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First Trust NASDAQ® ABA Community Bank Index Fund (QABA)
Investment Objective/Strategy - The First Trust NASDAQ® ABA Community Bank Index Fund is an exchange-traded fund. The objective of the Fund is to seek 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® ABA Community Bank IndexSM.
There can be no assurance that the Fund's investment objectives will be achieved.
  • The index is a market capitalization-weighted index that includes the common stock of all NASDAQ® listed banks and thrifts or their holding companies that are designated as banks by the Industry Classification Benchmark (or that which the American Bankers Association determines should be classified as such), but excluding:
    • Any of the 50 largest banks or thrifts and their holding companies based on asset size as determined by the most recently available call report data as compiled by the FDIC.
    • Any banks or thrifts classified as having an “international specialization” or a “credit-card specialization” as determined by the most recently available call report data as compiled by the FDIC, provided that such institutions constitute the majority of assets if in a holding company.
  • A security must have a market capitalization of at least $200 million and a three-month average daily dollar trading volume of at least $500 thousand.
  • In addition, a security must meet certain operating history, solvency, and financial statement requirements to remain eligible for inclusion in the index.
  • The index is rebalanced quarterly and reconstituted semi-annually.
Fund Overview
TickerQABA
Fund TypeCommunity Bank
Investment AdvisorFirst Trust Advisors L.P.
Investor Servicing AgentBank of New York Mellon
CUSIP33736Q104
Intraday NAVQABAIV
Fiscal Year-End12/31
ExchangeNASDAQ Stock Market
Inception6/29/2009
Inception Price$20.00
Inception NAV$20.00
Rebalance FrequencyQuarterly
Gross Expense Ratio*0.76%
Net Expense Ratio*0.60%
* As of 12/31/2013
Expenses are capped contractually at 0.60% per year, at least until April 30, 2014.
Current Fund Data (as of 4/14/2014)
Closing NAV1$34.99
Closing Share Price2$34.96
Bid/Ask Midpoint$35.06
Bid/Ask Premium0.21%
Total Net Assets$92,711,091
Outstanding Shares2,650,002
Daily Volume8,136
Average 30-Day Daily Volume53,360
Closing Share Price 52-Week High/Low$37.75 / $26.76
Closing NAV 52-Week High/Low$37.80 / $26.79
Number of Holdings135
Fund Characteristics (as of 3/31/2014)8
Median Market Cap.$702
Maximum Market Cap.$5,913
Minimum Market Cap.$192
Price/Earnings17.35
Price/Book1.58
Price/Cash Flow8.98
Price/Sales3.59
Top Holdings (as of 4/15/2014)
Holding Percent
Signature Bank 3.93%
Zions Bancorporation 3.69%
SVB Financial Group 3.43%
East West Bancorp, Inc. 3.18%
Commerce Bancshares, Inc. 2.84%
TFS Financial Corporation 2.69%
Investors Bancorp Inc. 2.46%
FirstMerit Corporation 2.20%
Hancock Holding Company 1.95%
Associated Banc-Corp 1.87%

Holdings are subject to change.

Bid/Ask Midpoint and NAV History (Since Inception)
Past performance is not indicative of future results.
Overall Morningstar RatingTM (as of 3/31/2014)3

Among 86 funds in the Financial category. This fund was rated 4 stars/86 funds (3 years).
Distribution Information
Dividend per Share Amt4$0.0867
30-Day SEC Yield (as of 3/31/2014)51.06%
12-Month Distribution Rate (as of 3/31/2014)61.09%
Index Yield (as of 3/31/2014)71.68%
Bid/Ask Midpoint vs. NAV (as of 3/31/2014)
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
3/31/2014 28 5 0 0
12/31/2013 41 7 0 0
9/30/2013 47 8 0 0
6/30/2013 30 5 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
3/31/2014 25 3 0 0
12/31/2013 12 4 0 0
9/30/2013 7 2 0 0
6/30/2013 23 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.

Month End Performance (as of 3/31/2014)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception9
Fund Performance *
NAV 2.12% 2.12% 31.01% 15.42% N/A N/A 15.34%
After Tax Held 2.02% 2.02% 30.33% 14.71% N/A N/A 14.73%
After Tax Sold 1.20% 1.20% 17.52% 11.76% N/A N/A 12.03%
Market Price 1.54% 1.54% 30.43% 15.32% N/A N/A 15.27%
Index Performance **
NASDAQ OMX® ABA Community Bank IndexSM 2.29% 2.29% 31.85% 16.18% N/A N/A 16.10%
S&P Composite 1500 Financials Index 2.76% 2.76% 23.48% 12.96% N/A N/A 16.22%
Russell 3000® Index 1.97% 1.97% 22.61% 14.61% N/A N/A 19.04%
Quarter End Performance (as of 3/31/2014)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception9
Fund Performance *
NAV 2.12% 2.12% 31.01% 15.42% N/A N/A 15.34%
After Tax Held 2.02% 2.02% 30.33% 14.71% N/A N/A 14.73%
After Tax Sold 1.20% 1.20% 17.52% 11.76% N/A N/A 12.03%
Market Price 1.54% 1.54% 30.43% 15.32% N/A N/A 15.27%
Index Performance **
NASDAQ OMX® ABA Community Bank IndexSM 2.29% 2.29% 31.85% 16.18% N/A N/A 16.10%
S&P Composite 1500 Financials Index 2.76% 2.76% 23.48% 12.96% N/A N/A 16.22%
Russell 3000® Index 1.97% 1.97% 22.61% 14.61% N/A N/A 19.04%
3-Year Statistics (as of 3/31/2014)
  Standard Deviation Alpha Beta Sharpe Ratio Correlation
QABA 17.12% 3.65 0.88 0.90 0.90
S&P Composite 1500 Financials Index 17.57% --- 1.00 0.76 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® ABA Community Bank 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 gross expense ratio for this fund is 0.76%. Expenses are capped contractually at 0.60% per year, at least until April 30, 2014.

The S&P Composite 1500 Financials Index is a capitalization-weighted index of companies classified by GICS as financials within the S&P Composite 1500 Index.

The Russell 3000® Index is comprised of the 3000 largest and most liquid stocks based and traded in the U.S.

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
The Morningstar RatingTM is provided for those exchange-traded funds ("ETFs") with at least a three-year history. Ratings are based on the ETF's Morningstar Risk-Adjusted Return measure which accounts for variation in monthly performance, placing more emphasis on downward variations and rewarding consistent performance. An ETF's risk-adjusted return includes a brokerage commission estimate. This estimate is intended to reflect what an average investor would pay when buying or selling an ETF. PLEASE NOTE, this estimate is subject to change and the actual brokerage commission an investor pays may be higher or lower than this estimate. Morningstar compares each ETF's risk-adjusted return to the open-end mutual fund rating breakpoints for that category. Consistent with the open-end mutual fund ratings, the top 10% of ETFs in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. The overall rating for an ETF is based on a weighted average of the time-period ratings (e.g., the ETF's 3,5, and 10 year rating). The determination of an ETF's rating does not affect the retail open end mutual fund data published by Morningstar. Past performance is no guarantee of future results.
4 Most recent distribution paid or declared through today's date. Subject to change in the future.
5 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.
6 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.
7 Index yield represents the weighted average trailing 12-month dividend of the constituents of the NASDAQ OMX® ABA Community Bank Index(SM)
8 All market capitalization numbers are in USD$ Millions.
9 Inception Date is 6/29/2009

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® ABA Community Bank IndexSM.  Securities held by the fund will generally not be bought or sold in response to market fluctuations.

The fund may not be fully invested at times. 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.

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

This fund is concentrated in the securities of NASDAQ® listed community banks as defined by the 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 U.S. and may be adversely impacted by any downturn or unfavorable economic or employment developments in their local markets and the U.S. as a whole. These companies may also be subject to interest rate risks and changes in monetary policy as their earnings are largely dependent upon their net interest income and lending risks that could further increase because of increases in interest rates and/or continuing economic weakness.

The fund is classified as "non-diversified." A non-diversified fund generally may invest a larger percentage of its assets in the securities of a smaller number of issuers. As a result, the fund may be more susceptible to the risks associated with these particular companies, or to a single economic, political or regulatory occurrence affecting these companies.

NASDAQ®, OMX®, NASDAQ OMX®, and NASDAQ OMX® ABA Community Bank IndexSM are trademarks of The NASDAQ OMX Group, Inc. and American Bankers Association, (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 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.

©2013 Morningstar, Inc. All Rights Reserved. The Morningstar RatingTM information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Not FDIC Insured • Not Bank Guaranteed • May Lose Value
 
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