CHAPMAN AND CUTLER LLP
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
March 21, 2007
First Trust Value Line(R) 100 Fund
1001 Warrenville Road
Lisle, IL 60532
First Trust Exchange-Traded Fund and its series,
First Trust Value Line(R) 100 Exchange-Traded Fund
1001 Warrenville Road
Lisle, IL 60532
Re: Federal Income Tax Consequences of Reorganization of
First Trust Value Line(R) 100 Fund with and into
First Trust Value Line(R) 100 Exchange-Traded Fund
----------------------------------------------------
Ladies and Gentlemen:
You have requested our opinion regarding certain United States federal
income tax consequences in connection with the transfer of the property, assets
and goodwill of First Trust Value Line(R) 100 Fund (the "Acquired Fund"), a
Massachusetts business trust, to First Trust Value Line(R) 100 Exchange-Traded
Fund (the "Acquiring Fund"), a series of First Trust Exchange-Traded Fund, a
Massachusetts business trust ("First Trust ETF"), in exchange solely for shares
of the Acquiring Fund issued by First Trust ETF, pursuant to the Agreement and
Plan of Reorganization dated as of March 21, 2007 (the "Agreement") (the
contemplated transaction in its entirety being hereinafter referred to as the
"Reorganization"). Capitalized terms used in this letter without definition
shall have the meanings given them in the Agreement.
For purposes of this opinion, we have examined and relied upon the
accuracy and completeness of the facts, information, covenants, statements and
representations contained in originals or copies of the Agreement, the exhibits
attached thereto, the Registration Statement on Form N-14 filed by First Trust
ETF on or about March 21, 2007, with the Securities and Exchange Commission, and
such other documents and instruments as we have deemed necessary or appropriate.
In our examination of the foregoing materials, we have assumed the genuineness
of all signatures, legal capacity of natural persons, the authenticity of all
documents submitted to us as originals and the conformity to the original
documents of all documents submitted to us as copies. We have assumed that such
documents reflect all the material facts relating to the Reorganization. In
First Trust Value Line(R) 100 Fund
1001 Warrenville Road
Lisle, IL 60532
Page 2
addition, we have assumed that the Reorganization will be consummated in
accordance with the terms of such documents and that none of the material terms
and conditions contained therein will have been waived or modified prior to the
consummation of the Reorganization.
In rendering this opinion, we are relying upon the representations and
warranties made by the Acquiring Fund and the Acquired Fund in the
representation letters provided to us. We have neither been asked to, nor have
we undertaken to, verify the accuracy of these and other representations made to
us. In this regard, we have assumed that any representation made "to the best of
knowledge," "to the knowledge" or similarly qualified is correct without such
qualification. As to all matters in which a person making a representation has
represented that such person either is not a party to, does not have, or is not
aware of, any plan or intention, understanding or agreement, we have likewise
assumed that there is in fact no such plan, intention, understanding, or
agreement.
Based upon and subject to the foregoing, it is our opinion that, for
United States federal income tax purposes:
1. The completion of the Reorganization, as set forth and
provided in the Agreement, will constitute a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the Acquired Fund and the Acquiring Fund will
each be a "party to a reorganization" within the meaning of Section
368(b) of the Code.
2. In accordance with Sections 361(a), 361(c)(1) and 357(a)
of the Code, no gain or loss will be recognized by the Acquired Fund
upon the transfer of its assets to the Acquiring Fund solely (except to
the extent cash payments are made in lieu of fractional shares) in
exchange for shares of the Acquiring Fund in the Reorganization, or on
the distribution of such shares of the Acquiring Fund to shareholders
of the Acquired Fund.
3. In accordance with Section 354(a)(1) of the Code, no gain
or loss will be recognized by any shareholder of the Acquired Fund to
the extent such shareholder receives shares of the Acquiring Fund in
exchange for shares of the Acquired Fund (except to the extent cash
payments are made in lieu of fractional shares).
4. In accordance with Section 358(a) of the Code, the tax
basis of the shares of the Acquiring Fund received by a shareholder of
the Acquired Fund in connection with the Reorganization will, in the
aggregate, be the same as the basis, in the aggregate, of shares of the
First Trust Value Line(R) 100 Fund
1001 Warrenville Road
Lisle, IL 60532
Page 3
Acquired Fund surrendered by such shareholder (after taking into
account fractional shares redeemed by such shareholder) in exchange
therefor.
5. In accordance with Section 1223(1) of the Code, the
holding period of shares of the Acquiring Fund received by a
shareholder of the Acquired Fund in the Reorganization will be
determined by including such shareholder's holding period for shares of
the Acquired Fund exchanged therefor, provided that such shares were
held by such shareholder as capital assets.
6. In accordance with Section 1032 of the Code, the
Acquiring Fund will not recognize gain or loss upon the receipt of
assets of the Acquired Fund in exchange for shares of the Acquiring
Fund and the assumption by the Acquiring Fund of all of the liabilities
of the Acquired Fund.
7. In accordance with Section 362(b) of the Code, the basis
of the assets of the Acquired Fund transferred to the Acquiring Fund in
the Reorganization will be the same in the hands of the Acquiring Fund
as the basis of such assets in the hands of the Acquired Fund
immediately prior to the transfer.
8. In accordance with Section 1223(2) of the Code, the
holding periods of the assets of the Acquired Fund transferred to the
Acquiring Fund in the Reorganization in the hands of the Acquiring Fund
will include the periods during which such assets were held by the
Acquired Fund.
9. The Acquiring Fund will succeed to and take into account
the items of the Acquired Fund described in Section 381(c) of the Code,
subject to the conditions and limitations specified in Sections 381,
382, 383 and 384 of the Code and the regulations thereunder.
We express no opinion as to the tax consequences of the Reorganization
except as expressly set forth above, or as to any transaction except the
Reorganization. We also note that certain shareholders of the Acquired Fund may
be subject to special rules because of their particular federal income tax
status and that the tax consequences of the Reorganization to such shareholders
may accordingly differ from the ones of general application that are described
above. This opinion is intended to satisfy the condition precedent to the
Reorganization set forth in Section 8.5 of the Agreement, is being furnished to
you solely for that purpose, and may not be relied upon by any other person
without our express written consent.
First Trust Value Line(R) 100 Fund
1001 Warrenville Road
Lisle, IL 60532
Page 4
Our opinion is based upon the Code, Treasury regulations (proposed,
temporary and final) promulgated thereunder, judicial decisions, interpretive
rulings of the Internal Revenue Service and such other authorities as we have
considered relevant, all as in effect on the date hereof. All such legal
authorities are subject to change, either prospectively or retroactively. We are
not undertaking hereby any obligation to advise you of any changes in the
applicable law subsequent to the date hereof, even if such changes materially
affect the tax consequences of the Reorganization that are set forth above.
If any of the facts, assumptions or representations on which our
opinion is based is incorrect, we expect you to advise us so that we may
consider the effect, if any, on our opinion.
Our opinion has no binding effect on the Internal Revenue Service or
the courts of any jurisdiction. No assurance can accordingly be given that, if
the matter were contested, a court would agree with the legal conclusions set
forth above.
Sincerely,
CHAPMAN AND CUTLER LLP