First Trust Exchange-Traded Fund - Certified annual shareholder report for management investment companies (N-CSR)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-21774

First Trust Exchange-Traded Fund

(Exact name of registrant as specified in charter)

1001 Warrenville Road, Suite 300
Lisle, Illinois 60532

(Address of principal executive offices) (Zip code)

W. Scott Jardine, Esq.
First Trust Portfolios L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532

(Name and address of agent for service)

Registrant's telephone number, including area code: 630-241-4141

Date of fiscal year end: December 31

Date of reporting period: December 31, 2007

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

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

Item 1. Report to Stockholders.

The registrant's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows:

[LOGO OMITTED] FIRST TRUST
ADVISORS L.P.

FIRST TRUST EXCHANGE-TRADED FUND

First Trust Dow Jones Select MicroCap Index(SM) Fund First Trust Morningstar(R) Dividend Leaders(SM) Index Fund First Trust IPOX-100 Index Fund
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund First Trust NASDAQ-100-Technology Sector Index(SM) Fund First Trust Amex(R) Biotechnology Index Fund First Trust Dow Jones Internet Index(SM) Fund First Trust DB Strategic Value Index Fund First Trust Value Line(R) Equity Allocation Index Fund First Trust Value Line(R) Dividend Index Fund First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund First Trust S&P REIT Index Fund
First Trust ISE Water Index Fund
First Trust ISE-Revere Natural Gas Index Fund First Trust ISE Chindia Index Fund
First Trust Value Line(R) 100 Exchange-Traded Fund

Annual Report
December 31, 2007

Front Cover

TABLE OF CONTENTS

 First Trust Exchange-Traded Fund
 December 31, 2007

Shareholder Letter 2
Market Overview 3
Fund Performance Overview
 First Trust Dow Jones Select MicroCap Index(SM) Fund 4
 First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 6
 First Trust IPOX-100 Index Fund 8
 First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 10
 First Trust NASDAQ-100-Technology Sector Index(SM) Fund 12
 First Trust Amex(R) Biotechnology Index Fund 14
 First Trust Dow Jones Internet Index(SM) Fund 16
 First Trust DB Strategic Value Index Fund 18
 First Trust Value Line(R) Equity Allocation Index Fund 20
 First Trust Value Line(R) Dividend Index Fund 22
 First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 24
 First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 26
 First Trust S&P REIT Index Fund 28
 First Trust ISE Water Index Fund 30
 First Trust ISE-Revere Natural Gas Index Fund 32
 First Trust ISE Chindia Index Fund 34
 First Trust Value Line(R) 100 Exchange-Traded Fund 36
Notes to Fund Performance Overview 38
Understanding Your Fund Expenses 39
Portfolio of Investments
 First Trust Dow Jones Select MicroCap Index(SM) Fund 41
 First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 45
 First Trust IPOX-100 Index Fund 47
 First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 49
 First Trust NASDAQ-100-Technology Sector Index(SM) Fund 51
 First Trust Amex(R) Biotechnology Index Fund 52
 First Trust Dow Jones Internet Index(SM) Fund 53
 First Trust DB Strategic Value Index Fund 54
 First Trust Value Line(R) Equity Allocation Index Fund 55
 First Trust Value Line(R) Dividend Index Fund 58
 First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 61
 First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 63
 First Trust S&P REIT Index Fund 64
 First Trust ISE Water Index Fund 66
 First Trust ISE-Revere Natural Gas Index Fund 67
 First Trust ISE Chindia Index Fund 68
 First Trust Value Line(R) 100 Exchange-Traded Fund 70
Statements of Assets and Liabilities 72
Statements of Operations 76
Statements of Changes in Net Assets 80
Financial Highlights 86
Notes to Financial Statements 96
Report of Independent Registered Public Accounting Firm 106
Additional Information 107
Board of Trustees and Officers 110
Risk Considerations 112

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its respective representatives, taking into account the information currently available to them. Forwardlooking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes.

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

PERFORMANCE AND RISK DISCLOSURE

There is no assurance that any Fund (each, individually a "Fund" and collectively, the "Funds") of the Trust will achieve its investment objective. Each Fund of the Trust is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in a Fund.

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

HOW TO READ THIS REPORT

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

By reading the portfolio commentary by Robert F. Carey, Chief Investment Officer of the Advisor, you may obtain an understanding of how the market environment affected the performance of each Fund. The statistical information that follows may help you understand each Fund's performance compared to that of relevant market benchmarks.

It is important to keep in mind that the opinions expressed by Mr. Carey are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The risks of investing in each Fund are spelled out in its prospectus.

Page 1

SHAREHOLDER LETTER

FIRST TRUST EXCHANGE-TRADED FUND
ANNUAL REPORT
DECEMBER 31, 2007

Dear Shareholders:

We believe investment opportunities abound, both here and abroad, affording the potential for exceptional returns for investors. At First Trust Advisors L.P. ("First Trust"), we realize that we must be mindful of the complexities of the global economy and at the same time address the needs of our customers through the types of investments we bring to market. We are single-minded about providing a range of investment products, including our family of exchange-traded funds ("ETFs"), to help First Trust meet the challenge of maximizing our customers' financial opportunities. Translating investment ideas into products which can deliver performance over the long term while continuing to support our current product line remains a focus for First Trust as we head into the future.

Over the past 12 months, we have added 7 ETFs to our First Trust Exchange-Traded Fund, one or more of which you may have purchased: First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund ("QQXT"), First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund ("QCLN"), First Trust S&P REIT Index Fund ("FRI"), First Trust ISE Chindia Index Fund ("FNI"), First Trust ISE-Revere Natural Gas Index Fund ("FCG"), First Trust ISE Water Index Fund ("FIW") and First Trust Value Line(R) 100 Exchange-Traded Fund ("FVL"), which converted from a closed-end fund in June 2007. We are proud to bring these unique investments to our customers, and are pleased you have chosen one or more of our ETFs for a portion of your investment portfolio. The report you hold will give you detailed information about your investment in the First Trust Exchange-Traded Fund for the 12-month period ended December 31, 2007. I encourage you to read this report and discuss it with your financial advisor. First Trust is pleased that our ETFs are a part of your financial portfolio and we will continue to offer you current information about your investment, as well as new opportunities to the financial marketplace, through your financial advisor. We value our relationship with you and appreciate the opportunity to assist you in achieving your financial goals.

Sincerely,

/s/ James A. Bowen

James A. Bowen
President of First Trust Exchange-Traded Fund

Page 2

--------------------------------------------------------------------------------
MARKET OVERVIEW
--------------------------------------------------------------------------------

 FIRST TRUST EXCHANGE-TRADED FUND
 ANNUAL REPORT
 DECEMBER 31, 2007

[PHOTO OMITTED] ROBERT F. CAREY, CFA
 SENIOR VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
 FIRST TRUST ADVISORS L.P.

 Mr. Carey is responsible for the overall management of
 research and analysis of the First Trust product line.
 Mr. Carey has 21 years of experience as an Equity and
 Fixed-Income Analyst and is a recipient of the
 Chartered Financial Analyst ("CFA") designation. He is
 a graduate of the University of Illinois at
 Champaign-Urbana with a B.S. in Physics. He is also a
 member of the Investment Analysts Society of Chicago
 and the CFA Institute. Mr. Carey has appeared as a
 guest on such programs as Bloomberg TV, CNBC, and WBBM
 Radio, and has been quoted by several publications,
 including The Wall Street Journal, The Wall Street
 Reporter, Bloomberg News Service, and Registered Rep.

U.S. STOCKS AND BONDS

U.S. stocks posted positive returns for the 12-month period ended December 31, 2007 as most major large-cap indices delivered gains in the 5.0% to 11.0% range. Mid-cap stocks outpaced both large- and small-caps, though large-caps did manage to eclipse small-caps, something they have generally struggled to do over the past eight years. Companies continued to deliver better than expected earnings. Sixty-five percent of companies exceeded their earnings estimates over the three quarters through and including the third quarter of 2007, according to SeekingAlpha.com. The percentage of firms topping their estimates since the end of 2001 fluctuated between 59% (third quarter of 2002) and 73% (third quarter of 2006). In addition, with respect to cash holdings, the nonfinancial companies alone in the S&P 500 Index held $609.7 billion in cash and equivalents at the end of December 2007, which is in the vicinity of the all-time high of $640.1 billion, according to Standard & Poor's ("S&P"). This is encouraging news considering that over the past eleven quarters through the third quarter of 2007, the S&P 500 Index companies combined spent $1.12 trillion on stock buybacks; $1.24 trillion on capital expenditures; and $594 billion on stock dividends, according to S&P.

U.S. debt securities, with the exception of municipal bonds, generally also delivered solid returns in 2007. Most of the major taxable investment-grade debt groups returned between 5.0% and 9.0%, according to data from Lehman Brothers. The top-performing group was Treasuries, due in large part, we believe, to the aggressive rate cuts initiated by the Federal Reserve in September and October, 2007. It lowered the Federal funds rate by a combined 75 basis points in these two months. Treasury Bonds, as well as other highquality debt groups, also potentially benefited from a "flight to quality" situation beginning in late July in response to the start of the subprime mortgage meltdown.

FOREIGN STOCKS AND BONDS

The global growth story is not only driving foreign stock and bond valuations higher but commodities as well. Some emerging markets, such as India and China, are growing their economies at three to four times the pace of U.S. growth. Foreign stocks and bonds of developed countries and emerging market equities outperformed U.S. stock and bond averages for the 12-month period ended December 2007. U.S. investors who owned foreign securities over that one-year period saw their total returns enhanced by the 10% decline in the U.S. dollar against a basket of major currencies created by the Federal Reserve. The drop in the dollar accelerated in September-October of 2007 due to the reduction in the Federal funds rate from 5.25% to 4.50%. The rate cuts were viewed by foreign investors as potentially inflationary moving forward. In our opinion, the spike in the price of gold bullion in September-October, a hard asset characterized as an inflation-hedge, supports that claim.

STATE OF THE ECONOMY

Despite many challenges, the U.S. economy has generally remained resilient during this 12-month period, in our opinion. The economy has been bolstered by strength in the following areas: job creation, personal income levels growing at roughly twice the rate of inflation, high productivity and a strong manufacturing sector. Some of the areas of the U.S. economy that have been a drag on growth are as follows: high price of oil, housing slump, subprime mortgage foreclosures and tighter lending standards. In an effort to mitigate these concerns, the Federal Reserve has cut short-term rates to help make capital more readily available. While lower rates will not necessarily help the majority of homeowners with adjustable-rate mortgages resetting in 2008, we believe that lower rates could act as a positive catalyst for the stock market. We believe this is potentially good for the economy since rising stock prices could help offset some of the decline in real estate values for homeowners. The consensus forecast from the Blue Chip Economic Indicators newsletter released in December 2007 calls for 2.1% real Gross Domestic Product growth for the U.S. in the year 2008. The current expansion entered its seventh year in December 2007. The last two expansions lasted 7.7 and 10 years, respectively.

Page 3

FUND PERFORMANCE OVERVIEW

FDM - FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND

The First Trust Dow Jones Select MicroCap Index(SM) Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Dow Jones Select MicroCap Index(SM) (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index measures the performance of selected U.S. micro-capitalization companies chosen from all common stocks traded on the New York Stock Exchange ("NYSE(R)"), the American Stock Exchange, Inc. ("AMEX") and The NASDAQ Stock Market, Inc. ("NASDAQ(R)") that are comparatively liquid and have strong fundamentals relative to the micro-capitalization segment as a whole. The Fund's shares are listed for trading on the AMEX. The first day of secondary market trading in shares of the Fund was 09/30/05.

PERFORMANCE AS OF DECEMBER 31, 2007
 AVERAGE ANNUAL CUMULATIVE
 TOTAL RETURNS TOTAL RETURNS
 12 Months Ended Inception (09/27/05) Inception (09/27/05)
 12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV -6.02% 5.47% 12.78%
Market Price -5.97% 5.55% 12.98%

INDEX PERFORMANCE
Dow Jones Select MicroCap Index(SM) -5.29% 6.27% 14.74%
Russell 2000 Index -1.56% 8.23% 19.57%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. The industrials sector was the biggest contributor to portfolio performance over the period covered by this report, led by Lindsay Corp. Materials stocks turned in the best performance in the portfolio, adding to portfolio returns. The consumer discretionary and financials sectors (with a combined weight of over 30% in the portfolio over the period) hurt performance as they were the two worst-performing sectors over the period.

The top five performing stocks in the Fund over the twelve months ended December 31, 2007, by percentage gain, were Blue Nile, Inc., Lindsay Corp., Genco Shipping & Trading Ltd., Geo Group, Inc. and Perini Corp. The worst-performing stocks, by percentage loss, were Alliance One International, Inc., Skechers USA, Inc., First Cash Financial Services, Inc., Casual Male Retail Group, Inc. and Strum Ruger & Co.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Industrials 21.74%
Consumer Discretionary 16.48
Health Care 13.43
Information Technology 12.98
Financials 12.97
Energy 6.57
Materials 6.30
Consumer Staples 4.99
Telecommunication Services 2.68
Utilities 2.13
Net Other Assets and Liabilities (0.27)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Darling International, Inc. 0.95%
ManTech International Corp., Class A 0.89
Chart Industries, Inc. 0.87
DCP Midstream Partners LP 0.79
CIRCOR International, Inc. 0.79
Lindsay Corp. 0.78
NBT Bancorp, Inc. 0.78
PrivateBancorp, Inc. 0.73
Dynamic Materials Corp. 0.71
Raven Industries, Inc. 0.71
 ---------
 Total 8.00%
 =========


_________________________

Dow Jones and Dow Jones Select MicroCap Index(SM) are trademarks of Dow Jones & Company, Inc. and have been licensed for use. The Fund, based on the Dow Jones Select MicroCap Index(SM), is not sponsored, endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of trading in the Fund.

Page 4

FUND PERFORMANCE OVERVIEW (CONTINUED)

FDM - FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND (CONTINUED)

Growth of a $10,000 Initial Investment
September 27, 2005 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust The Dow Jones
 Dow Jones Select Select MicroCap
 MicroCap Index(SM) Fund Index(SM) Russell 2000 Index
 ----------------------- --------------- ------------------
 9/27/2005 $10,000 $10,000 $10,000
12/31/2005 10,374 10,397 10,254
12/31/2006 12,002 12,115 12,146
12/31/2007 11,279 11,474 11,956

Performance figures assume reinvestment of all dividend distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results.

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the periods indicated.

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 28 3 4 0
9/30/2007 25 7 1 0
6/30/2007 32 1 0 0
3/31/2007 40 1 0 0
12/31/2006 45 0 0 0
9/30/2006 38 6 2 0
6/30/2006 17 1 0 0
3/31/2006 25 1 0 0
12/31/2005* 31 1 3 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 22 2 5 0
9/30/2007 29 1 0 0
6/30/2007 30 0 0 0
3/31/2007 19 1 0 0
12/31/2006 18 0 0 0
9/30/2006 17 0 0 0
6/30/2006 45 0 0 0
3/31/2006 36 0 0 0
12/31/2005* 29 0 0 0

* Trading commenced on September 30, 2005.

Page 5

FUND PERFORMANCE OVERVIEW (CONTINUED)

FDL - FIRST TRUST MORNINGSTAR(R) DIVIDEND LEADERS(SM) INDEX FUND

The First Trust Morningstar(R) Dividend Leaders(SM) Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Morningstar(R) Dividend Leaders(SM) Index (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The objective of the Index is to offer investors a benchmark for dividend portfolios as well as a means to invest in a portfolio of stocks that have a consistent record of growing dividends as well as the ability to sustain them. The Index consists of the top 100 stocks, based on dividend yield, of the securities listed on one of the three major exchanges (the New York Stock Exchange ("NYSE(R)"), the American Stock Exchange, Inc. ("AMEX") or The NASDAQ Stock Market, Inc. ("NASDAQ(R)")) that have been selected through the application of Morningstar, Inc.'s proprietary multi-step screening process. The Index is rebalanced four times annually in March, June, September and December. The Fund's shares are listed for trading on the AMEX. The first day of secondary market trading in shares of the Fund was 03/15/06.

PERFORMANCE AS OF DECEMBER 31, 2007
 AVERAGE ANNUAL CUMULATIVE
 TOTAL RETURNS TOTAL RETURNS
 12 Months Ended Inception (03/09/06) Inception (03/09/06)
 12/31/07 to 12/31/07 to 12/31/07
FUND PERFORMANCE
NAV -10.64% 4.30% 7.93%
Market Price -10.03% 4.66% 8.61%

INDEX PERFORMANCE
Morningstar(R) Dividend Leaders(SM) Index -10.24% 4.71% 8.70%
S&P 500 Index 5.49% 10.26% 19.39%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. Telecommunication services and utilities were the biggest contributors to performance on an absolute basis. AT&T and Verizon Communications produced solid returns in the telecommunications sector, while Dominion Resources was the biggest contributor to portfolio returns in the utilities sector. Financials, the largest sector weighting at a 44.8% average weight over the period, was the worst-performing sector as deteriorating credit market conditions dragged down shares.

The top five performing stocks in the Fund over the twelve months ended December 31, 2007, by percentage gain, were AT&T Inc., Altria Group, Inc., Verizon Communications, Inc., Merck & Co., Inc. and Dominion Resources, Inc. The worst-performing stocks, by percentage loss, were Citigroup, Inc., Washington Mutual, Inc., Bank of America Inc., Wachovia Corp. and National City Corp.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Financials 53.31%
Telecommunication Services 13.21
Utilities 12.54
Health Care 10.11
Consumer Staples 6.78
Materials 2.91
Industrials 0.80
Consumer Discretionary 0.12
Net Other Assets and Liabilities 0.22
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Bank of America Corp. 9.98%
Citigroup, Inc. 9.22
AT&T, Inc. 8.18
Pfizer, Inc. 7.20
Altria Group, Inc. 5.95
Verizon Communications, Inc. 5.03
Wachovia Corp. 4.84
Wells Fargo & Co. 4.17
U.S. Bancorp 3.33
Bristol-Myers Squibb Co. 2.91
 ---------
 Total 60.81%
 =========


_________________________

Morningstar is a service mark of Morningstar, Inc. and has been licensed for use. The First Trust Morningstar(R) Dividend Leaders(SM) Index Fund is not sponsored, endorsed, issued, sold or promoted by Morningstar, Inc., nor does this company make any representation regarding the advisability of investing in the Fund.

Page 6

FUND PERFORMANCE OVERVIEW (CONTINUED)

FDL - FIRST TRUST MORNINGSTAR(R) DIVIDEND LEADERS(SM) INDEX FUND (CONTINUED)

Growth of a $10,000 Initial Investment
March 9, 2006 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust Morningstar(R) Morningstar(R)
 Dividend Leaders(SM) Dividend Leaders
 Index Fund Index(SM) S&P 500 Index
 -------------------------- ---------------- -------------
 3/9/2006 $10,000 $10,000 $10,000
12/31/2006 12,080 12,110 11,317
12/31/2007 10,795 10,870 11,938

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 24 4 5 0
9/30/2007 32 1 0 0
6/30/2007 35 1 0 0
3/31/2007 31 0 0 0
12/31/2006 47 0 0 0
9/30/2006 34 0 0 0
6/30/2006 24 8 3 0
3/31/2006* 11 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 21 9 1 0
9/30/2007 29 1 0 0
6/30/2007 27 0 0 0
3/31/2007 30 0 0 0
12/31/2006 16 0 0 0
9/30/2006 29 0 0 0
6/30/2006 28 0 0 0
3/31/2006* 2 0 0 0

* Trading commenced on March 15, 2006.

Page 7

FUND PERFORMANCE OVERVIEW (CONTINUED)

FPX - FIRST TRUST IPOX-100 INDEX FUND

The First Trust IPOX-100 Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the IPOX-100 U.S. Index (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is a modified value-weighted price index measuring the performance of the top 100 U.S. companies ranked quarterly by market capitalization in the IPOX Global Composite Index. The Index utilizes a 10% capping on all constituents and includes the 100 largest, typically best performing and most liquid initial public offerings ("IPOs") of the U.S. companies in the IPOX Global Composite Index. The IPOX Global Composite Index is reconstituted regularly with IPOs being added to the IPOX Global Composite Index at their seventh trading day upon "going public" and automatically exiting after 1,000 trading days or approximately four years thereafter. The Index is reconstituted quarterly to reflect changes in the stock market values of the IPOX Global Composite Index constituents and IPO activity during the past quarter with potential new companies entering the Index while other companies reach 1,000 days in the Index and automatically drop out. The Fund's shares are listed for trading on the AMEX. The first day of secondary market trading on shares of the Fund was 04/13/06.

PERFORMANCE AS OF DECEMBER 31, 2007
 AVERAGE ANNUAL CUMULATIVE
 TOTAL RETURNS TOTAL RETURNS
 12 Months Ended Inception (04/12/06) Inception (04/12/06)
 12/31/07 to 12/31/07 to 12/31/07

FUND PERFORMANCE
NAV 14.53% 14.97% 27.12%
Market Price 15.08% 15.23% 27.62%

INDEX PERFORMANCE
IPOX-100 U.S. Index 15.15% 15.66% 28.44%
Russell 3000 Index 5.24% 9.28% 16.49%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. Information technology, led by Google, was the biggest contributor to portfolio returns over the period. Industrials, led by solar industry companies First Solar and SunPower, posted the highest sector return and contributed positively to portfolio performance. The financials, consumer staples, consumer discretionary and telecommunication services sectors all posted negative returns in the portfolio over the period, thus hurting portfolio results.

The top five performing stocks in the Fund over the twelve months ended December 31, 2007, by percentage gain, were Google, Inc., First Solar, Inc., MasterCard, Inc., SunPower, Inc. and CF Industries Holdings, Inc. The worst-performing stocks, by percentage loss, were Time Warner Cable, Inc., MetroPCS Communications, Inc., NYSE Euronext, Genworth Financial, Inc. and Discover Financial Services.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Information Technology 28.48%
Consumer Discretionary 16.50
Financials 15.88
Industrials 13.33
Energy 9.77
Health Care 6.89
Materials 4.47
Telecommunication Services 3.07
Consumer Staples 0.92
Utilities 0.87
Net Other Assets and Liabilities (0.18)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Google, Inc., Class A 9.98%
Viacom, Inc., Class B 5.34
MasterCard, Inc., Class A 5.25
Time Warner Cable, Inc., Class A 4.99
NYSE Euronext 4.31
Covidien Ltd. 4.08
First Solar, Inc. 3.86
Tyco Electronics Ltd. 3.42
Western Union Co. 3.38
Spectra Energy Corp. 3.02
 ---------
 Total 47.63%
 =========


_________________________

IPOX is a trademark of IPOX Schuster LLC, IPOX IPO Indexes and Derivatives (patent pending).

Page 8

FUND PERFORMANCE OVERVIEW (CONTINUED)

FPX - FIRST TRUST IPOX-100 INDEX FUND (CONTINUED)

Growth of a $10,000 Initial Investment
April 12, 2006 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust
 IPOX-100 Index Fund IPOX-100 U.S. Index Russell 3000 Index
 ------------------- ------------------- ------------------
 4/12/2006 $10,000 $10,000 $10,000
12/31/2006 11,100 11,154 11,069
12/31/2007 12,713 12,844 11,649

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 19 3 4 0
9/30/2007 30 5 0 1
6/30/2007 19 1 0 0
3/31/2007 28 0 0 0
12/31/2006 25 0 0 0
9/30/2006 2 0 0 0
6/30/2006* 10 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 33 4 1 0
9/30/2007 26 1 0 0
6/30/2007 43 0 0 0
3/31/2007 33 0 0 0
12/31/2006 38 0 0 0
9/30/2006 61 0 0 0
6/30/2006* 45 0 0 0

* Trading commenced on April 13, 2006.

Page 9

FUND PERFORMANCE OVERVIEW (CONTINUED)

QQEW - FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND

The First Trust NASDAQ-100 Equal Weighted Index(SM) Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ-100 Equal Weighted Index(SM) (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is the equal-weighted version of the NASDAQ-100 Index(R) which includes 100 of the largest non-financial securities listed on The NASDAQ Stock Market, Inc. ("NASDAQ(R)") based on market capitalization. The Index contains the same securities as the NASDAQ-100 Index(R) but each of the securities is initially set at a weight of 1.00% of the Index and is rebalanced quarterly. The Fund's shares are listed for trading on the NASDAQ(R). The first day of secondary market trading in shares of the Fund was 04/25/06.

PERFORMANCE AS OF DECEMBER 31, 2007
 AVERAGE ANNUAL CUMULATIVE
 TOTAL RETURNS TOTAL RETURNS
 12 Months Ended Inception (04/19/06) Inception (04/19/06)
 12/31/07 to 12/31/07 to 12/31/07

FUND PERFORMANCE
NAV 9.74% 5.99% 10.40%
Market Price 10.80% 6.52% 11.35%

INDEX PERFORMANCE
NASDAQ-100 Equal Weighted Index(SM) 10.35% 6.56% 11.42%
NASDAQ-100 Index(R) 19.24% 11.99% 21.24%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. Health care stocks posted strong returns in the portfolio over the period, gaining more than the health care sector in the broader market. The telecommunication services and energy sectors both posted negative returns for the period, although minimal weightings in both sectors (3.2% and 0.9% average weights, respectively), limited their impact on overall portfolio performance.

The top five performing stocks in the Fund over the twelve months ended December 31, 2007, by percentage gain, were Intuitive Surgical, Inc., Research In Motion Ltd., Amazon.com, Inc., Apple Computer, Inc. and Millicom International Cellular S.A. The worstperforming stocks, by percentage loss, were Sepracor, Inc., Starbucks Corp., Virgin Media, Inc., Network Appliance, Inc. and Level 3 Communications, Inc.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Information Technology 45.67%
Consumer Discretionary 19.36
Health Care 14.91
Industrials 11.15
Telecommunication Services 4.10
Consumer Staples 2.94
Materials 2.17
Net Other Assets and Liabilities (0.30)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Leap Wireless International, Inc. 1.23%
Research In Motion Ltd. 1.18
Activision, Inc. 1.15
Joy Global, Inc. 1.15
Steel Dynamics, Inc. 1.13
Hologic, Inc. 1.10
Oracle Corp. 1.09
Intuit, Inc. 1.08
Logitech International S.A. 1.07
Apple Computer, Inc. 1.07
 ---------
 Total 11.25%
 =========


_________________________

NASDAQ(R), NASDAQ-100, NASDAQ-100 Index(R), and NASDAQ-100 Equal Weighted Index(SM) are trademarks of The NASDAQ Stock Market, Inc. (which with its affiliates is referred to as the Corporations) and are licensed for use by First Trust Advisors L.P. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.

Page 10

FUND PERFORMANCE OVERVIEW (CONTINUED)

QQEW - FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND (CONTINUED)

Growth of a $10,000 Initial Investment
April 19, 2006 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust NASDAQ-100
 Equal Weighted NASDAQ-100 Equal
 Index(SM) Fund Weighted Index(SM) NASDAQ-100 Index(R)
 ---------------------- -------------------- -------------------
 4/19/2006 $10,000 $10,000 $10,000
12/31/2006 10,060 10,097 10,168
12/31/2007 11,040 11,142 12,124

The Fund's past performance is no guarantee of future results.

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 39 0 3 0
9/30/2007 32 0 0 0
6/30/2007 50 0 0 0
3/31/2007 30 0 0 0
12/31/2006 40 0 1 0
9/30/2006 43 0 0 0
6/30/2006* 22 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 22 0 0 0
9/30/2007 31 0 0 0
6/30/2007 13 0 0 0
3/31/2007 31 0 0 0
12/31/2006 22 0 0 0
9/30/2006 20 0 0 0
6/30/2006* 26 0 0 0

* Trading commenced on April 25, 2006.

Page 11

FUND PERFORMANCE OVERVIEW (CONTINUED)

QTEC - FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND

The First Trust NASDAQ-100-Technology Sector Index(SM) Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ-100 Technology Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is an equal-weighted index based on the securities of the NASDAQ-100 Index(R) that are classified as "technology" according to the Industry Classification Benchmark classification system. The NASDAQ-100 Index(R) includes 100 of the largest domestic and international nonfinancial companies listed on The NASDAQ Stock Market, Inc. ("NASDAQ(R)") based on market capitalization. The Fund's shares are listed for trading on the NASDAQ(R). The first day of secondary market trading in shares of the Fund was 04/25/06.

PERFORMANCE AS OF DECEMBER 31, 2007
 AVERAGE ANNUAL CUMULATIVE
 TOTAL RETURNS TOTAL RETURNS
 12 Months Ended Inception (04/19/06) Inception (04/19/06)
 12/31/07 to 12/31/07 to 12/31/07

FUND PERFORMANCE
NAV 7.66% 4.34% 7.50%
Market Price 7.82% 4.37% 7.55%

INDEX PERFORMANCE
NASDAQ-100 Technology Sector Index(SM) 8.25% 4.90% 8.47%
S&P 500 Information Technology Index 16.30% 11.17% 19.74%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. Research in Motion was the biggest contributor to portfolio performance over the period as sales of the firm's Blackberry devices surpassed expectations. Apple also posted strong performance due to strong Mac sales and the launch of the much anticipated iPhone. Network Appliance was the biggest drag on portfolio performance as sales and profits from the company's data storage devices trailed estimates.

The top five performing stocks in the Fund over the twelve months ended December 31, 2007, by percentage gain, were Research In Motion Ltd., Apple Computer, Inc., Juniper Networks, Inc., VeriSign, Inc. and Google, Inc. The worst-performing stocks, by percentage loss, were Network Appliance, Inc., L.M. Ericsson Telephone Co., Tellabs, Inc., Akamai Technologies, Inc. and Marvell Technology, Inc.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Information Technology 100.35%
Net Other Assets and Liabilities (0.35)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Research In Motion Ltd. 3.00%
Oracle Corp. 2.77
Intuit, Inc. 2.76
Logitech International S.A. 2.73
Apple Computer, Inc. 2.72
Microsoft Corp. 2.70
Microchip Technology, Inc. 2.69
Infosys Technologies Ltd. ADR 2.68
Baidu.com ADR 2.67
Linear Technology Corp. 2.65
 ---------
 Total 27.37%
 =========


_________________________

NASDAQ(R), NASDAQ-100, NASDAQ-100 Index(R), and NASDAQ-100 Technology Sector Index(SM) are trademarks of The NASDAQ Stock Market, Inc. (which with its affiliates is referred to as the Corporations) and are licensed for use by First Trust Advisors L.P. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.

Page 12

FUND PERFORMANCE OVERVIEW (CONTINUED)

QTEC - FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND (CONTINUED)

Growth of a $10,000 Initial Investment
April 19, 2006 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust NASDAQ-100 S&P 500
 NASDAQ-100-Technology Technology Information
 Sector Index(SM) Fund Sector Index(SM) Technology Index
 --------------------- ---------------- -----------------
 4/19/2006 $10,000 $10,000 $10,000
12/31/2006 9,985 10,020 10,296
12/31/2007 10,750 10,847 11,974

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 38 0 0 0
9/30/2007 39 0 0 0
6/30/2007 47 0 0 0
3/31/2007 29 0 0 0
12/31/2006 38 1 0 0
9/30/2006 33 0 1 1
6/30/2006* 32 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 26 0 0 0
9/30/2007 24 0 0 0
6/30/2007 16 0 0 0
3/31/2007 32 0 0 0
12/31/2006 24 0 0 0
9/30/2006 28 0 0 0
6/30/2006* 16 0 0 0

* Trading commenced on April 25, 2006.

Page 13

FUND PERFORMANCE OVERVIEW (CONTINUED)

FBT - FIRST TRUST AMEX(R) BIOTECHNOLOGY INDEX FUND

The First Trust Amex(R) Biotechnology Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Amex(R) Biotechnology Index(SM) (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is an equal dollar-weighted index designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. Such processes include, but are not limited to, recombinant DNA technology, molecular biology, genetic engineering, monoclonal antibody-based technology, lipid/liposome technology, and genomics. This Index is rebalanced quarterly based on closing prices on the third Friday in January, April, July and October to ensure that each component stock continues to represent approximately equal weight in the Index. The Fund's shares are listed for trading on the AMEX. The first day of secondary market trading in shares of the Fund was 06/23/06.

PERFORMANCE AS OF DECEMBER 31, 2007
 AVERAGE ANNUAL CUMULATIVE
 TOTAL RETURNS TOTAL RETURNS
 12 Months Ended Inception (06/19/06) Inception (06/19/06)
 12/31/07 to 12/31/07 to 12/31/07

FUND PERFORMANCE
NAV 3.65% 13.87% 22.05%
Market Price 3.99% 14.20% 22.60%

INDEX PERFORMANCE
Amex(R) Biotechnology Index(SM) 4.28% 14.57% 23.20%
NASDAQ(R) Biotechnology Index 4.64% 10.34% 16.30%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. Medimmune was the biggest contributor to the portfolio return over the twelve months ended December 31, 2007, as it was acquired by AstraZeneca at a 47% announced premium. ImClone also posted strong returns aided by positive data on Erbitux, its biggest drug. InterMune had the most negative impact on returns after the company announced it would stop advanced clinical trials for its pulmonary fibrosis drug.

The top three performing stocks in the Fund over the period covered by this report, by percentage gain, were Medimmune, ImClone Systems, Inc. and Invitrogen Corp. The worst-performing stocks, by percentage loss, were InterMune, Inc., Nektar Therapeutics and Amgen, Inc.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Health Care 99.43%
Net Other Assets and Liabilities 0.57
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Millennium Pharmaceuticals, Inc. 6.94%
OSI Pharmaceuticals, Inc. 6.94
Invitrogen Corp. 5.92
Human Genome Sciences, Inc. 5.92
Gilead Sciences, Inc. 5.74
Genzyme Corp. 5.45
Applera Corp. - Celera Group 5.44
Nektar Therapeutics 5.38
Millipore Corp. 4.92
Cephalon, Inc. 4.90
 ---------
 Total 57.55%
 =========


_________________________

The Amex(R) Biotechnology Index(SM) is a trademark of the American Stock Exchange LLC and is licensed for use by First Trust Advisors L.P. The Fund is not sponsored or endorsed by the American Stock Exchange LLC. American Stock Exchange LLC makes no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in the Fund or the ability of the Fund to track the performance of the various sectors represented in the stock market. American Stock Exchange LLC has no obligation to take the needs of the owners of the Fund into consideration in determining, composing or calculating the Index. American Stock Exchange LLC is not responsible for and has not participated in any determination or calculation made with respect to issuance or redemption of the Fund.

Page 14

FUND PERFORMANCE OVERVIEW (CONTINUED)

FBT - FIRST TRUST AMEX(R) BIOTECHNOLOGY INDEX FUND (CONTINUED)

Growth of a $10,000 Initial Investment
June 19, 2006 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust Amex(R) Amex(R)
 Biotechnology Biotechnology NASDAQ(R)
 Index Fund Index(SM) Biotechnology Index
 ------------------- ------------- --------------------
 6/19/2006 $10,000 $10,000 $10,000
12/31/2006 11,775 11,815 11,114
12/31/2007 12,205 12,321 11,630

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 34 5 1 0
9/30/2007 47 1 0 0
6/30/2007 44 1 0 0
3/31/2007 37 1 0 0
12/31/2006 38 0 0 0
9/30/2006 20 0 0 0
6/30/2006* 6 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 21 2 1 0
9/30/2007 15 0 0 0
6/30/2007 18 0 0 0
3/31/2007 22 1 0 0
12/31/2006 25 0 0 0
9/30/2006 43 0 0 0
6/30/2006* 0 0 0 0

* Trading commenced on June 23, 2006.

Page 15

FUND PERFORMANCE OVERVIEW (CONTINUED)

FDN - FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND

The First Trust Dow Jones Internet Index(SM) Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Dow Jones Internet Composite Index(SM) (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index represents companies that generate the majority of their revenues via the Internet. The Index was designed and is maintained according to a set of rules that were devised with the goal of providing clear and accurate views of the growing Internet market segment. The Index aims to consistently represent 80% of the float-adjusted Internet equity universe. The Index contains two sub-indexes, the Dow Jones Internet Commerce Index and the Dow Jones Internet Services Index. For its stock to be eligible for the "universe," a company must generate at least 50% of annual sales/revenues from the Internet, and be currently included in the Dow Jones U.S. Index. The Fund's shares are listed for trading on the AMEX. The first day of secondary market trading on shares of the Fund was 06/23/06.

PERFORMANCE AS OF DECEMBER 31, 2007
 AVERAGE ANNUAL CUMULATIVE
 TOTAL RETURNS TOTAL RETURNS
 12 Months Ended Inception (06/19/06) Inception (06/19/06)
 12/31/07 to 12/31/07 to 12/31/07

FUND PERFORMANCE
NAV 11.17% 15.93% 25.45%
Market Price 11.55% 16.26% 26.00%

INDEX PERFORMANCE
Dow Jones Internet Composite Index(SM) 11.81% 16.57% 26.52%
S&P 500 Index 5.49% 13.77% 21.89%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. Amazon.com was the biggest contributor to the portfolio return over the period as the firm benefited from strong gains in sales and profits. Google was the second largest contributor to returns as consistent growth and continued product expansion were the key factors in the company's positive performance. E*TRADE Financial was the biggest drag on portfolio performance as a deteriorating mortgage portfolio and tough credit market conditions weighed on its shares.

The top three performing stocks in the Fund over the twelve months ended December 31, 2007, by percentage gain, were Amazon.com, Inc., Google, Inc. and VeriSign, Inc. The worst-performing stocks, by percentage loss, were E*TRADE Financial Corp., Akamai Technologies, Inc. and IAC/InterActiveCorp.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Information Technology 67.96%
Consumer Discretionary 18.92
Financials 5.67
Industrials 3.31
Health Care 3.12
Money Market Funds 0.30
Net Other Assets and Liabilities 0.72
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Amazon.com, Inc. 10.35%
eBay, Inc. 10.07
Google, Inc., Class A 9.96
Yahoo!, Inc. 9.80
VeriSign, Inc. 7.40
BEA Systems, Inc. 4.92
Akamai Technologies, Inc. 4.86
IAC/InterActiveCorp. 4.73
TD Ameritrade Holding Corp. 4.32
Priceline.com,Inc. 3.51
 ---------
 Total 69.92%
 =========


_________________________

Dow Jones and Dow Jones Internet Composite Index(SM) are trademarks of Dow Jones & Company, Inc. and have been licensed for use. The Fund, based on the Dow Jones Internet Composite Index(SM), is not sponsored, endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of trading in the Fund.

Page 16

FUND PERFORMANCE OVERVIEW (CONTINUED)

FDN - FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND (CONTINUED)

Growth of a $10,000 Initial Investment
June 19, 2006 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust
 Dow Jones Internet Dow Jones Internet
 Index(SM) Fund Composite Index(SM) S&P 500 Index
 ------------------ ------------------- -------------
 6/19/2006 $10,000 $10,000 $10,000
12/31/2006 11,285 11,316 11,554
12/31/2007 12,546 12,652 12,188

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 20 4 3 0
9/30/2007 39 1 0 0
6/30/2007 32 1 0 0
3/31/2007 39 1 3 0
12/31/2006 33 0 0 0
9/30/2006 33 0 0 0
6/30/2006* 5 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 30 5 2 0
9/30/2007 23 0 0 0
6/30/2007 30 0 0 0
3/31/2007 18 0 0 0
12/31/2006 30 0 0 0
9/30/2006 30 0 0 0
6/30/2006* 1 0 0 0

* Trading commenced on June 23, 2006.

Page 17

FUND PERFORMANCE OVERVIEW (CONTINUED)

FDV - FIRST TRUST DB STRATEGIC VALUE INDEX FUND

The First Trust DB Strategic Value Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Deutsche Bank CROCI(R) US+ Index(TM) (the "Index"). The objective of the Index is to identify companies that may be undervalued based upon their "economic" price/earnings ratios. The Index is an equal dollar-weighted index which is intended to reflect the total return performance of 40 stocks with the lowest CROCI(R) Economic Price Earnings Ratios determined by taking the 251 stocks with the highest market capitalization in the S&P 500(R) Index and then excluding any stocks issued by financial companies. The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Fund's shares are listed for trading on the AMEX. The first day of secondary market trading in shares of the Fund was 07/11/06.

PERFORMANCE AS OF DECEMBER 31, 2007
 AVERAGE ANNUAL CUMULATIVE
 TOTAL RETURNS TOTAL RETURNS
 12 Months Ended Inception (07/06/06) Inception (07/06/06)
 12/31/07 to 12/31/07 to 12/31/07

FUND PERFORMANCE
NAV 10.26% 14.37% 22.10%
Market Price 10.61% 14.71% 22.66%

INDEX PERFORMANCE
Deutsche Bank CROCI(R) US+ Index(TM) 10.85% 14.76% 22.73%
S&P 500 Value Index 2.03% 10.02% 15.27%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. The energy sector was the biggest contributor to portfolio return of the Fund over the period covered by this report. The sector posted strong returns as sustained global economic activity led to rising crude oil prices throughout the year. Industrials also posted strong returns over the period. Consumer discretionary stocks were the biggest drag on portfolio performance as concerns about the strength of consumer spending weighed on shares in the sector over the second half of the year. Telecommunication services was the only other sector to post a negative return for the period.

The top five performing stocks in the Fund over the twelve months ended December 31, 2007, by percentage gain, were Apache Corp., Occidental Petroleum Corp., Biogen Idec, Inc., EOG Resources, Inc. and Hess Corp. The worst-performing stocks, by percentage loss, were Amgen, Inc., Home Depot, Inc., Sprint Nextel, Inc., Harley-Davidson, Inc. and Lowe's Cos.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Consumer Discretionary 24.58%
Energy 24.24
Health Care 19.41
Industrials 12.20
Information Technology 10.04
Materials 4.90
Consumer Staples 2.50
Telecommunication Services 2.14
Net Other Assets and Liabilities (0.01)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Apache Corp. 2.77%
Anadarko Petroleum Corp. 2.76
Occidental Petroleum Corp. 2.74
ConocoPhillips 2.73
Noble Corp. 2.70
Marathon Oil Corp. 2.68
Texas Instruments, Inc. 2.67
Exxon Mobil Corp. 2.64
Chevron Corp. 2.63
CBS Corp., Class B 2.59
 ---------
 Total 26.91%
 =========


_________________________

"Deutsche Bank" and "Deutsche Bank CROCI(R) US+ Index(TM)" are service marks of Deutsche Bank AG ("Deutsche Bank"). Deutsche Bank has no relationship to First Trust or the Fund, other than the licensing of the Index and its service marks for use in connection with the Fund.

Page 18

FUND PERFORMANCE OVERVIEW (CONTINUED)

FDV - FIRST TRUST DB STRATEGIC VALUE INDEX FUND (CONTINUED)

Growth of a $10,000 Initial Investment
July 6, 2006 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust The Deutsche
 DB Strategic Bank CROCI(R)
 Value Index Fund US+ Index(TM) S&P 500 Value Index
 ---------------- ------------- -------------------
 7/6/2006 $10,000 $10,000 $10,000
12/31/2006 11,074 11,072 11,298
12/31/2007 12,210 12,273 11,527

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 23 5 3 0
9/30/2007 32 2 1 0
6/30/2007 36 4 0 0
3/31/2007 30 4 0 0
12/31/2006 30 1 0 0
9/30/2006* 33 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 30 3 0 0
9/30/2007 28 0 0 0
6/30/2007 20 2 0 1
3/31/2007 22 3 2 0
12/31/2006 32 0 0 0
9/30/2006* 25 0 0 0

* Trading commenced on July 11, 2006.

Page 19

FUND PERFORMANCE OVERVIEW (CONTINUED)

FVI - FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND

The First Trust Value Line(R) Equity Allocation Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Value Line(R) Equity Allocation Index (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is designed to objectively identify and select those stocks from the 1,700-stock Value Line(R) universe across market capitalizations and investment styles for growth and value that appear to have the greatest potential for capital appreciation. The Index is rebalanced on a semi-annual basis on the fourth business day of the week containing the third Friday of February and August. The Fund's shares are listed for trading on the AMEX. The first day of secondary market trading in shares of the Fund was 12/07/06.

PERFORMANCE AS OF DECEMBER 31, 2007
 AVERAGE ANNUAL CUMULATIVE
 TOTAL RETURNS TOTAL RETURNS
 12 Months Ended Inception (12/05/06) Inception (12/05/06)
 12/31/07 to 12/31/07 to 12/31/07

FUND PERFORMANCE
NAV 4.65% 3.26% 3.50%
Market Price 4.85% 3.59% 3.85%

INDEX PERFORMANCE
Value Line(R) Equity Allocation Index 5.07% 3.71% 3.98%
Russell 3000 Index 5.24% 4.96% 5.33%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. Energy and materials were the best performing sectors and biggest contributors to portfolio performance. Both sectors benefited from sustained global economic growth over the period, which generally pushed up commodity prices worldwide. The financials sector was the worst performing sector in the portfolio as the fallout from deteriorating credit markets weighed on shares of companies in this sector. Consumer discretionary stocks also held back performance as concerns about slowing consumer spending hurt stock performance especially in the second half of the year.

The top five performing stocks in the Fund over the twelve months ended December 31, 2007, by percentage gain, were Research In Motion Ltd., ALCAN, Inc., Nokia Corp., Diamond Offshore Drilling, Inc. and Southern Copper Corp. The worst-performing stocks, by percentage loss, were Moody's Corp., Ambac Financial Group, Inc., Bear Stearns Cos., XL Capital Ltd. and Qwest Communications International, Inc.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Industrials 19.54%
Energy 18.91
Financials 12.65
Consumer Discretionary 12.35
Information Technology 10.63
Utilities 8.79
Materials 7.53
Consumer Staples 4.43
Health Care 3.42
Telecommunication Services 2.13
Net Other Assets and Liabilities (0.38)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Research In Motion Ltd. 1.90%
Diamond Offshore Drilling, Inc. 1.70
Transocean, Inc. 1.54
Berkshire Hathaway, Inc., Class B 1.50
CNH Global NV 1.50
Nokia Oyj ADR 1.48
Imperial Oil Ltd. 1.47
Apollo Group, Inc., Class A 1.41
British American Tobacco PLC ADR 1.39
Marathon Oil Corp. 1.38
 ---------
 Total 15.27%
 =========


_________________________

"Value Line(R)" and "Value Line(R) Equity Allocation Index" are trademarks of Value Line(R), Inc. and have been licensed for use for certain purposes by First Trust on behalf of the Fund. The Fund, based on the Value Line(R) Equity Allocation Index, is not sponsored, endorsed, sold, or promoted by Value Line(R), Inc., and Value Line(R) makes no representation regarding the advisability of investing in the Fund.

Page 20

FUND PERFORMANCE OVERVIEW (CONTINUED)

FVI - FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND (CONTINUED)

Growth of a $10,000 Initial Investment
December 5, 2006 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust
 Value Line(R) Equity Value Line(R)
 Allocation Equity
 Index Fund Allocation Index Russell 3000 Index
 -------------------- ---------------- ------------------
 12/5/2006 $10,000 $10,000 $10,000
12/31/2006 9,890 9,897 10,008
12/31/2007 10,350 10,399 10,532

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 21 4 2 0
9/30/2007 19 0 0 0
6/30/2007 20 1 0 0
3/31/2007 20 1 0 0
12/31/2006* 7 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 32 4 1 0
9/30/2007 44 0 0 0
6/30/2007 42 0 0 0
3/31/2007 39 1 0 0
12/31/2006* 9 0 0 0

* Trading commenced on December 7, 2006.

Page 21

FUND PERFORMANCE OVERVIEW (CONTINUED)

FVD - FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND

The First Trust Value Line(R) Dividend Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Value Line(R) Dividend Index (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is designed to objectively identify and select those stocks from the universe of stocks of which Value Line, Inc.(R) gives a Safety(TM) Ranking of #1 or #2 in the Value Line(R) Safety(TM) Ranking System and have the potential to pay above-average dividend and capital appreciation. The Index is rebalanced on a monthly basis. The Fund's shares are listed for trading on the AMEX.

PERFORMANCE AS OF DECEMBER 31, 2007
 AVERAGE ANNUAL CUMULATIVE
 TOTAL RETURNS TOTAL RETURNS
 12 Months Ended Inception (08/19/03) Inception (08/19/03)
 12/31/07 to 12/31/07 to 12/31/07

FUND PERFORMANCE
NAV -3.42% 10.70% 55.85%
Market Price -3.05% 10.78% 56.35%

INDEX PERFORMANCE
Value Line(R) Dividend Index -2.68% N.A. N.A.
S&P 500 Index 5.49% 11.14% 58.66%

On December 15, 2006, the Fund acquired the assets and adopted the financial and performance history of First Trust Value Line(R) Dividend Fund (the "Predecessor FVD Fund," a closed-end fund), which had an inception date of August 19, 2003. The inception date total returns at NAV include the sales load of $0.675 per share on the initial offering. The investment goals, strategies and policies of the Fund are substantially similar to those of the Predecessor FVD Fund. The inception date of the Index was July 3, 2006. Returns for the Index are only disclosed for those periods in which the Index was in existence for the entire period. The cumulative total returns for the period from the reorganization date (12/15/06) through (12/31/07) were -3.67% and -2.88% at NAV and market price, respectively. That compares to an Index return of -2.89% for that same period.

Prior to December 15, 2006, the price used to calculate market return was the AMEX closing market price of the Predecessor FVD Fund. NAV and market returns assume that all dividend distributions have been reinvested in the Fund at NAV and Market Price, respectively. Prior to December 15, 2006, NAV and market returns assumed that all dividend distributions were reinvested at prices obtained by the Dividend Reinvestment Plan of the Predecessor FVD Fund.

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. The utilities and consumer staples sectors were the biggest contributors to portfolio performance over the period on an absolute basis. The energy sector also performed well; however, a small share weight (3.4% average weight over the period) limited their impact on portfolio performance. The financials sector was the biggest drag on the performance as deteriorating credit market conditions weighed on shares of companies in this sector. The sector had the largest weight in the portfolio (33.1% average weight over the period) and also turned in the worst performance. Consumer discretionary stocks also turned in performance that was behind the overall market generally.

The top five performing stocks in the Fund over the twelve months ended December 31, 2007, by percentage gain, were PPL Corp., Constellation Energy Group, Inc., Unilever PLC, Mercantile Bankshares Corporation and ConocoPhillips. The worst-performing stocks, by percentage loss, were McClatchy Co., National City Corp., First Horizon National Corp., Freddie Mac and Zions Bancorp.

"Value Line(R)" and "Value Line(R) Dividend Index" are trademarks of Value Line(R), Inc. and have been licensed for use for certain purposes by First Trust on behalf of the Fund. The Fund, based on the Value Line(R) Dividend Index, is not sponsored, endorsed, sold, or promoted by Value Line(R), Inc., and Value Line(R) makes no representation regarding the advisability of investing in the Fund.

Page 22

FUND PERFORMANCE OVERVIEW (CONTINUED)

FVD - FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (CONTINUED)

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Financials 33.20%
Utilities 22.07
Consumer Staples 12.10
Industrials 8.86
Consumer Discretionary 7.73
Health Care 4.93
Materials 3.88
Energy 3.39
Telecommunication Services 2.23
Information Technology 1.63
Net Other Assets and Liabilities (0.02)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Bemis Co., Inc. 0.58%
Freddie Mac 0.58
Portland General Electric Co. 0.58
Teleflex, Inc. 0.58
AGL Resources, Inc. 0.57
Avery Dennison Corp. 0.57
Enbridge, Inc. 0.57
Health Care Property Investors, Inc. 0.57
Total SA ADR 0.57
TransCanada Corp. 0.57
 ---------
 Total 5.74%
 =========

Growth of a $10,000 Initial Investment August 19, 2003 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust Value Line(R)
 Dividend Index Fund S&P 500 Index
 ------------------------- -------------
 8/19/2003 $10,000 $10,000
12/31/2003 10,612 11,166
12/31/2004 12,605 12,381
12/31/2005 13,436 12,989
12/31/2006 16,137 15,040
12/31/2007 15,586 15,865

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 25 5 3 0
9/30/2007 15 0 0 0
6/30/2007 11 1 0 0
3/31/2007 5 0 0 0
12/31/2006* 0 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 23 7 1 0
9/30/2007 46 2 0 0
6/30/2007 51 0 0 0
3/31/2007 56 0 0 0
12/31/2006* 7 1 1 0

* Trading commenced on December 18, 2006.

Page 23

FUND PERFORMANCE OVERVIEW (CONTINUED)

QQXT - FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND

The First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ-100 Ex-Tech Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index contains securities of the NASDAQ-100 Index(R) that are not classified as "technology" according to the Industry Classification Benchmark (ICB) classification system and, as a result, is a subset of the NASDAQ-100 Index(R). The NASDAQ-100 Index(R) includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market, Inc. ("NASDAQ(R)") based on market capitalization. The Index is equally-weighted and is rebalanced four times annually in March, June, September and December. The Fund's shares are listed for trading on the NASDAQ(R). The first day of secondary market trading in shares of the Fund was 02/15/07.

PERFORMANCE AS OF DECEMBER 31, 2007

CUMULATIVE
TOTAL RETURNS

 Inception (02/08/07)
 to 12/31/07

FUND PERFORMANCE
NAV 5.95%
Market Price 6.00%

INDEX PERFORMANCE
NASDAQ-100 Ex-Tech Sector Index(SM) 6.53%
Russell 1000 Index 2.84%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. Health care stocks were the biggest contributors to portfolio performance over the period since inception (02/08/07). In addition to being a large weight in the portfolio (24.9% average weight over the period), the portfolio's holdings in the health care sector outperformed the health care sector in the broader market. Materials stocks posted the biggest gains over the period since inception; however, a small weight (1.8% average weight over the period) limited their impact on overall portfolio performance. The technology sector was the second biggest contributor to portfolio performance. The telecommunications services sector was the biggest drag on performance as the sector posted double digit negative returns over the period.

The top five performing stocks in the Fund since inception (02/8/07), by percentage gain, were Intuitive Surgical, Inc., Amazon.com, Inc., Medimmune, Garmin Ltd. and Express Scripts. The worst-performing stocks, by percentage loss, were Sepracor, Inc., Level 3 Communications, Inc., Monster Worldwide, Inc., Sears Holdings Corp. and Virgin Media, Inc.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR (1) % OF NET ASSETS

Consumer Discretionary 31.82%
Health Care 24.51
Industrials 18.34
Information Technology 10.23
Telecommunication Services 6.73
Consumer Staples 4.83
Materials 3.56
Money Market 2.53
Net Other Assets and Liabilities (2.55)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Leap Wireless International, Inc. 2.03%
Joy Global, Inc. 1.89
Activision, Inc. 1.88
Steel Dynamics, Inc. 1.86
Hologic, Inc. 1.81
Electronic Arts, Inc. 1.75
Patterson Cos., Inc. 1.75
Focus Media Holding Ltd. ADR 1.73
C.H. Robinson Worldwide, Inc. 1.73
Teva Pharmaceutical Industries Ltd. ADR 1.73
 ---------
 Total 18.16%
 =========

(1) The above sector allocation is based on Standard & Poor's Global Industry Classification Standard (GICS), and is different than the industry sector classification system used by the Index to select securities, which is the Industry Classification Benchmark (ICB) system, the joint classification system of Dow Jones Indexes and FTSE Group.

NASDAQ, NASDAQ-100, NASDAQ-100 Index(R), and NASDAQ-100 Ex-Tech Sector Index(SM) are trademarks of the NASDAQ Stock Market, Inc. (which with its affiliates is referred to as the Corporations) and are licensed for use by First Trust Advisors L.P. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.

Page 24

FUND PERFORMANCE OVERVIEW (CONTINUED)

QQXT - FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND (CONTINUED)

Growth of a $10,000 Initial Investment
February 8, 2007 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust
 NASDAQ-100 NASDAQ-100
 Ex-Technology Ex-Tech
 Sector Index(SM) Fund Sector Index(SM) Russell 1000 Index
 --------------------- ---------------- ------------------
02/08/2007 $10,000 $10,000 $10,000
12/31/2007 10,595 10,653 10,284

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 28 0 0 3
9/30/2007 31 0 0 0
6/30/2007 46 0 0 0
3/31/2007* 5 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 29 0 1 3
9/30/2007 30 1 1 0
6/30/2007 17 0 0 0
3/31/2007* 27 0 0 0

* Trading commenced on February 15, 2007.

Page 25

FUND PERFORMANCE OVERVIEW (CONTINUED)

QCLN - FIRST TRUST NASDAQ(R) CLEAN EDGE(R) U.S. LIQUID SERIES INDEX FUND

The First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. All component securities of the Index are included in the Clean Edge(R) Index, an equity index designed to track the performance of clean energy companies that are publicly traded in the United States and includes companies engaged in manufacturing, development, distribution and installation of emerging clean-energy technologies including, but not limited to, solar photovoltaics, biofuels and advanced batteries. The Index is a modified market capitalization weighted index and under the Index's weighting methodology, in contrast to the Clean Edge(R) Index, larger companies receive a larger Index weighting. The Index weighting methodology also includes caps to prevent high concentrations among larger alternative energy stocks. The Index is reconstituted semi-annually in March and September and rebalanced quarterly. The Fund's shares are listed for trading on the NASDAQ(R). The first day of secondary market trading in shares of the Fund was 02/14/07.

PERFORMANCE AS OF DECEMBER 31, 2007

CUMULATIVE
TOTAL RETURNS

 Inception (02/08/07)
 to 12/31/07

FUND PERFORMANCE
NAV 54.30%
Market Price 54.30%

INDEX PERFORMANCE
NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index 55.22%
Russell 2000 Index -5.10%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. The portfolio produced strong gains over the period since inception (02/08/07) as rising global energy prices and demand for cleaner fuels helped to push shares higher. Growth in the solar industry powered portfolio returns as three of the four top performers were solar focused companies (First Solar, SunPower, and Suntech). Oversupply and rising corn prices pressured shares of companies in the ethanol industry. Pacific Ethanol and VeraSun were among the biggest drags on performance over the period since inception.

The top five performing stocks in the Fund since inception, by percentage gain, were First Solar, Inc., SunPower Corp., MEMC Electronic Materials, Inc., Suntech Power Holdings Co. Ltd. and GrafTech International Ltd. The worst-performing stocks, by percentage loss, were International Rectifier Corp., Power-One, Inc., Pacific Ethanol, Inc., VeraSun Energy Corp. and LDK Solar Co. Ltd.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Information Technology 44.82%
Industrials 43.04
Energy 4.78
Utilities 2.83
Materials 2.17
Health Care 1.22
Consumer Discretionary 0.75
Consumer Staples 0.19
Net Other Assets and Liabilities 0.20
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

First Solar, Inc. 8.45%
Suntech Power Holdings Co. Ltd. ADR 8.02
MEMC Electronic Materials, Inc. 7.94
Linear Technology Corp. 7.66
SunPower Corp., Class A 6.35
Itron, Inc. 3.64
ON Semiconductor Corp. 3.22
International Rectifier Corp. 3.06
Cree, Inc. 2.91
Hexcel Corp. 2.88
 ---------
 Total 54.13%
 =========


_________________________

NASDAQ(R) and Clean Edge(R) are the registered trademarks (the "Marks") of The NASDAQ Stock Market, Inc. ("NASDAQ(R)") and Clean Edge, Inc. ("Clean Edge(R)") respectively. NASDAQ(R) and Clean Edge(R) are, collectively with their affiliates, the "Corporations." The Marks are licensed for use by First Trust Advisors L.P. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. The Fund should not be construed in any way as investment advice by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.

Page 26

FUND PERFORMANCE OVERVIEW (CONTINUED)

QCLN - FIRST TRUST NASDAQ(R) CLEAN EDGE(R) U.S. LIQUID SERIES INDEX FUND (CONTINUED)

Growth of a $10,000 Initial Investment
February 8, 2007 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust NASDAQ(R)
 NASDAQ(R) Clean Clean Edge(R)
 Edge(R) U.S. Liquid U.S. Liquid
 Series Index Fund Series Index Russell 2000 Index
 --------------------- ---------------- ------------------
02/08/2007 $10,000 $10,000 $10,000
12/31/2007 15,430 15,522 9,490

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 16 0 4 1
9/30/2007 11 0 0 1
6/30/2007 8 0 0 1
3/31/2007* 4 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 43 0 0 0
9/30/2007 51 0 0 0
6/30/2007 54 0 0 0
3/31/2007* 28 0 0 0

* Trading commenced on February 14, 2007.

Page 27

FUND PERFORMANCE OVERVIEW (CONTINUED)

FRI - FIRST TRUST S&P REIT INDEX FUND

The First Trust S&P REIT Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the S&P REIT Composite Index (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index measures the securitized U.S. real estate investment trust ("REIT") market and is comprised of 100 companies and covers approximately 89% of the U.S. REIT market (based on capitalization) and maintains a constituency that reflects the composition of the overall REIT market. The Index contains securities selected for market representation according to geography and property type. All securities in the Index satisfy the Index's liquidity, price, and market capitalization requirements. The Standard & Poor's Index Committee, a team of Standard & Poor's economists and index analysts, maintains the Index. The S&P Index Committee makes constituent changes on an as-needed basis. Share adjustments that exceed 5% are made at the time of the change. Share adjustments of less than 5% are made on a quarterly basis. The Fund's shares are listed for trading on the AMEX. The first day of secondary market trading in shares of the Fund was 05/10/07.

PERFORMANCE AS OF DECEMBER 31, 2007

CUMULATIVE
TOTAL RETURNS

 Inception (05/08/07)
 to 12/31/07

FUND PERFORMANCE
NAV -19.08%
Market Price -19.22%

INDEX PERFORMANCE
S&P REIT Composite Index -19.04%
Russell 3000 Index -1.89%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. REIT shares were under pressure for most of the period since the Fund's inception (05/08/07). Industrial REITs had the best relative performance over the period as growth in rents and global trade benefited that segment of the REIT market. Mortgage REITs, hurt by deteriorating credit market conditions, were the worst performing sub-industry in the portfolio.

The top five performing stocks in the Fund since inception, by percentage gain, were Archstone-Smith Trust, Plum Creek Timber Company, Inc., HCP, Inc., Rayonier, Inc. REIT and Equity Inns. The worst-performing stocks, by percentage loss, were General Growth Properties, Inc., Simon Property Group, Vornado Realty Trust, Host Hotels & Resorts, Inc. and Developers Diversified Realty Corp.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Financials 99.26%
Money Market Funds 8.44
Net Other Assets and Liabilities (7.70)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Simon Property Group, Inc. 7.14%
ProLogis 6.01
J.P. Morgan Institutional Treasury
 Money Market Fund 5.27
Vornado Realty Trust 4.34
Boston Properties, Inc. 4.04
General Growth Properties, Inc. 3.70
Equity Residential 3.64
Kimco Realty Corp. 3.39
Public Storage 3.37
Host Hotels & Resorts, Inc. 3.28
 ---------
 Total 44.18%
 =========


_________________________

Standard & Poor's(R), S&P(R) and S&P REIT Composite Index are registered trademarks of Standard & Poor's, a division of The McGraw-Hill Companies, Inc. and have been licensed for use by First Trust Advisors L.P. The Fund is not sponsored, endorsed, sold or promoted by S&P and S&P makes no representation, warranty or condition regarding the advisability of investing in the Fund.

Page 28

FUND PERFORMANCE OVERVIEW (CONTINUED)

FRI - FIRST TRUST S&P REIT INDEX FUND (CONTINUED)

Growth of a $10,000 Initial Investment
May 8, 2007 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust S&P REIT
 S&P REIT Composite
 Index Fund Index Russell 3000 Index
 --------------------- ---------------- ------------------
05/08/2007 $10,000 $10,000 $10,000
12/31/2007 8,092 8,096 9,811

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 13 10 1 1
9/30/2007 25 1 3 0
6/30/2007* 8 2 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 28 8 3 0
9/30/2007 31 1 2 0
6/30/2007* 26 0 0 0


* Trading commenced on May 10, 2007.

Page 29

FUND PERFORMANCE OVERVIEW (CONTINUED)

FIW - FIRST TRUST ISE WATER INDEX FUND

The First Trust ISE Water Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE Water Index(TM) (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is a modified market capitalization weighted index comprised of 36 stocks that derive a substantial portion of their revenues from the potable and wastewater industries. The Index is rebalanced on a semi-annual basis. The Fund's shares are listed for trading on the NYSE Arca, Inc. The first day of secondary market trading in shares of the Fund was 05/11/07.

PERFORMANCE AS OF DECEMBER 31, 2007

CUMULATIVE
TOTAL RETURNS

 Inception (05/08/07)
 to 12/31/07

FUND PERFORMANCE
NAV 12.12%
Market Price 12.12%

INDEX PERFORMANCE
ISE Water Index(TM) 12.60%
Russell 3000 Index -1.89%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. The portfolio produced solid returns in the period since inception (05/08/07) as the global demand for water and water infrastructure drove earnings on the underlying stocks higher. Companies focused on producing the technology and infrastructure to support the growth of the water industry fared the best over the period. Water utilities posted returns that trailed those of the portfolio as a whole; however, they still outpaced water utilities in the broader market.

The top five performing stocks in the Fund since inception, by percentage gain, were Calgon Carbon Corp., Flowserve Corp., Lindsay Corp., Itron, Inc. and Valmont Industries, Inc. The worst-performing stocks, by percentage loss, were Mueller Water Products, Ashland, Inc., Watts Water Technologies, Inc., Insituform Technologies, Inc. and Mueller Industries, Inc.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Industrials 61.29%
Utilities 19.44
Materials 11.45
Information Technology 4.17
Health Care 3.76
Money Market Funds 0.54
Net Other Assets and Liabilities (0.65)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Itron, Inc. 4.17%
ITT Corp. 4.15
Nalco Holding Co. 4.13
Veolia Environnement ADR 4.03
Danaher Corp. 3.99
Companhia de Saneamento Basico do
 Estado de Sao Paulo ADR 3.95
Pentair, Inc. 3.95
Pall Corp. 3.88
Roper Industries, Inc. 3.81
Flowserve Corp. 3.77
 ---------
 Total 39.83%
 =========


_________________________

"International Securities Exchange(TM)", "ISE(TM)" and "ISE Water Index(TM)" are trademarks of the International Securities Exchange(TM) and have been licensed for use for certain purposes by First Trust Advisors L.P. The Fund, based on the ISE Water Index(TM), is not sponsored, endorsed, sold or promoted by the International Securities Exchange(TM) and the International Securities Exchange(TM) makes no representation regarding the advisability of trading in such products.

Page 30

FUND PERFORMANCE OVERVIEW (CONTINUED)

FIW - FIRST TRUST ISE WATER INDEX FUND (CONTINUED)

Growth of a $10,000 Initial Investment
May 8, 2007 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust
 ISE Water ISE Water
 Index Fund Index(TM) Russell 3000 Index
 --------------------- ---------------- ------------------
05/08/2007 $10,000 $10,000 $10,000
12/31/2007 11,212 11,260 9,811

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 27 0 0 0
9/30/2007 13 0 0 1
6/30/2007* 11 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 36 0 1 0
9/30/2007 49 0 0 0
6/30/2007* 24 0 0 0

* Trading commenced on May 11, 2007.

Page 31

FUND PERFORMANCE OVERVIEW (CONTINUED)

FCG - FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND

The First Trust ISE-Revere Natural Gas Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE-REVERE Natural Gas Index(TM) (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is an equal-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas. The Index is constructed by establishing the universe of stocks listed in the U.S. of companies involved in the natural gas exploration and production industries and then eliminates stocks whose natural gas proven reserves do not meet certain requirements. The Index then ranks all candidate stocks using four different methods and, often averaging the rankings, selects the top 30 stocks based on the final rank. The Index is rebalanced on a quarterly basis. The Fund's shares are listed for trading on the NYSE Arca, Inc. The first day of secondary market trading in shares of the Fund was 05/11/07.

PERFORMANCE AS OF DECEMBER 31, 2007

CUMULATIVE
TOTAL RETURNS

 Inception (05/08/07)
 to 12/31/07

FUND PERFORMANCE
NAV 11.67%
Market Price 11.62%

INDEX PERFORMANCE
ISE-REVERE Natural Gas Index(TM) 12.13%
Russell 3000 Index -1.89%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. The Fund posted strong returns in the period since inception (05/08/07). Natural gas prices over the period were relatively flat with the nearest futures contract month for Nymex natural gas declining from $7.779/Million British Thermal Units ("MMbtu") in the beginning of the return period to $7.483/MMbtu as of 12/31/2007. Baker Hughes reported that natural gas rig counts also declined slightly to 1452 from 1462 in the same time period. While natural gas fundamentals were soft, many natural gas companies did well due to their related exposure to petroleum. The nearest futures month Nymex WTI crude oil gained 46% over the period increasing from $65.71 per barrel to $95.98 per barrel by the end of 2007. Apache Corp., Range Resource Corp. and Noble Energy were the top three contributors to the performance of the Fund; all three have some operations in crude.

The top five performing stocks in the Fund since inception, by percentage gain, were Apache Corp., Range Resources Corp., Noble Energy, Inc., Delta Petroleum Corp. and Quicksilver Resources, Inc. The worst-performing stocks, by percentage loss, were NGAS Resources, Inc., Rosetta Resources, Inc., Compton Petroleum Corp., EV Energy Partners L.P. and GMX Resources, Inc.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Energy 90.45%
Utilities 9.55
Money Market Funds 0.64
Net Other Assets and Liabilities (0.64)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Delta Petroleum Corp. 4.17%
Cabot Oil & Gas Corp. 3.51
Petrohawk Energy Corp. 3.50
Rosetta Resources, Inc. 3.50
Anadarko Petroleum Corp. 3.41
EXCO Resources, Inc. 3.41
Forest Oil Corp. 3.40
Pioneer Natural Resources Co. 3.38
Noble Energy, Inc. 3.38
Edge Petroleum Corp. 3.37
 ---------
 Total 35.03%
 =========


_________________________

"International Securities Exchange(TM)", "ISE(TM)" and "ISE-REVERE Natural Gas Index(TM)" are trademarks of the International Securities Exchange(TM) and have been licensed for use for certain purposes by First Trust Advisors L.P. The Fund, based on the ISE-REVERE Natural Gas Index(TM), is not sponsored, endorsed, sold or promoted by the International Securities Exchange(TM) and the International Securities Exchange(TM) makes no representation regarding the advisability of trading in such products.

Page 32

FUND PERFORMANCE OVERVIEW (CONTINUED)

FCG - FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND (CONTINUED)

Growth of a $10,000 Initial Investment
May 8, 2007 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust ISE-REVERE
 ISE-Revere Natural Natural Gas
 Gas Index Fund Index(TM) Russell 3000 Index
 --------------------- ---------------- ------------------
05/08/2007 $10,000 $10,000 $10,000
12/31/2007 11,167 11,213 9,811

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 19 0 0 1
9/30/2007 18 0 0 1
6/30/2007* 12 0 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 43 1 0 0
9/30/2007 43 1 0 0
6/30/2007* 23 0 0 0

* Trading commenced on May 11, 2007.

Page 33

FUND PERFORMANCE OVERVIEW (CONTINUED)

FNI - FIRST TRUST ISE CHINDIA INDEX FUND

The First Trust ISE Chindia Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE ChIndia Index(TM) (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is a non-market capitalization weighted portfolio of 50 American Depositary Receipts, American Depositary Shares and/or stocks selected from a universe of all listed ADRs, ADSs, and/or stocks of companies from China and India currently trading on a U.S. exchange. The Index is rebalanced on a semi-annual basis. The Fund's shares are listed for trading on the NYSE Arca, Inc. The first day of secondary market trading in shares of the Fund was 05/11/07.

PERFORMANCE AS OF DECEMBER 31, 2007

CUMULATIVE
TOTAL RETURNS

 Inception (05/08/07)
 to 12/31/07

FUND PERFORMANCE
NAV 38.73%
Market Price 38.78%

INDEX PERFORMANCE
ISE ChIndia Index(TM) 39.52%
Russell 3000 Index -1.89%

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. The portfolio produced strong returns in the period since inception (05/08/07) as generally strong economic growth in both China and India drove equity returns. On a relative basis, Chinese stocks outperformed Indian stocks over the period as evidenced by the fact that the top five contributors to performance were all Chinese firms.

The top five performing stocks in the Fund since inception, by percentage gain, were China Mobile Ltd., Baidu.com, Inc., CNOOC Ltd., China Life Insurance Co. Ltd. and PetroChina Co. Ltd. The worst-performing stocks, by percentage loss, were WNS Holdings Ltd., Infosys Technologies Ltd., Wipro Ltd., Patni Computer Systems and Qiao Xing Universal Telephone, Inc.

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Information Technology 26.73%
Energy 16.72
Financials 14.72
Telecommunication Services 12.08
Materials 11.41
Industrials 8.30
Consumer Discretionary 5.31
Health Care 3.43
Utilities 0.70
Consumer Staples 0.68
Net Other Assets and Liabilities (0.08)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Infosys Technologies Ltd. ADR 7.39%
China Petroleum & Chemical Corp. ADR 7.24
China Mobile Ltd. ADR 6.92
ICICI Bank Ltd. ADR 6.90
Sterlite Industries (India) Ltd. ADR 6.86
PetroChina Co., Ltd. ADR 6.70
Wipro Ltd. ADR 4.06
Satyam Computer Services Ltd. ADR 3.99
Baidu.com ADR 3.94
HDFC Bank Ltd. ADR 3.93
 ---------
 Total 57.93%
 =========


_________________________

"International Securities Exchange(TM)", "ISE(TM)" and "ISE ChIndia Index(TM)" are trademarks of the International Securities Exchange(TM) and have been licensed for use for certain purposes by First Trust Advisors L.P. The Fund, based on the ISE ChIndia Index(TM), is not sponsored, endorsed, sold or promoted by the International Securities Exchange(TM) and the International Securities Exchange(TM) makes no representation regarding the advisability of trading in such products.

Page 34

FUND PERFORMANCE OVERVIEW (CONTINUED)

FNI - FIRST TRUST ISE CHINDIA INDEX FUND (CONTINUED)

Growth of a $10,000 Initial Investment
May 8, 2007 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust
 ISE Chindia ISE ChIndia
 Index Fund Index(TM) Russell 3000 Index
 --------------------- ---------------- ------------------
05/08/2007 $10,000 $10,000 $10,000
12/31/2007 13,873 13,952 9,811

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 41 1 0 1
9/30/2007 29 0 0 1
6/30/2007* 12 1 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 21 0 0 0
9/30/2007 33 0 0 0
6/30/2007* 22 0 0 0

* Trading commenced on May 11, 2007.

Page 35

FUND PERFORMANCE OVERVIEW (CONTINUED)

FVL - FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND

The First Trust Value Line(R) 100 Exchange-Traded Fund (the "Fund") is an exchange-traded index fund. In accordance with the terms of the Agreement and Plan of Reorganization (the "Plan") adopted by the Board of Trustees of the First Trust Value Line(R) 100 Fund (the "Predecessor FVL Fund," a closed-end fund) on January 17, 2007 and approved by the Predecessor FVL Fund shareholders on May 17, 2007, the Predecessor FVL Fund was reorganized with and into the Fund effective June 15, 2007. Pursuant to the Plan, the shares of the Predecessor FVL Fund ceased trading on the American Stock Exchange, Inc. ("AMEX") on Friday, June 15, 2007 and the Fund began trading on the AMEX on Monday, June 18, 2007 under the ticker symbol "FVL," the same ticker symbol previously used by the Predecessor FVL Fund. The assets of the Predecessor FVL Fund were transferred to, and the liabilities of the Predecessor FVL Fund were assumed by the Fund in exchange for shares of the Fund on a one-for-one share basis. Fund shares were distributed to the Predecessor FVL Fund shareholders, on a tax-free basis for federal income tax purposes, and the Predecessor FVL Fund has been terminated.

The objective of the Fund is to seek investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Value Line(R) 100 Index (the "Index"). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is an equal-dollar weighted index that is designed to objectively identify and select 100 stocks from the universe of stocks to which Value Line(R) assigns a #1 ranking in the Value Line(R) TimelinessTM Ranking System (the "Ranking System"). At any one time, only 100 stocks are assigned a #1 ranking in the Ranking System. The Index is rebalanced quarterly.

PERFORMANCE AS OF DECEMBER 31, 2007
 AVERAGE ANNUAL CUMULATIVE
 TOTAL RETURNS TOTAL RETURNS
 12 Months Ended Inception (06/12/03) Inception (06/12/03)
 12/31/07 to 12/31/07 to 12/31/07

FUND PERFORMANCE
NAV 19.91% 13.15% 75.63%
Market Price 30.58% 13.23% 76.22%

INDEX PERFORMANCE
Russell 3000 Index 5.24% 11.57% 64.66%

On June 15, 2007, the Fund acquired the assets and adopted the financial and performance history of the Predecessor FVL Fund, which had an inception date of June 12, 2003. The inception date total returns at NAV include the sales load of $0.675 per share on the initial offering.

The investment goals, strategies and policies of the Fund are substantially similar to those of the Predecessor FVL Fund. The inception date of the Index was January 16, 2007. Returns for the Index will only be disclosed for those periods in which the Index was in existence for the entire period. The cumulative total returns for the period from the reorganization date (06/15/07) through period end (12/31/07) were 6.61% and 6.96% at NAV and market price, respectively. That compares to an Index return of 7.02% for that same period. Prior to June 15, 2007, the price used to calculate market return was the AMEX closing market price of the Predecessor FVL Fund. Prior to June 15, 2007, NAV and market returns assumed that all dividend distributions were reinvested at prices obtained by the Dividend Reinvestment Plan of the Predecessor FVL Fund.

(See Notes to Fund Performance Overview on page 38.)

FUND RECAP. The portfolio produced strong returns over the period since the Fund's reorganization from a closed-end fund into an exchange-traded fund (06/15/07) as the growth-oriented momentum stocks in the portfolio outpaced the broader market. Consumer discretionary stocks were the biggest contributors to portfolio performance on an absolute basis. The portfolio benefited from both strong returns along with a large weighting in the consumer discretionary sector. Materials and industrials stocks also produced strong returns. The telecommunication services sector produced the smallest gain in the portfolio; however, the performance was still inline with the overall market.

The top five performing stocks in the Fund since inception, by percentage gain, were Potash Corp. of Saskatchewan, Inc., Research In Motion Ltd., Priceline.com, Inc., Flir Systems, Inc. and Apple Computer, Inc. The worst-performing stocks, by percentage loss, were Sepracor, Inc., ValueClick, Inc., Penford Corp., CryoLife, Inc. and Moldflow Corp.

"Value Line(R)" and "Value Line(R) 100 Index" are trademarks of Value Line(R), Inc. and have been licensed for use for certain purposes by First Trust on behalf of the Fund. The Fund, based on the Value Line(R) 100 Index, is not sponsored, endorsed, sold, or promoted by Value Line(R), Inc., and Value Line(R) makes no representation regarding the advisability of investing in the Fund.

Page 36

FUND PERFORMANCE OVERVIEW (CONTINUED)

FVL - FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (CONTINUED)

PORTFOLIO SECTOR ALLOCATION AS OF DECEMBER 31, 2007

SECTOR % OF NET ASSETS

Information Technology 24.15%
Industrials 23.30
Health Care 18.35
Consumer Discretionary 11.96
Materials 9.31
Financials 5.13
Energy 4.11
Consumer Staples 3.09
Telecommunication Services 1.03
Net Other Assets and Liabilities (0.43)
 ---------
 Total 100.00%
 =========

TOP TEN PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2007

SECURITY % OF NET ASSETS

Fresh Del Monte Produce, Inc. 1.07%
Potash Corp. of Saskatchewan, Inc. 1.07
Agrium, Inc. 1.06
ArthroCare Corp. 1.06
Mosaic (The) Co. 1.06
Robbins & Myers, Inc. 1.06
Learning Tree International, Inc. 1.06
Amazon.com, Inc. 1.05
Deere & Co. 1.05
Cubic Corp. 1.05
 ---------
 Total 10.59%
 =========

Growth of a $10,000 Initial Investment June 12, 2003 - December 31, 2007

[GRAPHIC OMITTED]
EDGARIZATION OF DATA POINTS

 First Trust
 Value Line(R) 100
 Exchange-Traded Fund Russell 3000 Index
 ---------------------- ------------------
06/12/03 $10,000 $10,000
12/31/03 11,591 11,382
12/31/04 13,104 12,742
12/31/05 14,658 13,522
12/31/06 15,331 15,646
12/31/07 17,562 16,464

FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2007

 Number of Days Bid/Ask Midpoint At/Above NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 18 5 4 0
9/30/2007 21 3 0 0
6/30/2007* 0 1 0 0

 Number of Days Bid/Ask Midpoint Below NAV

Quarter Ended 0-49 Basis Points 50-99 Basis Points 100-199 Basis Points >= 200 Basis Points
12/31/2007 28 7 2 0
9/30/2007 38 1 0 0
6/30/2007* 8 1 0 0

* Trading commenced on June 18, 2007.

Page 37

NOTES TO FUND PERFORMANCE OVERVIEW

Total returns for the periods since inception are calculated from the inception date of each Fund. "Average annual total returns" respresent the average annual change in value of an investment over the periods indicated. "Cumulative total returns" represent the total change in value of an investment over the periods indicated. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the Advisor.

The Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund are listed for trading as of the time that the Fund's NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all dividend distributions have been reinvested in the Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results.

Page 38

FIRST TRUST EXCHANGE-TRADED FUND

UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2007

As a shareholder of First Trust Dow Jones Select MicroCap Index(SM) Fund, First Trust Morningstar(R) Dividend Leaders(SM) Index Fund, First Trust IPOX-100 Index Fund, First Trust NASDAQ-100 Equal Weighted Index(SM) Fund, First Trust NASDAQ-100-Technology Sector Index(SM) Fund, First Trust Amex(R) Biotechnology Index Fund, First Trust Dow Jones Internet Index(SM) Fund, First Trust DB Strategic Value Index Fund, First Trust Value Line(R) Equity Allocation Index Fund, First Trust Value Line(R) Dividend Index Fund, First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund, First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund, First Trust S&P REIT Index Fund, First Trust ISE Water Index Fund, First Trust ISE-Revere Natural Gas Index Fund, First Trust ISE Chindia Index Fund, or First Trust Value Line(R) 100 Exchange-Traded Fund (collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended December 31, 2007.

ACTUAL EXPENSES
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the six-month period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions paid on purchases and sales of Fund shares. Therefore the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 ANNUALIZED
 EXPENSE RATIO
 BEGINNING ENDING BASED ON THE EXPENSES PAID
 ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH DURING THE
 JULY 1, 2007 DECEMBER 31, 2007 PERIOD (A) SIX-MONTH PERIOD (B)

FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND
Actual $1,000.00 $884.70 0.60% $2.85
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06

FIRST TRUST MORNINGSTAR(R) DIVIDEND LEADERS(SM) INDEX FUND
Actual $1,000.00 $870.60 0.45% $2.12
Hypothetical (5% return before expenses) $1,000.00 $1,022.94 0.45% $2.29

FIRST TRUST IPOX-100 INDEX FUND
Actual $1,000.00 $1,026.40 0.60% $3.06
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06

FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND
Actual $1,000.00 $999.10 0.60% $3.02
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06

FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND
Actual $1,000.00 $984.00 0.60% $3.00
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06


 Page 39

FIRST TRUST EXCHANGE-TRADED FUND

UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
DECEMBER 31, 2007


 ANNUALIZED
 EXPENSE RATIO
 BEGINNING ENDING BASED ON THE EXPENSES PAID
 ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH DURING THE
 JULY 1, 2007 DECEMBER 31, 2007 PERIOD (A) SIX-MONTH PERIOD (B)

FIRST TRUST AMEX(R) BIOTECHNOLOGY INDEX FUND
Actual $1,000.00 $1,008.30 0.60% $3.04
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06

FIRST TRUST DOW JONES INTERNET INDEX(SM) FUND
Actual $1,000.00 $966.90 0.60% $2.97
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06

FIRST TRUST DB STRATEGIC VALUE INDEX FUND
Actual $1,000.00 $981.10 0.65% $3.25
Hypothetical (5% return before expenses) $1,000.00 $1,021.93 0.65% $3.31

FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
Actual $1,000.00 $975.40 0.70% $3.49
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57

FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND
Actual $1,000.00 $941.00 0.70% $3.42
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57

FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND
Actual $1,000.00 $1,013.40 0.60% $3.05
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06

FIRST TRUST NASDAQ(R) CLEAN EDGE(R) U.S. LIQUID SERIES INDEX FUND
Actual $1,000.00 $1,313.80 0.60% $3.50
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06

FIRST TRUST S&P REIT INDEX FUND
Actual $1,000.00 $881.70 0.50% $2.37
Hypothetical (5% return before expenses) $1,000.00 $1,022.69 0.50% $2.55

FIRST TRUST ISE WATER INDEX FUND
Actual $1,000.00 $1,030.00 0.60% $3.07
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06

FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND
Actual $1,000.00 $1,100.20 0.60% $3.18
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06

FIRST TRUST ISE CHINDIA INDEX FUND
Actual $1,000.00 $1,266.90 0.60% $3.43
Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06

FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND
Actual $1,000.00 $1,073.70 0.70% $3.66
Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57


(a) These expense ratios reflect expense caps.

(b) Expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period (July
1, 2007 through December 31, 2007), multiplied by 184/365.

Page 40

FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--100.3%
 Aerospace & Defense--0.8%
 1,682 American Science & Engineering,
 Inc. $ 95,453
 1,617 LMI Aerospace, Inc. (b) 42,867
 -------------
 138,320
 -------------
 Air Freight & Logistics--0.2%
 1,564 Park-Ohio Holdings Corp. (b) 39,256
 -------------
 Airlines--0.7%
 2,546 Allegiant Travel Co. (b) 81,829
 3,385 Pinnacle Airlines Corp. (b) 51,621
 -------------
 133,450
 -------------
 Auto Components--1.2%
 3,998 Aftermarket Technology Corp. (b) 108,986
 5,521 Spartan Motors, Inc. 42,180
 3,984 Superior Industries International,
 Inc. 72,389
 -------------
 223,555
 -------------
 Beverages--0.5%
 1,881 Boston Beer (The) Co., Inc.,
 Class A (b) 70,820
 1,886 MGP Ingredients, Inc. 17,766
 -------------
 88,586
 -------------
 Building Products--0.6%
 5,119 Gibraltar Industries, Inc. 78,935
 3,114 Insteel Industries, Inc. 36,527
 -------------
 115,462
 -------------
 Capital Markets--1.2%
 3,921 Calamos Asset Management, Inc.,
 Class A 116,768
 6,411 TradeStation Group, Inc. (b) 91,100
 -------------
 207,868
 -------------
 Chemicals--3.5%
 4,597 A. Schulman, Inc. 99,065
 3,389 American Vanguard Corp. 58,799
 3,093 Flotek Industries, Inc. (b) 111,472
 4,761 ICO, Inc. (b) 61,131
 2,853 Koppers Holdings, Inc. 123,365
 4,446 Landec Corp. (b) 59,576
 2,738 LSB Industries, Inc. (b) 77,266
 1,632 Penford Corp. 41,763
 -------------
 632,437
 -------------
 Commercial Banks--6.6%
 2,316 Bank of the Ozarks, Inc. 60,679
 3,961 Cascade Bancorp 55,137
 4,132 Chemical Financial Corp. 98,300
 3,021 City Holding Co. 102,231
 3,523 CoBiz Financial, Inc. 52,387
 5,500 Community Bank System, Inc. 109,285
 2,189 Greene BancShares, Inc. 42,029


 Commercial Banks (Continued)
 2,538 Independent Bank Corp. $ 69,084
 4,086 Nara Bancorp, Inc. 47,684
 6,128 NBT Bancorp, Inc. 139,840
 4,047 PrivateBancorp, Inc. 132,135
 3,895 Renasant Corp. 84,015
 2,798 Seacoast Banking Corp. of Florida 28,763
 4,754 Texas Capital Bancshares, Inc. (b) 86,761
 2,853 West Coast Bancorp 52,781
 -------------
 1,161,111
 -------------
 Commercial Services & Supplies--7.4%
 2,898 American Ecology Corp. 68,045
 4,908 Bowne & Co., Inc. 86,381
 9,502 CBIZ, Inc. (b) 93,215
 2,402 CDI Corp. 58,273
 2,473 COMSYS IT Partners, Inc. (b) 39,024
 1,850 Cornell Cos., Inc. (b) 43,142
 2,046 Courier Corp. 67,538
 2,021 CRA International, Inc. (b) 96,219
 4,673 Ennis, Inc. 84,114
 4,610 Hudson Highland Group, Inc. (b) 38,770
 1,239 ICF International, Inc. (b) 31,297
 5,095 Innerworkings, Inc. (b) 87,940
 7,637 Kforce, Inc. (b) 74,461
 4,643 LECG Corp. (b) 69,924
 6,462 On Assignment, Inc. (b) 45,299
 3,192 Pike Electric Corp. (b) 53,498
 1,966 Schawk, Inc. 30,512
 10,400 Spherion Corp. (b) 75,712
 3,312 Team, Inc. (b) 121,152
 1,218 Waste Industries USA, Inc. 44,213
 -------------
 1,308,729
 -------------
 Communications Equipment--1.4%
 2,800 Anaren, Inc. (b) 46,172
 2,814 EMS Technologies, Inc. (b) 85,095
 6,785 Ixia (b) 64,322
 3,740 Oplink Communications, Inc. (b) 57,409
 -------------
 252,998
 -------------
 Computers & Peripherals--0.7%
 3,840 STEC, Inc. (b) 33,562
 3,842 Stratasys, Inc. (b) 99,277
 -------------
 132,839
 -------------
 Construction & Engineering--0.8%
 1,894 Integrated Electrical Services,
 Inc. (b) 35,588
 1,279 Michael Baker Corp. (b) 52,567
 1,643 Northwest Pipe Co. (b) 64,307
 -------------
 152,462
 -------------
 Consumer Finance--0.4%
 5,098 First Cash Financial Services,
 Inc. (b) 74,839
 -------------

See Notes to Financial Statements. Page 41

FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks (Continued)
 Diversified Consumer
 Services--0.5%
 977 CPI Corp. $ 23,008
 4,379 Universal Technical Institute,
 Inc. (b) 74,443
 -------------
 97,451
 -------------
 Diversified Financial
 Services--0.3%
 1,992 ASTA Funding, Inc. 52,668
 -------------
 Diversified Telecommunication
 Services--2.3%
 7,854 Alaska Communications Systems
 Group, Inc. 117,811
 1,753 Atlantic Tele-Network, Inc. 59,216
 4,286 Consolidated Communications
 Holdings, Inc. 85,291
 5,058 FairPoint Communications, Inc. 65,855
 5,776 Iowa Telecommunications Services,
 Inc. 93,918
 -------------
 422,091
 -------------
 Electrical Equipment--0.7%
 2,173 Azz, Inc. (b) 61,605
 3,684 LSI Industries, Inc. 67,048
 -------------
 128,653
 -------------
 Electronic Equipment &
 Instruments--3.7%
 6,598 CTS Corp. 65,518
 2,806 FARO Technologies, Inc. (b) 76,267
 15,397 Kemet Corp. (b) 102,082
 3,446 LoJack Corp. (b) 57,927
 6,870 Methode Electronics, Inc. 112,943
 3,403 Park Electrochemical Corp. 96,101
 3,032 SYNNEX Corp. (b) 59,427
 7,771 TTM Technologies, Inc. (b) 90,610
 -------------
 660,875
 -------------
 Energy Equipment & Services--4.9%
 4,784 Bronco Drilling Co., Inc. (b) 71,042
 1,312 Dawson Geophysical Co. (b) 93,756
 2,043 Gulf Island Fabrication, Inc. 64,784
 4,889 Matrix Service Co. (b) 106,679
 16,434 Newpark Resources, Inc. (b) 89,565
 840 OYO Geospace Corp. (b) 63,302
 9,114 Pioneer Drilling Co. (b) 108,275
 2,746 Superior Well Services, Inc. (b) 58,270
 2,237 T-3 Energy Services, Inc. (b) 105,161
 2,318 Trico Marine Services, Inc. (b) 85,812
 2,125 Union Drilling, Inc. (b) 33,511
 -------------
 880,157
 -------------
 Food & Staples Retailing--1.4%
 2,465 Nash Finch Co. 86,965


 Food & Staples Retailing (Continued)
 2,263 PriceSmart, Inc. $ 68,026
 3,919 Spartan Stores, Inc. 89,549
 -------------
 244,540
 -------------
 Food Products--1.1%
 14,844 Darling International, Inc. (b) 171,596
 1,532 Imperial Sugar Co. 28,756
 -------------
 200,352
 -------------
 Gas Utilities--0.7%
 3,719 Laclede Group (The), Inc. 127,339
 -------------

 Health Care Equipment &
 Supplies--4.8%
 2,019 Aspect Medical Systems, Inc. (b) 28,266
 1,533 Cynosure, Inc. (b) 40,563
 2,355 Datascope Corp. 85,722
 2,329 ICU Medical, Inc. (b) 83,867
 3,350 IRIS International, Inc. (b) 65,727
 1,681 Kensey Nash Corp. (b) 50,296
 2,707 Medical Action Industries, Inc. (b) 56,441
 3,260 Natus Medical, Inc. (b) 63,081
 5,647 Quidel Corp. (b) 109,947
 5,942 Symmetry Medical, Inc. (b) 103,569
 1,490 Vital Signs, Inc. 76,169
 3,681 Zoll Medical Corp. (b) 98,356
 -------------
 862,004
 -------------
 Health Care Providers &
 Services--6.3%
 1,969 Air Methods Corp. (b) 97,800
 4,520 Alliance Imaging, Inc. (b) 43,482
 2,293 American Dental Partners, Inc. (b) 22,999
 2,161 Bio-Reference Laboratories, Inc. (b) 70,621
 5,438 Cross Country Healthcare, Inc. (b) 77,437
 1,700 Emergency Medical Services Corp. (b) 49,776
 4,763 Gentiva Health Services, Inc. (b) 90,688
 3,943 Matria Healthcare, Inc. (b) 93,725
 2,378 Medcath Corp. (b) 58,404
 2,209 MWI Veterinary Supply, Inc. (b) 88,360
 6,033 Odyssey HealthCare, Inc. (b) 66,725
 2,137 Providence Service (The) Corp. (b) 60,135
 3,210 RehabCare Group, Inc. (b) 72,418
 4,648 Res-Care, Inc. (b) 116,944
 7,015 Sun Healthcare Group, Inc. (b) 120,447
 -------------
 1,129,961
 -------------
 Health Care Technology--0.2%
 1,874 Computer Programs & Systems, Inc. 42,615
 -------------
 Hotels, Restaurants & Leisure--3.7%
 5,222 AFC Enterprises (b) 59,113
 3,320 BJ'S Restaurants, Inc. (b) 53,983
 2,825 Buffalo Wild Wings, Inc. (b) 65,597
 5,346 California Pizza Kitchen, Inc. (b) 83,237

Page 42 See Notes to Financial Statements.

FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

SHARES DESCRIPTION VALUE

Common Stocks (Continued)
Hotels, Restaurants & Leisure (Continued)

 3,940 Marcus (The) Corp. $ 60,873
 2,714 McCormick & Schmick's Seafood
 Restaurants, Inc. (b) 32,378
 2,162 Monarch Casino & Resort, Inc. (b) 52,061
 2,045 Morton's Restaurant Group, Inc. (b) 19,080
 2,553 Peet's Coffee & Tea, Inc. (b) 74,216
 2,853 Red Robin Gourmet Burgers, Inc. (b) 91,267
 4,760 Steak N Shake (The) Co. (b) 51,884
 2,462 Town Sports International Holdings,
 Inc. (b) 23,537
 -------------
 667,226
 -------------
 Household Durables--1.1%
 5,221 Helen of Troy Ltd. (b) 89,488
 1,654 Lifetime Brands, Inc. 21,469
 2,639 Universal Electronics, Inc. (b) 88,248
 -------------
 199,205
 -------------
 Household Products--0.6%
 2,922 WD-40 Co. 110,948
 -------------
 Industrial Conglomerates--0.7%
 3,326 Raven Industries, Inc. 127,685
 -------------
 Insurance--2.9%
 9,776 American Equity Investment Life
 Holding Co. 81,043
 1,777 American Physicians Capital, Inc. 73,674
 2,786 First Mercury Financial Corp. (b) 67,978
 6,610 Meadowbrook Insurance Group,
 Inc. (b) 62,200
 5,114 OneBeacon Insurance Group Ltd. 109,952
 2,866 Seabright Insurance Holdings (b) 43,219
 3,142 Stewart Information Services Corp. 81,975
 -------------
 520,041
 -------------
 Internet & Catalog Retail--1.2%
 3,617 FTD Group, Inc. 46,587
 2,547 Gaiam, Inc. (b) 75,595
 4,472 PetMed Express, Inc. (b) 54,111
 3,253 Stamps.com, Inc. (b) 39,622
 -------------
 215,915
 -------------
 Internet Software & Services--1.8%
 3,769 Greenfield Online, Inc. (b) 55,065
 5,320 Perficient, Inc. (b) 83,737
11,419 SonicWALL, Inc. (b) 122,411
 4,896 Vignette Corp. (b) 71,531
 -------------
 332,744
 -------------
 IT Services--1.9%
 9,824 Ciber, Inc. (b) 60,025
 6,130 infoUSA, Inc. 54,741
 3,669 ManTech International Corp.,
 Class A (b) 160,775


 IT Services (Continued)
 2,410 SI International, Inc. (b) $ 66,203
 -------------
 341,744
 -------------
 Leisure Equipment & Products--1.4%
 5,191 Jakks Pacific, Inc. (b) 122,559
 3,485 RC2 Corp. (b) 97,824
 4,163 Sturm, Ruger & Co., Inc. (b) 34,470
 -------------
 254,853
 -------------
 Life Sciences Tools & Services--1.2%
 4,314 Albany Molecular Research, Inc. (b) 62,035
 5,312 Cambrex Corp. 44,515
 2,356 Kendle International, Inc. (b) 115,255
 -------------
 221,805
 -------------
 Machinery--8.6%
 4,830 Altra Holdings, Inc. (b) 80,323
 1,663 American Railcar Industries, Inc. 32,013
 1,370 Ampco-Pittsburgh Corp. 52,238
 2,268 Badger Meter, Inc. 101,947
 6,999 Blount International, Inc. (b) 86,158
 5,067 Chart Industries, Inc. (b) 156,569
 3,061 CIRCOR International, Inc. 141,908
 3,442 Columbus McKinnon Corp. (b) 112,278
 2,178 Dynamic Materials Corp. 128,284
 1,961 Gehl Co. (b) 31,454
 2,787 Greenbrier Cos., Inc. 62,039
 2,105 Hardinge, Inc. 35,322
 974 Hurco Cos., Inc. (b) 42,515
 2,557 Kadant, Inc. (b) 75,866
 1,931 L.B. Foster Co., Class A (b) 99,891
 1,983 Lindsay Corp. 140,178
 2,157 Sun Hydraulics, Corp. 54,421
 845 Twin Disc, Inc. 59,801
 5,613 Wabash National Corp. 43,164
 -------------
 1,536,369
 -------------
 Marine--0.4%
 1,976 TBS International Ltd. (b) 65,327
 -------------
 Media--2.3%
 5,873 Cox Radio, Inc., Class A (b) 71,357
 2,781 DG Fastchannel, Inc. (b) 71,305
10,970 Entravision Communications Corp.,
 Class A (b) 85,895
 8,665 Journal Communications, Inc.,
 Class A 77,465
 3,781 Playboy Enterprises, Inc.,
 Class B (b) 34,483
 9,712 Sinclair Broadcast Group, Inc.,
 Class A 79,736
 -------------
 420,241
 -------------
 Metals & Mining--0.7%
 3,224 A.M. Castle & Co. 87,661
 1,853 Claymont Steel Holdings, Inc. (b) 43,268
 -------------
 130,929
 -------------

See Notes to Financial Statements. Page 43

FIRST TRUST DOW JONES SELECT MICROCAP INDEX(SM) FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks (Continued)
 Oil, Gas & Consumable Fuels--1.7%
 3,097 DCP Midstream Partners LP (c) $ 142,307
 7,870 PetroQuest Energy, Inc. (b) 112,541
 1,677 TransMontaigne Partners LP (c) 47,610
 -------------
 302,458
 -------------
 Paper & Forest Products--2.1%
 7,187 Buckeye Technologies, Inc. (b) 89,838
 8,235 Glatfelter 126,077
 2,715 Neenah Paper, Inc. 79,142
 2,871 Schweitzer-Mauduit International,
 Inc. 74,388
 -------------
 369,445
 -------------
 Personal Products--1.0%
 5,000 Elizabeth Arden, Inc. (b) 101,750
 1,731 Inter Parfums, Inc. 31,106
 6,450 Prestige Brands Holdings, Inc. (b) 48,246
 -------------
 181,102
 -------------
 Pharmaceuticals--0.9%
 2,525 Bradley Pharmaceuticals, Inc. (b) 49,743
 2,337 Obagi Medical Products, Inc. (b) 42,744
 8,671 Salix Pharmaceuticals Ltd. (b) 68,327
 -------------
 160,814
 -------------
 Road & Rail--0.4%
 4,351 Celadon Group, Inc. (b) 39,855
 2,770 Marten Transport Ltd. (b) 38,642
 -------------
 78,497
 -------------
 Semiconductors & Semiconductor
 Equipment--1.8%
 14,756 Cirrus Logic, Inc. (b) 77,912
 3,882 Cohu, Inc. 59,395
 9,392 Mattson Technology, Inc. (b) 80,395
 4,989 Rudolph Technologies, Inc. (b) 56,475
 3,553 Ultra Clean Holdings (b) 43,347
 -------------
 317,524
 -------------
 Software--1.6%
 11,095 Actuate Corp. (b) 86,208
 1,547 Interactive Intelligence, Inc. (b) 40,763
 4,471 Radiant Systems, Inc. (b) 77,035
 7,107 Tyler Technologies, Inc. (b) 91,610
 -------------
 295,616
 -------------
 Specialty Retail--2.8%
 3,720 A.C. Moore Arts & Crafts, Inc. (b) 51,150
 3,811 Big 5 Sporting Goods Corp. 54,955
 6,740 Casual Male Retail Group, Inc. (b) 34,913
 5,635 Cato (The) Corp., Class A 88,244
 2,192 Conn's, Inc. (b) 37,505
 3,309 Jos. A. Bank Clothiers, Inc. (b) 94,141
 2,712 Midas, Inc. (b) 39,758


 Specialty Retail (Continued)
 3,700 Monro Muffler Brake, Inc. $ 72,113
 2,631 West Marine, Inc. (b) 23,626
 -------------
 496,405
 -------------
 Textiles, Apparel & Luxury
 Goods--2.2%
 3,436 Maidenform Brands, Inc. (b) 46,489
 3,545 Movado Group, Inc. 89,653
 2,126 Perry Ellis International, Inc. (b) 32,698
 3,370 Steven Madden Ltd. (b) 67,400
 2,573 True Religion Apparel, Inc. (b) 54,934
 2,631 UniFirst Corp. 99,978
 -------------
 391,152
 -------------
 Thrifts & Mortgage Finance--1.8%
 3,524 Anchor BanCorp Wisconsin, Inc. 82,884
 9,671 Bank Mutual Corp. 102,223
 5,771 Dime Community Bancshares 73,696
 1,160 WSFS Financial Corp. 58,232
 -------------
 317,035
 -------------
 Tobacco--0.4%
 17,591 Alliance One International, Inc. (b) 71,595
 -------------
 Trading Companies &
 Distributors--0.5%
 4,775 Rush Enterprises, Inc., Class A (b) 86,810
 -------------
 Water Utilities--1.4%
 3,133 American States Water Co. 118,051
 2,386 SJW Corp. 82,723
 4,425 Southwest Water Co. 55,401
 -------------
 256,175
 -------------
 Wireless Telecommunication
 Services--0.3%
 4,247 USA Mobility, Inc. 60,732
 -------------

 Total Investments--100.3%
 (Cost $19,454,663) 18,041,010
 Net Other Assets and
 Liabilities--(0.3%) (48,209)
 -------------
 Net Assets--100.0% $ 17,992,801
 =============

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

(b) Non-income producing security.

Page 44 See Notes to Financial Statements.

FIRST TRUST MORNINGSTAR(R) DIVIDEND LEADERS(SM) INDEX FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--99.8%
 Building Products--0.8%
 22,949 Masco Corp. $ 495,928
 -------------
 Chemicals--2.7%
 38,347 Dow Chemical (The) Co. 1,511,639
 3,759 Olin Corp. 72,661
 6,407 RPM International, Inc. 130,062
 -------------
 1,714,362
 -------------
 Commercial Banks--29.2%
 7,755 Associated Banc-Corp. 210,083
 3,869 BancorpSouth, Inc. 91,347
 39,957 BB&T Corp. 1,225,481
 1,416 Chemical Financial Corp. 33,687
 8,984 Citizens Banking Corp. 130,358
 11,654 Colonial BancGroup (The), Inc. 157,795
 12,960 Comerica, Inc. 564,149
 1,678 Community Bank System, Inc. 33,342
 5,599 F.N.B. Corp. 82,305
 44,814 Fifth Third Bancorp. 1,126,176
 1,280 First Charter Corp. 38,221
 3,282 First Financial Bancorp 37,415
 16,945 First Horizon National Corp. 307,552
 2,830 First Midwest Bancorp, Inc. 86,598
 6,119 FirstMerit Corp. 122,441
 13,198 Fulton Financial Corp. 148,082
 38,824 Huntington Bancshares, Inc. 573,042
 33,479 KeyCorp 785,083
 75,251 National City Corp. 1,238,631
 2,666 National Penn Bancshares, Inc. 40,363
 1,513 NBT Bancorp, Inc. 34,527
 5,422 Old National Bancorp 81,113
 2,991 Pacific Capital Bancorp 60,209
 924 Park National Corp. 59,598
 18,351 PNC Financial Services Group, Inc. 1,204,743
 22,910 Popular, Inc. 242,846
 2,630 Provident Bankshares Corp. 56,256
 1,410 S&T Bancorp., Inc. 38,972
 4,466 South Financial Group (The), Inc. 69,804
 20,043 SunTrust Banks, Inc. 1,252,487
 4,171 Susquehanna Bancshares, Inc. 76,913
 9,107 TCF Financial Corp. 163,289
 2,672 Trustmark Corp. 67,762
 67,764 U.S. Bancorp 2,150,829
 2,353 United Bankshares, Inc. 65,931
 7,723 Valley National Bancorp 147,200
 24,958 W Holding Co., Inc. 30,698
 82,339 Wachovia Corp. 3,131,351
 89,398 Wells Fargo & Co. 2,698,925
 1,316 WesBanco, Inc. 27,110
 4,311 Whitney Holding Corp. 112,733
 3,748 Wilmington Trust Corp. 131,930
 -------------
 18,937,377
 -------------

 Commercial Services &
 Supplies--0.0%
 1,622 Kimball International, Inc. $ 22,221
 -------------
 Diversified Financial
 Services--19.2%
 156,334 Bank of America Corp. 6,450,341
 202,403 Citigroup, Inc. 5,958,744
 -------------
 12,409,085
 -------------
 Diversified Telecommunication
 Services--13.2%
 127,179 AT&T, Inc. 5,285,559
 74,423 Verizon Communications, Inc. 3,251,541
 -------------
 8,537,100
 -------------
 Electric Utilities--5.2%
 2,729 Cleco Corp. 75,866
 5,506 DPL, Inc. 163,253
 2,359 Empire District Electric (The) Co. 53,738
 6,765 Great Plains Energy, Inc. 198,350
 1,252 Otter Tail Corp. 43,319
 9,559 Pepco Holdings, Inc. 280,365
 6,861 Pinnacle West Capital Corp. 290,975
 17,977 Progress Energy, Inc. 870,626
 35,597 Southern Co. 1,379,384
 -------------
 3,355,876
 -------------
 Gas Utilities--1.1%
 4,906 AGL Resources, Inc. 184,661
 5,839 Atmos Energy Corp. 163,726
 1,224 Laclede Group (The), Inc. 41,910
 2,704 Nicor, Inc. 114,514
 3,697 Piedmont Natural Gas Co., Inc. 96,714
 2,877 WGL Holdings, Inc. 94,251
 -------------
 695,776
 -------------
 Household Durables--0.1%
 2,249 Tupperware Brands Corp. 74,285
 -------------
 Insurance--1.4%
 6,499 Arthur J. Gallagher & Co. 157,211
 8,160 Cincinnati Financial Corp. 322,647
 2,645 Commerce Group (The), Inc. 95,167
 1,524 Mercury General Corp. 75,910
 2,707 Unitrin, Inc. 129,909
 2,533 Zenith National Insurance Corp. 113,301
 -------------
 894,145
 -------------
 Metals & Mining--0.3%
 2,871 Nucor Corp. 170,021
 -------------
 Multi-Utilities--6.3%
 13,600 Ameren Corp. 737,256
 1,695 Black Hills Corp. 74,750
 1,085 CH Energy Group, Inc. 48,326
 18,020 Consolidated Edison, Inc. 880,277

See Notes to Financial Statements. Page 45

FIRST TRUST MORNINGSTAR(R) DIVIDEND LEADERS(SM) INDEX FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks (Continued)
 Multi-Utilities (Continued)
 13,516 Dominion Resources, Inc. $ 641,334
 10,975 DTE Energy Co. 482,461
 10,020 Energy East Corp. 272,644
 5,352 NSTAR 193,849
 4,834 OGE Energy Corp. 175,426
 5,867 Puget Energy, Inc. 160,932
 6,054 SCANA Corp. 255,176
 4,671 Vectren Corp. 135,506
 -------------
 4,057,937
 -------------
 Pharmaceuticals--10.1%
 70,822 Bristol-Myers Squibb Co. 1,878,199
 204,903 Pfizer, Inc. 4,657,446
 -------------
 6,535,645
 -------------
 Real Estate Investment
 Trusts--0.3%
 4,674 Rayonier, Inc. 220,800
 -------------
 Thrifts & Mortgage
 Finance--3.1%
 5,526 Astoria Financial Corp. 128,590
 4,412 Corus Bankshares, Inc. 47,076
 7,075 First Niagara Financial Group, Inc. 85,183
 1,528 Flagstar Bancorp, Inc. 10,650
 4,792 Washington Federal, Inc. 101,159
 119,923 Washington Mutual, Inc. 1,632,152
 -------------
 2,004,810
 -------------
 Tobacco--6.8%
 50,877 Altria Group, Inc. 3,845,283
 9,767 UST, Inc. 535,232
 -------------
 4,380,515
 -------------

 Total Investments--99.8%
 (Cost $76,588,671) 64,505,883
 Net Other Assets and
 Liabilities--0.2% 144,606
 -------------
 Net Assets--100.0% $ 64,650,489
 =============

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

Page 46 See Notes to Financial Statements.

FIRST TRUST IPOX-100 INDEX FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--100.2%
 Aerospace & Defense--1.6%
 2,812 DynCorp International, Inc.,
 Class A (b) $ 75,587
 6,879 Spirit Aerosystems Holdings, Inc.,
 Class A (b) 237,325
 2,328 TransDigm Group, Inc. (b) 105,155
 -------------
 418,067
 -------------
 Biotechnology--0.2%
 3,005 Theravance, Inc. (b) 58,598
 -------------
 Building Products--0.3%
 3,401 Goodman Global, Inc. (b) 83,461
 -------------
 Capital Markets--5.5%
 11,441 Ameriprise Financial, Inc. 630,513
 1,451 GFI Group, Inc. (b) 138,890
 1,331 Greenhill & Co., Inc. 88,485
 5,321 Lazard Ltd., Class A 216,458
 5,902 MF Global Ltd. (b) 185,736
 3,658 Och-Ziff Capital Management
 Group, Class A 96,132
 3,107 optionsXpress Holdings, Inc. 105,079
 -------------
 1,461,293
 -------------
 Chemicals--4.5%
 7,461 Celanese Corp., Class A 315,749
 2,756 CF Industries Holding, Inc. 303,325
 10,953 Huntsman Corp. 281,492
 7,048 Nalco Holding Co. 170,421
 3,644 Rockwood Holdings, Inc. (b) 121,054
 -------------
 1,192,041
 -------------
 Commercial Services &
 Supplies--1.1%
 4,292 EnergySolutions, Inc. (b) 115,841
 3,091 IHS, Inc., Class A (b) 187,191
 -------------
 303,032
 -------------
 Communications Equipment--0.2%
 3,388 Starent Networks Corp. (b) 61,831
 -------------
 Construction & Engineering--1.7%
 4,851 Aecom Technology Corp. (b) 138,593
 8,358 KBR, Inc. (b) 324,290
 -------------
 462,883
 -------------
 Consumer Finance--1.3%
 23,560 Discover Financial Services 355,285
 -------------
 Diversified Financial Services--4.4%
 794 MSCI, Inc., Class A (b) 30,490
 13,074 NYSE Euronext 1,147,505
 -------------
 1,177,995
 -------------

 Diversified Telecommunication
 Services--1.4%
 7,539 Embarq Corp. $ 373,407
 -------------
 Electric Utilities--0.5%
 2,110 ITC Holdings Corp. 119,046
 -------------
 Electrical Equipment--5.9%
 3,846 First Solar, Inc. (b) 1,027,420
 4,135 SunPower Corp., Class A (b) 539,163
 -------------
 1,566,583
 -------------
 Electronic Equipment &
 Instruments--4.4%
 5,446 Dolby Laboratories, Inc.,
 Class A (b) 270,775
 24,529 Tyco Electronics Ltd. 910,762
 -------------
 1,181,537
 -------------
 Energy Equipment &
 Services--1.5%
 5,166 Cal Dive International, Inc. (b) 68,398
 3,601 Complete Production Services,
 Inc. (b) 64,710
 4,234 Dresser-Rand Group, Inc. (b) 165,337
 4,383 Hercules Offshore, Inc. (b) 104,228
 -------------
 402,673
 -------------
 Health Care Equipment &
 Supplies--5.0%
 24,564 Covidien Ltd. 1,087,939
 5,142 ev3, Inc. (b) 65,355
 2,696 Masimo Corp. (b) 106,357
 1,732 NuVasive, Inc. (b) 68,449
 -------------
 1,328,100
 -------------
 Health Care Providers &
 Services--0.9%
 5,013 Brookdale Senior Living, Inc. 142,419
 2,058 WellCare Health Plans, Inc. (b) 87,280
 -------------
 229,699
 -------------
 Hotels, Restaurants &
 Leisure--3.1%
 6,671 Burger King Holdings, Inc. 190,190
 1,929 Life Time Fitness, Inc. (b) 95,833
 9,240 Tim Hortons, Inc. 341,233
 8,778 Wyndham Worldwide Corp. 206,810
 -------------
 834,066
 -------------
 Independent Power Producers &
 Energy Traders--0.4%
 2,048 Ormat Technologies, Inc. 112,660
 -------------
 Insurance--3.7%
 2,981 Allied World Assurance Holdings Ltd. 149,557
 3,341 Assured Guaranty Ltd. 88,670
 21,641 Genworth Financial Inc., Class A 550,763
 4,912 OneBeacon Insurance Group Ltd. 105,608

See Notes to Financial Statements. Page 47

FIRST TRUST IPOX-100 INDEX FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks (Continued)
 Insurance (Continued)
 3,661 Validus Holdings Ltd. (b) $ 95,113
 -------------
 989,711
 -------------
 Internet Software &
 Services--11.4%
 2,097 DealerTrack Holdings, Inc. (b) 70,187
 3,845 Google, Inc., Class A (b) 2,658,741
 2,943 Omniture, Inc. (b) 97,972
 2,155 VistaPrint Ltd. (b) 92,342
 2,834 WebMD Health Corp., Class A (b) 116,392
 -------------
 3,035,634
 -------------
 IT Services--10.9%
 10,448 Genpact Ltd. (b) 159,123
 6,500 MasterCard, Inc., Class A 1,398,800
 3,794 NeuStar, Inc., Class A (b) 108,812
 8,232 SAIC, Inc. (b) 165,628
 4,020 VeriFone Holdings, Inc. (b) 93,465
 37,047 Western Union Co. 899,501
 1,962 Wright Express Corp. (b) 69,631
 -------------
 2,894,960
 -------------
 Machinery--0.7%
 1,846 Bucyrus International, Inc.,
 Class A 183,474
 -------------
 Marine--0.3%
 1,424 Genco Shipping & Trading Ltd. 77,978
 -------------
 Media--11.8%
 5,255 Cinemark Holdings, Inc. 89,335
 4,917 DreamWorks Animation SKG,
 Inc., Class A (b) 125,580
 2,171 Morningstar, Inc. (b) 168,795
 48,196 Time Warner Cable, Inc., Class A (b) 1,330,210
 32,376 Viacom, Inc., Class B (b) 1,421,954
 -------------
 3,135,874
 -------------
 Oil, Gas & Consumable
 Fuels--8.3%
 3,237 Alpha Natural Resources, Inc. (b) 105,138
 1,327 Atlas America, Inc. 78,532
 2,217 Bill Barrett Corp. (b) 92,826
 3,737 Concho Resources, Inc. (b) 77,020
 8,291 Continental Resources, Inc. (b) 216,644
 2,088 Copano Energy LLC 75,899
 4,250 CVR Energy, Inc. (b) 105,995
 5,155 EXCO Resources, Inc. (b) 79,799
 2,230 Foundation Coal Holdings, Inc. 117,075
 6,998 SandRidge Energy, Inc. (b) 250,948
 31,195 Spectra Energy Corp. 805,454
 3,761 W&T Offshore, Inc. 112,680
 3,359 Western Refining, Inc. 81,321
 -------------
 2,199,331
 -------------

 Personal Products--0.9%
 4,496 Bare Escentuals, Inc. (b) $ 109,028
 3,354 Herbalife Ltd. 135,099
 -------------
 244,127
 -------------
 Pharmaceuticals--0.8%
 12,362 Warner Chilcott Ltd., Class A (b) 219,178
 -------------
 Real Estate Management &
 Development--0.9%
 11,354 CB Richard Ellis Group, Inc.,
 Class A (b) 244,679
 -------------
 Road & Rail--1.0%
 15,873 Hertz Global Holdings, Inc. (b) 252,222
 -------------
 Semiconductors & Semiconductor
 Equipment--1.2%
 2,802 Atheros Communications (b) 85,573
 1,529 Hittite Microwave Corp. (b) 73,025
 2,961 SiRF Technology Holdings, Inc. (b) 74,410
 2,361 Tessera Technologies, Inc. (b) 98,218
 -------------
 331,226
 -------------
 Software--0.3%
 3,195 Solera Holdings, Inc. (b) 79,172
 -------------
 Specialty Retail--0.6%
 3,033 J. Crew Group, Inc. (b) 146,221
 -------------
 Textiles, Apparel & Luxury
 Goods--1.0%
 4,068 Crocs, Inc. (b) 149,744
 4,697 Hanesbrands, Inc. (b) 127,617
 -------------
 277,361
 -------------
 Trading Companies &
 Distributors--0.8%
 3,869 Aircastle Ltd. 101,871
 2,588 UAP Holding Corp. 99,897
 -------------
 201,768
 -------------
 Wireless Telecommunication
 Services--1.7%
 8,099 Clearwire Corp., Class A (b) 111,037
 17,141 MetroPCS Communications, Inc. (b) 333,393
 -------------
 444,430
 -------------

 Total Investments--100.2%
 (Cost $24,691,056) 26,679,603
 Net Other Assets and
 Liabilities--(0.2%) (46,872)
 -------------
 Net Assets--100.0% $ 26,632,731
 =============

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

(b) Non-income producing security.

Page 48 See Notes to Financial Statements.

FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--100.3%
 Air Freight & Logistics--2.0%
 6,008 C.H. Robinson Worldwide, Inc. $ 325,153
 6,770 Expeditors International of
 Washington, Inc. 302,484
 -------------
 627,637
 -------------
 Airlines--2.0%
 8,171 Ryanair Holdings PLC ADR (b) 322,264
 8,064 UAL Corp. (b) 287,562
 -------------
 609,826
 -------------
 Beverages--1.0%
 6,705 Hansen Natural Corp. (b) 296,964
 -------------
 Biotechnology--7.6%
 6,316 Amgen, Inc. (b) 293,315
 8,277 Amylin Pharmaceuticals, Inc. (b) 306,249
 4,169 Biogen Idec, Inc. (b) 237,299
 6,266 Celgene Corp. (b) 289,552
 4,134 Cephalon, Inc. (b) 296,656
 4,351 Genzyme Corp. (b) 323,889
 6,852 Gilead Sciences, Inc. (b) 315,261
 12,480 Vertex Pharmaceuticals, Inc. (b) 289,910
 -------------
 2,352,131
 -------------
 Chemicals--1.0%
 5,876 Sigma-Aldrich Corp. 320,830
 -------------
 Commercial Services &
 Supplies--3.0%
 9,396 Cintas Corp. 315,893
 9,155 Monster Worldwide, Inc. (b) 296,622
 5,302 Stericycle, Inc. (b) 314,939
 -------------
 927,454
 -------------
 Communications Equipment--5.2%
 11,210 Cisco Systems, Inc. (b) 303,455
 9,641 Juniper Networks, Inc. (b) 320,081
 7,818 QUALCOMM, Inc. 307,638
 3,213 Research In Motion Ltd. (b) 364,354
 45,655 Tellabs, Inc. (b) 298,584
 -------------
 1,594,112
 -------------
 Computers & Peripherals--6.0%
 1,669 Apple Computer, Inc. (b) 330,596
 12,894 Dell, Inc. (b) 316,032
 9,055 Logitech International S.A. (b) 331,775
 11,934 Network Appliance, Inc. (b) 297,873
 8,242 SanDisk Corp. (b) 273,387
 16,002 Sun Microsystems, Inc. (b) 290,116
 -------------
 1,839,779
 -------------
 Construction & Engineering--1.0%
 2,003 Foster Wheeler Ltd. (b) 310,505
 -------------

 Diversified Consumer
 Services--1.0%
 4,308 Apollo Group, Inc., Class A (b) $ 302,206
 -------------
 Diversified Telecommunication
 Services--0.9%
 91,046 Level 3 Communications, Inc. (b) 276,780
 -------------
 Electronic Equipment &
 Instruments--1.0%
 26,619 Flextronics International Ltd. (b) 321,025
 -------------
 Food & Staples Retailing--2.0%
 4,490 Costco Wholesale Corp. 313,223
 7,318 Whole Foods Market, Inc. 298,574
 -------------
 611,797
 -------------
 Health Care Equipment &
 Supplies--3.1%
 7,073 DENTSPLY International, Inc. 318,426
 4,947 Hologic, Inc. (b) 339,562
 935 Intuitive Surgical, Inc. (b) 303,408
 -------------
 961,396
 -------------
 Health Care Providers &
 Services--3.1%
 4,449 Express Scripts, Inc. (b) 324,777
 5,163 Henry Schein, Inc. (b) 317,008
 9,707 Patterson Cos., Inc. (b) 329,553
 -------------
 971,338
 -------------
 Hotels, Restaurants &
 Leisure--1.9%
 14,363 Starbucks Corp. (b) 294,011
 2,627 Wynn Resorts Ltd. (b) 294,565
 -------------
 588,576
 -------------
 Household Durables--0.9%
 2,995 Garmin Ltd. 290,515
 -------------
 Internet & Catalog Retail--3.9%
 3,461 Amazon.com, Inc. (b) 320,627
 9,357 Expedia, Inc. (b) 295,868
 11,381 IAC/InterActiveCorp (b) 306,377
 14,936 Liberty Media Corp. - Interactive,
 Class A (b) 284,979
 -------------
 1,207,851
 -------------
 Internet Software & Services--6.0%
 8,467 Akamai Technologies, Inc. (b) 292,958
 830 Baidu.com, Inc. ADR (b) 324,023
 9,315 eBay, Inc. (b) 309,165
 449 Google, Inc., Class A (b) 310,475
 8,229 VeriSign, Inc. (b) 309,493
 12,826 Yahoo!, Inc. (b) 298,333
 -------------
 1,844,447
 -------------

See Notes to Financial Statements. Page 49

FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX(SM) FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks (Continued)
 IT Services--4.0%
 9,269 Cognizant Technology Solutions
 Corp., Class A (b) $ 314,590
 5,794 Fiserv, Inc. (b) 321,509
 7,181 Infosys Technologies Ltd. ADR 325,730
 7,928 Paychex, Inc. 287,152
 -------------
 1,248,981
 -------------
 Machinery--2.2%
 5,404 Joy Global, Inc. 355,691
 5,793 PACCAR, Inc. 315,603
 -------------
 671,294
 -------------
 Media--7.9%
 17,627 Comcast Corp., Class A (b) 321,869
 11,756 Discovery Holding Co., Class A (b) 295,546
 8,089 EchoStar Communications Corp.,
 Class A (b) 305,117
 5,726 Focus Media Holding Ltd. ADR (b) 325,293
 6,318 Lamar Advertising Co., Class A 303,706
 7,829 Liberty Global, Inc., Class A (b) 306,819
 90,003 Sirius Satellite Radio, Inc. (b) 272,709
 17,597 Virgin Media, Inc. 301,613
 -------------
 2,432,672
 -------------
 Metals & Mining--1.1%
 5,855 Steel Dynamics, Inc. 348,782
 -------------
 Multiline Retail--0.9%
 2,849 Sears Holdings Corp. (b) 290,740
 -------------
 Pharmaceuticals--1.1%
 6,997 Teva Pharmaceutical Industries
 Ltd. ADR 325,221
 -------------
 Semiconductors & Semiconductor
 Equipment--11.0%
 16,628 Altera Corp. 321,253
 17,364 Applied Materials, Inc. 308,385
 11,111 Broadcom Corp., Class A (b) 290,442
 11,664 Intel Corp. 310,962
 6,346 KLA-Tencor Corp. 305,623
 6,960 Lam Research Corp. (b) 300,881
 10,100 Linear Technology Corp. 321,483
 21,195 Marvell Technology Group Ltd. (b) 296,306
 10,401 Microchip Technology, Inc. 326,800
 9,166 NVIDIA Corp. (b) 311,827
 14,168 Xilinx, Inc. 309,854
 -------------
 3,403,816
 -------------
 Software--12.5%
 11,930 Activision, Inc. (b) 354,320
 7,263 Adobe Systems, Inc. (b) 310,348
 6,397 Autodesk, Inc. (b) 318,315
 19,620 BEA Systems, Inc. (b) 309,604
 18,510 Cadence Design Systems, Inc. (b) 314,855

 Software (Continued)
 14,207 Check Point Software
 Technologies Ltd. (b) $ 311,986
 8,394 Citrix Systems, Inc. (b) 319,056
 5,643 Electronic Arts, Inc. (b) 329,608
 10,597 Intuit, Inc. (b) 334,971
 9,211 Microsoft Corp. 327,912
 14,908 Oracle Corp. (b) 336,622
 18,348 Symantec Corp. (b) 296,137
 -------------
 3,863,734
 -------------
 Specialty Retail--2.8%
 10,182 Bed Bath & Beyond, Inc. (b) 299,249
 11,315 PetSmart, Inc. 266,242
 13,270 Staples, Inc. 306,139
 -------------
 871,630
 -------------
 Trading Companies &
 Distributors--1.0%
 7,438 Fastenal Co. 300,644
 -------------
 Wireless Telecommunication
 Services--3.2%
 8,184 Leap Wireless International,
 Inc. (b) 381,701
 2,655 Millicom International Cellular
 S.A. (b) 313,131
 6,099 NII Holdings, Inc. (b) 294,704
 -------------
 989,536
 -------------

 Total Investments--100.3%
 (Cost $32,649,125) 31,002,219
 Net Other Assets and
 Liabilities--(0.3%) (90,917)
 -------------
 Net Assets--100.0% $ 30,911,302
 =============

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

(b) Non-income producing security.

ADR - American Depositary Receipt.

Page 50 See Notes to Financial Statements.

FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX(SM) FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--100.3%
 Communications Equipment--13.1%
 21,821 Cisco Systems, Inc. (b) $ 590,694
 18,767 Juniper Networks, Inc. (b) 623,064
 15,217 QUALCOMM, Inc. 598,789
 6,255 Research In Motion Ltd. (b) 709,318
 88,869 Tellabs, Inc. (b) 581,203
 -------------
 3,103,068
 -------------
 Computers & Peripherals--15.1%
 3,249 Apple Computer, Inc. (b) 643,562
 25,099 Dell, Inc. (b) 615,176
 17,625 Logitech International S.A. (b) 645,781
 23,230 Network Appliance, Inc. (b) 579,821
 16,044 SanDisk Corp. (b) 532,179
 31,147 Sun Microsystems, Inc. (b) 564,695
 -------------
 3,581,214
 -------------
 Internet Software & Services--12.6%
 16,480 Akamai Technologies, Inc. (b) 570,208
 1,615 Baidu.com ADR (b) 630,480
 874 Google, Inc., Class A (b) 604,354
 16,018 VeriSign, Inc. (b) 602,437
 24,966 Yahoo!, Inc. (b) 580,709
 -------------
 2,988,188
 -------------
 IT Services--5.3%
 18,041 Cognizant Technology Solutions
 Corp., Class A (b) 612,312
 13,979 Infosys Technologies Ltd. ADR 634,087
 -------------
 1,246,399
 -------------
 Semiconductors & Semiconductor
 Equipment--28.0%
 32,367 Altera Corp. 625,330
 33,799 Applied Materials, Inc. 600,270
 21,628 Broadcom Corp., Class A (b) 565,356
 22,704 Intel Corp. 605,289
 12,352 KLA-Tencor Corp. 594,872
 13,548 Lam Research Corp. (b) 585,680
 19,660 Linear Technology Corp. 625,778
 41,257 Marvell Technology Group Ltd. (b) 576,773
 20,246 Microchip Technology, Inc. 636,129
 17,841 NVIDIA Corp. (b) 606,951
 27,579 Xilinx, Inc. 603,153
 -------------
 6,625,581
 -------------
 Software--26.2%
 14,137 Adobe Systems, Inc. (b) 604,074
 12,453 Autodesk, Inc. (b) 619,661
 38,190 BEA Systems, Inc. (b) 602,638
 36,030 Cadence Design Systems, Inc. (b) 612,870
 27,654 Check Point Software
 Technologies Ltd. (b) 607,282
 16,339 Citrix Systems, Inc. (b) 621,045
 20,628 Intuit, Inc. (b) 652,051

 Software (Continued)
 17,930 Microsoft Corp. $ 638,308
 29,019 Oracle Corp. (b) 655,250
 35,714 Symantec Corp. (b) 576,424
 -------------
 6,189,603
 -------------

 Total Investments--100.3%
 (Cost $25,513,950) 23,734,053
 Net Other Assets and
 Liabilities--(0.3%) (82,502)
 -------------
 Net Assets--100.0% $ 23,651,551
 =============

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

(b) Non-income producing security.

ADR - American Depositary Receipt.

See Notes to Financial Statements. Page 51

FIRST TRUST AMEX(R) BIOTECHNOLOGY INDEX FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--99.4%
 Biotechnology--78.8%
 68,580 Amgen, Inc. (b) $ 3,184,855
 84,170 Amylin Pharmaceuticals, Inc. (b) 3,114,290
 250,983 Applera Corp. - Celera Group (b) 3,983,100
 47,915 Biogen Idec, Inc. (b) 2,727,322
 54,885 Celgene Corp. (b) 2,536,236
 50,052 Cephalon, Inc. (b) 3,591,732
 51,210 Genentech, Inc. (b) 3,434,655
 53,617 Genzyme Corp. (b) 3,991,249
 91,389 Gilead Sciences, Inc. (b) 4,204,808
 415,013 Human Genome Sciences, Inc. (b) 4,332,736
 83,153 ImClone Systems, Inc. (b) 3,575,579
 194,316 InterMune, Inc. (b) 2,590,232
 339,465 Millennium Pharmaceuticals, Inc. (b) 5,085,185
 104,708 OSI Pharmaceuticals, Inc. (b) 5,079,385
 191,534 PDL BioPharma, Inc. (b) 3,355,676
 125,110 Vertex Pharmaceuticals, Inc. (b) 2,906,305
 -------------
 57,693,345
 -------------
 Life Sciences Tools &
 Services--20.6%
 140,447 Affymetrix, Inc. (b) 3,249,944
 46,393 Invitrogen Corp. (b) 4,333,570
 49,259 Millipore Corp. (b) 3,604,774
 587,027 Nektar Therapeutics (b) 3,938,951
 -------------
 15,127,239
 -------------

 Total Investments--99.4%
 (Cost $78,723,195) 72,820,584
 Net Other Assets and
 Liabilities--0.6% 420,463
 -------------
 Net Assets--100.0% $ 73,241,047
 =============

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

(b) Non-income producing security.

Page 52 See Notes to Financial Statements.

FIRST TRUST DOW JONES INTERNET INDEX(SM)

FUND PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--99.0%
 Capital Markets--5.7%
 138,504 E*TRADE Financial Corp. (b) $ 491,689
 78,307 TD Ameritrade Holding Corp. (b) 1,570,839
 -------------
 2,062,528
 -------------
 Commercial Services &
 Supplies--3.3%
 37,139 Monster Worldwide, Inc. (b) 1,203,304
 -------------
 Health Care Technology--3.1%
 17,948 Allscripts Healthcare Solutions,
 Inc. (b) 348,550
 58,817 HLTH Corp. (b) 788,148
 -------------
 1,136,698
 -------------
 Internet & Catalog Retail--18.9%
 40,635 Amazon.com, Inc. (b) 3,764,425
 6,292 Audible, Inc. (b) 56,125
 63,975 IAC/InterActiveCorp. (b) 1,722,207
 4,237 Overstock.com, Inc. (b) 65,801
 11,109 Priceline.com, Inc. (b) 1,275,980
 -------------
 6,884,538
 -------------
 Internet Software &
 Services--55.6%
 51,060 Akamai Technologies, Inc. (b) 1,766,676
 25,573 Ariba, Inc. (b) 285,139
 41,407 Art Technology Group, Inc. (b) 178,878
 14,072 Autobytel, Inc. (b) 38,698
 15,774 CMGI, Inc. (b) 206,482
 45,685 CNET Networks, Inc. (b) 417,561
 12,806 DealerTrack Holdings, Inc. (b) 428,617
 13,011 Digital River, Inc. (b) 430,274
 39,024 EarthLink, Inc. (b) 275,900
 110,407 eBay, Inc. (b) 3,664,407
 5,243 Google, Inc., Class A (b) 3,625,430
 10,696 InfoSpace, Inc. 201,085
 15,862 Internap Network Services Corp. (b) 132,130
 12,761 Interwoven, Inc. (b) 181,461
 16,128 j2 Global Communications, Inc. (b) 341,430
 7,303 Jupitermedia Corp. (b) 27,897
 31,255 RealNetworks, Inc. (b) 190,343
 20,133 SonicWALL, Inc. (b) 215,826
 21,942 United Online, Inc. 259,354
 32,353 ValueClick, Inc. (b) 708,531
 71,638 VeriSign, Inc. (b) 2,694,305
 8,632 Vignette Corp. (b) 126,114
 14,531 Websense, Inc. (b) 246,736
 153,379 Yahoo!, Inc. (b) 3,567,596
 -------------
 20,210,870
 -------------
 IT Services--1.7%
 21,960 CyberSource Corp. (b) 390,229
 26,368 Sapient Corp. (b) 232,302
 -------------
 622,531
 -------------

 Software--10.7%
 113,434 BEA Systems, Inc. (b) $ 1,789,988
 58,097 Check Point Software Technologies
 Ltd. (b) 1,275,810
 17,872 Quest Software, Inc. (b) 329,560
 61,783 TIBCO Software, Inc. (b) 498,589
 -------------
 3,893,947
 -------------

 Total Common Stocks--99.0%
 (Cost $38,881,967) 36,014,416
 -------------

 Money Market Funds--0.3%
 109,845 J.P. Morgan Institutional Treasury
 Money Market Fund - 3.09% (c)
 (Cost $109,845) 109,845
 -------------

 Total Investments--99.3%
 (Cost $38,991,812) 36,124,261
 Net Other Assets and
 Liabilities--0.7% 261,395
 -------------
 Net Assets--100.0% $ 36,385,656
 =============

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

(b) Non-income producing security.

See Notes to Financial Statements. Page 53

FIRST TRUST DB STRATEGIC VALUE INDEX FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--100.0%
 Biotechnology--2.2%
 28,751 Amgen, Inc. (b) $ 1,335,196
 -------------
 Chemicals--2.4%
 37,628 Dow Chemical (The) Co. 1,483,296
 -------------
 Computers & Peripherals--2.5%
 14,454 International Business Machines
 Corp. 1,562,477
 -------------
 Energy Equipment &
 Services--5.3%
 41,970 Halliburton Co. 1,591,083
 29,402 Noble Corp. 1,661,507
 -------------
 3,252,590
 -------------
 Food & Staples Retailing--2.5%
 32,306 Wal-Mart Stores, Inc. 1,535,504
 -------------
 Health Care Equipment &
 Supplies--2.5%
 22,792 Zimmer Holdings, Inc. (b) 1,507,691
 -------------
 Health Care Providers &
 Services--2.5%
 26,110 Cardinal Health, Inc. 1,507,853
 -------------
 Hotels, Restaurants &
 Leisure--2.5%
 35,034 Carnival Corp. 1,558,663
 -------------
 Machinery--9.7%
 21,327 Caterpillar, Inc. 1,547,487
 30,682 Ingersoll-Rand Co. Ltd., Class A 1,425,793
 28,870 PACCAR, Inc. 1,572,837
 19,278 Parker Hannifin Corp. 1,451,826
 -------------
 5,997,943
 -------------
 Media--7.5%
 58,446 CBS Corp., Class B 1,592,654
 75,078 News Corp., Class A 1,538,348
 91,444 Time Warner, Inc. 1,509,740
 -------------
 4,640,742
 -------------
 Metals & Mining--2.5%
 25,892 Nucor Corp. 1,533,324
 -------------
 Multiline Retail--2.3%
 30,969 Kohl's Corp. (b) 1,418,380
 -------------
 Office Electronics--2.4%
 90,247 Xerox Corp. 1,461,099
 -------------
 Oil, Gas & Consumable Fuels--19.0%
 25,802 Anadarko Petroleum Corp. 1,694,933
 15,860 Apache Corp. 1,705,585
 17,352 Chevron Corp. 1,619,462
 19,035 ConocoPhillips 1,680,791

 Oil, Gas & Consumable
 Fuels (Continued)
 17,341 Exxon Mobil Corp. $ 1,624,678
 27,110 Marathon Oil Corp. 1,649,915
 21,859 Occidental Petroleum Corp. 1,682,924
 -------------
 11,658,288
 -------------
 Pharmaceuticals--12.3%
 29,402 Eli Lilly & Co. 1,569,773
 23,216 Johnson & Johnson 1,548,507
 26,649 Merck & Co., Inc. 1,548,573
 65,604 Pfizer, Inc. 1,491,179
 32,419 Wyeth 1,432,596
 -------------
 7,590,628
 -------------
 Road & Rail--2.5%
 29,923 Norfolk Southern Corp. 1,509,316
 -------------
 Semiconductors & Semiconductor
 Equipment--5.1%
 84,975 Applied Materials, Inc. 1,509,156
 49,137 Texas Instruments, Inc. 1,641,176
 -------------
 3,150,332
 -------------
 Specialty Retail--9.7%
 30,082 Best Buy Co., Inc. 1,583,817
 53,769 Home Depot (The), Inc. 1,448,537
 63,451 Lowe's Cos., Inc. 1,435,262
 63,989 Staples, Inc. 1,476,226
 -------------
 5,943,842
 -------------
 Textiles, Apparel & Luxury
 Goods--2.5%
 24,242 NIKE, Inc., Class B 1,557,306
 -------------
 Wireless Telecommunication
 Services--2.1%
 100,420 Sprint Nextel Corp. 1,318,515
 -------------

 Total Investments--100.0%
 (Cost $63,126,173) 61,522,985
 Net Other Assets and
 Liabilities--(0.0%) (5,292)
 -------------
 Net Assets--100.0% $ 61,517,693
 =============

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

(b) Non-income producing security.

Page 54 See Notes to Financial Statements.

FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--100.4%
 Aerospace & Defense--2.7%
 576 Ceradyne, Inc. (b) $ 27,032
 1,977 Northrop Grumman Corp. 155,471
 2,789 Raytheon Co. 169,292
 -------------
 351,795
 -------------
 Air Freight & Logistics--1.3%
 1,108 Forward Air Corp. 34,536
 2,001 United Parcel Service, Inc.,
 Class B 141,511
 -------------
 176,047
 -------------
 Airlines--0.2%
 4,223 AirTran Holdings, Inc. (b) 30,237
 -------------
 Auto Components--0.6%
 3,003 Gentex Corp. 53,363
 1,180 Tenneco, Inc. (b) 30,763
 -------------
 84,126
 -------------
 Automobiles--2.0%
 5,026 General Motors Corp. 125,097
 1,287 Toyota Motor Corp. ADR 136,641
 -------------
 261,738
 -------------
 Beverages--1.7%
 1,347 Hansen Natural Corp. (b) 59,659
 2,260 PepsiCo, Inc. 171,534
 -------------
 231,193
 -------------
 Biotechnology--0.9%
 1,270 LifeCell Corp. (b) 54,750
 619 United Therapeutics Corp. (b) 60,445
 -------------
 115,195
 -------------
 Chemicals--2.3%
 1,734 Air Products and Chemicals, Inc. 171,024
 3,110 Hercules, Inc. 60,179
 1,295 Sigma-Aldrich Corp. 70,707
 -------------
 301,910
 -------------
 Commercial Banks--2.0%
 3,395 Huntington Bancshares, Inc. 50,110
 2,142 Old National Bancorp 32,044
 2,175 PNC Financial Services Group, Inc. 142,789
 1,644 Whitney Holding Corp. 42,991
 -------------
 267,934
 -------------
 Commercial Services &
 Supplies--1.6%
 701 Advisory Board (The) Co. (b) 44,997
 4,839 Allied Waste Industries, Inc. (b) 53,326
 1,714 Copart, Inc. (b) 72,931
 1,136 HNI Corp. 39,828
 -------------
 211,082
 -------------

 Communications Equipment--3.9%
 2,579 ADC Telecommunications, Inc. (b) $ 40,103
 1,006 Dycom Industries, Inc. (b) 26,810
 5,135 Nokia Oyj ADR 197,133
 2,225 Research In Motion Ltd. (b) 252,315
 -------------
 516,361
 -------------
 Computers & Peripherals--1.1%
 1,363 International Business Machines
 Corp. 147,340
 -------------
 Containers & Packaging--1.3%
 1,482 Bemis Co., Inc. 40,577
 2,626 Crown Holdings, Inc. (b) 67,357
 2,162 Sonoco Products Co. 70,654
 -------------
 178,588
 -------------
 Distributors--0.4%
 2,560 LKQ Corp. (b) 53,811
 -------------
 Diversified Consumer
 Services--2.2%
 2,674 Apollo Group, Inc., Class A (b) 187,581
 922 Bright Horizons Family Solutions,
 Inc. (b) 31,846
 390 Strayer Education, Inc. 66,526
 -------------
 285,953
 -------------
 Diversified Financial
 Services--0.8%
 2,807 Moody's Corp. 100,210
 -------------
 Diversified Telecommunication
 Services--2.1%
 1,463 CenturyTel, Inc. 60,656
 8,805 Cincinnati Bell, Inc. (b) 41,824
 18,345 Qwest Communications
 International, Inc. (b) 128,598
 3,100 Telecom Corp. of New Zealand
 Ltd. ADR 51,491
 -------------
 282,569
 -------------
 Electric Utilities--3.4%
 963 ALLETE, Inc. 38,116
 1,825 El Paso Electric Co. (b) 46,665
 1,825 Hawaiian Electric Industries, Inc. 41,555
 1,512 Pinnacle West Capital Corp. 64,124
 1,473 Portland General Electric Co. 40,920
 6,142 Reliant Energy, Inc. (b) 161,166
 2,463 Westar Energy, Inc. 63,890
 -------------
 456,436
 -------------
 Electronic Equipment &
 Instruments--1.4%
 1,445 Arrow Electronics, Inc. (b) 56,760
 3,975 AVX Corp. 53,345
 2,438 FLIR Systems, Inc. (b) 76,309
 -------------
 186,414
 -------------

See Notes to Financial Statements. Page 55

FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks (Continued)
 Energy Equipment & Services--9.9%
 539 Core Laboratories N.V. (b) $ 67,224
 1,593 Diamond Offshore Drilling, Inc. 226,205
 2,675 ENSCO International, Inc. 159,484
 2,811 Global Industries Ltd. (b) 60,212
 4,621 Halliburton Co. 175,182
 1,947 Helmerich & Payne, Inc. 78,016
 3,163 Noble Corp. 178,741
 1,667 Schlumberger Ltd. 163,983
 1,431 Transocean, Inc. 204,848
 -------------
 1,313,895
 -------------
 Food Products--0.7%
 1,988 Flowers Foods, Inc. 46,539
 1,026 Lancaster Colony Corp. 40,732
 -------------
 87,271
 -------------
 Gas Utilities--2.3%
 2,209 Atmos Energy Corp. 61,940
 933 New Jersey Resources Corp. 46,669
 853 Northwest Natural Gas Co. 41,507
 1,169 South Jersey Industries, Inc. 42,189
 2,587 UGI Corp. 70,496
 1,237 WGL Holdings, Inc. 40,524
 -------------
 303,325
 -------------
 Health Care Equipment &
 Supplies--2.1%
 781 ArthroCare Corp. (b) 37,527
 1,235 Hillenbrand Industries, Inc. 68,826
 1,139 IDEXX Laboratories, Inc. (b) 66,780
 1,226 Immucor, Inc. (b) 41,672
 1,081 Kinetic Concepts, Inc. (b) 57,898
 -------------
 272,703
 -------------
 Household Durables--2.3%
 1,542 Garmin Ltd. 149,574
 3,091 Leggett & Platt, Inc. 53,907
 2,094 Tempur-Pedic International, Inc. 54,381
 1,374 Tupperware Brands Corp. 45,383
 -------------
 303,245
 -------------
 Industrial Conglomerates--1.1%
 1,786 3M Co. 150,596
 -------------
 Insurance--8.7%
 929 Ambac Financial Group, Inc. 23,940
 1,707 Assured Guaranty Ltd. 45,304
 42 Berkshire Hathaway, Inc., Class B (b) 198,913
 639 Everest Re Group Ltd. 64,156
 1,463 Hanover Insurance Group, Inc. 67,005
 3,466 Loews Corp. 174,478
 1,609 MaxCapital Group Ltd. 45,036
 2,667 MetLife, Inc. 164,341
 622 RLI Corp. 35,323

 Insurance (Continued)
 976 Transatlantic Holdings, Inc. $ 70,926
 3,033 Travelers (The) Cos., Inc. 163,175
 2,043 XL Capital Ltd., Class A 102,783
 -------------
 1,155,380
 -------------
 Life Sciences Tools &
 Services--0.5%
 758 Ventana Medical Systems, Inc. (b) 66,120
 -------------
 Machinery--9.5%
 1,315 Actuant Corp., Class A 44,723
 772 Astec Industries, Inc. (b) 28,711
 1,284 Barnes Group, Inc. 42,873
 917 Cascade Corp. 42,604
 1,052 CLARCOR, Inc. 39,944
 3,036 CNH Global N.V. 199,830
 1,346 Cummins, Inc. 171,440
 1,076 Gardner Denver, Inc. (b) 35,508
 1,462 Graco, Inc. 54,474
 2,811 Illinois Tool Works, Inc. 150,501
 1,279 Joy Global, Inc. 84,184
 746 Kaydon Corp. 40,687
 830 Lincoln Electric Holdings, Inc. 59,079
 2,240 Parker Hannifin Corp. 168,694
 1,080 Toro (The) Co. 58,795
 492 Valmont Industries, Inc. 43,847
 -------------
 1,265,894
 -------------
 Media--2.4%
 6,036 Comcast Corp., Class A (b) 110,217
 1,633 Harte-Hanks, Inc. 28,251
 2,882 Lee Enterprises, Inc. 42,221
 8,246 Time Warner, Inc. 136,142
 -------------
 316,831
 -------------
 Metals & Mining--3.9%
 2,614 BHP Billiton Ltd. ADR 183,084
 913 Cleveland-Cliffs, Inc. 92,030
 2,041 Fording Canadian Coal Trust 78,783
 1,582 Southern Copper Corp. 166,316
 -------------
 520,213
 -------------
 Multi-Utilities--3.1%
 1,658 Alliant Energy Corp. 67,464
 3,034 Ameren Corp. 164,473
 1,902 NSTAR 68,890
 1,969 OGE Energy Corp. 71,455
 1,686 PNM Resources, Inc. 36,165
 -------------
 408,447
 -------------
 Oil, Gas & Consumable Fuels--9.0%
 1,139 Berry Petroleum Co., Class A 50,629
 2,262 Canadian Natural Resources Ltd. 165,443
 1,817 Exxon Mobil Corp. 170,235
 1,708 Frontier Oil Corp. 69,311
 1,485 Frontline Ltd. 71,280

Page 56 See Notes to Financial Statements.

FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks (Continued)
 Oil, Gas & Consumable Fuels
 (Continued)
 1,054 Holly Corp. $ 53,638
 3,563 Imperial Oil Ltd. 195,180
 3,018 Marathon Oil Corp. 183,675
 2,137 Massey Energy Co. 76,398
 3,064 Petro-Canada 164,292
 -------------
 1,200,081
 -------------
 Personal Products--0.3%
 1,614 NBTY, Inc. (b) 44,224
 -------------
 Real Estate Investment Trusts--1.2%
 2,484 ProLogis 157,436
 -------------
 Road & Rail--2.3%
 3,267 CSX Corp. 143,683
 1,316 Union Pacific Corp. 165,316
 -------------
 308,999
 -------------
 Semiconductors & Semiconductor
 Equipment--2.8%
 7,018 Applied Materials, Inc. 124,640
 2,810 Brooks Automation, Inc. (b) 37,120
 1,764 Lam Research Corp. (b) 76,258
 4,323 Linear Technology Corp. 137,601
 -------------
 375,619
 -------------
 Software--1.4%
 820 Advent Software, Inc. (b) 44,362
 2,805 SAP AG ADR 143,195
 -------------
 187,557
 -------------
 Specialty Retail--2.0%
 1,913 Aeropostale, Inc. (b) 50,695
 1,246 Barnes & Noble, Inc. 42,925
 1,240 Guess?, Inc. 46,984
 2,221 Sherwin-Williams (The) Co. 128,906
 -------------
 269,510
 -------------
 Textiles, Apparel & Luxury
 Goods--0.5%
 431 Deckers Outdoor Corp. (b) 66,831
 -------------
 Tobacco--1.7%
 2,355 British American Tobacco PLC ADR 185,009
 814 Universal Corp. 41,693
 -------------
 226,702
 -------------
 Trading Companies & Distributors--0.8%
 1,368 Applied Industrial Technologies, Inc. 39,699
 711 W.W. Grainger, Inc. 62,227
 -------------
 101,926
 -------------


 Total Investments--100.4%
 (Cost $12,674,262) $ 13,341,744
 Net Other Assets and
 Liabilities--(0.4%) (50,378)
 -------------

Net Assets--100.0% $ 13,291,366

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

(b) Non-income producing security.

ADR - American Depositary Receipt.

See Notes to Financial Statements. Page 57

FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--100.0%
 Air Freight & Logistics--0.5%
 13,790 United Parcel Service, Inc.,
 Class B $ 975,229
 -------------
 Auto Components--0.6%
 18,804 Autoliv, Inc. 991,159
 -------------
 Automobiles--1.1%
 30,077 Honda Motor Co., Ltd. ADR 996,752
 9,445 Toyota Motor Corp. ADR 1,002,775
 -------------
 1,999,527
 -------------
 Beverages--1.1%
 18,906 Anheuser-Busch Cos., Inc. 989,540
 16,026 Coca-Cola (The) Co. 983,516
 -------------
 1,973,056
 -------------
 Building Products--0.6%
 46,681 Masco Corp. 1,008,776
 -------------
 Capital Markets--1.1%
 23,999 Federated Investors, Inc., Class B 987,799
 18,794 Merrill Lynch & Co., Inc. 1,008,862
 -------------
 1,996,661
 -------------
 Chemicals--1.7%
 21,312 Ashland, Inc. 1,010,828
 22,396 E.I. du Pont de Nemours & Co. 987,440
 14,108 PPG Industries, Inc. 990,805
 -------------
 2,989,073
 -------------
 Commercial Banks--15.3%
 35,807 Associated Banc-Corp. 970,012
 19,495 Bank of Hawaii Corp. 996,974
 17,737 Bank of Montreal 1,003,914
 19,593 Bank of Nova Scotia 989,447
 31,361 BB&T Corp. 961,842
 13,922 Canadian Imperial Bank of Commerce 994,448
 16,444 City National Corp. 979,240
 22,566 Comerica, Inc. 982,298
 22,371 Commerce Bancshares, Inc. 1,003,563
 19,503 Cullen/Frost Bankers, Inc. 988,022
 37,490 Fifth Third Bancorp. 942,124
 31,596 First Midwest Bancorp, Inc. 966,838
 12,278 M&T Bank Corp. 1,001,516
 36,769 Marshall & Ilsley Corp. 973,643
 58,251 National City Corp. 958,811
 64,439 Old National Bancorp 964,007
 15,228 PNC Financial Services Group, Inc. 999,718
 40,912 Regions Financial Corp. 967,569
 19,812 Royal Bank of Canada 1,011,205
 16,151 SunTrust Banks, Inc. 1,009,277
 41,262 Synovus Financial Corp. 993,589
 14,302 Toronto-Dominion Bank (The) 1,000,425
 31,130 U.S. Bancorp 988,066
 25,465 Wachovia Corp. 968,434
 32,467 Wells Fargo & Co. 980,179

 Commercial Banks (Continued)
 37,925 Whitney Holding Corp. $ 991,739
 28,052 Wilmington Trust Corp. 987,430
 20,745 Zions Bancorporation 968,584
 -------------
 27,542,914
 -------------
 Commercial Services &
 Supplies--3.9%
 19,332 Avery Dennison Corp. 1,027,303
 16,541 Corporate Executive Board
 (The) Co. 994,114
 27,586 HNI Corp. 967,165
 26,428 Pitney Bowes, Inc. 1,005,321
 27,063 R.R. Donnelley & Sons Co. 1,021,358
 31,044 Republic Services, Inc. 973,229
 29,979 Waste Management, Inc. 979,414
 -------------
 6,967,904
 -------------
 Computers & Peripherals--0.5%
 33,487 Diebold, Inc. 970,453
 -------------
 Construction Materials--0.5%
 12,461 Vulcan Materials Co. 985,540
 -------------
 Containers & Packaging--1.1%
 37,911 Bemis Co., Inc. 1,038,003
 30,112 Sonoco Products Co. 984,060
 -------------
 2,022,063
 -------------
 Distributors--0.5%
 20,711 Genuine Parts Co. 958,919
 -------------
 Diversified Financial
 Services--0.6%
 23,959 Bank of America Corp. 988,548
 -------------
 Diversified Telecommunication
 Services--2.2%
 24,409 AT&T, Inc. 1,014,438
 60,189 Telecom Corp. of New Zealand
 Ltd. ADR 999,739
 10,352 Telefonica S.A. ADR 1,010,252
 22,616 Verizon Communications, Inc. 988,093
 -------------
 4,012,522
 -------------
 Electric Utilities--8.3%
 24,587 ALLETE, Inc. 973,153
 49,365 Duke Energy Corp. 995,692
 8,438 Entergy Corp. 1,008,510
 12,344 Exelon Corp. 1,007,764
 13,663 FirstEnergy Corp. 988,381
 14,807 FPL Group, Inc. 1,003,618
 34,350 Great Plains Energy, Inc. 1,007,142
 43,606 Hawaiian Electric Industries, Inc. 992,909
 27,385 Otter Tail Corp. 947,521
 23,519 Pinnacle West Capital Corp. 997,441
 37,643 Portland General Electric Co. 1,045,722
 19,332 PPL Corp. 1,007,004

Page 58 See Notes to Financial Statements.

FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks (Continued)
 Electric Utilities (Continued)
 20,518 Progress Energy, Inc. $ 993,687
 25,881 Southern Co. 1,002,889
 37,939 Westar Energy, Inc. 984,138
 -------------
 14,955,571
 -------------
 Electrical Equipment--1.1%
 17,632 Emerson Electric Co. 999,029
 19,095 Hubbell, Inc., Class B 985,302
 -------------
 1,984,331
 -------------
 Food & Staples Retailing--1.1%
 31,459 Sysco Corp. 981,836
 24,380 Weis Markets, Inc. 973,737
 -------------
 1,955,573
 -------------
 Food Products--7.7%
 19,800 Cadbury Schweppes PLC ADR 977,526
 27,730 Campbell Soup Co. 990,793
 41,618 ConAgra Foods, Inc. 990,092
 17,477 General Mills, Inc. 996,189
 21,443 H.J. Heinz Co. 1,000,959
 25,535 Hershey (The) Co. 1,006,079
 19,735 J.M. Smucker (The) Co. 1,015,168
 18,895 Kellogg Co. 990,665
 30,347 Kraft Foods, Inc., Class A 990,223
 24,257 Lancaster Colony Corp. 963,003
 25,980 McCormick & Co., Inc. 984,902
 62,299 Sara Lee Corp. 1,000,522
 26,798 Unilever PLC ADR 1,002,781
 16,925 Wm. Wrigley Jr. Co. 990,959
 -------------
 13,899,861
 -------------
 Gas Utilities--4.9%
 27,187 AGL Resources, Inc. 1,023,318
 35,222 Atmos Energy Corp. 987,625
 20,968 National Fuel Gas Co. 978,786
 19,689 New Jersey Resources Corp. 984,844
 20,219 Northwest Natural Gas Co. 983,857
 36,490 Piedmont Natural Gas Co. 954,578
 26,671 South Jersey Industries, Inc. 962,556
 37,338 UGI Corp. 1,017,461
 29,602 WGL Holdings, Inc. 969,762
 -------------
 8,862,787
 -------------
 Health Care Equipment &
 Supplies--0.6%
 18,089 Hillenbrand Industries, Inc. 1,008,100
 -------------
 Hotels, Restaurants &
 Leisure--0.5%
 16,796 McDonald's Corp. 989,452
 -------------
 Household Durables--1.7%
 13,680 Fortune Brands, Inc. 989,885
 57,555 Leggett & Platt, Inc. 1,003,759

 Household Durables (Continued)
 20,852 Snap-on, Inc. $ 1,005,900
 -------------
 2,999,544
 -------------
 Household Products--1.1%
 15,311 Clorox (The) Co. 997,818
 14,506 Kimberly-Clark Corp. 1,005,846
 -------------
 2,003,664
 -------------
 Industrial Conglomerates--1.7%
 11,743 3M Co. 990,170
 26,991 General Electric Co. 1,000,556
 16,566 Teleflex, Inc. 1,043,824
 -------------
 3,034,550
 -------------
 Insurance--6.0%
 19,167 Allstate (The) Corp. 1,001,092
 18,384 Chubb (The) Corp. 1,003,399
 25,012 Cincinnati Financial Corp. 988,974
 18,783 Erie Indemnity Co., Class A 974,650
 16,903 Lincoln National Corp. 984,093
 24,665 Manulife Financial Corp. 1,005,099
 19,921 Mercury General Corp. 992,265
 64,439 Old Republic International Corp. 993,005
 23,868 Protective Life Corp. 979,065
 18,391 Travelers (The) Cos., Inc. 989,436
 19,265 XL Capital Ltd., Class A 969,222
 -------------
 10,880,300
 -------------
 IT Services--1.1%
 22,132 Automatic Data Processing, Inc. 985,538
 27,034 Paychex, Inc. 979,171
 -------------
 1,964,709
 -------------
 Machinery--1.1%
 13,934 Caterpillar, Inc. 1,011,051
 18,388 Illinois Tool Works, Inc. 984,494
 -------------
 1,995,545
 -------------
 Media--1.7%
 25,974 Gannett Co., Inc. 1,012,986
 57,951 New York Times (The) Co., Class A 1,015,881
 24,725 Thomson (The) Corp. 1,007,544
 -------------
 3,036,411
 -------------
 Multi-Utilities--8.9%
 24,193 Alliant Energy Corp. 984,413
 18,600 Ameren Corp. 1,008,307
 20,860 Consolidated Edison, Inc. 1,019,012
 20,929 Dominion Resources, Inc. 993,081
 37,201 Energy East Corp. 1,012,240
 19,480 Integrys Energy Group, Inc. 1,006,921
 36,307 MDU Resources Group, Inc. 1,002,436
 27,624 NSTAR 1,000,541
 27,722 OGE Energy Corp. 1,006,031
 22,758 PG&E Corp. 980,642

See Notes to Financial Statements. Page 59

FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks (Continued)
 Multi-Utilities (Continued)
 45,384 PNM Resources, Inc. $ 973,487
 23,541 SCANA Corp. 992,253
 16,061 Sempra Energy 993,855
 33,924 Vectren Corp. 984,135
 20,394 Wisconsin Energy Corp. 993,392
 44,062 Xcel Energy, Inc. 994,479
 -------------
 15,945,225
 -------------
 Oil, Gas & Consumable
 Fuels--3.4%
 13,793 BP PLC ADR 1,009,234
 10,722 Chevron Corp. 1,000,684
 25,356 Enbridge, Inc. 1,025,143
 12,137 Royal Dutch Shell PLC ADR 1,021,935
 12,517 Total SA ADR 1,033,904
 25,018 TransCanada Corp. 1,023,987
 -------------
 6,114,887
 -------------
 Paper & Forest Products--0.5%
 30,539 International Paper Co. 988,853
 -------------
 Pharmaceuticals--4.4%
 17,360 Abbott Laboratories 974,764
 36,152 Bristol-Myers Squibb Co. 958,751
 18,590 Eli Lilly and Co. 992,520
 19,769 GlaxoSmithKline PLC ADR 996,159
 14,925 Johnson & Johnson 995,498
 43,420 Pfizer, Inc. 986,937
 21,640 Sanofi-Aventis ADR 985,269
 22,288 Wyeth 984,907
 -------------
 7,874,805
 -------------
 Real Estate Investment
 Trusts--8.0%
 23,757 BRE Properties, Inc. 962,871
 37,242 Duke Realty Corp. 971,271
 26,067 Equity Residential 950,663
 11,957 Federal Realty Investment Trust 982,268
 29,533 Health Care Property Investors, Inc. 1,027,159
 25,756 Kimco Realty Corp. 937,518
 32,719 Liberty Property Trust 942,634
 28,615 Mack-Cali Realty Corp. 972,910
 21,007 Plum Creek Timber Co., Inc. 967,162
 15,990 ProLogis 1,013,446
 12,707 Public Storage 932,821
 10,810 Simon Property Group, Inc. 938,957
 47,335 United Dominion Realty Trust, Inc. 939,600
 30,548 Washington Real Estate
 Investment Trust 959,513
 29,828 Weingarten Realty Investors 937,792
 -------------
 14,436,585
 -------------

 Specialty Retail--1.1%
 37,504 Home Depot (The), Inc. $ 1,010,357
 17,143 Sherwin-Williams (The) Co. 994,980
 -------------
 2,005,337
 -------------
 Textiles, Apparel & Luxury
 Goods--0.5%
 13,724 VF Corp. 942,290
 -------------
 Thrifts & Mortgage Finance--2.2%
 41,532 Astoria Financial Corp. 966,450
 31,606 Capitol Federal Financial 979,786
 30,752 Freddie Mac 1,047,720
 45,961 Washington Federal, Inc. 970,237
 -------------
 3,964,193
 -------------
 Tobacco--1.1%
 13,057 Altria Group, Inc. 986,848
 19,211 Universal Corp. 983,987
 -------------
 1,970,835
 -------------

 Total Investments--100.0%
 (Cost $189,756,276) 180,195,752
 Net Other Assets and
 Liabilities--0.0% (42,530)
 -------------
 Net Assets--100.0% $ 180,153,222
 =============

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

ADR - American Depositary Receipt.

Page 60 See Notes to Financial Statements.

FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks (1)--100.0%
 Air Freight & Logistics--3.3%
 677 C.H. Robinson Worldwide, Inc. $ 36,639
 763 Expeditors International of
 Washington, Inc. 34,091
 -------------
 70,730
 -------------
 Airlines--3.2%
 921 Ryanair Holdings PLC ADR (b) 36,325
 908 UAL Corp. (b) 32,379
 -------------
 68,704
 -------------
 Beverages--1.6%
 755 Hansen Natural Corp. (b) 33,439
 -------------
 Biotechnology--12.5%
 712 Amgen, Inc. (b) 33,065
 932 Amylin Pharmaceuticals, Inc. (b) 34,484
 470 Biogen Idec, Inc. (b) 26,752
 706 Celgene Corp. (b) 32,624
 466 Cephalon, Inc. (b) 33,440
 490 Genzyme Corp. (b) 36,477
 772 Gilead Sciences, Inc. (b) 35,520
 1,406 Vertex Pharmaceuticals, Inc. (b) 32,661
 -------------
 265,023
 -------------
 Chemicals--1.7%
 662 Sigma-Aldrich Corp. 36,145
 -------------
 Commercial Services &
 Supplies--4.9%
 1,059 Cintas Corp. 35,604
 1,031 Monster Worldwide, Inc. (b) 33,404
 597 Stericycle, Inc. (b) 35,462
 -------------
 104,470
 -------------
 Construction & Engineering--1.7%
 226 Foster Wheeler Ltd. (b) 35,035
 -------------
 Diversified Consumer
 Services--1.6%
 485 Apollo Group, Inc., Class A (b) 34,023
 -------------
 Diversified Telecommunication
 Services--1.5%
 10,257 Level 3 Communications, Inc. (b) 31,181
 -------------
 Electronic Equipment &
 Instruments--1.7%
 2,999 Flextronics International Ltd. (b) 36,168
 -------------
 Food & Staples Retailing--3.3%
 506 Costco Wholesale Corp. 35,299
 824 Whole Foods Market, Inc. 33,619
 -------------
 68,918
 -------------
 Health Care Equipment & Supplies--5.1%
 797 DENTSPLY International, Inc. 35,881

 Health Care Equipment &
 Supplies (Continued)
 557 Hologic, Inc. (b) $ 38,232
 105 Intuitive Surgical, Inc. (b) 34,073
 -------------
 108,186
 -------------
 Health Care Providers &
 Services--5.2%
 501 Express Scripts, Inc. (b) 36,573
 582 Henry Schein, Inc. (b) 35,735
 1,094 Patterson Cos., Inc. (b) 37,141
 -------------
 109,449
 -------------
 Hotels, Restaurants &
 Leisure--3.1%
 1,618 Starbucks Corp. (b) 33,120
 296 Wynn Resorts Ltd. 33,191
 -------------
 66,311
 -------------
 Household Durables--1.6%
 337 Garmin Ltd. 32,689
 -------------
 Internet & Catalog Retail--6.4%
 390 Amazon.com, Inc. (b) 36,130
 1,054 Expedia, Inc. (b) 33,327
 1,282 IAC/InterActiveCorp (b) 34,511
 1,683 Liberty Media Corp. - Interactive,
 Class A (b) 32,112
 -------------
 136,080
 -------------
 Internet Software &
 Services--1.6%
 1,049 eBay, Inc. (b) 34,816
 -------------
 IT Services--3.2%
 653 Fiserv, Inc. (b) 36,235
 893 Paychex, Inc. 32,344
 -------------
 68,579
 -------------
 Machinery--3.6%
 609 Joy Global, Inc. 40,085
 653 PACCAR, Inc. 35,575
 -------------
 75,660
 -------------
 Media--12.9%
 1,986 Comcast Corp., Class A (b) 36,264
 1,324 Discovery Holding Co., Class A (b) 33,285
 911 EchoStar Communications Corp.,
 Class A (b) 34,363
 645 Focus Media Holding Ltd. ADR (b) 36,642
 712 Lamar Advertising Co., Class A 34,226
 882 Liberty Global, Inc., Class A (b) 34,566
 10,139 Sirius Satellite Radio, Inc. (b) 30,721
 1,982 Virgin Media, Inc. 33,971
 -------------
 274,038
 -------------

See Notes to Financial Statements. Page 61

FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX(SM) FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks (1) (Continued)
 Metals & Mining--1.9%
 660 Steel Dynamics, Inc. $ 39,316
 -------------
 Multiline Retail--1.6%
 321 Sears Holdings Corp. (b) 32,758
 -------------
 Pharmaceuticals--1.7%
 788 Teva Pharmaceutical Industries
 Ltd. ADR 36,626
 -------------
 Software--3.6%
 1,344 Activision, Inc. (b) 39,917
 636 Electronic Arts, Inc. (b) 37,149
 -------------
 77,066
 -------------
 Specialty Retail--4.6%
 1,147 Bed Bath & Beyond, Inc. (b) 33,710
 1,275 PetSmart, Inc. 30,001
 1,495 Staples, Inc. 34,490
 -------------
 98,201
 -------------
 Trading Companies &
 Distributors--1.6%
 838 Fastenal Co. 33,872
 -------------
 Wireless Telecommunication
 Services--5.3%
 922 Leap Wireless International,
 Inc. (b) 43,002
 299 Millicom International Cellular
 S.A. (b) 35,264
 687 NII Holdings, Inc. (b) 33,196
 -------------
 111,462
 -------------

 Total Common Stocks--100.0%
 (Cost $2,327,753) 2,118,945
 -------------

 Money Market Funds--2.5%
 25,000 Federated Treasury Obligation -
 3.36% (c) 25,000
 28,693 J.P. Morgan Institutional Treasury
 Money Market Fund - 3.09% (c) 28,693
 -------------
 Total Money Market Funds--2.5%
 (Cost $53,693) 53,693
 -------------

 Total Investments--102.5%
 (Cost $2,381,446) 2,172,638
 Net Other Assets and
 Liabilities--(2.5%) (54,066)
 -------------
 Net Assets--100.0% $ 2,118,572
 =============

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

(b) Non-income producing security.

ADR - American Depositary Receipt.

(1) The industry allocation is based on Standard & Poor's Global Industry Classification Standard (GICS), and is different than the industry sector classification system used by the Index to select securities, which is the Industry Classification Benchmark (ICB) system, the joint classification system of Dow Jones Indexes and FTSE Group.

Page 62 See Notes to Financial Statements.

FIRST TRUST NASDAQ(R) CLEAN EDGE(R) U.S. LIQUID SERIES INDEX FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--99.8%
 Aerospace & Defense--2.9%
 60,381 Hexcel Corp. (b) $ 1,466,051
 -------------
 Auto Components--0.7%
 72,383 Ballard Power Systems, Inc. (b) 380,735
 -------------
 Beverages--0.2%
 10,423 MGP Ingredients, Inc. 98,185
 -------------
 Biotechnology--0.7%
 14,167 Metabolix, Inc. (b) 337,175
 -------------
 Chemicals--2.2%
 44,504 Altair Nanotechnologies, Inc. (b) 188,252
 21,358 Zoltek Cos., Inc. (b) 915,617
 -------------
 1,103,869
 -------------
 Electrical Equipment--40.1%
 25,978 American Superconductor Corp. (b) 710,239
 28,987 Baldor Electric Co. 975,702
 17,595 Canadian Solar, Inc. (b) 495,299
 92,262 Capstone Turbine Corp. (b) 150,387
 33,450 China BAK Battery, Inc. (b) 209,063
 25,254 Energy Conversion Devices, Inc. (b) 849,797
 64,030 Evergreen Solar, Inc. (b) 1,105,798
 16,105 First Solar, Inc. (b) 4,302,289
 43,006 FuelCell Energy, Inc. (b) 426,620
 64,791 GrafTech International Ltd. (b) 1,150,040
 10,628 Hoku Scientific, Inc. (b) 121,159
 11,944 JA Solar Holdings Co., Ltd. ADR (b) 833,811
 22,142 Medis Technologies Ltd. (b) 341,651
 55,480 Plug Power, Inc. (b) 219,146
 55,175 Power-One, Inc. (b) 220,148
 24,810 SunPower Corp., Class A (b) 3,234,976
 49,626 Suntech Power Holdings Co.
 Ltd. ADR (b) 4,085,212
 18,769 Vicor Corp. 292,609
 18,633 Yingli Green Energy Holding Co.,
 Ltd. ADR (b) 721,097
 -------------
 20,445,043
 -------------
 Electronic Equipment &
 Instruments--8.5%
 108,296 AVX Corp. 1,453,332
 12,934 Comverge, Inc. (b) 407,292
 25,697 Echelon Corp. (b) 530,386
 19,332 Itron, Inc. (b) 1,855,292
 12,876 Maxwell Technologies, Inc. (b) 106,485
 -------------
 4,352,787
 -------------
 Health Care Equipment &
 Supplies--0.6%
 14,199 Greatbatch, Inc. (b) 283,838
 -------------
 Independent Power Producers
 & Energy Traders--2.8%
 26,224 Ormat Technologies, Inc. 1,442,582
 -------------

 IT Services--1.2%
 12,072 EnerNOC, Inc. (b) $ 592,735
 -------------
 Oil, Gas & Consumable Fuels--4.8%
 26,518 Aventine Renewable Energy
 Holdings, Inc. (b) 338,370
 69,447 Nova Biosource Fuels, Inc. (b) 201,396
 25,648 Pacific Ethanol, Inc. (b) 210,570
 50,295 US BioEnergy Corp. (b) 588,954
 58,681 VeraSun Energy (b) 896,647
 39,861 Verenium Corp. (b) 198,906
 -------------
 2,434,843
 -------------
 Semiconductors & Semiconductor
 Equipment--35.1%
 28,419 Advanced Analogic Technologies,
 Inc. (b) 320,566
 53,867 Cree, Inc. (b) 1,479,726
 32,544 EMCORE Corp. (b) 497,923
 78,592 Fairchild Semiconductor International,
 Inc. (b) 1,134,083
 45,804 International Rectifier Corp. (b) 1,555,962
 20,336 IXYS Corp. (b) 163,095
 11,372 LDK Solar Co., Ltd. ADR (b) 534,598
 122,437 Linear Technology Corp. 3,897,170
 45,680 MEMC Electronic Materials, Inc. (b) 4,042,222
 48,833 Microsemi Corp. (b) 1,081,163
 23,985 O2Micro International Ltd. ADR (b) 276,787
 184,617 ON Semiconductor Corp. (b) 1,639,399
 18,708 Power Integrations, Inc. (b) 644,116
 11,288 Trina Solar Ltd. ADR (b) 607,294
 -------------
 17,874,104
 -------------

 Total Common Stocks--99.8%
 (Cost $45,239,978) 50,811,947
 -------------

 Rights--0.0%
 Electrical Equipment--0.0%
 1,347 Medis Technologies Ltd.
 (Cost $0) 0
 -------------

 Total Investments--99.8%
 (Cost $45,239,978) 50,811,947
 Net Other Assets and
 Liabilities--0.2% 101,088
 -------------
 Net Assets--100.0% $ 50,913,035
 =============

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

(b) Non-income producing security.

ADR - American Depositary Receipt.

See Notes to Financial Statements. Page 63

FIRST TRUST S&P REIT INDEX FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--99.3%
 Real Estate Investment Trusts--99.3%
 187 Acadia Realty Trust $ 4,789
 45 Agree Realty Corp. 1,355
 186 Alexandria Real Estate Equities, Inc. 18,911
 577 AMB Property Corp. 33,212
 159 American Campus Communities, Inc. 4,269
 41 American Land Lease, Inc. 813
 557 Apartment Investment &
 Management Co. 19,345
 615 Ashford Hospitality Trust 4,422
 86 Associated Estates Realty Corp. 812
 459 AvalonBay Communities, Inc. 43,210
 381 BioMed Realty Trust, Inc. 8,828
 695 Boston Properties, Inc. 63,808
 506 Brandywine Realty Trust 9,073
 296 BRE Properties, Inc. 11,997
 324 Camden Property Trust 15,601
 383 CBL & Associates Properties, Inc. 9,158
 258 Cedar Shopping Centers, Inc. 2,639
 60 Cogdell Spencer, Inc. 956
 274 Colonial Properties Trust 6,201
 276 Corporate Office Properties Trust 8,694
 218 Cousins Properties, Inc. 4,818
 981 DCT Industrial Trust, Inc. 9,133
 716 Developers Diversified Realty Corp. 27,416
 552 DiamondRock Hospitality Co. 8,269
 377 Digital Realty Trust, Inc. 14,465
 848 Duke Realty Corp. 22,116
 139 EastGroup Properties, Inc. 5,817
 166 Education Realty Trust, Inc. 1,866
 164 Entertainment Properties Trust 7,708
 142 Equity Lifestyle Properties, Inc. 6,485
 215 Equity One, Inc. 4,951
 1,579 Equity Residential 57,586
 147 Essex Property Trust, Inc. 14,331
 380 Extra Space Storage, Inc. 5,430
 330 Federal Realty Investment Trust 27,110
 364 FelCor Lodging Trust, Inc. 5,675
 260 First Industrial Realty Trust, Inc. 8,996
 141 First Potomac Realty Trust 2,438
 1,420 General Growth Properties, Inc. 58,476
 220 Glimcher Realty Trust 3,144
 1,260 HCP, Inc. 43,823
 495 Health Care REIT, Inc. 22,122
 295 Healthcare Realty Trust, Inc. 7,490
 240 Hersha Hospitality Trust 2,280
 333 Highwoods Properties, Inc. 9,784
 194 Home Properties, Inc. 8,701
 547 Hospitality Properties Trust 17,624
 3,044 Host Hotels & Resorts, Inc. 51,870
 1,313 HRPT Properties Trust 10,149
 340 Inland Real Estate Corp. 4,814
 321 Investors Real Estate Trust 2,879
 782 iStar Financial, Inc. 20,371
 191 Kilroy Realty Corp. 10,497
 1,472 Kimco Realty Corp. 53,581

 Real Estate Investment Trusts (Continued)
 169 Kite Realty Group Trust $ 2,581
 234 LaSalle Hotel Properties 7,465
 371 Lexington Realty Trust 5,394
 533 Liberty Property Trust 15,356
 118 LTC Properties, Inc. 2,956
 423 Macerich (The) Co. 30,058
 396 Mack-Cali Realty Corp. 13,464
 293 Medical Properties Trust, Inc. 2,986
 149 Mid-America Apartment
 Communities, Inc. 6,370
 140 Monmouth Real Estate Investment Corp. 1,134
 137 National Health Investors, Inc. 3,822
 419 National Retail Properties, Inc. 9,796
 541 Nationwide Health Properties, Inc. 16,971
 47 One Liberty Properties, Inc. 863
 90 Parkway Properties, Inc. 3,328
 227 Pennsylvania Real Estate Investment
 Trust 6,737
 1,004 Plum Creek Timber Co., Inc. 46,224
 255 Post Properties, Inc. 8,956
 228 Potlatch Corp. 10,132
 1,500 ProLogis 95,069
 93 PS Business Parks, Inc. 4,887
 725 Public Storage 53,222
 108 Ramco-Gershenson Properties Trust 2,308
 455 Rayonier, Inc. 21,494
 589 Realty Income Corp. 15,915
 406 Regency Centers Corp. 26,183
 63 Saul Centers, Inc. 3,366
 517 Senior Housing Properties Trust 11,726
 1,299 Simon Property Group, Inc. 112,830
 345 SL Green Realty Corp. 32,244
 126 Sovran Self Storage, Inc. 5,053
 433 Strategic Hotels & Resorts, Inc. 7,244
 94 Sun Communities, Inc. 1,981
 346 Sunstone Hotel Investors, Inc. 6,328
 102 Supertel Hospitality, Inc. 626
 182 Tanger Factory Outlet Centers, Inc. 6,863
 307 Taubman Centers, Inc. 15,101
 761 Thornburg Mortgage, Inc. 7,032
 782 UDR, Inc. 15,523
 69 Universal Health Realty Income Trust 2,445
 129 Urstadt Biddle Properties, Inc., Class A 2,000
 282 U-Store-It Trust 2,583
 781 Vornado Realty Trust 68,688
 272 Washington Real Estate Investment
 Trust 8,544
 441 Weingarten Realty Investors 13,865
 297 Winthrop Realty Trust, Inc. 1,571
 ------------

 Total Common Stocks--99.3%
 (Cost $1,953,907) 1,569,592
 -------------

Page 64 See Notes to Financial Statements.

FIRST TRUST S&P REIT INDEX FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Money Market Funds--8.4%
 50,000 Federated Treasury Obligation
 - 3.36% (b) $ 50,000
 83,403 J.P. Morgan Institutional Treasury
 Money Market Fund - 3.09% (b) 83,403
 -------------

 Total Money Market Funds
 (Cost $133,403) 133,403
 -------------

 Total Investments--107.7%
 (Cost $2,087,310) 1,702,995
 Net Other Assets and
 Liabilities--(7.7%) (121,717)
 -------------
 Net Assets--100.0% $ 1,581,278
 =============

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

(b) Represents annualized 7-day yield at December 31, 2007.

See Notes to Financial Statements. Page 65

FIRST TRUST ISE WATER INDEX FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--100.1%
 Building Products--1.8%
 2,419 Ameron International Corp. $ 222,911
 -------------
 Chemicals--11.4%
 6,236 Arch Chemicals, Inc. 229,173
 8,784 Ashland, Inc. 416,625
 16,011 Calgon Carbon Corp. (b) 254,415
 21,035 Nalco Holding Co. 508,626
 -------------
 1,408,839
 -------------
 Commercial Services &
 Supplies--5.1%
 5,194 Layne Christensen Co. (b) 255,597
 17,230 Tetra Tech, Inc. (b) 370,445
 -------------
 626,042
 -------------
 Construction & Engineering--2.8%
 11,587 Insituform Technologies, Inc.,
 Class A (b) 171,488
 4,344 Northwest Pipe Co. (b) 170,024
 -------------
 341,512
 -------------
 Electrical Equipment--5.8%
 6,513 Franklin Electric Co., Inc. 249,253
 7,491 Roper Industries, Inc. 468,487
 -------------
 717,740
 -------------
 Electronic Equipment &
 Instruments--4.2%
 5,352 Itron, Inc. (b) 513,631
 -------------
 Health Care Equipment &
 Supplies--3.8%
 7,894 IDEXX Laboratories, Inc. (b) 462,825
 -------------
 Machinery--45.8%
 5,979 Badger Meter, Inc. 268,756
 9,571 Crane Co. 410,596
 5,594 Danaher Corp. 490,818
 16,138 Flow International Corp. (b) 150,406
 4,829 Flowserve Corp. 464,550
 5,107 Gorman-Rupp (The) Co. 159,338
 11,773 IDEX Corp. 425,358
 7,743 ITT Corp. 511,349
 4,148 Lindsay Corp. 293,222
 12,657 Mueller Industries, Inc. 366,926
 38,319 Mueller Water Products, Inc., Class B 382,040
 11,840 Pall Corp. 477,389
 13,958 Pentair, Inc. 485,878
 4,220 Valmont Industries, Inc. 376,086
 12,525 Watts Water Technologies, Inc.,
 Class A 373,245
 -------------
 5,635,957
 -------------

 Multi-Utilities--4.0%
 5,451 Veolia Environnement ADR $ 495,932
 -------------
 Water Utilities--15.4%
 5,920 American States Water Co. 223,066
 19,578 Aqua America, Inc. 415,054
 6,450 California Water Service Group 238,779
 10,339 Companhia de Saneamento Basico
 do Estado de Sao Paulo ADR 485,933
 4,917 Consolidated Water Co., Ltd. 123,859
 7,279 SJW Corp. 252,363
 12,649 Southwest Water Co. 158,365
 -------------
 1,897,419
 -------------

 Total Common Stocks
 (Cost $11,999,554) 12,322,808
 -------------

 Money Market Funds--0.5%
 66,756 J.P. Morgan Institutional Treasury
 Money Market Fund - 3.09% (c)
 (Cost $66,756) 66,756
 -------------

 Total Investments--100.6%
 (Cost $12,066,310) 12,389,564
 Net Other Assets and
 Liabilities--(0.6%) (79,845)
 -------------

Net Assets--100.0% $ 12,309,719

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

(b) Non-income producing security.

ADR - American Depositary Receipt.

Page 66 See Notes to Financial Statements.

FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--100.0%
 Gas Utilities--9.6%
 5,463 Energen Corp. $ 350,888
 7,977 ONEOK, Inc. 357,130
 6,609 Questar Corp. 357,548
 -------------
 1,065,566
 -------------
 Oil, Gas & Consumable
 Fuels--90.4%
 5,796 Anadarko Petroleum Corp. 380,739
 3,442 Apache Corp. 370,153
 46,584 Brigham Exploration Co. (b) 350,312
 9,689 Cabot Oil & Gas Corp. 391,144
 9,448 Chesapeake Energy Corp. 370,362
 8,827 Cimarex Energy Co. 375,412
 10,957 Comstock Resources, Inc. (b) 372,538
 24,677 Delta Petroleum Corp. (b) 465,160
 4,069 Devon Energy Corp. 361,775
 63,449 Edge Petroleum Corp. (b) 376,253
 5,339 EnCana Corp. 362,838
 9,293 Enerplus Resources Fund 372,185
 24,593 EXCO Resources, Inc. (b) 380,700
 7,464 Forest Oil Corp. (b) 379,470
 16,270 Mariner Energy, Inc. (b) 372,258
 6,940 Newfield Exploration Co. (b) 365,738
 60,881 Ngas Resources, Inc. (b) 342,760
 4,738 Noble Energy, Inc. 376,766
 22,578 Petrohawk Energy Corp. (b) 390,825
 6,139 Petroleum Development Corp. (b) 362,999
 7,724 Pioneer Natural Resources Co. 377,240
 19,685 Rosetta Resources, Inc. (b) 390,354
 8,604 St. Mary Land & Exploration Co. 332,200
 12,152 Statoil ASA ADR 370,879
 7,949 Stone Energy Corp. (b) 372,888
 20,192 Talisman Energy, Inc. 373,956
 6,878 XTO Energy, Inc. 353,254
 -------------
 10,091,158
 -------------

 Total Common Stocks--100.0%
 (Cost $11,135,964) 11,156,724
 -------------

 Money Market Funds--0.6%
 71,890 J.P. Morgan Institutional Treasury
 Money Market Fund - 3.09% (c)
 (Cost $71,890) 71,890
 -------------

 Total Investments--100.6%
 (Cost $11,207,854) 11,228,614
 Net Other Assets and
 Liabilities--(0.6%) (71,230)
 -------------
 Net Assets--100.0% $ 11,157,384
 =============

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

(b) Non-income producing security.

ADR - American Depositary Receipt.

See Notes to Financial Statements. Page 67

FIRST TRUST ISE CHINDIA INDEX FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--100.1%
 Airlines--0.8%
 12,260 China Southern Airlines Co., Ltd.
 ADR (b) $ 802,417
 -------------
 Chemicals--0.6%
 11,198 Sinopec Shanghai Petrochemical
 Co., Ltd. ADR 683,750
 -------------
 Commercial Banks--10.8%
 31,335 HDFC Bank Ltd. ADR 4,087,651
 116,733 ICICI Bank Ltd. ADR 7,179,079
 -------------
 11,266,730
 -------------
 Communications Equipment--0.6%
 41,200 Comtech Group, Inc. (b) 663,732
 -------------
 Construction & Engineering--0.7%
 23,380 KHD Humboldt Wedag International
 Ltd. (b) 700,932
 -------------
 Diversified Consumer
 Services--0.7%
 8,960 New Oriental Education &
 Technology Group, Inc. ADR (b) 722,086
 -------------
 Diversified Telecommunication
 Services--3.7%
 11,500 China Netcom Group Corp.,
 Ltd. ADR 683,100
 9,791 China Telecom Corp., Ltd. ADR 764,383
 63,197 Videsh Sanchar Nigam Ltd. ADR 2,379,999
 -------------
 3,827,482
 -------------
 Electrical Equipment--3.5%
 10,145 JA Solar Holdings Co., Ltd.
 ADR (b) 708,222
 26,873 Solarfun Power Holdings Co.,
 Ltd. ADR (b) 877,403
 24,918 Suntech Power Holdings Co., Ltd.
 ADR (b) 2,051,251
 -------------
 3,636,876
 -------------
 Electronic Equipment &
 Instruments--0.7%
 61,621 Nam Tai Electronics, Inc. 694,469
 -------------
 Health Care Equipment &
 Supplies--1.4%
 16,725 China Medical Technologies,
 Inc. ADR 742,423
 17,006 Mindray Medical International
 Ltd. ADR 730,748
 -------------
 1,473,171
 -------------
 Hotels, Restaurants &
 Leisure--2.0%
 11,964 Ctrip.com International Ltd. ADR 687,571

 Hotels, Restaurants &
 Leisure (Continued)
 19,330 Home Inns & Hotels Managment,
 Inc. ADR (b) $ 688,921
 60,413 Melco PBL Entertainment Ltd.
 ADR (b) 698,375
 -------------
 2,074,867
 -------------
 Independent Power Producers &
 Energy Traders--0.7%
 17,575 Huaneng Power International,
 Inc. ADR 725,848
 -------------
 Insurance--3.9%
 52,906 China Life Insurance Co. Ltd. ADR 4,047,309
 -------------
 Internet Software &
 Services--5.9%
 10,493 Baidu.com ADR (b) 4,096,363
 35,414 NetEase.com, Inc. ADR (b) 671,449
 14,527 SINA Corp. (b) 643,691
 12,650 Sohu.com, Inc. (b) 689,678
 -------------
 6,101,181
 -------------
 IT Services--16.8%
 169,412 Infosys Technologies Ltd. ADR 7,684,529
 42,408 Patni Computer Systems Ltd. ADR 689,978
 155,409 Satyam Computer Services Ltd. ADR 4,152,528
 284,345 Wipro Ltd. ADR 4,219,680
 43,852 WNS Holdings Ltd. ADR (b) 716,980
 -------------
 17,463,695
 -------------
 Machinery--2.0%
 111,493 Tata Motors Ltd. ADR 2,102,758
 -------------
 Marine--0.7%
 28,021 Seaspan Corp. 686,234
 -------------
 Media--2.6%
 35,666 Focus Media Holding Ltd.
 ADR (b) 2,026,185
 116,553 Xinhua Finance Media Ltd.
 ADR (b) 699,318
 -------------
 2,725,503
 -------------
 Metals & Mining--10.8%
 80,027 Aluminum Corp. of China Ltd.
 ADR 4,052,567
 273,616 Sterlite Industries (India) Ltd.
 ADR (b) 7,133,169
 -------------
 11,185,736
 -------------
 Oil, Gas & Consumable
 Fuels--16.7%
 50,812 China Petroleum & Chemical
 Corp. ADR 7,530,339
 12,917 CNOOC Ltd. ADR 2,162,693
 39,686 PetroChina Co., Ltd. ADR 6,963,702

Page 68 See Notes to Financial Statements.

FIRST TRUST ISE CHINDIA INDEX FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks (Continued)
 Oil, Gas & Consumable
 Fuels (Continued)
 7,504 Yanzhou Coal Mining Co.,
 Ltd. ADR $ 728,338
 -------------
 17,385,072
 -------------
 Personal Products--0.7%
 63,957 American Oriental
 Bioengineering, Inc. (b) 708,644
 -------------
 Pharmaceuticals--2.0%
 115,039 Dr. Reddy's Laboratories
 Ltd. ADR 2,089,108
 -------------
 Road & Rail--0.7%
 19,855 Guangshen Railway Co.,
 Ltd. ADR 707,632
 -------------
 Semiconductors & Semiconductor
 Equipment--0.7%
 14,512 Trina Solar Ltd. ADR (b) 780,746
 -------------
 Software--2.0%
 169,531 CDC Corp., Class A (b) 825,617
 19,298 Shanda Interactive Entertainment
 Ltd. ADR (b) 643,395
 29,392 The9 Ltd. ADR (b) 626,637
 -------------
 2,095,649
 -------------
 Wireless Telecommunication
 Services--8.4%
 82,829 China Mobile Ltd. ADR 7,195,355
 36,155 China Unicom Ltd. ADR 809,872
 32,447 Hutchison Telecommunications
 International Ltd. ADR 734,925
 -------------
 8,740,152
 -------------

 Total Investments--100.1%
 (Cost $101,640,171) 104,091,779
 Net Other Assets and
 Liabilities--(0.1%) (87,479)
 -------------
 Net Assets--100.0% $ 104,004,300
 =============

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

(b) Non-income producing security.

ADR - American Depositary Receipt.

See Notes to Financial Statements. Page 69

FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND

PORTFOLIO OF INVESTMENTS (A)
DECEMBER 31, 2007

 SHARES DESCRIPTION VALUE
--------------------------------------------------------------

 Common Stocks--100.4%
 Aerospace & Defense--2.1%
 54,982 Cubic Corp. $ 2,155,295
 14,943 Precision Castparts Corp. 2,072,594
 -------------
 4,227,889
 -------------
 Beverages--2.0%
 33,554 Coca-Cola (The) Co. 2,059,209
 62,251 PepsiAmericas, Inc. 2,074,203
 -------------
 4,133,412
 -------------
 Biotechnology--3.0%
 46,277 LifeCell Corp. (b) 1,995,001
 37,269 Onyx Pharmaceuticals, Inc. (b) 2,072,902
 42,400 OSI Pharmaceuticals, Inc. (b) 2,056,824
 -------------
 6,124,727
 -------------
 Capital Markets--2.1%
 83,860 Charles Schwab (The) Corp. 2,142,623
 62,879 Janus Capital Group, Inc. 2,065,575
 -------------
 4,208,198
 -------------
 Chemicals--4.2%
 30,186 Agrium, Inc. 2,179,731
 18,544 Monsanto Co. 2,071,179
 22,933 Mosaic (The) Co. (b) 2,163,499
 15,195 Potash Corp. of Saskatchewan, Inc. 2,187,473
 -------------
 8,601,882
 -------------
 Commercial Services &
 Supplies--5.1%
 49,891 Copart, Inc. (b) 2,122,862
 34,641 FTI Consulting, Inc. (b) 2,135,271
 33,972 IHS, Inc., Class A (b) 2,057,344
 94,212 Learning Tree International, Inc. (b) 2,163,108
 34,441 Stericycle, Inc. (b) 2,045,795
 -------------
 10,524,380
 -------------
 Communications
 Equipment--3.0%
 118,286 Foundry Networks, Inc. (b) 2,072,371
 55,091 Nokia Oyj ADR 2,114,944
 17,981 Research In Motion Ltd. (b) 2,039,045
 -------------
 6,226,360
 -------------
 Computers & Peripherals--4.1%
 10,668 Apple Computer, Inc. (b) 2,113,117
 111,244 EMC Corp. (b) 2,061,351
 81,338 Seagate Technology 2,074,119
 70,051 Western Digital Corp. (b) 2,116,241
 -------------
 8,364,828
 -------------

 Construction & Engineering--2.0%
 14,454 Fluor Corp. $ 2,106,237
 21,776 Jacobs Engineering Group, Inc. (b) 2,082,003
 -------------
 4,188,240
 -------------
 Containers & Packaging--2.1%
 42,975 Owens-Illinois, Inc. (b) 2,127,262
 74,689 Packaging Corp. of America 2,106,230
 -------------
 4,233,492
 -------------
 Distributors--1.0%
 94,203 LKQ Corp. (b) 1,980,147
 -------------
 Diversified Consumer
 Services--3.0%
 29,351 Apollo Group, Inc., Class A (b) 2,058,973
 38,930 DeVry, Inc. 2,022,803
 11,876 Strayer Education, Inc. 2,025,808
 -------------
 6,107,584
 -------------
 Diversified Financial
 Services--1.0%
 43,304 Nasdaq Stock Market, Inc. (b) 2,143,115
 -------------
 Diversified Telecommunication
 Services--1.0%
 21,673 Telefonica S.A. ADR 2,115,068
 -------------
 Electrical Equipment--1.0%
 15,331 SunPower Corp., Class A (b) 1,999,009
 -------------
 Electronic Equipment &
 Instruments--3.0%
 41,209 Dolby Laboratories, Inc.,
 Class A (b) 2,048,911
 66,486 FLIR Systems, Inc. (b) 2,081,012
 61,693 National Instruments Corp. 2,056,228
 -------------
 6,186,151
 -------------
 Energy Equipment & Services--3.1%
 43,574 Cameron International Corp. (b) 2,097,217
 16,989 Core Laboratories N.V. (b) 2,118,868
 28,672 National-Oilwell Varco, Inc. (b) 2,106,245
 -------------
 6,322,330
 -------------
 Food Products--1.1%
 65,445 Fresh Del Monte Produce, Inc. (b) 2,197,643
 -------------
 Health Care Equipment &
 Supplies--5.1%
 45,305 ArthroCare Corp. (b) 2,176,906
 35,678 IDEXX Laboratories, Inc. (b) 2,091,801
 6,353 Intuitive Surgical, Inc. (b) 2,061,549
 39,099 Kinetic Concepts, Inc. (b) 2,094,142
 51,421 St. Jude Medical, Inc. (b) 2,089,749
 -------------
 10,514,147
 -------------

Page 70 See Notes to Financial Statements.

FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND

PORTFOLIO OF INVESTMENTS (A) (CONTINUED)
DECEMBER 31, 2007

SHARES DESCRIPTION VALUE

Common Stocks (Continued)
Health Care Providers & Services--2.1%

29,342 Express Scripts, Inc. (b) $ 2,141,966
23,655 WellPoint, Inc. (b) 2,075,253
 -------------
 4,217,219
 -------------
 Health Care Technology--1.0%
83,500 Eclipsys Corp. (b) 2,113,385
 -------------
 Household Durables--1.0%
21,039 Garmin Ltd. 2,040,783
 -------------
 Industrial Conglomerates--2.1%
35,969 McDermott International, Inc. (b) 2,123,250
29,659 Textron, Inc. 2,114,687
 -------------
 4,237,937
 -------------
 Insurance--2.0%
33,918 AFLAC, Inc. 2,124,285
42,551 Aon Corp. 2,029,257
 -------------
 4,153,542
 -------------
 Internet & Catalog Retail--2.1%
23,286 Amazon.com, Inc. (b) 2,157,215
17,991 Priceline.com, Inc. (b) 2,066,446
 -------------
 4,223,661
 -------------
 Internet Software & Services--2.0%
62,044 eBay, Inc. (b) 2,059,240
 3,016 Google, Inc., Class A (b) 2,085,504
 -------------
 4,144,744
 -------------
 IT Services--1.0%
40,709 Computer Sciences Corp. (b) 2,013,874
 -------------
 Life Sciences Tools &
 Services--4.1%
31,710 Charles River Laboratories
 International, Inc. (b) 2,086,518
23,845 Covance, Inc. (b) 2,065,454
22,523 Invitrogen Corp. (b) 2,103,873
27,070 Waters Corp. (b) 2,140,425
 -------------
 8,396,270
 -------------
 Machinery--11.0%
30,749 AGCO Corp. (b) 2,090,317
54,089 Axsys Technologies, Inc. (b) 1,982,362
21,135 Bucyrus International, Inc., Class A 2,100,608
32,014 CNH Global N.V. 2,107,161
23,146 Deere & Co. 2,155,356
33,405 Dynamic Materials Corp. 1,967,555
21,356 Flowserve Corp. 2,054,447
28,143 Lindsay Corp. 1,989,429
41,596 Manitowoc (The) Co., Inc. 2,031,133
28,678 Robbins & Myers, Inc. 2,168,916
21,483 Valmont Industries, Inc. 1,914,565
 -------------
 22,561,849
 -------------

 Media--1.0%
69,757 Global Sources Ltd. (b) $ 1,968,543
 -------------
 Metals & Mining--3.0%
59,062 AMCOL International Corp. 2,128,003
29,867 BHP Billiton Ltd. ADR 2,091,885
19,266 Southern Copper Corp. 2,025,435
 -------------
 6,245,323
 -------------
 Oil, Gas & Consumable Fuels--1.0%
59,034 Williams (The) Cos., Inc. 2,112,237
 -------------
 Pharmaceuticals--3.0%
35,491 Merck & Co., Inc. 2,062,382
32,144 Novo Nordisk A/S ADR 2,084,860
59,548 Perrigo Co. 2,084,775
 -------------
 6,232,017
 -------------
 Semiconductors & Semiconductor
 Equipment--6.0%
55,940 Cypress Semiconductor Corp. (b) 2,015,518
22,533 MEMC Electronic Materials, Inc. (b) 1,993,945
59,275 NVIDIA Corp. (b) 2,016,536
37,241 Sigma Designs, Inc. (b) 2,055,703
62,154 Texas Instruments, Inc. 2,075,944
91,463 Zoran Corp. (b) 2,058,832
 -------------
 12,216,478
 -------------
 Software--5.0%
50,347 ANSYS, Inc. (b) 2,087,387
81,914 CA, Inc. 2,043,754
83,457 Jack Henry & Associates, Inc. 2,031,343
57,957 Microsoft Corp. 2,063,269
93,178 Oracle Corp. (b) 2,103,960
 -------------
 10,329,713
 -------------
 Specialty Retail--2.0%
39,768 Best Buy Co., Inc. 2,093,785
33,515 GameStop Corp., Class A (b) 2,081,617
 -------------
 4,175,402
 -------------
 Textiles, Apparel & Luxury
 Goods--2.0%
12,887 Deckers Outdoor Corp. (b) 1,998,258
48,192 Fossil, Inc. (b) 2,023,100
 -------------
 4,021,358
 -------------

 Total Investments--100.4%
 (Cost $183,137,182) 205,802,937
 Net Other Assets and
 Liabilities--(0.4%) (889,512)
 -------------
 Net Assets--100.0% $ 204,913,425
 =============

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

(b) Non-income producing security.

ADR - American Depositary Receipt.

See Notes to Financial Statements. Page 71

FIRST TRUST EXCHANGE-TRADED FUND

STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2007

 First Trust First Trust
 Dow Jones Select Morningstar(R) First Trust
 MicroCap Dividend Leaders(SM) IPOX-100
 Index(SM) Fund Index Fund Index Fund
 ----------------- -------------------- -----------
ASSETS:
Investments at value...................................................... $ 18,041,010 $ 64,505,883 $ 26,679,603
Cash...................................................................... 23,882 -- 12,212
Receivables:
 Capital shares sold................................................. 5,072 14,625 --
 Investment securities sold.......................................... -- 84,267 --
 Dividends........................................................... 19,540 169,668 8,565
 Interest............................................................ -- -- --
 Reclaims............................................................ -- -- --
 From investment advisor............................................. 28,049 28,690 12,371
Other assets.............................................................. -- -- 15,091
 ------------- -------------- --------------
 Total Assets........................................................ 18,117,553 64,803,133 26,727,842
 ------------- -------------- --------------

LIABILITIES:
Due to Custodian.......................................................... -- 18,234 --
Payables:
 Investment securities purchased..................................... 11,095 -- --
 Capital shares purchased............................................ 12,270 596 --
 Investment advisory fees............................................ 7,330 17,147 8,543
 Licensing fees...................................................... 824 25,133 --
Accrued expenses and other liabilities.................................... 93,233 91,534 86,568
 ------------- -------------- --------------
 Total Liabilities................................................... 124,752 152,644 95,111
 ------------- -------------- --------------

NET ASSETS................................................................ $ 17,992,801 $ 64,650,489 $ 26,632,731
 ============= ============== ==============

NET ASSETS consist of:
Paid-in capital........................................................... $ 21,947,285 $ 77,672,170 $ 25,988,315
Par value................................................................. 8,050 32,000 10,500
Undistributed net investment income (loss)................................ 4,380 9,502 1,158
Accumulated net realized gain (loss) on investments ...................... (2,553,261) (980,395) (1,355,789)
Net unrealized appreciation (depreciation) on investments................. (1,413,653) (12,082,788) 1,988,547
 ------------- -------------- --------------
NET ASSETS................................................................ $ 17,992,801 $ 64,650,489 $ 26,632,731
 ============= ============== ==============


NET ASSET VALUE, per share................................................ $ 22.35 $ 20.20 $ 25.36
 ============= ============== ==============

Number of shares outstanding
(unlimited number of shares has been authorized, par value $0.01 per share) 805,000 3,200,002 1,050,002
 ------------- -------------- --------------

Investments at cost....................................................... $ 19,454,663 $ 76,588,671 $ 24,691,056
 ============= ============== ==============

Page 72 See Notes to Financial Statements.

 First Trust First Trust First Trust First Trust First Trust First Trust First Trust
 NASDAQ-100 NASDAQ-100- Amex(R) Dow Jones DB Strategic Value Line(R) Value Line(R)
 Equal Weighted Technology Sector Biotechnology Internet Value Equity Allocation Dividend
 Index(SM) Fund Index(SM) Fund Index Fund Index(SM) Fund Index Fund Index Fund Index Fund
---------------- ------------------- ---------------- ------------------ --------------- -------------------- ----------------

 $ 31,002,219 $ 23,734,053 $ 72,820,584 $ 36,124,261 $ 61,522,985 $ 13,341,744 $ 180,195,752
 10,549 13,252 -- -- 25,010 10,681 960,997

 -- -- -- -- -- -- 7,911,342
 -- -- 592,115 344,590 -- 1,084 6,532,105
 10,192 2,317 -- -- 101,272 13,624 476,585
 -- -- -- 841 -- -- --
 -- -- -- -- -- 566 3,712
 11,299 9,775 20,432 17,141 17,917 15,815 31,747
 -- -- -- -- -- -- 8,063
 -------------- -------------- -------------- -------------- -------------- -------------- ----------------
 31,034,259 23,759,397 73,433,131 36,486,833 61,667,184 13,383,514 196,120,303
 -------------- -------------- -------------- -------------- -------------- -------------- ----------------


 -- -- 57,783 2,956 -- -- --

 -- -- -- -- 14,489 -- 7,466,171
 -- -- -- -- -- -- 7,911,342
 10,430 8,095 26,303 19,364 23,525 5,696 78,693
 7,186 6,011 26,644 3,369 25,980 19,100 300,016
 105,341 93,740 81,354 75,488 85,497 67,352 210,859
 -------------- -------------- -------------- -------------- -------------- -------------- ----------------
 122,957 107,846 192,084 101,177 149,491 92,148 15,967,081
 -------------- -------------- -------------- -------------- -------------- -------------- ----------------

 $ 30,911,302 $ 23,651,551 $ 73,241,047 $ 36,385,656 $ 61,517,693 $ 13,291,366 $ 180,153,222
 ============== ============== ============== ============== ============== ============== ================


 $ 33,414,132 $ 26,368,424 $ 79,480,565 $ 45,349,633 $ 64,459,655 $ 14,053,511 $ 196,742,615
 14,000 11,000 30,000 14,500 25,500 6,500 114,380
 -- -- -- -- 22,423 3,164 --
 (869,924) (947,976) (366,907) (6,110,926) (1,386,697) (1,439,291) (7,143,249)
 (1,646,906) (1,779,897) (5,902,611) (2,867,551) (1,603,188) 667,482 (9,560,524)
 -------------- -------------- -------------- -------------- -------------- -------------- ----------------
 $ 30,911,302 $ 23,651,551 $ 73,241,047 $ 3 6,385,656 $ 61,517,693 $ 13,291,366 $ 180,153,222
 ============== ============== ============== ============== ============== ============== ================

 $ 22.08 $ 21.50 $ 24.41 $ 25.09 $ 24.12 $ 20.45 $ 15.75
 ============== ============== ============== ============== ============== ============== ================


 1,400,002 1,100,002 3,000,002 1,450,002 2,550,002 650,002 11,437,986
 -------------- -------------- -------------- -------------- -------------- -------------- ----------------

 $ 32,649,125 $ 25,513,950 $ 78,723,195 $ 38,991,812 $ 63,126,173 $ 12,674,262 $ 189,756,276
 ============== ============== ============== ============== ============== ============== ================

See Notes to Financial Statements. Page 73

FIRST TRUST EXCHANGE-TRADED FUND

STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 2007

 First Trust First Trust
 NASDAQ-100 NASDAQ(R) Clean Edge(R)
 Ex-Technology Sector U.S. Liquid Series
 IndexSM Fund Index Fund
 ----------------------- -----------------------
ASSETS:
Investments at value...................................................... $ 2,172,638 $ 50,811,947
Cash...................................................................... 74,928 179,229
Receivables:
 Capital shares sold................................................. -- 3,127,852
 Investment securities sold.......................................... 1,065,841 --
 Dividends........................................................... 1,126 3,831
 Interest............................................................ 217 --
 Reclaims............................................................ -- --
 From investment advisor............................................. -- --
Other assets.............................................................. 1,867 --
 -------------- --------------
 Total Assets........................................................ 3,316,617 54,122,859
 -------------- --------------

LIABILITIES:
Due to Custodian.......................................................... -- --
Payables:
 Investment securities purchased..................................... 69,788 3,131,858
 Capital shares purchased............................................ 1,065,169 --
 Investment advisory fees............................................ 15,575 16,608
 Licensing fees...................................................... 583 8,221
Accrued expenses and other liabilities.................................... 46,930 53,137
 -------------- --------------
 Total Liabilities................................................... 1,198,045 3,209,824
 -------------- --------------

NET ASSETS................................................................ $ 2,118,572 $ 50,913,035
 ============== ==============

NET ASSETS consist of:
Paid-in capital........................................................... $ 2,386,278 $ 45,780,650
Par value................................................................. 1,000 16,500
Undistributed net investment income (loss)................................ -- --
Accumulated net realized gain (loss) on investments ...................... (59,898) (456,084)
Net unrealized appreciation (depreciation) on investments................. (208,808) 5,571,969
 -------------- --------------
NET ASSETS................................................................ $ 2,118,572 $ 50,913,035
 ============== ==============


NET ASSET VALUE, per share................................................ $ 21.19 $ 30.86
 ============== ==============

Number of shares outstanding
(unlimited number of shares has been authorized, par value $0.01 per share) 100,002 1,650,002
 -------------- --------------

Investments at cost....................................................... $ 2,381,446 $ 45,239,978
 ============== ==============

Page 74 See Notes to Financial Statements.

 First Trust First Trust First Trust First Trust
 S&P ISE ISE-Revere ISE First Trust
 REIT Water Natural Gas Chindia Value Line(R) 100
 Index Fund Index Fund Index Fund Index Fund Exchange-Traded Fund
 ----------------- ----------------- ----------------- ----------------- ----------------------

$ 1,702,995 $ 12,389,564 $ 11,228,614 $ 104,091,779 $ 205,802,937
 -- -- -- 4,112 --

 -- -- -- -- 54,976,122
 -- -- -- -- 37,939,578
 15,532 14,221 4,859 12,963 90,235
 246 140 234 -- --
 -- -- -- -- 9,203
 325 -- -- 4,734 20,765
 -- -- -- -- 5,998
-------------- -------------- -------------- -------------- ---------------
 1,719,098 12,403,925 11,233,707 104,113,588 298,844,838
-------------- -------------- -------------- -------------- ---------------


 37,543 24,920 7,609 -- 170,300

 -- -- -- -- 54,478,885
 -- -- -- -- 38,855,573
 423 9,678 9,646 34,452 79,073
 48,493 2,477 3,018 7,497 230,866
 51,361 57,131 56,050 67,339 116,716
-------------- -------------- -------------- -------------- ---------------
 137,820 94,206 76,323 109,288 93,931,413
-------------- -------------- -------------- -------------- ---------------

$ 1,581,278 $ 12,309,719 $ 11,157,384 $ 104,004,300 $ 204,913,425
============== ============== ============== ============== ===============


$ 2,012,894 $ 12,016,965 $ 11,235,844 $ 103,452,483 $ 193,321,158
 1,000 5,500 5,000 37,500 114,400
 -- -- 1,666 1,096 --
 (48,301) (36,000) (105,886) (1,938,387) (11,187,888)
 (384,315) 323,254 20,760 2,451,608 22,665,755
-------------- -------------- -------------- -------------- ---------------
$ 1,581,278 $ 12,309,719 $ 11,157,384 $ 104,004,300 $ 204,913,425
============== ============== ============== ============== ===============

$ 15.81 $ 22.38 $ 22.31 $ 27.73 $ 17.91
============== ============== ============== ============== ===============


 100,002 550,002 500,002 3,750,002 11,439,982
-------------- -------------- -------------- -------------- ---------------

$ 2,087,310 $ 12,066,310 $ 11,207,854 $ 101,640,171 $ 183,137,182
============== ============== ============== ============== ===============

See Notes to Financial Statements. Page 75

FIRST TRUST EXCHANGE-TRADED FUND

STATEMENTS OF OPERATIONS

 First Trust First Trust
 Dow Jones Select Morningstar(R) First Trust
 MicroCap Dividend Leaders(SM) IPOX-100
 Index(SM) Fund Index Fund Index Fund
 -------------------- -------------------- --------------------
 For the For the For the
 Year Ended Year Ended Year Ended
 December 31, 2007 December 31, 2007 December 31, 2007
 --------------------- ------------------- --------------------
INVESTMENT INCOME:
Dividends (a) .................................................... $ 213,900 $ 3,685,392 $ 206,914
Interest.......................................................... -- -- --
 ------------- ------------- --------------
 Total investment income........................................ 213,900 3,685,392 206,914
 ------------- ------------- --------------

EXPENSES:
Investment advisory fees.......................................... 90,935 255,684 98,443
Audit and tax fees................................................ 35,026 34,918 34,983
Accounting and administration fees................................ 27,788 49,973 20,200
Licensing fees.................................................... 24,999 151,399 61,000
Printing fees..................................................... 19,954 28,366 11,714
Legal fees........................................................ 14,760 8,474 7,102
Custodian fees.................................................... 14,225 19,325 12,282
Listing fees...................................................... 10,643 10,817 10,001
Registration and filing fees...................................... 2,878 6,686 1,128
Trustees' fees and expenses....................................... 1,151 6,552 1,983
Transfer agent fees............................................... 909 4,261 1,231
Other expenses.................................................... 3,038 6,952 1,328
 ------------- ------------- --------------
 Total Expenses................................................. 246,306 583,407 261,395
 Less fees waived and expenses reimbursed by the investment
 advisor..................................................... (137,185) (199,880) (113,731)
 ------------- ------------- --------------
 Net Expenses................................................... 109,121 383,527 147,664
 ------------- ------------- --------------
NET INVESTMENT INCOME (LOSS)...................................... 104,779 3,301,865 59,250
 ------------- ------------- --------------

REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
 Investments.................................................... (958,976) (923,317) (1,070,153)
 In-kind redemptions............................................ 2,194,872 5,852,161 2,969,529
 ------------- ------------- --------------
Net realized gain (loss).......................................... 1,235,896 4,928,844 1,899,376
 ------------- ------------- --------------

Net change in unrealized appreciation (depreciation) on
 investments.................................................... (2,332,891) (17,025,191) 1,187,879
 ------------- ------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)........................... (1,096,995) (12,096,347) 3,087,255
 ------------- ------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
 FROM OPERATIONS................................................ $ (992,216) $ (8,794,482) $ 3,146,505
 ============= ============= ==============

(a) Net of foreign witholding taxes of $348 for the First Trust Morningstar(R)
 Dividend Leaders(SM) Index Fund, $1,280 for the First Trust NASDAQ-100
 Equal Weighted Index(SM) Fund, $2,145 for the First Trust NASDAQ-100-
 Technology Sector(SM) Index Fund, and $3,550 for the First Trust Value
 Line(R) Equity Allocation Index Fund.

Page 76 See Notes to Financial Statements.

 First Trust First Trust First Trust First Trust First Trust First Trust
 NASDAQ-100 NASDAQ-100- Amex(R) Dow Jones DB Strategic Value Line(R)
 Equal Weighted Technology Sector Biotechnology Internet Value Equity Allocation
 Index(SM) Fund Index(SM) Fund Index Fund Index(SM) Fund Index Fund Index Fund
-------------------- -------------------- -------------------- -------------------- -------------------- ---------------------
 For the For the For the For the For the For the
 Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
 December 31, 2007 December 31, 2007 December 31, 2007 December 31, 2007 December 31, 2007 December 31, 2007
--------------------- --------------------- --------------------- --------------------- ------------------------------------------

 $ 126,764 $ 104,092 $ -- $ 96,406 $ 637,377 $ 261,326
 -- -- -- 841 -- --
 ------------ ------------ ------------ ------------ ------------ ------------
 126,764 104,092 -- 97,247 637,377 261,326
 ------------ ------------ ------------ ------------ ------------ ------------


 97,177 94,558 201,334 218,892 183,113 75,067
 34,624 34,635 34,613 34,595 35,197 32,727
 20,175 13,624 27,676 30,673 21,887 13,243
 24,294 23,639 40,267 34,143 125,500 24,416
 13,823 11,487 21,782 23,174 9,837 15,474
 9,766 7,129 7,343 7,343 7,426 11,711
 10,301 9,280 12,013 12,526 9,097 9,412
 14,339 14,867 10,490 10,544 10,001 10,545
 2,041 2,753 2,351 1,791 1,695 2,931
 2,060 2,248 5,183 4,830 4,286 988
 1,215 1,182 2,517 2,736 1,831 751
 1,958 1,923 1,828 1,858 1,053 6,207
 ------------ ------------ ------------ ------------ ------------ ------------
 231,773 217,325 367,397 383,105 410,923 203,472
 (86,008) (75,489) (65,395) (54,768) (172,875) (98,378)
 ------------ ------------ ------------ ------------ ------------ ------------
 145,765 141,836 302,002 328,337 238,048 105,094
 ------------ ------------ ------------ ------------ ------------ ------------
 (19,001) (37,744) (302,002) (231,090) 399,329 156,232
 ------------ ------------ ------------ ------------ ------------ ------------



 (646,121) (505,402) (277,758) (6,085,666) (1,466,514) (1,437,666)
 3,914,875 3,570,635 7,427,406 12,961,361 5,544,664 1,033,752
 ------------ ------------ ------------ ------------ ------------ ------------
 3,268,754 3,065,233 7,149,648 6,875,695 4,078,150 (403,914)
 ------------ ------------ ------------ ------------ ------------ ------------

 (1,694,511) (1,702,778) (7,597,605) (4,669,550) (2,024,723) 851,149
 ------------ ------------ ------------ ------------ ------------ ------------
 1,574,243 1,362,455 (447,957) 2,206,145 2,053,427 447,235
 ------------ ------------ ------------ ------------ ------------ ------------
 $ 1,555,242 $ 1,324,711 $ (749,959) $ 1,975,055 $ 2,452,756 $ 603,467
 ============ ============ ============ ============ ============ ============

See Notes to Financial Statements. Page 77

FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF OPERATIONS (CONTINUED)

 First Trust First Trust First Trust
 Value Line(R) NASDAQ-100 NASDAQ(R) Clean Edge(R)
 Dividend Ex-Technology Sector U.S. Liquid Series
 Index Fund Index(SM) Fund Index Fund
 ------------------ -------------------- --------------------------
 For the Period For the Period
 For the February 8, 2007 (b) February 8, 2007 (b)
 Year Ended through through
 December 31, 2007 December 31, 2007 December 31, 2007
 ------------------ -------------------- --------------------------
INVESTMENT INCOME:
Dividends (a) .............................................. $ 7,943,435 $ 16,657 $ 51,494
Interest.................................................... 418 303
 -------------- ------------- -------------
 Total investment income.................................. 7,943,853 16,960 51,494
 -------------- ------------- -------------

EXPENSES:
Investment advisory fees.................................... 1,293,284 12,216 77,431
Audit and tax fees.......................................... 39,216 29,760 29,743
Accounting and administration fees.......................... 135,704 2,578 11,812
Licensing fees.............................................. 400,565 3,054 19,358
Printing fees............................................... 88,756 10,107 16,957
Legal fees.................................................. 17,204 5,654 8,874
Custodian fees.............................................. 46,628 1,879 4,384
Listing fees................................................ 32,016 9,395 16,498
Registration and filing fees................................ 31,186 4 4
Trustees' fees and expenses................................. 17,641 266 2,850
Transfer agent fees......................................... 12,933 153 968
Other expenses.............................................. 88,359 4,500 4,500
 -------------- ------------- -------------
 Total Expenses........................................... 2,203,492 79,566 193,379
 Less fees waived and expenses reimbursed by the
 investment advisor.................................... (392,894) (61,242) (77,233)
 -------------- ------------- -------------
 Net Expenses............................................. 1,810,598 18,324 116,146
 -------------- ------------- -------------
NET INVESTMENT INCOME (LOSS)................................ 6,133,255 (1,364) (64,652)
 -------------- ------------- -------------

REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................. (6,917,739) (59,898) (462,882)
In-kind redemptions......................................... 62,295,122 517,056 5,009,950
 -------------- ------------- -------------
Net realized gain (loss).................................... 55,377,383 457,158 4,547,068
 -------------- ------------- -------------

Net change in unrealized appreciation (depreciation) on
 investments.............................................. (65,904,350) (208,808) 5,571,969
 -------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS)..................... (10,526,967) 248,350 10,119,037
 -------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
 FROM OPERATIONS.......................................... $ (4,393,712) $ 246,986 $ 10,054,385
 ============== ============= =============

(a) Net of foreign witholding taxes of $99,984 for the First Trust Value
 Line(R) Dividend Index Fund, $101 for the First Trust NASDAQ-100
 Ex-Technology Sector Index(SM) Fund, $3,251 for the First Trust ISE-Revere
 Natural Gas Index Fund, and $23,086 for the First Trust Value Line(R) 100
 Exchange-Traded Fund.

(b) Inception date.

(c) Results for periods prior to June 18, 2007 are of First Trust Value Line(R)
 100 Fund. See Note 1 in the Notes to Financial Statements.

Page 78 See Notes to Financial Statements.

 First Trust First Trust First Trust First Trust
 S&P ISE ISE-Revere ISE First Trust
 REIT Water Natural Gas Chindia Value Line(R) 100
 Index Fund Index Fund Index Fund Index Fund Exchange-Traded Fund
---------------------- ---------------------- ---------------------- ---------------------- ------------------------
 For the Period For the Period For the Period For the Period
 May 8, 2007 (b) May 8, 2007 (b) May 8, 2007 (b) May 8, 2007 (b) For the
 through through through through Year Ended
 December 31, 2007 December 31, 2007 December 31, 2007 December 31, 2007 December 31, 2007 (c)
---------------------- ---------------------- ---------------------- ---------------------- ------------------------

 $ 43,954 $ 56,126 $ 30,838 $ 216,465 $ 1,482,882
 410 140 234 -- --
 ------------- ------------- ------------- ------------- --------------
 44,364 56,266 31,072 216,465 1,482,882
 ------------- ------------- ------------- ------------- --------------


 4,118 21,211 13,470 112,487 1,393,727
 32,211 29,924 29,925 29,925 42,097
 2,536 3,469 2,547 15,524 178,842
 48,493 2,651 3,368 22,497 305,385
 6,859 8,649 7,367 11,998 46,678
 5,343 5,775 5,608 10,927 36,524
 1,920 2,362 2,120 5,252 20,144
 6,525 7,210 7,210 7,210 20,083
 1,110 1,105 1,105 1,105 --
 158 725 506 5,316 9,277
 69 265 168 1,406 7,743
 6,129 6,134 6,134 6,304 52,434
 ------------- ------------- ------------- ------------- --------------
 115,471 89,480 79,528 229,951 2,112,934
 (108,608) (57,664) (59,322) (61,221) (132,258)
 ------------- ------------- ------------- ------------- --------------
 6,863 31,816 20,206 168,730 1,980,676
 ------------- ------------- ------------- ------------- --------------
 37,501 24,450 10,866 47,735 (497,794)
 ------------- ------------- ------------- ------------- --------------



 (48,301) (36,000) (106,407) (1,926,901) 7,734,350
 (15,732) 299,879 510,266 4,011,210 44,394,357
 ------------- ------------- ------------- ------------- --------------
 (64,033) 263,879 403,859 2,084,309 52,128,707
 ------------- ------------- ------------- ------------- --------------

 (384,315) 323,254 20,760 2,451,608 (5,434,509)
 ------------- ------------- ------------- ------------- --------------
 (448,348) 587,133 424,619 4,535,917 46,694,198
 ------------- ------------- ------------- ------------- --------------

 $ (410,847) $ 611,583 $ 435,485 $ 4,583,652 $ 46,196,404
 ============= ============= ============= ============= ==============

See Notes to Financial Statements. Page 79

FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS

 First Trust First Trust
 Dow Jones Select Morningstar(R)
 MicroCap Dividend Leaders(SM)
 Index(SM) Fund Index Fund
 ------------------------------------------- ---------------------------------------
 For the Period
 For the Year For the Year For the Year March 9, 2006 (a)
 Ended Ended Ended through
 December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006
 --------------------- ------------------- ------------------- ------------------
OPERATIONS:
 Net investment income (loss).................. $ 104,779 $ 57,986 $ 3,301,865 $ 1,135,197
 Net realized gain (loss)...................... 1,235,896 3,858,753 4,928,844 1,133,275
 Net change in unrealized appreciation
 (depreciation) (2,332,891) (4,051) (17,025,191) 4,942,403
 ------------- ------------- ------------- -------------
 Net increase (decrease) in net assets
 resulting from operations.................. (992,216) 3,912,688 (8,794,482) 7,210,875
 ------------- ------------- ------------- -------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
 Net investment income......................... (101,775) (67,080) (3,182,601) (1,240,001)
 Net realized gain............................. -- -- -- --
 ------------- ------------- ------------- -------------
 Total distributions to shareholders........... (101,775) (67,080) (3,182,601) (1,240,001)
 ------------- ------------- ------------- -------------

SHAREHOLDER TRANSACTIONS:
 Proceeds from shares sold..................... 20,378,526 37,006,899 69,676,425 82,248,231
 Value of shares repurchased................... (18,156,774) (63,479,407) (68,286,075) (12,981,883)
 ------------- ------------- ------------- -------------
 Net increase (decrease) in net assets resulting
 from shareholder transactions.............. 2,221,752 (26,472,508) 1,390,350 69,266,348
 ------------- ------------- ------------- -------------

 Net increase (decrease) in net assets......... 1,127,761 (22,626,900) (10,586,733) 75,237,222

NET ASSETS:
 Beginning of period........................... 16,865,040 39,491,940 75,237,222 --
 ------------- ------------- ------------- -------------

 End of period................................. $ 17,992,801 $ 16,865,040 $ 64,650,489 $ 75,237,222
 ============= ============= ============= =============

 Undistributed net investment income (loss)
 at end of period........................... $ 4,380 $ 1,376 $ 9,502 $ (104,804)
 ============= ============= ============= =============

CHANGES IN SHARES OUTSTANDING:
 Shares outstanding, beginning of period....... 705,000 1,905,000 3,200,002 --
 Shares sold................................... 850,000 1,700,000 2,950,000 3,800,002
 Shares repurchased............................ (750,000) (2,900,000) (2,950,000) (600,000)
 ------------- ------------- ------------- -------------
 Shares outstanding, end of period............. 805,000 705,000 3,200,002 3,200,002
 ============= ============= ============= =============


(a) Inception date.

Page 80 See Notes to Financial Statements.

 First Trust First Trust
 IPOX-100 NASDAQ-100 Equal Weighted
 Index Fund Index(SM) Fund
--------------------------------------- --------------------------------------
 For the Period For the Period
 For the Year April 12, 2006 (a) For the Year April 19, 2006 (a)
 Ended through Ended through
December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006
----------------- ------------------- ----------------- -------------------

$ 59,250 $ 9,633 $ (19,001) $ (9,563)
 1,899,376 (611,993) 3,268,754 521,972
 1,187,879 800,668 (1,694,511) 47,605
-------------- -------------- -------------- --------------

 3,146,505 198,308 1,555,242 560,014
-------------- -------------- -------------- --------------


 (67,725) -- -- --
 -- -- -- --
-------------- -------------- -------------- --------------
 (67,725) -- -- --
-------------- -------------- -------------- --------------


 22,872,902 43,915,451 26,192,404 32,413,288
 (19,299,601) (24,133,109) (22,994,445) (6,815,201)
-------------- -------------- -------------- --------------

 3,573,301 19,782,342 3,197,959 25,598,087
-------------- -------------- -------------- --------------

 6,652,081 19,980,650 4,753,201 26,158,101


 19,980,650 -- 26,158,101 --
-------------- -------------- -------------- --------------

$ 26,632,731 $ 19,980,650 $ 30,911,302 $ 26,158,101
============== ============== ============== ==============


$ 1,158 $ 9,633 $ -- $ --
============== ============== ============== ==============


 900,002 -- 1,300,002 --
 950,000 2,150,002 1,150,000 1,650,002
 (800,000) (1,250,000) (1,050,000) (350,000)
-------------- -------------- -------------- --------------
 1,050,002 900,002 1,400,002 1,300,002
============== ============== ============== ==============

 First Trust First Trust
 NASDAQ-100-Technology Sector Amex(R) Biotechnology
 Index(SM) Fund Index Fund
---------------------------------------- ---------------------------------------
 For the Period For the Period
 For the Year April 19, 2006 (a) For the Year June 19, 2006 (a)
 Ended through Ended through
Dececember 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006
------------------- ------------------ ------------------ -----------------

 $ (37,744) $ (24,769) $ (302,002) $ (78,128)
 3,065,233 478,780 7,149,648 1,789,320
 (1,702,778) (77,119) (7,597,605) 1,694,994
 ------------- ------------- -------------- --------------

 1,324,711 376,892 (749,959) 3,406,186
 ------------- ------------- -------------- --------------


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


 21,483,865 33,510,515 90,771,660 43,126,529
 (27,116,601) (5,927,831) (46,218,394) (17,094,975)
 ------------- ------------- -------------- --------------

 (5,632,736) 27,582,684 44,553,266 26,031,554
 ------------- ------------- -------------- --------------

 (4,308,025) 27,959,576 43,803,307 29,437,740


 27,959,576 -- 29,437,740 --
 ------------- ------------- -------------- --------------

 $ 23,651,551 $ 27,959,576 $ 73,241,047 $ 29,437,740
 ============= ============= ============== ==============


 $ -- $ -- $ -- $ --
 ============= ============= ============== ==============


 1,400,002 -- 1,250,002 --
 950,000 1,700,002 3,600,000 2,050,002
 (1,250,000) (300,000) (1,850,000) (800,000)
 ------------- ------------- -------------- --------------
 1,100,002 1,400,002 3,000,002 1,250,002
 ============= ============= ============== ==============

See Notes to Financial Statements. Page 81

FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

 First Trust First Trust
 Dow Jones Internet DB Strategic Value
 IndexSM Fund Index Fund
 ----------------------------------------- ------------------------------------
 For the Period For the Period
 For the Year June 19, 2006 (a) For the Year July 6, 2006 (a)
 Ended through Ended through
 December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006
 ------------------ ------------------ ----------------- -----------------
OPERATIONS:
 Net investment income (loss).................. $ (231,090) $ (71,540) $ 399,329 $ 88,369
 Net realized gain (loss)...................... 6,875,695 1,527,363 4,078,150 905,761
 Net change in unrealized appreciation
 (depreciation)............................. (4,669,550) 1,801,999 (2,024,723) 421,535
 ------------- ------------- ------------- -------------
 Net increase (decrease) in net assets
 resulting from operations................. 1,975,055 3,257,822 2,452,756 1,415,665
 ------------- ------------- ------------- -------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
 Net investment income......................... -- -- (394,875) (70,400)
 Net realized gain............................. -- -- -- --
 ------------- ------------- ------------- -------------
 Total distributions to shareholders........... -- -- (394,875) (70,400)
 ------------- ------------- ------------- -------------

SHAREHOLDER TRANSACTIONS:
 Proceeds from shares sold..................... 79,688,355 36,616,435 104,762,439 35,100,009
 Value of shares repurchased................... (71,230,802) (13,921,209) (62,952,782) (18,795,119)
 ------------- ------------- ------------- -------------
 Net increase (decrease) in net assets resulting
 from shareholder transactions.............. 8,457,553 22,695,226 41,809,657 16,304,890
 ------------- ------------- ------------- -------------

 Net increase (decrease) in net assets......... 10,432,608 25,953,048 43,867,538 17,650,155

NET ASSETS:
 Beginning of Period........................... 25,953,048 -- 17,650,155 --
 ------------- ------------- ------------- -------------

 End of Period................................. $ 36,385,656 $ 25,953,048 $ 61,517,693 $ 17,650,155
 ============= ============= ============= =============

 Undistributed net investment income (loss)
 at end of period........................... $ -- $ -- $ 22,423 $ 17,969
 ============= ============= ============= =============

CHANGES IN SHARES OUTSTANDING:
 Shares outstanding, beginning of period....... 1,150,002 -- 800,002 --
 Shares sold................................... 3,200,000 1,800,002 4,350,000 1,700,002
 Shares repurchased............................ (2,900,000) (650,000) (2,600,000) (900,000)
 ------------- ------------- ------------- -------------
 Shares outstanding, end of period............. 1,450,002 1,150,002 2,550,002 800,002
 ============= ============= ============= =============


(a) Inception date.
(b) Results for periods prior to December 18, 2006 are of First Trust Value
 Line(R) Dividend Fund. See Note 1 to Financial Statements.

Page 82 See Notes to Financial Statements.

 First Trust
 First Trust First Trust NASDAQ-100
 Value Line(R) Equity Allocation Value Line(R) Dividend Ex-Technology Sector
 Index Fund Index Fund Index(SM) Fund
------------------------------------------ --------------------------------------------------------------- ---------------------
 For the Period For the Period For the Period
 For the Year December 5, 2006 (a) For the Year June 1, 2006 For the Year February 8, 2007 (a)
 Ended through Ended through Ended through
 December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006 (b) May 31, 2006 (b) December 31, 2007
------------------- ------------------- -------------------- ---------------------- ----------------- ---------------------

$ 156,232 $ 18,537 $ 6,133,255 $ 7,470,307 $ 13,902,862 $ (1,364)
 (403,914) 29,372 55,377,383 56,814,074 48,450,270 457,158
 851,149 (183,667) (65,904,350) 10,193,087 (16,192,745) (208,808)
---------------- ---------------- --------------- --------------- ---------------- ----------------

 603,467 (135,758) (4,393,712) 74,477,468 46,160,387 246,986
---------------- ---------------- --------------- --------------- ---------------- ----------------


 (171,605) -- (6,533,096) (8,925,194) (13,527,000) --
 -- -- -- (59,311,848) (55,080,000) --
---------------- ---------------- --------------- --------------- ---------------- ----------------
 (171,605) -- (6,533,096) (68,237,042) (68,607,000) --
---------------- ---------------- --------------- --------------- ---------------- ----------------


 25,789,407 20,920,099 177,729,932 37,030,620 -- 8,275,318
 (31,723,062) (1,991,182) (438,291,965) (127,887,361) -- (6,403,732)
---------------- ---------------- --------------- --------------- ---------------- ----------------

 (5,933,655) 18,928,917 (260,562,033) (90,856,741) -- 1,871,586
---------------- ---------------- --------------- --------------- ---------------- ----------------

 (5,501,793) 18,793,159 (271,488,841) (84,616,315) (22,446,613) 2,118,572


 18,793,159 -- 451,642,063 536,258,378 558,704,991 --
---------------- ---------------- --------------- --------------- ---------------- ----------------

$ 13,291,366 $ 18,793,159 $ 180,153,222 $ 451,642,063 $ 536,258,378 $ 2,118,572
================ ================ =============== =============== ================ ================


$ 3,164 $ 18,537 $ -- $ -- $ 1,454,887 $ --
================ ================ =============== =============== ================ ================


 950,002 -- 26,938,000 32,400,000 32,400,000 --
 1,300,000 1,050,002 10,500,000 2,200,000 -- 400,002
 (1,600,000) (100,000) (26,000,014) (7,662,000) -- (300,000)
---------------- ---------------- --------------- --------------- ---------------- ----------------
 650,002 950,002 11,437,986 26,938,000 32,400,000 100,002
================ ================ =============== =============== ================ ================

See Notes to Financial Statements. Page 83

FIRST TRUST EXCHANGE-TRADED FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

 First Trust First Trust First Trust
 NASDAQ(R) Clean S&P ISE
 Edge(R) U.S. Liquid REIT Water
 Series Index Fund Index Fund Index Fund
 --------------------- ----------------- -----------------
 For the Period For the Period For the Period
 February 8, 2007 (a) May 8, 2007 (a) May 8, 2007 (a)
 through through through
 December 31, 2007 December 31, 2007 December 31, 2007
 --------------------- ----------------- -----------------
OPERATIONS:
 Net investment income (loss)............................... $ (64,652) $ 37,501 $ 24,450
 Net realized gain (loss)................................... 4,547,068 (64,033) 263,879
 Net change in unrealized appreciation (depreciation)....... 5,571,969 (384,315) 323,254
 ---------------- ---------------- ----------------
 Net increase (decrease) in net assets resulting from
 operations 10,054,385 (410,847) 611,583
 ---------------- ---------------- ----------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
 Net investment income...................................... -- (37,501) (24,475)
 Net realized gain.......................................... -- -- --
 ---------------- ---------------- ----------------
 Total distributions to shareholders........................ -- (37,501) (24,475)
 ---------------- ---------------- ----------------

SHAREHOLDER TRANSACTIONS:
 Proceeds from shares sold.................................. 57,955,176 3,796,816 18,295,951
 Value of shares repurchased............................... (17,096,526) (1,767,190) (6,573,340)
 ---------------- ---------------- ----------------
 Net increase (decrease) in net assets resulting from
 shareholder transactions.............................. 40,858,650 2,029,626 11,722,611
 ---------------- ---------------- ----------------

 Net increase (decrease) in net assets...................... 50,913,035 1,581,278 12,309,719

NET ASSETS:
 Beginning of Period........................................ -- -- --
 ---------------- ---------------- ----------------

 End of Period.............................................. $ 50,913,035 $ 1,581,278 $ 12,309,719
 ================ ================ ================

 Undistributed net investment income (loss) at end
 of period............................................... $ -- $ -- $ --
 ================ ================ ================

CHANGES IN SHARES OUTSTANDING:
 Shares outstanding, beginning of period.................... -- --
 Shares sold................................................ 2,350,002 200,002 850,002
 Shares repurchased......................................... (700,000) (100,000) (300,000)
 ---------------- ---------------- ----------------
 Shares outstanding, end of period.......................... 1,650,002 100,002 550,002
 ================ ================ ================


(a) Inception date.
(b) Results for periods prior to June 18, 2007 are of First Trust Value
 Line(R) 100 Fund. See Note 1 to Financial Statements.

Page 84 See Notes to Financial Statements.

 First Trust First Trust
 ISE-Revere ISE First Trust
 Natural Gas Chindia Value Line(R) 100
 Index Fund Index Fund Exchange-Traded Fund
----------------------- ----------------------- ------------------------------------------------
 For the Period For the Period
 May 8, 2007 (a) May 8, 2007 (a) For the Year For the Year
 through through Ended Ended
 December 31, 2007 December 31, 2007 December 31, 2007 (b) December 31, 2006 (b)
----------------------- ----------------------- ---------------------- ---------------------

 $ 10,866 $ 47,735 $ (497,794) $ (1,199,513)
 403,859 2,084,309 52,128,707 20,416,167
 20,760 2,451,608 (5,434,509) (8,499,843)
 ---------------- ---------------- ----------------- -----------------
 435,485 4,583,652 46,196,404 10,716,811
 ---------------- ---------------- ----------------- -----------------


 (9,200) (58,125) -- --
 -- -- (18,451,951) (32,863,710)
 ---------------- ---------------- ----------------- -----------------
 (9,200) (58,125) (18,451,951) (32,863,710)
 ---------------- ---------------- ----------------- -----------------


 17,272,326 119,626,564 219,100,688 --
 (6,541,227) (20,147,791) (319,833,579) --
 ---------------- ---------------- ----------------- -----------------

 10,731,099 99,478,773 (100,732,891) --
 ---------------- ---------------- ----------------- -----------------

 11,157,384 104,004,300 (72,988,438) (22,146,899)


 -- -- 277,901,863 300,048,762
 ---------------- ---------------- ----------------- -----------------

 $ 11,157,384 $ 104,004,300 $ 204,913,425 $ 277,901,863
 ================ ================ ================= =================

 $ 1,666 $ 1,096 $ -- $ --
 ================ ================ ================= =================


 -- -- 17,490,000 17,490,000
 800,002 4,500,002 12,750,000 --
 (300,000) (750,000) (18,800,018) --
 ---------------- ---------------- ----------------- -----------------
 500,002 3,750,002 11,439,982 17,490,000
 ================ ================ ================= =================

See Notes to Financial Statements. Page 85

FIRST TRUST EXCHANGE-TRADED FUND

FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

First Trust Dow Jones Select MicroCap Index(SM) Fund

 For the Period
 For the For the September 27, 2005 (a)
 Year Ended Year Ended through
 December 31, 2007 December 31, 2006 December 31, 2005
 -------------------- ------------------- ---------------------
Net asset value, beginning of period $ 23.92 $ 20.73 $ 20.00
 ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.16 0.06 (e) 0.03 (e)
Net realized and unrealized gain (loss) (1.60) 3.19 (e) 0.72 (e)
 ---------- ---------- ----------
Total from investment operations (1.44) 3.25 0.75
 ---------- ---------- ----------

Distributions paid to shareholders from:
Net investment income (0.13) (0.06) (0.02)
 ---------- ---------- ----------

Net asset value, end of period $ 22.35 $ 23.92 $ 20.73
 ========== ========== ==========

TOTAL RETURN (b) (6.02)% 15.69% 3.74%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 17,993 $ 16,865 $ 39,492
Ratios to average net assets:
Ratio of total expenses to average net assets 1.35% 1.18% 1.44% (c)
Ratio of net expenses to average net assets 0.60% 0.60% 0.60% (c)
Ratio of net investment income to average net assets 0.58% 0.24% 0.51% (c)
Portfolio turnover rate (d) 11% 20% 6%

First Trust Morningstar(R) Dividend Leaders(SM) Index Fund

 For the Period
 For the March 9, 2006 (a)
 Year Ended through
 December 31, 2007 December 31, 2006
 -------------------- ---------------------
Net asset value, beginning of period $ 23.51 $ 20.00
 ---------- ----------
Income from investment operations:
Net investment income (loss) 0.92 0.59 (e)
Net realized and unrealized gain (loss) (3.35) 3.52 (e)
 ---------- ----------
Total from investment operations (2.43) 4.11
 ---------- ----------

Distributions paid to shareholders from:
Net investment income (0.88) (0.60)
 ---------- ----------

Net asset value, end of period $ 20.20 $ 23.51
 ========== ==========

TOTAL RETURN (b) (10.64)% 20.80%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 64,650 $ 75,237
Ratios to average net assets:
Ratio of total expenses to average net assets 0.68% 0.99% (c)
Ratio of net expenses to average net assets 0.45% 0.45% (c)
Ratio of net investment income to average net assets 3.87% 3.55% (c)
Portfolio turnover rate (d) 9% 9%

(a) Inception date.
(b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividend distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Total return calculated for a period of less than one year is not annualized. The total return would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions.
(e) Per share amounts have been calculated using the average share method.

Page 86 See Notes to Financial Statements.

FIRST TRUST EXCHANGE-TRADED FUND

FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

First Trust IPOX-100 Index Fund

 For the Period
 For the April 12, 2006 (a)
 Year Ended through
 December 31, 2007 December 31, 2006
 -------------------- --------------------
Net asset value, beginning of period $ 22.20 $ 20.00
 ---------- ----------
Income from investment operations:
Net investment income (loss) 0.05 0.01 (e)
Net realized and unrealized gain (loss) 3.17 2.19 (e)
 ---------- ----------
Total from investment operations 3.22 2.20
 ---------- ----------

Distributions paid to shareholders from:
Net investment income (0.06) --
 ---------- ----------

Net asset value, end of period $ 25.36 $ 22.20
 ========== ==========
TOTAL RETURN (b) 14.53% 11.00%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 26,633 $ 19,981
Ratios to average net assets:
Ratio of total expenses to average net assets 1.06% 1.44% (c)
Ratio of net expenses to average net assets 0.60% 0.60% (c)
Ratio of net investment income to average net assets 0.24% 0.07% (c)
Portfolio turnover rate (d) 11% 26%

First Trust NASDAQ-100 Equal Weighted Index(SM) Fund

 For the Period
 For the April 19, 2006 (a)
 Year Ended through
 December 31, 2007 December 31, 2006
 ---------------------- --------------------
Net asset value, beginning of period $ 20.12 $ 20.00
 ---------- ----------
Income from investment operations:
Net investment income (loss) (0.02) (0.01) (e)
Net realized and unrealized gain (loss) 1.98 0.13 (e)
 ---------- ----------
Total from investment operations 1.96 0.12
 ---------- ----------

Net asset value, end of period $ 22.08 $ 20.12
 ========== ==========

TOTAL RETURN (b) 9.74% 0.60%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 30,911 $ 26,158
Ratios to average net assets:
Ratio of total expenses to average net assets 0.95% 1.31% (c)
Ratio of net expenses to average net assets 0.60% 0.60% (c)
Ratio of net investment loss to average net assets (0.08)% (0.07)%(c)
Portfolio turnover rate (d) 15% 1%

See Notes to Financial Statements. Page 87

FIRST TRUST EXCHANGE-TRADED FUND

FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

First Trust NASDAQ-100-Technology Sector Index(SM) Fund

 For the Period
 For the April 19, 2006 (a)
 Year Ended through
 December 31, 2007 December 31, 2006
 -------------------- --------------------
Net asset value, beginning of period $ 19.97 $ 20.00
 ---------- ----------
Income from investment operations:
Net investment income (loss) (0.03) (0.03)(f)
Net realized and unrealized gain (loss) 1.56 0.00 (e)(f)
 ---------- ----------
Total from investment operations 1.53 (0.03)
 ---------- ----------

Net asset value, end of period $ 21.50 $ 19.97
 ========== ==========

TOTAL RETURN (b) 7.66% (0.15)%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 23,652 $ 27,960
Ratios to average net assets:
Ratio of total expenses to average net assets 0.92% 1.37% (c)
Ratio of net expenses to average net assets 0.60% 0.60% (c)
Ratio of net investment loss to average net assets (0.16)% (0.20)%(c)
Portfolio turnover rate (d) 10% 7%

First Trust Amex(R) Biotechnology Index Fund

 For the Period
 For the June 19, 2006 (a)
 Year Ended through
 December 31, 2007 December 31, 2006
 -------------------- --------------------
Net asset value, beginning of period $ 23.55 $ 20.00
 ---------- ----------
Income from investment operations:
Net investment income (loss) (0.10) (0.07)(f)
Net realized and unrealized gain (loss) 0.96 3.62 (f)
 ---------- ----------
Total from investment operations 0.86 3.55
 ---------- ----------

Net asset value, end of period $ 24.41 $ 23.55
 ========== ==========

TOTAL RETURN (b) 3.65% 17.75%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 73,241 $ 29,438
Ratios to average net assets:
Ratio of total expenses to average net assets 0.73% 1.22% (c)
Ratio of net expenses to average net assets 0.60% 0.60% (c)
Ratio of net investment loss to average net assets (0.60)% (0.60)%(c)
Portfolio turnover rate (d) 11% 4%

(a) Inception date.
(b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividend distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Total return calculated for a period of less than one year is not annualized. The total return would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions.
(e) Amount represents less than $0.01 per share.
(f) Per share amounts have been calculated using the average share method.

Page 88 See Notes to Financial Statements.

FIRST TRUST EXCHANGE-TRADED FUND

FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

First Trust Dow Jones Internet Index(SM) Fund

 For the Period
 For the June 19, 2006 (a)
 Year Ended through
 December 31, 2007 December 31, 2006
 ------------------------------------------------
Net asset value, beginning of period $ 22.57 $ 20.00
 ---------- ----------
Income from investment operations:
Net investment income (loss) (0.16) (0.07)(e)
Net realized and unrealized gain (loss) 2.68 2.64 (e)
 ---------- ----------
Total from investment operations 2.52 2.57
 ---------- ----------

Net asset value, end of period $ 25.09 $ 22.57
 ========== ==========

TOTAL RETURN (b) 11.17% 12.85%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 36,386 $ 25,953
Ratios to average net assets:
Ratio of total expenses to average net assets 0.70% 1.24% (c)
Ratio of net expenses to average net assets 0.60% 0.60% (c)
Ratio of net investment loss to average net assets (0.42)% (0.55)%(c)
Portfolio turnover rate (d) 6% 4%

First Trust DB Strategic Value Index Fund

 For the Period
 For the July 6, 2006 (a)
 Year Ended through
 December 31, 2007 December 31, 2006
 -------------------- --------------------
Net asset value, beginning of period $ 22.06 $ 20.00
 ---------- ----------
Income from investment operations:
Net investment income (loss) 0.20 0.12 (e)
Net realized and unrealized gain (loss) 2.07 2.03 (e)
 ---------- ----------
Total from investment operations 2.27 2.15
 ---------- ----------

Distributions paid to shareholders from:
Net investment income (0.21) (0.09)
 ---------- ----------

Net asset value, end of period $ 24.12 $ 22.06
 ========== ==========

TOTAL RETURN (b) 10.26% 10.74%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 61,518 $ 17,650
Ratios to average net assets:
Ratio of total expenses to average net assets 1.12% 2.59% (c)
Ratio of net expenses to average net assets 0.65% 0.65% (c)
Ratio of net investment income to average net assets 1.09% 1.29% (c)
Portfolio turnover rate (d) 10% 4%

See Notes to Financial Statements. Page 89

FIRST TRUST EXCHANGE-TRADED FUND

FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

First Trust Value Line(R) Equity Allocation Index Fund

 For the Period
 For the December 5, 2006 (a)
 Year Ended through
 December 31, 2007 December 31, 2006
 -------------------- ----------------------
Net asset value, beginning of period $ 19.78 $ 20.00
 ---------- ----------
Income from investment operations:
Net investment income (loss) 0.24 0.03 (e)
Net realized and unrealized gain (loss) 0.68 (0.25)(e)
 ---------- ----------
Total from investment operations 0.92 (0.22)
 ---------- ----------

Distributions paid to shareholders from:
Net investment income (0.25) --
 ---------- ----------

Net asset value, end of period $ 20.45 $ 19.78
 ========== ==========

TOTAL RETURN (b) 4.65% (1.10)%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 13,291 $ 18,793
Ratios to average net assets:
Ratio of total expenses to average net assets 1.36% 3.25% (c)
Ratio of net expenses to average net assets 0.70% 0.70% (c)
Ratio of net investment income to average net assets 1.04% 1.82% (c)
Portfolio turnover rate (d) 43% 1%

Page 90 See Notes to Financial Statements.

FIRST TRUST EXCHANGE-TRADED FUND

FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

First Trust Value Line(R) Dividend Index Fund

 For the Period
 For the June 1, 2006 For the For the For the
 Year Ended through Year Ended Year Ended Period Ended
 December 31, 2007 December 31, 2006 (a) May 31, 2006 (a) May 31, 2005 (a) May 31, 2004 (a)
 ----------------- --------------------- ---------------- ---------------- ----------------
Net asset value, beginning of period $ 16.77 $ 16.55 $ 17.24 $ 16.13 $ 14.33 (e)
 ----------- ----------- ----------- ----------- -----------

Income from investment operations:
Net investment income (loss) 0.44 0.24 (i) 0.43 0.41 0.27
Net realized and unrealized gain (loss) (0.99) 2.10 (i) 1.00 1.99 1.86
 ----------- ----------- ----------- ----------- -----------
Total from investment operations (0.55) 2.34 1.43 2.40 2.13
 ----------- ----------- ----------- ----------- -----------

Distributions paid to shareholders
 from:
Net investment income (0.47) (0.63) (0.42) (0.37) (0.20)
Net realized gains -- (1.49) (1.70) (0.92) (0.11)
 ----------- ----------- ----------- ----------- -----------
Total distributions to shareholders (0.47) (2.12) (2.12) (1.29) (0.31)
 ----------- ----------- ----------- ----------- -----------

Common Shares offering costs
 charged to paid-in capital -- -- -- (0.00) (b) (0.02)
 ----------- ----------- ----------- ----------- -----------

Net asset value, end of period $ 15.75 $ 16.77 $ 16.55 $ 17.24 $ 16.13
 =========== =========== =========== =========== ===========

TOTAL RETURN, BASED ON
 NET ASSET VALUE (3.42)% (d) 14.70% (d) 10.26% (c) 16.05% (c) 15.09% (c)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 180,153 $ 451,642 $ 536,258 $ 558,705 $ 522,731
Ratios to average net assets:
Ratio of total expenses to average
 net assets 0.85% 0.94% (f) 0.93% 0.93% 0.93% (f)
Ratio of net expenses to average
 net assets 0.70% 0.93% (f)(h) 0.93% 0.93% 0.93% (f)
Ratio of net investment income to
 average net assets 2.37% 2.36% (f) 2.51% 2.45% 2.29% (f)
Portfolio turnover rate (g) 5% 28% 58% 57% 46%

(a) The Fund commenced operations on August 19, 2003. Results for periods prior to December 18, 2006 are of First Trust Value Line(R) Dividend Fund. See Note 1 in the Notes to Financial Statements.
(b) Amount represents less than $0.01 per share.
(c) Total return based on net asset value is the combination of reinvested dividend distributions and reinvested capital gains distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in net asset value per share and does not reflect sales load.
(d) Total return based on net asset value is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividend distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Prior to December 18, 2006, total return based on net asset value assumed that all dividend distributions were reinvested at prices obtained by the Dividend Reinvestment Plan of First Trust Value Line(R) Dividend Fund. See Note 1 in the Notes to Financial Statements. Total return calculated for a period of less than one year is not annualized. The total return would have been lower if certain fees had not been reimbursed by the investment advisor.
(e) Net of sales load $0.675 per Common Share on initial offering.
(f) Annualized.
(g) Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions.
(h) The annualized expense ratio is capped at 0.70% for the first two years from the date of the reorganization. This ratio of 0.93% includes expenses for a portion of the period prior to the reorganization for the First Trust Value Line(R) Dividend Fund.
(i) Per share amounts have been calculated using the average share method.

See Notes to Financial Statements. Page 91

FIRST TRUST EXCHANGE-TRADED FUND

FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund

 For the Period
 February 8, 2007 (a)
 through
 December 31, 2007
 -----------------------
Net asset value, beginning of period $ 20.00
 ----------
Income from investment operations:
Net investment income (loss) (0.01)
Net realized and unrealized gain (loss) 1.20
 ----------
Total from investment operations 1.19
 ----------

Net asset value, end of period $ 21.19
 ==========

TOTAL RETURN (b) 5.95%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2,119
Ratios to average net assets:
Ratio of total expenses to average net assets 2.61% (c)
Ratio of net expenses to average net assets 0.60% (c)
Ratio of net investment loss to average net assets (0.04)%(c)
Portfolio turnover rate (d) 27%

First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund

 For the Period
 February 8, 2007 (a)
 through
 December 31, 2007
 -----------------------
Net asset value, beginning of period $ 20.00
 ----------
Income from investment operations:
Net investment income (loss) (0.04)
Net realized and unrealized gain (loss) 10.90
 ----------
Total from investment operations 10.86
 ----------

Net asset value, end of period $ 30.86
 ==========

TOTAL RETURN (b) 54.30%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 50,913
Ratios to average net assets:
Ratio of total expenses to average net assets 1.00% (c)
Ratio of net expenses to average net assets 0.60% (c)
Ratio of net investment loss to average net assets (0.33)%(c)
Portfolio turnover rate (d) 4%

Page 92 See Notes to Financial Statements.

FIRST TRUST EXCHANGE-TRADED FUND

FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

First Trust S&P REIT Index Fund

 For the Period
 May 8, 2007 (a)
 through
 December 31, 2007
 -----------------------
Net asset value, beginning of period $ 20.00
 ----------
Income from investment operations:
Net investment income (loss) 0.32 (b)
Net realized and unrealized gain (loss) (4.13)(b)
 ----------
Total from investment operations (3.81)
 ----------
Distributions paid to shareholders from:
Net investment income (0.38)
 ----------

Net asset value, end of period $ 15.81
 ==========

TOTAL RETURN (c) (19.08)%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,581
Ratios to average net assets:
Ratio of total expenses to average net assets 8.41% (d)
Ratio of net expenses to average net assets 0.50% (d)
Ratio of net investment income to average net assets 2.73% (d)
Portfolio turnover rate (e) 25%

First Trust ISE Water Index Fund

 For the Period
 May 8, 2007 (a)
 through
 December 31, 2007
 -----------------------
Net asset value, beginning of period $ 20.00
 ----------
Income from investment operations:
Net investment income (loss) 0.04
Net realized and unrealized gain (loss) 2.38
 ----------
Total from investment operations 2.42
 ----------
Distributions paid to shareholders from:
Net investment income (0.04)
 ----------

Net asset value, end of period $ 22.38
 ==========

TOTAL RETURN (c) 12.12%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 12,310
Ratios to average net assets:
Ratio of total expenses to average net assets 1.68% (d)
Ratio of net expenses to average net assets 0.60% (d)
Ratio of net investment income to average net assets 0.46% (d)
Portfolio turnover rate (e) 3%

(a) Inception date.
(b) Per share amounts have been calculated using the average share method.
(c) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividend distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Total return calculated for a period of less than one year is not annualized. The total return would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor.
(d) Annualized.
(e) Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions.

See Notes to Financial Statements. Page 93

FIRST TRUST EXCHANGE-TRADED FUND

FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

First Trust ISE-Revere Natural Gas Index Fund

 For the Period
 May 8, 2007 (a)
 through
 December 31, 2007
 -----------------------
Net asset value, beginning of period $ 20.00
 ----------
Income from investment operations:
Net investment income (loss) 0.03
Net realized and unrealized gain (loss) 2.30
 ----------
Total from investment operations 2.33
 ----------
Distributions paid to shareholders from:
Net investment income (0.02)
 ----------

Net asset value, end of period $ 22.31
 ==========

TOTAL RETURN (b) 11.67%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 11,157
Ratios to average net assets:
Ratio of total expenses to average net assets 2.36% (c)
Ratio of net expenses to average net assets 0.60% (c)
Ratio of net investment income to average net assets 0.32% (c)
Portfolio turnover rate (d) 5%

First Trust ISE Chindia Index Fund

 For the Period
 May 8, 2007 (a)
 through
 December 31, 2007
 -----------------------
Net asset value, beginning of period $ 20.00
 ----------
Income from investment operations:
Net investment income (loss) 0.02
Net realized and unrealized gain (loss) 7.73
 ----------
Total from investment operations 7.75
 ----------
Distributions paid to shareholders from:
Net investment income (0.02)
 ----------

Net asset value, end of period $ 27.73
 ==========

TOTAL RETURN (b) 38.73%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 104,004
Ratios to average net assets:
Ratio of total expenses to average net assets 0.82% (c)
Ratio of net expenses to average net assets 0.60% (c)
Ratio of net investment income to average net assets 0.17% (c)
Portfolio turnover rate (d) 2%

Page 94 See Notes to Financial Statements.

FIRST TRUST EXCHANGE-TRADED FUND

FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

First Trust Value Line(R) 100 Exchange-Traded Fund

 For the Period
 For the For the For the For the June 12, 2003
 Year Ended Year Ended Year Ended Year Ended through
 December 31, December 31, December 31, December 31, December 31,
 2007 (a) 2006 (a) 2005 (a) 2004 (a) 2003 (a)
 -------------- -------------- -------------- -------------- -----------------
Net asset value, beginning of period $ 15.89 $ 17.16 $ 18.05 $ 16.61 $ 14.33 (e)
 ----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) 1.02 (0.07) (0.08) (0.09) (0.06)
Net realized and unrealized
 gain (loss) 2.06 0.68 2.00 2.19 2.37
 ----------- ----------- ----------- ----------- -----------
Total from investment operations 3.08 0.61 1.92 2.10 2.31
 ----------- ----------- ----------- ----------- -----------

Distributions paid to shareholders
 from:
Net realized gain (1.06) (1.88) (2.81) (0.66) --
 ----------- ----------- ----------- ----------- -----------

Common Shares offering costs
 charged to paid-in capital -- -- -- (0.00) (b) (0.03)
 ----------- ----------- ----------- ----------- -----------

Net asset value, end of period $ 17.91 $ 15.89 $ 17.16 $ 18.05 $ 16.61
 =========== =========== =========== =========== ===========

TOTAL RETURN 19.91% (d) 4.59% (c) 11.86% (c) 13.05% (c) 15.91% (c)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 204,913 $ 277,902 $ 300,049 $ 315,632 $ 290,464
Ratios to average net assets:
Ratio of total expenses to average
 net assets 0.89% 0.97% 0.95% 0.97% 1.02% (f)
Ratio of net expenses to average
 net assets 0.83% (h) 0.97% 0.95% 0.97% 1.02% (f)
Ratio of net investment loss to
 average net assets (0.21)% (0.40)% (0.43)% (0.52)% (0.75)%(f)
Portfolio turnover rate (g) 111% 234% 240% 220% 144%

(a) The Fund commenced operations on June 12, 2003. Results for periods prior to June 18, 2007 are of First Trust Value Line(R) 100 Fund. See Note 1 in the Notes to Financial Statements.
(b) Amount represents less than $0.01 per share.
(c) Total return based on net asset value is the combination of reinvested dividend distributions and reinvested capital gains distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in net asset value per share and does not reflect sales load.
(d) Total return based on net asset value is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividend distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Prior to June 18, 2007, total return based on net asset value assumed that all dividend distributions were reinvested at prices obtained by the Dividend Reinvestment Plan of First Trust Value Line(R) 100 Fund. See Note 1 in the Notes to Financial Statements. Total return calculated for a period of less than one year is not annualized. The total return would have been lower if certain fees had not been reimbursed by the investment advisor.
(e) Net of sales load $0.675 per Common Share on initial offering.
(f) Annualized.
(g) Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions.
(h) The annualized expense ratio is capped at 0.70% for the first two years from the date of the reorganization. This ratio of 0.83% includes expenses for a portion of the period prior to the reorganization for the First Trust Value Line(R) 100 Fund.

See Notes to Financial Statements. Page 95

NOTES TO FINANCIAL STATEMENTS

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007

1. Organization

First Trust Exchange-Traded Fund (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on August 8, 2003, and is registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended (the "1940 Act").

First Trust Value Line(R) Dividend Fund (the "Predecessor FVD Fund"), a closed-end fund organized as a Massachusetts business trust on June 11, 2003, reorganized with and into First Trust Value Line(R) Dividend Index Fund ("FVD"), an exchange-traded fund and newly created series of the Trust effective Friday, December 15, 2006. The Predecessor FVD Fund ceased trading on the AMEX on Friday, December 15, 2006, and FVD began trading on the AMEX on Monday, December 18, 2006 under the ticker symbol "FVD," the same ticker symbol used by the Predecessor FVD Fund. The assets of the Predecessor FVD Fund were transferred to, and the liabilities of the Predecessor FVD Fund were assumed by, FVD in exchange for shares of FVD on a one share for one share basis based upon the net asset value ("NAV") of the Predecessor FVD Fund on Friday, December 15, 2006. FVD shares have been distributed to the Predecessor FVD Fund shareholders, on a tax-free basis for federal income tax purposes, and the Predecessor FVD Fund has been terminated. The historical results of the Predecessor FVD Fund will survive for financial reporting purposes.

First Trust Value Line(R) 100 Fund (the "Predecessor FVL Fund"), a closed-end fund organized as a Massachusetts business trust on April 18, 2003, reorganized with and into First Trust Value Line(R) 100 Exchange-Traded Fund ("FVL"), an exchange-traded fund and newly created series of the Trust effective Friday, June 15, 2007. The Predecessor FVL Fund ceased trading on the AMEX on Friday, June 15, 2007, and FVL began trading on the AMEX on Monday, June 18, 2007 under the ticker symbol "FVL," the same ticker symbol used by the Predecessor FVL Fund. The assets of the Predecessor FVL Fund were transferred to, and the liabilities of the Predecessor FVL Fund were assumed by, FVL in exchange for shares of FVL on a one share for one share basis based upon the NAV of the Predecessor FVL Fund on Friday, June 15, 2007. FVL shares have been distributed to the Predecessor FVL Fund shareholders, on a tax-free basis for federal income tax purposes, and the Predecessor FVL Fund has been terminated. The historical results of the Predecessor FVL Fund will survive for financial reporting purposes.

The Trust currently consists of seventeen funds:

First Trust Dow Jones Select MicroCap Index(SM) Fund - (AMEX ticker "FDM") First Trust Morningstar(R) Dividend Leaders(SM) Index Fund - (AMEX ticker "FDL") First Trust IPOX-100 Index Fund - (AMEX ticker "FPX") First Trust NASDAQ-100 Equal Weighted Index(SM) Fund - (NASDAQ ticker "QQEW") First Trust NASDAQ-100-Technology Sector Index(SM) Fund - (NASDAQ ticker "QTEC") First Trust Amex(R) Biotechnology Index Fund - (AMEX ticker "FBT") First Trust Dow Jones Internet Index(SM) Fund - (AMEX ticker "FDN") First Trust DB Strategic Value Index Fund - (AMEX ticker "FDV") First Trust Value Line(R) Equity Allocation Index Fund - (AMEX ticker "FVI") First Trust Value Line(R) Dividend Index Fund - (AMEX ticker "FVD") First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -

(NASDAQ ticker "QQXT")

First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund -

(NASDAQ ticker "QCLN")

First Trust S&P REIT Index Fund - (AMEX ticker "FRI") First Trust ISE Water Index Fund - (NYSE Arca, Inc. ticker "FIW") First Trust ISE-Revere Natural Gas Index Fund - (NYSE Arca, Inc. ticker "FCG") First Trust ISE Chindia Index Fund - (NYSE Arca, Inc. ticker "FNI") First Trust Value Line(R) 100 Exchange-Traded Fund - (AMEX ticker "FVL")

Each fund represents a separate series of beneficial interest in the Trust (individually, each a "Fund" and collectively, the "Funds"). Each Fund's shares are listed and traded on the American Stock Exchange ("AMEX") except for the First Trust NASDAQ-100 Equal Weighted Index(SM) Fund, the First Trust NASDAQ-100-Technology Sector Index(SM) Fund, the First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund, and the First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund, which are listed and traded on The NASDAQ Stock Market, Inc. ("NASDAQ(R)") and the First Trust ISE Water Index Fund, the First Trust ISE-Revere Natural Gas Index Fund and the First Trust Chindia Index Fund, which are listed and traded on the NYSE Arca, Inc. ("NYSE Arca"). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at NAV, only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Creation Units are issued and redeemed principally in-kind for securities included in a Fund's relevant index. Except when aggregated in Creation Units, shares are not redeemable securities of a Fund. The investment objective of each Fund is to seek investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of the following indices:

Page 96

NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007

Fund Index
First Trust Dow Jones Select MicroCap Index(SM) Fund Dow Jones Select MicroCap Index(SM)
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund Morningstar(R) Dividend Leaders(SM) Index
First Trust IPOX-100 Index Fund IPOX-100 U.S. Index
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund NASDAQ-100 Equal Weighted Index(SM)
First Trust NASDAQ-100-Technology Sector Index(SM) Fund NASDAQ-100 Technology Sector Index(SM)
First Trust Amex(R) Biotechnology Index Fund Amex(R) Biotechnology Index(SM)
First Trust Dow Jones Internet Index(SM) Fund Dow Jones Internet Composite Index(SM)
First Trust DB Strategic Value Index Fund Deutsche Bank CROCI(R) US+ Index(TM)
First Trust Value Line(R) Equity Allocation Index Fund Value Line(R) Equity Allocation Index
First Trust Value Line(R) Dividend Index Fund Value Line(R) Dividend Index
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund NASDAQ-100 Ex-Tech Sector Index(SM)
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index
First Trust S&P REIT Index Fund S&P REIT Composite Index
First Trust ISE Water Index Fund ISE Water Index(TM)
First Trust ISE-Revere Natural Gas Index Fund ISE-REVERE Natural Gas Index(TM)
First Trust ISE Chindia Index Fund ISE ChIndia Index(TM)
First Trust Value Line(R) 100 Exchange-Traded Fund Value Line(R) 100 Index

2. Significant Accounting Policies

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

A. Portfolio Valuation
The NAV of each Fund's shares is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.

Each Fund's investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust's Board of Trustees. Portfolio securities listed on any exchange other than the NASDAQ(R) are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and asked prices on such day. Securities traded on the NASDAQ(R) are valued at the NASDAQ(R) Official Closing Price as determined by NASDAQ(R). Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ(R), are valued at the closing bid prices. Short-term investments that mature in less than 60 days are valued at amortized cost.

B. Securities Transactions and Investment Income Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.

The Funds may hold publicly-traded master limited partnerships and real estate investment trusts. Distributions from such investments may include a return of capital component.

C. Dividends and Distribution to Shareholders Dividends from net investment income of each Fund, if any, are declared and paid semi-annually, except for First Trust Morningstar(R) Dividend Leaders(SM) Index Fund and First Trust Value Line(R) Dividend Index Fund, which declare and pay dividends quarterly, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually.

Distributions from income and capital gains are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatments of income and gains on various investment securities held by a Fund, timing differences and differing characterization of distributions made by a Fund.

Page 97

NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007

The tax character of distributions paid by each Fund during the period ended December 31, 2007 were as follows:

 Distributions Distributions Distributions
 paid from paid paid from
 Ordinary from Capital Return of
 Income Gains Capital
 ----------------- -------------- ---------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 101,775 $ -- $ --
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund (A) 3,792,601 -- --
First Trust IPOX-100 Index Fund 67,725 -- --
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund -- -- --
First Trust NASDAQ-100-Technology Sector Index(SM) Fund -- -- --
First Trust Amex(R) Biotechnology Index Fund -- -- --
First Trust Dow Jones Internet Index(SM) Fund -- -- --
First Trust DB Strategic Value Index Fund 394,875 -- --
First Trust Value Line(R) Equity Allocation Index Fund 171,605 -- --
First Trust Value Line(R) Dividend Index Fund 6,533,096 -- --
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -- -- --
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund -- -- --
First Trust S&P REIT Index Fund 37,501 -- --
First Trust ISE Water Index Fund 24,475 -- --
First Trust ISE-Revere Natural Gas Index Fund 9,200 -- --
First Trust ISE Chindia Index Fund 58,125 -- --
First Trust Value Line(R) 100 Exchange-Traded Fund (B) -- -- --

(A) For the tax year ended November 30, 2007, the Fund distributed $2,951,001 from ordinary income. The Fund changed its tax year to December 31, effective December 1, 2007, and will have a short tax year of December 1 to December 31, 2007. The Fund distributed $841,600 from ordinary income for the period December 1 through December 31, 2007.

(B) All distributions were paid prior to June 18, 2007 and are of First Trust Value Line(R) 100 Fund. See Note 1 above.

The tax character of distributions paid during the period ended December 31, 2006 was as follows:

 Distributions Distributions Distributions
 paid from paid paid from
 Ordinary from Capital Return of
 Income Gains Capital
 ----------------- -------------- ---------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 67,080 $ -- $ --
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund (A) 630,001 -- --
First Trust DB Strategic Value Index Fund 70,400 -- --
First Trust Value Line(R) Dividend Index Fund 19,499,734 46,401,234 2,336,074
First Trust Value Line(R) 100 Exchange-Traded Fund (B) -- -- --

(A) This amount is as of November 30, 2006, the Fund's prior tax year-end.

(B) All distributions were paid prior to June 18, 2007 and are of First Trust Value Line(R) 100 Fund. See Note 1 above.

Page 98

NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007

As of December 31, 2007, the components of distributable earnings on a tax basis for each Fund were as follows:

 Undistributed Net Unrealized
 Ordinary Income Appreciation (Depreciation)
 ----------------------- ---------------------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 4,380 $ (1,430,004)
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund (A) 9,502 (12,609,479)
First Trust IPOX-100 Index Fund 1,158 1,958,507
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund -- (1,743,296)
First Trust NASDAQ-100-Technology Sector Index(SM) Fund -- (1,783,779)
First Trust Amex(R) Biotechnology Index Fund -- (6,269,136)
First Trust Dow Jones Internet Index(SM) Fund -- (3,579,723)
First Trust DB Strategic Value Index Fund 22,423 (1,794,979)
First Trust Value Line(R) Equity Allocation Index Fund 3,164 667,292
First Trust Value Line(R) Dividend Index Fund -- (10,114,015)
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -- (226,358)
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund -- 5,269,569
First Trust S&P REIT Index Fund -- (413,643)
First Trust ISE Water Index Fund -- 318,303
First Trust ISE-Revere Natural Gas Index Fund 1,666 10,424
First Trust ISE Chindia Index Fund 86,380 1,612,014
First Trust Value Line(R) 100 Exchange-Traded Fund -- 22,656,895

(A) The Fund changed its tax year to December 31, effective December 1, 2007, and will have a short tax year of December 1 to December 31, 2007.

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

In June 2006, Financial Accounting Standards Board Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" - an Interpretation of FASB Statement 109 ("FIN 48") was issued and is effective for fiscal years beginning after December 15, 2006. This Interpretation prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. As of December 31, 2007, management has evaluated the application of FIN 48 to each Fund, and has determined that there is no material impact resulting from the adoption of this Interpretation on each Fund's financial statements.

At December 31, 2007 for federal income tax purposes, each Fund has capital loss carryforwards available as shown in the table below, to the extent provided by regulations, to offset future capital gains through the years indicated. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to Fund shareholders.

 Capital Loss Capital Loss Capital Loss
 Available Available Available Total
 Through Through Through Capital Loss
 2013 2014 2015 Available
 ------------- ------------- ------------- --------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ -- $ 1,604,481 $ 910,503 $ 2,514,984
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 52,755 202,279 198,670 453,704
First Trust IPOX-100 Index Fund -- 303,759 740,683 1,044,442
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund -- 15,480 271,083 286,563
First Trust NASDAQ-100-Technology Sector Index(SM) Fund -- 95,862 535,229 631,091
First Trust Amex(R) Biotechnology Index Fund- -- -- -- --
First Trust Dow Jones Internet Index(SM) Fund -- -- 15 15
First Trust DB Strategic Value Index Fund -- 45,432 831,336 876,768
First Trust Value Line(R) Equity Allocation Index Fund -- -- 1,439,101 1,439,101
First Trust Value Line(R) Dividend Index Fund -- -- 4,488,019 4,488,019
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund -- -- 7,779 7,779
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund -- -- 141,332 141,332
First Trust S&P REIT Index Fund -- -- 10,162 10,162
First Trust ISE Water Index Fund -- -- 592 592
First Trust ISE-Revere Natural Gas Index Fund -- -- 5,274 5,274
First Trust ISE Chindia Index Fund -- -- -- --
First Trust Value Line(R) 100 Exchange-Traded Fund -- -- 6,804,100 6,804,100

Page 99

NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007

Capital losses incurred after October 31 ("post-October losses") within the taxable year can be deemed to arise on the first business day of the Funds' next taxable year.

The following Funds incurred and elected to defer net capital losses as follows:

 Post-October Losses
 -----------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 21,926
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund --
First Trust IPOX-100 Index Fund 281,307
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 486,971
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 313,003
First Trust Amex(R) Biotechnology Index Fund 382
First Trust Dow Jones Internet Index(SM) Fund 5,398,739
First Trust DB Strategic Value Index Fund 318,138
First Trust Value Line(R) Equity Allocation Index Fund --
First Trust Value Line(R) Dividend Index Fund 2,101,739
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 34,569
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 12,352
First Trust S&P REIT Index Fund 8,811
First Trust ISE Water Index Fund 30,457
First Trust ISE-Revere Natural Gas Index Fund 90,276
First Trust ISE Chindia Index Fund 1,184,077
First Trust Value Line(R) 100 Exchange-Traded Fund 4,374,928

In order to present paid-in capital and accumulated net realized gains or losses on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to additional paid-in capital, undistributed net investment income and accumulated net realized gains or losses on investments. For the period ended December 31, 2007, the adjustments of each Fund were as follows:

 Undistributed Undistributed
 Net Investment Capital Gains/ Paid-in
 Income (Loss) (Accumulated Losses) Capital
 ---------------- ---------------------- ----------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ -- $ (2,183,745) $ 2,183,745
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund (4,958) (6,685,825) 6,690,783
First Trust IPOX-100 Index Fund -- (2,944,257) 2,944,257
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 19,001 (3,872,930) 3,853,929
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 37,744 (3,561,366) 3,523,622
First Trust Amex(R) Biotechnology Index Fund 302,002 (7,464,003) 7,162,001
First Trust Dow Jones Internet Index(SM) Fund 231,090 (12,973,854) 12,742,764
First Trust DB Strategic Value Index Fund -- (5,413,876) 5,413,876
First Trust Value Line(R) Equity Allocation Index Fund -- (1,033,752) 1,033,752
First Trust Value Line(R) Dividend Index Fund 399,841 (61,254,336) 60,854,495
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 1,364 (517,056) 515,692
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 64,652 (5,003,152) 4,938,500
First Trust S&P REIT Index Fund -- 15,732 (15,732)
First Trust ISE Water Index Fund 25 (299,879) 299,854
First Trust ISE-Revere Natural Gas Index Fund -- (509,745) 509,745
First Trust ISE Chindia Index Fund 11,486 (4,022,696) 4,011,210
First Trust Value Line(R) 100 Exchange-Traded Fund 497,794 (44,640,291) 44,142,497

E. Expenses
Expenses that are directly related to one of the Funds are charged directly to that Fund. General expenses of the Trust are allocated to all the Funds based upon the average net assets of each Fund. First Trust Advisors L.P. ("First Trust" or the "Advisor") has entered into licensing agreements with each of the following "Licensors" for the respective Funds:

Page 100

NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007

Fund Licensor
First Trust Dow Jones Select MicroCap Index(SM) Fund Dow Jones & Company, Inc.
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund Morningstar, Inc.
First Trust IPOX-100 Index Fund IPOX Schuster LLC
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund The NASDAQ Stock Market, Inc.
First Trust NASDAQ-100-Technology Sector Index(SM) Fund The NASDAQ Stock Market, Inc.
First Trust Amex(R) Biotechnology Index Fund American Stock Exchange LLC
First Trust Dow Jones Internet Index(SM) Fund Dow Jones & Company, Inc.
First Trust DB Strategic Value Index Fund Deutsche Bank AG
First Trust Value Line(R) Equity Allocation Index Fund Value Line Publishing, Inc.(R)
First Trust Value Line(R) Dividend Index Fund Value Line Publishing, Inc.(R)
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund The NASDAQ Stock Market, Inc.
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund The NASDAQ Stock Market, Inc. / Clean Edge, Inc.
First Trust S&P REIT Index Fund Standard & Poor's
First Trust ISE Water Index Fund International Securities Exchange, LLC
First Trust ISE-Revere Natural Gas Index Fund International Securities Exchange, LLC
First Trust ISE Chindia Index Fund International Securities Exchange, LLC
First Trust Value Line(R) 100 Exchange-Traded Fund Value Line Publishing, Inc.(R)

The respective license agreements allow for the use by First Trust of certain trademarks and trade names of the respective Licensors. The Funds are sub-licensees to the applicable license agreements. The respective Funds are required to pay licensing fees, which are shown on the Statements of Operations.

F. Accounting Pronouncement
In September 2006, Statement of Financial Accounting Standards No. 157 Fair Value Measurements ("SFAS 157") was issued by the FASB and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. At this time, management is evaluating the implications of SFAS 157 and its impact on the Funds' financial statements, if any, has not been determined.

3. Investment Advisory Fee and Other Affiliated Transactions

First Trust is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. First Trust serves as investment advisor to the Funds pursuant to an Investment Management Agreement. First Trust is responsible for the selection and ongoing monitoring of the securities in the Funds' portfolios and certain other services necessary for the management of the Funds.

For these services, First Trust is entitled to a monthly fee calculated at the following annual rates:

 % of Average
 Daily Net Assets
 -----------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund 0.50%
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 0.30%
First Trust IPOX-100 Index Fund 0.40%
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 0.40%
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 0.40%
First Trust Amex(R) Biotechnology Index Fund 0.40%
First Trust Dow Jones Internet Index(SM) Fund 0.40%
First Trust DB Strategic Value Index Fund 0.50%
First Trust Value Line(R) Equity Allocation Index Fund 0.50%
First Trust Value Line(R) Dividend Index Fund 0.50%
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 0.40%
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 0.40%
First Trust S&P REIT Index Fund 0.30%
First Trust ISE Water Index Fund 0.40%
First Trust ISE-Revere Natural Gas Index Fund 0.40%
First Trust ISE Chindia Index Fund 0.40%
First Trust Value Line(R) 100 Exchange-Traded Fund (1) 0.50%

(1) Prior to June 18, 2007, First Trust was entitled to a monthly fee calculated at an annual rate of 0.65% of the Fund's average daily net assets for its investment advisory services to First Trust Value Line(R) 100 Fund.

Page 101

NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007

The Trust and the Advisor have entered into an Excess Expense Agreement in which the Advisor has agreed to waive fees and/or reimburse the Funds to the extent that the operating expenses of each Fund (excluding interest expense, brokerage commissions and other trading expenses, taxes and extraordinary expenses) exceeded the percentage of average daily net assets per year (the "Expense Cap") as shown below:

 Expense Cap
 ------------
First Trust Dow Jones Select MicroCap Index(SM) Fund 0.60%
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 0.45%
First Trust IPOX-100 Index Fund 0.60%
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 0.60%
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 0.60%
First Trust Amex(R) Biotechnology Index Fund 0.60%
First Trust Dow Jones Internet Index(SM) Fund 0.60%
First Trust DB Strategic Value Index Fund 0.65%
First Trust Value Line(R) Equity Allocation Index Fund 0.70%
First Trust Value Line(R) Dividend Index Fund 0.70%
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 0.60%
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 0.60%
First Trust S&P REIT Index Fund 0.50%
First Trust ISE Water Index Fund 0.60%
First Trust ISE-Revere Natural Gas Index Fund 0.60%
First Trust ISE Chindia Index Fund 0.60%
First Trust Value Line(R) 100 Exchange-Traded Fund 0.70%

Each Fund's Expense Cap will be in effect for at least two years from its inception date, except that First Trust Dow Jones Select MicroCap Index(SM) Fund's Expense Cap was extended until May 15, 2008. Expenses borne by the Advisor are subject to reimbursement by the Funds up to three years from the date the fee or expense was incurred, but no reimbursement payment will be made by a Fund if it would result in the Fund exceeding its Expense Cap.

For the period ended December 31, 2007, the advisory fee waivers and reimbursements of expenses (in order to maintain the Expense Caps) were as follows:

 Advisory Fee Expense
 Waivers Reimbursements
 ------------------- --------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 90,935 $ 46,250
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 199,880 --
First Trust IPOX-100 Index Fund 98,443 15,288
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 86,008 --
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 75,489 --
First Trust Amex(R) Biotechnology Index Fund 65,395 --
First Trust Dow Jones Internet Index(SM) Fund 54,768 --
First Trust DB Strategic Value Index Fund 172,875 --
First Trust Value Line(R) Equity Allocation Index Fund 75,067 23,311
First Trust Value Line(R) Dividend Index Fund 392,894 --
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 12,216 49,026
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 77,233 --
First Trust S&P REIT Index Fund 4,118 104,490
First Trust ISE Water Index Fund 21,211 36,453
First Trust ISE-Revere Natural Gas Index Fund 13,470 45,852
First Trust ISE Chindia Index Fund 61,221 --
First Trust Value Line(R) 100 Exchange-Traded Fund 132,258 --

The Trust has multiple service agreements with The Bank of New York ("BNY"). Under the servicing agreements, BNY will perform custodial, fund accounting, certain administrative services, and transfer agency services for the Trust. As custodian, BNY is responsible for the custody of the Trust's assets. As fund accountant and administrator, BNY is responsible for maintaining the books and records of the Trust's securities and cash. As transfer agent, BNY is responsible for performing transfer agency services for the Trust. The Bank of New York is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.

Page 102

NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007

The Trust, on behalf of the Funds, has entered into an agreement with PFPC, Inc. ("PFPC"), whereby PFPC will provide certain administrative services for the Trust and the Funds in connection with the Board's meetings and other related matters.

Prior to June 18, 2007, PFPC, an indirect, majority-owned subsidiary of The PNC Financial Services Group Inc., served as First Trust Value Line(R) 100 Fund's Administrator and Transfer Agent in accordance with certain fee arrangements. PFPC Trust Company, also an indirect, majority-owned subsidiary of The PNC Financial Services Group Inc., served as First Trust Value Line(R) 100 Fund's Custodian in accordance with certain fee arrangements.

Effective January 1, 2007, the Trustees approved a revised compensation plan. Under the revised plan, each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid an annual retainer of $10,000 per trust for the first 14 trusts of the First Trust Fund Complex and an annual retainer of $7,500 per trust for each subsequent trust added to the First Trust Fund Complex. The annual retainer is allocated equally among each of the trusts. No additional meeting fees are paid in connection with board or committee meetings.

Additionally, the Lead Independent Trustee is paid $10,000 annually and the Audit Committee Chairman is paid $5,000 annually, with such compensation paid by the trusts in the First Trust Fund Complex and divided among those trusts. Trustees are also reimbursed by the trusts in the First Trust Fund Complex for travel and out-of-pocket expenses in connection with all meetings. Prior to January 1, 2007, the trusts paid each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates an annual retainer of $10,000, which included compensation for all board and committee meetings. Effective January 1, 2008, each of the chairmen of the Nominating and Governance Committee and Valuation Committee will be paid $2,500 annually to serve in such capacities with such compensation paid by the trusts in the First Trust Fund Complex and divided among those trusts. Also effective January 1, 2008, each committee chairman will serve two years before rotating to serve as a chairman of another committee.

4. Purchases and Sales of Securities

For the period ended December 31, 2007, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:

 Purchases Sales
 ----------------- -----------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 2,026,281 $ 6,452,305
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 7,403,049 12,401,969
First Trust IPOX-100 Index Fund 2,744,316 6,108,089
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 3,693,046 3,676,209
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 2,432,152 4,566,339
First Trust Amex(R) Biotechnology Index Fund 8,022,538 5,649,685
First Trust Dow Jones Internet Index(SM) Fund 3,310,907 9,200,700
First Trust DB Strategic Value Index Fund 3,600,844 9,675,728
First Trust Value Line(R) Equity Allocation Index Fund 6,295,765 14,835,215
First Trust Value Line(R) Dividend Index Fund 13,083,142 39,505,401
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 1,100,767 938,747
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 1,042,859 2,103,636
First Trust S&P REIT Index Fund 551,945 529,675
First Trust ISE Water Index Fund 238,065 945,332
First Trust ISE-Revere Natural Gas Index Fund 272,367 1,697,199
First Trust ISE Chindia Index Fund 789,462 11,040,522
First Trust Value Line(R) 100 Exchange-Traded Fund 263,804,022 348,820,775

Page 103

NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007

For the period ended December 31, 2007, the cost of in-kind purchases and proceeds from in-kind sales were as follows:

 Purchases Sales
 ----------------- -----------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 20,717,231 $ 14,036,716
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 66,643,391 59,946,504
First Trust IPOX-100 Index Fund 22,897,265 15,897,966
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 24,182,946 21,009,227
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 20,846,783 24,389,689
First Trust Amex(R) Biotechnology Index Fund 88,117,651 46,556,875
First Trust Dow Jones Internet Index(SM) Fund 75,755,590 62,076,782
First Trust DB Strategic Value Index Fund 104,646,981 56,768,510
First Trust Value Line(R) Equity Allocation Index Fund 25,770,324 23,095,306
First Trust Value Line(R) Dividend Index Fund 177,415,981 410,789,172
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 8,099,473 6,390,899
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 57,096,680 15,342,993
First Trust S&P REIT Index Fund 3,771,996 1,755,034
First Trust ISE Water Index Fund 18,286,890 5,843,947
First Trust ISE-Revere Natural Gas Index Fund 16,731,803 4,571,186
First Trust ISE Chindia Index Fund 121,511,994 11,705,072
First Trust Value Line(R) 100 Exchange-Traded Fund 223,867,759 256,358,692

As of December 31, 2007, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/depreciation on investments were as follows:

 Net
 Unrealized Gross Gross
 Appreciation Unrealized Unrealized
 Cost (Depreciation) Appreciation (Depreciation)
 ------------- -------------- ------------ --------------
First Trust Dow Jones Select MicroCap Index(SM) Fund $ 19,471,014 $ (1,430,004) $ 982,571 $ (2,412,575)
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 77,115,362 (12,609,479) 1,948,890 (14,558,369)
First Trust IPOX-100 Index Fund 24,721,096 1,958,507 3,765,255 (1,806,748)
First Trust NASDAQ-100 Equal Weighted Index(SM) Fund 32,745,515 (1,743,296) 1,783,253 (3,526,549)
First Trust NASDAQ-100-Technology Sector Index(SM) Fund 25,517,832 (1,783,779) 1,230,556 (3,014,335)
First Trust Amex(R) Biotechnology Index Fund 79,089,720 (6,269,136) 4,180,196 (10,449,332)
First Trust Dow Jones Internet Index(SM) Fund 39,703,984 (3,579,723) 2,571,492 (6,151,215)
First Trust DB Strategic Value Index Fund 63,317,964 (1,794,979) 2,221,119 (4,016,098)
First Trust Value Line(R) Equity Allocation Index Fund 12,674,452 667,292 1,383,595 (716,303)
First Trust Value Line(R) Dividend Index Fund 190,309,767 (10,114,015) 9,162,686 (19,276,701)
First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund 2,398,996 (226,358) 80,792 (307,150)
First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund 45,542,378 5,269,569 7,166,577 (1,897,008)
First Trust S&P REIT Index Fund 2,116,638 (413,643) 4,490 (418,133)
First Trust ISE Water Index Fund 12,071,261 318,303 770,676 (452,373)
First Trust ISE-Revere Natural Gas Index Fund 11,218,190 10,424 302,858 (292,434)
First Trust ISE Chindia Index Fund 102,479,765 1,612,014 6,594,380 (4,982,366)
First Trust Value Line(R) 100 Exchange-Traded Fund 183,146,042 22,656,895 24,282,001 (1,625,106)

5. Capital

Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the daily NAV per Share of each Fund times the number of Shares in a Creation Unit on the transaction date. Purchasers of Creation Units must pay a standard creation transaction fee (the "Creation Transaction Fee"), which is based on the number of different securities in a Creation Unit of each Fund according to the fee schedule set forth below:

Page 104

NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007

 Number of
 Securities Creation
 in a Creation Unit Transaction Fee
---------------------- -------------------
 1-100 $500
 101-200 $1,000
 201-300 $1,500
 301-400 $2,000
 401-500 $2,500
 501-600 $3,000
 601-700 $3,500

The Creation Transaction Fee is applicable to each purchase transaction regardless of the number of Creation Units purchased in the transaction. An additional variable fee of up to three times the Creation Transaction Fee may be charged to approximate additional expenses incurred by a Fund with respect to transactions effected outside of the clearing process (i.e., through a DTC Participant) or to the extent that cash is used in lieu of securities to purchase Creation Units. The price for each Creation Unit will equal the daily NAV per Share of a Fund times the number of Shares in a Creation Unit on the transaction date plus the fees described above and, if applicable, any transfer taxes.

Parties redeeming Creation Units must pay a standard redemption transaction fee (the "Redemption Transaction Fee"), which is based on the number of different securities in a Creation Unit according to the fee scheduled set forth below:

 Number of
 Securities Redemption
 in a Creation Unit Transaction Fee
---------------------- -------------------
 1-100 $500
 101-200 $1,000
 201-300 $1,500
 301-400 $2,000
 401-500 $2,500
 501-600 $3,000
 601-700 $3,500

The Redemption Transaction Fee is applicable to each redemption transaction regardless of the number of Creation Units redeemed in the transaction. An additional variable fee of up to three times the Redemption Transaction Fee may be charged to approximate additional expenses incurred by a Fund with respect to redemptions effected outside of the clearing process or to the extent that redemptions are for cash. The Funds reserve the right to effect redemptions in cash. A shareholder may request a cash redemption in lieu of securities, however, a Fund may, in its discretion reject any such request.

6. Indemnification

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

Page 105

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of First Trust Exchange-Traded Fund:

We have audited the accompanying statements of assets and liabilities of First Trust Exchange-Traded Fund, comprising First Trust Dow Jones Select MicroCapSM Index Fund, First Trust Morningstar(R) Dividend Leaders(SM) Index Fund, First Trust IPOX-100 Index Fund, First Trust NASDAQ-100 Equal Weighted Index(SM) Fund, First Trust NASDAQ-100-Technology Sector Index(SM) Fund, First Trust Amex(R) Biotechnology Index Fund, First Trust Dow Jones Internet Index(SM) Fund, First Trust DB Strategic Value Index Fund, First Trust Value Line(R) Equity Allocation Index Fund, First Trust Value Line(R) Dividend Index Fund, First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund, First Trust NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund, First Trust S&P REIT Index Fund, First Trust ISE Water Index Fund, First Trust ISE-Revere Natural Gas Index Fund, First Trust ISE Chindia Index Fund and First Trust Value Line(R) 100 Exchange-Traded Fund (the "Funds"), including the portfolios of investments, as of December 31, 2007, and the related statements of operations, changes in net assets and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the Funds' custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of First Trust Exchange-Traded Fund as of December 31, 2007, the results of their operations, changes in its net assets, and the financial highlights for the respective periods presented in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois
February 20, 2008

Page 106

ADDITIONAL INFORMATION

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007 (UNAUDITED)

Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds use to determine how to vote proxies and information on how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, 2007 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Trust's website located at http://www.ftportfolios.com; and (3) on the Securities and Exchange Commission's website at http://www.sec.gov.

Portfolio Holdings

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

Federal Tax Information

For the taxable year ended December 31, 2007, the following percentages of income dividends paid by the Funds qualify for the dividends received deduction available to corporations:

 Dividends Received Deduction
 ----------------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund 100%
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 100%
First Trust IPOX-100 Index Fund 100%
First Trust DB Strategic Value Index Fund 100%
First Trust Value Line(R) Equity Allocation Index Fund 91%
First Trust Value Line(R) Dividend Index Fund 100%
First Trust ISE Water Index Fund 100%
First Trust ISE-Revere Natural Gas Index Fund 100%

For the taxable year ended December 31, 2007, the following percentages of income dividends paid by the Funds is hereby designated as qualified dividend income:

 Qualified Dividend Income
 -------------------------
First Trust Dow Jones Select MicroCap Index(SM) Fund 100%
First Trust Morningstar(R) Dividend Leaders(SM) Index Fund 100%
First Trust IPOX-100 Index Fund 100%
First Trust DB Strategic Value Index Fund 100%
First Trust Value Line(R) Equity Allocation Index Fund 100%
First Trust Value Line(R) Dividend Index Fund 100%
First Trust ISE Water Index Fund 100%
First Trust ISE-Revere Natural Gas Index Fund 100%
First Trust ISE Chindia Index Fund 100%

Page 107

ADDITIONAL INFORMATION (CONTINUED)

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007 (UNAUDITED)

Licensing Information

Dow Jones, Dow Jones Internet Composite Index(SM) and Dow Jones Select MicroCap Index(SM) are trademarks of Dow Jones & Company, Inc. and have been licensed for use. The First Trust Dow Jones Select MicroCap Index(SM) Fund, based on the Dow Jones Select MicroCap Index(SM) and the First Trust Dow Jones Internet Index(SM) Fund based on the Dow Jones Internet Composite Index(SM) are not sponsored, endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of trading in the Funds.

IPOX is a trademark of IPOX Schuster LLC. IPOX IPO Indexes and Derivatives (patent pending).

NASDAQ(R), NASDAQ-100, NASDAQ-100 Index(R), NASDAQ-100 Technology Sector Index(SM), NASDAQ-100 Equal-Weighted Index(SM), and NASDAQ-100 Ex-Tech Sector Index(SM), are trademarks of The NASDAQ Stock Market, Inc. (which with its affiliates is referred to as the Corporations) and are licensed for use by First Trust Advisors L.P. The Funds have not been passed on by the Corporations as to their legality or suitability. The Funds are not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUNDS.

NASDAQ(R) and Clean Edge(R) are the registered trademarks (the "Marks") of The NASDAQ Stock Market, Inc. ("NASDAQ(R)") and Clean Edge, Inc. ("Clean Edge") respectively. NASDAQ(R) and Clean Edge(R) are, collectively with their affiliates, the "Corporations." The Marks are licensed for use by First Trust Advisors L.P. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. The Fund should not be construed in any way as investment advice by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.

"Deutsche Bank" and "Deutsche Bank CROCI(R) US+ Index" are service marks of Deutsche Bank AG ("Deutsche Bank"). Deutsche Bank has no relationship to First Trust or the First Trust DB Strategic Value Index Fund, other than the licensing of the Index and its service marks for use in connection with the Fund.

"Value Line(R)", "Value Line(R) Equity Allocation Index", "Value Line(R) Dividend Index" and "Value Line(R) 100 Index" are trademarks of Value Line(R), Inc. and have been licensed for use for certain purposes by First Trust on behalf of the Funds. The First Trust Value Line(R) Equity Allocation Index Fund based on the Value Line(R) Equity Allocation Index, the First Trust Value Line(R) Dividend Index Fund, based on the Value Line(R) Dividend Index and the First Trust Value Line(R) 100 Exchange-Traded Fund, based on the Value Line(R) 100 Index, are not sponsored, endorsed, sold, or promoted by Value Line(R), Inc., and Value Line(R) makes no representation regarding the advisability of investing in the Funds.

"International Securities Exchange(TM)", "ISE(TM)", "ISE Water Index(TM)", "ISE ChIndia Index(TM)" and the ISE-Revere Natural Gas Index(TM)" are trademarks of the International Securities Exchange(TM) and have been licensed for use for certain purposes by First Trust Advisors L.P. Each Fund, based on its corresponding index, is not sponsored, endorsed, sold or promoted by the International Securities Exchange(TM) and the International Securities Exchange(TM) makes no representation regarding the advisability of trading in such products.

Page 108

ADDITIONAL INFORMATION (CONTINUED)

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007 (UNAUDITED)

The open-end and closed-end funds advised by First Trust Advisors L.P. (each a "Fund") consider your privacy an important priority in maintaining our relationship. We are committed to protecting the security and confidentiality of your personal information.

Sources of Information

We may collect nonpublic personal information about you from the following sources:

o Information we receive from you or your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms;

o Information about your transactions with us, our affiliates or others;

o Information we receive from your inquiries by mail, e-mail or telephone; and

o Information we collect on our website through the use of "cookies." For example, we may identify the pages on our website that your browser requests or visits.

Information Collected

The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information.

Disclosure of Information

We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. The permitted uses include the disclosure of such information to unaffiliated companies for the following reasons:

o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives and printers.

o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud).

In addition, in order to alert you to our other financial products and services, we may share your personal information with affiliates of the Fund. Please note, however, that the California Financial Information Privacy Act contains an "opt out" mechanism that California consumers may use to prevent us from sharing nonpublic personal information with affiliates.

Confidentiality and Security

With regard to our internal security procedures, the Fund restricts access to your nonpublic personal information to those individuals who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information.

Policy Updates and Inquiries

As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time; however, if we do change it, we will tell you promptly.

For questions about our policy, or for additional copies of this notice, please contact us at (800) 621-1675.

Page 108

BOARD OF TRUSTEES AND OFFICERS

First Trust Exchange-Traded Fund December 31, 2007 (Unaudited)

Each Fund's respective statement of additional information includes additional information about the Trustees and is available without charge, upon request, by calling (800) 988-5891.

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

 INDEPENDENT TRUSTEES
Richard E. Erickson, Trustee Physician; President, 58 None
c/o First Trust Advisors L.P. o Indefinite Term Wheaton Orthopedics;
1001 Warrenville Road Co-owner and Co-Director
 Suite 300 o 2 years, 6 (January 1996 to May
Lisle, IL 60532 months served 2007), Sports Med Center
D.O.B.: 04/51 for Fitness; Limited
 Partner, Gundersen Real
 Estate Partnership;
 Limited Partner, Sportsmed LLC

Thomas R. Kadlec, Trustee Senior Vice President and 58 None
c/o First Trust Advisors L.P. o Indefinite Term Chief Financial Officer
1001 Warrenville Road (May 2007 to Present),
 Suite 300 o 2 years, 6 Vice President and Chief
Lisle, IL 60532 months served Financial Officer (1990 to
D.O.B.: 11/57 May 2007), ADM Investor
 Services, Inc. (Futures
 Commission Merchant);
 President (May 2005 to
 Present), ADM Derivatives,
 Inc.; Registered
 Representative (2000 to
 Present), Segerdahl &
 Company, Inc., a FINRA
 member (Broker-Dealer)

Robert F. Keith, Trustee President (2003 to 58 None
c/o First Trust Advisors L.P. o Indefinite Term Present), Hibs Enterprises
1001 Warrenville Road (Financial and Management
 Suite 300 o 1 year, 6 Consulting); President
Lisle, IL 60532 months served (2001 to 2003), Aramark
D.O.B.: 11/56 Service Master Management;
 President and Chief
 Operating Officer (1998 to
 2003), Service Master
 Management Services

Niel B. Nielson, Trustee President (June 2002 to 58 Director of
c/o First Trust Advisors L.P. o Indefinite Term Present), Covenant College Covenant
1001 Warrenville Road Transport Inc.
 Suite 300 o 2 years, 6
Lisle, IL 60532 months served
D.O.B.: 03/54

 INTERESTED TRUSTEE
James A. Bowen(1), Trustee, President, First Trust 58 Trustee of
President, Chairman of the Board o Indefinite Term Advisors L.P. and First Wheaton College
and CEO Trust Portfolios L.P.;
1001 Warrenville Road o 2 years, 6 Chairman of the Board of
 Suite 300 months served Directors, BondWave LLC
Lisle, IL 60532 (Software Development
D.O.B.: 09/55 Company/Broker-Dealer) and
 Stonebridge Advisors LLC
 (Investment Advisor)

--------------------
1 Mr. Bowen is deemed an "interested person" of the Funds due to his position
 as President of First Trust Advisors L.P., investment advisor of the Funds.

Page 110

BOARD OF TRUSTEES AND OFFICERS (CONTINUED)

FIRST TRUST EXCHANGE-TRADED FUND
DECEMBER 31, 2007 (UNAUDITED)

 OFFICERS

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

Mark R. Bradley Treasurer, Controller, o Indefinite term Chief Financial Officer,
1001 Warrenville Road, Chief Financial Officer First Trust Advisors L.P. and
 Suite 300 and Chief Accounting o 2 years, 6 months First Trust Portfolios L.P.;
Lisle, IL 60532 Officer served Chief Financial Officer,
D.O.B.: 11/57 BondWave LLC (Software
 Development Company/Broker-Dealer) and
 Stonebridge Advisors LLC
 (Investment Advisor)

Kelley A. Christensen Vice President o Indefinite term Assistant Vice President,
1001 Warrenville Road, First Trust Advisors L.P. and
 Suite 300 o 1 year served First Trust Portfolios L.P.
Lisle, IL 60532
D.O.B.: 09/70

James M. Dykas Assistant Treasurer o Indefinite term Senior Vice President (April
1001 Warrenville Road, 2007 to Present), Vice
 Suite 300 o 2 years served President (January 2005 to
Lisle, IL 60532 April 2007), First Trust
D.O.B.: 01/66 Advisors L.P. and First Trust
 Portfolios L.P.; Executive
 Director (December 2002 to
 January 2005), Vice President
 (December 2000 to December
 2002), Van Kampen Asset
 Management and Morgan Stanley
 Investment Management

W. Scott Jardine Secretary and Chief o Indefinite term General Counsel, First Trust
1001 Warrenville Road, Compliance Officer Advisors L.P. and First Trust
 Suite 300 o 2 years, 6 months Portfolios L.P.; Secretary,
Lisle, IL 60532 served BondWave LLC (Software
D.O.B.: 05/60 Development Company/Broker-Dealer)
 and Stonebridge Advisors LLC
 (Investment Advisor)

Daniel J. Lindquist Vice President o Indefinite term Senior Vice President
1001 Warrenville Road, (September 2005 to Present),
 Suite 300 o 2 years served Vice President (April 2004 to
Lisle, IL 60532 September 2005), First Trust
D.O.B.: 02/70 Advisors L.P. and First Trust
 Portfolios L.P.; Chief
 Operating Officer (January
 2004 to April 2004), Mina
 Capital Management, LLC;
 Chief Operating Officer
 (April 2000 to January 2004),
 Samaritan Asset Management
 Services, Inc.

Kristi A. Maher Assistant Secretary o Indefinite term Deputy General Counsel (May
1001 Warrenville Road, 2007 to Present), Assistant
 Suite 300 o 2 years, 6 months General Counsel (March 2004
Lisle, IL 60532 served to May 2007), First Trust
D.O.B.: 12/66 Advisors L.P. and First Trust
 Portfolios L.P.; Associate
 (December 1995 to March
 2004), Chapman and Cutler LLP

Roger F. Testin Vice President o Indefinite term Senior Vice President, First
1001 Warrenville Road, Trust Advisors L. P. and
 Suite 300 o 2 years, 6 months First Trust Portfolios L.P.
Lisle, IL 60532 served (August 2001 to present);
D.O.B.: 06/66 Analyst (1998-2001), Dolan
 Capital Management

Stan Ueland Assistant Vice President o Indefinite term Vice President (August 2005
1001 Warrenville Road, to Present), First Trust
 Suite 300 o 1 year served Advisors L.P. and First Trust
Lisle, IL 60532 Portfolios L.P; Vice
D.O.B.: 11/70 President (May 2004 to August
 2005), BondWave LLC (Software
 Development Company/Broker-Dealer);
 Account Executive (January
 2003 to May 2004), Mina
 Capital Management, LLC and
 Samaritan Asset Management
 Services, Inc.; Sales
 Consultant (January 1997 to
 January 2003), Oracle
 Corporation

Page 111

RISK CONSIDERATIONS (UNAUDITED)

You should consider each Fund's investment objective, risks, charges and expenses carefully before investing. You can download each Fund's prospectus at http://www.ftportfolios.com or contact First Trust Portfolios L.P. at 1-800-621-1675 to request a prospectus, which contains this and other information about the particular Fund. Read it carefully before you invest. First Trust Portfolios L.P. is the distributor of the First Trust Exchange-Traded Fund.

Risk Considerations:

Each Fund's shares will change in value, and you could lose money by investing in a Fund. An investment in a Fund involves risks similar to those of investing in any fund of equity securities traded on an exchange. Investors buying or selling Fund shares on the secondary market may incur brokerage commissions. In addition, investors who sell Fund shares may receive less than the shares' net asset value. Unlike shares of open-end mutual funds, investors are generally not able to purchase ETF shares directly from a Fund and individual ETF shares are not redeemable. However, specified large blocks of ETF shares called creation units can be purchased from, or redeemed to, the Fund.

Each of the Funds is subject to index tracking risk. You should anticipate that the value of Fund shares will decline, more or less, in correlation with any decline in the value of the index that the Fund seeks to track.

Each Fund's return may not match the return of the index it seeks to track for a number of reasons. While First Trust seeks to have a correlation of 0.95 or better, before expenses, between a Fund's performance and the performance of its corresponding index, there can be no assurance that a Fund will be able to achieve such a correlation. Accordingly, each Fund's performance may correlate to a lesser extent and may possibly vary substantially from the performance of its corresponding index.

Each Fund is also exposed to additional market risk due to a policy of investing principally in the securities included in its corresponding index. As a result of such policies, securities held by each Fund will generally not be bought or sold in response to market fluctuations and the securities may be issued by companies concentrated in a particular industry. As a result, each Fund will generally not sell a stock because the stock's issuer is in financial trouble, unless that stock is removed or is anticipated to be removed from the index the Fund seeks to track.

Each Fund relies on a license from an index provider that permits the Fund to use its corresponding index and associated trade names and trademarks in connection with the name and investment strategies of the Fund. Such licenses may be terminated by the respective index provider and, as a result, each Fund may lose its ability to use such intellectual property. There is also no guarantee that index provider has all rights to license the respective intellectual property to First Trust, on behalf of the Fund. Accordingly, in the event the license is terminated or the index provider does not have rights to license the particular intellectual property, it may have a significant effect on the operation of the related Fund.

Each Fund may be concentrated in stocks of companies in an individual industry or sector if the Fund's corresponding index is concentrated in an individual industry or sector. You should be aware that an investment in a portfolio that is concentrated in an individual industry or sector involves additional risk, including limited diversification.

With the exception of First Trust DB Strategic Value Index Fund, First Trust Value Line(R) Dividend Index Fund, First Trust Value Line(R) Equity Allocation Index Fund and First Trust Value Line(R) 100 Exchange-Traded Fund, each Fund is considered to be non-diversified. As a result, those Funds are exposed to additional market risk. A non-diversified fund may invest a relatively high percentage of its assets in a limited number of issuers. As a result, changes in the market value of a single portfolio security could cause greater fluctuations in share price than would occur in a diversified fund. Furthermore, non-diversified funds are more susceptible to any single political, regulatory or economic occurrence.

The First Trust Dow Jones Select MicroCap Index(SM) Fund invests in micro-capitalization companies. Such companies may be more vulnerable to adverse general market or economic developments, may be less liquid, and may experience greater price volatility than larger, more established companies.

The First Trust Morningstar(R) Dividend Leaders(SM) Index Fund, the First Trust Amex(R) Biotechnology Index Fund and the First Trust Dow Jones Internet Index(SM) Fund invest in small-cap companies and are subject to additional risks, as the share prices of small-cap companies may be less liquid and are often more volatile than those of larger companies.

The First Trust Dow Jones Internet Index(SM) Fund invests in the securities of Internet companies. Internet companies are subject to rapid changes in technology, worldwide competition, rapid obsolescence of products and services, loss of patent protections, cyclical market patterns, evolving industry standards, frequent new product introductions and the considerable risk of owning small capitalization companies that have recently begun operations.

The First Trust NASDAQ-100 Equal Weighted Index(SM) Fund, the First Trust NASDAQ-100-Technology Sector Index(SM) Fund and the First Trust Dow Jones Internet Index(SM) Fund invest in stocks of companies in the technology sector. You should be aware that an investment in a portfolio which invests in a particular sector involves additional risks, including limited diversification. The companies engaged in the technology sector are subject to fierce competition and high research and development costs, and their products and services may be subject to rapid obsolescence.

The First Trust Amex(R) Biotechnology Index Fund is concentrated in stocks of companies in the biotechnology sector. You should be aware that an investment in a portfolio which is concentrated in a particular sector involves additional risks, including limited diversification. The companies engaged in the biotechnology sector are subject to fierce competition, substantial research and development costs, governmental regulations and pricing constraints, and their products and services may be subject to rapid obsolescence.

The First Trust IPOX-100 Fund invests in companies that have recently conducted an initial public offering. The stocks of such companies are often subject to extreme price volatility and speculative trading.

The First Trust IPOX-100 Fund also invests in securities of companies in the financial services industry. Banks, thrifts and their holding companies are especially subject to the adverse effects of economic recession; volatile interest rates; portfolio concentrations in geographic markets and in commercial and residential real estate loans; and competition from new entrants in their fields of business. Although recently enacted legislation repealed most of the barriers which separated the banking, insurance and securities industries, these industries are still extensively regulated at both the federal and state level and may be adversely affected by increased regulations.

Page 112

RISK CONSIDERATIONS (UNAUDITED) (CONTINUED)

The First Trust IPOX-100 Fund also invests in securities of companies in the information technology industry. Information technology companies are generally subject to the risks of rapidly changing technologies; short product life cycles; fierce competition; and aggressive pricing and reduced profit margins.

The First Trust S&P REIT Index Fund invests in companies in the real estate industry, including real estate investment trusts ("REITS") and is subject to the risks associated with investing in real estate (any of which could cause the value of a REIT's stock price to decline), which may include, but are not limited to, possible declines in the value of real estate, adverse general and local economic conditions, possible lack of availability of mortgage funds, overbuilding in a REIT's market, changes in interest rates and environmental problems. Furthermore, increases in interest rates typically lower the present value of a REIT's future earnings stream, and may make financing property purchases and improvements more costly.

The First Trust Value Line(R) Equity Allocation Index Fund, the First Trust Value Line(R) Dividend Index Fund, the First Trust Value Line(R) 100 Exchange-Traded Fund, the First Trust NASDAQ-100 Equal Weighted Index(SM) Fund, the First Trust NASDAQ-100-Technology Index(SM) Fund, the First Trust NASDAQ-100 Ex-Technology Sector Index(SM) Fund, the NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund, the First Trust IPOX-100 Index Fund, the First Trust ISE Water Index Fund, the First Trust ISE-Revere Natural Gas Index Fund, the First Trust ISE Chindia Index Fund and the First Trust S&P REIT Index Fund may invest in small capitalization and mid-capitalization companies. Such companies' securities may be less liquid and may experience greater price volatility than securities of larger, more established companies.

The First Trust Value Line(R) 100 Exchange-Traded Fund, the First Trust ISE Water Index Fund, the First Trust ISE-Revere Natural Gas Index Fund and the First Trust ISE Chindia Index Fund invest in non-U.S. securities and such securities may be denominated in currencies other than the U.S. Dollar. Non-U.S. companies, in general, are not subject to the regulatory requirements of U.S. companies and, as such, there may be less publicly available information about these companies. Moreover, non-U.S. accounting, auditing and financial reporting standards generally are different from those applicable to U.S. companies.

The NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund invests in renewable and alternative energy companies. You should be aware that share prices of renewable and alternative energy companies have been significantly more volatile than shares of companies operating in other more established industries and the securities included in the NASDAQ(R) Clean Edge(R) U.S. Liquid Series Index Fund may be subject to sharp price declines. This industry is relatively nascent and under-researched in comparison to more established and mature sectors, and should therefore be regarded as having greater investment risk.

The First Trust ISE Water Index Fund invests in companies in the potable water and wastewater industries. You should be aware that adverse developments in these industries may significantly affect the value of the shares of the First Trust ISE Water Index Fund. Companies involved in the potable water and wastewater industries are subject to environmental considerations, taxes, government regulation, price and supply fluctuations, competition and conservation.

The First Trust ISE-Revere Natural Gas Index Fund invests in companies in the natural gas industry. You should be aware that one of the natural gas industry's primary risks is the competitive risk associated with the prices of alternative fuels, such as coal and oil. Additionally, the natural gas industry is sensitive to increased interest rates because of the industry's capital intensive nature. Furthermore, there are additional risks and hazards that are inherent in the natural gas industry that may cause the price of natural gas to widely fluctuate.

The First Trust ISE Chindia Index Fund invests in the securities of Chinese and Indian companies. You should be aware that investments in such companies are subject to additional risks, which are associated with possible adverse economic, political and social developments in those countries.

NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE

Page 113

[LOGO OMITTED] FIRST TRUST
ADVISORS L.P.

FIRST TRUST EXCHANGE-TRADED FUND

INVESTMENT ADVISOR
First Trust Advisors L.P.
1001 Warrenville Road
Lisle, IL 60532

ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York
101 Barclay Street
New York, NY 10286

BOARD ADMINISTRATOR
PFPC, Inc.
301 Bellevue Parkway
Wilmington, DE 19809

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

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

Back Cover

Item 2. Code of Ethics.

(a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.

(c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item's instructions.

(d) The registrant has not, during the period covered by this report, granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph
(b) of this item's instructions.

Item 3. Audit Committee Financial Expert.

As of the end of the period covered by the report, the registrant's Board of Trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as an audit committee financial experts serving on the registrant's audit committee and that each is "independent," as defined by Item 3 of Form N-CSR.

Item 4. Principal Accountant Fees and Services.

(a) Audit Fees (Registrant) -- The aggregate fees billed for professional services rendered by the principal accountant for the audit of the Registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $27,500 for 2006 and $289,250 for 2007.

(b) Audit-Related Fees (Registrant) -- The aggregate fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the Registrant's financial statements and are not reported under paragraph (a) of this Item were $0 for 2006 and $0 for 2007.

Audit-Related Fees (Investment Adviser) -- The aggregate fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the Registrant's financial statements and are not reported under paragraph (a) of this Item were $0 for 2006 and $0 for 2007.

(c) Tax Fees (Registrant) -- The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the Registrant were $6,000 for 2006 and $39,675 for 2007. These fees were for tax preparation.

Tax Fees (Investment Adviser) -- The aggregate fees billed in each of the last two fiscal years of the Registrant for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the Registrant's adviser were $0 for 2006 and $0 for 2007.

(d) All Other Fees (Registrant) -- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the Registrant, other than the services reported in paragraphs (a) through (c) of this Item were $3,652,19 for 2006 and $2,857.04 for 2007. These fees were for compliance consulting services.

All Other Fees (Investment Adviser) -- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the Registrant's investment adviser, other than services reported in paragraphs (a) through (c) of this Item were $32,610.50 for 2006 and $42,138 for 2007. These fees were for tax and compliance consulting.

(e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.

Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the "Committee") is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the Registrant by its independent auditors. The Chairman of the Committee authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee.

The Committee is also responsible for the pre-approval of the independent auditor's engagements for non-audit services with the Registrant's adviser (not including a sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the Registrant's adviser (other than any sub-adviser whose role is primarily portfolio management and is sub-contracted with or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor's independence.

(e)(2) The percentage of services described in each of paragraphs (b) through (d) for the Registrant of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph
(c)(7)(i)(c) of Rule 2-01 of Regulation S-X are as follows:

(b) 0%

(d) 0%

The percentage of services described in each of paragraphs (b) through
(d) for the Registrant's investment adviser of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows:

(b) 0%

(d) 33.93%

(f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than fifty percent.

(g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant for 2006 were $9,562.19 for the Registrant, $57,610.50 for the Registrant's investment adviser and $41,925 for the registrant's distributor and for 2007 were $42,532.04 for the Registrant, $49,138 Registrant's investment adviser and $6,800 for the Registrant's distributor.

(h) The Registrant's audit committee of its Board of Trustees determined that the provision of non-audit services that were rendered to the Registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence.

Items 5. Audit Committee of Listed Registrants.

The registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The audit committee of the registrant is comprised of: Richard E. Erickson, Thomas R. Kadlec, Robert F. Keith and Niel B. Nielson.

Item 6. Schedule of Investments.

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

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.

Item 11. Controls and Procedures.

(a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3 (c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)).

(b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's second fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

Item 12. Exhibits.

(a)(1) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto.

(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.

(a)(3) Not applicable.

(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) First Trust Exchange-Traded Fund

By: /s/ James A. Bowen
 -------------------------------
Name: James A. Bowen

Title: Chairman of the Board, President and Chief Executive Officer

Date: February 26, 2008
 -----------------------------

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

By: /s/ James A. Bowen
 -------------------------------
Name: James A. Bowen

Title: Chairman of the Board, President and Chief Executive Officer

Date: February 26, 2008
 -----------------------------

By: /s/ Mark R. Bradley
 -------------------------------
Name: Mark R. Bradley

Title: Treasurer, Controller, Chief Financial Officer and Chief
 Accounting Officer

Date: February 26, 2008
 -----------------------------

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