FDN - FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND
The First Trust Dow Jones Internet Index(SM) Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Dow Jones Internet Composite
Index(SM) (the "Index"). The Fund will normally invest at least 90% of its
assets in common stocks that comprise the Index. The Index represents companies
that generate the majority of their revenues via the Internet. The Index was
designed and is maintained according to a set of rules that were devised with
the goal of providing clear and accurate views of the growing Internet market
segment. The Index aims to consistently represent 80% of the float-adjusted
Internet equity universe. The Index contains two sub-indexes, the Dow Jones
Internet Commerce Index and the Dow Jones Internet Services Index. For its stock
to be eligible for the "universe," a company must generate at least 50% of
annual sales/revenues from the Internet, and be currently included in the Dow
Jones U.S. Index. The Fund's shares are listed for trading on the NYSE Arca. The
first day of secondary market trading in shares of the Fund was 06/23/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (06/19/06) Ended (06/19/06)
12/31/11 12/31/11 to 12/31/11 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -5.74% 7.51% 9.12% 43.64% 62.10%
Market Value -5.85% 7.49% 9.12% 43.51% 62.10%
INDEX PERFORMANCE
Dow Jones Internet Composite Index(SM) -5.12% 8.10% 9.71% 47.61% 67.02%
S&P 500(R) Index 2.11% -0.25% 2.41% -1.24% 14.10%
S&P Composite 1500 Information Technology Index 1.12% 3.77% 6.17% 20.35% 39.30%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -5.74% during the 12-month period covered by
this report. During the same period, the benchmark S&P Composite 1500
Information Technology Index generated a return of +1.12%. VirnetX Holding Corp.
(+61.10%) and IAC/InterActiveCorp. (+48.87%) were two of the top-performing
stocks during the period covered by this report. Monster Worldwide, Inc.
(-66.44%) and Netflix, Inc. (-60.56%) were two of the worst-performing stocks
during the period covered by this report.
-------------------
Dow Jones and Dow Jones Internet Composite Index(SM) are products of Dow Jones
Indexes, a licensed trademark of CME Group Index Services LLC ("CME") and have
been licensed for use by First Trust on behalf of the Fund. The Fund, based on
the Dow Jones Internet Composite Index(SM), is not sponsored, endorsed, sold or
promoted by CME, Dow Jones or their respective affiliates and CME, Dow Jones and
their respective affiliates make no representation regarding the advisability of
trading in the Fund.
Page 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FDN - FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Information Technology 75.89%
Consumer Discretionary 17.27
Financials 4.32
Health Care 2.52
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Google, Inc., Class A 10.59%
Amazon.com, Inc. 6.93
eBay, Inc. 5.89
priceline.com, Inc. 5.11
Yahoo!, Inc. 4.89
Juniper Networks, Inc. 3.86
Salesforce.com, Inc. 3.63
Check Point Software Technologies Ltd. 3.51
Akamai Technologies, Inc. 3.36
VeriSign, Inc. 3.12
-------
Total 50.89%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 19, 2006 - DECEMBER 31, 2011
First Trust Dow Jones Dow Jones Internet S&P 500(R) S&P Composite 1500
Internet Index(SM) Fund Composite Index(SM) Index Information Technology Index
06/06 $10,000 $10,000 $10,000 $10,000
12/06 11,285 11,315 11,554 11,574
06/07 12,975 13,044 12,358 12,716
12/07 12,545 12,651 12,189 13,360
06/08 11,203 11,327 10,736 11,638
12/08 7,023 7,114 7,679 7,629
06/09 9,374 9,524 7,922 9,506
12/09 12,587 12,825 9,711 12,286
06/10 11,980 12,222 9,065 11,055
12/10 17,197 17,603 11,174 13,776
06/11 18,186 18,661 11,847 14,115
12/11 16,209 16,702 11,410 13,930
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 January 1, 2007 through
December 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%
01/01/07 - 12/31/07 130 7 6 0
01/01/08 - 12/31/08 140 4 1 0
01/01/09 - 12/31/09 134 2 1 0
01/01/10 - 12/31/10 189 0 0 0
01/01/11 - 12/31/11 151 0 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/07 - 12/31/07 101 5 2 0
01/01/08 - 12/31/08 105 2 1 0
01/01/09 - 12/31/09 112 3 0 0
01/01/10 - 12/31/10 63 0 0 0
01/01/11 - 12/31/11 101 0 0 0
Page 17
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FDV - FIRST TRUST STRATEGIC VALUE INDEX FUND
The First Trust Strategic Value Index Fund (the "Fund") seeks investment results
that correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the Credit Suisse U.S. Value Index, Powered
by HOLT(TM) (the "Index"). The Index is an equally-weighted index which measures
the performance of fifty stocks which have the highest HOLT valuation score and
meet liquidity and tradeability requirements. The HOLT valuation scoring model
aims to convert accounting data into cash as measured by HOLT's proprietary
CFROI(R) metric. The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Fund's shares are listed for trading
on the NYSE Arca. The first day of secondary market trading in shares of the
Fund was 07/11/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (07/06/06) Ended (07/06/06)
12/31/11 12/31/11 to 12/31/11 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -2.94% 1.33% 3.11% 6.82% 18.29%
Market Value -3.07% 1.28% 3.09% 6.58% 18.18%
INDEX PERFORMANCE
Credit Suisse U.S. Value Index, Powered by HOLT(TM)* -2.13% N/A N/A N/A N/A
S&P 500 Value Index -0.48% -2.96% -0.52% -13.96% -2.82%
S&P 500(R) Index 2.11% -0.25% 1.91% -1.24% 10.95%
---------------------------------------------------------------------------------------------------------------------------
* On June 19, 2010, the Fund's underlying index changed from the Deutsche Bank
CROCI(R) US+ Index(TM) to the Credit Suisse U.S. Value Index, Powered by
HOLT(TM). Since the Fund's new underlying index had an inception date of June
14, 2010, it was not in existence for any of the periods disclosed other than
the one year period.
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -2.94% during the 12-month period covered by
this report. During the same period, the benchmark S&P 500 Value Index generated
a return of -0.48%. The Health Care (+25.31%) and Consumer Discretionary
(+6.66%) sectors were two of the top-performing sectors, while the Financials
(-18.00%) and Information Technology (-13.43%) sectors were two of the
worst-performing sectors. UnitedHealth Group, Inc. (+53.61%) and Biogen Idec,
Inc. (+42.39%) were two of the top-performing stocks during the period covered
by this report. Goldman Sachs Group, Inc. (-45.60%) and Citigroup, Inc.
(-44.33%) were two of the worst-performing stocks during the period covered by
this report.
-------------------
"Credit Suisse," "HOLT" and "Credit Suisse U.S. Value Index, Powered by
HOLT(TM)," are trademarks of Credit Suisse Group AG, Credit Suisse Securities
(USA) LLC or one of their affiliates (collectively, "Credit Suisse"), and have
been licensed for use for certain purposes by First Trust on behalf of the Fund.
THE FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY CREDIT SUISSE, AND
CREDIT SUISSE MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, REGARDING
THE ADVISABILITY OF INVESTING OR TRADING IN THE FUND.
Page 18
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FDV - FIRST TRUST STRATEGIC VALUE INDEX FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Financials 25.68%
Health Care 21.43
Industrials 14.23
Energy 13.28
Information Technology 11.74
Materials 7.31
Consumer Discretionary 6.33
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
DISH Network Corp., Class A 2.50%
UnitedHealth Group, Inc. 2.30
Merck & Co., Inc. 2.29
Pfizer, Inc. 2.27
Eli Lilly & Co. 2.26
Raytheon Co. 2.26
Marathon Oil Corp. 2.24
Ameriprise Financial, Inc. 2.21
Aetna, Inc. 2.20
Celgene Corp. 2.19
-------
Total 22.72%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 6, 2006 - DECEMBER 31, 2011
First Trust Strategic S&P 500 Value S&P 500(R)
Value Index Fund Index Index
07/06 $10,000 $10,000 $10,000
12/06 11,074 11,294 11,235
06/07 12,444 12,126 12,016
12/07 12,210 11,519 11,852
06/08 11,253 9,671 10,440
12/08 7,665 7,002 7,467
06/09 8,640 6,903 7,703
12/09 10,686 8,484 9,443
06/10 9,880 8,034 8,815
12/10 12,185 9,765 10,866
06/11 13,144 10,276 11,520
12/11 11,827 9,718 11,095
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 January 1, 2007 through
December 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%
01/01/07 - 12/31/07 121 15 4 0
01/01/08 - 12/31/08 115 3 2 0
01/01/09 - 12/31/09 139 3 0 0
01/01/10 - 12/31/10 152 0 0 0
01/01/11 - 12/31/11 129 0 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/07 - 12/31/07 100 8 2 1
01/01/08 - 12/31/08 126 7 0 0
01/01/09 - 12/31/09 107 3 0 0
01/01/10 - 12/31/10 100 0 0 0
01/01/11 - 12/31/11 123 0 0 0
Page 19
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FVI - FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
The First Trust Value Line(R) Equity Allocation Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Value Line(R) Equity
Allocation Index(TM) (the "Index"). The Fund will normally invest at least 90%
of its assets in common stocks that comprise the Index. The Index is designed to
objectively identify and select those stocks from the 1,700-stock Value Line(R)
universe across market capitalizations and investment styles for growth and
value that appear to have the greatest potential for capital appreciation. The
Index is rebalanced on a semi-annual basis in February and August. The Fund's
shares are listed for trading on the NYSE Arca. The first day of secondary
market trading in shares of the Fund was 12/07/06.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (12/05/06) Ended (12/05/06)
12/31/11 12/31/11 to 12/31/11 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -9.56% -0.36% -0.57% -1.78% -2.86%
Market Value -9.65% -0.37% -0.56% -1.86% -2.79%
INDEX PERFORMANCE
Value Line(R) Equity Allocation Index(TM) -8.91% 0.47% 0.26% 2.40% 1.34%
Russell 3000(R) Index 1.03% -0.01% 0.00% -0.07% 0.01%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -9.56% during the 12-month period covered by
this report. During the same period, the benchmark Russell 3000(R) Index
generated a return of +1.03%. Oil States International, Inc. (+51.53%) and
NewMarket Corp. (+49.14%) were two of the top-performing stocks during the
period covered by this report. Suntech Power Holdings Co., Ltd., ADR (-62.85%)
and Research In Motion Ltd. (-60.80%) were two of the worst-performing stocks
during the period covered by this report.
-------------------
"Value Line(R)" and "Value Line(R) Equity Allocation Index" are trademarks of
Value Line(R), Inc. and have been licensed for use for certain purposes by First
Trust on behalf of the Fund. The Fund, based on the Value Line(R) Equity
Allocation Index, is not sponsored, endorsed, sold, or promoted by Value
Line(R), Inc., and Value Line(R) makes no representation regarding the
advisability of investing in the Fund.
Page 20
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FVI - FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Consumer Discretionary 21.32%
Consumer Staples 15.71
Information Technology 13.10
Utilities 12.89
Materials 9.18
Energy 7.05
Health Care 6.76
Financials 6.75
Industrials 3.66
Telecommunication Services 3.58
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Duke Energy Corp. 1.42%
TJX (The) Cos., Inc. 1.38
Edison International 1.37
Eli Lilly & Co. 1.37
Philip Morris International, Inc. 1.35
Consolidated Edison, Inc. 1.33
McDonald's Corp. 1.33
Google, Inc., Class A 1.32
NIKE, Inc., Class B 1.32
MasterCard, Inc., Class A 1.31
-------
Total 13.50%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 5, 2006 - DECEMBER 31, 2011
First Trust Value Line(R) Equity Value Line(R) Equity Russell 3000(R)
Allocation Index Fund Allocation Index(TM) Index
12/5/06 $10,000 $10,000 $10,000
12/06 9,890 9,897 10,008
06/07 10,610 10,623 10,720
12/07 10,350 10,398 10,522
06/08 9,470 9,551 9,360
12/08 6,681 6,772 6,597
06/09 7,037 7,177 6,874
12/09 8,962 9,192 8,466
06/10 8,831 9,104 7,954
12/10 10,741 11,125 9,900
06/11 10,976 11,405 10,529
12/11 9,714 10,132 10,001
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 January 1, 2007 through
December 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%
01/01/07 - 12/31/07 80 6 2 0
01/01/08 - 12/31/08 110 5 0 1
01/01/09 - 12/31/09 110 3 0 0
01/01/10 - 12/31/10 156 0 0 0
01/01/11 - 12/31/11 146 1 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/07 - 12/31/07 157 5 1 0
01/01/08 - 12/31/08 131 4 2 0
01/01/09 - 12/31/09 138 1 0 0
01/01/10 - 12/31/10 95 1 0 0
01/01/11 - 12/31/11 105 0 0 0
Page 21
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FVD - FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
The First Trust Value Line(R) Dividend Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Value Line(R) Dividend Index (the
"Index"). The Fund will normally invest at least 90% of its assets in common
stocks that comprise the Index. The Index is designed to objectively identify
and select those stocks from the universe of stocks which Value Line, Inc(R)
gives a Safety(TM) Ranking of #1 or #2 in the Value Line(R) Safety(TM) Ranking
System and have the potential to pay above-average dividends and achieve capital
appreciation. The Index is rebalanced on a monthly basis. The Fund's shares are
listed for trading on the NYSE Arca.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (08/19/03) Ended (08/19/03)
12/31/11 12/31/11 to 12/31/11 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV 9.03% 2.08% 7.20% 10.85% 78.87%
Market Value 8.96% 2.09% 7.20% 10.92% 78.88%
INDEX PERFORMANCE
Value Line(R) Dividend Index(TM) 9.88% 2.86% N/A 15.15% N/A
S&P 500(R) Index 2.11% -0.25% 4.84% -1.24% 48.54%
Dow Jones U.S. Select Dividend Index(SM) 12.42% -0.66% N/A -3.24% N/A
---------------------------------------------------------------------------------------------------------------------------
On December 15, 2006, the Fund acquired the assets and adopted the financial
and performance history of First Trust Value Line(R) Dividend Fund (the
"Predecessor FVD Fund," a closed-end fund), which had an inception date of
August 19, 2003. The inception date total returns at NAV include the sales
load of $0.675 per share on the initial offering. The investment goals,
strategies and policies of the Fund are substantially similar to those of the
Predecessor FVD Fund. The inception date of the Index was July 3, 2006.
Returns for the Index are only disclosed for those periods in which the Index
was in existence for the entire period. The cumulative total returns for the
period from the reorganization date (12/15/06) through period end (12/31/11)
were 10.59% and 11.12% at NAV and Market Value, respectively. That compares to
an Index return of 14.90% for the same period. The average annual total
returns for the period from the reorganization date (12/15/06) through period
end (12/31/11) were 2.01% and 2.11% at NAV and Market Value, respectively.
That compares to an Index return of 2.80% for the same period.
NAV and Market Value returns assume that all dividend distributions have been
reinvested in the Fund at NAV and Market Value, respectively. Prior to
December 15, 2006, NAV and Market Value returns assumed that all dividend
distributions were reinvested at prices obtained by the Dividend Reinvestment
Plan of the Predecessor FVD Fund and the price used to calculate Market Value
return was the AMEX (now known as the NYSE Amex) closing market price of the
Predecessor FVD Fund.
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of +9.03% during the 12-month period covered by
this report. During the same period, the benchmark S&P 500(R) Index generated a
return of +2.11%. The Energy (+20.11%) and Utilities (+17.66%) sectors were two
of the top-performing sectors, while the Materials (-0.99%) and Information
Technology (-0.63%) sectors were two of the worst-performing sectors. VF Corp.
(+47.40%) and Lorillard, Inc. (+46.26%) were two of the top-performing stocks
during the period covered by this report. Federated Investors, Inc. (-39.58%)
and Thomson Reuters Corp. (-25.80%) were two of the worst-performing stocks
during the period covered by this report.
-------------------
"Value Line(R)" and "Value Line(R) Dividend Index(TM)" are trademarks of Value
Line(R), Inc. and have been licensed for use for certain purposes by First Trust
on behalf of the Fund. The Fund, based on the Value Line(R) Dividend Index(TM),
is not sponsored, endorsed, sold, or promoted by Value Line(R), Inc., and Value
Line(R) makes no representation regarding the advisability of investing in the
Fund.
Page 22
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FVD - FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Utilities 22.01%
Consumer Staples 17.28
Financials 12.52
Industrials 11.29
Health Care 9.56
Consumer Discretionary 8.90
Information Technology 7.71
Energy 4.18
Materials 3.55
Telecommunication Services 3.00
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Federated Investors, Inc., Class B 0.61%
Honda Motor Co., Ltd., ADR 0.61
Medtonic, Inc. 0.61
NSTAR 0.61
Omnicom Group, Inc. 0.61
Royal Bank of Canada 0.61
Sanofi, ADR 0.61
Toronto-Dominion (The) Bank 0.61
Bank of Montreal 0.60
Canadian Imperial Bank of Commerce 0.60
-------
Total 6.08%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 19, 2003 - DECEMBER 31, 2011
First Trust Value Line(R) S&P 500(R)
Dividend Index Fund Index
08/03 $10,000 $10,000
12/03 10,612 11,166
06/04 11,244 11,551
12/04 12,605 12,381
06/05 12,987 12,281
12/05 13,435 12,989
06/06 14,208 13,341
12/06 16,137 15,041
06/07 16,571 16,088
12/07 15,586 15,867
06/08 14,067 13,977
12/08 11,818 9,997
06/09 11,676 10,313
12/09 14,132 12,642
06/10 13,725 11,801
12/10 16,404 14,547
06/11 17,738 15,423
12/11 17,885 14,854
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the index does not actually hold a portfolio of securities and
therefore does not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 January 1, 2007 through
December 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%
01/01/07 - 12/31/07 56 6 3 0
01/01/08 - 12/31/08 126 6 3 0
01/01/09 - 12/31/09 136 6 0 0
01/01/10 - 12/31/10 180 0 0 0
01/01/11 - 12/31/11 218 1 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
01/01/07 - 12/31/07 176 9 1 0
01/01/08 - 12/31/08 105 11 2 0
01/01/09 - 12/31/09 107 3 0 0
01/01/10 - 12/31/10 72 0 0 0
01/01/11 - 12/31/11 33 0 0 0
Page 23
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QQXT - FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
The First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund (the "Fund")
seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the NASDAQ-100
Ex-Tech Sector Index(SM) (the "Index"). The Fund will normally invest at least
90% of its assets in common stocks that comprise the Index. The Index contains
securities of the NASDAQ-100 Index(R) that are not classified as "technology"
according to the Industry Classification Benchmark classification system and, as
a result, is a subset of the NASDAQ-100 Index(R). The NASDAQ-100 Index(R)
includes 100 of the largest domestic and international non-financial companies
listed on NASDAQ(R) based on market capitalization. The Index is
equally-weighted and is rebalanced four times annually in March, June, September
and December. The Fund's shares are listed for trading on the NASDAQ(R). The
first day of secondary market trading in shares of the Fund was 02/15/07.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (02/08/07) Inception (02/08/07)
12/31/11 to 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -1.08% 1.12% 5.58%
Market Value -1.18% 1.11% 5.53%
INDEX PERFORMANCE
NASDAQ-100 Ex-Tech Sector Index(SM) -0.38% 1.77% 8.94%
Russell 1000(R) Index 1.50% -0.60% -2.89%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -1.08% during the 12-month period covered by
this report. During the same period, the benchmark Russell 1000(R) Index
generated a return of +1.50%. The Consumer Staples (+7.83%) and Health Care
(+2.89%) sectors were two of the top-performing sectors, while the
Telecommunication Services (-20.25%) and Information Technology (-8.19%) sectors
were two of the worst-performing sectors. Intuitive Surgical, Inc. (+79.64%) and
Biogen Idec, Inc. (+64.13%) were two of the top-performing stocks during the
period covered by this report. First Solar, Inc. (-74.06%) and Netflix, Inc.
(-60.56%) were two of the worst-performing stocks during the period covered by
this report.
-------------------
NASDAQ(R), NASDAQ-100(R), NASDAQ-100 Index(R), and NASDAQ-100 Ex-Tech Sector
Index(SM) are trademarks of The NASDAQ OMX Group, Inc. (which with its
affiliates is referred to as the Corporations) and are licensed for use by First
Trust on behalf of the Fund. The Fund has not been passed on by the Corporations
as to its legality or suitability. The Fund is not issued, endorsed, sold, or
promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO
LIABILITY WITH RESPECT TO THE FUND.
Page 24
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QQXT - FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECTOR (1) INVESTMENTS
Consumer Discretionary 38.10%
Health Care 26.71
Information Technology 14.11
Industrials 8.93
Consumer Staples 6.93
Materials 3.44
Telecommunication Services 1.78
-------
Total 100.00%
=======
(1) The above sector allocation is based on Standard & Poor's Global Industry
Classification Standard ("GICS"), and is different than the industry sector
classification system used by the Index to select securities, which is the
Industry Classification Benchmark ("ICB") system, the joint classification
system of Dow Jones Indexes and FTSE Group.
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Expedia, Inc. 1.90%
Gilead Sciences, Inc. 1.90
Alexion Pharmaceuticals, Inc. 1.86
Apollo Group, Inc., Class A 1.86
Warner Chilcott PLC, Class A 1.86
Amgen, Inc. 1.85
Intuitive Surgical, Inc. 1.85
Celgene Corp. 1.83
First Solar, Inc. 1.83
Starbucks Corp. 1.83
-------
Total 18.57%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 8, 2007 - DECEMBER 31, 2011
First Trust NASDAQ-100 Ex-Technology NASDAQ-100 Ex-Tech Russell 1000(R)
Sector Index(SM) Fund Sector Index(SM) Index
02/07 $10,000 $10,000 $10,000
12/07 10,595 10,653 10,282
06/08 9,057 9,126 9,131
12/08 6,029 6,102 6,417
06/09 7,060 7,165 6,694
12/09 8,848 9,009 8,241
06/10 8,454 8,633 7,714
12/10 10,674 10,935 9,568
06/11 11,961 12,294 10,177
12/11 10,558 10,894 9,711
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 15, 2007
(commencement of trading) through December 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%
02/15/07 - 12/31/07 110 0 0 3
01/01/08 - 12/31/08 136 2 0 3
01/01/09 - 12/31/09 137 1 3 1
01/01/10 - 12/31/10 156 0 0 0
01/01/11 - 12/31/11 159 0 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
02/15/07 - 12/31/07 103 1 2 3
01/01/08 - 12/31/08 110 2 0 0
01/01/09 - 12/31/09 109 1 0 0
01/01/10 - 12/31/10 94 2 0 0
01/01/11 - 12/31/11 93 0 0 0
Page 25
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QCLN - FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND
The First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (the "Fund")
seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the NASDAQ(R)
Clean Edge(R) Green Energy Index (the "Index"). The Fund will normally invest at
least 90% of its assets in common stocks that comprise the Index. The Index is
an equity index designed to track the performance of clean energy companies that
are publicly traded in the United States and includes companies engaged in
manufacturing, development, distribution and installation of emerging
clean-energy technologies including, but not limited to, solar photovoltaics,
biofuels and advanced batteries. The Index is a modified market capitalization
weighted index in which larger companies receive a larger Index weighting. The
Index weighting methodology also includes caps to prevent high concentrations
among larger alternative energy stocks. The Index is reconstituted semi-annually
in March and September and rebalanced quarterly. The Fund's shares are listed
for trading on the NASDAQ(R). The first day of secondary market trading in
shares of the Fund was 02/14/07.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (02/08/07) Inception (02/08/07)
12/31/11 to 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -41.23% -13.84% -51.75%
Market Value -41.41% -13.89% -51.90%
INDEX PERFORMANCE
NASDAQ(R) Clean Edge(R) Green Energy Index -40.81% -13.23% -50.07%
Russell 2000(R) Index -4.18% -0.59% -2.88%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -41.23% during the 12-month period covered by
this report. During the same period, the benchmark Russell 2000(R) Index
generated a return of -4.18%. National Semiconductor Corp. (+80.42%) and
Advanced Analogic Technologies (+61.45%) were two of the top-performing stocks
during the period covered by this report. Ener1, Inc. (-92.36%) and Hanwha
SolarOne Co., Ltd., ADR (-87.97%) were two of the worst-performing stocks during
the period covered by this report.
-------------------
NASDAQ(R) and Clean Edge(R) are the registered trademarks (the "Marks") of The
NASDAQ OMX Group, Inc. ("NASDAQ OMX") and Clean Edge, Inc. ("Clean Edge(R)")
respectively. NASDAQ OMX and Clean Edge(R) are, collectively with their
affiliates, the "Corporations." The Marks are licensed for use by First Trust on
behalf of the Fund. The Fund has not been passed on by the Corporations as to
its legality or suitability. The Fund is not issued, endorsed, sold, or promoted
by the Corporations. The Fund should not be construed in any way as investment
advice by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO
LIABILITY WITH RESPECT TO THE FUND.
Page 26
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QCLN - FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Information Technology 73.93%
Industrials 10.49
Consumer Discretionary 6.96
Energy 5.16
Utilities 1.99
Health Care 0.84
Materials 0.63
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Linear Technology Corp. 8.51%
ON Semiconductor Corp. 8.11
Tesla Motors, Inc. 6.95
First Solar, Inc. 6.12
Cree, Inc. 5.97
AVX Corp. 4.28
Hexcel Corp. 4.21
Universal Display Corp. 4.09
Fairchild Semiconductor International Inc. 3.69
Itron, Inc. 3.53
-------
Total 55.46%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 8, 2007 - DECEMBER 31, 2011
First Trust NASDAQ(R) Clean Edge(R) NASDAQ(R) Clean Edge(R) Russell 2000(R)
Green Energy Index Fund Green Energy Index Index
02/07 $10,000 $10,000 $10,000
12/07 15,430 15,522 9,489
06/08 12,350 12,472 8,599
12/08 5,595 5,675 6,283
06/09 6,920 7,038 6,449
12/09 8,045 8,213 7,990
06/10 6,665 6,824 7,834
12/10 8,210 8,434 10,136
06/11 7,640 7,879 10,765
12/11 4,825 4,992 9,713
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 14, 2007
(commencement of trading) through December 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%
02/14/07 - 12/31/07 39 0 4 3
01/01/08 - 12/31/08 87 1 2 0
01/01/09 - 12/31/09 92 4 0 0
01/01/10 - 12/31/10 79 0 0 0
01/01/11 - 12/31/11 125 5 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
02/14/07 - 12/31/07 176 0 0 0
01/01/08 - 12/31/08 156 3 4 0
01/01/09 - 12/31/09 152 3 1 0
01/01/10 - 12/31/10 173 0 0 0
01/01/11 - 12/31/11 116 6 0 0
Page 27
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FRI - FIRST TRUST S&P REIT INDEX FUND
The First Trust S&P REIT Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the S&P United States REIT Index (the
"Index"). The Fund will normally invest at least 90% of its assets in common
stocks that comprise the Index. The Index measures the securitized U.S. real
estate investment trust ("REIT") market and maintains a constituency that
reflects the composition of the overall REIT market. The Index contains
securities selected for market representation according to geography and
property type. All securities in the Index satisfy the Index's liquidity, price
and market capitalization requirements. The Standard & Poor's Index Committee, a
team of Standard & Poor's economists and index analysts, maintains the Index.
The S&P Index Committee makes constituent changes on an as-needed basis. Share
adjustments that exceed 5% are made at the time of the change. Share adjustments
of less than 5% are made on a quarterly basis. The Fund's shares are listed for
trading on the NYSE Arca. The first day of secondary market trading in shares of
the Fund was 05/10/07.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (05/08/07) Inception (05/08/07)
12/31/11 to 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV 7.90% -2.88% -12.72%
Market Value 7.82% -2.88% -12.72%
INDEX PERFORMANCE
S&P United States REIT Index* 8.48% N/A N/A
FTSE EPRA/NAREIT North America Index 8.19% -2.32% -10.34%
Russell 3000(R) Index 1.03% -1.51% -6.81%
---------------------------------------------------------------------------------------------------------------------------
* On November 6, 2008, the Fund's underlying index changed from the S&P REIT
Composite Index to the S&P United States REIT Index. Therefore, the Fund's
performance and historical returns shown for the periods prior to November 6,
2008 are not necessarily indicative of the performance that the Fund, based
on its current Index, would have generated. The inception date of the Index
was June 30, 2008. Returns for the Index are only disclosed for those periods
in which the Index was in existence for the whole period.
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of +7.90% during the 12-month period covered by
this report. During the same period, the benchmark Russell 3000(R) Index
generated a return of +1.03%. Mission West Properties (+44.16%) and Extra Space
Storage, Inc. (+43.01%) were two of the top-performing stocks during the period
covered by this report. FelCor Lodging Trust, Inc. (-56.68%) and Getty Realty
Corp. (-51.86%) were two of the worst-performing stocks during the period
covered by this report.
-------------------
Standard & Poor's(R), S&P(R) and S&P United States REIT Index are registered
trademarks of Standard & Poor's Financial Services LLC ("S&P") and have been
licensed for use by First Trust on behalf of the Fund. The Fund is not
sponsored, endorsed, sold or promoted by S&P or its affiliates, and S&P and its
affiliates make no representation, warranty or condition regarding the
advisability of buying, selling or holding shares of the Fund.
Page 28
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FRI - FIRST TRUST S&P REIT INDEX FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO REIT CLASS ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
REIT CLASS INVESTMENTS
Specialized 27.82%
Retail 26.62
Residential 18.50
Office 15.92
Diversified 6.35
Industrial 4.79
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Simon Property Group, Inc. 10.25%
Public Storage 5.16
Equity Residential 4.58
HCP, Inc. 4.57
Ventas, Inc. 4.29
Boston Properties, Inc. 3.98
Vornado Realty Trust 3.84
Prologis, Inc. 3.54
AvalonBay Communities, Inc. 3.36
Host Hotels & Resorts, Inc. 2.82
-------
Total 46.39%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - DECEMBER 31, 2011
First Trust S&P FTSE EPRA/NAREIT Russell 3000(R)
REIT Index Fund North America Index Index
05/07 $10,000 $10,000 $10,000
12/07 8,093 8,206 9,811
06/08 7,739 7,843 8,728
12/08 4,947 4,872 6,151
06/09 4,319 4,381 6,405
12/09 6,333 6,442 7,889
06/10 6,679 6,772 7,412
12/10 8,090 8,287 9,225
06/11 8,899 9,163 9,811
12/11 8,729 8,965 9,319
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 May 10, 2007 (commencement of
trading) through December 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%
05/10/07 - 12/31/07 46 13 4 1
01/01/08 - 12/31/08 91 15 9 11
01/01/09 - 12/31/09 136 16 1 0
01/01/10 - 12/31/10 185 0 0 0
01/01/11 - 12/31/11 149 1 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
05/10/07 - 12/31/07 85 9 5 0
01/01/08 - 12/31/08 109 12 4 2
01/01/09 - 12/31/09 84 14 1 0
01/01/10 - 12/31/10 67 0 0 0
01/01/11 - 12/31/11 102 0 0 0
Page 29
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FIW - FIRST TRUST ISE WATER INDEX FUND
The First Trust ISE Water Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE Water Index(TM) (the "Index"). The
Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index is a modified market capitalization weighted index
comprised of 36 stocks that derive a substantial portion of their revenues from
the potable and wastewater industries. The Index is rebalanced on a semi-annual
basis. The Fund's shares are listed for trading on the NYSE Arca. The first day
of secondary market trading in shares of the Fund was 05/11/07.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (05/08/07) Inception (05/08/07)
12/31/11 to 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -5.62% 1.54% 7.39%
Market Value -5.97% 1.49% 7.13%
INDEX PERFORMANCE
ISE Water Index(TM) -4.95% 2.22% 10.76%
Russell 3000(R) Index 1.03% -1.51% -6.81%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40)
PERFORMANCE REVIEW
The Fund generated a NAV return of -5.62% during the 12-month period covered by
this report. During the same period, the benchmark Russell 3000(R) Index
generated a return of +1.03%. American Water Works Co. (+30.04%) and Arch
Chemicals, Inc. (+25.81%) were two of the top-performing stocks during the
period covered by this report. Veolia Environnement, ADR (-60.52%) and Mueller
Water Products, Inc. (-40.05%) were two of the worst-performing stocks during
the period covered by this report.
-------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE Water Index(TM)" are
trademarks of the International Securities Exchange, LLC and have been licensed
for use for certain purposes by First Trust on behalf of the Fund. The Fund,
based on the ISE Water Index(TM), is not sponsored, endorsed, sold or promoted
by the International Securities Exchange, LLC and the International Securities
Exchange, LLC makes no representation regarding the advisability of trading in
such product.
Page 30
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FIW - FIRST TRUST ISE WATER INDEX FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Industrials 62.86%
Utilities 24.72
Health Care 4.29
Materials 4.14
Information Technology 3.99
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
American Water Works Co., Inc. 4.13%
Companhia de Saneamento
Basico do Estado de Sao Paulo, ADR 4.10
Aqua America, Inc. 4.10
Lindsay Corp. 4.10
California Water Service Group 4.07
Mueller Water Products, Inc., Class A 4.04
Flow International Corp. 4.00
Watts Water Technologies, Inc., Class A 3.79
Veolia Environment, ADR 3.77
Pentair, Inc. 3.65
-------
Total 39.75%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - DECEMBER 31, 2011
First Trust ISE Water ISE Water Russell 3000(R)
Index Fund Index(TM) Index
05/07 $10,000 $10,000 $10,000
12/07 11,212 11,260 9,811
06/08 10,992 11,056 8,728
12/08 7,915 7,987 6,151
06/09 8,168 8,276 6,405
12/09 9,522 9,681 7,889
06/10 8,989 9,168 7,412
12/10 11,378 11,653 9,225
06/11 11,910 12,243 9,811
12/11 10,738 11,076 9,319
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 May 11, 2007 (commencement of
trading) through December 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%
05/11/07 - 12/31/07 51 0 0 1
01/01/08 - 12/31/08 129 3 3 1
01/01/09 - 12/31/09 103 4 0 0
01/01/10 - 12/31/10 146 0 0 0
01/01/11 - 12/31/11 131 0 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
05/11/07 - 12/31/07 109 0 1 0
01/01/08 - 12/31/08 106 8 3 0
01/01/09 - 12/31/09 131 13 1 0
01/01/10 - 12/31/10 105 1 0 0
01/01/11 - 12/31/11 121 0 0 0
Page 31
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FCG - FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND
The First Trust ISE-Revere Natural Gas Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the ISE-REVERE Natural Gas Index(TM)
(the "Index"). The Fund will normally invest at least 90% of its assets in
common stocks that comprise the Index. The Index is an equal-weighted index
comprised of exchange-listed companies that derive a substantial portion of
their revenues from the exploration and production of natural gas. The Index is
constructed by establishing the universe of stocks listed in the U.S. of
companies involved in the natural gas exploration and production industries and
then eliminates stocks whose natural gas proven reserves do not meet certain
requirements. The Index then ranks all candidate stocks using four different
methods and, often averaging the rankings, selects the top 30 stocks based on
the final rank. The Index is rebalanced on a quarterly basis. The Fund's shares
are listed for trading on the NYSE Arca. The first day of secondary market
trading in shares of the Fund was 05/11/07.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (05/08/07) Inception (05/08/07)
12/31/11 to 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -6.85% -1.53% -6.93%
Market Value -7.13% -1.54% -6.97%
INDEX PERFORMANCE
ISE-REVERE Natural Gas Index(TM) -6.18% -0.83% -3.80%
Russell 3000(R) Index 1.03% -1.51% -6.81%
S&P Composite 1500 Energy Index 3.92% 2.99% 14.68%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -6.85% during the 12-month period covered by
this report. During the same period, the benchmark S&P Composite 1500 Energy
Index generated a return of +3.92%. Petrohawk Energy Corp. (+111.95%) and Cabot
Oil & Gas Corp. (+100.96%) were two of the top-performing stocks during the
period covered by this report. Quicksilver Resources, Inc. (-54.48%) and Forest
Oil Corp. (-48.09%) were two of the worst-performing stocks during the period
covered by this report.
-------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE-REVERE Natural Gas
Index(TM)" are trademarks of the International Securities Exchange, LLC and have
been licensed for use for certain purposes by First Trust on behalf of the Fund.
The Fund, based on the ISE-REVERE Natural Gas Index(TM), is not sponsored,
endorsed, sold or promoted by the International Securities Exchange, LLC and the
International Securities Exchange, LLC makes no representation regarding the
advisability of trading in such product.
Page 32
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FCG - FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO SUB-INDUSTRY ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SUB-INDUSTRY INVESTMENTS
Oil & Gas Exploration & Production 78.55%
Integrated Oil & Gas 17.80
Gas Utilities 3.65
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
SandRidge Energy, Inc. 3.76%
Exxon Mobil Corp. 3.67
Questar Corp. 3.66
Talisman Energy, Inc. 3.62
Murphy Oil Corp. 3.60
PetroQuest Energy, Inc. 3.59
Royal Dutch Shell PLC, ADR 3.58
Stone Energy Corp. 3.57
ConocoPhillips 3.57
Noble Energy, Inc. 3.48
-------
Total 36.10%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - DECEMBER 31, 2011
First Trust ISE-Revere ISE-REVERE Russell 3000(R) S&P Composite 1500
Natural Gas Index Fund Natural Gas Index(TM) Index Energy Index
05/07 $10,000 $10,000 $10,000 $10,000
12/07 11,166 11,213 9,804 12,170
06/08 15,755 15,942 8,721 13,578
12/08 5,967 6,016 6,147 7,810
06/09 6,454 6,518 6,405 7,740
12/09 8,903 9,017 7,889 9,092
06/10 7,752 7,891 7,412 8,016
12/10 9,992 10,254 9,225 11,036
06/11 11,012 11,342 9,811 12,304
12/11 9,308 9,620 9,319 11,469
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 May 11, 2007 (commencement of
trading) through December 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%
05/11/07 - 12/31/07 49 0 0 2
01/01/08 - 12/31/08 131 6 1 2
01/01/09 - 12/31/09 174 1 0 0
01/01/10 - 12/31/10 124 0 0 0
01/01/11 - 12/31/11 151 0 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
05/11/07 - 12/31/07 109 2 0 0
01/01/08 - 12/31/08 101 8 4 0
01/01/09 - 12/31/09 77 0 0 0
01/01/10 - 12/31/10 127 1 0 0
01/01/11 - 12/31/11 101 0 0 0
Page 33
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FNI - FIRST TRUST ISE CHINDIA INDEX FUND
The First Trust ISE Chindia Index Fund (the "Fund") seeks investment results
that correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE ChIndia Index(TM) (the "Index"). The
Fund will normally invest at least 90% of its assets in common stocks that
comprise the Index. The Index is a non-market capitalization weighted portfolio
of 50 American Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs")
and/or stocks selected from a universe of all listed ADRs, ADSs, and/or stocks
of companies from China and India currently trading on a U.S. exchange. The
Index is rebalanced on a semi-annual basis. The Fund's shares are listed for
trading on the NYSE Arca. The first day of secondary market trading in shares of
the Fund was 05/11/07.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (05/08/07) Inception (05/08/07)
12/31/11 to 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -26.02% -1.11% -5.04%
Market Value -26.24% -1.15% -5.25%
INDEX PERFORMANCE
ISE ChIndia Index(TM) -25.84% -0.50% -2.30%
Russell 3000(R) Index 1.03% -1.51% -6.81%
MSCI Emerging Markets Index -18.42% 0.58% 2.72%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -26.02% during the 12-month period covered by
this report. During the same period, the benchmark MSCI Emerging Markets Index
generated a return of -18.42%. The Telecommunication Services (+6.76%) and
Utilities (+2.99%) sectors were two of the top-performing sectors, while the
Financials (-37.78%) and Information Technology (-29.59%) sectors were two of
the worst-performing sectors. Melco Crown Entertainment Ltd., ADR (+51.26%) and
China Unicom (Hong Kong) Ltd., ADR (+49.12%) were two of the top-performing
stocks during the period covered by this report. Longtop Financial Technologies
Ltd., ADR (-97.84%) and ReneSola Ltd., ADR (-83.18%) were two of the
worst-performing stocks during the period covered by this report.
-------------------
"International Securities Exchange(TM)", "ISE(TM)" and "ISE ChIndia Index(TM)"
are trademarks of the International Securities Exchange, LLC and have been
licensed for use for certain purposes by First Trust on behalf of the Fund. The
Fund, based on the ISE ChIndia Index(TM), is not sponsored, endorsed, sold or
promoted by the International Securities Exchange, LLC and the International
Securities Exchange, LLC makes no representation regarding the advisability of
trading in such product.
Page 34
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FNI - FIRST TRUST ISE CHINDIA INDEX FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Information Technology 36.32%
Financials 15.73
Energy 13.99
Consumer Discretionary 13.79
Telecommunication Services 10.20
Materials 4.33
Health Care 3.49
Industrials 1.39
Utilities 0.76
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
China Mobile Ltd., ADR 7.40%
PetroChina Co., Ltd., ADR 7.38
Infosys Ltd., ADR 7.24
ICICI Bank Ltd., ADR 6.90
HDFC Bank Ltd., ADR 6.87
Baidu, Inc., ADR 6.60
Melco Crown Entertainment Ltd., ADR 4.42
Wipro Ltd., ADR 4.12
Tata Motors Ltd., ADR 3.96
CNOOC Ltd., ADR 3.80
-------
Total 58.69%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 8, 2007 - DECEMBER 31, 2011
First Trust ISE Chindia ISE ChIndia Russell 3000(R) MSCI Emerging Markets
Index Fund Index(TM) Index Index
05/07 $10,000 $10,000 $10,000 $10,000
12/07 13,873 13,952 9,804 12,715
06/08 9,985 10,059 8,721 11,220
12/08 5,968 6,031 6,147 5,934
06/09 8,329 8,451 6,405 8,071
12/09 10,836 11,031 7,889 10,593
06/10 10,540 10,767 7,412 9,939
12/10 12,836 13,175 9,225 12,592
06/11 13,047 13,466 9,811 12,703
12/11 9,497 9,771 9,319 10,273
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 May 11, 2007 (commencement of
trading) through December 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
QUARTER ENDED 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
05/11/07 - 12/31/07 82 2 0 2
01/01/08 - 12/31/08 87 8 2 0
01/01/09 - 12/31/09 131 15 10 1
01/01/10 - 12/31/10 151 2 0 0
01/01/11 - 12/31/11 65 1 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
QUARTER ENDED 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
05/11/07 - 12/31/07 76 0 0 0
01/01/08 - 12/31/08 138 11 5 2
01/01/09 - 12/31/09 95 0 0 0
01/01/10 - 12/31/10 99 0 0 0
01/01/11 - 12/31/11 186 0 0 0
Page 35
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FVL - FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
The First Trust Value Line(R) 100 Exchange-Traded Fund seeks investment results
that correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the Value Line(R) 100 Index(TM) (the
"Index"). The Fund will normally invest at least 90% of its assets in common
stocks that comprise the Index. The Index is an equal-dollar weighted index that
is designed to objectively identify and select 100 stocks from the universe of
stocks to which Value Line(R) assigns a #1 ranking in the Value Line(R)
Timeliness(TM) Ranking System (the "Ranking System"). At any one time only 100
stocks are assigned a #1 ranking in the Ranking System. The Index is rebalanced
quarterly. The Fund's shares are listed for trading on the NYSE Arca.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year 5 Years Inception 5 Years Inception
Ended Ended (06/12/03) Ended (06/12/03)
12/31/11 12/31/11 to 12/31/11 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -7.92% -3.58% 2.36% -16.65% 22.09%
Market Value -7.92% -1.98% 2.36% -9.53% 22.08%
INDEX PERFORMANCE
Value Line(R) 100 Index(TM) -7.04% N/A N/A N/A N/A
Russell 3000(R) Index 1.03% -0.01% 5.35% -0.07% 56.16%
---------------------------------------------------------------------------------------------------------------------------
On June 15, 2007, the Fund acquired the assets and adopted the financial and
performance history of First Trust Value Line(R) 100 Fund (the "Predecessor
FVL Fund," a closed-end fund), which had an inception date of June 12, 2003.
The inception date total returns at NAV include the sales load of $0.675 per
share on the initial offering. The investment goals, strategies and policies
of the Fund are substantially similar to those of the Predecessor FVL Fund.
The inception date of the Index was January 16, 2007. Returns for the Index
are only disclosed for those periods in which the Index was in existence for
the entire period. The cumulative total returns for the period from the
reorganization date (06/15/07) through period end (12/31/11) were -25.89% for
both NAV and Market Value. That compares to an Index return of -23.11% for
that same period. The average annual total returns for the period from the
reorganization date (6/15/07) through period end (12/31/11) were -6.38% for
both NAV and Market Value. That compares to an Index return of -5.63% for the
same period.
NAV and Market Value returns assume that all dividend distributions have been
reinvested in the Fund at NAV and Market Value, respectively. Prior to June
15, 2007, NAV and Market Value returns assumed that all dividend distributions
were reinvested at prices obtained by the Dividend Reinvestment Plan of the
Predecessor FVL Fund and the price used to calculate Market Value return was
the AMEX (now known as the NYSE Amex) closing market price of the Predecessor
FVL Fund.
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -7.92% during the 12-month period covered by
this report. During the same period, the benchmark Russell 3000(R) Index
generated a return of +1.03%. Kinetic Concepts, Inc. (+61.39%) and Genesco, Inc.
(+51.10%) were two of the top-performing stocks during the period covered by
this report. China-Biotics, Inc. (-90.07%) and Suntech Power Holdings Co., Ltd.,
ADR (-64.47%) were two of the worst-performing stocks during the period covered
by this report.
-------------------
"Value Line(R)" and "Value Line(R) 100 Index(TM)" are trademarks of Value
Line(R), Inc. and have been licensed for use for certain purposes by First Trust
on behalf of the Fund. The Fund, based on the Value Line(R) 100 Index(TM), is
not sponsored, endorsed, sold, or promoted by Value Line(R), Inc., and Value
Line(R) makes no representation regarding the advisability of investing in the
Fund.
Page 36
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
FVL - FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECTOR INVESTMENTS
Consumer Discretionary 23.31%
Industrials 23.26
Materials 13.07
Health Care 11.08
Information Technology 10.09
Energy 7.07
Telecommunication Services 4.06
Consumer Staples 3.04
Utilities 2.99
Financials 2.03
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
Seagate Technology PLC 1.06%
Railamerica, Inc. 1.05
Owens Corning, Inc. 1.04
Tenet Healthcare Corp. 1.04
Health Management Associates, Inc., Class A 1.04
Cost Plus, Inc. 1.04
Tenneco, Inc. 1.04
BCE, Inc. 1.04
Shaw Communications, Inc., Class B 1.03
AGCO Corp. 1.03
-------
Total 10.41%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 12, 2003 - DECEMBER 31, 2011
First Trust Value Line(R) 100 Russell 3000(R)
Exchange-Traded Fund Index
08/03 $10,000 $10,000
12/03 11,073 11,367
06/04 11,427 11,775
12/04 12,519 12,725
06/05 12,649 12,724
12/05 14,003 13,504
06/06 14,305 13,940
12/06 14,647 15,626
06/07 16,357 16,737
12/07 17,563 16,429
06/08 16,063 14,614
12/08 9,081 10,300
06/09 8,728 10,732
12/09 10,238 13,219
06/10 10,150 12,419
12/10 13,259 15,457
06/11 14,011 16,439
12/11 12,209 15,615
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the index does not actually hold a portfolio of securities and
therefore does not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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, 2007 (commencement
of trading as an exchange-traded fund) through December 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%
06/18/07 - 12/31/07 39 9 4 0
01/01/08 - 12/31/08 115 4 4 0
01/01/09 - 12/31/09 67 5 0 0
01/01/10 - 12/31/10 149 0 0 0
01/01/11 - 12/31/11 137 2 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
06/18/07 - 12/31/07 74 9 2 0
01/01/08 - 12/31/08 122 4 4 0
01/01/09 - 12/31/09 176 4 0 0
01/01/10 - 12/31/10 103 0 0 0
01/01/11 - 12/31/11 111 2 0 0
Page 37
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QABA - FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND
The First Trust NASDAQ(R) ABA Community Bank Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ OMX(R) ABA
Community Bank Index(SM) (the "Index"). The Fund will normally invest at least
90% of its assets in common stocks that comprise the Index. The Index includes a
subset of banks and thrifts or their holding companies listed on NASDAQ(R). The
Index is jointly owned and was developed by NASDAQ OMX(R) and the American
Bankers Association ("ABA"). For the purposes of the Index, a "community bank"
is considered to be all U.S. banks and thrifts or their holding companies listed
on NASDAQ(R) excluding the 50 largest U.S. banks by asset size. Also excluded
are banks that have an international specialization and those banks that have a
credit-card specialization, as screened by the ABA based on the most recent data
from the FDIC. Banks with an international specialization are those institutions
with assets greater than $10 billion and more than 25% of total assets in
foreign offices. Banks with a credit-card specialization are those institutions
with credit-card loans plus securitized receivables in excess of 50% of total
assets plus securitized receivables. Securities in the Index must have a market
capitalization of at least $200 million and a three-month average daily trading
volume of at least $500 thousand. The Index is rebalanced quarterly and
reconstituted semi-annually. The Fund's shares are listed for trading on the
NASDAQ(R). The first day of secondary market trading in shares of the Fund was
07/01/09.
---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE AS OF DECEMBER 31, 2011
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (06/29/09) Inception (06/29/09)
12/31/11 to 12/31/11 to 12/31/11
FUND PERFORMANCE
NAV -6.48% 7.17% 18.96%
Market Value -7.27% 6.89% 18.19%
INDEX PERFORMANCE
NASDAQ OMX(R) ABA Community Bank Index(SM) -5.84% 7.89% 20.96%
S&P Composite 1500 Financials Sector Index -15.01% 6.33% 16.62%
Russell 3000(R) Index 1.03% 15.79% 44.40%
---------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 40.)
PERFORMANCE REVIEW
The Fund generated a NAV return of -6.48% during the 12-month period covered by
this report. During the same period, the benchmark Russell 3000(R) Index
generated a return of +1.03%. Citizens Republic Bancorp, Inc. (+85.37%) and
Texas Capital Bancshares, Inc. (+43.91%) were two of the top-performing stocks
during the period covered by this report. Hampton Roads Bankshares, Inc.
(-85.34%) and Wilshire Bancorp, Inc. (-52.36%) were two of the worst-performing
stocks during the period covered by this report.
-------------------
NASDAQ(R), OMX(R), NASDAQ OMX(R), and NASDAQ OMX(R) ABA Community Bank Index(SM)
are trademarks of The NASDAQ OMX Group, Inc. ("NASDAQ OMX") and American Bankers
Association ("ABA") (NASDAQ OMX and ABA, collectively with their affiliates, are
referred to as the "Corporations") and are licensed for use by First Trust on
behalf of the Fund. The Fund has not been passed on by the Corporations as to
its legality or suitability. The Fund is not issued, endorsed, sold, or promoted
by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY
WITH RESPECT TO THE FUND.
Page 38
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
--------------------------------------------------------------------------------
QABA - FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (CONTINUED)
---------------------------------------------------------
PORTFOLIO INDUSTRY ALLOCATION AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
INDUSTRY INVESTMENTS
Commercial Banks 80.23%
Thrifts & Mortgage Finance 19.37
IT Services 0.40
-------
Total 100.00%
=======
---------------------------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2011
---------------------------------------------------------
% OF LONG-TERM
SECURITY INVESTMENTS
People's United Financial, Inc. 4.93%
BOK Financial Corp. 3.98
Commerce Bancshares, Inc. 3.70
Zions Bancorporation 3.19
East West Bancorp, Inc. 3.13
Signature Bank 2.95
TFS Financial Corp. 2.95
Hancock Holding Co. 2.88
SVB Financial Group 2.20
Fulton Financial Corp. 2.09
-------
Total 32.00%
=======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 29, 2009 - DECEMBER 31, 2011
First Trust NASDAQ(R) ABA NASDAQ OMX(R) ABA Russell 3000(R) S&P Composite 1500
Community Bank Index Fund Community Bank Index(SM) Index Financials Sector Index
06/09 $10,000 $10,000 $10,000 $10,000
12/09 11,280 11,318 12,224 12,112
06/10 11,438 11,505 11,484 11,744
12/10 12,721 12,846 14,293 13,722
06/11 12,520 12,688 15,201 13,420
12/11 11,898 12,095 14,439 11,662
Performance figures assume reinvestment of all dividend distributions and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance does
not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 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 July 1, 2009 (commencement of
trading) through December 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%
07/01/09 - 12/31/09 60 3 1 0
01/01/10 - 12/31/10 151 1 0 0
01/01/11 - 12/31/11 135 2 0 0
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
07/01/09 - 12/31/09 62 2 0 0
01/01/10 - 12/31/10 98 1 0 1
01/01/11 - 12/31/11 111 4 0 0
Page 39
--------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW
--------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average annual total returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative total
returns" represent the total change in value of an investment over the periods
indicated. The total returns would have been lower if certain fees had not been
waived and expenses reimbursed by the Advisor.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Value") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
the Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and Market Value returns assume that all dividend
distributions have been reinvested in the Fund at NAV and Market Value,
respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike a Fund, an index does not actually hold a portfolio of securities
and therefore does not incur the expenses incurred by each Fund. These expenses
negatively impact the performance of each Fund. Also, market returns do not
include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future results.
Page 40
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2011 (UNAUDITED)
As a shareholder of First Trust Dow Jones Select MicroCap Index(SM) Fund, First
Trust Morningstar Dividend Leaders(SM) Index Fund, First Trust US IPO Index
Fund, First Trust NASDAQ-100 Equal Weighted Index(SM) Fund, First Trust
NASDAQ-100-Technology Sector Index(SM) Fund, First Trust NYSE Arca Biotechnology
Index Fund, First Trust Dow Jones Internet Index(SM) Fund, First Trust Strategic
Value Index Fund, First Trust Value Line(R) Equity Allocation Index Fund, First
Trust Value Line(R) Dividend Index Fund, First Trust NASDAQ-100 Ex-Technology
Sector Index(SM) Fund, First Trust NASDAQ(R) Clean Edge(R) Green Energy Index
Fund, First Trust S&P REIT Index Fund, First Trust ISE Water Index Fund, First
Trust ISE-Revere Natural Gas Index Fund, First Trust ISE Chindia Index Fund,
First Trust Value Line(R) 100 Exchange-Traded Fund, or First Trust NASDAQ(R) ABA
Community Bank Index Fund (each a "Fund" and collectively, the "Funds"), you
incur two types of costs: (1) transaction costs; and (2) ongoing costs,
including management fees, distribution and/or service fees, and other Fund
expenses. This Example is intended to help you understand your ongoing costs of
investing in the Funds and to compare these costs with the ongoing costs of
investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended December 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 EXPENSE PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2011 DECEMBER 31, 2011 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
Actual $1,000.00 $883.50 0.60% $2.85
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND
Actual $1,000.00 $1,061.40 0.45% $2.34
Hypothetical (5% return before expenses) $1,000.00 $1,022.94 0.45% $2.29
FIRST TRUST US IPO INDEX FUND
Actual $1,000.00 $938.10 0.60% $2.93
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
Actual $1,000.00 $904.30 0.60% $2.88
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND
Actual $1,000.00 $935.30 0.60% $2.93
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND
Actual $1,000.00 $745.40 0.60% $2.64
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND
Actual $1,000.00 $891.30 0.60% $2.86
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
Page 41
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
DECEMBER 31, 2011 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSE PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
JULY 1, 2011 DECEMBER 31, 2011 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST STRATEGIC VALUE INDEX FUND
Actual $1,000.00 $899.80 0.65% $3.11
Hypothetical (5% return before expenses) $1,000.00 $1,021.93 0.65% $3.31
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
Actual $1,000.00 $885.00 0.70% $3.33
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
Actual $1,000.00 $1,008.30 0.70% $3.54
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
Actual $1,000.00 $882.70 0.60% $2.85
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND
Actual $1,000.00 $631.50 0.60% $2.47
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST S&P REIT INDEX FUND
Actual $1,000.00 $980.90 0.50% $2.50
Hypothetical (5% return before expenses) $1,000.00 $1,022.68 0.50% $2.55
FIRST TRUST ISE WATER INDEX FUND
Actual $1,000.00 $901.60 0.60% $2.88
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND
Actual $1,000.00 $845.30 0.60% $2.79
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST ISE CHINDIA INDEX FUND
Actual $1,000.00 $727.90 0.60% $2.61
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
Actual $1,000.00 $871.40 0.70% $3.30
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND
Actual $1,000.00 $950.30 0.60% $2.95
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
(a) These expense ratios reflect expense caps.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (July 1, 2011
through December 31, 2011), multiplied by 184/365 (to reflect the one-half
year period).
Page 42
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 1.2%
6,068 Astronics Corp. (b) $ 217,295
7,112 Ducommun, Inc. 90,678
6,727 LMI Aerospace, Inc. (b) 118,059
37,823 Taser International, Inc. (b) 193,654
------------
619,686
------------
AIR FREIGHT & LOGISTICS -- 0.2%
5,945 Park-Ohio Holdings Corp. (b) 106,059
------------
AUTO COMPONENTS -- 1.9%
13,194 Drew Industries, Inc. (b) 323,649
14,143 Standard Motor Products, Inc. 283,567
17,317 Stoneridge, Inc. (b) 145,983
16,106 Superior Industries International, Inc. 266,393
------------
1,019,592
------------
BIOTECHNOLOGY -- 1.2%
63,141 Astex Pharmaceuticals (b) 119,337
48,470 Rigel Pharmaceuticals, Inc. (b) 382,428
32,410 SciClone Pharmaceuticals, Inc. (b) 139,039
------------
640,804
------------
BUILDING PRODUCTS -- 0.5%
13,968 AAON, Inc. 286,204
------------
CAPITAL MARKETS -- 1.7%
13,696 Calamos Asset Management, Inc.,
Class A 171,337
1,908 Diamond Hill Investment Group, Inc. 141,154
10,049 INTL FCStone, Inc. (b) 236,855
13,108 Safeguard Scientifics, Inc. (b) 206,975
22,161 SWS Group, Inc. 152,246
------------
908,567
------------
CHEMICALS -- 2.7%
16,542 American Vanguard Corp. 220,670
33,869 Flotek Industries, Inc. (b) 337,335
5,912 Hawkins, Inc. 217,917
4,964 KMG Chemicals, Inc. 85,728
8,728 Quaker Chemical Corp. 339,432
14,940 Zep, Inc. 208,861
------------
1,409,943
------------
COMMERCIAL BANKS -- 15.6%
1,939 Bancorp Rhode Island, Inc. 76,978
11,442 Banner Corp. 196,230
52,089 BBCN Bancorp, Inc. (b) 492,241
53,103 Boston Private Financial Holdings, Inc. 421,638
7,490 Bryn Mawr Bank Corp. 145,980
19,549 Cardinal Financial Corp. 209,956
17,032 Chemical Financial Corp. 363,122
27,387 Citizens Republic Bancorp, Inc. (b) 312,212
10,266 City Holding Co. 347,915
9,455 Community Trust Bancorp, Inc. 278,166
9,396 Financial Institutions, Inc. 151,651
55,396 First Busey Corp. 276,980
7,477 First Financial Corp. 248,835
9,821 First Interstate BancSystem, Inc.,
Class A 127,968
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMERCIAL BANKS (CONTINUED)
12,008 Hudson Valley Holding Corp. $ 254,810
14,608 Independent Bank Corp. 398,652
10,031 Lakeland Financial Corp. 259,502
29,950 Oriental Financial Group, Inc. 362,695
6,849 Republic Bancorp, Inc., Class A 156,842
19,045 S&T Bancorp, Inc. 372,330
16,491 Sandy Spring Bancorp, Inc. 289,417
10,675 Simmons First National Corp.,
Class A 290,253
11,176 Southside Bancshares, Inc. 242,072
21,512 State Bank Financial Corp. (b) 325,046
5,628 Tompkins Financial Corp. 216,734
19,648 TowneBank 240,492
9,701 Washington Trust Bancorp, Inc. 231,466
16,935 WesBanco, Inc. 329,725
12,059 West Coast Bancorp (b) 188,120
55,472 Western Alliance Bancorp (b) 345,591
------------
8,153,619
------------
COMMERCIAL SERVICES & SUPPLIES
-- 4.5%
6,171 A.T. Cross Co., Class A (b) 69,609
39,750 Cenveo, Inc. (b) 135,150
55,885 EnergySolutions, Inc. (b) 172,685
17,593 Ennis, Inc. 234,515
19,602 InnerWorkings, Inc. (b) 182,494
6,701 Intersections, Inc. 74,314
28,094 Metalico, Inc. (b) 92,429
9,123 Multi-Color Corp. 234,735
7,228 Schawk, Inc. 81,026
10,614 Standard Parking Corp. (b) 189,672
13,279 Team, Inc. (b) 395,050
12,458 US Ecology, Inc. 233,961
13,981 Viad Corp. 244,388
------------
2,340,028
------------
COMMUNICATIONS EQUIPMENT
-- 1.7%
10,289 Anaren, Inc. (b) 171,003
12,277 Black Box Corp. 344,247
15,258 Globecomm Systems, Inc. (b) 208,730
29,079 Symmetricom, Inc. (b) 156,736
------------
880,716
------------
COMPUTERS & PERIPHERALS -- 1.0%
36,906 China Digital TV Holding Co.
Ltd., ADR 116,992
10,409 Datalink Corp. (b) 85,978
19,833 Super Micro Computer, Inc. (b) 310,982
------------
513,952
------------
CONSTRUCTION & ENGINEERING
-- 1.4%
25,006 Furmanite Corp. (b) 157,788
13,237 Layne Christensen Co. (b) 320,335
13,885 MYR Group, Inc. (b) 265,759
------------
743,882
------------
See Notes to Financial Statements Page 43
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
CONSUMER FINANCE -- 0.6%
34,351 Advance America Cash Advance
Centers, Inc. $ 307,441
------------
DISTRIBUTORS -- 0.2%
12,756 Voxx International Corp., Class A (b) 107,788
------------
DIVERSIFIED CONSUMER SERVICES
-- 0.6%
15,255 Lincoln Educational Services Corp. 120,515
14,754 Universal Technical Institute, Inc. (b) 188,556
------------
309,071
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.4%
30,738 Alaska Communications Systems
Group, Inc. 92,521
17,454 Consolidated Communications
Holdings, Inc. 332,499
34,113 Premiere Global Services, Inc. (b) 288,937
------------
713,957
------------
ELECTRIC UTILITIES -- 0.9%
8,092 Central Vermont Public Service Corp. 284,029
7,383 Unitil Corp. 209,530
------------
493,559
------------
ELECTRICAL EQUIPMENT -- 1.3%
10,140 Coleman Cable, Inc. (b) 88,218
12,948 Encore Wire Corp. 335,353
2,311 Preformed Line Products Co. 137,874
13,716 Vicor Corp. 109,180
------------
670,625
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 4.1%
10,195 Badger Meter, Inc. 300,039
23,363 CTS Corp. 214,940
12,148 Electro Rent Corp. 208,338
18,912 Maxwell Technologies, Inc. (b) 307,131
9,777 Measurement Specialties, Inc. (b) 273,365
25,496 Newport Corp. (b) 347,000
12,790 Park Electrochemical Corp. 327,680
3,080 Viasystems Group, Inc. (b) 52,113
8,361 Vishay Precision Group, Inc. (b) 133,609
------------
2,164,215
------------
ENERGY EQUIPMENT & SERVICES
-- 2.1%
5,385 Dawson Geophysical Co. (b) 212,869
14,647 Global Geophysical Services, Inc. (b) 98,428
93,529 Hercules Offshore, Inc. (b) 415,269
8,448 Mitcham Industries, Inc. (b) 184,504
8,312 Natural Gas Services Group, Inc. (b) 120,191
10,073 Union Drilling, Inc. (b) 62,856
------------
1,094,117
------------
FOOD PRODUCTS -- 0.2%
13,186 Omega Protein Corp. (b) 94,016
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
GAS UTILITIES -- 0.5%
6,508 Chesapeake Utilities Corp. $ 282,122
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 5.1%
17,160 AngioDynamics, Inc. (b) 254,140
1,121 Atrion Corp. 269,298
9,450 Cantel Medical Corp. 263,938
15,806 Greatbatch, Inc. (b) 349,313
5,803 Kensey Nash Corp. (b) 111,360
28,521 Merit Medical Systems, Inc. (b) 381,611
37,538 RTI Biologics, Inc. (b) 166,669
24,687 Symmetry Medical, Inc. (b) 197,249
7,798 Synovis Life Technologies, Inc. (b) 217,018
26,815 Wright Medical Group, Inc. (b) 442,447
------------
2,653,043
------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.0%
10,515 American Dental Partners, Inc. (b) 197,998
13,589 Assisted Living Concepts, Inc.,
Class A 202,340
16,438 Bio-Reference Laboratories, Inc. (b) 267,446
4,613 CorVel Corp. (b) 238,538
11,850 Ensign Group (The), Inc. 290,325
27,291 Metropolitan Health Networks,
Inc. (b) 203,864
8,091 U.S. Physical Therapy, Inc. 159,231
------------
1,559,742
------------
HEALTH CARE TECHNOLOGY -- 1.4%
15,809 Medidata Solutions, Inc. (b) 343,846
40,228 Merge Healthcare, Inc. (b) 195,106
7,263 Transcend Services, Inc. (b) 172,351
------------
711,303
------------
HOTELS, RESTAURANTS & LEISURE
-- 3.3%
16,851 AFC Enterprises, Inc. (b) 247,710
833 Biglari Holdings, Inc. (b) 306,744
12,183 Bravo Brio Restaurant Group, Inc. (b) 208,939
14,113 Caribou Coffee Co., Inc. (b) 196,876
66,232 Denny's Corp. (b) 249,032
17,525 Ruth's Hospitality Group, Inc. (b) 87,099
36,502 Shuffle Master, Inc. (b) 427,803
------------
1,724,203
------------
HOUSEHOLD DURABLES -- 1.4%
35,254 La-Z-Boy, Inc. (b) 419,523
13,392 Libbey, Inc. (b) 170,614
10,180 Universal Electronics, Inc. (b) 171,736
------------
761,873
------------
HOUSEHOLD PRODUCTS -- 0.4%
23,585 Central Garden & Pet Co.,
Class A (b) 196,227
------------
INDUSTRIAL CONGLOMERATES -- 0.6%
8,607 Standex International Corp. 294,101
------------
Page 44 See Notes to Financial Statements
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
INSURANCE -- 1.9%
11,025 Crawford & Co., Class A $ 44,872
13,680 eHealth, Inc. (b) 201,096
35,982 Meadowbrook Insurance Group, Inc. 384,288
28,157 National Financial Partners Corp. (b) 380,682
------------
1,010,938
------------
INTERNET SOFTWARE & SERVICES
-- 1.4%
25,340 Move, Inc. (b) 160,149
8,751 Stamps.com, Inc. (b) 228,663
60,359 United Online, Inc. 328,353
------------
717,165
------------
IT SERVICES -- 1.1%
6,294 Cass Information Systems, Inc. 229,039
10,101 Computer Task Group, Inc. (b) 142,222
13,820 Virtusa Corp. (b) 200,113
------------
571,374
------------
LEISURE EQUIPMENT & PRODUCTS
-- 1.7%
17,681 JAKKS Pacific, Inc. 249,479
43,969 Smith & Wesson Holding Corp. (b) 191,705
12,960 Sturm, Ruger & Co., Inc. 433,641
------------
874,825
------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.3%
42,998 Affymetrix, Inc. (b) 175,862
------------
MACHINERY -- 5.0%
6,145 Alamo Group, Inc. 165,485
18,146 Altra Holdings, Inc. (b) 341,689
6,154 American Railcar Industries, Inc. (b) 147,265
5,875 Cascade Corp. 277,124
13,125 Columbus McKinnon Corp. (b) 166,556
13,772 Douglas Dynamics, Inc. 201,347
6,717 Graham Corp. 150,729
19,491 John Bean Technologies Corp. 299,577
8,457 Kadant, Inc. (b) 191,213
7,009 L.B. Foster Co., Class A 198,285
7,625 Miller Industries, Inc. 119,941
11,535 NN, Inc. (b) 69,210
6,335 Twin Disc, Inc. 230,087
8,446 Xerium Technologies, Inc. (b) 55,237
------------
2,613,745
------------
MEDIA -- 1.2%
3,802 Fisher Communications, Inc. (b) 109,612
12,792 Global Sources Ltd. (b) 62,041
27,735 Journal Communications, Inc.,
Class A (b) 122,034
22,351 Knology, Inc. (b) 317,384
------------
611,071
------------
METALS & MINING -- 1.7%
44,665 General Moly, Inc. (b) 138,015
4,304 Handy & Harman Ltd. (b) 42,609
29,482 Horsehead Holding Corp. (b) 265,633
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
METALS & MINING (CONTINUED)
9,071 Metals USA Holdings Corp. (b) $ 102,049
6,486 Olympic Steel, Inc. 151,253
4,649 Universal Stainless & Alloy
Products, Inc. (b) 173,687
------------
873,246
------------
MULTILINE RETAIL -- 0.8%
24,502 Fred's, Inc., Class A 357,239
3,765 Gordmans Stores, Inc. (b) 47,326
------------
404,565
------------
OIL, GAS & CONSUMABLE FUELS
-- 1.4%
93,466 Hyperdynamics Corp. (b) 228,992
7,969 TransMontaigne Partners L.P. (c) 267,041
38,514 VAALCO Energy, Inc. (b) 232,625
------------
728,658
------------
PAPER & FOREST PRODUCTS -- 1.0%
10,200 Neenah Paper, Inc. 227,664
33,532 Wausau Paper Corp. 276,974
------------
504,638
------------
PERSONAL PRODUCTS -- 0.2%
6,965 Nature's Sunshine Products, Inc. (b) 108,097
------------
PHARMACEUTICALS -- 1.0%
41,257 Corcept Therapeutics, Inc. (b) 141,099
6,815 Hi-Tech Pharmacal Co., Inc. (b) 265,036
12,583 Obagi Medical Products, Inc. (b) 127,843
------------
533,978
------------
PROFESSIONAL SERVICES -- 2.8%
29,306 CBIZ, Inc. (b) 179,060
9,054 CDI Corp. 125,036
7,344 CRA International, Inc. (b) 145,705
13,448 ICF International, Inc. (b) 333,241
10,840 Mistras Group, Inc. (b) 276,312
35,557 Navigant Consulting, Inc. (b) 405,705
------------
1,465,059
------------
REAL ESTATE INVESTMENT TRUSTS
-- 1.2%
71,573 Newcastle Investment Corp. 332,815
50,656 Resource Capital Corp. 284,180
------------
616,995
------------
ROAD & RAIL -- 1.1%
15,323 Celadon Group, Inc. 180,964
10,390 Marten Transport Ltd. 186,916
10,391 Quality Distribution, Inc. (b) 116,899
7,345 Roadrunner Transportation Systems,
Inc. (b) 103,785
------------
588,564
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.0%
21,757 AXT, Inc. (b) 90,727
15,317 Cohu, Inc. 173,848
17,157 IXYS Corp. (b) 185,810
See Notes to Financial Statements Page 45
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (CONTINUED)
14,383 Nanometrics, Inc. (b) $ 264,935
40,004 Photronics, Inc. (b) 243,224
21,541 Rudolph Technologies, Inc. (b) 199,470
15,764 Standard Microsystems Corp. (b) 406,238
------------
1,564,252
------------
SOFTWARE -- 1.9%
16,218 Kenexa Corp. (b) 433,021
36,132 S1 Corp. (b) 345,783
14,321 TeleNav, Inc. (b) 111,847
18,642 VASCO Data Security International,
Inc. (b) 121,546
------------
1,012,197
------------
SPECIALTY RETAIL -- 4.0%
6,672 America's Car-Mart, Inc. (b) 261,409
8,842 Body Central Corp. (b) 220,696
29,113 Casual Male Retail Group, Inc. (b) 99,567
72,344 Charming Shoppes, Inc. (b) 354,486
8,992 Destination Maternity Corp. 150,346
28,930 Hot Topic, Inc. 191,227
15,077 Lithia Motors, Inc., Class A 329,583
6,726 Shoe Carnival, Inc. (b) 172,858
19,136 Stein Mart, Inc. (b) 130,316
61,576 Wet Seal, Inc., Class A (b) 200,738
------------
2,111,226
------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.4%
12,281 Movado Group, Inc. 223,146
------------
THRIFTS & MORTGAGE FINANCE
-- 3.0%
14,427 Berkshire Hills Bancorp, Inc. 320,135
21,563 Dime Community Bancshares, Inc. 271,694
86,625 Doral Financial Corp. (b) 82,813
5,958 Federal Agricultural Mortgage Corp.,
Class C 107,363
21,449 Flushing Financial Corp. 270,901
8,624 Rockville Financial, Inc. 89,345
10,688 ViewPoint Financial Group 139,051
7,854 Walker & Dunlop, Inc. (b) 98,646
5,847 WSFS Financial Corp. 210,258
------------
1,590,206
------------
TRADING COMPANIES & DISTRIBUTORS
-- 2.0%
8,657 CAI International, Inc. (b) 133,837
6,382 DXP Enterprises, Inc. (b) 205,500
20,775 H&E Equipment Services, Inc. (b) 278,801
11,221 Houston Wire & Cable Co. 155,074
11,639 Titan Machinery, Inc. (b) 252,916
------------
1,026,128
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
WATER UTILITIES -- 0.8%
10,555 Middlesex Water Co. $ 196,956
8,928 SJW Corp. 211,058
------------
408,014
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.4%
15,036 USA Mobility, Inc. 208,549
------------
TOTAL INVESTMENTS -- 100.0% 52,302,953
(Cost $48,817,502) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 24,930
------------
NET ASSETS -- 100.0% $ 52,327,883
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Master Limited Partnership ("MLP").
(d) Aggregate cost for federal income tax purposes is $48,975,614. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$6,098,260 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$2,770,921.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $52,302,953 $ -- $ --
=========================================
* See Portfolio of Investments for industry breakout.
Page 46 See Notes to Financial Statements
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 2.7%
93,071 Lockheed Martin Corp. $ 7,529,444
91,833 Raytheon Co. 4,442,880
------------
11,972,324
------------
CAPITAL MARKETS -- 0.1%
46,204 Federated Investors, Inc., Class B 699,991
------------
CHEMICALS -- 0.3%
20,557 Olin Corp. 403,945
33,626 RPM International, Inc. 825,518
------------
1,229,463
------------
COMMERCIAL BANKS -- 1.1%
13,940 Bank of Hawaii Corp. 620,191
10,240 Community Bank System, Inc. 284,672
23,387 CVB Financial Corp. 234,572
150,530 First Niagara Financial Group, Inc. 1,299,074
22,507 Glacier Bancorp, Inc. 270,759
5,702 Park National Corp. 370,972
16,387 Trustmark Corp. 398,040
15,183 United Bankshares, Inc. 429,223
70,674 Valley National Bancorp 874,237
------------
4,781,740
------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.7%
9,579 HNI Corp. 250,012
104,059 Pitney Bowes, Inc. 1,929,254
96,759 R.R. Donnelley & Sons Co. 1,396,232
120,793 Waste Management, Inc. 3,951,139
------------
7,526,637
------------
COMPUTERS & PERIPHERALS -- 0.1%
16,205 Diebold, Inc. 487,284
------------
CONTAINERS & PACKAGING -- 0.2%
25,118 Sonoco Products Co. 827,889
------------
DISTRIBUTORS -- 0.5%
33,495 Genuine Parts Co. 2,049,894
------------
DIVERSIFIED CONSUMER SERVICES
-- 0.4%
80,730 H&R Block, Inc. 1,318,321
3,652 Strayer Education, Inc. 354,938
------------
1,673,259
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 19.2%
1,474,009 AT&T, Inc. 44,574,032
1,024,171 Verizon Communications, Inc. 41,089,741
------------
85,663,773
------------
ELECTRIC UTILITIES -- 14.8%
10,001 ALLETE, Inc. 419,842
159,264 American Electric Power Co., Inc. 6,579,196
67,649 Edison International 2,800,669
57,304 Entergy Corp. 4,186,057
221,807 Exelon Corp. 9,619,769
143,192 FirstEnergy Corp. 6,343,406
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
ELECTRIC UTILITIES (CONTINUED)
31,786 Hawaiian Electric Industries, Inc. $ 841,693
5,492 MGE Energy, Inc. 256,861
111,875 NextEra Energy, Inc. 6,810,950
86,600 Pepco Holdings, Inc. 1,757,980
34,280 Pinnacle West Capital Corp. 1,651,610
194,333 PPL Corp. 5,717,277
92,606 Progress Energy, Inc. 5,187,788
253,500 Southern (The) Co. 11,734,515
17,541 UIL Holdings Corp. 620,425
11,577 Unisource Energy Corp. 427,423
37,870 Westar Energy, Inc. 1,089,899
------------
66,045,360
------------
FOOD PRODUCTS -- 5.0%
49,412 Campbell Soup Co. 1,642,455
108,831 ConAgra Foods, Inc. 2,873,138
81,467 H. J. Heinz Co. 4,402,477
362,865 Kraft Foods, Inc., Class A 13,556,636
------------
22,474,706
------------
GAS UTILITIES -- 1.1%
36,145 AGL Resources, Inc. 1,527,488
26,872 Atmos Energy Corp. 896,181
5,930 Laclede Group (The), Inc. 239,987
7,078 Northwest Natural Gas Co. 339,248
17,703 Piedmont Natural Gas Co., Inc. 601,548
41,372 Questar Corp. 821,648
13,163 WGL Holdings, Inc. 582,068
------------
5,008,168
------------
HOUSEHOLD DURABLES -- 0.3%
50,443 Leggett & Platt, Inc. 1,162,207
------------
HOUSEHOLD PRODUCTS -- 1.8%
108,753 Kimberly-Clark Corp. 7,999,871
------------
INSURANCE -- 0.4%
4,365 American National Insurance Co. 318,776
31,664 Arthur J. Gallagher & Co. 1,058,844
2,155 Harleysville Group, Inc. 121,908
9,722 Mercury General Corp. 443,518
------------
1,943,046
------------
IT SERVICES -- 0.6%
97,439 Paychex, Inc. 2,933,888
------------
LEISURE EQUIPMENT & PRODUCTS
-- 0.5%
77,075 Mattel, Inc. 2,139,602
------------
METALS & MINING -- 0.6%
73,771 Nucor Corp. 2,919,119
------------
MULTI-UTILITIES -- 10.9%
31,050 Alliant Energy Corp. 1,369,615
17,420 Avista Corp. 448,565
12,378 Black Hills Corp. 415,653
112,563 CenterPoint Energy, Inc. 2,261,391
81,736 Consolidated Edison, Inc. 5,070,084
153,945 Dominion Resources, Inc. 8,171,401
52,774 DTE Energy Co. 2,873,544
See Notes to Financial Statements Page 47
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
MULTI-UTILITIES (CONTINUED)
29,054 Integrys Energy Group, Inc. $ 1,574,146
80,422 NiSource, Inc. 1,914,848
10,545 NorthWestern Corp. 377,406
26,853 NSTAR 1,261,017
131,673 PG&E Corp. 5,427,561
153,314 Public Service Enterprise Group, Inc. 5,060,895
36,444 SCANA Corp. 1,642,167
56,313 Sempra Energy 3,097,215
65,996 TECO Energy, Inc. 1,263,163
27,553 Vectren Corp. 832,927
50,621 Wisconsin Energy Corp. 1,769,710
134,440 Xcel Energy, Inc. 3,715,922
------------
48,547,230
------------
OIL, GAS & CONSUMABLE FUELS
-- 5.3%
323,619 ConocoPhillips 23,582,117
------------
PAPER & FOREST PRODUCTS -- 0.7%
107,830 International Paper Co. 3,191,768
------------
PHARMACEUTICALS -- 28.6%
381,142 Abbott Laboratories 21,431,615
468,758 Bristol-Myers Squibb Co. 16,519,032
336,400 Eli Lilly & Co. 13,980,784
625,730 Johnson & Johnson 41,035,373
925,437 Merck & Co., Inc. 34,888,975
------------
127,855,779
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.5%
41,634 Intersil Corp., Class A 434,659
54,106 Microchip Technology, Inc. 1,981,903
------------
2,416,562
------------
SPECIALTY RETAIL -- 0.1%
40,731 American Eagle Outfitters, Inc. 622,777
------------
THRIFTS & MORTGAGE FINANCE
-- 1.2%
252,554 New York Community Bancorp, Inc. 3,124,093
24,487 Northwest Bancshares, Inc. 304,618
127,626 People's United Financial, Inc. 1,639,994
14,740 Provident Financial Services, Inc. 197,369
------------
5,266,074
------------
TOBACCO -- 1.2%
121,930 Reynolds American, Inc. 5,050,340
7,281 Universal Corp. 334,635
------------
5,384,975
------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.1%
6,266 Watsco, Inc. 411,426
------------
DESCRIPTION VALUE
--------------------------------------- ------------
TOTAL INVESTMENTS -- 100.0% $446,816,929
(Cost $417,273,230) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 212,605
------------
NET ASSETS -- 100.0% $447,029,534
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Aggregate cost for federal income tax purposes is $419,278,444. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$29,000,340 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$1,461,855.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $446,816,929 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
Page 48 See Notes to Financial Statements
FIRST TRUST US IPO INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 0.2%
1,509 DigitalGlobe, Inc. (b) $ 25,819
------------
AIRLINES -- 0.2%
2,365 Spirit Airlines, Inc. (b) 36,894
------------
AUTO COMPONENTS -- 1.5%
10,705 Delphi Automotive PLC (b) 230,586
------------
AUTOMOBILES -- 7.3%
51,023 General Motors Co. (b) 1,034,236
3,401 Tesla Motors, Inc. (b) 97,133
------------
1,131,369
------------
BEVERAGES -- 1.8%
6,991 Dr. Pepper Snapple Group, Inc. 276,005
------------
BIOTECHNOLOGY -- 2.3%
3,271 Ironwood Pharmaceuticals, Inc.,
Class A (b) 39,154
2,470 Pharmasset, Inc. (b) 316,654
------------
355,808
------------
CAPITAL MARKETS -- 1.2%
4,013 Apollo Global Management LLC,
Class A 49,801
1,484 Financial Engines, Inc. (b) 33,138
3,600 LPL Investment Holdings, Inc. (b) 109,944
------------
192,883
------------
COMMERCIAL BANKS -- 0.8%
4,202 First Republic Bank (b) 128,623
------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.4%
4,444 KAR Auction Services, Inc. (b) 59,994
------------
COMMUNICATIONS EQUIPMENT
-- 2.8%
9,768 Motorola Mobility Holdings, Inc. (b) 378,999
2,984 Ubiquiti Networks, Inc. (b) 54,398
------------
433,397
------------
COMPUTERS & PERIPHERALS -- 0.4%
2,814 Fusion-io, Inc. (b) 68,099
------------
CONSUMER FINANCE -- 3.0%
17,925 Discover Financial Services 430,200
1,376 Green Dot Corp., Class A (b) 42,959
------------
473,159
------------
DIVERSIFIED CONSUMER SERVICES
-- 1.1%
1,674 Bridgepoint Education, Inc. (b) 38,502
4,154 Education Management Corp. (b) 116,270
1,186 K12, Inc. (b) 21,277
------------
176,049
------------
DIVERSIFIED FINANCIAL SERVICES
-- 1.3%
2,933 CBOE Holdings, Inc. 75,847
3,932 MSCI, Inc., Class A (b) 129,481
------------
205,328
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
ELECTRICAL EQUIPMENT -- 1.4%
2,205 Generac Holdings, Inc. (b) $ 61,806
5,743 Sensata Technologies Holding
N.V. (b) 150,926
------------
212,732
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.3%
2,765 Aeroflex Holding Corp. (b) 28,314
2,587 Invensense, Inc. (b) 25,766
------------
54,080
------------
ENERGY EQUIPMENT & SERVICES
-- 0.2%
1,692 C&J Energy Services, Inc. (b) 35,414
------------
FOOD & STAPLES RETAILING -- 0.4%
1,565 Fresh Market (The), Inc. (b) 62,443
------------
FOOD PRODUCTS -- 3.1%
2,890 Dole Food Co., Inc. (b) 24,999
6,639 Mead Johnson Nutrition Co. 456,298
------------
481,297
------------
HEALTH CARE EQUIPMENT & SUPPLIES
-- 0.2%
1,358 Mako Surgical Corp. (b) 34,235
------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.2%
3,203 Accretive Health, Inc. (b) 73,605
14,237 HCA Holdings, Inc. (b) 313,641
4,830 Select Medical Holdings Corp. (b) 40,958
2,137 Team Health Holdings, Inc. (b) 47,164
2,506 Vanguard Health Systems, Inc. (b) 25,611
------------
500,979
------------
HOTELS, RESTAURANTS & LEISURE
-- 1.9%
3,918 Dunkin' Brands Group, Inc. (b) 97,872
5,386 Hyatt Hotels Corp., Class A (b) 202,729
------------
300,601
------------
INSURANCE -- 0.6%
2,407 Primerica, Inc. 55,938
3,868 Symetra Financial Corp. 35,083
------------
91,021
------------
INTERNET & CATALOG RETAIL -- 0.8%
2,628 HomeAway, Inc. (b) 61,101
1,926 HSN, Inc. 69,837
------------
130,938
------------
INTERNET SOFTWARE & SERVICES -- 2.5%
1,437 Ancestry.com, Inc. (b) 32,994
3,175 AOL, Inc. (b) 47,943
3,261 Bankrate, Inc. (b) 70,111
1,581 Cornerstone OnDemand, Inc. (b) 28,837
793 LogMeIn, Inc. (b) 30,570
4,275 Rackspace Hosting, Inc. (b) 183,868
------------
394,323
------------
See Notes to Financial Statements Page 49
FIRST TRUST US IPO INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
IT SERVICES -- 13.5%
4,634 Booz Allen Hamilton Holding Corp.,
Class A (b) $ 79,937
2,652 FleetCor Technologies, Inc. (b) 79,215
1,842 Higher One Holdings, Inc. (b) 33,966
2,316 ServiceSource International, Inc. (b) 36,338
5,459 Teradata Corp. (b) 264,816
15,872 Visa, Inc., Class A 1,611,484
------------
2,105,756
------------
MACHINERY -- 1.0%
6,019 Xylem, Inc. 154,628
------------
MEDIA -- 2.3%
2,343 AMC Networks, Inc., Class A (b) 88,050
5,262 Pandora Media, Inc. (b) 52,672
5,200 Scripps Networks Interactive, Class A 220,584
------------
361,306
------------
METALS & MINING -- 0.6%
2,736 Molycorp, Inc. (b) 65,609
2,283 SunCoke Energy, Inc. (b) 25,570
------------
91,179
------------
MULTILINE RETAIL -- 2.9%
11,140 Dollar General Corp. (b) 458,300
------------
OIL, GAS & CONSUMABLE FUELS
-- 13.3%
1,987 Cloud Peak Energy, Inc. (b) 38,389
12,788 Cobalt International Energy, Inc. (b) 198,470
3,381 Concho Resources, Inc. (b) 316,969
2,823 CVR Energy, Inc. (b) 52,875
23,057 Kinder Morgan, Inc. 741,744
3,329 KiOR, Inc., Class A (b) 33,889
12,714 Kosmos Energy Ltd. (b) 155,873
11,627 Marathon Petroleum Corp. 387,063
3,015 Oasis Petroleum, Inc. (b) 87,706
1,381 Targa Resources Corp. 56,193
------------
2,069,171
------------
PROFESSIONAL SERVICES -- 3.7%
11,715 Nielsen Holdings N.V. (b) 347,819
1,599 RPX Corp. (b) 20,227
5,333 Verisk Analytics, Inc., Class A (b) 214,013
------------
582,059
------------
REAL ESTATE INVESTMENT TRUSTS
-- 0.5%
2,699 CYS Investments, Inc. 35,465
2,045 DuPont Fabros Technology, Inc. 49,530
------------
84,995
------------
ROAD & RAIL -- 0.2%
4,549 Swift Transportation Co. (b) 37,484
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.7%
8,007 Freescale Semiconductor Holdings I
Ltd. (b) 101,288
4,149 GT Advanced Technologies, Inc. (b) 30,039
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (CONTINUED)
8,178 NXP Semiconductor N.V. (b) $ 125,696
------------
257,023
------------
SOFTWARE -- 3.7%
882 BroadSoft, Inc. (b) 26,636
5,023 Fortinet, Inc. (b) 109,552
2,214 NetSuite, Inc. (b) 89,778
2,727 QLIK Technologies, Inc. (b) 65,993
2,342 RealPage, Inc. (b) 59,182
2,384 Solarwinds, Inc. (b) 66,633
2,480 SS&C Technologies Holdings,
Inc. (b) 44,789
2,746 SuccessFactors, Inc. (b) 109,483
------------
572,046
------------
SPECIALTY RETAIL -- 1.4%
2,893 Express, Inc. (b) 57,686
1,420 Francesca's Holdings Corp. (b) 24,566
3,465 GNC Acquisition Holdings, Inc.,
Class A (b) 100,312
952 Vitamin Shoppe, Inc. (b) 37,966
------------
220,530
------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.3%
1,321 Vera Bradley, Inc. (b) 42,602
------------
THRIFTS & MORTGAGE FINANCE
-- 0.5%
3,173 BankUnited, Inc. 69,774
------------
TOBACCO -- 13.4%
4,403 Lorillard, Inc. 501,942
20,161 Philip Morris International, Inc. 1,582,235
------------
2,084,177
------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.5%
3,225 Air Lease Corp. (b) 76,465
------------
TRANSPORTATION INFRASTRUCTURE
-- 0.3%
2,791 Wesco Aircraft Holdings, Inc. (b) 39,046
------------
WATER UTILITIES -- 1.2%
5,724 American Water Works Co., Inc. 182,367
------------
TOTAL INVESTMENTS -- 99.9% 15,580,984
(Cost $14,831,539) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 12,851
------------
NET ASSETS -- 100.0% $ 15,593,835
============
Page 50 See Notes to Financial Statements
FIRST TRUST US IPO INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Aggregate cost for federal income tax purposes is $14,966,750. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$2,062,617 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$1,448,383.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $15,580,984 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 51
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 99.9%
AIR FREIGHT & LOGISTICS -- 2.0%
10,808 C.H. Robinson Worldwide, Inc. $ 754,182
17,827 Expeditors International of
Washington, Inc. 730,194
------------
1,484,376
------------
BEVERAGES -- 0.9%
7,505 Hansen Natural Corp. (b) 691,511
------------
BIOTECHNOLOGY -- 6.2%
10,843 Alexion Pharmaceuticals, Inc. (b) 775,275
11,985 Amgen, Inc. 769,557
6,525 Biogen Idec, Inc. (b) 718,076
11,300 Celgene Corp. (b) 763,880
19,367 Gilead Sciences, Inc. (b) 792,691
21,223 Vertex Pharmaceuticals, Inc. (b) 704,816
------------
4,524,295
------------
CHEMICALS -- 1.0%
11,396 Sigma-Aldrich Corp. 711,794
------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.0%
9,406 Stericycle, Inc. (b) 732,915
------------
COMMUNICATIONS EQUIPMENT
-- 4.0%
40,116 Cisco Systems, Inc. 725,297
6,865 F5 Networks, Inc. (b) 728,514
13,679 QUALCOMM, Inc. 748,241
53,547 Research In Motion Ltd. (b) 776,432
------------
2,978,484
------------
COMPUTERS & PERIPHERALS -- 5.0%
1,889 Apple, Inc. (b) 765,045
47,883 Dell, Inc. (b) 700,528
20,153 NetApp, Inc. (b) 730,949
15,021 SanDisk Corp. (b) 739,184
46,641 Seagate Technology PLC 764,912
------------
3,700,618
------------
DIVERSIFIED CONSUMER SERVICES
-- 1.0%
14,350 Apollo Group, Inc., Class A (b) 773,034
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.0%
124,297 Flextronics International Ltd. (b) 703,521
------------
FOOD & STAPLES RETAILING -- 2.0%
8,716 Costco Wholesale Corp. 726,217
10,878 Whole Foods Market, Inc. 756,891
------------
1,483,108
------------
FOOD PRODUCTS -- 1.0%
15,901 Green Mountain Coffee Roasters,
Inc. (b) 713,160
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
HEALTH CARE EQUIPMENT & SUPPLIES
-- 2.0%
20,764 DENTSPLY International, Inc. $ 726,532
1,665 Intuitive Surgical, Inc. (b) 770,912
------------
1,497,444
------------
HEALTH CARE PROVIDERS & SERVICES
-- 2.0%
16,537 Express Scripts, Inc. (b) 739,039
11,526 Henry Schein, Inc. (b) 742,620
------------
1,481,659
------------
HEALTH CARE TECHNOLOGY -- 1.1%
12,772 Cerner Corp. (b) 782,285
------------
HOTELS, RESTAURANTS & LEISURE
-- 3.0%
31,155 Ctrip.com International Ltd., ADR (b) 729,027
16,552 Starbucks Corp. 761,557
6,812 Wynn Resorts Ltd. 752,658
------------
2,243,242
------------
HOUSEHOLD DURABLES -- 1.0%
18,939 Garmin Ltd. 753,962
------------
INTERNET & CATALOG RETAIL -- 5.0%
3,970 Amazon.com, Inc. (b) 687,207
27,350 Expedia, Inc. 793,697
46,641 Liberty Interactive Corp., Class A (b) 756,284
10,308 Netflix, Inc. (b) 714,241
1,575 priceline.com, Inc. (b) 736,643
------------
3,688,072
------------
INTERNET SOFTWARE & SERVICES
-- 6.2%
27,005 Akamai Technologies, Inc. (b) 871,721
6,284 Baidu, Inc., ADR (b) 731,898
23,674 eBay, Inc. (b) 718,032
1,150 Google, Inc., Class A (b) 742,785
20,728 VeriSign, Inc. 740,404
48,107 Yahoo!, Inc. (b) 775,966
------------
4,580,806
------------
IT SERVICES -- 5.0%
13,912 Automatic Data Processing, Inc. 751,387
10,989 Cognizant Technology Solutions
Corp., Class A (b) 706,703
12,531 Fiserv, Inc. (b) 736,071
14,288 Infosys Ltd., ADR 734,117
24,322 Paychex, Inc. 732,335
------------
3,660,613
------------
LEISURE EQUIPMENT & PRODUCTS
-- 1.0%
25,749 Mattel, Inc. 714,792
------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.0%
18,505 Life Technologies Corp. (b) 720,030
------------
MACHINERY -- 1.0%
19,870 PACCAR, Inc. 744,529
------------
Page 52 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
MEDIA -- 5.0%
30,848 Comcast Corp., Class A $ 731,406
17,094 DIRECTV, Class A (b) 730,939
42,384 News Corp., Class A 756,131
406,597 Sirius XM Radio, Inc. (b) 740,006
34,352 Virgin Media, Inc. 734,446
------------
3,692,928
------------
METALS & MINING -- 1.0%
7,070 Randgold Resources Ltd., ADR 721,847
------------
MULTILINE RETAIL -- 1.7%
8,690 Dollar Tree, Inc. (b) 722,226
15,591 Sears Holdings Corp. (b) 495,482
------------
1,217,708
------------
PHARMACEUTICALS -- 4.0%
34,467 Mylan, Inc. (b) 739,662
7,330 Perrigo Co. 713,209
16,846 Teva Pharmaceutical Industries Ltd.,
ADR 679,905
51,332 Warner Chilcott PLC, Class A (b) 776,653
------------
2,909,429
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 15.3%
21,111 Altera Corp. 783,218
69,669 Applied Materials, Inc. 746,155
24,989 Avago Technologies Ltd. 721,183
25,058 Broadcom Corp., Class A (b) 735,703
22,553 First Solar, Inc. (b) 761,389
30,981 Intel Corp. 751,289
15,632 KLA-Tencor Corp. 754,244
20,036 Lam Research Corp. (b) 741,733
24,842 Linear Technology Corp. 746,005
53,231 Marvell Technology Group Ltd. (b) 737,249
28,741 Maxim Integrated Products, Inc. 748,416
20,872 Microchip Technology, Inc. 764,541
126,704 Micron Technology, Inc. (b) 796,968
53,270 NVIDIA Corp. (b) 738,322
23,059 Xilinx, Inc. 739,272
------------
11,265,687
------------
SOFTWARE -- 12.6%
60,579 Activision Blizzard, Inc. 746,333
25,520 Adobe Systems, Inc. (b) 721,450
23,067 Autodesk, Inc. (b) 699,622
21,697 BMC Software, Inc. (b) 711,228
35,769 CA, Inc. 723,070
13,283 Check Point Software Technologies
Ltd. (b) 697,889
11,231 Citrix Systems, Inc. (b) 681,946
35,584 Electronic Arts, Inc. (b) 733,031
13,899 Intuit, Inc. 730,949
27,680 Microsoft Corp. 718,573
29,220 Nuance Communications, Inc. (b) 735,175
24,638 Oracle Corp. 631,965
46,551 Symantec Corp. (b) 728,523
------------
9,259,754
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
SPECIALTY RETAIL -- 3.9%
11,756 Bed Bath & Beyond, Inc. (b) $ 681,495
568 Orchard Supply Hardware Stores
Corp., Class A (b) (c) 2,138
9,009 O'Reilly Automotive, Inc. (b) 720,270
15,312 Ross Stores, Inc. 727,779
51,113 Staples, Inc. 709,960
------------
2,841,642
------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.0%
8,891 Fossil, Inc. (b) 705,590
------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.0%
17,375 Fastenal Co. 757,724
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 1.0%
26,488 Vodafone Group PLC, ADR 742,459
------------
TOTAL COMMON STOCKS -- 99.9%
(Cost $80,657,449) 73,479,018
PREFERRED STOCK -- 0.0%
SPECIALTY RETAIL -- 0.0%
568 Orchard Supply Hardware Stores
Corp. (b) (c) 2,138
(Cost $0) ------------
TOTAL INVESTMENTS -- 99.9% 73,481,156
(Cost $80,657,449) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 58,196
------------
NET ASSETS -- 100.0% $ 73,539,352
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) This security is fair valued in accordance with procedures adopted by the
Trust's Board of Trustees and in accordance with the provisions of the
Investment Company Act of 1940, as amended.
(d) Aggregate cost for federal income tax purposes is $81,514,571. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$2,564,540 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$10,597,955.
ADR - American Depositary Receipt
See Notes to Financial Statements Page 53
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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
TOTAL
VALUE AT
INVESTMENTS 12/31/2011 LEVEL 1 LEVEL 2 LEVEL 3
------------------------------------------------------------------
Common Stocks:
Specialty Retail $ 2,841,642 $ 2,839,504 $ 2,138 $ --
Other Industry
Categories* 70,637,376 70,637,376 -- --
---------------------------------------------
Total Common Stock 73,479,018 73,476,880 2,138 --
Preferred Stocks* 2,138 -- 2,138 --
---------------------------------------------
TOTAL INVESTMENTS $ 73,481,156 $ 73,476,880 $ 4,276 $ --
=============================================
* See Portfolio of Investments for industry breakout. Industry categories are
only shown separately if they include holdings in two or more levels or have
holdings in only Level 3.
Page 54 See Notes to Financial Statements
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 100.0%
COMMUNICATIONS EQUIPMENT
-- 9.4%
188,769 Cisco Systems, Inc. $ 3,412,943
32,305 F5 Networks, Inc. (b) 3,428,207
64,370 QUALCOMM, Inc. 3,521,039
251,972 Research In Motion Ltd. (b) 3,653,594
------------
14,015,783
------------
COMPUTERS & PERIPHERALS -- 11.6%
8,888 Apple, Inc. (b) 3,599,640
225,317 Dell, Inc. (b) 3,296,388
94,834 NetApp, Inc. (b) 3,439,629
70,685 SanDisk Corp. (b) 3,478,409
219,476 Seagate Technology PLC 3,599,406
------------
17,413,472
------------
HEALTH CARE TECHNOLOGY -- 2.5%
60,098 Cerner Corp. (b) 3,681,002
------------
HOUSEHOLD DURABLES -- 2.4%
89,119 Garmin Ltd. 3,547,827
------------
INTERNET SOFTWARE & SERVICES
-- 12.1%
127,074 Akamai Technologies, Inc. (b) 4,101,949
29,571 Baidu, Inc., ADR (b) 3,444,135
5,410 Google, Inc., Class A (b) 3,494,319
97,538 VeriSign, Inc. 3,484,057
226,371 Yahoo!, Inc. (b) 3,651,364
------------
18,175,824
------------
IT SERVICES -- 4.5%
51,710 Cognizant Technology Solutions
Corp., Class A (b) 3,325,470
67,233 Infosys Ltd., ADR 3,454,432
------------
6,779,902
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 33.0%
99,340 Altera Corp. 3,685,514
327,833 Applied Materials, Inc. 3,511,091
117,587 Avago Technologies Ltd. 3,393,561
117,915 Broadcom Corp., Class A 3,461,984
145,782 Intel Corp. 3,535,213
73,556 KLA-Tencor Corp. 3,549,077
94,279 Lam Research Corp. (b) 3,490,209
116,897 Linear Technology Corp. 3,510,417
250,482 Marvell Technology Group Ltd. (b) 3,469,176
135,244 Maxim Integrated Products, Inc. 3,521,754
98,217 Microchip Technology, Inc. 3,597,689
596,217 Micron Technology, Inc. (b) 3,750,205
250,667 NVIDIA Corp. (b) 3,474,245
108,507 Xilinx, Inc. 3,478,734
------------
49,428,869
------------
SOFTWARE -- 24.5%
120,089 Adobe Systems, Inc. (b) 3,394,916
108,542 Autodesk, Inc. (b) 3,292,079
102,096 BMC Software, Inc. (b) 3,346,707
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
SOFTWARE (CONTINUED)
168,316 CA, Inc. $ 3,402,508
62,505 Check Point Software Technologies
Ltd. (b) 3,284,013
52,848 Citrix Systems, Inc. (b) 3,208,931
65,402 Intuit, Inc. 3,439,491
130,250 Microsoft Corp. 3,381,290
137,495 Nuance Communications, Inc. (b) 3,459,374
115,937 Oracle Corp. 2,973,784
219,050 Symantec Corp. (b) 3,428,132
------------
36,611,225
------------
TOTAL INVESTMENTS -- 100.0% 149,653,904
(Cost $171,342,757) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 6,161
------------
NET ASSETS -- 100.0% $149,660,065
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Aggregate cost for federal income tax purposes is $174,162,734. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$4,681,263 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$29,190,093.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $149,653,904 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 55
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 98.1%
BIOTECHNOLOGY -- 66.9%
141,721 Alexion Pharmaceuticals, Inc. (b) $ 10,133,052
165,378 Amgen, Inc. 10,618,922
782,158 Amylin Pharmaceuticals, Inc. (b) 8,900,958
81,001 Biogen Idec, Inc. (b) 8,914,160
131,997 Celgene Corp. (b) 8,922,997
937,460 Dendreon Corp. (b) 7,124,696
218,868 Gilead Sciences, Inc. (b) 8,958,267
724,997 Human Genome Sciences, Inc. (b) 5,357,728
687,516 Incyte Corp. (b) 10,319,615
435,467 InterMune, Inc. (b) 5,486,884
482,551 Myriad Genetics, Inc. (b) 10,104,618
156,009 Regeneron Pharmaceuticals, Inc. (b) 8,647,579
238,465 United Therapeutics Corp. (b) 11,267,471
232,139 Vertex Pharmaceuticals, Inc. (b) 7,709,336
------------
122,466,283
------------
LIFE SCIENCES TOOLS & SERVICES
-- 25.3%
1,849,854 Affymetrix, Inc. (b) 7,565,903
354,885 Illumina, Inc. (b) 10,816,894
229,124 Life Technologies Corp. (b) 8,915,215
723,825 QIAGEN N.V. (b) 9,996,023
1,998,602 Sequenom, Inc. (b) 8,893,779
------------
46,187,814
------------
PHARMACEUTICALS -- 5.9%
1,938,635 Nektar Therapeutics (b) 10,846,663
------------
TOTAL INVESTMENTS -- 98.1% 179,500,760
(Cost $266,928,269) (c)
NET OTHER ASSETS AND
LIABILITIES -- 1.9% 3,529,203
------------
NET ASSETS -- 100.0% $183,029,963
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Aggregate cost for federal income tax purposes is $277,149,287. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$3,691,600 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$101,340,127.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $179,500,760 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
Page 56 See Notes to Financial Statements
FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 100.0%
CAPITAL MARKETS -- 4.3%
1,224,641 E*TRADE Financial Corp. (b) $ 9,748,142
812,441 TD Ameritrade Holding Corp. 12,714,702
------------
22,462,844
------------
COMMUNICATIONS EQUIPMENT
-- 6.5%
984,349 Juniper Networks, Inc. (b) 20,090,563
244,285 NETGEAR, Inc. (b) 8,200,647
2,344,492 Sonus Networks, Inc. (b) 5,626,781
------------
33,917,991
------------
HEALTH CARE TECHNOLOGY -- 2.5%
691,388 Allscripts Healthcare Solutions,
Inc. (b) 13,094,889
------------
INTERNET & CATALOG RETAIL -- 17.3%
208,093 Amazon.com, Inc. (b) 36,020,898
153,482 Blue Nile, Inc. (b) 6,274,344
275,971 Expedia, Inc. 8,008,679
185,980 Netflix, Inc. (b) 12,886,554
56,780 priceline.com, Inc. (b) 26,556,574
------------
89,747,049
------------
INTERNET SOFTWARE & SERVICES
-- 48.0%
541,310 Akamai Technologies, Inc. (b) 17,473,487
277,666 Constant Contact, Inc. (b) 6,444,628
304,061 DealerTrack Holdings, Inc. (b) 8,288,703
405,658 Digital River, Inc. (b) 6,092,983
1,067,680 EarthLink, Inc. 6,875,859
1,009,560 eBay, Inc. (b) 30,619,955
85,227 Google, Inc., Class A (b) 55,048,119
288,396 IAC/InterActiveCorp 12,285,670
846,016 Internap Network Services Corp. (b) 5,025,335
316,839 j2 Global, Inc. 8,915,850
1,032,859 Monster Worldwide, Inc. (b) 8,190,572
559,103 NIC, Inc. 7,441,661
518,264 RealNetworks, Inc. 3,886,980
1,084,801 United Online, Inc. 5,901,317
537,783 ValueClick, Inc. (b) 8,760,485
453,594 VeriSign, Inc. 16,202,378
260,913 Vocus, Inc. (b) 5,763,568
294,188 WebMD Health Corp. (b) 11,046,759
1,574,570 Yahoo!, Inc. (b) 25,397,814
------------
249,662,123
------------
IT SERVICES -- 1.8%
731,028 Sapient Corp. 9,210,953
------------
SOFTWARE -- 19.6%
370,328 Ariba, Inc. (b) 10,398,810
347,267 Check Point Software Technologies
Ltd. (b) 18,245,408
211,496 Concur Technologies, Inc. (b) 10,741,882
325,837 Ebix, Inc. 7,200,998
435,758 Quest Software, Inc. (b) 8,105,099
186,207 Salesforce.com, Inc. (b) 18,892,562
522,182 TIBCO Software, Inc. (b) 12,485,372
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
SOFTWARE (CONTINUED)
341,316 Virnetx Holding Corp. (b) $ 8,522,660
379,681 Websense, Inc. (b) 7,111,425
------------
101,704,216
------------
TOTAL INVESTMENTS -- 100.0% 519,800,065
(Cost $570,316,466) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% (116,684)
------------
NET ASSETS -- 100.0% $519,683,381
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Aggregate cost for federal income tax purposes is $581,525,578. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$14,438,795 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$76,164,308.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $519,800,065 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 57
FIRST TRUST STRATEGIC VALUE INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 6.5%
10,287 General Dynamics Corp. $ 683,160
11,415 Northrop Grumman Corp. 667,549
14,776 Raytheon Co. 714,863
------------
2,065,572
------------
BIOTECHNOLOGY -- 4.3%
10,243 Celgene Corp. (b) 692,427
16,030 Gilead Sciences, Inc. (b) 656,108
------------
1,348,535
------------
CAPITAL MARKETS -- 5.9%
14,109 Ameriprise Financial, Inc. 700,371
6,215 Goldman Sachs Group (The), Inc. 562,022
39,040 Morgan Stanley 590,675
------------
1,853,068
------------
CHEMICALS -- 3.6%
3,756 CF Industries Holdings, Inc. 544,545
18,644 LyondellBasell Industries N.V.,
Class A 605,743
------------
1,150,288
------------
COMMERCIAL BANKS -- 2.2%
54,350 Fifth Third Bancorp 691,332
------------
COMPUTERS & PERIPHERALS -- 3.9%
42,497 Dell, Inc. (b) 621,731
12,721 SanDisk Corp. (b) 626,001
------------
1,247,732
------------
CONSUMER FINANCE -- 1.9%
14,140 Capital One Financial Corp. 597,981
------------
DIVERSIFIED FINANCIAL SERVICES
-- 5.6%
100,577 Bank of America Corp. 559,208
21,514 Citigroup, Inc. 566,033
19,214 JPMorgan Chase & Co. 638,866
------------
1,764,107
------------
HEALTH CARE EQUIPMENT & SUPPLIES
-- 1.8%
16,915 St. Jude Medical, Inc. 580,184
------------
HEALTH CARE PROVIDERS & SERVICES
-- 8.5%
16,462 Aetna, Inc. 694,532
15,183 CIGNA Corp. 637,686
8,097 McKesson Corp. 630,837
14,320 UnitedHealth Group, Inc. 725,738
------------
2,688,793
------------
INSURANCE -- 8.1%
14,412 Aflac, Inc. 623,463
25,203 Allstate (The) Corp. 690,815
27,301 American International Group,
Inc. (b) 633,383
12,508 Prudential Financial, Inc. 626,901
------------
2,574,562
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
MACHINERY -- 7.7%
6,313 Cummins, Inc. $ 555,670
8,657 Deere & Co. 669,619
13,259 Illinois Tool Works, Inc. 619,328
7,721 Parker Hannifin Corp. 588,726
------------
2,433,343
------------
MEDIA -- 4.4%
13,990 DIRECTV, Class A (b) 598,212
27,799 DISH Network Corp., Class A 791,716
------------
1,389,928
------------
METALS & MINING -- 3.7%
16,190 Freeport-McMoRan Copper &
Gold, Inc. 595,630
9,409 Newmont Mining Corp. 564,634
------------
1,160,264
------------
OIL, GAS & CONSUMABLE FUELS
-- 13.3%
6,514 Apache Corp. 590,038
6,134 Chevron Corp. 652,658
24,148 Marathon Oil Corp. 706,812
16,901 Marathon Petroleum Corp. 562,634
11,785 Murphy Oil Corp. 656,896
14,981 Peabody Energy Corp. 496,021
25,301 Valero Energy Corp. 532,586
------------
4,197,645
------------
PHARMACEUTICALS -- 6.8%
17,205 Eli Lilly & Co. 715,040
19,186 Merck & Co., Inc. 723,312
33,201 Pfizer, Inc. 718,470
------------
2,156,822
------------
REAL ESTATE INVESTMENT TRUSTS
-- 2.0%
39,898 Annaly Capital Management, Inc. 636,772
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.8%
18,127 Broadcom Corp., Class A (b) 532,209
27,496 Intel Corp. 666,778
------------
1,198,987
------------
SOFTWARE -- 4.0%
21,911 Adobe Systems, Inc. (b) 619,424
24,867 Microsoft Corp. 645,547
------------
1,264,971
------------
SPECIALTY RETAIL -- 1.9%
43,896 Staples, Inc. 609,715
------------
TOTAL INVESTMENTS -- 99.9% 31,610,601
(Cost $32,011,788) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 31,920
------------
NET ASSETS -- 100.0% $ 31,642,521
============
Page 58 See Notes to Financial Statements
FIRST TRUST STRATEGIC VALUE INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Aggregate cost for federal income tax purposes is $32,289,621. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$1,599,815 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$2,278,835.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $31,610,601 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 59
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 100.1%
AEROSPACE & DEFENSE -- 1.6%
1,493 AAR Corp. $ 28,621
688 Curtiss-Wright Corp. 24,307
576 Moog, Inc., Class A (b) 25,304
386 Teledyne Technologies, Inc. (b) 21,172
------------
99,404
------------
AIRLINES -- 0.4%
438 Allegiant Travel Co. (b) 23,363
------------
AUTOMOBILES -- 1.0%
2,188 Honda Motor Co., Ltd., ADR 66,843
------------
BEVERAGES -- 2.2%
431 Brown-Forman Corp., Class B 34,700
1,089 Coca-Cola (The) Co. 76,197
676 Molson Coors Brewing Co., Class B 29,433
------------
140,330
------------
BIOTECHNOLOGY -- 1.3%
1,954 Gilead Sciences, Inc. (b) 79,977
------------
BUILDING PRODUCTS -- 0.5%
1,017 Owens Corning, Inc. (b) 29,208
------------
CAPITAL MARKETS -- 0.4%
3,508 American Capital Ltd. (b) 23,609
------------
CHEMICALS -- 4.2%
874 Agrium, Inc. 58,654
865 Cabot Corp. 27,801
436 CF Industries Holdings, Inc. 63,211
356 Minerals Technologies, Inc. 20,125
1,129 Mosaic (The) Co. 56,936
126 NewMarket Corp. 24,962
624 OM Group, Inc. (b) 13,971
------------
265,660
------------
COMPUTERS & PERIPHERALS -- 1.7%
194 Apple, Inc. (b) 78,570
923 Lexmark International, Inc., Class A 30,524
------------
109,094
------------
CONSUMER FINANCE -- 1.4%
1,671 Capital One Financial Corp. 70,667
356 Cash America International, Inc. 16,600
------------
87,267
------------
CONTAINERS & PACKAGING -- 1.0%
656 AptarGroup, Inc. 34,224
814 Ball Corp. 29,068
------------
63,292
------------
DIVERSIFIED CONSUMER SERVICES
-- 0.2%
264 ITT Educational Services, Inc. (b) 15,019
------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.5%
1,274 NASDAQ OMX Group (The),
Inc. (b) 31,226
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.5%
2,592 AT&T, Inc. $ 78,382
1,911 BCE, Inc. 79,632
------------
158,014
------------
ELECTRIC UTILITIES -- 6.4%
514 ALLETE, Inc. 21,578
4,105 Duke Energy Corp. 90,310
2,103 Edison International 87,064
580 El Paso Electric Co. 20,091
1,634 Great Plains Energy, Inc. 35,589
713 Pinnacle West Capital Corp. 34,352
2,813 PPL Corp. 82,758
1,191 Westar Energy, Inc. 34,277
------------
406,019
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 2.1%
1,567 AVX Corp. 19,995
1,318 Hitachi Ltd., ADR 68,720
2,344 Sanmina-SCI Corp. (b) 21,823
466 Tech Data Corp. (b) 23,025
------------
133,563
------------
ENERGY EQUIPMENT & SERVICES
-- 1.0%
579 Oil States International, Inc. (b) 44,218
1,209 RPC, Inc. 22,065
------------
66,283
------------
FOOD & STAPLES RETAILING -- 1.9%
470 Casey's General Stores, Inc. 24,210
3,218 Kroger (The) Co. 77,940
493 Ruddick Corp. 21,021
------------
123,171
------------
FOOD PRODUCTS -- 6.3%
2,460 Archer-Daniels-Midland Co. 70,356
478 Bunge Ltd. 27,342
630 Cal-Maine Foods, Inc. 23,039
2,383 Campbell Soup Co. 79,211
1,420 Flowers Foods, Inc. 26,951
335 J & J Snack Foods Corp. 17,849
338 Lancaster Colony Corp. 23,437
500 McCormick & Co., Inc. 25,210
1,478 Smithfield Foods, Inc. (b) 35,886
2,223 Unilever PLC, ADR 74,515
------------
403,796
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 1.7%
11,411 Boston Scientific Corp. (b) 60,935
296 IDEXX Laboratories, Inc. (b) 22,780
1,362 Wright Medical Group, Inc. (b) 22,473
------------
106,188
------------
HEALTH CARE PROVIDERS & SERVICES
-- 0.2%
432 LifePoint Hospitals, Inc. (b) 16,049
------------
Page 60 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
HOTELS, RESTAURANTS & LEISURE
-- 3.8%
829 Brinker International, Inc. $ 22,184
601 Darden Restaurants, Inc. 27,394
846 McDonald's Corp. 84,879
691 Papa John's International, Inc. (b) 26,037
785 Penn National Gaming, Inc. (b) 29,885
636 Tim Hortons, Inc. 30,795
3,909 Wendy's (The) Co. 20,952
------------
242,126
------------
HOUSEHOLD DURABLES -- 0.7%
410 American Greetings Corp., Class A 5,129
1,812 Toll Brothers, Inc. (b) 37,001
------------
42,130
------------
HOUSEHOLD PRODUCTS -- 2.9%
857 Colgate-Palmolive Co. 79,178
1,123 Kimberly-Clark Corp. 82,608
508 WD-40 Co. 20,528
------------
182,314
------------
INDEPENDENT POWER PRODUCERS &
ENERGY TRADERS -- 0.4%
1,107 TransAlta Corp. 22,826
------------
INSURANCE -- 2.4%
116 Alleghany Corp. (b) 33,094
973 Chubb (The) Corp. 67,351
617 Hanover Insurance Group, Inc. 21,564
584 Transatlantic Holdings, Inc. 31,962
------------
153,971
------------
INTERNET & CATALOG RETAIL -- 0.5%
1,063 Expedia, Inc. 30,848
------------
INTERNET SOFTWARE & SERVICES
-- 2.1%
130 Google, Inc., Class A (b) 83,967
773 IAC/InterActiveCorp 32,930
675 j2 Global, Inc. 18,994
------------
135,891
------------
IT SERVICES -- 4.1%
422 DST Systems, Inc. 19,209
436 International Business Machines
Corp. 80,172
223 MasterCard, Inc., Class A 83,139
530 MAXIMUS, Inc. 21,915
812 NeuStar, Inc., Class A (b) 27,746
584 Teradata Corp. (b) 28,330
------------
260,511
------------
LEISURE EQUIPMENT & PRODUCTS
-- 1.0%
1,198 Mattel, Inc. 33,257
594 Polaris Industries, Inc. 33,252
------------
66,509
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
MACHINERY -- 0.3%
479 Sauer-Danfoss, Inc. (b) $ 17,345
------------
MEDIA -- 4.2%
2,934 CBS Corp., Class B 79,629
2,102 Live Nation Entertainment, Inc. (b) 17,468
4,507 News Corp., Class A 80,405
762 Scripps Networks Interactive, Class A 32,324
1,362 Shaw Communications, Inc., Class B 27,063
82 Washington Post (The) Co., Class B 30,898
------------
267,787
------------
METALS & MINING -- 4.0%
5,966 Alcoa, Inc. 51,606
1,476 Barrick Gold Corp. 66,789
1,711 Commercial Metals Co. 23,663
1,611 Freeport-McMoRan Copper & Gold,
Inc. 59,269
4,689 Kinross Gold Corp. 53,454
------------
254,781
------------
MULTILINE RETAIL -- 1.4%
705 Dillard's, Inc., Class A 31,641
438 Dollar Tree, Inc. (b) 36,402
2,268 Saks, Inc. (b) 22,113
------------
90,156
------------
MULTI-UTILITIES -- 5.6%
782 Alliant Energy Corp. 34,494
990 Ameren Corp. 32,799
838 Avista Corp. 21,578
1,676 CenterPoint Energy, Inc. 33,671
1,361 Consolidated Edison, Inc. 84,423
1,533 Dominion Resources, Inc. 81,371
623 Integrys Energy Group, Inc. 33,754
1,491 NiSource, Inc. 35,501
------------
357,591
------------
OFFICE ELECTRONICS -- 1.1%
1,556 CANON, Inc., ADR 68,526
------------
OIL, GAS & CONSUMABLE FUELS
-- 6.0%
414 Alliance Resource Partners L.P. (c) 31,290
763 Chevron Corp. 81,183
1,107 ConocoPhillips 80,667
1,114 Royal Dutch Shell PLC, ADR 81,422
1,440 Tesoro Corp. (b) 33,639
3,500 Valero Energy Corp. 73,675
------------
381,876
------------
PERSONAL PRODUCTS -- 1.0%
522 Herbalife Ltd. 26,972
740 Nu Skin Enterprises, Inc., Class A 35,942
------------
62,914
------------
PHARMACEUTICALS -- 3.6%
2,098 Eli Lilly & Co. 87,193
2,136 Forest Laboratories, Inc. (b) 64,636
1,154 Johnson & Johnson 75,679
------------
227,508
------------
See Notes to Financial Statements Page 61
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS
-- 1.0%
4,091 Annaly Capital Management, Inc. $ 65,292
------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 1.1%
2,464 Brookfield Asset Management, Inc.,
Class A 67,711
------------
ROAD & RAIL -- 0.7%
1,493 Heartland Express, Inc. 21,335
851 Werner Enterprises, Inc. 20,509
------------
41,844
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.8%
2,086 Brooks Automation, Inc. 21,423
1,634 GT Advanced Technologies, Inc. (b) 11,830
517 Xilinx, Inc. 16,575
------------
49,828
------------
SOFTWARE -- 1.2%
2,914 Microsoft Corp. 75,647
------------
SPECIALTY RETAIL -- 6.6%
755 Aaron's, Inc. 20,143
643 Ascena Retail Group, Inc. (b) 19,110
254 AutoZone, Inc. (b) 82,542
447 DSW, Inc., Class A 19,762
1,588 Gap (The), Inc. 29,457
473 Genesco, Inc. (b) 29,203
487 Group 1 Automotive, Inc. 25,227
699 PetSmart, Inc. 35,852
723 Ross Stores, Inc. 34,364
1,424 Sonic Automotive, Inc., Class A 21,090
1,202 Stage Stores, Inc. 16,696
1,357 TJX (The) Cos., Inc. 87,594
------------
421,040
------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.8%
868 NIKE, Inc., Class B 83,649
214 Ralph Lauren Corp. 29,549
------------
113,198
------------
TOBACCO -- 1.4%
1,098 Philip Morris International, Inc. 86,171
------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.3%
1,710 Aircastle Ltd. 21,751
------------
WATER UTILITIES -- 0.5%
1,036 American Water Works Co., Inc. 33,007
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 1.1%
3,088 America Movil SAB de C.V.,
Series L, ADR 69,789
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
TOTAL COMMON STOCKS -- 100.1% $ 6,358,263
(Cost $6,149,375)
MONEY MARKET FUND -- 0.0%
3,082 Morgan Stanley Institutional Treasury
Money Market Fund - 0.01% (d) 3,082
(Cost $3,082) ------------
TOTAL INVESTMENTS -- 100.1% 6,361,345
(Cost $6,152,457) (e)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (4,470)
------------
NET ASSETS -- 100.0% $ 6,356,875
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Master Limited Partnership ("MLP").
(d) Represents annualized 7-day yield at December 31, 2011.
(e) Aggregate cost for federal income tax purposes is $6,166,047. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$515,573 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$320,275.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $ 6,358,263 $ -- $ --
Money Market Fund 3,082 -- --
------------------------------------------
Total Investments $ 6,361,345 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
Page 62 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 4.7%
29,498 Boeing (The) Co. $ 2,163,678
32,915 General Dynamics Corp. 2,185,885
39,869 Honeywell International, Inc. 2,166,880
32,586 L-3 Communications Holdings, Inc. 2,172,835
26,940 Lockheed Martin Corp. 2,179,446
37,220 Northrop Grumman Corp. 2,176,626
45,059 Raytheon Co. 2,179,954
29,593 United Technologies Corp. 2,162,952
------------
17,388,256
------------
AIR FREIGHT & LOGISTICS -- 0.6%
29,811 United Parcel Service, Inc., Class B 2,181,867
------------
AUTOMOBILES -- 0.6%
73,418 Honda Motor Co., Ltd., ADR 2,242,920
------------
BEVERAGES -- 1.8%
31,351 Coca-Cola (The) Co. 2,193,630
49,757 Molson Coors Brewing Co., Class B 2,166,420
33,004 PepsiCo, Inc. 2,189,815
------------
6,549,865
------------
BIOTECHNOLOGY -- 0.6%
34,008 Amgen, Inc. 2,183,654
------------
CAPITAL MARKETS -- 1.2%
148,427 Federated Investors, Inc., Class B 2,248,669
163,370 KKR & Co. L.P. (b) 2,096,037
------------
4,344,706
------------
CHEMICALS -- 2.4%
25,351 Air Products and Chemicals, Inc. 2,159,652
47,389 E.I. du Pont de Nemours & Co. 2,169,468
41,072 International Flavors & Fragrances,
Inc. 2,152,994
26,092 PPG Industries, Inc. 2,178,421
------------
8,660,535
------------
COMMERCIAL BANKS -- 4.8%
40,376 Bank of Montreal 2,213,009
44,116 Bank of Nova Scotia 2,197,418
39,212 BOK Financial Corp. 2,153,915
30,572 Canadian Imperial Bank of
Commerce 2,212,496
56,978 Commerce Bancshares, Inc. 2,172,001
41,142 Cullen/Frost Bankers, Inc. 2,176,823
43,719 Royal Bank of Canada 2,227,920
29,970 Toronto-Dominion (The) Bank 2,242,056
------------
17,595,638
------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.2%
76,547 Avery Dennison Corp. 2,195,368
66,691 Waste Management, Inc. 2,181,463
------------
4,376,831
------------
COMPUTERS & PERIPHERALS -- 0.6%
71,782 Diebold, Inc. 2,158,485
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
CONTAINERS & PACKAGING -- 1.2%
72,832 Bemis Co., Inc. $ 2,190,787
65,514 Sonoco Products Co. 2,159,341
------------
4,350,128
------------
DISTRIBUTORS -- 0.6%
35,387 Genuine Parts Co. 2,165,684
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.4%
72,929 AT&T, Inc. 2,205,373
58,956 CenturyLink, Inc. 2,193,163
127,371 Telefonica S.A., ADR 2,189,508
54,783 Verizon Communications, Inc. 2,197,894
------------
8,785,938
------------
ELECTRIC UTILITIES -- 7.7%
51,767 ALLETE, Inc. 2,173,179
57,396 Cleco Corp. 2,186,788
99,626 Duke Energy Corp. 2,191,772
61,747 El Paso Electric Co. 2,138,916
29,770 Entergy Corp. 2,174,699
50,155 Exelon Corp. 2,175,222
48,869 FirstEnergy Corp. 2,164,897
46,642 MGE Energy, Inc. 2,181,446
36,050 NextEra Energy, Inc. 2,194,724
44,976 Pinnacle West Capital Corp. 2,166,944
47,073 Southern (The) Co. 2,179,009
61,539 UIL Holdings Corp. 2,176,634
76,095 Westar Energy, Inc. 2,190,014
------------
28,294,244
------------
ELECTRICAL EQUIPMENT -- 1.2%
47,246 Emerson Electric Co. 2,201,191
32,698 Hubbell, Inc., Class B 2,186,188
------------
4,387,379
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.6%
90,416 Molex, Inc. 2,157,326
------------
FOOD & STAPLES RETAILING -- 2.4%
103,388 Safeway, Inc. 2,175,284
74,289 Sysco Corp. 2,178,896
65,671 Walgreen Co. 2,171,083
36,617 Wal-Mart Stores, Inc. 2,188,232
------------
8,713,495
------------
FOOD PRODUCTS -- 7.7%
75,440 Archer-Daniels-Midland Co. 2,157,584
65,888 Campbell Soup Co. 2,190,117
82,330 ConAgra Foods, Inc. 2,173,512
114,641 Flowers Foods, Inc. 2,175,886
53,947 General Mills, Inc. 2,179,998
40,339 H. J. Heinz Co. 2,179,920
35,605 Hershey (The) Co. 2,199,677
27,830 J.M. Smucker (The) Co. 2,175,471
43,168 Kellogg Co. 2,183,006
58,111 Kraft Foods, Inc., Class A 2,171,027
43,177 McCormick & Co., Inc. 2,176,984
115,853 Sara Lee Corp. 2,191,939
See Notes to Financial Statements Page 63
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
FOOD PRODUCTS (CONTINUED)
65,533 Unilever PLC, ADR $ 2,196,666
------------
28,351,787
------------
GAS UTILITIES -- 5.3%
51,779 AGL Resources, Inc. 2,188,181
65,318 Atmos Energy Corp. 2,178,355
38,803 National Fuel Gas Co. 2,156,671
44,027 New Jersey Resources Corp. 2,166,128
45,143 Northwest Natural Gas Co. 2,163,704
63,816 Piedmont Natural Gas Co., Inc. 2,168,468
38,147 South Jersey Industries, Inc. 2,167,131
74,466 UGI Corp. 2,189,300
49,198 WGL Holdings, Inc. 2,175,536
------------
19,553,474
------------
HEALTH CARE EQUIPMENT & SUPPLIES
-- 2.4%
44,240 Baxter International, Inc. 2,188,995
29,289 Becton, Dickinson & Co. 2,188,474
58,034 Medtronic, Inc. 2,219,801
63,026 St. Jude Medical, Inc. 2,161,792
------------
8,759,062
------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.2%
85,411 Lincare Holdings, Inc. 2,195,917
77,826 Owens & Minor, Inc. 2,162,784
------------
4,358,701
------------
HOTELS, RESTAURANTS & LEISURE
-- 0.6%
21,788 McDonald's Corp. 2,185,990
------------
HOUSEHOLD DURABLES -- 0.6%
92,283 Leggett & Platt, Inc. 2,126,200
------------
HOUSEHOLD PRODUCTS -- 2.4%
32,791 Clorox (The) Co. 2,182,569
23,471 Colgate-Palmolive Co. 2,168,485
29,677 Kimberly-Clark Corp. 2,183,040
32,801 Procter & Gamble (The) Co. 2,188,155
------------
8,722,249
------------
INDUSTRIAL CONGLOMERATES -- 0.6%
26,626 3M Co. 2,176,143
------------
INSURANCE -- 5.9%
31,035 ACE Ltd. 2,176,174
79,665 Allstate (The) Corp. 2,183,618
64,778 Arthur J. Gallagher & Co. 2,166,176
31,159 Chubb (The) Corp. 2,156,826
71,641 Cincinnati Financial Corp. 2,182,185
28,105 Erie Indemnity Co., Class A 2,196,687
25,572 Everest Re Group, Ltd. 2,150,350
62,115 Hanover Insurance Group, Inc. 2,170,919
47,771 Mercury General Corp. 2,179,313
36,801 Travelers (The) Cos., Inc. 2,177,515
------------
21,739,763
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
IT SERVICES -- 2.4%
41,390 Accenture PLC, Class A $ 2,203,190
40,257 Automatic Data Processing, Inc. 2,174,280
90,904 Computer Sciences Corp. 2,154,425
72,856 Paychex, Inc. 2,193,694
------------
8,725,589
------------
LEISURE EQUIPMENT & PRODUCTS
-- 1.2%
68,164 Hasbro, Inc. 2,173,750
78,749 Mattel, Inc. 2,186,072
------------
4,359,822
------------
MACHINERY -- 2.3%
49,276 Eaton Corp. 2,144,984
45,766 Illinois Tool Works, Inc. 2,137,730
42,498 Snap-on, Inc. 2,151,249
32,208 Stanley Black & Decker, Inc. 2,177,261
------------
8,611,224
------------
MEDIA -- 1.8%
49,757 Omnicom Group, Inc. 2,218,167
82,828 Thomson Reuters Corp. 2,209,023
5,761 Washington Post (The) Co., Class B 2,170,802
------------
6,597,992
------------
MULTILINE RETAIL -- 0.6%
42,042 Target Corp. 2,153,391
------------
MULTI-UTILITIES -- 8.9%
49,476 Alliant Energy Corp. 2,182,386
83,586 Avista Corp. 2,152,340
35,053 Consolidated Edison, Inc. 2,174,338
41,003 Dominion Resources, Inc. 2,176,439
40,302 Integrys Energy Group, Inc. 2,183,562
101,803 MDU Resources Group, Inc. 2,184,693
47,195 NSTAR 2,216,277
38,631 OGE Energy Corp. 2,190,764
52,524 PG&E Corp. 2,165,039
66,752 Public Service Enterprise Group, Inc. 2,203,484
48,533 SCANA Corp. 2,186,897
39,840 Sempra Energy 2,191,200
72,232 Vectren Corp. 2,183,573
62,292 Wisconsin Energy Corp. 2,177,728
79,319 Xcel Energy, Inc. 2,192,377
------------
32,761,097
------------
OFFICE ELECTRONICS -- 0.6%
49,836 CANON, Inc., ADR 2,194,777
------------
OIL, GAS & CONSUMABLE FUELS
-- 4.2%
20,289 Chevron Corp. 2,158,750
30,036 ConocoPhillips 2,188,723
58,546 Enbridge, Inc. 2,190,206
25,689 Exxon Mobil Corp. 2,177,400
29,835 Royal Dutch Shell PLC, ADR 2,180,640
43,246 Total S.A., ADR 2,210,303
49,927 TransCanada Corp. 2,180,312
------------
15,286,334
------------
Page 64 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS -- 5.4%
38,961 Abbott Laboratories $ 2,190,777
62,185 Bristol-Myers Squibb Co. 2,191,399
52,474 Eli Lilly & Co. 2,180,820
47,897 GlaxoSmithKline PLC, ADR 2,185,540
33,184 Johnson & Johnson 2,176,207
58,034 Merck & Co., Inc. 2,187,882
38,381 Novartis AG, ADR 2,194,242
100,633 Pfizer, Inc. 2,177,698
60,619 Sanofi, ADR 2,215,018
------------
19,699,583
------------
REAL ESTATE INVESTMENT TRUSTS
-- 0.6%
16,143 Public Storage 2,170,588
------------
ROAD & RAIL -- 0.6%
20,729 Union Pacific Corp. 2,196,030
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.9%
60,220 Analog Devices, Inc. 2,154,672
202,289 Applied Materials, Inc. 2,166,515
89,201 Intel Corp. 2,163,124
73,938 Texas Instruments, Inc. 2,152,335
67,847 Xilinx, Inc. 2,175,175
------------
10,811,821
------------
SOFTWARE -- 0.6%
84,132 Microsoft Corp. 2,184,067
------------
SPECIALTY RETAIL -- 2.3%
114,942 Gap (The), Inc. 2,132,174
51,890 Home Depot (The), Inc. 2,181,456
85,779 Lowe's Cos., Inc. 2,177,071
154,717 Staples, Inc. 2,149,019
------------
8,639,720
------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.6%
16,780 VF Corp. 2,130,892
------------
TOBACCO -- 3.0%
73,714 Altria Group, Inc. 2,185,620
23,151 British American Tobacco PLC, ADR 2,196,567
19,214 Lorillard, Inc. 2,190,396
27,791 Philip Morris International, Inc. 2,181,038
52,487 Reynolds American, Inc. 2,174,011
------------
10,927,632
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.6%
78,664 Vodafone Group PLC, ADR 2,204,952
------------
TOTAL INVESTMENTS -- 99.9% 366,165,831
(Cost $327,944,716) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 232,726
------------
NET ASSETS -- 100.0% $366,398,557
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Master Limited Partnership ("MLP").
(c) Aggregate cost for federal income tax purposes is $338,867,959. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$34,141,455 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$6,843,583.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $366,165,831 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 65
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (b) -- 100.0%
AIR FREIGHT & LOGISTICS -- 3.6%
7,819 C.H. Robinson Worldwide, Inc. $ 545,610
12,898 Expeditors International of
Washington, Inc. 528,302
------------
1,073,912
------------
BEVERAGES -- 1.7%
5,430 Hansen Natural Corp. (c) 500,320
------------
BIOTECHNOLOGY -- 10.8%
7,845 Alexion Pharmaceuticals, Inc. (c) 560,917
8,671 Amgen, Inc. 556,765
4,721 Biogen Idec, Inc. (c) 519,546
8,175 Celgene Corp. (c) 552,630
14,012 Gilead Sciences, Inc. (c) 573,511
15,355 Vertex Pharmaceuticals, Inc. (c) 509,940
------------
3,273,309
------------
CHEMICALS -- 1.7%
8,245 Sigma-Aldrich Corp. 514,983
------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.8%
6,806 Stericycle, Inc. (c) 530,324
------------
DIVERSIFIED CONSUMER SERVICES
-- 1.9%
10,383 Apollo Group, Inc., Class A (c) 559,332
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.7%
89,929 Flextronics International Ltd. (c) 508,998
------------
FOOD & STAPLES RETAILING -- 3.6%
6,306 Costco Wholesale Corp. 525,416
7,870 Whole Foods Market, Inc. 547,595
------------
1,073,011
------------
FOOD PRODUCTS -- 1.7%
11,504 Green Mountain Coffee Roasters,
Inc. (c) 515,954
------------
HEALTH CARE EQUIPMENT & SUPPLIES
-- 3.6%
15,023 DENTSPLY International, Inc. 525,655
1,205 Intuitive Surgical, Inc. (c) 557,927
------------
1,083,582
------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.6%
11,964 Express Scripts, Inc. (c) 534,671
8,339 Henry Schein, Inc. (c) 537,282
------------
1,071,953
------------
HOTELS, RESTAURANTS & LEISURE
-- 5.4%
22,541 Ctrip.com International Ltd., ADR (c) 527,459
11,975 Starbucks Corp. 550,970
4,928 Wynn Resorts Ltd. 544,495
------------
1,622,924
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
INTERNET & CATALOG RETAIL -- 8.8%
2,873 Amazon.com, Inc. (c) $ 497,316
19,787 Expedia, Inc. 574,219
33,745 Liberty Interactive Corp., Class A (c) 547,175
7,458 Netflix, Inc. (c) 516,765
1,139 priceline.com, Inc. (c) 532,722
------------
2,668,197
------------
INTERNET SOFTWARE & SERVICES
-- 1.7%
17,128 eBay, Inc. (c) 519,492
------------
IT SERVICES -- 5.3%
10,066 Automatic Data Processing, Inc. 543,664
9,066 Fiserv, Inc. (c) 532,537
17,597 Paychex, Inc. 529,846
------------
1,606,047
------------
LEISURE EQUIPMENT & PRODUCTS
-- 1.7%
18,629 Mattel, Inc. 517,141
------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.7%
13,389 Life Technologies Corp. (c) 520,966
------------
MACHINERY -- 1.8%
14,376 PACCAR, Inc. 538,669
------------
MEDIA -- 8.9%
22,318 Comcast Corp., Class A 529,160
12,368 DIRECTV, Class A (c) 528,856
30,665 News Corp., Class A 547,063
294,174 Sirius XM Radio, Inc. (c) 535,397
24,854 Virgin Media, Inc. 531,378
------------
2,671,854
------------
METALS & MINING -- 1.7%
5,115 Randgold Resources Ltd., ADR 522,242
------------
MULTILINE RETAIL -- 2.9%
6,287 Dollar Tree, Inc. (c) 522,513
11,280 Sears Holdings Corp. (c) 358,478
------------
880,991
------------
PHARMACEUTICALS -- 7.0%
24,937 Mylan, Inc. (c) 535,148
5,303 Perrigo Co. 515,982
12,188 Teva Pharmaceutical Industries Ltd.,
ADR 491,908
37,139 Warner Chilcott PLC, Class A (c) 561,913
------------
2,104,951
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.8%
16,317 First Solar, Inc. (c) 550,862
------------
SOFTWARE -- 3.5%
43,829 Activision Blizzard, Inc. 539,973
25,745 Electronic Arts, Inc. (c) 530,347
------------
1,070,320
------------
Page 66 See Notes to Financial Statements
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (b) (CONTINUED)
SPECIALTY RETAIL -- 6.8%
8,505 Bed Bath & Beyond, Inc. (c) $ 493,035
401 Orchard Supply Hardware Stores
Corp., Class A (c) (d) 1,506
6,518 O'Reilly Automotive, Inc. (c) 521,114
11,078 Ross Stores, Inc. 526,537
36,981 Staples, Inc. 513,666
------------
2,055,858
------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.7%
6,433 Fossil, Inc. (c) 510,523
------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.8%
12,571 Fastenal Co. 548,221
------------
WIRELESS TELECOMMUNICATION
SERVICES -- 1.8%
19,164 Vodafone Group PLC, ADR 537,167
------------
TOTAL COMMON STOCKS -- 100.0% 30,152,103
(Cost $30,861,003)
PREFERRED STOCK -- 0.0%
SPECIALTY RETAIL -- 0.0%
401 Orchard Supply Hardware Stores
Corp. (c) (d) 1,506
(Cost $0) ------------
TOTAL INVESTMENTS -- 100.0% 30,153,609
(Cost $30,861,003) (e)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 3,286
------------
NET ASSETS -- 100.0% $ 30,156,895
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) The industry allocation is based on Standard & Poor's Global Industry
Classification Standard ("GICS"), and is different than the industry
sector classification system used by the Index to select securities, which
is the Industry Classification Benchmark ("ICB") system, the joint
classification system of Dow Jones Indexes and FTSE Group.
(c) Non-income producing security.
(d) This security is fair valued in accordance with procedures adopted by the
Trust's Board of Trustees and in accordance with the provisions of the
Investment Company Act of 1940, as amended.
(e) Aggregate cost for federal income tax purposes is $31,214,611. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$2,149,190 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$3,210,192.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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
TOTAL
VALUE AT
INVESTMENTS 12/31/2011 LEVEL 1 LEVEL 2 LEVEL 3
------------------------------------------------------------------
Common Stocks:
Specialty Retail $ 2,055,858 $ 2,054,352 $ 1,506 $ --
Other Industry
Categories* 28,096,245 28,096,245 -- --
---------------------------------------------
Total Common Stocks 30,152,103 30,150,597 1,506 --
Preferred Stocks* 1,506 -- 1,506 --
---------------------------------------------
TOTAL INVESTMENTS $ 30,153,609 $ 30,150,597 $ 3,012 $ --
=============================================
* See Portfolio of Investments for industry breakout. Industry categories are
only shown separately if they include holdings in two or more levels or have
holdings in only Level 3.
See Notes to Financial Statements Page 67
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 4.2%
36,125 Hexcel Corp. (b) $ 874,586
------------
AUTOMOBILES -- 7.0%
50,520 Tesla Motors, Inc. (b) 1,442,851
------------
BIOTECHNOLOGY -- 0.8%
18,074 Codexis, Inc. (b) 95,792
17,151 Metabolix, Inc. (b) 78,037
------------
173,829
------------
BUILDING PRODUCTS -- 0.8%
12,751 Ameresco, Inc., Class A (b) 174,944
------------
CHEMICALS -- 0.6%
17,279 Zoltek Cos., Inc. (b) 131,666
------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.7%
13,470 EnerNOC, Inc. (b) 146,419
------------
ELECTRICAL EQUIPMENT -- 2.9%
67,529 A123 Systems, Inc. (b) 108,722
25,852 American Superconductor Corp. (b) 95,394
130,594 Capstone Turbine Corp. (b) 151,489
60,216 Satcon Technology Corp. (b) 36,135
84,413 Valence Technology, Inc. (b) 82,725
15,105 Vicor Corp. 120,236
------------
594,701
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 16.0%
69,570 AVX Corp. 887,713
21,372 Echelon Corp. (b) 104,082
21,735 Elster Group SE, ADR (b) 282,555
20,479 Itron, Inc. (b) 732,534
14,144 Maxwell Technologies, Inc. (b) 229,699
61,217 Power-One, Inc. (b) 239,358
23,106 Universal Display Corp. (b) 847,759
------------
3,323,700
------------
INDEPENDENT POWER PRODUCERS &
ENERGY TRADERS -- 2.0%
22,841 Ormat Technologies, Inc. 411,823
------------
MACHINERY -- 1.9%
13,411 ESCO Technologies, Inc. 385,969
------------
OIL, GAS & CONSUMABLE FUELS
-- 5.2%
22,903 Amyris, Inc. (b) 264,301
13,106 Gevo, Inc. (b) 82,437
16,543 Green Plains Renewable Energy,
Inc. (b) 161,460
20,214 KiOR, Inc., Class A (b) 205,778
30,029 Solazyme, Inc. (b) 357,345
------------
1,071,321
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 57.9%
22,245 Advanced Analogic Technologies,
Inc. (b) $ 128,576
3,309 Aixtron SE, ADR 42,024
21,716 Canadian Solar, Inc. (b) 57,765
56,158 Cree, Inc. (b) 1,237,722
63,561 Fairchild Semiconductor
International, Inc. (b) 765,274
37,619 First Solar, Inc. (b) 1,270,017
63,960 GT Advanced Technologies, Inc. (b) 463,070
25,968 Hanwha SolarOne Co., Ltd., ADR (b) 25,519
34,714 International Rectifier Corp. (b) 674,146
15,676 IXYS Corp. (b) 169,771
67,230 JA Solar Holdings Co., Ltd., ADR (b) 90,088
6,722 JinkoSolar Holding Co., Ltd.,
ADR (b) 33,610
53,098 LDK Solar Co., Ltd., ADR (b) 222,481
58,781 Linear Technology Corp. 1,765,193
115,869 MEMC Electronic Materials, Inc. (b) 456,524
43,665 Microsemi Corp. (b) 731,389
16,643 O2Micro International Ltd., ADR (b) 66,406
217,855 ON Semiconductor Corp. (b) 1,681,841
14,103 Power Integrations, Inc. 467,655
43,816 Renesola Ltd., ADR (b) 67,038
11,349 Rubicon Technology, Inc. (b) 106,567
20,916 STR Holdings, Inc. (b) 172,139
50,483 SunPower Corp., Class A (b) 314,509
65,141 Suntech Power Holdings Co., Ltd.,
ADR (b) 143,962
36,878 Trina Solar Ltd., ADR (b) 246,345
19,465 Veeco Instruments, Inc. (b) 404,872
54,917 Yingli Green Energy Holding Co.,
Ltd., ADR (b) 208,685
------------
12,013,188
------------
TOTAL INVESTMENTS -- 100.0% 20,744,997
(Cost $30,589,929) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% (5,370)
------------
NET ASSETS -- 100.0% $ 20,739,627
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Aggregate cost for federal income tax purposes is $35,405,199. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$1,681,776 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$16,341,978.
ADR - American Depositary Receipt
Page 68 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $20,744,997 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 69
FIRST TRUST S&P REIT INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (b) -- 99.8%
DIVERSIFIED REITS -- 6.3%
29,290 American Assets Trust, Inc. $ 600,738
58,170 CapLease, Inc. 235,007
90,975 Cousins Properties, Inc. 583,150
9,600 Gladstone Commercial Corp. 168,480
72,000 Investors Real Estate Trust 525,240
101,792 Liberty Property Trust 3,143,337
9,579 One Liberty Properties, Inc. 158,053
16,296 PS Business Parks, Inc. 903,287
161,839 Vornado Realty Trust 12,438,946
57,955 Washington Real Estate Investment
Trust 1,585,069
25,796 Winthrop Realty Trust 262,345
------------
20,603,652
------------
INDUSTRIAL REITS -- 4.8%
216,052 DCT Industrial Trust, Inc. 1,106,186
23,551 EastGroup Properties, Inc. 1,023,997
75,985 First Industrial Realty Trust, Inc. (c) 777,327
44,115 First Potomac Realty Trust 575,701
34,442 Monmouth Real Estate Investment
Corp., Class A 315,144
401,978 Prologis, Inc. 11,492,551
11,993 STAG Industrial, Inc. 137,560
6,612 Terreno Realty Corp. 100,106
------------
15,528,572
------------
OFFICE REITS -- 15.9%
54,349 Alexandria Real Estate Equities, Inc. 3,748,451
134,940 BioMed Realty Trust, Inc. 2,439,715
129,502 Boston Properties, Inc. 12,898,399
118,891 Brandywine Realty Trust 1,129,465
73,440 CommonWealth REIT 1,222,042
17,412 Coresite Realty Corp. 310,282
63,149 Corporate Office Properties Trust 1,342,548
92,069 Digital Realty Trust, Inc. 6,138,240
112,118 Douglas Emmett, Inc. 2,045,032
221,866 Duke Realty Corp. 2,673,485
55,000 DuPont Fabros Technology, Inc. 1,332,100
63,291 Franklin Street Properties Corp. 629,745
30,955 Government Properties Income Trust 698,035
63,667 Highwoods Properties, Inc. 1,889,000
15,020 Hudson Pacific Properties, Inc. 212,683
51,284 Kilroy Realty Corp. 1,952,382
117,778 Lexington Realty Trust 882,157
76,442 Mack-Cali Realty Corp. 2,040,237
17,633 Mission West Properties, Inc. 159,050
37,578 MPG Office Trust, Inc. (c) 74,780
19,296 Parkway Properties, Inc. 190,259
151,604 Piedmont Office Realty Trust, Inc.,
Class A 2,583,332
75,570 SL Green Realty Corp. 5,035,985
------------
51,627,404
------------
RESIDENTIAL REITS -- 18.5%
62,155 American Campus Communities, Inc. 2,608,024
106,065 Apartment Investment &
Management Co., Class A 2,429,949
37,129 Associated Estates Realty Corp. 592,207
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
RESIDENTIAL REITS (CONTINUED)
83,403 AvalonBay Communities, Inc. $ 10,892,432
66,062 BRE Properties, Inc. 3,334,810
62,595 Camden Property Trust 3,895,913
26,939 Campus Crest Communities, Inc. 271,006
76,650 Colonial Properties Trust 1,598,919
80,692 Education Realty Trust, Inc. 825,479
35,787 Equity Lifestyle Properties, Inc. 2,386,635
260,201 Equity Residential 14,839,263
29,933 Essex Property Trust, Inc. 4,205,886
42,340 Home Properties, Inc. 2,437,514
33,181 Mid-America Apartment
Communities, Inc. 2,075,471
45,509 Post Properties, Inc. 1,989,653
19,037 Sun Communities, Inc. 695,422
192,148 UDR, Inc. 4,822,915
11,241 UMH Properties, Inc. 104,654
------------
60,006,152
------------
RETAIL REITS -- 26.5%
37,356 Acadia Realty Trust 752,350
8,639 Agree Realty Corp. 210,619
1,794 Alexander's, Inc. 663,834
130,142 CBL & Associates Properties, Inc. 2,043,229
48,923 Cedar Realty Trust, Inc. 210,858
191,934 DDR Corp. 2,335,837
52,301 Equity One, Inc. 888,071
26,570 Excel Trust, Inc. 318,840
55,697 Federal Realty Investment Trust 5,054,503
516,903 General Growth Properties, Inc. 7,763,883
23,729 Getty Realty Corp. 331,019
94,289 Glimcher Realty Trust 867,459
67,873 Inland Real Estate Corp. 516,514
356,969 Kimco Realty Corp. 5,797,177
55,800 Kite Realty Group Trust 251,658
115,737 Macerich (The) Co. 5,856,292
90,703 National Retail Properties, Inc. 2,392,745
48,834 Pennsylvania Real Estate
Investment Trust 509,827
34,193 Ramco-Gershenson Properties Trust 336,117
116,849 Realty Income Corp. 4,085,041
78,872 Regency Centers Corp. 2,967,165
42,722 Retail Opportunity Investments Corp. 505,828
10,315 Saul Centers, Inc. 365,357
257,716 Simon Property Group, Inc. 33,229,901
76,049 Tanger Factory Outlet Centers, Inc. 2,229,757
50,804 Taubman Centers, Inc. 3,154,928
20,249 Urstadt Biddle Properties, Inc.,
Class A 366,102
106,002 Weingarten Realty Investors 2,312,964
------------
86,317,875
------------
SPECIALIZED REITS -- 27.8%
59,678 Ashford Hospitality Trust 477,424
12,122 Chatham Lodging Trust 130,675
28,211 Chesapeake Lodging Trust 436,142
44,845 Cogdell Spencer, Inc. 190,591
107,516 CubeSmart 1,143,970
146,931 DiamondRock Hospitality Co. 1,416,415
40,987 Entertainment Properties Trust 1,791,542
Page 70 See Notes to Financial Statements
FIRST TRUST S&P REIT INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (b) (CONTINUED)
SPECIALIZED REITS (CONTINUED)
82,786 Extra Space Storage, Inc. $ 2,005,905
109,281 FelCor Lodging Trust, Inc. (c) 333,307
357,708 HCP, Inc. 14,819,842
166,474 Health Care REIT, Inc. 9,077,827
68,275 Healthcare Realty Trust, Inc. 1,269,232
132,671 Hersha Hospitality Trust 647,435
108,356 Hospitality Properties Trust 2,490,021
619,507 Host Hotels & Resorts, Inc. 9,150,118
73,498 LaSalle Hotel Properties 1,779,387
26,616 LTC Properties, Inc. 821,370
97,062 Medical Properties Trust, Inc. 958,002
24,334 National Health Investors, Inc. 1,070,209
90,498 OMEGA Healthcare Investors, Inc. 1,751,136
44,649 Pebblebrook Hotel Trust 856,368
124,543 Public Storage 16,746,052
25,178 RLJ Lodging Trust 423,746
142,670 Senior Housing Properties Trust 3,201,515
24,433 Sovran Self Storage, Inc. 1,042,556
143,294 Strategic Hotels & Resorts, Inc. (c) 769,489
23,930 Summit Hotel Properties, Inc. 225,899
104,100 Sunstone Hotel Investors, Inc. (c) 848,415
11,110 Universal Health Realty Income
Trust 433,290
252,565 Ventas, Inc. 13,923,908
------------
90,231,788
------------
TOTAL INVESTMENTS -- 99.8% 324,315,443
(Cost $339,580,242) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 645,355
------------
NET ASSETS -- 100.0% $324,960,798
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) The industry classification is based upon Standard & Poor's Global
Industry Classification Standard ("GICS") Sub-Industry.
(c) Non-income producing security.
(d) Aggregate cost for federal income tax purposes is $344,113,848. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$6,243,509 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$26,041,914.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $324,315,443 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 71
FIRST TRUST ISE WATER INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 100.0%
CHEMICALS -- 4.1%
20,704 Ashland, Inc. $ 1,183,441
77,626 Calgon Carbon Corp. (b) 1,219,504
------------
2,402,945
------------
COMMERCIAL SERVICES & SUPPLIES
-- 3.5%
92,953 Tetra Tech, Inc. (b) 2,006,855
------------
CONSTRUCTION & ENGINEERING
-- 9.2%
35,030 AECOM Technology Corp. (b) 720,567
73,613 Aegion Corp. (b) 1,129,223
31,117 Layne Christensen Co. (b) 753,031
87,425 Northwest Pipe Co. (b) 1,998,536
20,157 URS Corp. (b) 707,914
------------
5,309,271
------------
ELECTRICAL EQUIPMENT -- 6.8%
22,652 Emerson Electric Co. 1,055,357
38,548 Franklin Electric Co., Inc. 1,679,151
13,805 Roper Industries, Inc. 1,199,240
------------
3,933,748
------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 4.0%
39,846 Badger Meter, Inc. 1,172,668
31,855 Itron, Inc. (b) 1,139,453
------------
2,312,121
------------
HEALTH CARE EQUIPMENT & SUPPLIES
-- 1.3%
9,789 IDEXX Laboratories, Inc. (b) 753,362
------------
INDUSTRIAL CONGLOMERATES -- 3.5%
43,545 Danaher Corp. 2,048,357
------------
LIFE SCIENCES TOOLS & SERVICES
-- 3.0%
49,568 Agilent Technologies, Inc. (b) 1,731,410
------------
MACHINERY -- 39.9%
24,538 Crane Co. 1,146,170
819,295 Energy Recovery, Inc. (b) 2,113,781
663,350 Flow International Corp. (b) 2,321,725
11,279 Flowserve Corp. 1,120,230
47,293 IDEX Corp. 1,755,043
87,826 ITT Corp. 1,697,677
43,297 Lindsay Corp. 2,376,572
29,519 Mueller Industries, Inc. 1,134,120
959,210 Mueller Water Products, Inc., Class A 2,340,473
36,059 Pall Corp. 2,060,772
63,554 Pentair, Inc. 2,115,713
8,458 Valmont Industries, Inc. 767,902
64,201 Watts Water Technologies, Inc.,
Class A 2,196,316
------------
23,146,494
------------
MULTI-UTILITIES -- 3.8%
198,048 Veolia Environment, ADR 2,188,430
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
WATER UTILITIES -- 20.9%
21,010 American States Water Co. $ 733,249
75,128 American Water Works Co., Inc. 2,393,578
107,902 Aqua America, Inc. 2,379,239
129,362 California Water Service Group 2,362,150
42,765 Cia de Saneamento Basico do
Estado de Sao Paulo, ADR (b) 2,379,873
220,838 Consolidated Water Co., Ltd. 1,894,790
------------
12,142,879
------------
TOTAL COMMON STOCKS -- 100.0% 57,975,872
(Cost $59,834,664)
MONEY MARKET FUND -- 0.0%
27,308 Morgan Stanley Institutional Treasury
Money Market Fund - 0.01% (c) 27,308
(Cost $27,308) ------------
TOTAL INVESTMENTS -- 100.0% 58,003,180
(Cost $59,861,972) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% (17,154)
------------
NET ASSETS -- 100.0% $ 57,986,026
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Represents annualized 7-day yield at December 31, 2011.
(d) Aggregate cost for federal income tax purposes is $61,809,366. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$2,893,818 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$6,700,004.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $57,975,872 $ -- $ --
Money Market Fund 27,308 -- --
------------------------------------------
TOTAL INVESTMENTS $58,003,180 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
Page 72 See Notes to Financial Statements
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 100.0%
GAS UTILITIES -- 3.6%
638,053 Questar Corp. $ 12,671,732
------------
OIL, GAS & CONSUMABLE FUELS
-- 96.4%
152,101 Anadarko Petroleum Corp. 11,609,869
125,213 Apache Corp. 11,341,794
150,355 Cabot Oil & Gas Corp. 11,411,945
494,973 Chesapeake Energy Corp. 11,032,948
178,892 Cimarex Energy Co. 11,073,415
642,422 Comstock Resources, Inc. (b) 9,829,057
169,647 ConocoPhillips 12,362,177
183,386 Devon Energy Corp. 11,369,932
636,725 EnCana Corp. 11,798,514
117,647 EOG Resources, Inc. 11,589,406
215,499 EQT Corp. 11,807,190
1,046,824 EXCO Resources, Inc. 10,939,311
150,060 Exxon Mobil Corp. 12,719,086
721,398 Forest Oil Corp. (b) 9,774,943
223,760 Murphy Oil Corp. 12,472,382
291,451 Newfield Exploration Co. (b) 10,996,446
127,774 Noble Energy, Inc. 12,060,588
1,883,641 PetroQuest Energy, Inc. (b) 12,432,031
381,082 QEP Resources, Inc. 11,165,703
1,520,047 Quicksilver Resources, Inc. (b) 10,199,515
179,159 Range Resources Corp. 11,097,108
169,737 Royal Dutch Shell PLC, ADR 12,406,077
1,595,554 SandRidge Energy, Inc. (b) 13,019,721
159,930 (SM) Energy Co. 11,690,883
331,774 Southwestern Energy Co. (b) 10,596,862
458,012 Statoil ASA, ADR 11,729,687
469,463 Stone Energy Corp. (b) 12,384,434
983,558 Talisman Energy, Inc. 12,540,364
354,618 Ultra Petroleum Corp. (b) 10,507,331
------------
333,958,719
------------
TOTAL COMMON STOCKS -- 100.0% 346,630,451
(Cost $406,679,368)
MONEY MARKET FUND -- 0.1%
272,025 Morgan Stanley Institutional Treasury
Money Market Fund - 0.01% (c) 272,025
------------
(Cost $272,025)
TOTAL INVESTMENTS -- 100.1% 346,902,476
(Cost $406,951,393) (d)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (346,088)
------------
NET ASSETS -- 100.0% $346,556,388
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Represents annualized 7-day yield at December 31, 2011.
(d) Aggregate cost for federal income tax purposes is $414,109,165. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$13,669,129 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$80,875,818.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $346,630,451 $ -- $ --
Money Market Fund 272,025 -- --
------------------------------------------
TOTAL INVESTMENTS $346,902,476 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 73
FIRST TRUST ISE CHINDIA INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 100.1%
AIRLINES -- 0.7%
22,260 China Southern Airlines Co., Ltd.,
ADR (b) $ 566,517
------------
AUTOMOBILES -- 4.0%
185,869 Tata Motors Ltd., ADR 3,141,186
------------
COMMERCIAL BANKS -- 13.8%
207,639 HDFC Bank Ltd., ADR 5,456,753
207,126 ICICI Bank Ltd., ADR 5,474,340
------------
10,931,093
------------
DIVERSIFIED CONSUMER SERVICES
-- 0.7%
23,834 New Oriental Education &
Technology Group, Inc., ADR (b) 573,208
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.8%
9,607 China Telecom Corp., Ltd., ADR 548,848
79,269 China Unicom (Hong Kong) Ltd.,
ADR 1,674,954
------------
2,223,802
------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 0.7%
21,896 Mindray Medical International Ltd.,
ADR 561,413
------------
HOTELS, RESTAURANTS & LEISURE
-- 5.8%
24,840 Ctrip.com International Ltd., ADR (b) 581,256
19,269 Home Inns & Hotels Management,
Inc., ADR (b) 497,140
364,465 Melco Crown Entertainment Ltd.,
ADR (b) 3,506,153
------------
4,584,549
------------
INDEPENDENT POWER PRODUCERS &
ENERGY TRADERS -- 0.8%
28,902 Huaneng Power International, Inc.,
ADR 607,520
------------
INSURANCE -- 2.0%
42,081 China Life Insurance Co., Ltd., ADR 1,555,735
------------
INTERNET & CATALOG RETAIL -- 2.7%
110,829 E-Commerce China Dangdang, Inc.,
ADR (b) 487,648
69,336 MakeMyTrip Ltd. (b) 1,666,837
------------
2,154,485
------------
INTERNET SOFTWARE & SERVICES
-- 16.9%
62,710 21Vianet Group, Inc., ADR (b) 573,797
44,957 Baidu, Inc., ADR (b) 5,236,142
12,195 NetEase.com, Inc., ADR (b) 546,946
29,845 Qihoo 360 Technology Co., Ltd.,
ADR (b) 468,268
156,606 Renren, Inc., ADR (b) 555,951
392,159 Sify Technologies Ltd., ADR (b) 1,576,479
54,204 SINA Corp. (b) 2,818,608
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
INTERNET SOFTWARE & SERVICES
(CONTINUED)
10,999 Sohu.com, Inc. (b) $ 549,950
41,641 SouFun Holdings Ltd., ADR 607,959
28,917 Youku, Inc., ADR (b) 453,129
------------
13,387,229
------------
IT SERVICES -- 11.4%
111,790 Infosys Ltd., ADR 5,743,770
320,561 Wipro Ltd., ADR 3,266,517
------------
9,010,287
------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.7%
51,920 WuXi PharmaTech Cayman, Inc.,
ADR (b) 573,197
------------
MEDIA -- 0.6%
25,377 Focus Media Holding Ltd., ADR (b) 494,598
------------
METALS & MINING -- 4.3%
48,308 Aluminum Corp. of China Ltd., ADR 521,726
420,185 Sterlite Industries (India) Ltd., ADR 2,911,882
------------
3,433,608
------------
OIL, GAS & CONSUMABLE FUELS
-- 14.0%
16,129 China Petroleum & Chemical Corp.,
ADR 1,694,351
17,285 CNOOC Ltd., ADR 3,019,344
47,102 PetroChina Co., Ltd., ADR 5,855,250
25,324 Yanzhou Coal Mining Co., Ltd., ADR 537,122
------------
11,106,067
------------
PHARMACEUTICALS -- 2.0%
55,496 Dr. Reddy's Laboratories Ltd., ADR 1,633,247
------------
PROFESSIONAL SERVICES -- 0.7%
12,731 51job, Inc., ADR (b) 533,938
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.1%
126,661 LDK Solar Co., Ltd., ADR (b) 530,709
25,167 Spreadtrum Communications, Inc.,
ADR 525,487
211,879 Suntech Power Holdings Co., Ltd.,
ADR (b) 468,252
72,401 Trina Solar Ltd., ADR (b) 483,639
129,507 Yingli Green Energy Holding Co.,
Ltd., ADR (b) 492,127
------------
2,500,214
------------
SOFTWARE -- 5.0%
64,464 Asiainfo-Linkage, Inc. (b) 499,596
24,205 Changyou.com Ltd., ADR (b) 557,925
143,718 Giant Interactive Group, Inc., ADR 586,370
52,488 Perfect World Co., Ltd., ADR (b) 549,550
171,521 Shanda Games Ltd., ADR 670,647
14,422 Shanda Interactive Entertainment
Ltd., ADR (b) 577,024
54,318 VanceInfo Technologies, Inc., ADR (b) 492,664
------------
3,933,776
------------
Page 74 See Notes to Financial Statements
FIRST TRUST ISE CHINDIA INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
WIRELESS TELECOMMUNICATION
SERVICES -- 7.4%
121,112 China Mobile Ltd., ADR $ 5,872,721
------------
TOTAL INVESTMENTS -- 100.1% 79,378,390
(Cost $93,042,608) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (91,048)
------------
NET ASSETS -- 100.0% $ 79,287,342
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Aggregate cost for federal income tax purposes is $94,970,979. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$4,671,426 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$20,264,015.
ADR - American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $79,378,390 $ -- $ --
==========================================
COUNTRY ALLOCATIONS AS A PERCENTAGE OF NET ASSETS**:
----------------------------------------------------
China 47.2%
India 38.9
Hong Kong 13.9
------
100.0%
======
* See Portfolio of Investments for industry breakout.
** Portfolio securities are categorized based on their country of
incorporation.
See Notes to Financial Statements Page 75
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 3.0%
15,769 Curtiss-Wright Corp. $ 557,119
12,754 Moog, Inc., Class A (b) 560,283
9,438 Triumph Group, Inc. 551,651
------------
1,669,053
------------
AIR FREIGHT & LOGISTICS -- 1.0%
30,185 Park-Ohio Holdings Corp. (b) 538,500
------------
AIRLINES -- 2.0%
7,491 Alaska Air Group, Inc. (b) 562,499
96,634 Hawaiian Holdings, Inc. (b) 560,477
------------
1,122,976
------------
AUTO COMPONENTS -- 4.1%
46,994 Dana Holding Corp. (b) 570,977
39,991 Goodyear Tire & Rubber (The)
Co. (b) 566,672
27,317 Standard Motor Products, Inc. 547,706
19,314 Tenneco, Inc. (b) 575,171
------------
2,260,526
------------
BUILDING PRODUCTS -- 1.0%
20,174 Owens Corning, Inc. (b) 579,397
------------
CHEMICALS -- 2.0%
3,884 CF Industries Holdings, Inc. 563,102
19,635 Dow Chemical (The) Co. 564,703
------------
1,127,805
------------
COMPUTERS & PERIPHERALS -- 1.1%
35,795 Seagate Technology PLC 587,038
------------
CONSTRUCTION & ENGINEERING
-- 1.0%
26,800 Dycom Industries, Inc. (b) 560,656
------------
CONSUMER FINANCE -- 1.0%
23,410 Discover Financial Services 561,840
------------
CONTAINERS & PACKAGING -- 4.0%
15,783 Ball Corp. 563,611
16,587 Crown Holdings, Inc. (b) 556,992
42,932 Myers Industries, Inc. 529,781
9,809 Rock-Tenn Co., Class A 565,979
------------
2,216,363
------------
DIVERSIFIED FINANCIAL SERVICES
-- 1.0%
22,991 NASDAQ OMX Group (The),
Inc. (b) 563,510
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 4.1%
18,851 AT&T, Inc. 570,054
13,795 BCE, Inc. 574,838
18,882 BT Group PLC, ADR 559,662
180,918 Cincinnati Bell, Inc. (b) 548,182
------------
2,252,736
------------
ELECTRIC UTILITIES -- 1.0%
15,960 El Paso Electric Co. 552,854
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 6.0%
15,112 Arrow Electronics, Inc. (b) $ 565,340
52,874 Brightpoint, Inc. (b) 568,924
75,302 Celestica, Inc. (b) 551,964
28,159 Jabil Circuit, Inc. 553,606
48,607 PC Connection, Inc. 539,051
31,600 Zygo Corp. (b) 557,740
------------
3,336,625
------------
ENERGY EQUIPMENT & SERVICES
-- 3.0%
36,022 Helix Energy Solutions Group,
Inc. (b) 569,148
7,460 Oil States International, Inc. (b) 569,720
29,835 RPC, Inc. 544,489
------------
1,683,357
------------
FOOD & STAPLES RETAILING -- 2.0%
10,966 Casey's General Stores, Inc. 564,859
37,777 Ingles Markets, Inc., Class A 568,921
------------
1,133,780
------------
FOOD PRODUCTS -- 1.0%
22,806 Smithfield Foods, Inc. (b) 553,730
------------
HEALTH CARE PROVIDERS & SERVICES
-- 6.1%
12,949 Aetna, Inc. 546,318
78,215 Health Management Associates, Inc.,
Class A (b) 576,445
6,304 Humana, Inc. 552,293
63,914 Select Medical Holdings Corp. (b) 541,991
112,804 Tenet Healthcare Corp. (b) 578,685
14,542 Universal Health Services, Inc.,
Class B 565,102
------------
3,360,834
------------
HOTELS, RESTAURANTS & LEISURE
-- 2.0%
14,735 Penn National Gaming, Inc. (b) 560,961
54,554 Pinnacle Entertainment, Inc. (b) 554,269
------------
1,115,230
------------
HOUSEHOLD DURABLES -- 1.0%
18,820 Jarden Corp. 562,342
------------
IT SERVICES -- 2.0%
9,947 CACI International, Inc., Class A (b) 556,236
16,602 NeuStar, Inc., Class A (b) 567,291
------------
1,123,527
------------
LEISURE EQUIPMENT & PRODUCTS
-- 1.0%
20,355 Mattel, Inc. 565,055
------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.0%
77,254 Cambrex Corp. (b) 554,684
------------
MACHINERY -- 7.1%
13,324 AGCO Corp. (b) 572,532
12,079 Cascade Corp. 569,767
Page 76 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
MACHINERY (CONTINUED)
15,321 CNH Global N.V. (b) $ 551,403
15,460 Kennametal, Inc. 564,599
15,069 Navistar International Corp. (b) 570,814
14,929 Sauer-Danfoss, Inc. (b) 540,579
14,606 Timken (The) Co. 565,398
------------
3,935,092
------------
MARINE -- 1.0%
8,614 Kirby Corp. (b) 567,146
------------
MEDIA -- 6.1%
29,695 Cinemark Holdings, Inc. 549,061
13,145 DIRECTV, Class A (b) 562,080
19,793 DISH Network Corp., Class A 563,705
40,162 Knology, Inc. (b) 570,300
28,848 Shaw Communications, Inc., Class B 573,210
49,586 Sinclair Broadcast Group, Inc.,
Class A 561,809
------------
3,380,165
------------
METALS & MINING -- 3.0%
12,445 Barrick Gold Corp. 563,136
8,719 Cliffs Natural Resources, Inc. 543,630
11,503 Rio Tinto PLC, ADR 562,727
------------
1,669,493
------------
MULTILINE RETAIL -- 3.1%
39,080 Fred's, Inc., Class A 569,786
11,355 Kohl's Corp. 560,369
17,543 Macy's, Inc. 564,534
------------
1,694,689
------------
OFFICE ELECTRONICS -- 1.0%
69,396 Xerox Corp. 552,392
------------
OIL, GAS & CONSUMABLE FUELS
-- 4.0%
7,454 Alliance Resource Partners L.P. (c) 563,373
5,244 Chevron Corp. 557,962
10,017 Murphy Oil Corp. 558,347
26,636 Valero Energy Corp. 560,688
------------
2,240,370
------------
PAPER & FOREST PRODUCTS -- 4.0%
19,248 International Paper Co. 569,741
18,857 MeadWestvaco Corp. 564,767
24,761 Neenah Paper, Inc. 552,665
8,349 Schweitzer-Mauduit International,
Inc. 554,875
------------
2,242,048
------------
PHARMACEUTICALS -- 4.0%
10,071 Abbott Laboratories 566,292
15,001 Merck & Co., Inc. 565,538
13,586 Teva Pharmaceutical Industries Ltd.,
ADR 548,331
9,227 Watson Pharmaceuticals, Inc. (b) 556,757
------------
2,236,918
------------
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
PROFESSIONAL SERVICES -- 1.0%
41,005 Kelly Services, Inc., Class A $ 560,948
------------
ROAD & RAIL -- 5.1%
29,617 Arkansas Best Corp. 570,720
50,696 Avis Budget Group, Inc. (b) 543,461
7,783 Norfolk Southern Corp. 567,069
13,691 Old Dominion Freight Line, Inc. (b) 554,896
39,027 RailAmerica, Inc. (b) 581,112
------------
2,817,258
------------
SPECIALTY RETAIL -- 6.1%
7,985 Advance Auto Parts, Inc. 555,996
59,048 Cost Plus, Inc. (b) 575,718
8,999 Genesco, Inc. (b) 555,598
17,238 Men's Wearhouse (The), Inc. 558,684
10,821 PetSmart, Inc. 555,009
37,878 Sonic Automotive, Inc., Class A 560,973
------------
3,361,978
------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.0%
44,068 Aircastle Ltd. 560,545
------------
WATER UTILITIES -- 2.0%
15,911 American States Water Co. 555,294
17,397 American Water Works Co., Inc. 554,268
------------
1,109,562
------------
TOTAL INVESTMENTS -- 99.9% 55,511,022
(Cost $53,818,387) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 31,658
------------
NET ASSETS -- 100.0% $ 55,542,680
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Master Limited Partnership ("MLP").
(d) Aggregate cost for federal income tax purposes is $54,203,006. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$3,623,649 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$2,315,633.
ADR - American Depositary Receipt
See Notes to Financial Statements Page 77
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $55,511,022 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
Page 78 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND
PORTFOLIO OF INVESTMENTS (a)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS -- 100.0%
COMMERCIAL BANKS -- 80.2%
3,255 1st Source Corp. $ 82,449
3,193 Ameris Bancorp (b) 32,824
1,586 Arrow Financial Corp. 37,176
23,466 Associated Banc-Corp. 262,115
2,034 BancFirst Corp. 76,356
4,463 Bancorp (The), Inc. (b) 32,268
4,608 Bank of the Ozarks, Inc. 136,535
2,314 Banner Corp. 39,685
10,484 BBCN Bancorp, Inc. (b) 99,074
9,143 BOK Financial Corp. 502,225
10,488 Boston Private Financial Holdings,
Inc. 83,275
1,760 Bryn Mawr Bank Corp. 34,302
1,034 Camden National Corp. 33,708
3,903 Cardinal Financial Corp. 41,918
10,574 Cathay General Bancorp 157,870
3,691 Chemical Financial Corp. 78,692
5,413 Citizens Republic Bancorp, Inc. (b) 61,708
1,991 City Holding Co. 67,475
5,311 Columbia Banking System, Inc. 102,343
12,261 Commerce Bancshares, Inc. 467,389
2,074 Community Trust Bancorp, Inc. 61,017
14,047 CVB Financial Corp. 140,891
2,677 Eagle Bancorp, Inc. (b) 38,924
20,039 East West Bancorp, Inc. 395,770
2,386 Enterprise Financial Services Corp. 35,313
1,856 Financial Institutions, Inc. 29,956
11,643 First Busey Corp. 58,215
1,166 First Citizens BancShares, Inc.,
Class A 204,038
2,399 First Community Bancshares, Inc. 29,940
7,833 First Financial Bancorp 130,341
4,229 First Financial Bankshares, Inc. 141,375
1,768 First Financial Corp. 58,839
3,837 First Merchants Corp. 32,499
10,015 First Midwest Bancorp, Inc. 101,452
1,181 First of Long Island (The) Corp. 31,084
14,688 FirstMerit Corp. 222,229
26,891 Fulton Financial Corp. 263,801
9,669 Glacier Bancorp, Inc. 116,318
1,812 Great Southern Bancorp, Inc. 42,745
11,388 Hancock Holding Co. 364,074
3,801 Home Bancshares, Inc. 98,484
3,947 IBERIABANK Corp. 194,587
2,888 Independent Bank Corp. 78,814
9,045 International Bancshares Corp. 165,840
14,954 Investors Bancorp, Inc. (b) 201,580
2,180 Lakeland Financial Corp. 56,397
7,350 MB Financial, Inc. 125,685
20,401 National Penn Bancshares, Inc. 172,184
4,451 NBT Bancorp, Inc. 98,501
4,424 Pacific Capital Bancorp (b) 124,934
4,772 PacWest Bancorp 90,429
4,613 Pinnacle Financial Partners, Inc. (b) 74,500
9,653 PrivateBancorp, Inc. 105,990
3,369 Renasant Corp. 50,535
2,508 Republic Bancorp, Inc., Class A 57,433
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMERCIAL BANKS (CONTINUED)
3,779 S&T Bancorp, Inc. $ 73,879
1,856 S.Y. Bancorp, Inc. 38,104
3,238 Sandy Spring Bancorp, Inc. 56,827
1,884 SCBT Financial Corp. 54,655
6,209 Signature Bank (b) 372,478
2,322 Simmons First National Corp.,
Class A 63,135
2,214 Southside Bancshares, Inc. 47,955
4,250 State Bank Financial Corp. (b) 64,218
3,093 StellarOne Corp. 35,198
8,332 Sterling Financial Corp. (b) 139,144
11,503 Sun Bancorp, Inc. (b) 27,837
21,066 Susquehanna Bancshares, Inc. 176,533
5,827 SVB Financial Group (b) 277,890
5,037 Texas Capital Bancshares, Inc. (b) 154,183
3,918 TowneBank 47,956
2,148 TriCo Bancshares 30,545
8,621 Trustmark Corp. 209,404
5,430 UMB Financial Corp. 202,268
15,399 Umpqua Holdings Corp. 190,794
3,503 Union First Market Bankshares Corp. 46,555
6,750 United Bankshares, Inc. 190,823
5,595 United Community Banks, Inc. (b) 39,109
2,249 Univest Corp. of Pennsylvania 32,925
4,058 Virginia Commerce Bancorp, Inc. (b) 31,368
2,190 Washington Trust Bancorp, Inc. 52,253
3,580 WesBanco, Inc. 69,703
2,595 West Coast Bancorp (b) 40,482
3,829 Westamerica Bancorporation 168,093
9,585 Wilshire Bancorp, Inc. (b) 34,794
4,831 Wintrust Financial Corp. 135,510
24,777 Zions Bancorporation 403,370
------------
10,132,089
------------
IT SERVICES -- 0.4%
1,392 Cass Information Systems, Inc. 50,655
------------
THRIFTS & MORTGAGE FINANCE
-- 19.4%
10,809 Beneficial Mutual Bancorp, Inc. (b) 90,363
2,843 Berkshire Hills Bancorp, Inc. 63,086
7,960 Brookline Bancorp, Inc. 67,182
22,519 Capitol Federal Financial, Inc. 259,869
4,709 Dime Community Bancshares, Inc. 59,333
4,189 Flushing Financial Corp. 52,907
5,462 Northfield Bancorp, Inc. 77,342
13,109 Northwest Bancshares, Inc. 163,076
2,534 OceanFirst Financial Corp. 33,119
6,159 Oritani Financial Corp. 78,651
48,486 People's United Financial, Inc. 623,045
3,968 Rockville Financial, Inc. 41,109
1,485 Territorial Bancorp, Inc. 29,329
41,532 TFS Financial Corp. (b) 372,127
12,546 TrustCo Bank Corp. NY 70,383
2,121 United Financial Bancorp, Inc. 34,127
4,559 ViewPoint Financial Group 59,312
14,469 Washington Federal, Inc. 202,421
3,714 Westfield Financial, Inc. 27,335
See Notes to Financial Statements Page 79
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
DECEMBER 31, 2011
SHARES DESCRIPTION VALUE
--------- --------------------------------------- ------------
COMMON STOCKS (CONTINUED)
THRIFTS & MORTGAGE FINANCE (CONTINUED)
1,158 WSFS Financial Corp. $ 41,642
------------
2,445,758
------------
TOTAL INVESTMENTS -- 100.0% 12,628,502
(Cost $13,047,341) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 5,675
------------
NET ASSETS -- 100.0% $ 12,634,177
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Aggregate cost for federal income tax purposes is $13,360,430. As of
December 31, 2011, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$352,465 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$1,084,393.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 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* $12,628,502 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
Page 80 See Notes to Financial Statements
This page intentionally left blank.
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2011
FIRST TRUST
FIRST TRUST MORNINGSTAR
DOW JONES SELECT DIVIDEND FIRST TRUST
MICROCAP LEADERS(SM) US IPO
INDEX(SM) FUND INDEX FUND INDEX FUND
--------------- --------------- ---------------
ASSETS:
Investments at value................................................... $ 52,302,953 $ 446,816,929 $ 15,580,984
Cash................................................................... 18,421 -- 16,005
Receivables:
Capital shares sold.............................................. -- 6,168,738 --
Investment securities sold....................................... 3,033,389 -- --
Dividends........................................................ 64,074 1,081,990 22,226
Interest......................................................... -- -- --
From investment advisor.......................................... -- 2,798 2,451
Reclaims......................................................... -- -- --
Prepaid expenses....................................................... 11,599 7,452 9,585
--------------- --------------- ---------------
TOTAL ASSETS..................................................... 55,430,436 454,077,907 15,631,251
--------------- --------------- ---------------
LIABILITIES:
Due to Custodian....................................................... -- 657,736 --
Payables:
Capital shares purchased......................................... 3,035,756 -- --
Investment securities purchased.................................. -- 6,166,454 60
Audit and tax fees............................................... 23,748 23,748 23,748
Licensing fees................................................... 19,093 83,102 9,115
Investment advisory fees......................................... 9,879 -- --
Printing fees.................................................... 5,266 35,587 1,524
Other liabilities...................................................... 8,811 81,746 2,969
--------------- --------------- ---------------
TOTAL LIABILITIES................................................ 3,102,553 7,048,373 37,416
--------------- --------------- ---------------
NET ASSETS............................................................. $ 52,327,883 $ 447,029,534 $ 15,593,835
=============== =============== ===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 71,723,860 $ 452,263,673 $ 20,762,932
Par value.............................................................. 26,050 254,500 6,500
Accumulated net investment income (loss)............................... (56,755) -- --
Accumulated net realized gain (loss) on investments.................... (22,850,723) (35,032,338) (5,925,042)
Net unrealized appreciation (depreciation) on investments.............. 3,485,451 29,543,699 749,445
--------------- --------------- ---------------
NET ASSETS............................................................. $ 52,327,883 $ 447,029,534 $ 15,593,835
=============== =============== ===============
NET ASSET VALUE, per share............................................. $ 20.09 $ 17.57 $ 23.99
=============== =============== ===============
Number of shares outstanding
(unlimited number of shares has been authorized, par value $0.01
per share) ............................................................ 2,605,000 25,450,002 650,002
=============== =============== ===============
Investments at cost.................................................... $ 48,817,502 $ 417,273,230 $ 14,831,539
=============== =============== ===============
Page 82 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NASDAQ-100 NASDAQ-100- NYSE ARCA DOW JONES STRATEGIC VALUE LINE(R)
EQUAL WEIGHTED TECHNOLOGY SECTOR BIOTECHNOLOGY INTERNET VALUE EQUITY ALLOCATION
INDEX(SM) FUND INDEX(SM) FUND INDEX FUND INDEX(SM) FUND INDEX FUND INDEX FUND
--------------- --------------- --------------- --------------- --------------- ---------------
$ 73,481,156 $ 149,653,904 $ 179,500,760 $ 519,800,065 $ 31,610,601 $ 6,361,345
61,665 113,556 174,163 -- 14,752 --
-- -- -- -- -- --
-- -- 6,813,960 9,660,544 -- 55,220
72,671 -- -- 142,480 66,172 9,688
-- -- -- 5 -- --
-- -- -- -- -- 3,021
-- -- -- -- -- --
2,094 4,757 11,281 121,696 972 11,369
--------------- --------------- --------------- --------------- --------------- ---------------
73,617,586 149,772,217 186,500,164 529,724,790 31,692,497 6,440,643
--------------- --------------- --------------- --------------- --------------- ---------------
-- -- -- 1,499 -- --
-- -- 3,268,282 9,658,498 -- --
-- -- -- -- -- 55,160
23,748 23,748 23,748 23,748 23,748 23,748
19,956 40,575 55,600 216,742 8,453 2,385
14,475 9,151 66,387 23,738 9,120 --
7,308 15,387 17,700 47,110 3,361 666
12,747 23,291 38,484 70,074 5,294 1,809
--------------- --------------- --------------- --------------- --------------- ---------------
78,234 112,152 3,470,201 10,041,409 49,976 83,768
--------------- --------------- --------------- --------------- --------------- ---------------
$ 73,539,352 $ 149,660,065 $ 183,029,963 $ 519,683,381 $ 31,642,521 $ 6,356,875
=============== =============== =============== =============== =============== ===============
$ 90,183,372 $ 182,462,187 $ 290,022,062 $ 596,397,984 $ 58,032,206 $ 12,048,566
32,000 62,000 56,000 161,000 14,500 3,500
-- -- -- -- -- 271
(9,499,727) (11,175,269) (19,620,590) (26,359,202) (26,002,998) (5,904,350)
(7,176,293) (21,688,853) (87,427,509) (50,516,401) (401,187) 208,888
--------------- --------------- --------------- --------------- --------------- ---------------
$ 73,539,352 $ 149,660,065 $ 183,029,963 $ 519,683,381 $ 31,642,521 $ 6,356,875
=============== =============== =============== =============== =============== ===============
$ 22.98 $ 24.14 $ 32.68 $ 32.28 $ 21.82 $ 18.16
=============== =============== =============== =============== =============== ===============
3,200,002 6,200,002 5,600,002 16,100,002 1,450,002 350,002
=============== =============== =============== =============== =============== ===============
$ 80,657,449 $ 171,342,757 $ 266,928,269 $ 570,316,466 $ 32,011,788 $ 6,152,457
=============== =============== =============== =============== =============== ===============
See Notes to Financial Statements Page 83
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 2011
FIRST TRUST FIRST TRUST
FIRST TRUST NASDAQ-100 NASDAQ(R)
VALUE LINE(R) EX-TECHNOLOGY CLEAN EDGE(R)
DIVIDEND SECTOR GREEN ENERGY
INDEX FUND INDEX(SM) FUND INDEX FUND
--------------- --------------- ---------------
ASSETS:
Investments at value................................................... $ 366,165,831 $ 30,153,609 $ 20,744,997
Cash................................................................... -- -- 44,561
Receivables:
Capital shares sold.............................................. 11,941,738 -- --
Investment securities sold....................................... 25,694,660 -- --
Dividends........................................................ 1,022,741 46,809 --
Interest......................................................... -- -- --
From investment advisor.......................................... -- -- --
Reclaims......................................................... 17,060 -- 335
Prepaid expenses....................................................... 20,211 751 705
--------------- --------------- ---------------
TOTAL ASSETS..................................................... 404,862,241 30,201,169 20,790,598
--------------- --------------- ---------------
LIABILITIES:
Due to Custodian....................................................... 498,580 997 --
Payables:
Capital shares purchased......................................... 12,065,599 -- --
Investment securities purchased.................................. 25,543,265 -- 14,458
Audit and tax fees............................................... 23,748 23,748 23,748
Licensing fees................................................... 129,503 7,304 5,764
Investment advisory fees......................................... 102,603 2,596 183
Printing fees.................................................... 33,647 2,980 2,255
Other liabilities...................................................... 66,739 6,649 4,563
--------------- --------------- ---------------
TOTAL LIABILITIES................................................ 38,463,684 44,274 50,971
--------------- --------------- ---------------
NET ASSETS............................................................. $ 366,398,557 $ 30,156,895 $ 20,739,627
=============== =============== ===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 385,928,102 $ 33,362,696 $ 57,791,740
Par value.............................................................. 228,880 14,500 21,500
Accumulated net investment income (loss)............................... -- -- --
Accumulated net realized gain (loss) on investments.................... (57,979,540) (2,512,907) (27,228,681)
Net unrealized appreciation (depreciation) on investments.............. 38,221,115 (707,394) (9,844,932)
--------------- --------------- ---------------
NET ASSETS............................................................. $ 366,398,557 $ 30,156,895 $ 20,739,627
=============== =============== ===============
NET ASSET VALUE, per share............................................. $ 16.01 $ 20.80 $ 9.65
=============== =============== ===============
Number of shares outstanding
(unlimited number of shares has been authorized, par value $0.01
per share) ......................................................... 22,887,986 1,450,002 2,150,002
=============== =============== ===============
Investments at cost.................................................... $ 327,944,716 $ 30,861,003 $ 30,589,929
=============== =============== ===============
Page 84 See Notes to Financial Statements
FIRST TRUST
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST NASDAQ(R) ABA
S&P ISE ISE-REVERE ISE VALUE LINE(R) 100 COMMUNITY
REIT WATER NATURAL GAS CHINDIA EXCHANGE-TRADED BANK
INDEX FUND INDEX FUND INDEX FUND INDEX FUND FUND INDEX FUND
--------------- --------------- --------------- --------------- --------------- ---------------
$ 324,315,443 $ 58,003,180 $ 346,902,476 $ 79,378,390 $ 55,511,022 $ 12,628,502
-- -- -- 76,907 -- 10,778
-- -- -- -- 4,902,593 --
3,877,863 -- 3,639,495 912,348 12,380,574 281,219
1,126,139 41,200 -- 41,278 70,391 20,079
7 1 3 -- -- --
-- -- -- -- -- 1,163
-- -- -- -- 502 --
7,048 1,467 10,793 2,862 1,622 5,291
--------------- --------------- --------------- --------------- --------------- ---------------
329,326,500 58,045,848 350,552,767 80,411,785 72,866,704 12,947,032
--------------- --------------- --------------- --------------- --------------- ---------------
213,709 -- -- -- 9,796 --
3,885,050 -- 3,638,266 911,318 4,962,445 --
-- -- -- 138,272 12,274,924 281,020
23,748 23,748 23,748 23,748 23,748 23,748
102,237 7,047 97,374 18,666 22,036 2,725
29,092 13,734 137,997 11,197 16,361 --
30,492 5,615 38,893 8,490 5,363 1,189
81,374 9,678 60,101 12,752 9,351 4,173
--------------- --------------- --------------- --------------- --------------- ---------------
4,365,702 59,822 3,996,379 1,124,443 17,324,024 312,855
--------------- --------------- --------------- --------------- --------------- ---------------
$ 324,960,798 $ 57,986,026 $ 346,556,388 $ 79,287,342 $ 55,542,680 $ 12,634,177
=============== =============== =============== =============== =============== ===============
$ 344,549,203 $ 71,172,840 $ 500,301,014 $ 136,648,837 $ 145,729,306 $ 13,995,200
210,000 28,000 190,500 43,500 44,900 5,500
-- 15,568 83,767 -- (24,835) 1,117
(4,533,606) (11,371,590) (93,969,976) (43,740,777) (91,899,326) (948,801)
(15,264,799) (1,858,792) (60,048,917) (13,664,218) 1,692,635 (418,839)
--------------- --------------- --------------- --------------- --------------- ---------------
$ 324,960,798 $ 57,986,026 $ 346,556,388 $ 79,287,342 $ 55,542,680 $ 12,634,177
=============== =============== =============== =============== =============== ===============
$ 15.47 $ 20.71 $ 18.19 $ 18.23 $ 12.37 $ 22.97
=============== =============== =============== =============== =============== ===============
21,000,002 2,800,002 19,050,002 4,350,002 4,489,982 550,002
=============== =============== =============== =============== =============== ===============
$ 339,580,242 $ 59,861,972 $ 406,951,393 $ 93,042,608 $ 53,818,387 $ 13,047,341
=============== =============== =============== =============== =============== ===============
See Notes to Financial Statements Page 85
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011
FIRST TRUST
FIRST TRUST MORNINGSTAR
DOW JONES SELECT DIVIDEND FIRST TRUST
MICROCAP LEADERS(SM) US IPO
INDEX(SM) FUND INDEX FUND INDEX FUND
--------------- --------------- ---------------
INVESTMENT INCOME:
Dividends.............................................................. $ 1,116,498 $ 9,523,637 $ 231,956
Foreign tax withholding................................................ (371) -- --
Interest............................................................... -- -- --
--------------- --------------- ---------------
Total investment income............................................. 1,116,127 9,523,637 231,956
--------------- --------------- ---------------
EXPENSES:
Investment advisory fees............................................... 557,416 645,620 71,247
Licensing fees......................................................... 66,230 203,254 50,001
Accounting and administration fees..................................... 59,102 109,854 11,160
Audit and tax fees..................................................... 23,749 23,749 23,749
Legal fees............................................................. 21,405 66,764 4,329
Printing fees.......................................................... 19,866 52,483 5,675
Custodian fees......................................................... 13,935 26,901 2,226
Listing fees........................................................... 8,379 8,379 8,379
Transfer agent fees.................................................... 7,078 12,056 1,544
Trustees' fees and expenses............................................ 1,323 3,078 221
Registration and filing fees........................................... (216) 24,861 25
Expenses previously waived or reimbursed............................... -- -- --
Other expenses......................................................... 7,867 18,105 2,087
--------------- --------------- ---------------
Total expenses...................................................... 786,134 1,195,104 180,643
Less fees waived and expenses reimbursed by the investment advisor . (117,235) (226,674) (73,773)
--------------- --------------- ---------------
Net expenses........................................................ 668,899 968,430 106,870
--------------- --------------- ---------------
NET INVESTMENT INCOME (LOSS)........................................... 447,228 8,555,207 125,086
--------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Investments......................................................... (11,212,191) (1,907,466) (739,226)
In-kind redemptions................................................. 14,739,409 14,068,420 1,855,793
Foreign currency transactions....................................... -- -- --
--------------- --------------- ---------------
Net realized gain (loss)............................................... 3,527,218 12,160,954 1,116,567
Net change in unrealized appreciation (depreciation) on investments ... (15,388,722) 17,878,265 (1,032,399)
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (11,861,504) 30,039,219 84,168
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ (11,414,276) $ 38,594,426 $ 209,254
=============== =============== ===============
Page 86 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST
NASDAQ-100 NASDAQ-100- NYSE ARCA DOW JONES STRATEGIC VALUE LINE(R)
EQUAL WEIGHTED TECHNOLOGY SECTOR BIOTECHNOLOGY INTERNET VALUE EQUITY ALLOCATION
INDEX(SM) FUND INDEX(SM) FUND INDEX FUND INDEX(SM) FUND INDEX FUND INDEX FUND
--------------- --------------- --------------- --------------- --------------- ---------------
$ 704,876 $ 2,291,860 $ 189,695 $ 2,166,210 $ 806,670 $ 122,362
(2,294) -- -- -- (14,328) (2,365)
-- -- -- 51 -- 3
--------------- --------------- --------------- --------------- --------------- ---------------
702,582 2,291,860 189,695 2,166,261 792,342 120,000
--------------- --------------- --------------- --------------- --------------- ---------------
339,525 1,570,171 1,260,807 2,482,993 183,051 34,240
84,881 392,543 252,162 403,507 36,610 10,856
45,255 205,901 158,969 311,973 20,000 6,217
23,749 23,749 23,749 23,749 23,749 23,749
20,428 81,633 69,245 140,227 8,723 1,627
18,526 73,182 68,045 123,882 8,315 3,015
10,610 49,068 39,400 77,594 4,576 856
15,343 23,446 8,379 8,379 8,379 12,192
5,474 20,993 16,451 31,756 2,084 1,195
1,062 4,581 3,623 7,808 469 87
1,219 834 12,820 579 -- --
-- -- -- 76,990 -- --
8,784 23,884 21,221 35,052 3,440 975
--------------- --------------- --------------- --------------- --------------- ---------------
574,856 2,469,985 1,934,871 3,724,489 299,396 95,009
(65,568) (114,729) (43,660) -- (61,430) (47,073)
--------------- --------------- --------------- --------------- --------------- ---------------
509,288 2,355,256 1,891,211 3,724,489 237,966 47,936
--------------- --------------- --------------- --------------- --------------- ---------------
193,294 (63,396) (1,701,516) (1,558,228) 554,376 72,064
--------------- --------------- --------------- --------------- --------------- ---------------
(2,417,424) (9,298,574) (31,559,077) (24,237,028) (758,827) (920,481)
9,361,163 45,332,769 22,491,879 87,038,344 2,962,869 1,049,325
-- -- -- -- -- --
--------------- --------------- --------------- --------------- --------------- ---------------
6,943,739 36,034,195 (9,067,198) 62,801,316 2,204,042 128,844
(14,365,617) (68,573,256) (114,433,625) (129,043,201) (3,710,370) (835,358)
--------------- --------------- --------------- --------------- --------------- ---------------
(7,421,878) (32,539,061) (123,500,823) (66,241,885) (1,506,328) (706,514)
--------------- --------------- --------------- --------------- --------------- ---------------
$ (7,228,584) $ (32,602,457) $ (125,202,339) $ (67,800,113) $ (951,952) $ (634,450)
=============== =============== =============== =============== =============== ===============
See Notes to Financial Statements Page 87
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2011
FIRST TRUST FIRST TRUST
FIRST TRUST NASDAQ-100 NASDAQ(R)
VALUE LINE(R) EX-TECHNOLOGY CLEAN EDGE(R)
DIVIDEND SECTOR GREEN ENERGY
INDEX FUND INDEX(SM) FUND INDEX FUND
--------------- --------------- ---------------
INVESTMENT INCOME:
Dividends.............................................................. $ 10,012,978 $ 256,703 $ 132,993
Foreign tax withholding................................................ (161,141) (1,286) (442)
Interest............................................................... -- 3 --
--------------- --------------- ---------------
Total investment income............................................. 9,851,837 255,420 132,551
--------------- --------------- ---------------
EXPENSES:
Investment advisory fees............................................... 1,392,546 112,425 126,620
Licensing fees......................................................... 427,512 28,106 31,655
Accounting and administration fees..................................... 142,237 15,863 21,057
Audit and tax fees..................................................... 23,749 23,749 23,749
Legal fees............................................................. 75,276 7,092 6,998
Printing fees.......................................................... 36,428 9,199 9,661
Custodian fees......................................................... 34,814 3,513 3,957
Listing fees........................................................... 12,192 14,135 14,781
Transfer agent fees.................................................... 15,279 2,007 1,964
Trustees' fees and expenses............................................ 3,784 366 392
Registration and filing fees........................................... 14,438 420 82
Expenses previously waived or reimbursed............................... -- -- --
Other expenses......................................................... 21,171 2,701 3,560
--------------- --------------- ---------------
Total expenses...................................................... 2,199,426 219,576 244,476
Less fees waived and expenses reimbursed by the investment advisor . (249,861) (50,938) (54,545)
--------------- --------------- ---------------
Net expenses........................................................ 1,949,565 168,638 189,931
--------------- --------------- ---------------
NET INVESTMENT INCOME (LOSS)........................................... 7,902,272 86,782 (57,380)
--------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Investments......................................................... (5,025,923) (1,045,754) (4,519,799)
In-kind redemptions................................................. 17,661,954 2,188,134 2,587,099
Foreign currency transactions....................................... -- -- --
--------------- --------------- ---------------
Net realized gain (loss)............................................... 12,636,031 1,142,380 (1,932,700)
Net change in unrealized appreciation (depreciation) on investments ... 3,716,675 (2,777,822) (13,448,678)
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 16,352,706 (1,635,442) (15,381,378)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 24,254,978 $ (1,548,660) $ (15,438,758)
=============== =============== ===============
Page 88 See Notes to Financial Statements
FIRST TRUST
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST NASDAQ(R) ABA
S&P ISE ISE-REVERE ISE VALUE LINE(R) 100 COMMUNITY
REIT WATER NATURAL GAS CHINDIA EXCHANGE-TRADED BANK
INDEX FUND INDEX FUND INDEX FUND INDEX FUND FUND INDEX FUND
--------------- --------------- --------------- --------------- --------------- ---------------
$ 4,490,778 $ 869,963 $ 5,323,912 $ 2,306,909 $ 988,710 $ 279,167
-- (22,682) (411,055) (105,463) (17,929) --
18 7 36 -- -- --
--------------- --------------- --------------- --------------- --------------- ---------------
4,490,796 847,288 4,912,893 2,201,446 970,781 279,167
--------------- --------------- --------------- --------------- --------------- ---------------
532,334 243,875 1,988,749 551,533 413,305 50,249
185,456 30,484 497,187 110,307 132,035 11,306
91,083 32,040 250,080 112,860 43,726 8,506
23,750 23,749 23,749 23,749 23,749 23,749
51,580 14,811 117,724 28,621 18,728 3,196
44,003 17,097 94,583 27,565 13,949 4,728
22,181 7,621 62,148 17,236 10,333 1,570
8,379 8,379 8,379 8,379 8,379 13,771
9,608 3,609 26,376 7,011 5,307 1,413
2,560 775 6,194 1,682 1,032 162
33,317 1,186 4,451 6 1,181 1,207
-- -- -- -- -- --
13,750 8,015 42,898 14,770 6,548 1,180
--------------- --------------- --------------- --------------- --------------- ---------------
1,018,001 391,641 3,122,518 903,719 678,272 121,037
(130,777) (25,829) (139,394) (76,490) (99,646) (45,663)
--------------- --------------- --------------- --------------- --------------- ---------------
887,224 365,812 2,983,124 827,229 578,626 75,374
--------------- --------------- --------------- --------------- --------------- ---------------
3,603,572 481,476 1,929,769 1,374,217 392,155 203,793
--------------- --------------- --------------- --------------- --------------- ---------------
(4,990,215) (2,014,989) (20,617,193) (8,706,316) (13,450,728) (795,402)
992,448 4,276,271 74,445,317 13,110,472 12,100,007 440,990
-- -- (147) -- -- --
--------------- --------------- --------------- --------------- --------------- ---------------
(3,997,767) 2,261,282 53,827,977 4,404,156 (1,350,721) (354,412)
(21,892,948) (6,845,222) (112,055,233) (39,977,843) (4,336,999) (788,265)
--------------- --------------- --------------- --------------- --------------- ---------------
(25,890,715) (4,583,940) (58,227,256) (35,573,687) (5,687,720) (1,142,677)
--------------- --------------- --------------- --------------- --------------- ---------------
$ (22,287,143) $ (4,102,464) $ (56,297,487) $ (34,199,470) $ (5,295,565) $ (938,884)
=============== =============== =============== =============== =============== ===============
See Notes to Financial Statements Page 89
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
DOW JONES SELECT MORNINGSTAR
MICROCAP DIVIDEND LEADERS(SM)
INDEX(SM) FUND INDEX FUND
------------------------------------ ------------------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010
----------------- ----------------- ----------------- -----------------
OPERATIONS:
Net investment income (loss)................... $ 447,228 $ 499,285 $ 8,555,207 $ 2,913,346
Net realized gain (loss)....................... 3,527,218 (2,429,083) 12,160,954 1,461,455
Net change in unrealized appreciation
(depreciation) .............................. (15,388,722) 18,873,114 17,878,265 8,079,545
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting
from operations............................. (11,414,276) 16,943,316 38,594,426 12,454,346
---------------- ---------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.......................... (610,163) (470,895) (8,577,026) (2,936,478)
Return of capital.............................. -- -- -- (25,193)
---------------- ---------------- ---------------- ----------------
Total distributions to shareholders............ (610,163) (470,895) (8,577,026) (2,961,671)
---------------- ---------------- ---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold...................... 7,892,863 137,291,718 357,088,401 99,924,591
Cost of shares redeemed........................ (96,590,691) (19,392,644) (83,370,049) (14,628,087)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions............... (88,697,828) 117,899,074 273,718,352 85,296,504
---------------- ---------------- ---------------- ----------------
Total increase (decrease) in net assets........ (100,722,267) 134,371,495 303,735,752 94,789,179
NET ASSETS:
Beginning of period............................ 153,050,150 18,678,655 143,293,782 48,504,603
---------------- ---------------- ---------------- ----------------
End of period.................................. $ 52,327,883 $ 153,050,150 $ 447,029,534 $ 143,293,782
================ ================ ================ ================
Accumulated net investment income (loss)
at end of period............................ $ (56,755) $ 31,467 $ -- $ --
================ ================ ================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period........ 6,905,000 1,055,000 9,000,002 3,400,002
Shares sold.................................... 350,000 6,900,000 21,500,000 6,600,000
Shares redeemed................................ (4,650,000) (1,050,000) (5,050,000) (1,000,000)
---------------- ---------------- ---------------- ----------------
Shares outstanding, end of period.............. 2,605,000 6,905,000 25,450,002 9,000,002
================ ================ ================ ================
Page 90 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
FIRST TRUST NASDAQ-100 NASDAQ-100- NYSE ARCA
US IPO EQUAL WEIGHTED TECHNOLOGY SECTOR BIOTECHNOLOGY
INDEX FUND INDEX(SM) FUND INDEX(SM) FUND INDEX FUND
------------------------------ ------------------------------ ------------------------------ ------------------------------
For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
2011 2010 2011 2010 2011 2010 2011 2010
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 125,086 $ 147,944 $ 193,294 $ 432,430 $ (63,396) $ 1,544,493 $ (1,701,516) $ (893,750)
1,116,567 684,591 6,943,739 7,244,257 36,034,195 16,671,628 (9,067,198) 15,058,828
(1,032,399) 1,446,294 (14,365,617) 2,165,178 (68,573,256) 37,101,460 (114,433,625) 25,834,919
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
209,254 2,278,829 (7,228,584) 9,841,865 (32,602,457) 55,317,581 (125,202,339) 39,999,997
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(175,526) (134,485) (367,180) (346,700) (1,713,900) (1,556,425) -- --
-- -- -- -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(175,526) (134,485) (367,180) (346,700) (1,713,900) (1,556,425) -- --
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
8,666,281 5,506,758 79,966,639 63,221,332 196,450,901 417,327,774 640,051,793 196,944,891
(8,388,699) (3,411,585) (74,786,704) (37,130,166) (465,889,979) (104,439,045) (533,039,358) (102,793,389)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
277,582 2,095,173 5,179,935 26,091,166 (269,439,078) 312,888,729 107,012,435 94,151,502
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
311,310 4,239,517 (2,415,829) 35,586,331 (303,755,435) 366,649,885 (18,189,904) 134,151,499
15,282,525 11,043,008 75,955,181 40,368,850 453,415,500 86,765,615 201,219,867 67,068,368
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 15,593,835 $ 15,282,525 $ 73,539,352 $ 75,955,181 $ 149,660,065 $ 453,415,500 $ 183,029,963 $ 201,219,867
============== ============== ============== ============== ============== ============== ============== ==============
$ -- $ 13,751 $ -- $ 89,275 $ -- $ -- $ -- $ --
============== ============== ============== ============== ============== ============== ============== ==============
650,002 550,002 3,200,002 2,050,002 17,650,002 4,100,002 5,150,002 2,350,002
350,000 250,000 3,200,000 2,950,000 7,300,000 18,300,000 15,400,000 5,850,000
(350,000) (150,000) (3,200,000) (1,800,000) (18,750,000) (4,750,000) (14,950,000) (3,050,000)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
650,002 650,002 3,200,002 3,200,002 6,200,002 17,650,002 5,600,002 5,150,002
============== ============== ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 91
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST FIRST TRUST
DOW JONES INTERNET STRATEGIC VALUE
INDEX(SM) FUND INDEX FUND
------------------------------------ ------------------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010
----------------- ----------------- ----------------- -----------------
OPERATIONS:
Net investment income (loss)................... $ (1,558,228) $ 655,966 $ 554,376 $ 644,739
Net realized gain (loss)....................... 62,801,316 24,987,964 2,204,042 6,878,550
Net change in unrealized appreciation
(depreciation) ........................... (129,043,201) 64,467,650 (3,710,370) (2,858,232)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting
from operations............................. (67,800,113) 90,111,580 (951,952) 4,665,057
---------------- ---------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.......................... (412,275) (659,835) (660,711) (657,855)
Return of capital.............................. -- -- -- (7,885)
---------------- ---------------- ---------------- ----------------
Total distributions to shareholders............ (412,275) (659,835) (660,711) (665,740)
---------------- ---------------- ---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold...................... 519,933,101 517,361,186 13,640,278 52,387,882
Cost of shares redeemed........................ (521,516,911) (103,947,961) (17,017,824) (70,918,017)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions............... (1,583,810) 413,413,225 (3,377,546) (18,530,135)
---------------- ---------------- ---------------- ----------------
Total increase (decrease) in net assets........ (69,796,198) 502,864,970 (4,990,209) (14,530,818)
NET ASSETS:
Beginning of period............................ 589,479,579 86,614,609 36,632,730 51,163,548
---------------- ---------------- ---------------- ----------------
End of period.................................. $ 519,683,381 $ 589,479,579 $ 31,642,521 $ 36,632,730
================ ================ ================ ================
Accumulated net investment income (loss)
at end of period............................ $ -- $ -- $ -- $ --
================ ================ ================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period........ 17,200,002 3,450,002 1,600,002 2,500,002
Shares sold.................................... 14,900,000 17,650,000 550,000 2,500,000
Shares redeemed................................ (16,000,000) (3,900,000) (700,000) (3,400,000)
---------------- ---------------- ---------------- ----------------
Shares outstanding, end of period.............. 16,100,002 17,200,002 1,450,002 1,600,002
================ ================ ================ ================
Page 92 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST
VALUE LINE(R) FIRST TRUST NASDAQ-100 NASDAQ(R)
EQUITY ALLOCATION VALUE LINE(R) DIVIDEND EX-TECHNOLOGY SECTOR CLEAN EDGE(R) GREEN ENERGY
INDEX FUND INDEX FUND INDEX(SM) FUND INDEX FUND
------------------------------ ------------------------------ ------------------------------ ------------------------------
For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
2011 2010 2011 2010 2011 2010 2011 2010
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 72,064 $ 100,085 $ 7,902,272 $ 4,980,314 $ 86,782 $ 173,556 $ (57,380) $ (26,978)
128,844 1,145,729 12,636,031 8,011,210 1,142,380 1,597,438 (1,932,700) (128,157)
(835,358) (99,602) 3,716,675 13,888,773 (2,777,822) 1,230,277 (13,448,678) 633,094
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(634,450) 1,146,212 24,254,978 26,880,297 (1,548,660) 3,001,271 (15,438,758) 477,959
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(72,485) (102,971) (7,975,414) (5,061,937) (104,225) (158,610) -- --
-- -- -- (65,937) -- -- -- --
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(72,485) (102,971) (7,975,414) (5,127,874) (104,225) (158,610) -- --
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
5,352,158 7,037,546 225,622,376 75,819,232 21,526,159 16,507,613 7,115,097 1,526,157
(5,394,000) (7,860,408) (94,012,975) (32,679,842) (11,867,696) (7,777,681) (7,056,700) (9,333,154)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(41,842) (822,862) 131,609,401 43,139,390 9,658,463 8,729,932 58,397 (7,806,997)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(748,777) 220,379 147,888,965 64,891,813 8,005,578 11,572,593 (15,380,361) (7,329,038)
7,105,652 6,885,273 218,509,592 153,617,779 22,151,317 10,578,724 36,119,988 43,449,026
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,356,875 $ 7,105,652 $ 366,398,557 $ 218,509,592 $ 30,156,895 $ 22,151,317 $ 20,739,627 $ 36,119,988
============== ============== ============== ============== ============== ============== ============== ==============
$ 271 $ -- $ -- $ -- $ -- $ 16,623 $ -- $ --
============== ============== ============== ============== ============== ============== ============== ==============
350,002 400,002 14,487,986 11,487,986 1,050,002 600,002 2,200,002 2,700,002
250,000 400,000 14,500,000 5,250,000 950,000 850,000 450,000 100,000
(250,000) (450,000) (6,100,000) (2,250,000) (550,000) (400,000) (500,000) (600,000)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
350,002 350,002 22,887,986 14,487,986 1,450,002 1,050,002 2,150,002 2,200,002
============== ============== ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 93
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
S&P FIRST TRUST
REIT ISE WATER
INDEX FUND INDEX FUND
------------------------------------ ------------------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010
----------------- ----------------- ----------------- -----------------
OPERATIONS:
Net investment income (loss)................... $ 3,603,572 $ 1,371,447 $ 481,476 $ 405,065
Net realized gain (loss)....................... (3,997,767) 4,840,048 2,261,282 (70,286)
Net change in unrealized appreciation
(depreciation) ........................... (21,892,948) 4,804,142 (6,845,222) 7,533,201
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting
from operations............................. (22,287,143) 11,015,637 (4,102,464) 7,867,980
---------------- ---------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.......................... (4,049,501) (1,400,636) (554,561) (319,290)
Return of capital.............................. -- -- -- --
---------------- ---------------- ---------------- ----------------
Total distributions to shareholders............ (4,049,501) (1,400,636) (554,561) (319,290)
---------------- ---------------- ---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold...................... 453,173,259 66,628,620 34,659,837 17,153,891
Cost of shares redeemed........................ (172,941,669) (26,264,803) (25,127,425) (8,905,590)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions............... 280,231,590 40,363,817 9,532,412 8,248,301
---------------- ---------------- ---------------- ----------------
Total increase (decrease) in net assets........ 253,894,946 49,978,818 4,875,387 15,796,991
NET ASSETS:
Beginning of period............................ 71,065,852 21,087,034 53,110,639 37,313,648
---------------- ---------------- ---------------- ----------------
End of period.................................. $ 324,960,798 $ 71,065,852 $ 57,986,026 $ 53,110,639
================ ================ ================ ================
Accumulated net investment income (loss)
at end of period............................ $ -- $ 217,284 $ 15,568 $ 89,624
================ ================ ================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period........ 4,850,002 1,800,002 2,400,002 2,000,002
Shares sold.................................... 28,200,000 5,050,000 1,600,000 850,000
Shares redeemed................................ (12,050,000) (2,000,000) (1,200,000) (450,000)
---------------- ---------------- ---------------- ----------------
Shares outstanding, end of period.............. 21,000,002 4,850,002 2,800,002 2,400,002
================ ================ ================ ================
Page 94 See Notes to Financial Statements
FIRST TRUST FIRST TRUST
ISE-REVERE FIRST TRUST FIRST TRUST NASDAQ(R) ABA
NATURAL GAS ISE CHINDIA VALUE LINE(R) 100 COMMUNITY BANK
INDEX FUND INDEX FUND EXCHANGE-TRADED FUND INDEX FUND
------------------------------ ------------------------------ ------------------------------ ------------------------------
For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
2011 2010 2011 2010 2011 2010 2011 2010
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 1,929,769 $ 769,258 $ 1,374,217 $ 1,074,343 $ 392,155 $ 4,512 $ 203,793 $ 112,441
53,827,977 20,680,688 4,404,156 3,627,703 (1,350,721) 18,153,935 (354,412) 242,654
(112,055,233) 2,466,035 (39,977,843) 14,801,653 (4,336,999) (1,728,785) (788,265) 1,511
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(56,297,487) 23,915,981 (34,199,470) 19,503,699 (5,295,565) 16,429,662 (938,884) 356,606
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(1,845,855) (1,172,607) (1,488,951) (1,073,636) (420,210) -- (204,876) (114,106)
-- (54,408) -- -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(1,845,855) (1,227,015) (1,488,951) (1,073,636) (420,210) -- (204,876) (114,106)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
444,624,390 441,554,686 -- 91,212,949 85,357,150 81,283,340 6,285,743 8,559,196
(436,818,095) (531,689,123) (61,376,060) (53,531,101) (112,529,279) (69,715,177) (2,486,580) (4,426,523)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
7,806,295 (90,134,437) (61,376,060) 37,681,848 (27,172,129) 11,568,163 3,799,163 4,132,673
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(50,337,047) (67,445,471) (97,064,481) 56,111,911 (32,887,904) 27,997,825 2,655,403 4,375,173
396,893,435 464,338,906 176,351,823 120,239,912 88,430,584 60,432,759 9,978,774 5,603,601
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 346,556,388 $ 396,893,435 $ 79,287,342 $ 176,351,823 $ 55,542,680 $ 88,430,584 $ 12,634,177 $ 9,978,774
============== ============== ============== ============== ============== ============== ============== ==============
$ 83,767 $ -- $ -- $ 707 $ (24,835) $ 4,512 $ 1,117 $ 2,200
============== ============== ============== ============== ============== ============== ============== ==============
20,250,002 26,500,002 7,050,002 5,650,002 6,539,982 5,789,982 400,002 250,002
20,550,000 24,500,000 -- 3,950,000 6,100,000 6,350,000 250,000 350,000
(21,750,000) (30,750,000) (2,700,000) (2,550,000) (8,150,000) (5,600,000) (100,000) (200,000)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
19,050,002 20,250,002 4,350,002 7,050,002 4,489,982 6,539,982 550,002 400,002
============== ============== ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 95
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 22.17 $ 17.70 $ 14.74 $ 22.35 $ 23.92
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.10 0.09 0.09 0.17 0.16
Net realized and unrealized gain (loss) (2.02) 4.46 2.97 (7.60) (1.60)
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.92) 4.55 3.06 (7.43) (1.44)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.16) (0.08) (0.10) (0.17) (0.13)
Return of capital -- -- (0.00) (c) (0.01) --
---------- ---------- ---------- ---------- ----------
Total distributions (0.16) (0.08) (0.10) (0.18) (0.13)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 20.09 $ 22.17 $ 17.70 $ 14.74 $ 22.35
========== ========== ========== ========== ==========
TOTAL RETURN (a) (8.69)% 25.77% 20.85% (33.33)% (6.02)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 52,328 $ 153,050 $ 18,679 $ 14,077 $ 17,993
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.71% 0.86% 0.94% 1.05% 1.35%
Ratio of net expenses to average
net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss)
to average net assets 0.40% 0.94% 0.69% 0.79% 0.58%
Portfolio turnover rate (b) 59% 86% 86% 85% 11%
FIRST TRUST MORNINGSTAR DIVIDEND LEADERS(SM) INDEX FUND
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 15.92 $ 14.27 $ 13.09 $ 20.20 $ 23.51
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.61 0.57 0.56 0.83 0.92
Net realized and unrealized gain (loss) 1.65 1.66 1.19 (7.13) (3.35)
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.26 2.23 1.75 (6.30) (2.43)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.61) (0.58) (0.57) (0.81) (0.88)
Return of capital -- (0.00) (c) -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions (0.61) (0.58) (0.57) (0.81) (0.88)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 17.57 $ 15.92 $ 14.27 $ 13.09 $ 20.20
========== ========== ========== ========== ==========
TOTAL RETURN (a) 14.44% 16.05% 14.24% (31.71)% (10.64)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 447,030 $ 143,294 $ 48,505 $ 43,196 $ 64,650
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.56% 0.66% 0.79% 0.72% 0.68%
Ratio of net expenses to average
net assets 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of net investment income (loss)
to average net assets 3.98% 4.22% 4.64% 5.07% 3.87%
Portfolio turnover rate (b) 27% 30% 81% 56% 9%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return
calculated for a period of less than one year is not annualized. The total
returns would have been lower if certain fees had not been waived and
expenses reimbursed by the investment advisor.
(b) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(c) Amount represents less than $0.01 per share.
Page 96 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST US IPO INDEX FUND
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 23.51 $ 20.08 $ 14.09 $ 25.36 $ 22.20
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.18 0.20 0.59 0.15 0.05
Net realized and unrealized gain (loss) 0.55 3.45 5.72 (11.27) 3.17
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.73 3.65 6.31 (11.12) 3.22
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.25) (0.22) (0.32) (0.14) (0.06)
Return of capital -- -- -- (0.01) --
---------- ---------- ---------- ---------- ----------
Total distributions (0.25) (0.22) (0.32) (0.15) (0.06)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 23.99 $ 23.51 $ 20.08 $ 14.09 $ 25.36
========== ========== ========== ========== ==========
TOTAL RETURN (a) 3.11% 18.28% 44.93% (43.88)% 14.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 15,594 $ 15,283 $ 11,043 $ 8,454 $ 26,633
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 1.01% 1.32% 1.34% 1.02% 1.06%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.70% 1.28% 3.59% 0.50% 0.24%
Portfolio turnover rate (b) 44% 43% 30% 62% 11%
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 23.74 $ 19.69 $ 12.37 $ 22.08 $ 20.12
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.05 0.15 0.05 0.00 (c) (0.02)
Net realized and unrealized gain (loss) (0.70) 4.02 7.32 (9.70) 1.98
---------- ---------- ---------- ---------- ----------
Total from investment operations (0.65) 4.17 7.37 (9.70) 1.96
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.11) (0.12) (0.05) (0.00)(c) --
Return of capital -- -- -- (0.01) --
---------- ---------- ---------- ---------- ----------
Total distributions (0.11) (0.12) (0.05) (0.01) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 22.98 $ 23.74 $ 19.69 $ 12.37 $ 22.08
========== ========== ========== ========== ==========
TOTAL RETURN (a) (2.77)% 21.25% 59.54% (43.96)% 9.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 73,539 $ 75,955 $ 40,369 $ 14,848 $ 30,911
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.68% 0.75% 0.67% 0.88% 0.95%
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets 0.23% 0.79% 0.35% 0.01% (0.08)%
Portfolio turnover rate (b) 27% 24% 36% 39% 15%
(a) Total return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividend distributions at net asset value during the period, and
redemption at net asset value on the last day of the period. The returns
presented do not reflect the deduction of taxes that a shareholder would
pay on Fund distributions or the redemption or sale of Fund shares.
Total return calculated for a period of less than one year is not
annualized. The total returns would have been lower if certain fees had
not been waived and expenses reimbursed by the investment advisor.
(b) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and
in-kind transactions.
(c) Amount represents less than $0.01 per share.
See Notes to Financial Statements Page 97
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 25.69 $ 21.16 $ 11.77 $ 21.50 $ 19.97
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.00 (a)(d) 0.10 0.01 -- (0.03)
Net realized and unrealized gain (loss) (1.47) 4.53 9.39 (9.73) 1.56
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.47) 4.63 9.40 (9.73) 1.53
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.08) (0.10) (0.01) -- --
Return of capital -- -- (0.00)(d) -- --
---------- ---------- ---------- ---------- ----------
Total distributions (0.08) (0.10) (0.01) -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 24.14 $ 25.69 $ 21.16 $ 11.77 $ 21.50
========== ========== ========== ========== ==========
TOTAL RETURN (b) (5.75)% 21.92% 79.89% (45.26)% 7.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 149,660 $ 453,416 $ 86,766 $ 9,414 $ 23,652
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.63% 0.70% 0.67% 0.88% 0.92%
Ratio of net expenses to average net
assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets (0.02)% 0.71% 0.16% (0.01)% (0.16)%
Portfolio turnover rate (c) 21% 26% 35% 33% 10%
FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 39.07 $ 28.54 $ 19.70 $ 24.41 $ 23.55
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.30) (0.17) (0.16) 0.18 (0.10)
Net realized and unrealized gain (loss) (6.09) 10.70 9.00 (4.62) 0.96
---------- ---------- ---------- ---------- ----------
Total from investment operations (6.39) 10.53 8.84 (4.44) 0.86
---------- ---------- ---------- ----------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income -- -- -- (0.18) --
Return of capital -- -- -- (0.09) --
---------- ---------- ---------- ---------- ----------
Total distributions -- -- -- (0.27) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 32.68 $ 39.07 $ 28.54 $ 19.70 $ 24.41
========== ========== ========== ========== ==========
TOTAL RETURN (b) (16.36)% 36.90% 44.87% (18.33)% 3.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 183,030 $ 201,220 $ 67,068 $ 59,097 $ 73,241
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.61% 0.66% 0.72% 0.72% 0.73%
Ratio of net expenses to average net
assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets (0.54%) (0.60)% (0.60)% 0.67% (0.60)%
Portfolio turnover rate (c) 44% 35% 44% 38% 11%
(a) Per share amounts have been calculated using the average share method.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return
calculated for a period of less than one year are not annualized. The
total returns would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(c) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(d) Amount represents less than $0.01 per share.
Page 98 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 34.27 $ 25.11 $ 14.01 $ 25.09 $ 22.57
---------- ----------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.10) 0.04 (0.05) 0.05 (0.16)
Net realized and unrealized gain (loss) (1.87) 9.16 11.15 (11.08) 2.68
---------- ----------- ---------- ---------- ----------
Total from investment operations (1.97) 9.20 11.10 (11.03) 2.52
---------- ----------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.02) (0.04) -- (0.05) --
Return of capital -- -- -- (0.00)(c) --
---------- ----------- ---------- ---------- ----------
Total distributions (0.02) (0.04) -- (0.05) --
---------- ----------- ---------- ---------- ----------
Net asset value, end of period $ 32.28 $ 34.27 $ 25.11 $ 14.01 $ 25.09
========== =========== ========== ========== ===========
TOTAL RETURN (a) (5.74)% 36.63% 79.23% (44.02)% 11.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 519,683 $ 589,480 $ 86,615 $ 14,708 $ 36,386
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.60% 0.66% 0.73% 0.82% 0.70%
Ratio of net expenses to average net
assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income (loss) to
average net assets (0.25)% 0.26% (0.46)% 0.21% (0.42)%
Portfolio turnover rate (b) 18% 16% 35% 44% 6%
FIRST TRUST STRATEGIC VALUE INDEX FUND
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 22.90 $ 20.47 $ 14.90 $ 24.12 $ 22.06
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.35 0.39 0.28 0.28 0.20
Net realized and unrealized gain (loss) (1.01) 2.44 5.57 (9.22) 2.07
----------- ----------- ----------- ----------- -----------
Total from investment operations (0.66) 2.83 5.85 (8.94) 2.27
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.42) (0.40) (0.28) (0.28) (0.21)
Return of capital -- (0.00)(c) -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions (0.42) (0.40) (0.28) (0.28) (0.21)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 21.82 $ 22.90 $ 20.47 $ 14.90 $ 24.12
=========== =========== =========== =========== ===========
TOTAL RETURN (a) (2.94)% 14.04% 39.43% (37.23)% 10.26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 31,643 $ 36,633 $ 51,164 $ 35,762 $ 61,518
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.82% 0.86% 0.87% 0.72% 1.12%
Ratio of net expenses to average net
assets 0.65% 0.65% 0.65% 0.65% 0.65%
Ratio of net investment income (loss) to
average net assets 1.51% 1.58% 1.57% 1.31% 1.09%
Portfolio turnover rate (b) 114% 197% 171% 157% 10%
(a) Total return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividend distributions at net asset value during the period, and
redemption at net asset value on the last day of the period. The returns
presented do not reflect the deduction of taxes that a shareholder would
pay on Fund distributions or the redemption or sale of Fund shares.
Total returns calculated for a period of less than one year are not
annualized. The total returns would have been lower if certain fees had
not been waived and expenses reimbursed by the investment advisor.
(b) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and
in-kind transactions.
(c) Amount represents less than $0.01 per share.
See Notes to Financial Statements Page 99
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 20.30 $ 17.21 $ 12.98 $ 20.45 $ 19.78
---------- ---------- ---------- ----------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.21 0.29 0.18 0.25 0.24
Net realized and unrealized gain (loss) (2.14) 3.09 4.23 (7.47) 0.68
---------- ---------- ---------- ----------- ----------
Total from investment operations (1.93) 3.38 4.41 (7.22) 0.92
---------- ---------- ---------- ----------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.21) (0.29) (0.18) (0.25) (0.25)
---------- ---------- ---------- ----------- ----------
Net asset value, end of period $ 18.16 $ 20.30 $ 17.21 $ 12.98 $ 20.45
========== ========== ========== =========== ==========
TOTAL RETURN (a) (9.56)% 19.85% 34.15% (35.45)% 4.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 6,357 $ 7,106 $ 6,885 $ 5,841 $ 13,291
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 1.39% 1.35% 1.24% 1.14% 1.36%
Ratio of net expenses to average net
assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 1.05% 1.29% 1.24% 1.29% 1.04%
Portfolio turnover rate (b) 184% 205% 191% 120% 43%
(a) Total return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividend distributions at net asset value during the period, and
redemption at net asset value on the last day of the period. The returns
presented do not reflect the deduction of taxes that a shareholder would
pay on Fund distributions or the redemption or sale of Fund shares.
Total returns calculated for a period of less than one year are not
annualized. The total return would have been lower if certain fees had
not been waived and expenses reimbursed by the investment advisor.
(b) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and
in-kind transactions.
Page 100 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 15.08 $ 13.37 $ 11.55 $ 15.75 $ 16.77
----------- ---------- ---------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.42 0.41 (a) 0.38 0.45 0.44
Net realized and unrealized gain (loss) 0.93 1.71 1.82 (4.20) (0.99)
----------- ---------- ---------- ----------- -----------
Total from investment operations 1.35 2.12 2.20 (3.75) (0.55)
----------- ----------- ---------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.42) (0.40) (0.38) (0.45) (0.47)
Return of capital -- (0.01) -- -- --
----------- ---------- ---------- ----------- -----------
Total distributions to shareholders (0.42) (0.41) (0.38) (0.45) (0.47)
----------- ---------- ---------- ----------- -----------
Net asset value, end of period $ 16.01 $ 15.08 $ 13.37 $ 11.55 $ 15.75
=========== ========== ========== =========== ===========
TOTAL RETURN (b) 9.03% 16.08% 19.58% (24.17)% (3.42)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 366,399 $ 218,510 $ 153,618 $ 115,403 $ 180,153
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.79% 0.84% 0.80% 0.84% 0.85%
Ratio of net expenses to average net
assets 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income (loss) to
average net assets 2.84% 2.94% 3.30% 3.20% 2.37%
Portfolio turnover rate (c) 53% 55% 101% 109% 5%
(a) Per share amounts have been calculated using the average share method.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total returns
calculated for a period of less than one year are not annualized. The
total returns would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(c) 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 101
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
FOR THE PERIOD
FOR THE FOR THE FOR THE FOR THE FEBRUARY 8, 2007 (a)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -------------------
Net asset value, beginning of period $ 21.10 $ 17.63 $ 12.05 $ 21.19 $ 20.00
---------- ---------- --------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.06 0.17 0.05 0.01 (0.01)
Net realized and unrealized gain (loss) (0.28) 3.46 5.58 (9.14) 1.20
---------- ---------- --------- ---------- ----------
Total from investment operations (0.22) 3.63 5.63 (9.13) 1.19
---------- ---------- --------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.08) (0.16) (0.05) (0.01) --
Return of capital -- -- (0.00)(e) (0.00)(e) --
---------- ---------- --------- ---------- ----------
Total distributions to shareholders (0.08) (0.16) (0.05) (0.01) --
---------- ---------- --------- ---------- ----------
Net asset value, end of period $ 20.80 $ 21.10 $ 17.63 $ 12.05 $ 21.19
========== ========== ========= ========== ==========
TOTAL RETURN (b) (1.08)% 20.64% 46.74% (43.09)% 5.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 30,157 $ 22,151 $ 10,579 $ 7,232 $ 2,119
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.78% 0.94% 1.28% 1.86% 2.61% (c)
Ratio of net expenses to average net
assets 0.60% 0.60% 0.60% 0.60% 0.60% (c)
Ratio of net investment income (loss) to
average net assets 0.31% 1.02% 0.48% 0.03% (0.04)% (c)
Portfolio turnover rate (d) 37% 19% 43% 67% 27%
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND
FOR THE PERIOD
FOR THE FOR THE FOR THE FOR THE FEBRUARY 8, 2007 (a)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 16.42 $ 16.09 $ 11.19 $ 30.86 $ 20.00
---------- ----------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.03) (0.01) (0.02) (0.04) (0.04)
Net realized and unrealized gain (loss) (6.74) 0.34 4.92 (19.63) 10.90
---------- ----------- ---------- ---------- ----------
Total from investment operations (6.77) 0.33 4.90 (19.67) 10.86
---------- ----------- ---------- ---------- ----------
Net asset value, end of period $ 9.65 $ 16.42 $ 16.09 $ 11.19 $ 30.86
========== =========== ========== ========== ==========
TOTAL RETURN (b) (41.23)% 2.05% 43.79% (63.74)% 54.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 20,740 $ 36,120 $ 43,449 $ 23,504 $ 50,913
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.77% 0.78% 0.81% 0.83% 1.00% (c)
Ratio of net expenses to average net
assets 0.60% 0.60% 0.60% 0.60% 0.60% (c)
Ratio of net investment income (loss) to
average net assets (0.18)% (0.07)% (0.12)% (0.21)% (0.33)% (c)
Portfolio turnover rate (d) 22% 22% 40% 32% 4%
(a) Inception date.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total returns
calculated for a period of less than one year are not annualized. The
total returns would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(e) Amount represents less than $0.01 per share.
Page 102 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST S&P REIT INDEX FUND
FOR THE PERIOD
FOR THE FOR THE FOR THE FOR THE MAY 8, 2007 (a)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 14.65 $ 11.72 $ 9.43 $ 15.81 $ 20.00
---------- ---------- --------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.28 0.29 0.25 0.31 0.32 (b)
Net realized and unrealized gain (loss) 0.88 2.94 2.31 (6.38) (4.13)
---------- ---------- --------- ---------- ----------
Total from investment operations 1.16 3.23 2.56 (6.07) (3.81)
---------- ---------- --------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.34) (0.30) (0.25) (0.31) (0.38)
Return of capital -- -- (0.02) -- --
---------- ----------- --------- ---------- ----------
Total distributions (0.34) (0.30) (0.27) (0.31) (0.38)
---------- ---------- --------- ---------- ----------
Net asset value, end of period $ 15.47 $ 14.65 $ 11.72 $ 9.43 $ 15.81
========== ========== ========= ========== ==========
TOTAL RETURN (c) 7.90% 27.73% 28.00% (38.87)% (19.08)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 324,961 $ 71,066 $ 21,087 $ 5,187 $ 1,581
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.57% 0.69% 1.95% 5.30% 8.41% (d)
Ratio of net expenses to average net
assets 0.50% 0.50% 0.50% 0.50% 0.50% (d)
Ratio of net investment income (loss) to
average net assets 2.03% 2.60% 3.39% 3.40% 2.73% (d)
Portfolio turnover rate (e) 9% 16% 13% 20% 25%
FIRST TRUST ISE WATER INDEX FUND
FOR THE PERIOD
FOR THE FOR THE FOR THE FOR THE MAY 8, 2007 (a)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period $ 22.13 $ 18.66 $ 15.69 $ 22.38 $ 20.00
---------- ----------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.16 0.18 0.19 0.12 0.04
Net realized and unrealized gain (loss) (1.39) 3.43 2.97 (6.69) 2.38
---------- ----------- ---------- ---------- ----------
Total from investment operations (1.23) 3.61 3.16 (6.57) 2.42
---------- ----------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.19) (0.14) (0.19) (0.12) (0.04)
---------- ----------- ---------- ---------- ----------
Net asset value, end of period $ 20.71 $ 22.13 $ 18.66 $ 15.69 $ 22.38
========== =========== ========== ========== ==========
TOTAL RETURN (c) (5.62)% 19.49% 20.29% (29.40)% 12.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 57,986 $ 53,111 $ 37,314 $ 32,157 $ 12,310
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.64% 0.69% 0.72% 0.77% 1.68% (d)
Ratio of net expenses to average net
assets 0.60% 0.60% 0.60% 0.60% 0.60% (d)
Ratio of net investment income (loss) to
average net assets 0.79% 0.96% 1.20% 0.76% 0.46% (d)
Portfolio turnover rate (e) 31% 38% 44% 45% 3%
(a) Inception date.
(b) Per share amounts have been calculated using the average share method.
(c) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total returns
calculated for a period of less than one year are not annualized. The
total returns would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(d) Annualized.
(e) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 103
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND
FOR THE PERIOD
FOR THE FOR THE FOR THE FOR THE MAY 8, 2007 (a)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ---------------- -----------------
Net asset value, beginning of period $ 19.60 $ 17.52 $ 11.80 $ 22.31 $ 20.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.08 0.03 0.07 0.14 0.03
Net realized and unrealized gain (loss) (1.41) 2.10 5.72 (10.51) 2.30
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.33) 2.13 5.79 (10.37) 2.33
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.08) (0.05) (0.07) (0.14) (0.02)
Return of capital -- (0.00)(e) (0.00)(e) -- --
---------- ---------- ---------- ---------- ----------
Total distributions (0.08) (0.05) (0.07) (0.14) (0.02)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 18.19 $ 19.60 $ 17.52 $ 11.80 $ 22.31
========== ========== ========== ========== ==========
TOTAL RETURN (b) (6.85)% 12.22% 49.21% (46.57)% 11.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 346,556 $ 396,893 $ 464,339 $ 37,179 $ 11,157
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets 0.63% 0.65% 0.72% 0.77% 2.36% (c)
Ratio of net expenses to average net
assets 0.60% 0.60% 0.60% 0.60% 0.60% (c)
Ratio of net investment income (loss) to
average net assets 0.39% 0.19% 0.53% 0.77% 0.32% (c)
Portfolio turnover rate (d) 43% 93% 71% 116% 5%
FIRST TRUST ISE CHINDIA INDEX FUND
FOR THE PERIOD
FOR THE FOR THE FOR THE FOR THE MAY 8, 2007 (a)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- ----------------- ----------------- ------------------ -----------------
Net asset value, beginning of period $ 25.01 $ 21.28 $ 11.78 $ 27.73 $ 20.00
---------- ---------- --------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.27 0.17 0.09 0.17 0.02
Net realized and unrealized gain (loss) (6.75) 3.73 9.50 (15.92) 7.73
---------- ---------- --------- ---------- ----------
Total from investment operations (6.48) 3.90 9.59 (15.75) 7.75
---------- ---------- --------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.30) (0.17) (0.09) (0.20) (0.02)
Return of capital -- -- (0.00)(e) (0.00)(e) --
---------- ---------- --------- ---------- ----------
Total distributions (0.30) (0.17) (0.09) (0.20) (0.02)
---------- ---------- --------- ---------- ----------
Net asset value, end of period $ 18.23 $ 25.01 $ 21.28 $ 11.78 $ 27.73
========== ========== ========= ========== ==========
TOTAL RETURN (b) (26.02)% 18.46% 81.58% (56.98)% 38.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 79,287 $ 176,352 $ 120,240 $ 35,937 $ 104,004
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.66% 0.66% 0.73% 0.73% 0.82% (c)
Ratio of net expenses to average
net assets 0.60% 0.60% 0.60% 0.60% 0.60% (c)
Ratio of net investment income (loss) to
average net assets 1.00% 0.74% 0.58% 0.90% 0.17% (c)
Portfolio turnover rate (d) 23% 34% 47% 39% 2%
(a) Inception date.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total returns
calculated for a period of less than one year are not annualized. The
total returns would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(e) Amount represents less than $0.01 per share.
Page 104 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 DECEMBER 31, 2008 DECEMBER 31, 2007 (a)
----------------- ----------------- ----------------- ----------------- ---------------------
Net asset value, beginning of period $ 13.52 $ 10.44 $ 9.26 $ 17.91 $ 15.89
---------- ---------- ----------- ---------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.08 0.00 (f) (0.01) (0.02) 1.02
Net realized and unrealized gain (loss) (1.15) 3.08 1.19 (8.63) 2.06
---------- ---------- ----------- ---------- -----------
Total from investment operations (1.07) 3.08 1.18 (8.65) 3.08
---------- ---------- ----------- ---------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS
FROM:
Net investment income (0.08) -- -- -- --
Net realized gains -- -- -- -- (1.06)
Return of capital -- -- -- -- --
--------- ---------- ----------- ---------- -----------
Total distributions to shareholders (0.08) -- -- -- (1.06)
--------- ---------- ----------- ---------- -----------
Net asset value, end of period $ 12.37 $ 13.52 $ 10.44 $ 9.26 $ 17.91
========= ========== =========== ========== ===========
TOTAL RETURN, BASED ON
NET ASSET VALUE (b) (7.92)% 29.50% 12.74% (48.30)% 19.91% (e)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 55,543 $ 88,431 $ 60,433 $ 75,825 $ 204,913
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.82% 0.87% 0.85% 0.86% 0.89%
Ratio of net expenses to average
net assets 0.70% 0.70% 0.70% 0.70% 0.83% (d)
Ratio of net investment income (loss)
to average net assets 0.47% 0.01% (0.08)% (0.11)% (0.21)%
Portfolio turnover rate (c) 202% 266% 235% 251% 111%
(a) The Fund commenced operations on June 12, 2003. Results for periods prior
to June 18, 2007 are of First Trust Value Line(R) 100 Fund. See
Reorganization History below.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total returns
calculated for a period of less than one year are not annualized. The
total returns would have been lower if certain fees had not been waived or
expenses reimbursed by the investment advisor.
(c) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(d) The annualized expense ratio is capped at 0.70%. This ratio of 0.83%
includes expenses for a portion of the period prior to the reorganization
of the First Trust Value Line(R) 100 Fund.
(e) Prior to June 18, 2007, total return based on net asset value assumed that
all dividend distributions were reinvested at prices obtained by the
Dividend Reinvestment Plan of First Trust Value Line(R) 100 Fund. See
Reorganization History below.
(f) Amount represents less than $0.01 per share.
REORGANIZATION HISTORY:
First Trust Value Line(R) 100 Fund (the "Predecessor FVL Fund"), a closed-end
fund organized as a Massachusetts business trust on April 18, 2003, reorganized
with and into First Trust Value Line(R) 100 Exchange-Traded Fund ("FVL"), an
exchange-traded fund and newly created series of the Trust effective Friday,
June 15, 2007. The Predecessor FVL Fund ceased trading on the AMEX (now known as
NYSE Amex) on Friday, June 15, 2007 and FVL began trading on the AMEX on Monday,
June 18, 2007 (effective November 6, 2008, FVL began trading on NYSE Arca),
under the ticker symbol "FVL," the same ticker symbol used by the Predecessor
FVL Fund. The assets of the Predecessor FVL Fund were transferred to, and the
liabilities of the Predecessor FVL Fund were assumed by, FVL in exchange for
shares of FVL on a one share for one share basis based upon the net asset value
("NAV") of the Predecessor FVL Fund on Friday, June 15, 2007. FVL shares have
been distributed to the Predecessor FVL Fund shareholders, on a tax-free basis
for federal income tax purposes, and the Predecessor FVL Fund has been
terminated. The historical results of the Predecessor FVL Fund survive for
financial reporting purposes.
See Notes to Financial Statements Page 105
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND
FOR THE PERIOD
FOR THE FOR THE JUNE 29, 2009 (a)
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009
----------------- ----------------- -----------------
Net asset value, beginning of period $ 24.95 $ 22.41 $ 20.00
----------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.37 0.30 0.16
Net realized and unrealized gain (loss) (1.98) 2.55 2.40
----------- ---------- ----------
Total from investment operations (1.61) 2.85 2.56
----------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.37) (0.31) (0.15)
----------- ---------- ----------
Net asset value, end of period $ 22.97 $ 24.95 $ 22.41
=========== ========== ==========
TOTAL RETURN (b) (6.48)% 12.77% 12.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 12,634 $ 9,979 $ 5,604
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.96% 1.16% 2.67% (c)
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% (c)
Ratio of net investment income (loss) to average net assets 1.62% 1.40% 1.92% (c)
Portfolio turnover rate (d) 29% 26% 15%
(a) Inception date.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total returns
calculated for a period of less than one year are not annualized. The
total returns would have been lower if certain fees had not been waived or
expenses reimbursed by the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 106 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
1. ORGANIZATION
First Trust Exchange-Traded Fund (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on August 8,
2003, and is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of eighteen exchange-traded funds:
First Trust Dow Jones Select MicroCap Index(SM) Fund - (NYSE Arca, Inc. ticker "FDM")
First Trust Morningstar Dividend Leaders(SM) Index Fund - (NYSE Arca, Inc. ticker "FDL")
First Trust US IPO Index Fund - (NYSE Arca, Inc. ticker "FPX")
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund - (NASDAQ ticker "QQEW")
First Trust NASDAQ-100-Technology Sector Index(SM) Fund - (NASDAQ ticker "QTEC")
First Trust NYSE Arca Biotechnology Index Fund - (NYSE Arca, Inc. ticker "FBT")
First Trust Dow Jones Internet Index(SM) Fund - (NYSE Arca, Inc. ticker "FDN")
First Trust Strategic Value Index Fund - (NYSE Arca, Inc. ticker "FDV")
First Trust Value Line(R) Equity Allocation Index Fund - (NYSE Arca, Inc. ticker "FVI")
First Trust Value Line(R) Dividend Index Fund - (NYSE Arca, Inc. ticker "FVD")
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund - (NASDAQ ticker "QQXT")
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund - (NASDAQ ticker "QCLN")
First Trust S&P REIT Index Fund - (NYSE Arca, Inc. ticker "FRI")
First Trust ISE Water Index Fund - (NYSE Arca, Inc. ticker "FIW")
First Trust ISE-Revere Natural Gas Index Fund - (NYSE Arca, Inc. ticker "FCG")
First Trust ISE Chindia Index Fund - (NYSE Arca, Inc. ticker "FNI")
First Trust Value Line(R) 100 Exchange-Traded Fund - (NYSE Arca, Inc. ticker "FVL")
First Trust NASDAQ(R) ABA Community Bank Index Fund - (NASDAQ ticker "QABA")
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Each Fund's shares are
listed and traded on NYSE Arca, Inc. ("NYSE Arca") except for the First Trust
NASDAQ-100 Equal Weighted Index(SM) Fund, the First Trust NASDAQ-100-Technology
Sector Index(SM) Fund, the First Trust NASDAQ-100 Ex-Technology Sector Index(SM)
Fund, the First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund, and the
First Trust NASDAQ(R) ABA Community Bank Index Fund, which are listed and traded
on The NASDAQ Stock Market, Inc. ("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 Dow Jones Select MicroCap Index(SM) Fund Dow Jones Select MicroCapIndex(SM)
First Trust Morningstar Dividend Leaders(SM) Index Fund Morningstar(R) Dividend Leaders(SM) Index
First Trust US IPO Index Fund IPOX(R)-100 U.S. Index
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund NASDAQ-100 Equal Weighted Index(SM)
First Trust NASDAQ-100-Technology Sector Index(SM) Fund NASDAQ-100 Technology Sector Index(SM)
First Trust NYSE Arca Biotechnology Index Fund NYSE Arca Biotechnology Index(SM)
First Trust Dow Jones Internet Index(SM) Fund Dow Jones Internet Composite Index(SM)
First Trust Strategic Value Index Fund Credit Suisse U.S. Value Index, Powered by HOLT(TM)
First Trust Value Line(R) Equity Allocation Index Fund Value Line(R) Equity Allocation Index(TM)
First Trust Value Line(R) Dividend Index Fund Value Line(R) Dividend Index(TM)
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund NASDAQ-100 Ex-Tech Sector Index(SM)
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund NASDAQ(R) Clean Edge(R) Green Energy Index
First Trust S&P REIT Index Fund S&P United States REIT Index
First Trust ISE Water Index Fund ISE Water Index(TM)
First Trust ISE-Revere Natural Gas Index Fund ISE-REVERE Natural Gas Index(TM)
First Trust ISE Chindia Index Fund ISE ChIndia Index(TM)
First Trust Value Line(R) 100 Exchange-Traded Fund Value Line(R) 100 Index(TM)
First Trust NASDAQ(R) ABA Community Bank Index Fund NASDAQ OMX(R) ABA Community Bank Index(SM)
Page 107
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
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.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value in
accordance with valuation procedures adopted by the Trust's Board of Trustees
and in accordance with the 1940 Act. Each Fund's securities will be valued as
follows:
Portfolio securities listed on any exchange other than NASDAQ or the
London Stock Exchange Alternative Investment Market ("AIM") are valued at
the last sale price on the business day as of which such value is being
determined. If there has been no sale on such day, the securities are
valued at the mean of the most recent bid and asked price on such day.
Portfolio securities traded on one or more securities exchange are valued
at the last sale price or official closing price, as applicable, on the
business day as of which such value is being determined at the close of
the exchange representing the principal market for such securities.
Securities listed on the NASDAQ or the AIM are valued at the official
closing price on the business day as of which such value is being
determined. If there is no official closing price on the valuation day,
the securities are valued at the mean of the most recent bid and ask
prices on such day.
Portfolio securities traded in the over-the-counter market, but excluding
securities trading on the NASDAQ or the AIM, are valued at the closing
bid prices.
Short-term investments that mature in less than 60 days when purchased
are valued at amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Board of Trustees or its delegate
at fair value. These securities generally include, but are not limited to,
restricted securities (securities which may not be publicly sold without
registration under the Securities Act of 1933, as amended) for which a pricing
service is unable to provide a market price; securities whose trading has been
formally suspended; a security whose market price is not available from a
pre-established pricing source; a security with respect to which an event has
occurred that is likely to affect the value of the security after the market has
closed but before the calculation of a Fund's NAV or make it difficult or
impossible to obtain a reliable market quotation; and a security whose price, as
provided by the pricing service, does not reflect the security's "fair value."
As a general principle, the current "fair value" of a security would appear to
be the amount which the owner might reasonably expect to receive for the
security upon its current sale. The use of fair value prices by a Fund generally
results in prices used by the Fund that may differ from current market
quotations or official closing prices on the applicable exchange. A variety of
factors may be considered in determining the fair value of such securities. In
addition, the use of fair value prices and certain current market quotations or
official closing prices could result in a difference between the prices used to
calculate a Fund's NAV and the prices used by such Fund's corresponding index,
which, in turn, could result in a difference between a Fund's performance and
the performance of its underlying index.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical 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:
- Quoted prices for similar securities in active markets.
- 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.
- 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).
Page 108
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
- 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 December 31, 2011, is
included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Distributions received from a Fund's investments in publicly-traded master
limited partnerships ("MLPs") generally are comprised of return of capital from
the MLP to the extent of the cost basis of such MLP investments. Cumulative
distributions received in excess of the Fund's cost basis in an MLP generally
are recorded as capital gain.
Distributions received from a Fund's investments in real estate investment
trusts ("REITs") are comprised of return of capital, capital gains and income.
The actual character of the amounts received during the year are not known until
the fiscal year end. A Fund records the character of distributions received from
the REITs during the year based on estimates available. A Fund's
characterization may be subsequently revised based on information received from
the REITs after their tax reporting periods conclude.
C. DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
semi-annually, except for First Trust Morningstar Dividend Leaders(SM) Index
Fund and First Trust Value Line(R) Dividend Index Fund, which declare and pay
dividends quarterly, or as the Board of Trustees may determine from time to
time. Distributions of net realized gains earned by each Fund, if any, are
distributed at least annually.
Distributions from income and capital gains are determined in accordance with
income tax regulations, which may differ from accounting principles generally
accepted in the United States of America. Certain capital accounts in the
financial statements are periodically adjusted for permanent differences in
order to reflect their tax character. These permanent differences are primarily
due to the varying treatment of income and gain/loss on portfolio securities
held by the Fund and have no impact on net assets or net asset value per share.
Temporary differences, which arise from recognizing certain items of income,
expense and gain/loss in different periods for financial statement and tax
purposes, will reverse at some time in the future.
The tax character of distributions paid by each Fund during the year ended
December 31, 2011 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ -------------- --------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 610,163 $ -- $ --
First Trust Morningstar Dividend Leaders(SM) Index Fund 8,577,026 -- --
First Trust US IPO Index Fund 175,526 -- --
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 367,180 -- --
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 1,713,900 -- --
First Trust NYSE Arca Biotechnology Index Fund -- -- --
First Trust Dow Jones Internet Index(SM) Fund 412,275 -- --
First Trust Strategic Value Index Fund 660,711 -- --
First Trust Value Line(R) Equity Allocation Index Fund 72,485 -- --
First Trust Value Line(R) Dividend Index Fund 7,975,414 -- --
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 104,225 -- --
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund -- -- --
First Trust S&P REIT Index Fund 4,049,501 -- --
First Trust ISE Water Index Fund 554,561 -- --
First Trust ISE-Revere Natural Gas Index Fund 1,845,855 -- --
First Trust ISE Chindia Index Fund 1,488,951 -- --
First Trust Value Line(R) 100 Exchange-Traded Fund 420,210 -- --
First Trust NASDAQ(R) ABA Community Bank Index Fund 204,876 -- --
Page 109
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
The tax character of distributions paid by each Fund during the year ended
December 31, 2010 was as follows:
Distributions Distributions
Distributions paid paid paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ -------------- --------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 470,895 $ -- $ --
First Trust Morningstar Dividend Leaders(SM) Index Fund 2,936,478 -- 25,193
First Trust US IPO Index Fund 134,485 -- --
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 346,700 -- --
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 1,556,425 -- --
First Trust NYSE Arca Biotechnology Index Fund -- -- --
First Trust Dow Jones Internet Index(SM) Fund 659,835 -- --
First Trust Strategic Value Index Fund 657,855 -- 7,885
First Trust Value Line(R) Equity Allocation Index Fund 102,971 -- --
First Trust Value Line(R) Dividend Index Fund 5,061,937 -- 65,937
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 158,610 -- --
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund -- -- --
First Trust S&P REIT Index Fund 1,400,636 -- --
First Trust ISE Water Index Fund 319,290 -- --
First Trust ISE-Revere Natural Gas Index Fund 1,172,607 -- 54,408
First Trust ISE Chindia Index Fund 1,073,636 -- --
First Trust Value Line(R) 100 Exchange-Traded Fund -- -- --
First Trust NASDAQ(R) ABA Community Bank Index Fund 114,106 -- --
As of December 31, 2011, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ -------------- ----------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ -- $ (22,749,366) $ 3,327,339
First Trust Morningstar Dividend Leaders(SM) Index Fund -- (33,027,124) 27,538,485
First Trust US IPO Index Fund -- (5,789,831) 614,234
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund -- (8,642,605) (8,033,415)
First Trust NASDAQ-100-Technology Sector Index(SM) Fund -- (8,355,292) (24,508,830)
First Trust NYSE Arca Biotechnology Index Fund -- (9,399,572) (97,648,527)
First Trust Dow Jones Internet Index(SM) Fund -- (15,150,090) (61,725,513)
First Trust Strategic Value Index Fund -- (25,725,165) (679,020)
First Trust Value Line(R) Equity Allocation Index Fund 1,170 (5,891,659) 195,298
First Trust Value Line(R) Dividend Index Fund -- (47,056,297) 27,297,872
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -- (2,159,299) (1,061,002)
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund -- (22,413,411) (14,660,202)
First Trust S&P REIT Index Fund -- -- (19,798,405)
First Trust ISE Water Index Fund 15,568 (9,424,196) (3,806,186)
First Trust ISE-Revere Natural Gas Index Fund 83,767 (86,812,204) (67,206,689)
First Trust ISE Chindia Index Fund -- (41,812,406) (15,592,589)
First Trust Value Line(R) 100 Exchange-Traded Fund 14,386 (91,553,928) 1,308,016
First Trust NASDAQ(R) ABA Community Bank Index Fund 1,117 (635,712) (731,928)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
D. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98.2% of the Fund's taxable income
exceeds the distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ended 2008, 2009,
2010 and 2011 remain open to federal and state audit. As of December 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.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses recognized after December 31, 2010, may be carried forward
indefinitely, and their character is retained as short-term and/or long-term
losses. Previously, net capital losses were carried forward for eight years and
treated as short-term losses. As a transition rule, the Act requires that
post-enactment net capital losses be used before pre-enactment net capital
losses. At December 31, 2011, the Fund had pre-enactment and post-enactment net
capital losses for federal income tax purposes as shown in the table below. To
the extent that these loss carryforwards are used to offset future capital
gains, it is probable that the capital gains so offset will not be distributed
to Fund shareholders. The Funds are subject to certain limitations, under U.S.
tax rules, on the use of capital loss carryforwards and net unrealized built-in
losses. These limitations apply when there has been a 50% change in ownership.
Capital Capital Capital Capital Capital Capital
Loss Loss Loss Loss Loss Loss Post- Total
Available Available Available Available Available Available Effective - Capital
Through Through Through Through Through Through No Loss
2013 2014 2015 2016 2017 2018 Expiration Available
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
First Trust Dow Jones Select
MicroCap Index(SM) Fund $ -- $1,604,481 $ 910,503 $ 902,807 $ 3,227,616 $ 5,096,533 $11,007,426 $22,749,366
First Trust Morningstar Dividend
Leaders(SM) Index Fund 52,755 202,279 198,670 14,962,284 16,831,977 473,435 305,724 33,027,124
First Trust US IPO Index Fund -- 303,759 740,683 2,682,788 1,127,563 65,058 869,980 5,789,831
First Trust NASDAQ-100 Equal
Weighted Index(SM) Fund -- -- 54,385 1,957,170 4,681,103 -- 1,949,947 8,642,605
First Trust NASDAQ-100-Technology
Sector Index(SM) Fund -- -- 311,155 1,421,664 2,016,911 -- 4,605,562 8,355,292
First Trust NYSE Arca
Biotechnology Index Fund -- -- -- 2,061,136 5,787,577 1,039,054 511,805 9,399,572
First Trust Dow Jones
Internet Index(SM) Fund -- -- -- 6,295,170 1,163,966 -- 7,690,954 15,150,090
First Trust Strategic Value
Index Fund -- 45,432 831,336 11,401,861 11,336,270 1,367,556 742,710 25,725,165
First Trust Value Line(R) Equity
Allocation Index Fund -- -- 1,392,919 1,168,041 2,421,122 -- 909,577 5,891,659
First Trust Value Line(R)
Dividend Index Fund -- -- 4,488,019 21,855,796 19,646,203 437,987 628,292 47,056,297
First Trust NASDAQ-100 Ex-
Technology Sector Index(SM) Fund -- -- 7,779 143,597 1,051,894 80,899 875,130 2,159,299
First Trust NASDAQ(R) Clean Edge(R)
Green Energy Index Fund -- -- 141,332 4,246,707 7,483,633 5,884,801 4,656,938 22,413,411
First Trust S&P REIT Index Fund -- -- -- -- -- -- -- --
First Trust ISE Water Index Fund -- -- 592 318,246 5,768,328 2,198,674 1,138,356 9,424,196
First Trust ISE-Revere Natural
Gas Index Fund -- -- 5,274 7,264,703 32,569,413 40,089,981 6,882,833 86,812,204
First Trust ISE Chindia Index Fund -- -- -- 11,116,593 11,686,955 7,245,147 11,763,711 41,812,406
First Trust Value Line(R) 100
Exchange-Traded Fund -- -- 1,905,072 47,805,834 29,477,928 -- 12,365,094 91,553,928
First Trust NASDAQ(R) ABA
Community Bank Index Fund -- -- -- -- 4,787 116,604 514,321 635,712
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
In order to present paid-in capital and accumulated net realized gain (loss) on
investments on the Statements of Assets and Liabilities that more closely
represent their tax character, certain adjustments have been made to paid-in
capital, accumulated net investment income (loss) and accumulated net realized
gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the year
ended December 31, 2011, the adjustments for each Fund were as follows:
Accumulated Accumulated Net
Net Investment Realized Gain (Loss) Paid-in
Income (Loss) on Investments Capital
--------------- -------------------- --------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 74,713 $ (14,271,023) $ 14,196,310
First Trust Morningstar Dividend Leaders(SM) Index Fund 21,819 (12,434,376) 12,412,557
First Trust US IPO Index Fund 36,689 (1,614,916) 1,578,227
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 84,611 (8,456,089) 8,371,478
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 1,777,296 (39,419,165) 37,641,869
First Trust NYSE Arca Biotechnology Index Fund 1,701,516 10,333,168 (12,034,684)
First Trust Dow Jones Internet Index(SM) Fund 1,970,503 (77,873,827) 75,903,324
First Trust Strategic Value Index Fund 106,335 (2,741,610) 2,635,275
First Trust Value Line(R) Equity Allocation Index Fund 692 (1,048,015) 1,047,323
First Trust Value Line(R) Dividend Index Fund 73,142 (15,118,056) 15,044,914
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 820 (1,981,633) 1,980,813
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 57,380 (1,909,408) 1,852,028
First Trust S&P REIT Index Fund 228,645 101,783 (330,428)
First Trust ISE Water Index Fund (971) (2,925,560) 2,926,531
First Trust ISE-Revere Natural Gas Index Fund (147) (65,022,566) 65,022,713
First Trust ISE Chindia Index Fund 114,027 (11,677,862) 11,563,835
First Trust Value Line(R) 100 Exchange-Traded Fund (1,292) (11,073,709) 11,075,001
First Trust NASDAQ(R) ABA Community Bank Index Fund -- (435,287) 435,287
E. EXPENSES
Expenses that are directly related to one of the Funds are charged directly to
the respective Fund. General expenses of the Trust are allocated to all the
Funds based upon the net assets of each Fund. First Trust Advisors L.P. ("First
Trust" or the "Advisor") has entered into licensing agreements with each of the
following "Licensors" for the respective Funds:
FUND LICENSOR
First Trust Dow Jones Select MicroCap Index(SM) Fund Dow Jones & Company, Inc.
First Trust Morningstar Dividend Leaders(SM) Index Fund Morningstar, Inc.
First Trust US IPO Index Fund IPOX Schuster LLC
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund The NASDAQ Stock Market, Inc.
First Trust NASDAQ-100-Technology Sector Index(SM) Fund The NASDAQ Stock Market, Inc.
First Trust NYSE Arca Biotechnology Index Fund NYSE Euronext
First Trust Dow Jones Internet Index(SM) Fund Dow Jones & Company, Inc.
First Trust Strategic Value Index Fund Credit Suisse Securities (USA) LLC and Credit Suisse Group AG
First Trust Value Line(R) Equity Allocation Index Fund Value Line Publishing, Inc.(R)
First Trust Value Line(R) Dividend Index Fund Value Line Publishing, Inc.(R)
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund The NASDAQ Stock Market, Inc.
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund The NASDAQ Stock Market, Inc. / Clean Edge(R), Inc.
First Trust S&P REIT Index Fund Standard & Poor's
First Trust ISE Water Index Fund International Securities Exchange, LLC
First Trust ISE-Revere Natural Gas Index Fund International Securities Exchange, LLC
First Trust ISE Chindia Index Fund International Securities Exchange, LLC
First Trust Value Line(R) 100 Exchange-Traded Fund Value Line Publishing, Inc.(R)
First Trust NASDAQ(R) ABA Community Bank Index Fund The NASDAQ Stock Market, Inc.
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreement. The respective Funds are
required to pay licensing fees, which are shown on the Statements of Operations.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
F. ACCOUNTING PRONOUNCEMENT:
In May 2011, the Financial Accounting Standards Board ("FASB") issued ASU No.
2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs," modifying Topic 820, "Fair Value
Measurements and Disclosures." At the same time, the International Accounting
Standards Board ("IASB") issued International Financial Reporting Standard
("IFRS") 13, "Fair Value Measurement." The objective by the FASB and IASB is
convergence of their guidance on fair value measurements and disclosures.
Specifically, the ASU requires reporting entities to disclose (i) the amounts of
any transfers between Level 1 and Level 2, and the reasons for the transfers,
(ii) for Level 3 fair value measurements, quantitative information about
significant unobservable inputs used, (iii) a description of the valuation
processes used by the reporting entity, and (iv) a narrative description of the
sensitivity of the fair value measurement to changes in unobservable inputs if a
change in those inputs might result in a significantly higher or lower fair
value measurement. The effective date of the ASU is for interim and annual
periods beginning after December 15, 2011, and it is therefore not effective for
the current fiscal year. Management is currently evaluating the impact of the
updated standards on the Funds' financial statements, if any.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. First Trust is responsible for the selection and ongoing
monitoring of the securities in each Fund's portfolio, managing the Funds'
business affairs and providing certain other services necessary for the
management of the Funds.
For these services, First Trust is entitled to receive monthly fees from each
Fund calculated at the following annual rates:
% of Average
Daily Net Assets
----------------
First Trust Dow Jones Select MicroCap Index(SM) Fund 0.50%
First Trust Morningstar Dividend Leaders(SM) Index Fund 0.30%
First Trust US IPO Index Fund 0.40%
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 0.40%
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 0.40%
First Trust NYSE Arca Biotechnology Index Fund 0.40%
First Trust Dow Jones Internet Index(SM) Fund 0.40%
First Trust Strategic Value Index Fund 0.50%
First Trust Value Line(R) Equity Allocation Index Fund 0.50%
First Trust Value Line(R) Dividend Index Fund 0.50%
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 0.40%
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 0.40%
First Trust S&P REIT Index Fund 0.30%
First Trust ISE Water Index Fund 0.40%
First Trust ISE-Revere Natural Gas Index Fund 0.40%
First Trust ISE Chindia Index Fund 0.40%
First Trust Value Line(R) 100 Exchange-Traded Fund 0.50%
First Trust NASDAQ(R) ABA Community Bank Index Fund 0.40%
The Trust and the Advisor have entered into an Expense Reimbursement, Fee Waiver
and Recovery Agreement in which the Advisor has agreed to waive fees and/or
reimburse Fund expenses to the extent that the operating expenses of each Fund
(excluding interest expense, brokerage commissions and other trading expenses,
taxes and extraordinary expenses) exceed the below amount as a percentage of
average daily net assets per year (the "Expense Cap").
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
Expense Cap
-----------
First Trust Dow Jones Select MicroCap Index(SM) Fund 0.60%
First Trust Morningstar Dividend Leaders(SM) Index Fund 0.45%
First Trust US IPO Index Fund 0.60%
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 0.60%
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 0.60%
First Trust NYSE Arca Biotechnology Index Fund 0.60%
First Trust Dow Jones Internet Index(SM) Fund 0.60%
First Trust Strategic Value Index Fund 0.65%
First Trust Value Line(R) Equity Allocation Index Fund 0.70%
First Trust Value Line(R) Dividend Index Fund 0.70%
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 0.60%
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 0.60%
First Trust S&P REIT Index Fund 0.50%
First Trust ISE Water Index Fund 0.60%
First Trust ISE-Revere Natural Gas Index Fund 0.60%
First Trust ISE Chindia Index Fund 0.60%
First Trust Value Line(R) 100 Exchange-Traded Fund 0.70%
First Trust NASDAQ(R) ABA Community Bank Index Fund 0.60%
Each Fund's Expense Cap will be in effect until the Expense Cap Termination Date
listed below:
Fund Name Expense Cap Termination Date
--------- ----------------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund 12/6/2012
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 12/6/2012
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 12/6/2012
First Trust Dow Jones Internet Index(SM) Fund 12/6/2012
First Trust Value Line(R) Equity Allocation Index Fund 12/6/2012
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 12/6/2012
First Trust S&P REIT Index Fund 12/6/2012
First Trust ISE Water Index Fund 12/6/2012
First Trust Morningstar Dividend Leaders(SM) Index Fund 12/20/2012
First Trust US IPO Index Fund 1/3/2013
First Trust NYSE Arca Biotechnology Index Fund 1/3/2013
First Trust Strategic Value Index Fund 1/3/2013
First Trust Value Line(R) Dividend Index Fund 1/3/2013
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 1/3/2013
First Trust ISE Chindia Index Fund 1/3/2013
First Trust Value Line(R) 100 Exchange-Traded Fund 1/3/2013
First Trust NASDAQ(R) ABA Community Bank Index Fund 1/3/2013
First Trust ISE-Revere Natural Gas Index Fund 1/20/2013
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 Statements of
Operations. The advisory fee waivers and expense reimbursements for the year
ended December 31, 2011 and the expenses borne by the Advisor subject to
recovery from each applicable Fund for the periods indicated were as follows:
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
Expenses Borne by Advisor Subject to Recovery
---------------------------------------------
Period Period Year
Advisory Ended Ended Ended
Fee Expense December December December
Waivers Reimbursement 31, 2009 31, 2010 31, 2011 Total
--------- ------------- -------- -------- -------- ----------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 117,235 $ -- $ 48,917 $ 127,967 $ 117,235 $ 294,119
First Trust Morningstar Dividend Leaders(SM)
Index Fund 226,674 -- 137,066 147,279 226,674 511,019
First Trust US IPO Index Fund 71,247 2,526 67,290 83,357 73,773 224,420
First Trust NASDAQ-100 Equal Weighted
Index(SM) Fund 65,568 -- 16,264 79,793 65,568 161,625
First Trust NASDAQ-100-Technology Sector
Index(SM) Fund 114,729 -- 20,687 206,140 114,729 341,556
First Trust NYSE Arca Biotechnology Index Fund 43,660 -- 70,966 95,610 43,660 210,236
First Trust Dow Jones Internet Index(SM) Fund -- -- -- 109,122 -- 109,122
First Trust Strategic Value Index Fund 61,430 -- 86,736 83,712 61,430 231,878
First Trust Value Line(R) Equity Allocation Index Fund 34,240 12,833 31,276 50,388 47,073 128,737
First Trust Value Line(R) Dividend Index Fund 249,861 -- 125,081 228,962 249,861 603,904
First Trust NASDAQ-100 Ex-Technology Sector
Index(SM) Fund 50,938 -- 46,747 57,769 50,938 155,454
First Trust NASDAQ(R) Clean Edge(R) Green Energy
Index Fund 54,545 -- 74,427 66,287 54,545 195,259
First Trust S&P REIT Index Fund 130,777 -- 107,158 99,014 130,777 336,949
First Trust ISE Water Index Fund 25,829 -- 40,314 39,351 25,829 105,494
First Trust ISE-Revere Natural Gas Index Fund 139,394 -- 195,399 212,049 139,394 546,842
First Trust ISE Chindia Index Fund 76,490 -- 90,414 83,567 76,490 250,471
First Trust Value Line(R) 100 Exchange Traded Fund 99,646 -- 97,391 107,626 99,646 304,663
First Trust NASDAQ(R) ABA Community Bank
Index Fund 45,663 -- 44,294 44,800 45,663 134,757
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 in connection with the Funds
was approved by the Board of Trustees 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, January 3, 2011 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 affected
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 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
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
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 year ended December 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 Dow Jones Select MicroCap Index(SM) Fund $ 65,981,468 $ 66,029,241
First Trust Morningstar Dividend Leaders(SM) Index Fund 60,383,706 59,807,813
First Trust US IPO Index Fund 7,672,764 7,720,461
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 23,503,996 23,719,420
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 80,432,586 86,062,066
First Trust NYSE Arca Biotechnology Index Fund 137,992,507 175,348,255
First Trust Dow Jones Internet Index(SM) Fund 110,424,781 137,282,461
First Trust Strategic Value Index Fund 41,694,377 41,681,675
First Trust Value Line(R) Equity Allocation Index Fund 12,686,175 12,701,820
First Trust Value Line(R) Dividend Index Fund 150,242,861 150,038,014
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 10,481,225 10,520,221
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 6,846,681 6,910,669
First Trust S&P REIT Index Fund 16,968,785 34,812,223
First Trust ISE Water Index Fund 19,095,675 19,311,425
First Trust ISE-Revere Natural Gas Index Fund 217,055,438 217,849,664
First Trust ISE Chindia Index Fund 32,101,578 32,220,516
First Trust Value Line(R) 100 Exchange-Traded Fund 165,313,340 165,263,809
First Trust NASDAQ(R) ABA Community Bank Index Fund 3,714,398 3,785,142
For the year ended December 31, 2011, the cost of in-kind purchases and proceeds
from in-kind sales for each Fund were as follows:
Purchases Sales
----------------- ---------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 7,885,371 $ 96,516,796
First Trust Morningstar Dividend Leaders(SM) Index Fund 356,253,984 83,185,480
First Trust US IPO Index Fund 8,658,467 8,386,251
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 79,975,103 74,771,571
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 196,455,820 460,648,974
First Trust NYSE Arca Biotechnology Index Fund 639,497,257 500,340,588
First Trust Dow Jones Internet Index(SM) Fund 519,901,666 494,380,029
First Trust Strategic Value Index Fund 13,624,890 17,031,846
First Trust Value Line(R) Equity Allocation Index Fund 5,343,687 5,365,890
First Trust Value Line(R) Dividend Index Fund 225,418,137 94,230,892
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 21,526,262 11,865,028
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 7,115,042 7,039,885
First Trust S&P REIT Index Fund 452,773,729 155,386,738
First Trust ISE Water Index Fund 34,507,923 24,762,510
First Trust ISE-Revere Natural Gas Index Fund 444,483,023 435,784,870
First Trust ISE Chindia Index Fund -- 61,290,142
First Trust Value Line(R) 100 Exchange-Traded Fund 85,309,229 112,497,514
First Trust NASDAQ(R) ABA Community Bank Index Fund 6,280,031 2,413,028
5. CREATION, REDEMPTION & TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares. Such transactions are generally permitted on an
in-kind basis, with a balancing cash component to equate the transaction to the
daily NAV per Share of each Fund on the transaction date times the number of
Shares in a Creation Unit. Purchasers of Creation Units must pay to BNYM, as
transfer agent, a standard creation transaction fee (the "Creation Transaction
Fee"), which is based on the number of different securities in a Creation Unit
of each Fund according to the fee schedule set forth below:
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
Number of Securities Creation
in a Creation Unit Transaction Fee
------------------------ -----------------
1-100 $500
101-200 $1,000
201-300 $1,500
301-400 $2,000
401-500 $2,500
501-600 $3,000
601-700 $3,500
The Creation Transaction Fee is applicable to each purchase transaction
regardless of the number of Creation Units purchased in the transaction. An
additional variable fee of up to three times the Creation Transaction Fee may be
charged to approximate additional expenses incurred by a Fund with respect to
transactions effected outside of the clearing process (i.e., through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. The price for each Creation Unit will equal the daily
NAV per Share of a Fund on the transaction date times the number of Shares in a
Creation Unit plus the fees described above and, if applicable, any transfer
taxes.
Parties redeeming Creation Units must pay to BNYM, as transfer agent, a standard
redemption transaction fee (the "Redemption Transaction Fee"), which is based on
the number of different securities in a Creation Unit of each Fund according to
the fee schedule set forth below:
Number of Securities Redemption
in a Creation Unit Transaction Fee
------------------------ -----------------
1-100 $500
101-200 $1,000
201-300 $1,500
301-400 $2,000
401-500 $2,500
501-600 $3,000
601-700 $3,500
The Redemption Transaction Fee is applicable to each redemption transaction
regardless of the number of Creation Units redeemed in the transaction. An
additional variable fee of up to three times the Redemption Transaction Fee may
be charged to approximate additional expenses incurred by a Fund with respect to
redemptions effected outside of the clearing process or to the extent that
redemptions are for cash. Each Fund reserves the right to effect redemptions in
cash. A shareholder may request cash redemption in lieu of securities; however,
a Fund may, in its discretion, reject any such request.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual
arrangement, the Funds will not pay 12b-1 fees any time before April 29, 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were the following subsequent events:
Effective January 1, 2012, each Independent Trustee will be paid a fixed annual
retainer of $125,000 per year and an annual per fund fee of $4,000 for each
closed-end fund or other actively managed fund and $1,000 for each index fund in
the First Trust Fund Complex. The fixed annual retainer will be allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Additionally, the Lead Independent Trustee will be paid $15,000 annually, the
Chairman of the Audit Committee will be paid $10,000 annually, and each of the
Chairmen of the Nominating and Governance Committee and the Valuation Committee
will be paid $5,000 annually to serve in such capacities, with such compensation
allocated pro rata among each fund in the First Trust Fund Complex based on net
assets. Trustees continue to be reimbursed for travel and out-of-pocket expenses
in connection with all meetings. The Lead Independent Trustee and each Committee
chairman will serve two-year terms before rotating to serve as chairman of
another committee or as Lead Independent Trustee. The officers and "Interested"
Trustee continue to receive no compensation from the Funds for acting in such
capacities.
Effective January 23, 2012, James A. Bowen resigned from his position as the
President and Chief Executive Officer of the Trust. He will continue as a
Trustee, the Chairman of the Board of Trustees and a member of the Executive
Committee. The Board elected Mark R. Bradley to serve as the President and Chief
Executive Officer and James M. Dykas to serve as the Treasurer, Chief Financial
Officer and Chief Accounting Officer of the Funds.
On January 23, 2012, the Board of Trustees approved a change to quarterly
dividends for each of the Funds, except for First Trust Morningstar Dividend
Leaders(SM) Index Fund and First Trust Value Line(R) Dividend Index Fund, which
already declare and pay dividends quarterly. This change will be effective with
the filing of each Fund's annual Form N-1A prospectus update in April 2012.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of First Trust Exchange-Traded Fund:
We have audited the accompanying statements of assets and liabilities of First
Trust Exchange-Traded Fund (the "Fund"), comprised of First Trust Dow Jones
Select MicroCap Index(SM) Fund, First Trust Morningstar Dividend Leaders(SM)
Index Fund, First Trust US IPO Index Fund, First Trust NASDAQ-100 Equal Weighted
Index(SM) Fund, First Trust NASDAQ-100-Technology Sector Index(SM) Fund, First
Trust NYSE Arca Biotechnology Index Fund, First Trust Dow Jones Internet
Index(SM) Fund, First Trust Strategic Value Index Fund, First Trust Value
Line(R) Equity Allocation Index Fund, First Trust Value Line(R) Dividend Index
Fund, First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund, First Trust
NASDAQ(R) Clean Edge(R) Green Energy Index Fund, First Trust S&P REIT Index
Fund, First Trust ISE Water Index Fund, First Trust ISE-Revere Natural Gas Index
Fund, First Trust ISE Chindia Index Fund, First Trust Value Line(R) 100
Exchange-Traded Fund, and First Trust NASDAQ(R) ABA Community Bank Index Fund,
including the portfolios of investments, as of December 31, 2011 and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2011 by correspondence with the Fund's
custodian and brokers. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the funds constituting the First Trust Exchange-Traded Fund as of December
31, 2011, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods presented, in conformity with
accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 24, 2012
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Funds use to determine how
to vote proxies and information on how each Fund voted proxies relating to its
portfolio securities during the period ended June 30, 2011 is available (1)
without charge, upon request, by calling (800) 988-5891; (2) on the Trust's
website located at http://www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files a complete schedule of each Fund's portfolio holdings with
the Securities and Exchange Commission ("SEC") for the first and third
quarters of each fiscal year on Form N-Q. The Trust's Form N-Q is available
(1) by calling (800) 988-5891; (2) on the Trust's website located at
http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov; and
(4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling (800) SEC-0330.
Federal Tax Information
For the taxable year ended December 31, 2011, the following percentages of
income dividends paid by the Funds qualify for the dividends received deduction
available to corporations:
Dividends Received Deduction
----------------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund 100.00%
First Trust Morningstar Dividend Leaders(SM) Index Fund 100.00%
First Trust US IPO Index Fund 100.00%
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 100.00%
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 100.00%
First Trust NYSE Arca Biotechnology Index Fund --
First Trust Dow Jones Internet Index(SM) Fund 100.00%
First Trust Strategic Value Index Fund 100.00%
First Trust Value Line(R) Equity Allocation Index Fund 100.00%
First Trust Value Line(R) Dividend Index Fund 100.00%
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 95.72%
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund --
First Trust S&P REIT Index Fund --
First Trust ISE Water Index Fund 100.00%
First Trust ISE-Revere Natural Gas Index Fund 100.00%
First Trust ISE Chindia Index Fund --
First Trust Value Line(R) 100 Exchange-Traded Fund 100.00%
First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00%
For the taxable year ended December 31, 2011, the following percentages of
income dividends paid by the Funds is hereby designated as qualified
dividend income:
Qualified Dividend Income
----------------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund 100.00%
First Trust Morningstar Dividend Leaders(SM) Index Fund 100.00%
First Trust US IPO Index Fund 100.00%
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 100.00%
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 100.00%
First Trust NYSE Arca Biotechnology Index Fund --
First Trust Dow Jones Internet Index(SM) Fund 100.00%
First Trust Strategic Value Index Fund 100.00%
First Trust Value Line(R) Equity Allocation Index Fund 100.00%
First Trust Value Line(R) Dividend Index Fund 100.00%
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 100.00%
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund --
First Trust S&P REIT Index Fund --
First Trust ISE Water Index Fund 100.00%
First Trust ISE-Revere Natural Gas Index Fund 100.00%
First Trust ISE Chindia Index Fund 100.00%
First Trust Value Line(R) 100 Exchange-Traded Fund 100.00%
First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00%
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011 (UNAUDITED)
The following Funds meet the requirements of Section 853 of the Internal Revenue
Code and elects to pass through to its shareholders credit for foreign taxes
paid. The total amounts of income received by the Funds from sources within
foreign countries and possessions of the United States and of taxes paid to such
countries are as follows:
Gross Foreign Income Foreign Taxes Paid
------------------------------ ---------------------------
Amount Per Share Amount Per Share
----------- ----------- ---------- -----------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ -- $ -- $ -- $ --
First Trust Morningstar Dividend Leaders(SM) Index Fund -- -- -- --
First Trust US IPO Index Fund -- -- -- --
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund -- -- -- --
First Trust NASDAQ-100-Technology Sector Index(SM) Fund -- -- -- --
First Trust NYSE Arca Biotechnology Index Fund -- -- -- --
First Trust Dow Jones Internet Index(SM) Fund -- -- -- --
First Trust Strategic Value Index Fund -- -- -- --
First Trust Value Line(R) Equity Allocation Index Fund -- -- -- --
First Trust Value Line(R) Dividend Index Fund -- -- -- --
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -- -- -- --
First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund -- -- -- --
First Trust S&P REIT Index Fund -- -- -- --
First Trust ISE Water Index Fund -- -- -- --
First Trust ISE-Revere Natural Gas Index Fund -- -- -- --
First Trust ISE Chindia Index Fund 2,306,909 0.53 44,865 0.01
First Trust Value Line(R) 100 Exchange-Traded Fund -- -- -- --
First Trust NASDAQ(R) ABA Community Bank Index Fund -- -- -- --
For the tax year ended December 31, 2011, the First Trust S&P REIT Index Fund
designated $251,735, or amounts necessary, as long-term capital gain. During the
tax year, Fund shareholders redeemed amounts in excess of our long-term capital
gain and of these proceeds, $251,735, or amounts necessary, represents long-term
capital gain from the Fund.
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, January 3, 2011 and January 20, 2011. A new investment
management agreement between the Trust and First Trust relating to the change in
control of First Trust Advisors L.P. was approved at such meetings as detailed
below. The terms of the new investment management agreement are substantially
similar to the terms of the previous agreements.
Ticker Symbol Date of Vote % of Voted Voted For Voted Against Abstained
------------- ------------ ---------- ---------- ------------- ---------
FDM 12/6/2010 62.83% 1,840,384 5,371 10,916
QQEW 12/6/2010 51.39% 1,288,109 15,666 6,561
QTEC 12/6/2010 56.42% 6,714,638 36,598 46,797
FDN 12/6/2010 58.54% 6,379,155 19,386 40,541
FVI 12/6/2010 55.63% 192,332 2,000 381
QQXT 12/6/2010 72.00% 646,766 1,008 200
FRI 12/6/2010 70.82% 3,135,275 5,233 10,825
FIW 12/6/2010 51.07% 1,097,967 12,418 13,070
FDL 12/20/2010 50.02% 2,346,778 53,693 200,803
FPX 1/3/2011 53.92% 241,251 7,451 47,867
FBT 1/3/2011 52.31% 2,180,970 29,815 195,518
FDV 1/3/2011 52.42% 744,121 32,622 88,190
FVD 1/3/2011 51.22% 5,539,652 172,812 683,786
QCLN 1/3/2011 50.62% 942,236 34,209 187,722
FNI 1/3/2011 50.31% 2,592,043 60,461 340,950
FVL 1/3/2011 50.87% 2,256,802 112,857 244,798
QABA 1/3/2011 52.45% 181,041 3,160 25,581
FCG 1/20/2011 50.06% 9,111,862 265,456 1,135,890
LICENSING INFORMATION
Dow Jones, Dow Jones Internet Composite Index(SM) and Dow Jones Select MicroCap
Index(SM) are products of Dow Jones Indexes, a licensed trademark of CME Group
Index Services LLC ("CME") and have been licensed for use. "Dow Jones(R)", "Dow
Jones Internet Composite Index(SM)", "Dow Jones Select MicroCap Index(SM)" and
"Dow Jones Indexes" are service marks of Dow Jones Trademark Holdings, LLC ("Dow
Jones") and have been licensed to CME and have been sublicensed for use for
certain purposes by First Trust on behalf of the Funds. The First Trust Dow
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011 (UNAUDITED)
Jones Select MicroCap Index(SM) Fund, based on the Dow Jones Select MicroCap
Index(SM) and the First Trust Dow Jones Internet Index(SM) Fund, based on the
Dow Jones Internet Composite Index(SM), are not sponsored, endorsed, sold or
promoted by CME, Dow Jones or their respective affiliates, and CME, Dow Jones
and their respective affiliates make no representation regarding the
advisability of trading in such Funds.
Morningstar is a service mark of Morningstar, Inc. and has been licensed for
use. The First Trust Morningstar Dividend Leaders(SM) Index Fund is not
sponsored, endorsed, issued, sold or promoted by Morningstar, Inc., nor does
this company make any representation regarding the advisability of investing in
the Fund. MORNINGSTAR MAKES NO WARRANTIES AND BEARS NO LIABILITIES WITH RESPECT
TO THE FUND.
The First Trust US IPO Index Fund is not sponsored, endorsed, sold or promoted
by IPOX(R). IPOX(R) makes no representation or warranty, express or implied, to
the owners of the Fund or any member of the public regarding the advisability of
trading in the Fund. IPOX(R)'s only relationship to First Trust is the licensing
of certain trademarks and trade names of IPOX(R) and of the U.S. IPOX(R) 100
Index, which is determined, composed and calculated by IPOX(R) without regard to
First Trust or the Fund. IPOX(R) IS A REGISTERED INTERNATIONAL TRADEMARK OF
IPOX(R) SCHUSTER LLC AND IPOX(R) SCHUSTER, IPOX(R)-100 AND IPOX(R)-30 ARE
TRADEMARKS AND SERVICE MARKS OF IPOX(R) SCHUSTER LLC (WWW.IPOXSCHUSTER.COM) AND
HAVE BEEN LICENSED FOR CERTAIN PURPOSES FROM IPOX(R) SCHUSTER LLC TO FIRST TRUST
PURSUANT TO THE PRODUCT LICENSE AGREEMENT. A PATENT WITH RESPECT TO THE IPOX(R)
INDEX METHODOLOGY HAS BEEN ISSUED (U.S. PAT. NO. 7,698,197).
NASDAQ(R), NASDAQ-100(R), NASDAQ-100 Index(R), NASDAQ-100 Technology Sector
Index(SM), NASDAQ-100 Equal-Weighted Index(SM), and NASDAQ-100 Ex-Tech Sector
Index(SM), are trademarks of The NASDAQ OMX Group, Inc. ("NASDAQ OMX") or its
affiliates (NASDAQ OMX with its affiliates are referred to as the
"Corporations") and are licensed for use by First Trust Advisors L.P. First
Trust NASDAQ-100 Equal Weighted Index(SM) Fund, First Trust NASDAQ-100
Ex-Technology Sector Index(SM) Fund and the First Trust NASDAQ-100-Technology
Sector Index(SM) Fund have not been passed on by the Corporations as to their
legality or suitability. These Funds are not issued, endorsed, sold, or promoted
by the Corporations and should not be construed in anyway as investment advice
by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY
WITH RESPECT TO THESE FUNDS.
NASDAQ(R) and Clean Edge(R) are the registered trademarks (the "Marks") of The
NASDAQ OMX Group, Inc. ("NASDAQ OMX"), Clean Edge(R) or their affiliates (NASDAQ
OMX and Clean Edge(R), collectively with their affiliates, are referred to
herein as the "Corporations"). The Marks are licensed for use by First Trust
Advisors L.P. The Fund has not been passed on by the Corporations as to its
legality or suitability. The First Trust NASDAQ(R) Clean Edge(R) Green Energy
Index Fund is not issued, endorsed, sold, or promoted by the Corporations and
should not be construed in any way as investment advice by the Corporations. THE
CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
NASDAQ(R), OMX(R), NASDAQ OMX(R), and NASDAQ OMX(R) ABA Community Bank Index(SM)
are trademarks of The NASDAQ OMX Group, Inc. ("NASDAQ OMX"), American Bankers
Association ("ABA") or their affiliates (NASDAQ OMX and ABA, collectively with
their affiliates, are referred to as the "Corporations") and are licensed for
use by First Trust Advisors L.P. The First Trust NASDAQ(R) ABA Community Bank
Index Fund has not been passed on by the Corporations as to its legality or
suitability. The Fund is not issued, endorsed, sold, or promoted by the
Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH
RESPECT TO THE FUND.
The NYSE Arca Biotechnology Index(SM) is a trademark of the NYSE Euronext or its
affiliates ("NYSE Euronext") and is licensed for use by First Trust Advisors
L.P. The First Trust NYSE Arca Biotechnology Index Fund is not sponsored or
endorsed by the NYSE Euronext. NYSE Euronext makes no representation or
warranty, express or implied, to the owners of the Fund or any member of the
public regarding the advisability of investing in the Fund or the ability of the
Fund to track the performance of the various sectors represented in the stock
market. NYSE Euronext has no obligation to take the needs of the owners of the
Fund into consideration in determining, composing or calculating the Index. NYSE
Euronext is not responsible for and has not participated in any determination or
calculation made with respect to issuance or redemption of the Fund. NYSE
EURONEXT MAKES NO WARRANTIES AND BEARS NO LIABILITIES WITH REPSECT TO THE FUND.
"Credit Suisse", "HOLT" and "Credit Suisse U.S. Value Index, Powered by
HOLT(TM)," are trademarks of Credit Suisse Group, Credit Suisse Securities (USA)
LLC or one of their affiliates (collectively, "Credit Suisse"), and have been
licensed for use for certain purposes by First Trust. THE FIRST TRUST STRATEGIC
VALUE INDEX FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY CREDIT SUISSE
OR THE INDEX CALCULATION AGENT, AND CREDIT SUISSE AND THE INDEX CALCULATION
AGENT MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, REGARDING THE
ADVISABILITY OF INVESTING OR TRADING IN SUCH PRODUCT(S) OR IN SECURITIES
GENERALLY, THE RESULTS TO BE OBTAINED FROM THE USE OF THE CREDIT SUISSE US VALUE
INDEX, POWERED BY HOLT, THE FIGURE AT WHICH THE SAID INDEX STANDS AT ANY
PARTICULAR TIME ON ANY PARTICULAR DAY OR OTHERWISE. CREDIT SUISSE MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011 (UNAUDITED)
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
CREDIT SUISSE US VALUE INDEX, POWERED BY HOLT(TM) OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL CREDIT SUISSE OR THE
INDEX CALCULATION AGENT HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT,
PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. THERE ARE NO THIRD PARTY
BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN CREDIT SUISSE AND FIRST
TRUST.
"Value Line(R)", "Value Line(R) Equity Allocation Index(TM)", "Value Line(R)
Dividend Index(TM)" and "Value Line(R) 100 Index(TM)" are trademarks of Value
Line(R), Inc. and have been licensed for use for certain purposes by First Trust
Advisors L.P. on behalf of the Funds. The First Trust Value Line(R) Equity
Allocation Index Fund, based on the Value Line(R) Equity Allocation Index(TM),
the First Trust Value Line(R) Dividend Index Fund, based on the Value Line(R)
Dividend Index(TM) and the First Trust Value Line(R) 100 Exchange-Traded Fund,
based on the Value Line(R) 100 Index(TM), are not sponsored, endorsed, sold, or
promoted by Value Line(R), Inc., and Value Line(R) makes no representation
regarding the advisability of investing in the Funds.
Standard & Poor's(R) and S&P(R) are registered trademarks of Standard & Poor's
Financial Services LLC ("S&P") and have been licensed for use by First Trust
Advisors L.P. The First Trust S&P REIT Index Fund is not sponsored, endorsed,
sold or promoted by S&P or its affiliates, and S&P and its affiliates make no
representation, warranty or condition regarding the advisability of buying,
selling or holding shares of the Fund.
"International Securities Exchange(TM)", "ISE(TM)", "ISE Water Index(TM)", "ISE
ChIndia Index(TM)" and the "ISE-REVERE Natural Gas Index(TM)" are trademarks of
the International Securities Exchange, LLC and have been licensed for use for
certain purposes by First Trust Advisors L.P. Each of the First Trust ISE
Chindia Index Fund, First Trust ISE-Revere Natural Gas Index Fund and First
Trust ISE Water Index Fund, based on its corresponding index, is not sponsored,
endorsed, sold or promoted by the International Securities Exchange, LLC and the
International Securities Exchange, LLC makes no representation regarding the
advisability of trading in such Funds.
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011 (UNAUDITED)
The Funds' statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF
PORTFOLIOS IN
TERM OF OFFICE THE FIRST TRUST OTHER
NAME, ADDRESS, AND YEAR FIRST FUND COMPLEX TRUSTEESHIPS OR
DATE OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DIRECTORSHIPS
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE HELD BY TRUSTEE
INDEPENDENT TRUSTEES
Richard E. Erickson, Trustee o Indefinite Term Physician; President, Wheaton
c/o First Trust Advisors L.P. Orthopedics; Co-Owner and Co-Director 82 None
120 East Liberty Drive, (January 1996 to May 2007),
Suite 400 o Since Inception Sports Med Center for Fitness;
Wheaton, IL 60187 Limited Partner, Gundersen Real
D.O.B.: 04/51 Estate Limited Partnership; Member,
Sportsmed LLC
Thomas R. Kadlec, Trustee o Indefinite Term President (March 2010 to Present), 82 Director of ADM
c/o First Trust Advisors L.P. Senior Vice President and Chief Investor Services,
120 East Liberty Drive, Financial Officer (May 2007 to March Inc. and ADM
Suite 400 o Since Inception 2010), Vice President and Chief Investor Services,
Wheaton, IL 60187 Financial Officer (1990 to May 2007), International
D.O.B.: 11/57 ADM Investor Services, Inc.
(Futures Commission Merchant)
Robert F. Keith, Trustee o Indefinite Term President (2003 to Present), Hibs 82 Director of
c/o First Trust Advisors L.P. Enterprises (Financial and Management Trust Company
120 East Liberty Drive, o Since Inception Consulting) of Illinois
Suite 400
Wheaton, IL 60187
D.O.B.: 11/56
Niel B. Nielson, Trustee o Indefinite Term President (June 2002 to Present), 82 Director of
c/o First Trust Advisors L.P. Covenant College Covenant
120 East Liberty Drive, o Since Inception Transport Inc.
Suite 400
Wheaton, IL 60187
D.O.B.: 03/54
INTERESTED TRUSTEE
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer (December 2010 82 None
President, Chairman of the Board to Present), President (until December
and CEO 2010), First Trust Advisors L.P. and
120 East Liberty Drive, o Since Inception First Trust Portfolios L.P.; Chairman
Suite 400 of the Board of Directors, BondWave LLC
Wheaton, IL 60187 (Software Development Company/
D.O.B.: 09/55 Investment Advisor) and Stonebridge
Advisors LLC (Investment Advisor)
----------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief
Executive Officer of First Trust Advisors L.P., investment advisor of the Trust.
Page 124
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BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME, ADDRESS OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
AND DATE OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
OFFICERS WHO ARE NOT TRUSTEES(2)
Mark R. Bradley Treasurer, Chief Financial o Indefinite Term Chief Operating Officer (December 2010 to
120 E. Liberty Drive, Officer and Chief Present) and Chief Financial Officer,
Suite 400 Accounting Officer o Since Inception First Trust Advisors L.P. and First Trust
Wheaton, IL 60187 Portfolios L.P.; Chief Financial Officer,
D.O.B.: 11/57 BondWave LLC (Software Development
Company/Investment Advisor) and Stonebridge
Advisors LLC (Investment Advisor)
Erin E. Chapman Assistant Secretary o Indefinite Term Assistant General Counsel (October 2007 to
120 E. Liberty Drive, Present), Associate Counsel (March 2006 to October
Suite 400 o Since June 2009 2007), First Trust Advisors L.P. and First Trust
Wheaton, IL 60187 Portfolios L.P.; Associate Attorney (November 2003
D.O.B.: 08/76 to March 2006), Doyle & Bolotin, Ltd.
James M. Dykas Assistant Treasurer o Indefinite Term Controller (January 2011 to Present), Senior Vice
120 E. Liberty Drive, President (April 2007 to January 2011), Vice
Suite 400 o Since Inception President (January 2005 to April 2007), First
Wheaton, IL 60187 Trust Advisors L.P. and First Trust
D.O.B.: 01/66 Portfolios L.P.
Roseanne Gatta Assistant Secretary o Indefinite Term Board Liaison Associate (July 2010 to Present),
120 E. Liberty Drive, First Trust Advisors L.P. and First Trust
Suite 400 o Since March 2011 Portfolios L.P.; Assistant Vice President
Wheaton, IL 60187 (February 2001 to July 2010), PNC
D.O.B.: 07/55 Global Investment Services
W. Scott Jardine Secretary o Indefinite Term General Counsel, First Trust Advisors L.P., First
120 E. Liberty Drive, Trust Portfolios L.P.; Secretary, BondWave LLC
Suite 400 o Since Inception (Software Development Company/Investment
Wheaton, IL 60187 Advisor) and Stonebridge Advisors LLC
D.O.B.: 05/60 (Investment Advisor)
Daniel J. Lindquist Vice President o Indefinite Term Senior Vice President (September 2005 to
120 E. Liberty Drive, Present), Vice President (April 2004 to September
Suite 400 o Since Inception 2005), First Trust Advisors L.P. and First Trust
Wheaton, IL 60187 Portfolios L.P.
D.O.B.: 02/70
Coleen D. Lynch Assistant Vice President o Indefinite Term Assistant Vice President (January 2008 to Present),
120 E. Liberty Drive, First Trust Advisors L.P. and First Trust
Suite 400 o Since July 2008 Portfolios L.P.; Vice President (May 1998 to
Wheaton, IL 60187 January 2008), Van Kampen Asset Management and
D.O.B.: 07/58 Morgan Stanley Investment Management
Kristi A. Maher Assistant Secretary and o Indefinite Term Deputy General Counsel (May 2007 to Present),
120 E. Liberty Drive, Chief Compliance Officer o Assistant Secretary Assistant General Counsel (March 2004 to May
Suite 400 Since Inception 2007), First Trust Advisors L.P. and First Trust
Wheaton, IL 60187 o Chief Compliance Portfolios L.P.
D.O.B.: 12/66 Officer since
January 2011
Roger F. Testin Vice President o Indefinite Term Senior Vice President (November 2003 to Present),
120 E. Liberty Drive, Vice President (August 2001 to November 2003),
Suite 400 o Since Inception First Trust Advisors L.P. and First Trust
Wheaton, IL 60187 Portfolios L.P.
D.O.B.: 06/66
Stan Ueland Vice President o Indefinite Term Vice President (August 2005 to Present), First
120 E. Liberty Drive, Trust Advisors L.P. and First Trust Portfolios
Suite 400 o Since Inception L.P.; Vice President (May 2004 to August 2005)
Wheaton, IL 60187 BondWave LLC (Software Development Company/
D.O.B.: 11/70 Investment Advisor)
----------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
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RISK CONSIDERATIONS (UNAUDITED)
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RISKS ARE INHERENT IN ALL INVESTING. YOU SHOULD CONSIDER EACH FUND'S INVESTMENT
OBJECTIVE, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. YOU CAN
DOWNLOAD EACH FUND'S PROSPECTUS AT HTTP://WWW.FTPORTFOLIOS.COM OR CONTACT FIRST
TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS
THIS AND OTHER INFORMATION ABOUT EACH FUND. FOR ADDITIONAL INFORMATION ABOUT THE
RISKS ASSOCIATED WITH INVESTING IN THE FUNDS, PLEASE SEE THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION, AS WELL AS OTHER REGULATORY FILINGS. READ THESE
DOCUMENTS CAREFULLY BEFORE YOU INVEST. FIRST TRUST PORTFOLIOS L.P. IS THE
DISTRIBUTOR OF THE FIRST TRUST EXCHANGE-TRADED FUND.
The following summarizes some of the risks that should be considered for the
Funds.
Each Fund's shares will change in value, and you could lose money by investing
in a Fund. Shares are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates and perceived trends in stock prices. Overall stock values could decline
generally or could underperform other investments. Overall stock market values
could decline generally or could underperform other investments.
An investment in a Fund involves risks similar to those of investing in any fund
of equity securities traded on an exchange. Investors buying or selling Fund
shares on the secondary market may incur brokerage commissions. In addition,
investors who sell Fund shares may receive less than the Fund shares' net asset
value. Unlike shares of open-end funds, investors are generally not able to
purchase exchange-traded fund ("ETF") shares directly from a Fund and individual
ETF shares are not redeemable. However, specified large blocks of ETF shares
called creation units can be purchased from, or redeemed to, a Fund.
Each Fund is subject to index tracking risk. You should anticipate that the
value of Fund shares will decline, more or less, in correlation with any decline
in the value of the index that the Fund seeks to track.
Each Fund's return may not match the return of the index it seeks to track for a
number of reasons. While First Trust seeks to have a correlation of 0.95 or
better, before expenses, between a Fund's performance and the performance of its
corresponding index, there can be no assurance that a Fund will be able to
achieve such a correlation. Accordingly, each Fund's performance may correlate
to a lesser extent and may possibly vary substantially from the performance of
its corresponding index.
Each Fund is also exposed to additional market risk due to a policy of investing
principally in the securities included in its corresponding index. As a result
of such policies, securities held by each Fund will generally not be bought or
sold in response to market fluctuations and the securities may be issued by
companies concentrated in a particular industry. As a result, each Fund will
generally not sell a stock because the stock's issuer is in financial trouble,
unless that stock is removed or is anticipated to be removed from the index the
Fund seeks to track.
Each Fund relies on a license from an index provider that permits the Fund to
use its corresponding index and associated trade names and trademarks in
connection with the name and investment strategies of the Fund. Such licenses
may be terminated by the respective index provider and, as a result, each Fund
may lose its ability to use such intellectual property. There is also no
guarantee that the index provider has all rights to license the respective
intellectual property to First Trust, on behalf of the Fund. Accordingly, in the
event the license is terminated or the index provider does not have rights to
license the particular intellectual property, it may have a significant effect
on the operation of the related Fund.
Each Fund is subject to issuer specific changes risk. The value of an individual
security or a particular type of security can be more volatile than the market
as a whole and can perform differently from the value of the market as a whole.
Each Fund will be concentrated in the securities of companies of a given
industry if the Fund's corresponding index is concentrated in such industry. A
concentration makes a Fund more susceptible to any single occurrence affecting
the related industry and may subject a Fund to greater market risk than less
concentrated funds.
With the exception of First Trust Dow Jones Select MicroCap Index(SM) Fund,
First Trust Value Line(R) Dividend Index Fund, First Trust Value Line(R) Equity
Allocation Index Fund and First Trust Value Line(R) 100 Exchange-Traded Fund,
each Fund is considered to be non-diversified. As a result, those Funds are
exposed to additional market risk. A non-diversified fund may invest a
relatively high percentage of its assets in a limited number of issuers. As a
result, changes in the market value of a single portfolio security could cause
greater fluctuations in share price than would occur in a diversified fund.
Furthermore, non-diversified funds are more susceptible to any single political,
regulatory or economic occurrence.
The Funds are not actively managed. The Funds may be affected by a general
decline in certain market segments relating to their corresponding index. The
Funds invests in securities included in or representative of their corresponding
index regardless of their investment merit. The Funds generally will not attempt
to take defensive positions in declining markets.
The First Trust Dow Jones Select MicroCap Index(SM) Fund invests in
micro-capitalization companies. Such companies may be more vulnerable to adverse
general market or economic developments, may be less liquid, and may experience
greater price volatility than larger, more established companies.
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RISK CONSIDERATIONS (UNAUDITED) (CONTINUED)
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The First Trust NASDAQ-100 Equal Weighted Index(SM) Fund, the First Trust
NASDAQ-100-Technology Sector Index(SM) Fund and the First Trust Dow Jones
Internet Index(SM) Fund invest in stocks of companies in the technology sector.
You should be aware that an investment in a portfolio which invests in a
particular sector involves additional risks, including limited diversification.
The companies engaged in the technology sector are subject to fierce competition
and high research and development costs, and their products and services may be
subject to rapid obsolescence.
The First Trust NYSE Arca Biotechnology Index Fund is concentrated in stocks of
companies in the biotechnology sector. You should be aware that an investment in
a portfolio which is concentrated in a particular sector involves additional
risks, including limited diversification. The companies engaged in the
biotechnology sector are subject to fierce competition, substantial research and
development costs, governmental regulations and pricing constraints, and their
products and services may be subject to rapid obsolescence.
The First Trust NYSE Arca Biotechnology Index Fund invests in the securities of
companies in the health care sector. Because companies in the health care sector
are involved in medical services or health care including biotechnology research
and production, drugs and pharmaceuticals and health care facilities and
services, general problems of these companies include extensive competition,
generic drug sales or the loss of patent protection, product liability
litigation and increased government regulations.
The First Trust US IPO Fund invests in companies that have recently conducted an
initial public offering. The stocks of such companies are often subject to
extreme price volatility and speculative trading.
The First Trust Morningstar Dividend Leaders(SM) Index Fund, First Trust S&P
REIT Index Fund, First Trust Value Line(R) Dividend Index Fund and First Trust
NASDAQ(R) ABA Community Bank Index Fund invest in securities of companies in the
financials sector. Banks, thrifts and their holding companies are especially
subject to the adverse effects of economic recession; volatile interest rates;
portfolio concentrations in geographic markets and in commercial and residential
real estate loans; and competition from new entrants in their fields of
business. Although recently enacted legislation repealed most of the barriers
which separated the banking, insurance and securities industries, these
industries are still extensively regulated at both the federal and state level
and may be adversely affected by increased regulations. The downturn in the U.S.
and world economies has adversely affected banks, thrifts and other companies in
the financials sector.
The First Trust US IPO Fund, the First Trust Dow Jones Internet Index(SM) Fund,
the First Trust ISE Chindia Index Fund, the First Trust NASDAQ-100 Equal
Weighted Index(SM) Fund, the First Trust NASDAQ-100-Technology Sector Index(SM)
Fund and the First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund invest
in securities of companies in the information technology industry. Information
technology companies are generally subject to the risks of rapidly changing
technologies; short product life cycles; fierce competition; and aggressive
pricing and reduced profit margins.
The First Trust Strategic Value Index Fund and the First Trust NASDAQ-100
Ex-Technology Sector Index(SM) Fund invest in the securities of companies in the
consumer discretionary sector. Because companies in the consumer discretionary
sector manufacture products and provide discretionary services directly to the
consumer, the success of these companies is tied closely to the performance of
the overall domestic and international economy, interest rates, competition and
consumer confidence. Success depends heavily on disposable household income and
consumer spending. Changes in demographics and consumer tastes can also affect
the demand for, and success of, consumer discretionary products in the
marketplace.
The First Trust ISE-Revere Natural Gas Index Fund invests in the securities of
companies in the energy sector. General problems of issuers in the energy sector
include volatile fluctuations in price and supply of energy fuels, international
politics, terrorist attacks, reduced demand as a result of increases in energy
efficiency and energy conservation, the success of exploration projects,
clean-up and litigation costs relating to oil spills and environmental damage,
and tax and other regulatory policies of various governments. In addition,
recent oil prices have been at historic highs and extremely volatile.
The First Trust ISE Water Index Fund and the First Trust NASDAQ(R) Clean Edge(R)
Green Energy Index Fund invest in the securities of companies in the industrials
sector. General risks of these companies include the general state of the
economy, intense competition, consolidation, domestic and international
politics, excess capacity and consumer demand and spending trends. In addition,
they may also be significantly affected by overall capital spending levels,
economic cycles, technical obsolescence, delays in modernization, labor
relations, government regulations and e-commerce initiatives.
The First Trust S&P REIT Index Fund invests in companies in the real estate
industry, including real estate investment trusts ("REITs") and is subject to
the risks associated with investing in real estate (any of which could cause the
value of a REIT's stock price to decline), which may include, but are not
limited to, possible declines in the value of real estate, adverse general and
local economic conditions, possible lack of availability of mortgage funds,
overbuilding in a REIT's market, changes in interest rates and environmental
problems. Furthermore, increases in interest rates typically lower the present
value of a REIT's future earnings stream, and may make financing property
purchases and improvements more costly.
Page 127
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RISK CONSIDERATIONS (UNAUDITED) (CONTINUED)
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With the exception of First Trust Strategic Value Index Fund and First Trust Dow
Jones Select MicroCap Index(SM) Fund, the Funds may invest in small
capitalization and mid-capitalization companies. Such companies' securities may
be less liquid and may experience greater price volatility than securities of
larger, more established companies.
Because a Fund's corresponding index may include American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs") and/or stocks of non-U.S.
companies, the investments of certain Funds, including but not limited to, the
First Trust ISE Chindia Index Fund, the First Trust ISE-Revere Natural Gas Index
Fund, the First Trust ISE Water Index Fund and the First Trust Value Line(R) 100
Exchange-Traded Fund, involve risks of investing in non-U.S. securities that are
in addition to the risk associated with domestic securities. Non-U.S. companies,
in general, are not subject to the regulatory requirements of U.S. companies
and, as such, there may be less publicly available information about these
companies. Moreover, non-U.S. accounting, auditing and financial reporting
standards generally are different from those applicable to U.S. companies. In
addition, non-U.S. companies are exposed to additional economic, political,
social or diplomatic events. ADRs and ADSs also involve substantially identical
risks to those associated with investments in non-U.S. securities. In addition,
the issuers of certain depositary receipts, particularly unsponsored or
unregistered depositary receipts, are under no obligation to distribute
shareholder communications to the holders of such receipts, or to pass through
to them any voting rights with respect to the deposited securities.
The First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund invests in
renewable and alternative energy companies. You should be aware that share
prices of renewable and alternative energy companies have been significantly
more volatile than shares of companies operating in other more established
industries and the securities included in the First Trust NASDAQ(R) Clean
Edge(R) Green Energy Index Fund may be subject to sharp price declines. This
industry is relatively nascent and under-researched in comparison to more
established and mature sectors, and should therefore be regarded as having
greater investment risk.
The First Trust ISE Water Index Fund invests in companies in the potable water
and wastewater industries. You should be aware that adverse developments in
these industries may significantly affect the value of the shares of the First
Trust ISE Water Index Fund. Companies involved in the potable water and
wastewater industries are subject to environmental considerations, taxes,
government regulation, price and supply fluctuations, competition and
conservation.
The First Trust ISE-Revere Natural Gas Index Fund invests in companies in the
natural gas industry. You should be aware that one of the natural gas industry's
primary risks is the competitive risk associated with the prices of alternative
fuels, such as coal and oil. Additionally, the natural gas industry is sensitive
to increased interest rates because of the industry's capital intensive nature.
Furthermore, there are additional risks and hazards that are inherent in the
natural gas industry that may cause the price of natural gas to widely
fluctuate.
The First Trust ISE Chindia Index Fund invests in the securities of Chinese and
Indian companies. You should be aware that investments in such companies are
subject to additional risks, which are associated with possible adverse
economic, political and social developments in those countries.
The First Trust NASDAQ(R) ABA Community Bank Index Fund is concentrated in the
securities of NASDAQ(R) listed community banks as defined by its corresponding
index which involves additional risks, including limited diversification. These
companies are subject to certain risks, including the adverse effects of
volatile interest rates, economic recession, increased competition from new
entrants in the field, and potential increased regulation. The financial
performance of these companies may also be highly dependent upon the business
environment in certain geographic regions of the United States and may be
adversely impacted by any downturn or unfavorable economic or employment
developments in their local markets and the United States as a whole. These
companies may also be subject to interest rate risks and changes in monetary
policy as their earnings are largely dependent upon their net interest income
and lending risks that could further increase because of increases in interest
rates and/or continuing economic weakness.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
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PRIVACY POLICY
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FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2011 (UNAUDITED)
PRIVACY POLICY
The open-end and closed-end funds advised by First Trust Advisors L.P. (each a
"Fund") value our relationship with you and consider your privacy an important
priority in maintaining that relationship. We are committed to protecting the
security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews, applications,
agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians and
trustees, or that assist us in the distribution of investor materials
such as trustees, banks, financial representatives, proxy services,
solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information with affiliates of the Fund.
PRIVACY ONLINE
We allow third-party companies, including AddThis, to collect certain anonymous
information when you visit our website. These companies may use non-personally
identifiable information during your visits to this and other websites in order
to provide advertisements about goods and services likely to be of greater
interest to you. These companies typically use a cookie, third party web beacon
or pixel tags, to collect this information. To learn more about this behavioral
advertising practice, you can visit www.networkadvertising.org.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, we restrict access to your
nonpublic personal information to those individuals who need to know that
information to provide products or services to you. We maintain physical,
electronic and procedural safeguards to protect your nonpublic personal
information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
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FIRST TRUST
FIRST TRUST EXCHANGE-TRADED FUND
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
101 Barclay Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party.
(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, and that relates to any element of the code
of ethics description.
(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, that relates to one or more of the items set
forth in paragraph (b) of this item's instructions.
(e) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified
to serve as audit committee financial experts serving on its audit committee and
that each of them is "independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees -- The aggregate fees billed for each of the last two
fiscal years for professional services rendered by the principal accountant for
the audit of the registrant's annual financial statements or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements were $415,475 for 2010 and $378,000 for 2011.
(b) Audit-Related Fees (Registrant) -- The aggregate fees billed in each
of the last two fiscal years, for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under paragraph
(a) of this Item were $0 for 2010 and $0 for 2011.
Audit-Related Fees (Investment Adviser and Distributor) -- The
aggregate fees billed in each of the last two fiscal years for assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item were $0 for 2010 and $0 for 2011.
(c) Tax Fees (Registrant) -- The aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal accountant
for tax compliance, tax advice, and tax planning to the registrant were $75,298
for 2010 and $67,500 for 2011.
Tax Fees (Investment Adviser and Distributor) -- The aggregate fees
billed in each of the last two fiscal years for professional services rendered
by the principal accountant for tax compliance, tax advice, and tax planning to
the registrant's adviser and distributor were $0 for 2010 and $0 for 2011.
(d) All Other Fees (Registrant) -- The aggregate fees billed in each of
the last two fiscal years for products and services provided by the principal
accountant to the registrant, other than the services reported in paragraphs (a)
through (c) of this Item were $0 for 2010 and $0 for 2011.
All Other Fees (Investment Adviser and Distributor) -- The aggregate
fees billed in each of the last two fiscal years for products and services
provided by the principal accountant to the registrant's investment adviser and
distributor, other than the services reported in paragraphs (a) through (c) of
this Item were $ 0 for 2010 and $0 for 2011.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval
Policy, the Audit Committee (the "Committee") is responsible for the
pre-approval of all audit services and permitted non-audit services (including
the fees and terms thereof) to be performed for the registrant by its
independent auditors. The Chairman of the Committee is authorized to give such
pre-approvals on behalf of the Committee up to $25,000 and report any such
pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent
auditor's engagements for non-audit services with the registrant's adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and any entity
controlling, controlled by or under common control with the investment adviser
that provides ongoing services to the registrant, if the engagement relates
directly to the operations and financial reporting of the registrant, subject to
the de minimis exceptions for non-audit services described in Rule 2-01 of
Regulation S-X. If the independent auditor has provided non-audit services to
the registrant's adviser (other than any sub-adviser whose role is primarily
portfolio management and is sub-contracted with or overseen by another
investment adviser) and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to its policies, the Committee
will consider whether the provision of such non-audit services is compatible
with the auditor's independence.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) for the registrant and the registrant's investment adviser of this
Item that were approved by the audit committee pursuant to the
pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows:
(b) 0%
(c) 0%
(d) 0%
(f) The percentage of hours expended on the principal accountant's engagement
to audit the registrant's financial statements for the most recent fiscal
year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was less than fifty
percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the
registrant for 2010 were $75,298 for the registrant, $6,000 for the
registrant's investment adviser and $57,145 for the registrant's
distributor, and for 2011 were $67,500 for the registrant, $6,200 for the
registrant's investment adviser and $59,063 for the registrant's
distributor.
(h) The registrant's audit committee of its Board of Trustees has determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role
is primarily portfolio management and is subcontracted with or overseen
by another investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
ITEMS 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The Registrant has a separately designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934
consisting of all the independent directors of the Registrant. The audit
committee of the registrant is comprised of: Richard E. Erickson, Thomas R.
Kadlec, Robert F. Keith and Niel B. Nielson.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
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 trustees, 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 of
the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not Applicable
(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
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By (Signature and Title)* /s/ Mark R. Bradley
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Mark R. Bradley, President and Chief
Executive Officer
(principal executive officer)
Date February 21, 2012
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Mark R. Bradley
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Mark R. Bradley, President and Chief
Executive Officer
(principal executive officer)
Date February 21, 2012
----------------------
By (Signature and Title)* /s/ James M. Dykas
-----------------------------------------------------
James M. Dykas, Treasurer, Chief Financial
Officer and Chief Accounting Officer
(principal financial officer)
Date February 21, 2012
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* Print the name and title of each signing officer under his or her signature.