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First Trust NASDAQ CEA Smartphone Index Fund (FONE)
  • 2014 Estimated Capital Gain Distributions
    The First Trust Exchange-Traded Funds are not expecting to pay long-term capital gain distributions during the remainder of 2014.  Short-term capital gain distributions, if any, are expected to be nominal and are taxed like ordinary income.  Final determination of the source and tax status of all distributions paid in the current year are to be made after year-end and could differ from the expectations indicated above.
Investment Objective/Strategy - The First Trust NASDAQ CEA Smartphone Index Fund is an exchange-traded 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 CEA Smartphone IndexSM.
There can be no assurance that the Fund's investment objectives will be achieved.
  • The index is designed to track the performance of companies engaged in the smartphone segment of the telecom and technology sectors. To be eligible for the index, issuers of the securities must be classified as a smartphone company as determined by the Consumer Electronics Association.
  • Component securities must be listed on an index-eligible global stock exchange, as determined by the NASDAQ OMX, have a minimum worldwide market capitalization of $250 million, have a minimum free float of 20%, and have a minimum three-month average daily dollar trading volume of $1 million.
  • All securities are then classified according to the following three business segments:
    • Handsets: Companies primarily engaged in the manufacturing of wireless equipment, specifically of smartphone handheld devices.
    • Software Applications and Hardware Components: Companies primarily engaged in the support of smartphones through creation of operating systems, processor chips, network hardware and software, and other elements to support the operations of a smartphone.
    • Network Providers: Companies engaged in providing the wireless network access for use by smartphones.
  • 45% of the index weight is allocated to Handsets, 45% of the index weight is allocated to Software Applications and Hardware Components, and 10% of the index weight is allocated to Network Providers.
  • Index components are equally weighted within each business segment.
  • Index components are reconstituted semi-annually and rebalanced quarterly.
Fund Overview
TickerFONE
Fund TypeTechnology
Investment AdvisorFirst Trust Advisors L.P.
Investor Servicing AgentBank of New York Mellon
CUSIP33737K106
Intraday NAVFONEIV
Fiscal Year-End09/30
ExchangeNASDAQ Stock Market
Inception2/17/2011
Inception Price$30.11
Inception NAV$30.11
Rebalance FrequencyQuarterly
Expense Ratio0.70%
Current Fund Data (as of 12/18/2014)
Closing NAV1$37.88
Closing Share Price2$37.93
Bid/Ask Midpoint$37.90
Bid/Ask Premium0.05%
Total Net Assets$11,363,449
Outstanding Shares300,002
Daily Volume123
Average 30-Day Daily Volume785
Closing Share Price 52-Week High/Low$38.94 / $32.03
Closing NAV 52-Week High/Low$38.96 / $32.09
Number of Holdings61
Fund Characteristics (as of 11/28/2014)7
Median Market Cap.$15,498
Maximum Market Cap.$671,202
Minimum Market Cap.$361
Price/Earnings19.38
Price/Book1.83
Price/Cash Flow9.06
Price/Sales0.66
Top Holdings (as of 12/18/2014)
Holding Percent
Apple Inc. 3.35%
Sony Corporation 3.35%
Celestica Inc. 3.21%
Kyocera Corporation 3.12%
Sanmina Corporation 3.09%
Benchmark Electronics, Inc. 3.08%
Flextronics International Ltd. 3.02%
BlackBerry Ltd. 3.01%
Nokia Oyj (ADR) 2.93%
Samsung Electronics Co., Ltd. 2.90%

Holdings are subject to change.

Top Country Exposure (as of 12/18/2014)
Country Percent
United States 44.15%
Japan 9.92%
Taiwan 7.77%
Canada 6.25%
South Korea 5.69%
Singapore 4.87%
China 4.69%
France 2.98%
Finland 2.94%
Bermuda 1.51%
NAV History (Since Inception)
Past performance is not indicative of future results.
Distribution Information
Dividend per Share Amt3$0.1746
30-Day SEC Yield (as of 11/28/2014)40.76%
12-Month Distribution Rate (as of 11/28/2014)51.08%
Index Yield (as of 11/28/2014)61.75%
Bid/Ask Midpoint vs. NAV (as of 9/30/2014)
Number of Days Bid/Ask Midpoint Above NAV
Quarter Ended 0-49
Basis Points
50-99
Basis Points
100-199
Basis Points
>=200
Basis Points
9/30/2014 52 2 0 0
6/30/2014 46 3 0 0
3/31/2014 19 1 0 0
12/31/2013 22 6 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49
Basis Points
50-99
Basis Points
100-199
Basis Points
>=200
Basis Points
9/30/2014 9 1 0 0
6/30/2014 14 0 0 0
3/31/2014 33 7 1 0
12/31/2013 30 6 0 0

The price used to calculate market return 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.

Top Industry Exposure (as of 12/18/2014)
Semiconductors 26.16%
Telecommunications Equipment 18.88%
Electrical Components & Equipment 15.60%
Computer Hardware 9.51%
Consumer Electronics 8.48%
Mobile Telecommunications 6.41%
Fixed Line Telecommunications 3.95%
Software 2.71%
Internet 2.63%
Electronic Equipment 1.47%
Month End Performance (as of 11/28/2014)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception8
Fund Performance *
NAV -0.15% 16.52% 18.73% 17.99% N/A N/A 7.92%
After Tax Held -0.35% 16.02% 18.14% 17.42% N/A N/A 7.47%
After Tax Sold -0.09% 9.33% 10.58% 13.91% N/A N/A 5.95%
Market Price 0.06% 16.85% 19.17% 18.13% N/A N/A 8.01%
Index Performance **
NASDAQ OMX CEA Smartphone IndexSM 0.09% 17.54% 19.87% 19.63% N/A N/A 8.93%
MSCI All Country World Information Technology Index 3.87% 17.20% 21.54% 19.17% N/A N/A 11.96%
MSCI World Index -0.12% 6.66% 8.91% 16.08% N/A N/A 9.08%
Quarter End Performance (as of 9/30/2014)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception8
Fund Performance *
NAV -2.54% 11.32% 16.16% 19.33% N/A N/A 6.95%
After Tax Held -2.74% 10.85% 15.58% 18.75% N/A N/A 6.48%
After Tax Sold -1.44% 6.41% 9.14% 15.00% N/A N/A 5.17%
Market Price -2.64% 11.41% 16.65% 19.45% N/A N/A 6.98%
Index Performance **
NASDAQ OMX CEA Smartphone IndexSM -2.24% 12.11% 17.26% 20.18% N/A N/A 7.94%
MSCI All Country World Information Technology Index 2.23% 10.84% 23.36% 20.01% N/A N/A 10.82%
MSCI World Index -2.16% 3.89% 12.20% 17.93% N/A N/A 8.72%
3-Year Statistics (as of 11/28/2014)
  Standard Deviation Alpha Beta Sharpe Ratio Correlation
FONE 14.47% 0.52 1.11 1.20 0.79
MSCI All Country World Information Technology Index 11.42% 3.69 0.94 1.58 0.85
MSCI World Index 10.26% --- 1.00 1.48 1.00
Standard Deviation is a measure of price variability (risk). Alpha is an indication of how much an investment outperforms or underperforms on a risk-adjusted basis relative to its benchmark.Beta is a measure of price variability relative to the market. Sharpe Ratio is a measure of excess reward per unit of volatility. Correlation is a measure of the similarity of performance.

*Performance data quoted represents past performance. Past performance is not a guarantee of future results and current performance may be higher or lower than performance quoted. Investment returns and principal value will fluctuate and shares when sold or redeemed, may be worth more or less than their original cost.

After Tax Held returns represent return after taxes on distributions. Assumes shares have not been sold. After Tax Sold returns represent the return after taxes on distributions and the sale of fund shares. Returns do not represent the returns you would receive if you traded shares at other times. Market Price returns are based on the midpoint of the bid/ask spread. Returns are average annualized total returns, except those for periods of less than one year, which are cumulative. The fund's performance reflects fee waivers and expense reimbursements, absent which performance would have been lower.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

**Performance information for the NASDAQ OMX CEA Smartphone IndexSM is for illustrative purposes only and does not represent actual fund performance. The Index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Indexes are unmanaged and an investor cannot invest directly in an index.

The expense ratio for this fund is 0.70%.

The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of 23 developed markets around the world.

The MSCI All Country World Information Technology Index is a free float-adjusted market capitalization weighted index that is designed to measure the information technology sector performance of developed and emerging markets.

Footnotes
1 The NAV represents the fund's net assets (assets less liabilities) divided by the fund's shares outstanding.
2 Fund shares are purchased and sold on an exchange at their share price rather than net asset value (NAV), which may cause the shares to trade at a price greater than NAV (premium) or less than NAV (discount).
3 Most recent distribution paid or declared through today's date. Subject to change in the future.
4 30-day SEC yield is calculated by dividing the net investment income per share earned during the most recent 30-day period by the maximum offering price per share on the last day of the period.
5 12-Month Distribution Rate is calculated by dividing the sum of the fund's trailing 12-month ordinary distributions paid or declared by the NAV price. Distribution rates may vary.
6 Index yield represents the weighted average trailing 12-month dividend of the constituents of the NASDAQ OMX CEA Smartphone Index(SM)
7 All market capitalization numbers are in USD$ Millions.
8 Inception Date is 2/17/2011

You should consider the fund's investment objectives, risks, and charges and expenses carefully before investing. You can download a prospectus or summary prospectus, or contact First Trust Portfolios L.P. at 1-800-621-1675 to request a prospectus or summary prospectus which contains this and other information about the fund. The prospectus or summary prospectus should be read carefully before investing.

ETF Characteristics

The fund lists and principally trades its shares on the NASDAQ Stock Market LLC.

The fund's return may not match the return of the NASDAQ OMX CEA Smartphone IndexSM.  Securities held by the fund will generally not be bought or sold in response to market fluctuations.

Investors buying or selling fund shares on the secondary market may incur customary brokerage commissions. Market prices may differ to some degree from the net asset value of the shares. Investors who sell fund shares may receive less than the share's net asset value. Shares may be sold throughout the day on the exchange through any brokerage account. However, unlike mutual funds, shares may only be redeemed directly from the fund by authorized participants, in very large creation/redemption units.

Risk Considerations

The fund's shares will change in value, and you could lose money by investing in the fund. One of the principal risks of investing in the fund is market risk. Market risk is the risk that a particular stock owned by the fund, fund shares or stocks in general may fall in value. There can be no assurance that the fund's investment objective will be achieved.

The fund may invest in small capitalization and mid capitalization companies. Such companies may experience greater price volatility than larger, more established companies.

An investment in a fund containing securities of non-U.S. issuers is subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers. These risks may be heightened for securities of companies located in, or with significant operations in, emerging market countries. The fund may invest in depositary receipts which may be less liquid than the underlying shares in their primary trading market.

The fund invests in information technology companies, which are subject to certain risks, including rapidly changing technologies, short product life cycles, fierce competition, aggressive pricing and reduced profit margins, loss of patent, copyright and trademark protections, cyclical market patterns, evolving industry standards and frequent new product introductions. Certain companies may be smaller and less experienced companies, with limited product lines, markets or financial resources. Information technology company stocks, especially those which are Internet related, have experienced extreme price and volume fluctuations that are often unrelated to their operating performance.

The smartphone industry is characterized by intense competition and new market entrants, which could negatively impact profit margins and overall revenues. The smartphone industry is in the early stages of development and can be extremely volatile.

The fund is classified as "non-diversified" and may invest a relatively high percentage of its assets in a limited number of issuers. As a result, the fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly concentrated in certain issuers.

First Trust Advisors L.P. is the adviser to the fund. First Trust Advisors L.P. is an affiliate of First Trust Portfolios L.P., the fund's distributor.

NASDAQ®, NASDAQ OMX®, Consumer Electronics Association, and NASDAQ OMX CEA Smartphone IndexSM are trademarks of NASDAQ OMX and Consumer Electronics Association, (which with its affiliates is referred to as the "Corporations") and 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 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.

Not FDIC Insured • Not Bank Guaranteed • May Lose Value
 
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First Trust Advisors L.P.
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