Edgar Filing: FIRST TRUST SPECIALTY FINANCE & FINANCIAL OPPORTUNITIES FUND

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 811-22039
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First Trust Specialty Finance and Financial Opportunities
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Fund (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: November 30
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Date of reporting period: May 31, 2012
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.

ITEM 1. REPORTS TO STOCKHOLDERS.

The Report to Shareholders is attached herewith.

FIRST TRUST
Specialty Finance
and Financial
Opportunities Fund

SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED
MAY 31, 2012

Confluence
FIRST TRUST INVESTMENT MANAGEMENT

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TABLE OF CONTENTS
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FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)

SEMI-ANNUAL REPORT
MAY 31, 2012

Shareholder Letter........................................................... 1
At A Glance.................................................................. 2
Portfolio Commentary......................................................... 3
Portfolio of Investments..................................................... 6
Statement of Assets and Liabilities.......................................... 9
Statement of Operations...................................................... 10
Statements of Changes in Net Assets.......................................... 11
Statement of Cash Flows...................................................... 12
Financial Highlights......................................................... 13
Notes to Financial Statements................................................ 14
Additional Information....................................................... 20

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/or Confluence Investment Management LLC
("Confluence" or the "Sub-Advisor") and their respective 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 Specialty Finance and Financial Opportunities Fund (the "Fund") 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/or Sub-Advisor and their respective 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 the Fund will achieve its investment objectives. The
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 by investing in the Fund. See "Risk Considerations" in the Notes to
Financial Statements for a discussion of certain other risks of investing in the
Fund.

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 common 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 the Fund and presents data and analysis that provide
insight into the Fund's performance and investment approach.

By reading the portfolio commentary by the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of relevant market
benchmarks.

It is important to keep in mind that the opinions expressed by personnel of
Confluence 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 the Fund are
spelled out in the prospectus, the statement of additional information, this
report and other Fund regulatory filings.

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SHAREHOLDER LETTER
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FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO

MAY 31, 2012

Dear Shareholders:

I am pleased to present you with the semi-annual report for your investment in
First Trust Specialty Finance and Financial Opportunities Fund (the "Fund").

The report you hold contains detailed information about your investment; a
portfolio commentary from the Fund's management team that provides a recap of
the period; a performance analysis and a market and Fund outlook. Additionally,
you will find the Fund's financial statements for the period this report covers.
I encourage you to read this document and discuss it with your financial
advisor. A successful investor is also typically a knowledgeable one, as we have
found to be the case at First Trust.

First Trust remains committed to being a long-term investor and investment
manager and to bringing you quality financial solutions regardless of market ups
and downs. We have always believed, as I have written previously, that there are
two ways to attain success in reaching your financial goals: staying invested in
quality products and having a long-term investment horizon. We are committed to
this approach in the products we manage or supervise and offer to investors.

As you know, First Trust offers a variety of products that we believe could fit
many financial plans to help investors seeking long-term investment success. We
encourage you to talk to your advisor about the other investments First Trust
offers that might also fit your financial goals and to discuss those goals with
your advisor regularly so that he or she can help keep you on track.

First Trust will continue to make available up-to-date information about your
investments so you and your financial advisor are current on any First Trust
investments you own. We value our relationship with you, and thank you for the
opportunity to assist you in achieving your financial goals. I look forward to
the remainder of 2012 and to the next edition of your Fund's report.

Sincerely,

/s/ James A. Bowen

James A. Bowen
Chairman of the Board of Trustees of First Trust Specialty Finance and Financial
Opportunities Fund and Chief Executive Officer of First Trust Advisors L.P.

Page 1

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
"AT A GLANCE"
AS OF MAY 31, 2012 (UNAUDITED)

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FUND STATISTICS
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Symbol on New York Stock Exchange FGB
Common Share Price $7.10
Common Share Net Asset Value ("NAV") $7.13
Premium (Discount) to NAV (0.42)%
Net Assets Applicable to Common Shares $101,813,398
Current Quarterly Distribution per Common Share (1) $0.1600
Current Annualized Distribution per Common Share $0.6400
Current Distribution Rate on Closing Common Share Price (2) 9.01%
Current Distribution Rate on NAV (2) 8.98%
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COMMON SHARE PRICE & NAV (WEEKLY CLOSING PRICE)
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Common Share Price NAV
5/11 7.64 7.90
7.59 7.73
7.42 7.59
7.25 7.55
6/11 7.27 7.61
7.62 7.76
7.62 7.89
7.30 7.67
7.37 7.77
7/11 6.80 7.32
6.36 6.90
6.35 6.83
6.35 6.59
8/11 6.54 6.70
6.29 6.57
6.23 6.61
6.48 6.85
5.98 6.35
9/11 5.94 6.32
5.77 6.25
6.13 6.76
6.35 6.80
10/11 6.61 7.24
6.28 7.08
6.41 7.05
6.15 6.86
11/11 6.00 6.40
6.41 6.95
6.40 7.01
6.28 6.85
6.28 7.07
12/11 6.30 6.99
6.60 7.15
6.72 7.29
7.01 7.47
1/12 7.02 7.45
7.26 7.68
7.08 7.48
7.24 7.60
2/12 7.03 7.42
7.00 7.34
7.08 7.43
7.15 7.46
7.18 7.46
3/12 7.11 7.48
7.26 7.47
7.11 7.31
7.17 7.39
4/12 7.42 7.51
7.18 7.37
7.16 7.43
7.16 7.02
6.96 7.11
5/12 7.10 7.13

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PERFORMANCE
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Average Annual Total Return
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Inception
6 Months Ended 1 Year Ended 5 Years Ended (5/25/07)
5/31/2012 5/31/2012 5/31/2012 to 5/31/2012

FUND PERFORMANCE (3)
NAV 6.72% -1.06% -7.58% -7.60%
Market Value 19.65% 1.88% -8.99% -8.52%

INDEX PERFORMANCE
Blended Benchmark(4) 5.56% -13.72% N/A(5) N/A(5)
MSCI U.S. Investable Market Financials Index 10.38% -7.56% -15.36% -15.08%
S&P 500 Index 6.24% -0.41% -0.92% -0.71%
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% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
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Ares Capital Corp. 10.9%
PennantPark Investment Corp. 6.6
Golub Capital BDC, Inc. 5.7
MVC Capital, Inc. 5.1
THL Credit, Inc. 4.7
Annaly Capital Management, Inc. 4.7
Medley Capital Corp. 4.5
Hercules Technology Growth Capital, Inc. 4.5
CYS Investments, Inc. 4.3
Solar Capital Ltd. 4.2
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Total 55.2%
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% OF TOTAL
INDUSTRY INVESTMENTS
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Capital Markets 78.2%
Real Estate Investment Trusts (REITs) 15.2
Diversified Financial Services 4.5
Insurance 2.1
Oil, Gas & Consumable Fuels 0.0 *
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Total 100.0%
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% OF TOTAL
ASSET CLASSIFICATION INVESTMENTS
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Common Stocks:
Business Development Companies 78.8%
Residential Mortgage REITs 14.7
Domestic 2.1
Triple Net Lease REITs 0.4
Canadian Common Stock 0.0 *
Master Limited Partnership 2.3
Exchange-Traded Funds 1.7
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Total 100.0%
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* Amount is less than 0.1%

(1) Most recent distribution paid or declared through 5/31/2012. Subject to
change in the future.

(2) Distribution rates are calculated by annualizing the most recent
distribution paid or declared through the report date and then dividing by
Common Share price or NAV, as applicable, as of 5/31/2012. Subject to
change in the future.

(3) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan and changes in NAV per share for net asset
value returns and changes in Common Share price for market value returns.
Total returns do not reflect sales load and are not annualized for periods
less than one year. Past performance is not indicative of future results.

(4) Blended benchmark consists of the following (Source: Bloomberg): Red Rocks
Global Listed Private Equity Index (70%), FTSE NAREIT Mortgage REIT Index
(20%) and S&P SmallCap Financials Index (10%)

(5) Previously, the blended benchmark consisted of the following:
Red Rocks Listed Private Equity Index (40%),
FTSE NAREIT Mortgage REIT Index (20%),
FTSE NAREIT Hybrid REIT Index (20%),
Merrill Lynch Preferred Stock Hybrid Securities Index (10%)
and Russell 2000 Financial Services Index (10%)
Certain of these indices were discontinued during 2009, therefore the
blended benchmark was changed. See footnote (4) above for the new blended
benchmark constituents. As certain of the indices in the new blended
benchmark began subsequent to the inception date (5/25/2007) of the Fund,
the average annual total return for the 5 years ended 5/31/2012 and from
inception to 5/31/2012 for the blended benchmark cannot be calculated.

Page 2

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PORTFOLIO COMMENTARY
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FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
SEMI-ANNUAL REPORT
MAY 31, 2012

Confluence Investment Management LLC, a registered investment advisor
("Confluence" or "Sub-Advisor"), located in Saint Louis, Missouri, has served as
the Sub-Advisor to First Trust Specialty Finance and Financial Opportunities
Fund (NYSE: FGB) since July 29, 2008. The investment professionals at Confluence
have over 80 years of aggregate portfolio management experience. Confluence
professionals have invested in a wide range of specialty finance and other
financial company securities during various market cycles, working to provide
attractive risk-adjusted returns to clients.

PORTFOLIO MANAGEMENT TEAM

MARK A. KELLER, CFA - CHIEF EXECUTIVE OFFICER AND CHIEF INVESTMENT OFFICER

Mr. Keller has 30 years of investment experience with a focus on value-oriented
equity analysis and management. Prior to joining Confluence in 2000, from 1994
to May 2008 Mr. Keller was the Chief Investment Officer of Gallatin Asset
Management, Inc., and its predecessor organization, A.G. Edwards Asset
Management, the investment management arm of A.G. Edwards, Inc. From 1999 to
2008, Mr. Keller was Chairman of A.G. Edwards' Investment Strategy Committee,
which set investment policy and established asset allocation models for the
entire organization. Mr. Keller was a founding member of the A.G. Edwards
Investment Strategy Committee, on which he served for over 20 years. Mr. Keller
began his career with A.G. Edwards in 1978, serving as an equity analyst for the
firm's Securities Research Department from 1979 to 1994. During his last five
years in Securities Research, Mr. Keller was Equity Strategist and manager of
the firm's Focus List. Mark was a Senior Vice President of A.G. Edwards & Sons,
Inc. and of Gallatin Asset Management, Inc., and was a member of the Board of
Directors of both companies. Mr. Keller received a Bachelor of Arts from Wheaton
College (Illinois) and is a CFA charterholder.

DAVID B. MIYAZAKI, CFA - SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER

Prior to joining Confluence in May 2008, Mr. Miyazaki served as a Portfolio
Manager and Analyst with Gallatin Asset Management, Inc., the investment
management arm of A.G. Edwards, Inc. Mr. Miyazaki was responsible for equity
investments in value-oriented separately managed accounts. He also co-managed
the A.G. Edwards ETF-based asset allocation program. In addition to portfolio
management, Mr. Miyazaki served as a member of the A.G. Edwards Investment
Strategy Committee. As a strategist, he was responsible for the firm's
quantitative asset allocation models, including its Cyclical Asset Allocation
program. Prior to joining A.G. Edwards in 1999, Mr. Miyazaki was a Portfolio
Manager at Koch Industries in Wichita, Kansas. His previous experience includes
working as an Investment Analyst at Prudential Capital Group in Dallas, Texas,
and as a Bond Trader at Barre & Company, also in Dallas. Mr. Miyazaki received a
Bachelor of Business Administration from Texas Christian University and is a CFA
charterholder.

DANIEL T. WINTER, CFA - SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER

Prior to joining Confluence in May 2008, Mr. Winter served as a Portfolio
Manager and Analyst with Gallatin Asset Management, Inc., the investment arm of
A.G. Edwards, Inc. While at Gallatin, Mr. Winter chaired the portfolio
management team responsible for the firm's six value-oriented equity strategies.
His responsibilities also included directing the strategy implementation and
trading execution for the equity portfolios. Mr. Winter also served as a
portfolio manager for the Cyclical Growth ETF Portfolio and the Cyclical Growth
and Income ETF Portfolio which were offered through variable annuities. He was
also a member of the firm's Allocation Advisor Committee which oversaw the A.G.
Edwards exchange-traded fund focused strategies. Prior to joining the firm's
Asset Management division in 1996, Mr. Winter served as a portfolio manager for
A.G. Edwards Trust Company. Mr. Winter earned a Bachelor of Arts in business
management from Eckerd College and a Master of Business Administration from
Saint Louis University. Mr. Winter is a CFA charterholder.

Page 3

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PORTFOLIO COMMENTARY - (CONTINUED)
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COMMENTARY

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB) The primary
investment objective of the First Trust Specialty Finance and Financial
Opportunities Fund ("FGB" or the "Fund") is to seek a high level of current
income. As a secondary objective, the Fund seeks an attractive total return. The
Fund pursues its investment objectives by investing at least 80% of its managed
assets in a portfolio of securities of specialty finance and other financial
companies that the Fund's Sub-Advisor believes offer attractive opportunities
for income and capital appreciation. There can be no assurance that the Fund's
investment objectives will be achieved. The Fund may not be appropriate for all
investors.

MARKET RECAP

FGB is a financial sector fund with a particular focus on a niche called
business development companies ("BDCs"). BDCs lend to and invest in private
companies, oftentimes working with those not large enough to efficiently access
the public markets. Each BDC has a unique profile, determined by its respective
management team. Some specialize in particular industries, while others apply a
more generalized approach and maintain a diversified portfolio. Both approaches
can work effectively and offer shareholders a unique and differentiated return
opportunity derived from the private markets. As of May 31, 2012, the Fund had
over three quarters of its assets invested in 30 BDCs.

The Fund began its fiscal year on December 1, 2011, and started the year by
participating in the strong rally in U.S. equities that characterized the end of
2011 and the beginning of 2012. In the Fund's first quarter ending in February,
the total return for the S&P 500 Index ("S&P 500") and for the Fund was 10.11%
and 19.97%, respectively.

The healthy equity environment in the first quarter changed in the second
quarter, following a pattern similar to what we experienced in 2011. The primary
drivers appeared to once again be related to European debt problems and ongoing
concerns about low U.S. economic growth. Consequently, by the end of the six
months ended in May, the total return for the S&P 500 had moderated to 6.24%.
The Fund was better able to hold on to its first quarter performance, delivering
a total return of 19.57% over the same six-month timeframe. We reference the
broad market because its movement does affect the portfolio, particularly over
shorter time frames. But BDCs are unique securities and over time deliver a
differentiated performance relative to the broad market. The distinction was
illustrated in the Fund's first half of its fiscal year.

It is difficult to pinpoint exactly why the Fund outperformed by such a wide
margin. But we believe the combination of relatively low valuations, high
dividend yields and relatively low levels of debt helped to stabilize BDCs
during a time when big picture issues related to the economy and Europe
negatively affected the overall stock market. To be sure, the macro risks
continue to exist, and they will still affect BDC performance. Yet it was a
positive sign that the performance of BDCs reflected their own strong operating
performance rather than what was happening in the broader market.

When FGB was initially formed, a central thesis was that the BDC industry had
substantial growth potential and the Fund would position shareholders to
participate in this growth. We continue to believe in this viewpoint and the
industry made further progress in its evolution in the early parts of 2012.
Despite market turmoil, several BDCs were able to successfully raise equity and
debt capital.

Still, progress in 2012 has been choppy and the equity market volatility allowed
for only one successful BDC initial public offering, TCP Capital. We believe
this company was able to come public due to a strong management team, a
reasonable valuation and an attractive shareholder fee structure. Not all
companies have necessarily attempted to come public with these attributes; in
fact, we've seen some that lacked proper structuring and pricing. We were
pleased to see the market make the differentiation. After all, we don't want
industry growth to involve just quantity; we want to see quality, too. In our
opinion, TCP Capital helped on both fronts.

The Fund also invests a portion of the portfolio in Agency MBS REITs. These
companies invest in high-quality Agency mortgage-backed securities and finance
their positions utilizing funds from the short-term debt markets. The investing
environment has allowed these companies to operate quite profitably, and deliver
high levels of current income. Their dividends complement the BDC income, but
because the income from these companies is variable, we limit the Fund's
allocation to MBS REITs to help limit variability of the Fund's own income.

The balance of the Fund's investments are in companies intended to help pursue
both income and growth objectives. Some of the positions are in stocks with
small or non-existent dividends. However, we believe these companies are
well-positioned to compound their earnings and thereby help the Fund compound
its own net asset value.

SIX MONTHS
PERFORMANCE ANALYSIS ENDED 5/31/12
FGB Total Return 19.65%
FGB NAV Total Return 6.72%
Blended Benchmark* 5.56%

* Components of the blended benchmark: Red Rocks Global Listed Private Equity
(70%); FTSE/NAREIT Mortgage REIT (20%); S&P SmallCap Financials (10%).

Source: Bloomberg, BNY Mellon

Page 4

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PORTFOLIO COMMENTARY - (CONTINUED)
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The Fund's total return1 of 19.65% was much higher than the Fund's net asset
value ("NAV") total return1 of 6.72% as the discount to NAV narrowed
significantly, moving from -11.17% to -0.42% during the six months ended May 31,
2012. Both of these metrics of the Fund's performance were higher than the 5.56%
total return of the Fund's blended benchmark.

Because FGB is unique in its focus on BDCs, it often performs in a much
different manner than most benchmarks, including its own blended benchmark. And
though the difference is at times substantial, a comparison helps frame the Fund
relative to certain industries within the financial sector. Part of the Fund's
stronger relative performance was derived from positions in BDCs that
outperformed the benchmark's exposure to private equity, which had a total
return of only 1.3% during the six-month period. Many BDCs raised their
dividends in 2012, adding to yields that in many cases were already relatively
high. The strong dividend trends among BDCs played a constructive role in
enabling the Fund to outperform its benchmark.

The Fund's positions in MBS REITs also performed well, delivering low
double-digit total returns over the six months ended May 31, 2012. The mortgage
market was at times quite unpredictable, as the government's various refinancing
programs and the Federal Reserve's monetary intervention directly affected MBS
prices and yields. Despite this unpredictability, the companies were able to
make meaningful contributions to the Fund's income and overall performance.

One important factor impacting the return of the Fund relative to its benchmarks
was the Fund's use of financial leverage through the use of bank borrowings. The
Fund uses leverage because we believe that, over time, leverage provides
opportunities for additional income and total return for common shareholders.
However, the use of leverage can also expose common shareholders to additional
volatility. For example, as the prices of securities held by the Fund decline,
the negative impact of valuation changes on Common Share NAV and common
shareholder total return is magnified by the use of leverage. Conversely,
leverage may enhance Common Share returns during periods when the prices of
securities held by the Fund generally are rising. Leverage had a positive impact
on the performance of the Fund over this reporting period.

MARKET AND FUND OUTLOOK
Since the financial crisis of 2008, the financial sector has generally lagged
the broader market, struggling through bad real estate loans, ratings
downgrades, mortgage foreclosure problems, broker-dealer scandals, trading
blunders, punitive and uncertain regulations and the European debt crisis.
Despite these headwinds, and unlike what has happened in other industries in the
financial sector, the BDC industry has steadily recovered.

BDCs received little in the way of emergency governmental help during the
crisis. Although this made the crisis worse for BDCs, it also created an absence
of regulatory retribution during the recovery. Accordingly, the BDC industry has
been able to repair, rebuild and return to the growth path that existed prior to
the crisis. Furthermore, many BDCs have elected to strengthen their capital
structures by diversifying their sources of debt and we have recently seen the
use of preferred equity, another form of stable, long-term capital. Finally,
we've witnessed growth in the size, number and quality of public BDCs. All of
these factors have contributed to an industry evolution that today includes a
wider and deeper shareholder base for many BDCs.

Despite these positive developments, the industry itself still appears to have
quite a distance to travel in its evolution. Valuations remain quite low, with
several BDCs trading at relatively high yields, despite strong fundamentals,
including multi-year dividend growth, well-constructed portfolios, low leverage
and shareholder-friendly fee structures. It is quite possible that low industry
valuations are a function of poor operating performance delivered by certain
older BDCs during the crisis. But if the newer BDCs continue to deliver strong
performance (as we expect most to do), and the legacy BDCs shift from "repair"
into "growth," we believe there is a good likelihood that valuations may move
higher.

FGB is positioned to participate in the industry growth and its portfolio is a
combination of more concentrated positions in high-quality BDCs, alongside a
diversified exposure across the broader industry. These positions are
complemented by the Agency MBS REIT allocation, which contributes to the Fund's
income stream. And we also include other financial companies to help create the
opportunity to compound the Fund's net asset value. We believe the Fund's unique
portfolio offers shareholders a differentiated exposure to the private debt and
equity markets, one that delivers a high level of current income, along with the
potential to participate in the growth of the BDC industry.

1 -Total return is based on the combination of reinvested dividend, capital gain
and return of capital distributions, if any, at prices obtained by the Dividend
Reinvestment Plan and changes in NAV per share for net asset value returns and
changes in Common Share price for market value returns. Total returns do not
reflect sales load and are not annualized for periods less than one year. Past
performance is not indicative of future results.

Page 5

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 2012 (UNAUDITED)

SHARES DESCRIPTION VALUE
------------ ------------------------------------------------------- -------------
COMMON STOCKS - BUSINESS DEVELOPMENT COMPANIES - 94.8%

CAPITAL MARKETS - 92.2%

100,000 American Capital Ltd. (a) (b).......................... $ 926,000
467,706 Apollo Investment Corp. (b)............................ 3,479,733
882,033 Ares Capital Corp. (b)................................. 13,309,878
250,720 BlackRock Kelso Capital Corp. (b)...................... 2,356,768
6,495 Fidus Investment Corp. ................................ 89,306
208,094 Fifth Street Finance Corp. (b)......................... 1,978,974
142,536 Full Circle Capital Corp. (b).......................... 1,061,893
420,716 Gladstone Capital Corp. (b)............................ 3,113,298
183,333 Gladstone Investment Corp. (b)......................... 1,347,498
480,502 Golub Capital BDC, Inc. (b)............................ 7,000,914
519,556 Hercules Technology Growth Capital, Inc. (b)........... 5,486,511
205,404 Horizon Technology Finance Corp. (b)................... 3,251,545
252,256 Kohlberg Capital Corp. (b)............................. 1,435,337
19,774 Main Street Capital Corp. (b).......................... 458,955
448,100 MCG Capital Corp. (b).................................. 1,976,121
502,553 Medley Capital Corp. (b)............................... 5,558,236
497,292 MVC Capital, Inc. (b).................................. 6,236,042
116,441 New Mountain Finance Corp. (b)......................... 1,653,462
333,937 NGP Capital Resources Co. (b).......................... 2,284,129
156,897 PennantPark Floating Rate Capital Ltd. (b)............. 1,832,557
834,500 PennantPark Investment Corp. (b)....................... 8,136,375
12,176 Prospect Capital Corp. ................................ 131,136
12,837 Saratoga Investment Corp. (a).......................... 222,465
236,228 Solar Capital, Ltd. (b)................................ 5,142,684
21,800 Solar Senior Capital Ltd. (b).......................... 362,752
233,235 TCP Capital Corp. ..................................... 3,381,907
456,812 THL Credit, Inc. (b)................................... 5,792,376
104,140 TICC Capital Corp. (b)................................. 986,206
239,601 Triangle Capital Corp. (b)............................. 4,873,484
-------------
93,866,542
-------------
DIVERSIFIED FINANCIAL SERVICES - 2.6%
260,853 Medallion Financial Corp. (b).......................... 2,692,003
-------------
TOTAL COMMON STOCKS - BUSINESS DEVELOPMENT COMPANIES .. 96,558,545
(Cost $114,938,737) -------------

COMMON STOCKS - 20.9%

INSURANCE - 2.5%
3 Berkshire Hathaway, Inc., Class A (a) (b).............. 356,550
43,700 Fidelity National Financial, Inc., Class A ............ 823,308
3,250 Markel Corp. (a)....................................... 1,425,093
-------------
2,604,951
-------------
OIL, GAS & CONSUMABLE FUELS - 0.0%
100 ARC Resources Ltd. (CAD) ............................ 2,003
81 Progress Energy Resources Corp. (CAD) ............... 878
-------------
2,881
-------------

Page 6 See Notes to Financial Statements

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
MAY 31, 2012 (UNAUDITED)

SHARES/
UNITS DESCRIPTION VALUE
------------ ------------------------------------------------------- -------------
COMMON STOCKS - (CONTINUED)

REAL ESTATE INVESTMENT TRUSTS (REITS) - 18.4%

344,500 Annaly Capital Management, Inc. (b).................... $ 5,725,590
10,000 Ares Commercial Real Estate Corp. ..................... 164,900
192,307 CYS Investments, Inc. (c).............................. 2,630,760
382,573 CYS Investments, Inc. (b).............................. 5,233,598
30,000 Gladstone Commercial Corp. (b)......................... 475,200
156,282 Hatteras Financial Corp. (b)........................... 4,461,851
-------------
18,691,899
-------------
TOTAL COMMON STOCKS ................................... 21,299,731
(Cost $19,056,970) -------------

MASTER LIMITED PARTNERSHIPS - 2.8%
DIVERSIFIED FINANCIAL SERVICES - 2.8%
216,200 Compass Diversified Holdings (b)....................... 2,836,544
-------------
TOTAL MASTER LIMITED PARTNERSHIPS ..................... 2,836,544
(Cost $1,337,407) -------------

EXCHANGE-TRADED FUNDS - 2.0%
CAPITAL MARKETS - 2.0%
52,600 SPDR Barclays Capital High Yield Bond ETF (b).......... 2,004,586
-------------
TOTAL EXCHANGE-TRADED FUNDS ........................... 2,004,586
(Cost $1,811,228) -------------

TOTAL INVESTMENTS - 120.5% ............................ 122,699,406
(Cost $137,144,342) (d)

OUTSTANDING LOAN - (21.6%) ............................ (22,000,000)
NET OTHER ASSETS AND LIABILITIES - 1.1% ................ 1,113,992
-------------
NET ASSETS - 100.0% ................................... $ 101,813,398
=============

(a) Non-income producing security.

(b) All or a portion of this security is available to serve as collateral on
the outstanding loan.

(c) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A under the Securities
Act of 1933, as amended (the "1933 Act"), and may be resold in
transactions exempt from registration, nomally to qualified institutional
buyers (see Note 2C - Restricted Securities in the Notes to Financial
Statements.)

(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of May 31, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $9,319,249 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $23,764,185.

CAD Canadian Dollar - Security is denominated in Canadian Dollars and is
translated into U.S. Dollars based upon the current exchange rate.

See Notes to Financial Statements Page 7

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
MAY 31, 2012 (UNAUDITED)

VALUATION INPUTS

A summary of the inputs used to value the Fund's investments as of May 31, 2012
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):

LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
5/31/2012 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------

Common Stocks - Business Development Companies*... $ 96,558,545 $ 96,558,545 $ -- $ --
Common Stocks* ................................... 21,299,731 21,299,731 -- --
Master Limited Partnerships*...................... 2,836,544 2,836,544 -- --
Exchange-Traded Funds*............................ 2,004,586 2,004,586 -- --
------------ ------------ ------------ ------------
TOTAL INVESTMENTS................................. $122,699,406 $122,699,406 $ -- $ --
============ ============ ============ ============

* See Portfolio of Investments for industry breakout.

Page 8 See Notes to Financial Statements

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2012 (UNAUDITED)

ASSETS:

Investments, at value
(Cost $137,144,342) ........................................................................ $122,699,406
Cash 331,032
Prepaid expenses 17,678
Receivables:
Investment securities sold.................................................................. 790,696
Dividends................................................................................... 185,511
Interest.................................................................................... 89
Other assets .................................................................................. 721
------------
Total Assets............................................................................. 124,025,133
------------

LIABILITIES:
Outstanding loan .............................................................................. 22,000,000
Payables:
Investment advisory fees.................................................................... 106,660
Audit and tax fees.......................................................................... 29,126
Investment securities purchased............................................................. 28,711
Printing fees............................................................................... 12,459
Custodian fees.............................................................................. 11,378
Administrative fees......................................................................... 9,300
Transfer agent fees......................................................................... 5,040
Trustees' fees and expenses................................................................. 3,534
Legal fees.................................................................................. 3,066
Interest and fees on loan................................................................... 1,690
Financial reporting fees.................................................................... 771
------------
Total Liabilities........................................................................ 22,211,735
------------
NET ASSETS $101,813,398
============
NET ASSETS CONSIST OF:
Paid-in capital ............................................................................... $267,388,999
Par value ..................................................................................... 142,783
Accumulated net investment income (loss) ...................................................... (1,657,282)
Accumulated net realized gain (loss) on investments ........................................... (149,616,166)
Net unrealized appreciation (depreciation) on investments ..................................... (14,444,936)
------------
NET ASSETS .................................................................................... $101,813,398
============
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share) .......................... $ 7.13
============
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized).... 14,278,252
============

See Notes to Financial Statements Page 9

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 2012 (UNAUDITED)

INVESTMENT INCOME:

Dividends (net of foreign withholding tax of $11).............................................. $ 6,014,912
Interest....................................................................................... 510
------------
Total investment income..................................................................... 6,015,422
------------
EXPENSES:
Investment advisory fees....................................................................... 625,311
Interest and fees on loan...................................................................... 154,962
Administrative fees............................................................................ 54,405
Printing fees.................................................................................. 31,982
Audit and tax fees............................................................................. 24,591
Transfer agent fees............................................................................ 18,179
Trustees' fees and expenses.................................................................... 12,174
Legal fees..................................................................................... 8,716
Custodian fees................................................................................. 6,909
Financial reporting fees....................................................................... 4,625
Other.......................................................................................... 17,796
------------
Total expenses.............................................................................. 959,650
------------
NET INVESTMENT INCOME (LOSS)................................................................... 5,055,772
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments..................................................... (2,966,796)
Net change in unrealized appreciation (depreciation) on investments......................... 4,596,119
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)........................................................ 1,629,323
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 6,685,095
============

Page 10 See Notes to Financial Statements

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS

SIX MONTHS
ENDED YEAR
5/31/2012 ENDED
(UNAUDITED) 11/30/2011
------------ ------------
OPERATIONS:

Net investment income (loss)....................................................... $ 5,055,772 $ 8,986,322
Net realized gain (loss)........................................................... (2,966,796) (4,143,951)
Net change in unrealized appreciation (depreciation)............................... 4,596,119 (6,010,514)
------------ ------------
Net increase (decrease) in net assets resulting from operations.................... 6,685,095 (1,168,143)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................................................. (4,569,041) (8,963,727)
Net realized gain.................................................................. -- --
Return of capital.................................................................. -- (31,572)
------------ ------------
Total distributions to shareholders................................................ (4,569,041) (8,995,299)
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from Common Shares reinvested............................................. -- --
------------ ------------
Net increase (decrease) in net assets resulting from capital transactions.......... -- --
------------ ------------
Total increase (decrease) in net assets............................................ 2,116,054 (10,163,442)

NET ASSETS:
Beginning of period................................................................ 99,697,344 109,860,786
------------ ------------
End of period...................................................................... $101,813,398 $ 99,697,344
============ ============
Accumulated net investment income (loss) at end of period.......................... $ (1,657,282) $ (2,144,013)
============ ============
CAPITAL TRANSACTIONS WERE AS FOLLOWS:
Common Shares at beginning of period............................................... 14,278,252 14,278,252
Common Shares issued as reinvestment under the Dividend Reinvestment Plan.......... -- --
------------ ------------
Common Shares at end of period..................................................... 14,278,252 14,278,252
============ ============

See Notes to Financial Statements Page 11

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 2012 (UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net increase (decrease) in net assets resulting from operations.................... $ 6,685,095
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash provided by operating activities:
Purchases of investments..................................................... (17,806,071)
Sales, maturities and paydowns of investments................................ 13,443,619
Net realized gain/loss on investments........................................ 2,966,796
Net change in unrealized appreciation/depreciation on investments............ (4,596,119)

CHANGES IN ASSETS AND LIABILITIES:
Decrease in interest receivable.............................................. 77
Increase in dividends receivable............................................. (124,595)
Increase in prepaid expenses................................................. (11,641)
Increase in other assets..................................................... (721)
Decrease in interest and fees on loan payable................................ (16)
Increase in investment advisory fees payable................................. 9,563
Decrease in audit and tax fees payable....................................... (20,074)
Increase in legal fees payable............................................... 346
Decrease in printing fees payable............................................ (9,973)
Increase in administrative fees payable...................................... 909
Increase in custodian fees payable........................................... 6,909
Increase in transfer agent fees payable...................................... 1,882
Decrease in Trustees' fees and expenses payable.............................. (2,919)
Increase in financial reporting fees payable................................. 1
Decrease in other liabilities................................................ (1,798)
------------
CASH PROVIDED BY OPERATING ACTIVITIES.............................................. $ 541,270
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Common Shareholders from net investment income.............. (6,853,561)
Issuances of loan............................................................ 2,000,000
------------
CASH USED IN FINANCING ACTIVITIES.................................................. (4,853,561)
------------
Decrease in cash................................................................... (4,312,291)
Cash at beginning of period........................................................ 4,643,323
------------
CASH AT END OF PERIOD.............................................................. $ 331,032
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest and fees.................................. $ 154,978
============

Page 12 See Notes to Financial Statements

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD

SIX MONTHS
ENDED YEAR YEAR YEAR YEAR PERIOD
5/31/2012 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 11/30/2011 11/30/2010 11/30/2009 11/30/2008 (b) 11/30/2007 (a)
----------- ----------- ----------- ----------- ------------- -------------

Net asset value, beginning of period ..... $ 6.98 $ 7.69 $ 5.98 $ 4.51 $ 13.73 $ 19.10 (c)
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) ............. 0.35 0.66 0.56 0.65 1.02 0.70
Net realized and unrealized gain (loss)... 0.12 (0.74) 1.76 1.43 (8.88) (5.32)
--------- --------- --------- --------- --------- ---------
Total from investment operations ......... 0.47 (0.08) 2.32 2.08 (7.86) (4.62)
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income .................... (0.32) (0.63) (0.59) (0.55) (1.27) (0.71)
Net realized gain ........................ -- -- -- -- -- --
Return of capital ........................ -- (0.00) (g) (0.02) (0.06) (0.09) --
--------- --------- --------- --------- --------- ---------
Total distributions ...................... (0.32) (0.63) (0.61) (0.61) (1.36) (0.71)
--------- --------- --------- --------- --------- ---------
Common shares offering costs charged to
paid-in capital....................... -- -- -- -- -- (0.04)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period ........... $ 7.13 $ 6.98 $ 7.69 $ 5.98 $ 4.51 $ 13.73
========= ========= ========= ========= ========= =========
Market value, end of period .............. $ 7.10 $ 6.20 $ 7.50 $ 5.43 $ 3.29 $ 14.23
========= ========= ========= ========= ========= =========
TOTAL RETURN BASED ON NET ASSET VALUE (d) 6.72% (1.01)% 40.04% 56.00% (61.38)% (24.53)%
========= ========= ========= ========= ========= =========
TOTAL RETURN BASED ON MARKET VALUE (d).... 19.65% (9.84)% 50.41% 94.18% (72.80)% (25.36)%
========= ========= ========= ========= ========= =========

--------------------

RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ..... $ 101,813 $ 99,697 $ 109,861 $ 85,069 $ 64,208 $ 193,070
Ratio of total expenses to average
net assets ........................... 1.84% (e) 1.85% 1.83% 2.29% 2.72% 1.99% (e)
Ratio of total expenses to average net
assets excluding interest expense .... 1.54% (e) 1.58% 1.58% 1.94% 1.73% 1.41% (e)
Ratio of net investment income (loss) to
average net assets .................... 9.68% (e) 8.32% 7.93% 13.36% 9.53% 8.64% (e)
Portfolio turnover rate .................. 12% 11% 24% 20% 15% 3%
INDEBTEDNESS:
Total loan outstanding (in 000's) ........ $ 22,000 $ 20,000 $ 18,000 $ 14,350 $ 11,450 $ 36,000
Asset coverage per $1,000 of
indebtedness (f) ..................... $ 5,628 $ 5,985 $ 7,103 $ 6,928 $ 6,608 $ 6,363

--------------------

(a) Initial seed date of April 23, 2007. The Fund commenced operations on May
25, 2007.

(b) On July 29, 2008, Confluence Investment Management LLC became the
sub-advisor to the Fund.

(d) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan, and changes in net asset value per share
for net asset value returns and changes in Common Share price for market
value returns. Total returns do not reflect sales load and are not
annualized for periods less than one year. Past performance is not
indicative of future results.

(e) Annualized.

(f) Calculated by taking the Fund's total assets less the Fund's total
liabilities (not including the loan outstanding) and dividing by the loan
outstanding in 000's. (g) Amount represents less than $0.01 per share.

See Notes to Financial Statements Page 13

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
MAY 31, 2012 (UNAUDITED)

1. FUND DESCRIPTION

First Trust Specialty Finance and Financial Opportunities Fund (the "Fund") is a
non-diversified, closed-end management investment company organized as a
Massachusetts business trust on March 20, 2007, and is registered with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund trades under the ticker symbol FGB
on the New York Stock Exchange ("NYSE").

The Fund's primary investment objective is to seek a high level of current
income. The Fund seeks attractive total return as a secondary objective. Under
normal market conditions, the Fund invests at least 80% of its Managed Assets in
a portfolio of securities of specialty finance and other financial companies
that Confluence Investment Management LLC ("Confluence" or the "Sub-Advisor")
believes offer attractive opportunities for income and capital appreciation.
Under normal market conditions, the Fund concentrates its investments in
securities of companies within industries in the financial sector. "Managed
Assets" means the total asset value of the Fund minus the sum of the Fund's
liabilities other than the principal amount of borrowings. There can be no
assurance that the Fund will achieve its investment objectives. The Fund may not
be appropriate for all investors.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP") requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.

A. PORTFOLIO VALUATION

The net asset value ("NAV") of the Common Shares of the Fund is determined daily
as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time,
on each day the NYSE is open for trading. If the NYSE closes early on a
valuation day, the NAV is determined as of that time. Domestic debt securities
and foreign securities are priced using data reflecting the earlier closing of
the principal markets for those securities. The NAV per Common Share is
calculated by dividing the value of all assets of the Fund (including accrued
interest and dividends), less all liabilities (including accrued expenses,
dividends declared but unpaid, and any borrowings of the Fund) by the total
number of Common Shares outstanding.

The Fund's investments are valued daily in accordance with valuation procedures
adopted by the Fund's Board of Trustees, and in accordance with provisions of
the 1940 Act. The following securities, for which accurate and reliable market
quotations are readily available, will be valued as follows:

Common stocks and other securities listed on any national or foreign
exchange (excluding the NASDAQ National Market ("NASDAQ") and the London
Stock Exchange Alternative Investment Market ("AIM")) are valued at the
last sale price on the exchange on which they are principally traded. If
there are no transactions on the valuation day, the securities are valued
at the mean between the most recent bid and asked prices.

Securities listed on the NASDAQ or the AIM are valued at the official
closing price. If there is no official closing price on the valuation day,
the securities are valued at the mean between the most recent bid and
asked prices.

Securities traded in the over-the-counter market are valued at their
closing bid prices.

Short-term investments that mature in less than 60 days when purchased are
valued at amortized cost.

All market quotations used in valuing the Fund's securities will be obtained
from a third party pricing service. If no quotation is received from a pricing
service, attempts will be made to obtain one or more broker quotes for the
security. In the event the pricing service does not provide a valuation, broker
quotations are not readily available, or the valuations received are deemed
unreliable, the Fund's Board of Trustees has designated First Trust Advisors
L.P. ("First Trust") to use a fair value method to value the Fund's securities.
Additionally, if events occur after the close of the principal markets for
certain securities (e.g., domestic debt and foreign securities) that could
materially affect the Fund's NAV, First Trust will use a fair value method to
value the Fund's securities. The use of fair value pricing is governed by
valuation procedures adopted by the Fund's Board of Trustees, and in accordance
with the provisions of the 1940 Act. As a general principle, the fair value of a
security is the amount which the Fund might reasonably expect to receive for the
security upon its current sale. However, in light of the judgment involved in
fair valuations, there can be no assurance that a fair value assigned to a
particular security will be the amount which the Fund might be able to receive
upon its current sale. Fair valuation of a security will be based on the
consideration of all available information, including, but not limited to, the
following:

1) the type of security;

2) the size of the holding;

3) the initial cost of the security;

4) transactions in comparable securities;

5) price quotes from dealers and/or pricing services;

6) relationships among various securities;

7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;

Page 14

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
--------------------------------------------------------------------------------

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
MAY 31, 2012 (UNAUDITED)

8) an analysis of the issuer's financial statements; and

9) the existence of merger proposals or tender offers that might affect the
value of the security.

If the securities in question are foreign securities, the following additional
information may be considered:

1) the value of similar foreign securities traded on other foreign markets;

2) ADR trading of similar securities;

3) closed-end fund trading of similar securities;

4) foreign currency exchange activity;

5) the trading prices of financial products that are tied to baskets of
foreign securities;

6) factors relating to the event that precipitated the pricing problem;

7) whether the event is likely to recur; and

8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.

The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:

o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.

o Level 2 - Level 2 inputs are observable inputs, either
directly or indirectly, and include the following:

o Quoted prices for similar investments in active markets.

o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.

o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).

o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.

o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investments.

The inputs or methodology used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of May 31, 2012, is
included with the 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 daily on the accrual basis, including the amortization of premiums and
accretion of discounts.

The Fund may hold real estate investment trusts ("REITs"). Distributions from
such investments may include a return of capital component from the REIT to the
extent of the cost basis of such REIT investments. The actual character of
amounts received during the year is not known until after the fiscal year end.
The Fund records the character of distributions received from the REITs during
the year based on estimates available. The Fund's characterization may be
subsequently revised based on information received from the REITs after their
tax reporting periods conclude.

The Fund may also hold business development companies ("BDCs"), and
exchange-traded funds ("ETFs"). The tax character of distributions received from
these securities may vary when reported by the issuer after their tax reporting
periods conclude.

C. RESTRICTED SECURITIES:

The Fund invests in restricted securities, which are securities that cannot be
offered for public sale without first being registered under the Securities Act
of 1933, as amended (the "1933 Act"). Prior to registration, restricted
securities may only be resold in transactions exempt from registration under
Rule 144A under the 1933 Act, normally to qualified institutional buyers. As of
May 31, 2012, the Fund held restricted securities as shown in the following
table. The Fund does not have the right to demand that such securities be
registered. These securities are valued according to the valuation procedures as
stated in the Portfolio Valuation footnote (Note 2A) and are not expressed as a
discount to the carrying value of a comparable unrestricted security.

ACQUISITION % OF
SECURITY DATE SHARES PRICE CARRYING COST VALUE NET ASSETS
----------- -------- ------ ------------- ----------- ----------

CYS Investments, Inc. 5/19/08 192,307 $13.68 $ 2,999,989 $ 2,630,760 2.58%

Page 15

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
MAY 31, 2012 (UNAUDITED)

D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:

Dividends from net investment income of the Fund are declared and paid quarterly
or as the Board of Trustees may determine from time to time. Distributions of
any net realized capital gains earned by the Fund are distributed at least
annually. Distributions will automatically be reinvested into additional Common
Shares pursuant to the Fund's Dividend Reinvestment Plan unless cash
distributions are elected by the shareholder.

Distributions from income and realized capital gains are determined in
accordance with income tax regulations, which may differ from U.S. GAAP. Certain
capital accounts in the financial statements are periodically adjusted for
permanent differences in order to reflect their tax character. These permanent
differences are primarily due to the varying treatment of income and gain/loss
on portfolio securities held by the Fund and have no impact on net assets or NAV
per share. Temporary differences, which arise from recognizing certain items of
income, expense and gain/loss in different periods for financial statement and
tax purposes, will reverse at some point in the future.

The tax character of distributions paid during the fiscal year ended November
30, 2011 was as follows:

Distributions paid from:
Ordinary income................................... $ 8,963,727
Return of capital................................. 31,572

As of November 30, 2011, the distributable earnings and net assets on a tax
basis were as follows:

Undistributed ordinary income........................ $ --
Undistributed capital gains.......................... --
------------
Total undistributed earnings......................... --
Accumulated capital and other losses................. (144,096,384)
Net unrealized appreciation (depreciation)........... (21,453,534)
------------
Total accumulated earnings (losses).................. (165,549,918)
Other ............................................... (2,284,520)
Paid-in capital...................................... 267,531,782
------------
Net assets........................................... $ 99,697,344
============

E. INCOME TAXES:

The 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 or 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.

Certain capital losses realized after October 31 may be deferred and treated as
occurring on the first day of the following fiscal year. For the fiscal year
ended November 30, 2011, the Fund elected to defer net realized capital losses
of $104,763 incurred between November 1, 2011 and November 30, 2011.

The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry realized capital losses forward for up to eight years
following the year of the loss and offset such loss against any future realized
capital gains. The Fund is 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. At
November 30, 2011, the Fund had a capital loss carryforward for federal income
tax purposes of $143,991,621, expiring as follows:

EXPIRATION DATE AMOUNT
November 30, 2015 $ 5,166,354
November 30, 2016 62,747,095
November 30, 2017 55,647,845
November 30, 2018 14,556,882
November 30, 2019 5,873,445

The Fund is 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 ending 2008, 2009,
2010 and 2011 remain open to federal and state audit. As of May 31, 2012,
management has evaluated the application of these standards to the Fund and has
determined that no provision for income tax is required in the Fund's financial
statements for uncertain tax positions.

Page 16

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
MAY 31, 2012 (UNAUDITED)

F. EXPENSES:

The Fund will pay all expenses directly related to its operations.

G. ACCOUNTING PRONOUNCEMENT:

In May 2011, the Financial Accounting Standards Board ("FASB") issued ASU
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 of 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 in the process of assessing the impact of
the updated standards on the Fund's 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 ongoing monitoring of
the Fund's investment portfolio, managing the Fund's business affairs and
providing certain administrative services necessary for the management of the
Fund. For these investment management services, First Trust is entitled to a
monthly fee calculated at an annual rate of 1.00% of the Fund's Managed Assets.
First Trust also provides fund reporting services to the Fund for a flat annual
fee in the amount of $9,250.

Confluence serves as the Fund's sub-advisor and manages the Fund's portfolio
subject to First Trust's supervision. The Sub-Advisor receives a monthly
portfolio management fee calculated at an annual rate of 0.50% of Managed Assets
that is paid by First Trust from its investment advisory fee.

On May 7, 2008, First Trust Portfolios L.P., an affiliate of the Advisor, paid
$200,000 for an equity ownership interest in Confluence, which was subsequently
converted into debt. Accordingly, First Trust Portfolios L.P. currently holds a
promissory note from Confluence with a stated principal amount of $200,000, an
annual interest rate of 3.20% and a stated maturity date of June 30, 2015.

BNY Mellon Investment Servicing (US) Inc. serves as the Fund's Administrator,
Fund Accountant and Transfer Agent in accordance with certain fee arrangements.
The Bank of New York Mellon serves as the Fund's Custodian in accordance with
certain fee arrangements.

Effective January 23, 2012, James A. Bowen resigned from his position as the
President and Chief Executive Officer of the Fund. He will continue as a
Trustee, the Chairman of the Board of Trustees and a member of the Executive
Committee. The Board elected Mark R. Bradley to serve as the President and Chief
Executive Officer of the Fund and James M. Dykas to serve as the Treasurer,
Chief Financial Officer and Chief Accounting Officer of the Fund.

Effective January 1, 2012, each Trustee who is not an officer or employee of
First Trust, any sub-advisor or any of their affiliates ("Independent Trustees")
is paid a fixed annual retainer of $125,000 per year and an annual per fund fee
of $4,000 for each closed-end fund or other actively managed fund and $1,000 for
each index fund in the First Trust Fund Complex. The fixed annual retainer is
allocated pro rata among each fund in the First Trust Fund Complex based on net
assets. Prior to January 1, 2012, each Independent Trustee received an annual
retainer of $10,000 per trust for the first 14 trusts of the First Trust Fund
Complex and an annual retainer of $7,500 per trust for each additional trust in
the First Trust Fund Complex. The annual retainer was allocated equally among
each of the trusts.

Additionally, the Lead Independent Trustee is paid $15,000 annually, the
Chairman of the Audit Committee is paid $10,000 annually, and each of the
Chairmen of the Nominating and Governance Committee and the Valuation Committee
is paid $5,000 annually to serve in such capacities, with such compensation
allocated pro rata among each fund in the First Trust Fund Complex based on net
assets. Prior to January 1, 2012, the annual amounts paid were $10,000, $5,000
and $2,500, respectively. Trustees are also reimbursed for travel and
out-of-pocket expenses in connection with all meetings. The Lead Independent
Trustee and each Committee chairman will serve two-year terms before rotating to
serve as chairman of another committee or as Lead Independent Trustee. The
officers and "Interested" Trustee receive no compensation from the Fund for
serving in such capacities.

4. PURCHASES AND SALES OF SECURITIES

Cost of purchases and proceeds from sales of securities, excluding short-term
investments, for the six months ended May 31, 2012 were $17,651,320 and
$14,060,542, respectively.

5. CREDIT AGREEMENT

The Fund entered into a committed facility agreement (the "BNP Facility"), with
BNP Paribas Prime Brokerage, Inc. ("BNP") which currently has a maximum
commitment amount of $25,000,000. Absent certain events of default or failure to
maintain certain collateral requirements, BNP may not terminate the BNP Facility
except upon 180 calendar days prior notice. The borrowing rate under the BNP
Facility is equal to the 3-month LIBOR plus 80 basis points. In addition, under
the BNP Facility, the Fund pays a commitment fee of 0.85% on the undrawn amount.

Page 17

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
MAY 31, 2012 (UNAUDITED)

The average amount outstanding for the six months ended May 31, 2012 was
$20,633,880, with a weighted average interest rate of 1.30%. As of May 31, 2012,
the Fund had outstanding borrowings of $22,000,000 under the BNP Facility. The
high and low annual interest rates for the six months ended May 31, 2012 were
1.38% and 1.27%, respectively, and the interest rate at May 31, 2012 was 1.27%.

The Fund's Board of Trustees, at a special meeting on March 27, 2012, approved
sub-advisor authority to enter into swap transactions under an ISDA
(International Swaps and Derivatives) Master Agreement with Credit Suisse
International. The swap transactions may be used to hedge against interest rate
risk on leverage. In addition, the Fund already has standing permission to use
derivatives for investment purposes.

6. INDEMNIFICATION

The Fund has a variety of indemnification obligations under contracts with its
service providers. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.

7. RISK CONSIDERATIONS

Risks are inherent in all investing. The following summarizes some, but not all,
of the risks that should be considered for the Fund. For additional information
about the risks associated with investing in the Fund, please see the Fund's
prospectus and statement of additional information, as well as other Fund
regulatory filings.

INVESTMENT AND MARKET RISK: An investment in the Fund's Common Shares is subject
to investment risk, including the possible loss of the entire principal
invested. An investment in Common Shares represents an indirect investment in
the securities owned by the Fund. The value of these securities, like other
market investments, may move up or down, sometimes rapidly and unpredictably.
Common Shares at any point in time may be worth less than the original
investment, even after taking into account the reinvestment of Fund dividends
and distributions. Security prices can fluctuate for several reasons including
the general condition of the securities markets, or when political or economic
events affecting the issuers occur. When the Advisor or Sub-Advisor determines
that it is temporarily unable to follow the Fund's investment strategy or that
it is impractical to do so (such as when a market disruption event has occurred
and trading in the securities is extremely limited or absent), the Fund may take
temporary defensive positions.

FINANCIAL SECTOR CONCENTRATION RISK: Under normal market conditions, the Fund
will invest at least 80% of its total assets in securities of companies within
industries in the financial sector. A fund concentrated in a single industry or
sector is likely to present more risks than a fund that is broadly diversified
over several industries or groups of industries. Compared to the broad market,
an individual sector may be more strongly affected by changes in the economic
climate, broad market shifts, moves in a particular dominant stock, or
regulatory changes. Specialty finance and other financial companies in general
are subject to extensive government regulation, which may change frequently. The
profitability of specialty finance and other financial companies is largely
dependent upon the availability and cost of capital funds, and may fluctuate
significantly in response to changes in interest rates, as well as changes in
general economic conditions. From time to time, severe competition may also
affect the profitability of specialty finance and other financial companies.
Financial companies can be highly dependent upon access to capital markets and
any impediments to such access, such as general economic conditions or a
negative perception in the capital markets of a company's financial condition or
prospects, could adversely affect its business. Leasing companies can be
negatively impacted by changes in tax laws which affect the types of
transactions in which such companies engage.

BUSINESS DEVELOPMENT COMPANY ("BDC") RISK: Investments in closed-end funds that
elect to be treated as BDCs may be subject to a high degree of risk. BDCs
typically invest in small and medium-sized private and certain public companies
that may not have access to public equity markets or capital raising. As a
result, a BDC's portfolio could include a substantial amount of securities
purchased in private placements, and its portfolio may carry risks similar to
those of a private equity or venture capital fund. Securities that are not
publicly registered may be difficult to value and may be difficult to sell at a
price representative of their intrinsic value. Investments in BDCs are subject
to various risks, including management's ability to meet the BDC's investment
objective, and to manage the BDC's portfolio when the underlying securities are
redeemed or sold, during periods of market turmoil and as investors' perceptions
regarding a BDC or its underlying investments change. BDC shares are not
redeemable at the option of the BDC shareholder and, as with shares of other
closed-end funds, they may trade in the secondary market at a discount to their
NAV.

REIT, MORTGAGE-RELATED AND ASSET-BACKED SECURITIES RISKS: Investing in REITs
involves certain unique risks in addition to investing in the real estate
industry in general. REITs are subject to interest rate risk (especially
mortgage REITs) and the risk of default by lessees or borrowers. An equity REIT
may be affected by changes in the value of the underlying properties owned by
the REIT. A mortgage REIT may be affected by the ability of the issuers of its
portfolio of mortgages to repay their obligations. REITs whose underlying assets
are concentrated in properties used by a particular industry are also subject to
risks associated with such industry. REITs may have limited financial resources,
their securities may trade less frequently and in a limited volume, and their
securities may be subject to more abrupt or erratic price movements than larger
company securities.

In addition to REITs, the Fund may invest in a variety of other mortgage-related
securities, including commercial mortgage securities and other mortgage-backed
instruments. Rising interest rates tend to extend the duration of
mortgage-related securities, making them more sensitive to changes in interest
rates, and may reduce the market value of the securities. In addition,
mortgage-related securities are subject to prepayment risk, the risk that
borrowers may pay off their mortgagees sooner than expected, particularly when
interest rates decline. This can reduce the Fund's returns because the Fund may
have to reinvest that money at lower prevailing interest rates.

Page 18

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
MAY 31, 2012 (UNAUDITED)

The Fund's investments in other asset-backed securities are subject to risks
similar to those associated with mortgage-backed securities, as well as
additional risks associated with the nature of the assets and the servicing of
those assets.

LEVERAGE RISK: The use of leverage results in additional risks and can magnify
the effect of any losses. The funds borrowed pursuant to a leverage borrowing
program constitute a substantial lien and burden by reason of their prior claim
against the income of the Fund and against the net assets of the Fund in
liquidation. If the Fund is not in compliance with certain credit facility
provisions, the Fund may not be permitted to declare dividends or other
distributions.

NON-DIVERSIFICATION RISK: Because the Fund is non-diversified, it is only
limited as to the percentage of its assets which may be invested in the
securities of any one issuer by the diversification requirements imposed by the
Internal Revenue Code of 1986, as amended. Because the Fund may invest a
relatively high percentage of its assets in a limited number of issuers, the
Fund may be more susceptible to any single economic, political or regulatory
occurrence and to the financial conditions of the issuers in which it invests.

8. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events to the Fund through
the date the financial statements were issued, and has determined that there
were no subsequent events requiring recognition or disclosure in the financial
statements that have not already been disclosed.

Page 19

--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
MAY 31, 2012 (UNAUDITED)

DIVIDEND REINVESTMENT PLAN

If your Common Shares are registered directly with the Fund or if you hold your
Common Shares with a brokerage firm that participates in the Fund's Dividend
Reinvestment Plan (the "Plan"), unless you elect, by written notice to the Fund,
to receive cash distributions, all dividends, including any capital gain
distributions, on your Common Shares will be automatically reinvested by BNY
Mellon Investment Servicing (US) Inc. (the "Plan Agent"), in additional Common
Shares under the Plan. If you elect to receive cash distributions, you will
receive all distributions in cash paid by check mailed directly to you by the
Plan Agent, as the dividend paying agent.

If you decide to participate in the Plan, the number of Common Shares you will
receive will be determined as follows:

(1) If Common Shares are trading at or above net asset value ("NAV") at
the time of valuation, the Fund will issue new shares at a price
equal to the greater of (i) NAV per Common Share on that date or
(ii) 95% of the market price on that date.

(2) If Common Shares are trading below NAV at the time of valuation, the
Plan Agent will receive the dividend or distribution in cash and
will purchase Common Shares in the open market, on the NYSE or
elsewhere, for the participants' accounts. It is possible that the
market price for the Common Shares may increase before the Plan
Agent has completed its purchases. Therefore, the average purchase
price per share paid by the Plan Agent may exceed the market price
at the time of valuation, resulting in the purchase of fewer shares
than if the dividend or distribution had been paid in Common Shares
issued by the Fund. The Plan Agent will use all dividends and
distributions received in cash to purchase Common Shares in the open
market within 30 days of the valuation date except where temporary
curtailment or suspension of purchases is necessary to comply with
federal securities laws. Interest will not be paid on any uninvested
cash payments.

You may elect to opt-out of or withdraw from the Plan at any time by giving
written notice to the Plan Agent, or by telephone at (866) 340-1104, in
accordance with such reasonable requirements as the Plan Agent and the Fund may
agree upon. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan, and you will
receive a cash payment for any fraction of a share in your account. If you wish,
the Plan Agent will sell your shares and send you the proceeds, minus brokerage
commissions.

The Plan Agent maintains all Common Shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. The Plan Agent will forward to each
participant any proxy solicitation material and will vote any shares so held
only in accordance with proxies returned to the Fund. Any proxy you receive will
include all Common Shares you have received under the Plan.

There is no brokerage charge for reinvestment of your dividends or distributions
in Common Shares. However, all participants will pay a pro rata share of
brokerage commissions incurred by the Plan Agent when it makes open market
purchases.

Automatically reinvesting dividends and distributions does not mean that you do
not have to pay income taxes due upon receiving dividends and distributions.
Capital gains and income are realized although cash is not received by you.
Consult your financial advisor for more information.

If you hold your Common Shares with a brokerage firm that does not participate
in the Plan, you will not be able to participate in the Plan and any dividend
reinvestment may be effected on different terms than those described above.

The Fund reserves the right to amend or terminate the Plan if in the judgment of
the Board of Trustees the change is warranted. There is no direct service charge
to participants in the Plan; however, the Fund reserves the right to amend the
Plan to include a service charge payable by the participants. Additional
information about the Plan may be obtained by writing BNY Mellon Investment
Servicing (US) Inc., 301 Bellevue Parkway, Wilmington, Delaware 19809.

PROXY VOTING POLICIES AND PROCEDURES

A description of the policies and procedures that the Fund uses to determine how
to vote proxies and information on how the Fund voted proxies relating to
portfolio investments during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website located at
http://www.sec.gov.

Page 20

--------------------------------------------------------------------------------
ADDITIONAL INFORMATION - (CONTINUED)
--------------------------------------------------------------------------------

FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
MAY 31, 2012 (UNAUDITED)

PORTFOLIO HOLDINGS

The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
are available (1) by calling (800) 988-5891; (2) on the Fund's website located
at http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov;
and (4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling (800) SEC-0330.

SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

The Joint Annual Meeting of Shareholders of the Common Shares of First Trust
Energy Income and Growth Fund, First Trust Enhanced Equity Income Fund, First
Trust/Aberdeen Global Opportunity Income Fund, First Trust Mortgage Income Fund,
First Trust Strategic High Income Fund II, First Trust/Aberdeen Emerging
Opportunity Fund, First Trust Specialty Finance and Financial Opportunities
Fund, First Trust Active Dividend Income Fund, First Trust Energy Infrastructure
Fund, Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income
Fund and First Trust High Income Long/Short Fund was held on Monday, April 18,
2012 (the "Annual Meeting"). At the Annual Meeting, Thomas R. Kadlec and Richard
E. Erickson were elected by the Common Shareholders of the First Trust Specialty
Finance and Financial Opportunities Fund as Class I Trustees for a three-year
term expiring at the Fund's annual meeting of shareholders in 2015. The number
of votes cast in favor of Mr. Kadlec was 12,933,166, the number of votes against
was 179,806 and the number of abstentions was 1,165,280. The number of votes
cast in favor of Mr. Erickson was 12,933,823, the number of votes against was
179,149 and the number of abstentions was 1,165,280. James A. Bowen, Niel B.
Nielson, and Robert F. Keith are the other current and continuing Trustees.

Page 21

This Page Left Blank Intentionally.

FIRST TRUST

INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187

INVESTMENT SUB-ADVISOR
Confluence Investment Management LLC
349 Marshall Avenue, Suite 302
Saint Louis, MO 63119

ADMINISTRATOR,
FUND ACCOUNTANT &
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809

CUSTODIAN
The Bank of New York Mellon
1 Wall 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.

Not applicable.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

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.

(a) Not applicable.

(b) There has been no change, as of the date of this filing, in any of the
portfolio managers identified in response to paragraph (a)(1) of this Item
in the registrant's most recently filed annual report on Form N-CSR.

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 second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.

ITEM 12. EXHIBITS.

(a)(1) Not applicable.

(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 Specialty Finance and Financial Opportunities Fund
-----------------------------------------------------------------

By (Signature and Title)* /s/ Mark R. Bradley
--------------------------------------------------
Mark R. Bradley, President and Chief Executive
Officer
(principal executive officer)

Date July 19, 2012
--------------------

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
--------------------------------------------------
Mark R. Bradley, President and Chief Executive
Officer
(principal executive officer)

Date July 19, 2012
--------------------

By (Signature and Title)* /s/ James M. Dykas
--------------------------------------------------
James M. Dykas, Treasurer, Chief Financial Officer
and Chief Accounting Officer
(principal financial officer)

Date July 19, 2012
--------------------

* Print the name and title of each signing officer under his or her signature.