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 811-22080
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First Trust Active Dividend Income Fund
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(Exact name of registrant as specified in charter)

120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Address of principal executive offices) (Zip code)

W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Name and address of agent for service)

Registrant's telephone number, including area code: 630-765-8000
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Date of fiscal year end: November 30
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Date of reporting period: November 30, 2010
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.

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

ITEM 1. REPORTS TO STOCKHOLDERS.

The Report to Shareholders is attached herewith.

[LOGO OMITTED] First Trust

ANNUAL REPORT
FOR THE YEAR ENDED
NOVEMBER 30, 2010

FIRST TRUST
ACTIVE DIVIDEND
INCOME
FUND

[LOGO OMITTED]

AVIANCE
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Capital Management

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TABLE OF CONTENTS
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FIRST TRUST ACTIVE DIVIDEND INCOME FUND (FAV)
ANNUAL REPORT
NOVEMBER 30, 2010

Shareholder Letter 1
At A Glance 2
Portfolio Commentary 3
Portfolio of Investments 8
Statement of Assets and Liabilities 12
Statement of Operations 13
Statements of Changes in Net Assets 14
Financial Highlights 15
Notes to Financial Statements 16
Report of Independent Registered Public Accounting Firm 21
Additional Information 22
Board of Trustees and Officers 25
Privacy Policy 27

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Aviance Capital Management, LLC ("Aviance" or
the "Sub-Advisor") and their respective representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.

Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
First Trust Active Dividend Income Fund (the "Fund") to be materially different
from any future results, performance or achievements expressed or implied by the
forward-looking statements. When evaluating the information included in this
report, you are cautioned not to place undue reliance on these forward-looking
statements, which reflect the judgment of the Advisor and/or Sub-Advisor and
their respective representatives only as of the date hereof. We undertake no
obligation to publicly revise or update these forward-looking statements to
reflect events and circumstances that arise after the date hereof.

PERFORMANCE AND RISK DISCLOSURE

There is no assurance that the Fund will achieve its investment objectives. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund
shares may therefore be less than what you paid for them. Accordingly, you can
lose money by investing in the Fund. See "Risk Considerations" in the Notes to
Financial Statements for a discussion of certain other risks of investing in the
Fund.

Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns, net asset value and common share price will fluctuate and Fund shares,
when sold, may be worth more or less than their original cost.

HOW TO READ THIS REPORT

This report contains information that may help you evaluate your investment. It
includes details about the Fund and presents data and analysis that provide
insight into the Fund's performance and investment approach.

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

It is important to keep in mind that the opinions expressed by personnel of
Aviance are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The risks of investing in the Fund are
spelled out in the prospectus, the statement of additional information, this
report and other Fund regulatory filings.

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SHAREHOLDER LETTER
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FIRST TRUST ACTIVE DIVIDEND INCOME FUND (FAV)
ANNUAL LETTER FROM THE PRESIDENT
NOVEMBER 30, 2010

Dear Shareholders:

I am pleased to present you with the annual report for your investment in First
Trust Active Dividend Income Fund (the "Fund").

First Trust Advisors L.P. ("First Trust") has always believed that staying
invested in quality products and having a long-term horizon can help investors
reach their financial goals. While the past two years have been challenging,
successful investors understand that having a long-term investment perspective
through all kinds of markets can help them reach their investing goals. First
Trust is a long-term investor and investment manager, and we will continue to
bring investments we believe fit investors with long-term goals.

The report you hold contains detailed information about your investment; a
portfolio commentary from the Fund's management team that provides a recap of
the period; a performance analysis and a market and Fund outlook. Additionally,
you will find the Fund's financial statements for the twelve months this report
covers. I encourage you to read this document and discuss it with your financial
advisor.

First Trust offers a variety of products that can fit many financial plans to
help those investors who are seeking long-term financial success and we remain
committed to bringing you quality investment solutions regardless of the
inevitable volatility the market experiences. In addition to going over your
investment plan, you may want to talk to your advisor about the investments
First Trust offers that might also fit your financial plan.

At First Trust we continue to be committed to making available up-to-date
information about your investments so you and your financial advisor have
current information on your portfolio. We value our relationship with you, and
we thank you for the opportunity to assist you in achieving your financial
goals.

Sincerely,

/s/ James A. Bowen

James A. Bowen
President of First Trust Active Dividend Income Fund

Page 1

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
"AT A GLANCE"
AS OF NOVEMBER 30, 2010 (UNAUDITED)

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Fund Statistics
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Symbol on New York Stock Exchange FAV
Common Share Price $10.47
Common Share Net Asset Value ("NAV") $9.93
Premium (Discount) to NAV 5.44%
Net Assets Applicable to Common Shares $80,301,987
Current Quarterly Distribution per Common Share (1) $0.3200
Current Annualized Distribution per Common Share $1.2800
Current Distribution Rate on Closing Common Share Price (2) 12.23%
Current Distribution Rate on NAV (2) 12.89%
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Common Share Price & NAV (weekly closing price)
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[CHART OMITTED]

[DATA POINTS REPRESENTED IN CHART]

Common Share Price NAV
11/30/2009 12.14 10.64
12/4/2009 12.07 10.57
12/11/2009 12.27 10.63
12/18/2009 12.42 10.67
12/24/2009 12.7 10.94
12/31/2009 12.62 10.85
1/8/2010 13.23 11.1
1/15/2010 13.39 10.99
1/22/2010 12.19 10.12
1/29/2010 12.4 9.84
2/5/2010 11.47 9.81
2/12/2010 12.31 10.02
2/19/2010 12.27 10.4
2/26/2010 12.58 10.31
3/5/2010 13.35 10.66
3/12/2010 13.44 10.71
3/19/2010 13.68 10.67
3/26/2010 13.58 10.72
4/1/2010 14.16 10.89
4/9/2010 14.57 11.04
4/16/2010 13.3 11.03
4/23/2010 12.27 10.9
4/30/2010 11.98 10.58
5/7/2010 11.73 9.78
5/14/2010 11.3 10.05
5/21/2010 9.75 9.56
5/28/2010 10.23 9.66
6/4/2010 10.27 9.45
6/11/2010 10.5 9.74
6/18/2010 10.88 10
6/25/2010 10.6 9.73
7/2/2010 9.9 9.28
7/9/2010 11.05 9.78
7/16/2010 11.44 9.64
7/23/2010 10.37 9.65
7/30/2010 10.41 9.62
8/6/2010 10.29 9.68
8/13/2010 10.18 9.28
8/20/2010 10.51 9.14
8/27/2010 10.37 9.14
9/3/2010 10.21 9.47
9/10/2010 10.52 9.47
9/17/2010 10.45 9.6
9/24/2010 10.61 9.78
10/1/2010 10.74 9.81
10/8/2010 11.13 9.98
10/15/2010 11.12 10.08
10/22/2010 10.57 9.74
10/29/2010 10.65 9.76
11/5/2010 10.83 10.14
11/12/2010 10.5 9.97
11/19/2010 10.46 10.02
11/26/2010 10.42 9.97
11/30/2010 10.47 9.92

Average Annual
Total Return
One Year Ended Inception (9/20/2007)
11/30/2010 to 11/30/2010

FUND PERFORMANCE(3)
NAV 7.59% -5.64%
Market Value -1.56% -5.41%
INDEX PERFORMANCE
Russell 1000 Value Index 8.95% -8.18%
S&P 500 Index 9.94% -5.66%

(1) Most recent distribution paid or declared through 11/30/2010. Subject to
change in the future. The distribution was decreased subsequent to
11/30/2010. See Note 8 - Subsequent Events in the Notes to Financial
Statements.

(2) Distribution rates are calculated by annualizing the most recent
distribution paid or declared through the report date and then dividing by
Common Share price or NAV, as applicable, as of 11/30/2010. Subject to
change in the future.

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

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Portfolio Commentary (Unaudited)
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FIRST TRUST ACTIVE DIVIDEND INCOME FUND (FAV) ANNUAL REPORT
FOR THE TWELVE MONTHS ENDED NOVEMBER 30, 2010

SUB-ADVISOR

Aviance Capital Management, LLC ("Aviance"), a registered investment advisor, is
the Sub-Advisor to the First Trust Active Dividend Income Fund. Aviance is an
asset management firm focused on managing multi-cap value and growth portfolios
and is currently managed by Christian C. Bertelsen, Michael J. Dixon, and Edward
C. Bertelsen, who are all Founding Members of the firm. Aviance is responsible
for the day-to-day management of the Fund's portfolio utilizing a team made up
of Christian C. Bertelsen, James R. Neel, Edward C. Bertelsen and Mark Belanian.
The team has approximately six years of experience working together and
approximately 80 years of cumulative industry experience.

PORTFOLIO MANAGEMENT TEAM

CHRISTIAN C. BERTELSEN, Chief Investment Officer and Senior Portfolio Manager

Christian C. Bertelsen has over 41 years of investment experience. In November
2004, he became Chief Investment Officer at Global Financial Private Capital
("GFPC"), the incubator company of Aviance. From July 1997 to December 2003, Mr.
Bertelsen was director of the value equity group for Phoenix Investment Counsel,
during which time he was responsible for developing strategies that focused on
the analysis of dividends as a means of identifying undervalued companies and
generating income. He served as Chief Investment Officer at Dreman Value
Advisors between January 1996 and July 1997, and was a Senior Vice President
with Eagle Asset Management between April 1993 and January 1996. From June 1986
to April 1993, Mr. Bertelsen headed the equity investment department at Colonial
Advisory Services, Inc., and managed the Colonial Fund. Prior to 1986, he held
positions with Batterymarch Financial Management and State Street Bank & Trust
Company. Mr. Bertelsen holds an M.B.A. and a B.A. in Economics and History from
Boston University.

JAMES R. NEEL, CFA, Portfolio Manager

James R. Neel, CFA, has over 30 years of experience in investment management.
While managing equity mutual funds for Kemper in the 1990s, Mr. Neel won a
Lipper Award in the Growth and Income category. Mr. Neel also served as the
portfolio strategist for Kemper Financial Services; CEO of Dreman Value
Advisors, where he worked with Christian Bertelsen; and Partner at Loomis
Sayles. Mr. Neel is a graduate of Michigan State University, where he received a
B.A. in 1965. He received an M.B.A. from Michigan State University in 1966. Mr.
Neel earned the Chartered Financial Analyst designation in 1976 and also served
four years as a U.S. Navy officer.

EDWARD C. BERTELSEN, Portfolio Manager - Research

Edward C. Bertelsen has over 14 years of experience in supporting and managing
portfolios. He is also responsible for a limited number of selected client
relationships. He joined GFPC/Aviance in April 2004 and was instrumental in
creating its trading environment. Between March 2001 and April 2004, Mr.
Bertelsen was a Senior Portfolio Manager with Salomon Smith Barney. Between
November 1996 and March 2001, Mr. Bertelsen was employed by Legg Mason Wood
Walker as a Portfolio Manager. He graduated with Honors from Albion College in
1993 with a B.A. in Economics and History and started his financial career with
Raymond James in July 1993.

MARK BELANIAN, Portfolio Analyst

Mark Belanian has over 10 years of investment industry experience. Mr. Belanian
joined GFPC/Aviance in February 2006 from Merrill Lynch's Global Private Client
Group in Sarasota, Florida, where he had worked since February 2005. Mr.
Belanian worked with Christian Bertelsen as a portfolio analyst at Phoenix
Investment Counsel between June 1998 and January 2005. Mr. Belanian graduated
from Trinity College with a B.A. in Modern Language.

FIRST TRUST ACTIVE DIVIDEND INCOME FUND

The primary investment objective of the First Trust Active Dividend Income Fund
("FAV" or the "Fund") is to seek a high level of current income. Its secondary
objective is capital appreciation. The Fund pursues its investment objectives by
investing at least 80% of its Managed Assets in a diversified portfolio of
dividend-paying multi-cap equity securities of both U.S. and non-U.S. issuers
that the Fund's Sub-Advisor believes offer the potential for attractive income
and/or capital appreciation. Managed assets are defined as the average daily
total asset value of the Fund minus the sum of the Fund's liabilities other than
the principal amount of borrowings, if any. There can be no assurance that the
Fund's investment objectives will be achieved. The Fund may not be appropriate
for all investors.

Page 3

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Portfolio Commentary (Unaudited) (Continued)
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MARKET RECAP

This section discusses the primary factors which impacted FAV's two objectives
throughout the twelve months ended November 30, 2010.

STEADY ECONOMIC AND EQUITY RECOVERY
The Fund's 2009 Annual Report noted the potential for a "Square Root" shape of
recovery for both

U.S. economic and equity markets. Although the "V-shaped" period of recovery
continued during the early months of the reporting period, April 2010 marked its
end. Equity performance was flat; similar to the flat portion to the right of a
"Square Root" symbol, albeit with a significant correction principally during
May and June. From April 26, 2010 to November 5, 2010 the Russell 1000 Value
Index fell by approximately 1.4%.

Two corrections, a short, mild one in January 2010 and the longer, more severe
one mentioned above, interspersed periods of broadly appreciating prices on
major U.S. equity indices. These corrections indicated that investors remained
worried that domestic and global economies could fall back into recession.
Fortunately, the corrections didn't foretell a "double-dip" recession, as a
portion of the popular media predicted, but they did mark the end of the "easy"
returns made during the "V-shaped" recovery. Sharp corrections are historically
a feature of bull market periods. By the end of the reporting period,
expectations for a "double-dip" recession had greatly diminished.

For the twelve months ending November 30, 2010, overall equity markets continued
their recovery from 2009 lows, albeit at a steadier pace to the previous year.
The Russell 1000 Value Index, the Fund's primary benchmark, rose 8.95% between
December 1, 2009 and November 30, 2010. The Standard & Poor's 500 Index ("S&P
500"), one of the Fund's secondary benchmarks, rose 9.94% for the same period.

QUANTITATIVE EASING (QE2)
A significant portion of the gains noted above were created by the market's
expectation that the

U.S. government would print money "ex-nihilo" (out of nothing) and inject this
liquidity into the U.S., and thereafter global, financial systems. This process
was dubbed "Quantitative Easing Part Two" (QE2). As a long-only equity fund,
FAV's price is highly correlated to the fiscal outlook for U.S. companies, and
to a lesser degree, overseas companies. From July 2010 through the end of
November, the promise of the world's largest economy inflating its money supply
was enough to "float the boat" of most companies' stock prices.

CORPORATE EARNINGS
A slow start to the fourth quarter 2009 earnings reporting season caused the
mild January correction referenced above. However, by the end of the earnings
season, it was clear that most

U.S. companies had enjoyed another successful period. This pattern was repeated
for the subsequent three reporting seasons of 2010.

A glance at the high unemployment numbers and exceptional profit margins
reported showed that companies had beat expectations primarily by cutting costs.
In our opinion, all of the large-capitalization companies the Fund invests in
are exceptional at managing their businesses. Supply chains were flushed of
inventory when required and staff were asked to work harder and longer to reduce
the need for increased headcount.

Corporate earnings, therefore, ended the year at levels which approached the
50-year highs seen in early 2007, primarily as a result of cost control rather
than outright revenue growth.

EUROPEAN CREDIT CRISIS
Concerns regarding sovereign debt and deficits in the Euro Zone sparked the May
correction. Although this was essentially a credit issue, primarily affecting
the banking sector, markets worried about its effect on growth prospects in
developed countries. It proved to be a stern reminder of our own domestic credit
crisis of 2008 and stocks reacted accordingly.

In a similar manner to the 2008 domestic crisis, order was restored by the
announcement of an approximately $1 trillion "bailout" fund by the European
Central Bank (ECB).

DIVIDEND RECAP

HOW WERE DIVIDENDS AFFECTED?
Dividend-paying stocks tend to be those with strong fundamental business metrics
and free cash flows; the type of stock which FAV looks to invest in. The primary
aim of the Fund is the generation of yield from the capture of dividends.
Therefore, a major factor which affects the Fund's management is the
availability of dividends.

Page 4

Although certain sectors, which historically represented excellent hunting
grounds for dividends, drastically reduced payments during 2008 and the first
three quarters of 2009, the table* below shows that quarterly dividends have
effectively recovered from the credit crisis:

COMPANIES COMPANIES
RAISING DIVIDENDS LOWERING DIVIDENDS

QUARTER 4, 2009 484 74
QUARTER 1, 2010 399 48
QUARTER 2, 2010 335 34
QUARTER 3, 2010 299 35

* Table based on approximately 7,000 publicly-owned companies that report
dividend information to Standard & Poor's.

In general, the companies that the Sub-Advisor seeks for inclusion in the Fund
excelled at managing their balance sheets and cash flows during the recession.
Company cash is at cyclical highs and these companies now find themselves in a
position to maintain or increase dividend payments. This is good news for the
Fund.

PERFORMANCE ANALYSIS

The net asset value ("NAV") total return1 of the Fund for the twelve months
ended November 30, 2010 was 7.59%. Over the same period, the total return of the
Russell 1000 Value Index, the Fund's primary benchmark index, was 8.95% while
the Fund's secondary benchmark indices, the S&P 500 and the Dow Jones Select
Dividend Index (DVY) returned 9.94% and 16.26% respectively.

NAV PERFORMANCE

The Fund's NAV closely correlated to the performance of its main benchmark; the
Russell 1000 Value Index, while lagging by approximately 1.36%. This
underperformance primarily occurred during July and August of 2010 and was
primarily the result of the decision by the Fund's manager to "barbell" the risk
(beta) in the portfolio in order to protect investors from volatility while
participating in appreciation of more volatile stocks. What we describe as
"barbelling" involved focusing holdings at both ends of the yield and beta
scales. On one hand, the Fund invested in high yield, low-beta stocks such as
Utilities. On the other hand, we sought to maintain the Fund's investments in
high-beta, low-yield positions such as Technology. Over this period, Utilities
and Technology were two of the Fund's worst three relative sector performers.

In addition, as the Russell 1000 Value and S&P 500 indices climbed in mid-late
July, we decided to protect the Fund's portfolio from a potential downturn which
we thought was approaching. This downturn didn't appear until the second week in
August, by which time the portfolio had lost capital relative to the market.

FAV's underperformance relative to the DVY was primarily the result of the high
concentration of Utility stocks within DVY (approximately 22% against
approximately 3% in FAV and 1% in the S&P 500, for example). During the second
quarter of 2010, this concentration provided downside protection for DVY which
was not matched by the Fund.

SHARE PRICE PERFORMANCE

The Fund's market value provided a total return1 was -1.56% during the reporting
period. This drop was primarily due to the announcement in April that FAV would
cut its dividend distribution in order to bring the balance between Income and
NAV Stability more in line with expectations at the Fund's inception. The
announcement reduced the Fund's Price/NAV premium from mid-twenty percent levels
during March to mid-single figure levels during May. Throughout the period prior
to this dividend reduction, FAV maintained its payout despite volatile
conditions which, at times, required distributions of approximately 20% on the
underlying assets.

Although the Fund's reduced dividend has led to a lowered share price and
average price premium for the Fund, the Fund's Sub-Advisor feels this policy
change will be beneficial to shareholders over the medium- to long-term.

____________________
1 Total Return is based on the combination of reinvested dividend,
capital gain, and return of capital distributions, if any, at prices
obtained by the Dividend Reinvestment Plan and changes in NAV per
share for net asset value returns and changes in common share price
for market value returns. Total returns do not reflect sales load.
Past performance is not indicative of future results.

Page 5

MARKET & FUND OUTLOOK

We see economic and corporate fundamentals continuing their recent improvement,
although at a reduced rate. For future quarters, significant earnings and
revenue improvement will become harder to maintain due to the improvements
already reported in the corresponding previous quarters. Corporate performance
levels are now approaching levels prior to the recession and should, therefore,
level off. Valuations based on earnings suggest equities are currently around
"fair value" and some expectation of continued economic recovery is already
priced-in. The following discusses the Sub-Advisor's thoughts on how the next 12
months may develop.

EMERGING MARKET CORPORATE REVENUES

In the opinion of the Sub-Advisor, the performance of equity indices mentioned
above as benchmarks for the Fund will be positive for the coming year, but not
double figures positive. Margins cannot be expected to drive valuations much
higher; therefore, revenue growth is now required for longer-term price
appreciation. The potential for revenue growth exists domestically and
internationally. With regard to the direction of the Fund, we expect this growth
to be experienced by those companies who have significant involvement in
emerging market development and selected domestic sectors.

VOLATILITY

The expectation of a "double-dip" recession has moved to the back of the
collective investor sentiment mind and volatility should remain beneath its
previously elevated levels, in our opinion. The VIX, a commonly accepted measure
of equity market volatility which spiked to 80 in 2008, has stayed below 30
since mid-summer 2010. We expect these lower levels of volatility to persist,
but not without periodic emergencies such as that created by the PIIGS of Europe
in 2010.

The Great Debt & Derivative Unwind is not yet over; a fact which was brought
back into focus by the most recent European Crisis. However, the tremors felt
from the European/Ireland credit crisis in November 2010 were much less intense
than those experienced during the May Greek-inspired crisis referred to above.
There remains the distinct possibility of sudden and painful drops in global
equity prices if and when investor sentiment decides to prioritize bad news,
wherever it originates from.

INFLATION & INTEREST RATES

Although the U.S. government continues to inflate domestic money supply, low
demand has kept the lid on overall price inflation. In our last report we
rejected the possibility of deflation and this has proven accurate to date.

During 2011, inflation may begin to rise; if growing economic confidence meets
with increased availability of credit, expect price rises across the board.
Inflation would put pressure on interest rates, even if the U.S. government does
everything in its powers to suppress interest rates. When interest rates do
rise, the Fund should benefit from the demand for income switching from
fixed-income to equity-based income as bond prices fall. Additionally, rising
interest rates are commonly a positive factor for the types of companies which
FAV invests in.

Even if it takes a while for interest rates to rise in the U.S., we expect
interest rates to continue their rise in many emerging and commodity-based
countries.

Higher interest rates will put pressure on the prices of many income-producing
securities, especially bonds. The high yields generated by the Fund, and the
high yield spreads over many higher-yielding corporate debt issues, should
insulate its price against this pressure. Investors will struggle to accept the
low yields currently being paid by more conservative risk assets.

THE FUND'S FUNDAMENTAL INVESTMENT THEME FOR 2011...

.... should be continued investment in those companies benefiting from
international revenues; domestic companies that receive 50% or more of their
revenues from overseas. This is based on the belief that emerging market growth
and balance sheet strength will be a significant driver for global growth. We
believe developed nations have now stabilized and can expect a reasonable level
of growth; however, the exciting opportunities lie in emerging markets.

Moreover, this theme fits well with the overall investment discipline of the
Fund: quality balance sheets and businesses. U.S. companies still lead the world
in productivity, financing, branding and management excellence. "Investing in
Emerging Markets by Investing in U.S. Companies" summarizes our current
investment theme.

INVESTMENT SLEEVES

FAV captures dividends by rotating in and out of specific sector or thematic
company groupings which we call "Sleeves." We assign a specific amount of
capital to each Sleeve, based on fundamental research on the probability of
market outperformance and available yield in that Sleeve. The component equities
of a Sleeve are selected for this similar behavior (or sector exposure) and for
the dates in which they pay their dividends.

Page 6

For 2011, we expect our ICE (Industrial, Commodity, Energy) thematic Sleeve to
continue as a primary source of income and NAV performance. Others which we will
look to exploit include, but will not be limited, to:

Technology - Software, Mobile and Cloud suppliers are increasingly offering
dividends. This is one of the true indigenous growth stories which doesn't rely
on general GDP-type growth.

Energy - we expect increasing energy consumption and prices to provide the
foundation of successful dividend capture rotations.

International Telecoms - a number of government-backed, near-monopolies are now
paying attractive dividends which we can construct as a Sleeve.

Special Dividends - we remain vigilant that numerous factors will create
increased Merger & Acquisition activity and more Special Dividend payments than
we have seen in recent years.

Page 7

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
PORTFOLIO OF INVESTMENTS (A)
NOVEMBER 30, 2010

SHARES DESCRIPTION VALUE
___________ _________________________________________________________________ _________________

COMMON STOCKS - 77.6%

AEROSPACE & DEFENSE - 0.8%
12,600 Honeywell International, Inc..................................... $ 626,346
_______________

AUTO COMPONENTS - 0.5%
10,000 Johnson Controls, Inc............................................ 364,400
_______________

AUTOMOBILES - 0.2%
5,000 General Motors Co. (b)........................................... 171,000
_______________

BEVERAGES - 2.9%
20,000 Coca-Cola (The) Co............................................... 1,263,400
17,000 PepsiCo, Inc..................................................... 1,098,710
_______________
2,362,110
_______________

CAPITAL MARKETS - 0.2%
15,000 Hercules Technology Growth Capital, Inc.......................... 149,700
_______________

CHEMICALS - 0.9%
5,000 Potash Corp of Saskatchewan, Inc................................. 718,750
_______________

COMMERCIAL BANKS - 1.9%
20,000 Canadian Imperial Bank of Commerce Canada........................ 1,541,200
_______________

COMMUNICATIONS EQUIPMENT - 2.6%
70,000 Sycamore Networks, Inc........................................... 2,101,400
_______________

COMPUTERS & PERIPHERALS - 4.5%
3,000 Apple, Inc. (b).................................................. 933,450
25,000 Diebold, Inc..................................................... 785,500
10,000 EMC Corp. (b).................................................... 214,900
20,000 Sandisk Corp. (b)................................................ 892,000
58,000 Seagate Technology (b)........................................... 777,780
_______________
3,603,630
_______________

CONSTRUCTION & ENGINEERING - 1.4%
20,000 Fluor Corp....................................................... 1,156,600
_______________

DIVERSIFIED FINANCIAL SERVICES - 2.2%
35,000 Bank of America Corp............................................. 383,250
330,000 Citigroup, Inc. (b).............................................. 1,386,000
_______________
1,769,250
_______________

DIVERSIFIED TELECOMMUNICATION SERVICES - 2.8%
30,000 Centurylink, Inc................................................. 1,289,700
120,000 Telecom Corp. of New Zealand Ltd................................. 968,400
_______________
2,258,100
_______________

ELECTRICAL EQUIPMENT - 1.5%
10,000 American Superconductor Corp. (b)................................ 332,800
7,500 Emerson Electric Co.............................................. 413,025
7,000 Rockwell Automation, Inc......................................... 462,840
_______________
1,208,665
_______________

ENERGY EQUIPMENT & SERVICES - 3.2%
15,000 Diamond Offshore Drilling, Inc................................... 971,400
16,966 Schlumberger Ltd................................................. 1,312,150
5,000 Tidewater, Inc................................................... 245,450
_______________
2,529,000
_______________
See Notes to Financial Statements.

Page 8

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
PORTFOLIO OF INVESTMENTS (A) - (CONTINUED)
NOVEMBER 30, 2010

SHARES DESCRIPTION VALUE
___________ _________________________________________________________________ _________________

COMMON STOCKS - (CONTINUED)

HEALTH CARE EQUIPMENT & SUPPLIES - 0.2%
8,000 Given Imaging Ltd. (b)........................................... $ 120,800
_______________
HOTELS, RESTAURANTS & LEISURE - 3.2%
20,000 McDonald's Corp.................................................. 1,566,000
10,000 Wynn Resorts Ltd................................................. 1,011,000
_______________
2,577,000
_______________

INSURANCE - 2.5%
40,000 Prudential Financial, Inc........................................ 2,027,200
_______________

INTERNET SOFTWARE & SERVICES - 0.3%
5,000 Akamai Technologies, Inc. (b).................................... 260,950
_______________

IT SERVICES - 2.4%
160,000 Sapient Corp..................................................... 1,908,800
_______________

LEISURE EQUIPMENT & PRODUCTS - 3.4%
105,000 Mattel, Inc...................................................... 2,713,200
_______________

MACHINERY - 2.1%
10,000 Deere & Co....................................................... 747,000
7,000 Dover Corp....................................................... 383,670
6,000 Eaton Corp....................................................... 578,400
_______________
1,709,070
_______________

MEDIA - 3.7%
71,000 Grupo Televisa S.A............................................... 1,654,300
55,000 News Corp........................................................ 837,650
20,000 Virgin Media, Inc................................................ 509,600
_______________
3,001,550
_______________

METALS & MINING - 7.8%
27,500 Allegheny Technologies, Inc...................................... 1,421,750
15,000 Freeport-McMoRan Copper & Gold, Inc.............................. 1,519,800
21,800 Southern Copper Corp............................................. 914,074
75,000 Vale S.A., ADR................................................... 2,376,000
_______________
6,231,624
_______________

MULTILINE RETAIL - 0.5%
10,000 Nordstrom, Inc................................................... 428,000
_______________

OIL, GAS & CONSUMABLE FUELS - 9.8%
55,000 Arch Coal, Inc................................................... 1,606,000
30,000 Cenovus Energy, Inc.............................................. 863,100
15,000 Conocophillips................................................... 902,550
20,000 Devon Energy Corp................................................ 1,411,400
4,000 Murphy Oil Corp.................................................. 270,080
15,000 Occidental Petroleum Corp........................................ 1,322,550
4,000 Total S.A., ADR.................................................. 195,080
125,000 USEC, Inc. (b)................................................... 743,750
20,000 Vanguard Natural Resources LLC................................... 528,600
_______________
7,843,110
_______________

REAL ESTATE INVESTMENT TRUSTS (REITS) - 1.8%
80,000 Annaly Capital Management, Inc................................... 1,455,200
_______________

See Notes to Financial Statements.

Page 9

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
PORTFOLIO OF INVESTMENTS (A) - (CONTINUED)
NOVEMBER 30, 2010

SHARES/
UNITS DESCRIPTION VALUE
___________ _________________________________________________________________ _________________

COMMON STOCKS - (CONTINUED)

ROAD & RAIL - 3.3%
19,000 Canadian National Railway Co..................................... $ 1,215,050
10,000 Canadian Pacific Railway Ltd..................................... 639,900
13,000 CSX Corp......................................................... 790,530
_______________
2,645,480
_______________

SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.9%
45,000 Analog Devices, Inc.............................................. 1,600,200
10,000 Microchip Technology, Inc........................................ 336,100
7,500 Texas Instruments, Inc........................................... 238,500
6,000 Xilinx, Inc...................................................... 162,720
_______________
2,337,520
_______________

SOFTWARE - 0.5%
5,000 VMware, Inc. (b)................................................. 407,600
_______________

SPECIALTY RETAIL - 3.2%
120,000 Chico's Fas, Inc................................................. 1,446,000
40,000 Men's Wearhouse (The), Inc....................................... 1,140,800
_______________
2,586,800
_______________

TEXTILES, APPAREL & LUXURY GOODS - 0.5%
5,000 NIKE, Inc., Class B.............................................. 430,650
_______________

TOBACCO - 3.4%
7,000 Altria Group, Inc................................................ 168,000
20,000 Lorillard, Inc................................................... 1,591,600
30,000 Reynolds American, Inc........................................... 928,200
_______________
2,687,800
_______________

TRADING COMPANIES & DISTRIBUTORS - 0.5%
7,500 Fastenal Co...................................................... 401,400
_______________
TOTAL COMMON STOCKS.............................................. 62,333,905
(Cost $60,995,230) _______________

MASTER LIMITED PARTNERSHIPS - 13.1%

OIL, GAS & CONSUMABLE FUELS - 13.1%
32,000 Copano Energy LLC................................................ 957,760
18,000 El Paso Pipeline Partners, L.P................................... 596,160
19,000 Enbridge Energy Partners, L.P.................................... 1,156,150
17,000 Energy Transfer Partners, L.P.................................... 861,390
40,000 Enterprise Products Partners, L.P................................ 1,683,200
16,000 EV Energy Partner, L.P........................................... 610,720
45,000 Genesis Energy, L.P.............................................. 1,099,350
15,000 Kinder Morgan Energy Partners, L.P............................... 1,056,750
1,500 Martin Midstream Partners, L.P................................... 55,095
7,000 Niska Gas Storage Partners LLC (b)............................... 139,860
11,000 Penn Virginia GP Holdings, L.P................................... 274,230
13,000 Plains All American Pipeline, L.P................................ 799,500
20,000 Regency Energy Partners, L.P..................................... 514,000
10,000 Targa Resources Partners, L.P.................................... 302,900
10,000 Western Gas Partners, L.P........................................ 297,800
1,500 Williams Partners, L.P........................................... 70,575
_______________
TOTAL MASTER LIMITED PARTNERSHIPS................................ 10,475,440
(Cost $10,109,465) _______________

See Notes to Financial Statements.

Page 10

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
PORTFOLIO OF INVESTMENTS (A) - (CONTINUED)
NOVEMBER 30, 2010

SHARES DESCRIPTION VALUE
___________ _________________________________________________________________ _________________

INVESTMENT COMPANIES - 4.5%

ASSET MANAGEMENT & CUSTODY BANKS - 4.5%
15,000 India Fund, Inc.................................................. $ 533,700
15,000 PowerShares QQQ.................................................. 780,900
30,000 ProShares UltraShort 20+ Year Treasury (b)....................... 1,043,400
6,700 SPDR S&P 500 ETF Trust........................................... 793,816
10,000 SPDR S&P Retail ETF.............................................. 471,100
_______________
TOTAL INVESTMENT COMPANIES....................................... 3,622,916
(Cost $3,693,309) _______________

TOTAL INVESTMENTS (C) - 95.2%.................................... 76,432,261
(Cost $74,798,004)

NET OTHER ASSETS AND LIABILITIES - 4.8%.......................... 3,869,726
_______________

NET ASSETS - 100.0%.............................................. $ 80,301,987
===============

(a) All percentages shown in the Portfolio of Investments are based on net
assets.

(b) Non-income producing security.

(c) Aggregate cost for federal income tax purposes is $75,504,533. As of
November 30, 2010, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$2,306,119 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$1,378,391. ADR - American Depositary Receipt

VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of November 30,
2010 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):

LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE QUOTED OBSERVABLE UNOBSERVABLE
AT 11/30/2010 PRICES INPUTS INPUTS
____________ ____________ ____________ ____________

Common Stocks*................... $ 62,333,905 $ 62,333,905 $ -- $ --
Master Limited Partnerships*..... 10,475,440 10,475,440 -- --
Investment Companies*............ 3,622,916 3,622,916 -- --
_____________ _____________ ____________ ______________
TOTAL INVESTMENTS................ $ 76,432,261 $ 76,432,261 $ -- $ --
============= ============= ============ ==============

* See Portfolio of Investments for industry breakout.

See Notes to Financial Statements.

Page 11

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 2010

ASSETS:

Investments, at value
(Cost $74,798,004).................................................................................. $ 76,432,261
Cash..................................................................................................... 2,738,402
Prepaid expenses......................................................................................... 57,734
Receivables:
Investment securities sold.......................................................................... 7,216,282
Dividends........................................................................................... 835,862
Dividend reclaims................................................................................... 10,775
Interest............................................................................................ 98
_____________
Total Assets...................................................................................... 87,291,414
_____________

LIABILITIES:
Payables:
Investment securities purchased..................................................................... 6,834,054
Investment advisory fees............................................................................ 66,396
Audit and tax fees.................................................................................. 34,285
Printing fees....................................................................................... 16,608
Custodian fees...................................................................................... 13,205
Administrative fees................................................................................. 8,271
Trustees' fees and expenses......................................................................... 6,632
Offering costs...................................................................................... 4,618
Legal fees.......................................................................................... 3,418
Transfer agent fees................................................................................. 1,727
Other liabilities........................................................................................ 213
_____________
Total Liabilities................................................................................. 6,989,427
_____________
NET ASSETS............................................................................................... $ 80,301,987
=============

NET ASSETS CONSIST OF:
Paid-in capital......................................................................................... $145,901,263
Par value................................................................................................ 80,886
Accumulated net investment income (loss)................................................................. 151,062
Accumulated net realized gain (loss) on investments...................................................... (67,465,481)
Net unrealized appreciation (depreciation) on investments................................................ 1,634,257
_____________
NET ASSETS............................................................................................... $ 80,301,987
=============

NET ASSET VALUE, per Common Share (par value $0.01 per Common Share)..................................... $ 9.93
=============

Number of Common Shares outstanding (unlimited number of Common Shares has been authorized).............. 8,088,610
=============

See Notes to Financial Statements.

Page 12

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 2010

INVESTMENT INCOME:

Dividends (net of foreign withholding tax of $213,670)................................................... $ 10,159,603
Interest................................................................................................. 1,153
Other.................................................................................................... 34
_______________
Total investment income.............................................................................. 10,160,790
_______________

EXPENSES:
Investment advisory fees................................................................................. 781,483
Administrative fees...................................................................................... 90,768
Excise tax expense....................................................................................... 80,792
Custodian fees........................................................................................... 83,205
Printing fees............................................................................................ 49,716
At the market offering costs............................................................................. 46,312
Trustees' fees and expenses.............................................................................. 39,582
Audit and tax fees....................................................................................... 34,300
Legal fees............................................................................................... 21,913
Transfer agent fees...................................................................................... 21,692
Other.................................................................................................... 47,082
_______________
Total expenses....................................................................................... 1,296,845
_______________
NET INVESTMENT INCOME (LOSS)............................................................................. 8,863,945
_______________

NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments............................................................. (4,395,680)
Net change in unrealized appreciation (depreciation) on investments................................. 884,123
_______________
NET REALIZED AND UNREALIZED GAIN (LOSS).................................................................. (3,511,557)
_______________
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.......................................... $ 5,352,388
===============

See Notes to Financial Statements.

Page 13

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS

YEAR YEAR
ENDED ENDED
11/30/2010 11/30/2009
________________ _______________
OPERATIONS:

Net investment income (loss)........................................................ $ 8,863,945 $ 13,693,715
Net realized gain (loss)............................................................. (4,395,680) 1,048,844
Net change in unrealized appreciation (depreciation)................................. 884,123 (2,413,505)
_____________ _____________
Net increase (decrease) in net assets resulting from operations...................... 5,352,388 12,329,054
_____________ _____________

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................................................ (9,398,415) (13,276,526)
Net realized gain.................................................................... -- --
Return of capital.................................................................... (1,622,430) --
_____________ _____________
Total distributions to shareholders.................................................. (11,020,845) (13,276,526)
_____________ _____________

CAPITAL TRANSACTIONS:
Proceeds from Common Shares sold through shelf offerings............................. 9,298,335 354,746
Proceeds from Common Shares reinvested............................................... 475,819 332,606
_____________ _____________
Net increase (decrease) in net assets resulting from capital transactions............ 9,774,154 687,352
_____________ _____________
Total increase (decrease) in net assets.............................................. 4,105,697 (260,120)

NET ASSETS:
Beginning of period.................................................................. 76,196,290 76,456,410
_____________ _____________
End of period........................................................................ $ 80,301,987 $ 76,196,290
============= =============

Accumulated net investment income (loss) at end of period............................ $ 151,062 $ 1,571,334
============= =============

CAPITAL TRANSACTIONS WERE AS FOLLOWS:
Common Shares at beginning of period................................................. 7,267,804 7,205,236
Common Shares sold through shelf offerings........................................... 776,261 29,820
Common Shares issued as reinvestment under the Dividend Reinvestment Plan............ 44,545 32,748
_____________ _____________
Common Shares at end of period....................................................... 8,088,610 7,267,804
============= =============

See Notes to Financial Statements.

Page 14

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD

YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
11/30/2010 11/30/2009 11/30/2008 11/30/2007 (a)
_____________ ____________ ____________ _____________

Net asset value, beginning of period.................... $ 10.48 $ 10.61 $ 19.03 $ 19.10 (b)
____________ ____________ ____________ ____________
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (c)........................ 1.15 1.90 1.78 0.52
Net realized and unrealized gain (loss)................. (0.45) (0.20) (7.99) (0.55)
____________ ____________ ____________ ____________
Total from investment operations........................ (0.70) 1.70 (6.21) (0.03)
____________ ____________ ____________ ____________
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income................................... (1.21) (1.84) (1.97) --
Net realized gain....................................... -- -- (0.24) --
Return of capital....................................... (0.21) -- -- --
____________ ____________ ____________ ____________
Total from distributions................................ (1.42) (1.84) (2.21) --
____________ ____________ ____________ ____________

Common Shares offering costs charged to paid-in capital. -- -- -- (0.04)
____________ ____________ ____________ ____________

Premiums from shares sold in at the market offering..... 0.17 0.01 -- --
____________ ____________ ____________ ____________
Net asset value, end of period.......................... $ 9.93 $ 10.48 $ 10.61 $ 19.03
============ ============ ============ ===========
Market value, end of period............................. $ 10.47 $ 12.10 $ 8.03 $ 17.78
============ ============ ============ ===========
TOTAL RETURN BASED ON NET ASSET VALUE (e)............... 7.59% 18.44% (34.64)% (0.37)%(d)
============ ============ ============ ===========
TOTAL RETURN BASED ON MARKET VALUE (e).................. (1.56)% 80.51% (47.00)% (11.10)%
============ ============ ============ ===========
________________________________________

RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).................... $ 80,302 $ 76,196 $ 76,456 $ 137,117
Ratio of total expenses to average net assets........... 1.66% 1.89% 1.31% 1.44%(f)
Ratio of net investment income (loss) to average net assets 11.34% 19.31% 11.34% 13.87%(f)
Portfolio turnover rate................................. 1,516% 2,030% 1,722% 178%
________________________________________

(a) Initial seed date of July 19, 2007. The Fund commenced operations on
September 20, 2007.

(b) Net of sales load of $0.90 per share on initial offering.

(d) In 2007, the Fund received a reimbursement from the investment sub-advisor
in the amount of $3,067. This reimbursement from the sub-advisor
represents less than $0.01 and had no effect on the Fund's total return.

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

(f) Annualized.

See Notes to Financial Statements.

Page 15

- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
NOVEMBER 30, 2010

1. FUND DESCRIPTION

First Trust Active Dividend Income Fund (the "Fund") is a diversified,
closed-end management investment company organized as a Massachusetts business
trust on June 14, 2007 and is registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Fund trades under the ticker symbol FAV on the New York Stock
Exchange ("NYSE").

The Fund's primary investment objective is to seek a high level of current
income. It has a secondary objective of capital appreciation. The Fund seeks to
achieve its objectives by investing at least 80% of its Managed Assets (as
defined below) in a diversified portfolio of dividend-paying, multi-cap equity
securities of both U.S. and non-U.S. issuers that Aviance Capital Management,
LLC ("Aviance" or the "Sub-Advisor") believes offer the potential for attractive
income and/or capital appreciation. Managed Assets are defined as the average
daily total asset value of the Fund minus the sum of the Fund's liabilities
other than the principal amount of borrowings, if any. There can be no assurance
that the Fund's investment objectives will be achieved. The Fund may not be
appropriate for all investors.

2. SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

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

1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.

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

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

Page 16

- --------------------------------------------------------------------------------
Notes to Financial Statements - (Continued)
- --------------------------------------------------------------------------------

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
NOVEMBER 30, 2010

3) closed-end fund trading of similar securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and 8) whether the effects of the
event are isolated or whether they affect entire markets, countries or
regions.

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

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

o Level 1 - Level 1 inputs are quoted prices in active markets for
identical securities. An active market is a market in which
transactions for the security occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
- Quoted prices for similar securities in active markets.
- Quoted prices for identical or similar securities in markets that are
non-active. A non-active market is a market where there are few
transactions for the security, the prices are not current, or price
quotations vary substantially either over time or among market makers, or
in which little information is released publicly.
- Inputs other than quoted prices that are observable for the security (for
example, interest rates and yield curves observable at commonly quoted
intervals, volatilities, prepayment speeds, loss severities, credit risks,
and default rates).
- Inputs that are derived principally from or corroborated by observable
market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the security.

The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. A summary
of the inputs used to value the Fund's investments as of November 30, 2010, is
included with the Fund's Portfolio of Investments.

B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis, including the amortization of premiums and
accretion of discounts.

Distributions received from the Fund's investments in MLPs generally are
comprised of return of capital from the MLP to the extent of the cost basis of
such MLP investments. Cumulative distributions received in excess of the Fund's
cost basis in an MLP generally are recorded as capital gain. For the fiscal year
ended November 30, 2010, distributions of $757,647 received from MLPs have been
reclassified as return of capital. The cost basis of applicable MLPs has been
reduced accordingly.

C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Level dividend distributions are declared and paid quarterly to Common
Shareholders after the payment of interest and/or dividends in connection with
leverage. The level dividend rate may be modified by the Board of Trustees from
time to time. If, for any quarterly distribution, net investment company taxable
income, if any (which term includes net short-term capital gain), is less than
the amount of the distribution, the difference will generally be a tax-free
return of capital distributed from the Fund's assets. Distributions of any net
long-term capital gains earned by the Fund are distributed at least annually.
Distributions will automatically be reinvested into additional Common Shares
pursuant to the Fund's Dividend Reinvestment Plan unless cash distributions are
elected by the shareholder.

Distributions from income and 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 the Fund, timing differences and differing characterization of distributions
made by the Fund. Permanent differences incurred during the fiscal year ended
November 30, 2010, resulting in book and tax accounting differences, have been
reclassified at year end to reflect a decrease in accumulated net investment
income (loss) by $885,802, an increase in accumulated net realized gain (loss)
on investments by $1,042,757 and a decrease to paid-in capital of $156,955. Net
assets were not affected by this reclassification.

The tax character of distributions paid during the fiscal years ended November
30, 2010 and November 30, 2009 was as follows:

2010 2009
Distributions paid from:
Ordinary Income............ $ 9,398,415 $13,276,526
Return of capital.......... 1,622,430 --

Page 17

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
NOVEMBER 30, 2010

As of November 30, 2010, the distributable earnings and net assets on a tax
basis were as follows:

Undistributed ordinary income.................. $ --
Undistributed capital gains.................... --
_________________
Total undistributed earnings................... --
_________________
Accumulated capital and other losses .......... (66,607,890)
Net unrealized appreciation (depreciation)..... 927,728
_________________
Total accumulated earnings (losses)............ (65,680,162)
Other.......................................... --
Paid-in capital................................ 145,982,149
_________________
Net assets..................................... $ 80,301,987
=================

D. INCOME TAXES:
The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal or state income taxes.

The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At November 30, 2010, the
Fund had a capital loss carryforward for federal income tax purposes of
$66,607,890, with $44,083,569, $17,263,318 and $5,261,003 expiring on November
30, 2016, 2017 and 2018, respectively.

The Fund is subject to tax accounting standards that establish a minimum
threshold for recognizing, and a system for measuring, the benefits of a tax
position taken or expected to be taken in a tax return. Taxable years ended
2007, 2008, 2009 and 2010 remain open to federal and state audit. As of November
30, 2010, management has evaluated the application of these standards to the
Fund and has determined that no provision for income tax is required in the
Fund's financial statements for uncertain tax positions.

E. EXPENSES:
The Fund pays all expenses directly related to its operations.

F. ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements." ASU 2010-06 amends FASB Accounting Standards
Codification Topic 820, Fair Value Measurements and Disclosures, to require
additional disclosures regarding fair value measurements. Certain disclosures
required by ASU No. 2010-06 are effective for interim and annual reporting
periods beginning after December 15, 2009, and other required disclosures are
effective for fiscal years beginning after December 15, 2010, and for interim
periods within those fiscal years. Management is currently evaluating the impact
ASU No. 2010-06 will have on the Fund's financial statement disclosures, if any.

3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND
OTHER FEE ARRANGEMENTS

First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. First Trust is responsible for the ongoing monitoring of
the Fund's investment portfolio, managing the Fund's business affairs and
providing certain administrative services necessary for the management of the
Fund. For these investment management services, First Trust is entitled to a
monthly fee calculated at an annual rate of 1.00% of the Fund's Managed Assets.

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

James A. Bowen, the Chief Executive Officer of First Trust, on October 12, 2010,
acquired 100% of the voting stock of The Charger Corporation, the general
partner of First Trust (the "Transaction"). The consummation of the Transaction
was deemed to be an "assignment" (as defined in the 1940 Act) of the Fund's
investment management agreement and investment sub-advisory agreement and
resulted in the automatic termination of the agreements. The Transaction is not
expected to impact the day-to-day operations of the Fund.

The Board of Trustees of the Fund approved an interim investment management
agreement with First Trust and an interim investment sub-advisory agreement,
which were entered into effective upon the closing of the Transaction and would
be in effect for a maximum period of 150 days. A new investment management
agreement with First Trust and a new investment sub-advisory agreement have been
approved by the Board of Trustees of the Fund and were submitted to shareholders
of the Fund as of the record date (September 30, 2010) for approval to take
effect upon such shareholder approval. A special shareholder meeting of the Fund
to vote on a proposal to approve the new investment management agreement and the
new investment sub-advisory agreement was held on January 3, 2011, at which time
the new investment management agreement and new investment sub-advisory
agreement were approved by the Fund's shareholders. Until January 3, 2011,
advisory fees payable to First Trust and Aviance were held in escrow. See
Submission of Matters to a Vote of Shareholders, in the Additional Information
section of this report, for the results.

Page 18

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
NOVEMBER 30, 2010

BNY Mellon Investment Servicing (US) Inc. (formerly PNC Global Investment
Servicing (U.S.) Inc.) serves as the Fund's Administrator, Fund Accountant and
Transfer Agent in accordance with certain fee arrangements. PFPC Trust Company,
which will be renamed BNY Mellon Investment Servicing Trust Company effective
July 1, 2011, serves as the Fund's Custodian in accordance with certain fee
arrangements.

Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustee") 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 in 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, the
Chairman of the Audit Committee is paid $5,000 annually, and each of the
Chairmen of the Nominating and Governance Committee and the Valuation Committee
is 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.
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. The Lead
Independent Trustee and each Committee chairman will serve two-year terms before
rotating to serve as chairman of another committee or as Lead Independent
Trustee. The officers and "Interested" Trustee receive no compensation from the
Fund for serving in such capacities.

4. PURCHASES AND SALES OF SECURITIES

Cost of purchases and proceeds from sales of securities, other than U.S.
government obligations and short-term obligations, for the year ended November
30, 2010, were $1,131,624,406 and $1,125,965,467, respectively.

5. AT THE MARKET OFFERING

On July 14, 2010, the Fund, Advisor and Sub-Advisor entered into a sales
agreement with JonesTrading whereby the Fund may offer and sell up to 1,000,000
Common Shares from time to time through JonesTrading as agent for the offer and
sale of the Common Shares. This sales agreement terminated and replaced the
previous sales agreement that was entered into on November 13, 2009. Sales of
Common Shares pursuant to the sales agreement may be made in negotiated
transactions or transactions that are deemed to be "at the market" as defined in
Rule 415 under the Securities Act of 1933, as amended, including sales made
directly on the NYSE or sales made through a market maker other than on an
exchange, at an offering price equal to or in excess of the net asset value per
share of the Fund's Common Shares at the time such Common Shares are initially
sold. The Fund intends to use the net proceeds from the sale of the Common
Shares in accordance with its investment objectives and policies. Transactions
for the years ended November 30, 2009 and 2010 related to offerings under the
previous and current sales agreements are as follows:

NET PROCEEDS
COMMON NET PROCEEDS NET ASSET VALUE RECEIVED IN EXCESS
SHARES SOLD RECEIVED OF SHARES SOLD OF NET ASSET VALUE
_______________ ________________ ___________________ ______________________

Year Ended 11/30/2010* 776,261 $9,298,335 $8,027,005 $1,271,330
Year Ended 11/30/2009 29,820 $354,746 $315,479 $39,267

* Additionally, estimated offering costs of $46,312 related to this
offering for this reporting period have been expensed by the Fund and
are disclosed as "At the market offering costs" on the Statement of
Operations.

6. INDEMNIFICATION

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

7. RISK CONSIDERATIONS

Risks are inherent in all investing. The following summarizes some of the risks
that should be considered for the Fund. For additional information about the
risks associated with investing in the Fund, please see the Fund's prospectus
and statement of additional information, as well as other Fund regulatory
filings.

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

Page 19

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
NOVEMBER 30, 2010

DIVIDEND STRATEGY RISK: The Sub-Advisor may not be able to anticipate the level
of dividends that companies will pay in any given timeframe. The Fund's
strategies require the Sub-Advisor to identify and exploit opportunities such as
the announcement of major corporate actions that may lead to high current
dividend income. These situations are typically not recurring in nature or the
frequency may be difficult to predict and may not result in an opportunity that
allows the Sub-Advisor to fulfill the Fund's investment objectives. In addition,
the dividend policies of the Fund's target companies are heavily influenced by
the current economic climate.

MLP RISK: An investment in MLP units involves risks which differ from an
investment in common stock of a corporation. Holders of MLP units have limited
control and voting rights on matters affecting the partnership. In addition,
there are certain tax risks associated with an investment in MLP units and
conflicts of interest exist between common unit holders and the general partner,
including those arising from incentive distribution payments.

QUALIFIED DIVIDEND INCOME TAX RISK: There can be no assurance as to what portion
of the distributions paid to the Fund's Common Shareholders will consist of
tax-advantaged qualified dividend income. For taxable years beginning before
January 1, 2013, certain distributions designated by the Fund as derived from
qualified dividend income will be taxed in the hands of non-corporate Common
Shareholders at the rates applicable to long-term capital gains, provided
certain holding period and other requirements are satisfied by both the Fund and
the Common Shareholders. Additional requirements apply in determining whether
distributions by foreign issuers should be regarded as qualified dividend
income. Certain investment strategies of the Fund will limit the Fund's ability
to meet these requirements and consequently will limit the amount of qualified
dividend income received and distributed by the Fund. A change in the favorable
provisions of the federal tax laws with respect to qualified dividends may
result in a widespread reduction in announced dividends and may adversely impact
the valuation of the shares of dividend-paying companies.

8. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through
the date the financial statements were issued and has determined that there was
the following subsequent event:

On January 12, 2011, the Fund declared a dividend of $0.280 per share to Common
Shareholders of record on January 25, 2011, payable January 31, 2011.

Page 20

- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FIRST TRUST ACTIVE DIVIDEND INCOME
FUND:

We have audited the accompanying statement of assets and liabilities of First
Trust Active Dividend Income Fund ("the Fund"), including the portfolio of
investments, as of November 30, 2010, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's 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 audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its 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 Fund's 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 November 30, 2010 by correspondence with the Fund's
custodian and brokers; where replies were not received, we performed other
auditing procedures. 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 the
First Trust Active Dividend Income Fund as of November 30, 2010, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for the
periods presented, in conformity with accounting principles generally accepted
in the United States of America.

Deloitte & Touche LLP

Chicago, Illinois
January 26, 2011

Page 21

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Additional Information
- --------------------------------------------------------------------------------

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
NOVEMBER 30, 2010 (UNAUDITED)

DIVIDEND REINVESTMENT PLAN

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

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

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

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

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

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

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

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

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

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

________________________________________________________________________________
PROXY VOTING POLICIES AND PROCEDURES

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

PORTFOLIO HOLDINGS

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

Page 22

- --------------------------------------------------------------------------------
Additional Information - (Continued)
- --------------------------------------------------------------------------------

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
NOVEMBER 30, 2010 (UNAUDITED)

TAX INFORMATION

Of the ordinary income (including short-term capital gain) distributions made by
the Fund during the year ended November 30, 2010, 6.03% qualified for the
corporate dividends received deduction available to corporate shareholders.

The Fund hereby designates as qualified dividend income 5.29% of the ordinary
income distributions for the year ended November 30, 2010.

NYSE CERTIFICATION INFORMATION

In accordance with Section 303A-12 of the New York Stock Exchange ("NYSE")
Listed Company Manual, the Fund's President has certified to the NYSE that, as
of June 14, 2010, he was not aware of any violation by the Fund of NYSE
corporate governance listing standards. In addition, the Fund's reports to the
SEC on Forms N-CSR, N-CSRS and N-Q contain certifications by the Fund's
principal executive officer and principal financial officer that relate to the
Fund's public disclosure in such reports and are required by Rule 30a-2 under
the 1940 Act.

SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

A Special Meeting of the Shareholders of the Common Shares of First Trust Active
Dividend Fund was held on February 18, 2010. At that meeting the shareholders
approved a new Sub-Advisory Agreement between the Fund, the Advisor and Aviance.
A quorum of more than fifty percent of the outstanding voting securities was
required for this vote. 3,634,250 of the outstanding voting securities were
voted at the meeting. This amounted to 50.13% of the outstanding voting
securities. The number of votes cast in favor of the new Sub-Advisory Agreement
was 3,256,080, the number of votes against was 114,493 and the number of
abstentions was 263,677. The terms of the new Sub-Advisory Agreement are
substantially identical to the terms of the previous Sub-Advisory Agreement.
This action was taken to continue to permit Aviance to serve as the Fund's
Sub-Advisor. Prior to the meeting Aviance had been serving as the Fund's
Sub-Advisor pursuant to an Interim Sub-Advisory Agreement which was approved by
the Fund's Board of Trustees and was necessitated by the termination of the
previous Sub-Advisory Agreement because of a "change of control" of Aviance.

The Joint Annual Meeting of Shareholders of the Common Shares of Macquarie/First
Trust Global Infrastructure/Utilities Dividend & Income Fund, Energy Income and
Growth Fund, First Trust Enhanced Equity Income Fund, First Trust/Aberdeen
Global Opportunity Income Fund, First Trust/FIDAC Mortgage Income Fund, First
Trust Strategic High Income Fund, First Trust Strategic High Income Fund II,
First Trust/Aberdeen Emerging Opportunity Fund, First Trust Strategic High
Income Fund III, First Trust Specialty Finance and Financial Opportunities Fund
and First Trust Active Dividend Income Fund was held on April 14, 2010. At the
Annual Meeting, Trustees James A. Bowen and Niel B. Nielson were elected by the
Common Shareholders of the Fund as Class III Trustees for a three-year term
expiring at the Fund's annual meeting of shareholders in 2013. The number of
votes cast in favor of Mr. Bowen was 6,792,553, the number of votes against was
170,962 and the number of abstentions was 591,942. The number of votes cast in
favor of Mr. Nielson was 6,791,657, the number of votes against was 171,858 and
the number of abstentions was 591,942. Richard E. Erickson, Thomas R. Kadlec and
Robert F. Keith are the other current and continuing Trustees.

A special meeting of shareholders of the Fund was held on January 3, 2011. At
the meeting, shareholders approved a new investment management agreement between
the Fund and First Trust and a new investment sub-advisory agreement between the
Fund, First Trust and Aviance. 4,052,274 (51.32%) of the outstanding voting
securities were voted at the meeting. The number of votes cast in favor of the
new investment management agreement was 3,536,966, the number of votes against
was 147,844, and the number of abstentions was 367,464. The number of votes cast
in favor of the new investment sub-advisory agreement was 3,510,842, the number
of votes against was 148,486, and the number of abstentions was 392,946. The
terms of the new investment management agreement and new investment sub-advisory
agreement are substantially similar to the terms of the previous agreements.

INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS

BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AND
SUB-ADVISORY AGREEMENTS

The Board of Trustees of First Trust Active Dividend Income Fund (the "Fund"),
including the Independent Trustees, approved the Interim Investment Management
Agreement and the New Investment Management Agreement (collectively, the
"Advisory Agreements") between the Fund and First Trust Advisors L.P. (the
"Advisor") and the Interim Investment Sub-Advisory Agreement and New Investment
Sub-Advisory Agreement (collectively, the "Sub-Advisory Agreements" and together
with the Advisory Agreements, the "Agreements") among the Fund, the Advisor and
Aviance Capital Management, LLC (the "Sub-Advisor"), at a meeting held on
September 20, 2010. The Board determined that the terms of the Agreements are
fair and reasonable and that the Agreements are in the best interests of the
Fund. The Board also determined that it believes that the scope and quality of
services to be provided to the Fund under the Agreements will be at least
equivalent to the scope and quality of services provided under the current
Investment Management Agreement with the Advisor and the current Investment
Sub-Advisory Agreement among the Fund, the Advisor and the Sub-Advisor
(collectively, the "Original Agreements").

On August 25, 2010, the Independent Trustees were informed that James A. Bowen,
the President of the Advisor and a Trustee and Chairman of the Board of the
Fund, had entered into an agreement to acquire 100% of the common stock of The
Charger Corporation, the general partner of the Advisor (the "Transaction"), the
consummation of which would constitute a "change of control" of the Advisor and
would result in the "assignment" and termination of the current Investment
Management Agreement and may also result in the "assignment" and termination of
the current Investment Sub-Advisory Agreement pursuant to their terms and in
accordance with Section 15 of the Investment Company Act of 1940, as amended
(the "1940 Act"). On August 31, 2010, counsel to the Independent Trustees
forwarded to Mr. Bowen and the Advisor a request for information regarding the
Transaction. In anticipation of the consummation of the Transaction, the Board
at its meeting held on September 20, 2010, considered the information provided
by Mr. Bowen and the Advisor in response to the Independent Trustees' request
for information and considered the approval of the Agreements.

Page 23

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
NOVEMBER 30, 2010 (UNAUDITED)

To reach its determination, the Board considered its duties under the 1940 Act,
as well as under the general principles of state law in reviewing and approving
advisory contracts; the requirements of the 1940 Act in such matters; the
fiduciary duty of investment advisors with respect to advisory agreements and
compensation; the standards used by courts in determining whether investment
company boards have fulfilled their duties; and the factors to be considered by
the Board in voting on such agreements. In connection with its deliberations
regarding the Agreements, the Board noted the Advisor's representation that
apart from their effective and termination dates and any provisions of the
Interim Investment Management Agreement and Interim Investment Sub-Advisory
Agreement required by Rule 15a-4 under the 1940 Act, the Advisory Agreements and
Sub-Advisory Agreements were the same in all material respects as the Original
Agreements. The Board noted that it had recently considered the Advisor's and
Sub-Advisor's capabilities and the terms of the Original Agreements at a meeting
held on March 21-22, 2010 and had determined to renew the Original Agreements
for an additional one-year term (the "2010 Renewal"). The Board considered that
in connection with the 2010 Renewal, it had received a report from each of the
Advisor and the Sub-Advisor that, among other things, outlined the services
provided by the Advisor and the Sub-Advisor (including the relevant personnel
responsible for these services and their experience); the advisory and
sub-advisory fees for the Fund as compared to fees charged to other clients of
the Advisor and the Sub-Advisor and as compared to fees charged by investment
advisors and sub-advisors to comparable funds; expenses of the Fund as compared
to expense ratios of comparable funds; the nature of expenses incurred in
providing services to the Fund and the potential for economies of scale, if any;
financial data on the Advisor and the Sub-Advisor; any fall out benefits to the
Advisor and the Sub-Advisor; and information on the Advisor's and the
Sub-Advisor's compliance programs. Prior to the September meeting, the Advisor
represented to the Board that there had been no material changes to the
information provided in March 2010 and that the Board could continue to rely on
such information. In addition, the Sub-Advisor represented to the Board that
there had been no material changes to the information provided in March 2010 and
that the Board could continue to rely on such information.

Because the Board determined that any differences between the Original
Agreements and the Agreements were immaterial, the Board determined that much of
its previous analysis in connection with the 2010 Renewal applied to its review
and consideration of the Agreements. Accordingly, the Board took note of such
prior analysis and supplemented it with the additional considerations noted
below. The Independent Trustees also met separately with their independent legal
counsel to discuss the Transaction and their consideration of the Agreements.

In reviewing the Agreements, the Board considered the nature, quality and extent
of services to be provided by the Advisor and the Sub-Advisor under the
Agreements. The Board noted that the Transaction was not expected to result in
any changes to the personnel of the Advisor and Sub-Advisor responsible for
providing services to the Fund. The Board also considered the representations of
both the Advisor and the Sub-Advisor that there will be no diminution in
services provided under the Agreements. The Board noted that shareholders had
recently approved the current Investment Sub-Advisory Agreement at a special
meeting held on February 18, 2010. In light of the information presented and the
considerations made at the September meeting, including the considerations made
in connection with the 2010 Renewal, the Board concluded that the nature,
quality and extent of services to be provided to the Fund by the Advisor and the
Sub-Advisor under the Agreements are expected to be satisfactory.

The Board considered the advisory and sub-advisory fees payable under the
Agreements, noting that they would be the same as the fees payable under the
Original Agreements. The Board considered that in connection with the 2010
Renewal it had reviewed the advisory fees charged by the Advisor to similar
funds and other non-fund clients, and had noted that the Advisor does not
provide advisory services to other clients with investment objectives and
policies similar to the Fund's. The Board also considered that it had reviewed
information provided by the Sub-Advisor as to the fees it charges to other
similar clients, noting that the sub-advisory fee rate is lower than the fee
rate charged by the Sub-Advisor to its other clients. The Board also considered
performance information for the Fund, including the Fund's quarterly performance
report, which is part of the process that the Board has established for
monitoring the Fund's performance and portfolio risk on an ongoing basis. In
light of the information presented on the fees and performance of the Fund and
the considerations made at the September meeting, including the considerations
made in connection with the 2010 Renewal, the Board concluded that the advisory
and sub-advisory fees were reasonable and appropriate in light of the nature,
quality and extent of services expected to be provided by the Advisor and
Sub-Advisor under the Agreements.

The Board noted that the Advisor has continued to invest in personnel and
infrastructure and considered whether fee levels reflect any economies of scale
for the benefit of shareholders. The Board concluded that the advisory fee
continues to reflect an appropriate level of sharing of any economies of scale
at current asset levels. The Board noted that in connection with the 2010
Renewal it had reviewed the costs of the services provided and profits realized
by the Advisor from serving as investment manager to the Fund for the twelve
months ended December 31, 2009. The Board considered its prior conclusion that
the Advisor's profitability appeared to be not excessive in light of the
services provided to the Fund. The Board considered whether the Advisor derives
any ancillary benefits from its relationship with the Fund and noted that the
typical fall out benefits to the Advisor such as soft dollars are not present.
The Board noted that the Advisor will receive compensation from the Fund for
providing fund reporting services. The Board concluded that any other fall out
benefits received by the Advisor or its affiliates would appear to be limited.

The Board considered that, in connection with the 2010 Renewal, the Sub-Advisor
did not identify any economies of scale realized in connection with providing
services to the Fund and represented that the Sub-Advisor was providing
sub-advisory services to the Fund at a loss. The Board also considered the
Advisor's representation that First Trust Portfolios L.P., an affiliate of the
Advisor, had committed to provide any necessary financing for the Sub-Advisor.
The Board noted that the Sub-Advisor does not maintain any soft-dollar
arrangements and that the Sub-Advisor had previously indicated that it does not
receive any material fall out benefits from its relationship to the Fund.

Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, determined that the terms of the
Agreements are fair and reasonable and that the approval of the Agreements is in
the best interests of the Fund. No single factor was determinative in the
Board's analysis.

Page 24

- --------------------------------------------------------------------------------
Board of Trustees and Officers
- --------------------------------------------------------------------------------

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
NOVEMBER 30, 2010 (UNAUDITED)

NUMBER OF
PORTFOLIOS IN
THE FIRST OTHER
TRUST TRUSTEESHIPS OR
NAME, ADDRESS, TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS
DATE OF BIRTH AND AND LENGTH OF PRINCIPAL OCCUPATIONS OVERSEEN BY HELD BY
POSITION WITH THE FUND SERVICE(2) DURING PAST 5 YEARS TRUSTEE TRUSTEE

- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------

Richard E. Erickson, Trustee o Three Year Physician; President, Wheaton 64 None
c/o First Trust Advisors L.P. Term Orthopedics; Co-owner and Co-Director
120 E. Liberty Drive, (January 1996 to May 2007), Sports
Suite 400 Med Center for Fitness; Limited
Wheaton, IL 60187 o Since Fund Partner, Gundersen Real Estate
D.O.B.: 04/51 Inception Limited Partnership; Member,
Sportsmed LLC

Thomas R. Kadlec, Trustee o Three Year President (March 2010 to Present), 64 Director of ADM
c/o First Trust Advisors L.P. Term Senior Vice President and Chief Investor
120 E. Liberty Drive, Financial Officer (May 2007 to March Services, Inc.
Suite 400 o Since Fund 2010), Vice President and Chief and ADM
Wheaton, IL 60187 Inception Financial Officer (1990 to May 2007), Investor
D.O.B.: 11/57 ADM Investor Services, Inc. (Futures Services
Commission Merchant) International

Robert F. Keith, Trustee o Three Year President (2003 to Present), 64 None
c/o First Trust Advisors L.P. Term Hibs Enterprises (Financial and
120 E. Liberty Drive, Management Consulting)
Suite 400 o Since Fund
Wheaton, IL 60187 Inception
D.O.B.: 11/56

Niel B. Nielson, Trustee o Three Year President (June 2002 64 Director of
c/o First Trust Advisors L.P. Term to Present), Covenant Covenant
120 E. Liberty Drive, College Transport Inc.
Suite 400 o Since Fund
Wheaton, IL 60187 Inception
D.O.B.: 03/54

- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------

James A. Bowen, Trustee, o Three Year Chief Executive Officer (December 2010 64 Trustee of
President, Chairman of the Board Trustee to Present), President (until Wheaton College
and CEO(1) Term and December 2010), First Trust Advisors
120 E. Liberty Drive, Indefinite L.P. and First Trust Portfolios L.P.;
Suite 400 Officer Chairman of the Board of Directors,
Wheaton, IL 60187 Term BondWave LLC (Software Development
D.O.B.: 09/55 Company/Investment Advisor) and
o Since Fund Stonebridge Advisors LLC (Investment
Inception Advisor)

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

(1) Mr. Bowen is deemed an interested person of the Fund due to his position
of Chief Executive Officer of First Trust Advisors L.P., investment advisor
of the Fund.
(2) Currently, Robert F. Keith, as a Class I Trustee, is serving as a trustee
until the Fund's 2011 annual meeting of shareholders. Richard E. Erickson
and Thomas R. Kadlec, as Class II Trustees, are serving as trustees until
the Fund's 2012 annual meeting of shareholders. James A. Bowen and Niel B.
Nielson, as Class III Trustees, are serving as trustees until the Fund's
2013 annual meeting of shareholders. Officers of the Fund have an
indefinite term. The term "officer" means the president, vice president,
secretary, treasurer, controller or any other officer who performs a
policy making function.

Page 25

- --------------------------------------------------------------------------------
Board of Trustees and Officers - (Continued)
- --------------------------------------------------------------------------------

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
NOVEMBER 30, 2010 (UNAUDITED)

TERM OF OFFICE
NAME, ADDRESS AND POSITION AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
DATE OF BIRTH WITH FUND SERVICE DURING PAST 5 YEARS

- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES (3)
- -----------------------------------------------------------------------------------------------------------------------------------

Mark R. Bradley Treasurer, Chief o Indefinite term Chief Operating Officer
120 E. Liberty Drive, Financial Officer (December 2010 to Present) and
Suite 400 and Chief Accounting o Since Fund Chief Financial Officer,
Wheaton, IL 60187 Officer Inception First Trust Advisors L.P.
D.O.B.: 11/57 and First Trust Portfolios
L.P.; Chief Financial
Officer, BondWave LLC
(Software Development
Company/Investment Advisor)
and Stonebridge Advisors LLC
(Investment Advisor)

Erin E. Chapman Assistant Secretary o Indefinite term Assistant General Counsel
120 E. Liberty Drive, (October 2007 to Present),
Suite 400 o Since June 2009 Associate Counsel (March
Wheaton, IL 60187 2006 to October 2007), First
D.O.B.: 08/76 Trust Advisors L.P. and
First Trust Portfolios L.P.;
Associate Attorney (November
2003 to March 2006), Doyle &
Bolotin, Ltd.

James M. Dykas Assistant Treasurer o Indefinite term Controller (January 2011 to
120 E. Liberty Drive, Present), Senior Vice President
Suite 400 o Since Fund (April 2007 to January 2011),
Wheaton, IL 60187 Inception Vice President (January 2005 to
D.O.B.: 01/66 April 2007), First Trust
Advisors L.P. and First
Trust Portfolios L.P.

Christopher R. Fallow Assistant Vice o Indefinite term Assistant Vice President
120 E. Liberty Drive, President (August 2006 to Present),
Suite 400 o Since Fund Associate (January 2005 to
Wheaton, IL 60187 Inception August 2006), First Trust
D.O.B.: 04/79 Advisors L.P. and First
Trust Portfolios L.P.

W. Scott Jardine Secretary o Indefinite term General Counsel, First Trust
120 E. Liberty Drive, Advisors L.P., First Trust
Suite 400 o Since Fund Portfolios L.P. and BondWave
Wheaton, IL 60187 Inception LLC (Software Development
D.O.B.: 05/60 Company/Investment Advisor);
Secretary of Stonebridge
Advisors LLC (Investment Advisor)

Daniel J. Lindquist Vice President o Indefinite term Senior Vice President
120 E. Liberty Drive, (September 2005 to Present),
Suite 400 o Since Fund First Trust Advisors L.P. and
Wheaton, IL 60187 Inception First Trust Portfolios L.P.
D.O.B: 02/70

Coleen D. Lynch Assistant Vice o Indefinite term Assistant Vice President
120 E. Liberty Drive, President (January 2008 to Present),
Suite 400 o Since July 2008 First Trust Advisors L.P. and
Wheaton, IL 60187 First Trust Portfolios L.P.;
DOB: 07/58 Vice President (May 1998 to
January 2008), Van Kampen
Asset Management and Morgan
Stanley Investment Management

Kristi A. Maher Assistant Secretary o Indefinite term Deputy General Counsel (May
120 E. Liberty Drive, and Chief Compliance 2007 to Present), Assistant
Suite 400 Officer o Assistant General Counsel (March 2004 to
Wheaton, IL 60187 Secretary since May 2007), First Trust
D.O.B.: 12/66 Fund Inception Advisors L.P. and First Trust
Portfolios L.P.
o Chief
Compliance
Officer since
January 2011

- ---------------------
(3) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.

Page 26

- --------------------------------------------------------------------------------
Privacy Policy
- --------------------------------------------------------------------------------

FIRST TRUST ACTIVE DIVIDEND INCOME FUND
NOVEMBER 30, 2010 (UNAUDITED)

The open-end and closed-end funds advised by First Trust Advisors L.P. (each a
"Fund") value our relationship with you and 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. In addition to using
this information to verify your identity (as required by law), the permitted
uses may also 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.

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 go to www.ftportfolios.com, or contact us at (800)
621-1675 (First Trust Portfolios) or (800) 222-6822 (First Trust Advisors).

Page 27

This page left blank intentionally.

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

INVESTMENT SUB-ADVISOR
Aviance Capital Management, LLC
2080 Ringling Boulevard
Sarasota, FL 34237

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

CUSTODIAN
PFPC Trust Company
8800 Tinicum Boulevard
Philadelphia, PA 19153

INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606

LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603

[BLANK BACK COVER]

ITEM 2. CODE OF ETHICS.

(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 description.

(d) The registrant has not 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 audit committee financial experts serving on its audit committee and
that each of them 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 each of the
last two fiscal years 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 for those fiscal years were
$49,800 for the fiscal year ended November 30, 2009 and $54,800 for the fiscal
year ended November 30, 2010.

(b) Audit-Related Fees (Registrant) -- The aggregate fees billed in each
of the last two fiscal years 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 the fiscal year ended November 30, 2009 and $0 for the
fiscal year ended November 30, 2010.

Audit-Related Fees (Investment Adviser) -- The aggregate fees billed in
each of the last two fiscal years 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 the fiscal year ended November 30, 2009 and $0 for
the fiscal year ended November 30, 2010.

(c) Tax Fees (Registrant) -- The aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal accountant
for tax compliance, tax advice, and tax planning to the registrant were $4,500
for the fiscal year ended November 30, 2009 and $4,515.18 for the fiscal year
ended November 30, 2010. These fees were for tax consultation.

Tax Fees (Investment Adviser) -- The aggregate fees billed in each of
the last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning to the registrant's
adviser were $0 for the fiscal year ended November 30, 2009 and $0 for the
fiscal year ended November 30, 2010.

(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 $0 for the fiscal year ended November 30, 2009 and
$0 for the fiscal year ended November 30, 2010.

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 the services
reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year
ended November 30, 2009 and $0 for the fiscal year ended November 30, 2010.

(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 is 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 and 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)(i)(c) or paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X are as follows:

(b) 0%

(d) 0%

(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 the fiscal year
ended November 30, 2009, were $4,500 for the registrant and $36,000 for the
registrant's investment adviser, and for the fiscal year ended November 30,
2010, were $4,515.18 for the registrant and $6,000 for the registrant's
investment adviser.

(h) The registrant's audit committee of its Board of Trustees has
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.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

(a) The Registrant has a separately designated audit committee consisting
of all the independent directors of the Registrant. The members of
the audit committee are: Thomas R. Kadlec, Niel B. Nielson, Richard
E. Erickson and Robert F. Keith.

ITEM 6. SCHEDULE OF INVESTMENTS.

Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.

The Proxy Voting Policies are set forth below.

Aviance Capital Management, LLC. (the "Sub-Adviser") serves as investment
adviser providing discretionary investment advisory services for a closed-end
investment company (the "Fund"). As part of these services, the Sub-Adviser has
full responsibility for proxy voting and related duties. In fulfilling these
duties, the Sub-Adviser has adopted the following policies and procedures:

1. It is the Sub-Adviser's policy to seek to ensure that proxies for
securities held by the Fund are voted consistently and solely in the best
economic interests of the Fund.

2. The Sub-Adviser shall be responsible for the oversight of the Fund's
proxy voting process and shall assign a senior member of its staff to be
responsible for this oversight.

3. The Sub-Adviser has engaged the services of Institutional Shareholder
Services, Inc. ("ISS") to make recommendations to the Sub-Adviser on the voting
of proxies related to securities held by the Fund. ISS provides voting
recommendations based on established guidelines and practices. The Sub-Adviser
has adopted these ISS Proxy Voting Guidelines.

4. The Sub-Adviser shall review the ISS recommendations and generally will
vote the proxies in accordance with such recommendations. Notwithstanding the
foregoing, the Sub-Adviser may not vote in accordance with the ISS
recommendations if the Sub-Adviser believes that the specific ISS recommendation
is not in the best interests of the Fund.

5. If the Sub-Adviser manages the assets or pension fund of a company and
any of the Sub-Adviser's clients hold any securities in that company, the
Sub-Adviser will vote proxies relating to such company's securities in
accordance with the ISS recommendations to avoid any conflict of interest. In
addition, if the Sub-Adviser has actual knowledge of any other type of material
conflict of interest between itself and the Fund with respect to the voting of a
proxy, the Sub-Adviser shall vote the applicable proxy in accordance with the
ISS recommendations to avoid such conflict of interest.

6. If the Fund requests the Sub-Adviser to follow specific voting
guidelines or additional guidelines, the Sub-Adviser shall review the request
and follow such guidelines, unless the Sub-Adviser determines that it is unable
to follow such guidelines. In such case, the Sub-Adviser shall inform the Fund
that it is not able to follow the Fund's request.

7. The Sub-Adviser may have clients in addition to the Fund which have
provided the Sub-Adviser with discretionary authority to vote proxies on their
behalf. In such cases, the Sub-Adviser shall follow the same policies and
procedures.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

(a)(1) Identification of Portfolio Manager(s) or Management Team Members and
Description of Role of Portfolio Manager(s) or Management Team Members

INFORMATION PROVIDED AS OF FEBRUARY 4, 2011

Aviance Capital Management, LLC, ("Aviance") a registered investment advisor, is
the Sub-Advisor to the Registrant. Aviance is an asset management firm focused
on managing multi-cap value and growth portfolios and is currently managed by
Christian C. Bertelsen, Michael J. Dixon, and Edward C. Bertelsen, who are all
Founding Members of the firm. Aviance is responsible for the day-to-day
management of the Registrant's portfolio utilizing a team consisting of
Christian C. Bertelsen, James R. Neel, Edward Bertelsen and Mark Belanian.

CHRISTIAN C. BERTELSEN, Chief Investment Officer and Senior Portfolio Manager

JAMES R. NEEL, CFA, Portfolio Manager

James R. Neel, CFA, has over 30 years of experience in investment management.
Mr. Neel joined Aviance as a portfolio manager in January 2009. He has also been
a portfolio manager for Aviance Capital Partners, a registered investment
advisor, since January 2009. From September 2006 to December 2008, Mr. Neel was
a portfolio manager for YHB Investment Advisors, Inc. From June 2005 to
September 2006 he was a portfolio manager for Gibraltar Private Bank, and from
December 2004 to June 2005 he served in the same role at Thomas Partners, Inc.
While managing equity mutual funds for Kemper in the 1990s, Mr. Neel won a
Lipper Award in the Growth and Income category. Mr. Neel also served as the
portfolio strategist for Kemper Financial Services; CEO of Dreman Value
Advisors, where he worked with Christian Bertelsen; and Partner at Loomis
Sayles. Mr. Neel is a graduate of Michigan State University, where he received a
B.A. in 1965. He received an M.B.A. from Michigan State University in 1966. Mr.
Neel earned the Chartered Financial Analyst designation in 1976 and also served
four years as a U.S. Navy officer.

EDWARD C. BERTELSEN, Portfolio Manager - Research

MARK BELANIAN, Portfolio Analyst
Mark Belanian has over 10 years of investment industry experience. Mr. Belanian
joined GFPC/Aviance in February 2006 from Merrill Lynch's Global Private Client
Group in Sarasota, Florida, where he had worked since February 2005. Mr.
Belanian worked with Christian Bertelsen as a portfolio analyst at Phoenix
Investment Counsel between June 1998 and January 2005. Mr. Belanian graduated
from Trinity College with a B.A. in Modern Language.

(a)(2) Other Accounts Managed by Portfolio Manager and Potential Conflicts
of Interest

INFORMATION PROVIDED AS OF NOVEMBER 30, 2010

# of Accounts Total Assets
Managed for for which
Total # of which Advisory Advisory Fee is
Name of Portfolio Manager Accounts Total Fee is Based on Based on
or Team Member Type of Accounts Managed Assets Performance Performance

Christian C. Bertelsen Registered Investment 0 $0 0 $0
Companies:
Other Pooled Investment 0 $0 0 $0
Vehicles:

Other Accounts: $319
67 Million 0 $0

James R. Neel Registered Investment 0 $0 0 $0
Companies:
Other Pooled Investment 0 $0 0 $0
Vehicles:

Other Accounts: $39
20 Million 0 $0

Edward C. Bertelsen Registered Investment 0 $0 0 $0
Companies:
Other Pooled Investment 0 $0 0 $0
Vehicles:

Other Accounts: $28 0 $0
12 Million

Mark Belanian Registered Investment
Companies: 0 $0 0 $0

Other Pooled Investment
Vehicles: 0 $0 0 $0

Other Accounts: 0 $0 0 $0

POTENTIAL CONFLICTS OF INTERESTS

Aviance believes there are not any material conflicts of interest that may arise
in connection with the Portfolio Manager's management of the Registrant's
investments.

(a)(3) Compensation Structure of Portfolio Manager(s) or Management
Team Members

INFORMATION PROVIDED AS OF FEBRUARY 4, 2011.

As Members of Aviance, Christian Bertelsen and Edward Bertelsen receive
compensation which is capped at a certain level that can rise annually with
inflation. Additional bonuses are based on the overall profitability of the
firm. At this time, the cash flow of the company does not support the full
amount of the capped draw, therefore Christian Bertelsen and Edward Bertelsen
are paid at a discounted level, as cash flow allows. Mark Belanian is paid a
monthly salary and is eligible for bonuses based on his performance and the
company's profitability. James Neel's compensation is tied to the performance
and profitability of the company. As of this date, the performance trigger for
compensation to be paid to Mr. Neel has not been met. Aviance employees are
offered health/dental insurance through the firm's group policy.

(a)(4) Disclosure of Securities Ownership

INFORMATION PROVIDED AS OF NOVEMBER 30, 2010

Dollar Range of Registrant
Name Shares Beneficially Owned
Christian C. Bertelsen $0
James R. Neel $0
Edward C. Bertelsen $0
Mark Belanian $0

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

ITEM 12. EXHIBITS.

(a)(1) 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 Active Dividend Income Fund
-----------------------------------------------------------------

By (Signature and Title)* /s/ James A. Bowen
--------------------------------------------------
James A. Bowen, Chairman of the Board, President
and Chief Executive Officer
(principal executive officer)

Date January 20, 2011
--------------------

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

Date January 20, 2011
--------------------

By (Signature and Title)* /s/ Mark R. Bradley
--------------------------------------------------
Mark R. Bradley, Treasurer, Chief Financial Officer
and Chief Accounting Officer
(principal financial officer)

Date January 20, 2011
--------------------

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