UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21774
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First Trust Exchange-Traded Fund
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(Exact name of registrant as specified in charter)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
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(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
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(Name and address of agent for service)
Registrant's telephone number, including area code: 630-241-4141
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2007
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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. Report to Stockholders.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
[LOGO OMITTED] FIRST TRUST
ADVISORS L.P.
FIRST TRUST EXCHANGE-TRADED FUND
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First Trust Dow Jones Select MicroCap Index(SM) Fund
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund
First Trust IPOX-100 Index Fund
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund
First Trust NASDAQ-100-Technology Sector Index(SM) Fund
First Trust Amex(R) Biotechnology Index Fund
First Trust Dow Jones Internet Index(SM) Fund
First Trust DB Strategic Value Index Fund
First Trust Value Line(R) Equity Allocation Index Fund
First Trust Value Line(R) Dividend Index Fund
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund
First Trust S&P REIT Index Fund
First Trust ISE Water Index Fund
First Trust ISE-Revere Natural Gas Index Fund
First Trust ISE Chindia Index Fund
First Trust Value Line(R) 100 Exchange-Traded Fund
Annual Report
December 31, 2007
Front Cover
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TABLE OF CONTENTS
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First Trust Exchange-Traded Fund
December 31, 2007
Shareholder Letter 2
Market Overview 3
Fund Performance Overview
First Trust Dow Jones Select MicroCap Index(SM) Fund 4
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 6
First Trust IPOX-100 Index Fund 8
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 10
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 12
First Trust Amex(R) Biotechnology Index Fund 14
First Trust Dow Jones Internet Index(SM) Fund 16
First Trust DB Strategic Value Index Fund 18
First Trust Value Line(R) Equity Allocation Index Fund 20
First Trust Value Line(R) Dividend Index Fund 22
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 24
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 26
First Trust S&P REIT Index Fund 28
First Trust ISE Water Index Fund 30
First Trust ISE-Revere Natural Gas Index Fund 32
First Trust ISE Chindia Index Fund 34
First Trust Value Line(R) 100 Exchange-Traded Fund 36
Notes to Fund Performance Overview 38
Understanding Your Fund Expenses 39
Portfolio of Investments
First Trust Dow Jones Select MicroCap Index(SM) Fund 41
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 45
First Trust IPOX-100 Index Fund 47
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 49
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 51
First Trust Amex(R) Biotechnology Index Fund 52
First Trust Dow Jones Internet Index(SM) Fund 53
First Trust DB Strategic Value Index Fund 54
First Trust Value Line(R) Equity Allocation Index Fund 55
First Trust Value Line(R) Dividend Index Fund 58
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 61
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 63
First Trust S&P REIT Index Fund 64
First Trust ISE Water Index Fund 66
First Trust ISE-Revere Natural Gas Index Fund 67
First Trust ISE Chindia Index Fund 68
First Trust Value Line(R) 100 Exchange-Traded Fund 70
Statements of Assets and Liabilities 72
Statements of Operations 76
Statements of Changes in Net Assets 80
Financial Highlights 86
Notes to Financial Statements 96
Report of Independent Registered Public Accounting Firm 106
Additional Information 107
Board of Trustees and Officers 110
Risk Considerations 112
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933. Forward-looking statements include
statements regarding the goals, beliefs, plans or current expectations of First
Trust Advisors L.P. ("First Trust" or the "Advisor") and its respective
representatives, taking into account the information currently available to
them. Forwardlooking statements include all statements that do not relate solely
to current or historical fact. For example, forward-looking statements include
the use of words such as "anticipate," "estimate," "intend," "expect,"
"believe," "plan," "may," "should," "would" or other words that convey
uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
First Trust Exchange-Traded Fund (the "Trust") to be materially different from
any future results, performance or achievements expressed or implied by the
forward-looking statements. When evaluating the information included in this
report, you are cautioned not to place undue reliance on these forward-looking
statements, which reflect the judgment of the Advisor and its 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 any Fund (each, individually a "Fund" and
collectively, the "Funds") of the Trust will achieve its investment objective.
Each Fund of the Trust is subject to market risk, which is the possibility that
the market values of securities owned by the Fund will decline and that the
value of the Fund shares may therefore be less than what you paid for them.
Accordingly, you can lose money investing in a Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns, net asset value and share price will fluctuate and Fund shares 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 portfolios and presents data and analysis that
provide insight into each Fund's performance and investment approach.
By reading the portfolio commentary by Robert F. Carey, Chief Investment Officer
of the Advisor, you may obtain an understanding of how the market environment
affected the performance of each Fund. The statistical information that follows
may help you understand each Fund's performance compared to that of relevant
market benchmarks.
It is important to keep in mind that the opinions expressed by Mr. Carey are
just that: informed opinions. They should not be considered to be promises or
advice. The opinions, like the statistics, cover the period through the date on
the cover of this report. The risks of investing in each Fund are spelled out in
its prospectus.
Page 1
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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2007
Dear Shareholders:
We believe investment opportunities abound, both here and abroad,
affording the potential for exceptional returns for investors. At First
Trust Advisors L.P. ("First Trust"), we realize that we must be mindful
of the complexities of the global economy and at the same time address
the needs of our customers through the types of investments we bring to
market. We are single-minded about providing a range of investment
products, including our family of exchange-traded funds ("ETFs"), to help
First Trust meet the challenge of maximizing our customers' financial
opportunities. Translating investment ideas into products which can
deliver performance over the long term while continuing to support our
current product line remains a focus for First Trust as we head into the
future.
Over the past 12 months, we have added 7 ETFs to our First Trust
Exchange-Traded Fund, one or more of which you may have purchased: First
Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund ("QQXT"), First Trust
NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund ("QCLN"), First
Trust S&P REIT Index Fund ("FRI"), First Trust ISE Chindia Index Fund
("FNI"), First Trust ISE-Revere Natural Gas Index Fund ("FCG"), First
Trust ISE Water Index Fund ("FIW") and First Trust Value Line(R) 100
Exchange-Traded Fund ("FVL"), which converted from a closed-end fund in
June 2007. We are proud to bring these unique investments to our
customers, and are pleased you have chosen one or more of our ETFs for a
portion of your investment portfolio. The report you hold will give you
detailed information about your investment in the First Trust
Exchange-Traded Fund for the 12-month period ended December 31, 2007. I
encourage you to read this report and discuss it with your financial
advisor. First Trust is pleased that our ETFs are a part of your
financial portfolio and we will continue to offer you current information
about your investment, as well as new opportunities to the financial
marketplace, through your financial advisor. We value our relationship
with you and appreciate the opportunity to assist you in achieving your
financial goals.
Sincerely,
/s/ James A. Bowen
James A. Bowen
President of First Trust Exchange-Traded Fund
Page 2
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MARKET OVERVIEW
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FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2007
[PHOTO OMITTED] ROBERT F. CAREY, CFA
SENIOR VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
FIRST TRUST ADVISORS L.P.
Mr. Carey is responsible for the overall management of
research and analysis of the First Trust product line.
Mr. Carey has 21 years of experience as an Equity and
Fixed-Income Analyst and is a recipient of the
Chartered Financial Analyst ("CFA") designation. He is
a graduate of the University of Illinois at
Champaign-Urbana with a B.S. in Physics. He is also a
member of the Investment Analysts Society of Chicago
and the CFA Institute. Mr. Carey has appeared as a
guest on such programs as Bloomberg TV, CNBC, and WBBM
Radio, and has been quoted by several publications,
including The Wall Street Journal, The Wall Street
Reporter, Bloomberg News Service, and Registered Rep.
U.S. STOCKS AND BONDS
U.S. stocks posted positive returns for the 12-month period ended
December 31, 2007 as most major large-cap indices delivered gains in the
5.0% to 11.0% range. Mid-cap stocks outpaced both large- and small-caps,
though large-caps did manage to eclipse small-caps, something they have
generally struggled to do over the past eight years. Companies continued
to deliver better than expected earnings. Sixty-five percent of companies
exceeded their earnings estimates over the three quarters through and
including the third quarter of 2007, according to SeekingAlpha.com. The
percentage of firms topping their estimates since the end of 2001
fluctuated between 59% (third quarter of 2002) and 73% (third quarter of
2006). In addition, with respect to cash holdings, the nonfinancial
companies alone in the S&P 500 Index held $609.7 billion in cash and
equivalents at the end of December 2007, which is in the vicinity of the
all-time high of $640.1 billion, according to Standard & Poor's ("S&P").
This is encouraging news considering that over the past eleven quarters
through the third quarter of 2007, the S&P 500 Index companies combined
spent $1.12 trillion on stock buybacks; $1.24 trillion on capital
expenditures; and $594 billion on stock dividends, according to S&P.
U.S. debt securities, with the exception of municipal bonds, generally
also delivered solid returns in 2007. Most of the major taxable
investment-grade debt groups returned between 5.0% and 9.0%, according to
data from Lehman Brothers. The top-performing group was Treasuries, due
in large part, we believe, to the aggressive rate cuts initiated by the
Federal Reserve in September and October, 2007. It lowered the Federal
funds rate by a combined 75 basis points in these two months. Treasury
Bonds, as well as other highquality debt groups, also potentially
benefited from a "flight to quality" situation beginning in late July in
response to the start of the subprime mortgage meltdown.
FOREIGN STOCKS AND BONDS
The global growth story is not only driving foreign stock and bond
valuations higher but commodities as well. Some emerging markets, such as
India and China, are growing their economies at three to four times the
pace of U.S. growth. Foreign stocks and bonds of developed countries and
emerging market equities outperformed U.S. stock and bond averages for
the 12-month period ended December 2007. U.S. investors who owned foreign
securities over that one-year period saw their total returns enhanced by
the 10% decline in the U.S. dollar against a basket of major currencies
created by the Federal Reserve. The drop in the dollar accelerated in
September-October of 2007 due to the reduction in the Federal funds rate
from 5.25% to 4.50%. The rate cuts were viewed by foreign investors as
potentially inflationary moving forward. In our opinion, the spike in the
price of gold bullion in September-October, a hard asset characterized as
an inflation-hedge, supports that claim.
STATE OF THE ECONOMY
Despite many challenges, the U.S. economy has generally remained
resilient during this 12-month period, in our opinion. The economy has
been bolstered by strength in the following areas: job creation, personal
income levels growing at roughly twice the rate of inflation, high
productivity and a strong manufacturing sector. Some of the areas of the
U.S. economy that have been a drag on growth are as follows: high price
of oil, housing slump, subprime mortgage foreclosures and tighter lending
standards. In an effort to mitigate these concerns, the Federal Reserve
has cut short-term rates to help make capital more readily available.
While lower rates will not necessarily help the majority of homeowners
with adjustable-rate mortgages resetting in 2008, we believe that lower
rates could act as a positive catalyst for the stock market. We believe
this is potentially good for the economy since rising stock prices could
help offset some of the decline in real estate values for homeowners. The
consensus forecast from the Blue Chip Economic Indicators newsletter
released in December 2007 calls for 2.1% real Gross Domestic Product
growth for the U.S. in the year 2008. The current expansion entered its
seventh year in December 2007. The last two expansions lasted 7.7 and 10
years, respectively.
Page 3
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FUND PERFORMANCE OVERVIEW
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FDM - FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
The First Trust Dow Jones Select MicroCap Index(SM) Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Dow Jones Select
MicroCap Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its total assets in common stocks that comprise the Index. The Index measures
the performance of selected U.S. micro-capitalization companies chosen from all
common stocks traded on the New York Stock Exchange ("NYSE(R)"), the American
Stock Exchange, Inc. ("AMEX") and The NASDAQ Stock Market, Inc. ("NASDAQ(R)")
that are comparatively liquid and have strong fundamentals relative to the
micro-capitalization segment as a whole. The Fund's shares are listed for
trading on the AMEX. The first day of secondary market trading in shares of the
Fund was 09/30/05.
PERFORMANCE AS OF DECEMBER 31, 2007
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
12 Months Ended Inception (09/27/05) Inception (09/27/05)
12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV -6.02% 5.47% 12.78%
Market Price -5.97% 5.55% 12.98%
INDEX PERFORMANCE
Dow Jones Select MicroCap Index(SM) -5.29% 6.27% 14.74%
Russell 2000 Index -1.56% 8.23% 19.57%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. The industrials sector was the biggest contributor to portfolio
performance over the period covered by this report, led by Lindsay Corp.
Materials stocks turned in the best performance in the portfolio, adding to
portfolio returns. The consumer discretionary and financials sectors (with a
combined weight of over 30% in the portfolio over the period) hurt performance
as they were the two worst-performing sectors over the period.
The top five performing stocks in the Fund over the twelve months ended December
31, 2007, by percentage gain, were Blue Nile, Inc., Lindsay Corp., Genco
Shipping & Trading Ltd., Geo Group, Inc. and Perini Corp. The worst-performing
stocks, by percentage loss, were Alliance One International, Inc., Skechers USA,
Inc., First Cash Financial Services, Inc., Casual Male Retail Group, Inc. and
Strum Ruger & Co.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Industrials 21.74%
Consumer Discretionary 16.48
Health Care 13.43
Information Technology 12.98
Financials 12.97
Energy 6.57
Materials 6.30
Consumer Staples 4.99
Telecommunication Services 2.68
Utilities 2.13
Net Other Assets and Liabilities (0.27)
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Total 100.00%
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TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Darling International, Inc. 0.95%
ManTech International Corp., Class A 0.89
Chart Industries, Inc. 0.87
DCP Midstream Partners LP 0.79
CIRCOR International, Inc. 0.79
Lindsay Corp. 0.78
NBT Bancorp, Inc. 0.78
PrivateBancorp, Inc. 0.73
Dynamic Materials Corp. 0.71
Raven Industries, Inc. 0.71
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Total 8.00%
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Dow Jones and Dow Jones Select MicroCap Index(SM) are trademarks of Dow
Jones & Company, Inc. and have been licensed for use. The Fund, based on
the Dow Jones Select MicroCap Index(SM), is not sponsored, endorsed, sold
or promoted by Dow Jones, and Dow Jones makes no representation regarding
the advisability of trading in the Fund.
Page 4
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FDM - FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND (CONTINUED)
Growth of a $10,000 Initial Investment
September 27, 2005 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust The Dow Jones
Dow Jones Select Select MicroCap
MicroCap Index(SM) Fund Index(SM) Russell 2000 Index
----------------------- --------------- ------------------
9/27/2005 $10,000 $10,000 $10,000
12/31/2005 10,374 10,397 10,254
12/31/2006 12,002 12,115 12,146
12/31/2007 11,279 11,474 11,956
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 28 3 4 0
9/30/2007 25 7 1 0
6/30/2007 32 1 0 0
3/31/2007 40 1 0 0
12/31/2006 45 0 0 0
9/30/2006 38 6 2 0
6/30/2006 17 1 0 0
3/31/2006 25 1 0 0
12/31/2005* 31 1 3 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 22 2 5 0
9/30/2007 29 1 0 0
6/30/2007 30 0 0 0
3/31/2007 19 1 0 0
12/31/2006 18 0 0 0
9/30/2006 17 0 0 0
6/30/2006 45 0 0 0
3/31/2006 36 0 0 0
12/31/2005* 29 0 0 0
* Trading commenced on September 30, 2005.
Page 5
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FDL - FIRST TRUST MORNINGSTAR(R) DIVIDEND LEADERS(SM) INDEX FUND
The First Trust Morningstar(R) Dividend Leaders(SM) Index Fund (the "Fund")
seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the
Morningstar(R) Dividend Leaders(SM) Index (the "Index"). The Fund will normally
invest at least 90% of its total assets in common stocks that comprise the
Index. The objective of the Index is to offer investors a benchmark for dividend
portfolios as well as a means to invest in a portfolio of stocks that have a
consistent record of growing dividends as well as the ability to sustain them.
The Index consists of the top 100 stocks, based on dividend yield, of the
securities listed on one of the three major exchanges (the New York Stock
Exchange ("NYSE(R)"), the American Stock Exchange, Inc. ("AMEX") or The NASDAQ
Stock Market, Inc. ("NASDAQ(R)")) that have been selected through the
application of Morningstar, Inc.'s proprietary multi-step screening process. The
Index is rebalanced four times annually in March, June, September and December.
The Fund's shares are listed for trading on the AMEX. The first day of secondary
market trading in shares of the Fund was 03/15/06.
PERFORMANCE AS OF DECEMBER 31, 2007
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
12 Months Ended Inception (03/09/06) Inception (03/09/06)
12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV -10.64% 4.30% 7.93%
Market Price -10.03% 4.66% 8.61%
INDEX PERFORMANCE
Morningstar(R) Dividend Leaders(SM) Index -10.24% 4.71% 8.70%
S&P 500 Index 5.49% 10.26% 19.39%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. Telecommunication services and utilities were the biggest
contributors to performance on an absolute basis. AT&T and Verizon
Communications produced solid returns in the telecommunications sector, while
Dominion Resources was the biggest contributor to portfolio returns in the
utilities sector. Financials, the largest sector weighting at a 44.8% average
weight over the period, was the worst-performing sector as deteriorating credit
market conditions dragged down shares.
The top five performing stocks in the Fund over the twelve months ended December
31, 2007, by percentage gain, were AT&T Inc., Altria Group, Inc., Verizon
Communications, Inc., Merck & Co., Inc. and Dominion Resources, Inc. The
worst-performing stocks, by percentage loss, were Citigroup, Inc., Washington
Mutual, Inc., Bank of America Inc., Wachovia Corp. and National City Corp.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Financials 53.31%
Telecommunication Services 13.21
Utilities 12.54
Health Care 10.11
Consumer Staples 6.78
Materials 2.91
Industrials 0.80
Consumer Discretionary 0.12
Net Other Assets and Liabilities 0.22
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Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Bank of America Corp. 9.98%
Citigroup, Inc. 9.22
AT&T, Inc. 8.18
Pfizer, Inc. 7.20
Altria Group, Inc. 5.95
Verizon Communications, Inc. 5.03
Wachovia Corp. 4.84
Wells Fargo & Co. 4.17
U.S. Bancorp 3.33
Bristol-Myers Squibb Co. 2.91
---------
Total 60.81%
=========
_________________________
Morningstar is a service mark of Morningstar, Inc. and has been licensed for
use. The First Trust Morningstar(R) Dividend Leaders(SM) Index Fund is not
sponsored, endorsed, issued, sold or promoted by Morningstar, Inc., nor does
this company make any representation regarding the advisability of investing in
the Fund.
Page 6
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FDL - FIRST TRUST MORNINGSTAR(R) DIVIDEND LEADERS(SM) INDEX FUND (CONTINUED)
Growth of a $10,000 Initial Investment
March 9, 2006 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust Morningstar(R) Morningstar(R)
Dividend Leaders(SM) Dividend Leaders
Index Fund Index(SM) S&P 500 Index
-------------------------- ---------------- -------------
3/9/2006 $10,000 $10,000 $10,000
12/31/2006 12,080 12,110 11,317
12/31/2007 10,795 10,870 11,938
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 24 4 5 0
9/30/2007 32 1 0 0
6/30/2007 35 1 0 0
3/31/2007 31 0 0 0
12/31/2006 47 0 0 0
9/30/2006 34 0 0 0
6/30/2006 24 8 3 0
3/31/2006* 11 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 21 9 1 0
9/30/2007 29 1 0 0
6/30/2007 27 0 0 0
3/31/2007 30 0 0 0
12/31/2006 16 0 0 0
9/30/2006 29 0 0 0
6/30/2006 28 0 0 0
3/31/2006* 2 0 0 0
* Trading commenced on March 15, 2006.
Page 7
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FUND PERFORMANCE OVERVIEW (CONTINUED)
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FPX - FIRST TRUST IPOX-100 INDEX FUND
The First Trust IPOX-100 Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the IPOX-100 U.S. Index (the "Index"). The
Fund will normally invest at least 90% of its total assets in common stocks that
comprise the Index. The Index is a modified value-weighted price index measuring
the performance of the top 100 U.S. companies ranked quarterly by market
capitalization in the IPOX Global Composite Index. The Index utilizes a 10%
capping on all constituents and includes the 100 largest, typically best
performing and most liquid initial public offerings ("IPOs") of the U.S.
companies in the IPOX Global Composite Index. The IPOX Global Composite Index is
reconstituted regularly with IPOs being added to the IPOX Global Composite Index
at their seventh trading day upon "going public" and automatically exiting after
1,000 trading days or approximately four years thereafter. The Index is
reconstituted quarterly to reflect changes in the stock market values of the
IPOX Global Composite Index constituents and IPO activity during the past
quarter with potential new companies entering the Index while other companies
reach 1,000 days in the Index and automatically drop out. The Fund's shares are
listed for trading on the AMEX. The first day of secondary market trading on
shares of the Fund was 04/13/06.
PERFORMANCE AS OF DECEMBER 31, 2007
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
12 Months Ended Inception (04/12/06) Inception (04/12/06)
12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV 14.53% 14.97% 27.12%
Market Price 15.08% 15.23% 27.62%
INDEX PERFORMANCE
IPOX-100 U.S. Index 15.15% 15.66% 28.44%
Russell 3000 Index 5.24% 9.28% 16.49%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. Information technology, led by Google, was the biggest contributor
to portfolio returns over the period. Industrials, led by solar industry
companies First Solar and SunPower, posted the highest sector return and
contributed positively to portfolio performance. The financials, consumer
staples, consumer discretionary and telecommunication services sectors all
posted negative returns in the portfolio over the period, thus hurting portfolio
results.
The top five performing stocks in the Fund over the twelve months ended December
31, 2007, by percentage gain, were Google, Inc., First Solar, Inc., MasterCard,
Inc., SunPower, Inc. and CF Industries Holdings, Inc. The worst-performing
stocks, by percentage loss, were Time Warner Cable, Inc., MetroPCS
Communications, Inc., NYSE Euronext, Genworth Financial, Inc. and Discover
Financial Services.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Information Technology 28.48%
Consumer Discretionary 16.50
Financials 15.88
Industrials 13.33
Energy 9.77
Health Care 6.89
Materials 4.47
Telecommunication Services 3.07
Consumer Staples 0.92
Utilities 0.87
Net Other Assets and Liabilities (0.18)
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Google, Inc., Class A 9.98%
Viacom, Inc., Class B 5.34
MasterCard, Inc., Class A 5.25
Time Warner Cable, Inc., Class A 4.99
NYSE Euronext 4.31
Covidien Ltd. 4.08
First Solar, Inc. 3.86
Tyco Electronics Ltd. 3.42
Western Union Co. 3.38
Spectra Energy Corp. 3.02
---------
Total 47.63%
=========
_________________________
IPOX is a trademark of IPOX Schuster LLC, IPOX IPO Indexes and Derivatives
(patent pending).
Page 8
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FPX - FIRST TRUST IPOX-100 INDEX FUND (CONTINUED)
Growth of a $10,000 Initial Investment
April 12, 2006 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust
IPOX-100 Index Fund IPOX-100 U.S. Index Russell 3000 Index
------------------- ------------------- ------------------
4/12/2006 $10,000 $10,000 $10,000
12/31/2006 11,100 11,154 11,069
12/31/2007 12,713 12,844 11,649
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 19 3 4 0
9/30/2007 30 5 0 1
6/30/2007 19 1 0 0
3/31/2007 28 0 0 0
12/31/2006 25 0 0 0
9/30/2006 2 0 0 0
6/30/2006* 10 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 33 4 1 0
9/30/2007 26 1 0 0
6/30/2007 43 0 0 0
3/31/2007 33 0 0 0
12/31/2006 38 0 0 0
9/30/2006 61 0 0 0
6/30/2006* 45 0 0 0
* Trading commenced on April 13, 2006.
Page 9
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
QQEW - FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
The First Trust NASDAQ-100 Equal Weighted Index(SM) Fund (the "Fund") seeks
investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the
NASDAQ-100 Equal Weighted Index(SM) (the "Index"). The Fund will normally
invest at least 90% of its total assets in common stocks that comprise
the Index. The Index is the equal-weighted version of the NASDAQ-100
Index(R) which includes 100 of the largest non-financial securities
listed on The NASDAQ Stock Market, Inc. ("NASDAQ(R)") based on market
capitalization. The Index contains the same securities as the NASDAQ-100
Index(R) but each of the securities is initially set at a weight of 1.00%
of the Index and is rebalanced quarterly. The Fund's shares are listed
for trading on the NASDAQ(R). The first day of secondary market trading
in shares of the Fund was 04/25/06.
PERFORMANCE AS OF DECEMBER 31, 2007
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
12 Months Ended Inception (04/19/06) Inception (04/19/06)
12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV 9.74% 5.99% 10.40%
Market Price 10.80% 6.52% 11.35%
INDEX PERFORMANCE
NASDAQ-100 Equal Weighted Index(SM) 10.35% 6.56% 11.42%
NASDAQ-100 Index(R) 19.24% 11.99% 21.24%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. Health care stocks posted strong returns in the portfolio over the
period, gaining more than the health care sector in the broader market. The
telecommunication services and energy sectors both posted negative returns for
the period, although minimal weightings in both sectors (3.2% and 0.9% average
weights, respectively), limited their impact on overall portfolio performance.
The top five performing stocks in the Fund over the twelve months ended December
31, 2007, by percentage gain, were Intuitive Surgical, Inc., Research In Motion
Ltd., Amazon.com, Inc., Apple Computer, Inc. and Millicom International Cellular
S.A. The worstperforming stocks, by percentage loss, were Sepracor, Inc.,
Starbucks Corp., Virgin Media, Inc., Network Appliance, Inc. and Level 3
Communications, Inc.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Information Technology 45.67%
Consumer Discretionary 19.36
Health Care 14.91
Industrials 11.15
Telecommunication Services 4.10
Consumer Staples 2.94
Materials 2.17
Net Other Assets and Liabilities (0.30)
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Leap Wireless International, Inc. 1.23%
Research In Motion Ltd. 1.18
Activision, Inc. 1.15
Joy Global, Inc. 1.15
Steel Dynamics, Inc. 1.13
Hologic, Inc. 1.10
Oracle Corp. 1.09
Intuit, Inc. 1.08
Logitech International S.A. 1.07
Apple Computer, Inc. 1.07
---------
Total 11.25%
=========
_________________________
NASDAQ(R), NASDAQ-100, NASDAQ-100 Index(R), and NASDAQ-100 Equal Weighted
Index(SM) are trademarks of The NASDAQ Stock Market, Inc. (which with its
affiliates is referred to as the Corporations) and are licensed for use
by First Trust Advisors L.P. The Fund has not been passed on by the
Corporations as to its legality or suitability. The Fund is not issued,
endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO
WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.
Page 10
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
QQEW - FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND (CONTINUED)
Growth of a $10,000 Initial Investment
April 19, 2006 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust NASDAQ-100
Equal Weighted NASDAQ-100 Equal
Index(SM) Fund Weighted Index(SM) NASDAQ-100 Index(R)
---------------------- -------------------- -------------------
4/19/2006 $10,000 $10,000 $10,000
12/31/2006 10,060 10,097 10,168
12/31/2007 11,040 11,142 12,124
Performance figures assume reinvestment of all dividend distributions and
do not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption or sale of Fund shares. An index is
a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by the Fund.
These expenses negatively impact the performance of the Fund.
The Fund's past performance is no guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 39 0 3 0
9/30/2007 32 0 0 0
6/30/2007 50 0 0 0
3/31/2007 30 0 0 0
12/31/2006 40 0 1 0
9/30/2006 43 0 0 0
6/30/2006* 22 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 22 0 0 0
9/30/2007 31 0 0 0
6/30/2007 13 0 0 0
3/31/2007 31 0 0 0
12/31/2006 22 0 0 0
9/30/2006 20 0 0 0
6/30/2006* 26 0 0 0
* Trading commenced on April 25, 2006.
Page 11
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
QTEC - FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND
The First Trust NASDAQ-100-Technology Sector Index(SM) Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the NASDAQ-100 Technology
Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of
its total assets in common stocks that comprise the Index. The Index is an
equal-weighted index based on the securities of the NASDAQ-100 Index(R) that are
classified as "technology" according to the Industry Classification Benchmark
classification system. The NASDAQ-100 Index(R) includes 100 of the largest
domestic and international nonfinancial companies listed on The NASDAQ Stock
Market, Inc. ("NASDAQ(R)") based on market capitalization. The Fund's shares are
listed for trading on the NASDAQ(R). The first day of secondary market trading
in shares of the Fund was 04/25/06.
PERFORMANCE AS OF DECEMBER 31, 2007
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
12 Months Ended Inception (04/19/06) Inception (04/19/06)
12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV 7.66% 4.34% 7.50%
Market Price 7.82% 4.37% 7.55%
INDEX PERFORMANCE
NASDAQ-100 Technology Sector Index(SM) 8.25% 4.90% 8.47%
S&P 500 Information Technology Index 16.30% 11.17% 19.74%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. Research in Motion was the biggest contributor to portfolio
performance over the period as sales of the firm's Blackberry devices surpassed
expectations. Apple also posted strong performance due to strong Mac sales and
the launch of the much anticipated iPhone. Network Appliance was the biggest
drag on portfolio performance as sales and profits from the company's data
storage devices trailed estimates.
The top five performing stocks in the Fund over the twelve months ended December
31, 2007, by percentage gain, were Research In Motion Ltd., Apple Computer,
Inc., Juniper Networks, Inc., VeriSign, Inc. and Google, Inc. The
worst-performing stocks, by percentage loss, were Network Appliance, Inc., L.M.
Ericsson Telephone Co., Tellabs, Inc., Akamai Technologies, Inc. and Marvell
Technology, Inc.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Information Technology 100.35%
Net Other Assets and Liabilities (0.35)
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Research In Motion Ltd. 3.00%
Oracle Corp. 2.77
Intuit, Inc. 2.76
Logitech International S.A. 2.73
Apple Computer, Inc. 2.72
Microsoft Corp. 2.70
Microchip Technology, Inc. 2.69
Infosys Technologies Ltd. ADR 2.68
Baidu.com ADR 2.67
Linear Technology Corp. 2.65
---------
Total 27.37%
=========
_________________________
NASDAQ(R), NASDAQ-100, NASDAQ-100 Index(R), and NASDAQ-100 Technology Sector
Index(SM) are trademarks of The NASDAQ Stock Market, Inc. (which with its
affiliates is referred to as the Corporations) and are licensed for use by First
Trust Advisors L.P. The Fund has not been passed on by the Corporations as to
its legality or suitability. The Fund is not issued, endorsed, sold, or promoted
by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY
WITH RESPECT TO THE FUND.
Page 12
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
QTEC - FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND (CONTINUED)
Growth of a $10,000 Initial Investment
April 19, 2006 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust NASDAQ-100 S&P 500
NASDAQ-100-Technology Technology Information
Sector Index(SM) Fund Sector Index(SM) Technology Index
--------------------- ---------------- -----------------
4/19/2006 $10,000 $10,000 $10,000
12/31/2006 9,985 10,020 10,296
12/31/2007 10,750 10,847 11,974
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 38 0 0 0
9/30/2007 39 0 0 0
6/30/2007 47 0 0 0
3/31/2007 29 0 0 0
12/31/2006 38 1 0 0
9/30/2006 33 0 1 1
6/30/2006* 32 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 26 0 0 0
9/30/2007 24 0 0 0
6/30/2007 16 0 0 0
3/31/2007 32 0 0 0
12/31/2006 24 0 0 0
9/30/2006 28 0 0 0
6/30/2006* 16 0 0 0
* Trading commenced on April 25, 2006.
Page 13
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FBT - FIRST TRUST AMEX(R) BIOTECHNOLOGY INDEX FUND
The First Trust Amex(R) Biotechnology Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Amex(R) Biotechnology Index(SM) (the
"Index"). The Fund will normally invest at least 90% of its total assets in
common stocks that comprise the Index. The Index is an equal dollar-weighted
index designed to measure the performance of a cross section of companies in the
biotechnology industry that are primarily involved in the use of biological
processes to develop products or provide services. Such processes include, but
are not limited to, recombinant DNA technology, molecular biology, genetic
engineering, monoclonal antibody-based technology, lipid/liposome technology,
and genomics. This Index is rebalanced quarterly based on closing prices on the
third Friday in January, April, July and October to ensure that each component
stock continues to represent approximately equal weight in the Index. The Fund's
shares are listed for trading on the AMEX. The first day of secondary market
trading in shares of the Fund was 06/23/06.
PERFORMANCE AS OF DECEMBER 31, 2007
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
12 Months Ended Inception (06/19/06) Inception (06/19/06)
12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV 3.65% 13.87% 22.05%
Market Price 3.99% 14.20% 22.60%
INDEX PERFORMANCE
Amex(R) Biotechnology Index(SM) 4.28% 14.57% 23.20%
NASDAQ(R) Biotechnology Index 4.64% 10.34% 16.30%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. Medimmune was the biggest contributor to the portfolio return over
the twelve months ended December 31, 2007, as it was acquired by AstraZeneca at
a 47% announced premium. ImClone also posted strong returns aided by positive
data on Erbitux, its biggest drug. InterMune had the most negative impact on
returns after the company announced it would stop advanced clinical trials for
its pulmonary fibrosis drug.
The top three performing stocks in the Fund over the period covered by this
report, by percentage gain, were Medimmune, ImClone Systems, Inc. and Invitrogen
Corp. The worst-performing stocks, by percentage loss, were InterMune, Inc.,
Nektar Therapeutics and Amgen, Inc.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Health Care 99.43%
Net Other Assets and Liabilities 0.57
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Millennium Pharmaceuticals, Inc. 6.94%
OSI Pharmaceuticals, Inc. 6.94
Invitrogen Corp. 5.92
Human Genome Sciences, Inc. 5.92
Gilead Sciences, Inc. 5.74
Genzyme Corp. 5.45
Applera Corp. - Celera Group 5.44
Nektar Therapeutics 5.38
Millipore Corp. 4.92
Cephalon, Inc. 4.90
---------
Total 57.55%
=========
_________________________
The Amex(R) Biotechnology Index(SM) is a trademark of the American Stock
Exchange LLC and is licensed for use by First Trust Advisors L.P. The Fund is
not sponsored or endorsed by the American Stock Exchange LLC. American Stock
Exchange LLC makes no representation or warranty, express or implied, to the
owners of the Fund or any member of the public regarding the advisability of
investing in the Fund or the ability of the Fund to track the performance of the
various sectors represented in the stock market. American Stock Exchange LLC has
no obligation to take the needs of the owners of the Fund into consideration in
determining, composing or calculating the Index. American Stock Exchange LLC is
not responsible for and has not participated in any determination or calculation
made with respect to issuance or redemption of the Fund.
Page 14
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FBT - FIRST TRUST AMEX(R) BIOTECHNOLOGY INDEX FUND (CONTINUED)
Growth of a $10,000 Initial Investment
June 19, 2006 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust Amex(R) Amex(R)
Biotechnology Biotechnology NASDAQ(R)
Index Fund Index(SM) Biotechnology Index
------------------- ------------- --------------------
6/19/2006 $10,000 $10,000 $10,000
12/31/2006 11,775 11,815 11,114
12/31/2007 12,205 12,321 11,630
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 34 5 1 0
9/30/2007 47 1 0 0
6/30/2007 44 1 0 0
3/31/2007 37 1 0 0
12/31/2006 38 0 0 0
9/30/2006 20 0 0 0
6/30/2006* 6 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 21 2 1 0
9/30/2007 15 0 0 0
6/30/2007 18 0 0 0
3/31/2007 22 1 0 0
12/31/2006 25 0 0 0
9/30/2006 43 0 0 0
6/30/2006* 0 0 0 0
* Trading commenced on June 23, 2006.
Page 15
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FDN - FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND
The First Trust Dow Jones Internet Index(SM) Fund (the "Fund") seeks
investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the Dow
Jones Internet Composite Index(SM) (the "Index"). The Fund will normally
invest at least 90% of its total assets in common stocks that comprise
the Index. The Index represents companies that generate the majority of
their revenues via the Internet. The Index was designed and is maintained
according to a set of rules that were devised with the goal of providing
clear and accurate views of the growing Internet market segment. The
Index aims to consistently represent 80% of the float-adjusted Internet
equity universe. The Index contains two sub-indexes, the Dow Jones
Internet Commerce Index and the Dow Jones Internet Services Index. For
its stock to be eligible for the "universe," a company must generate at
least 50% of annual sales/revenues from the Internet, and be currently
included in the Dow Jones U.S. Index. The Fund's shares are listed for
trading on the AMEX. The first day of secondary market trading on shares
of the Fund was 06/23/06.
PERFORMANCE AS OF DECEMBER 31, 2007
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
12 Months Ended Inception (06/19/06) Inception (06/19/06)
12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV 11.17% 15.93% 25.45%
Market Price 11.55% 16.26% 26.00%
INDEX PERFORMANCE
Dow Jones Internet Composite Index(SM) 11.81% 16.57% 26.52%
S&P 500 Index 5.49% 13.77% 21.89%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. Amazon.com was the biggest contributor to the portfolio return over
the period as the firm benefited from strong gains in sales and profits. Google
was the second largest contributor to returns as consistent growth and continued
product expansion were the key factors in the company's positive performance.
E*TRADE Financial was the biggest drag on portfolio performance as a
deteriorating mortgage portfolio and tough credit market conditions weighed on
its shares.
The top three performing stocks in the Fund over the twelve months ended
December 31, 2007, by percentage gain, were Amazon.com, Inc., Google, Inc. and
VeriSign, Inc. The worst-performing stocks, by percentage loss, were E*TRADE
Financial Corp., Akamai Technologies, Inc. and IAC/InterActiveCorp.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Information Technology 67.96%
Consumer Discretionary 18.92
Financials 5.67
Industrials 3.31
Health Care 3.12
Money Market Funds 0.30
Net Other Assets and Liabilities 0.72
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Amazon.com, Inc. 10.35%
eBay, Inc. 10.07
Google, Inc., Class A 9.96
Yahoo!, Inc. 9.80
VeriSign, Inc. 7.40
BEA Systems, Inc. 4.92
Akamai Technologies, Inc. 4.86
IAC/InterActiveCorp. 4.73
TD Ameritrade Holding Corp. 4.32
Priceline.com,Inc. 3.51
---------
Total 69.92%
=========
_________________________
Dow Jones and Dow Jones Internet Composite Index(SM) are trademarks of Dow Jones
& Company, Inc. and have been licensed for use. The Fund, based on the Dow Jones
Internet Composite Index(SM), is not sponsored, endorsed, sold or promoted by
Dow Jones, and Dow Jones makes no representation regarding the advisability of
trading in the Fund.
Page 16
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FDN - FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND (CONTINUED)
Growth of a $10,000 Initial Investment
June 19, 2006 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust
Dow Jones Internet Dow Jones Internet
Index(SM) Fund Composite Index(SM) S&P 500 Index
------------------ ------------------- -------------
6/19/2006 $10,000 $10,000 $10,000
12/31/2006 11,285 11,316 11,554
12/31/2007 12,546 12,652 12,188
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 20 4 3 0
9/30/2007 39 1 0 0
6/30/2007 32 1 0 0
3/31/2007 39 1 3 0
12/31/2006 33 0 0 0
9/30/2006 33 0 0 0
6/30/2006* 5 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 30 5 2 0
9/30/2007 23 0 0 0
6/30/2007 30 0 0 0
3/31/2007 18 0 0 0
12/31/2006 30 0 0 0
9/30/2006 30 0 0 0
6/30/2006* 1 0 0 0
* Trading commenced on June 23, 2006.
Page 17
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FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FDV - FIRST TRUST DB STRATEGIC VALUE INDEX FUND
The First Trust DB Strategic Value Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Deutsche Bank CROCI(R) US+ Index(TM)
(the "Index"). The objective of the Index is to identify companies that may be
undervalued based upon their "economic" price/earnings ratios. The Index is an
equal dollar-weighted index which is intended to reflect the total return
performance of 40 stocks with the lowest CROCI(R) Economic Price Earnings Ratios
determined by taking the 251 stocks with the highest market capitalization in
the S&P 500(R) Index and then excluding any stocks issued by financial
companies. The Fund will normally invest at least 90% of its total assets in
common stocks that comprise the Index. The Fund's shares are listed for trading
on the AMEX. The first day of secondary market trading in shares of the Fund was
07/11/06.
PERFORMANCE AS OF DECEMBER 31, 2007
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
12 Months Ended Inception (07/06/06) Inception (07/06/06)
12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV 10.26% 14.37% 22.10%
Market Price 10.61% 14.71% 22.66%
INDEX PERFORMANCE
Deutsche Bank CROCI(R) US+ Index(TM) 10.85% 14.76% 22.73%
S&P 500 Value Index 2.03% 10.02% 15.27%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. The energy sector was the biggest contributor to portfolio return of
the Fund over the period covered by this report. The sector posted strong
returns as sustained global economic activity led to rising crude oil prices
throughout the year. Industrials also posted strong returns over the period.
Consumer discretionary stocks were the biggest drag on portfolio performance as
concerns about the strength of consumer spending weighed on shares in the sector
over the second half of the year. Telecommunication services was the only other
sector to post a negative return for the period.
The top five performing stocks in the Fund over the twelve months ended December
31, 2007, by percentage gain, were Apache Corp., Occidental Petroleum Corp.,
Biogen Idec, Inc., EOG Resources, Inc. and Hess Corp. The worst-performing
stocks, by percentage loss, were Amgen, Inc., Home Depot, Inc., Sprint Nextel,
Inc., Harley-Davidson, Inc. and Lowe's Cos.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Consumer Discretionary 24.58%
Energy 24.24
Health Care 19.41
Industrials 12.20
Information Technology 10.04
Materials 4.90
Consumer Staples 2.50
Telecommunication Services 2.14
Net Other Assets and Liabilities (0.01)
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Apache Corp. 2.77%
Anadarko Petroleum Corp. 2.76
Occidental Petroleum Corp. 2.74
ConocoPhillips 2.73
Noble Corp. 2.70
Marathon Oil Corp. 2.68
Texas Instruments, Inc. 2.67
Exxon Mobil Corp. 2.64
Chevron Corp. 2.63
CBS Corp., Class B 2.59
---------
Total 26.91%
=========
_________________________
"Deutsche Bank" and "Deutsche Bank CROCI(R) US+ Index(TM)" are service marks of
Deutsche Bank AG ("Deutsche Bank"). Deutsche Bank has no relationship to First
Trust or the Fund, other than the licensing of the Index and its service marks
for use in connection with the Fund.
Page 18
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FDV - FIRST TRUST DB STRATEGIC VALUE INDEX FUND (CONTINUED)
Growth of a $10,000 Initial Investment
July 6, 2006 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust The Deutsche
DB Strategic Bank CROCI(R)
Value Index Fund US+ Index(TM) S&P 500 Value Index
---------------- ------------- -------------------
7/6/2006 $10,000 $10,000 $10,000
12/31/2006 11,074 11,072 11,298
12/31/2007 12,210 12,273 11,527
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 23 5 3 0
9/30/2007 32 2 1 0
6/30/2007 36 4 0 0
3/31/2007 30 4 0 0
12/31/2006 30 1 0 0
9/30/2006* 33 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 30 3 0 0
9/30/2007 28 0 0 0
6/30/2007 20 2 0 1
3/31/2007 22 3 2 0
12/31/2006 32 0 0 0
9/30/2006* 25 0 0 0
* Trading commenced on July 11, 2006.
Page 19
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FVI - FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
The First Trust Value Line(R) Equity Allocation Index Fund (the "Fund") seeks
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Value Line(R) Equity
Allocation Index (the "Index"). The Fund will normally invest at least 90% of
its total assets in common stocks that comprise the Index. The Index is designed
to objectively identify and select those stocks from the 1,700-stock Value
Line(R) universe across market capitalizations and investment styles for growth
and value that appear to have the greatest potential for capital appreciation.
The Index is rebalanced on a semi-annual basis on the fourth business day of the
week containing the third Friday of February and August. The Fund's shares are
listed for trading on the AMEX. The first day of secondary market trading in
shares of the Fund was 12/07/06.
PERFORMANCE AS OF DECEMBER 31, 2007
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
12 Months Ended Inception (12/05/06) Inception (12/05/06)
12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV 4.65% 3.26% 3.50%
Market Price 4.85% 3.59% 3.85%
INDEX PERFORMANCE
Value Line(R) Equity Allocation Index 5.07% 3.71% 3.98%
Russell 3000 Index 5.24% 4.96% 5.33%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. Energy and materials were the best performing sectors and biggest
contributors to portfolio performance. Both sectors benefited from sustained
global economic growth over the period, which generally pushed up commodity
prices worldwide. The financials sector was the worst performing sector in the
portfolio as the fallout from deteriorating credit markets weighed on shares of
companies in this sector. Consumer discretionary stocks also held back
performance as concerns about slowing consumer spending hurt stock performance
especially in the second half of the year.
The top five performing stocks in the Fund over the twelve months ended December
31, 2007, by percentage gain, were Research In Motion Ltd., ALCAN, Inc., Nokia
Corp., Diamond Offshore Drilling, Inc. and Southern Copper Corp. The
worst-performing stocks, by percentage loss, were Moody's Corp., Ambac Financial
Group, Inc., Bear Stearns Cos., XL Capital Ltd. and Qwest Communications
International, Inc.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Industrials 19.54%
Energy 18.91
Financials 12.65
Consumer Discretionary 12.35
Information Technology 10.63
Utilities 8.79
Materials 7.53
Consumer Staples 4.43
Health Care 3.42
Telecommunication Services 2.13
Net Other Assets and Liabilities (0.38)
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Research In Motion Ltd. 1.90%
Diamond Offshore Drilling, Inc. 1.70
Transocean, Inc. 1.54
Berkshire Hathaway, Inc., Class B 1.50
CNH Global NV 1.50
Nokia Oyj ADR 1.48
Imperial Oil Ltd. 1.47
Apollo Group, Inc., Class A 1.41
British American Tobacco PLC ADR 1.39
Marathon Oil Corp. 1.38
---------
Total 15.27%
=========
_________________________
"Value Line(R)" and "Value Line(R) Equity Allocation Index" are trademarks of
Value Line(R), Inc. and have been licensed for use for certain purposes by First
Trust on behalf of the Fund. The Fund, based on the Value Line(R) Equity
Allocation Index, is not sponsored, endorsed, sold, or promoted by Value
Line(R), Inc., and Value Line(R) makes no representation regarding the
advisability of investing in the Fund.
Page 20
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FVI - FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND (CONTINUED)
Growth of a $10,000 Initial Investment
December 5, 2006 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust
Value Line(R) Equity Value Line(R)
Allocation Equity
Index Fund Allocation Index Russell 3000 Index
-------------------- ---------------- ------------------
12/5/2006 $10,000 $10,000 $10,000
12/31/2006 9,890 9,897 10,008
12/31/2007 10,350 10,399 10,532
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 21 4 2 0
9/30/2007 19 0 0 0
6/30/2007 20 1 0 0
3/31/2007 20 1 0 0
12/31/2006* 7 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 32 4 1 0
9/30/2007 44 0 0 0
6/30/2007 42 0 0 0
3/31/2007 39 1 0 0
12/31/2006* 9 0 0 0
* Trading commenced on December 7, 2006.
Page 21
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FVD - FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
The First Trust Value Line(R) Dividend Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Value Line(R) Dividend Index (the
"Index"). The Fund will normally invest at least 90% of its total assets in
common stocks that comprise the Index. The Index is designed to objectively
identify and select those stocks from the universe of stocks of which Value
Line, Inc.(R) gives a Safety(TM) Ranking of #1 or #2 in the Value Line(R)
Safety(TM) Ranking System and have the potential to pay above-average dividend
and capital appreciation. The Index is rebalanced on a monthly basis. The Fund's
shares are listed for trading on the AMEX.
PERFORMANCE AS OF DECEMBER 31, 2007
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
12 Months Ended Inception (08/19/03) Inception (08/19/03)
12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV -3.42% 10.70% 55.85%
Market Price -3.05% 10.78% 56.35%
INDEX PERFORMANCE
Value Line(R) Dividend Index -2.68% N.A. N.A.
S&P 500 Index 5.49% 11.14% 58.66%
On December 15, 2006, the Fund acquired the assets and adopted the
financial and performance history of First Trust Value Line(R) Dividend
Fund (the "Predecessor FVD Fund," a closed-end fund), which had an
inception date of August 19, 2003. The inception date total returns at
NAV include the sales load of $0.675 per share on the initial offering.
The investment goals, strategies and policies of the Fund are
substantially similar to those of the Predecessor FVD Fund. The
inception date of the Index was July 3, 2006. Returns for the Index are
only disclosed for those periods in which the Index was in existence for
the entire period. The cumulative total returns for the period from the
reorganization date (12/15/06) through (12/31/07) were -3.67% and -2.88%
at NAV and market price, respectively. That compares to an Index return
of -2.89% for that same period.
Prior to December 15, 2006, the price used to calculate market return
was the AMEX closing market price of the Predecessor FVD Fund. NAV and
market returns assume that all dividend distributions have been
reinvested in the Fund at NAV and Market Price, respectively. Prior to
December 15, 2006, NAV and market returns assumed that all dividend
distributions were reinvested at prices obtained by the Dividend
Reinvestment Plan of the Predecessor FVD Fund.
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. The utilities and consumer staples sectors were the biggest
contributors to portfolio performance over the period on an absolute basis. The
energy sector also performed well; however, a small share weight (3.4% average
weight over the period) limited their impact on portfolio performance. The
financials sector was the biggest drag on the performance as deteriorating
credit market conditions weighed on shares of companies in this sector. The
sector had the largest weight in the portfolio (33.1% average weight over the
period) and also turned in the worst performance. Consumer discretionary stocks
also turned in performance that was behind the overall market generally.
The top five performing stocks in the Fund over the twelve months ended December
31, 2007, by percentage gain, were PPL Corp., Constellation Energy Group, Inc.,
Unilever PLC, Mercantile Bankshares Corporation and ConocoPhillips. The
worst-performing stocks, by percentage loss, were McClatchy Co., National City
Corp., First Horizon National Corp., Freddie Mac and Zions Bancorp.
_________________________
"Value Line(R)" and "Value Line(R) Dividend Index" are trademarks of Value
Line(R), Inc. and have been licensed for use for certain purposes by First Trust
on behalf of the Fund. The Fund, based on the Value Line(R) Dividend Index, is
not sponsored, endorsed, sold, or promoted by Value Line(R), Inc., and Value
Line(R) makes no representation regarding the advisability of investing in the
Fund.
Page 22
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FVD - FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (CONTINUED)
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Financials 33.20%
Utilities 22.07
Consumer Staples 12.10
Industrials 8.86
Consumer Discretionary 7.73
Health Care 4.93
Materials 3.88
Energy 3.39
Telecommunication Services 2.23
Information Technology 1.63
Net Other Assets and Liabilities (0.02)
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Bemis Co., Inc. 0.58%
Freddie Mac 0.58
Portland General Electric Co. 0.58
Teleflex, Inc. 0.58
AGL Resources, Inc. 0.57
Avery Dennison Corp. 0.57
Enbridge, Inc. 0.57
Health Care Property Investors, Inc. 0.57
Total SA ADR 0.57
TransCanada Corp. 0.57
---------
Total 5.74%
=========
Growth of a $10,000 Initial Investment
August 19, 2003 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust Value Line(R)
Dividend Index Fund S&P 500 Index
------------------------- -------------
8/19/2003 $10,000 $10,000
12/31/2003 10,612 11,166
12/31/2004 12,605 12,381
12/31/2005 13,436 12,989
12/31/2006 16,137 15,040
12/31/2007 15,586 15,865
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 25 5 3 0
9/30/2007 15 0 0 0
6/30/2007 11 1 0 0
3/31/2007 5 0 0 0
12/31/2006* 0 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 23 7 1 0
9/30/2007 46 2 0 0
6/30/2007 51 0 0 0
3/31/2007 56 0 0 0
12/31/2006* 7 1 1 0
* Trading commenced on December 18, 2006.
Page 23
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
QQXT - FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
The First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund (the "Fund")
seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the NASDAQ-100
Ex-Tech Sector Index(SM) (the "Index"). The Fund will normally invest at least
90% of its total assets in common stocks that comprise the Index. The Index
contains securities of the NASDAQ-100 Index(R) that are not classified as
"technology" according to the Industry Classification Benchmark (ICB)
classification system and, as a result, is a subset of the NASDAQ-100 Index(R).
The NASDAQ-100 Index(R) includes 100 of the largest domestic and international
non-financial companies listed on The Nasdaq Stock Market, Inc. ("NASDAQ(R)")
based on market capitalization. The Index is equally-weighted and is rebalanced
four times annually in March, June, September and December. The Fund's shares
are listed for trading on the NASDAQ(R). The first day of secondary market
trading in shares of the Fund was 02/15/07.
PERFORMANCE AS OF DECEMBER 31, 2007
CUMULATIVE
TOTAL RETURNS
Inception (02/08/07)
to 12/31/07
FUND PERFORMANCE
NAV 5.95%
Market Price 6.00%
INDEX PERFORMANCE
NASDAQ-100 Ex-Tech Sector Index(SM) 6.53%
Russell 1000 Index 2.84%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. Health care stocks were the biggest contributors to portfolio
performance over the period since inception (02/08/07). In addition to being a
large weight in the portfolio (24.9% average weight over the period), the
portfolio's holdings in the health care sector outperformed the health care
sector in the broader market. Materials stocks posted the biggest gains over the
period since inception; however, a small weight (1.8% average weight over the
period) limited their impact on overall portfolio performance. The technology
sector was the second biggest contributor to portfolio performance. The
telecommunications services sector was the biggest drag on performance as the
sector posted double digit negative returns over the period.
The top five performing stocks in the Fund since inception (02/8/07), by
percentage gain, were Intuitive Surgical, Inc., Amazon.com, Inc., Medimmune,
Garmin Ltd. and Express Scripts. The worst-performing stocks, by percentage
loss, were Sepracor, Inc., Level 3 Communications, Inc., Monster Worldwide,
Inc., Sears Holdings Corp. and Virgin Media, Inc.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR (1) % OF NET ASSETS
Consumer Discretionary 31.82%
Health Care 24.51
Industrials 18.34
Information Technology 10.23
Telecommunication Services 6.73
Consumer Staples 4.83
Materials 3.56
Money Market 2.53
Net Other Assets and Liabilities (2.55)
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Leap Wireless International, Inc. 2.03%
Joy Global, Inc. 1.89
Activision, Inc. 1.88
Steel Dynamics, Inc. 1.86
Hologic, Inc. 1.81
Electronic Arts, Inc. 1.75
Patterson Cos., Inc. 1.75
Focus Media Holding Ltd. ADR 1.73
C.H. Robinson Worldwide, Inc. 1.73
Teva Pharmaceutical Industries Ltd. ADR 1.73
---------
Total 18.16%
=========
(1) The above sector allocation is based on Standard & Poor's Global Industry
Classification Standard (GICS), and is different than the industry sector
classification system used by the Index to select securities, which is the
Industry Classification Benchmark (ICB) system, the joint classification system
of Dow Jones Indexes and FTSE Group.
_________________________
NASDAQ, NASDAQ-100, NASDAQ-100 Index(R), and NASDAQ-100 Ex-Tech Sector Index(SM)
are trademarks of the NASDAQ Stock Market, Inc. (which with its affiliates is
referred to as the Corporations) and are licensed for use by First Trust
Advisors L.P. The Fund has not been passed on by the Corporations as to its
legality or suitability. The Fund is not issued, endorsed, sold, or promoted by
the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH
RESPECT TO THE FUND.
Page 24
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
QQXT - FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND (CONTINUED)
Growth of a $10,000 Initial Investment
February 8, 2007 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust
NASDAQ-100 NASDAQ-100
Ex-Technology Ex-Tech
Sector Index(SM) Fund Sector Index(SM) Russell 1000 Index
--------------------- ---------------- ------------------
02/08/2007 $10,000 $10,000 $10,000
12/31/2007 10,595 10,653 10,284
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 28 0 0 3
9/30/2007 31 0 0 0
6/30/2007 46 0 0 0
3/31/2007* 5 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 29 0 1 3
9/30/2007 30 1 1 0
6/30/2007 17 0 0 0
3/31/2007* 27 0 0 0
* Trading commenced on February 15, 2007.
Page 25
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
QCLN - FIRST TRUST NASDAQ(R) CLEAN EDGE(R) U.S. LIQUID SERIES INDEX FUND
The First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund (the
"Fund") seeks investment results that correspond generally to the price and
yield (before the Fund's fees and expenses) of an equity index called the
NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index (the "Index"). The Fund will
normally invest at least 90% of its total assets in common stocks that comprise
the Index. All component securities of the Index are included in the Clean
Edge(R) Index, an equity index designed to track the performance of clean energy
companies that are publicly traded in the United States and includes companies
engaged in manufacturing, development, distribution and installation of emerging
clean-energy technologies including, but not limited to, solar photovoltaics,
biofuels and advanced batteries. The Index is a modified market capitalization
weighted index and under the Index's weighting methodology, in contrast to the
Clean Edge(R) Index, larger companies receive a larger Index weighting. The
Index weighting methodology also includes caps to prevent high concentrations
among larger alternative energy stocks. The Index is reconstituted semi-annually
in March and September and rebalanced quarterly. The Fund's shares are listed
for trading on the NASDAQ(R). The first day of secondary market trading in
shares of the Fund was 02/14/07.
PERFORMANCE AS OF DECEMBER 31, 2007
CUMULATIVE
TOTAL RETURNS
Inception (02/08/07)
to 12/31/07
FUND PERFORMANCE
NAV 54.30%
Market Price 54.30%
INDEX PERFORMANCE
NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index 55.22%
Russell 2000 Index -5.10%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. The portfolio produced strong gains over the period since inception
(02/08/07) as rising global energy prices and demand for cleaner fuels helped to
push shares higher. Growth in the solar industry powered portfolio returns as
three of the four top performers were solar focused companies (First Solar,
SunPower, and Suntech). Oversupply and rising corn prices pressured shares of
companies in the ethanol industry. Pacific Ethanol and VeraSun were among the
biggest drags on performance over the period since inception.
The top five performing stocks in the Fund since inception, by percentage gain,
were First Solar, Inc., SunPower Corp., MEMC Electronic Materials, Inc., Suntech
Power Holdings Co. Ltd. and GrafTech International Ltd. The worst-performing
stocks, by percentage loss, were International Rectifier Corp., Power-One, Inc.,
Pacific Ethanol, Inc., VeraSun Energy Corp. and LDK Solar Co. Ltd.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Information Technology 44.82%
Industrials 43.04
Energy 4.78
Utilities 2.83
Materials 2.17
Health Care 1.22
Consumer Discretionary 0.75
Consumer Staples 0.19
Net Other Assets and Liabilities 0.20
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
First Solar, Inc. 8.45%
Suntech Power Holdings Co. Ltd. ADR 8.02
MEMC Electronic Materials, Inc. 7.94
Linear Technology Corp. 7.66
SunPower Corp., Class A 6.35
Itron, Inc. 3.64
ON Semiconductor Corp. 3.22
International Rectifier Corp. 3.06
Cree, Inc. 2.91
Hexcel Corp. 2.88
---------
Total 54.13%
=========
_________________________
NASDAQ(R) and Clean Edge(R) are the registered trademarks (the "Marks") of The
NASDAQ Stock Market, Inc. ("NASDAQ(R)") and Clean Edge, Inc. ("Clean Edge(R)")
respectively. NASDAQ(R) and Clean Edge(R) are, collectively with their
affiliates, the "Corporations." The Marks are licensed for use by First Trust
Advisors L.P. The Fund has not been passed on by the Corporations as to its
legality or suitability. The Fund is not issued, endorsed, sold, or promoted by
the Corporations. The Fund should not be construed in any way as investment
advice by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO
LIABILITY WITH RESPECT TO THE FUND.
Page 26
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
QCLN - FIRST TRUST NASDAQ(R) CLEAN EDGE(R) U.S. LIQUID SERIES
INDEX FUND (CONTINUED)
Growth of a $10,000 Initial Investment
February 8, 2007 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust NASDAQ(R)
NASDAQ(R) Clean Clean Edge(R)
Edge(R) U.S. Liquid U.S. Liquid
Series Index Fund Series Index Russell 2000 Index
--------------------- ---------------- ------------------
02/08/2007 $10,000 $10,000 $10,000
12/31/2007 15,430 15,522 9,490
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 16 0 4 1
9/30/2007 11 0 0 1
6/30/2007 8 0 0 1
3/31/2007* 4 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 43 0 0 0
9/30/2007 51 0 0 0
6/30/2007 54 0 0 0
3/31/2007* 28 0 0 0
* Trading commenced on February 14, 2007.
Page 27
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FRI - FIRST TRUST S&P REIT INDEX FUND
The First Trust S&P REIT Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the S&P REIT Composite Index (the "Index").
The Fund will normally invest at least 90% of its total assets in common stocks
that comprise the Index. The Index measures the securitized U.S. real estate
investment trust ("REIT") market and is comprised of 100 companies and covers
approximately 89% of the U.S. REIT market (based on capitalization) and
maintains a constituency that reflects the composition of the overall REIT
market. The Index contains securities selected for market representation
according to geography and property type. All securities in the Index satisfy
the Index's liquidity, price, and market capitalization requirements. The
Standard & Poor's Index Committee, a team of Standard & Poor's economists and
index analysts, maintains the Index. The S&P Index Committee makes constituent
changes on an as-needed basis. Share adjustments that exceed 5% are made at the
time of the change. Share adjustments of less than 5% are made on a quarterly
basis. The Fund's shares are listed for trading on the AMEX. The first day of
secondary market trading in shares of the Fund was 05/10/07.
PERFORMANCE AS OF DECEMBER 31, 2007
CUMULATIVE
TOTAL RETURNS
Inception (05/08/07)
to 12/31/07
FUND PERFORMANCE
NAV -19.08%
Market Price -19.22%
INDEX PERFORMANCE
S&P REIT Composite Index -19.04%
Russell 3000 Index -1.89%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. REIT shares were under pressure for most of the period since the
Fund's inception (05/08/07). Industrial REITs had the best relative performance
over the period as growth in rents and global trade benefited that segment of
the REIT market. Mortgage REITs, hurt by deteriorating credit market conditions,
were the worst performing sub-industry in the portfolio.
The top five performing stocks in the Fund since inception, by percentage gain,
were Archstone-Smith Trust, Plum Creek Timber Company, Inc., HCP, Inc.,
Rayonier, Inc. REIT and Equity Inns. The worst-performing stocks, by percentage
loss, were General Growth Properties, Inc., Simon Property Group, Vornado Realty
Trust, Host Hotels & Resorts, Inc. and Developers Diversified Realty Corp.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Financials 99.26%
Money Market Funds 8.44
Net Other Assets and Liabilities (7.70)
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Simon Property Group, Inc. 7.14%
ProLogis 6.01
J.P. Morgan Institutional Treasury
Money Market Fund 5.27
Vornado Realty Trust 4.34
Boston Properties, Inc. 4.04
General Growth Properties, Inc. 3.70
Equity Residential 3.64
Kimco Realty Corp. 3.39
Public Storage 3.37
Host Hotels & Resorts, Inc. 3.28
---------
Total 44.18%
=========
_________________________
Standard & Poor's(R), S&P(R) and S&P REIT Composite Index are registered
trademarks of Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
and have been licensed for use by First Trust Advisors L.P. The Fund is not
sponsored, endorsed, sold or promoted by S&P and S&P makes no representation,
warranty or condition regarding the advisability of investing in the Fund.
Page 28
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FRI - FIRST TRUST S&P REIT INDEX FUND (CONTINUED)
Growth of a $10,000 Initial Investment
May 8, 2007 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust S&P REIT
S&P REIT Composite
Index Fund Index Russell 3000 Index
--------------------- ---------------- ------------------
05/08/2007 $10,000 $10,000 $10,000
12/31/2007 8,092 8,096 9,811
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 13 10 1 1
9/30/2007 25 1 3 0
6/30/2007* 8 2 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 28 8 3 0
9/30/2007 31 1 2 0
6/30/2007* 26 0 0 0
* Trading commenced on May 10, 2007.
Page 29
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FIW - FIRST TRUST ISE WATER INDEX FUND
The First Trust ISE Water Index Fund (the "Fund") seeks investment results that
correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE Water Index(TM) (the "Index"). The
Fund will normally invest at least 90% of its total assets in common stocks that
comprise the Index. The Index is a modified market capitalization weighted index
comprised of 36 stocks that derive a substantial portion of their revenues from
the potable and wastewater industries. The Index is rebalanced on a semi-annual
basis. The Fund's shares are listed for trading on the NYSE Arca, Inc. The first
day of secondary market trading in shares of the Fund was 05/11/07.
PERFORMANCE AS OF DECEMBER 31, 2007
CUMULATIVE
TOTAL RETURNS
Inception (05/08/07)
to 12/31/07
FUND PERFORMANCE
NAV 12.12%
Market Price 12.12%
INDEX PERFORMANCE
ISE Water Index(TM) 12.60%
Russell 3000 Index -1.89%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. The portfolio produced solid returns in the period since inception
(05/08/07) as the global demand for water and water infrastructure drove
earnings on the underlying stocks higher. Companies focused on producing the
technology and infrastructure to support the growth of the water industry fared
the best over the period. Water utilities posted returns that trailed those of
the portfolio as a whole; however, they still outpaced water utilities in the
broader market.
The top five performing stocks in the Fund since inception, by percentage gain,
were Calgon Carbon Corp., Flowserve Corp., Lindsay Corp., Itron, Inc. and
Valmont Industries, Inc. The worst-performing stocks, by percentage loss, were
Mueller Water Products, Ashland, Inc., Watts Water Technologies, Inc.,
Insituform Technologies, Inc. and Mueller Industries, Inc.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Industrials 61.29%
Utilities 19.44
Materials 11.45
Information Technology 4.17
Health Care 3.76
Money Market Funds 0.54
Net Other Assets and Liabilities (0.65)
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Itron, Inc. 4.17%
ITT Corp. 4.15
Nalco Holding Co. 4.13
Veolia Environnement ADR 4.03
Danaher Corp. 3.99
Companhia de Saneamento Basico do
Estado de Sao Paulo ADR 3.95
Pentair, Inc. 3.95
Pall Corp. 3.88
Roper Industries, Inc. 3.81
Flowserve Corp. 3.77
---------
Total 39.83%
=========
_________________________
"International Securities Exchange(TM)", "ISE(TM)" and "ISE Water Index(TM)" are
trademarks of the International Securities Exchange(TM) and have been licensed
for use for certain purposes by First Trust Advisors L.P. The Fund, based on the
ISE Water Index(TM), is not sponsored, endorsed, sold or promoted by the
International Securities Exchange(TM) and the International Securities
Exchange(TM) makes no representation regarding the advisability of trading in
such products.
Page 30
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FIW - FIRST TRUST ISE WATER INDEX FUND (CONTINUED)
Growth of a $10,000 Initial Investment
May 8, 2007 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust
ISE Water ISE Water
Index Fund Index(TM) Russell 3000 Index
--------------------- ---------------- ------------------
05/08/2007 $10,000 $10,000 $10,000
12/31/2007 11,212 11,260 9,811
Performance figures assume reinvestment of all dividend
distributions and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption or sale of
Fund shares. An index is a statistical composite that tracks a specified
financial market or sector. Unlike the Fund, the indices do not actually
hold a portfolio of securities and therefore do not incur the expenses
incurred by the Fund. These expenses negatively impact the performance of
the Fund. The Fund's past performance is no guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 27 0 0 0
9/30/2007 13 0 0 1
6/30/2007* 11 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 36 0 1 0
9/30/2007 49 0 0 0
6/30/2007* 24 0 0 0
* Trading commenced on May 11, 2007.
Page 31
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FCG - FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND
The First Trust ISE-Revere Natural Gas Index Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the ISE-REVERE Natural Gas Index(TM)
(the "Index"). The Fund will normally invest at least 90% of its total assets in
common stocks that comprise the Index. The Index is an equal-weighted index
comprised of exchange-listed companies that derive a substantial portion of
their revenues from the exploration and production of natural gas. The Index is
constructed by establishing the universe of stocks listed in the U.S. of
companies involved in the natural gas exploration and production industries and
then eliminates stocks whose natural gas proven reserves do not meet certain
requirements. The Index then ranks all candidate stocks using four different
methods and, often averaging the rankings, selects the top 30 stocks based on
the final rank. The Index is rebalanced on a quarterly basis. The Fund's shares
are listed for trading on the NYSE Arca, Inc. The first day of secondary market
trading in shares of the Fund was 05/11/07.
PERFORMANCE AS OF DECEMBER 31, 2007
CUMULATIVE
TOTAL RETURNS
Inception (05/08/07)
to 12/31/07
FUND PERFORMANCE
NAV 11.67%
Market Price 11.62%
INDEX PERFORMANCE
ISE-REVERE Natural Gas Index(TM) 12.13%
Russell 3000 Index -1.89%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. The Fund posted strong returns in the period since inception
(05/08/07). Natural gas prices over the period were relatively flat with the
nearest futures contract month for Nymex natural gas declining from
$7.779/Million British Thermal Units ("MMbtu") in the beginning of the return
period to $7.483/MMbtu as of 12/31/2007. Baker Hughes reported that natural gas
rig counts also declined slightly to 1452 from 1462 in the same time period.
While natural gas fundamentals were soft, many natural gas companies did well
due to their related exposure to petroleum. The nearest futures month Nymex WTI
crude oil gained 46% over the period increasing from $65.71 per barrel to $95.98
per barrel by the end of 2007. Apache Corp., Range Resource Corp. and Noble
Energy were the top three contributors to the performance of the Fund; all three
have some operations in crude.
The top five performing stocks in the Fund since inception, by percentage gain,
were Apache Corp., Range Resources Corp., Noble Energy, Inc., Delta Petroleum
Corp. and Quicksilver Resources, Inc. The worst-performing stocks, by percentage
loss, were NGAS Resources, Inc., Rosetta Resources, Inc., Compton Petroleum
Corp., EV Energy Partners L.P. and GMX Resources, Inc.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Energy 90.45%
Utilities 9.55
Money Market Funds 0.64
Net Other Assets and Liabilities (0.64)
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Delta Petroleum Corp. 4.17%
Cabot Oil & Gas Corp. 3.51
Petrohawk Energy Corp. 3.50
Rosetta Resources, Inc. 3.50
Anadarko Petroleum Corp. 3.41
EXCO Resources, Inc. 3.41
Forest Oil Corp. 3.40
Pioneer Natural Resources Co. 3.38
Noble Energy, Inc. 3.38
Edge Petroleum Corp. 3.37
---------
Total 35.03%
=========
_________________________
"International Securities Exchange(TM)", "ISE(TM)" and "ISE-REVERE Natural Gas
Index(TM)" are trademarks of the International Securities Exchange(TM) and have
been licensed for use for certain purposes by First Trust Advisors L.P. The
Fund, based on the ISE-REVERE Natural Gas Index(TM), is not sponsored, endorsed,
sold or promoted by the International Securities Exchange(TM) and the
International Securities Exchange(TM) makes no representation regarding the
advisability of trading in such products.
Page 32
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FCG - FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (CONTINUED)
Growth of a $10,000 Initial Investment
May 8, 2007 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust ISE-REVERE
ISE-Revere Natural Natural Gas
Gas Index Fund Index(TM) Russell 3000 Index
--------------------- ---------------- ------------------
05/08/2007 $10,000 $10,000 $10,000
12/31/2007 11,167 11,213 9,811
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 19 0 0 1
9/30/2007 18 0 0 1
6/30/2007* 12 0 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 43 1 0 0
9/30/2007 43 1 0 0
6/30/2007* 23 0 0 0
* Trading commenced on May 11, 2007.
Page 33
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FNI - FIRST TRUST ISE CHINDIA INDEX FUND
The First Trust ISE Chindia Index Fund (the "Fund") seeks investment results
that correspond generally to the price and yield (before the Fund's fees and
expenses) of an equity index called the ISE ChIndia Index(TM) (the "Index"). The
Fund will normally invest at least 90% of its total assets in common stocks that
comprise the Index. The Index is a non-market capitalization weighted portfolio
of 50 American Depositary Receipts, American Depositary Shares and/or stocks
selected from a universe of all listed ADRs, ADSs, and/or stocks of companies
from China and India currently trading on a U.S. exchange. The Index is
rebalanced on a semi-annual basis. The Fund's shares are listed for trading on
the NYSE Arca, Inc. The first day of secondary market trading in shares of the
Fund was 05/11/07.
PERFORMANCE AS OF DECEMBER 31, 2007
CUMULATIVE
TOTAL RETURNS
Inception (05/08/07)
to 12/31/07
FUND PERFORMANCE
NAV 38.73%
Market Price 38.78%
INDEX PERFORMANCE
ISE ChIndia Index(TM) 39.52%
Russell 3000 Index -1.89%
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. The portfolio produced strong returns in the period since inception
(05/08/07) as generally strong economic growth in both China and India drove
equity returns. On a relative basis, Chinese stocks outperformed Indian stocks
over the period as evidenced by the fact that the top five contributors to
performance were all Chinese firms.
The top five performing stocks in the Fund since inception, by percentage gain,
were China Mobile Ltd., Baidu.com, Inc., CNOOC Ltd., China Life Insurance Co.
Ltd. and PetroChina Co. Ltd. The worst-performing stocks, by percentage loss,
were WNS Holdings Ltd., Infosys Technologies Ltd., Wipro Ltd., Patni Computer
Systems and Qiao Xing Universal Telephone, Inc.
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Information Technology 26.73%
Energy 16.72
Financials 14.72
Telecommunication Services 12.08
Materials 11.41
Industrials 8.30
Consumer Discretionary 5.31
Health Care 3.43
Utilities 0.70
Consumer Staples 0.68
Net Other Assets and Liabilities (0.08)
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Infosys Technologies Ltd. ADR 7.39%
China Petroleum & Chemical Corp. ADR 7.24
China Mobile Ltd. ADR 6.92
ICICI Bank Ltd. ADR 6.90
Sterlite Industries (India) Ltd. ADR 6.86
PetroChina Co., Ltd. ADR 6.70
Wipro Ltd. ADR 4.06
Satyam Computer Services Ltd. ADR 3.99
Baidu.com ADR 3.94
HDFC Bank Ltd. ADR 3.93
---------
Total 57.93%
=========
_________________________
"International Securities Exchange(TM)", "ISE(TM)" and "ISE ChIndia
Index(TM)" are trademarks of the International Securities Exchange(TM) and
have been licensed for use for certain purposes by First Trust Advisors
L.P. The Fund, based on the ISE ChIndia Index(TM), is not sponsored,
endorsed, sold or promoted by the International Securities Exchange(TM) and
the International Securities Exchange(TM) makes no representation regarding
the advisability of trading in such products.
Page 34
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FNI - FIRST TRUST ISE CHINDIA INDEX FUND (CONTINUED)
Growth of a $10,000 Initial Investment
May 8, 2007 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust
ISE Chindia ISE ChIndia
Index Fund Index(TM) Russell 3000 Index
--------------------- ---------------- ------------------
05/08/2007 $10,000 $10,000 $10,000
12/31/2007 13,873 13,952 9,811
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 41 1 0 1
9/30/2007 29 0 0 1
6/30/2007* 12 1 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 21 0 0 0
9/30/2007 33 0 0 0
6/30/2007* 22 0 0 0
* Trading commenced on May 11, 2007.
Page 35
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FVL - FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
The First Trust Value Line(R) 100 Exchange-Traded Fund (the "Fund") is an
exchange-traded index fund. In accordance with the terms of the Agreement and
Plan of Reorganization (the "Plan") adopted by the Board of Trustees of the
First Trust Value Line(R) 100 Fund (the "Predecessor FVL Fund," a closed-end
fund) on January 17, 2007 and approved by the Predecessor FVL Fund shareholders
on May 17, 2007, the Predecessor FVL Fund was reorganized with and into the Fund
effective June 15, 2007. Pursuant to the Plan, the shares of the Predecessor FVL
Fund ceased trading on the American Stock Exchange, Inc. ("AMEX") on Friday,
June 15, 2007 and the Fund began trading on the AMEX on Monday, June 18, 2007
under the ticker symbol "FVL," the same ticker symbol previously used by the
Predecessor FVL Fund. The assets of the Predecessor FVL Fund were transferred
to, and the liabilities of the Predecessor FVL Fund were assumed by the Fund in
exchange for shares of the Fund on a one-for-one share basis. Fund shares were
distributed to the Predecessor FVL Fund shareholders, on a tax-free basis for
federal income tax purposes, and the Predecessor FVL Fund has been terminated.
The objective of the Fund is to seek investment results that correspond
generally to the price and yield (before the Fund's fees and expenses) of an
equity index called the Value Line(R) 100 Index (the "Index"). The Fund will
normally invest at least 90% of its total assets in common stocks that comprise
the Index. The Index is an equal-dollar weighted index that is designed to
objectively identify and select 100 stocks from the universe of stocks to which
Value Line(R) assigns a #1 ranking in the Value Line(R) TimelinessTM Ranking
System (the "Ranking System"). At any one time, only 100 stocks are assigned a
#1 ranking in the Ranking System. The Index is rebalanced quarterly.
PERFORMANCE AS OF DECEMBER 31, 2007
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
12 Months Ended Inception (06/12/03) Inception (06/12/03)
12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV 19.91% 13.15% 75.63%
Market Price 30.58% 13.23% 76.22%
INDEX PERFORMANCE
Russell 3000 Index 5.24% 11.57% 64.66%
On June 15, 2007, the Fund acquired the assets and adopted the financial
and performance history of the Predecessor FVL Fund, which had an
inception date of June 12, 2003. The inception date total returns at NAV
include the sales load of $0.675 per share on the initial offering.
The investment goals, strategies and policies of the Fund are
substantially similar to those of the Predecessor FVL Fund. The
inception date of the Index was January 16, 2007. Returns for the Index
will only be disclosed for those periods in which the Index was in
existence for the entire period. The cumulative total returns for the
period from the reorganization date (06/15/07) through period end
(12/31/07) were 6.61% and 6.96% at NAV and market price, respectively.
That compares to an Index return of 7.02% for that same period. Prior to
June 15, 2007, the price used to calculate market return was the AMEX
closing market price of the Predecessor FVL Fund. Prior to June 15,
2007, NAV and market returns assumed that all dividend distributions
were reinvested at prices obtained by the Dividend Reinvestment Plan of
the Predecessor FVL Fund.
(See Notes to Fund Performance Overview on page 38.)
FUND RECAP. The portfolio produced strong returns over the period since the
Fund's reorganization from a closed-end fund into an exchange-traded fund
(06/15/07) as the growth-oriented momentum stocks in the portfolio outpaced the
broader market. Consumer discretionary stocks were the biggest contributors to
portfolio performance on an absolute basis. The portfolio benefited from both
strong returns along with a large weighting in the consumer discretionary
sector. Materials and industrials stocks also produced strong returns. The
telecommunication services sector produced the smallest gain in the portfolio;
however, the performance was still inline with the overall market.
The top five performing stocks in the Fund since inception, by percentage gain,
were Potash Corp. of Saskatchewan, Inc., Research In Motion Ltd., Priceline.com,
Inc., Flir Systems, Inc. and Apple Computer, Inc. The worst-performing stocks,
by percentage loss, were Sepracor, Inc., ValueClick, Inc., Penford Corp.,
CryoLife, Inc. and Moldflow Corp.
_________________________
"Value Line(R)" and "Value Line(R) 100 Index" are trademarks of Value Line(R),
Inc. and have been licensed for use for certain purposes by First Trust on
behalf of the Fund. The Fund, based on the Value Line(R) 100 Index, is not
sponsored, endorsed, sold, or promoted by Value Line(R), Inc., and Value Line(R)
makes no representation regarding the advisability of investing in the Fund.
Page 36
- --------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
FVL - FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (CONTINUED)
PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007
SECTOR % OF NET ASSETS
Information Technology 24.15%
Industrials 23.30
Health Care 18.35
Consumer Discretionary 11.96
Materials 9.31
Financials 5.13
Energy 4.11
Consumer Staples 3.09
Telecommunication Services 1.03
Net Other Assets and Liabilities (0.43)
---------
Total 100.00%
=========
TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007
SECURITY % OF NET ASSETS
Fresh Del Monte Produce, Inc. 1.07%
Potash Corp. of Saskatchewan, Inc. 1.07
Agrium, Inc. 1.06
ArthroCare Corp. 1.06
Mosaic (The) Co. 1.06
Robbins & Myers, Inc. 1.06
Learning Tree International, Inc. 1.06
Amazon.com, Inc. 1.05
Deere & Co. 1.05
Cubic Corp. 1.05
---------
Total 10.59%
=========
Growth of a $10,000 Initial Investment
June 12, 2003 - December 31, 2007
[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS
First Trust
Value Line(R) 100
Exchange-Traded Fund Russell 3000 Index
---------------------- ------------------
06/12/03 $10,000 $10,000
12/31/03 11,591 11,382
12/31/04 13,104 12,742
12/31/05 14,658 13,522
12/31/06 15,331 15,646
12/31/07 17,562 16,464
Performance figures assume reinvestment of all dividend distributions and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. The Fund's past performance is no
guarantee of future results.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for
the Fund was at a discount or premium to the daily NAV. The following
tables are for comparative purposes only and represent the periods
indicated.
Number of Days Bid/Ask Midpoint At/Above NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 18 5 4 0
9/30/2007 21 3 0 0
6/30/2007* 0 1 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 28 7 2 0
9/30/2007 38 1 0 0
6/30/2007* 8 1 0 0
* Trading commenced on June 18, 2007.
Page 37
- --------------------------------------------------------------------------------
NOTES TO FUND PERFORMANCE OVERVIEW
- --------------------------------------------------------------------------------
Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average annual total returns" respresent the average annual
change in value of an investment over the periods indicated. "Cumulative total
returns" represent the total change in value of an investment over the periods
indicated. The total returns would have been lower if certain fees had not been
waived and expenses reimbursed by the Advisor.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
the Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all dividend distributions
have been reinvested in the Fund at NAV and Market Price, respectively. An index
is a statistical composite that tracks a specified financial market or sector.
Unlike the Fund, the indices do not actually hold a portfolio of securities and
therefore do not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of the Fund. Also, market returns do not
include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future results.
Page 38
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2007
As a shareholder of First Trust Dow Jones Select MicroCap Index(SM) Fund, First
Trust Morningstar(R) Dividend Leaders(SM) Index Fund, First Trust IPOX-100 Index
Fund, First Trust NASDAQ-100 Equal Weighted Index(SM) Fund, First Trust
NASDAQ-100-Technology Sector Index(SM) Fund, First Trust Amex(R) Biotechnology
Index Fund, First Trust Dow Jones Internet Index(SM) Fund, First Trust DB
Strategic Value Index Fund, First Trust Value Line(R) Equity Allocation Index
Fund, First Trust Value Line(R) Dividend Index Fund, First Trust NASDAQ-100
Ex-Technology Sector Index(SM) Fund, First Trust NASDAQ(R) Clean Edge(R) U.S.
Liquid Series Index Fund, First Trust S&P REIT Index Fund, First Trust ISE Water
Index Fund, First Trust ISE-Revere Natural Gas Index Fund, First Trust ISE
Chindia Index Fund, or First Trust Value Line(R) 100 Exchange-Traded Fund
(collectively, the "Funds"), you incur two types of costs: (1) transaction
costs; and (2) ongoing costs, including management fees, distribution and/or
service fees, and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Funds and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended December 31, 2007.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
six-month period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During the
Six-Month Period" to estimate the expenses you paid on your account during this
six-month period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions paid on purchases and sales of Fund shares. Therefore the second
line in the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
ANNUALIZED
EXPENSE RATIO
BEGINNING ENDING BASED ON THE EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH DURING THE
JULY 1, 2007 DECEMBER 31, 2007 PERIOD (A) SIX-MONTH PERIOD (B)
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
Actual $1,000.00 $884.70 0.60% $2.85
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST MORNINGSTAR(R) DIVIDEND LEADERS(SM) INDEX FUND
Actual $1,000.00 $870.60 0.45% $2.12
Hypothetical (5% return before expenses) $1,000.00 $1,022.94 0.45% $2.29
FIRST TRUST IPOX-100 INDEX FUND
Actual $1,000.00 $1,026.40 0.60% $3.06
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
Actual $1,000.00 $999.10 0.60% $3.02
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND
Actual $1,000.00 $984.00 0.60% $3.00
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
Page 39
FIRST TRUST EXCHANGE-TRADED FUND
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
DECEMBER 31, 2007
ANNUALIZED
EXPENSE RATIO
BEGINNING ENDING BASED ON THE EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH DURING THE
JULY 1, 2007 DECEMBER 31, 2007 PERIOD (A) SIX-MONTH PERIOD (B)
FIRST TRUST AMEX(R) BIOTECHNOLOGY INDEX FUND
Actual $1,000.00 $1,008.30 0.60% $3.04
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND
Actual $1,000.00 $966.90 0.60% $2.97
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST DB STRATEGIC VALUE INDEX FUND
Actual $1,000.00 $981.10 0.65% $3.25
Hypothetical (5% return before expenses) $1,000.00 $1,021.93 0.65% $3.31
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
Actual $1,000.00 $975.40 0.70% $3.49
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
Actual $1,000.00 $941.00 0.70% $3.42
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
Actual $1,000.00 $1,013.40 0.60% $3.05
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) U.S. LIQUID SERIES INDEX FUND
Actual $1,000.00 $1,313.80 0.60% $3.50
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST S&P REIT INDEX FUND
Actual $1,000.00 $881.70 0.50% $2.37
Hypothetical (5% return before expenses) $1,000.00 $1,022.69 0.50% $2.55
FIRST TRUST ISE WATER INDEX FUND
Actual $1,000.00 $1,030.00 0.60% $3.07
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND
Actual $1,000.00 $1,100.20 0.60% $3.18
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST ISE CHINDIA INDEX FUND
Actual $1,000.00 $1,266.90 0.60% $3.43
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
Actual $1,000.00 $1,073.70 0.70% $3.66
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57
<FN>
(a) These expense ratios reflect expense caps.
(b) Expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period (July
1, 2007 through December 31, 2007), multiplied by 184/365.
</FN>
Page 40
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--100.3%
Aerospace & Defense--0.8%
1,682 American Science & Engineering,
Inc. $ 95,453
1,617 LMI Aerospace, Inc. (b) 42,867
-------------
138,320
-------------
Air Freight & Logistics--0.2%
1,564 Park-Ohio Holdings Corp. (b) 39,256
-------------
Airlines--0.7%
2,546 Allegiant Travel Co. (b) 81,829
3,385 Pinnacle Airlines Corp. (b) 51,621
-------------
133,450
-------------
Auto Components--1.2%
3,998 Aftermarket Technology Corp. (b) 108,986
5,521 Spartan Motors, Inc. 42,180
3,984 Superior Industries International,
Inc. 72,389
-------------
223,555
-------------
Beverages--0.5%
1,881 Boston Beer (The) Co., Inc.,
Class A (b) 70,820
1,886 MGP Ingredients, Inc. 17,766
-------------
88,586
-------------
Building Products--0.6%
5,119 Gibraltar Industries, Inc. 78,935
3,114 Insteel Industries, Inc. 36,527
-------------
115,462
-------------
Capital Markets--1.2%
3,921 Calamos Asset Management, Inc.,
Class A 116,768
6,411 TradeStation Group, Inc. (b) 91,100
-------------
207,868
-------------
Chemicals--3.5%
4,597 A. Schulman, Inc. 99,065
3,389 American Vanguard Corp. 58,799
3,093 Flotek Industries, Inc. (b) 111,472
4,761 ICO, Inc. (b) 61,131
2,853 Koppers Holdings, Inc. 123,365
4,446 Landec Corp. (b) 59,576
2,738 LSB Industries, Inc. (b) 77,266
1,632 Penford Corp. 41,763
-------------
632,437
-------------
Commercial Banks--6.6%
2,316 Bank of the Ozarks, Inc. 60,679
3,961 Cascade Bancorp 55,137
4,132 Chemical Financial Corp. 98,300
3,021 City Holding Co. 102,231
3,523 CoBiz Financial, Inc. 52,387
5,500 Community Bank System, Inc. 109,285
2,189 Greene BancShares, Inc. 42,029
Commercial Banks (Continued)
2,538 Independent Bank Corp. $ 69,084
4,086 Nara Bancorp, Inc. 47,684
6,128 NBT Bancorp, Inc. 139,840
4,047 PrivateBancorp, Inc. 132,135
3,895 Renasant Corp. 84,015
2,798 Seacoast Banking Corp. of Florida 28,763
4,754 Texas Capital Bancshares, Inc. (b) 86,761
2,853 West Coast Bancorp 52,781
-------------
1,161,111
-------------
Commercial Services & Supplies--7.4%
2,898 American Ecology Corp. 68,045
4,908 Bowne & Co., Inc. 86,381
9,502 CBIZ, Inc. (b) 93,215
2,402 CDI Corp. 58,273
2,473 COMSYS IT Partners, Inc. (b) 39,024
1,850 Cornell Cos., Inc. (b) 43,142
2,046 Courier Corp. 67,538
2,021 CRA International, Inc. (b) 96,219
4,673 Ennis, Inc. 84,114
4,610 Hudson Highland Group, Inc. (b) 38,770
1,239 ICF International, Inc. (b) 31,297
5,095 Innerworkings, Inc. (b) 87,940
7,637 Kforce, Inc. (b) 74,461
4,643 LECG Corp. (b) 69,924
6,462 On Assignment, Inc. (b) 45,299
3,192 Pike Electric Corp. (b) 53,498
1,966 Schawk, Inc. 30,512
10,400 Spherion Corp. (b) 75,712
3,312 Team, Inc. (b) 121,152
1,218 Waste Industries USA, Inc. 44,213
-------------
1,308,729
-------------
Communications Equipment--1.4%
2,800 Anaren, Inc. (b) 46,172
2,814 EMS Technologies, Inc. (b) 85,095
6,785 Ixia (b) 64,322
3,740 Oplink Communications, Inc. (b) 57,409
-------------
252,998
-------------
Computers & Peripherals--0.7%
3,840 STEC, Inc. (b) 33,562
3,842 Stratasys, Inc. (b) 99,277
-------------
132,839
-------------
Construction & Engineering--0.8%
1,894 Integrated Electrical Services,
Inc. (b) 35,588
1,279 Michael Baker Corp. (b) 52,567
1,643 Northwest Pipe Co. (b) 64,307
-------------
152,462
-------------
Consumer Finance--0.4%
5,098 First Cash Financial Services,
Inc. (b) 74,839
-------------
See Notes to Financial Statements. Page 41
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (Continued)
Diversified Consumer
Services--0.5%
977 CPI Corp. $ 23,008
4,379 Universal Technical Institute,
Inc. (b) 74,443
-------------
97,451
-------------
Diversified Financial
Services--0.3%
1,992 ASTA Funding, Inc. 52,668
-------------
Diversified Telecommunication
Services--2.3%
7,854 Alaska Communications Systems
Group, Inc. 117,811
1,753 Atlantic Tele-Network, Inc. 59,216
4,286 Consolidated Communications
Holdings, Inc. 85,291
5,058 FairPoint Communications, Inc. 65,855
5,776 Iowa Telecommunications Services,
Inc. 93,918
-------------
422,091
-------------
Electrical Equipment--0.7%
2,173 Azz, Inc. (b) 61,605
3,684 LSI Industries, Inc. 67,048
-------------
128,653
-------------
Electronic Equipment &
Instruments--3.7%
6,598 CTS Corp. 65,518
2,806 FARO Technologies, Inc. (b) 76,267
15,397 Kemet Corp. (b) 102,082
3,446 LoJack Corp. (b) 57,927
6,870 Methode Electronics, Inc. 112,943
3,403 Park Electrochemical Corp. 96,101
3,032 SYNNEX Corp. (b) 59,427
7,771 TTM Technologies, Inc. (b) 90,610
-------------
660,875
-------------
Energy Equipment & Services--4.9%
4,784 Bronco Drilling Co., Inc. (b) 71,042
1,312 Dawson Geophysical Co. (b) 93,756
2,043 Gulf Island Fabrication, Inc. 64,784
4,889 Matrix Service Co. (b) 106,679
16,434 Newpark Resources, Inc. (b) 89,565
840 OYO Geospace Corp. (b) 63,302
9,114 Pioneer Drilling Co. (b) 108,275
2,746 Superior Well Services, Inc. (b) 58,270
2,237 T-3 Energy Services, Inc. (b) 105,161
2,318 Trico Marine Services, Inc. (b) 85,812
2,125 Union Drilling, Inc. (b) 33,511
-------------
880,157
-------------
Food & Staples Retailing--1.4%
2,465 Nash Finch Co. 86,965
Food & Staples Retailing (Continued)
2,263 PriceSmart, Inc. $ 68,026
3,919 Spartan Stores, Inc. 89,549
-------------
244,540
-------------
Food Products--1.1%
14,844 Darling International, Inc. (b) 171,596
1,532 Imperial Sugar Co. 28,756
-------------
200,352
-------------
Gas Utilities--0.7%
3,719 Laclede Group (The), Inc. 127,339
-------------
Health Care Equipment &
Supplies--4.8%
2,019 Aspect Medical Systems, Inc. (b) 28,266
1,533 Cynosure, Inc. (b) 40,563
2,355 Datascope Corp. 85,722
2,329 ICU Medical, Inc. (b) 83,867
3,350 IRIS International, Inc. (b) 65,727
1,681 Kensey Nash Corp. (b) 50,296
2,707 Medical Action Industries, Inc. (b) 56,441
3,260 Natus Medical, Inc. (b) 63,081
5,647 Quidel Corp. (b) 109,947
5,942 Symmetry Medical, Inc. (b) 103,569
1,490 Vital Signs, Inc. 76,169
3,681 Zoll Medical Corp. (b) 98,356
-------------
862,004
-------------
Health Care Providers &
Services--6.3%
1,969 Air Methods Corp. (b) 97,800
4,520 Alliance Imaging, Inc. (b) 43,482
2,293 American Dental Partners, Inc. (b) 22,999
2,161 Bio-Reference Laboratories, Inc. (b) 70,621
5,438 Cross Country Healthcare, Inc. (b) 77,437
1,700 Emergency Medical Services Corp. (b) 49,776
4,763 Gentiva Health Services, Inc. (b) 90,688
3,943 Matria Healthcare, Inc. (b) 93,725
2,378 Medcath Corp. (b) 58,404
2,209 MWI Veterinary Supply, Inc. (b) 88,360
6,033 Odyssey HealthCare, Inc. (b) 66,725
2,137 Providence Service (The) Corp. (b) 60,135
3,210 RehabCare Group, Inc. (b) 72,418
4,648 Res-Care, Inc. (b) 116,944
7,015 Sun Healthcare Group, Inc. (b) 120,447
-------------
1,129,961
-------------
Health Care Technology--0.2%
1,874 Computer Programs & Systems, Inc. 42,615
-------------
Hotels, Restaurants & Leisure--3.7%
5,222 AFC Enterprises (b) 59,113
3,320 BJ'S Restaurants, Inc. (b) 53,983
2,825 Buffalo Wild Wings, Inc. (b) 65,597
5,346 California Pizza Kitchen, Inc. (b) 83,237
Page 42 See Notes to Financial Statements.
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (Continued)
Hotels, Restaurants & Leisure (Continued)
3,940 Marcus (The) Corp. $ 60,873
2,714 McCormick & Schmick's Seafood
Restaurants, Inc. (b) 32,378
2,162 Monarch Casino & Resort, Inc. (b) 52,061
2,045 Morton's Restaurant Group, Inc. (b) 19,080
2,553 Peet's Coffee & Tea, Inc. (b) 74,216
2,853 Red Robin Gourmet Burgers, Inc. (b) 91,267
4,760 Steak N Shake (The) Co. (b) 51,884
2,462 Town Sports International Holdings,
Inc. (b) 23,537
-------------
667,226
-------------
Household Durables--1.1%
5,221 Helen of Troy Ltd. (b) 89,488
1,654 Lifetime Brands, Inc. 21,469
2,639 Universal Electronics, Inc. (b) 88,248
-------------
199,205
-------------
Household Products--0.6%
2,922 WD-40 Co. 110,948
-------------
Industrial Conglomerates--0.7%
3,326 Raven Industries, Inc. 127,685
-------------
Insurance--2.9%
9,776 American Equity Investment Life
Holding Co. 81,043
1,777 American Physicians Capital, Inc. 73,674
2,786 First Mercury Financial Corp. (b) 67,978
6,610 Meadowbrook Insurance Group,
Inc. (b) 62,200
5,114 OneBeacon Insurance Group Ltd. 109,952
2,866 Seabright Insurance Holdings (b) 43,219
3,142 Stewart Information Services Corp. 81,975
-------------
520,041
-------------
Internet & Catalog Retail--1.2%
3,617 FTD Group, Inc. 46,587
2,547 Gaiam, Inc. (b) 75,595
4,472 PetMed Express, Inc. (b) 54,111
3,253 Stamps.com, Inc. (b) 39,622
-------------
215,915
-------------
Internet Software & Services--1.8%
3,769 Greenfield Online, Inc. (b) 55,065
5,320 Perficient, Inc. (b) 83,737
11,419 SonicWALL, Inc. (b) 122,411
4,896 Vignette Corp. (b) 71,531
-------------
332,744
-------------
IT Services--1.9%
9,824 Ciber, Inc. (b) 60,025
6,130 infoUSA, Inc. 54,741
3,669 ManTech International Corp.,
Class A (b) 160,775
IT Services (Continued)
2,410 SI International, Inc. (b) $ 66,203
-------------
341,744
-------------
Leisure Equipment & Products--1.4%
5,191 Jakks Pacific, Inc. (b) 122,559
3,485 RC2 Corp. (b) 97,824
4,163 Sturm, Ruger & Co., Inc. (b) 34,470
-------------
254,853
-------------
Life Sciences Tools & Services--1.2%
4,314 Albany Molecular Research, Inc. (b) 62,035
5,312 Cambrex Corp. 44,515
2,356 Kendle International, Inc. (b) 115,255
-------------
221,805
-------------
Machinery--8.6%
4,830 Altra Holdings, Inc. (b) 80,323
1,663 American Railcar Industries, Inc. 32,013
1,370 Ampco-Pittsburgh Corp. 52,238
2,268 Badger Meter, Inc. 101,947
6,999 Blount International, Inc. (b) 86,158
5,067 Chart Industries, Inc. (b) 156,569
3,061 CIRCOR International, Inc. 141,908
3,442 Columbus McKinnon Corp. (b) 112,278
2,178 Dynamic Materials Corp. 128,284
1,961 Gehl Co. (b) 31,454
2,787 Greenbrier Cos., Inc. 62,039
2,105 Hardinge, Inc. 35,322
974 Hurco Cos., Inc. (b) 42,515
2,557 Kadant, Inc. (b) 75,866
1,931 L.B. Foster Co., Class A (b) 99,891
1,983 Lindsay Corp. 140,178
2,157 Sun Hydraulics, Corp. 54,421
845 Twin Disc, Inc. 59,801
5,613 Wabash National Corp. 43,164
-------------
1,536,369
-------------
Marine--0.4%
1,976 TBS International Ltd. (b) 65,327
-------------
Media--2.3%
5,873 Cox Radio, Inc., Class A (b) 71,357
2,781 DG Fastchannel, Inc. (b) 71,305
10,970 Entravision Communications Corp.,
Class A (b) 85,895
8,665 Journal Communications, Inc.,
Class A 77,465
3,781 Playboy Enterprises, Inc.,
Class B (b) 34,483
9,712 Sinclair Broadcast Group, Inc.,
Class A 79,736
-------------
420,241
-------------
Metals & Mining--0.7%
3,224 A.M. Castle & Co. 87,661
1,853 Claymont Steel Holdings, Inc. (b) 43,268
-------------
130,929
-------------
See Notes to Financial Statements. Page 43
FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (Continued)
Oil, Gas & Consumable Fuels--1.7%
3,097 DCP Midstream Partners LP (c) $ 142,307
7,870 PetroQuest Energy, Inc. (b) 112,541
1,677 TransMontaigne Partners LP (c) 47,610
-------------
302,458
-------------
Paper & Forest Products--2.1%
7,187 Buckeye Technologies, Inc. (b) 89,838
8,235 Glatfelter 126,077
2,715 Neenah Paper, Inc. 79,142
2,871 Schweitzer-Mauduit International,
Inc. 74,388
-------------
369,445
-------------
Personal Products--1.0%
5,000 Elizabeth Arden, Inc. (b) 101,750
1,731 Inter Parfums, Inc. 31,106
6,450 Prestige Brands Holdings, Inc. (b) 48,246
-------------
181,102
-------------
Pharmaceuticals--0.9%
2,525 Bradley Pharmaceuticals, Inc. (b) 49,743
2,337 Obagi Medical Products, Inc. (b) 42,744
8,671 Salix Pharmaceuticals Ltd. (b) 68,327
-------------
160,814
-------------
Road & Rail--0.4%
4,351 Celadon Group, Inc. (b) 39,855
2,770 Marten Transport Ltd. (b) 38,642
-------------
78,497
-------------
Semiconductors & Semiconductor
Equipment--1.8%
14,756 Cirrus Logic, Inc. (b) 77,912
3,882 Cohu, Inc. 59,395
9,392 Mattson Technology, Inc. (b) 80,395
4,989 Rudolph Technologies, Inc. (b) 56,475
3,553 Ultra Clean Holdings (b) 43,347
-------------
317,524
-------------
Software--1.6%
11,095 Actuate Corp. (b) 86,208
1,547 Interactive Intelligence, Inc. (b) 40,763
4,471 Radiant Systems, Inc. (b) 77,035
7,107 Tyler Technologies, Inc. (b) 91,610
-------------
295,616
-------------
Specialty Retail--2.8%
3,720 A.C. Moore Arts & Crafts, Inc. (b) 51,150
3,811 Big 5 Sporting Goods Corp. 54,955
6,740 Casual Male Retail Group, Inc. (b) 34,913
5,635 Cato (The) Corp., Class A 88,244
2,192 Conn's, Inc. (b) 37,505
3,309 Jos. A. Bank Clothiers, Inc. (b) 94,141
2,712 Midas, Inc. (b) 39,758
Specialty Retail (Continued)
3,700 Monro Muffler Brake, Inc. $ 72,113
2,631 West Marine, Inc. (b) 23,626
-------------
496,405
-------------
Textiles, Apparel & Luxury
Goods--2.2%
3,436 Maidenform Brands, Inc. (b) 46,489
3,545 Movado Group, Inc. 89,653
2,126 Perry Ellis International, Inc. (b) 32,698
3,370 Steven Madden Ltd. (b) 67,400
2,573 True Religion Apparel, Inc. (b) 54,934
2,631 UniFirst Corp. 99,978
-------------
391,152
-------------
Thrifts & Mortgage Finance--1.8%
3,524 Anchor BanCorp Wisconsin, Inc. 82,884
9,671 Bank Mutual Corp. 102,223
5,771 Dime Community Bancshares 73,696
1,160 WSFS Financial Corp. 58,232
-------------
317,035
-------------
Tobacco--0.4%
17,591 Alliance One International, Inc. (b) 71,595
-------------
Trading Companies &
Distributors--0.5%
4,775 Rush Enterprises, Inc., Class A (b) 86,810
-------------
Water Utilities--1.4%
3,133 American States Water Co. 118,051
2,386 SJW Corp. 82,723
4,425 Southwest Water Co. 55,401
-------------
256,175
-------------
Wireless Telecommunication
Services--0.3%
4,247 USA Mobility, Inc. 60,732
-------------
Total Investments--100.3%
(Cost $19,454,663) 18,041,010
Net Other Assets and
Liabilities--(0.3%) (48,209)
-------------
Net Assets--100.0% $ 17,992,801
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Master limited partnership ("MLP").
Page 44 See Notes to Financial Statements.
FIRST TRUST MORNINGSTAR(R) DIVIDEND LEADERS(SM) INDEX FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--99.8%
Building Products--0.8%
22,949 Masco Corp. $ 495,928
-------------
Chemicals--2.7%
38,347 Dow Chemical (The) Co. 1,511,639
3,759 Olin Corp. 72,661
6,407 RPM International, Inc. 130,062
-------------
1,714,362
-------------
Commercial Banks--29.2%
7,755 Associated Banc-Corp. 210,083
3,869 BancorpSouth, Inc. 91,347
39,957 BB&T Corp. 1,225,481
1,416 Chemical Financial Corp. 33,687
8,984 Citizens Banking Corp. 130,358
11,654 Colonial BancGroup (The), Inc. 157,795
12,960 Comerica, Inc. 564,149
1,678 Community Bank System, Inc. 33,342
5,599 F.N.B. Corp. 82,305
44,814 Fifth Third Bancorp. 1,126,176
1,280 First Charter Corp. 38,221
3,282 First Financial Bancorp 37,415
16,945 First Horizon National Corp. 307,552
2,830 First Midwest Bancorp, Inc. 86,598
6,119 FirstMerit Corp. 122,441
13,198 Fulton Financial Corp. 148,082
38,824 Huntington Bancshares, Inc. 573,042
33,479 KeyCorp 785,083
75,251 National City Corp. 1,238,631
2,666 National Penn Bancshares, Inc. 40,363
1,513 NBT Bancorp, Inc. 34,527
5,422 Old National Bancorp 81,113
2,991 Pacific Capital Bancorp 60,209
924 Park National Corp. 59,598
18,351 PNC Financial Services Group, Inc. 1,204,743
22,910 Popular, Inc. 242,846
2,630 Provident Bankshares Corp. 56,256
1,410 S&T Bancorp., Inc. 38,972
4,466 South Financial Group (The), Inc. 69,804
20,043 SunTrust Banks, Inc. 1,252,487
4,171 Susquehanna Bancshares, Inc. 76,913
9,107 TCF Financial Corp. 163,289
2,672 Trustmark Corp. 67,762
67,764 U.S. Bancorp 2,150,829
2,353 United Bankshares, Inc. 65,931
7,723 Valley National Bancorp 147,200
24,958 W Holding Co., Inc. 30,698
82,339 Wachovia Corp. 3,131,351
89,398 Wells Fargo & Co. 2,698,925
1,316 WesBanco, Inc. 27,110
4,311 Whitney Holding Corp. 112,733
3,748 Wilmington Trust Corp. 131,930
-------------
18,937,377
-------------
Commercial Services &
Supplies--0.0%
1,622 Kimball International, Inc. $ 22,221
-------------
Diversified Financial
Services--19.2%
156,334 Bank of America Corp. 6,450,341
202,403 Citigroup, Inc. 5,958,744
-------------
12,409,085
-------------
Diversified Telecommunication
Services--13.2%
127,179 AT&T, Inc. 5,285,559
74,423 Verizon Communications, Inc. 3,251,541
-------------
8,537,100
-------------
Electric Utilities--5.2%
2,729 Cleco Corp. 75,866
5,506 DPL, Inc. 163,253
2,359 Empire District Electric (The) Co. 53,738
6,765 Great Plains Energy, Inc. 198,350
1,252 Otter Tail Corp. 43,319
9,559 Pepco Holdings, Inc. 280,365
6,861 Pinnacle West Capital Corp. 290,975
17,977 Progress Energy, Inc. 870,626
35,597 Southern Co. 1,379,384
-------------
3,355,876
-------------
Gas Utilities--1.1%
4,906 AGL Resources, Inc. 184,661
5,839 Atmos Energy Corp. 163,726
1,224 Laclede Group (The), Inc. 41,910
2,704 Nicor, Inc. 114,514
3,697 Piedmont Natural Gas Co., Inc. 96,714
2,877 WGL Holdings, Inc. 94,251
-------------
695,776
-------------
Household Durables--0.1%
2,249 Tupperware Brands Corp. 74,285
-------------
Insurance--1.4%
6,499 Arthur J. Gallagher & Co. 157,211
8,160 Cincinnati Financial Corp. 322,647
2,645 Commerce Group (The), Inc. 95,167
1,524 Mercury General Corp. 75,910
2,707 Unitrin, Inc. 129,909
2,533 Zenith National Insurance Corp. 113,301
-------------
894,145
-------------
Metals & Mining--0.3%
2,871 Nucor Corp. 170,021
-------------
Multi-Utilities--6.3%
13,600 Ameren Corp. 737,256
1,695 Black Hills Corp. 74,750
1,085 CH Energy Group, Inc. 48,326
18,020 Consolidated Edison, Inc. 880,277
See Notes to Financial Statements. Page 45
FIRST TRUST MORNINGSTAR(R) DIVIDEND LEADERS(SM) INDEX FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (Continued)
Multi-Utilities (Continued)
13,516 Dominion Resources, Inc. $ 641,334
10,975 DTE Energy Co. 482,461
10,020 Energy East Corp. 272,644
5,352 NSTAR 193,849
4,834 OGE Energy Corp. 175,426
5,867 Puget Energy, Inc. 160,932
6,054 SCANA Corp. 255,176
4,671 Vectren Corp. 135,506
-------------
4,057,937
-------------
Pharmaceuticals--10.1%
70,822 Bristol-Myers Squibb Co. 1,878,199
204,903 Pfizer, Inc. 4,657,446
-------------
6,535,645
-------------
Real Estate Investment
Trusts--0.3%
4,674 Rayonier, Inc. 220,800
-------------
Thrifts & Mortgage
Finance--3.1%
5,526 Astoria Financial Corp. 128,590
4,412 Corus Bankshares, Inc. 47,076
7,075 First Niagara Financial Group, Inc. 85,183
1,528 Flagstar Bancorp, Inc. 10,650
4,792 Washington Federal, Inc. 101,159
119,923 Washington Mutual, Inc. 1,632,152
-------------
2,004,810
-------------
Tobacco--6.8%
50,877 Altria Group, Inc. 3,845,283
9,767 UST, Inc. 535,232
-------------
4,380,515
-------------
Total Investments--99.8%
(Cost $76,588,671) 64,505,883
Net Other Assets and
Liabilities--0.2% 144,606
-------------
Net Assets--100.0% $ 64,650,489
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
Page 46 See Notes to Financial Statements.
FIRST TRUST IPOX-100 INDEX FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--100.2%
Aerospace & Defense--1.6%
2,812 DynCorp International, Inc.,
Class A (b) $ 75,587
6,879 Spirit Aerosystems Holdings, Inc.,
Class A (b) 237,325
2,328 TransDigm Group, Inc. (b) 105,155
-------------
418,067
-------------
Biotechnology--0.2%
3,005 Theravance, Inc. (b) 58,598
-------------
Building Products--0.3%
3,401 Goodman Global, Inc. (b) 83,461
-------------
Capital Markets--5.5%
11,441 Ameriprise Financial, Inc. 630,513
1,451 GFI Group, Inc. (b) 138,890
1,331 Greenhill & Co., Inc. 88,485
5,321 Lazard Ltd., Class A 216,458
5,902 MF Global Ltd. (b) 185,736
3,658 Och-Ziff Capital Management
Group, Class A 96,132
3,107 optionsXpress Holdings, Inc. 105,079
-------------
1,461,293
-------------
Chemicals--4.5%
7,461 Celanese Corp., Class A 315,749
2,756 CF Industries Holding, Inc. 303,325
10,953 Huntsman Corp. 281,492
7,048 Nalco Holding Co. 170,421
3,644 Rockwood Holdings, Inc. (b) 121,054
-------------
1,192,041
-------------
Commercial Services &
Supplies--1.1%
4,292 EnergySolutions, Inc. (b) 115,841
3,091 IHS, Inc., Class A (b) 187,191
-------------
303,032
-------------
Communications Equipment--0.2%
3,388 Starent Networks Corp. (b) 61,831
-------------
Construction & Engineering--1.7%
4,851 Aecom Technology Corp. (b) 138,593
8,358 KBR, Inc. (b) 324,290
-------------
462,883
-------------
Consumer Finance--1.3%
23,560 Discover Financial Services 355,285
-------------
Diversified Financial Services--4.4%
794 MSCI, Inc., Class A (b) 30,490
13,074 NYSE Euronext 1,147,505
-------------
1,177,995
-------------
Diversified Telecommunication
Services--1.4%
7,539 Embarq Corp. $ 373,407
-------------
Electric Utilities--0.5%
2,110 ITC Holdings Corp. 119,046
-------------
Electrical Equipment--5.9%
3,846 First Solar, Inc. (b) 1,027,420
4,135 SunPower Corp., Class A (b) 539,163
-------------
1,566,583
-------------
Electronic Equipment &
Instruments--4.4%
5,446 Dolby Laboratories, Inc.,
Class A (b) 270,775
24,529 Tyco Electronics Ltd. 910,762
-------------
1,181,537
-------------
Energy Equipment &
Services--1.5%
5,166 Cal Dive International, Inc. (b) 68,398
3,601 Complete Production Services,
Inc. (b) 64,710
4,234 Dresser-Rand Group, Inc. (b) 165,337
4,383 Hercules Offshore, Inc. (b) 104,228
-------------
402,673
-------------
Health Care Equipment &
Supplies--5.0%
24,564 Covidien Ltd. 1,087,939
5,142 ev3, Inc. (b) 65,355
2,696 Masimo Corp. (b) 106,357
1,732 NuVasive, Inc. (b) 68,449
-------------
1,328,100
-------------
Health Care Providers &
Services--0.9%
5,013 Brookdale Senior Living, Inc. 142,419
2,058 WellCare Health Plans, Inc. (b) 87,280
-------------
229,699
-------------
Hotels, Restaurants &
Leisure--3.1%
6,671 Burger King Holdings, Inc. 190,190
1,929 Life Time Fitness, Inc. (b) 95,833
9,240 Tim Hortons, Inc. 341,233
8,778 Wyndham Worldwide Corp. 206,810
-------------
834,066
-------------
Independent Power Producers &
Energy Traders--0.4%
2,048 Ormat Technologies, Inc. 112,660
-------------
Insurance--3.7%
2,981 Allied World Assurance Holdings Ltd. 149,557
3,341 Assured Guaranty Ltd. 88,670
21,641 Genworth Financial Inc., Class A 550,763
4,912 OneBeacon Insurance Group Ltd. 105,608
See Notes to Financial Statements. Page 47
FIRST TRUST IPOX-100 INDEX FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (Continued)
Insurance (Continued)
3,661 Validus Holdings Ltd. (b) $ 95,113
-------------
989,711
-------------
Internet Software &
Services--11.4%
2,097 DealerTrack Holdings, Inc. (b) 70,187
3,845 Google, Inc., Class A (b) 2,658,741
2,943 Omniture, Inc. (b) 97,972
2,155 VistaPrint Ltd. (b) 92,342
2,834 WebMD Health Corp., Class A (b) 116,392
-------------
3,035,634
-------------
IT Services--10.9%
10,448 Genpact Ltd. (b) 159,123
6,500 MasterCard, Inc., Class A 1,398,800
3,794 NeuStar, Inc., Class A (b) 108,812
8,232 SAIC, Inc. (b) 165,628
4,020 VeriFone Holdings, Inc. (b) 93,465
37,047 Western Union Co. 899,501
1,962 Wright Express Corp. (b) 69,631
-------------
2,894,960
-------------
Machinery--0.7%
1,846 Bucyrus International, Inc.,
Class A 183,474
-------------
Marine--0.3%
1,424 Genco Shipping & Trading Ltd. 77,978
-------------
Media--11.8%
5,255 Cinemark Holdings, Inc. 89,335
4,917 DreamWorks Animation SKG,
Inc., Class A (b) 125,580
2,171 Morningstar, Inc. (b) 168,795
48,196 Time Warner Cable, Inc., Class A (b) 1,330,210
32,376 Viacom, Inc., Class B (b) 1,421,954
-------------
3,135,874
-------------
Oil, Gas & Consumable
Fuels--8.3%
3,237 Alpha Natural Resources, Inc. (b) 105,138
1,327 Atlas America, Inc. 78,532
2,217 Bill Barrett Corp. (b) 92,826
3,737 Concho Resources, Inc. (b) 77,020
8,291 Continental Resources, Inc. (b) 216,644
2,088 Copano Energy LLC 75,899
4,250 CVR Energy, Inc. (b) 105,995
5,155 EXCO Resources, Inc. (b) 79,799
2,230 Foundation Coal Holdings, Inc. 117,075
6,998 SandRidge Energy, Inc. (b) 250,948
31,195 Spectra Energy Corp. 805,454
3,761 W&T Offshore, Inc. 112,680
3,359 Western Refining, Inc. 81,321
-------------
2,199,331
-------------
Personal Products--0.9%
4,496 Bare Escentuals, Inc. (b) $ 109,028
3,354 Herbalife Ltd. 135,099
-------------
244,127
-------------
Pharmaceuticals--0.8%
12,362 Warner Chilcott Ltd., Class A (b) 219,178
-------------
Real Estate Management &
Development--0.9%
11,354 CB Richard Ellis Group, Inc.,
Class A (b) 244,679
-------------
Road & Rail--1.0%
15,873 Hertz Global Holdings, Inc. (b) 252,222
-------------
Semiconductors & Semiconductor
Equipment--1.2%
2,802 Atheros Communications (b) 85,573
1,529 Hittite Microwave Corp. (b) 73,025
2,961 SiRF Technology Holdings, Inc. (b) 74,410
2,361 Tessera Technologies, Inc. (b) 98,218
-------------
331,226
-------------
Software--0.3%
3,195 Solera Holdings, Inc. (b) 79,172
-------------
Specialty Retail--0.6%
3,033 J. Crew Group, Inc. (b) 146,221
-------------
Textiles, Apparel & Luxury
Goods--1.0%
4,068 Crocs, Inc. (b) 149,744
4,697 Hanesbrands, Inc. (b) 127,617
-------------
277,361
-------------
Trading Companies &
Distributors--0.8%
3,869 Aircastle Ltd. 101,871
2,588 UAP Holding Corp. 99,897
-------------
201,768
-------------
Wireless Telecommunication
Services--1.7%
8,099 Clearwire Corp., Class A (b) 111,037
17,141 MetroPCS Communications, Inc. (b) 333,393
-------------
444,430
-------------
Total Investments--100.2%
(Cost $24,691,056) 26,679,603
Net Other Assets and
Liabilities--(0.2%) (46,872)
-------------
Net Assets--100.0% $ 26,632,731
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
Page 48 See Notes to Financial Statements.
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--100.3%
Air Freight & Logistics--2.0%
6,008 C.H. Robinson Worldwide, Inc. $ 325,153
6,770 Expeditors International of
Washington, Inc. 302,484
-------------
627,637
-------------
Airlines--2.0%
8,171 Ryanair Holdings PLC ADR (b) 322,264
8,064 UAL Corp. (b) 287,562
-------------
609,826
-------------
Beverages--1.0%
6,705 Hansen Natural Corp. (b) 296,964
-------------
Biotechnology--7.6%
6,316 Amgen, Inc. (b) 293,315
8,277 Amylin Pharmaceuticals, Inc. (b) 306,249
4,169 Biogen Idec, Inc. (b) 237,299
6,266 Celgene Corp. (b) 289,552
4,134 Cephalon, Inc. (b) 296,656
4,351 Genzyme Corp. (b) 323,889
6,852 Gilead Sciences, Inc. (b) 315,261
12,480 Vertex Pharmaceuticals, Inc. (b) 289,910
-------------
2,352,131
-------------
Chemicals--1.0%
5,876 Sigma-Aldrich Corp. 320,830
-------------
Commercial Services &
Supplies--3.0%
9,396 Cintas Corp. 315,893
9,155 Monster Worldwide, Inc. (b) 296,622
5,302 Stericycle, Inc. (b) 314,939
-------------
927,454
-------------
Communications Equipment--5.2%
11,210 Cisco Systems, Inc. (b) 303,455
9,641 Juniper Networks, Inc. (b) 320,081
7,818 QUALCOMM, Inc. 307,638
3,213 Research In Motion Ltd. (b) 364,354
45,655 Tellabs, Inc. (b) 298,584
-------------
1,594,112
-------------
Computers & Peripherals--6.0%
1,669 Apple Computer, Inc. (b) 330,596
12,894 Dell, Inc. (b) 316,032
9,055 Logitech International S.A. (b) 331,775
11,934 Network Appliance, Inc. (b) 297,873
8,242 SanDisk Corp. (b) 273,387
16,002 Sun Microsystems, Inc. (b) 290,116
-------------
1,839,779
-------------
Construction & Engineering--1.0%
2,003 Foster Wheeler Ltd. (b) 310,505
-------------
Diversified Consumer
Services--1.0%
4,308 Apollo Group, Inc., Class A (b) $ 302,206
-------------
Diversified Telecommunication
Services--0.9%
91,046 Level 3 Communications, Inc. (b) 276,780
-------------
Electronic Equipment &
Instruments--1.0%
26,619 Flextronics International Ltd. (b) 321,025
-------------
Food & Staples Retailing--2.0%
4,490 Costco Wholesale Corp. 313,223
7,318 Whole Foods Market, Inc. 298,574
-------------
611,797
-------------
Health Care Equipment &
Supplies--3.1%
7,073 DENTSPLY International, Inc. 318,426
4,947 Hologic, Inc. (b) 339,562
935 Intuitive Surgical, Inc. (b) 303,408
-------------
961,396
-------------
Health Care Providers &
Services--3.1%
4,449 Express Scripts, Inc. (b) 324,777
5,163 Henry Schein, Inc. (b) 317,008
9,707 Patterson Cos., Inc. (b) 329,553
-------------
971,338
-------------
Hotels, Restaurants &
Leisure--1.9%
14,363 Starbucks Corp. (b) 294,011
2,627 Wynn Resorts Ltd. (b) 294,565
-------------
588,576
-------------
Household Durables--0.9%
2,995 Garmin Ltd. 290,515
-------------
Internet & Catalog Retail--3.9%
3,461 Amazon.com, Inc. (b) 320,627
9,357 Expedia, Inc. (b) 295,868
11,381 IAC/InterActiveCorp (b) 306,377
14,936 Liberty Media Corp. - Interactive,
Class A (b) 284,979
-------------
1,207,851
-------------
Internet Software & Services--6.0%
8,467 Akamai Technologies, Inc. (b) 292,958
830 Baidu.com, Inc. ADR (b) 324,023
9,315 eBay, Inc. (b) 309,165
449 Google, Inc., Class A (b) 310,475
8,229 VeriSign, Inc. (b) 309,493
12,826 Yahoo!, Inc. (b) 298,333
-------------
1,844,447
-------------
See Notes to Financial Statements. Page 49
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (Continued)
IT Services--4.0%
9,269 Cognizant Technology Solutions
Corp., Class A (b) $ 314,590
5,794 Fiserv, Inc. (b) 321,509
7,181 Infosys Technologies Ltd. ADR 325,730
7,928 Paychex, Inc. 287,152
-------------
1,248,981
-------------
Machinery--2.2%
5,404 Joy Global, Inc. 355,691
5,793 PACCAR, Inc. 315,603
-------------
671,294
-------------
Media--7.9%
17,627 Comcast Corp., Class A (b) 321,869
11,756 Discovery Holding Co., Class A (b) 295,546
8,089 EchoStar Communications Corp.,
Class A (b) 305,117
5,726 Focus Media Holding Ltd. ADR (b) 325,293
6,318 Lamar Advertising Co., Class A 303,706
7,829 Liberty Global, Inc., Class A (b) 306,819
90,003 Sirius Satellite Radio, Inc. (b) 272,709
17,597 Virgin Media, Inc. 301,613
-------------
2,432,672
-------------
Metals & Mining--1.1%
5,855 Steel Dynamics, Inc. 348,782
-------------
Multiline Retail--0.9%
2,849 Sears Holdings Corp. (b) 290,740
-------------
Pharmaceuticals--1.1%
6,997 Teva Pharmaceutical Industries
Ltd. ADR 325,221
-------------
Semiconductors & Semiconductor
Equipment--11.0%
16,628 Altera Corp. 321,253
17,364 Applied Materials, Inc. 308,385
11,111 Broadcom Corp., Class A (b) 290,442
11,664 Intel Corp. 310,962
6,346 KLA-Tencor Corp. 305,623
6,960 Lam Research Corp. (b) 300,881
10,100 Linear Technology Corp. 321,483
21,195 Marvell Technology Group Ltd. (b) 296,306
10,401 Microchip Technology, Inc. 326,800
9,166 NVIDIA Corp. (b) 311,827
14,168 Xilinx, Inc. 309,854
-------------
3,403,816
-------------
Software--12.5%
11,930 Activision, Inc. (b) 354,320
7,263 Adobe Systems, Inc. (b) 310,348
6,397 Autodesk, Inc. (b) 318,315
19,620 BEA Systems, Inc. (b) 309,604
18,510 Cadence Design Systems, Inc. (b) 314,855
Software (Continued)
14,207 Check Point Software
Technologies Ltd. (b) $ 311,986
8,394 Citrix Systems, Inc. (b) 319,056
5,643 Electronic Arts, Inc. (b) 329,608
10,597 Intuit, Inc. (b) 334,971
9,211 Microsoft Corp. 327,912
14,908 Oracle Corp. (b) 336,622
18,348 Symantec Corp. (b) 296,137
-------------
3,863,734
-------------
Specialty Retail--2.8%
10,182 Bed Bath & Beyond, Inc. (b) 299,249
11,315 PetSmart, Inc. 266,242
13,270 Staples, Inc. 306,139
-------------
871,630
-------------
Trading Companies &
Distributors--1.0%
7,438 Fastenal Co. 300,644
-------------
Wireless Telecommunication
Services--3.2%
8,184 Leap Wireless International,
Inc. (b) 381,701
2,655 Millicom International Cellular
S.A. (b) 313,131
6,099 NII Holdings, Inc. (b) 294,704
-------------
989,536
-------------
Total Investments--100.3%
(Cost $32,649,125) 31,002,219
Net Other Assets and
Liabilities--(0.3%) (90,917)
-------------
Net Assets--100.0% $ 30,911,302
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
ADR - American Depositary Receipt.
Page 50 See Notes to Financial Statements.
FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--100.3%
Communications Equipment--13.1%
21,821 Cisco Systems, Inc. (b) $ 590,694
18,767 Juniper Networks, Inc. (b) 623,064
15,217 QUALCOMM, Inc. 598,789
6,255 Research In Motion Ltd. (b) 709,318
88,869 Tellabs, Inc. (b) 581,203
-------------
3,103,068
-------------
Computers & Peripherals--15.1%
3,249 Apple Computer, Inc. (b) 643,562
25,099 Dell, Inc. (b) 615,176
17,625 Logitech International S.A. (b) 645,781
23,230 Network Appliance, Inc. (b) 579,821
16,044 SanDisk Corp. (b) 532,179
31,147 Sun Microsystems, Inc. (b) 564,695
-------------
3,581,214
-------------
Internet Software & Services--12.6%
16,480 Akamai Technologies, Inc. (b) 570,208
1,615 Baidu.com ADR (b) 630,480
874 Google, Inc., Class A (b) 604,354
16,018 VeriSign, Inc. (b) 602,437
24,966 Yahoo!, Inc. (b) 580,709
-------------
2,988,188
-------------
IT Services--5.3%
18,041 Cognizant Technology Solutions
Corp., Class A (b) 612,312
13,979 Infosys Technologies Ltd. ADR 634,087
-------------
1,246,399
-------------
Semiconductors & Semiconductor
Equipment--28.0%
32,367 Altera Corp. 625,330
33,799 Applied Materials, Inc. 600,270
21,628 Broadcom Corp., Class A (b) 565,356
22,704 Intel Corp. 605,289
12,352 KLA-Tencor Corp. 594,872
13,548 Lam Research Corp. (b) 585,680
19,660 Linear Technology Corp. 625,778
41,257 Marvell Technology Group Ltd. (b) 576,773
20,246 Microchip Technology, Inc. 636,129
17,841 NVIDIA Corp. (b) 606,951
27,579 Xilinx, Inc. 603,153
-------------
6,625,581
-------------
Software--26.2%
14,137 Adobe Systems, Inc. (b) 604,074
12,453 Autodesk, Inc. (b) 619,661
38,190 BEA Systems, Inc. (b) 602,638
36,030 Cadence Design Systems, Inc. (b) 612,870
27,654 Check Point Software
Technologies Ltd. (b) 607,282
16,339 Citrix Systems, Inc. (b) 621,045
20,628 Intuit, Inc. (b) 652,051
Software (Continued)
17,930 Microsoft Corp. $ 638,308
29,019 Oracle Corp. (b) 655,250
35,714 Symantec Corp. (b) 576,424
-------------
6,189,603
-------------
Total Investments--100.3%
(Cost $25,513,950) 23,734,053
Net Other Assets and
Liabilities--(0.3%) (82,502)
-------------
Net Assets--100.0% $ 23,651,551
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
ADR - American Depositary Receipt.
See Notes to Financial Statements. Page 51
FIRST TRUST AMEX(R) BIOTECHNOLOGY INDEX FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--99.4%
Biotechnology--78.8%
68,580 Amgen, Inc. (b) $ 3,184,855
84,170 Amylin Pharmaceuticals, Inc. (b) 3,114,290
250,983 Applera Corp. - Celera Group (b) 3,983,100
47,915 Biogen Idec, Inc. (b) 2,727,322
54,885 Celgene Corp. (b) 2,536,236
50,052 Cephalon, Inc. (b) 3,591,732
51,210 Genentech, Inc. (b) 3,434,655
53,617 Genzyme Corp. (b) 3,991,249
91,389 Gilead Sciences, Inc. (b) 4,204,808
415,013 Human Genome Sciences, Inc. (b) 4,332,736
83,153 ImClone Systems, Inc. (b) 3,575,579
194,316 InterMune, Inc. (b) 2,590,232
339,465 Millennium Pharmaceuticals, Inc. (b) 5,085,185
104,708 OSI Pharmaceuticals, Inc. (b) 5,079,385
191,534 PDL BioPharma, Inc. (b) 3,355,676
125,110 Vertex Pharmaceuticals, Inc. (b) 2,906,305
-------------
57,693,345
-------------
Life Sciences Tools &
Services--20.6%
140,447 Affymetrix, Inc. (b) 3,249,944
46,393 Invitrogen Corp. (b) 4,333,570
49,259 Millipore Corp. (b) 3,604,774
587,027 Nektar Therapeutics (b) 3,938,951
-------------
15,127,239
-------------
Total Investments--99.4%
(Cost $78,723,195) 72,820,584
Net Other Assets and
Liabilities--0.6% 420,463
-------------
Net Assets--100.0% $ 73,241,047
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
Page 52 See Notes to Financial Statements.
FIRST TRUST DOW JONES INTERNET INDEX(SM)
FUND PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--99.0%
Capital Markets--5.7%
138,504 E*TRADE Financial Corp. (b) $ 491,689
78,307 TD Ameritrade Holding Corp. (b) 1,570,839
-------------
2,062,528
-------------
Commercial Services &
Supplies--3.3%
37,139 Monster Worldwide, Inc. (b) 1,203,304
-------------
Health Care Technology--3.1%
17,948 Allscripts Healthcare Solutions,
Inc. (b) 348,550
58,817 HLTH Corp. (b) 788,148
-------------
1,136,698
-------------
Internet & Catalog Retail--18.9%
40,635 Amazon.com, Inc. (b) 3,764,425
6,292 Audible, Inc. (b) 56,125
63,975 IAC/InterActiveCorp. (b) 1,722,207
4,237 Overstock.com, Inc. (b) 65,801
11,109 Priceline.com, Inc. (b) 1,275,980
-------------
6,884,538
-------------
Internet Software &
Services--55.6%
51,060 Akamai Technologies, Inc. (b) 1,766,676
25,573 Ariba, Inc. (b) 285,139
41,407 Art Technology Group, Inc. (b) 178,878
14,072 Autobytel, Inc. (b) 38,698
15,774 CMGI, Inc. (b) 206,482
45,685 CNET Networks, Inc. (b) 417,561
12,806 DealerTrack Holdings, Inc. (b) 428,617
13,011 Digital River, Inc. (b) 430,274
39,024 EarthLink, Inc. (b) 275,900
110,407 eBay, Inc. (b) 3,664,407
5,243 Google, Inc., Class A (b) 3,625,430
10,696 InfoSpace, Inc. 201,085
15,862 Internap Network Services Corp. (b) 132,130
12,761 Interwoven, Inc. (b) 181,461
16,128 j2 Global Communications, Inc. (b) 341,430
7,303 Jupitermedia Corp. (b) 27,897
31,255 RealNetworks, Inc. (b) 190,343
20,133 SonicWALL, Inc. (b) 215,826
21,942 United Online, Inc. 259,354
32,353 ValueClick, Inc. (b) 708,531
71,638 VeriSign, Inc. (b) 2,694,305
8,632 Vignette Corp. (b) 126,114
14,531 Websense, Inc. (b) 246,736
153,379 Yahoo!, Inc. (b) 3,567,596
-------------
20,210,870
-------------
IT Services--1.7%
21,960 CyberSource Corp. (b) 390,229
26,368 Sapient Corp. (b) 232,302
-------------
622,531
-------------
Software--10.7%
113,434 BEA Systems, Inc. (b) $ 1,789,988
58,097 Check Point Software Technologies
Ltd. (b) 1,275,810
17,872 Quest Software, Inc. (b) 329,560
61,783 TIBCO Software, Inc. (b) 498,589
-------------
3,893,947
-------------
Total Common Stocks--99.0%
(Cost $38,881,967) 36,014,416
-------------
Money Market Funds--0.3%
109,845 J.P. Morgan Institutional Treasury
Money Market Fund - 3.09% (c)
(Cost $109,845) 109,845
-------------
Total Investments--99.3%
(Cost $38,991,812) 36,124,261
Net Other Assets and
Liabilities--0.7% 261,395
-------------
Net Assets--100.0% $ 36,385,656
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Represents annualized 7-day yield at December 31, 2007.
See Notes to Financial Statements. Page 53
FIRST TRUST DB STRATEGIC VALUE INDEX FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--100.0%
Biotechnology--2.2%
28,751 Amgen, Inc. (b) $ 1,335,196
-------------
Chemicals--2.4%
37,628 Dow Chemical (The) Co. 1,483,296
-------------
Computers & Peripherals--2.5%
14,454 International Business Machines
Corp. 1,562,477
-------------
Energy Equipment &
Services--5.3%
41,970 Halliburton Co. 1,591,083
29,402 Noble Corp. 1,661,507
-------------
3,252,590
-------------
Food & Staples Retailing--2.5%
32,306 Wal-Mart Stores, Inc. 1,535,504
-------------
Health Care Equipment &
Supplies--2.5%
22,792 Zimmer Holdings, Inc. (b) 1,507,691
-------------
Health Care Providers &
Services--2.5%
26,110 Cardinal Health, Inc. 1,507,853
-------------
Hotels, Restaurants &
Leisure--2.5%
35,034 Carnival Corp. 1,558,663
-------------
Machinery--9.7%
21,327 Caterpillar, Inc. 1,547,487
30,682 Ingersoll-Rand Co. Ltd., Class A 1,425,793
28,870 PACCAR, Inc. 1,572,837
19,278 Parker Hannifin Corp. 1,451,826
-------------
5,997,943
-------------
Media--7.5%
58,446 CBS Corp., Class B 1,592,654
75,078 News Corp., Class A 1,538,348
91,444 Time Warner, Inc. 1,509,740
-------------
4,640,742
-------------
Metals & Mining--2.5%
25,892 Nucor Corp. 1,533,324
-------------
Multiline Retail--2.3%
30,969 Kohl's Corp. (b) 1,418,380
-------------
Office Electronics--2.4%
90,247 Xerox Corp. 1,461,099
-------------
Oil, Gas & Consumable Fuels--19.0%
25,802 Anadarko Petroleum Corp. 1,694,933
15,860 Apache Corp. 1,705,585
17,352 Chevron Corp. 1,619,462
19,035 ConocoPhillips 1,680,791
Oil, Gas & Consumable
Fuels (Continued)
17,341 Exxon Mobil Corp. $ 1,624,678
27,110 Marathon Oil Corp. 1,649,915
21,859 Occidental Petroleum Corp. 1,682,924
-------------
11,658,288
-------------
Pharmaceuticals--12.3%
29,402 Eli Lilly & Co. 1,569,773
23,216 Johnson & Johnson 1,548,507
26,649 Merck & Co., Inc. 1,548,573
65,604 Pfizer, Inc. 1,491,179
32,419 Wyeth 1,432,596
-------------
7,590,628
-------------
Road & Rail--2.5%
29,923 Norfolk Southern Corp. 1,509,316
-------------
Semiconductors & Semiconductor
Equipment--5.1%
84,975 Applied Materials, Inc. 1,509,156
49,137 Texas Instruments, Inc. 1,641,176
-------------
3,150,332
-------------
Specialty Retail--9.7%
30,082 Best Buy Co., Inc. 1,583,817
53,769 Home Depot (The), Inc. 1,448,537
63,451 Lowe's Cos., Inc. 1,435,262
63,989 Staples, Inc. 1,476,226
-------------
5,943,842
-------------
Textiles, Apparel & Luxury
Goods--2.5%
24,242 NIKE, Inc., Class B 1,557,306
-------------
Wireless Telecommunication
Services--2.1%
100,420 Sprint Nextel Corp. 1,318,515
-------------
Total Investments--100.0%
(Cost $63,126,173) 61,522,985
Net Other Assets and
Liabilities--(0.0%) (5,292)
-------------
Net Assets--100.0% $ 61,517,693
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
Page 54 See Notes to Financial Statements.
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--100.4%
Aerospace & Defense--2.7%
576 Ceradyne, Inc. (b) $ 27,032
1,977 Northrop Grumman Corp. 155,471
2,789 Raytheon Co. 169,292
-------------
351,795
-------------
Air Freight & Logistics--1.3%
1,108 Forward Air Corp. 34,536
2,001 United Parcel Service, Inc.,
Class B 141,511
-------------
176,047
-------------
Airlines--0.2%
4,223 AirTran Holdings, Inc. (b) 30,237
-------------
Auto Components--0.6%
3,003 Gentex Corp. 53,363
1,180 Tenneco, Inc. (b) 30,763
-------------
84,126
-------------
Automobiles--2.0%
5,026 General Motors Corp. 125,097
1,287 Toyota Motor Corp. ADR 136,641
-------------
261,738
-------------
Beverages--1.7%
1,347 Hansen Natural Corp. (b) 59,659
2,260 PepsiCo, Inc. 171,534
-------------
231,193
-------------
Biotechnology--0.9%
1,270 LifeCell Corp. (b) 54,750
619 United Therapeutics Corp. (b) 60,445
-------------
115,195
-------------
Chemicals--2.3%
1,734 Air Products and Chemicals, Inc. 171,024
3,110 Hercules, Inc. 60,179
1,295 Sigma-Aldrich Corp. 70,707
-------------
301,910
-------------
Commercial Banks--2.0%
3,395 Huntington Bancshares, Inc. 50,110
2,142 Old National Bancorp 32,044
2,175 PNC Financial Services Group, Inc. 142,789
1,644 Whitney Holding Corp. 42,991
-------------
267,934
-------------
Commercial Services &
Supplies--1.6%
701 Advisory Board (The) Co. (b) 44,997
4,839 Allied Waste Industries, Inc. (b) 53,326
1,714 Copart, Inc. (b) 72,931
1,136 HNI Corp. 39,828
-------------
211,082
-------------
Communications Equipment--3.9%
2,579 ADC Telecommunications, Inc. (b) $ 40,103
1,006 Dycom Industries, Inc. (b) 26,810
5,135 Nokia Oyj ADR 197,133
2,225 Research In Motion Ltd. (b) 252,315
-------------
516,361
-------------
Computers & Peripherals--1.1%
1,363 International Business Machines
Corp. 147,340
-------------
Containers & Packaging--1.3%
1,482 Bemis Co., Inc. 40,577
2,626 Crown Holdings, Inc. (b) 67,357
2,162 Sonoco Products Co. 70,654
-------------
178,588
-------------
Distributors--0.4%
2,560 LKQ Corp. (b) 53,811
-------------
Diversified Consumer
Services--2.2%
2,674 Apollo Group, Inc., Class A (b) 187,581
922 Bright Horizons Family Solutions,
Inc. (b) 31,846
390 Strayer Education, Inc. 66,526
-------------
285,953
-------------
Diversified Financial
Services--0.8%
2,807 Moody's Corp. 100,210
-------------
Diversified Telecommunication
Services--2.1%
1,463 CenturyTel, Inc. 60,656
8,805 Cincinnati Bell, Inc. (b) 41,824
18,345 Qwest Communications
International, Inc. (b) 128,598
3,100 Telecom Corp. of New Zealand
Ltd. ADR 51,491
-------------
282,569
-------------
Electric Utilities--3.4%
963 ALLETE, Inc. 38,116
1,825 El Paso Electric Co. (b) 46,665
1,825 Hawaiian Electric Industries, Inc. 41,555
1,512 Pinnacle West Capital Corp. 64,124
1,473 Portland General Electric Co. 40,920
6,142 Reliant Energy, Inc. (b) 161,166
2,463 Westar Energy, Inc. 63,890
-------------
456,436
-------------
Electronic Equipment &
Instruments--1.4%
1,445 Arrow Electronics, Inc. (b) 56,760
3,975 AVX Corp. 53,345
2,438 FLIR Systems, Inc. (b) 76,309
-------------
186,414
-------------
See Notes to Financial Statements. Page 55
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (Continued)
Energy Equipment & Services--9.9%
539 Core Laboratories N.V. (b) $ 67,224
1,593 Diamond Offshore Drilling, Inc. 226,205
2,675 ENSCO International, Inc. 159,484
2,811 Global Industries Ltd. (b) 60,212
4,621 Halliburton Co. 175,182
1,947 Helmerich & Payne, Inc. 78,016
3,163 Noble Corp. 178,741
1,667 Schlumberger Ltd. 163,983
1,431 Transocean, Inc. 204,848
-------------
1,313,895
-------------
Food Products--0.7%
1,988 Flowers Foods, Inc. 46,539
1,026 Lancaster Colony Corp. 40,732
-------------
87,271
-------------
Gas Utilities--2.3%
2,209 Atmos Energy Corp. 61,940
933 New Jersey Resources Corp. 46,669
853 Northwest Natural Gas Co. 41,507
1,169 South Jersey Industries, Inc. 42,189
2,587 UGI Corp. 70,496
1,237 WGL Holdings, Inc. 40,524
-------------
303,325
-------------
Health Care Equipment &
Supplies--2.1%
781 ArthroCare Corp. (b) 37,527
1,235 Hillenbrand Industries, Inc. 68,826
1,139 IDEXX Laboratories, Inc. (b) 66,780
1,226 Immucor, Inc. (b) 41,672
1,081 Kinetic Concepts, Inc. (b) 57,898
-------------
272,703
-------------
Household Durables--2.3%
1,542 Garmin Ltd. 149,574
3,091 Leggett & Platt, Inc. 53,907
2,094 Tempur-Pedic International, Inc. 54,381
1,374 Tupperware Brands Corp. 45,383
-------------
303,245
-------------
Industrial Conglomerates--1.1%
1,786 3M Co. 150,596
-------------
Insurance--8.7%
929 Ambac Financial Group, Inc. 23,940
1,707 Assured Guaranty Ltd. 45,304
42 Berkshire Hathaway, Inc., Class B (b) 198,913
639 Everest Re Group Ltd. 64,156
1,463 Hanover Insurance Group, Inc. 67,005
3,466 Loews Corp. 174,478
1,609 MaxCapital Group Ltd. 45,036
2,667 MetLife, Inc. 164,341
622 RLI Corp. 35,323
Insurance (Continued)
976 Transatlantic Holdings, Inc. $ 70,926
3,033 Travelers (The) Cos., Inc. 163,175
2,043 XL Capital Ltd., Class A 102,783
-------------
1,155,380
-------------
Life Sciences Tools &
Services--0.5%
758 Ventana Medical Systems, Inc. (b) 66,120
-------------
Machinery--9.5%
1,315 Actuant Corp., Class A 44,723
772 Astec Industries, Inc. (b) 28,711
1,284 Barnes Group, Inc. 42,873
917 Cascade Corp. 42,604
1,052 CLARCOR, Inc. 39,944
3,036 CNH Global N.V. 199,830
1,346 Cummins, Inc. 171,440
1,076 Gardner Denver, Inc. (b) 35,508
1,462 Graco, Inc. 54,474
2,811 Illinois Tool Works, Inc. 150,501
1,279 Joy Global, Inc. 84,184
746 Kaydon Corp. 40,687
830 Lincoln Electric Holdings, Inc. 59,079
2,240 Parker Hannifin Corp. 168,694
1,080 Toro (The) Co. 58,795
492 Valmont Industries, Inc. 43,847
-------------
1,265,894
-------------
Media--2.4%
6,036 Comcast Corp., Class A (b) 110,217
1,633 Harte-Hanks, Inc. 28,251
2,882 Lee Enterprises, Inc. 42,221
8,246 Time Warner, Inc. 136,142
-------------
316,831
-------------
Metals & Mining--3.9%
2,614 BHP Billiton Ltd. ADR 183,084
913 Cleveland-Cliffs, Inc. 92,030
2,041 Fording Canadian Coal Trust 78,783
1,582 Southern Copper Corp. 166,316
-------------
520,213
-------------
Multi-Utilities--3.1%
1,658 Alliant Energy Corp. 67,464
3,034 Ameren Corp. 164,473
1,902 NSTAR 68,890
1,969 OGE Energy Corp. 71,455
1,686 PNM Resources, Inc. 36,165
-------------
408,447
-------------
Oil, Gas & Consumable Fuels--9.0%
1,139 Berry Petroleum Co., Class A 50,629
2,262 Canadian Natural Resources Ltd. 165,443
1,817 Exxon Mobil Corp. 170,235
1,708 Frontier Oil Corp. 69,311
1,485 Frontline Ltd. 71,280
Page 56 See Notes to Financial Statements.
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (Continued)
Oil, Gas & Consumable Fuels
(Continued)
1,054 Holly Corp. $ 53,638
3,563 Imperial Oil Ltd. 195,180
3,018 Marathon Oil Corp. 183,675
2,137 Massey Energy Co. 76,398
3,064 Petro-Canada 164,292
-------------
1,200,081
-------------
Personal Products--0.3%
1,614 NBTY, Inc. (b) 44,224
-------------
Real Estate Investment Trusts--1.2%
2,484 ProLogis 157,436
-------------
Road & Rail--2.3%
3,267 CSX Corp. 143,683
1,316 Union Pacific Corp. 165,316
-------------
308,999
-------------
Semiconductors & Semiconductor
Equipment--2.8%
7,018 Applied Materials, Inc. 124,640
2,810 Brooks Automation, Inc. (b) 37,120
1,764 Lam Research Corp. (b) 76,258
4,323 Linear Technology Corp. 137,601
-------------
375,619
-------------
Software--1.4%
820 Advent Software, Inc. (b) 44,362
2,805 SAP AG ADR 143,195
-------------
187,557
-------------
Specialty Retail--2.0%
1,913 Aeropostale, Inc. (b) 50,695
1,246 Barnes & Noble, Inc. 42,925
1,240 Guess?, Inc. 46,984
2,221 Sherwin-Williams (The) Co. 128,906
-------------
269,510
-------------
Textiles, Apparel & Luxury
Goods--0.5%
431 Deckers Outdoor Corp. (b) 66,831
-------------
Tobacco--1.7%
2,355 British American Tobacco PLC ADR 185,009
814 Universal Corp. 41,693
-------------
226,702
-------------
Trading Companies & Distributors--0.8%
1,368 Applied Industrial Technologies, Inc. 39,699
711 W.W. Grainger, Inc. 62,227
-------------
101,926
-------------
Total Investments--100.4%
(Cost $12,674,262) $ 13,341,744
Net Other Assets and
Liabilities--(0.4%) (50,378)
-------------
Net Assets--100.0% $ 13,291,366
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
ADR - American Depositary Receipt.
See Notes to Financial Statements. Page 57
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--100.0%
Air Freight & Logistics--0.5%
13,790 United Parcel Service, Inc.,
Class B $ 975,229
-------------
Auto Components--0.6%
18,804 Autoliv, Inc. 991,159
-------------
Automobiles--1.1%
30,077 Honda Motor Co., Ltd. ADR 996,752
9,445 Toyota Motor Corp. ADR 1,002,775
-------------
1,999,527
-------------
Beverages--1.1%
18,906 Anheuser-Busch Cos., Inc. 989,540
16,026 Coca-Cola (The) Co. 983,516
-------------
1,973,056
-------------
Building Products--0.6%
46,681 Masco Corp. 1,008,776
-------------
Capital Markets--1.1%
23,999 Federated Investors, Inc., Class B 987,799
18,794 Merrill Lynch & Co., Inc. 1,008,862
-------------
1,996,661
-------------
Chemicals--1.7%
21,312 Ashland, Inc. 1,010,828
22,396 E.I. du Pont de Nemours & Co. 987,440
14,108 PPG Industries, Inc. 990,805
-------------
2,989,073
-------------
Commercial Banks--15.3%
35,807 Associated Banc-Corp. 970,012
19,495 Bank of Hawaii Corp. 996,974
17,737 Bank of Montreal 1,003,914
19,593 Bank of Nova Scotia 989,447
31,361 BB&T Corp. 961,842
13,922 Canadian Imperial Bank of Commerce 994,448
16,444 City National Corp. 979,240
22,566 Comerica, Inc. 982,298
22,371 Commerce Bancshares, Inc. 1,003,563
19,503 Cullen/Frost Bankers, Inc. 988,022
37,490 Fifth Third Bancorp. 942,124
31,596 First Midwest Bancorp, Inc. 966,838
12,278 M&T Bank Corp. 1,001,516
36,769 Marshall & Ilsley Corp. 973,643
58,251 National City Corp. 958,811
64,439 Old National Bancorp 964,007
15,228 PNC Financial Services Group, Inc. 999,718
40,912 Regions Financial Corp. 967,569
19,812 Royal Bank of Canada 1,011,205
16,151 SunTrust Banks, Inc. 1,009,277
41,262 Synovus Financial Corp. 993,589
14,302 Toronto-Dominion Bank (The) 1,000,425
31,130 U.S. Bancorp 988,066
25,465 Wachovia Corp. 968,434
32,467 Wells Fargo & Co. 980,179
Commercial Banks (Continued)
37,925 Whitney Holding Corp. $ 991,739
28,052 Wilmington Trust Corp. 987,430
20,745 Zions Bancorporation 968,584
-------------
27,542,914
-------------
Commercial Services &
Supplies--3.9%
19,332 Avery Dennison Corp. 1,027,303
16,541 Corporate Executive Board
(The) Co. 994,114
27,586 HNI Corp. 967,165
26,428 Pitney Bowes, Inc. 1,005,321
27,063 R.R. Donnelley & Sons Co. 1,021,358
31,044 Republic Services, Inc. 973,229
29,979 Waste Management, Inc. 979,414
-------------
6,967,904
-------------
Computers & Peripherals--0.5%
33,487 Diebold, Inc. 970,453
-------------
Construction Materials--0.5%
12,461 Vulcan Materials Co. 985,540
-------------
Containers & Packaging--1.1%
37,911 Bemis Co., Inc. 1,038,003
30,112 Sonoco Products Co. 984,060
-------------
2,022,063
-------------
Distributors--0.5%
20,711 Genuine Parts Co. 958,919
-------------
Diversified Financial
Services--0.6%
23,959 Bank of America Corp. 988,548
-------------
Diversified Telecommunication
Services--2.2%
24,409 AT&T, Inc. 1,014,438
60,189 Telecom Corp. of New Zealand
Ltd. ADR 999,739
10,352 Telefonica S.A. ADR 1,010,252
22,616 Verizon Communications, Inc. 988,093
-------------
4,012,522
-------------
Electric Utilities--8.3%
24,587 ALLETE, Inc. 973,153
49,365 Duke Energy Corp. 995,692
8,438 Entergy Corp. 1,008,510
12,344 Exelon Corp. 1,007,764
13,663 FirstEnergy Corp. 988,381
14,807 FPL Group, Inc. 1,003,618
34,350 Great Plains Energy, Inc. 1,007,142
43,606 Hawaiian Electric Industries, Inc. 992,909
27,385 Otter Tail Corp. 947,521
23,519 Pinnacle West Capital Corp. 997,441
37,643 Portland General Electric Co. 1,045,722
19,332 PPL Corp. 1,007,004
Page 58 See Notes to Financial Statements.
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (Continued)
Electric Utilities (Continued)
20,518 Progress Energy, Inc. $ 993,687
25,881 Southern Co. 1,002,889
37,939 Westar Energy, Inc. 984,138
-------------
14,955,571
-------------
Electrical Equipment--1.1%
17,632 Emerson Electric Co. 999,029
19,095 Hubbell, Inc., Class B 985,302
-------------
1,984,331
-------------
Food & Staples Retailing--1.1%
31,459 Sysco Corp. 981,836
24,380 Weis Markets, Inc. 973,737
-------------
1,955,573
-------------
Food Products--7.7%
19,800 Cadbury Schweppes PLC ADR 977,526
27,730 Campbell Soup Co. 990,793
41,618 ConAgra Foods, Inc. 990,092
17,477 General Mills, Inc. 996,189
21,443 H.J. Heinz Co. 1,000,959
25,535 Hershey (The) Co. 1,006,079
19,735 J.M. Smucker (The) Co. 1,015,168
18,895 Kellogg Co. 990,665
30,347 Kraft Foods, Inc., Class A 990,223
24,257 Lancaster Colony Corp. 963,003
25,980 McCormick & Co., Inc. 984,902
62,299 Sara Lee Corp. 1,000,522
26,798 Unilever PLC ADR 1,002,781
16,925 Wm. Wrigley Jr. Co. 990,959
-------------
13,899,861
-------------
Gas Utilities--4.9%
27,187 AGL Resources, Inc. 1,023,318
35,222 Atmos Energy Corp. 987,625
20,968 National Fuel Gas Co. 978,786
19,689 New Jersey Resources Corp. 984,844
20,219 Northwest Natural Gas Co. 983,857
36,490 Piedmont Natural Gas Co. 954,578
26,671 South Jersey Industries, Inc. 962,556
37,338 UGI Corp. 1,017,461
29,602 WGL Holdings, Inc. 969,762
-------------
8,862,787
-------------
Health Care Equipment &
Supplies--0.6%
18,089 Hillenbrand Industries, Inc. 1,008,100
-------------
Hotels, Restaurants &
Leisure--0.5%
16,796 McDonald's Corp. 989,452
-------------
Household Durables--1.7%
13,680 Fortune Brands, Inc. 989,885
57,555 Leggett & Platt, Inc. 1,003,759
Household Durables (Continued)
20,852 Snap-on, Inc. $ 1,005,900
-------------
2,999,544
-------------
Household Products--1.1%
15,311 Clorox (The) Co. 997,818
14,506 Kimberly-Clark Corp. 1,005,846
-------------
2,003,664
-------------
Industrial Conglomerates--1.7%
11,743 3M Co. 990,170
26,991 General Electric Co. 1,000,556
16,566 Teleflex, Inc. 1,043,824
-------------
3,034,550
-------------
Insurance--6.0%
19,167 Allstate (The) Corp. 1,001,092
18,384 Chubb (The) Corp. 1,003,399
25,012 Cincinnati Financial Corp. 988,974
18,783 Erie Indemnity Co., Class A 974,650
16,903 Lincoln National Corp. 984,093
24,665 Manulife Financial Corp. 1,005,099
19,921 Mercury General Corp. 992,265
64,439 Old Republic International Corp. 993,005
23,868 Protective Life Corp. 979,065
18,391 Travelers (The) Cos., Inc. 989,436
19,265 XL Capital Ltd., Class A 969,222
-------------
10,880,300
-------------
IT Services--1.1%
22,132 Automatic Data Processing, Inc. 985,538
27,034 Paychex, Inc. 979,171
-------------
1,964,709
-------------
Machinery--1.1%
13,934 Caterpillar, Inc. 1,011,051
18,388 Illinois Tool Works, Inc. 984,494
-------------
1,995,545
-------------
Media--1.7%
25,974 Gannett Co., Inc. 1,012,986
57,951 New York Times (The) Co., Class A 1,015,881
24,725 Thomson (The) Corp. 1,007,544
-------------
3,036,411
-------------
Multi-Utilities--8.9%
24,193 Alliant Energy Corp. 984,413
18,600 Ameren Corp. 1,008,307
20,860 Consolidated Edison, Inc. 1,019,012
20,929 Dominion Resources, Inc. 993,081
37,201 Energy East Corp. 1,012,240
19,480 Integrys Energy Group, Inc. 1,006,921
36,307 MDU Resources Group, Inc. 1,002,436
27,624 NSTAR 1,000,541
27,722 OGE Energy Corp. 1,006,031
22,758 PG&E Corp. 980,642
See Notes to Financial Statements. Page 59
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (Continued)
Multi-Utilities (Continued)
45,384 PNM Resources, Inc. $ 973,487
23,541 SCANA Corp. 992,253
16,061 Sempra Energy 993,855
33,924 Vectren Corp. 984,135
20,394 Wisconsin Energy Corp. 993,392
44,062 Xcel Energy, Inc. 994,479
-------------
15,945,225
-------------
Oil, Gas & Consumable
Fuels--3.4%
13,793 BP PLC ADR 1,009,234
10,722 Chevron Corp. 1,000,684
25,356 Enbridge, Inc. 1,025,143
12,137 Royal Dutch Shell PLC ADR 1,021,935
12,517 Total SA ADR 1,033,904
25,018 TransCanada Corp. 1,023,987
-------------
6,114,887
-------------
Paper & Forest Products--0.5%
30,539 International Paper Co. 988,853
-------------
Pharmaceuticals--4.4%
17,360 Abbott Laboratories 974,764
36,152 Bristol-Myers Squibb Co. 958,751
18,590 Eli Lilly and Co. 992,520
19,769 GlaxoSmithKline PLC ADR 996,159
14,925 Johnson & Johnson 995,498
43,420 Pfizer, Inc. 986,937
21,640 Sanofi-Aventis ADR 985,269
22,288 Wyeth 984,907
-------------
7,874,805
-------------
Real Estate Investment
Trusts--8.0%
23,757 BRE Properties, Inc. 962,871
37,242 Duke Realty Corp. 971,271
26,067 Equity Residential 950,663
11,957 Federal Realty Investment Trust 982,268
29,533 Health Care Property Investors, Inc. 1,027,159
25,756 Kimco Realty Corp. 937,518
32,719 Liberty Property Trust 942,634
28,615 Mack-Cali Realty Corp. 972,910
21,007 Plum Creek Timber Co., Inc. 967,162
15,990 ProLogis 1,013,446
12,707 Public Storage 932,821
10,810 Simon Property Group, Inc. 938,957
47,335 United Dominion Realty Trust, Inc. 939,600
30,548 Washington Real Estate
Investment Trust 959,513
29,828 Weingarten Realty Investors 937,792
-------------
14,436,585
-------------
Specialty Retail--1.1%
37,504 Home Depot (The), Inc. $ 1,010,357
17,143 Sherwin-Williams (The) Co. 994,980
-------------
2,005,337
-------------
Textiles, Apparel & Luxury
Goods--0.5%
13,724 VF Corp. 942,290
-------------
Thrifts & Mortgage Finance--2.2%
41,532 Astoria Financial Corp. 966,450
31,606 Capitol Federal Financial 979,786
30,752 Freddie Mac 1,047,720
45,961 Washington Federal, Inc. 970,237
-------------
3,964,193
-------------
Tobacco--1.1%
13,057 Altria Group, Inc. 986,848
19,211 Universal Corp. 983,987
-------------
1,970,835
-------------
Total Investments--100.0%
(Cost $189,756,276) 180,195,752
Net Other Assets and
Liabilities--0.0% (42,530)
-------------
Net Assets--100.0% $ 180,153,222
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
ADR - American Depositary Receipt.
Page 60 See Notes to Financial Statements.
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (1)--100.0%
Air Freight & Logistics--3.3%
677 C.H. Robinson Worldwide, Inc. $ 36,639
763 Expeditors International of
Washington, Inc. 34,091
-------------
70,730
-------------
Airlines--3.2%
921 Ryanair Holdings PLC ADR (b) 36,325
908 UAL Corp. (b) 32,379
-------------
68,704
-------------
Beverages--1.6%
755 Hansen Natural Corp. (b) 33,439
-------------
Biotechnology--12.5%
712 Amgen, Inc. (b) 33,065
932 Amylin Pharmaceuticals, Inc. (b) 34,484
470 Biogen Idec, Inc. (b) 26,752
706 Celgene Corp. (b) 32,624
466 Cephalon, Inc. (b) 33,440
490 Genzyme Corp. (b) 36,477
772 Gilead Sciences, Inc. (b) 35,520
1,406 Vertex Pharmaceuticals, Inc. (b) 32,661
-------------
265,023
-------------
Chemicals--1.7%
662 Sigma-Aldrich Corp. 36,145
-------------
Commercial Services &
Supplies--4.9%
1,059 Cintas Corp. 35,604
1,031 Monster Worldwide, Inc. (b) 33,404
597 Stericycle, Inc. (b) 35,462
-------------
104,470
-------------
Construction & Engineering--1.7%
226 Foster Wheeler Ltd. (b) 35,035
-------------
Diversified Consumer
Services--1.6%
485 Apollo Group, Inc., Class A (b) 34,023
-------------
Diversified Telecommunication
Services--1.5%
10,257 Level 3 Communications, Inc. (b) 31,181
-------------
Electronic Equipment &
Instruments--1.7%
2,999 Flextronics International Ltd. (b) 36,168
-------------
Food & Staples Retailing--3.3%
506 Costco Wholesale Corp. 35,299
824 Whole Foods Market, Inc. 33,619
-------------
68,918
-------------
Health Care Equipment & Supplies--5.1%
797 DENTSPLY International, Inc. 35,881
Health Care Equipment &
Supplies (Continued)
557 Hologic, Inc. (b) $ 38,232
105 Intuitive Surgical, Inc. (b) 34,073
-------------
108,186
-------------
Health Care Providers &
Services--5.2%
501 Express Scripts, Inc. (b) 36,573
582 Henry Schein, Inc. (b) 35,735
1,094 Patterson Cos., Inc. (b) 37,141
-------------
109,449
-------------
Hotels, Restaurants &
Leisure--3.1%
1,618 Starbucks Corp. (b) 33,120
296 Wynn Resorts Ltd. 33,191
-------------
66,311
-------------
Household Durables--1.6%
337 Garmin Ltd. 32,689
-------------
Internet & Catalog Retail--6.4%
390 Amazon.com, Inc. (b) 36,130
1,054 Expedia, Inc. (b) 33,327
1,282 IAC/InterActiveCorp (b) 34,511
1,683 Liberty Media Corp. - Interactive,
Class A (b) 32,112
-------------
136,080
-------------
Internet Software &
Services--1.6%
1,049 eBay, Inc. (b) 34,816
-------------
IT Services--3.2%
653 Fiserv, Inc. (b) 36,235
893 Paychex, Inc. 32,344
-------------
68,579
-------------
Machinery--3.6%
609 Joy Global, Inc. 40,085
653 PACCAR, Inc. 35,575
-------------
75,660
-------------
Media--12.9%
1,986 Comcast Corp., Class A (b) 36,264
1,324 Discovery Holding Co., Class A (b) 33,285
911 EchoStar Communications Corp.,
Class A (b) 34,363
645 Focus Media Holding Ltd. ADR (b) 36,642
712 Lamar Advertising Co., Class A 34,226
882 Liberty Global, Inc., Class A (b) 34,566
10,139 Sirius Satellite Radio, Inc. (b) 30,721
1,982 Virgin Media, Inc. 33,971
-------------
274,038
-------------
See Notes to Financial Statements. Page 61
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (1) (Continued)
Metals & Mining--1.9%
660 Steel Dynamics, Inc. $ 39,316
-------------
Multiline Retail--1.6%
321 Sears Holdings Corp. (b) 32,758
-------------
Pharmaceuticals--1.7%
788 Teva Pharmaceutical Industries
Ltd. ADR 36,626
-------------
Software--3.6%
1,344 Activision, Inc. (b) 39,917
636 Electronic Arts, Inc. (b) 37,149
-------------
77,066
-------------
Specialty Retail--4.6%
1,147 Bed Bath & Beyond, Inc. (b) 33,710
1,275 PetSmart, Inc. 30,001
1,495 Staples, Inc. 34,490
-------------
98,201
-------------
Trading Companies &
Distributors--1.6%
838 Fastenal Co. 33,872
-------------
Wireless Telecommunication
Services--5.3%
922 Leap Wireless International,
Inc. (b) 43,002
299 Millicom International Cellular
S.A. (b) 35,264
687 NII Holdings, Inc. (b) 33,196
-------------
111,462
-------------
Total Common Stocks--100.0%
(Cost $2,327,753) 2,118,945
-------------
Money Market Funds--2.5%
25,000 Federated Treasury Obligation -
3.36% (c) 25,000
28,693 J.P. Morgan Institutional Treasury
Money Market Fund - 3.09% (c) 28,693
-------------
Total Money Market Funds--2.5%
(Cost $53,693) 53,693
-------------
Total Investments--102.5%
(Cost $2,381,446) 2,172,638
Net Other Assets and
Liabilities--(2.5%) (54,066)
-------------
Net Assets--100.0% $ 2,118,572
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Represents annualized 7-day yield at December 31, 2007.
ADR - American Depositary Receipt.
(1) The industry allocation is based on Standard & Poor's Global Industry
Classification Standard (GICS), and is different than the industry sector
classification system used by the Index to select securities, which is the
Industry Classification Benchmark (ICB) system, the joint classification system
of Dow Jones Indexes and FTSE Group.
Page 62 See Notes to Financial Statements.
FIRST TRUST NASDAQ(R) CLEAN EDGE(R) U.S. LIQUID SERIES INDEX FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--99.8%
Aerospace & Defense--2.9%
60,381 Hexcel Corp. (b) $ 1,466,051
-------------
Auto Components--0.7%
72,383 Ballard Power Systems, Inc. (b) 380,735
-------------
Beverages--0.2%
10,423 MGP Ingredients, Inc. 98,185
-------------
Biotechnology--0.7%
14,167 Metabolix, Inc. (b) 337,175
-------------
Chemicals--2.2%
44,504 Altair Nanotechnologies, Inc. (b) 188,252
21,358 Zoltek Cos., Inc. (b) 915,617
-------------
1,103,869
-------------
Electrical Equipment--40.1%
25,978 American Superconductor Corp. (b) 710,239
28,987 Baldor Electric Co. 975,702
17,595 Canadian Solar, Inc. (b) 495,299
92,262 Capstone Turbine Corp. (b) 150,387
33,450 China BAK Battery, Inc. (b) 209,063
25,254 Energy Conversion Devices, Inc. (b) 849,797
64,030 Evergreen Solar, Inc. (b) 1,105,798
16,105 First Solar, Inc. (b) 4,302,289
43,006 FuelCell Energy, Inc. (b) 426,620
64,791 GrafTech International Ltd. (b) 1,150,040
10,628 Hoku Scientific, Inc. (b) 121,159
11,944 JA Solar Holdings Co., Ltd. ADR (b) 833,811
22,142 Medis Technologies Ltd. (b) 341,651
55,480 Plug Power, Inc. (b) 219,146
55,175 Power-One, Inc. (b) 220,148
24,810 SunPower Corp., Class A (b) 3,234,976
49,626 Suntech Power Holdings Co.
Ltd. ADR (b) 4,085,212
18,769 Vicor Corp. 292,609
18,633 Yingli Green Energy Holding Co.,
Ltd. ADR (b) 721,097
-------------
20,445,043
-------------
Electronic Equipment &
Instruments--8.5%
108,296 AVX Corp. 1,453,332
12,934 Comverge, Inc. (b) 407,292
25,697 Echelon Corp. (b) 530,386
19,332 Itron, Inc. (b) 1,855,292
12,876 Maxwell Technologies, Inc. (b) 106,485
-------------
4,352,787
-------------
Health Care Equipment &
Supplies--0.6%
14,199 Greatbatch, Inc. (b) 283,838
-------------
Independent Power Producers
& Energy Traders--2.8%
26,224 Ormat Technologies, Inc. 1,442,582
-------------
IT Services--1.2%
12,072 EnerNOC, Inc. (b) $ 592,735
-------------
Oil, Gas & Consumable Fuels--4.8%
26,518 Aventine Renewable Energy
Holdings, Inc. (b) 338,370
69,447 Nova Biosource Fuels, Inc. (b) 201,396
25,648 Pacific Ethanol, Inc. (b) 210,570
50,295 US BioEnergy Corp. (b) 588,954
58,681 VeraSun Energy (b) 896,647
39,861 Verenium Corp. (b) 198,906
-------------
2,434,843
-------------
Semiconductors & Semiconductor
Equipment--35.1%
28,419 Advanced Analogic Technologies,
Inc. (b) 320,566
53,867 Cree, Inc. (b) 1,479,726
32,544 EMCORE Corp. (b) 497,923
78,592 Fairchild Semiconductor International,
Inc. (b) 1,134,083
45,804 International Rectifier Corp. (b) 1,555,962
20,336 IXYS Corp. (b) 163,095
11,372 LDK Solar Co., Ltd. ADR (b) 534,598
122,437 Linear Technology Corp. 3,897,170
45,680 MEMC Electronic Materials, Inc. (b) 4,042,222
48,833 Microsemi Corp. (b) 1,081,163
23,985 O2Micro International Ltd. ADR (b) 276,787
184,617 ON Semiconductor Corp. (b) 1,639,399
18,708 Power Integrations, Inc. (b) 644,116
11,288 Trina Solar Ltd. ADR (b) 607,294
-------------
17,874,104
-------------
Total Common Stocks--99.8%
(Cost $45,239,978) 50,811,947
-------------
Rights--0.0%
Electrical Equipment--0.0%
1,347 Medis Technologies Ltd.
(Cost $0) 0
-------------
Total Investments--99.8%
(Cost $45,239,978) 50,811,947
Net Other Assets and
Liabilities--0.2% 101,088
-------------
Net Assets--100.0% $ 50,913,035
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
ADR - American Depositary Receipt.
See Notes to Financial Statements. Page 63
FIRST TRUST S&P REIT INDEX FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--99.3%
Real Estate Investment Trusts--99.3%
187 Acadia Realty Trust $ 4,789
45 Agree Realty Corp. 1,355
186 Alexandria Real Estate Equities, Inc. 18,911
577 AMB Property Corp. 33,212
159 American Campus Communities, Inc. 4,269
41 American Land Lease, Inc. 813
557 Apartment Investment &
Management Co. 19,345
615 Ashford Hospitality Trust 4,422
86 Associated Estates Realty Corp. 812
459 AvalonBay Communities, Inc. 43,210
381 BioMed Realty Trust, Inc. 8,828
695 Boston Properties, Inc. 63,808
506 Brandywine Realty Trust 9,073
296 BRE Properties, Inc. 11,997
324 Camden Property Trust 15,601
383 CBL & Associates Properties, Inc. 9,158
258 Cedar Shopping Centers, Inc. 2,639
60 Cogdell Spencer, Inc. 956
274 Colonial Properties Trust 6,201
276 Corporate Office Properties Trust 8,694
218 Cousins Properties, Inc. 4,818
981 DCT Industrial Trust, Inc. 9,133
716 Developers Diversified Realty Corp. 27,416
552 DiamondRock Hospitality Co. 8,269
377 Digital Realty Trust, Inc. 14,465
848 Duke Realty Corp. 22,116
139 EastGroup Properties, Inc. 5,817
166 Education Realty Trust, Inc. 1,866
164 Entertainment Properties Trust 7,708
142 Equity Lifestyle Properties, Inc. 6,485
215 Equity One, Inc. 4,951
1,579 Equity Residential 57,586
147 Essex Property Trust, Inc. 14,331
380 Extra Space Storage, Inc. 5,430
330 Federal Realty Investment Trust 27,110
364 FelCor Lodging Trust, Inc. 5,675
260 First Industrial Realty Trust, Inc. 8,996
141 First Potomac Realty Trust 2,438
1,420 General Growth Properties, Inc. 58,476
220 Glimcher Realty Trust 3,144
1,260 HCP, Inc. 43,823
495 Health Care REIT, Inc. 22,122
295 Healthcare Realty Trust, Inc. 7,490
240 Hersha Hospitality Trust 2,280
333 Highwoods Properties, Inc. 9,784
194 Home Properties, Inc. 8,701
547 Hospitality Properties Trust 17,624
3,044 Host Hotels & Resorts, Inc. 51,870
1,313 HRPT Properties Trust 10,149
340 Inland Real Estate Corp. 4,814
321 Investors Real Estate Trust 2,879
782 iStar Financial, Inc. 20,371
191 Kilroy Realty Corp. 10,497
1,472 Kimco Realty Corp. 53,581
Real Estate Investment Trusts (Continued)
169 Kite Realty Group Trust $ 2,581
234 LaSalle Hotel Properties 7,465
371 Lexington Realty Trust 5,394
533 Liberty Property Trust 15,356
118 LTC Properties, Inc. 2,956
423 Macerich (The) Co. 30,058
396 Mack-Cali Realty Corp. 13,464
293 Medical Properties Trust, Inc. 2,986
149 Mid-America Apartment
Communities, Inc. 6,370
140 Monmouth Real Estate Investment Corp. 1,134
137 National Health Investors, Inc. 3,822
419 National Retail Properties, Inc. 9,796
541 Nationwide Health Properties, Inc. 16,971
47 One Liberty Properties, Inc. 863
90 Parkway Properties, Inc. 3,328
227 Pennsylvania Real Estate Investment
Trust 6,737
1,004 Plum Creek Timber Co., Inc. 46,224
255 Post Properties, Inc. 8,956
228 Potlatch Corp. 10,132
1,500 ProLogis 95,069
93 PS Business Parks, Inc. 4,887
725 Public Storage 53,222
108 Ramco-Gershenson Properties Trust 2,308
455 Rayonier, Inc. 21,494
589 Realty Income Corp. 15,915
406 Regency Centers Corp. 26,183
63 Saul Centers, Inc. 3,366
517 Senior Housing Properties Trust 11,726
1,299 Simon Property Group, Inc. 112,830
345 SL Green Realty Corp. 32,244
126 Sovran Self Storage, Inc. 5,053
433 Strategic Hotels & Resorts, Inc. 7,244
94 Sun Communities, Inc. 1,981
346 Sunstone Hotel Investors, Inc. 6,328
102 Supertel Hospitality, Inc. 626
182 Tanger Factory Outlet Centers, Inc. 6,863
307 Taubman Centers, Inc. 15,101
761 Thornburg Mortgage, Inc. 7,032
782 UDR, Inc. 15,523
69 Universal Health Realty Income Trust 2,445
129 Urstadt Biddle Properties, Inc., Class A 2,000
282 U-Store-It Trust 2,583
781 Vornado Realty Trust 68,688
272 Washington Real Estate Investment
Trust 8,544
441 Weingarten Realty Investors 13,865
297 Winthrop Realty Trust, Inc. 1,571
------------
Total Common Stocks--99.3%
(Cost $1,953,907) 1,569,592
-------------
Page 64 See Notes to Financial Statements.
FIRST TRUST S&P REIT INDEX FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Money Market Funds--8.4%
50,000 Federated Treasury Obligation
- 3.36% (b) $ 50,000
83,403 J.P. Morgan Institutional Treasury
Money Market Fund - 3.09% (b) 83,403
-------------
Total Money Market Funds
(Cost $133,403) 133,403
-------------
Total Investments--107.7%
(Cost $2,087,310) 1,702,995
Net Other Assets and
Liabilities--(7.7%) (121,717)
-------------
Net Assets--100.0% $ 1,581,278
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Represents annualized 7-day yield at December 31, 2007.
See Notes to Financial Statements. Page 65
FIRST TRUST ISE WATER INDEX FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--100.1%
Building Products--1.8%
2,419 Ameron International Corp. $ 222,911
-------------
Chemicals--11.4%
6,236 Arch Chemicals, Inc. 229,173
8,784 Ashland, Inc. 416,625
16,011 Calgon Carbon Corp. (b) 254,415
21,035 Nalco Holding Co. 508,626
-------------
1,408,839
-------------
Commercial Services &
Supplies--5.1%
5,194 Layne Christensen Co. (b) 255,597
17,230 Tetra Tech, Inc. (b) 370,445
-------------
626,042
-------------
Construction & Engineering--2.8%
11,587 Insituform Technologies, Inc.,
Class A (b) 171,488
4,344 Northwest Pipe Co. (b) 170,024
-------------
341,512
-------------
Electrical Equipment--5.8%
6,513 Franklin Electric Co., Inc. 249,253
7,491 Roper Industries, Inc. 468,487
-------------
717,740
-------------
Electronic Equipment &
Instruments--4.2%
5,352 Itron, Inc. (b) 513,631
-------------
Health Care Equipment &
Supplies--3.8%
7,894 IDEXX Laboratories, Inc. (b) 462,825
-------------
Machinery--45.8%
5,979 Badger Meter, Inc. 268,756
9,571 Crane Co. 410,596
5,594 Danaher Corp. 490,818
16,138 Flow International Corp. (b) 150,406
4,829 Flowserve Corp. 464,550
5,107 Gorman-Rupp (The) Co. 159,338
11,773 IDEX Corp. 425,358
7,743 ITT Corp. 511,349
4,148 Lindsay Corp. 293,222
12,657 Mueller Industries, Inc. 366,926
38,319 Mueller Water Products, Inc., Class B 382,040
11,840 Pall Corp. 477,389
13,958 Pentair, Inc. 485,878
4,220 Valmont Industries, Inc. 376,086
12,525 Watts Water Technologies, Inc.,
Class A 373,245
-------------
5,635,957
-------------
Multi-Utilities--4.0%
5,451 Veolia Environnement ADR $ 495,932
-------------
Water Utilities--15.4%
5,920 American States Water Co. 223,066
19,578 Aqua America, Inc. 415,054
6,450 California Water Service Group 238,779
10,339 Companhia de Saneamento Basico
do Estado de Sao Paulo ADR 485,933
4,917 Consolidated Water Co., Ltd. 123,859
7,279 SJW Corp. 252,363
12,649 Southwest Water Co. 158,365
-------------
1,897,419
-------------
Total Common Stocks
(Cost $11,999,554) 12,322,808
-------------
Money Market Funds--0.5%
66,756 J.P. Morgan Institutional Treasury
Money Market Fund - 3.09% (c)
(Cost $66,756) 66,756
-------------
Total Investments--100.6%
(Cost $12,066,310) 12,389,564
Net Other Assets and
Liabilities--(0.6%) (79,845)
-------------
Net Assets--100.0% $ 12,309,719
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Represents annualized 7-day yield at December 31, 2007.
ADR - American Depositary Receipt.
Page 66 See Notes to Financial Statements.
FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--100.0%
Gas Utilities--9.6%
5,463 Energen Corp. $ 350,888
7,977 ONEOK, Inc. 357,130
6,609 Questar Corp. 357,548
-------------
1,065,566
-------------
Oil, Gas & Consumable
Fuels--90.4%
5,796 Anadarko Petroleum Corp. 380,739
3,442 Apache Corp. 370,153
46,584 Brigham Exploration Co. (b) 350,312
9,689 Cabot Oil & Gas Corp. 391,144
9,448 Chesapeake Energy Corp. 370,362
8,827 Cimarex Energy Co. 375,412
10,957 Comstock Resources, Inc. (b) 372,538
24,677 Delta Petroleum Corp. (b) 465,160
4,069 Devon Energy Corp. 361,775
63,449 Edge Petroleum Corp. (b) 376,253
5,339 EnCana Corp. 362,838
9,293 Enerplus Resources Fund 372,185
24,593 EXCO Resources, Inc. (b) 380,700
7,464 Forest Oil Corp. (b) 379,470
16,270 Mariner Energy, Inc. (b) 372,258
6,940 Newfield Exploration Co. (b) 365,738
60,881 Ngas Resources, Inc. (b) 342,760
4,738 Noble Energy, Inc. 376,766
22,578 Petrohawk Energy Corp. (b) 390,825
6,139 Petroleum Development Corp. (b) 362,999
7,724 Pioneer Natural Resources Co. 377,240
19,685 Rosetta Resources, Inc. (b) 390,354
8,604 St. Mary Land & Exploration Co. 332,200
12,152 Statoil ASA ADR 370,879
7,949 Stone Energy Corp. (b) 372,888
20,192 Talisman Energy, Inc. 373,956
6,878 XTO Energy, Inc. 353,254
-------------
10,091,158
-------------
Total Common Stocks--100.0%
(Cost $11,135,964) 11,156,724
-------------
Money Market Funds--0.6%
71,890 J.P. Morgan Institutional Treasury
Money Market Fund - 3.09% (c)
(Cost $71,890) 71,890
-------------
Total Investments--100.6%
(Cost $11,207,854) 11,228,614
Net Other Assets and
Liabilities--(0.6%) (71,230)
-------------
Net Assets--100.0% $ 11,157,384
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
(c) Represents annualized 7-day yield at December 31, 2007.
ADR - American Depositary Receipt.
See Notes to Financial Statements. Page 67
FIRST TRUST ISE CHINDIA INDEX FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--100.1%
Airlines--0.8%
12,260 China Southern Airlines Co., Ltd.
ADR (b) $ 802,417
-------------
Chemicals--0.6%
11,198 Sinopec Shanghai Petrochemical
Co., Ltd. ADR 683,750
-------------
Commercial Banks--10.8%
31,335 HDFC Bank Ltd. ADR 4,087,651
116,733 ICICI Bank Ltd. ADR 7,179,079
-------------
11,266,730
-------------
Communications Equipment--0.6%
41,200 Comtech Group, Inc. (b) 663,732
-------------
Construction & Engineering--0.7%
23,380 KHD Humboldt Wedag International
Ltd. (b) 700,932
-------------
Diversified Consumer
Services--0.7%
8,960 New Oriental Education &
Technology Group, Inc. ADR (b) 722,086
-------------
Diversified Telecommunication
Services--3.7%
11,500 China Netcom Group Corp.,
Ltd. ADR 683,100
9,791 China Telecom Corp., Ltd. ADR 764,383
63,197 Videsh Sanchar Nigam Ltd. ADR 2,379,999
-------------
3,827,482
-------------
Electrical Equipment--3.5%
10,145 JA Solar Holdings Co., Ltd.
ADR (b) 708,222
26,873 Solarfun Power Holdings Co.,
Ltd. ADR (b) 877,403
24,918 Suntech Power Holdings Co., Ltd.
ADR (b) 2,051,251
-------------
3,636,876
-------------
Electronic Equipment &
Instruments--0.7%
61,621 Nam Tai Electronics, Inc. 694,469
-------------
Health Care Equipment &
Supplies--1.4%
16,725 China Medical Technologies,
Inc. ADR 742,423
17,006 Mindray Medical International
Ltd. ADR 730,748
-------------
1,473,171
-------------
Hotels, Restaurants &
Leisure--2.0%
11,964 Ctrip.com International Ltd. ADR 687,571
Hotels, Restaurants &
Leisure (Continued)
19,330 Home Inns & Hotels Managment,
Inc. ADR (b) $ 688,921
60,413 Melco PBL Entertainment Ltd.
ADR (b) 698,375
-------------
2,074,867
-------------
Independent Power Producers &
Energy Traders--0.7%
17,575 Huaneng Power International,
Inc. ADR 725,848
-------------
Insurance--3.9%
52,906 China Life Insurance Co. Ltd. ADR 4,047,309
-------------
Internet Software &
Services--5.9%
10,493 Baidu.com ADR (b) 4,096,363
35,414 NetEase.com, Inc. ADR (b) 671,449
14,527 SINA Corp. (b) 643,691
12,650 Sohu.com, Inc. (b) 689,678
-------------
6,101,181
-------------
IT Services--16.8%
169,412 Infosys Technologies Ltd. ADR 7,684,529
42,408 Patni Computer Systems Ltd. ADR 689,978
155,409 Satyam Computer Services Ltd. ADR 4,152,528
284,345 Wipro Ltd. ADR 4,219,680
43,852 WNS Holdings Ltd. ADR (b) 716,980
-------------
17,463,695
-------------
Machinery--2.0%
111,493 Tata Motors Ltd. ADR 2,102,758
-------------
Marine--0.7%
28,021 Seaspan Corp. 686,234
-------------
Media--2.6%
35,666 Focus Media Holding Ltd.
ADR (b) 2,026,185
116,553 Xinhua Finance Media Ltd.
ADR (b) 699,318
-------------
2,725,503
-------------
Metals & Mining--10.8%
80,027 Aluminum Corp. of China Ltd.
ADR 4,052,567
273,616 Sterlite Industries (India) Ltd.
ADR (b) 7,133,169
-------------
11,185,736
-------------
Oil, Gas & Consumable
Fuels--16.7%
50,812 China Petroleum & Chemical
Corp. ADR 7,530,339
12,917 CNOOC Ltd. ADR 2,162,693
39,686 PetroChina Co., Ltd. ADR 6,963,702
Page 68 See Notes to Financial Statements.
FIRST TRUST ISE CHINDIA INDEX FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (Continued)
Oil, Gas & Consumable
Fuels (Continued)
7,504 Yanzhou Coal Mining Co.,
Ltd. ADR $ 728,338
-------------
17,385,072
-------------
Personal Products--0.7%
63,957 American Oriental
Bioengineering, Inc. (b) 708,644
-------------
Pharmaceuticals--2.0%
115,039 Dr. Reddy's Laboratories
Ltd. ADR 2,089,108
-------------
Road & Rail--0.7%
19,855 Guangshen Railway Co.,
Ltd. ADR 707,632
-------------
Semiconductors & Semiconductor
Equipment--0.7%
14,512 Trina Solar Ltd. ADR (b) 780,746
-------------
Software--2.0%
169,531 CDC Corp., Class A (b) 825,617
19,298 Shanda Interactive Entertainment
Ltd. ADR (b) 643,395
29,392 The9 Ltd. ADR (b) 626,637
-------------
2,095,649
-------------
Wireless Telecommunication
Services--8.4%
82,829 China Mobile Ltd. ADR 7,195,355
36,155 China Unicom Ltd. ADR 809,872
32,447 Hutchison Telecommunications
International Ltd. ADR 734,925
-------------
8,740,152
-------------
Total Investments--100.1%
(Cost $101,640,171) 104,091,779
Net Other Assets and
Liabilities--(0.1%) (87,479)
-------------
Net Assets--100.0% $ 104,004,300
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
ADR - American Depositary Receipt.
See Notes to Financial Statements. Page 69
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks--100.4%
Aerospace & Defense--2.1%
54,982 Cubic Corp. $ 2,155,295
14,943 Precision Castparts Corp. 2,072,594
-------------
4,227,889
-------------
Beverages--2.0%
33,554 Coca-Cola (The) Co. 2,059,209
62,251 PepsiAmericas, Inc. 2,074,203
-------------
4,133,412
-------------
Biotechnology--3.0%
46,277 LifeCell Corp. (b) 1,995,001
37,269 Onyx Pharmaceuticals, Inc. (b) 2,072,902
42,400 OSI Pharmaceuticals, Inc. (b) 2,056,824
-------------
6,124,727
-------------
Capital Markets--2.1%
83,860 Charles Schwab (The) Corp. 2,142,623
62,879 Janus Capital Group, Inc. 2,065,575
-------------
4,208,198
-------------
Chemicals--4.2%
30,186 Agrium, Inc. 2,179,731
18,544 Monsanto Co. 2,071,179
22,933 Mosaic (The) Co. (b) 2,163,499
15,195 Potash Corp. of Saskatchewan, Inc. 2,187,473
-------------
8,601,882
-------------
Commercial Services &
Supplies--5.1%
49,891 Copart, Inc. (b) 2,122,862
34,641 FTI Consulting, Inc. (b) 2,135,271
33,972 IHS, Inc., Class A (b) 2,057,344
94,212 Learning Tree International, Inc. (b) 2,163,108
34,441 Stericycle, Inc. (b) 2,045,795
-------------
10,524,380
-------------
Communications
Equipment--3.0%
118,286 Foundry Networks, Inc. (b) 2,072,371
55,091 Nokia Oyj ADR 2,114,944
17,981 Research In Motion Ltd. (b) 2,039,045
-------------
6,226,360
-------------
Computers & Peripherals--4.1%
10,668 Apple Computer, Inc. (b) 2,113,117
111,244 EMC Corp. (b) 2,061,351
81,338 Seagate Technology 2,074,119
70,051 Western Digital Corp. (b) 2,116,241
-------------
8,364,828
-------------
Construction & Engineering--2.0%
14,454 Fluor Corp. $ 2,106,237
21,776 Jacobs Engineering Group, Inc. (b) 2,082,003
-------------
4,188,240
-------------
Containers & Packaging--2.1%
42,975 Owens-Illinois, Inc. (b) 2,127,262
74,689 Packaging Corp. of America 2,106,230
-------------
4,233,492
-------------
Distributors--1.0%
94,203 LKQ Corp. (b) 1,980,147
-------------
Diversified Consumer
Services--3.0%
29,351 Apollo Group, Inc., Class A (b) 2,058,973
38,930 DeVry, Inc. 2,022,803
11,876 Strayer Education, Inc. 2,025,808
-------------
6,107,584
-------------
Diversified Financial
Services--1.0%
43,304 Nasdaq Stock Market, Inc. (b) 2,143,115
-------------
Diversified Telecommunication
Services--1.0%
21,673 Telefonica S.A. ADR 2,115,068
-------------
Electrical Equipment--1.0%
15,331 SunPower Corp., Class A (b) 1,999,009
-------------
Electronic Equipment &
Instruments--3.0%
41,209 Dolby Laboratories, Inc.,
Class A (b) 2,048,911
66,486 FLIR Systems, Inc. (b) 2,081,012
61,693 National Instruments Corp. 2,056,228
-------------
6,186,151
-------------
Energy Equipment & Services--3.1%
43,574 Cameron International Corp. (b) 2,097,217
16,989 Core Laboratories N.V. (b) 2,118,868
28,672 National-Oilwell Varco, Inc. (b) 2,106,245
-------------
6,322,330
-------------
Food Products--1.1%
65,445 Fresh Del Monte Produce, Inc. (b) 2,197,643
-------------
Health Care Equipment &
Supplies--5.1%
45,305 ArthroCare Corp. (b) 2,176,906
35,678 IDEXX Laboratories, Inc. (b) 2,091,801
6,353 Intuitive Surgical, Inc. (b) 2,061,549
39,099 Kinetic Concepts, Inc. (b) 2,094,142
51,421 St. Jude Medical, Inc. (b) 2,089,749
-------------
10,514,147
-------------
Page 70 See Notes to Financial Statements.
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------
Common Stocks (Continued)
Health Care Providers & Services--2.1%
29,342 Express Scripts, Inc. (b) $ 2,141,966
23,655 WellPoint, Inc. (b) 2,075,253
-------------
4,217,219
-------------
Health Care Technology--1.0%
83,500 Eclipsys Corp. (b) 2,113,385
-------------
Household Durables--1.0%
21,039 Garmin Ltd. 2,040,783
-------------
Industrial Conglomerates--2.1%
35,969 McDermott International, Inc. (b) 2,123,250
29,659 Textron, Inc. 2,114,687
-------------
4,237,937
-------------
Insurance--2.0%
33,918 AFLAC, Inc. 2,124,285
42,551 Aon Corp. 2,029,257
-------------
4,153,542
-------------
Internet & Catalog Retail--2.1%
23,286 Amazon.com, Inc. (b) 2,157,215
17,991 Priceline.com, Inc. (b) 2,066,446
-------------
4,223,661
-------------
Internet Software & Services--2.0%
62,044 eBay, Inc. (b) 2,059,240
3,016 Google, Inc., Class A (b) 2,085,504
-------------
4,144,744
-------------
IT Services--1.0%
40,709 Computer Sciences Corp. (b) 2,013,874
-------------
Life Sciences Tools &
Services--4.1%
31,710 Charles River Laboratories
International, Inc. (b) 2,086,518
23,845 Covance, Inc. (b) 2,065,454
22,523 Invitrogen Corp. (b) 2,103,873
27,070 Waters Corp. (b) 2,140,425
-------------
8,396,270
-------------
Machinery--11.0%
30,749 AGCO Corp. (b) 2,090,317
54,089 Axsys Technologies, Inc. (b) 1,982,362
21,135 Bucyrus International, Inc., Class A 2,100,608
32,014 CNH Global N.V. 2,107,161
23,146 Deere & Co. 2,155,356
33,405 Dynamic Materials Corp. 1,967,555
21,356 Flowserve Corp. 2,054,447
28,143 Lindsay Corp. 1,989,429
41,596 Manitowoc (The) Co., Inc. 2,031,133
28,678 Robbins & Myers, Inc. 2,168,916
21,483 Valmont Industries, Inc. 1,914,565
-------------
22,561,849
-------------
Media--1.0%
69,757 Global Sources Ltd. (b) $ 1,968,543
-------------
Metals & Mining--3.0%
59,062 AMCOL International Corp. 2,128,003
29,867 BHP Billiton Ltd. ADR 2,091,885
19,266 Southern Copper Corp. 2,025,435
-------------
6,245,323
-------------
Oil, Gas & Consumable Fuels--1.0%
59,034 Williams (The) Cos., Inc. 2,112,237
-------------
Pharmaceuticals--3.0%
35,491 Merck & Co., Inc. 2,062,382
32,144 Novo Nordisk A/S ADR 2,084,860
59,548 Perrigo Co. 2,084,775
-------------
6,232,017
-------------
Semiconductors & Semiconductor
Equipment--6.0%
55,940 Cypress Semiconductor Corp. (b) 2,015,518
22,533 MEMC Electronic Materials, Inc. (b) 1,993,945
59,275 NVIDIA Corp. (b) 2,016,536
37,241 Sigma Designs, Inc. (b) 2,055,703
62,154 Texas Instruments, Inc. 2,075,944
91,463 Zoran Corp. (b) 2,058,832
-------------
12,216,478
-------------
Software--5.0%
50,347 ANSYS, Inc. (b) 2,087,387
81,914 CA, Inc. 2,043,754
83,457 Jack Henry & Associates, Inc. 2,031,343
57,957 Microsoft Corp. 2,063,269
93,178 Oracle Corp. (b) 2,103,960
-------------
10,329,713
-------------
Specialty Retail--2.0%
39,768 Best Buy Co., Inc. 2,093,785
33,515 GameStop Corp., Class A (b) 2,081,617
-------------
4,175,402
-------------
Textiles, Apparel & Luxury
Goods--2.0%
12,887 Deckers Outdoor Corp. (b) 1,998,258
48,192 Fossil, Inc. (b) 2,023,100
-------------
4,021,358
-------------
Total Investments--100.4%
(Cost $183,137,182) 205,802,937
Net Other Assets and
Liabilities--(0.4%) (889,512)
-------------
Net Assets--100.0% $ 204,913,425
=============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Non-income producing security.
ADR - American Depositary Receipt.
See Notes to Financial Statements. Page 71
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2007
First Trust First Trust
Dow Jones Select Morningstar(R) First Trust
MicroCap Dividend Leaders(SM) IPOX-100
Index(SM) Fund Index Fund Index Fund
----------------- -------------------- -----------
ASSETS:
Investments at value...................................................... $ 18,041,010 $ 64,505,883 $ 26,679,603
Cash...................................................................... 23,882 -- 12,212
Receivables:
Capital shares sold................................................. 5,072 14,625 --
Investment securities sold.......................................... -- 84,267 --
Dividends........................................................... 19,540 169,668 8,565
Interest............................................................ -- -- --
Reclaims............................................................ -- -- --
From investment advisor............................................. 28,049 28,690 12,371
Other assets.............................................................. -- -- 15,091
------------- -------------- --------------
Total Assets........................................................ 18,117,553 64,803,133 26,727,842
------------- -------------- --------------
LIABILITIES:
Due to Custodian.......................................................... -- 18,234 --
Payables:
Investment securities purchased..................................... 11,095 -- --
Capital shares purchased............................................ 12,270 596 --
Investment advisory fees............................................ 7,330 17,147 8,543
Licensing fees...................................................... 824 25,133 --
Accrued expenses and other liabilities.................................... 93,233 91,534 86,568
------------- -------------- --------------
Total Liabilities................................................... 124,752 152,644 95,111
------------- -------------- --------------
NET ASSETS................................................................ $ 17,992,801 $ 64,650,489 $ 26,632,731
============= ============== ==============
NET ASSETS consist of:
Paid-in capital........................................................... $ 21,947,285 $ 77,672,170 $ 25,988,315
Par value................................................................. 8,050 32,000 10,500
Undistributed net investment income (loss)................................ 4,380 9,502 1,158
Accumulated net realized gain (loss) on investments ...................... (2,553,261) (980,395) (1,355,789)
Net unrealized appreciation (depreciation) on investments................. (1,413,653) (12,082,788) 1,988,547
------------- -------------- --------------
NET ASSETS................................................................ $ 17,992,801 $ 64,650,489 $ 26,632,731
============= ============== ==============
NET ASSET VALUE, per share................................................ $ 22.35 $ 20.20 $ 25.36
============= ============== ==============
Number of shares outstanding
(unlimited number of shares has been authorized, par value $0.01 per share) 805,000 3,200,002 1,050,002
------------- -------------- --------------
Investments at cost....................................................... $ 19,454,663 $ 76,588,671 $ 24,691,056
============= ============== ==============
Page 72 See Notes to Financial Statements.
First Trust First Trust First Trust First Trust First Trust First Trust First Trust
NASDAQ-100 NASDAQ-100- Amex(R) Dow Jones DB Strategic Value Line(R) Value Line(R)
Equal Weighted Technology Sector Biotechnology Internet Value Equity Allocation Dividend
Index(SM) Fund Index(SM) Fund Index Fund Index(SM) Fund Index Fund Index Fund Index Fund
- ---------------- ------------------- ---------------- ------------------ --------------- -------------------- ----------------
$ 31,002,219 $ 23,734,053 $ 72,820,584 $ 36,124,261 $ 61,522,985 $ 13,341,744 $ 180,195,752
10,549 13,252 -- -- 25,010 10,681 960,997
-- -- -- -- -- -- 7,911,342
-- -- 592,115 344,590 -- 1,084 6,532,105
10,192 2,317 -- -- 101,272 13,624 476,585
-- -- -- 841 -- -- --
-- -- -- -- -- 566 3,712
11,299 9,775 20,432 17,141 17,917 15,815 31,747
-- -- -- -- -- -- 8,063
-------------- -------------- -------------- -------------- -------------- -------------- ----------------
31,034,259 23,759,397 73,433,131 36,486,833 61,667,184 13,383,514 196,120,303
-------------- -------------- -------------- -------------- -------------- -------------- ----------------
-- -- 57,783 2,956 -- -- --
-- -- -- -- 14,489 -- 7,466,171
-- -- -- -- -- -- 7,911,342
10,430 8,095 26,303 19,364 23,525 5,696 78,693
7,186 6,011 26,644 3,369 25,980 19,100 300,016
105,341 93,740 81,354 75,488 85,497 67,352 210,859
-------------- -------------- -------------- -------------- -------------- -------------- ----------------
122,957 107,846 192,084 101,177 149,491 92,148 15,967,081
-------------- -------------- -------------- -------------- -------------- -------------- ----------------
$ 30,911,302 $ 23,651,551 $ 73,241,047 $ 36,385,656 $ 61,517,693 $ 13,291,366 $ 180,153,222
============== ============== ============== ============== ============== ============== ================
$ 33,414,132 $ 26,368,424 $ 79,480,565 $ 45,349,633 $ 64,459,655 $ 14,053,511 $ 196,742,615
14,000 11,000 30,000 14,500 25,500 6,500 114,380
-- -- -- -- 22,423 3,164 --
(869,924) (947,976) (366,907) (6,110,926) (1,386,697) (1,439,291) (7,143,249)
(1,646,906) (1,779,897) (5,902,611) (2,867,551) (1,603,188) 667,482 (9,560,524)
-------------- -------------- -------------- -------------- -------------- -------------- ----------------
$ 30,911,302 $ 23,651,551 $ 73,241,047 $ 3 6,385,656 $ 61,517,693 $ 13,291,366 $ 180,153,222
============== ============== ============== ============== ============== ============== ================
$ 22.08 $ 21.50 $ 24.41 $ 25.09 $ 24.12 $ 20.45 $ 15.75
============== ============== ============== ============== ============== ============== ================
1,400,002 1,100,002 3,000,002 1,450,002 2,550,002 650,002 11,437,986
-------------- -------------- -------------- -------------- -------------- -------------- ----------------
$ 32,649,125 $ 25,513,950 $ 78,723,195 $ 38,991,812 $ 63,126,173 $ 12,674,262 $ 189,756,276
============== ============== ============== ============== ============== ============== ================
See Notes to Financial Statements. Page 73
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 2007
First Trust First Trust
NASDAQ-100 NASDAQ(R) Clean Edge(R)
Ex-Technology Sector U.S. Liquid Series
IndexSM Fund Index Fund
----------------------- -----------------------
ASSETS:
Investments at value...................................................... $ 2,172,638 $ 50,811,947
Cash...................................................................... 74,928 179,229
Receivables:
Capital shares sold................................................. -- 3,127,852
Investment securities sold.......................................... 1,065,841 --
Dividends........................................................... 1,126 3,831
Interest............................................................ 217 --
Reclaims............................................................ -- --
From investment advisor............................................. -- --
Other assets.............................................................. 1,867 --
-------------- --------------
Total Assets........................................................ 3,316,617 54,122,859
-------------- --------------
LIABILITIES:
Due to Custodian.......................................................... -- --
Payables:
Investment securities purchased..................................... 69,788 3,131,858
Capital shares purchased............................................ 1,065,169 --
Investment advisory fees............................................ 15,575 16,608
Licensing fees...................................................... 583 8,221
Accrued expenses and other liabilities.................................... 46,930 53,137
-------------- --------------
Total Liabilities................................................... 1,198,045 3,209,824
-------------- --------------
NET ASSETS................................................................ $ 2,118,572 $ 50,913,035
============== ==============
NET ASSETS consist of:
Paid-in capital........................................................... $ 2,386,278 $ 45,780,650
Par value................................................................. 1,000 16,500
Undistributed net investment income (loss)................................ -- --
Accumulated net realized gain (loss) on investments ...................... (59,898) (456,084)
Net unrealized appreciation (depreciation) on investments................. (208,808) 5,571,969
-------------- --------------
NET ASSETS................................................................ $ 2,118,572 $ 50,913,035
============== ==============
NET ASSET VALUE, per share................................................ $ 21.19 $ 30.86
============== ==============
Number of shares outstanding
(unlimited number of shares has been authorized, par value $0.01 per share) 100,002 1,650,002
-------------- --------------
Investments at cost....................................................... $ 2,381,446 $ 45,239,978
============== ==============
Page 74 See Notes to Financial Statements.
First Trust First Trust First Trust First Trust
S&P ISE ISE-Revere ISE First Trust
REIT Water Natural Gas Chindia Value Line(R) 100
Index Fund Index Fund Index Fund Index Fund Exchange-Traded Fund
----------------- ----------------- ----------------- ----------------- ----------------------
$ 1,702,995 $ 12,389,564 $ 11,228,614 $ 104,091,779 $ 205,802,937
-- -- -- 4,112 --
-- -- -- -- 54,976,122
-- -- -- -- 37,939,578
15,532 14,221 4,859 12,963 90,235
246 140 234 -- --
-- -- -- -- 9,203
325 -- -- 4,734 20,765
-- -- -- -- 5,998
-------------- -------------- -------------- -------------- ---------------
1,719,098 12,403,925 11,233,707 104,113,588 298,844,838
-------------- -------------- -------------- -------------- ---------------
37,543 24,920 7,609 -- 170,300
-- -- -- -- 54,478,885
-- -- -- -- 38,855,573
423 9,678 9,646 34,452 79,073
48,493 2,477 3,018 7,497 230,866
51,361 57,131 56,050 67,339 116,716
-------------- -------------- -------------- -------------- ---------------
137,820 94,206 76,323 109,288 93,931,413
-------------- -------------- -------------- -------------- ---------------
$ 1,581,278 $ 12,309,719 $ 11,157,384 $ 104,004,300 $ 204,913,425
============== ============== ============== ============== ===============
$ 2,012,894 $ 12,016,965 $ 11,235,844 $ 103,452,483 $ 193,321,158
1,000 5,500 5,000 37,500 114,400
-- -- 1,666 1,096 --
(48,301) (36,000) (105,886) (1,938,387) (11,187,888)
(384,315) 323,254 20,760 2,451,608 22,665,755
-------------- -------------- -------------- -------------- ---------------
$ 1,581,278 $ 12,309,719 $ 11,157,384 $ 104,004,300 $ 204,913,425
============== ============== ============== ============== ===============
$ 15.81 $ 22.38 $ 22.31 $ 27.73 $ 17.91
============== ============== ============== ============== ===============
100,002 550,002 500,002 3,750,002 11,439,982
-------------- -------------- -------------- -------------- ---------------
$ 2,087,310 $ 12,066,310 $ 11,207,854 $ 101,640,171 $ 183,137,182
============== ============== ============== ============== ===============
See Notes to Financial Statements. Page 75
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS
First Trust First Trust
Dow Jones Select Morningstar(R) First Trust
MicroCap Dividend Leaders(SM) IPOX-100
Index(SM) Fund Index Fund Index Fund
-------------------- -------------------- --------------------
For the For the For the
Year Ended Year Ended Year Ended
December 31, 2007 December 31, 2007 December 31, 2007
--------------------- ------------------- --------------------
INVESTMENT INCOME:
Dividends (a) .................................................... $ 213,900 $ 3,685,392 $ 206,914
Interest.......................................................... -- -- --
------------- ------------- --------------
Total investment income........................................ 213,900 3,685,392 206,914
------------- ------------- --------------
EXPENSES:
Investment advisory fees.......................................... 90,935 255,684 98,443
Audit and tax fees................................................ 35,026 34,918 34,983
Accounting and administration fees................................ 27,788 49,973 20,200
Licensing fees.................................................... 24,999 151,399 61,000
Printing fees..................................................... 19,954 28,366 11,714
Legal fees........................................................ 14,760 8,474 7,102
Custodian fees.................................................... 14,225 19,325 12,282
Listing fees...................................................... 10,643 10,817 10,001
Registration and filing fees...................................... 2,878 6,686 1,128
Trustees' fees and expenses....................................... 1,151 6,552 1,983
Transfer agent fees............................................... 909 4,261 1,231
Other expenses.................................................... 3,038 6,952 1,328
------------- ------------- --------------
Total Expenses................................................. 246,306 583,407 261,395
Less fees waived and expenses reimbursed by the investment
advisor..................................................... (137,185) (199,880) (113,731)
------------- ------------- --------------
Net Expenses................................................... 109,121 383,527 147,664
------------- ------------- --------------
NET INVESTMENT INCOME (LOSS)...................................... 104,779 3,301,865 59,250
------------- ------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.................................................... (958,976) (923,317) (1,070,153)
In-kind redemptions............................................ 2,194,872 5,852,161 2,969,529
------------- ------------- --------------
Net realized gain (loss).......................................... 1,235,896 4,928,844 1,899,376
------------- ------------- --------------
Net change in unrealized appreciation (depreciation) on
investments.................................................... (2,332,891) (17,025,191) 1,187,879
------------- ------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)........................... (1,096,995) (12,096,347) 3,087,255
------------- ------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................................ $ (992,216) $ (8,794,482) $ 3,146,505
============= ============= ==============
<FN>
(a) Net of foreign witholding taxes of $348 for the First Trust Morningstar(R)
Dividend Leaders(SM) Index Fund, $1,280 for the First Trust NASDAQ-100
Equal Weighted Index(SM) Fund, $2,145 for the First Trust NASDAQ-100-
Technology Sector(SM) Index Fund, and $3,550 for the First Trust Value
Line(R) Equity Allocation Index Fund.
</FN>
Page 76 See Notes to Financial Statements.
First Trust First Trust First Trust First Trust First Trust First Trust
NASDAQ-100 NASDAQ-100- Amex(R) Dow Jones DB Strategic Value Line(R)
Equal Weighted Technology Sector Biotechnology Internet Value Equity Allocation
Index(SM) Fund Index(SM) Fund Index Fund Index(SM) Fund Index Fund Index Fund
- -------------------- -------------------- -------------------- -------------------- -------------------- ---------------------
For the For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, 2007 December 31, 2007 December 31, 2007 December 31, 2007 December 31, 2007 December 31, 2007
- --------------------- --------------------- --------------------- --------------------- ------------------------------------------
$ 126,764 $ 104,092 $ -- $ 96,406 $ 637,377 $ 261,326
-- -- -- 841 -- --
------------ ------------ ------------ ------------ ------------ ------------
126,764 104,092 -- 97,247 637,377 261,326
------------ ------------ ------------ ------------ ------------ ------------
97,177 94,558 201,334 218,892 183,113 75,067
34,624 34,635 34,613 34,595 35,197 32,727
20,175 13,624 27,676 30,673 21,887 13,243
24,294 23,639 40,267 34,143 125,500 24,416
13,823 11,487 21,782 23,174 9,837 15,474
9,766 7,129 7,343 7,343 7,426 11,711
10,301 9,280 12,013 12,526 9,097 9,412
14,339 14,867 10,490 10,544 10,001 10,545
2,041 2,753 2,351 1,791 1,695 2,931
2,060 2,248 5,183 4,830 4,286 988
1,215 1,182 2,517 2,736 1,831 751
1,958 1,923 1,828 1,858 1,053 6,207
------------ ------------ ------------ ------------ ------------ ------------
231,773 217,325 367,397 383,105 410,923 203,472
(86,008) (75,489) (65,395) (54,768) (172,875) (98,378)
------------ ------------ ------------ ------------ ------------ ------------
145,765 141,836 302,002 328,337 238,048 105,094
------------ ------------ ------------ ------------ ------------ ------------
(19,001) (37,744) (302,002) (231,090) 399,329 156,232
------------ ------------ ------------ ------------ ------------ ------------
(646,121) (505,402) (277,758) (6,085,666) (1,466,514) (1,437,666)
3,914,875 3,570,635 7,427,406 12,961,361 5,544,664 1,033,752
------------ ------------ ------------ ------------ ------------ ------------
3,268,754 3,065,233 7,149,648 6,875,695 4,078,150 (403,914)
------------ ------------ ------------ ------------ ------------ ------------
(1,694,511) (1,702,778) (7,597,605) (4,669,550) (2,024,723) 851,149
------------ ------------ ------------ ------------ ------------ ------------
1,574,243 1,362,455 (447,957) 2,206,145 2,053,427 447,235
------------ ------------ ------------ ------------ ------------ ------------
$ 1,555,242 $ 1,324,711 $ (749,959) $ 1,975,055 $ 2,452,756 $ 603,467
============ ============ ============ ============ ============ ============
See Notes to Financial Statements. Page 77
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS (CONTINUED)
First Trust First Trust First Trust
Value Line(R) NASDAQ-100 NASDAQ(R) Clean Edge(R)
Dividend Ex-Technology Sector U.S. Liquid Series
Index Fund Index(SM) Fund Index Fund
------------------ -------------------- --------------------------
For the Period For the Period
For the February 8, 2007 (b) February 8, 2007 (b)
Year Ended through through
December 31, 2007 December 31, 2007 December 31, 2007
------------------ -------------------- --------------------------
INVESTMENT INCOME:
Dividends (a) .............................................. $ 7,943,435 $ 16,657 $ 51,494
Interest.................................................... 418 303
-------------- ------------- -------------
Total investment income.................................. 7,943,853 16,960 51,494
-------------- ------------- -------------
EXPENSES:
Investment advisory fees.................................... 1,293,284 12,216 77,431
Audit and tax fees.......................................... 39,216 29,760 29,743
Accounting and administration fees.......................... 135,704 2,578 11,812
Licensing fees.............................................. 400,565 3,054 19,358
Printing fees............................................... 88,756 10,107 16,957
Legal fees.................................................. 17,204 5,654 8,874
Custodian fees.............................................. 46,628 1,879 4,384
Listing fees................................................ 32,016 9,395 16,498
Registration and filing fees................................ 31,186 4 4
Trustees' fees and expenses................................. 17,641 266 2,850
Transfer agent fees......................................... 12,933 153 968
Other expenses.............................................. 88,359 4,500 4,500
-------------- ------------- -------------
Total Expenses........................................... 2,203,492 79,566 193,379
Less fees waived and expenses reimbursed by the
investment advisor.................................... (392,894) (61,242) (77,233)
-------------- ------------- -------------
Net Expenses............................................. 1,810,598 18,324 116,146
-------------- ------------- -------------
NET INVESTMENT INCOME (LOSS)................................ 6,133,255 (1,364) (64,652)
-------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................. (6,917,739) (59,898) (462,882)
In-kind redemptions......................................... 62,295,122 517,056 5,009,950
-------------- ------------- -------------
Net realized gain (loss).................................... 55,377,383 457,158 4,547,068
-------------- ------------- -------------
Net change in unrealized appreciation (depreciation) on
investments.............................................. (65,904,350) (208,808) 5,571,969
-------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS)..................... (10,526,967) 248,350 10,119,037
-------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.......................................... $ (4,393,712) $ 246,986 $ 10,054,385
============== ============= =============
<FN>
(a) Net of foreign witholding taxes of $99,984 for the First Trust Value
Line(R) Dividend Index Fund, $101 for the First Trust NASDAQ-100
Ex-Technology Sector Index(SM) Fund, $3,251 for the First Trust ISE-Revere
Natural Gas Index Fund, and $23,086 for the First Trust Value Line(R) 100
Exchange-Traded Fund.
(b) Inception date.
(c) Results for periods prior to June 18, 2007 are of First Trust Value Line(R)
100 Fund. See Note 1 in the Notes to Financial Statements.
</FN>
Page 78 See Notes to Financial Statements.
First Trust First Trust First Trust First Trust
S&P ISE ISE-Revere ISE First Trust
REIT Water Natural Gas Chindia Value Line(R) 100
Index Fund Index Fund Index Fund Index Fund Exchange-Traded Fund
---------------------- ---------------------- ---------------------- ---------------------- ------------------------
For the Period For the Period For the Period For the Period
May 8, 2007 (b) May 8, 2007 (b) May 8, 2007 (b) May 8, 2007 (b) For the
through through through through Year Ended
December 31, 2007 December 31, 2007 December 31, 2007 December 31, 2007 December 31, 2007 (c)
---------------------- ---------------------- ---------------------- ---------------------- ------------------------
$ 43,954 $ 56,126 $ 30,838 $ 216,465 $ 1,482,882
410 140 234 -- --
------------- ------------- ------------- ------------- --------------
44,364 56,266 31,072 216,465 1,482,882
------------- ------------- ------------- ------------- --------------
4,118 21,211 13,470 112,487 1,393,727
32,211 29,924 29,925 29,925 42,097
2,536 3,469 2,547 15,524 178,842
48,493 2,651 3,368 22,497 305,385
6,859 8,649 7,367 11,998 46,678
5,343 5,775 5,608 10,927 36,524
1,920 2,362 2,120 5,252 20,144
6,525 7,210 7,210 7,210 20,083
1,110 1,105 1,105 1,105 --
158 725 506 5,316 9,277
69 265 168 1,406 7,743
6,129 6,134 6,134 6,304 52,434
------------- ------------- ------------- ------------- --------------
115,471 89,480 79,528 229,951 2,112,934
(108,608) (57,664) (59,322) (61,221) (132,258)
------------- ------------- ------------- ------------- --------------
6,863 31,816 20,206 168,730 1,980,676
------------- ------------- ------------- ------------- --------------
37,501 24,450 10,866 47,735 (497,794)
------------- ------------- ------------- ------------- --------------
(48,301) (36,000) (106,407) (1,926,901) 7,734,350
(15,732) 299,879 510,266 4,011,210 44,394,357
------------- ------------- ------------- ------------- --------------
(64,033) 263,879 403,859 2,084,309 52,128,707
------------- ------------- ------------- ------------- --------------
(384,315) 323,254 20,760 2,451,608 (5,434,509)
------------- ------------- ------------- ------------- --------------
(448,348) 587,133 424,619 4,535,917 46,694,198
------------- ------------- ------------- ------------- --------------
$ (410,847) $ 611,583 $ 435,485 $ 4,583,652 $ 46,196,404
============= ============= ============= ============= ==============
See Notes to Financial Statements. Page 79
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS
First Trust First Trust
Dow Jones Select Morningstar(R)
MicroCap Dividend Leaders(SM)
Index(SM) Fund Index Fund
------------------------------------------- ---------------------------------------
For the Period
For the Year For the Year For the Year March 9, 2006 (a)
Ended Ended Ended through
December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006
--------------------- ------------------- ------------------- ------------------
OPERATIONS:
Net investment income (loss).................. $ 104,779 $ 57,986 $ 3,301,865 $ 1,135,197
Net realized gain (loss)...................... 1,235,896 3,858,753 4,928,844 1,133,275
Net change in unrealized appreciation
(depreciation) (2,332,891) (4,051) (17,025,191) 4,942,403
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations.................. (992,216) 3,912,688 (8,794,482) 7,210,875
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................... (101,775) (67,080) (3,182,601) (1,240,001)
Net realized gain............................. -- -- -- --
------------- ------------- ------------- -------------
Total distributions to shareholders........... (101,775) (67,080) (3,182,601) (1,240,001)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold..................... 20,378,526 37,006,899 69,676,425 82,248,231
Value of shares repurchased................... (18,156,774) (63,479,407) (68,286,075) (12,981,883)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions.............. 2,221,752 (26,472,508) 1,390,350 69,266,348
------------- ------------- ------------- -------------
Net increase (decrease) in net assets......... 1,127,761 (22,626,900) (10,586,733) 75,237,222
NET ASSETS:
Beginning of period........................... 16,865,040 39,491,940 75,237,222 --
------------- ------------- ------------- -------------
End of period................................. $ 17,992,801 $ 16,865,040 $ 64,650,489 $ 75,237,222
============= ============= ============= =============
Undistributed net investment income (loss)
at end of period........................... $ 4,380 $ 1,376 $ 9,502 $ (104,804)
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period....... 705,000 1,905,000 3,200,002 --
Shares sold................................... 850,000 1,700,000 2,950,000 3,800,002
Shares repurchased............................ (750,000) (2,900,000) (2,950,000) (600,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period............. 805,000 705,000 3,200,002 3,200,002
============= ============= ============= =============
<FN>
(a) Inception date.
</FN>
Page 80 See Notes to Financial Statements.
First Trust First Trust
IPOX-100 NASDAQ-100 Equal Weighted
Index Fund Index(SM) Fund
- --------------------------------------- --------------------------------------
For the Period For the Period
For the Year April 12, 2006 (a) For the Year April 19, 2006 (a)
Ended through Ended through
December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006
- ----------------- ------------------- ----------------- -------------------
$ 59,250 $ 9,633 $ (19,001) $ (9,563)
1,899,376 (611,993) 3,268,754 521,972
1,187,879 800,668 (1,694,511) 47,605
- -------------- -------------- -------------- --------------
3,146,505 198,308 1,555,242 560,014
- -------------- -------------- -------------- --------------
(67,725) -- -- --
-- -- -- --
- -------------- -------------- -------------- --------------
(67,725) -- -- --
- -------------- -------------- -------------- --------------
22,872,902 43,915,451 26,192,404 32,413,288
(19,299,601) (24,133,109) (22,994,445) (6,815,201)
- -------------- -------------- -------------- --------------
3,573,301 19,782,342 3,197,959 25,598,087
- -------------- -------------- -------------- --------------
6,652,081 19,980,650 4,753,201 26,158,101
19,980,650 -- 26,158,101 --
- -------------- -------------- -------------- --------------
$ 26,632,731 $ 19,980,650 $ 30,911,302 $ 26,158,101
============== ============== ============== ==============
$ 1,158 $ 9,633 $ -- $ --
============== ============== ============== ==============
900,002 -- 1,300,002 --
950,000 2,150,002 1,150,000 1,650,002
(800,000) (1,250,000) (1,050,000) (350,000)
- -------------- -------------- -------------- --------------
1,050,002 900,002 1,400,002 1,300,002
============== ============== ============== ==============
First Trust First Trust
NASDAQ-100-Technology Sector Amex(R) Biotechnology
Index(SM) Fund Index Fund
- ---------------------------------------- ---------------------------------------
For the Period For the Period
For the Year April 19, 2006 (a) For the Year June 19, 2006 (a)
Ended through Ended through
Dececember 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006
- ------------------- ------------------ ------------------ -----------------
$ (37,744) $ (24,769) $ (302,002) $ (78,128)
3,065,233 478,780 7,149,648 1,789,320
(1,702,778) (77,119) (7,597,605) 1,694,994
------------- ------------- -------------- --------------
1,324,711 376,892 (749,959) 3,406,186
------------- ------------- -------------- --------------
-- -- -- --
-- -- -- --
------------- ------------- -------------- --------------
-- -- -- --
------------- ------------- -------------- --------------
21,483,865 33,510,515 90,771,660 43,126,529
(27,116,601) (5,927,831) (46,218,394) (17,094,975)
------------- ------------- -------------- --------------
(5,632,736) 27,582,684 44,553,266 26,031,554
------------- ------------- -------------- --------------
(4,308,025) 27,959,576 43,803,307 29,437,740
27,959,576 -- 29,437,740 --
------------- ------------- -------------- --------------
$ 23,651,551 $ 27,959,576 $ 73,241,047 $ 29,437,740
============= ============= ============== ==============
$ -- $ -- $ -- $ --
============= ============= ============== ==============
1,400,002 -- 1,250,002 --
950,000 1,700,002 3,600,000 2,050,002
(1,250,000) (300,000) (1,850,000) (800,000)
------------- ------------- -------------- --------------
1,100,002 1,400,002 3,000,002 1,250,002
============= ============= ============== ==============
See Notes to Financial Statements. Page 81
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
First Trust First Trust
Dow Jones Internet DB Strategic Value
IndexSM Fund Index Fund
----------------------------------------- ------------------------------------
For the Period For the Period
For the Year June 19, 2006 (a) For the Year July 6, 2006 (a)
Ended through Ended through
December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006
------------------ ------------------ ----------------- -----------------
OPERATIONS:
Net investment income (loss).................. $ (231,090) $ (71,540) $ 399,329 $ 88,369
Net realized gain (loss)...................... 6,875,695 1,527,363 4,078,150 905,761
Net change in unrealized appreciation
(depreciation)............................. (4,669,550) 1,801,999 (2,024,723) 421,535
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations................. 1,975,055 3,257,822 2,452,756 1,415,665
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................... -- -- (394,875) (70,400)
Net realized gain............................. -- -- -- --
------------- ------------- ------------- -------------
Total distributions to shareholders........... -- -- (394,875) (70,400)
------------- ------------- ------------- -------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold..................... 79,688,355 36,616,435 104,762,439 35,100,009
Value of shares repurchased................... (71,230,802) (13,921,209) (62,952,782) (18,795,119)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from shareholder transactions.............. 8,457,553 22,695,226 41,809,657 16,304,890
------------- ------------- ------------- -------------
Net increase (decrease) in net assets......... 10,432,608 25,953,048 43,867,538 17,650,155
NET ASSETS:
Beginning of Period........................... 25,953,048 -- 17,650,155 --
------------- ------------- ------------- -------------
End of Period................................. $ 36,385,656 $ 25,953,048 $ 61,517,693 $ 17,650,155
============= ============= ============= =============
Undistributed net investment income (loss)
at end of period........................... $ -- $ -- $ 22,423 $ 17,969
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period....... 1,150,002 -- 800,002 --
Shares sold................................... 3,200,000 1,800,002 4,350,000 1,700,002
Shares repurchased............................ (2,900,000) (650,000) (2,600,000) (900,000)
------------- ------------- ------------- -------------
Shares outstanding, end of period............. 1,450,002 1,150,002 2,550,002 800,002
============= ============= ============= =============
<FN>
(a) Inception date.
(b) Results for periods prior to December 18, 2006 are of First Trust Value
Line(R) Dividend Fund. See Note 1 to Financial Statements.
</FN>
Page 82 See Notes to Financial Statements.
First Trust
First Trust First Trust NASDAQ-100
Value Line(R) Equity Allocation Value Line(R) Dividend Ex-Technology Sector
Index Fund Index Fund Index(SM) Fund
- ------------------------------------------ --------------------------------------------------------------- ---------------------
For the Period For the Period For the Period
For the Year December 5, 2006 (a) For the Year June 1, 2006 For the Year February 8, 2007 (a)
Ended through Ended through Ended through
December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006 (b) May 31, 2006 (b) December 31, 2007
- ------------------- ------------------- -------------------- ---------------------- ----------------- ---------------------
$ 156,232 $ 18,537 $ 6,133,255 $ 7,470,307 $ 13,902,862 $ (1,364)
(403,914) 29,372 55,377,383 56,814,074 48,450,270 457,158
851,149 (183,667) (65,904,350) 10,193,087 (16,192,745) (208,808)
- ---------------- ---------------- --------------- --------------- ---------------- ----------------
603,467 (135,758) (4,393,712) 74,477,468 46,160,387 246,986
- ---------------- ---------------- --------------- --------------- ---------------- ----------------
(171,605) -- (6,533,096) (8,925,194) (13,527,000) --
-- -- -- (59,311,848) (55,080,000) --
- ---------------- ---------------- --------------- --------------- ---------------- ----------------
(171,605) -- (6,533,096) (68,237,042) (68,607,000) --
- ---------------- ---------------- --------------- --------------- ---------------- ----------------
25,789,407 20,920,099 177,729,932 37,030,620 -- 8,275,318
(31,723,062) (1,991,182) (438,291,965) (127,887,361) -- (6,403,732)
- ---------------- ---------------- --------------- --------------- ---------------- ----------------
(5,933,655) 18,928,917 (260,562,033) (90,856,741) -- 1,871,586
- ---------------- ---------------- --------------- --------------- ---------------- ----------------
(5,501,793) 18,793,159 (271,488,841) (84,616,315) (22,446,613) 2,118,572
18,793,159 -- 451,642,063 536,258,378 558,704,991 --
- ---------------- ---------------- --------------- --------------- ---------------- ----------------
$ 13,291,366 $ 18,793,159 $ 180,153,222 $ 451,642,063 $ 536,258,378 $ 2,118,572
================ ================ =============== =============== ================ ================
$ 3,164 $ 18,537 $ -- $ -- $ 1,454,887 $ --
================ ================ =============== =============== ================ ================
950,002 -- 26,938,000 32,400,000 32,400,000 --
1,300,000 1,050,002 10,500,000 2,200,000 -- 400,002
(1,600,000) (100,000) (26,000,014) (7,662,000) -- (300,000)
- ---------------- ---------------- --------------- --------------- ---------------- ----------------
650,002 950,002 11,437,986 26,938,000 32,400,000 100,002
================ ================ =============== =============== ================ ================
See Notes to Financial Statements. Page 83
FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
First Trust First Trust First Trust
NASDAQ(R) Clean S&P ISE
Edge(R) U.S. Liquid REIT Water
Series Index Fund Index Fund Index Fund
--------------------- ----------------- -----------------
For the Period For the Period For the Period
February 8, 2007 (a) May 8, 2007 (a) May 8, 2007 (a)
through through through
December 31, 2007 December 31, 2007 December 31, 2007
--------------------- ----------------- -----------------
OPERATIONS:
Net investment income (loss)............................... $ (64,652) $ 37,501 $ 24,450
Net realized gain (loss)................................... 4,547,068 (64,033) 263,879
Net change in unrealized appreciation (depreciation)....... 5,571,969 (384,315) 323,254
---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting from
operations 10,054,385 (410,847) 611,583
---------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................................... -- (37,501) (24,475)
Net realized gain.......................................... -- -- --
---------------- ---------------- ----------------
Total distributions to shareholders........................ -- (37,501) (24,475)
---------------- ---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.................................. 57,955,176 3,796,816 18,295,951
Value of shares repurchased............................... (17,096,526) (1,767,190) (6,573,340)
---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting from
shareholder transactions.............................. 40,858,650 2,029,626 11,722,611
---------------- ---------------- ----------------
Net increase (decrease) in net assets...................... 50,913,035 1,581,278 12,309,719
NET ASSETS:
Beginning of Period........................................ -- -- --
---------------- ---------------- ----------------
End of Period.............................................. $ 50,913,035 $ 1,581,278 $ 12,309,719
================ ================ ================
Undistributed net investment income (loss) at end
of period............................................... $ -- $ -- $ --
================ ================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.................... -- --
Shares sold................................................ 2,350,002 200,002 850,002
Shares repurchased......................................... (700,000) (100,000) (300,000)
---------------- ---------------- ----------------
Shares outstanding, end of period.......................... 1,650,002 100,002 550,002
================ ================ ================
<FN>
(a) Inception date.
(b) Results for periods prior to June 18, 2007 are of First Trust Value
Line(R) 100 Fund. See Note 1 to Financial Statements.
</FN>
Page 84 See Notes to Financial Statements.
First Trust First Trust
ISE-Revere ISE First Trust
Natural Gas Chindia Value Line(R) 100
Index Fund Index Fund Exchange-Traded Fund
----------------------- ----------------------- ------------------------------------------------
For the Period For the Period
May 8, 2007 (a) May 8, 2007 (a) For the Year For the Year
through through Ended Ended
December 31, 2007 December 31, 2007 December 31, 2007 (b) December 31, 2006 (b)
----------------------- ----------------------- ---------------------- ---------------------
$ 10,866 $ 47,735 $ (497,794) $ (1,199,513)
403,859 2,084,309 52,128,707 20,416,167
20,760 2,451,608 (5,434,509) (8,499,843)
---------------- ---------------- ----------------- -----------------
435,485 4,583,652 46,196,404 10,716,811
---------------- ---------------- ----------------- -----------------
(9,200) (58,125) -- --
-- -- (18,451,951) (32,863,710)
---------------- ---------------- ----------------- -----------------
(9,200) (58,125) (18,451,951) (32,863,710)
---------------- ---------------- ----------------- -----------------
17,272,326 119,626,564 219,100,688 --
(6,541,227) (20,147,791) (319,833,579) --
---------------- ---------------- ----------------- -----------------
10,731,099 99,478,773 (100,732,891) --
---------------- ---------------- ----------------- -----------------
11,157,384 104,004,300 (72,988,438) (22,146,899)
-- -- 277,901,863 300,048,762
---------------- ---------------- ----------------- -----------------
$ 11,157,384 $ 104,004,300 $ 204,913,425 $ 277,901,863
================ ================ ================= =================
$ 1,666 $ 1,096 $ -- $ --
================ ================ ================= =================
-- -- 17,490,000 17,490,000
800,002 4,500,002 12,750,000 --
(300,000) (750,000) (18,800,018) --
---------------- ---------------- ----------------- -----------------
500,002 3,750,002 11,439,982 17,490,000
================ ================ ================= =================
See Notes to Financial Statements. Page 85
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
First Trust Dow Jones Select MicroCap Index(SM) Fund
For the Period
For the For the September 27, 2005 (a)
Year Ended Year Ended through
December 31, 2007 December 31, 2006 December 31, 2005
-------------------- ------------------- ---------------------
Net asset value, beginning of period $ 23.92 $ 20.73 $ 20.00
---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.16 0.06 (e) 0.03 (e)
Net realized and unrealized gain (loss) (1.60) 3.19 (e) 0.72 (e)
---------- ---------- ----------
Total from investment operations (1.44) 3.25 0.75
---------- ---------- ----------
Distributions paid to shareholders from:
Net investment income (0.13) (0.06) (0.02)
---------- ---------- ----------
Net asset value, end of period $ 22.35 $ 23.92 $ 20.73
========== ========== ==========
TOTAL RETURN (b) (6.02)% 15.69% 3.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 17,993 $ 16,865 $ 39,492
Ratios to average net assets:
Ratio of total expenses to average net assets 1.35% 1.18% 1.44% (c)
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% (c)
Ratio of net investment income to average net assets 0.58% 0.24% 0.51% (c)
Portfolio turnover rate (d) 11% 20% 6%
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund
For the Period
For the March 9, 2006 (a)
Year Ended through
December 31, 2007 December 31, 2006
-------------------- ---------------------
Net asset value, beginning of period $ 23.51 $ 20.00
---------- ----------
Income from investment operations:
Net investment income (loss) 0.92 0.59 (e)
Net realized and unrealized gain (loss) (3.35) 3.52 (e)
---------- ----------
Total from investment operations (2.43) 4.11
---------- ----------
Distributions paid to shareholders from:
Net investment income (0.88) (0.60)
---------- ----------
Net asset value, end of period $ 20.20 $ 23.51
========== ==========
TOTAL RETURN (b) (10.64)% 20.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 64,650 $ 75,237
Ratios to average net assets:
Ratio of total expenses to average net assets 0.68% 0.99% (c)
Ratio of net expenses to average net assets 0.45% 0.45% (c)
Ratio of net investment income to average net assets 3.87% 3.55% (c)
Portfolio turnover rate (d) 9% 9%
(a) Inception date.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. Total return calculated for a
period of less than one year is not annualized. The total return would have
been lower if certain fees had not been waived and expenses reimbursed by
the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions.
(e) Per share amounts have been calculated using the average share method.
Page 86 See Notes to Financial Statements.
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
First Trust IPOX-100 Index Fund
For the Period
For the April 12, 2006 (a)
Year Ended through
December 31, 2007 December 31, 2006
-------------------- --------------------
Net asset value, beginning of period $ 22.20 $ 20.00
---------- ----------
Income from investment operations:
Net investment income (loss) 0.05 0.01 (e)
Net realized and unrealized gain (loss) 3.17 2.19 (e)
---------- ----------
Total from investment operations 3.22 2.20
---------- ----------
Distributions paid to shareholders from:
Net investment income (0.06) --
---------- ----------
Net asset value, end of period $ 25.36 $ 22.20
========== ==========
TOTAL RETURN (b) 14.53% 11.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 26,633 $ 19,981
Ratios to average net assets:
Ratio of total expenses to average net assets 1.06% 1.44% (c)
Ratio of net expenses to average net assets 0.60% 0.60% (c)
Ratio of net investment income to average net assets 0.24% 0.07% (c)
Portfolio turnover rate (d) 11% 26%
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund
For the Period
For the April 19, 2006 (a)
Year Ended through
December 31, 2007 December 31, 2006
---------------------- --------------------
Net asset value, beginning of period $ 20.12 $ 20.00
---------- ----------
Income from investment operations:
Net investment income (loss) (0.02) (0.01) (e)
Net realized and unrealized gain (loss) 1.98 0.13 (e)
---------- ----------
Total from investment operations 1.96 0.12
---------- ----------
Net asset value, end of period $ 22.08 $ 20.12
========== ==========
TOTAL RETURN (b) 9.74% 0.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 30,911 $ 26,158
Ratios to average net assets:
Ratio of total expenses to average net assets 0.95% 1.31% (c)
Ratio of net expenses to average net assets 0.60% 0.60% (c)
Ratio of net investment loss to average net assets (0.08)% (0.07)%(c)
Portfolio turnover rate (d) 15% 1%
(a) Inception date.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. Total return calculated for a
period of less than one year is not annualized. The total return would have
been lower if certain fees had not been waived and expenses reimbursed by
the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions.
(e) Per share amounts have been calculated using the average share method.
See Notes to Financial Statements. Page 87
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
First Trust NASDAQ-100-Technology Sector Index(SM) Fund
For the Period
For the April 19, 2006 (a)
Year Ended through
December 31, 2007 December 31, 2006
-------------------- --------------------
Net asset value, beginning of period $ 19.97 $ 20.00
---------- ----------
Income from investment operations:
Net investment income (loss) (0.03) (0.03)(f)
Net realized and unrealized gain (loss) 1.56 0.00 (e)(f)
---------- ----------
Total from investment operations 1.53 (0.03)
---------- ----------
Net asset value, end of period $ 21.50 $ 19.97
========== ==========
TOTAL RETURN (b) 7.66% (0.15)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 23,652 $ 27,960
Ratios to average net assets:
Ratio of total expenses to average net assets 0.92% 1.37% (c)
Ratio of net expenses to average net assets 0.60% 0.60% (c)
Ratio of net investment loss to average net assets (0.16)% (0.20)%(c)
Portfolio turnover rate (d) 10% 7%
First Trust Amex(R) Biotechnology Index Fund
For the Period
For the June 19, 2006 (a)
Year Ended through
December 31, 2007 December 31, 2006
-------------------- --------------------
Net asset value, beginning of period $ 23.55 $ 20.00
---------- ----------
Income from investment operations:
Net investment income (loss) (0.10) (0.07)(f)
Net realized and unrealized gain (loss) 0.96 3.62 (f)
---------- ----------
Total from investment operations 0.86 3.55
---------- ----------
Net asset value, end of period $ 24.41 $ 23.55
========== ==========
TOTAL RETURN (b) 3.65% 17.75%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 73,241 $ 29,438
Ratios to average net assets:
Ratio of total expenses to average net assets 0.73% 1.22% (c)
Ratio of net expenses to average net assets 0.60% 0.60% (c)
Ratio of net investment loss to average net assets (0.60)% (0.60)%(c)
Portfolio turnover rate (d) 11% 4%
(a) Inception date.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. Total return calculated for a
period of less than one year is not annualized. The total return would have
been lower if certain fees had not been waived and expenses reimbursed by
the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions.
(e) Amount represents less than $0.01 per share.
(f) Per share amounts have been calculated using the average share method.
Page 88 See Notes to Financial Statements.
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
First Trust Dow Jones Internet Index(SM) Fund
For the Period
For the June 19, 2006 (a)
Year Ended through
December 31, 2007 December 31, 2006
------------------------------------------------
Net asset value, beginning of period $ 22.57 $ 20.00
---------- ----------
Income from investment operations:
Net investment income (loss) (0.16) (0.07)(e)
Net realized and unrealized gain (loss) 2.68 2.64 (e)
---------- ----------
Total from investment operations 2.52 2.57
---------- ----------
Net asset value, end of period $ 25.09 $ 22.57
========== ==========
TOTAL RETURN (b) 11.17% 12.85%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 36,386 $ 25,953
Ratios to average net assets:
Ratio of total expenses to average net assets 0.70% 1.24% (c)
Ratio of net expenses to average net assets 0.60% 0.60% (c)
Ratio of net investment loss to average net assets (0.42)% (0.55)%(c)
Portfolio turnover rate (d) 6% 4%
First Trust DB Strategic Value Index Fund
For the Period
For the July 6, 2006 (a)
Year Ended through
December 31, 2007 December 31, 2006
-------------------- --------------------
Net asset value, beginning of period $ 22.06 $ 20.00
---------- ----------
Income from investment operations:
Net investment income (loss) 0.20 0.12 (e)
Net realized and unrealized gain (loss) 2.07 2.03 (e)
---------- ----------
Total from investment operations 2.27 2.15
---------- ----------
Distributions paid to shareholders from:
Net investment income (0.21) (0.09)
---------- ----------
Net asset value, end of period $ 24.12 $ 22.06
========== ==========
TOTAL RETURN (b) 10.26% 10.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 61,518 $ 17,650
Ratios to average net assets:
Ratio of total expenses to average net assets 1.12% 2.59% (c)
Ratio of net expenses to average net assets 0.65% 0.65% (c)
Ratio of net investment income to average net assets 1.09% 1.29% (c)
Portfolio turnover rate (d) 10% 4%
(a) Inception date.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. Total return calculated for a
period of less than one year is not annualized. The total return would have
been lower if certain fees had not been waived and expenses reimbursed by
the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions.
(e) Per share amounts have been calculated using the average share method.
See Notes to Financial Statements. Page 89
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
First Trust Value Line(R) Equity Allocation Index Fund
For the Period
For the December 5, 2006 (a)
Year Ended through
December 31, 2007 December 31, 2006
-------------------- ----------------------
Net asset value, beginning of period $ 19.78 $ 20.00
---------- ----------
Income from investment operations:
Net investment income (loss) 0.24 0.03 (e)
Net realized and unrealized gain (loss) 0.68 (0.25)(e)
---------- ----------
Total from investment operations 0.92 (0.22)
---------- ----------
Distributions paid to shareholders from:
Net investment income (0.25) --
---------- ----------
Net asset value, end of period $ 20.45 $ 19.78
========== ==========
TOTAL RETURN (b) 4.65% (1.10)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 13,291 $ 18,793
Ratios to average net assets:
Ratio of total expenses to average net assets 1.36% 3.25% (c)
Ratio of net expenses to average net assets 0.70% 0.70% (c)
Ratio of net investment income to average net assets 1.04% 1.82% (c)
Portfolio turnover rate (d) 43% 1%
(a) Inception date.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. Total return calculated for a
period of less than one year is not annualized. The total return would have
been lower if certain fees had not been waived and expenses reimbursed by
the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions.
(e) Per share amounts have been calculated using the average share method.
Page 90 See Notes to Financial Statements.
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
First Trust Value Line(R) Dividend Index Fund
For the Period
For the June 1, 2006 For the For the For the
Year Ended through Year Ended Year Ended Period Ended
December 31, 2007 December 31, 2006 (a) May 31, 2006 (a) May 31, 2005 (a) May 31, 2004 (a)
----------------- --------------------- ---------------- ---------------- ----------------
Net asset value, beginning of period $ 16.77 $ 16.55 $ 17.24 $ 16.13 $ 14.33 (e)
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) 0.44 0.24 (i) 0.43 0.41 0.27
Net realized and unrealized gain (loss) (0.99) 2.10 (i) 1.00 1.99 1.86
----------- ----------- ----------- ----------- -----------
Total from investment operations (0.55) 2.34 1.43 2.40 2.13
----------- ----------- ----------- ----------- -----------
Distributions paid to shareholders
from:
Net investment income (0.47) (0.63) (0.42) (0.37) (0.20)
Net realized gains -- (1.49) (1.70) (0.92) (0.11)
----------- ----------- ----------- ----------- -----------
Total distributions to shareholders (0.47) (2.12) (2.12) (1.29) (0.31)
----------- ----------- ----------- ----------- -----------
Common Shares offering costs
charged to paid-in capital -- -- -- (0.00) (b) (0.02)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 15.75 $ 16.77 $ 16.55 $ 17.24 $ 16.13
=========== =========== =========== =========== ===========
TOTAL RETURN, BASED ON
NET ASSET VALUE (3.42)% (d) 14.70% (d) 10.26% (c) 16.05% (c) 15.09% (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 180,153 $ 451,642 $ 536,258 $ 558,705 $ 522,731
Ratios to average net assets:
Ratio of total expenses to average
net assets 0.85% 0.94% (f) 0.93% 0.93% 0.93% (f)
Ratio of net expenses to average
net assets 0.70% 0.93% (f)(h) 0.93% 0.93% 0.93% (f)
Ratio of net investment income to
average net assets 2.37% 2.36% (f) 2.51% 2.45% 2.29% (f)
Portfolio turnover rate (g) 5% 28% 58% 57% 46%
(a) The Fund commenced operations on August 19, 2003. Results for periods prior
to December 18, 2006 are of First Trust Value Line(R) Dividend Fund. See
Note 1 in the Notes to Financial Statements.
(b) Amount represents less than $0.01 per share.
(c) Total return based on net asset value is the combination of reinvested
dividend distributions and reinvested capital gains distributions, if any,
at prices obtained by the Dividend Reinvestment Plan and changes in net
asset value per share and does not reflect sales load.
(d) Total return based on net asset value is calculated assuming an initial
investment made at the net asset value at the beginning of the period,
reinvestment of all dividend distributions at net asset value during the
period, and redemption at net asset value on the last day of the period.
Prior to December 18, 2006, total return based on net asset value assumed
that all dividend distributions were reinvested at prices obtained by the
Dividend Reinvestment Plan of First Trust Value Line(R) Dividend Fund. See
Note 1 in the Notes to Financial Statements. Total return calculated for a
period of less than one year is not annualized. The total return would have
been lower if certain fees had not been reimbursed by the investment
advisor.
(e) Net of sales load $0.675 per Common Share on initial offering.
(f) Annualized.
(g) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions.
(h) The annualized expense ratio is capped at 0.70% for the first two years from
the date of the reorganization. This ratio of 0.93% includes expenses for a
portion of the period prior to the reorganization for the First Trust Value
Line(R) Dividend Fund.
(i) Per share amounts have been calculated using the average share method.
See Notes to Financial Statements. Page 91
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund
For the Period
February 8, 2007 (a)
through
December 31, 2007
-----------------------
Net asset value, beginning of period $ 20.00
----------
Income from investment operations:
Net investment income (loss) (0.01)
Net realized and unrealized gain (loss) 1.20
----------
Total from investment operations 1.19
----------
Net asset value, end of period $ 21.19
==========
TOTAL RETURN (b) 5.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2,119
Ratios to average net assets:
Ratio of total expenses to average net assets 2.61% (c)
Ratio of net expenses to average net assets 0.60% (c)
Ratio of net investment loss to average net assets (0.04)%(c)
Portfolio turnover rate (d) 27%
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund
For the Period
February 8, 2007 (a)
through
December 31, 2007
-----------------------
Net asset value, beginning of period $ 20.00
----------
Income from investment operations:
Net investment income (loss) (0.04)
Net realized and unrealized gain (loss) 10.90
----------
Total from investment operations 10.86
----------
Net asset value, end of period $ 30.86
==========
TOTAL RETURN (b) 54.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 50,913
Ratios to average net assets:
Ratio of total expenses to average net assets 1.00% (c)
Ratio of net expenses to average net assets 0.60% (c)
Ratio of net investment loss to average net assets (0.33)%(c)
Portfolio turnover rate (d) 4%
(a) Inception date.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. Total return calculated for a
period of less than one year is not annualized. The total return would have
been lower if certain fees had not been waived and expenses reimbursed by
the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions.
Page 92 See Notes to Financial Statements.
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
First Trust S&P REIT Index Fund
For the Period
May 8, 2007 (a)
through
December 31, 2007
-----------------------
Net asset value, beginning of period $ 20.00
----------
Income from investment operations:
Net investment income (loss) 0.32 (b)
Net realized and unrealized gain (loss) (4.13)(b)
----------
Total from investment operations (3.81)
----------
Distributions paid to shareholders from:
Net investment income (0.38)
----------
Net asset value, end of period $ 15.81
==========
TOTAL RETURN (c) (19.08)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,581
Ratios to average net assets:
Ratio of total expenses to average net assets 8.41% (d)
Ratio of net expenses to average net assets 0.50% (d)
Ratio of net investment income to average net assets 2.73% (d)
Portfolio turnover rate (e) 25%
First Trust ISE Water Index Fund
For the Period
May 8, 2007 (a)
through
December 31, 2007
-----------------------
Net asset value, beginning of period $ 20.00
----------
Income from investment operations:
Net investment income (loss) 0.04
Net realized and unrealized gain (loss) 2.38
----------
Total from investment operations 2.42
----------
Distributions paid to shareholders from:
Net investment income (0.04)
----------
Net asset value, end of period $ 22.38
==========
TOTAL RETURN (c) 12.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 12,310
Ratios to average net assets:
Ratio of total expenses to average net assets 1.68% (d)
Ratio of net expenses to average net assets 0.60% (d)
Ratio of net investment income to average net assets 0.46% (d)
Portfolio turnover rate (e) 3%
(a) Inception date.
(b) Per share amounts have been calculated using the average share method.
(c) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. Total return calculated for a
period of less than one year is not annualized. The total return would have
been lower if certain fees had not been waived and expenses reimbursed by
the investment advisor.
(d) Annualized.
(e) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions.
See Notes to Financial Statements. Page 93
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
First Trust ISE-Revere Natural Gas Index Fund
For the Period
May 8, 2007 (a)
through
December 31, 2007
-----------------------
Net asset value, beginning of period $ 20.00
----------
Income from investment operations:
Net investment income (loss) 0.03
Net realized and unrealized gain (loss) 2.30
----------
Total from investment operations 2.33
----------
Distributions paid to shareholders from:
Net investment income (0.02)
----------
Net asset value, end of period $ 22.31
==========
TOTAL RETURN (b) 11.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 11,157
Ratios to average net assets:
Ratio of total expenses to average net assets 2.36% (c)
Ratio of net expenses to average net assets 0.60% (c)
Ratio of net investment income to average net assets 0.32% (c)
Portfolio turnover rate (d) 5%
First Trust ISE Chindia Index Fund
For the Period
May 8, 2007 (a)
through
December 31, 2007
-----------------------
Net asset value, beginning of period $ 20.00
----------
Income from investment operations:
Net investment income (loss) 0.02
Net realized and unrealized gain (loss) 7.73
----------
Total from investment operations 7.75
----------
Distributions paid to shareholders from:
Net investment income (0.02)
----------
Net asset value, end of period $ 27.73
==========
TOTAL RETURN (b) 38.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 104,004
Ratios to average net assets:
Ratio of total expenses to average net assets 0.82% (c)
Ratio of net expenses to average net assets 0.60% (c)
Ratio of net investment income to average net assets 0.17% (c)
Portfolio turnover rate (d) 2%
(a) Inception date.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividend
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. Total return calculated for a
period of less than one year is not annualized. The total return would have
been lower if certain fees had not been waived and expenses reimbursed by
the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions.
Page 94 See Notes to Financial Statements.
FIRST TRUST EXCHANGE-TRADED FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
First Trust Value Line(R) 100 Exchange-Traded Fund
For the Period
For the For the For the For the June 12, 2003
Year Ended Year Ended Year Ended Year Ended through
December 31, December 31, December 31, December 31, December 31,
2007 (a) 2006 (a) 2005 (a) 2004 (a) 2003 (a)
-------------- -------------- -------------- -------------- -----------------
Net asset value, beginning of period $ 15.89 $ 17.16 $ 18.05 $ 16.61 $ 14.33 (e)
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) 1.02 (0.07) (0.08) (0.09) (0.06)
Net realized and unrealized
gain (loss) 2.06 0.68 2.00 2.19 2.37
----------- ----------- ----------- ----------- -----------
Total from investment operations 3.08 0.61 1.92 2.10 2.31
----------- ----------- ----------- ----------- -----------
Distributions paid to shareholders
from:
Net realized gain (1.06) (1.88) (2.81) (0.66) --
----------- ----------- ----------- ----------- -----------
Common Shares offering costs
charged to paid-in capital -- -- -- (0.00) (b) (0.03)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 17.91 $ 15.89 $ 17.16 $ 18.05 $ 16.61
=========== =========== =========== =========== ===========
TOTAL RETURN 19.91% (d) 4.59% (c) 11.86% (c) 13.05% (c) 15.91% (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 204,913 $ 277,902 $ 300,049 $ 315,632 $ 290,464
Ratios to average net assets:
Ratio of total expenses to average
net assets 0.89% 0.97% 0.95% 0.97% 1.02% (f)
Ratio of net expenses to average
net assets 0.83% (h) 0.97% 0.95% 0.97% 1.02% (f)
Ratio of net investment loss to
average net assets (0.21)% (0.40)% (0.43)% (0.52)% (0.75)%(f)
Portfolio turnover rate (g) 111% 234% 240% 220% 144%
(a) The Fund commenced operations on June 12, 2003. Results for periods prior to
June 18, 2007 are of First Trust Value Line(R) 100 Fund. See Note 1 in the
Notes to Financial Statements.
(b) Amount represents less than $0.01 per share.
(c) Total return based on net asset value is the combination of reinvested
dividend distributions and reinvested capital gains distributions, if any,
at prices obtained by the Dividend Reinvestment Plan and changes in net
asset value per share and does not reflect sales load.
(d) Total return based on net asset value is calculated assuming an initial
investment made at the net asset value at the beginning of the period,
reinvestment of all dividend distributions at net asset value during the
period, and redemption at net asset value on the last day of the period.
Prior to June 18, 2007, total return based on net asset value assumed that
all dividend distributions were reinvested at prices obtained by the
Dividend Reinvestment Plan of First Trust Value Line(R) 100 Fund. See Note 1
in the Notes to Financial Statements. Total return calculated for a period
of less than one year is not annualized. The total return would have been
lower if certain fees had not been reimbursed by the investment advisor.
(e) Net of sales load $0.675 per Common Share on initial offering.
(f) Annualized.
(g) Portfolio turnover is not annualized and does not include securities
received or delivered from processing creations or redemptions.
(h) The annualized expense ratio is capped at 0.70% for the first two years from
the date of the reorganization. This ratio of 0.83% includes expenses for a
portion of the period prior to the reorganization for the First Trust Value
Line(R) 100 Fund.
See Notes to Financial Statements. Page 95
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007
1. Organization
First Trust Exchange-Traded Fund (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on August 8,
2003, and is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940, as amended (the "1940 Act").
First Trust Value Line(R) Dividend Fund (the "Predecessor FVD Fund"), a
closed-end fund organized as a Massachusetts business trust on June 11, 2003,
reorganized with and into First Trust Value Line(R) Dividend Index Fund ("FVD"),
an exchange-traded fund and newly created series of the Trust effective Friday,
December 15, 2006. The Predecessor FVD Fund ceased trading on the AMEX on
Friday, December 15, 2006, and FVD began trading on the AMEX on Monday, December
18, 2006 under the ticker symbol "FVD," the same ticker symbol used by the
Predecessor FVD Fund. The assets of the Predecessor FVD Fund were transferred
to, and the liabilities of the Predecessor FVD Fund were assumed by, FVD in
exchange for shares of FVD on a one share for one share basis based upon the net
asset value ("NAV") of the Predecessor FVD Fund on Friday, December 15, 2006.
FVD shares have been distributed to the Predecessor FVD Fund shareholders, on a
tax-free basis for federal income tax purposes, and the Predecessor FVD Fund has
been terminated. The historical results of the Predecessor FVD Fund will survive
for financial reporting purposes.
First Trust Value Line(R) 100 Fund (the "Predecessor FVL Fund"), a closed-end
fund organized as a Massachusetts business trust on April 18, 2003, reorganized
with and into First Trust Value Line(R) 100 Exchange-Traded Fund ("FVL"), an
exchange-traded fund and newly created series of the Trust effective Friday,
June 15, 2007. The Predecessor FVL Fund ceased trading on the AMEX on Friday,
June 15, 2007, and FVL began trading on the AMEX on Monday, June 18, 2007 under
the ticker symbol "FVL," the same ticker symbol used by the Predecessor FVL
Fund. The assets of the Predecessor FVL Fund were transferred to, and the
liabilities of the Predecessor FVL Fund were assumed by, FVL in exchange for
shares of FVL on a one share for one share basis based upon the NAV of the
Predecessor FVL Fund on Friday, June 15, 2007. FVL shares have been distributed
to the Predecessor FVL Fund shareholders, on a tax-free basis for federal income
tax purposes, and the Predecessor FVL Fund has been terminated. The historical
results of the Predecessor FVL Fund will survive for financial reporting
purposes.
The Trust currently consists of seventeen funds:
First Trust Dow Jones Select MicroCap Index(SM) Fund - (AMEX ticker "FDM")
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund - (AMEX ticker "FDL")
First Trust IPOX-100 Index Fund - (AMEX ticker "FPX")
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund - (NASDAQ ticker "QQEW")
First Trust NASDAQ-100-Technology Sector Index(SM) Fund - (NASDAQ ticker "QTEC")
First Trust Amex(R) Biotechnology Index Fund - (AMEX ticker "FBT")
First Trust Dow Jones Internet Index(SM) Fund - (AMEX ticker "FDN")
First Trust DB Strategic Value Index Fund - (AMEX ticker "FDV")
First Trust Value Line(R) Equity Allocation Index Fund - (AMEX ticker "FVI")
First Trust Value Line(R) Dividend Index Fund - (AMEX ticker "FVD")
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -
(NASDAQ ticker "QQXT")
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund -
(NASDAQ ticker "QCLN")
First Trust S&P REIT Index Fund - (AMEX ticker "FRI")
First Trust ISE Water Index Fund - (NYSE Arca, Inc. ticker "FIW")
First Trust ISE-Revere Natural Gas Index Fund - (NYSE Arca, Inc. ticker "FCG")
First Trust ISE Chindia Index Fund - (NYSE Arca, Inc. ticker "FNI")
First Trust Value Line(R) 100 Exchange-Traded Fund - (AMEX ticker "FVL")
Each fund represents a separate series of beneficial interest in the Trust
(individually, each a "Fund" and collectively, the "Funds"). Each Fund's shares
are listed and traded on the American Stock Exchange ("AMEX") except for the
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund, the First Trust
NASDAQ-100-Technology Sector Index(SM) Fund, the First Trust NASDAQ-100
Ex-Technology Sector Index(SM) Fund, and the First Trust NASDAQ(R) Clean Edge(R)
U.S. Liquid Series Index Fund, which are listed and traded on The NASDAQ Stock
Market, Inc. ("NASDAQ(R)") and the First Trust ISE Water Index Fund, the First
Trust ISE-Revere Natural Gas Index Fund and the First Trust Chindia Index Fund,
which are listed and traded on the NYSE Arca, Inc. ("NYSE Arca"). Unlike
conventional mutual funds, each Fund issues and redeems shares on a continuous
basis, at NAV, only in large specified blocks consisting of 50,000 shares called
a "Creation Unit." Creation Units are issued and redeemed principally in-kind
for securities included in a Fund's relevant index. Except when aggregated in
Creation Units, shares are not redeemable securities of a Fund. The investment
objective of each Fund is to seek investment results that correspond generally
to the price and yield (before the Fund's fees and expenses) of the following
indices:
Page 96
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007
Fund Index
First Trust Dow Jones Select MicroCap Index(SM) Fund Dow Jones Select MicroCap Index(SM)
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund Morningstar(R) Dividend Leaders(SM) Index
First Trust IPOX-100 Index Fund IPOX-100 U.S. Index
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund NASDAQ-100 Equal Weighted Index(SM)
First Trust NASDAQ-100-Technology Sector Index(SM) Fund NASDAQ-100 Technology Sector Index(SM)
First Trust Amex(R) Biotechnology Index Fund Amex(R) Biotechnology Index(SM)
First Trust Dow Jones Internet Index(SM) Fund Dow Jones Internet Composite Index(SM)
First Trust DB Strategic Value Index Fund Deutsche Bank CROCI(R) US+ Index(TM)
First Trust Value Line(R) Equity Allocation Index Fund Value Line(R) Equity Allocation Index
First Trust Value Line(R) Dividend Index Fund Value Line(R) Dividend Index
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund NASDAQ-100 Ex-Tech Sector Index(SM)
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index
First Trust S&P REIT Index Fund S&P REIT Composite Index
First Trust ISE Water Index Fund ISE Water Index(TM)
First Trust ISE-Revere Natural Gas Index Fund ISE-REVERE Natural Gas Index(TM)
First Trust ISE Chindia Index Fund ISE ChIndia Index(TM)
First Trust Value Line(R) 100 Exchange-Traded Fund Value Line(R) 100 Index
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of the financial statements. The
preparation of the financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. Portfolio Valuation
The NAV of each Fund's shares is determined daily as of the close of regular
trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern
time, on each day the NYSE is open for trading. The NAV is computed by dividing
the value of all assets of the Fund (including accrued interest and dividends),
less all liabilities (including accrued expenses and dividends declared but
unpaid), by the total number of shares outstanding.
Each Fund's investments are valued at market value or, in the absence of market
value with respect to any portfolio securities, at fair value according to
procedures adopted by the Trust's Board of Trustees. Portfolio securities listed
on any exchange other than the NASDAQ(R) are valued at the last sale price on
the business day as of which such value is being determined. If there has been
no sale on such day, the securities are valued at the mean of the most recent
bid and asked prices on such day. Securities traded on the NASDAQ(R) are valued
at the NASDAQ(R) Official Closing Price as determined by NASDAQ(R). Portfolio
securities traded on more than one securities exchange are valued at the last
sale price on the business day as of which such value is being determined at the
close of the exchange representing the principal market for such securities.
Portfolio securities traded in the over-the-counter market, but excluding
securities traded on the NASDAQ(R), are valued at the closing bid prices.
Short-term investments that mature in less than 60 days are valued at amortized
cost.
B. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
The Funds may hold publicly-traded master limited partnerships and real estate
investment trusts. Distributions from such investments may include a return of
capital component.
C. Dividends and Distribution to Shareholders
Dividends from net investment income of each Fund, if any, are declared and paid
semi-annually, except for First Trust Morningstar(R) Dividend Leaders(SM) Index
Fund and First Trust Value Line(R) Dividend Index Fund, which declare and pay
dividends quarterly, or as the Board of Trustees may determine from time to
time. Distributions of net realized gains earned by each Fund, if any, are
distributed at least annually.
Distributions from income and capital gains are determined in accordance with
income tax regulations, which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by a Fund, timing differences and differing characterization of distributions
made by a Fund.
Page 97
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007
The tax character of distributions paid by each Fund during the period ended
December 31, 2007 were as follows:
Distributions Distributions Distributions
paid from paid paid from
Ordinary from Capital Return of
Income Gains Capital
----------------- -------------- ---------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 101,775 $ -- $ --
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund (A) 3,792,601 -- --
First Trust IPOX-100 Index Fund 67,725 -- --
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund -- -- --
First Trust NASDAQ-100-Technology Sector Index(SM) Fund -- -- --
First Trust Amex(R) Biotechnology Index Fund -- -- --
First Trust Dow Jones Internet Index(SM) Fund -- -- --
First Trust DB Strategic Value Index Fund 394,875 -- --
First Trust Value Line(R) Equity Allocation Index Fund 171,605 -- --
First Trust Value Line(R) Dividend Index Fund 6,533,096 -- --
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -- -- --
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund -- -- --
First Trust S&P REIT Index Fund 37,501 -- --
First Trust ISE Water Index Fund 24,475 -- --
First Trust ISE-Revere Natural Gas Index Fund 9,200 -- --
First Trust ISE Chindia Index Fund 58,125 -- --
First Trust Value Line(R) 100 Exchange-Traded Fund (B) -- -- --
(A) For the tax year ended November 30, 2007, the Fund distributed $2,951,001
from ordinary income. The Fund changed its tax year to December 31, effective
December 1, 2007, and will have a short tax year of December 1 to December 31,
2007. The Fund distributed $841,600 from ordinary income for the period December
1 through December 31, 2007.
(B) All distributions were paid prior to June 18, 2007 and are of First Trust
Value Line(R) 100 Fund. See Note 1 above.
The tax character of distributions paid during the period ended December 31,
2006 was as follows:
Distributions Distributions Distributions
paid from paid paid from
Ordinary from Capital Return of
Income Gains Capital
----------------- -------------- ---------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 67,080 $ -- $ --
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund (A) 630,001 -- --
First Trust DB Strategic Value Index Fund 70,400 -- --
First Trust Value Line(R) Dividend Index Fund 19,499,734 46,401,234 2,336,074
First Trust Value Line(R) 100 Exchange-Traded Fund (B) -- -- --
(A) This amount is as of November 30, 2006, the Fund's prior tax year-end.
(B) All distributions were paid prior to June 18, 2007 and are of First Trust
Value Line(R) 100 Fund. See Note 1 above.
Page 98
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007
As of December 31, 2007, the components of distributable earnings on a tax basis
for each Fund were as follows:
Undistributed Net Unrealized
Ordinary Income Appreciation (Depreciation)
----------------------- ---------------------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 4,380 $ (1,430,004)
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund (A) 9,502 (12,609,479)
First Trust IPOX-100 Index Fund 1,158 1,958,507
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund -- (1,743,296)
First Trust NASDAQ-100-Technology Sector Index(SM) Fund -- (1,783,779)
First Trust Amex(R) Biotechnology Index Fund -- (6,269,136)
First Trust Dow Jones Internet Index(SM) Fund -- (3,579,723)
First Trust DB Strategic Value Index Fund 22,423 (1,794,979)
First Trust Value Line(R) Equity Allocation Index Fund 3,164 667,292
First Trust Value Line(R) Dividend Index Fund -- (10,114,015)
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -- (226,358)
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund -- 5,269,569
First Trust S&P REIT Index Fund -- (413,643)
First Trust ISE Water Index Fund -- 318,303
First Trust ISE-Revere Natural Gas Index Fund 1,666 10,424
First Trust ISE Chindia Index Fund 86,380 1,612,014
First Trust Value Line(R) 100 Exchange-Traded Fund -- 22,656,895
(A) The Fund changed its tax year to December 31, effective December 1, 2007,
and will have a short tax year of December 1 to December 31, 2007.
D. Income Taxes
Each Fund intends to qualify or 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, by distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes.
In June 2006, Financial Accounting Standards Board Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes" - an Interpretation of FASB
Statement 109 ("FIN 48") was issued and is effective for fiscal years beginning
after December 15, 2006. This Interpretation prescribes a minimum threshold for
financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return. As of December 31, 2007, management has
evaluated the application of FIN 48 to each Fund, and has determined that there
is no material impact resulting from the adoption of this Interpretation on each
Fund's financial statements.
At December 31, 2007 for federal income tax purposes, each Fund has capital loss
carryforwards available as shown in the table below, to the extent provided by
regulations, to offset future capital gains through the years indicated. To the
extent that these loss carryforwards are used to offset future capital gains, it
is probable that the capital gains so offset will not be distributed to Fund
shareholders.
Capital Loss Capital Loss Capital Loss
Available Available Available Total
Through Through Through Capital Loss
2013 2014 2015 Available
------------- ------------- ------------- --------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ -- $ 1,604,481 $ 910,503 $ 2,514,984
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 52,755 202,279 198,670 453,704
First Trust IPOX-100 Index Fund -- 303,759 740,683 1,044,442
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund -- 15,480 271,083 286,563
First Trust NASDAQ-100-Technology Sector Index(SM) Fund -- 95,862 535,229 631,091
First Trust Amex(R) Biotechnology Index Fund- -- -- -- --
First Trust Dow Jones Internet Index(SM) Fund -- -- 15 15
First Trust DB Strategic Value Index Fund -- 45,432 831,336 876,768
First Trust Value Line(R) Equity Allocation Index Fund -- -- 1,439,101 1,439,101
First Trust Value Line(R) Dividend Index Fund -- -- 4,488,019 4,488,019
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -- -- 7,779 7,779
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund -- -- 141,332 141,332
First Trust S&P REIT Index Fund -- -- 10,162 10,162
First Trust ISE Water Index Fund -- -- 592 592
First Trust ISE-Revere Natural Gas Index Fund -- -- 5,274 5,274
First Trust ISE Chindia Index Fund -- -- -- --
First Trust Value Line(R) 100 Exchange-Traded Fund -- -- 6,804,100 6,804,100
Page 99
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NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007
Capital losses incurred after October 31 ("post-October losses") within the
taxable year can be deemed to arise on the first business day of the Funds' next
taxable year.
The following Funds incurred and elected to defer net capital losses as follows:
Post-October Losses
-----------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 21,926
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund --
First Trust IPOX-100 Index Fund 281,307
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 486,971
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 313,003
First Trust Amex(R) Biotechnology Index Fund 382
First Trust Dow Jones Internet Index(SM) Fund 5,398,739
First Trust DB Strategic Value Index Fund 318,138
First Trust Value Line(R) Equity Allocation Index Fund --
First Trust Value Line(R) Dividend Index Fund 2,101,739
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 34,569
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 12,352
First Trust S&P REIT Index Fund 8,811
First Trust ISE Water Index Fund 30,457
First Trust ISE-Revere Natural Gas Index Fund 90,276
First Trust ISE Chindia Index Fund 1,184,077
First Trust Value Line(R) 100 Exchange-Traded Fund 4,374,928
In order to present paid-in capital and accumulated net realized gains or losses
on the Statements of Assets and Liabilities that more closely represent their
tax character, certain adjustments have been made to additional paid-in capital,
undistributed net investment income and accumulated net realized gains or losses
on investments. For the period ended December 31, 2007, the adjustments of each
Fund were as follows:
Undistributed Undistributed
Net Investment Capital Gains/ Paid-in
Income (Loss) (Accumulated Losses) Capital
---------------- ---------------------- ----------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ -- $ (2,183,745) $ 2,183,745
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund (4,958) (6,685,825) 6,690,783
First Trust IPOX-100 Index Fund -- (2,944,257) 2,944,257
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 19,001 (3,872,930) 3,853,929
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 37,744 (3,561,366) 3,523,622
First Trust Amex(R) Biotechnology Index Fund 302,002 (7,464,003) 7,162,001
First Trust Dow Jones Internet Index(SM) Fund 231,090 (12,973,854) 12,742,764
First Trust DB Strategic Value Index Fund -- (5,413,876) 5,413,876
First Trust Value Line(R) Equity Allocation Index Fund -- (1,033,752) 1,033,752
First Trust Value Line(R) Dividend Index Fund 399,841 (61,254,336) 60,854,495
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 1,364 (517,056) 515,692
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 64,652 (5,003,152) 4,938,500
First Trust S&P REIT Index Fund -- 15,732 (15,732)
First Trust ISE Water Index Fund 25 (299,879) 299,854
First Trust ISE-Revere Natural Gas Index Fund -- (509,745) 509,745
First Trust ISE Chindia Index Fund 11,486 (4,022,696) 4,011,210
First Trust Value Line(R) 100 Exchange-Traded Fund 497,794 (44,640,291) 44,142,497
E. Expenses
Expenses that are directly related to one of the Funds are charged directly to
that Fund. General expenses of the Trust are allocated to all the Funds based
upon the average net assets of each Fund. First Trust Advisors L.P. ("First
Trust" or the "Advisor") has entered into licensing agreements with each of the
following "Licensors" for the respective Funds:
Page 100
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NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007
Fund Licensor
First Trust Dow Jones Select MicroCap Index(SM) Fund Dow Jones & Company, Inc.
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund Morningstar, Inc.
First Trust IPOX-100 Index Fund IPOX Schuster LLC
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund The NASDAQ Stock Market, Inc.
First Trust NASDAQ-100-Technology Sector Index(SM) Fund The NASDAQ Stock Market, Inc.
First Trust Amex(R) Biotechnology Index Fund American Stock Exchange LLC
First Trust Dow Jones Internet Index(SM) Fund Dow Jones & Company, Inc.
First Trust DB Strategic Value Index Fund Deutsche Bank AG
First Trust Value Line(R) Equity Allocation Index Fund Value Line Publishing, Inc.(R)
First Trust Value Line(R) Dividend Index Fund Value Line Publishing, Inc.(R)
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund The NASDAQ Stock Market, Inc.
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund The NASDAQ Stock Market, Inc. / Clean Edge, Inc.
First Trust S&P REIT Index Fund Standard & Poor's
First Trust ISE Water Index Fund International Securities Exchange, LLC
First Trust ISE-Revere Natural Gas Index Fund International Securities Exchange, LLC
First Trust ISE Chindia Index Fund International Securities Exchange, LLC
First Trust Value Line(R) 100 Exchange-Traded Fund Value Line Publishing, Inc.(R)
The respective license agreements allow for the use by First Trust of certain
trademarks and trade names of the respective Licensors. The Funds are
sub-licensees to the applicable license agreements. The respective Funds are
required to pay licensing fees, which are shown on the Statements of Operations.
F. Accounting Pronouncement
In September 2006, Statement of Financial Accounting Standards No. 157 Fair
Value Measurements ("SFAS 157") was issued by the FASB and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. At this time, management is evaluating the implications
of SFAS 157 and its impact on the Funds' financial statements, if any, has not
been determined.
3. Investment Advisory Fee and Other Affiliated Transactions
First Trust is a limited partnership with one limited partner, Grace Partners of
DuPage L.P., and one general partner, The Charger Corporation. First Trust
serves as investment advisor to the Funds pursuant to an Investment Management
Agreement. First Trust is responsible for the selection and ongoing monitoring
of the securities in the Funds' portfolios and certain other services necessary
for the management of the Funds.
For these services, First Trust is entitled to a monthly fee calculated at the
following annual rates:
% of Average
Daily Net Assets
-----------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund 0.50%
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 0.30%
First Trust IPOX-100 Index Fund 0.40%
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 0.40%
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 0.40%
First Trust Amex(R) Biotechnology Index Fund 0.40%
First Trust Dow Jones Internet Index(SM) Fund 0.40%
First Trust DB Strategic Value Index Fund 0.50%
First Trust Value Line(R) Equity Allocation Index Fund 0.50%
First Trust Value Line(R) Dividend Index Fund 0.50%
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 0.40%
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 0.40%
First Trust S&P REIT Index Fund 0.30%
First Trust ISE Water Index Fund 0.40%
First Trust ISE-Revere Natural Gas Index Fund 0.40%
First Trust ISE Chindia Index Fund 0.40%
First Trust Value Line(R) 100 Exchange-Traded Fund (1) 0.50%
(1) Prior to June 18, 2007, First Trust was entitled to a monthly fee calculated
at an annual rate of 0.65% of the Fund's average daily net assets for its
investment advisory services to First Trust Value Line(R) 100 Fund.
Page 101
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NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007
The Trust and the Advisor have entered into an Excess Expense Agreement in which
the Advisor has agreed to waive fees and/or reimburse the Funds to the extent
that the operating expenses of each Fund (excluding interest expense, brokerage
commissions and other trading expenses, taxes and extraordinary expenses)
exceeded the percentage of average daily net assets per year (the "Expense Cap")
as shown below:
Expense Cap
------------
First Trust Dow Jones Select MicroCap Index(SM) Fund 0.60%
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 0.45%
First Trust IPOX-100 Index Fund 0.60%
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 0.60%
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 0.60%
First Trust Amex(R) Biotechnology Index Fund 0.60%
First Trust Dow Jones Internet Index(SM) Fund 0.60%
First Trust DB Strategic Value Index Fund 0.65%
First Trust Value Line(R) Equity Allocation Index Fund 0.70%
First Trust Value Line(R) Dividend Index Fund 0.70%
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 0.60%
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 0.60%
First Trust S&P REIT Index Fund 0.50%
First Trust ISE Water Index Fund 0.60%
First Trust ISE-Revere Natural Gas Index Fund 0.60%
First Trust ISE Chindia Index Fund 0.60%
First Trust Value Line(R) 100 Exchange-Traded Fund 0.70%
Each Fund's Expense Cap will be in effect for at least two years from its
inception date, except that First Trust Dow Jones Select MicroCap Index(SM)
Fund's Expense Cap was extended until May 15, 2008. Expenses borne by the
Advisor are subject to reimbursement by the Funds up to three years from the
date the fee or expense was incurred, but no reimbursement payment will be made
by a Fund if it would result in the Fund exceeding its Expense Cap.
For the period ended December 31, 2007, the advisory fee waivers and
reimbursements of expenses (in order to maintain the Expense Caps) were as
follows:
Advisory Fee Expense
Waivers Reimbursements
------------------- --------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 90,935 $ 46,250
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 199,880 --
First Trust IPOX-100 Index Fund 98,443 15,288
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 86,008 --
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 75,489 --
First Trust Amex(R) Biotechnology Index Fund 65,395 --
First Trust Dow Jones Internet Index(SM) Fund 54,768 --
First Trust DB Strategic Value Index Fund 172,875 --
First Trust Value Line(R) Equity Allocation Index Fund 75,067 23,311
First Trust Value Line(R) Dividend Index Fund 392,894 --
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 12,216 49,026
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 77,233 --
First Trust S&P REIT Index Fund 4,118 104,490
First Trust ISE Water Index Fund 21,211 36,453
First Trust ISE-Revere Natural Gas Index Fund 13,470 45,852
First Trust ISE Chindia Index Fund 61,221 --
First Trust Value Line(R) 100 Exchange-Traded Fund 132,258 --
The Trust has multiple service agreements with The Bank of New York ("BNY").
Under the servicing agreements, BNY will perform custodial, fund accounting,
certain administrative services, and transfer agency services for the Trust. As
custodian, BNY is responsible for the custody of the Trust's assets. As fund
accountant and administrator, BNY is responsible for maintaining the books and
records of the Trust's securities and cash. As transfer agent, BNY is
responsible for performing transfer agency services for the Trust. The Bank of
New York is a subsidiary of The Bank of New York Mellon Corporation, a financial
holding company.
Page 102
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NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007
The Trust, on behalf of the Funds, has entered into an agreement with PFPC, Inc.
("PFPC"), whereby PFPC will provide certain administrative services for the
Trust and the Funds in connection with the Board's meetings and other related
matters.
Prior to June 18, 2007, PFPC, an indirect, majority-owned subsidiary of The PNC
Financial Services Group Inc., served as First Trust Value Line(R) 100 Fund's
Administrator and Transfer Agent in accordance with certain fee arrangements.
PFPC Trust Company, also an indirect, majority-owned subsidiary of The PNC
Financial Services Group Inc., served as First Trust Value Line(R) 100 Fund's
Custodian in accordance with certain fee arrangements.
Effective January 1, 2007, the Trustees approved a revised compensation plan.
Under the revised plan, each Trustee who is not an officer or employee of First
Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is
paid an annual retainer of $10,000 per trust for the first 14 trusts of the
First Trust Fund Complex and an annual retainer of $7,500 per trust for each
subsequent trust added to the First Trust Fund Complex. The annual retainer is
allocated equally among each of the trusts. No additional meeting fees are paid
in connection with board or committee meetings.
Additionally, the Lead Independent Trustee is paid $10,000 annually and the
Audit Committee Chairman is paid $5,000 annually, with such compensation paid by
the trusts in the First Trust Fund Complex and divided among those trusts.
Trustees are also reimbursed by the trusts in the First Trust Fund Complex for
travel and out-of-pocket expenses in connection with all meetings. Prior to
January 1, 2007, the trusts paid each Trustee who is not an officer or employee
of First Trust, any sub-advisor or any of their affiliates an annual retainer of
$10,000, which included compensation for all board and committee meetings.
Effective January 1, 2008, each of the chairmen of the Nominating and Governance
Committee and Valuation Committee will be paid $2,500 annually to serve in such
capacities with such compensation paid by the trusts in the First Trust Fund
Complex and divided among those trusts. Also effective January 1, 2008, each
committee chairman will serve two years before rotating to serve as a chairman
of another committee.
4. Purchases and Sales of Securities
For the period ended December 31, 2007, the cost of purchases and proceeds from
sales of investment securities, excluding short-term investments and in-kind
transactions, were as follows:
Purchases Sales
----------------- -----------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 2,026,281 $ 6,452,305
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 7,403,049 12,401,969
First Trust IPOX-100 Index Fund 2,744,316 6,108,089
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 3,693,046 3,676,209
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 2,432,152 4,566,339
First Trust Amex(R) Biotechnology Index Fund 8,022,538 5,649,685
First Trust Dow Jones Internet Index(SM) Fund 3,310,907 9,200,700
First Trust DB Strategic Value Index Fund 3,600,844 9,675,728
First Trust Value Line(R) Equity Allocation Index Fund 6,295,765 14,835,215
First Trust Value Line(R) Dividend Index Fund 13,083,142 39,505,401
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 1,100,767 938,747
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 1,042,859 2,103,636
First Trust S&P REIT Index Fund 551,945 529,675
First Trust ISE Water Index Fund 238,065 945,332
First Trust ISE-Revere Natural Gas Index Fund 272,367 1,697,199
First Trust ISE Chindia Index Fund 789,462 11,040,522
First Trust Value Line(R) 100 Exchange-Traded Fund 263,804,022 348,820,775
Page 103
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NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007
For the period ended December 31, 2007, the cost of in-kind purchases and
proceeds from in-kind sales were as follows:
Purchases Sales
----------------- -----------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 20,717,231 $ 14,036,716
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 66,643,391 59,946,504
First Trust IPOX-100 Index Fund 22,897,265 15,897,966
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 24,182,946 21,009,227
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 20,846,783 24,389,689
First Trust Amex(R) Biotechnology Index Fund 88,117,651 46,556,875
First Trust Dow Jones Internet Index(SM) Fund 75,755,590 62,076,782
First Trust DB Strategic Value Index Fund 104,646,981 56,768,510
First Trust Value Line(R) Equity Allocation Index Fund 25,770,324 23,095,306
First Trust Value Line(R) Dividend Index Fund 177,415,981 410,789,172
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 8,099,473 6,390,899
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 57,096,680 15,342,993
First Trust S&P REIT Index Fund 3,771,996 1,755,034
First Trust ISE Water Index Fund 18,286,890 5,843,947
First Trust ISE-Revere Natural Gas Index Fund 16,731,803 4,571,186
First Trust ISE Chindia Index Fund 121,511,994 11,705,072
First Trust Value Line(R) 100 Exchange-Traded Fund 223,867,759 256,358,692
As of December 31, 2007, the costs of investments for federal income tax
purposes and accumulated net unrealized appreciation/depreciation on investments
were as follows:
Net
Unrealized Gross Gross
Appreciation Unrealized Unrealized
Cost (Depreciation) Appreciation (Depreciation)
------------- -------------- ------------ --------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 19,471,014 $ (1,430,004) $ 982,571 $ (2,412,575)
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 77,115,362 (12,609,479) 1,948,890 (14,558,369)
First Trust IPOX-100 Index Fund 24,721,096 1,958,507 3,765,255 (1,806,748)
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 32,745,515 (1,743,296) 1,783,253 (3,526,549)
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 25,517,832 (1,783,779) 1,230,556 (3,014,335)
First Trust Amex(R) Biotechnology Index Fund 79,089,720 (6,269,136) 4,180,196 (10,449,332)
First Trust Dow Jones Internet Index(SM) Fund 39,703,984 (3,579,723) 2,571,492 (6,151,215)
First Trust DB Strategic Value Index Fund 63,317,964 (1,794,979) 2,221,119 (4,016,098)
First Trust Value Line(R) Equity Allocation Index Fund 12,674,452 667,292 1,383,595 (716,303)
First Trust Value Line(R) Dividend Index Fund 190,309,767 (10,114,015) 9,162,686 (19,276,701)
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 2,398,996 (226,358) 80,792 (307,150)
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 45,542,378 5,269,569 7,166,577 (1,897,008)
First Trust S&P REIT Index Fund 2,116,638 (413,643) 4,490 (418,133)
First Trust ISE Water Index Fund 12,071,261 318,303 770,676 (452,373)
First Trust ISE-Revere Natural Gas Index Fund 11,218,190 10,424 302,858 (292,434)
First Trust ISE Chindia Index Fund 102,479,765 1,612,014 6,594,380 (4,982,366)
First Trust Value Line(R) 100 Exchange-Traded Fund 183,146,042 22,656,895 24,282,001 (1,625,106)
5. Capital
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares. Such transactions are generally permitted on an
in-kind basis, with a balancing cash component to equate the transaction to the
daily NAV per Share of each Fund times the number of Shares in a Creation Unit
on the transaction date. Purchasers of Creation Units must pay a standard
creation transaction fee (the "Creation Transaction Fee"), which is based on the
number of different securities in a Creation Unit of each Fund according to the
fee schedule set forth below:
Page 104
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NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007
Number of
Securities Creation
in a Creation Unit Transaction Fee
---------------------- -------------------
1-100 $500
101-200 $1,000
201-300 $1,500
301-400 $2,000
401-500 $2,500
501-600 $3,000
601-700 $3,500
The Creation Transaction Fee is applicable to each purchase transaction
regardless of the number of Creation Units purchased in the transaction. An
additional variable fee of up to three times the Creation Transaction Fee may be
charged to approximate additional expenses incurred by a Fund with respect to
transactions effected outside of the clearing process (i.e., through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. The price for each Creation Unit will equal the daily
NAV per Share of a Fund times the number of Shares in a Creation Unit on the
transaction date plus the fees described above and, if applicable, any transfer
taxes.
Parties redeeming Creation Units must pay a standard redemption transaction fee
(the "Redemption Transaction Fee"), which is based on the number of different
securities in a Creation Unit according to the fee scheduled set forth below:
Number of
Securities Redemption
in a Creation Unit Transaction Fee
---------------------- -------------------
1-100 $500
101-200 $1,000
201-300 $1,500
301-400 $2,000
401-500 $2,500
501-600 $3,000
601-700 $3,500
The Redemption Transaction Fee is applicable to each redemption transaction
regardless of the number of Creation Units redeemed in the transaction. An
additional variable fee of up to three times the Redemption Transaction Fee may
be charged to approximate additional expenses incurred by a Fund with respect to
redemptions effected outside of the clearing process or to the extent that
redemptions are for cash. The Funds reserve the right to effect redemptions in
cash. A shareholder may request a cash redemption in lieu of securities,
however, a Fund may, in its discretion reject any such request.
6. Indemnification
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
Page 105
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of First Trust Exchange-Traded Fund:
We have audited the accompanying statements of assets and liabilities of First
Trust Exchange-Traded Fund, comprising First Trust Dow Jones Select MicroCapSM
Index Fund, First Trust Morningstar(R) Dividend Leaders(SM) Index Fund, First
Trust IPOX-100 Index Fund, First Trust NASDAQ-100 Equal Weighted Index(SM) Fund,
First Trust NASDAQ-100-Technology Sector Index(SM) Fund, First Trust Amex(R)
Biotechnology Index Fund, First Trust Dow Jones Internet Index(SM) Fund, First
Trust DB Strategic Value Index Fund, First Trust Value Line(R) Equity Allocation
Index Fund, First Trust Value Line(R) Dividend Index Fund, First Trust
NASDAQ-100 Ex-Technology Sector Index(SM) Fund, First Trust NASDAQ(R) Clean
Edge(R) U.S. Liquid Series Index Fund, First Trust S&P REIT Index Fund, First
Trust ISE Water Index Fund, First Trust ISE-Revere Natural Gas Index Fund, First
Trust ISE Chindia Index Fund and First Trust Value Line(R) 100 Exchange-Traded
Fund (the "Funds"), including the portfolios of investments, as of December 31,
2007, and the related statements of operations, changes in net assets and the
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Funds
are not required to have, nor were we engaged to perform, an audit of their
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Funds' internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2007, by correspondence with the Funds'
custodian and brokers. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of First
Trust Exchange-Traded Fund as of December 31, 2007, the results of their
operations, changes in its net assets, and the financial highlights for the
respective periods presented in conformity with accounting principles generally
accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 20, 2008
Page 106
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ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007 (UNAUDITED)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Funds use to determine how
to vote proxies and information on how the Funds voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30, 2007
is available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Trust's website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's website at http://www.sec.gov.
Portfolio Holdings
The Trust files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Trust's Form N-Q is available (1) by calling (800)
988-5891; (2) on the Trust's website located at http://www.ftportfolios.com; (3)
on the SEC's website at http://www.sec.gov; and (4) for review and copying at
the SEC's Public Reference Room ("PRR") in Washington, DC. Information regarding
the operation of the PRR may be obtained by calling (800) SEC-0330.
Federal Tax Information
For the taxable year ended December 31, 2007, the following percentages of
income dividends paid by the Funds qualify for the dividends received deduction
available to corporations:
Dividends Received Deduction
----------------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund 100%
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 100%
First Trust IPOX-100 Index Fund 100%
First Trust DB Strategic Value Index Fund 100%
First Trust Value Line(R) Equity Allocation Index Fund 91%
First Trust Value Line(R) Dividend Index Fund 100%
First Trust ISE Water Index Fund 100%
First Trust ISE-Revere Natural Gas Index Fund 100%
For the taxable year ended December 31, 2007, the following percentages of
income dividends paid by the Funds is hereby designated as qualified dividend
income:
Qualified Dividend Income
-------------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund 100%
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 100%
First Trust IPOX-100 Index Fund 100%
First Trust DB Strategic Value Index Fund 100%
First Trust Value Line(R) Equity Allocation Index Fund 100%
First Trust Value Line(R) Dividend Index Fund 100%
First Trust ISE Water Index Fund 100%
First Trust ISE-Revere Natural Gas Index Fund 100%
First Trust ISE Chindia Index Fund 100%
Page 107
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ADDITIONAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007 (UNAUDITED)
Licensing Information
Dow Jones, Dow Jones Internet Composite Index(SM) and Dow Jones Select MicroCap
Index(SM) are trademarks of Dow Jones & Company, Inc. and have been licensed for
use. The First Trust Dow Jones Select MicroCap Index(SM) Fund, based on the Dow
Jones Select MicroCap Index(SM) and the First Trust Dow Jones Internet Index(SM)
Fund based on the Dow Jones Internet Composite Index(SM) are not sponsored,
endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation
regarding the advisability of trading in the Funds.
Morningstar is a service mark of Morningstar, Inc. and has been licensed for
use. The First Trust Morningstar(R) Dividend Leaders(SM) Index Fund is not
sponsored, endorsed, issued, sold or promoted by Morningstar, Inc., nor does
this company make any representation regarding the advisability of investing in
the Fund.
IPOX is a trademark of IPOX Schuster LLC. IPOX IPO Indexes and Derivatives
(patent pending).
NASDAQ(R), NASDAQ-100, NASDAQ-100 Index(R), NASDAQ-100 Technology Sector
Index(SM), NASDAQ-100 Equal-Weighted Index(SM), and NASDAQ-100 Ex-Tech Sector
Index(SM), are trademarks of The NASDAQ Stock Market, Inc. (which with its
affiliates is referred to as the Corporations) and are licensed for use by First
Trust Advisors L.P. The Funds have not been passed on by the Corporations as to
their legality or suitability. The Funds are not issued, endorsed, sold, or
promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO
LIABILITY WITH RESPECT TO THE FUNDS.
NASDAQ(R) and Clean Edge(R) are the registered trademarks (the "Marks") of The
NASDAQ Stock Market, Inc. ("NASDAQ(R)") and Clean Edge, Inc. ("Clean Edge")
respectively. NASDAQ(R) and Clean Edge(R) are, collectively with their
affiliates, the "Corporations." The Marks are licensed for use by First Trust
Advisors L.P. The Fund has not been passed on by the Corporations as to its
legality or suitability. The Fund is not issued, endorsed, sold, or promoted by
the Corporations. The Fund should not be construed in any way as investment
advice by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO
LIABILITY WITH RESPECT TO THE FUND.
The Amex(R) Biotechnology Index(SM) is a trademark of the American Stock
Exchange LLC and is licensed for use by First Trust Advisors L.P. The Fund is
not sponsored or endorsed by the American Stock Exchange LLC. American Stock
Exchange LLC makes no representation or warranty, express or implied, to the
owners of the Fund or any member of the public regarding the advisability of
investing in the Fund or the ability of the Fund to track the performance of the
various sectors represented in the stock market. American Stock Exchange LLC has
no obligation to take the needs of the owners of the Fund into consideration in
determining, composing or calculating the Index. American Stock Exchange LLC is
not responsible for and has not participated in any determination or calculation
made with respect to issuance or redemption of the Fund.
"Deutsche Bank" and "Deutsche Bank CROCI(R) US+ Index" are service marks of
Deutsche Bank AG ("Deutsche Bank"). Deutsche Bank has no relationship to First
Trust or the First Trust DB Strategic Value Index Fund, other than the licensing
of the Index and its service marks for use in connection with the Fund.
"Value Line(R)", "Value Line(R) Equity Allocation Index", "Value Line(R)
Dividend Index" and "Value Line(R) 100 Index" are trademarks of Value Line(R),
Inc. and have been licensed for use for certain purposes by First Trust on
behalf of the Funds. The First Trust Value Line(R) Equity Allocation Index Fund
based on the Value Line(R) Equity Allocation Index, the First Trust Value
Line(R) Dividend Index Fund, based on the Value Line(R) Dividend Index and the
First Trust Value Line(R) 100 Exchange-Traded Fund, based on the Value Line(R)
100 Index, are not sponsored, endorsed, sold, or promoted by Value Line(R),
Inc., and Value Line(R) makes no representation regarding the advisability of
investing in the Funds.
Standard & Poor's(R), S&P(R) and S&P REIT Composite Index are registered
trademarks of Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
and have been licensed for use by First Trust Advisors L.P. The Fund is not
sponsored, endorsed, sold or promoted by S&P and S&P makes no representation,
warranty or condition regarding the advisability of investing in the Fund.
"International Securities Exchange(TM)", "ISE(TM)", "ISE Water Index(TM)", "ISE
ChIndia Index(TM)" and the ISE-Revere Natural Gas Index(TM)" are trademarks of
the International Securities Exchange(TM) and have been licensed for use for
certain purposes by First Trust Advisors L.P. Each Fund, based on its
corresponding index, is not sponsored, endorsed, sold or promoted by the
International Securities Exchange(TM) and the International Securities
Exchange(TM) makes no representation regarding the advisability of trading in
such products.
Page 108
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ADDITIONAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007 (UNAUDITED)
Privacy Policy
The open-end and closed-end funds advised by First Trust Advisors L.P. (each a
"Fund") consider your privacy an important priority in maintaining our
relationship. We are committed to protecting the security and confidentiality of
your personal information.
Sources of Information
We may collect nonpublic personal information about you from the following
sources:
o Information we receive from you or your broker-dealer, investment
advisor or financial representative through interviews, applications,
agreements or other forms;
o Information about your transactions with us, our affiliates or others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies." For
example, we may identify the pages on our website that your browser
requests or visits.
Information Collected
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
Disclosure of Information
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. The permitted uses
include the disclosure of such information to unaffiliated companies for the
following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians and
trustees, or that assist us in the distribution of investor materials
such as trustees, banks, financial representatives and printers.
o We may release information we have about you if you direct us to do so,
if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information with affiliates of the Fund. Please note,
however, that the California Financial Information Privacy Act contains an "opt
out" mechanism that California consumers may use to prevent us from sharing
nonpublic personal information with affiliates.
Confidentiality and Security
With regard to our internal security procedures, the Fund restricts access to
your nonpublic personal information to those individuals who need to know that
information to provide products or services to you. We maintain physical,
electronic and procedural safeguards to protect your nonpublic personal
information.
Policy Updates and Inquiries
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time; however, if we do change
it, we will tell you promptly.
For questions about our policy, or for additional copies of this notice, please
contact us at (800) 621-1675.
Page 108
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BOARD OF TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
First Trust Exchange-Traded Fund
December 31, 2007 (Unaudited)
Each Fund's respective statement of additional information includes additional
information about the Trustees and is available without charge, upon request, by
calling (800) 988-5891.
NUMBER OF
PORTFOLIOS IN
THE FIRST TRUST OTHER
TERM OF OFFICE FUND COMPLEX TRUSTEESHIPS OR
NAME, ADDRESS, DATE OF BIRTH AND AND LENGTH OF PRINCIPAL OCCUPATIONS OVERSEEN BY DIRECTORSHIPS
POSITION(S) WITH THE TRUST SERVICE DURING PAST 5 YEARS TRUSTEE HELD BY TRUSTEE
INDEPENDENT TRUSTEES
Richard E. Erickson, Trustee Physician; President, 58 None
c/o First Trust Advisors L.P. o Indefinite Term Wheaton Orthopedics;
1001 Warrenville Road Co-owner and Co-Director
Suite 300 o 2 years, 6 (January 1996 to May
Lisle, IL 60532 months served 2007), Sports Med Center
D.O.B.: 04/51 for Fitness; Limited
Partner, Gundersen Real
Estate Partnership;
Limited Partner, Sportsmed LLC
Thomas R. Kadlec, Trustee Senior Vice President and 58 None
c/o First Trust Advisors L.P. o Indefinite Term Chief Financial Officer
1001 Warrenville Road (May 2007 to Present),
Suite 300 o 2 years, 6 Vice President and Chief
Lisle, IL 60532 months served Financial Officer (1990 to
D.O.B.: 11/57 May 2007), ADM Investor
Services, Inc. (Futures
Commission Merchant);
President (May 2005 to
Present), ADM Derivatives,
Inc.; Registered
Representative (2000 to
Present), Segerdahl &
Company, Inc., a FINRA
member (Broker-Dealer)
Robert F. Keith, Trustee President (2003 to 58 None
c/o First Trust Advisors L.P. o Indefinite Term Present), Hibs Enterprises
1001 Warrenville Road (Financial and Management
Suite 300 o 1 year, 6 Consulting); President
Lisle, IL 60532 months served (2001 to 2003), Aramark
D.O.B.: 11/56 Service Master Management;
President and Chief
Operating Officer (1998 to
2003), Service Master
Management Services
Niel B. Nielson, Trustee President (June 2002 to 58 Director of
c/o First Trust Advisors L.P. o Indefinite Term Present), Covenant College Covenant
1001 Warrenville Road Transport Inc.
Suite 300 o 2 years, 6
Lisle, IL 60532 months served
D.O.B.: 03/54
INTERESTED TRUSTEE
James A. Bowen(1), Trustee, President, First Trust 58 Trustee of
President, Chairman of the Board o Indefinite Term Advisors L.P. and First Wheaton College
and CEO Trust Portfolios L.P.;
1001 Warrenville Road o 2 years, 6 Chairman of the Board of
Suite 300 months served Directors, BondWave LLC
Lisle, IL 60532 (Software Development
D.O.B.: 09/55 Company/Broker-Dealer) and
Stonebridge Advisors LLC
(Investment Advisor)
<FN>
- --------------------
1 Mr. Bowen is deemed an "interested person" of the Funds due to his position
as President of First Trust Advisors L.P., investment advisor of the Funds.
</FN>
Page 110
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BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
- --------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007 (UNAUDITED)
OFFICERS
NAME, ADDRESS POSITION AND OFFICES TERM OF OFFICE AND PRINCIPAL OCCUPATIONS
AND DATE OF BIRTH WITH TRUST LENGTH OF SERVICE DURING PAST 5 YEARS
Mark R. Bradley Treasurer, Controller, o Indefinite term Chief Financial Officer,
1001 Warrenville Road, Chief Financial Officer First Trust Advisors L.P. and
Suite 300 and Chief Accounting o 2 years, 6 months First Trust Portfolios L.P.;
Lisle, IL 60532 Officer served Chief Financial Officer,
D.O.B.: 11/57 BondWave LLC (Software
Development Company/Broker-Dealer) and
Stonebridge Advisors LLC
(Investment Advisor)
Kelley A. Christensen Vice President o Indefinite term Assistant Vice President,
1001 Warrenville Road, First Trust Advisors L.P. and
Suite 300 o 1 year served First Trust Portfolios L.P.
Lisle, IL 60532
D.O.B.: 09/70
James M. Dykas Assistant Treasurer o Indefinite term Senior Vice President (April
1001 Warrenville Road, 2007 to Present), Vice
Suite 300 o 2 years served President (January 2005 to
Lisle, IL 60532 April 2007), First Trust
D.O.B.: 01/66 Advisors L.P. and First Trust
Portfolios L.P.; Executive
Director (December 2002 to
January 2005), Vice President
(December 2000 to December
2002), Van Kampen Asset
Management and Morgan Stanley
Investment Management
W. Scott Jardine Secretary and Chief o Indefinite term General Counsel, First Trust
1001 Warrenville Road, Compliance Officer Advisors L.P. and First Trust
Suite 300 o 2 years, 6 months Portfolios L.P.; Secretary,
Lisle, IL 60532 served BondWave LLC (Software
D.O.B.: 05/60 Development Company/Broker-Dealer)
and Stonebridge Advisors LLC
(Investment Advisor)
Daniel J. Lindquist Vice President o Indefinite term Senior Vice President
1001 Warrenville Road, (September 2005 to Present),
Suite 300 o 2 years served Vice President (April 2004 to
Lisle, IL 60532 September 2005), First Trust
D.O.B.: 02/70 Advisors L.P. and First Trust
Portfolios L.P.; Chief
Operating Officer (January
2004 to April 2004), Mina
Capital Management, LLC;
Chief Operating Officer
(April 2000 to January 2004),
Samaritan Asset Management
Services, Inc.
Kristi A. Maher Assistant Secretary o Indefinite term Deputy General Counsel (May
1001 Warrenville Road, 2007 to Present), Assistant
Suite 300 o 2 years, 6 months General Counsel (March 2004
Lisle, IL 60532 served to May 2007), First Trust
D.O.B.: 12/66 Advisors L.P. and First Trust
Portfolios L.P.; Associate
(December 1995 to March
2004), Chapman and Cutler LLP
Roger F. Testin Vice President o Indefinite term Senior Vice President, First
1001 Warrenville Road, Trust Advisors L. P. and
Suite 300 o 2 years, 6 months First Trust Portfolios L.P.
Lisle, IL 60532 served (August 2001 to present);
D.O.B.: 06/66 Analyst (1998-2001), Dolan
Capital Management
Stan Ueland Assistant Vice President o Indefinite term Vice President (August 2005
1001 Warrenville Road, to Present), First Trust
Suite 300 o 1 year served Advisors L.P. and First Trust
Lisle, IL 60532 Portfolios L.P; Vice
D.O.B.: 11/70 President (May 2004 to August
2005), BondWave LLC (Software
Development Company/Broker-Dealer);
Account Executive (January
2003 to May 2004), Mina
Capital Management, LLC and
Samaritan Asset Management
Services, Inc.; Sales
Consultant (January 1997 to
January 2003), Oracle
Corporation
Page 111
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RISK CONSIDERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
You should consider each Fund's investment objective, risks, charges and
expenses carefully before investing. You can download each Fund's prospectus at
http://www.ftportfolios.com or contact First Trust Portfolios L.P. at
1-800-621-1675 to request a prospectus, which contains this and other
information about the particular Fund. Read it carefully before you invest.
First Trust Portfolios L.P. is the distributor of the First Trust
Exchange-Traded Fund.
Risk Considerations:
Each Fund's shares will change in value, and you could lose money by investing
in a Fund. An investment in a Fund involves risks similar to those of investing
in any fund of equity securities traded on an exchange. Investors buying or
selling Fund shares on the secondary market may incur brokerage commissions. In
addition, investors who sell Fund shares may receive less than the shares' net
asset value. Unlike shares of open-end mutual funds, investors are generally not
able to purchase ETF shares directly from a Fund and individual ETF shares are
not redeemable. However, specified large blocks of ETF shares called creation
units can be purchased from, or redeemed to, the Fund.
Each of the Funds is subject to index tracking risk. You should anticipate that
the value of Fund shares will decline, more or less, in correlation with any
decline in the value of the index that the Fund seeks to track.
Each Fund's return may not match the return of the index it seeks to track for a
number of reasons. While First Trust seeks to have a correlation of 0.95 or
better, before expenses, between a Fund's performance and the performance of its
corresponding index, there can be no assurance that a Fund will be able to
achieve such a correlation. Accordingly, each Fund's performance may correlate
to a lesser extent and may possibly vary substantially from the performance of
its corresponding index.
Each Fund is also exposed to additional market risk due to a policy of investing
principally in the securities included in its corresponding index. As a result
of such policies, securities held by each Fund will generally not be bought or
sold in response to market fluctuations and the securities may be issued by
companies concentrated in a particular industry. As a result, each Fund will
generally not sell a stock because the stock's issuer is in financial trouble,
unless that stock is removed or is anticipated to be removed from the index the
Fund seeks to track.
Each Fund relies on a license from an index provider that permits the Fund to
use its corresponding index and associated trade names and trademarks in
connection with the name and investment strategies of the Fund. Such licenses
may be terminated by the respective index provider and, as a result, each Fund
may lose its ability to use such intellectual property. There is also no
guarantee that index provider has all rights to license the respective
intellectual property to First Trust, on behalf of the Fund. Accordingly, in the
event the license is terminated or the index provider does not have rights to
license the particular intellectual property, it may have a significant effect
on the operation of the related Fund.
Each Fund may be concentrated in stocks of companies in an individual industry
or sector if the Fund's corresponding index is concentrated in an individual
industry or sector. You should be aware that an investment in a portfolio that
is concentrated in an individual industry or sector involves additional risk,
including limited diversification.
With the exception of First Trust DB Strategic Value Index Fund, First Trust
Value Line(R) Dividend Index Fund, First Trust Value Line(R) Equity Allocation
Index Fund and First Trust Value Line(R) 100 Exchange-Traded Fund, each Fund is
considered to be non-diversified. As a result, those Funds are exposed to
additional market risk. A non-diversified fund may invest a relatively high
percentage of its assets in a limited number of issuers. As a result, changes in
the market value of a single portfolio security could cause greater fluctuations
in share price than would occur in a diversified fund. Furthermore,
non-diversified funds are more susceptible to any single political, regulatory
or economic occurrence.
The First Trust Dow Jones Select MicroCap Index(SM) Fund invests in
micro-capitalization companies. Such companies may be more vulnerable to adverse
general market or economic developments, may be less liquid, and may experience
greater price volatility than larger, more established companies.
The First Trust Morningstar(R) Dividend Leaders(SM) Index Fund, the First Trust
Amex(R) Biotechnology Index Fund and the First Trust Dow Jones Internet
Index(SM) Fund invest in small-cap companies and are subject to additional
risks, as the share prices of small-cap companies may be less liquid and are
often more volatile than those of larger companies.
The First Trust Dow Jones Internet Index(SM) Fund invests in the securities of
Internet companies. Internet companies are subject to rapid changes in
technology, worldwide competition, rapid obsolescence of products and services,
loss of patent protections, cyclical market patterns, evolving industry
standards, frequent new product introductions and the considerable risk of
owning small capitalization companies that have recently begun operations.
The First Trust NASDAQ-100 Equal Weighted Index(SM) Fund, the First Trust
NASDAQ-100-Technology Sector Index(SM) Fund and the First Trust Dow Jones
Internet Index(SM) Fund invest in stocks of companies in the technology sector.
You should be aware that an investment in a portfolio which invests in a
particular sector involves additional risks, including limited diversification.
The companies engaged in the technology sector are subject to fierce competition
and high research and development costs, and their products and services may be
subject to rapid obsolescence.
The First Trust Amex(R) Biotechnology Index Fund is concentrated in stocks of
companies in the biotechnology sector. You should be aware that an investment in
a portfolio which is concentrated in a particular sector involves additional
risks, including limited diversification. The companies engaged in the
biotechnology sector are subject to fierce competition, substantial research and
development costs, governmental regulations and pricing constraints, and their
products and services may be subject to rapid obsolescence.
The First Trust IPOX-100 Fund invests in companies that have recently conducted
an initial public offering. The stocks of such companies are often subject to
extreme price volatility and speculative trading.
The First Trust IPOX-100 Fund also invests in securities of companies in the
financial services industry. Banks, thrifts and their holding companies are
especially subject to the adverse effects of economic recession; volatile
interest rates; portfolio concentrations in geographic markets and in commercial
and residential real estate loans; and competition from new entrants in their
fields of business. Although recently enacted legislation repealed most of the
barriers which separated the banking, insurance and securities industries, these
industries are still extensively regulated at both the federal and state level
and may be adversely affected by increased regulations.
Page 112
- --------------------------------------------------------------------------------
RISK CONSIDERATIONS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
The First Trust IPOX-100 Fund also invests in securities of companies in the
information technology industry. Information technology companies are generally
subject to the risks of rapidly changing technologies; short product life
cycles; fierce competition; and aggressive pricing and reduced profit margins.
The First Trust S&P REIT Index Fund invests in companies in the real estate
industry, including real estate investment trusts ("REITS") and is subject to
the risks associated with investing in real estate (any of which could cause the
value of a REIT's stock price to decline), which may include, but are not
limited to, possible declines in the value of real estate, adverse general and
local economic conditions, possible lack of availability of mortgage funds,
overbuilding in a REIT's market, changes in interest rates and environmental
problems. Furthermore, increases in interest rates typically lower the present
value of a REIT's future earnings stream, and may make financing property
purchases and improvements more costly.
The First Trust Value Line(R) Equity Allocation Index Fund, the First Trust
Value Line(R) Dividend Index Fund, the First Trust Value Line(R) 100
Exchange-Traded Fund, the First Trust NASDAQ-100 Equal Weighted Index(SM) Fund,
the First Trust NASDAQ-100-Technology Index(SM) Fund, the First Trust NASDAQ-100
Ex-Technology Sector Index(SM) Fund, the NASDAQ(R) Clean Edge(R) U.S. Liquid
Series Index Fund, the First Trust IPOX-100 Index Fund, the First Trust ISE
Water Index Fund, the First Trust ISE-Revere Natural Gas Index Fund, the First
Trust ISE Chindia Index Fund and the First Trust S&P REIT Index Fund may invest
in small capitalization and mid-capitalization companies. Such companies'
securities may be less liquid and may experience greater price volatility than
securities of larger, more established companies.
The First Trust Value Line(R) 100 Exchange-Traded Fund, the First Trust ISE
Water Index Fund, the First Trust ISE-Revere Natural Gas Index Fund and the
First Trust ISE Chindia Index Fund invest in non-U.S. securities and such
securities may be denominated in currencies other than the U.S. Dollar. Non-U.S.
companies, in general, are not subject to the regulatory requirements of U.S.
companies and, as such, there may be less publicly available information about
these companies. Moreover, non-U.S. accounting, auditing and financial reporting
standards generally are different from those applicable to U.S. companies.
The NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund invests in renewable
and alternative energy companies. You should be aware that share prices of
renewable and alternative energy companies have been significantly more volatile
than shares of companies operating in other more established industries and the
securities included in the NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund
may be subject to sharp price declines. This industry is relatively nascent and
under-researched in comparison to more established and mature sectors, and
should therefore be regarded as having greater investment risk.
The First Trust ISE Water Index Fund invests in companies in the potable water
and wastewater industries. You should be aware that adverse developments in
these industries may significantly affect the value of the shares of the First
Trust ISE Water Index Fund. Companies involved in the potable water and
wastewater industries are subject to environmental considerations, taxes,
government regulation, price and supply fluctuations, competition and
conservation.
The First Trust ISE-Revere Natural Gas Index Fund invests in companies in the
natural gas industry. You should be aware that one of the natural gas industry's
primary risks is the competitive risk associated with the prices of alternative
fuels, such as coal and oil. Additionally, the natural gas industry is sensitive
to increased interest rates because of the industry's capital intensive nature.
Furthermore, there are additional risks and hazards that are inherent in the
natural gas industry that may cause the price of natural gas to widely
fluctuate.
The First Trust ISE Chindia Index Fund invests in the securities of Chinese and
Indian companies. You should be aware that investments in such companies are
subject to additional risks, which are associated with possible adverse
economic, political and social developments in those countries.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 113
[LOGO OMITTED] FIRST TRUST
ADVISORS L.P.
FIRST TRUST EXCHANGE-TRADED FUND
INVESTMENT ADVISOR
First Trust Advisors L.P.
1001 Warrenville Road
Lisle, IL 60532
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York
101 Barclay Street
New York, NY 10286
BOARD ADMINISTRATOR
PFPC, Inc.
301 Bellevue Parkway
Wilmington, DE 19809
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
Back Cover
Item 2. Code of Ethics.
(a) The registrant, as of the end of the period covered by this report,
has adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics definition enumerated in paragraph (b) of this
Item's instructions.
(d) The registrant has not, during the period covered by this report,
granted any waivers, including an implicit waiver, from a provision of
the code of ethics that applies to the registrant's principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of
whether these individuals are employed by the registrant or a third
party, that relates to one or more of the items set forth in paragraph
(b) of this item's instructions.
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant's Board of
Trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified
to serve as an audit committee financial experts serving on the registrant's
audit committee and that each is "independent," as defined by Item 3 of Form
N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees (Registrant) -- The aggregate fees billed for
professional services rendered by the principal accountant for the audit of the
Registrant's annual financial statements or services that are normally provided
by the accountant in connection with statutory and regulatory filings or
engagements were $27,500 for 2006 and $289,250 for 2007.
(b) Audit-Related Fees (Registrant) -- The aggregate fees billed for
assurance and related services by the principal accountant that are reasonably
related to the performance of the audit of the Registrant's financial statements
and are not reported under paragraph (a) of this Item were $0 for 2006 and $0
for 2007.
Audit-Related Fees (Investment Adviser) -- The aggregate fees
billed for assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the Registrant's financial
statements and are not reported under paragraph (a) of this Item were $0 for
2006 and $0 for 2007.
(c) Tax Fees (Registrant) -- The aggregate fees billed for professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning to the Registrant were $6,000 for 2006 and $39,675 for 2007.
These fees were for tax preparation.
Tax Fees (Investment Adviser) -- The aggregate fees billed in
each of the last two fiscal years of the Registrant for professional services
rendered by the principal accountant for tax compliance, tax advice, and tax
planning to the Registrant's adviser were $0 for 2006 and $0 for 2007.
(d) All Other Fees (Registrant) -- The aggregate fees billed in each of
the last two fiscal years for products and services provided by the principal
accountant to the Registrant, other than the services reported in paragraphs (a)
through (c) of this Item were $3,652,19 for 2006 and $2,857.04 for 2007. These
fees were for compliance consulting services.
All Other Fees (Investment Adviser) -- The aggregate fees billed
in each of the last two fiscal years for products and services provided by the
principal accountant to the Registrant's investment adviser, other than services
reported in paragraphs (a) through (c) of this Item were $32,610.50 for 2006 and
$42,138 for 2007. These fees were for tax and compliance consulting.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services
Pre-Approval Policy, the Audit Committee (the "Committee") is responsible for
the pre-approval of all audit services and permitted non-audit services
(including the fees and terms thereof) to be performed for the Registrant by its
independent auditors. The Chairman of the Committee authorized to give such
pre-approvals on behalf of the Committee up to $25,000 and report any such
pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the
independent auditor's engagements for non-audit services with the Registrant's
adviser (not including a sub-adviser whose role is primarily portfolio
management and is sub-contracted or overseen by another investment adviser) and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the Registrant, if the
engagement relates directly to the operations and financial reporting of the
Registrant, subject to the de minimis exceptions for non-audit services
described in Rule 2-01 of Regulation S-X. If the independent auditor has
provided non-audit services to the Registrant's adviser (other than any
sub-adviser whose role is primarily portfolio management and is sub-contracted
with or overseen by another investment adviser) and any entity controlling,
controlled by or under common control with the investment adviser that provides
ongoing services to the Registrant that were not pre-approved pursuant to its
policies, the Committee will consider whether the provision of such non-audit
services is compatible with the auditor's independence.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) for the Registrant of this Item that were approved by the audit
committee pursuant to the pre-approval exceptions included in paragraph
(c)(7)(i)(c) of Rule 2-01 of Regulation S-X are as follows:
(b) 0%
(c) 0%
(d) 0%
The percentage of services described in each of paragraphs (b) through
(d) for the Registrant's investment adviser of this Item that were
approved by the audit committee pursuant to the pre-approval exceptions
included in paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are as
follows:
(b) 0%
(c) 0%
(d) 33.93%
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most recent
fiscal year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was less than fifty
percent.
(g) The aggregate non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the Registrant for 2006 were
$9,562.19 for the Registrant, $57,610.50 for the Registrant's investment adviser
and $41,925 for the registrant's distributor and for 2007 were $42,532.04 for
the Registrant, $49,138 Registrant's investment adviser and $6,800 for the
Registrant's distributor.
(h) The Registrant's audit committee of its Board of Trustees
determined that the provision of non-audit services that were rendered to the
Registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal accountant's
independence.
Items 5. Audit Committee of Listed Registrants.
The registrant has a separately designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The audit committee of the registrant is comprised of: Richard E. Erickson,
Thomas R. Kadlec, Robert F. Keith and Niel B. Nielson.
Item 6. Schedule of Investments.
Schedules of Investments in securities of unaffiliated issuers as of the close
of the reporting period are included as part of the report to shareholders filed
under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, 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
that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) First Trust Exchange-Traded Fund
-----------------------------------------------------
By: /s/ James A. Bowen
-------------------------------
Name: James A. Bowen
Title: Chairman of the Board, President and Chief Executive Officer
Date: February 26, 2008
-----------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ James A. Bowen
-------------------------------
Name: James A. Bowen
Title: Chairman of the Board, President and Chief Executive Officer
Date: February 26, 2008
-----------------------------
By: /s/ Mark R. Bradley
-------------------------------
Name: Mark R. Bradley
Title: Treasurer, Controller, Chief Financial Officer and Chief
Accounting Officer
Date: February 26, 2008
-----------------------------