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 811-21517
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FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
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(Exact name of registrant as specified in charter)
1001 Warrenville Road
Suite 300
LISLE, IL 60532
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(Address of principal executive offices) (Zip code)
W. Scott Jardine
First Trust Portfolios L.P.
1001 Warrenville Road
Suite 300
LISLE, IL 60532
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(Name and address of agent for service)
registrant's telephone number, including area code: 630-241-4141
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Date of fiscal year end: MAY 31
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Date of reporting period: NOVEMBER 30, 2005
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
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FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY
ALLOCATION FUND
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2005
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TABLE OF CONTENTS
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FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
NOVEMBER 30, 2005
Shareholder Letter ........................................................ 1
Portfolio Commentary ...................................................... 2
Portfolio Components ...................................................... 4
Portfolio of Investments .................................................. 5
Statement of Assets and Liabilities ....................................... 11
Statement of Operations ................................................... 12
Statements of Changes in Net Assets ....................................... 13
Financial Highlights ...................................................... 14
Notes to Financial Statements ............................................. 15
Additional Information .................................................... 18
Dividend Reinvestment Plan
Proxy Voting Policies and Procedures
Portfolio Holdings
Submission of Matters to a Vote of Shareholders
By-Law Amendment
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This Semi-Annual 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. and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the First Trust/Value Line(R) & Ibbotson Equity
Allocation Fund's (the "Fund") actual results, performance or achievements 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 Semi-Annual Report, you are cautioned not to place
undue reliance on these forward-looking statements, which reflect the judgment
of First Trust Advisors L.P. and its 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.
HOW TO READ THIS REPORT
This report contains information that can help you evaluate your investment. It
includes details about the First Trust/Value Line(R) & Ibbotson Equity
Allocation Fund (the "Fund") and presents data and analysis that provide insight
into the Fund's performance and investment approach.
By reading the letter from the Fund's President, James A. Bowen, together with
the portfolio commentary by Robert F. Carey, who is the Chief Investment Officer
of First Trust Advisors L.P., the Fund's investment advisor, you will obtain an
understanding of how the market environment affected the Fund's performance. The
statistical information that follows can help you understand the Fund's
performance compared to that of relevant benchmarks.
It is important to keep in mind that the opinions expressed by Mr. Bowen, Mr.
Carey and First Trust Advisors L.P. personnel 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. Of
course, the risks of investing in the Fund are spelled out in the prospectus.
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SHAREHOLDER LETTER
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FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND (FVI)
SEMI-ANNUAL REPORT
NOVEMBER 30, 2005
Dear Shareholder:
We are pleased to inform you that your Fund, the First Trust/Value Line(R) &
Ibbotson Equity Allocation Fund (AMEX: FVI), has achieved substantial gains in
both market value and net asset value ("NAV") for the period ended November 30,
2005. The Fund seeks to provide capital appreciation utilizing an equity asset
allocation model provided by Ibbotson Associates to determine the optimal equity
allocations among the six asset classes: large-cap growth and value; mid-cap
growth and value and small-cap growth and value. The portfolio is selected from
those stocks ranked #1 or #2 in the Value Line(R) TimelinessTM Ranking System,
Value Line(R) SafetyTM Ranking System or Value Line(R) TechnicalTM Ranking
System. The top 25 ranked stocks within each of the six asset classes are then
selected for the FVI portfolio, which results in approximately 150 stocks.
During the six-month period covered by this report, the U.S. stock market, as
measured by the S&P 500 Index, was up 5.9% on a total return basis. Over the
same period, FVI achieved a NAV total return of 11.4%, compared to a market
value total return of 13.5%.
First Trust Advisors L.P. ("First Trust" or the "Advisor") serves as the Fund's
Advisor and currently manages or supervises approximately $21 billion in assets.
I encourage you to read the commentary from Bob Carey, Chief Investment Officer
for First Trust, found on the following pages. It includes a review of the
Fund's performance and Bob's outlook for the markets.
We thank you for your confidence in First Trust and we will work diligently to
keep earning it.
Sincerely,
/S/ JAMES A. BOWEN
James A. Bowen
President of the First Trust/Value Line(R) & Ibbotson Equity Allocation Fund
January 6, 2006
Page 1
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A COMMENTARY ON THE FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
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OVERVIEW
The First Trust/Value Line(R) & Ibbotson Equity Allocation Fund ("FVI" or the
"Fund") posted a market price total return of 13.5% for the six-month period
ended November 30, 2005. Its net asset value ("NAV") total return was 11.4%.
Over the same six-month period, the S&P 500 Index and S&P 1500 Supercomposite
Index, which has exposure to large-, mid- and small-cap stocks, gained 5.9% and
6.4%, respectively. The Fund distributed $0.02 per share in ordinary income in
June as well as a short-term capital gain of $1.25 per share. FVI carried a beta
of 1.03 as of December 30, 2005, according to Bloomberg, meaning that FVI's
price sensitivity to broad market moves is approximately as volatile as the
market. FVI traded at a 12.4% discount to its NAV on November 30, 2005. Its
daily trading volume throughout the period averaged 21,784.
Following is a review of the portfolio strategy and composition, investment
environment and performance results of FVI for the semi-annual period ended
November 30, 2005.
INVESTMENT STRATEGY
The Fund's investment objective is to provide capital appreciation. Under normal
market conditions, the Fund invests substantially all of its net assets in
common stocks that are selected through the application of a top-down asset
allocation strategy and a bottom-up stock selection methodology, in each case
implemented by First Trust Advisors L.P. (the "Advisor"). The Advisor utilizes
the Strategic Equity Asset Allocation Model of Ibbotson Associates (top-down) to
determine the optimal equity allocations among the following six U.S. equity
asset classes:
(1) Large-Cap Growth, (2) Large-Cap Value, (3) Mid-Cap Growth, (4) Mid-Cap
Value, (5) Small-Cap Growth and (6) Small-Cap Value. To select the stocks within
each of the six U.S. equity classes, the Advisor begins with the universe of
stocks that Value Line(R) Publishing, Inc. gives a TimelinessTM, SafetyTM or
TechnicalTM Ranking of #1 or #2 using the Value Line(R) Ranking Systems. The
Advisor then applies a proprietary model to rank the stocks contained in that
universe to determine which stocks will be selected for each of six different
classes. The Advisor then selects the top 25 ranked stocks for each of the six
asset classes for a total of approximately 150 stocks in the portfolio. The Fund
does not employ leverage. The Advisor rebalances the Fund's portfolio holdings
on a semi-annual basis and adjusts the portfolio to reflect changes in the
Ibbotson Strategic Equity Asset Allocation Model on an annual basis. On a more
frequent basis, the Advisor may sell stocks that are no longer within the Value
Line(R) universe of #1 and #2 rankings and replace them with new stocks.
DISTRIBUTIONS
The Fund distributed $1.27 per share in June, which represented $0.02 per share
in ordinary income and $1.25 per share short-term capital gain for the six-month
period ended November 30, 2005.
COMPOSITION OF THE FUND
The Fund is usually comprised of 150 equity holdings. Over the past six months,
135 stocks were sold and 135 were bought. As of November 30, 2005, the weighted
average market capitalization of the stocks in the portfolio was $21.8 billion,
down from $26.7 billion six months ago. The average market capitalization was
$13.0 billion, down from $15.7 billion six months ago. The largest market
capitalization holding in the portfolio was $365.9 billion, up from $358.9
billion six months ago. The smallest was $588.0 million, up from $407.0 million
six months ago.
As of November 30, 2005, the Strategic Equity Asset Allocation Model of Ibbotson
Associates, Inc. set the allocations among the six U.S. equity asset classes as
follows: Large-Cap Growth (30%), Large-Cap Value (34%), Mid-Cap Growth (7%),
Mid-Cap Value (11%), Small-Cap Growth (9%) and Small-Cap Value (9%).
For the six-month period ended November 30, 2005, these six major U.S. equity
asset classes posted the following returns (as measured by Standard & Poor's &
Russell): S&P Barra Growth Index (+4.73%), S&P Barra Value Index (+7.05%), S&P
400 Barra (Mid-Cap) Growth Index (+10.62%), S&P 400 Barra (Mid-Cap) Value Index
(+9.63%), Russell 2000 (Small-Cap) Growth Index (+10.69%) and Russell 2000
(Small-Cap) Value Index (+9.90%).
SECTOR DIVERSIFICATION
The following breakdown illustrates the major economic sector weightings
according to S&P's Global Industry Classification Standard for FVI as of May 31,
2005 and NOVEMBER 30, 2005: Basic Materials (5.8%; 5.2%); Consumer Discretionary
(16.1%; 14.5%); Consumer Staples (10.4%; 1.5%); Energy (19.2%; 35.6%); Financial
Services (10.3%; 10.2%); Health Care (9.0%: 2.2%); Industrials (7.5%; 12.7%);
Information Technology (13.2%; 16.0%); REITs (0.4%; 0.0%); Telecommunications
(2.4%; 0.0%); Utilities (5.0%; 1.6%); and Cash & Equivalents (0.7%; 0.5%).
PERFORMANCE OF THE FUND
The Fund posted some impressive returns for the semi-annual period. Based on
market price, the Fund's total return was 13.5% for the six-month period ended
November 30, 2005. Its NAV total return was 11.4%. Over the same period, the S&P
500 Index and S&P 1500 Supercomposite Index, which has exposure to large-, mid-
and small-cap stocks, gained 5.9% and 6.4%, respectively.
Page 2
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A COMMENTARY ON THE FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY
ALLOCATION FUND - (CONTINUED)
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Over the six-month period ended November 30, 2005, an overweight position in
energy shares, relative to the benchmarks, contributed to the positive
performance of the Fund. Over the period, energy shares returned 15.3% and 17.0%
in the S&P 500 Index and S&P 1500 Supercomposite Index, respectively. An
underweight position in health care stocks, the worst performing sector of the
benchmarks, contributed to the positive performance of the Fund over the
six-month period. Fund performance was hindered by an underweight position,
relative to the benchmarks, in financial shares. Financial shares were among the
best performers in the benchmarks, returning 10.2% and 10.5% for the S&P 500
Index and S&P 1500 Supercomposite Index, respectively.
We are pleased that our strategy continues to outperform the Fund's benchmark
indexes - returning substantially more than the two benchmarks mentioned based
on the market price and NAV. The market price of FVI closed at $21.96 per share
on November 30, 2005, above its $20.00 IPO price. Despite the strong NAV
performance of FVI, the Fund traded at a 12.4% discount to its NAV on November
30, 2005.
MARKET AND ECONOMIC OVERVIEW
The companies in the S&P 500, S&P 500/Citigroup Growth and S&P 500/Citigroup
Value indexes finished with moderate gains, including dividends, of 5.85%, 4.73%
and 7.06%, respectively, for the six-month period ended November 30, 2005.
Moderate economic growth, continued strong profit growth and mergers and
acquisitions ("M&A") activity helped to boost market returns. At the same time,
the trend toward rising short-term interest rates continued, a factor that may
limit market performance. The Federal Reserve raised its target for short-term
interest rates four times during the six-month period and has since raised rates
in December 2005, bringing it to the current 4.25% rate.
Despite natural disasters and energy prices, and interest rates that are sharply
higher than one year ago, the economy continues to grow. The economy turned in a
strong performance in the summer (July - September) with the fastest growth pace
in one and a half years, according to the Commerce Department. Real Gross
Domestic Product, the output of goods and services produced by labor and
property located in the United States, increased at an annual rate of 4.1% in
the third quarter of 2005, according to final estimates released by the Bureau
of Economic Analysis.
Mergers, acquisitions and restructurings also supported equities. M&A activity
surpassed $1 trillion for the year, according to Thomson Financial. Companies
have announced 8,489 M&A deals valued at roughly $1.1 trillion, a level not seen
since 2000. Two of the most active sectors have been telecommunications and
technology. Deal volume should finish the year about 30% higher than the volume
registered in 2004.
Though oil prices have dropped from post-hurricane peaks, the threat of higher
inflation lingers. In September, inflation numbers, as measured by the Consumer
Price Index and the Producer Price Index, were at levels not experienced in the
past 15-25 years. Obviously, the financial fallout from the hurricanes in the
Gulf Coast region was reflected in the numbers. Investors, however, should not
lose sight of the fact that the U.S. has enjoyed a prolonged period of high
productivity aided by new technologies. High productivity has helped
manufacturers absorb higher commodity and materials prices over the past couple
of years without having to raise prices much, if at all. High productivity is
also one of the main reasons why corporate profits have surged. While price
stability may not be as feasible a goal moving forward as it once was, stocks
have shown that they are capable of rallying even when higher interest rates are
creating headwind.
IN CLOSING
The S&P 500 Index set records in 2005 including both earnings per share and
dividend payouts. It will be interesting to monitor the progress and see whether
this positive momentum will continue into 2006.
Page 3
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
PORTFOLIO COMPONENTS+
NOVEMBER 30, 2005 (UNAUDITED)
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS IN PRINTED GRAPHIC
Oil, Gas & Consumable Fuels 31.7%
Insurance 9.4%
Specialty Retail 5.5%
Metals & Mining 4.4%
Energy Equipment & Services 4.1%
Semiconductors & Semiconductor Equipment 3.1%
Commercial Services & Supplies 3.0%
Household Durables 3.0%
Communications Equipment 2.8%
Electronic Equipment & Instruments 2.7%
Machinery 2.4%
Computers & Peripherals 2.2%
Textiles, Apparel & Luxury Goods 2.0%
IT Services 1.7%
Diversified Consumer Services 1.6%
Auto Components 1.5%
Software 1.5%
Diversified Financial Services 1.5%
Road & Rail 1.4%
Hotels, Restaurant & Leisure 1.2%
Personal Products 0.9%
Construction & Engineering 0.9%
Pharmaceuticals 0.8%
Chemcials 0.8%
Health Care Equipment & Supplies 0.8%
Internet Software & Services 0.7%
Electric Utilities 0.7%
Aerospace & Defense 0.6%
Food Products 0.6%
Construction Materials 0.6%
Capital Markets 0.5%
Internet & Catalog Retail 0.4%
Marine 0.4%
Trading Company & Distributors 0.4%
Air Freight & Logistics 0.4%
Electrical Equipment 0.4%
Distributors 0.4%
Multi-Utilities 0.4%
Airlines 0.4%
Building Products 0.4%
Biotechnology 0.4%
Leisure Equipment & Products 0.3%
Independent Power Producers
& Energy Traders 0.3%
Gas Utilities 0.3%
Media 0.3%
Health Care Providers & Services 0.2%
+ Percentages are based on total investments. Please note that the percentages
shown on the Portfolio of Investments are based on net assets.
Page 4 See Notes to Financial Statements.
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
SHARES VALUE
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COMMON STOCKS - 99.5%
AEROSPACE & DEFENSE - 0.6%
226,773 Bombardier Inc. ................................ $ 468,455
13,315 Esterline Technologies Corp.* .................. 547,380
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1,015,835
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AIR FREIGHT & LOGISTICS - 0.4%
16,601 Forward Air Corp. .............................. 638,308
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AIRLINES - 0.4%
16,699 Alaska Air Group, Inc.* ........................ 587,137
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AUTO COMPONENTS - 1.5%
28,513 Magna International, Inc. ...................... 1,964,546
31,161 Tenneco Automotive Inc.* ....................... 541,267
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2,505,813
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BIOTECHNOLOGY - 0.3%
45,650 Applera Corp. - Celera Genomics Group* ......... 566,973
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BUILDING PRODUCTS - 0.4%
10,200 Universal Forest Products, Inc. ................ 586,092
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CAPITAL MARKETS - 0.5%
21,159 Investment Technology Group, Inc.* ............. 822,874
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CHEMICALS - 0.8%
33,000 Agrium Inc. .................................... 673,530
11,422 Ashland Inc. ................................... 636,776
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1,310,306
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COMMERCIAL SERVICES & SUPPLIES - 3.0%
11,850 Banta Corp. .................................... 598,425
15,400 John H. Harland Company ........................ 582,120
19,823 Kelly Services, Inc. ........................... 551,079
57,065 R.R. Donnelley & Sons Company .................. 1,951,623
13,235 Robert Half International Inc. ................. 506,371
46,940 Steelcase Inc., Class A ........................ 694,243
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4,883,861
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COMMUNICATIONS EQUIPMENT - 2.8%
28,300 Belden CDT Inc. ................................ 661,088
89,845 Motorola, Inc. ................................. 2,164,366
54,222 Telefonaktiebolaget LM Ericsson, Sponsored ADR . 1,766,553
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4,592,007
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COMPUTERS & PERIPHERALS - 2.1%
80,500 Hewlett-Packard Company ........................ 2,388,435
14,306 Intergraph Corp.* .............................. 686,974
12,958 QLogic Corp.* .................................. 428,391
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3,503,800
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CONSTRUCTION & ENGINEERING - 0.9%
17,211 McDermott International, Inc.* ................. 720,452
51,265 Quanta Services, Inc.* ......................... 725,400
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1,445,852
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See Notes to Financial Statements. Page 5
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
SHARES VALUE
----------- ------------
COMMON STOCKS - CONTINUED
CONSTRUCTION MATERIALS - 0.6%
4,186 Eagle Materials Inc. ........................... $ 480,971
8,386 Florida Rock Industries, Inc. .................. 418,210
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899,181
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DISTRIBUTORS - 0.4%
7,548 Building Materials Holding Corp. ............... 621,427
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DIVERSIFIED CONSUMER SERVICES - 1.6%
12,601 Education Management Corp.* .................... 425,284
68,428 H&R Block, Inc. ................................ 1,672,380
9,200 ITT Educational Services, Inc.* ................ 564,604
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2,662,268
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DIVERSIFIED FINANCIAL SERVICES - 1.4%
46,286 Principal Financial Group, Inc. ................ 2,345,312
---------------
ELECTRIC UTILITIES - 0.7%
18,900 Otter Tail Corp. ............................... 567,945
40,643 Sierra Pacific Resources Corp.* ................ 547,868
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1,115,813
---------------
ELECTRICAL EQUIPMENT - 0.4%
15,000 Franklin Electric Co., Inc. .................... 637,500
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ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.7%
23,367 Arrow Electronics, Inc.* ....................... 724,377
28,450 Avnet, Inc.* ................................... 640,125
161,439 Flextronics International Ltd.* ................ 1,666,050
39,700 Ingram Micro Inc., Class A* .................... 745,566
24,300 Orbotech Ltd.* ................................. 563,517
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4,339,635
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ENERGY EQUIPMENT & SERVICES - 4.0%
62,604 BJ Services Company ............................ 2,294,437
8,080 Cal Dive International, Inc.* .................. 586,689
50,622 Global Industry, Ltd.* ......................... 599,871
76,759 Input/Output, Inc.* ............................ 571,087
8,292 Lone Star Technologies, Inc.* .................. 406,308
19,841 Rowan Companies, Inc. .......................... 711,895
21,307 TETRA Technologies, Inc.* ...................... 624,295
17,327 Tidewater, Inc. ................................ 783,180
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6,577,762
---------------
FOOD PRODUCTS - 0.6%
15,978 Flowers Foods, Inc. ............................ 414,150
12,552 Lancaster Colony Corp. ......................... 489,528
---------------
903,678
---------------
GAS UTILITIES - 0.3%
5,924 Questar Corp. .................................. 441,693
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Page 6 See Notes to Financial Statements.
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
SHARES VALUE
----------- ------------
COMMON STOCKS - CONTINUED
HEALTH CARE EQUIPMENT & SUPPLIES - 0.8%
11,476 Analogic Corp. ................................. $ 550,389
23,000 Thermo Electron Corp.* ......................... 709,550
---------------
1,259,939
---------------
HEALTH CARE PROVIDERS & SERVICES - 0.2%
16,160 IMS Health, Inc. ............................... 395,112
---------------
HOTELS, RESTAURANTS & LEISURE - 1.2%
17,383 California Pizza Kitchen, Inc.* ................ 569,815
12,373 Papa John's International, Inc.* ............... 673,834
89,816 Six Flags, Inc.* ............................... 670,027
---------------
1,913,676
---------------
HOUSEHOLD DURABLES - 3.0%
7,766 Garmin Ltd. .................................... 427,907
511 NVR, Inc.* ..................................... 351,185
50,634 Pulte Homes, Inc. .............................. 2,107,893
16,274 Standard Pacific Corp. ......................... 613,367
38,668 Toll Brothers, Inc.* ........................... 1,330,179
---------------
4,830,531
---------------
INDEPENDENT POWER PRODUCERS &
ENERGY TRADERS - 0.3%
14,252 Black Hills Corp. .............................. 520,911
---------------
INSURANCE - 9.4%
150,250 Aegon N.V. ..................................... 2,370,945
16,304 Allmerica Financial Corp. ...................... 651,345
71,860 CNA Financial Corp.* ........................... 2,446,833
24,102 Loews Corp. .................................... 2,327,771
43,221 MetLife, Inc. .................................. 2,223,288
13,000 RLI Corp. ...................................... 678,600
24,291 The Chubb Corp. ................................ 2,352,340
47,259 The St. Paul Travelers Companies, Inc. ......... 2,198,961
---------------
15,250,083
---------------
INTERNET SOFTWARE & SERVICES - 0.7%
42,700 United Online, Inc. ............................ 602,497
24,000 WebEx Communications Inc.* ..................... 571,440
---------------
1,173,937
---------------
INTERNET & CATALOG RETAIL - 0.4%
26,289 Netflix Inc.* .................................. 723,999
---------------
IT SERVICES - 1.7%
75,446 Accenture Ltd., Class A ........................ 2,145,684
51,500 MPS Group, Inc.* ............................... 647,355
---------------
2,793,039
---------------
LEISURE EQUIPMENT & PRODUCTS - 0.3%
33,193 Oakley, Inc. ................................... 533,743
---------------
See Notes to Financial Statements. Page 7
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
SHARES VALUE
----------- ------------
COMMON STOCKS - CONTINUED
MACHINERY - 2.4%
8,171 Cummins, Inc. .................................. $ 727,219
10,802 ESCO Technologies Inc.* ........................ 464,486
15,478 Lincoln Electric Holdings, Inc. ................ 631,657
24,000 Stewart & Stevenson Services, Inc. ............. 492,000
24,749 The Timken Company ............................. 766,724
19,064 Trinity Industries, Inc. ....................... 793,825
---------------
3,875,911
---------------
MARINE - 0.4%
32,387 CP Ships Ltd. .................................. 693,082
---------------
MEDIA - 0.3%
38,828 Radio One, Inc., Class D* ...................... 429,438
---------------
METALS & MINING - 4.4%
15,348 Allegheny Technologies, Inc. ................... 506,177
5,863 Cleveland-Cliffs, Inc. ......................... 558,685
51,034 Inco Ltd. ...................................... 2,244,986
9,665 Quanex Corp. ................................... 597,780
11,687 Reliance Steel & Aluminum Company .............. 753,928
54,527 Teck Cominco Ltd., Class B ..................... 2,502,825
---------------
7,164,381
---------------
MULTI-UTILITIES - 0.4%
43,155 CMS Energy Corp.* .............................. 603,307
---------------
OIL, GAS & CONSUMABLE FUELS - 31.6%
24,319 Anadarko Petroleum Corp. ....................... 2,203,545
30,607 Apache Corp. ................................... 1,998,025
9,263 Berry Petroleum Company, Class A ............... 528,454
28,408 Burlington Resources Inc. ...................... 2,052,478
10,472 Cabot Oil & Gas Corp. .......................... 442,023
41,306 Canadian Natural Resources Ltd. ................ 1,875,705
33,674 ConocoPhillips ................................. 2,037,614
36,315 Devon Energy Corp. ............................. 2,186,163
18,067 Encore Acquisition Company* .................... 560,800
30,408 EOG Resources, Inc. ............................ 2,181,774
31,815 Exxon Mobil Corp. .............................. 1,846,224
16,039 Forest Oil Corp.* .............................. 718,708
13,740 Frontier Oil Corp. ............................. 517,723
20,355 Imperial Oil Ltd. .............................. 1,868,793
21,568 Kerr-McGee Corp. ............................... 1,864,554
35,207 Marathon Oil Corp. ............................. 2,087,423
34,648 Murphy Oil Corp. ............................... 1,713,690
46,429 Nexen Inc. ..................................... 2,038,697
50,146 Noble Energy, Inc. ............................. 1,873,956
26,685 Occidental Petroleum Corp. ..................... 2,116,120
11,562 Overseas Shipholding Group, Inc. ............... 589,200
72,816 Repsol YPF, S.A., Sponsored ADR ................ 2,149,528
60,375 Shell Canada Ltd. .............................. 1,809,206
Page 8 See Notes to Financial Statements.
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
SHARES VALUE
----------- ------------
COMMON STOCKS - CONTINUED
OIL, GAS & CONSUMABLE FUELS - (CONTINUED)
15,600 Southwestern Energy Company* ................... $ 531,492
29,773 Sunoco, Inc. ................................... 2,298,476
39,788 Talisman Energy Inc. ........................... 1,901,071
100,011 The Williams Companies, Inc. ................... 2,150,237
14,736 Total SA, Sponsored ADR ........................ 1,837,432
24,034 Valero Energy Corp. ............................ 2,312,071
11,905 Vintage Petroleum, Inc. ........................ 623,584
9,536 Western Gas Resources, Inc. .................... 454,676
51,382 XTO Energy, Inc. ............................... 2,090,734
---------------
51,460,176
---------------
PERSONAL PRODUCTS - 0.9%
45,752 The Estee Lauder Companies, Class A ............ 1,510,274
---------------
PHARMACEUTICALS - 0.8%
23,116 Alpharma Inc., Class A ......................... 610,725
48,151 King Pharmaceuticals, Inc.* .................... 757,415
---------------
1,368,140
---------------
ROAD & RAIL - 1.4%
47,385 CSX Corp. ...................................... 2,304,806
---------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.1%
74,335 Cirrus Logic, Inc.* ............................ 561,973
71,848 Intel Corp. .................................... 1,916,905
58,811 Texas Instruments, Inc. ........................ 1,910,181
39,178 Zoran Corp.* ................................... 662,892
---------------
5,051,951
---------------
SOFTWARE - 1.5%
82,495 Compuware Corp.* ............................... 761,429
24,000 Internet Security Systems, Inc.* ............... 548,640
95,000 Novell, Inc.* .................................. 739,100
70,871 Parametric Technology Corp.* ................... 414,595
---------------
2,463,764
---------------
SPECIALTY RETAIL - 5.5%
15,643 American Eagle Outfitters, Inc. ................ 356,035
35,500 AutoNation, Inc.* .............................. 735,560
19,704 Autozone, Inc.* ................................ 1,754,838
17,750 Burlington Coat Factory Warehouse Corp. ........ 703,610
47,594 Charming Shoppes, Inc.* ........................ 559,230
54,350 Chico's FAS, Inc.* ............................. 2,397,378
21,000 GameStop Corp., Class B* ....................... 659,400
10,650 Guitar Center, Inc.* ........................... 561,681
30,871 Payless ShoeSource, Inc.* ...................... 705,402
12,912 Tiffany & Co. .................................. 525,518
---------------
8,958,652
---------------
See Notes to Financial Statements. Page 9
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
SHARES VALUE
----------- ------------
COMMON STOCKS - CONTINUED
TEXTILES, APPAREL & LUXURY GOODS - 2.0%
23,631 Nike Inc., Class B ............................. $ 2,015,724
12,408 Oxford Industries, Inc. ........................ 700,059
8,982 Polo Ralph Lauren Corp. ........................ 481,435
---------------
3,197,218
---------------
TRADING COMPANY & DISTRIBUTORS - 0.4%
16,961 GATX Corp. ..................................... 638,412
---------------
TOTAL COMMON STOCKS ............................ 162,117,609
---------------
(Cost $143,733,761)
TOTAL INVESTMENTS - 99.5% ...................... 162,117,609
(Cost $143,733,761)**
NET OTHER ASSETS & LIABILITIES - 0.5% .......... 876,968
---------------
NET ASSETS - 100.0% ............................ $ 162,994,577
===============
--------------------------------------------------------------------------------
* Non-income producing security
** Aggregate cost for federal income tax and financial reporting
purposes
ADR American Depository Receipt
Page 10 See Notes to Financial Statements.
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 2005 (UNAUDITED)
ASSETS:
Investments, at value
(Cost $143,733,761) ............................................................................. $162,117,609
Cash .............................................................................................. 864,377
Prepaid expenses .................................................................................. 9,120
Receivables:
Dividends ...................................................................................... 215,288
Interest ....................................................................................... 2,443
-------------
Total Assets ................................................................................... 163,208,837
-------------
LIABILITIES:
Payables:
Investment advisory fees ....................................................................... 77,088
License fees ................................................................................... 51,551
Audit fees ..................................................................................... 25,275
Printing fees .................................................................................. 23,987
Administrative fees ............................................................................ 13,291
Legal fees ..................................................................................... 8,239
Trustees' fees ................................................................................. 7,008
Custodian fees ................................................................................. 4,610
Accrued expenses .................................................................................. 3,211
-------------
Total Liabilities .............................................................................. 214,260
-------------
NET ASSETS $162,994,577
=============
NET ASSETS CONSIST OF:
Undistributed net investment income ............................................................ $ 115,287
Accumulated net realized gain on investments sold .............................................. 20,563,500
Net unrealized appreciation of investments ..................................................... 18,383,858
Par value ...................................................................................... 65,052
Paid-in capital ................................................................................ 123,866,880
-------------
Total Net Assets ............................................................................... $162,994,577
=============
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share) .............................. $ 25.06
=============
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized) ....... 6,505,236
=============
See Notes to Financial Statements. Page 11
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2005 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $3,391) ........................................ $ 949,574
Interest .................................................................................... 17,598
---------------
Total investment income ................................................................ 967,172
---------------
EXPENSES:
Investment advisory fees ............................................................... 516,768
License fees ........................................................................... 157,067
Administration fees .................................................................... 79,502
Audit and legal fees ................................................................... 32,658
Printing fees .......................................................................... 20,790
Trustees' fees and expenses ............................................................ 20,664
Transfer agent fees .................................................................... 15,000
Custodian fees ......................................................................... 14,586
Other .................................................................................. 19,126
---------------
Total expenses ......................................................................... 876,161
Fees waived by the investment advisor .................................................. (55,652)
---------------
Net expenses ........................................................................... 820,509
---------------
NET INVESTMENT INCOME ....................................................................... 146,663
---------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on:
Securities transactions ................................................................ 12,197,304
Foreign currencies and net other assets ................................................ 297
---------------
Net realized gain on investments during the period .......................................... 12,197,601
---------------
Net change in unrealized appreciation/(depreciation) of:
Investments ............................................................................ 3,548,044
Foreign currencies and net other assets ................................................ 10
---------------
Net change in unrealized appreciation/(depreciation) of investments during the period ....... 3,548,054
---------------
Net realized and unrealized gain on investments ............................................. 15,745,655
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................................ $ 15,892,318
===============
Page 12 See Notes to Financial Statements.
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR
11/30/2005 ENDED
(UNAUDITED) 5/31/2005
------------- ------------
OPERATIONS:
Net investment income ................................................................... $ 146,663 $ 230,420
Net realized gain on investments during the period....................................... 12,197,601 16,621,050
Net change in unrealized appreciation/(depreciation) of investments during the period ... 3,548,054 14,213,786
--------------- --------------
Net increase in net assets resulting from operations .................................... 15,892,318 31,065,256
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................................................... (130,105) (130,104)
Net realized gains ...................................................................... (8,131,545) --
--------------- --------------
Total distributions to shareholders................................................... (8,261,650) (130,104)
--------------- --------------
Net increase in net assets ......................................................... 7,630,668 30,935,152
NET ASSETS:
Beginning of period ................................................................ 155,363,909 124,428,757
--------------- --------------
End of period ...................................................................... $ 162,994,577 $ 155,363,909
=============== ==============
Undistributed net investment income at end of period ............................... $ 115,287 $ 98,729
=============== ==============
See Notes to Financial Statements. Page 13
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS
ENDED YEAR PERIOD
11/30/2005 ENDED ENDED
(UNAUDITED) 5/31/2005 5/31/2004*
---------- --------- ----------
Net asset value, beginning of period ................................... $ 23.88 $ 19.13 $ 19.10
---------- --------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) ........................................... 0.02 0.04 (0.01)
Net realized and unrealized gain on investments ........................ 2.43 4.73 0.08
---------- --------- ----------
Total from investment operations ....................................... 2.45 4.77 0.07
---------- --------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income .................................................. (0.02) (0.02) --
Net realized gains ..................................................... (1.25) -- --
---------- --------- ----------
Total from distributions ............................................... (1.27) (0.02) --
---------- --------- ----------
Common Shares offering costs charged to paid-in capital ................ -- -- (0.04)
---------- --------- ----------
Net asset value, end of period ......................................... $ 25.06 $ 23.88 $ 19.13
========== ========= ==========
Market value, end of period ............................................ $ 21.96 $ 20.54 $ 17.20
---------- --------- ----------
TOTAL RETURN BASED ON NET ASSET VALUE (A)+ ............................. 11.43% 24.96% 0.16%
========== ========= ==========
TOTAL RETURN BASED ON MARKET VALUE (B)+ ................................ 13.53% 19.54% (14.00)%
========== ========= ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ................................... $ 162,995 $ 155,364 $ 124,429
Ratio of net expenses to average net assets ............................ 1.03%** 1.05% 1.68%**
Ratio of total expenses to average net assets .......................... 1.10%** 1.13% 1.68%**
Ratio of net investment income/(loss) to average net assets ............ 0.18%** 0.16% (0.52)%**
Portfolio turnover rate ................................................ 80.95% 162.61% 2.93%
--------------------------------------------------
* The Fund commenced operations on April 16, 2004.
** Annualized.
(a) 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.
(b) Total return based on market 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 Common
Share market price per share, all based on Common Share market price per
share.
+ Total return is not annualized for periods less than one year.
Page 14 See Notes to Financial Statements.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
NOVEMBER 30, 2005 (UNAUDITED)
1. FUND DESCRIPTION
First Trust/Value Line(R) & Ibbotson Equity Allocation Fund (the "Fund") is a
diversified, closed-end management investment company organized as a
Massachusetts business trust on February 20, 2004, and is registered with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund trades under the ticker symbol FVI
on the American Stock Exchange.
The Fund's investment objective is to provide capital appreciation. The Fund
seeks to outperform the Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500 Index") by investing in a diversified portfolio of the common stocks
selected through the application of a disciplined investment strategy
implemented by the Fund's investment advisor, First Trust Advisors L.P. ("First
Trust"). There can be no assurance that the Fund's investment objective will be
achieved.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION:
The Fund determines the net asset value ("NAV") of its shares daily, as of the
close of regular session 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.
The 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 Fund's Board of Trustees. Portfolio securities listed
on any exchange other than the NASDAQ National Market ("NASDAQ") 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 are valued at the NASDAQ Official Closing Price as determined by
NASDAQ. 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 trading on the NASDAQ, are valued at the closing bid
prices. Short-term investments that mature in less than 60 days are valued at
amortized cost.
Foreign securities traded outside the United States are generally valued as of
the time their trading is complete, which is usually different from the close of
the NYSE. Occasionally, events affecting the value of such securities may occur
between such times and the close of the NYSE that will not always be reflected
in such securities' value. If events materially affecting the value of such
securities occur during such period, these securities will be valued at their
fair value according to procedures adopted by the Fund's Board of Trustees. All
securities and other assets of the Fund denominated in foreign currencies will
be converted to U.S. dollars using exchange rates in effect at the time of
valuation.
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 is recorded
on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income on such securities
is not accrued until settlement date. The Fund instructs the custodian to
segregate assets of the Fund with a current value at least equal to the amount
of its when-issued purchase commitments.
C. FOREIGN CURRENCY:
The books and records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investment securities and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses which result from changes in foreign currency exchange rates have been
included in the "Net change in unrealized appreciation/(depreciation) of foreign
currencies
Page 15
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
NOVEMBER 30, 2005 (UNAUDITED)
and net other assets" in the Statement of Operations. Net realized foreign
currency gains and losses include the effect of changes in exchange rates
between trade date and settlement date on investment security transactions,
foreign currency transactions and interest and dividends received. The portion
of foreign currency gains and losses related to fluctuation in exchange rates
between the initial purchase trade date and subsequent sale trade date is
included in the "Net realized gains on foreign currencies and net other assets"
in the Statement of Operations.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income, if any, of the Fund are declared and paid
semi-annually or as the Board of Trustees may determine from time to time.
Distributions of any net capital gains earned by the Fund are distributed at
least annually. Distributions will automatically be reinvested into additional
Common Shares pursuant to the Fund's Dividend Reinvestment Plan unless cash
distributions are elected by the shareholder.
Distributions from income and capital gains are determined in accordance with
income tax regulations, which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Fund, timing differences and differing characterization of distributions
made by the Fund.
The tax character of distributions paid during the fiscal year ended May 31,
2005 was as follows:
Distributions paid from:
2005
Ordinary Income................................ $ 130,104
As of May 31, 2005, the components of distributable earnings on a tax basis were
as follows:
Undistributed Ordinary Income.................. $ 16,594,461
Undistributed Long-term Gain................... $ 1,712
Net Unrealized Appreciation.................... $ 14,835,804
E. INCOME TAXES:
The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, and by distributing substantially all of its net investment
income and net realized gains to shareholders. Accordingly, no provision has
been made for federal or state income taxes.
F. EXPENSES:
The Fund pays all expenses directly related to its operations. First Trust has
entered into a non-exclusive license agreement with Value Line(R) Publishing,
Inc. which allows for the use by First Trust of the Value Line(R)
Timeliness(TM), Safety(TM) and Technical(TM) Ranking Systems and certain
trademarks and trade names of Value Line(R) Publishing, Inc. The Fund is a
sub-licensee to this license agreement. In exchange, Value Line(R) Publishing,
Inc. receives an annual fee, payable on a quarterly basis, equal to 0.15% of the
Fund's gross daily assets during such calendar quarter. This license fee is paid
by the Fund to First Trust, which in turn pays Value Line(R) Publishing, Inc.
The terms of the license agreement provide that it shall continue in effect for
a term of one year and will be automatically renewed for successive one-year
terms unless either party elects not to renew the agreement.
First Trust has entered into a non-exclusive licensing and services agreement
and a related work order with Ibbotson Associates, Inc. ("Ibbotson") which
allows for the use by First Trust of the Ibbotson name for inclusion in the name
of the Fund and in connection with the promotion, offering, operation and
marketing of the Fund. In addition, Ibbotson performs certain other services for
First Trust under the terms of the agreement. In exchange, Ibbotson receives an
annual fee, payable quarterly, based upon the aggregate assets under management
in the Fund. The annual fee is 0.05% of all assets under management of the Fund,
with a minimum annual fee of $50,000 for services rendered. The annual fee is
paid by the Fund to First Trust, which in turn pays Ibbotson. The terms of the
agreement provide that it shall remain in effect for a minimum of twenty-four
(24) months from the date of execution of the agreement unless terminated
earlier in accordance with the terms of the agreement.
Page 16
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
NOVEMBER 30, 2005 (UNAUDITED)
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 Fund pursuant to an Investment Management
Agreement. First Trust is responsible for the ongoing monitoring of the Fund's
investment portfolio, managing the Fund's business affairs and certain
administrative services necessary for the management of the Fund. For these
services, First Trust is entitled to a monthly fee calculated at an annual rate
of 0.65% of the Fund's average daily net assets.
First Trust has agreed to waive fees and reimburse the Fund for expenses in an
amount equal to 0.07% of the average daily net assets of the Fund through April
27, 2006. Waivers and reimbursements are reported as "fees waived by the
investment advisor" in the Statement of Operations.
PFPC Inc. ("PFPC"), an indirect, majority-owned subsidiary of The PNC Financial
Services Group, Inc., serves as the Fund's Administrator and Transfer Agent in
accordance with certain fee arrangements. PFPC Trust Company, an indirect,
majority-owned subsidiary of The PNC Financial Services Group, Inc., serves as
the Fund's Custodian in accordance with certain fee arrangements.
The Fund pays each Trustee who is not an officer or employee of First Trust or
any of its affiliates an annual retainer of $10,000 which includes compensation
for all regular quarterly board meetings and regular committee meetings. No
additional meeting fees are paid in connection with regular quarterly board
meetings or regular committee meetings. Additional fees of $1,000 and $500 are
paid to non-interested Trustees for special board meetings and non-regular
committee meetings, respectively. These additional fees are shared by the funds
in the First Trust fund complex that participate in the particular meeting and
are not per fund fees. Trustees are also reimbursed for travel and out-of-pocket
expenses in connection with all meetings.
4. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments, for the six months ended November 30, 2005, were
$128,464,873 and $136,333,990, respectively.
As of November 30, 2005, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $22,165,666,
and the aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $3,781,818.
5. SUBSEQUENT EVENT
On December 9, 2005, the Fund declared distributions totaling $3.20 per share,
which represents a dividend from net investment income of $0.02, short-term
capital gains of $2.55 and long-term capital gains of $0.63, to Common
Shareholders of record December 21, 2005, payable December 30, 2005.
Page 17
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
NOVEMBER 30, 2005 (UNAUDITED)
DIVIDEND REINVESTMENT PLAN
If your Common Shares are registered directly with the Fund or if you hold your
Common Shares with a brokerage firm that participates in the Fund's Dividend
Reinvestment Plan (the "Plan"), unless you elect, by written notice to the Fund,
to receive cash distributions, all dividends, including any capital gain
distributions, on your Common Shares will be automatically reinvested by PFPC
Inc. (the "Plan Agent"), in additional Common Shares under the Plan. If you
elect to receive cash distributions, you will receive all distributions in cash
paid by check mailed directly to you by PFPC Inc., as the dividend paying agent.
If you decide to participate in the Plan, the number of Common Shares you will
receive will be determined as follows:
(1) If the Common Shares are trading at or above net asset value
("NAV") at the time of valuation, the Fund will issue new
shares at a price equal to the greater of (i) NAV per Common
Share on that date or (ii) 95% of the market price on that
date.
(2) If the Common Shares are trading below NAV at the time of
valuation, the Plan Agent will receive the dividend or
distribution in cash and will purchase Common Shares in the
open market, on the American Stock Exchange or elsewhere, for
the participants' accounts. It is possible that the market
price for the Common Shares may increase before the Plan Agent
has completed its purchases. Therefore, the average purchase
price per share paid by the Plan Agent may exceed the market
price at the time of valuation, resulting in the purchase of
fewer shares than if the dividend or distribution had been paid
in Common Shares issued by the Fund. The Plan Agent will use
all dividends and distributions received in cash to purchase
Common Shares in the open market within 30 days of the
valuation date except where temporary curtailment or suspension
of purchases is necessary to comply with federal securities
laws. Interest will not be paid on any uninvested cash
payments.
You may elect to opt-out of or withdraw from the Plan at any time by giving
written notice to the Plan Agent, or by telephone at (800) 331-1710, in
accordance with such reasonable requirements as the Plan Agent and Fund may
agree upon. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan, and you will
receive a cash payment for any fraction of a share in your account. If you wish,
the Plan Agent will sell your shares and send you the proceeds, minus brokerage
commissions.
The Plan Agent maintains all Common Shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. The Plan Agent will forward to each
participant any proxy solicitation material and will vote any shares so held
only in accordance with proxies returned to the Fund. Any proxy you receive will
include all Common Shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or distributions
in Common Shares. However, all participants will pay a pro rata share of
brokerage commissions incurred by the Plan Agent when it makes open market
purchases.
Automatically reinvesting dividends and distributions does not mean that you do
not have to pay income taxes due upon receiving dividends and distributions.
Capital gains and income are realized, although cash is not received by you.
Consult your financial advisor for more information.
If you hold your Common Shares with a brokerage firm that does not participate
in the Plan, you will not be able to participate in the Plan and any dividend
reinvestment may be effected on different terms than those described above.
The Fund reserves the right to amend or terminate the Plan if in the judgment of
the Board of Trustees the change is warranted. There is no direct service charge
to participants in the Plan; however, the Fund reserves the right to amend the
Plan to include a service charge payable by the participants. Additional
information about the Plan may be obtained by writing PFPC Inc., 301 Bellevue
Parkway, Wilmington, Delaware 19809.
--------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Fund uses to determine how
to vote proxies and information on how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's website at http://www.sec.gov.
Page 18
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
NOVEMBER 30, 2005 (UNAUDITED)
PORTFOLIO HOLDINGS
The Fund 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 Fund's Forms N-Q are available (1) by calling (800)
988-5891; (2) on the Fund's website located at http://www.ftportfolios.com; (3)
on the SEC's website at http://www.sec.gov; and (4) for review and copying at
the SEC's Public Reference Room ("PRR") in Washington, DC. Information regarding
the operation of the PRR may be obtained by calling 1-800-SEC-0330.
SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Joint Annual Meeting of Shareholders of First Trust Value Line(R) Dividend
Fund, First Trust/Four Corners Senior Floating Rate Income Fund, Macquarie/First
Trust Global Infrastructure/Utilities Dividend & Income Fund, First Trust/Value
Line(R) & Ibbotson Equity Allocation Fund, and First Trust/Four Corners Senior
Floating Rate Income Fund II was held on September 12, 2005. At the Annual
Meeting, the Fund's Board of Trustees, consisting of James A. Bowen, Niel B.
Nielson, Thomas R. Kadlec, Richard E. Erickson and David M. Oster, was elected
to serve an additional one-year term. The number of votes cast for James A.
Bowen was 5,272,299, the number of votes withheld was 238,961 and the number of
abstentions was 993,976. The number of votes cast for Niel B. Nielson was
5,265,724, the number of votes withheld was 245,536 and the number of
abstentions was 993,976. The number of votes cast for Richard E. Erickson was
5,272,389, the number of votes withheld was 238,871 and the number of
abstentions was 993,976. The number of votes cast for Thomas R. Kadlec was
5,272,389, the number of votes withheld was 238,871 and the number of
abstentions was 993,976. The number of votes cast for David M. Oster was
5,272,299, the number of votes withheld was 238,961 and the number of
abstentions was 993,976.
BY-LAW AMENDMENT
On December 12, 2005, the Board of Trustees of the Fund approved certain changes
to the By-Laws of the Fund that may have the effect of delaying or preventing a
change of control of the Fund. To receive a copy of the revised By-Laws,
investors may call the Fund at (800) 988-5891.
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ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issures as of the close of
the reporting period is included as part of the report to shareholders filed
under item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not yet 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.
On December 12, 2005, the Registrant's Board of Trustees adopted an
Amended Nominating and Governance Committee Charter which included some material
changes to the procedures by which shareholders may recommend nominees to the
Registrant's board of trustees as described below:
Any proposal to elect any person nominated by shareholders for election
as trustee may only be brought before an annual meeting of the Registrant if
timely written notice (the "Shareholder Notice") is provided to the secretary of
the Registrant. Unless a greater or lesser period is required under applicable
law, to be timely, the Shareholder Notice must be delivered to or mailed and
received at Registrant's address, 1001 Warrenville Road, Suite 300, Lisle,
Illinois 60532, Attn: W. Scott Jardine, not less than forty-five (45) days nor
more than sixty (60) days prior to the first anniversary date of the date of the
Registrant's proxy statement released to shareholders for the prior year's
annual meeting; provided, however, if and only if the annual meeting is not
scheduled to be held within a period that commences thirty (30) days before the
first anniversary date of the annual meeting for the preceding year and ends
thirty (30) days after such anniversary date (an annual meeting date outside
such period being referred to herein as an "Other Annual Meeting Date"), such
Shareholder Notice must be given in the manner provided herein by the later of
the close of business on (i) the date forty-five (45) days prior to such Other
Annual Meeting Date or (ii) the tenth (10th) business day following the date
such Other Annual Meeting Date is first publicly announced or disclosed.
Any shareholder submitting a nomination of any person or persons (as
the case may be) for election as a trustee or trustees of the Registrant shall
deliver, as part of such Shareholder Notice: (i) a statement in writing setting
forth (A) the name, age, date of birth, business address, residence address and
nationality of the person or persons to be nominated; (B) the class or series
and number of all shares of the Registrant owned of record or beneficially by
each such person or persons, as reported to such shareholder by such nominee(s);
(C) any other information regarding each such person required by paragraphs (a),
(d), (e) and (f) of Item 401 of Regulation S-K or paragraph (b) of Item 22 of
Rule 14a-101 (Schedule 14A) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (or any successor provision
thereto); (D) any other information regarding the person or persons to be
nominated that would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitation of proxies for
election of trustees or directors pursuant to Section 14 of the Exchange Act and
the rules and regulations promulgated thereunder; and (E) whether such
shareholder believes any nominee is or will be an "interested person" of the
Registrant (as defined in the Investment Company Act of 1940) and, if not an
"interested person," information regarding each nominee that will be sufficient
for the Registrant to make such determination; and (ii) the written and signed
consent of any person to be nominated to be named as a nominee and to serve as a
trustee if elected. In addition, the trustees may require any proposed nominee
to furnish such other information as they may reasonably require or deem
necessary to determine the eligibility of such proposed nominee to serve as a
trustee.
Without limiting the foregoing, any shareholder who gives a Shareholder
Notice of any matter proposed to be brought before a shareholder meeting
(whether or not involving nominees for trustees) shall deliver, as part of such
Shareholder Notice: (i) the description of and text of the proposal to be
presented; (ii) a brief written statement of the reasons why such shareholder
favors the proposal; (iii) such shareholder's name and address as they appear on
the Registrant's books; (iv) any other information relating to the shareholder
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with the solicitation of proxies with respect
to the matter(s) proposed pursuant to Section 14 of the Exchange Act; (v) the
class or series and number of all shares of the Registrant owned beneficially
and of record by such shareholder; (vi) any material interest of such
shareholder in the matter proposed (other than as a shareholder); (vii) a
representation that the shareholder intends to appear in person or by proxy at
the shareholder meeting to act on the matter(s) proposed; (viii) if the proposal
involves nominee(s) for trustees, a description of all arrangements or
understandings between the shareholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination(s)
are to be made by the shareholder; and (ix) in the case of a shareholder (a
"BENEFICIAL OWNER") that holds shares entitled to vote at the meeting through a
nominee or "street name" holder of record, evidence establishing such Beneficial
Owner's indirect ownership of, and entitlement to vote, shares at the meeting of
shareholders. As used herein, shares "beneficially owned" shall mean all shares
which such person is deemed to beneficially own pursuant to Rules 13d-3 and
13d-5 under the Exchange Act.
A copy of the amended Nominating and Governance Committee Charter is
available on the Registrant's website at www.ftportfolios.com.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of
a date within 90 days of the filing date of the report that includes
the disclosure required by this paragraph, based on their evaluation of
these controls and procedures required by Rule 30a-3(b) under the 1940
Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b)
or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) FIRST TRUST/VALUE LINE(R) & IBBOTSON EQUITY ALLOCATION FUND
By (Signature and Title)* /S/ JAMES A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date FEBRUARY 1, 2006
----------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /S/ JAMES A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date FEBRUARY 1, 2006
----------------------------------------------------------------------------
By (Signature and Title)* /S/ MARK R. BRADLEY
-------------------------------------------------------
Mark R. Bradley, Treasurer, Controller, Chief
Financial Officer and Chief Accounting Officer
(principal financial officer)
Date FEBRUARY 1, 2006
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.